JOHN HANCOCK GLOBAL RESOURCES FUND
101 Huntington Avenue
Boston, Massachusetts 02199
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 14, 1996
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of John Hancock Global Resources Fund ("Global Resources Fund"), a
series of John Hancock Series, Inc., a Maryland corporation (the "Company"),
will be held at 101 Huntington Avenue, Boston, Massachusetts 02116 on
Wednesday, August 14, 1996 at 9:00 a.m., Boston time, and at any adjournment
thereof, for the following purposes:
1. To consider and act upon a proposal to approve an Agreement and Plan of
Reorganization between the Company, on behalf of Global Resources Fund,
and Freedom Investment Trust II ("Freedom Trust"), on behalf of John
Hancock Special Opportunities Fund ("Special Opportunities Fund"),
providing for Special Opportunities Fund's acquisition of all of Global
Resources Fund's assets in exchange solely for the assumption of Global
Resources Fund's liabilities by Special Opportunities Fund and the
issuance of Class A and Class B shares of Special Opportunities Fund to
Global Resources Fund for distribution to its Class A and Class B
shareholders; and
2. To consider and act upon such other matters as may properly come before
the Meeting or any adjournment thereof.
The Company's Board of Directors has fixed the close of business on June
17, 1996 as the record date for determination of shareholders who are
entitled to notice of and to vote at the Meeting and any adjournment thereof.
If you cannot attend the Meeting in person, please complete, date and sign
the enclosed proxy and return it to John Hancock Investor Services
Corporation, 101 Huntington Avenue, Boston, Massachusetts 02199 in the
enclosed envelope. It is important that you exercise your right to vote. THE
ENCLOSED PROXY IS BEING SOLICITED BY THE BOARD OF TRUSTEES OF JOHN HANCOCK
GLOBAL RESOURCES FUND.
By order of the Board of Trustees,
SUSAN S. NEWTON
Secretary
Boston, Massachusetts
July 5, 1996
630PX2nd7/96
<PAGE>
JOHN HANCOCK GLOBAL RESOURCES FUND
a series of John Hancock Series, Inc.
PROXY STATEMENT
JOHN HANCOCK SPECIAL OPPORTUNITIES FUND
a series of Freedom Investment Trust II
PROSPECTUS
This Proxy Statement and Prospectus sets forth the information you should
know before voting on the proposed reorganization of John Hancock Global
Resources Fund ("Global Resources Fund") into John Hancock Special
Opportunities Fund ("Special Opportunities Fund"). Please read it carefully
and retain it for future reference. Global Resources Fund is a series of John
Hancock Series, Inc., a Maryland corporation (the "Company"), and Special
Opportunities Fund is a series of Freedom Investment Trust II ("Freedom
Trust"), a Massachusetts business trust.
This Proxy Statement and Prospectus includes the Prospectus of Special
Opportunities Fund for Class A and Class B shares, dated July 1, 1996.
Information about Global Resources Fund's Class A and Class B shares is
incorporated herein by reference to the Global Resources Fund Prospectus which
is available at no charge upon request to Special Opportunities Fund at
1-800-225-5291.
A Statement of Additional Information dated July 5, 1996 relating to this
Proxy Statement and Prospectus, and containing additional information about
each of Special Opportunities Fund and Global Resources Fund, including
historical financial statements, is on file with the Securities and Exchange
Commission ("SEC"). It is available, upon telephone request at no charge at
the toll-free number stated above, from Special Opportunities Fund. The
Statement of Additional Information is incorporated by reference into this
Prospectus.
- -------------------------
(continued on next page)
Shares of Special Opportunities Fund are not deposits or obligations of,
or guaranteed or endorsed by, any bank or other depository institution, and
the shares of Special Opportunities Fund are not federally insured by The
Federal Deposit Insurance Corporation, The Federal Reserve Board or any other
government agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
This Proxy Statement and Prospectus relates to Class A and Class B shares
of beneficial interest (collectively, the "Special Opportunities Fund
Shares") of Special Opportunities Fund which will be issued in exchange for
all of Global Resources Fund's assets. In exchange for these assets, Special
Opportunities Fund will assume all liabilities of Global Resources Fund.
The Class A Special Opportunities Fund Shares issued to Global Resources
Fund for distribution to Global Resources Fund's Class A shareholders will
have an aggregate net asset value equal to that of Global Resources Fund's
Class A shares. The Class B Special Opportunities Fund Shares issued to
Global Resources Fund for distribution to Global Resources Fund's Class B
shareholders will have an aggregate net asset value equal to that of Global
Resources Fund's Class B shares. The asset values of Global Resources Fund
and Special Opportunities Fund will be determined at the close of business
(4:00 p.m. Boston time) on the Closing Date (as defined below) for purposes
of the proposed reorganization.
Following the receipt of Special Opportunities Fund Shares (1) Global
Resources Fund will be liquidated, (2) the Special Opportunities Fund Shares
will be distributed to Global Resources Fund's shareholders pro rata in
exchange for their shares of Global Resources Fund and (3) Global Resources
Fund will be terminated as a series of the Company. Consequently, Class A
Global Resources Fund shareholders will become Class A shareholders of
Special Opportunities Fund, and Class B Global Resources Fund shareholders
will become Class B shareholders of Special Opportunities Fund. These
transactions are collectively referred to in this Proxy Statement and
Prospectus as the "Reorganization." The Reorganization is being structured as
a tax-free reorganization so that, in the opinion of tax counsel, no gain or
loss will be recognized by Special Opportunities Fund, Global Resources Fund
or the shareholders of Global Resources Fund. The terms and conditions of
this transaction are more fully described in this Proxy Statement and
Prospectus, and in the Agreement and Plan of Reorganization that is attached
as Exhibit A.
Special Opportunities Fund is a non-diversified series of Freedom Trust,
an open-end management investment company organized as a Massachusetts
business trust in 1986. Special Opportunities Fund's investment objective is
long-term capital appreciation. Special Opportunities Fund seeks to achieve
its investment objective by varying the relative weighting of its portfolio
securities among several economic sectors based upon both macroeconomic
factors and the outlook for each particular sector. The Fund may focus on as
many as five of the following economic sectors at any one time: automotive
and housing, consumer goods and services, defense and aerospace, energy,
financial services, health care, heavy industry, leisure and entertainment,
machinery and equipment, precious metals, retailing, technology,
transportation, utilities, foreign and environmental.
The principal place of business of both Special Opportunities Fund and
Global Resources Fund is at 101 Huntington Avenue, Boston, Massachusetts
02199. Their toll-free telephone number is 1-800-225-5291.
The date of this Proxy Statement and Prospectus is July 5, 1996.
2
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TABLE OF CONTENTS
Page
-------
INTRODUCTION 1
SUMMARY 2
RISK FACTORS AND SPECIAL CONSIDERATIONS 18
INFORMATION CONCERNING THE MEETING 19
PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF
REORGANIZATION 20
CAPITALIZATION 27
COMPARATIVE PERFORMANCE INFORMATION 28
BUSINESS OF GLOBAL RESOURCES FUND 31
General 31
Investment Objective and Policies 31
Portfolio Management 31
Directors 31
Investment Adviser and Distributor 31
Expenses 31
Custodian and Transfer Agent 31
Global Resources Fund Shares 31
Purchase of Global Resources Fund Shares 31
Redemption of Global Resources Fund Shares 32
Dividends, Distributions and Taxes 32
BUSINESS OF SPECIAL OPPORTUNITIES FUND 32
General 32
Investment Objective and Policies 32
Portfolio Management 32
Trustees 32
Investment Adviser and Distributor 32
Expenses 33
Custodian and Transfer Agent 33
Special Opportunities Fund Shares 33
Purchase of Special Opportunities Fund Shares 33
Redemption of Special Opportunities Fund Shares 33
Dividends, Distributions and Taxes 33
EXPERTS 33
AVAILABLE INFORMATION 34
EXHIBIT A A-1
i
<PAGE>
EXHIBITS
A--Agreement and Plan of Reorganization by and between John Hancock Series,
Inc., on behalf of John Hancock Global Resources Fund, and Freedom
Investment Trust II, on behalf of John Hancock Special Opportunities Fund
(attached to this document).
B--Prospectus of John Hancock Special Opportunities Fund for Class A and
Class B shares, dated July 1, 1996 (included with this document).
C--Annual Report to Shareholders of Special Opportunities Fund, dated October
31, 1995 (included with this document).
ii
<PAGE>
PROXY STATEMENT AND PROSPECTUS
FOR SPECIAL MEETING OF SHAREHOLDERS OF
JOHN HANCOCK GLOBAL RESOURCES FUND
TO BE HELD ON AUGUST 14, 1996
INTRODUCTION
This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of the Company on behalf of
Global Resources Fund. The proxies will be voted at the Special Meeting of
Shareholders (the "Meeting") of Global Resources Fund to be held at 101
Huntington Avenue, Boston, Massachusetts 02199 on Wednesday, August 14, 1996
at 9:00 a.m., Boston time, and at any adjournment or adjournments of the
Meeting. The purposes of the Meeting are set forth in the accompanying Notice
of Special Meeting of Shareholders.
This Proxy Statement and Prospectus includes and incorporates by reference
the prospectus of John Hancock Special Opportunities Fund ("Special
Opportunities Fund") for Class A and Class B shares, dated July 1, 1996 (the
"Special Opportunities Fund Prospectus"). The Annual Report to Shareholders of
Special Opportunities Fund, dated October 31, 1995, accompanies this Proxy
Statement and Prospectus. These materials are being mailed to shareholders of
Global Resources Fund on or after July 5, 1996. Information about Global
Resources Fund is incorporated by reference to the Global Resources Fund
prospectus dated March 1, 1996 (the "Global Resources Prospectus") which is
available upon request. Global Resources Fund's Annual Report to Shareholders
was previously sent to shareholders on or about December 30, 1995.
As of May 31, 1996, 291,666 Class A and 2,074,076 Class B shares of common
stock of Global Resources Fund were outstanding. Shareholders of record on
June 17, 1996 (the "Record Date") are entitled to notice of and to vote at
the Meeting.
All properly executed proxies received by management prior to the Meeting,
unless revoked, will be voted at the Meeting according to the instructions on
the proxies. If no instructions are given, shares of Global Resources Fund
represented by proxies will be voted FOR the proposal (the "Proposal") to
approve the Agreement and Plan of Reorganization (the "Agreement") between
the Company, on behalf of Global Resources Fund, and Freedom Trust, on behalf
of Special Opportunities Fund.
The Board of Directors knows of no business to be presented for
consideration at the Meeting other than that mentioned in the immediately
preceding paragraph. If other business is properly brought before the
Meeting, proxies will be voted according to the best judgment of the persons
named as proxies.
In addition to the mailing of these proxy materials, proxies may be
solicited in person or by telephone by Directors, officers and employees of
Global
1
<PAGE>
Resources Fund; by personnel of Global Resources Fund's investment adviser,
John Hancock Advisers, Inc., and its transfer agent, John Hancock Investor
Services Corporation ("Investor Services"); or by broker-dealer firms.
Investor Services has agreed to provide proxy solicitation services to Global
Resources Fund at a cost of approximately $5,000. Investor Services is
providing this proxy solicitation service to the Fund at a lower cost than
would be charged by a third party solicitation firm. Global Resources Fund
and Special Opportunities Fund (each, a "Fund" and collectively, the "Funds")
will each bear its own fees and expenses in connection with the
Reorganization discussed in this Proxy Statement and Prospectus.
The information concerning Global Resources Fund and Special Opportunities
Fund in this Proxy Statement and Prospectus has been supplied by the Company
and Freedom Trust, respectively.
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement and Prospectus. The summary is qualified by reference to
the more complete information contained in this Proxy Statement and
Prospectus, and in the Exhibits attached to or included with this document.
Please read this entire Proxy Statement and Prospectus carefully.
Reasons for the Proposed Reorganization
The Company's Board of Directors has determined that the proposed
Reorganization is in the best interests of Global Resources Fund and its
shareholders. In making this determination, the Board considered several
relevant factors, including (1) the fact that the investment objectives and
policies of Global Resources Fund and Special Opportunities Fund are similar,
(2) the fact that the Reorganization will result in improved economies of
scale and a corresponding decrease in the expenses currently borne by Global
Resources Fund's shareholders and (3) the fact that combining the Funds'
assets into a single portfolio will enable Special Opportunities Fund to
achieve greater diversification than Global Resources Fund is now able to
achieve. The Board believes that the Special Opportunities Fund Shares
received in the Reorganization will provide existing Global Resources Fund
shareholders with substantially the same investment advantages that they
currently enjoy at a comparable level of risk. The Board also considered that
the management fee rate of Special Opportunities Fund applicable to the
assets of Global Resources Fund after the Reorganization will be higher than
that of Global Resources Fund. However, the Board noted that the total fund
operating expenses of Special Opportunities Fund after the Reorganization
will be substantially less than currently applicable to Global Resources Fund
and that Special Opportunities Fund's past performance has been better than
that of Global Resources Fund. For a more detailed discussion of the reasons
for the proposed Reorganization, see "Proposal to Approve the Agreement and
Plan of Reorganization--Reasons For The Proposed Reorganization."
2
<PAGE>
The Adviser provides investment advisory services to John Hancock Gold &
Government Fund ("Gold & Government Fund"), a series of Freedom Investment
Trust, a Massachusetts business trust ("Investment Trust"). The Investment
Trust's Board of Trustees, including the Trustees not affiliated with the
Funds, has approved the reorganization of Gold & Government Fund into Special
Opportunities Fund (the "Gold & Government Reorganization" and, together with
the Reorganization, the "Reorganizations"). On October 31, 1995, Gold &
Government Fund had net assets of $35,218,599. The Reorganization of Global
Resources Fund described in this Proxy Statement and Prospectus is not
contingent in any way upon the consummation of the Gold & Government
Reorganization. The Gold & Government Reorganization will not affect the net
asset value of the Special Opportunities Fund Shares or the number of those
Shares to be received by the shareholders of Global Resources Fund in the
Reorganization. Global Resources Fund and Gold & Government Fund may be
referred to collectively as, the "Acquired Funds."
The Funds' Expenses
The Funds and their shareholders are subject to various fees and expenses.
The tables set forth below show the shareholder transaction and operating
expenses of Class A and Class B shares of the Funds. These expenses are based
on fees and expenses incurred during each Fund's most recently completed
fiscal year.
GLOBAL RESOURCES FUND
Class A Class B
Shares Shares
-------- ----------
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% None
Maximum sales charge imposed on reinvested
dividends None None
Maximum deferred sales charge None* 5.00%
Redemption fee+ None None
Annual Fund Operating Expenses
(As a percentage of average net assets)
Management fee 0.75% 0.75%
12b-1 fee** 0.25% 1.00%
Other expenses*** 0.98% 0.98%
Total Fund operating expenses 1.98% 2.73%
* No sales charge is payable at the time of purchase on investments of $1
million or more, but for these investments a contingent deferred sales
charge may be imposed in the event of certain redemption transactions
within one year of purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of the Class's average net assets, and the remaining portion will be
used to cover distribution expenses.
*** Other expenses include transfer agent, legal, audit, custody and other
expenses.
+ Redemption by wire fee (currently $4.00) not included.
3
<PAGE>
SPECIAL OPPORTUNITIES FUND
Class A Class B
Shares Shares
-------- ----------
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% None
Maximum sales charge imposed on reinvested
dividends None None
Maximum deferred sales charge None* 5.00%
Redemption fee+ None None
Annual Fund Operating Expenses
(As a percentage of average net assets)
Management fee 0.80% 0.80%
12b-1 fee** 0.30% 1.00%
Other expenses*** 0.49% 0.49%
Total Fund operating expenses 1.59% 2.29%
* No sales charge is payable at the time of purchase on investments of $1
million or more, but for these investments a contingent deferred sales
charge may be imposed in the event of certain redemption transactions
within one year of purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of the Class's average net assets, and the remaining portion will be
used to cover distribution expenses.
*** Other expenses include transfer agent, legal, audit, custody and other
expenses.
+ Redemption by wire fee (currently $4.00) not included.
SPECIAL OPPORTUNITIES FUND (PRO FORMA)
(Consummation of Global Resources Reorganization only)
The table set forth below shows the pro forma operating expenses of Class
A and Class B shares of Special Opportunities Fund which assumes that
shareholders of Global Resources Fund approved the Reorganization, that
shareholders of Gold & Government Fund did not approve the Gold & Government
Reorganization and that the Reorganization took place on October 31, 1995.
These expenses are based on fees and expenses incurred during Special
Opportunities Fund's and Global Resources Fund's most recently completed
fiscal years.
Class A Class B
Shares Shares
-------- ----------
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% None
Maximum sales charge imposed on reinvested
dividends None None
Maximum deferred sales charge None* 5.00%
4
<PAGE>
Class A Class B
Shares Shares
-------- ----------
Redemption fee+ None None
Annual Fund Operating Expenses
(As a percentage of average net assets)
Management fee 0.80% 0.80%
12b-1 fee** 0.30% 1.00%
Other expenses*** 0.52% 0.52%
Total Fund operating expenses 1.62% 2.32%
* No sales charge is payable at the time of purchase on investments of $1
million or more, but for these investments a contingent deferred sales
charge may be imposed in the event of certain redemption transactions
within one year of purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of the Class's average net assets, and the remaining portion will be
used to cover distribution expenses.
*** Other expenses include transfer agent, legal, audit, custody and other
expenses.
+ Redemption by wire fee (currently $4.00) not included.
If the Reorganization is consummated, the actual total operating expenses
of Class A and Class B shares of Special Opportunities Fund may vary from the
pro forma operating expenses indicated above due to changes in the net asset
value of Global Resources Fund or Special Opportunities Fund between October
31, 1995 and the Closing Date (defined below).
Example
The following example illustrates the expenses you would pay on a $1,000
investment under the existing fees for each of Global Resources Fund and
Special Opportunities Fund and under the pro forma fees if the Reorganization
had occurred on October 31, 1995. The example assumes (1) a 5% annual return
and (2) redemption at the end of each time perio.
Class A Class B Class A Class B Pro Pro
Global Global Special Special Forma Forma
Resources Resources Opportunities Opportunities Class A Class B
Fund Fund Fund Fund Shares Shares
------- ------- ----------- ----------- ----- -------
1 year $ 69 $ 78 $ 65 $ 73 $ 66 $ 74
3 years 109 115 98 102 99 103
5 years 151 164 132 143 134 144
10 years 269 288 229 245 233 248
5
<PAGE>
Assuming there is no redemption at the end of each time period, the
expenses you would pay on the same investment would be as follows:
Class B Class B Pro
Global Special Forma
Resources Opportunities Class B
Fund Fund Shares
-------- --------------- --------
1 year $ 28 $ 23 $ 24
3 years 85 72 73
5 years 144 123 124
10 years 288 245 248
The purpose of this example and the tables set forth above is to assist
investors in understanding the various costs and expenses of investing in
shares of the Funds and what such costs would be had the Reorganization
occurred. The example above should not be considered a representation of
future expenses of Global Resources Fund or Special Opportunities Fund after
the Reorganization. Actual expenses may vary from year to year and may be
higher or lower than those shown above.
SPECIAL OPPORTUNITIES FUND (PRO FORMA)
(Consummation of Global Resources Reorganization and Gold & Government
Reorganization)
The table set forth below shows the pro forma operating expenses of Class
A and Class B shares of Special Opportunities Fund which assumes that
shareholders of each Acquired Fund approved the respective Reorganizations,
and that both Reorganizations took place on October 31, 1995. These expenses
are based on fees and expenses incurred during each Acquired Fund's and
Special Opportunities Fund's most recently completed fiscal years and include
some expense savings due to the completion of both Reorganizations.
Class A Class B
Shares Shares
------- ---------
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% None
Maximum sales charge imposed on reinvested
dividends None None
Maximum deferred sales charge None* 5.00%
Redemption fee+ None None
Annual Fund Operating Expenses
(As a percentage of average net assets)
Management fee 0.80% 0.80%
12b-1 fee** 0.30% 1.00%
Other expenses*** 0.49% 0.49%
Total Fund operating expenses 1.59% 2.29%
* No sales charge is payable at the time of purchase on investments of $1
million or more, but for these investments a contingent deferred sales
charge may be imposed in the event of certain redemption transactions
within one year of purchase.
6
<PAGE>
** The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of the Class' average net assets, and the remaining portion will be
used to cover distribution expenses.
*** Other expenses include transfer agent, legal, audit, custody and other
expenses.
+ Redemption by wire fee (currently $4.00) not included.
If the Reorganizations are consummated, the actual total operating
expenses of Class A and Class B shares of Special Opportunities Fund may vary
from the pro forma operating expenses indicated above due to changes in the
net asset value of one or more of the Acquired Funds or Special Opportunities
Fund between October 31, 1995 and the Closing Date (defined below).
Example
The following example illustrates the expenses you would pay on a $1,000
investment under the existing fees for each Acquired Fund and Special
Opportunities Fund and under the pro forma fees if both Reorganizations had
occurred on October 31, 1995. The example assumes (1) a 5% annual return and
(2) redemption at the end of each time period.
Class A Class A Class A Pro
Global Gold & Special Forma
Resources Government Opportunities Class A
Fund Fund Fund Shares
----------- -------- --------------- -------
1 year $ 69 $ 66 $ 65 $ 65
3 years 109 99 98 98
5 years 151 135 132 132
10 years 269 235 229 229
Class B Class B Class B Pro
Global Gold & Special Forma
Resources Government Opportunities Class B
Fund Fund Fund Shares
----------- -------- --------------- -------
1 year $ 78 $ 74 $ 73 $ 73
3 years 115 102 102 102
5 years 164 144 143 143
10 years 288 248 245 245
Assuming there is no redemption at the end of each time period, the
expenses you would pay on the same investment would be as follows:
Class B Class B Class B Pro
Global Gold & Special Forma
Resources Government Opportunities Class B
Fund Fund Fund Shares
----------- -------- --------------- -------
1 year $ 28 $ 24 $ 23 $ 23
3 years 85 72 72 72
5 years 144 124 123 123
10 years 288 248 245 245
7
<PAGE>
The purpose of this example and the tables set forth above is to assist
investors in understanding the various costs and expenses of investing in
shares of each Fund and what the cost would be if both Reorganizations had
occurred. The example above should not be considered a representative of
future expenses. Actual expenses may vary from year to year and may be higher
or lower than those shown above.
The Funds' Investment Adviser
John Hancock Advisers, Inc. (the "Adviser") acts as investment adviser to
both Funds.
Business of Global Resources Fund
Global Resources Fund is a diversified series of the Company, an open-end
management investment company organized as a Maryland corporation in 1987. As
of October 31, 1995, Global Resources Fund's net assets were $28,726,170.
Kevin R. Baker is portfolio manager of Global Resources Fund. Prior to
joining the Adviser in 1994, Mr. Baker was President of Baker Capital
Management. He also worked as a registered representative for Kidder, Peabody
& Co. Incorporated.
Business of Special Opportunities Fund
Special Opportunities Fund is a non-diversified series of Freedom Trust.
As of October 31, 1995, Special Opportunities Fund's net assets were
$238,925,410. Kevin R. Baker is portfolio manager of Special Opportunities
Fund and is assisted by a team of portfolio managers and analysts.
Comparison of the Investment Objectives and Policies of Global Resources Fund
and Special Opportunities Fund
Each Fund's investment objective is non-fundamental and may be changed by
a vote of the Fund's Board of Directors or Board of Trustees. Prior to the
implementation of a change to a Fund's investment objective, the Fund's
prospectus and statement of additional information will be revised or
supplemented.
In considering whether to approve the Reorganization, you should consider
the differences between the two Funds' investment objectives and policies and
whether an investment in Special Opportunities Fund is a suitable investment
for you. For a discussion of the risks associated with an investment in the
Funds, see "Risk Factors and Special Considerations."
<TABLE>
<CAPTION>
Investment Policies Special Opportunities Fund Global Resources Fund
- ------------------------ ------------------------------- --------------------------------
<S> <C> <C>
Investment Objective: The Fund's investment The Fund seeks to protect the
objective is long-term purchasing power of
capital appreciation. shareholders' capital and to
achieve growth of capital.
Current income is not a
primary consideration.
8
<PAGE>
Investment Policies Special Opportunities Fund Global Resources Fund
- ------------------------ ------------------------------- --------------------------------
Primary Investments: The types of securities/ The types of securities in
sectors in which the Fund may which the Fund may invest
invest include: include:
(1) Common stocks, preferred (1) Equity securities of
stocks, convertible debt domestic and foreign companies
securities and warrants of (a) with substantial natural
U.S. and foreign issuers. The resource assets, natural
Fund may also invest in resource-related or
fixed-income securities energy-related activities
including U.S. Government ("Natural Resource Companies")
securities, convertible and or (b) that provide equipment
non-convertible corporate or services primarily devoted
preferred stocks and debt to the natural resource or
securities. Corporate fixed- energy-related activities of
income securities will be Natural Resource Companies.
rated at least investment
grade or if unrated
determined by the Adviser to
be of comparable quality.
(2) Sectors include: (2) Investment grade debt
automotive and housing, securities, preferred stocks
consumer goods and services, or convertible securities,
defense and aerospace, when the principal amount,
energy, financial services, redemption terms or conversion
health care, heavy industry, terms of these instruments are
leisure and entertainment, related to the market price of
machinery and equipment, some natural resource asset
precious metals, retailing, such as gold bouillon ("asset-
technology, transportation, based securities"); and
utilities, foreign and commercial paper.
environmental (the
"Sectors").
9
<PAGE>
Investment Policies Special Opportunities Fund Global Resources Fund
- ------------------------ ------------------------------- --------------------------------
Investment (1) Under normal market (1) At least 65% of the Fund's
Policies: conditions, at least 90% of total assets will be invested
the Fund's investment in in equity securities of
equity securities will be in Natural Resource Companies and
issuers in five or fewer of asset-based securities; and up
the Sectors. to 35% of the Fund's total
assets in investment grade
corporate or government debt
obligations except that, for
temporary defensive purposes,
more than 35% of the Fund's
total assets may be invested
in fixed-income securities,
cash and cash equivalents.
(2) No more than 25% of the (2) No more than 25% of the
Fund's total assets in any Fund's total assets will be
one industry, but up to 100% invested in gold and
of the Fund's net assets may gold-related securities or
be in one Sector. securities of gold-related
companies; no more than 10% of
the Fund's total assets in
gold bullion or gold coins;
and no more than 25% of the
Fund's total assets in the
securities of companies in any
one natural resource industry.
To the extent that the Fund
invests in securities of
foreign issuers (which could
be up to 100% of its total
assets), the Fund will invest
in a minium of three foreign
countries.
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<PAGE>
Investment Policies Special Opportunities Fund Global Resources Fund
- ------------------------ ------------------------------- --------------------------------
(3) The Fund is classified as (3) The Fund is classified as
non-diversified to permit diversified and is required,
investment of more than 5% of with respect to 75% of its
its assets in the obligations total assets, to limit
of any one issuer. investments in obligations of
any one issuer to 5% of the
Fund's total assets and to 10%
of an issuer's voting
securities.
Investment Restrictions: The investment restrictions applicable to Special Opportunities
Fund are substantially similar to or more restrictive than those
of Global Resources Fund, except as noted below:
(1) The Fund may not borrow (1) The Fund may not borrow
money, except from banks as a money in excess of 33-1/3% of
temporary measure and not to its total assets, except as a
exceed 33% of the Fund's temporary measure for
total assets taken at market extraordinary purposes (except
value. the Fund's purchase of reverse
repurchase agreements is not
subject to this restriction).
(2) The Fund may not pledge, (2) The Fund may not pledge,
mortgage or hypothecate its mortgage or hypothecate its
assets, except to secure assets, except to secure
borrowings and then only up borrowings and then only up to
to 33% of the value of the 15% of the value of the Fund's
Fund's total assets taken at total assets taken at the
market value. lower or cost or market value.
(3) The Fund may not make (3) The Fund may not make
short sales of securities short sales of securities
except "against the box," to except "against the box."
hedge exposure to an actual
or anticipated market decline
in the investments or to
profit from an anticipated
decline in the value of a
security.
