[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm September 22, 1997
Dear Fellow Shareholder:
I am writing to ask for your vote on an important matter that will affect your
investment in the John Hancock Disciplined Growth Fund.
You may be aware that in addition to your Fund, John Hancock Funds offers a
similar growth-oriented fund, the John Hancock Growth Fund. This Fund, investing
primarily in stocks of large, more established companies, has the same long-term
capital appreciation investment objective as yours, while having a larger asset
base.
After careful consideration, your Fund's Trustees have unanimously recommended
merging your Fund into the John Hancock Growth Fund to offer you the same
investment objective with lower operating expenses. This proposed merger is
detailed in the enclosed proxy statement and summarized in the questions and
answers on the following page. I suggest you read both thoroughly prior to
voting.
Your Vote Makes a Difference!
No matter what the size of your investment may be, your vote is critical. I urge
you to review the enclosed materials and to complete, sign and return the
enclosed proxy ballot to us immediately. Your prompt response will help avoid
the need for additional mailings at your Fund's expense. For your convenience,
we have provided a postage-paid envelope.
If you have any questions or need additional information, please contact your
investment professional or 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. I thank you for your prompt vote on this matter.
Sincerely,
/s/ Edward J. Boudreau, Jr.
Edward J. Boudreau, Jr.
Chairman and CEO
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Q: What are the benefits of merging the Disciplined Growth Fund into the Growth
Fund?
A: The Growth Fund is more widely recognized in the mutual fund marketplace than
your Fund, which has made it harder for your Fund to raise assets and reduce
expenses. Your Trustees firmly believe this merger will allow you to continue
investing for long-term capital appreciation at a lower expense.
The Growth Fund's larger asset base after the merger, $537 million compared with
Disciplined Growth Fund's $121 million, should allow for lower operating
expenses than your Fund's. Following the merger, annual fees are projected to be
1.44% for Class A shareholders, down from 1.49%, and 2.14% for Class B
shareholders, down from 2.19%. Expected lower expenses should help to keep more
of your money invested, which often helps bolster an investment's total return
over time.
Q: How does the Growth Fund's strategy compare with that of the Disciplined
Growth Fund?
A: Both funds seek long-term capital appreciation through investments in stocks
that the management team believes have above-average earnings growth potential.
Although the Growth Fund may invest in companies of any size, it has
historically invested in larger, more established companies. As you know, your
Fund also typically focuses on stocks of large companies, but may also invest in
stocks of medium-sized companies.
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Q: How has the Growth Fund performed?
A: Although past performance does not necessarily guarantee future results, the
Growth Fund has been a steady performer over its more than 28-year history. The
Fund's Class A shares have posted average annual total returns of 9.04% over the
past year, 19.98% over the past three years, 14.73% over the past five years and
10.78% over the past ten years at public offering price as of June 30, 1997. The
Fund's Class B shares have posted an average annual total return of 8.93% over
the past year, 20.44% over the past three years and 12.37% since inception on
January 3, 1994.* To review the Growth Fund in greater detail, please refer to
the John Hancock Growth Funds prospectus and the Growth Fund's most recent
annual and semiannual reports, all of which are enclosed.
Q: How do I vote?
A: Most shareholders typically vote by completing, signing and returning the
enclosed proxy card using the postage-paid envelope provided. If you prefer to
vote in person, you are cordially invited to attend a meeting of shareholders of
your Fund, which will be held at 9:00 A.M. on November 12, 1997 at our 101
Huntington Avenue headquarters in Boston, Massachusetts. If you vote now, you
will help avoid further solicitations at your Fund's expense.
Q: How will the merger happen?
A: If the merger is approved, your Disciplined Growth Fund shares will be
converted to Growth Fund shares, using the Funds' net asset value share prices,
excluding sales charges, at the close of trading on December 5, 1997. This
conversion will not affect the total dollar value of your investment.
Q: Will the merger have tax consequences?
A: Although taxable dividends and capital gains will be paid prior to the
merger, the merger itself is a non-taxable event and does not need to be
reported on your 1997 tax return.
*Performance figures assume all distributions are reinvested and reflect a
maximum sales charge on Class A shares of 5% and the applicable contingent
deferred sales charge on Class B shares. The CDSC declines annually between
years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1% . No sales
charge will be assessed after the sixth year. The return and principal value of
any mutual fund investment will fluctuate, so that shares, when redeemed, may be
worth more or less than their original cost.
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JOHN HANCOCK DISCIPLINED GROWTH FUND
(a series of John Hancock Investment Trust II)
101 Huntington Avenue
Boston, MA 02199
NOTICE OF MEETING OF SHAREHOLDERS
SCHEDULED FOR NOVEMBER 12, 1997
This is the formal agenda for your fund's shareholder meeting. It tells you what
matters will be voted on and the time and place of the meeting, in case you want
to attend in person.
To the shareholders of John Hancock Disciplined Growth Fund:
A meeting of shareholders of your fund will be held at 101 Huntington Avenue,
Boston, Massachusetts on Wednesday, November 12, 1997 at 9:00 a.m., Eastern
Time, to consider the following:
1. A proposal to approve an Agreement and Plan of Reorganization between
your fund and John Hancock Growth Fund. Under this Agreement your fund
would transfer all of its assets to Growth Fund in exchange for shares
of Growth Fund. These shares would be distributed proportionately to
you and the other shareholders of your fund. Growth Fund would also
assume your fund's liabilities. Your board of trustees recommends that
you vote FOR this proposal.
2. Any other business that may properly come before the meeting.
Shareholders of record as of the close of business on September 17, 1997 are
entitled to vote at the meeting and any related follow-up meetings.
Whether or not you expect to attend the meeting, please complete and return the
enclosed proxy card. If shareholders do not return their proxies in sufficient
numbers, your fund will incur the cost of extra solicitations, which is
indirectly borne by you and other shareholders.
By order of the board of
trustees,
Susan S. Newton
Secretary
September 22, 1997
350PX 9/97
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PROXY STATEMENT OF
JOHN HANCOCK DISCIPLINED GROWTH FUND
(a series of John Hancock Investment Trust II)
PROSPECTUS FOR
CLASS A AND CLASS B SHARES OF
JOHN HANCOCK GROWTH FUND
(a series of John Hancock Investment Trust III)
This proxy statement and prospectus contains the information you should know
before voting on the proposed reorganization of your fund into John Hancock
Growth Fund. Please read it carefully and retain it for future reference.
How the Reorganization Will Work
o Your fund will transfer all of its assets to Growth Fund. Growth Fund
will assume your fund's liabilities.
o Growth Fund will issue Class A shares in an amount equal to the value
of your fund's Class A shares. These shares will be distributed to
your fund's Class A shareholders in proportion to their holdings on
the reorganization date.
o Growth Fund will issue Class B shares in an amount equal to the value
of your fund's Class B shares. These shares will be distributed to
your fund's Class B shareholders in proportion to their holdings on
the reorganization date.
o The reorganization will be tax-free.
o Your fund will be liquidated and you will end up as a share holder of
Growth Fund.