11
<PAGE>
Investment Policies Special Opportunities Fund Global Resources Fund
- ------------------------ ------------------------------- --------------------------------
(4) The Fund may not invest (4) The Fund may not invest
more than 15% of its assets more than 10% of its assets in
in restricted or illiquid restricted or illiquid
securities. securities.
Other Investments: The Fund may enter into The Fund may enter into
repurchase agreements, repurchase agreements, reverse
purchase securities on a repurchase agreements, lend
forward commitment or its portfolio securities, make
when-issued basis, lend its short sales against the box,
portfolio securities, engage invest in when-issued
in short sales, purchase securities, restricted and
restricted and illiquid illiquid securities, buy and
securities, engage in short- sell options contracts on
term trading, purchase and equity securities, stock
sell options on securities indices and foreign
and indices composed of currencies, stock index and
securities in which it may currency futures contracts,
invest, buy and sell options on such futures
financial futures contracts contracts and enter into
and options on such futures forward currency exchange
for hedging and enter into contracts for hedging foreign
forward foreign currency. currency.
</TABLE>
Form of Organization
Global Resources Fund is a series of a Maryland corporation and Special
Opportunities Fund is a series of a Massachusetts business trust. Both Funds
have authorized and outstanding two classes of shares: Class A and Class B.
Each share of the respective series of the Company or Freedom Trust
represents an equal proportionate interest in the assets belonging to that
series. The liabilities attributable to the respective series are not charged
against the assets of the other series of the Company or Freedom Trust.
Shares of a series and the other series of the Company or Freedom Trust,
respectively are voted separately with respect to matters pertaining to that
series, but all shares vote together for the election of the respective
Directors or Trustees and the ratification of independent accountants of the
Company or Freedom Trust, respectively. The shares of each class of Global
Resources Fund and Special Opportunities Fund represent an interest in the
same portfolio of investments of that Fund. Except as stated below, each
class of each Fund has equal rights as to voting, redemption, dividends and
liquidation. Each class bears different Rule 12b-1 distribution and service
fees and may bear other expenses properly attributable to that class. Class A
and Class B shareholders of each Fund have exclusive voting rights with
regard to the Rule 12b-1 distribution plan covering their class of shares.
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<PAGE>
Sales Charges and Distribution and Service Fees
Class A Shares. Global Resources Fund and Special Opportunities Fund
impose an initial sales charge on Class A shares as described above under the
caption, "The Funds' Expenses." An initial sales charge does not apply to
Class A shares acquired through the reinvestment of dividends from net
investment income or capital gain distributions.
Class A shares of Special Opportunities Fund acquired by Global Resources
Fund's Class A shareholders pursuant to the Reorganization will not be
subject to any initial sales charge or CDSC. However, the CDSC imposed upon
certain redemptions within one year of purchase will continue to apply to
those Class A shares of Special Opportunities Fund issued in the
Reorganization. The holding period for determining the application of this
CDSC will be calculated from the date those Global Resources Fund Class A
shares were originally issued.
Class B Shares. Global Resources Fund and Special Opportunities Fund do
not impose an initial sales charge on Class B shares. However, Class B shares
redeemed within a specified number of years of purchase will be subject to a
CDSC at the rates set forth below. This CDSC will be assessed on an amount
equal to the lesser of the current market value or the original purchase cost
of the Class B shares being redeemed. Accordingly, Class B shareholders will
not be assessed a CDSC on increases in account value above the initial
purchase price, including shares derived from reinvested dividends. The
amount of the CDSC, if any, will vary depending on the number of years from
the time the Class B shares were purchased until the time they are redeemed,
as follows:
Contingent
Deferred Sales
Charge As a
Year in Which Class B Percentage of
Shares Redeemed Dollar Amount
Following Purchase Subject to CDSC
- --------------------- ---------------
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
Class B shares of Special Opportunities Fund acquired by Global Resources
Fund's Class B shareholders pursuant to the Reorganization will not be
subject to any CDSC at the time of the Reorganization. However, these shares
will remain subject to the original CDSC applicable when you redeem those
shares. For purposes of computing the CDSC payable upon redemption of Class B
Special Opportunities Fund Shares acquired by Global Resources Fund's Class B
shareholders pursuant to the Reorganization and the automatic conversion of
Class B shares into
13
<PAGE>
Class A shares, the holding period of the Global Resources Fund Class B
shares will be added to that of the Class B Special Opportunities Fund Shares
acquired in the Reorganization.
Distribution and Service Fees. Both Funds have adopted distribution plans
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). Under these plans, each Fund may pay fees to
John Hancock Funds, Inc. ("John Hancock Funds"), the distributor of the
Funds' shares, to reimburse distribution and service expenses in connection
with Class A shares. These fees are payable at an annual rate of up to 0.25%
of the average daily net assets attributable to the Class A shares of Global
Resources Fund and 0.30% of such assets of Special Opportunities Fund.
In addition, under the plans, each Fund may pay fees to John Hancock Funds
to reimburse it for distribution and service expenses in connection with
Class B shares. These fees are payable at an annual rate of up to 1.00% of
each Fund's average daily net assets attributable to its Class B shares. With
respect to Class B shares only, if John Hancock Funds is not fully reimbursed
for payments made or expenses incurred in any fiscal year, it is entitled to
carry forward these expenses to subsequent fiscal years for submission to the
applicable Fund for payment, subject always to the maximum annual Class B
distribution fee described above. With respect to Class A shares, John
Hancock Funds may carry forward unreimbursed expenses for 12 months from the
date incurred.
The Board of Trustees of Freedom Trust, on behalf of Special Opportunities
Fund, has determined that, if the Reorganization is consummated, unreimbursed
distribution and shareholder service expenses originally incurred in
connection with Global Resources Fund's Class A and Class B shares shares
will be reimbursable under Special Opportunities Fund's Rule 12b-1 plans. As
of October 31, 1995, the unreimbursed distribution and shareholder service
expenses for Class A shares of Special Opportunities Fund and Global
Resources Fund were $341,951 and $13,302, respectively. The unreimbursed
distribution and shareholder service expenses for Class B shares of Special
Opportunities Fund and Global Resources Fund were $6,051,842 and $850,145,
respectively. See "Unreimbursed Distribution and Shareholder Expenses" below.
Purchases and Exchanges
Shares of Special Opportunities Fund may be purchased through certain
broker-dealers and through John Hancock Funds at the public offering price,
which is based on the next determined net asset value per share, plus any
applicable sales charge. The minimum initial investment in Special
Opportunities Fund is $1,000 ($250 for group investments or $500 for
retirement plans). In anticipation of the Reorganization, after the Record
Date, no new accounts may be opened in Global Resources Fund. Existing
shareholders of Global Resources Fund may continue to purchase shares of the
Fund after the Record Date.
Shareholders of both Funds may exchange their shares at net asset value
for shares of the same class, if applicable, of certain other funds managed
by the
14
<PAGE>
Adviser. Shares of any fund acquired in this manner that are subject to a
CDSC will incur the CDSC, if still applicable, upon redemption. The exchange
privilege is available only in those states where exchanges can be made
legally.
Distribution Procedures
Each Fund generally declares and distributes dividends representing all or
substantially all net investment income, if any, at least annually and
distributes net short-term or long-term capital gains, if any, annually
after the close of the fiscal year.
Reinvestment Options
Unless an election is made to receive cash, the shareholders of both Funds
automatically reinvest all of their respective dividends and capital gain
distributions in additional shares of the same class of the same Fund. These
reinvestments are made at the net asset value per share and are not subject
to any sales charge.
Redemption Procedures
Shares of both Funds may be redeemed on any day that the Fund is open for
business at a price equal to the net asset value of the shares next
determined after receipt of a redemption request in good order, less any
applicable CDSC. Alternatively, shareholders of both Funds may sell their
shares through securities dealers, who may charge a fee. Redemptions and
repurchases of Class B shares and certain Class A shares of Global Resources
Fund and Special Opportunities Fund are subject to the applicable CDSC, if
any. Class A and Class B shares of Global Resources Fund may be redeemed up
to and including the Closing Date (as defined below).
Reorganization
Effect of the Reorganization--General. Pursuant to the terms of the
Agreement, the proposed Reorganization will consist of the acquisition by
Special Opportunities Fund of all the assets of Global Resources Fund in
exchange solely for (i) the assumption by Special Opportunities Fund of all
the liabilities of Global Resources Fund and (ii) the issuance of Special
Opportunities Fund Shares equal to the value of these assets, less the amount
of these liabilities, to Global Resources Fund. As part of the liquidation
process, Global Resources Fund will immediately distribute to its
shareholders these Special Opportunities Fund Shares in exchange for their
shares of Global Resources Fund. Consequently, Class A shareholders of Global
Resources Fund will become Class A shareholders of Special Opportunities Fund
and Class B shareholders of Global Resources Fund will become Class B
shareholders of Special Opportunities Fund. After completion of the
Reorganization, the existence of Global Resources Fund as a series of the
Company will be terminated.
The Reorganization will become effective as of 5:00 p.m. on the closing
date, scheduled for August 16, 1996, or another date on or before December
31, 1996 as authorized representatives of the Funds may agree (the "Closing
Date"). The
15
<PAGE>
Class A Special Opportunities Fund Shares issued to Global Resources Fund for
distribution to Global Resources Fund's Class A shareholders will have an
aggregate net asset value equal to that of Global Resources Fund's Class A
shares. The Class B Special Opportunities Fund Shares issued to Global
Resources Fund for distribution to Global Resources Fund's Class B
shareholders will have an aggregate net asset value equal to that of Global
Resources Fund's Class B shares. For purposes of the Reorganization, the
Funds' respective asset values will be determined as of the close of business
(4:00 p.m. Boston time) on the Closing Date.
Effect of the Reorganization--Management Fee and Class A Rule 12b-1 Fee.
After the Reorganization, the assets of Special Opportunities Fund
attributable to Global Resources Fund will be subject to an increase in the
(i) management fee of 5 basis points and (ii) Class A Rule 12b-1 fee of 5
basis points. As a result of the Reorganization, Global Resources Fund's
total annual operating expense ratios will decrease from 1.98% for Class A
shares and 2.73% for Class B shares to 1.62% and 2.32%, respectively. This
represents an overall decrease in the expense ratios of 36 basis points for
Class A shares and 41 basis points for Class B shares. (If both
Reorganizations are consummated, the reduction in Global Resources Fund's
total annual operating expenses will be greater. See "The Fund's Expenses,"
above.)
In approving the Reorganization, the Board of Directors considered this
decrease in total fund operating expense ratios as a significant benefit to
the Global Resources Fund and its shareholders. The indirect increase in
management fees on the assets of Global Resources Fund upon transfer to
Special Opportunities Fund is for the provision by the Adviser of bona fide
advisory services to Special Opportunities Fund. The Board also considered
the fact that Special Opportunities Fund had a better performance record for
the one year period ended October 31, 1995 than Global Resources Fund.
The Board of Directors on behalf of Global Resources Fund, including the
Directors not affiliated with the Funds, unanimously approved the
Reorganization and determined that it was in the best interests of Global
Resources Fund and that the interests of Global Resources Fund's shareholders
would not be diluted as a result of the Reorganization. Similarly, the Board
of Trustees of Freedom Trust on behalf of Special Opportunities Fund,
including the Trustees not affiliated with the Funds, approved the
Reorganization, and determined that it was in the best interests of Special
Opportunities Fund and that the interests of Special Opportunities Fund's
shareholders would not be diluted as a result of the Reorganization. For a
discussion of the factors considered by the respective Boards, see "Proposal
to Approve the Agreement and Plan of Reorganization--Reasons for the Proposed
Reorganization."
Tax Considerations
The consummation of the Reorganization is subject to the receipt of an
opinion of Hale and Dorr, counsel to the Funds, satisfactory to the Company
and Freedom Trust on behalf of the respective Funds and substantially to the
effect that:
16
<PAGE>
(a) The acquisition by Special Opportunities Fund of all of the assets of
Global Resources Fund solely in exchange for the issuance of Special
Opportunities Fund Shares to Global Resources Fund and the assumption of all
of Global Resources Fund's liabilities by Special Opportunities Fund,
followed by the distribution by Global Resources Fund, in liquidation of
Global Resources Fund, of Special Opportunities Fund Shares to the
shareholders of Global Resources Fund in exchange for their shares of common
stock of Global Resources Fund and the termination of Global Resources Fund,
will constitute a "reorganization" within the meaning of Section 368(a)(1)(C)
of the Code, and Global Resources Fund and Special Opportunities Fund will
each be "a party to a reorganization" within the meaning of Section 368(b) of
the Code;
(b) no gain or loss will be recognized by Global Resources Fund upon (a)
the transfer of all of its assets to Special Opportunities Fund solely in
exchange for the issuance of Special Opportunities Fund Shares to Global
Resources Fund, and the assumption of all of Global Resources Fund's
liabilities by Special Opportunities Fund; and (b) the distribution by Global
Resources Fund of these Special Opportunities Fund Shares to the shareholders
of Global Resources Fund;
(c) no gain or loss will be recognized by Special Opportunities Fund upon
the receipt of Global Resources Fund's assets solely in exchange for the
issuance of Special Opportunities Fund Shares to Global Resources Fund and
the assumption of all of Global Resources Fund's liabilities by Special
Opportunities Fund;
(d) the basis of the assets of Global Resources Fund acquired by Special
Opportunities Fund will be, in each instance, the same as the basis of those
assets in the hands of Global Resources Fund immediately prior to the
transfer;
(e) the tax holding period of the assets of Global Resources Fund in the
hands of Special Opportunities Fund will, in each instance, include Global
Resources Fund's tax holding period for those assets;
(f) the shareholders of Global Resources Fund will not recognize gain or
loss upon the exchange of all of their shares of common stock of Global
Resources Fund solely for Special Opportunities Fund Shares as part of the
Reorganization;
(g) the basis of the Special Opportunities Fund Shares received by Global
Resources Fund shareholders in the Reorganization will be the same as the
basis of the Global Resources Fund Shares surrendered in exchange therefor;
and
(h) the tax holding period of the Special Opportunities Fund Shares
received by Global Resources Fund shareholders will include, for each
shareholder, the tax holding period for the Global Resources Fund shares
surrendered in exchange therefor, provided the Global Resources Fund shares
were held as capital assets on the date of the exchange.
The Meeting
Time, Place and Date. The Meeting will be held on Wednesday, August 14,
1996, at 101 Huntington Avenue, Boston, Massachusetts 02199, at 9:00 a.m.
Boston time.
17
<PAGE>
Record Date The Record Date for determining shareholders entitled to
notice of and to vote at the Meeting is June 17, 1996.
Vote Required for Approval Approval of the Agreement by the shareholders
of Global Resources Fund requires the affirmative vote of a majority of the
outstanding shares of Global Resources Fund entitled to vote. The
Reorganization does not require the approval of Special Opportunities Fund's
or Gold & Government Fund's shareholders. See "Proposal to Approve the
Agreement and Plan of Reorganization--Voting Rights and Required Vote."
RISK FACTORS AND SPECIAL CONSIDERATIONS
Each Fund is subject to risks that result from the investment strategies
the Fund uses to achieve its investment objective. Special Opportunities Fund
limits its investments to certain specified economic sectors and, under
normal conditions, further limits the number of the sectors in which it may
invest to five. The Adviser determines the distribution of the Fund's
securities among the various sectors, the specific industries within each
sector and the specific securities within each industry. Furthermore, the
Fund has elected to be treated as "non-diversified" under the Investment
Company Act. This means that the Fund is permitted to invest more than 5% of
its assets in the securities of any one issuer. If the Adviser does not
accurately predict the economic performance of a particular sector or issuer,
the value of the Fund's shares may be more susceptible to any single
economic, political or regulatory event, and to credit and market risks
associated with a single issuer than would a more diversified fund.
Because of Global Resources Fund's emphasis on Natural Resources
Companies, the Fund is more subject to the risks associated with investments
in companies with substantial natural resource assets or natural resource
asset-related or energy-related businesses than is a fund with a more diverse
portfolio of investments. Additionally, the price of gold stocks and the
price of gold are subject to substantial fluctuations and are affected by
unpredictable international monetary and political circumstances.
Each Fund invests in foreign securities which involve a greater degree of
risk than investment in domestic securities due to exchange controls, less
publicly available information, more volatile or less liquid securities
markets and the possibility of expropriation, confiscatory taxation or
political, economic or social instability.
Special Opportunities Fund's ability to invest up to 15% of its net assets
in illiquid securities may subject it to the risks of such securities to a
greater extent than Global Resources Fund, which may invest up to 10% of its
assets in these securities. The sale of illiquid securities, if they can be
sold at all, generally requires more time and results in higher brokerage
charges and other selling expenses than does the sale of liquid securities.
18
<PAGE>
INFORMATION CONCERNING THE MEETING
Solicitation, Revocation and Use of Proxies
A majority of Global Resources Fund's outstanding shares that are
represented and entitled to vote at the Meeting will be a quorum for the
transaction of business. A Global Resources Fund shareholder executing and
returning a proxy has the power to revoke it at any time before it is
exercised, by filing a written notice of revocation with Global Resources
Fund's transfer agent, Investor Services, P.O. Box 9116, Boston,
Massachusetts 02205-9116, or by returning a duly executed proxy with a later
date before the time of the Meeting. Any shareholder who has executed a proxy
but is present at the Meeting and wishes to vote in person may revoke his or
her proxy by notifying the Secretary of Global Resources Fund (without
complying with any formalities) at any time before it is voted. Presence at
the Meeting alone will not serve to revoke a previously executed and returned
proxy.
If a quorum is not present in person or by proxy at the time any session
of the Meeting is called to order, the persons named as proxies may vote
those proxies that have been received to adjourn the Meeting to a later date.
If a quorum is present but there are not sufficient votes in favor of the
Proposal, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies with respect to the
Proposal. Any adjournment will require the affirmative vote of a majority of
the shares of Global Resources Fund, represented in person or by proxy, at
the session of the Meeting to be adjourned. If an adjournment of the Meeting
is proposed because there are not sufficient votes in favor of the
Reorganization, the persons named as proxies will vote those proxies in favor
of the Reorganization in favor of adjournment, and will vote those proxies
against the Reorganization against adjournment.
In addition to the solicitation of proxies by mail or in person, Global
Resources Fund may also arrange to have votes recorded by telephone by
officers and employees of the Fund or by personnel of the Adviser or Investor
Services. The telephone voting procedure is designed to authenticate a
shareholder's identity, to allow a shareholder to authorize the voting of
shares in accordance with the shareholder's instructions and to confirm that
the voting instructions have been properly recorded. If these procedures were
subject to a successful legal challenge, such votes would not be counted at
the Meeting. The Fund has not sought to obtain an opinion of counsel on this
matter and is unaware of any such challenge at this time. A shareholder would
be called on a recorded line at the telephone number the Fund has in its
records for the account and would be asked the shareholder's Social Security
number or other identifying information. The shareholder would then be given
an opportunity to authorize proxies to vote his shares at the Meeting in
accordance with the shareholder's instructions. To ensure that the
shareholder's instructions have been recorded correctly, the shareholder will
also receive a confirmation of the voting instructions in the mail. A special
toll-free number will be
19
<PAGE>
available in case the voting information contained in the confirmation is
incorrect. If the shareholder decides after voting by telephone to attend the
Meeting, the shareholder can revoke the proxy at that time and vote the
shares at the Meeting.
Outstanding Shares and Record Date
At the close of business on May 31, 1996, 291,666 Class A and 2,074,046
Class B shares of common stock of Global Resources Fund were outstanding and
entitled to vote. Only Global Resources Fund shareholders of record at the
close of business on June 17, 1996 (the "Record Date") are entitled to notice
of and to vote at the Meeting and any adjournment of the Meeting. As of May
31, 1996, 10,259,837 Class A and 15,126,623 Class B shares of beneficial
interest of Special Opportunities Fund were outstanding.
Security Ownership of Certain Beneficial Owners and Management of Global
Resources Fund and Special Opportunities Fund
To the knowledge of the Company, as of May 31, 1996, no persons owned of
record or beneficially 5% or more of the outstanding Class A shares of Global
Resources Fund and the following persons owned of record or beneficially 5%
or more of the outstanding Class B shares of Global Resources Fund: Merrill
Lynch Pierce Fenner & Smith Inc., Attn: Mutual Fund Operations, 4800 Deer
Lake Drive East, Jacksonville, FL 32246-6484 (137,071 shares (6.61%)).
To the knowledge of Freedom Trust, as of May 31, 1996, no persons owned of
record or beneficially, 5% or more of the outstanding Class A or Class B
shares of Special Opportunities Fund.
As of May 31, 1996, the Directors and officers of the Company and the
Trustees and officers of Freedom Trust, as a group, owned in the aggregate
less than 1% of the outstanding Class A and Class B shares of Global
Resources Fund and Special Opportunities Fund, respectively.
PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
General
The shareholders of Global Resources Fund are being asked to approve the
Agreement, a copy of which is attached as Exhibit A. The Reorganization will
consist of: (a) the transfer of all of Global Resources Fund's assets to
Special Opportunities Fund, in exchange solely for the issuance of Special
Opportunities Fund Shares to Global Resources Fund and the assumption of
Global Resources Fund's liabilities by Special Opportunities Fund, (b) the
subsequent distribution by Global Resources Fund, as part of its liquidation,
of the Special Opportunities Fund Shares to Global Resources Fund's
shareholders and (c) the termination of Global Resources Fund's existence.
The Class A Special Opportunities Fund Shares issued upon the consummation of
the Reorganization will have an aggregate net
20
<PAGE>
asset value equal to that of Global Resources Fund's Class A shares. The
Class B Special Opportunities Fund Shares issued upon consummation of the
Reorganization will have an aggregate net asset value equal to that of Global
Resources Fund's Class B shares. As noted above, the asset values of Global
Resources Fund and Special Opportunities Fund will be determined at the close
of business (4:00 p.m. Eastern Time) on the Closing Date for purposes of the
Reorganization. See "Description of Agreement" below.
Pursuant to the Agreement, Global Resources Fund will liquidate and
distribute the Special Opportunities Fund Shares received, as described
above, pro rata to the shareholders of record of each class determined as of
the close of regular trading on the New York Stock Exchange on the Closing
Date. The result of the transfer of assets will be that Special Opportunities
Fund will add to its portfolio the net assets of Global Resources Fund. Class
A shareholders of Global Resources Fund will become Class A shareholders of
Special Opportunities Fund, and Class B shareholders of Global Resources Fund
will become Class B shareholders of Special Opportunities Fund. Shareholder
approval of the Agreement shall constitute shareholder approval to terminate
the existence of Global Resources Fund as a series of the Company.
The Agreement and the Reorganization were unanimously approved by the
Company's Board of Directors on behalf of Global Resources Fund at a meeting
held on March 26, 1996, and by the Freedom Trust Board of Trustees on behalf
of Special Opportunities Fund at meetings held on March 5, 1996.
Reasons for the Proposed Reorganization
The Company's Board of Directors believes that the proposed Reorganization
will be advantageous to the shareholders of Global Resources Fund in several
respects. The Company's Board of Directors considered the following matters,
among others, in approving the Proposal.
First, a combined fund offers economies of scale that will have a positive
effect on the expenses currently borne by the shareholders of Global
Resources Fund. Both Funds incur substantial overhead costs for accounting,
legal, transfer agency services, insurance, and custodial and administrative
services. The Board of Directors noted that the Reorganization will result in
a significant decrease in the total annual fund expense ratios currently
borne by Global Resources Fund's Class A and Class B shareholders. The Board
also considered the fact that the Reorganization will have the effect of
increasing the management fee rate and the Class A Rule 12b-1 fee rate for
the assets attributable to Global Resources Fund. However, the Board believes
that the lower total annual fund operating expense ratios of Special
Opportunities Fund and its better performance record affords a significant
potential benefit to the shareholders of Global Resources Fund. See
"Summary--The Fund's Expenses" and "Summary--Reorganization--Effect of the
Reorganization--Management Fee and Class A Rule 12b-1 Fee" above for
additional information.
21
<PAGE>
Second, the Board of Directors considered the performance history of each
Fund, including the fact that Special Opportunities Fund has achieved a
better return for investors over the most recent one year period ended
October 31, 1995.
Third, the Board of Directors believes that the Special Opportunities Fund
Shares received in the Reorganization will provide existing Global Resources
Fund shareholders with substantially the same investment advantages that they
currently enjoy at a comparable level of risk.
Fourth, the Board of Directors believes that it is not advantageous to
operate and market Global Resources Fund separately from Special
Opportunities Fund, because the investment objectives and policies of the two
Funds are generally similar.
Fifth, the Board of Directors considered the fact that Global Resources
Fund is significantly smaller than Special Opportunities Fund. The Board of
Directors determined that the existence of a larger competing fund within the
same fund complex with generally similar investment characteristics is likely
to impede the marketing and asset growth of Global Resources Fund.
Sixth, the Board of Directors considered that shareholders of both Funds
may be better served by a fund offering greater diversification. To the
extent that the Funds' assets are combined into a single portfolio and a
larger asset base is created as a result of the Reorganization, greater
diversification of Special Opportunities Fund's investment portfolio can be
achieved than is currently possible. Greater diversification is expected to
be beneficial to shareholders of both Funds, because it may reduce the
negative effect which the adverse performance of any one security may have on
the performance of the entire portfolio. The Board of Directors also
considered that the Reorganization presents an opportunity for Special
Opportunities Fund to acquire assets without the obligation to pay
commissions or other similar costs that are normally associated with the
purchase of securities. This opportunity provides an economic benefit to
Special Opportunities Fund and its shareholders.
In determining that the Reorganization is in the best interests of Global
Resources Fund and the interests of its shareholders, the Board of Directors
considered the fact that the Adviser will receive certain benefits from the
Reorganization. The Reorganization will result in a consolidated portfolio
management effort, and may result in time savings to the Adviser by reducing
the number of reports and regulatory filings that its personnel must prepare.
Capital Loss Carryovers
As of October 31, 1995, Global Resources Fund had capital loss carryovers,
as determined for federal income tax purposes, in the aggregate amount of
approximately $421,721, of which $16,520 expires on October 31, 2000, $90,341
expires on October 31, 2002 and $314,860 expires on October 31, 2003. If the
Reorganization does not occur, Global Resources Fund may use the capital loss
carryovers to offset any net capital gain, which would reduce the amount of
net capital gain
22
<PAGE>
the Fund would be required to distribute to its respective shareholders in
order to avoid fund-level income and/or excise taxes on undistributed capital
gain.
If the Reorganization is consummated, Special Opportunities Fund will
succeed to and take into account Global Resources Fund's capital loss
carryovers and will be able to use such carryovers, along with any carryovers
it may have, to offset its net capital gain, subject to certain limitations
under the Code that may be applicable because of the Reorganizations and
certain other changes in the past or future share ownership of Special
Opportunities Fund, including the issuance of shares of Special Opportunities
Fund in other reorganization transactions. These limitations could result in
the expiration of all or portions of such carryovers before they are fully
used. Global Resources Fund had, as of October 31, 1995, net unrealized gains
of $543,762 that, when realized, the capital loss carryovers could be used to
offset.
Unreimbursed Distribution and Shareholder Service Expenses
The Company's Board of Directors and Freedom Trust's Board of Trustees
have determined that, if the Reorganization is consummated, distribution and
shareholder service expenses incurred in connection with shares of Global
Resources Fund, and not reimbursed under the Fund's Rule 12b-1 plans or
through CDSCs, will be reimbursable expenses under Special Opportunities
Fund's Rule 12b-1 Plans (the "assumption"). However, the maximum aggregate
amounts payable during any fiscal year under Special Opportunities Fund's
Rule 12b-1 Plans (0.30% of average daily net assets attributable to Class A
shares and 1.00% of average daily net assets attributable to Class B shares)
will not be affected by the assumption.
With respect to both Class A and Class B shares of Special Opportunities
Fund, the percentage of net assets on a pro forma combined basis that the
unreimbursed expenses represent will not increase as a result of the
Reorganization and the assumption. As of October 31, 1995, the unreimbursed
distribution and shareholder service expenses of Special Opportunities Fund
attributable to Class A and Class B shares were $341,951 (0.34% of Special
Opportunities Fund's net assets attributable to Class A shares) and
$6,051,842 (4.4% of Special Opportunities Fund's net assets attributable to
Class B shares), respectively. As of the same date, the unreimbursed
distribution and shareholder service expenses of Global Resources Fund
attributable to Class A and Class B shares were $13,302 (0.57% of Global
Resources Fund's net assets attributable to Class A shares) and $850,145
(3.22% of Global Resources Fund's net assets attributable to Class B shares),
respectively.