Shares of Growth Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other depository institution. These shares are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency.
2
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Shares of Growth Fund have not been approved or disapproved by the Securities
and Exchange Commission. The Securities and Exchange Commission has not passed
upon the accuracy or adequacy of this prospectus. Any representation to the
contrary is a criminal offense.
Why Your Fund's Trustees are Recommending the Reorganization
The trustees of your fund believe that reorganizing your fund into a larger fund
with similar investment policies would enable the shareholders of your fund to
benefit from increased diversification, the ability to achieve better net prices
on securities trades and economies of scale that could contribute to a lower
expense ratio. Therefore, the trustees recommend that your fund's shareholders
vote FOR the reorganization.
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Investment Objectives
- --------------------------------------------------------------------------------
Disciplined Growth Growth
- --------------------------------------------------------------------------------
Investment Long-term growth of Long-term capital
objective. capital. Moderate income is appreciation. Income is not
a secondary objective. an objective.
- --------------------------------------------------------------------------------
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Where to Get More Information
- --------------------------------------------------------------------------------
Prospectus of your fund and Growth Fund In the same envelope as this proxy
dated 3/1/97. statement and prospectus.
Incorporated by reference into this
proxy statement and
prospectus.
- -----------------------------------------
Growth Fund's annual and semi-
annual reports to shareholders.
- --------------------------------------------------------------------------------
Your fund's annual and semi- annual On file with the Securities and
reports to shareholders. Exchange Commission ("SEC") and
available at no charge by calling
1-800-225-5291. Incorporated by
reference into this proxy statement
and prospectus.
- -----------------------------------------
A statement of additional
information dated 9/22/97. It
contains additional information about
your fund and Growth Fund.
- --------------------------------------------------------------------------------
To ask questions about this proxy Call our toll-free telephone
statement and prospectus. number: 1-800-225-5291
- --------------------------------------------------------------------------------
The date of this proxy statement and prospectus is September 22, 1997.
3
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TABLE OF CONTENTS
Page
INTRODUCTION 5
SUMMARY 5
INVESTMENT RISKS 18
PROPOSAL TO APPROVE AGREEMENT
AND PLAN OF REORGANIZATION 20
CAPITALIZATION 27
ADDITIONAL INFORMATION ABOUT
THE FUNDS' BUSINESSES 28
BOARDS' EVALUATION AND RECOMMENDATION 29
VOTING RIGHTS AND REQUIRED VOTE 30
INFORMATION CONCERNING THE MEETING 30
OWNERSHIP OF SHARES OF THE FUNDS 33
EXPERTS 33
AVAILABLE INFORMATION 33
EXHIBITS
A - Agreement and Plan of Reorganization between John Hancock Disciplined
Growth Fund and John Hancock Growth Fund (attached to this document).
4
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INTRODUCTION
This proxy statement and prospectus is being used by the board of trustees of
your fund to solicit proxies to be voted at a special meeting of shareholders of
your fund. This meeting will be held at 101 Huntington Avenue, Boston,
Massachusetts on Wednesday, November 12, 1997 at 9:00 a.m., Eastern Time. The
purpose of the meeting is to consider a proposal to approve an Agreement and
Plan of Reorganization providing for the reorganization of your fund into John
Hancock Growth Fund. This proxy statement and prospectus is being mailed to your
fund's shareholders on or about September 22, 1997.
Who is Eligible to Vote?
Shareholders of record on September 17, 1997 are entitled to attend and vote at
the meeting or any adjourned meeting. Each share is entitled to one vote. Shares
represented by properly executed proxies, unless revoked before or at the
meeting, will be voted according to shareholders' instructions. If you sign a
proxy, but do not fill in a vote, your shares will be voted to approve the
Agreement and Plan of Reorganization. If any other business comes before the
meeting, your shares will be voted at the discretion of the persons named as
proxies.
SUMMARY
The following is a summary of more complete information appearing later in this
proxy statement. You should read the entire proxy statement, Exhibit A and the
enclosed documents carefully because they contain details that are not in the
summary.
5
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Comparison of Disciplined Growth Fund to Growth Fund
- ------------------- ------------------------------ -----------------------------
Disciplined Growth Growth
- ------------------- ------------------------------ -----------------------------
Business: Your fund is a diversified Growth Fund is a
series of John Hancock diversified series of John
Investment Trust II. The Hancock Investment Trust
trust is an open-end III. The trust is an open-
investment company organized end investment company
as a organized as a
Massachusetts business Massachusetts business
trust. trust.
- ------------------- ------------------------------ -----------------------------
Net assets as of $121.0 million. $300.1 million.
April 30, 1997:
- ------------------- ------------------------------ -----------------------------
Investment The Fund's investment The Fund's investment
adviser and adviser is John Hancock adviser is John Hancock
portfolio Advisers, Inc. John Snyder, Advisers, Inc. Anurag
managers: III and Jere Estes are the Pandit, CFA, has led Growth
leaders of your fund's Fund's portfolio management
portfolio management team. team since January 1, 1997.
Mr. Snyder is an executive A second vice president of
vice president of the the adviser, Mr. Pandit has
adviser and has been a team been a member of the
member since July 1992. He management team since
has been an investment joining the adviser in April
manager since 1971. Mr. 1996. Mr. Pandit has been
Estes has been a part of in the investment business
your fund's management team since 1984.
since joining John Hancock
in July 1992. He has been in
the investment business
since 1967.
- ------------------- ------------------------------ -----------------------------
6
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INVESTMENT OBJECTIVES AND POLICIES
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Disciplined Growth Growth
- --------------------------------------------------------------------------------
Investment Long-term growth of capital. Long-term capital
objective: Moderate income is a appreciation. Income is not
secondary objective. These an objective. Growth Fund's
objectives cannot be changed objective cannot be changed
without shareholder without shareholder approval.
approval.
- --------------------------------------------------------------------------------
Primary At least 65% of assets in The Fund may invest in common
investments: common stocks, preferred stocks, preferred stocks,
stocks, warrants and warrants and convertible debt
convertible debt securities securities of companies whose
of established, growing operating earnings and
companies that have revenues have grown more than
demonstrated superior twice as fast as the gross
earnings growth and domestic product for the past
stability. Your fund also five years. Companies
looks for the following selected generally have
characteristics: positive operating earnings
predictability of earnings, a growth for five consecutive
low level of debt, seasoned years. However, not all
management and a strong stocks in the fund's portfolio
market position. Many of your meet the above standards.
fund's investments are in
medium and large
capitalization companies.
- --------------------------------------------------------------------------------
Investments in For liquidity and For liquidity and flexibility,
debt flexibility, your fund may Growth Fund may place up to
securities: place up to 15% of net assets 35% of net assets in cash or
in cash or investment grade investment grade short term
short term securities. In securities. In abnormal
abnormal market conditions, market conditions, it may
it may invest up to 80% in invest more than 35% in these
these securities as a securities as a defensive
defensive tactic. tactic. In addition, Growth
Fund may invest up to 5% of
net assets in securities
rated (or equivalent to those
rated) below BBB/Baa. These
securities are generally
known as "junk bonds."
- --------------------------------------------------------------------------------
7
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INVESTMENT OBJECTIVES AND POLICIES
- ------------------- ------------------------------ -----------------------------
Disciplined Growth Growth
- ------------------- ------------------------------ -----------------------------
Foreign Your fund may invest up to Growth Fund may invest up to
securities: 10% of assets in American 15% of assets in securities
Depository Receipts and issued by
European Depository foreign companies.
Receipts, but not in other
foreign securities.
- ------------------- ------------------------------------------------------------
Illiquid Both funds may invest up to 15% of net assets in illiquid
securities: securities. This limitation does not apply to liquid Rule
144A securities, but does apply to other restricted
securities.
- ------------------- ------------------------------------------------------------
Financial futures Both funds may, but typically do not, use financial
and related futures, options on futures and options on securities and
options; indices. There are no percentage limits on the amount of
options on fund assets that may be invested in these instruments.
securities and
indices:
- ------------------- ------------------------------ -----------------------------
Currency Your fund may not enter into Growth Fund may enter in
contracts: currency contracts for any currency contracts for
purpose. hedging, but not
speculative, purposes.
- ------------------- ------------------------------ -----------------------------
Short sales: Your fund may not Growth Fund may, but
engage in short sales. typically does not, engage
in short sales.
- ------------------- ------------------------------------------------------------
When-issued and Both funds may purchase when-issued securities and purchase
forward or sell securities in forward commitment transactions.
commitment
transactions:
- ------------------- ------------------------------------------------------------
Short-term Neither fund is subject to any limitations on short-term
trading: trading.
- ------------------- ------------------------------------------------------------
Repurchase Both funds may invest without limitation in repurchase
agreements: agreements.
- ------------------- ------------------------------ -----------------------------
Securities Your fund may lend portfolio Growth Fund may lend
lending: securities portfolio securities
representing up to 5% of representing up to 33.3% of
assets. assets.
- ------------------- ------------------------------ -----------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
Disciplined Growth Growth
- ------------------- ------------------------------ -----------------------------
Borrowing and Your fund may temp- orarily Your fund may temp- orarily
reverse borrow from banks or through borrow from banks or through
repurchase reverse repurchase reverse repurchase
agreements: agreements for extraordinary agreements for extraordinary
or emergency purposes. These or emergency purposes. These
borrowings may not exceed 5% borrowings may not exceed
of net assets. 33.3% of total assets.
- ------------------- ------------------------------ -----------------------------
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CLASSES OF SHARES
- --------------------------------------------------------------------------------
Disciplined Growth Growth
- ------------------- ------------------------------------------------------------
Class A The Class A shares of both funds have the same
shares: characteristics and fee structure.
o Class A shares are offered with front-end sales charges
ranging from 2% to 5% of each fund's offering price,
depending on the amount invested.
o There is no front-end sales charge for investments of
$1 million or more, but there is a contingent deferred
sales charge ranging from 0.25% to 1.00% on shares sold
within one year of purchase.
o Investors can combine multiple purchases of Class A
shares to take advantage of breakpoints in the sales
charge schedule.
o Sales charges are waived for the categories of
investors listed in the funds' prospectus.
o Class A shares are subject to a 12b-1 distribution fee
equal to 0.30% annually of average net assets.
- ------------------- ------------------------------------------------------------
9
<PAGE>
- ------------------- ------------------------------------------------------------
Class B The Class B shares of both funds have the same
shares: characteristics and fee structure.
o Class B shares are offered without a front-end sales
charge, but are subject to a contingent deferred sales
charge (CDSC) if sold within six years after purchase.
The CDSC ranges from 1.00% to 5.00% depending on how
long they are held. No CDSC is imposed on shares held
more than six years.
o CDSCs are waived for the categories of investors listed
in the funds' prospectus.
o Class B shares are subject to 12b-1 distribution and
service fees equal to 1.00% annually of average net
assets.
- ------------------- ------------------------------------------------------------
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BUYING, SELLING AND EXCHANGING SHARES
- ------------------- ------------------------------------------------------------
Both Disciplined Growth and Growth Funds
- ------------------- ------------------------------------------------------------
Buying The procedures for buying shares of both funds are
shares: identical. Investors may buy shares at their public
offering price through a financial representative or the
funds' transfer agent, John Hancock Signature Services,
Inc. After September 17, 1997, investors will not be
allowed to open new accounts in your fund but can add to
existing accounts.
- ------------------- ------------------------------------------------------------
Minimum The funds have the same initial investment minimums, which
initial are $1,000 for non-retirement accounts and $250 for
Investments: retirement accounts and group investments.
- ------------------- ------------------------------------------------------------
Exchanging Shareholders of both funds may exchange their shares at net
shares: asset value with no sales charge for shares of the same
class of any other John Hancock fund.
- ------------------- ------------------------------------------------------------
Selling shares: Shareholders of both funds may sell their shares by
submitting a proper written or telephone request to John
Hancock Signature Services, Inc.
- ------------------- ------------------------------------------------------------
Net asset All purchases, exchanges and sales of each fund's shares are
value: made at a price based on the next determined net asset value
per share (NAV) of the fund. Both funds' NAVs are determined
at the close of regular trading on the New York Stock
Exchange, which is normally 4:00 p.m. Boston Time.
- ------------------- ------------------------------------------------------------
10
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The Funds' Expenses
Shareholders of both funds pay various expenses, either directly or indirectly.
The first two expense tables appearing below show the expenses for the twelve
months ended April 30, 1997, adjusted to reflect any changes. Future expenses
may be greater or less. The examples contained in each expense table show what
you would pay if you invested $1,000 over the various time frames indicated.
Each example assumes that you reinvested all dividends and that the average
annual return was 5%. The examples are for comparison purposes only and are not
a representation of either fund's actual expenses or returns, either past or
future.
DISCIPLINED GROWTH FUND
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 Class A Class B
(as a % of average net assets)
Management fee 0.75% 0.75%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.44% 0.44%
Total fund operating expenses 1.49% 2.19%
Example
Share class Year 1 Year 3 Year 5 Year 10
Class A shares $64 $95 $127 $219
Class B shares
Assuming redemption
at end of period $72 $99 $137 $235
Assuming no redemption $22 $69 $117 $235
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GROWTH FUND
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 Class A Class B
(as a % of average net assets)
Management fee 0.79% 0.79%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.36% 0.36%
Total fund operating expenses 1.45% 2.15%
Example
Share class Year 1 Year 3 Year 5 Year 10
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
(1) Except for investments of $1 million or more.
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may pay more than
the equivalent of the maximum permitted front-end sales charge.