After the Reorganization, on a pro forma combined basis, the unreimbursed
distribution and shareholder service expenses of Special Opportunities Fund
attributable to Class A and Class B shares will be $355,253 (0.34% of Special
Opportunities Fund's pro forma net assets attributable to Class A shares) and
$6,901,987 (4.21% of Special Opportunities Fund's pro forma net assets
attributable to Class B shares), respectively.
23
<PAGE>
The assumption will have no immediate effect upon the payments made under
Special Opportunities Fund's Rule 12b-1 Plans. While John Hancock Funds hopes
to recover unreimbursed distribution and shareholder service expenses over an
extended period of time, Special Opportunities Fund is not obligated to
assure that these amounts are recouped by John Hancock Funds. Unreimbursed
distribution and shareholder service expenses do not currently appear as an
expense or liability in the financial statements of either Fund, nor will
they appear in the financial statements of Special Opportunities Fund after
the Reorganization until paid or accrued. Unreimbursed expenses do not enter
into the calculation of the Fund's net asset value or the formula for
calculating Rule 12b-1 payments. Even in the event of termination or
noncontinuance of Special Opportunities Fund's 12b-1 Plans, Special
Opportunities Fund is not legally committed, and is not required to commit,
to the payment of any unreimbursed distribution and shareholder service
expenses. The staff of the SEC has not approved or disapproved the treatment
of the unreimbursed distribution and shareholder service expenses described
in this Proxy Statement.
Boards' Evaluation and Recommendation
On the basis of the factors described above and other factors, the
Company's Board of Directors, including a majority of the Directors who are
not "interested persons" (as defined in the Investment Company Act) of the
Funds, determined that the Reorganization is in the best interests of Global
Resources Fund and that the interests of Global Resources Fund's shareholders
will not be diluted as a result of the Reorganization. On the same basis, the
Freedom Trust's Board of Trustees including a majority of the Trustees who
are not "interested persons" (as defined in the Investment Company Act) of
the Funds, determined that the Reorganization is in the best interests of
Special Opportunities Fund and the interests of Special Opportunities Fund's
shareholders will not be diluted as a result of the Reorganization.
THE DIRECTORS OF JOHN HANCOCK GLOBAL RESOURCES FUND RECOMMEND THAT THE
SHAREHOLDERS OF JOHN HANCOCK GLOBAL RESOURCES FUND VOTE FOR THE PROPOSAL TO
APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION
Description of Agreement
The following description of the Agreement is a summary, does not purport
to be complete, and is subject in all respects to the provisions of the
Agreement, and is qualified in its entirety by reference to the Agreement. A
copy of the Agreement is attached to this Proxy Statement and Prospectus as
Exhibit A and should be read in its entirety. Paragraph references are to
appropriate provisions of the Agreement.
Method of Carrying Out Reorganization. If Global Resources Fund
shareholders approve the Agreement, the Reorganization will be consummated
24
<PAGE>
promptly after the various conditions to the obligations of each of the
parties are satisfied (see Agreement, paragraphs 6 through 8). The
Reorganization will be completed on the Closing Date.
On the Closing Date, Global Resources Fund will transfer all of its assets
to Special Opportunities Fund in exchange for Special Opportunities Fund
Shares with an aggregate net asset value equal to the value of the assets
delivered, less the liabilities of Global Resources Fund assumed, as of the
close of business on the Closing Date (see Agreement, paragraphs 1 and 2).
The value of Global Resources Fund's assets shall be determined in
accordance with the Fund's current prospectus and statement of additional
information and Special Opportunities Fund's net asset values per Class A
share and per Class B share will be determined according to the valuation
procedures set forth in the Freedom Trust Declaration of Trust and By-laws
and the Special Opportunities Fund Prospectus, (see "Share Price" in the
Special Opportunities Fund Prospectus). No initial sales charge or CDSC will
be imposed upon delivery of the Special Opportunities Fund Shares in exchange
for the assets of Global Resources Fund.
Surrender of Stock Certificates. Global Resources Fund shareholders whose
Class A or Class B shares are represented by one or more stock certificates
should, prior to the Closing Date, either surrender their certificates to
Global Resources Fund or deliver to Global Resources Fund an affidavit with
respect to lost certificates, in the form and accompanied by the surety bonds
that Global Resources Fund may require (collectively, an "Affidavit"). On the
Closing Date, all certificates which have not been surrendered will be deemed
to be cancelled, will no longer evidence ownership of Global Resources Fund's
shares and will evidence ownership of Special Opportunities Fund Shares.
Shareholders may not redeem or transfer Special Opportunities Fund Shares
received in the Reorganization until they have surrendered their Global
Resources Fund stock certificates or delivered an Affidavit relating to them.
Special Opportunities Fund will not issue share certificates in the
Reorganization.
Conditions Precedent to Closing. The obligation of Global Resources Fund
to consummate the Reorganization is subject to the satisfaction of certain
conditions precedent, including the Company's performance of all acts and
undertakings required under the Agreement and the receipt of all consents,
orders and permits necessary to consummate the Reorganization (see Agreement,
paragraphs 6 through 8).
The obligation of Special Opportunities Fund to consummate the
Reorganization is subject to the satisfaction of certain conditions
precedent, including Freedom Trust's performance of all acts and undertakings
to be performed under the Agreement, the receipt of certain documents and
financial statements from the Company, on behalf of Global Resources Fund,
and the receipt of all consents, orders and permits necessary to consummate
the Reorganization (see Agreement, paragraphs 6 through 8).
25
<PAGE>
The obligations of both parties are subject to the receipt of approval and
authorization of the Agreement by the vote of not less than a majority of the
shares of Global Resources Fund outstanding and entitled to vote (as
described in the section captioned "Voting Rights and Required Vote") and the
receipt of a favorable opinion of Hale and Dorr as to the federal income tax
consequences of the Reorganization.
Termination of Agreement. The Agreement may be terminated, whether or not
approval of Global Resources Fund's shareholders has been obtained, by mutual
agreement of the parties. In addition, either party may terminate its
obligations under the Agreement at or prior to the Closing Date, because of a
material breach by the other party of any representations, warranties or
agreements contained in the Agreement, or if a condition precedent in the
Agreement has not been met.
Expenses of the Reorganization. Special Opportunities Fund and Global
Resources Fund will each be responsible for its own expenses incurred in
connection with entering into and carrying out the provisions of the
Agreement, whether or not the Reorganization is consummated.
Tax Considerations
The consummation of the Reorganization is subject to the receipt of a
favorable opinion of Hale and Dorr, counsel to the Funds, satisfactory to the
Company on behalf of Global Resources Fund and Freedom Trust on behalf of
Special Opportunities Fund and described above under the caption, "Summary--
Reorganization--Tax Considerations."
Voting Rights and Required Vote
Each Global Resources Fund share is entitled to one vote. Class A and
Class B shareholders of Global Resources Fund vote together with respect to
the Proposal. Approval of the Proposal requires the affirmative vote of a
majority of the shares of Global Resources Fund outstanding and entitled to
vote.
Shares of common stock of Global Resources Fund represented in person or
by proxy, including shares which abstain or do not vote with respect to the
Proposal, will be counted for purposes of determining whether a quorum is
present at the Meeting. Accordingly, an abstention from voting has the same
effect as a vote against the Proposal. However, if a broker or nominee
holding shares in "street name" indicates on the proxy card that it does not
have discretionary authority to vote on the Proposal, those shares will not
be considered as present and entitled to vote with respect to the Proposal.
In determining whether the Proposal has been adopted pursuant to the
requirement that the Proposal be approved by a majority of the outstanding
shares of the Fund entitled to vote, because shares represented by a "broker
non-vote" are considered outstanding shares, a "broker non-vote" will have
the same effect as a vote against the Proposal.
If the requisite approval of shareholders is not obtained, Global
Resources Fund will continue to engage in business as a registered open-end,
management
26
<PAGE>
investment company and the Board of Directors of the Company will consider
what further action may be appropriate.
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of
October 31, 1995, and the pro forma combined capitalization of Special
Opportunities Fund as if the Reorganization had occurred on that date. The
table reflects pro forma exchange ratios of approximately (i) 1.5037 Class A
Special Opportunities Fund Shares being issued for each Class A share of
Global Resources Fund and (ii) approximately 1.5082 Class B Special
Opportunities Fund Shares being issued for each Class B share of Global
Resources Fund. If the Reorganization is consummated, the actual exchange
ratios on the Closing Date may vary from those indicated due to (i) changes
in the market value of the portfolio securities of Special Opportunities Fund
and Global Resources Fund between October 31, 1995 and the Closing Date; (ii)
changes in the amount of undistributed net investment income and net realized
capital gains of Special Opportunities Fund and Global Resources Fund during
that period resulting from income and distributions; and (iii) changes in the
accrued liabilities of Special Opportunities Fund and Global Resources Fund
during the same period.
OCTOBER 31, 1995
Global Special
Resources Opportunities Pro Forma
Fund Fund Combined
---------- ----------- -------------
Net Assets $28,726,170 $238,925,410 $267,651,580
Net Asset Value Per Share:
Class A $14.00 $9.32 $9.32
Class B $13.86 $9.19 $9.19
Shares Outstanding
Class A 165,952 10,902,887 11,152,373
Class B 1,905,178 14,949,105 17,822,417
(1) If the Reorganization had taken place on October 31, 1995, Global
Resources Fund would have received 249,486 Class A shares and 2,873,312
Class B shares of Special Opportunities Fund, which would have been
available for distribution to shareholders of the applicable class of
Global Resources Fund. No assurance can be given as to the number of
Class A Shares or Class B shares of Special Opportunities Fund that will
be received by Global Resources Fund on the Closing Date. The foregoing
is merely an example of what Global Resources Fund would have received
and distributed had the Reorganization been consummated on October 31,
1995, and should not be relied upon to reflect the amount that will
actually be received on the Closing Date.
(2) If both the Reorganization and the Gold & Government Reorganization had
taken place on October 31, 1995, Special Opportunities Fund's pro forma
27
<PAGE>
combined net assets would be $302,870,179 and the number of Class A and
Class B Special Opportunities Fund Shares outstanding would have been
13,116,891 and 19,663,676, respectively. The Gold & Government
Reorganization does not affect the net asset value of the Class A or
Class B Special Opportunities Fund Shares to be issued in the
Reorganization to Global Resources Fund for distribution to its
shareholders.
COMPARATIVE PERFORMANCE INFORMATION
Total Return
The average annual total return of each class of the Funds is determined
by multiplying a hypothetical initial investment of $1,000 in a class by the
average annual compound rate of return (including capital
appreciation/depreciation, and dividends and distributions paid and
reinvested) attributable to that class for the stated period and annualizing
the result. Total return on Class B shares reflects the applicable CDSC.
The table below indicates the total return (capital changes plus
reinvestment of all dividends and distributions) on a hypothetical investment
of $1,000 in each class of each Acquired Fund and Special Opportunities Fund
covering the indicated periods ending October 31, 1995. The data below
represent historical performance which should not be considered indicative of
future performance of a fund. Some performance results would be lower absent
expense limitations that were in effect during the periods described. Each
Acquired Fund's and Special Opportunities Fund's performance and net asset
value will fluctuate so that their shares, when redeemed, may be worth more
or less than their original cost.
28
<PAGE>
Value of a $1,000 Investment in John Hancock
Global Resources Fund
(Unaudited)
<TABLE>
<CAPTION>
Value of
Investment on
October 31, 1995 Total Return Total Return
Investment Investment Amount of Including Including Sales Charge Excluding Sales Charge
Period Date Investment Sales Charge Cumulative Annualized Cumulative Annualized
------------------ -------- --------- ------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares:
From inception
(June 15, 1994) to
October 31, 1995 6/15/94 $1,000 $ 893.42 (10.65)% (7.87)% (5.98)% (4.38)%
1 year ended
October 31, 1995 10/31/94 $1,000 $ 851.58 (14.84)% (14.84)% (10.37)% (10.37)%
Class B Shares:
From inception
(October 26, 1987) to
October 31, 1995 10/26/87 $1,000 $1,770.24 77.02% 7.39% 77.02% 7.39%
5 years ended
October 31, 1995 10/31/90 $1,000 $1,242.29 24.23% 4.43% 26.23% 4.77%
1 year ended
October 31, 1995 10/31/94 $1,000 $ 845.12 (15.49)% (15.49)% (11.04)% (11.04)%
</TABLE>
Value of a $1,000 Investment in John Hancock
Gold & Government Fund
(Unaudited)
<TABLE>
<CAPTION>
Value of
Investment on
October 31, 1995 Total Return Total Return
Investment Investment Amount of Including Including Sales Charge Excluding Sales Charge
Period Date Investment Sales Charge Cumulative Annualized Cumulative Annualized
------------------ -------- --------- ------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares:
From inception
(January 3, 1992) to
October 31, 1995 1/3/92 $1,000 $ 975.77 (2.42%) (0.64%) 2.74% 0.71%
1 year ended
October 31, 1995 10/31/94 $1,000 $ 895.96 (10.40%) (10.40%) (5.66%) (5.66%)
Class B Shares:
10 years ended
October 31, 1995 10/31/85 $1,000 $1,722.67 72.27% 5.60% 72.27% 5.60%
5 years ended
October 31, 1995 10/31/90 $1,000 $1,139.75 13.98% 2.65% 15.98% 3.01%
1 year ended
October 31, 1995 10/31/94 $1,000 $ 889.79 (11.02%) (11.02%) (6.32%) (6.32%)
</TABLE>
29
<PAGE>
Value of a $1,000 Investment in John Hancock
Special Opportunities Fund
(Unaudited)
<TABLE>
<CAPTION>
Value of
Investment on
October 31, 1995 Total Return Total Return
Investment Investment Amount of Including Including Sales Charge Excluding Sales Charge
Period Date Investment Sales Charge Cumulative Annualized Cumulative Annualized
------------------ -------- --------- ------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares:
From inception
(January 1, 1993) 1/1/93 $1,000 $1,041.34 4.13% 2.05% 9.65% 4.73%
1 year ended
October 31, 1995 10/31/94 $1,000 $1,116.16 11.62% 11.62% 17.53% 17.53%
Class B Shares:
From inception
(January 1, 1993) to
October 31, 1995 1/1/93 $1,000 $1,031.18 3.12% 1.55% 8.12% 4.00%
1 year ended
October 31, 1995 10/31/94 $1,000 $1,117.73 11.77% 11.77% 16.77% 16.77%
</TABLE>
30
<PAGE>
BUSINESS OF GLOBAL RESOURCES FUND
General
For a discussion of the organization and operation of Global Resources
Fund, see "Investment Objectives and Policies" and "Organization and
Management of the Fund" in the Global Resources Fund Prospectus.
Investment Objective and Policies
For a discussion of Global Resources Fund's investment objective and
policies, see "Investment Objective and Policies" in the Global Resources
Fund Prospectus.
Portfolio Management
Kevin R. Baker is portfolio manager of Global Resources Fund. Prior to
joining the Adviser in 1994, Mr. Baker was President of Baker Capital
Management. He also worked as a registered representative for Kidder, Peabody
& Co. Incorporated.
Directors
For a discussion of the responsibilities of the Board of Directors of the
Company, see "Organization and Management of the Fund" in the Global
Resources Fund Prospectus.
Investment Adviser and Distributor
For a discussion regarding Global Resources Fund's investment adviser and
distributor, see "Organization and Management of the Fund," "How to Buy
Shares" and "Share Price" in the Global Resources Fund Prospectus.
Expenses
For a discussion of Global Resources Fund's expenses, see "Expense
Information" and "The Fund's Expenses" in the Global Resources Fund
Prospectus.
Custodian and Transfer Agent
Global Resources Fund's custodian is Investors Bank & Trust Company.
Global Resources Fund's transfer agent is John Hancock Investor Services
Corporation.
Global Resources Fund Shares
For a discussion of Global Resources Fund's shares of common stock, see
"Organization and Management of the Fund" in the Global Resources Fund
Prospectus.
Purchase of Global Resources Fund Shares
For a discussion of how shares of Global Resources Fund may be purchased
or exchanged, see "How to Buy Shares," "Alternative Purchase Arrangements"
and "Additional Services and Programs" in the Global Resources Fund
Prospectus. In anticipation of the Reorganization, no new accounts may be
opened in
31
<PAGE>
Global Resources Fund. Existing shareholders of Global Resources Fund may
continue to purchase shares of the Fund after the Record Date.
Redemption of Global Resources Fund Shares
For a discussion of how Class A and Class B shares of Global Resources
Fund may be redeemed (other than in the Reorganization), see "How to Redeem
Shares" in the Global Resources Fund Prospectus. Global Resources Fund
shareholders whose shares are represented by stock certificates will be
required to surrender their certificates for cancellation or deliver an
affidavit of loss accompanied by an adequate surety bond to Investor Services
in order to redeem Special Opportunities Fund Shares received in the
Reorganization.
Dividends, Distributions and Taxes
For a discussion of Global Resources Fund's policy with respect to
dividends, distributions and taxes, see "Dividends and Taxes" in the Global
Resources Fund Prospectus.
BUSINESS OF SPECIAL OPPORTUNITIES FUND
General
For a discussion of the organization and current operation of Special
Opportunities Fund, see "Investment Objective and Policies and Certain Risk
Considerations" and "Organization and Management of the Fund" in the Special
Opportunities Fund Prospectus.
Investment Objective and Policies
For discussion of Special Opportunities Fund's investment objective and
policies, see "Investment Objective and Policies and Certain Risk
Considerations" in the Special Opportunities Fund Prospectus.
Portfolio Management
Kevin R. Baker is portfolio manager of Special Opportunities Fund and is
assisted by a team of portfolio managers and analysts.
Trustees
For a discussion of the responsibilities of Freedom Trust's Board of
Trustees, see "Organization and Management of the Fund" in the Special
Opportunities Fund Prospectus.
Investment Adviser and Distributor
For a discussion regarding Special Opportunities Fund's investment adviser
and distributor, see "Organization and Management of the Fund," "How to Buy
Shares" and "Share Price" in the Special Opportunities Fund Prospectus.
32
<PAGE>
Expenses
For a discussion of Special Opportunities Fund's expenses, see "Expense
Information" and "The Fund's Expenses" in the Special Opportunities Fund
Prospectus.
Custodian and Transfer Agent
Special Opportunities Fund's custodian is Investors Bank & Trust Company.
Special Opportunities Fund's transfer agent is John Hancock Investor Services
Corporation.
Special Opportunities Fund Shares
For a discussion of the Special Opportunities Fund Shares, see
"Organization and Management of the Fund" in the Special Opportunities Fund
Prospectus.
Purchase of Special Opportunities Fund Shares
For a discussion of how Class A and Class B shares of Special
Opportunities Fund may be purchased or exchanged, see "How to Buy Shares,"
"Alternative Purchase Arrangements" and "Additional Services and Programs" in
the Special Opportunities Fund Prospectus.
Redemption of Special Opportunities Fund Shares
For a discussion of how Class A and Class B shares of Special
Opportunities Fund may be redeemed, see "How to Redeem Shares" in the Special
Opportunities Fund Prospectus. Former shareholders of Global Resources Fund
whose shares are represented by stock certificates will be required to
surrender their certificates for cancellation or deliver an affidavit of loss
accompanied by an adequate surety bond to Investor Services in order to
redeem Special Opportunities Fund Shares received in the Reorganization.
Dividends, Distributions and Taxes
For a discussion of Special Opportunities Fund's policy with respect to
dividends, distributions and taxes, see "Dividends and Taxes" in the Special
Opportunities Fund Prospectus.
EXPERTS
The respective financial statements and the financial highlights of
Special Opportunities Fund and Global Resources Fund as of October 31, 1995
and for the year then ended, incorporated by reference into this Proxy
Statement and Prospectus, have been audited by Price Waterhouse LLP and Ernst
& Young LLP, respectively, independent auditors, as set forth in their
respective reports thereon appearing in the Statement of Additional
Information, and are included in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
33
<PAGE>
AVAILABLE INFORMATION
Each Fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the Investment Company Act, and in accordance
therewith files reports, proxy statements and other information with the SEC.
These reports, proxy statements and other information filed by the Company
and Freedom Trust, respectively, on behalf of each Fund, can be inspected and
copied (at prescribed rates) at the public reference facilities of the SEC at
450 Fifth Street, N.W., Washington, D.C., and at the following regional
office: New York (7 World Trade Center, Suite 1300, New York, New York).
Copies of such material can also be obtained by mail from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
34
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this 28th
day of June, 1996, by and between John Hancock Special Opportunities Fund (the
"Acquiring Fund"), a series of Freedom Investment Trust II, a Massachusetts
business trust (the "Trust"), and John Hancock Global Resources Fund (the
"Acquired Fund"), a series of John Hancock Series, Inc., a Maryland corporation
(the "Company") each with their principal place of business at 101 Huntington
Avenue, Boston, Massachusetts 02199. The Acquiring Fund and the Acquired Fund
are sometimes referred to collectively herein as the "Funds" and individually as
a "Fund."
This Agreement is intended to be and is adopted as a plan of "reorganization,"
as such term is used in Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization will consist of the transfer of all of
the assets of the Acquired Fund to the Acquiring Fund in exchange solely for the
issuance of Class A and Class B shares of beneficial interest of the Acquiring
Fund (the "Acquiring Fund Shares") to the Acquired Fund and the assumption by
the Acquiring Fund of all of the liabilities of the Acquired Fund, followed by
the distribution by the Acquired Fund, on or promptly after the Closing Date
hereinafter referred to, of the Acquiring Fund Shares to the shareholders of the
Acquired Fund in liquidation and termination of the Acquired Fund as provided
herein, all upon the terms and conditions set forth in this Agreement.
In consideration of the premises of the covenants and agreements hereinafter set
forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ISSUANCE OF ACQUIRING FUND SHARES; LIQUIDATION OF THE
ACQUIRED FUND
1.1 The Acquired Fund will transfer all of its assets (consisting, without
limitation, of portfolio securities and instruments, dividends and interest
receivables, cash and other assets), as set forth in the statement of
assets and liabilities referred to in Paragraph 7.2 hereof (the "Statement
of Assets and Liabilities"), to the Acquiring Fund free and clear of all
liens and encumbrances, except as otherwise provided herein, in exchange
for (i) the assumption by the Acquiring Fund of the known and unknown
liabilities of the Acquired Fund, including the liabilities set forth in
the Statement of Assets and Liabilities (the "Acquired Fund Liabilities"),
which shall be assigned and transferred to the Acquiring Fund by the
Acquired Fund and assumed by the Acquiring Fund, and (ii) delivery by the
Acquiring Fund to the Acquired Fund, for distribution pro rata by the
Acquired Fund to its shareholders in proportion to their respective
ownership of Class A and/or Class B shares of common stock of the Acquired
Fund, as of the close of business on August 16, 1996 (the "Closing Date"),
of a number of the Acquiring Fund Shares having an aggregate net asset
value equal, in the case of each class of Acquiring Fund Shares, to the
value of the assets, less such liabilities
<PAGE>
(herein referred to as the "net value of the assets") attributable to the
applicable class, assumed, assigned and delivered, all determined as
provided in Paragraph 2.1 hereof and as of a date and time as specified
therein. Such transactions shall take place at the closing provided for in
Paragraph 3.1 hereof (the "Closing"). All computations shall be provided by
Investors Bank & Trust Company (the "Custodian"), as custodian and pricing
agent for the Acquiring Fund and the Acquired Fund.
1.2 The Acquired Fund has provided the Acquiring Fund with a list of the
current securities holdings of the Acquired Fund as of the date of
execution of this Agreement. The Acquired Fund reserves the right to sell
any of these securities (except to the extent sales may be limited by
representations made in connection with issuance of the tax opinion
provided for in paragraph 8.6 hereof) but will not, without the prior
approval of the Acquiring Fund, acquire any additional securities other
than securities of the type in which the Acquiring Fund is permitted to
invest.
1.3 The Acquiring Fund and the Acquired Fund shall each bear its own expenses
in connection with the transactions contemplated by this Agreement.
1.4 On or as soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Acquired Fund will liquidate and distribute pro
rata to shareholders of record (the "Acquired Fund shareholders"),
determined as of the close of regular trading on the New York Stock
Exchange on the Closing Date, the Acquiring Fund Shares received by the
Acquired Fund pursuant to Paragraph 1.1 hereof. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund
Shares then credited to the account of the Acquired Fund on the books of
the Acquiring Fund, to open accounts on the share records of the Acquiring
Fund in the names of the Acquired Fund shareholders and representing the
respective pro rata number and class of Acquiring Fund Shares due such
shareholders. Acquired Fund shareholders who own Class A shares of the
Acquired Fund will receive Class A Acquiring Fund Shares and Acquired Fund
shareholders who own Class B shares of the Acquired Fund will receive Class
B Acquiring Fund Shares. The Acquiring Fund shall not issue certificates
representing Acquiring Fund Shares in connection with such exchange.
1.5 The Acquired Fund shareholders holding certificates representing their
ownership of shares of common stock of the Acquired Fund shall surrender
such certificates or deliver an affidavit with respect to lost certificates
in such form and accompanied by such surety bonds as the Acquired Fund may
require (collectively, an "Affidavit"), to John Hancock Investor Services
Corporation prior to the Closing Date. Any Acquired Fund share certificate
which remains outstanding on the Closing Date shall be deemed to be
canceled, shall no longer evidence ownership of shares of beneficial
interest of the Acquired Fund and shall evidence ownership of Acquiring
Fund Shares. Unless and until any such certificate shall be so surrendered
or an Affidavit relating thereto shall be delivered, dividends and other
distributions payable by the Acquiring Fund subsequent to the Liquidation
Date with respect to Acquiring Fund Shares shall be paid to the holder of
such certificate(s), but such
-2-
<PAGE>
shareholders may not redeem or transfer Acquiring Fund Shares received in
the Reorganization. The Acquiring Fund will not issue share certificates in
the Reorganization.
1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name
other than the registered holder of the Acquired Fund Shares on the books
of the Acquired Fund as of that time shall, as a condition of such issuance
and transfer, be paid by the person to whom such Acquiring Fund Shares are
to be issued and transferred.
1.7 The existence of the Acquired Fund shall be terminated as promptly as
practicable following the Liquidation Date.
1.8 Any reporting responsibility of the Trust, including, but not limited to,
the responsibility for filing of regulatory reports, tax returns, or other
documents with the Securities and Exchange Commission (the "Commission"),
any state securities commissions, and any federal, state or local tax
authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Trust.
2. VALUATION
2.1 The net asset values of the Class A and Class B Acquiring Fund Shares and
the net values of the assets and liabilities of the Acquired Fund
attributable to its Class A and Class B shares to be transferred shall, in
each case, be determined as of the close of business (4:00 p.m. Boston
time) on the Closing Date. The net asset values of the Class A and Class B
Acquiring Fund Shares shall be computed by the Custodian in the manner set
forth in the Acquiring Fund's Declaration of Trust as amended and restated
(the "Declaration"), or By-Laws and the Acquiring Fund's then-current
prospectus and statement of additional information and shall be computed in
each case to not fewer than four decimal places. The net values of the
assets of the Acquired Fund attributable to its Class A and Class B shares
to be transferred shall be computed by the Custodian by calculating the
value of the assets of each class transferred by the Acquired Fund and by
subtracting therefrom the amount of the liabilities of each class assigned
and transferred to and assumed by the Acquiring Fund on the Closing Date,
said assets and liabilities to be valued in the manner set forth in the
Acquired Fund's then current prospectus and statement of additional
information and shall be computed in each case to not fewer than four
decimal places.
2.2 The number of shares of each class of Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Acquired Fund's
assets shall be determined by dividing the value of the Acquired Fund's
assets attributable to a class, less the liabilities attributable to that
class assumed by the Acquiring Fund, by the Acquiring Fund's net asset
value per share of the same class, all as determined in accordance with
Paragraph 2.1 hereof.
2.3 All computations of value shall be made by the Custodian in accordance with
its rgular practice as pricing agent for the Funds.