Pro Forma Expense Tables
The board of trustees of another John Hancock fund, John Hancock Discovery Fund,
has recommended that Discovery Fund also reorganize into Growth Fund. The
reorganization of your fund with Growth Fund, however, does not depend upon
whether the reorganization involving Discovery Fund occurs. Your trustees do not
expect the total expenses paid by Growth Fund to increase if both
reorganizations do occur.
The next two expense tables show the hypothetical ("pro forma") expenses of
Growth Fund assuming (1) that a reorganization with your fund, but not John
12
<PAGE>
Hancock Discovery Fund, occurred on April 30, 1997 or (2) that a reorganization
with both your fund and John Hancock Discovery Fund occurred on April 30, 1997.
The expenses shown in both tables are based on fees and expenses incurred during
the twelve months ended April 30, 1997. Growth Fund's actual expenses after the
reorganization may be greater or less than those shown. The examples contained
in each pro forma expense table show what you would pay on a $1,000 investment
if the reorganization had occurred on April 30, 1997. Each example assumes that
you reinvested all dividends and that the average annual return was 5%. The pro
forma examples are for comparison purposes only and are not a representation of
Growth Fund's actual expenses or returns, either past or future.
GROWTH FUND (PRO FORMA)
(Assuming reorganization with Disciplined Growth Fund only)
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) Class A Class B
Management fee(3) 0.75% 0.75%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.37% 0.37%
Total fund operating expenses 1.42% 2.12%
Pro Forma Example
Share class Year 1 Year 3 Year 5 Year 10
Class A shares $64 $93 $124 $212
Class B shares
Assuming redemption
at end of period $72 $96 $134 $227
Assuming no redemption $22 $66 $114 $227
13
<PAGE>
GROWTH FUND (PRO FORMA)
(Assuming reorganization with both
Disciplined Growth Fund and Discovery Fund)
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) Class A Class B
Management fee(3) 0.75% 0.75%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.39% 0.39%
Total fund operating expenses 1.44% 2.14%
Pro Forma Example
Share class Year 1 Year 3 Year 5 Year 10
Class A shares $64 $93 $125 $214
Class B shares
Assuming redemption
at end of period $72 $97 $135 $229
Assuming no redemption $22 $67 $115 $229
(1) Except for investments of $1 million or more.
(2) Does not include wire redemption fee (currently $4.00).
(3) On September 9, 1997, the trustees of Growth Fund approved a
reduction in the advisory fee rates paid by Growth Fund to take effect
on the reorganization date. The pro forma management fees in the tables
have been restated to reflect the lower fee rates.
(4) Because of the 12b-1 fee, long-term shareholders may pay more than the
equivalent of the maximum permitted front-end sales charge.
14
<PAGE>
The Reorganization
o The reorganization is scheduled to occur at 5:00 p.m., Eastern Time,
on December 5, 1997, but may occur on any later date before June 1,
1998. Your fund will transfer all of its assets to Growth Fund. Growth
Fund will assume your fund's liabilities. The net asset value of both
funds will be computed as of 5:00 p.m., Eastern Time, on the
reorganization date.
o Growth Fund will issue to your fund Class A shares in an amount equal
to the aggregate net asset value of your fund's Class A shares. These
shares will immediately be distributed to your fund's Class A
shareholders in proportion to their holdings on the reorganization
date. As a result, Class A shareholders of your fund will end up as
Class A shareholders of Growth Fund.
o Growth Fund will issue to your fund Class B shares in an amount equal
to the aggregate net asset value of your fund's Class B shares. These
shares will immediately be distributed to your fund's Class B
shareholders in proportion to their holdings on the reorganization
date. As a result, Class B shareholders of your fund will end up as
Class B shareholders of Growth Fund.
o After the reorganization is over, your fund will be terminated.
o The reorganization will be tax-free and will not take place unless
both funds receive a satisfactory opinion concerning the tax
consequences of the reorganization from Hale and Dorr LLP, counsel to
the funds.
Other Consequences of the Reorganization. If the reorganization had occurred on
April 30, 1997, Growth Fund's Class A and Class B expense ratios would have been
slightly lower than your fund's current Class A and Class B expense ratios.
Your fund pays, and Growth Fund will pay after the reorganization, monthly
advisory fees equal to the following annual percentage of average daily net
assets:
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- ---------------------------------------------- ---------------- ----------------
Fund Asset Disciplined
Breakpoints Growth Growth
- ---------------------------------------------- ---------------- ----------------
First $500 million 0.75% 0.75%
- ---------------------------------------------- ---------------- ----------------
Next $250 million 0.65% 0.75%
- ---------------------------------------------- ---------------- ----------------
Over $750 million 0.65% 0.70%
- ---------------------------------------------- ---------------- ----------------
Thus, at asset levels of up to $500 million, the advisory fee rates paid by your
fund and Growth Fund would be the same. At asset levels between $500 million and
$750 million, the advisory fee rate paid by Growth Fund would be 0.10% of assets
higher than would have been paid by your fund at the same asset levels. For
assets over $750 million this differential would be higher by 0.05% of assets.
On the other hand, your fund's historical growth pattern suggests that its asset
size probably would not have increased sufficiently in the near future to
qualify for the 0.65% fee rate. Combining the assets of your fund and Growth
Fund will enable Growth Fund to more quickly reach the next fee reduction
breakpoint.
In addition, Growth Fund's other expenses of 0.36%, as well as its pro forma
other expenses, are lower than your fund's other expenses of 0.44%.
Consequently, Growth Fund's annual Class A and Class B expense ratios (equal to
1.45% and 2.15%, respectively, of average net assets) are slightly lower than
your fund's expense ratios (equal to 1.49% and 2.19%, respectively, of average
net assets). If the reorganization had occurred on April 30, 1997, Growth Fund's
pro forma Class A and Class B expense ratios (equal to 1.42% and 2.12%,
respectively, of average net assets) would also have been lower than your fund's
expense ratios.
16
<PAGE>
The following diagram shows how the reorganization would be carried out.
Disciplined Growth Disciplined Growth Growth Fund receives
Fund transfers assets & Fund's assets & assumes
liabilities to Global assets and liabilities of
Fund liabilities Disciplined Growth
Fund
Class A Class B Issues Class Issues Class
shareholders shareholders B Shares A Shares
Your fund receives Growth Fund
Class B shares and
distributes them to your fund's Class B shareholders
Your fund receives Growth Fund
Class A shares and
distributes them to your fund's Class A shareholders
[The above was represented as a diagram illustrating the reorganization]
17
<PAGE>
INVESTMENT RISKS
The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table compares the risks
affecting each fund.
- ------------------- ------------------------------ -----------------------------
Disciplined Growth Growth
- ------------------- ------------------------------------------------------------
Stock As with any fund that invests primarily in stocks, the
market risk value of each fund's portfolio will change in response to
stock market movements.
- ------------------- ------------------------------------------------------------
Credit risk The debt securities held by The debt securities held by
your fund are subject to the your fund are subject to the
risk that the issuer of a risk that the issuer of a
security will default or security will default or
otherwise fail to meet its otherwise fail to meet its
obligations. obligations. This risk is
greater to the extent that
Growth Fund invests in junk
bonds.