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<PAGE>
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be August 16, 1996 or such other date on or before
December 31, 1996 as the parties may agree. The Closing shall be held as of
5:00 p.m. at the offices of the Company and the Trust, 101 Huntington
Avenue, Boston, Massachusetts 02199, or at such other time and/or place as
the parties may agree.
3.2 Portfolio securities that are not held in book-entry form in the name of
the Custodian as record holder for the Acquired Fund shall be presented by
the Acquired Fund to the Custodian for examination no later than three
business days preceding the Closing Date. Portfolio securities which are
not held in book-entry form shall be delivered by the Acquired Fund to the
Custodian for the account of the Acquiring Fund on the Closing Date, duly
endorsed in proper form for transfer, in such condition as to constitute
good delivery thereof in accordance with the custom of brokers, and shall
be accompanied by all necessary federal and state stock transfer stamps or
a check for the appropriate purchase price thereof. Portfolio securities
held of record by the Custodian in book-entry form on behalf of the
Acquired Fund shall be delivered to the Acquiring Fund by the Custodian by
recording the transfer of beneficial ownership thereof on its records. The
cash delivered shall be in the form of currency or by the Custodian
crediting the Acquiring Fund's account maintained with the Custodian with
immediately available funds.
3.3 In the event that on the Closing Date (a) the New York Stock Exchange shall
be closed to trading or trading thereon shall be restricted or (b) trading
or the reporting of trading on said Exchange or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of the
Acquiring Fund or the Acquired Fund is impracticable, the Closing Date
shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored;
provided that if trading shall not be fully resumed and reporting restored
on or before December 31, 1996, this Agreement may be terminated by the
Acquiring Fund or by the Acquired Fund upon the giving of written notice to
the other party.
3.4 The Acquired Fund shall deliver at the Closing a list of the names,
addresses, federal taxpayer identification numbers and backup withholding
and nonresident alien withholding status of the Acquired Fund shareholders
and the number of outstanding shares of each class of beneficial interest
of the Acquired Fund owned by each such shareholder, all as of the close of
business on the Closing Date, certified by its Treasurer, Secretary or
other authorized officer (the "Shareholder List"). The Acquiring Fund shall
issue and deliver to the Acquired Fund a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date, or provide
evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares
have been credited to the Acquired Fund's account on the books of the
Acquiring Fund. At the Closing, each party shall deliver to the other such
bills of sale, checks, assignments, stock certificates, receipts or other
documents as such other party or its counsel may reasonably request.
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<PAGE>
4. REPRESENTATIONS AND WARRANTIES
4.1 The Company on behalf of the Acquired Fund represents, warrants and
covenants to the Acquiring Fund as follows:
(a) The Company is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Maryland and has the
power to own all of its properties and assets and, subject to approval
by the shareholders of the Acquired Fund, to carry out the
transactions contemplated by this Agreement. Neither the Company nor
the Acquired Fund is required to qualify to do business in any
jurisdiction in which it is not so qualified or where failure to
qualify would subject it to any material liability or disability. The
Company has all necessary federal, state and local authorizations to
own all of its properties and assets and to carry on its business as
now being conducted;
(b) The Company is a registered investment company classified as a
management company and its registration with the Commission as an
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), is in full force and effect. The Acquired
Fund is a diversified series of the Company;
(c) The Company and the Acquired Fund are not, and the execution, delivery
and performance of their obligations under this Agreement will not
result, in violation of any provision of the Company's Articles of
Incorporation, as amended and restated, or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking
to which the Company or the Acquired Fund is a party or by which it is
bound;
(d) Except as otherwise disclosed in writing and accepted by the Acquiring
Fund, no material litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or threatened against the Company or the Acquired Fund or any
of the Acquired Fund's properties or assets. The Company knows of no
facts which might form the basis for the institution of such
proceedings, and neither the Company nor the Acquired Fund is a party
to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects
the Acquired Fund's business or its ability to consummate the
transactions herein contemplated;
(e) The Acquired Fund has no material contracts or other commitments
(other than this Agreement or agreements for the purchase of
securities entered into in the ordinary course of business and
consistent with its obligations under this Agreement) which will not
be terminated without liability to the Acquired Fund at or prior to
the Closing Date;
(f) The unaudited statement of assets and liabilities, including the
schedule of investments, of the Acquired Fund as of October 31, 1995
and the related statement of operations (copies of which have been
furnished to the Acquiring Fund) present fairly in all material
respects the financial condition of the Acquired Fund as of October
31, 1995 and the results of its operations for the period then ended
in accordance with generally accepted accounting
-5-
<PAGE>
principles consistently applied, and there were no known actual or
contingent liabilities of the Acquired Fund as of the respective dates
thereof not disclosed therein;
(g) Since October 31, 1995, there has not been any material adverse
change in the Acquired Fund's financial condition, assets,
liabilities, or business other than changes occurring in the ordinary
course of business, or any incurrence by the Acquired Fund of
indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund;
(h) At the date hereof and by the Closing Date, all federal, state and
other tax returns and reports, including information returns and payee
statements, of the Acquired Fund required by law to have been filed or
furnished by such dates shall have been filed or furnished, and all
federal, state and other taxes, interest and penalties shall have been
paid so far as due, or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge no such
return is currently under audit and no assessment has been asserted
with respect to such returns or reports;
(i) The Acquired Fund has elected to be treated as a regulated investment
company for federal income tax purposes, has qualified as such for
each taxable year of its operation and will qualify as such as of the
Closing Date with respect to its final taxable year ending on the
Closing Date;
(j) The authorized capital of the Company consists of 6,500,000,000 shares
of common stock divided into six series. The Acquired Fund consists of
75,000,000 authorized shares, $0.01 par value, which are divided into
two classes, Class A consisting of 25,000,000 authorized shares and
Class B consisting of 50,000,000 authorized shares. All issued and
outstanding shares of common stock of the Acquired Fund are,
and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and nonassessable by the Company. All of the
issued and outstanding shares of common stock of the Acquired Fund
will, at the time of Closing, be held by the persons and in the
amounts and classes set forth in the Shareholder List submitted to the
Acquiring Fund pursuant to Paragraph 3.4 hereof. The Acquired Fund
does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of its shares of common stock, nor is
there outstanding any security convertible into any of its shares of
common stock;
(k) At the Closing Date, the Acquired Fund will have good and marketable
title to the assets to be transferred to the Acquiring Fund pursuant
to Paragraph 1.1 hereof, and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder, and upon delivery
and payment for such assets, the Acquiring Fund will acquire good and
marketable title thereto subject to no restrictions on the full
transfer thereof, including such restrictions as might arise under the
Securities Act of 1933, as amended (the "1933 Act");
(l) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Company on
behalf of the Acquired
-6-
<PAGE>
Fund, and this Agreement constitutes a valid and binding obligation of
the Company and the Acquired Fund enforceable in accordance with its
terms, subject to the approval of the Acquired Fund's shareholders;
(m) The information to be furnished by the Acquired Fund to the Acquiring
Fund for use in applications for orders, registration statements,
proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate
and complete and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable
thereto;
(n) The proxy statement of the Acquired Fund (the "Proxy Statement") to be
included in the Registration Statement referred to in Paragraph 5.7
hereof (other than written information furnished by the Acquiring Fund
for inclusion therein, as covered by the Acquiring Fund's warranty in
Paragraph 4.2(m) hereof), on the effective date of the Registration
Statement, on the date of the meeting of the Acquired Fund
shareholders and on the Closing Date, shall not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading;
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquired Fund of the transactions contemplated by this Agreement;
(p) All of the issued and outstanding shares of common stock of the
Acquired Fund have been offered for sale and sold in conformity with
all applicable federal and state securities laws;
(q) The prospectus of the Acquired Fund, dated March 1, 1996 (the
"Acquired Fund Prospectus"), previously furnished to the Acquiring
Fund, does not contain any untrue statements of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
4.2 The Trust on behalf of the Acquiring Fund represents, warrants and
covenants to the Acquired Fund as follows:
(a) The Trust is a business trust duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts and
has the power to own all of its properties and assets and to carry out
the Agreement. Neither the Trust nor the Acquiring Fund is required to
qualify to do business in any jurisdiction in which it is not so
qualified or where failure to qualify would subject it to any material
liability or disability. The Trust has all necessary federal, state
and local authorizations to own all of its properties and assets and
to carry on its business as now being conducted;
(b) The Trust is a registered investment company classified as a
management company and its registration with the Commission as an
investment company under the 1940 Act is in full force and effect. The
Acquiring Fund is a non-diversified series of the Trust;
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<PAGE>
(c) The prospectus (the "Acquiring Fund Prospectus") and statement of
additional information for Class A and Class B shares of the Acquiring
Fund, each dated July 1, 1996, and any amendments or supplements
thereto on or prior to the Closing Date, and the Registration
Statement on Form N-14 to be filed in connection with this Agreement
(the "Registration Statement") (other than written information
furnished by the Acquired Fund for inclusion therein, as covered by
the Acquired Fund's warranty in Paragraph 4.1(m) hereof) will conform
in all material respects to the applicable requirements of the 1933
Act and the 1940 Act and the rules and regulations of the Commission
thereunder, the Acquiring Fund Prospectus does not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and the Registration Statement will not include any untrue
statement of material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(d) At the Closing Date, the Trust on behalf of the Acquiring Fund will
have good and marketable title to the assets of the Acquiring Fund;
(e) The Trust and the Acquiring Fund are not, and the execution, delivery
and performance of their obligations under this Agreement will not
result, in violation of any provisions of the Trust's Declaration, or
By-Laws or of any agreement, indenture, instrument, contract, lease or
other undertaking to which the Trust or the Acquiring Fund is a party
or by which the Trust or the Acquiring Fund is bound;
(f) Except as otherwise disclosed in writing and accepted by the Acquired
Fund, no material litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or threatened against the Trust or the Acquiring Fund or any
of the Acquiring Fund's properties or assets. The Trust knows of no
facts which might form the basis for the institution of such
proceedings, and neither the Trust nor the Acquiring Fund is a party
to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects
the Acquiring Fund's business or its ability to consummate the
transactions herein contemplated;
(g) The unaudited statement of assets and liabilities, including the
schedule of investments, of the Acquiring Fund as of October 31, 1995
and the related statement of operations (copies of which have been
furnished to the Acquired Fund), present fairly in all material
respects the financial condition of the Acquiring Fund as of October
31, 1995 and the results of its operations for the period then ended
in accordance with generally accepted accounting principles
consistently applied, and there were no known actual or contingent
liabilities of the Acquiring Fund as of the respective dates thereof
not disclosed herein;
(h) Since October 31, 1995, there has not been any material adverse change
in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of
business, or any incurrence by the Trust on behalf of the Acquiring
Fund
-8-
<PAGE>
of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as disclosed to and accepted by the
Acquired Fund;
(i) The Acquiring Fund has elected to be treated as a regulated investment
company for federal income tax purposes, has qualified as such for
each taxable year of its operation and will qualify as such as of the
Closing Date;
(j) The authorized capital of the Trust consists of an unlimited number of
shares of beneficial interest, no par value per share. All issued and
outstanding shares of beneficial interest of the Acquiring Fund are,
and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and nonassessable by the Trust. The Acquiring
Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of its shares of beneficial interest,
nor is there outstanding any security convertible into any of its
shares of beneficial interest;
(k) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action on the part of the Trust on
behalf of the Acquiring Fund, and this Agreement constitutes a valid
and binding obligation of the Acquiring Fund enforceable in accordance
with its terms;
(l) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund pursuant to the terms of this Agreement, when so issued and
delivered, will be duly and validly issued shares of beneficial
interest of the Acquiring Fund and will be fully paid and
nonassessable by the Trust;
(m) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete and
shall comply in all material respects with federal securities and
other laws and regulations applicable thereto; and
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Fund of the transactions contemplated by the Agreement,
except for the registration of the Acquiring Fund Shares under the
1933 Act, the 1940 Act and under state securities laws.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 Except as expressly contemplated herein to the contrary, the Company on
behalf of the Acquired Fund and the Trust on behalf of Acquiring Fund, will
operate their respective businesses in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary course
of business will include customary dividends and distributions and any
other distributions necessary or desirable to avoid federal income or
excise taxes.
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<PAGE>
5.2 The Company will call a meeting of the Acquired Fund shareholders to
consider and act upon this Agreement and to take all other action necessary
to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be issued
hereunder are not being acquired by the Acquired Fund for the purpose of
making any distribution thereof other than in accordance with the terms of
this Agreement.
5.4 The Company on behalf of the Acquired Fund will provide such information
within its possession or reasonably obtainable as the Trust on behalf of
the Acquiring Fund requests concerning the beneficial ownership of the
Acquired Fund's shares of common stock.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund each shall take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate the transactions contemplated by this Agreement.
5.6 The Company on behalf of the Acquired Fund shall furnish to the Trust on
behalf of the Acquiring Fund on the Closing Date the Statement of Assets
and Liabilities of the Acquired Fund as of the Closing Date, which
statement shall be prepared in accordance with generally accepted
accounting principles consistently applied and shall be certified by the
Acquired Fund's Treasurer or Assistant Treasurer. As promptly as
practicable but in any case within 60 days after the Closing Date, the
Acquired Fund shall furnish to the Acquiring Fund, in such form as is
reasonably satisfactory to the Trust, a statement of the earnings and
profits of the Acquired Fund for federal income tax purposes and of any
capital loss carryovers and other items that will be carried over to the
Acquiring Fund as a result of Section 381 of the Code, and which statement
will be certified by the President of the Acquired Fund.
5.7 The Trust on behalf of the Acquiring Fund will prepare and file with the
Commission the Registration Statement in compliance with the 1933 Act and
the 1940 Act in connection with the issuance of the Acquiring Fund Shares
as contemplated herein.
5.8 The Company on behalf of the Acquired Fund will prepare a Proxy Statement,
to be included in the Registration Statement in compliance with the 1933
Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
the 1940 Act and the rules and regulations thereunder (collectively, the
"Acts") in connection with the special meeting of shareholders of the
Acquired Fund to consider approval of this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY ON BEHALF OF THE
ACQUIRED FUND
The obligations of the Company on behalf of the Acquired Fund to complete the
transactions provided for herein shall be, at its election, subject to the
performance by the Trust on behalf of the Acquiring Fund of all the obligations
to be performed by it hereunder on or before the Closing Date, and, in addition
thereto, the following further conditions:
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<PAGE>
6.1 All representations and warranties of the Trust on behalf of the Acquiring
Fund contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with
the same force and effect as if made on and as of the Closing Date; and
6.2 The Trust on behalf of the Acquiring Fund shall have delivered to the
Acquired Fund a certificate executed in its name by the Trust's President
or Vice President and its Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquired Fund and dated as of the Closing
Date, to the effect that the representations and warranties of the Trust on
behalf of the Acquiring Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters
as the Company on behalf of the Acquired Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST ON BEHALF OF THE ACQUIRING
FUND
The obligations of the Trust on behalf of the Acquiring Fund to complete the
transactions provided for herein shall be, at its election, subject to the
performance by the Acquired Fund of all the obligations to be performed by it
hereunder on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Acquired Fund contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as
if made on and as of the Closing Date;
7.2 The Company on behalf of the Acquired Fund shall have delivered to the
Trust on behalf of the Acquiring Fund the Statement of Assets and
Liabilities of the Acquired Fund, together with a list of its portfolio
securities showing the federal income tax bases and holding periods of such
securities, as of the Closing Date, certified by the Treasurer or Assistant
Treasurer of the Company;
7.3 The Company on behalf of the Acquired Fund shall have delivered to the
Trust on behalf of the Acquiring Fund on the Closing Date a certificate
executed in the name of the Acquired Fund by a President or Vice President
and a Treasurer or Assistant Treasurer of the Company, in form and
substance satisfactory to the Trust on behalf of the Acquiring Fund and
dated as of the Closing Date, to the effect that the representations and
warranties of the Acquired Fund in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters
as the Trust on behalf of the Acquiring Fund shall reasonably request; and
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<PAGE>
7.4 At or prior to the Closing Date, the Acquired Fund's investment adviser, or
an affiliate thereof, shall have made all payments, or applied all credits,
to the Acquired Fund required by any applicable contractual or
state-imposed expense limitation.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST AND THE COMPANY
The obligations hereunder of the Trust on behalf of the Acquiring Fund and the
Company on behalf of the Acquired Fund are each subject to the further
conditions that on or before the Closing Date:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of
common stock of the Acquired Fund in accordance with the provisions of the
Acquired Fund's Articles of Incorporation and By-Laws, and certified copies
of the resolutions evidencing such approval by the Acquired Fund's
shareholders shall have been delivered by the Acquired Fund to the Trust on
behalf of the Acquiring Fund;
8.2 On the Closing Date no action, suit or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain
or prohibit, or obtain changes or other relief in connection with, this
Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and permits of
federal, state and local regulatory authorities (including those of the
Commission and of state Blue Sky and securities authorities, including
"no-action" positions of such federal or state authorities) deemed
necessary by the Trust or the Company to permit consummation, in all
material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order or permit
would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may waive any such conditions for itself;
8.4 The Registration Statement shall have become effective under the 1933 Act
and the 1940 Act and no stop orders suspending the effectiveness thereof
shall have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act or the 1940 Act;
8.5 The Acquired Fund shall have distributed to its shareholders all of its
investment company taxable income (as defined in Section 852(b)(2) of the
Code) for its taxable year ending on the Closing Date and all of its net
capital gain (as such term is used in Section 852(b)(3)(C) of the Code),
after reduction by any available capital loss carryforward, for its taxable
year ending on the Closing Date; and
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<PAGE>
8.6 The parties shall have received an opinion of Messrs. Hale and Dorr,
satisfactory to the Company on behalf of the Acquired Fund and the Trust on
behalf of the Acquiring Fund, substantially to the effect that for federal
income tax purposes:
(a) The acquisition by the Acquiring Fund of all of the assets of the
Acquired Fund solely in exchange for the issuance of Acquiring Fund
Shares to the Acquired Fund and the assumption of all of the Acquired
Fund Liabilities by the Acquiring Fund, followed by the distribution
by the Acquired Fund, in liquidation of the Acquired Fund, of
Acquiring Fund Shares to the shareholders of the Acquired Fund in
exchange for their shares of common stock of the Acquired Fund and the
termination of the Acquired Fund, will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the Acquired
Fund and the Acquiring Fund will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by the Acquired Fund upon (i) the
transfer of all of its assets to the Acquiring Fund solely in exchange
for the issuance of Acquiring Fund Shares to the Acquired Fund and the
assumption of all of the Acquired Fund Liabilities by the Acquiring
Fund; and (ii) the distribution by the Acquired Fund of such Acquiring
Fund Shares to the shareholders of the Acquired Fund;
(c) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the
issuance of the Acquiring Fund Shares to the Acquired Fund and the
assumption of all of the Acquired Fund Liabilities by the Acquiring
Fund;
(d) The basis of the assets of the Acquired Fund acquired by the Acquiring
Fund will be, in each instance, the same as the basis of those assets
in the hands of the Acquired Fund immediately prior to the transfer;
(e) The tax holding period of the assets of the Acquired Fund in the hands
of the Acquiring Fund will, in each instance, include the Acquired
Fund's tax holding period for those assets;
(f) The shareholders of the Acquired Fund will not recognize gain or loss
upon the exchange of all of their shares of common stock of the
Acquired Fund solely for Acquiring Fund Shares as part of the
transaction;
(g) The basis of the Acquiring Fund Shares received by the Acquired Fund
shareholders in the transaction will be the same as the basis of the
shares of common stock of the Acquired Fund surrendered in exchange
therefor; and
(h) The tax holding period of the Acquiring Fund Shares received by the
Acquired Fund shareholders will include, for each shareholder, the tax
holding period for the shares of the Acquired Fund surrendered in
exchange therefor, provided that the Acquired Fund shares were held as
capital assets on the date of the exchange.
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<PAGE>
The Trust and the Company agree to make and provide representations with respect
to the Acquiring Fund and the Acquired Fund, respectively, which are reasonably
necessary to enable Hale and Dorr to deliver an opinion substantially as set
forth in this Paragraph 8.6. Notwithstanding anything herein to the contrary,
neither the Trust nor the Company may waive the conditions set forth in this
Paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1 The Trust on behalf of the Acquiring Fund, and the Company on behalf of the
Acquired Fund, each represent and warrant to the other, that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
9.2 The Acquiring Fund and the Acquired Fund shall each be liable solely for
its own expenses incurred in connection with entering into and carrying out
the provisions of this Agreement whether or not the transactions
contemplated hereby are consummated.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust on behalf of the Acquiring Fund, and the Company on behalf of the
Acquired Fund agree that neither party has made any representation,
warranty or covenant not set forth herein or referred to in Paragraph 4
hereof and that this Agreement constitutes the entire agreement between the
parties.
10.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the Trust on
behalf of the Acquiring Fund, and the Company on behalf of the Acquired
Fund. In addition, either party may at its option terminate this Agreement
at or prior to the Closing Date:
(a) because of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be performed at or
prior to the Closing Date;
(b) because of a condition herein expressed to be precedent to the
obligations of the terminating party which has not been met and which
reasonably appears will not or cannot be met;
(c) by resolution of the Trust's Board of Trustees if circumstances should
develop that, in the good faith opinion of such Board, make proceeding
with the Agreement not in the best interests of the Acquiring Fund's
shareholders; or
-14-
<PAGE>
(d) by resolution of the Company's Board of Directors if circumstances
should develop that, in the good faith opinion of such Board, make
proceeding with the Agreement not in the best interests of the
Acquired Fund's shareholders.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Trust, the Acquiring Fund, the Company, or the
Acquired Fund, or the Trustees, Directors or officers of the Company or the
Trust, but each party shall bear the expenses incurred by it incidental to
the preparation and carrying out of this Agreement.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon by the authorized officers of the Company and the Trust.
However, following the meeting of shareholders of the Acquired Fund held
pursuant to Paragraph 5.2 of this Agreement, no such amendment may have the
effect of changing the provisions regarding the method for determining the
number of Acquiring Fund Shares to be received by the Acquired Fund shareholders
under this Agreement to the detriment of such shareholders without their further
approval; provided that nothing contained in this Article 12 shall be construed
to prohibit the parties from amending this Agreement to change the Closing Date.
13. NOTICES
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Acquiring Fund or to the Acquired
Fund, each at 101 Huntington Avenue, Boston, Massachusetts 02199, Attention:
President, and, in either case, with copies to Hale and Dorr, 60 State Street,
Boston, Massachusetts 02109, Attention: Pamela J. Wilson, Esq.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by any party
without the prior written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
-15-
<PAGE>
14.5 All persons dealing with the Trust must look solely to the property of the
Trust for the enforcement of any claims against the Trust as the Trustees,
officers, agents and shareholders of the Trust assume no personal liability
for obligations entered into on behalf of the Trust. None of the other
series of the Trust shall be responsible for any obligations assumed by
on or behalf of the Acquiring Fund under this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first set forth above by its President or Vice President
and has caused its corporate seal to be affixed hereto.
FREEDOM INVESTMENT TRUST II on behalf of
JOHN HANCOCK SPECIAL OPPORTUNITIES FUND
By: /s/ Anne C. Hodsdon
----------------------------------------
Anne C. Hodsdon
President
JOHN HANCOCK SERIES, INC. on behalf of
JOHN HANCOCK GLOBAL RESOURCES FUND
By: /s/ Susan S. Newton
----------------------------------------
Susan S. Newton
Vice President
-16-
<PAGE>
John Hancock Disciplined Growth Fund
John Hancock Discovery Fund
John Hancock Emerging Growth Fund
John Hancock Growth Fund
John Hancock Regional Bank Fund
John Hancock Special Equities Fund
John Hancock Special Opportunities Fund
(together, the "Funds")
Supplement to Class A and B Prospectus, effective July 1, 1996
(to be distributed to investors in the State of Maryland)
The Funds' investment objectives and primary investment policies are described
from page 4 to page 17 of the prospectus. The Funds may also use additional
investment practices which have specific risks associated with them.
Particularly, please note:
o The Funds may engage in transactions in some or all of the following
derivative instruments: financial futures and related options, securities
and index options and currency contracts. The risks associated with their
use include: interest rate risk, currency risk, market risk, hedged or
speculative leverage risk, correlation risk, liquidity risk, credit risk
and opportunity risk.
o John Hancock Emerging Growth Fund may invest up to 10% of total assets in
non-investment grade convertible securities ("convertibles"), which are
debt securities that can be converted into equity securities at a future
time. Convertibles rated below BBB/Baa are considered "junk" bonds. The
risks associated with their use include: credit risk, valuation and
information risk, interest rate risk, market risk and liquidity risk.
These instruments and other "higher-risk securities and practices" are described
on page 29 of the prospectus. The risks associated with these instruments are
defined under the heading "Types of Investment Risk" on page 28 of the
prospectus.
July 1, 1996
GRMDS
<PAGE>
JOHN HANCOCK
GROWTH
FUNDS
[John Hancock's graphic logo. A
circle, diamond, triangle and a
cube.]
- --------------------------------------------------------------------------------
PROSPECTUS
JULY 1, 1996
This prospectus gives vital information about these funds. For your own benefit
and protection, please read it before you invest, and keep it on hand for future
reference.
Please note that these funds:
- - are not bank deposits
- - are not federally insured
- - are not endorsed by any bank or
government agency
- - are not guaranteed to achieve
their goal(s)
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
DISCIPLINED GROWTH FUND
DISCOVERY FUND
EMERGING GROWTH FUND
GROWTH FUND
REGIONAL BANK FUND
SPECIAL EQUITIES FUND
SPECIAL OPPORTUNITIES FUND
[John Hancock's graphic logo. A circle, diamond, triangle and a cube.]
101 Huntington Avenue, Boston, Massachusetts 02199-7603
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
A fund-by-fund look at goals, DISCIPLINED GROWTH FUND 4
strategies, risks, expenses and
financial history. DISCOVERY FUND 6
EMERGING GROWTH FUND 8
GROWTH FUND 10
REGIONAL BANK FUND 12
SPECIAL EQUITIES FUND 14
SPECIAL OPPORTUNITIES FUND 16
Policies and instructions for Your account
opening, maintaining and closing
an account in any growth fund. Choosing a share class 18
How sales charges are calculated 18
Sales charge reductions and waivers 19
Opening an account 19
Buying shares 20
Selling shares 21
Transaction policies 23
Dividends and account policies 23
Additional investor services 24
Details that apply to the growth FUND DETAILS
funds as a group.
Business structure 25
Sales compensation 26
More about risk 28
FOR MORE INFORMATION BACK COVER
<PAGE>
OVERVIEW
- --------------------------------------------------------------------------------
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[A graphic image of a bullseye with an arrow in the middle of it.] GOAL AND
STRATEGY The fund's particular investment goals and the strategies it intends
to use in pursuing those goals.
[A graphic image of a black folder that contains a couple sheets of paper.]
PORTFOLIO SECURITIES The primary types of securities in which the fund invests.
Secondary investments are described in "More about risk" at the end of the
prospectus.
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] RISK FACTORS The major risk factors associated with the fund.
[A graphic image of a generic person.] PORTFOLIO MANAGEMENT The individual or
group (including subadvisers, if any) designated by the investment adviser to
handle the fund's day-to-day management.
[A graphic image of a percent symbol.] EXPENSES The overall costs borne by an
investor in the fund, including sales charges and annual expenses.
[A graphic image of a dollar sign.] FINANCIAL HIGHLIGHTS A table showing the
fund's financial performance for up to ten years, by share class. A bar chart
showing total return allows you to compare the fund's historical risk level to
those of other funds.
GOAL OF THE GROWTH FUNDS
John Hancock growth funds seek long-term growth by investing primarily in common
stocks. Each fund employs its own strategy and has its own risk/reward profile.
Because you could lose money by investing in these funds, be sure to read all
risk disclosure carefully before investing.
WHO MAY WANT TO INVEST
These funds may be appropriate for investors who:
* have longer time horizons
* are willing to accept higher short-term risk along with higher potential
long-term returns
* want to diversify their portfolios
* are seeking funds for the growth portion of an asset allocation portfolio
* are investing for retirement or other goals that are many years in the
future
Growth funds may NOT be appropriate if you:
* are investing with a shorter time horizon in mind
* are uncomfortable with an investment that will go up and down in value
THE MANAGEMENT FIRM
All John Hancock growth funds are managed by John Hancock Advisers, Inc. Founded
in 1968, John Hancock Advisers is a wholly owned subsidiary of John Hancock
Mutual Life Insurance Company and manages more than $19 billion in assets.
<PAGE>
DISCIPLINED GROWTH FUND
<TABLE>
<S> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST TICKER SYMBOL CLASS A: SVAAX CLASS B: FEQVX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
established, growing companies that have demonstrated superior earnings growth
and stability. Under normal circumstances, the fund will invest at least 65% of
assets in these companies, without concentration in any one industry. The fund
also looks for the following characteristics:
* predictability of earnings
* a low level of debt
* seasoned management
* a strong market position
Many of the fund's investments are in medium or large capitalization companies.
The fund invests for income as a secondary goal.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in the common stocks of U.S. companies. It may also
invest in warrants, preferred stocks and investment-grade convertible debt
securities.
The fund expects any foreign investments to remain below 10% of assets.
For liquidity and flexibility, the fund may place up to 15% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The fund also may invest in certain higher-risk securities, and may engage in
other investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. To the extent that the fund invests in
higher-risk securities, it takes on additional risks that could adversely
affect its performance. Before you invest, please read "More about risk"
starting on page 28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] John F. Snyder III and Jere E. Estes are
the leaders of the fund's portfolio management team. Mr. Snyder is an executive
vice president of the adviser and has been a team member since July 1992. He
has been an investment manager since 1971. Mr. Estes has been a part of the
fund's management team since joining John Hancock in July 1992. He has been in
the investment business since 1967.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the
past year, adjusted to reflect any changes. Future expenses may be greater or
less.
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management fee 0.75% 0.75%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.40% 0.40%
Total fund operating expenses 1.45% 2.15%
</TABLE>
<TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $64 $94 $125 $215
Class B shares
Assuming redemption
at end of period $72 $97 $135 $231
Assuming no redemption $22 $67 $115 $231
This example is for comparison purposes only and is not a representation of
the fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
4 DISCIPLINED GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
Financial highlights
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Price Waterhouse LLP.
VOLATILITY, AS INDICATED BY CLASS B
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [BAR GRAPH]
<CAPTION>
======================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1992(1) 1993 1994 1995
======================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.81 $ 10.99 $ 12.39 $ 12.02
Net investment income (loss) 0.06(2) 0.08(2) 0.10 0.08(2)
Net realized and unrealized gain (loss) on investments (0.06) 1.34 0.07 1.29
Total from investment operations 0.00 1.42 0.17 1.37
Less distributions:
Dividends from net investment income (0.07) (0.02) (0.10) (0.10)
Distributions from net realized gain on investments sold (1.74) -- (0.44) (0.52)
Distributions from capital paid-in (0.01) -- -- --
Total distributions (1.82) (0.02) (0.54) (0.62)
Net asset value, end of period $10.99 $ 12.39 $ 12.02 $ 12.77
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) 0.19(4) 12.97 1.35 12.21
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 1,771 23,372 23,292 27,692
Ratio of expenses to average net assets(%) 1.73(5) 1.60 1.53 1.46
Ratio of net investment income (loss) to average net assets(%) 0.62(5) 0.64 0.83 0.69
Portfolio turnover rate(%) 246 71 60 65
Average brokerage commission rate(6)($) N/A N/A N/A N/A
</TABLE>
<TABLE>
=========================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1987(1) 1988 1989 1990 1991 1992
=========================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 8.34 $ 10.29 $ 11.52 $ 9.22 $ 11.71
Net investment income (loss) 0.06 0.13 0.19 0.18 0.07 0.01(2)
Net realized and unrealized gain (loss) on investments (1.70) 2.05 1.25 (2.00) 2.67 1.05
Total from investment operations (1.64) 2.18 1.44 (1.82) 2.74 1.06
Less distributions:
Dividends from net investment income (0.02) (0.09) (0.12) (0.20) (0.20) (0.03)
Distributions from net realized gain on investments sold -- (0.14) (0.09) (0.28) (0.05) (1.76)
Distributions from capital paid-in -- -- -- -- -- (0.01)
Total distributions (0.02) (0.23) (0.21) (0.48) (0.25) (1.80)
Net asset value, end of period $ 8.34 $ 10.29 $ 11.52 $ 9.22 $ 11.71 $ 10.97
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) (16.44)(4) 26.69 14.27 (16.46) 30.21 7.22
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 14,016 14,927 23,813 17,714 21,826 23,525
Ratio of expenses to average net assets(%) 2.56(5,7) 2.61(7) 2.30 2.13 2.24 2.27
Ratio of net investment income (loss) to average net assets(%) 0.93(5,7) 1.46(7) 1.75 1.64 0.66 0.10
Portfolio turnover rate(%) 40(5) 54 94 165 217 246
Average brokerage commission rate(6)($) N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
======================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1993 1994 1995
======================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.97 $ 12.31 $ 11.95
Net investment income (loss) 0.02(2) 0.03 0.01(2)
Net realized and unrealized gain (loss) on investments 1.33 0.07 1.28
Total from investment operations 1.35 0.10 1.29
Less distributions:
Dividends from net investment income (0.01) (0.02) (0.03)
Distributions from net realized gain on investments sold -- (0.44) (0.52)
Distributions from capital paid-in -- -- --
Total distributions (0.01) (0.46) (0.55)
Net asset value, end of period $ 12.31 $ 11.95 $ 12.69
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) 12.34 0.78 11.51
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 93,853 94,431 86,178
Ratio of expenses to average net assets(%) 2.09 2.10 2.11
Ratio of net investment income (loss) to average net assets(%) 0.17 0.25 0.06
Portfolio turnover rate(%) 71 60 65
Average brokerage commission rate(6)($) N/A N/A N/A
(1) Class A and Class B shares commenced operations on January 3, 1992 and
April 22, 1987, respectively.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
(6) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(7) Net of advisory expense reimbursements per share of $0.01 for the fiscal
year ended October 31, 1988 and less than $0.01 for the fiscal year ended
October 31, 1987.
</TABLE>
DISCIPLINED GROWTH FUND 5
<PAGE>
DISCOVERY FUND
<TABLE>
<S> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST III TICKER SYMBOL CLASS A: FRDAX CLASS B: FRDIX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
companies that appear to offer superior growth prospects. Under normal
circumstances, the fund will invest at least 65% of assets in these companies.
The fund looks for companies, including small- and medium-sized companies, that
have broad market opportunities and consistent or accelerating earnings growth.
These companies may:
- - occupy a profitable market niche
- - have products or technologies that are new, unique or proprietary
- - are in an industry that has a favorable long-term growth outlook
- - have a capable management team with a significant equity stake
These companies may be in a relatively early stage of development, but will
usually have established a record of profitability and a strong financial
position. The fund does not invest for income.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in common stocks of U.S. companies and may also invest
in warrants, preferred stocks and investment-grade convertible debt securities.
For liquidity and flexibility, the fund may place up to 15% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The fund may invest up to 25% of assets in foreign securities, which carry
additional risks. The fund also may invest in certain higher-risk securities,
and may engage in other investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. To the extent that the fund invests in
small and medium-sized company stocks, foreign securities and other higher-risk
securities, it takes on additional risks that could adversely affect its
performance. The fund may experience higher volatility than many other types of
growth funds. Before you invest, please read "More about risk" starting on page
28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] Bernice S. Behar, leader of the fund's
portfolio management team since March 1994, is a senior vice president of the
adviser. She joined the adviser in 1991 and has been in the investment business
since 1986.
- --------------------------------------------------------------------------------
<TABLE>
INVESTOR EXPENSES
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the
past year, adjusted to reflect any changes. Future expenses may be greater or
less.
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
ANNUAL FUND OPERATING EXPENSES
(AS A % OF AVERAGE NET ASSETS)
Management fee 0.75% 0.75%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.80% 0.80%
Total fund operating expenses 1.85% 2.55%
</TABLE>
<TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $68 $105 $145 $256
Class B shares
Assuming redemption
at end of period $76 $109 $155 $271
Assuming no redemption $26 $ 79 $135 $271
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
6 DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
[A graphic image of a dollar sign.] The figures below for the period ended July
31, 1992, were audited by the fund's former independent auditors, Price
Waterhouse LLP. Figures for subsequent years have been audited by the fund's
current independent auditors, Ernst & Young LLP.
Volatility, as indicated by Class B
year-by-year total investment return (%) [BAR GRAPH]
<CAPTION>
============================================================================================================================
CLASS A - YEAR ENDED JULY 31, 1992(1) 1993 1994 1995 1996(2)
============================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.40 $ 8.95 $ 10.81 $ 8.56 $ 12.95
Net investment income (loss) (0.05) (0.16) (0.16)(3) (0.10)(3) (0.10)(3)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (0.40) 2.15 (0.43) 4.83 0.55
Total from investment operations (0.45) 1.99 (0.59) 4.66 0.45
Less distributions:
Distributions from net realized gain on investments sold -- (0.13) (1.66) (0.27) (0.13)
Net asset value, end of period $ 8.95 $ 10.81 $ 8.56 $ 12.95 $ 13.27
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) (4.79)(5) 22.33 (6.45) 55.80 3.52(5)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 3,866 4,692 3,226 5,075 6,583
Ratio of expenses to average net assets (%) 1.78(6) 2.17 2.01 2.10 1.74(6)
Ratio of net investment income (loss) to average net assets (%) (1.20)(6) (1.61) (1.64) (1.73) (1.51)(6)
Portfolio turnover rate (%) 138 148 108 118 73
Average brokerage commission rate(7) ($) N/A N/A N/A N/A N/A
<CAPTION>
===========================================================================================================================
CLASS B - YEAR ENDED JULY 31, 992(1) 1993 1994 1995 1996(2)
===========================================================================================================================
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.00 $ 8.87 $ 10.65 $ 8.34 $ 12.54
Net investment income (loss) (0.11) (0.23) (0.22)(3) (0.22)(3) (30.14)(3)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.98 2.14 (0.43) 4.69 0.53
Total from investment operations 0.87 1.91 (0.65) 4.47 0.39
Less distributions:
Distributions from net realized gain on investments sold -- (0.13) (1.66) (0.27) (0.13)
Net asset value, end of period $ 8.87 $ 10.65 $ 8.34 $ 12.54 $ 12.80
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) 10.88(5) 21.63 (7.18) 54.97 3.15(5)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) ($) 34,636 38,672 26,537 31,645 34,452
Ratio of expenses to average net assets (%) 2.56(6) 2.86 2.62 2.70 2.43(6)
Ratio of net investment income (loss) to average net assets (%) (1.56)(6) (2.26) (2.24) (2.34) (2.20)(6)
Portfolio turnover rate (%) 138 148 108 118 73
Average brokerage commission rate(7) ($) N/A N/A N/A N/A N/A
(1) Class A and Class B shares commenced operations on January 3, 1992 and
August 30, 1991, respectively.
(2) Six months ended January 31, 1996. (Unaudited.)
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Not annualized.
(6) Annualized.
(7) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
</TABLE>
DISCOVERY FUND 7
<PAGE>
EMERGING GROWTH FUND
<TABLE>
<S><C>
REGISTRANT NAME: JOHN HANCOCK SERIES, INC. TICKER SYMBOL CLASS A: TAEMX CLASS B: TSEGX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
emerging companies (market capitalization of less than $1 billion). Under
normal circumstances, the fund will invest at least 80% of assets in a
diversified portfolio of these companies. The fund looks for companies that
show rapid growth but are not yet widely recognized. The fund also may invest
in established companies that, because of new management, products or
opportunities, offer the possibility of accelerating earnings. The fund does
not invest for income.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in the common stocks of U.S. and foreign emerging growth
companies, although it may invest up to 20% of assets in other types of
companies. The fund may also invest in warrants, preferred stocks and
investment-grade convertible debt securities.
For liquidity and flexibility, the fund may place up to 20% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest more assets in these securities as a defensive tactic.
The fund also may invest in certain higher-risk securities, and may engage in
other investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. Stocks of emerging growth companies carry
higher risks than stocks of larger companies. This is because emerging growth
companies:
- - may be in the early stages of development
- - may be dependent on a small number of products or services
- - may lack substantial capital reserves
- - do not have proven track records
In addition, stocks of emerging companies are often traded in low volumes,
which can increase market and liquidity risks. Before you invest, please read
"More about risk" starting on page 28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] Bernice S. Behar, leader of the fund's
portfolio management team since April 1996, is a senior vice president of the
adviser. She joined the adviser in 1991 and has been in the investment
business since 1986.
- --------------------------------------------------------------------------------
<TABLE>
INVESTOR EXPENSES
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the
past year, adjusted to reflect any changes. Future expenses may be greater or
less.
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
ANNUAL FUND OPERATING EXPENSES
(AS A % OF AVERAGE NET ASSETS)
Management fee 0.75% 0.75%
12b-1 fee(3) 0.25% 1.00%
Other expenses 0.40% 0.40%
Total fund operating expenses 1.40% 2.15%
</TABLE>
<TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $64 $92 $123 $210
Class B shares
Assuming redemption
at end of period $72 $97 $135 $229
Assuming no redemption $22 $67 $115 $229
This example is for comparison purposes only and is not a representation of
the fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
8 EMERGING GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS B
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [BAR CHART]
<CAPTION>
======================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1991(1) 1992 1993 1994 1995(2)
======================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.12 $ 19.26 $ 20.60 $ 25.89 $ 26.82
Net investment income (loss)(3) (0.03) (0.20) (0.16) (0.18) (0.25)
Net realized and unrealized gain (loss) on investments 1.17 1.60 5.45 1.11 9.52
Total from investment operations 1.14 1.40 5.29 0.93 9.27
Less distributions:
Distributions from net realized gain on investments sold -- (0.06) -- -- --
Net asset value, end of period $ 19.26 $ 20.60 $ 25.89 $ 26.82 $ 36.09
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) 6.29 7.32 25.68 3.59 34.56
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 38,859 46,137 81,263 131,053 179,481
Ratio of expenses to average net assets (%) 0.33 1.67 1.40 1.44 1.38
Ratio of net investment income (loss) to average net assets (%) (0.15) (1.03) (0.70) (0.71) (0.83)
Portfolio turnover rate (%) 66 48 29 25 23
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1987(1) 1988 1989 1990 1991 1992
=============================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.89 $ 7.89 $ 10.54 $ 12.76 $ 11.06 $ 19.22
Net investment income (loss)(3) (0.0021) 0.09 (0.08) (0.22) (0.30) (0.38)
Net realized and unrealized gain (loss) on investments 0.0021 2.56 2.83 (1.26) 8.46 1.56
Total from investment operations 0.0000 2.65 2.75 (1.48) 8.16 1.18
Less distributions:
Dividends from net investment income -- -- (0.04) -- -- --
Distributions from net realized gain on investments sold -- -- (0.49) (0.22) -- (0.06)
Total distributions -- -- (0.53) (0.22) -- (0.06)
Net asset value, end of period $ 7.89 $10.54 $ 12.76 $ 11.06 $ 19.22 $ 20.34
Total investment return at net asset value(4) (%) 0.00 33.59 27.40 (11.82) 73.78 6.19
TOTAL ADJUSTED INVESTMENT RETURN AT NET ASSET VALUE(4,6) (%) (0.41) 31.00 27.37 -- -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 79 3,232 7,877 11,668 52,743 86,923
Ratio of expenses to average net assets (%) 0.03 3.05 3.48 3.11 2.85 2.64
Ratio of adjusted expenses to average net assets(7) (%) 0.44 5.64 3.51 -- -- --
Ratio of net investment income (loss) to average net assets (%) (0.03) 0.81 (0.67) (1.64) (1.83) (1.99)
Ratio of adjusted net investment income (loss) to average net assets(7)(%) (0.44) (1.78) (0.70) -- -- --
Portfolio turnover rate (%) 0 252 90 82 66 48
Fee reduction per share ($) 0.03 0.29 0.004 -- -- --
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
======================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1993 1994 1995(2)
======================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C>
Net asset value, beginning of period $ 20.34 $ 25.33 $ 26.04
Net investment income (loss)(3) (0.36) (0.36) (0.45)
Net realized and unrealized gain (loss) on investments 5.35 1.07 9.20
Total from investment operations 4.99 0.71 8.75
Less distributions:
Dividends from net investment income -- -- --
Distributions from net realized gain on investments sold -- -- --
Total distributions -- -- --
Net asset value, end of period $ 25.33 $ 26.04 $ 34.79
Total investment return at net asset value(4) (%) 24.53 2.80 33.60
Total adjusted investment return at net asset value(4,6) (%) -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 219,484 283,435 393,478
Ratio of expenses to average net assets (%) 2.28 2.19 2.11
Ratio of adjusted expenses to average net assets(7) (%) -- --
Ratio of net investment income (loss) to average net assets (%) (1.58) (1.46) (1.55)
Ratio of adjusted net investment income (loss) to average net assets(7)(%)
Portfolio turnover rate (%) 29 25 23
Fee reduction per share ($) -- -- --
Average brokerage commission rate(5) ($) N/A N/A N/A
(1) Class A and Class B shares commenced operations on August 22, 1991 and
October 26, 1987, respectively. (Not annualized.)
(2) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(6) An estimated total return calculation, which does not take into
consideration fee reductions by the adviser during the periods shown.
(7) Unreimbursed, without fee reduction.
</TABLE>
EMERGING GROWTH FUND 9
<PAGE>
GROWTH FUND
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II
TICKER SYMBOL CLASS A: JHNGX CLASS B: JHGBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
stocks that are diversified with regard to industries and issuers. The fund
favors stocks of companies whose operating earnings and revenues have grown
more than twice as fast as the gross domestic product (GDP) over the past five
years, although not all stocks in the fund's portfolio will meet this
criterion.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
portfolio invests primarily in the common stocks of U.S. companies. It may also
invest in warrants, preferred stocks and convertible debt securities.
For liquidity and flexibility, the fund may invest up to 35% of net assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest more than 35% in these securities as a defensive tactic. The fund may
also invest in certain higher-risk securities, and may engage in other
investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. To the extent that the fund invests in
higher-risk securities, it takes on additional risks that could adversely
affect its performance. Before you invest, please read "More about risk"
starting on page 28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] Bernice S. Behar, leader of the fund's
portfolio management team since August 1995, is a senior vice president of the
adviser. She joined the adviser in 1991 and has been in the investment business
since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the
past year, adjusted to reflect any changes. Future expenses may be greater or
less.
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
ANNUAL FUND OPERATING EXPENSES
(AS A % OF AVERAGE NET ASSETS)
Management fee 0.80% 0.80%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.40% 0.40%
Total fund operating expenses 1.50% 2.20%
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
Class A shares $65 $95 $128 $220
Class B shares
Assuming redemption
at end of period $72 $99 $138 $236
Assuming no redemption $22 $69 $118 $236
This example is for comparison purposes only and is not a representation of
the fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
10 GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS A YEAR-BY-YEAR [BAR GRAPHIC]
TOTAL INVESTMENT RETURN (%)
<CAPTION>
==============================================================================================================================
CLASS A - YEAR ENDED DECEMBER 31, 1986 1987 1988 1989 1990
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 14.50 $ 14.03 $ 12.34 $ 13.33 $ 15.18
Net investment income (loss) 0.11 0.22 0.23 0.28 0.16
Net realized and unrealized gain (loss) on investments 1.79 0.64 1.16 3.81 (1.47)
Total from investment operations 1.90 0.86 1.39 4.09 (1.31)
Less distributions:
Dividends from net investment income (0.17) (0.28) (0.23) (0.29) (0.16)
Distributions from net realized gain on investments sold (2.20) (2.27) (0.17) (1.95) (0.78)
Total distributions (2.37) (2.55) (0.40) (2.24) (0.94)
Net asset value, end of period $ 14.03 $ 12.34 $ 13.33 $ 15.18 $ 12.93
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2)(%) 13.83 6.03 11.23 30.96 (8.34)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 87,468 86,426 101,497 105.014 102,416
Ratio of expenses to average net assets(%) 1.03 1.00 1.06 0.96 1.46
Ratio of net investment income (loss) to average net assets(%) 0.77 1.41 1.76 1.73 1.12
Portfolio turnover rate (%) 62 68 47 61 102
Average brokerage commission rate(4)($) N/A N/A N/A N/A N/A
<CAPTION>
==============================================================================================================================
CLASS A - YEAR ENDED DECEMBER 31, 1991 1992 1993 1994 1995
==============================================================================================================================
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.93 $ 17.48 $ 17.32 $ 17.40 $ 15.89
Net investment income (loss) 0.04 (0.06) (0.11) (0.10) (0.09)(1)
Net realized and unrealized gain (loss) on investments 5.36 1.10 2.33 (1.21) 4.40
Total from investment operations 5.40 1.04 2.22 (1.31) 4.31
Less distributions:
Dividends from net investment income (0.04) -- -- -- --
Distributions from net realized gain on investments sold (0.81) (1.20) (2.14) (0.20) (0.69)
Total distributions (0.85) (1.20) (2.14) (0.20) (0.69)
Net asset value, end of period $ 17,48 $ 17.32 $ 17.40 $ 15.89 $ 19.51
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2)(%) 41.68 6.06 13.03 (7.50) 27.17
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 145,287 153,057 162,937 146,466 241,700
Ratio of expenses to average net assets(%) 1.44 1.60 1.56 1.65 1.48
Ratio of net investment income (loss) to average net assets(%) 0.27 (0.36) (0.67) (0.64) (0.46)
Portfolio turnover rate (%) 82 71 68 52 68(3)
Average brokerage commission rate(4)($) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
======================================================================================================================
CLASS B - YEAR ENDED DECEMBER 31, 1994(5) 1995
======================================================================================================================
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $17.16 $15.83
Net investment income (loss) (0.20)(1) (0.26)(1)
Net realized and unrealized gain (loss) on investments (0.93) 4.73
Total from investment operations (1.13) 4.11
Less distributions:
Distributions from net realized gain on investments sold (0.20) (0.69)
Net asset value, end of period $15,83 $19.25
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2) (%) (6.56)(6) 26.01
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 3,807 15,913
Ratio of expenses to average net assets (%) 2.38(7) 2.31
Ratio of net investment income (loss) to average net assets (%) (1.25)(7) (1.39)
Portfolio turnover rate (%) 52 68(3)
Average brokerage commission rate(4) ($) N/A N/A
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Excludes merger activity.
(4) Per portfolio share traded. Required for fiscal years that began
September 1, 1995 or later.
(5) Class B shares commenced operations on January 3, 1994.
(6) Not annualized.
(7) Annualized.
</TABLE>
GROWTH FUND 11
<PAGE>
REGIONAL BANK FUND
<TABLE>
<S> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST TICKER SYMBOL CLASS A: FRBAX CLASS B: FRBFX
- ----------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
regional banks and lending institutions, including:
- commercial and industrial banks
- savings and loan associations
- bank holding companies
These financial institutions provide full-service banking, have primarily
domestic assets and are typically based outside of New York City and Chicago.
They may or may not be members of the Federal Reserve, and their deposits may or
may not be FDIC-insured. Under normal circumstances, the fund will invest at
least 65% of assets in these companies; it may invest up to 35% of assets in
other financial services companies, including lending companies and money center
banks. Because regional banks typically pay regular dividends, moderate income
is an investment goal.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in the common stocks of U.S. companies. It may also
invest in warrants, preferred stocks and investment-grade convertible debt
securities, as well as foreign stocks.
For liquidity and flexibility, the fund may place up to 15% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The fund may also invest in certain higher-risk securities, and may engage in
other investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. Because the fund concentrates in a
single industry, its performance is largely dependent on the industry's
performance, which may differ in direction and degree from that of the overall
stock market. Falling interest rates or deteriorating economic conditions can
adversely affect the performance of bank stocks, while rising interest rates
will cause a decline in the value of any debt securities the fund holds. Before
you invest, please read "More about risk" starting on page 28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] James K. Schmidt joined John Hancock in
1985 and has served as the fund's portfolio manager since its inception that
year. A senior vice president of the adviser, he has been in the investment
business since 1974.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the
past year, adjusted to reflect any changes. Future expenses may be greater or
less.
<CAPTION>
================================================================================
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
================================================================================
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
================================================================================
<CAPTION>
Annual fund operating expenses (as a % of average net assets)
================================================================================
Management fee 0.78% 0.78%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.31% 0.31%
Total fund operating expenses 1.39% 2.09%
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
=======================================================================================
Share class Year 1 Year 3 Year 5 Year 10
=======================================================================================
Class A shares $63 $92 $122 $209
- ---------------------------------------------------------------------------------------
Class B shares
- ---------------------------------------------------------------------------------------
Assuming redemption
at end of period $71 $95 $132 $224
- ---------------------------------------------------------------------------------------
Assuming no redemption $21 $65 $112 $224
- ---------------------------------------------------------------------------------------
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
12 REGIONAL BANK FUND
<PAGE>
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.]
The figures below have been audited by the fund's independent auditors, Price
Waterhouse LLP.
Volatility, as indicated by Class B [Bar Graph]
year-by-year total investment return (%)
<TABLE>
<CAPTION>
======================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1992(1) 1993 1994 1995
======================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.47 $ 17.47 $ 21.62 $ 21.52
Net investment income (loss) 0.21 0.26(2) 0.39(2) 0.52(2)
Net realized and unrealized gain (loss) on investments 3.98 5.84 0.91 5.92
Total from investment operations 4.19 6.10 1.30 6.44
Less distributions:
Dividends from net investment income (0.19) (0.26) (0.34) (0.48)
Distributions from net realized gain on investments sold -- (1.69) (1.06) (0.34)
Total distributions (0.19) (1.95) (1.40) (0.82)
Net asset value, end of period $ 17.47 $ 21.62 $ 21.52 $ 27.14
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 31.26(4) 37.45 6.44 31.00
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 31,306 94,158 216,978 486,631
Ratio of expenses to average net assets (%) 1.41(5) 1.35 1.34 1.39
Ratio of net investment income to average net assets (%) 1.64(5) 1.29 1.78 2.23
Portfolio turnover rate (%) 53 35 13 14
Average brokerage commission rate(6) ($) N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
==================================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1987(7) 1987(8) 1988 1989 1990
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.51 $ 12.68 $ 10.02 $ 11.89 $ 13.00
Net investment income (loss) 0.20 0.05 0.16 0.20 0.30
Net realized and unrealized gain (loss) on investment 1.74 (2.17) 3.12 2.02 (4.19)
Total from investment operations 1.94 (2.12) 3.28 2.22 (3.89)
Less distributions:
Dividends from net investment income (0.26) (0.04) (0.15) (0.16) (0.19)
Distributions from net realized gain on investments sold (1.51) (0.50) (1.26) (0.95) (0.76)
Distributions from capital paid-in -- -- -- -- (0.03)
Total distributions (1.77) (0.54) (1.41) (1.11) (0.98)
Net asset value, end of period $ 12.68 $ 10.02 $ 11.89 $ 13.00 $ 8.13
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 17.44 (17.36)(4) 36.89 20.46 (32.29)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 54,626 38,721 50,965 81,167 38,992
Ratio of expenses to average net assets (%) 1.48 2.47(5) 2.17 1.99 1.99
Ratio of net investment income (loss) to average net assets (%) 1.62 0.73(5) 1.50 1.67 2.51
Portfolio turnover rate (%) 89 58(5) 87 85 56
Average brokerage commission rate(6) ($) N/A N/A N/A N/A N/A
<CAPTION>
====================================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1991 1992 1993 1994 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.13 $ 13.76 $ 17.44 $ 21.56 $ 21.43
Net investment income (loss) 0.29 0.18 0.15(2) 0.23(2) 0.36(2)
Net realized and unrealized gain (loss) on investment 5.68 4.56 5.83 0.91 5.89
Total from investment operations 5.97 4.74 5.98 1.14 6.25
Less distributions:
Dividends from net investment income (0.34) (0.28) (0.17) (0.21) (0.32)
Distributions from net realized gain on investments sold -- (0.78) (1.69) (1.06) (0.34)
Distributions from capital paid-in -- -- -- -- --
Total distributions (0.34) (1.06) (1.86) (1.27) (0.66)
Net asset value, end of period $ 13.76 $ 17.44 $ 21.56 $ 21.43 $ 27.02
Total investment return at net asset value(3) (%) 75.35 37.20 36.71 5.69 30.11
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 52,098 56,016 171,808 522,207 1,236
Ratio of expenses to average net assets (%) 2.04 1.96 1.88 2.06 2.09
Ratio of net investment income (loss) to average net assets (%) 2.65 1.21 0.76 1.07 1.53
Portfolio turnover rate (%) 75 53 35 13 14
Average brokerage commission rate(6) ($) N/A N/A N/A N/A N/A
(1) Class A shares commenced operations on January 3, 1992.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
(6) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
(7) Year ended March 31, 1987.