- ------------------- ------------------------------ -----------------------------
Interest A rise in interest rates A rise in interest rates
rate risk typically causes the value typically causes the value
of debt securities to fall. of debt securities to fall.
A fall in interest rates A fall in interest rates
typically causes the value typically causes the value
of debt securities to rise. of debt securities to rise.
Interest rate risk may be
greater to the extent that
Growth Fund invests in junk
bonds.
- ------------------- ------------------------------ -----------------------------
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- ------------------- ------------------------------ -----------------------------
Disciplined Growth Growth
- ------------------- ------------------------------ -----------------------------
Foreign Your fund's investments in Growth Fund's investments in
securities and depository receipts for foreign securities are
currency risks foreign securities are subject to the risks of
subject to the risks of adverse foreign government
adverse foreign actions, political
government actions, instability or a lack of
political instability or a adequate and accurate
lack of adequate and information. Also, currency
accurate information. Also, exchange rate movements
currency exchange rate could reduce gains or create
movements could reduce gains losses. These risks may be
or create losses. greater for direct
investments in foreign
securities and
currency contracts than for
depository receipts.
- ------------------- ------------------------------------------------------------
Risks of The funds' investments in restricted and illiquid
restricted and securities may be difficult or impossible to sell at a
illiquid desirable time or a fair price. Restricted and illiquid
securities securities also present a greater risk of inaccurate
valuation.
- ------------------- ------------------------------------------------------------
Risks of Most derivative instruments involve leverage, which
derivative increases market risks. Leverage magnifies gains and
instruments, losses on derivatives relative to changes in the value of
including underlying assets. If a derivative is used for hedging
financial purposes, changes in the value of the derivative may not
futures, match those of the hedged asset. Over the counter
options on derivatives may be illiquid or hard to value accurately.
futures, In addition, the other party may default on its
securities and obligations. If markets for underlying assets do not move
index options, in the right direction, a fund's performance may be worse
than if it had not used derivatives.
- ------------------- ------------------------------ -----------------------------
Risks of Since your fund may not Since Growth Fund may enter
currency enter into currency contracts into currency contracts
contracts and or short sales, it is not or short sales, it is exposed
short sales exposed to the risks of those to the risks of those
transactions. transactions.
- ------------------- ------------------------------ -----------------------------
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PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
Description of Reorganization
You are being asked to approve an Agreement and Plan of Reorganization, a copy
of which is attached as Exhibit A. The Agreement provides for a reorganization
on the following terms:
o The reorganization is scheduled to occur at 5:00 p.m., Boston time, on
December 5, 1997, but may occur on any later date before June 1, 1998.
Your fund will transfer all of its assets to Growth Fund and Growth
Fund will assume all of your fund's liabilities. This will result in
the addition of your fund's assets to Growth Fund's portfolio. The net
asset value of both funds will be computed as of 5:00 p.m., Eastern
Time, on the reorganization date.
o Growth Fund will issue to your fund Class A shares in an amount equal
to the aggregate net asset value of your fund's Class A shares. As
part of the liquidation of your fund, these shares will immediately be
distributed to Class A shareholders of record of your fund in
proportion to their holdings on the reorganization date. As a result,
Class A shareholders of your fund will end up as Class A shareholders
of Growth Fund.
o Growth Fund will issue to your fund Class B shares in an amount equal
to the aggregate net asset value of your fund's Class B shares. As
part of the liquidation of your fund, these shares will immediately be
distributed to Class B shareholders of record of your fund in
proportion to their holdings on the reorganization date. As a result,
Class B shareholders of your fund will end up as Class B shareholders
of Growth Fund.
o After the reorganization is over, the existence of your fund will be
terminated.
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<PAGE>
Reasons for the Proposed Reorganization
The board of trustees of your fund believes that the proposed reorganization
will be advantageous to the shareholders of your fund for several reasons. The
board of trustees considered the following matters, among others, in approving
the proposal.
First, that Growth Fund is more widely recognized in the broker community as
John Hancock's primary U.S. equity fund, making it increasingly difficult to
attract assets to your fund.
Second, that shareholders may be better served by a fund offering greater
diversification. To the extent that combining the funds' assets into a single
portfolio creates a larger asset base, Growth Fund's investment portfolio can
achieve greater diversification after the reorganization than is currently
possible for either fund. Greater diversification is expected to benefit the
shareholders of both funds because it may reduce the negative effect that the
adverse performance of any one security may have on the performance of the
entire portfolio.
Third, that Growth Fund's total expenses are lower than your fund's total
expenses. As a result of the reorganization, shareholders of your fund should
experience a reduction in the total amount of fees that they indirectly pay each
month. A combined fund offers economies of scale that is expected to lead to
better control over expenses than is possible for your fund. Both funds incur
substantial costs for accounting, legal, transfer agency services, insurance,
and custodial and administrative services.
Fourth, that the Growth Fund shares received in the reorganization will provide
you with a similar investment at a comparable or lower level of risk. The board
of trustees also considered the performance history of each fund.
The board of trustees of Growth Fund considered that the reorganization presents
an excellent opportunity for Growth Fund to acquire investment assets without
the obligation to pay commissions or other transaction costs that are normally
associated with the purchase of securities. This opportunity provides an
economic benefit to Growth Fund and its shareholders.
The boards of trustees of both funds also considered that the adviser and the
funds' distributor, John Hancock Funds, Inc., will also benefit from the
reorganization. For example, the adviser might realize time savings from a
consolidated portfolio management effort and from the need to prepare fewer
21
<PAGE>
reports and regulatory filings as well as prospectus disclosure for one fund
instead of two. The trustees believe, however, that these savings will not
amount to a significant economic benefit.
Comparative Fees and Expense Ratios. As discussed above in the Summary, at asset
levels of up to $500 million, the advisory fee rates paid by your fund and
Growth Fund would be the same. At asset levels between $500 million and $750
million, the advisory fee rate paid by Growth Fund would be 0.10% of assets
higher than would have been paid by your fund at the same asset levels. For
assets over $750 million this differential would be higher by 0.05% of assets.
On the other hand, your fund's historical growth pattern suggests that its asset
size probably would not have increased sufficiently in the near future to
qualify for the 0.65% fee rate. Combining the assets of your fund and Growth
Fund will enable Growth Fund to more quickly reach the next fee reduction
breakpoint.
In addition, Growth Fund's other expenses of 0.36%, as well as its pro forma
other expenses, are lower than your fund's other expenses of 0.44%.
Consequently, Growth Fund's annual Class A and Class B expense ratios (equal to
1.45% and 2.15%, respectively, of average net assets) are slightly lower than
your fund's expense ratios (equal to 1.49% and 2.19%, respectively, of average
net assets). If the reorganization had occurred on April 30, 1997, Growth Fund's
pro forma Class A and Class B expense ratios (equal to 1.42% and 2.12%,
respectively, of average net assets) would also have been lower than your fund's
expense ratios.