(8) For the period April 1, 1987 to October 31, 1987.
</TABLE>
REGIONAL BANK FUND 13
<PAGE>
SPECIAL EQUITIES FUND
<TABLE>
<S> <C>
REGISTRANT NAME: JOHN HANCOCK SPECIAL EQUITIES FUND TICKER SYMBOL CLASS A: JHNSX CLASS B: SPQBX
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
small-capitalization companies and companies in situations offering unusual or
non-recurring opportunities. Under normal circumstances, the fund will invest
at least 65% of assets in a diversified portfolio of these companies. The fund
looks for companies that dominate an emerging industry or hold a growing market
share in a fragmented industry, and that have demonstrated annual earnings and
revenue growth of at least 25%, self-financing capabilities and strong
management. The fund does not invest for income.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in the common stocks of U.S. and foreign companies. It
may also invest in warrants, preferred stocks and investment-grade convertible
debt securities. For liquidity and flexibility, the fund may place up to 35% of
assets in cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest more than 35% in these securities as a defensive
tactic. The fund also may invest in certain higher-risk securities, and may
engage in other investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. Stocks of small-capitalization and
special-situation companies carry higher risks than stocks of larger companies.
This is because these companies:
- may lack proven track records
- may be dependent on a small
number of products or services
- may be undercapitalized
- may have highly priced stocks
that are sensitive to adverse news
In addition, stocks of these companies are often traded in low volumes, which
can increase market and liquidity risks. Before you invest, please read "More
about risk" starting on page 28.
MANAGEMENT/SUBADVISER
[A graphic image of a generic person.] Michael P. DiCarlo is responsible for
the fund's day-to-day investment management. He has served as the fund's
portfolio manager since January 1988, and has been in the investment business
since 1984. He is currently one of three principals in DFS Advisors, LLC, which
was founded in 1996 and serves as subadviser to the fund.
This fund will be closed to new investors at the end of the day its total assets
reach $2.5 billion. Further investments will be limited to existing accounts.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the
past year, adjusted to reflect any changes. Future expenses may be greater or
less.
<CAPTION>
================================================================================
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
================================================================================
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
================================================================================
<CAPTION>
================================================================================
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
================================================================================
Management fee(3) 0.82% 0.82%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.38% 0.40%
Total fund operating expenses 1.50% 2.22%
</TABLE>
<TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
=======================================================================================
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
=======================================================================================
<S> <C> <C> <C> <C>
Class A shares $65 $95 $128 $220
Class B shares
Assuming redemption
at end of period $73 $99 $139 $237
Assuming no redemption $23 $69 $119 $237
This example is for comparison purposes only and is not a representation of the fund's
actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Includes a subadviser fee equal to 0.25% of the fund's net assets.
(4) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
14 SPECIAL EQUITIES FUND
<PAGE>
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS A [Bar Graph]
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
<TABLE>
<CAPTION>
==================================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1986(7) 1987(8) 1988 1989 1990
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 5.21 $ 6.08 $ 4.30 $ 4.89 $ 6.38
Net investment income (loss) (0.03) (0.03) 0.04 0.01 (0.12)
Net realized and unrealized gain (loss) on investments 0.93 (1.26) 0.55 1.53 (1.27)
Total from investment operations 0.90 (1.29) 0.59 1.54 (1.39)
Less distributions:
Dividends from net investment income (0.02) -- -- (0.05) (0.02)
Distributions from net realized gain on investments sold (0.01) (0.45) -- -- --
Distributions from capital paid-in -- (0.04) -- -- --
Total distributions (0.03) (0.49) -- (0.05) (0.02)
Net asset value, end of period $ 6.08 $ 4.30 $ 4.89 $ 6.38 $ 4.97
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(1,2) (%) 17.38 (28.68) 13.72 31.82 (21.89)
Total adjusted investment return at net asset value (2,3) 15.41 (29.41) 12.28 30.75 (22.21)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 13,780 10,637 11,714 12,285 8,166
Ratio of expenses to average net assets (%) 1.50 1.50 1.50 1.50 2.63
Ratio of adjusted expenses to average net assets (4) (%) 3.47 2.23 2.94 2.57 2.95
Ratio of net investment income (loss) to average net assets (%) (0.57) (0.57) 0.82 0.47 (1.58)
Ratio of adjusted net investment income (loss) to average
Portfolio turnover rate (%) 64 93 91 115 113
Fee reduction per share 0.09 0.04 0.07 0.03 0.02
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A
<CAPTION>
====================================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1991 1992 1993 1994 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 4.97 $ 9.71 $ 10.99 $ 16.13 $ 16.11
Net investment income (loss) 0.10 0.19(1) 0.20(1) 0.21(1) 0.18(1)
Net realized and unrealized gain (loss) on investments 4.84 2.14 5.43 0.19 6.22
Total from investment operations 4.74 1.95 5.23 (0.02) 6.04
Less distributions:
Dividends from net investment income -- -- -- -- --
Distributions from net realized gain on investments sold -- (0.67) (0.09) -- --
Distributions from capital paid-in -- -- -- -- --
Total distributions -- (0.67) (0.09) -- --
Net asset value, end of period $ 9.71 $ 10.99 $ 16.13 $ 16.11 $ 22.15
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(1,2) (%) 95.37 20.25 47.83 (0.12) 37.49
Total adjusted investment return at net asset value (2,3) 95.33 -- -- -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 19,713 44,665 296,793 310,625 555,655
Ratio of expenses to average net assets (%) 2.75 2.24 1.84 1.62 1.48
Ratio of adjusted expenses to average net assets (4) (%) (2.21) (1.91) (1.49) (1.40) (0.97)
Ratio of net investment income (loss) to average net assets (%) 2.79 -- -- -- --
Ratio of adjusted net investment income (loss) to average
net assets(4)(%) (2.12) (1.91) (1.49) (1.40) (0.97)
Portfolio turnover rate (%) (2.16) -- -- -- --
Fee reduction per share 0.09 0.04 0.07 0.03 0.02
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
==========================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1993(6) 1994 1995
==========================================================================================================
<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 12.30 $ 16.08 $ 15.97
Net investment income (loss) 0.18(1) 0.30(1) 0.31(1)
Net realized and unrealized gain (loss) on investments 3.96 0.19 6.15
Total from investment operations 3.78 (0.11) 5.84
Net asset value, end of period $ 16.08 $ 15.97 $ 21.81
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2) (%) 30.73(7) (0.68) 36.57
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 158,281 191,979 454,934
Ratio of expenses to average net assets (%) 2.34(8) 2.25 2.20
Ratio of net investment income to average net assets (%) (2.03)(8) (2.02) (1.69)
Portfolio turnover rate (%) 33 66 82
Average brokerage commission rate(5) ($) N/A N/A N/A
- -------------
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(3) An estimated total return calculation which does not take into
consideration fee reductions by the adviser during the periods shown.
(4) Unreimbursed, without fee reduction.
(5) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
(6) Class B shares commenced operations on March 1, 1993.
(7) Not annualized.
(8) Annualized.
SPECIAL EQUITIES FUND 15
</TABLE>
<PAGE>
SPECIAL OPPORTUNITIES FUND
<TABLE>
<S> <C> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A: SPOAX CLASS B:SPOBX
- --------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
those economic sectors that appear to have a higher than average earning
potential.
Under normal circumstances, at least 90% of the fund's equity securities will be
invested within five or fewer sectors (e.g., financial serv ices, energy,
technology). At times, the fund may focus on a single sector. The fund first
determines the inclusion and weighting of sectors, using macroeconomic as well
as other factors, then selects portfolio securities by seeking the most
attractive companies. The fund may add or drop sectors. Because the fund may
invest more than 5% of assets in a single issuer, it is classified as a
non-diversified fund.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in common stocks of U.S. and foreign companies of any
size. It may also invest in warrants, preferred stocks, convertible debt
securities, U.S. Government securities and corporate bonds rated at least
BBB/Baa, or equivalent. The fund also may invest in certain higher-risk
securities, and may engage in other investment practices.
For liquidity and flexibility, the fund may place up to 10% of net assets in
cash or investment-grade short-term securities. In abnormal market conditions,
it may invest more than 10% in these securities as a defensive tactic.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. By focusing on a relatively small number
of sectors or issuers, the fund runs the risk that any factor influencing those
sectors or issuers will have a major effect on performance. The fund may invest
in companies with smaller market capitalizations, which represent higher
near-term risks than larger capitalization companies. These factors make the
fund likely to experience higher volatility than most other types of growth
funds. Before you invest, please read "More about risk" starting on page 28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] Kevin R. Baker is leader of the portfolio
management team for the fund. A second vice president of the adviser, he has
been a member of the management team since joining the adviser in January 1994.
He has been in the investment business since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
================================================================================
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
================================================================================
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
================================================================================
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
================================================================================
Management fee 0.80% 0.80%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.49% 0.49%
Total fund operating expenses 1.59% 2.29%
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
================================================================================
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
================================================================================
Class A shares $65 $ 98 $132 $229
Class B shares
Assuming redemption
at end of period $73 $102 $143 $245
Assuming no redemption $23 $ 72 $123 $245
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
16 SPECIAL OPPORTUNITIES FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Price Waterhouse LLP.
VOLATILITY, AS INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [BAR GRAPH]
<TABLE>
<CAPTION>
============================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1994(1) 1995
============================================================================================
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 7.93
Net investment income (loss) (0.03)(2) (0.07)(2)
Net realized and unrealized gain (loss) on investments (0.54) 1.46
Total from investment operations (0.57) 1.39
Net asset value, end of period $ 7.93 $ 9.32
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) (6.71) 17.53
Total adjusted investment return at net asset value(3,4)(%) (6.83) --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 92,325 101,562
Ratio of expenses to average net assets (%) 1.50 1.59
Ratio of adjusted expenses to average net assets(5)(%) 1.62 --
Ratio of net investment income (loss) to average net assets (%) (0.41) (0.87)
Ratio of adjusted net investment (loss) to average net assets(5)(%) (0.53) --
Portfolio turnover rate (%) 57 155
Fee reduction per share ($) 0.01(2) --
Average brokerage commission rate(6)($) N/A N/A
============================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1994(1) 1995
============================================================================================
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 7.87
Net investment income (loss) (0.09)(2) (0.13)(2)
Net realized and unrealized gain (loss) on investments (0.54) 1.45
Total from investment operations (0.63) 1.32
Net asset value, end of period $ 7.87 $ 9.19
Total investment return at net asset value(3)(%) (7.41)(4) 16.77
Total adjusted investment return at net asset value(3,4)(%) (7.53) --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)($) 131,983 137,363
Ratio of expenses to average net assets (%) 2.22 2.30
Ratio of adjusted expenses to average net assets(5)(%) 2.34 --
Ratio of net investment income (loss) to average net assets (%) (1.13) (1.55)
Ratio of adjusted net investment (loss) to average net assets(5)(%) (1.25) --
Portfolio turnover rate (%) 57 155
Fee reduction per share ($) 0.01(2) --
Average brokerage commission rate(6) ($) N/A N/A
- --------------
(1) Class A and B shares commenced operations on November 1, 1993.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(4) An estimated total return calculation which does not take into consideration fee
reductions by the adviser during the periods shown.
(5) Unreimbursed, without fee reduction.
(6) Per portfolio share traded. Required for fiscal years that began September 1, 1995
or later.
</TABLE>
SPECIAL OPPORTUNITIES FUND 17
<PAGE>
YOUR ACCOUNT
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
All John Hancock growth funds offer two classes of shares, Class A and Class B.
Each class has its own cost structure, allowing you to choose the one that best
meets your requirements. Your financial representative can help you decide.
================================================================================
CLASS A CLASS B
================================================================================
- - Front-end sales charge, - No front-end sales charge; all of
as described below. There your monet goes to work for you
are several ways to right away.
reduce these charges,
also described below. - Higher annual expenses than class
A shares.
- - Lower annual expenses
than Class B shares. - A deferred sales charge on shares
you sell within six years of
purchase, as described below.
- Automatic conversion to Class A
shares after eight years, thus
reducing future annual expenses.
For actual past expenses of Class A and B shares, see the fund-by-fund
information earlier in this prospectus.
Special Equities Fund offers Class C shares, which have their own expense
structure and are available to financial institutions only. Call Investor
Services for more information (see the back cover of this prospectus).
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
<TABLE>
CLASS A Sales charges are as follows:
<CAPTION>
================================================================================
CLASS A SALES CHARGES
================================================================================
<CAPTION>
AS A % OF AS A % OF YOUR
YOUR INVESTMENT OFFERING PRICE INVESTMENT
<S> <C> <C>
Up to $49,999 5.00% 5.26%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 and over See below
</TABLE>
INVESTMENTS OF $1 MILLION OR MORE Class A shares are available with no
front-end sales charge. However, there is a contingent deferred sales charge
(CDSC) on any shares sold within one year of purchase, as follows:
================================================================================
CDSC ON $1 MILLION+ INVESTMENT
================================================================================
YOUR INVESTMENT CDSC ON SHARES BEING SOLD
First $1M - $4,999,999 1.00%
Next $1 - $5M above that 0.50%
Next $1 or more above that 0.25%
For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the LAST day of that month.
The CDSC is based on the lesser of the original purchase cost or the current
market value of the shares being sold, and is not charged on shares you
acquired by reinvesting your dividends. To keep your CDSC as low as possible,
each time you place a request to sell shares we will first sell any shares in
your account that are not subject to a CDSC.
CLASS B Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a contingent deferred sales charge
(CDSC) on shares you sell within six years of buying them. There is no CDSC
on shares acquired through reinvestment of dividends. The CDSC is based on
the original purchase cost or the current market value of the shares being
sold, whichever is less. The longer the time between the purchase and the
sale of shares, the lower the rate of the CDSC:
================================================================================
CLASS B DEFERRED CHARGES
================================================================================
YEARS AFTER PURCHASE CDSC ON SHARES BEING SOLD
1st year 5.00%
2nd year 4.00%
3rd or 4th years 3.00%
5th year 2.00%
6th year 1.00%
After 6 years None
For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the First day of that month.
CDSC calculations are based on the number of shares involved, not on the
value of your account. To keep your CDSC as low as possible, each time you
place a request to sell shares we will first sell any shares in your account
that carry no CDSC. If there are not enough of these to meet your request, we
will sell those shares that have the lowest CDSC.
18 YOUR ACCOUNT
<PAGE>
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES There are several ways you can combine
multiple purchases of Class A shares in John Hancock funds to take advantage
of the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
- - Accumulation Privilege -- lets you add the value of any Class A shares you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
- - Letter of Intention -- lets you purchase Class A shares of a fund over a
13-month period and receive the same sales charge as if all shares had been
purchased at once.
- - Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section on your application, or contact
your financial representative or Investor Services to add these options to an
existing account.
GROUP INVESTMENT PROGRAM Allows established groups of four or more investors to
invest as a group. Each has an individual account, but for sales charge
purposes, their investments are lumped together, making the investors
potentially eligible for reduced sales charges. There is no charge, no
obligation to invest (although initial aggregate investments must be at least
$250) and you may terminate the program at any time.
To utilize: contact your financial representative or Investor Services to find
out how to qualify.
CDSC WAIVERS In general, the CDSC for either share class may be waived on
shares you sell for the following reasons:
- - to make payments through certain systematic withdrawal plans
- - to make certain distributions from a retirement plan
- - because of shareholder death or disability
To utilize: contact your financial representative or Investor Services, or
consult the SAI (see the back cover of this prospectus).
REINSTATEMENT PRIVILEGE If you sell shares of a John Hancock fund, you may
invest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge. If you paid a CDSC when you sold
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration.
To utilize: contact your financial representative or Investor Services.
WAIVERS FOR CERTAIN INVESTORS Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
- - government entities that are prohibited from paying mutual fund sales
charges
- - financial institutions or common trust funds investing $1 million or more
for non-discretionary accounts
- - selling brokers and their employees and sales representatives
- - financial representatives utilizing fund shares in fee-based investment
products under agreement with John Hancock Funds
- - fund trustees and other individuals who are affiliated with these or other
John Hancock funds
- - individuals transferring assets to a John Hancock growth fund from an
employee benefit plan that has John Hancock funds
- - members of an approved affinity group financial services program
- - certain insurance company contract holders (one-year CDSC applies)
- - participants in certain plans with at least 100 members (one-year CDSC
applies)
To utilize: if you think you may be eligible for a sales charge waiver,
contact Investor Services or consult the SAI.
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investments for
the John Hancock growth funds are as follows:
- non-retirement account: $1,000
- retirement account: $250
- group investments: $250
- Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
3 Complete the appropriate parts of the account application, carefully
following the instructions. If you have questions, please contact your
financial representative or call Investor Services at 1-800-225-5291.
4 Complete the appropriate parts of the account privileges section of the
application. By applying for privileges now, you can avoid the delay and
inconvenience of having to file an additional application if you want to
add privileges later.
5 Make your initial investment using the table on the next page. You can
initiate any purchase, exchange or sale of shares through your financial
representative.
YOUR ACCOUNT 19
<PAGE>
<TABLE>
====================================================================================================================================
BUYING SHARES
====================================================================================================================================
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C>
BY CHECK
[A graphic image of a blank check.]
- Make out a check for the investment amount, payable - Make out a check for the investment amount payable
to "John Hancock Investor Services Corporation." to "John Hancock Investor Services Corporation."
- Deliver the check and your completed application - Fill out the detachable investment lip from an account
to your financial representative, or mail them to Investor statement. If no slip is available, include a note specifying
Services (address on next page). the fund name, your share class, your account number,
and the name(s) in which the account is registered.
- Deliver the check and your investment slip or note to
your financial representative, or mail them to Investor
Services (address on next page).
BY EXCHANGE
[A graphic image of a white arrow outlined in black that points
to the right above a black that points to the left.]
- Call your financial representative or Investor Services to - Call Investor Services to request an exchange.
request an exchange.
BY WIRE
[A graphic image of a jagged white arrow outlined in black that
points upwards at a 45 degree angle.]
- Deliver your completed application to your financial repre- - Instruct your bank to wire the amount of your
sentative, or mail it to Investor Services. investment to:
First Signature Bank & Trust
- Obtain your account number by calling your financial Account # 900000260
representative or Investor Services. Routing # 211475000
Specify the fund name, your share class, your account
- Instruct your bank to wire the amount of your number and the name(s) in which the account is regis-
investment to: tered. Your bank may charge a fee to wire funds.
First Signature Bank & Trust
Account # 900000260
Routing # 211475000
Specify the fund name, your choice of share class, the new
account number and the name(s) in which the account is
registered. Your bank may charge a fee to wire funds.
BY PHONE
[A graphic image of a telephone.]
See "By wire" and "By exchange." - Verify that your bank or credit union is a member of
the Automated Clearing House (ACH) system.
- Complete the "Invest-By-Phone" and "Bank Information"
sections on you account application.
- Call Investor Services to verify that these features are in
place on your account.
- Tell the Investor Services representative the fund name,
your share class, your account number, the name(s) in
which the account is registered and the amount of
your investment.
To open or add to an account using the Monthly Automatic Accumulation Program, see "Additional investor services."
</TABLE>
20 YOUR ACCOUNT
<PAGE>
<TABLE>
===============================================================================================================================
SELLING SHARES
===============================================================================================================================
<CAPTION>
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
<S> <C>
BY LETTER
[A graphic image of the back of an envelope.]
- Accounts of any type. - Write a letter of instruction or complete a stock power
indicating the fund name, your share class, your account
- Sales of any amount. number, the name(s) in which the account is registered
and the dollar value or number of shares you wish to sell.
- Include all signatures and any additional documents
that may be required (see next page).
- Mail the materials to Investor Services.
- A check will be mailed to the name(s) and address in
which the account is registered, or otherwise according
to your letter of instruction.
BY PHONE
[A graphic image of a telephone.]
- Most accounts. - For automated service 24 hours a day using your
touch-tone phone, call the John Hancock Funds
- Sales of up to $100,000. EASI-Line at 1-800-338-8080.
- To place your order with a representative at John Han-
cock Funds, call Investor Services between 8 a.m. and
4 p.m. on most business days.
BY WIRE OR ELECTRONIC FUNDS TRANSFER (EFT)
[A graphic image of a jagged white arrow outlined in black
that points upwards at a 45 degree angle.]
- Requests by letter to sell any amount (accounts of - Fill out the "Telephone Redemption" section of your
any type). new account application.
- Requests by phone to sell up to $100,000 (accounts - To verify that the telephone redemption privilege is in
with telephone redemption privileges). place on an account, or to request the forms to add it
to an existing account, call Investor Services.
- Amounts of $1,000 or more will be wired on the next
business day. A $4 fee will be deducted from your
account.
- Amounts of less than $1,000 may be sent by EFT or by
check. Funds from EFT transactions are generally avail-
able by the second business day. Your bank may charge
a fee for this service.
BY EXCHANGE
[A graphic image of a white arrow outlined in black that
points to the right above a black that points to the left.]
- Accounts of any type. - Obtain a current prospectus for the fund into which
you are exchanging by calling your financial representa-
- Sales of any amount. tive or Investor Services.
- Call Investor Services to request an exchange.
</TABLE>
- --------------------------------------------------------------------------------
Address
John Hancock Investor Services Corporation
P.O. Box 9116 Boston, MA 02205-9116
Phone
1-800-225-5291
Or contact your financial representative for instructions and assistance.
- --------------------------------------------------------------------------------
To sell shares through a systematic withdrawal plan, see "Additional investor
services."
YOUR ACCOUNT 21
<PAGE>
SELLING SHARES IN WRITING In certain circumstances, you will need to make
your request to sell shares in writing. You may need to include additional
items with your request, as shown in the table below. You may also need to
include a signature guarantee, which protects you against fraudulent orders.
You will need a signature guarantee if:
- - your address of record has changed within the past 30 days
- - you are selling more than $100,000 worth of shares
- - you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
You can generally obtain a signature guarantee from the following sources:
- - a broker or securities dealer
- - a federal savings, cooperative or other type of bank
- - a savings and loan or other thrift institution
- - a credit union
- - a securities exchange or clearing agency A notary public cannot provide a
signature guarantee.
A notary public CANNOT provide a signature guarantee.
<TABLE>
====================================================================================================== [A graphic image of the
back of an envelope.]
<CAPTION>
SELLER REQUIREMENTS FOR WRITTEN REQUESTS
======================================================================================================
<S> <C>
Owners of individual, joint, or sole propriertorship, UGMA/UTMA - Letter of instruction.
(custodial accounts for minors) or general partner accounts. - On the letter, the signatures and titles of all persons
authorized to sign for the account, exactly as the
account is registered.
- Signature garuntee if applicable (see above)
Owners of corporate or association accounts. - Letter of instruction.
- Corporate resolution, certified within the past 90 days.
- On the letter and the resolution, the signature of the
person(s) authorized to sign for the account.
- Signature garuntee if applicable (see above).
Owners or Trustees of trust accounts - Letter of instruction.
- Corporate resolution, certified within the past 90 days.
- If the names of all trustees are not registered on the
account, please also provide a copy of the trust document
certified within the past 60 days.
- Signature garuntee if applicable (see above)
Joint tenancy shareholders whose co-tenants are deceased - Letter of instruction signed by surviving tenant.
- Copy of death certificate.
- Signature garuntee if applicable (see above).
Adsministrators, conservatore, guardians and other sellers or - Call 1-800-225-5291 for instructions.
account types not listed above.
</TABLE>
22 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION POLICIES
VALUATION OF SHARES The net asset value per share (NAV) for each fund and class
is determined each business day at the close of regular trading on the New York
Stock Exchange (typically 4 p.m. Eastern Time) by dividing a class's net assets
by the number of its shares outstanding.
BUY AND SELL PRICES When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable deferred sales charges.
EXECUTION OF REQUESTS Each fund is open on those days when the New York Stock
Exchange is open, typically Monday - Friday. Buy and sell requests are executed
at the next NAV to be calculated after your request is accepted by Investor
Services.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider using EASI-Line or sending your request in writing.
In unusual circumstances, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.
TELEPHONE TRANSACTIONS For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition, Investor Services will take
measures to verify the identity of the caller, such as asking for name, account
number, Social Security or taxpayer ID number and other relevant information. If
these measures are not taken, Investor Services is responsible for any losses
that may occur to any account due to an unauthorized telephone call. Also for
your protection, telephone transactions are not permitted on accounts whose
names or addresses have changed within the past 30 days. Proceeds from telephone
transactions can only be mailed to the address of record.
EXCHANGES You may exchange shares of one John Hancock fund for shares of the
same class of any other, generally without paying any additional sales charges.
Class B shares will continue to age from the original date and will retain the
same CDSC rate as they had before the exchange, except that the rate will change
to that of the new fund if the new fund's rate is higher. A CDSC rate that has
increased will drop again with a future exchange into a fund with a lower rate.
To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties that, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. A fund may change or cancel its exchange
privilege at any time, upon 60 days' notice to its shareholders. A fund may also
refuse any exchange order.
CERTIFICATED SHARES Most shares are electronically recorded. If you wish to have
certificates for your shares, please write to Investor Services. Certificated
shares can only be sold by returning the certificates to Investor Services,
along with a letter of instruction or a stock power and a signature guarantee.
SALES IN ADVANCE OF PURCHASE PAYMENTS When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten calendar days after
the purchase.
ELIGIBILITY BY STATE You may only invest in, or exchange into, fund shares
legally available in your state.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
- - After every transaction (except a dividend reinvestment) that affects your
account balance.
- - After any changes of name or address of the registered owner(s).
- - In all other circumstances, every quarter.
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
DIVIDENDS The funds generally distribute most or all of their net earnings in
the form of dividends. Any capital gains are distributed annually. Most of the
funds do not typically pay income dividends, with the exception of Disciplined
Growth Fund and Regional Bank Fund, which typically pay income dividends
semi-annually and quarterly, respectively.
YOUR ACCOUNT 23
<PAGE>
DIVIDEND REINVESTMENTS Most investors have their dividends reinvested in
additional shares of the same fund and class. If you choose this option, or if
you do not indicate any choice, your dividends will be reinvested on the
dividend record date. Alternatively, you can choose to have a check for your
dividends mailed to you. However, if the check is not deliverable, your
dividends will be reinvested.
TAXABILITY OF DIVIDENDS As long as a fund meets the requirements for being a
tax-qualified regulated investment company, which each fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, dividends you receive from a fund, whether reinvested or taken as
cash, are generally considered taxable. Dividends from a fund's long-term
capital gains are taxable as capital gains; dividends from other sources are
generally taxable as ordinary income.
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
TAXABILITY OF TRANSACTIONS Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
SMALL ACCOUNTS (NON-RETIREMENT ONLY) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Investor Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
MAAP lets you set up regular investments from your paycheck or bank account to
the John Hancock fund(s) of your choice. You determine the frequency and amount
of your investments, and you can terminate your program at any time. To
establish:
- - Complete the appropriate parts of your Account Application.
- - If you are using MAAP to open an account, make out a check ($25 minimum)
for your first investment amount payable to "John Hancock Investor Services
Corporation." Deliver your check and application to your financial
representative or Investor Services.
SYSTEMATIC WITHDRAWAL PLAN This plan may be used for routine bill payment or
periodic withdrawals from your account. To establish:
- - Make sure you have at least $5,000 worth of shares in your account.
- - Make sure you are not planning to invest more money in this account (buying
shares during a period when you are also selling shares of the same fund is
not advantageous to you, because of sales charges).
- - Specify the payee(s). The payee may be yourself or any other party, and
there is no limit to the number of payees you may have, as long as they are
all on the same payment schedule.
- - Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
- - Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial
representative or Investor Services.