In approving the reorganization, the trustees concluded that Growth Fund's
advisory fee rates, although higher at certain asset levels, are reasonable.
They also believed that these higher advisory fee rates would be more than
offset by the lower overall expense ratios likely to be achieved by Growth Fund
after the reorganization.
Comparative Performance. The trustees also took into consideration the relative
performance of your fund and Growth Fund. As shown in the table below, your fund
has had better performance for some periods while Growth Fund has had better
performance for other periods.
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- -------------------------------- ------------------------ ----------------------
Average Annual
Total Return Disciplined Growth Growth
(without including sales
charges)
----------- ------------ ----------- ----------
Class A Class B Class A Class B
- -------------------------------- ----------- ------------ ----------- ----------
1 year ended 4/30/97 14.66% 13.87% 4.89% 4.21%
- -------------------------------- ----------- ------------ ----------- ----------
3 years ended 4/30/97 14.17% 13.42% 15.30% 14.45%
- -------------------------------- ----------- ------------ ----------- ----------
5 years ended 4/30/97 11.53% 10.85% 13.19% 10.35%*
- -------------------------------- ----------- ------------ ----------- ----------
10 years ended 4/30/97 10.38%* 8.97% 10.73% N/A
- -------------------------------- ----------- ------------ ----------- ----------
*Since inception.
Although your fund achieved a higher one year total return than Growth Fund,
Growth Fund's performance has been better than that of your fund for most of the
other periods reported.
Unreimbursed Distribution and Shareholder Service Expenses
The boards of trustees of your fund and Growth Fund have determined that, if the
reorganization occurs, unreimbursed distribution and shareholder service
expenses incurred under your fund's Rule 12b-1 Plans will be reimbursable
expenses under Growth Fund's Rule 12b-1 Plans. However, the maximum amounts
payable annually under Growth Fund's Rule 12b-1 Plans (0.30% and 1.00% of
average daily net assets attributable to Class A shares and Class B shares,
respectively) will not increase.
The following table shows the actual and pro forma unreimbursed distribution and
shareholder service expenses of both classes of your fund and Growth Fund. The
table shows both the dollar amount of these expenses and the percentage of each
class' average net assets that they represent.
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<PAGE>
- --------------------------------- ------------------------ ---------------------
Unreimbursed
Distribution and Shareholder Disciplined Growth Growth
Service Expenses
----------- ------------ ---------- ----------
Class A Class B Class A Class B
- --------------------------------- ----------- ------------ ---------- ----------
Actual expenses as of $62,400 $3,945,091 $287,922 $199,391
April 30, 1997 0.20% 4.38% 0.11% 0.69%
- --------------------------------- ----------- ------------ ---------- ----------
Pro forma combined expenses as $350,322 $4,144,482
of April 30, 1997 0.12% 3.48%
- --------------------------------- ------------------------ ---------- ----------
Thus, if the reorganization had taken place on April 30, 1997, the pro forma
combined unreimbursed expenses of Growth Fund's Class A and Class B shares would
have been higher than if no reorganization had occurred. Nevertheless, Growth
Fund's assumption of your fund's unreimbursed Rule 12b-1 expenses will have no
immediate effect upon the payments made under Growth Fund's Rule 12b-1 Plans.
These payments will continue to be 0.30% and 1.00% of average daily net assets
attributable to Class A and Class B shares, respectively.
John Hancock Funds, Inc. hopes to recover unreimbursed distribution and
shareholder service expenses for Class B shares over an extended period of time.
However, if Growth Fund's board terminates either class' Rule 12b-1 Plan, that
class will not be obligated to reimburse these distribution and shareholder
service expenses Accordingly, until they are paid or accrued, unreimbursed
distribution and shareholder service expenses do not and will not appear as an
expense or liability in the financial statements of either fund. In addition,
unreimbursed expenses are not reflected in a fund's net asset value or the
formula for calculating Rule 12b-1 payments. 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
Tax Status of the Reorganization
The reorganization will be tax-free for federal income tax purposes and will not
take place unless both funds receive a satisfactory opinion from Hale and Dorr
LLP, counsel to the funds, substantially to the effect that:
o The reorganization described above will be a "reorganization" within
the meaning of Section 368(a)(1)(C) of the Internal Revenue Code of
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<PAGE>
1986 (the "Code"), and each fund will be "a party to a reorganization"
within the meaning of Section 368 of the Code;
o No gain or loss will be recognized by your fund upon (1) the transfer
of all of its assets to Growth Fund as described above or (2) the
distribution by your fund of Growth Fund shares to your fund's
shareholders;
o No gain or loss will be recognized by Growth Fund upon the receipt of
your fund's assets solely in exchange for the issuance of Growth Fund
shares and the assumption of all of your fund's liabilities by Growth
Fund;
o The basis of the assets of your fund acquired by Growth Fund will be
the same as the basis of those assets in the hands of your fund
immediately before the transfer;
o The tax holding period of the assets of your fund in the hands of
Growth Fund will include your fund's tax holding period for those
assets;
o The shareholders of your fund will not recognize gain or loss upon the
exchange of all their shares of your fund solely for Growth Fund
shares as part of the reorganization;
o The basis of Growth Fund shares received by your fund's shareholders
in the reorganization will be the same as the basis of the shares of
your fund surrendered in exchange; and
o The tax holding period of the Growth Fund shares received by you will
include the tax holding period of your fund's shares surrendered in
the exchange, provided that the shares of your fund were held as
capital assets on the reorganization date.
Additional Terms of Agreement and Plan of Reorganization
Surrender of Share Certificates. Shareholders of your fund whose shares are
represented by one or more share certificates should, before the reorganization
date, either surrender their certificates to your fund or deliver to your fund a
lost certificate affidavit, in the form and accompanied by the surety bonds that
your fund may require (collectively, an "Affidavit"). On the reorganization
25
<PAGE>
date, all certificates that have not been surrendered will be canceled, will no
longer evidence ownership of your fund's shares and will evidence ownership of
Growth Fund shares. Shareholders may not redeem or transfer Growth Fund shares
received in the reorganization until they have surrendered their Disciplined
Growth Fund share certificates or delivered an Affidavit. Growth Fund will not
issue share certificates in the reorganization.
Conditions to Closing the Reorganization. The obligation of your fund to
consummate the reorganization is subject to the satisfaction of certain
conditions, including the performance by Growth Fund of all its obligations
under the Agreement and the receipt of all consents, orders and permits
necessary to consummate the reorganization (see Agreement, paragraph 6).
The obligation of Growth Fund to consummate the reorganization is subject to the
satisfaction of certain conditions, including your fund's performance of all of
its obligations under the Agreement, the receipt of certain documents and
financial statements from your fund and the receipt of all consents, orders and
permits necessary to consummate the reorganization (see Agreement, paragraph 7).
The obligations of both funds are subject to the approval of the Agreement by
the necessary vote of the outstanding shares of your fund, in accordance with
the provisions of your fund's declaration of trust and by- laws. The funds'
obligations are also subject to the receipt of a favorable opinion of Hale and
Dorr LLP as to the federal income tax consequences of the reorganization. (see
Agreement, paragraph 8).
Termination of Agreement. The board of trustees of either your fund or Growth
Fund may terminate the Agreement (even if the shareholders of your fund have
already approved it) at any time before the reorganization date, if that board
believes that proceeding with the reorganization would no longer be advisable.
Expenses of the Reorganization. Growth Fund and your 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
occurs. These expenses are estimated to be approximately $128,763 in total.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of each fund as of
April 30, 1997, and the pro forma combined capitalization of both funds as if
the reorganization had occurred on such date. The table reflects pro forma
exchange ratios of approximately 0.7111 Class A Growth Fund shares being issued
for each Class A share of your fund and approximately 0.7157 Class B Growth Fund
shares being issued for each Class B share of your fund. If the reorganization
is consummated, the actual exchange ratios on the reorganization date may vary
from the exchange ratios indicated due to changes in the market value of the
portfolio securities of both Growth Fund and your fund between April 30, 1997
and the reorganization date, changes in the amount of undistributed net
investment income and net realized capital gains of Growth Fund and your fund
during that period resulting from income and distributions, and changes in the
accrued liabilities of Growth Fund and your fund during the same period.
APRIL 30, 1997
Disciplined
Growth Growth Pro Forma1 Pro Forma2
Net Assets $120,989,102 $300,133,842 $421,122,944 $536,974,516
Net Asset Value
Per Share
Class A $ 14.87 $ 20.92 $ 20.92 $ 20.92
Class B $ 14.60 $ 20.41 $ 20.41 $ 20.41
Shares
Outstanding
Class A 2,079,053 12,958,944 14,437,273 16,307,386
Class B 6,167,167 1,423,285 5,836,862 9,597,037
1 Assuming the reorganization of Discovery Fund into Growth Fund does not occur.
If the reorganization of your fund only had taken place on April 30, 1997, your
fund would have received 1,478,329 Class A shares and 4,413,577 Class B shares
of Growth Fund, which would have been available for distribution to the
shareholders of your fund.
2 Assuming the reorganization of Discovery Fund into Growth Fund occurs. If both
reorganizations had taken place on April 30, 1997, your fund would have received
1,478,329 Class A shares and 4,413,577 Class B shares of Growth Fund, which
would have been available for distribution to the shareholders of your fund.
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<PAGE>
It is impossible to predict how many Class A shares and Class B shares of Growth
Fund will actually be received and distributed by your fund on the
reorganization date. The table should not be relied upon to determine the amount
of Growth Fund shares that will actually be received and distributed.
ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES
The following table shows where in the funds' combined prospectus you can find
additional information about the business of each fund.
- ---------------------------- ---------------------------------------------------
Type of Information Headings in Combined Prospectus
- ---------------------------- ---------------------------------------------------
Disciplined Growth Growth
-------------------------- ------------------------
Organization Fund Details: Business Structure: How the Funds
and operation are Organized
- ---------------------------- -------------------------- ------------------------
Investment objective and Disciplined Growth Fund: Growth Fund: Goal and
policies Goal and Strategy, Strategy, Portfolio
Portfolio Securities, Securities, Risk
Risk Factors; Fund
Factors; Fund Details: Business
Details: Business Structure: Portfolio
Structure: Portfolio Trades, Investment
Trades, Investment Goals, Diversification;
Goals, Diversification; More About Risk
More About Risk
- ---------------------------- -------------------------- ------------------------
Portfolio Disciplined Growth Fund: Growth Fund:
management Portfolio Portfolio Management
Management
- ---------------------------- ---------------------------------------------------
Investment adviser and Overview: The Management Firm; Fund Details:
distributor Business Structure: How the Funds are Organized,
Sales Compensation
- ---------------------------- -------------------------- ------------------------
Expenses Disciplined Growth Fund: Growth Fund: Investor
Investor Expenses
Expenses
- ---------------------------- -------------------------- ------------------------
Custodian and Fund Details: Business Fund Details: Business
transfer agent Structure: How the Funds Structure: How the
are Organized Funds are Organized
- ---------------------------- ---------------------------------------------------
Shares of beneficial Your Account: Choosing a Share Class
interest
- ---------------------------- ---------------------------------------------------
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- ---------------------------- ---------------------------------------------------
Type of Information Headings in Combined Prospectus
- ---------------------------- -------------------------- ------------------------
Disciplined Growth Growth
- ---------------------------- -------------------------- ------------------------
Purchase of shares Your Account: Choosing a Share Class, Sales Charge
Reductions and Waivers, Opening an Account, Buying
Shares; Transaction Policies; Additional Investor
Services
- ---------------------------- ---------------------------------------------------
Redemption Your Account: Selling Shares; Transaction
or sale of shares Policies; Additional Investor Services, Systematic
Withdrawal Plan
- ---------------------------- ---------------------------------------------------
Dividends, Dividends and Account Policies
distributions and taxes
- ---------------------------- ---------------------------------------------------
BOARDS' EVALUATION AND RECOMMENDATION
For the reasons described above, the board of trustees of your fund, including
the trustees who are not "interested persons" of either fund or the adviser
("independent trustees"), approved the reorganization. In particular, the
trustees determined that the reorganization was in the best interests of your
fund and that the interests of your fund's shareholders would not be diluted as
a result of the reorganization. Similarly, the board of trustees of Growth Fund,
including the independent trustees, approved the reorganization. They also
determined that the reorganization was in the best interests of Growth Fund and
that the interests of Growth Fund's shareholders would not be diluted as a
result of the reorganization.
- --------------------------------------------------------------------------------
The trustees of your fund recommend that the
shareholders of your fund vote for the proposal to
approve the agreement and plan of reorganization.
- --------------------------------------------------------------------------------
29
<PAGE>
VOTING RIGHTS AND REQUIRED VOTE
Each share of your fund is entitled to one vote. Approval of the above proposal
requires the affirmative vote of a majority of the shares of your fund
outstanding and entitled to vote. For this purpose, a majority of the
outstanding shares of your fund means the vote of the lesser of
(1) 67% or more of the shares present at the meeting, if the holders of more
than 50% of the shares of the fund are present or represented by proxy, or
(2) more than 50% of the outstanding shares of the fund.
Shares of your 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 there is a quorum 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 present and entitled to vote on
the proposal. Thus, a "broker non-vote" has no effect on the voting in
determining whether the proposal has been adopted in accordance with clause (1)
above, if more than 50% of the outstanding shares (excluding the "broker
non-votes") are present or represented. However, for purposes of determining
whether the proposal has been adopted in accordance with clause (2) above, a
"broker non-vote" has the same effect as a vote against the proposal because
shares represented by a "broker non-vote" are considered to be outstanding
shares.
If the required approval of shareholders is not obtained, your fund will
continue to engage in business as a separate mutual fund and the board of
trustees will consider what further action may be appropriate.