RETIREMENT PLANS John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SEPs, SARSEPs, 401(k) plans, 403(b) plans (including
TSAs) and other pension and profit-sharing plans. Using these plans, you can
invest in any John Hancock fund with a low minimum investment of $250 or, for
some group plans, no minimum investment at all. To find out more, call Investor
Services at 1-800-225-5291.
24 YOUR ACCOUNT
<PAGE>
FUND DETAILS
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
HOW THE FUNDS ARE ORGANIZED Each John Hancock growth fund is an open-end
management investment company or a series of such a company.
Each fund is supervised by a board of trustees or a board of directors, an
independent body which has ultimate responsibility for the fund's activities.
The board retains various companies to carry out the fund's operations,
including the investment adviser, custodian, transfer agent and others (see
diagram). The board has the right, and the obligation, to terminate the fund's
relationship with any of these companies and to retain a different comp any if
the board believes that it is in the shareholders' best interests.
At a mutual fund's inception, the initial shareholder (typically the adviser)
appoints the fund's board. Thereafter, the board and the shareholders determine
the board's membership. The boards of the John Hancock growth funds may include
individuals who are affiliated with the investment adviser. However, the
majority of board members must be independent.
The funds do not hold annual shareholder meetings, but may hold special meetings
for such purposes as electing or removing board members, changing fundamental
policies, approving a management contract or approving a 12b-1 plan (12b-1 fees
are explained in "Sales compensation").
[A flow chart that contains 8 rectangular-shaped boxes and illustrates the
hierarchy of how the funds are organized. Within the flowchart, there are 5
tiers. The tiers are connected by shaded lines.
Shareholders represent the first tier. There is a shaded vertical arrow on the
left-hand side of the page. The arrow has arrowheads on both ends and is
contained within two horizontal, shaded lines. This is meant to highlight tiers
two and three which focus on Distribution and Shareholder Services.
Financial Services Firms and their Representatives are shown on the second
tier. Principal Distributor and Transfer Agent are shown on the third tier.
A shaded vertical arrow on the right-hand side of the page denotes those
entities involved in the Asset Management. The arrow has arrowheads on both
ends and is contained within two horizontal, shaded lines. This fourth tier
includes the Subadvisor, Investment Advisor and the Custodian.
The fifth tier contains the Trustees/Directors.]
FUND DETAILS 25
<PAGE>
ACCOUNTING COMPENSATION The funds compensate the adviser for performing tax and
financial management services. Annual compensation for 1996 will not exceed
0.02% of each fund's average net assets.
PORTFOLIO TRADES In placing portfolio trades, the adviser may use brokerage
firms that market the fund's shares or are affiliated with John Hancock Mutual
Life Insurance Company, but only when the adviser believes no other firm offers
a better combination of quality execution (i.e., timeliness and completeness)
and favorable price.
INVESTMENT GOALS Except for Discovery Fund, Special Opportunities Fund
and Emerging Growth Fund, each fund's investment goal is fundamental and may
only be changed with shareholder approval.
DIVERSIFICATION Except for Special Opportunities Fund, all growth funds are
diversified.
- --------------------------------------------------------------------------------
SALES COMPENSATION
As part of their business strategies, the funds, along with John Hancock Funds,
pay compensation to financial services firms that sell the funds' shares. These
firms typically pass along a portion of this compensation to your financial
representative.
Compensation payments originate from two sources: from sales charges and from
12b-1 fees that are paid out of the fund's in assets ("12b-1" refers to the
federal securities regulation authorizing annual fees of this type). The 12b-1
fee rates vary by fund and by share class, according to Rule 12b-1 plans adopted
by the funds. The sales charges and 12b-1 fees paid by investors are detailed in
the fund-by-fund information. The portions of these expenses that are reallowed
to financial services firms are shown on the next page.
Distribution fees may be used to pay for sales compensation to financial
services firms, marketing and overhead expenses and, for Class B shares,
interest expenses.
- -------------------------------------------------------------------------------
<TABLE>
CLASS B UNREIMBURSED DISTRIBUTION EXPENSES(1)
UNREIMBURSED AS A % OF
FUND EXPENSES NET ASSETS
<S> <C> <C>
Disciplined Growth $ 3,620,687 3.99%
Discovery $ 552,329 1.75%
Emerging Growth $ 9,697,401 3.02%
Growth $ 165,787 2.01%
Regional Bank $41,492,867 5.90%
Special Equities $15,131,619 5.42%
Special Opportunities $ 6,051,842 4.49%
(1) As of the most recent fiscal year end covered by each fund's financial
highlights. These expenses may be carried forward indefinitely.
</TABLE>
INITIAL COMPENSATION Whenever you make an investment in a fund or funds, the
financial services firm receives either a reallowance from the initial sales
charge or a commission, as described below. The firm also receives the first
year's service fee at this time.
ANNUAL COMPENSATION Beginning with the second year after an investment is made,
the financial services firm receives an annual service fee of 0.25% of its total
eligible net assets. This fee is paid quarterly in arrears. Firms affiliated
with John Hancock, which include Tucker Anthony, Sutro & Company and John
Hancock Distributors, may receive an additional fee of up to 0.05% a year of
their total eligible net assets.
26 FUND DETAILS
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A INVESTMENTS
<CAPTION>
MAXIMUM
SALES CHARGE REALLOWANCE FIRST YEAR MAXIMUM
PAID BY INVESTORS OR COMMISSION SERVICE FEE TOTAL COMPENSATION(1)
(% of offering price) (% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C> <C>
Up to $49,999 5.00% 4.01% 0.25% 4.25%
$50,000 - $99,999 4.50% 3.51% 0.25% 3.75%
$100,000 - $249,999 3.50% 2.61% 0.25% 2.85%
$250,000 - $499,999 2.50% 1.86% 0.25% 2.10%
$500,000 - $999,999 2.00% 1.36% 0.25% 1.60%
REGULAR INVESTMENTS OF
$1 MILLION OR MORE
First $1M - $4,999,999 -- 1.00% 0.25% 1.24%
Next $1 - $5M above that -- 0.50% 0.25% 0.74%
Next $1 and more above that -- 0.25% 0.25% 0.49%
Waiver investments(2) -- 0.00% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B INVESTMENTS
MAXIMUM
REALLOWANCE MAXIMUM
OR COMMISSION SERVICE FEE TOTAL COMPENSATION
(% of offering price) (% of net investment) (% of offering price)
All amounts 3.75% 0.25% 4.00%
(1) Reallowance/commission percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition.
(2) Refers to any investments made by municipalities, financial institutions,
trusts and affinity group members that take advantage of the sales charge
waivers described earlier in this prospectus.
CDSC revenues collected by John Hancock Funds may be used to fund commission
payments when there is no initial sales charge.
</TABLE>
FUND DETAILS 27
<PAGE>
- --------------------------------------------------------------------------------
MORE ABOUT RISK
A fund's risk profile is largely defined by the fund's primary securities and
investment practices. You may find the most concise description of each fund's
risk profile in the fund-by-fund information.
The funds are permitted to utilize -- within limits established by the trustees
- -- certain other securities and investment practices that have higher risks and
opportunities associated with them. To the extent a fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively. On the following page are brief descriptions of these
securities and practices, along with the risks associated with them. The funds
follow certain policies that may reduce these risks.
As with any mutual fund, there is no guarantee that the performance of a John
Hancock growth fund will be positive over any period of time -- days, months or
years. However, stock funds as a category have historically performed better
over the long term than bond or money market funds.
- --------------------------------------------------------------------------------
TYPES OF INVESTMENT RISK
CORRELATION RISK The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment). Incomplete correlation can result
in unanticipated risks.
CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
CURRENCY RISK The risk that fluctuations in the exchange rates
between the U.S. dollar and foreign currencies may negatively affect an
investment. Adverse changes in exchange rates may erode or reverse any gains
produced by foreign currency denominated investments and may widen any losses.
INFORMATION RISK The risk that key information about a security or market is
inaccurate or unavailable.
INTEREST RATE RISK The risk of market losses attributable to changes in interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values.
LEVERAGE RISK Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value.
* HEDGED When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position which
the fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains.
* SPECULATIVE To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead, or forego an investment
opportunity, any of which could have a negative effect on fund management or
performance.
MANAGEMENT RISK The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
MARKET RISK The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than the price originally paid for it, or less than it was worth
at an earlier time. Market risk may affect a single issuer, industry, sector of
the economy or the market as a whole. Common to all stocks and bonds and the
mutual funds that invest in them.
NATURAL EVENT RISK The risk of losses attributable to natural disasters, crop
failures and similar events.
OPPORTUNITY RISK The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in other investments.
POLITICAL RISK The risk of losses directly attributable to government or
political actions of any sort. These actions may range from changes in tax or
trade statutes to expropriation, governmental collapse and war.
VALUATION RISK The risk that a fund has valued certain of its securities at a
higher price than it can sell them for.
28 FUND DETAILS
<PAGE>
- --------------------------------------------------------------------------------
HIGHER-RISK SECURITIES AND PRACTICES
- --------------------------------------------------------------------------------
<TABLE>
This table shows each fund's investment limitations
as a percentage of portfolio assets. In each case the
principal types of risk are listed (see previous
page for definitions).
10 Percent of total assets (italic type)
<CAPTION>
10 Percent of net assets (roman type)
* No policy limitation on usage; fund may be
using currently
@ Permitted, but has not typically been used DISCIPLINED EMERGING REGIONAL SPECIAL SPECIAL
- -- Not permitted GROWTH DISCOVERY GROWTH GROWTH BANK EQUITIES OPPORTUNITIES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT PRACTICES
BORROWING; REVERSE REPURCHASE AGREEMENTS The
borrowing of money from banks or through
reverse repurchase agreements. Leverage, credit risks. 5 5 33.3 33.3 5 33.3 33.3
REPURCHASE AGREEMENTS The purchase of a security
that must later be sold back to the seller at the
same price plus interest. Credit risk. * * * * * * *
SECURITIES LENDING The lending of securities to
financial institutions, which provide cash or
government securities as collateral. Credit risk. 5 33.3 30 33.3 -- 33.3 33.3
SHORT SALES The selling of securities which have
been borrowed on the expectation that the market
price will drop.
* Hedged. Hedged leverage, market, correlation,
liquidity, opportunity risks. -- @ @ @ -- @ @
* Seculative. Speculative leverage, market,
liquidity risks. -- @ -- @ -- @ @
SHORT-TERM TRADING Selling a security soon after
purchase. A portfolio engaging in short-term
trading will have higher turnover and transaction
expenses. Market risk. * * * * * * *
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The purchase or sale of securities for delivery
at a future date; market value may change before
delivery. Market, opportunity, leverage risks. * * * * * * *
- -----------------------------------------------------------------------------------------------------------------------------------
CONVENTIONAL SECURITIES
NON-INVESTMENT-GRADE CONVERTIBLE SECURITIES Debt
securities that convert into equity securities at
a future time. Convertibles rated below BBB/Baa are
considered "junk" bonds. Credit, market, interest
rate, liquidity, valuation and information risks. -- -- 10 5 5 -- --
FOREIGN EQUITIES
* Stocks issued by foreign companies. Market,
currency, information, natural event, political risks. -- 25 * 15 @ * *
* American or European depository receipts, which are
dollar-denominated securities typically issued by
American or European banks and are based on ownership
of securities issued by foreign companies. Market,
currency, information, natural event, political risks. 10 25 * 15 @ * *
RESTRICTED AND ILLIQUID SECURITIES Securities not
traded on the open market. May include illiquid Rule
144A securities. Liquidity, market risks. 15 15 10 15 15 15 15
- ------------------------------------------------------------------------------------------------------------------------------------
LEVERAGED DERIVATIVE SECURITIES
FINANCIAL FUTURES AND OPTIONS; SECURITIES AND INDEX
OPTIONS Contracts involving the right or obligation
to deliver or receive assets or money depending on the
performance of one or more assets or an economic index.
* Futures and related options. Interest rate, currency,
market, hedged or speculative leverage, correlation,
liquidity, opportunity risks. * @ * @ @ @ *
* Options on securities and indices. Interest rate,
currency, market, hedged or speculative leverage,
correlation, liquidity, credit, opportunity risks. 5(1) 5(1) 10(1) @ 5(1) @ *
CURRENCY CONTRACTS Contracts involving the right or
obligation to buy or sell a given amount of foreign
currency at a specified price and future date.
* Hedged. Currency, hedged leverage, correlation,
liquidity, opportunity risks. -- * * * @ @ *
* Speculative. Currency, speculative leverage,
liquidity risks. -- -- -- -- @ @ --
(1) Applies to purchased options only.
</TABLE>
FUND DETAILS 29
<PAGE>
<PAGE>
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
Two documents are available that To request a free copy of the cur-
offer further information on John rent annual/semi-annual report or
Hancock Growth Funds: SAI, please write or call:
ANNUAL/SEMI-ANNUAL John Hancock Investor Services
REPORT TO SHAREHOLDERS Corporation
Includes financial statements, P.O.Box 9116
detailed performance information Boston, MA 02205-9116
portfolio holdings, a statement from Telephone: 1-800-225-5291
portfolio management and the EASI-Line: 1-800-338-8080
auditor's report. TDD: 1-800-544-6713
STATEMENT OF ADDITIONAL
INFORMATION (SAI)
The SAI contains more detailed
information on all aspects of the
funds. The current annual/
semi-annual report is included
in the SAI.
A current SAI has been filed with
the Securities and Exchange
Commission and is incorporated
by reference into this prospectus
(is legally a part of this prospectus).
[John Hancock's graphic logo.
A circle, diamond, triangle and a cube.]
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FILM
101 Huntington Avenue
Boston, Massachusetts 02199-7603
[Copyright] John Hancock Funds, Inc.
GROPN 7/96
[John Hancock script logo]
<PAGE>
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
William A. Barron, III*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
William F. Glavin*
Patrick Grant*
Ralph Lowell, Jr.*
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President, Assistant Secretary
and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
INVESTMENT SUB-ADVISER
John Hancock Advisers International Limited
34 Dover Street
London, England W1X3RA
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
Investors around the world have been watching Wall Street in awe for the better
part of 1995. Through October, the Standard & Poor's 500-Stock Index, a
widely-used barometer of stock performance, had grown by more than 25%.
Investors who stayed in the market after a disappointing 1994 have been
rewarded.
On another street, Pennsylvania Avenue, one of the hot topics many people
are watching is Medicare reform. While there's no clear-cut solution on the
horizon, today's Medicare debate should serve as another wake-up call to all
Americans about the need to have a financial plan and to save for retirement.
Whether or not the government changes the way health-care benefits are allotted
to senior citizens, the message is clear: your future security and well-being
lies in your own hands -- not Uncle Sam's.
We know you've heard it a hundred times. Pick up almost any financial
periodical today, and you'll see cover stories on retirement. Many of them will
perhaps scare you or make you think that the task of saving for retirement is
just too daunting. But take heart. We don't believe that and neither do many
financial experts.
Yet retirement planning is not to be taken lightly. To live the way you want
to -- the way you deserve to after all those years of hard work -- you need to
plan and save now, on a regular basis, no matter what your other costs, no
matter how small the amount, no matter what your current age. It may be easier
if you start earlier, but it's never too late.
Building a secure nest egg is indeed doable. Talk to your financial adviser
about establishing your retirement planning roadmap, if you haven't already. And
educate yourself by reading some of the many articles about how to save for
retirement. Take control of your future by saving today. That way, when it comes
time for retirement, you shouldn't have to think about any street but Easy
Street.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
BY MICHAEL P. DICARLO,
CHIEF EQUITY OFFICER AND PORTFOLIO MANAGER
JOHN HANCOCK
SPECIAL OPPORTUNITIES FUND
GROWTH STOCKS DELIVER EARNINGS, OUTPERFORM BROADER MARKET; TECHNOLOGY
SURGES WHILE PRECIOUS METALS LAG
Declining interest rates, low inflation and steady corporate earnings helped
drive stocks sharply higher during the year. Growth stocks, because they
produced especially strong earnings in a generally weaker economy, drew
attention from Wall Street and outpaced the broader market. However, performance
varied across sectors. For example, while the Fund's technology stocks generally
fared extremely well, other sectors, such as precious metals, turned in only
lackluster numbers. The upshot was a mixed performance bag. In absolute terms,
the Fund performed quite well, more than making up for losses suffered in 1994.
In relative terms, however, the Fund lagged the average fund in its competitive
universe. For the year that ended October 31, 1995, Class A and Class B shares
of John Hancock Special Opportunities Fund had total returns at net asset value
of 17.53% and 16.77%, respectively, compared to 21.09% for the average capital
appreciation fund, according to Lipper Analytical Services.(1)
What follows is a sector-by-sector discussion of the Fund's performance. The
Fund seeks always to spread its investments among five sectors of the economy
we've identified as having unusual promise. Those five sectors have remained
unchanged since the last shareholder report six months ago.
TECHNOLOGY
With more than 40% of the Fund's total net assets, technology was the most
important sector in the Fund, and the best-performing.
[A 2" x 3" photo of Michael DiCarlo at bottom right. Caption reads: "Michael P.
DiCarlo, Portfolio Manager."]
[CAPTION]
"GROWTH STOCKS... DREW ATTENTION FROM WALL STREET AND
OUTPACED THE BROADER MARKET."
3
<PAGE>
John Hancock Funds - Special Opportunities Fund
"...TECHNOLOGY WAS THE MOST IMPORTANT SECTOR IN THE FUND, AND THE BEST
PERFORMING."
- -------------------------------------------------------------------------------
TOP FIVE COMMON
STOCK HOLDINGS
1. INTUIT 7.8%
2. CUC INTERNATIONAL 5.4%
3. AMERICA ONLINE 4.9%
4. CASCADE COMMUNICATIONS 4.7%
5. LINEAR TECHNOLOGY 4.6%
As a percentage of net assets on October 31, 1995
Chart with heading "Top Five Common Stock Holdings" at top of left hand column.
The chart lists five holdings: 1) Intuit 7.8% 2) CUC International 5.4% 3)
America Online 4.9% 4) Cascade Communications 4.7% 5) Linear Technology 4.6%. A
footnote below reads "As a percentage of net assets on October 31, 1995."
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SCORECARD
INVESTMENTS RECENT PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS
<S> <C> <C>
America OnLine [GRAPHIC] Captures mainstream subscribers
Intuit [GRAPHIC] Introduces online banking
New World Communications [GRAPHIC] Earnings disappointment
</TABLE>
Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
performance ... and what's behind the numbers. The first listing is America
Online followed by an up arrow and the phrase "Captures mainstream subscribers."
The second listing is Intuit followed by an up arrow and the phrase "Introduces
online banking." The third listing is New World Communications followed by a
down arrow and the phrase "Earnings disappointment." Footnote below reads: See
"Schedule of Investment." Investment holdings are subject to change."
See "Schedule of Investments." Investment holdings are subject to change.
Technology stocks benefited from a confluence of powerful trends, including the
explosion in multimedia computing; the proliferation of semiconductors; the
introduction of Windows 95, which has increased demand for sophisticated
computer hardware; and the push among manufacturers and service providers to
achieve productivity gains through technology.
Several software providers were among the Fund's largest holdings. These
included Microsoft, designers of Windows 95, which has met sales projections
even though many large corporate users have yet to upgrade their systems; and
Intuit, an innovative designer of personal-finance software and a leader in
electronic home-banking services.
OIL AND GAS
Investing in energy stocks is one way to capitalize on exploding growth in the
world's developing markets. Fast-growing economies in places such as China and
India have a huge unmet demand for energy. And in this country, the surge in
popularity of high-consumption vehicles has helped increase demand for oil,
while the supply side of the equation remains unchanged. Energy stocks totaled
about 15% of the Fund's net assets at the end of October. Our focus has been on
oil, rather than natural gas, and on the specialty service companies, which have
more potential for dramatic earnings growth. Our largest investment in the
sector, for example, is Diamond Offshore Drilling. All they do is drill offshore
oil and gas wells. We also own Pride Petroleum Services, a contract driller
which provides rigs and crews to oil wells all over the world. Both Pride and
Diamond have been decent performers in a somewhat lackluster sector. Meanwhile,
Reading & Bates, another contract driller, has failed so far to meet
expectations. Overall, we believe it's still early in the game for energy
stocks. For now, we're being patient, waiting for the stocks to realize their
significant potential.
MEDIA/INFORMATION DISTRIBUTION
Various media and information distribution stocks accounted for about 14% of
the Fund's net assets at the end of October. This category continues to be
driven by the Fund's largest individual holding and its top performer for the
year: America Online (AOL). By targeting mainstream consumers, AOL has emerged
as the fastest growing distributor of online computer services. During
the period we sold three broadcaster stocks: Renaissance Communications,
Capital Cities/ABC and entertainment giant Walt Disney, which has a deal pending
to buy Capital Cities/ABC. To the extent the broadcasters depend on advertising
revenues, we
4
<PAGE>
John Hancock Funds - Special Opportunities Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended October 31, 1995." The chart is
scaled in increments of 10% from bottom to top, with 30% at the top and 0% at
the bottom. Within the chart there are three solid bars. The first represents
the 17.53% total return for the John Hancock Special Opportunities Fund: Class
A. The second represents the 16.77% total return for the John Hancock Special
Opportunities Fund: Class B. The third represents the 21.09% total return for
the average capital appreciation fund. A footnote below reads: "Total returns
for John Hancock Special Opportunities Fund are at net asset value with all
distributions reinvested. The average capital appreciation fund is tracked by
Lipper Analytical Services. (1) See following page for historical performance
information."]
see them as less promising candidates for growth going forward. In most cases,
their prices already reflect the expected increase in 1996 ad revenues
associated with the upcoming Olympics, political conventions and presidential
election. Perhaps our most disappointing stock in recent months has been New
World Communications, a programming producer and local station owner. We believe
it's a delay and not a disaster, but so far earnings have not come through as
expected.
HEALTH CARE
Health-care and medical stocks were only 10% of the Fund's net assets at the end
of the period. But that percentage is growing. Most of the companies we own and
target are those in a position to profit from the drive to contain costs, a
mission which the government seems to have relegated to the private sector. They
included Boston Scientific, a medical device manufacturer with a broad array of
products, many of which enable physicians to perform cheaper, less invasive
procedures.
PRECIOUS METALS
Precious metals accounted for only about 4% of the Fund's net assets,
distributed among a handful of stocks, including Kinross Gold. In the jewelry
industry, demand for precious metals has outstripped supply for the past six
years. Moreover, Chinese and Mexican citizens have begun buying gold in record
amounts to protect their wealth in an unstable economic environment. So far,
however, those powerful forces have had little effect on the price of gold. This
was the Fund's most disappointing sector.
OUTLOOK
In the months to come, we'll keep the Fund's holdings within the sectors
outlined above and we may try to improve our relative performance by making less
frequent sector rotations and giving our tactics more room to play themselves
out. Overall, we believe the stage remains set for growth stocks to keep
performing well. Positives include a market-friendly Congress, which seems
poised to deliver both a capital-gains tax cut and looser regulations concerning
IRAs. What's more, the economy seems to be plodding along in its slow growth
mode with many signs suggesting it will stay that way for a while. That bodes
well for companies like those favored by Special Opportunities Fund. They are
companies which are often better able to deliver earnings than the more
economically-sensitive cyclical companies.
[CAPTION]
"THE CLIMATE FOR GROWTH STOCKS REMAINS ATTRACTIVE."
- ------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
5
<PAGE>
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Special Opportunities Fund. Total return is a
performance measure that equals the sum of all dividends and capital gains,
assuming reinvestment of these distributions and the change in the price of the
Fund's shares, expressed as a percentage of the Fund's average net assets.
Performance figures include the maximum applicable sales charge of 5% for Class
A shares. The effect of the maximum contingent deferred sales charge for Class B
shares (maximum 5% and declining to 0% over six years) is included in Class B
performance. Remember that all figures represent past performance and are no
guarantee of how the Fund will perform in the future. Also, keep in mind that
the total return and share price of the Fund's investments will fluctuate. As a
result, your Fund's shares may be worth more or less than their original cost,
depending on when you sell them. Please see your prospectus for risks associated
with industry segment investing.
Note: Participant-directed defined-contribution plans with at least 100 eligible
employees at inception of the Fund account may purchase Class A shares without
an initial sales charge as of March 15, 1995. If those shares are redeemed,
however, during the year following the calendar year end during which they were
purchased, a contingent deferred sales charge will be assessed.
CUMULATIVE TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
ONE LIFE OF
YEAR FUND(1)
---- -------
<S> <C> <C>
John Hancock Special Opportunities Fund: Class A 17.98% 7.04%
John Hancock Special Opportunities Fund: Class B 18.50% 7.29%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
ONE LIFE OF
YEAR FUND(1)
---- -------
<S> <C> <C>
John Hancock Special Opportunities Fund: Class A 17.98% 3.63%
John Hancock Special Opportunities Fund: Class B 18.50% 3.75%
</TABLE>
NOTES TO PERFORMANCE
(1) Both Class A and Class B shares started on November 1, 1993.
6
<PAGE>
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John Hancock
Special Opportunities Fund would be worth on October 31, 1995, assuming you had
invested on the day each class of shares started and reinvested all
distributions. For comparison, we've shown the same $10,000 investment in the
Standard & Poor's 500 Stock Index -- an unmanaged index that includes 500 widely
traded common stocks and is a commonly used measure of stock market performance.
[Special Opportunities Fund
Class A shares
Line chart with the heading Special Opportunities Fund: Class A, representing
the growth of a hypothetical $10,000 investment over the life of the fund.
Within the chart are three lines.
The first line represents the value of the Standard & Poor's 500 Stock Index and
is equal to $13,128 as of October 31, 1995. The second line represents the value
of the hypothetical $10,000 investment made in the Special Opportunities Fund on
November 1, 1993, before sales charge, and is equal to $10,965 as of October 31,
1995. The third line represents the Special Opportunities Fund after sales
charge and is equal to $10,413 as of October 31, 1995.
Special Opportunities Fund
Class B shares
Line chart with the heading Special Opportunities Fund: Class B, representing
the growth of a hypothetical $10,000 investment over the life of the fund.
Within the chart are three lines.
The first line represents the value of the Standard & Poor's 500 Stock Index and
is equal to $13,128 as of October 31, 1995. The second line represents the value
of the hypothetical $10,000 investment made in the Special Opportunities Fund on
November 1, 1993, before contingent deferred sales charge, and is equal to
$10,812 as of October 31, 1995. The third line represents the Special
Opportunities Fund after contingent deferred sales charge and is equal to
$10,312 as of October 31, 1995.]
7
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $167,202,826).......................... $ 202,350,123
Joint repurchase agreement (cost - $25,672,000).............. 25,672,000
-------------
228,022,123
Receivable for shares sold.................................... 241,136
Receivable for investments sold............................... 24,025,617
Interest receivable........................................... 4,211
Dividends receivable.......................................... 67,410
Deferred organization expenses - Note A....................... 78,290
Other assets.................................................. 726
-------------
Total Assets................................ 252,439,513
-----------------------------------------------------------
LIABILITIES:
Temporary overdraft of cash................................... 243,454
Payable for shares repurchased................................ 129,854
Payable for investments purchased............................. 12,750,625
Payable to John Hancock Advisers, Inc. and
affiliates - Note B.......................................... 326,416
Accrued fees and expenses..................................... 63,754
-------------
Total Liabilities........................... 13,514,103
-----------------------------------------------------------
NET ASSETS:
Capital paid-in............................................... 209,681,269
Accumulated net realized loss on investments and
foreign currency transactions................................ ( 5,914,444)
Net unrealized appreciation of investments and
foreign currency transactions................................ 35,158,585
-----------
Net Assets.................................. $ 238,925,410
===========================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value, respectively)
Class A - $101,561,612/10,902,887............................. $ 9.32
=============================================================================
Class B - $137,363,798/14,949,105............................. $ 9.19
=============================================================================
MAXIMUM OFFERING PRICE PER SHARE *
Class A - ($9.32 x 105.26%)................................... $ 9.81
=============================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
** Class C shares commenced operations on July 6, 1994. All shares were
redeemed on April 11, 1995.
</TABLE>
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest...................................................... $ 1,047,280
Dividends (net of foreign withholding taxes
of $53,585).................................................. 668,536
-------------
1,715,816
-------------
Expenses:
Investment management fee - Note B........................... 1,870,771
Distribution/service fee - Note B
Class A.................................................... 296,691
Class B.................................................... 1,348,679
Transfer agent fee - Note B.................................. 945,811
Printing..................................................... 47,581
Custodian fee................................................ 44,422
Trustees' fees............................................... 44,135
Organization expense - Note A................................ 26,046
Auditing fee................................................. 23,300
Legal fees................................................... 16,506
Miscellaneous................................................ 5,966
-------------
Total Expenses.............................. 4,669,908
- -------------------------------------------------------------------------------
Net Investment Loss......................... ( 2,954,092)
-----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments sold......................... 17,052,914
Net realized loss on foreign currency transactions ........... ( 17,231)
Change in net unrealized appreciation/depreciation
of investments............................................... 23,246,748
Change in net unrealized appreciation/depreciation
of foreign currency transactions............................. 11,288
-------------
Net Realized and Unrealized
Gain on Investments and Foreign
Currency Transactions....................... 40,293,719
-----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations................... $ 37,339,627
===========================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss....................................................................... ($ 2,954,092) ($ 1,363,789)
Net realized gain (loss) on investments sold and foreign currency transactions............ 17,035,683 ( 22,967,358)
Change in net unrealized appreciation/depreciation of investments and foreign currency
transactions............................................................................ 23,258,036 12,841,899
------------ ------------
Net Incease (Decrease) in Net Assets Resulting from Operations........................... 37,339,627 ( 11,489,248)
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET*........................................................ ( 22,887,222) 235,962,253
------------ ------------
NET ASSETS:
Beginning of period....................................................................... 224,473,005 --
------------ ------------
End of period............................................................................. $238,925,410 $224,473,005
============ ============
* ANALYSIS OF FUND SHARE TRANSACTIONS:
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold........................................................ 3,199,395 $27,308,044 20,116,435 $167,224,012
Shares issued in reorganization - Note E........................... 1,058,125 7,921,550 -- --
---------- ------------ ----------- -------------
4,257,520 35,229,594 20,116,435 167,224,012
Less shares repurchased............................................ (5,001,778) ( 42,409,032) ( 8,469,290) ( 70,395,194)
---------- ------------ ----------- -------------
Net increase (decrease)............................................ ( 744,258) ($ 7,179,438) 11,647,145 $ 96,828,818
========== ============ =========== =============
CLASS B
Shares sold........................................................ 2,612,144 $21,533,048 19,318,988 $159,278,074
Shares issued in reorganization - Note E........................... 69,972 519,918 -- --
---------- ------------ ----------- -------------
2,682,116 22,052,966 19,318,988 159,278,074
Less shares repurchased............................................ (4,494,039) ( 37,589,041) ( 2,557,960) ( 20,304,549)
---------- ------------ ----------- -------------
Net increase (decrease)............................................ (1,811,923) ($15,536,075) 16,761,028 $138,973,525
========== ============ =========== =============
CLASS C**
Shares sold........................................................ 11,302 $ 89,560 21,556 $ 166,302
Less shares repurchased............................................ ( 32,055) ( 261,269) ( 803) ( 6,392)
---------- ------------ ----------- -------------
Net increase (decrease)............................................ ( 20,753) ($ 171,709) 20,753 $ 159,910
========== ============ =========== =============
** Class C shares commenced operations on July 6, 1994. All shares were redeemed
on April 11, 1995.
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, AND ANY INCREASE OR
DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES
THE NUMBER OF FUND SHARES SOLD DURING THE PERIOD, ALONG WITH THE CORRESPONDING
DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the period indicated, investment returns, key
ratios and supplemental data are listed as follows:
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD NOVEMBER 1, 1993
YEAR ENDED (COMMENCEMENT OF OPERATIONS)
OCTOBER 31, 1995 TO OCTOBER 31, 1994
---------------- -------------------------------
<S> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................. $ 7.93 $ 8.50
-------- --------
Net Investment Loss.............................................. (0.07)(b) (0.03)(b)
Net Realized and Unrealized Gain (Loss) on Investments........... 1.46 (0.54)
-------- --------
Total from Investment Operations................................ 1.39 (0.57)
-------- --------
Net Asset Value, End of Period................................... $ 9.32 $ 7.93
======== ========
Total Investment Return at Net Asset Value....................... 17.53% (6.71%)(f)
Total Adjusted Investment Return at Net Asset Value (a).......... -- (6.83%)(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)........................ $101,562 $ 92,325
Ratio of Expenses to Average Net Assets **....................... 1.59% 1.50%
Ratio of Adjusted Expenses to Average Net Assets (a)............. -- 1.62%
Ratio of Net Investment Loss to Average Net Assets............... (0.87%) (0.41%)
Ratio of Adjusted Net Investment Loss to Average Net Assets (a).. -- (0.53%)
Portfolio Turnover Rate.......................................... 155% 57%
** Expense Reimbursement Per Share............................... -- $ 0.01(b)
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................. $ 7.87 $ 8.50
-------- --------
Net Investment Loss.............................................. (0.13)(b) (0.09)(b)
Net Realized and Unrealized Gain (Loss) on Investments........... 1.45 (0.54)
-------- --------
Total from Investment Operations................................ 1.32 (0.63)
-------- --------
Net Asset Value, End of Period................................... $ 9.19 $ 7.87
======== ========
Total Investment Return at Net Asset Value....................... 16.77% (7.41%)(f)
Total Adjusted Investment Return at Net Asset Value (a).......... -- (7.53%)(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)........................ $137,363 $131,983
Ratio of Expenses to Average Net Assets **....................... 2.30% 2.22%*
Ratio of Adjusted Expenses to Average Net Assets (a)............. -- 2.34%*
Ratio of Net Investment Loss to Average Net Assets............... (1.55%) (1.13%)*
Ratio of Adjusted Net Investment Loss to Average Net Assets (a).. -- (1.25%)*
Portfolio Turnover Rate.......................................... 155% 57%
** Expense Reimbursement Per Share............................... -- $ 0.01(b)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD JULY 6, 1994
PERIOD ENDED (COMMENCEMENT OF OPERATIONS)
APRIL 11, 1995 TO OCTOBER 31, 1994
-------------- ----------------------------
<S> <C> <C>
CLASS C (e)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................... $ 7.94 $ 7.60
-------- --------
Net Investment Income.............................................. 0.01 --
Net Realized and Unrealized Gain on Investments.................... 0.29(d) 0.34(d)
-------- --------
Total From Investment Operations.................................. 0.30 0.34
-------- --------
Net Asset Value, End of Period..................................... $ 8.24 $ 7.94
======== ========
Total Investment Return at Net Asset Value......................... 3.40% (4.47%)
Total Adjusted Investment Return at Net Asset Value (a)............ -- (4.85%)(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).......................... $ 218 $ 165
Ratio of Expenses to Average Net Assets **......................... 0.98%* 1.01% *
Ratio of Adjusted Expenses to Average Net Assets (a)............... -- 1.39% *
Ratio of Net Investment Income to Average Net Assets............... 0.23%* 0.03% *
Ratio of Adjusted Net Investment Income to Average Net Assets (a).. -- (0.35%)*
Portfolio Turnover Rate............................................ N/A 57%
** Expense Reimbursement Per Share................................. -- $ 0.01(b)
</TABLE>
* On an annualized basis.
(a) On an unreimbursed basis without expense reduction.
(b) On average month end shares outstanding.
(c) An estimated total return calculation which takes into consideration fees
and expenses waived or borne by the adviser during the periods shown.
(d) May not accord to amounts shown elsewhere in the financial statements.
(e) Per share operating performance and the ratios and supplemental data are
calculated as of April 11, 1995, the date on which Class C shares were
redeemed.
(f) Without the reimbursement, total investment return would be lower.
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT LOSS, GAINS (LOSSES),
AND TOTAL INVESTMENT RETURN OF THE FUND. IT SHOWS HOW THE FUND'S NET ASSET VALUE
FOR A SHARE HAS CHANGED SINCE THE COMMENCEMENT OF OPERATIONS. ADDITIONALLY,
IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE FINANCIAL STATEMENTS
ARE EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
SPECIAL OPPORTUNITIES FUND ON OCTOBER 31, 1995. IT'S DIVIDED INTO TWO MAIN
CATEGORIES: COMMON STOCKS AND SHORT-TERM INVESTMENTS. THE COMMON STOCKS ARE
FURTHER BROKEN DOWN BY INDUSTRY GROUPS. SHORT-TERM INVESTMENTS, WHICH REPRESENT
THE FUND'S "CASH" POSITION, ARE LISTED LAST.
<TABLE>
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
COMMON STOCKS
AUDIO/VIDEO (2.59%)
Polygram NV (Netherlands).................... 100,000* $ 6,200,000
------------
BROADCASTING (0.34%)
New World Communications Group, Inc.**....... 49,900* 823,350
------------
COMPUTERS (19.21%)
HBO & Co..................................... 35,000* 2,476,250
Intuit, Inc.**............................... 259,900* 18,712,800
Microsoft Corp.**............................ 75,000 7,500,000
Parametric Technology Co.**.................. 35,000* 2,340,625
Sun Microsystems, Inc.**..................... 52,000* 4,056,000
3Com Corp.**................................. 230,000* 10,810,000
------------
45,895,675
------------
CONSTRUCTION (0.24%)
Australian National Industries, Ltd.
(Australia)................................. 200,000 156,680
CEMEX SA (Class B) American Depositary
Receipt (ADR) (Mexico)...................... 18,812 60,466
Ekran Berhad (Malaysia)...................... 70,000 177,548
Hopewell Holdings (Hong Kong)................ 200,000 126,100
Tolmex SA de CV (Mexico)**................... 11,000 41,749
------------
562,543
------------
DIVERSIFIED OPERATIONS (5.65%)
CUC International Inc.**..................... 375,000 12,984,375
Hutchinson Whampoa (Hong Kong)............... 50,000 275,485
Ogden Corp................................... 10,000 227,500
------------
13,487,360
------------
ELECTRICAL (0.00%)
Consolidated Electric Power Asia Ltd.
(Hong Kong)................................. 1,503 3,042
------------
ELECTRONICS (10.45%)
HADCO Corp.**................................ 85,000* 2,380,000
Helix Technology Corp........................ 86,200 3,232,500
Linear Technology Corp....................... 250,000* 10,937,500
Micron Technology, Inc....................... 35,000* 2,471,875
SCI Systems, Inc.**.......................... 169,100* 5,939,638
------------
24,961,513
------------
ENGINEERING (0.24%)
Fluor Corp................................... 5,000 282,500
Foster Wheeler Corp.......................... 8,000 300,000
------------
582,500
------------
HAZARDOUS WASTE (1.15%)
Handex Environmental Recovery, Inc.**........ 16,000 100,000
TETRA Technologies, Inc.**................... 200,000 2,650,000
------------
2,750,000
------------
HEALTHCARE (4.37%)
HealthCare COMPARE Corp.**................... 80,000* 2,960,000
Healthsource, Inc.**......................... 95,000* 5,035,000
Johnson & Johnson............................ 30,000* 2,445,000
------------
10,440,000
------------
LEISURE & RECREATION (3.74%)
Walt Disney Co., (The)....................... 155,000* 8,931,875
------------
MEDICAL (5.38%)
Boston Scientific Corp.**.................... 230,000* 9,688,750
Community Health Systems, Inc.**............. 100,000* 3,175,000
------------
12,863,750
------------
METALS (3.54%)
Asarco, Inc.................................. 70,000* 2,257,500
Kinross Gold Corp. (Canada)**................ 385,100* 2,863,141
Newmont Gold Co.............................. 37,000* 1,332,000
Prime Resource Group, Inc. (Canada)**........ 140,000* 1,014,846
Santa Fe Pacific Gold Corp................... 100,000* 987,500
------------
8,454,987
------------
OIL & GAS (15.48%)
Cairn Energy USA, Inc.**..................... 147,000* 1,764,000
Chesapeake Energy Corp.**.................... 100,000* 2,925,000
Diamond Offshore Drilling, Inc.**............ 88,000* 2,189,000
Falcon Drilling Co., Inc.**.................. 435,000* 4,513,125
Global Marine, Inc.**........................ 450,000* 2,925,000
Nabors Industries, Inc.**.................... 540,000* 4,657,500
Pride Petroleum Services, Inc.**............. 536,800* 4,697,000
Reading & Bates Corp.**...................... 420,000* 4,830,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
OIL & GAS (CONTINUED)
Sonat Offshore Drilling Co................... 130,000* $ 4,127,500
Triton Energy Corp.**........................ 93,600* 4,364,100
------------
36,992,225
------------
PUBLISHING (1.29%)
Scholastic Corp.**........................... 50,000* 3,087,500
------------
SOLID WASTE (0.29%)
Brambles Industries Ltd. (Australia)......... 30,000 318,561
Laidlaw, Inc. (Class B)...................... 23,500 211,500
Waste Management Intl., PLC, (ADR)
(United Kingdom)**.......................... 15,000 151,875
------------
681,936
------------
TELECOMMUNICATIONS (10.54%)
America Online, Inc.**....................... 145,000 11,600,000
Cascade Communications Corp.**............... 158,000* 11,257,500
U.S. Order, Inc.**........................... 155,000* 2,325,000
------------
25,182,500
------------
WATER TREATMENT (0.19%)
Compagnie Generale des Eaux (France)......... 1,316 122,243
Lyonnaise Des Eaux Dumez (France )........... 2,000 194,976
Wessex Water, PLC (United Kingdom)........... 25,000 132,148
------------
449,367
------------
TOTAL COMMONS STOCKS
(Cost $167,202,826) 84.69% 202,350,123
------- ------------
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE
RATE (000'S OMITTED)
---- ---------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (10.74%)
Investment in a joint repurchase
agreement transaction with
SBC Capital Markets Inc. -
Dated 10-31-95, Due 11-01-95
(secured by U.S. Treasury Bond,
8.75% Due 05-15-17,
and by U.S. Treasury Note, 5.75%
Due 09-30-97) - Note A............ 5.89% $25,672 25,672,000
------------
TOTAL SHORT-TERM INVESTMENTS 10.74% 25,672,000
------- ------------
TOTAL INVESTMENTS 95.43% $228,022,123
======= ============
</TABLE>
* Securities other than short-term investments, newly added to the
portfolio during the period ended October 31,1995.
** Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
PORTFOLIO CONCENTRATION (UNAUDITED)
- --------------------------------------------------------------------------------
THE SPECIAL OPPORTUNITIES FUND INVESTS PRIMARILY IN SECURITIES ISSUED IN THE
UNITED STATES OF AMERICA. THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE
ECONOMIC AND FINANCIAL CONDITIONS WITHIN THE COUNTRIES IN WHICH IT INVESTS. THE
CONCENTRATION OF INVESTMENTS BY INDUSTRY CATEGORY FOR INDIVIDUAL SECURITIES HELD
BY THE FUND IS SHOWN IN THE SCHEDULE OF INVESTMENTS.
IN ADDITION, CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS
COUNTRIES. THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS AT
OCTOBER 31, 1995 ASSIGNED TO COUNTRY CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE
AS A PERCENTAGE
OF FUND'S
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- ---------------
<S> <C>
Australia.................................................... 0.20%
Canada....................................................... 1.62
France....................................................... 0.13
Hong Kong.................................................... 0.17
Malaysia..................................................... 0.07
Mexico....................................................... 0.04
Netherlands.................................................. 2.59
United Kingdom............................................... 0.12
United States................................................ 79.75
Short-term Investments....................................... 10.74
-----
TOTAL INVESTMENTS 95.43%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust II (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Special Opportunities Fund (the "Fund,")
John Hancock Global Fund, John Hancock Global Income Fund, John Hancock
Short-Term Strategic Income Fund and John Hancock International Fund. Prior to
January 1, 1995, John Hancock Global Fund was known as John Hancock Freedom
Global Fund, John Hancock Global Income Fund was known as John Hancock Freedom
Global Income Fund and John Hancock International Fund was known as John Hancock
Freedom International Fund.
The Trustees have authorized the issuance of two classes of shares of the
Fund, designated as Class A and Class B. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, dividends, and liquidation, except that certain
expenses, subject to the approval of the Trustees, may be applied differently to
each class of shares in accordance with current regulations of the
Securities and Exchange Commission. Shareholders of a class which bears
distribution/ service expenses under the terms of a distribution plan, have
exclusive voting rights regarding such distribution plan. Class C shares were
outstanding during the period from July 6, 1994 through April 11, 1995, but the
Trustees terminated Class C shares as of May 1, 1995. Significant accounting
policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described under the heading "Foreign Currency
Translation."
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $5,914,444 of a capital
loss carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the Fund,
no capital gain distributions will be made. The carryforward expires October 31,
2002.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date or, in the case of some foreign securities,
on the date thereafter when the Fund is made aware of the dividend. Interest
income on investment securities is recorded on the accrual basis. Foreign income
may be subject to foreign withholding taxes which are accrued as applicable.
The fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
be calculated in the same manner, at the same time and will be in the same
amount, except for the effect of expenses that may be applied differently to
each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked-to-market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities. The
Fund may also purchase and sell forward contracts to facilitate the settlement
of foreign currency denominated portfolio transactions, under which it intends
to take delivery of the foreign currency. Such contracts normally involve no
market risk other than that offset by the currency amount of the underlying
transaction.
At October 31, 1995, there were no open forward foreign currency exchange
contracts.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund enters into a financial futures contract, it is
required to deposit with its custodian a specified amount of cash or U.S.
government securities, known as "initial margin," equal to a certain percentage
of the value of the financial futures contract being traded. Each day, the
futures contract is valued at the official settlement price of the board of
trade or U.S. commodities exchange. Subsequent payments, known as "variation
margin," to and from the broker are made on a daily basis as the market price of
the financial futures contract fluctuates. Daily variation margin adjustments,
arising from
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
this "mark to market," are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contract may not
correlate with changes in the value of the underlying securities.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1995, there were no open positions in financial futures
contracts.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Fund have been capitalized and are being charged to the Fund's operations
ratably over a five-year period that began with the commencement of investment
operations of the Fund.
NOTE B --
MANAGEMENT FEE, AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of: (a) 0.80% of the first $500,000,000 of the
Fund's average daily net asset value, (b) 0.75% of the next $500,000,000 and (c)
0.70% of the Fund's average daily net asset value in excess of $1,000,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
The Adviser has agreed to limit the Fund's expenses, including the
management fee (but not including the transfer agent and 12b-1 fee) further to
the extent required to prevent expenses from exceeding 0.90% of the Fund's
average daily net asset value, exclusive of certain expenses prescribed by state
law. For the period ended October 31, 1995, no reduction in the Adviser's fee
was necessary. The Adviser reserves the right to terminate this agreement at any
time.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. Prior to January 1, 1995 JH
Funds was known as John Hancock Broker Distribution Services, Inc. For the
period ended October 31, 1995, net sales charges received with regard to sales
of Class A shares amounted to $443,675. Out of this amount, $67,560 was retained
and used for printing prospectuses, advertising, sales literature and other
purposes, $156,268 was paid as sales commissions to unrelated broker-dealers and
$219,847 was paid as sales commissions to sales personnel of John Hancock
Distributors, Inc. ("Distributors"), Tucker Anthony, Incorporated ("Tucker
Anthony") and Sutro & Co., ("Sutro"), all of which are broker dealers. The
Adviser's indirect parent, John Hancock Mutual Life Insurance Company, is the
indirect sole shareholder of Distributors and John Hancock Freedom Securities
Corporation and its subsidiaries which include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from CDSC are paid to JH Funds and are used in whole or in part to defray its
expenses related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the period ended October 31,
1995, contingent deferred sales charges paid to JH Funds amounted to $741,870.
In addition, to reimburse JH Funds for the services it provides as
distributors of shares of the Fund, the Fund has adopted Distribution Plans with
respect to Class A and Class B pursuant to
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
Rule 12b-1 under the Investment Company Act of 1940. Accordingly, the Fund will
make payments to JH Funds for distribution and service expenses, at an annual
rate not to exceed 0.30% of Class A average daily net assets and 1.00% of Class
B average daily net assets to reimburse JH Funds for its distribution/service
costs. Up to a maximum of 0.25% of such payments may be service fees as defined
by the amended Rules of Fair Practice of the National Association of Securities
Dealers. Under the amended Rules of Fair Practice, curtailment of a portion of
the Fund's 12b-1 payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Prior to January 1, 1995, the Fund paid Investor
Services a monthly transfer agent fee equivalent, on an annual basis, to 0.30%
and 0.32% of the average daily net asset value of Class A and Class B shares of
the Fund, respectively, plus out-of-pocket expenses incurred by Fund Services on
behalf of the Fund. For the period January 1, 1995 through September 30, 1995
Class A and Class B shares paid transfer agent fees based on the number of
shareholder accounts and certain out-of-pocket expenses. For the period November
1, 1994 and through April 11, 1995, Class C shares paid a monthly transfer agent
fee equivalent, on an annual basis, to 0.10% of the average daily net asset
value of Class C shares plus out-of-pocket expenses incurred by Fund Services.
All Class C shares were redeemed on April 11, 1995. For the eleven months ended
September 30, 1995 the transfer agent expense, calculated as a class specific
expense was $356,361 for Class A and $497,061 for Class B, respectively. For the
period November 1, 1994 and through April 11, 1995, the transfer agent expense
for Class C shares amounted to $81. Effective October 1, 1995 transfer agent
expense is being treated as a fund expense based on the number of shareholder
accounts in the Fund and certain out-of-pocket expenses.
Edward J. Boudreau, Jr. is a director and officer of the Adviser, and its
affiliates as well as a Trustee of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees paid for
1995, the unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund will make investments into other John Hancock Funds,
as applicable, to cover its liability for the deferred compensation. Investments
to cover the Fund's deferred compensation liability will be recorded on the
Fund's books as an other asset. The deferred compensation liability and the
investment to cover the liability will be marked to market on a periodic basis
to reflect income earned by the investment.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended October 31, 1995 aggregated $328,853,750 and $327,825,528, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended October 31, 1995.
The cost of investments owned at October 31, 1995 for Federal income tax
purposes was $192,874,826. Gross unrealized appreciation and depreciation of
investments aggregated $40,334,138 and $5,186,841, respectively, resulting in
net unrealized appreciation of $35,147,297.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1995, the Fund has reclassified amounts to
reflect a decrease in accumulated net realized loss on investments and foreign
currency transactions of $17,231, a decrease in distributions in excess of net
investment income of $2,954,092 and a decrease in capital paid-in of $2,971,323.
This represents the cumulative amount necessary to report these balances on a
tax basis, excluding certain temporary differences, as of October 31, 1995.
Additional adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
asset value of the Fund, are primarily attributable to the treatment of net
operating losses in the computation of distributable income and capital gains
under federal tax rules versus generally accepted accounting principle.
NOTE E --
REORGANIZATION
On November 30, 1994, the shareholders of John Hancock Environmental Fund (JHEF)
approved a plan of reorganization between JHEF and the Fund providing for the
transfer of substantially all of the assets and liabilities of JHEF to the Fund
in exchange solely for Class A shares and Class B shares of the Fund. The
acquisition was accounted for as a tax free exchange of 1,058,125 Class A
shares, and 69,972 Class B shares of John Hancock Special Opportunities Fund for
the net assets of JHEF, which amounted to $7,921,550 and $519,918 for Class A
and Class B shares, respectively, including $941,350 of unrealized depreciation,
after the close of business at December 16, 1994.
18
<PAGE>
John Hancock Funds - Special Opportunities Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Special Opportunities Fund and the Trustees
of John Hancock Freedom Investment Trust II
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Special Opportunities
Fund (the "Fund") (a portfolio of John Hancock Freedom Investment Trust II) at
October 31, 1995, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during the fiscal year ended October
31, 1995.
The Fund has not paid any distributions of dividends or net realized gains
during the fiscal year.
19
<PAGE>
Dear Fellow Global Resources Fund Shareholder:
As you know, the last several years have been difficult for the global
resources sector. And while there are recent signs of improvement in certain
areas, the outlook for long-term industry recovery seems uncertain. For this
reason, we are proposing a merger of the John Hancock Global Resources Fund
into the John Hancock Special Opportunities Fund.
We believe this merger will benefit you in two ways:
Increased Investment Flexibility. The Special Opportunities Fund was created
to offer investors access to not just one, but several of the most promising
industry sectors. The Fund targets up to five industry sectors that the Fund's
management team believes to offer extraordinary growth prospects, and then
selects the companies within those sectors that show the greatest promise. In
fact, the Special Opportunities Fund currently counts the natural resources
sector among its targeted industries.
The Special Opportunities Fund offers you:
* Access to the top growth sectors
* The opportunity to invest in the fastest-growing companies within these
sectors
* Timely repositioning for highest growth potential
Lower Fund Expenses. Your Trustees firmly believe that combining these two
funds may benefit shareholders by allowing the Fund to capitalize on expected
economies of scale in investment research, operations and other important
areas. By creating a larger combined fund, the reorganization may lead to
reduced expenses and, ultimately, lower costs for you.
YOUR VOTE IS IMPORTANT!
At a special meeting of shareholders on August 14, 1996 at 9:00 A.M., you will
be asked to approve the merger of the Global Resources Fund into the Special
Opportunities Fund. Your Board of Trustees has already unanimously approved this
merger.
We urge you to consider this proposal and vote by completing, signing and
returning the enclosed proxy ballot form immediately. Your prompt response
will help avoid the cost of additional mailings to the Fund. For your
convenience, we have provided a postage-paid envelope.
If you have questions, please call your Customer Service Representative at
1-800-225-5291, Monday through Friday between 8:00 A.M. and 8:00 P.M. Eastern
time.
Sincerely,
Edward J. Boudreau, Jr.
Chairman and CEO
<PAGE>
JOHN HANCOCK GLOBAL RESOURCES FUND
101 HUNTINGTON AVENUE, BOSTON, MASSACHUSETTS 02199
SPECIAL MEETING OF SHAREHOLDERS - AUGUST 14, 1996
PROXY SOLICITATION BY THE BOARD OF DIRECTORS
The undersigned, revoking previous proxies, hereby appoint(s) Edward J.
Boudreau, Jr., Susan S. Newton and James B. Little, with full power of
substitution in each, to vote all the shares of common stock of John Hancock
Global Resources Fund ("Global Resources Fund" or the "Fund") which the
undersigned is (are) entitled to vote at the Special Meeting of Shareholders
(the "Meeting") of Global Resources Fund to be held at 101 Huntington Avenue,
Boston, Massachusetts, on Wednesday, August 14, 1996 at 9:00 a.m., Boston time,
and at any adjournment of the Meeting. All powers may be exercised by a majority
of said proxy holders or substitutes voting or acting, or, if only one votes and
acts, then by that one. Receipt of the Proxy Statement dated July 5, 1996 is
hereby acknowledged. If not revoked, this proxy shall be voted:
THIS PROXY SHALL BE VOTED IN FAVOR OF (FOR) PROPOSAL 1 IF NO SPECIFICATION IS
MADE BELOW. AS TO ANY OTHER MATTER, SAID PROXY OR PROXIES SHALL VOTE IN
ACCORDANCE WITH THEIR BEST JUDGEMENT. PLEASE VOTE BY FILLING IN THE APPROPRIATE
BOX BELOW, AS SHOWN, USING BLUE OR BLACK INK OR DARK PENCIL. DO NOT USE RED INK.
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL SAVE YOUR FUND THE EXPENSE
OF ADDITIONAL MAILINGS.
(1) To approve an Agreement and Plan of Reorganization between John
Hancock Series, Inc., on behalf of Global Resources Fund, and Freedom
Investment Trust II, on behalf of John Hancock Special Opportunities
Fund ("Special Opportunities Fund") providing for Special
Opportunities Fund's acquisition of all of Global Resources Fund's
assets in exchange solely for the assumption of Global Resources
Fund's liabilities, and the issuance of Class A and Class B shares of
Special Opportunities Fund to Global Resources Fund for distribution
to its shareholders.
FOR / / AGAINST / / ABSTAIN / /
PLEASE DO NOT FORGET TO SIGN BELOW.
NOTE: SIGNATURE(S) SHOULD AGREE WITH NAME(S) PRINTED HEREIN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE YOUR FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
- --------------------------- ------------------------- -------------
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