INFORMATION CONCERNING THE MEETING
Solicitation of Proxies
In addition to the mailing of these proxy materials, proxies may be solicited by
telephone, by fax or in person by the trustees, officers and employees of your
fund; by personnel of your fund's investment adviser, John Hancock Advisers,
Inc. and its transfer agent, John Hancock Signature Services, Inc.; or by
broker-dealer firms. Signature Services, together with a third party
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<PAGE>
solicitation firm, has agreed to provide proxy solicitation services to your
fund at a cost of approximately $3,000.
Revoking Proxies
A Disciplined Growth Fund shareholder signing and returning a proxy has the
power to revoke it at any time before it is exercised:
o By filing a written notice of revocation with your fund's transfer
agent, John Hancock Signature Services, Inc., 1 John Hancock Way STE
1000, Boston, Massachusetts 02217-1000, or
o By returning a duly executed proxy with a later date before the time
of the meeting, or
o If a shareholder has executed a proxy but is present at the meeting
and wishes to vote in person, by notifying the secretary of your fund
(without complying with any formalities) at any time before it is
voted.
Being present at the meeting alone does not revoke a previously executed and
returned proxy.
Outstanding Shares and Quorum
As of September 17, 1997, 2,113,919 Class A shares and 5,927,418 Class B shares
of beneficial interest of your fund were outstanding. Only shareholders of
record on September 17, 1997 (the "record date") are entitled to notice of and
to vote at the meeting. A majority of the outstanding shares of your fund that
are entitled to vote will be considered a quorum for the transaction of
business.
Other Business
Your fund's board of trustees knows of no business to be presented for
consideration at the meeting other than the proposal. If other business is
properly brought before the meeting, proxies will be voted according to the best
judgment of the persons named as proxies.
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Adjournments
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 concerning the proposal. Any adjournment will
require the affirmative vote of a majority of your fund's shares 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 proposal, the persons
named as proxies will vote those proxies favoring the proposal in favor of
adjournment, and will vote those proxies against the reorganization against
adjournment.
Telephone Voting
In addition to soliciting proxies by mail, by fax or in person, your fund may
also arrange to have votes recorded by telephone by officers and employees of
your fund or by personnel of the adviser or transfer agent. The telephone voting
procedure is designed to verify 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,
these telephone votes would not be counted at the meeting. Your fund has not
obtained an opinion of counsel about telephone voting, but is currently not
aware of any challenge.
o A shareholder will be called on a recorded line at the telephone
number in the fund's account records and will be asked to provide the
shareholder's social security number or other identifying information.
o The shareholder will then be given an opportunity to authorize proxies
to vote his or her shares at the meeting in accordance with the
shareholder's instructions.
o To ensure that the shareholder's instructions have been recorded
correctly, the shareholder will also receive a confirmation of the
voting instructions by mail.
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o A toll-free number will be available in case the voting information
contained in the confirmation is incorrect.
o 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.
OWNERSHIP OF SHARES OF THE FUNDS
To the knowledge of the fund, as of August 29, 1997, no persons owned of record
or beneficially 5% or more of the outstanding Class A and Class B shares of your
fund or Class A shares of Growth Fund. The following persons owned of record
beneficially 5% or more of the outstanding Class B shares of the Growth Fund:
Continental Trust Co. Cust, C/F County Employee's Annuity & Ben Fund of Cook
County IL, 209 W Jackson St, Chicago, IL
As of August 29, 1997, the trustees and officers of your fund and Growth Fund,
each as a group, owned in the aggregate less than 1% of the outstanding shares
of their respective funds.
EXPERTS
The financial statements and the financial highlights of Disciplined Growth Fund
and Growth Fund, each as of October 31, 1996 and for the period then ended, are
incorporated by reference into this proxy statement and prospectus. These
financial statements and financial highlights have been independently audited by
Price Waterhouse LLP and Ernst & Young LLP, respectively, as stated in their
reports appearing in the statement of additional information. These financial
statements and highlights have been included in reliance on their reports given
on their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
Each fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 and files reports,
proxy statements and other information with the SEC. These reports, proxy
statements and other information filed by the funds 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 offices: Chicago
(500 West Madison Street, Suite 1400, Chicago, Illinois); and New York (7 World
Trade Center, Suite 1300, New York, New York). Copies of such material can also
33
<PAGE>
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. In addition, copies
of these documents may be viewed on-screen or downloaded from the SEC's Internet
site at http://www.sec.gov.
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this 22nd
day of September, 1997, by and between John Hancock Growth Fund (the "Acquiring
Fund"), a series of John Hancock Investment Trust III, a Massachusetts business
trust (the "Trust II"), and John Hancock Disciplined Growth Fund (the "Acquired
Fund"), a series of John Hancock Investment Trust II, a Massachusetts business
trust (the "Trust") 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
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shareholders in proportion to their respective ownership of Class A and/or
Class B shares of beneficial interest of the Acquired Fund, as of the close
of business on December 5, 1997 (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 (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 beneficial interest of the Acquired Fund shall
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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
Signature Services, Inc. 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 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
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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 regular practice as pricing agent for the Funds.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 5, 1997 or such other date on or before
June 30, 1998 as the parties may agree. The Closing shall be held as of
5:00 p.m. at the offices of the Trust II 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
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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 June 30, 1998, 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.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Trust on behalf of the Acquired Fund represents, warrants and covenants
to the Acquiring 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, subject to
approval by the shareholders of the Acquired Fund, to carry out the
transactions contemplated by this Agreement. Neither the Trust 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
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 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 Trust;
(c) The Trust 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 Trust's Declaration of
Trust, as amended
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and restated (the "Trust's Declaration") or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking
to which the Trust 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 Trust or the Acquired Fund or any of
the Acquired 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 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 April 30, 1997 and
the related statement of operations for the six months then ended, and
the statement of changes in net assets for the year ended October 31,
1996, and the six months ended April 30, 1997 (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 April 30,
1997 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 Acquired Fund as of the respective dates thereof not disclosed
therein;
(g) Since April 30, 1997, 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
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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) Each of the Acquired Fund and its predecessors has qualified as a
regulated investment company for each taxable year of its operation
and the Acquired Fund will qualify as such as of the Closing Date with
respect to its taxable year ending on the Closing Date;
(j) The authorized capital of the Acquired Fund consists of an unlimited
number of shares of beneficial interest, no par value. All issued and
outstanding shares of beneficial interest of the Acquired Fund are,
and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and nonassessable by the Trust. All of the
issued and outstanding shares of beneficial interest 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 beneficial interest,
nor is there outstanding any security convertible into any of its
shares of beneficial interest;
(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 Trust on
behalf of the Acquired Fund, and this Agreement constitutes a valid
and binding obligation of the Trust 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
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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 beneficial interest 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, 1997 (the
"Acquired Fund Prospectus"), previously furnished to the Acquiring
Fund, does 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 in which
they were made, not misleading.
4.2 The Trust II on behalf of the Acquiring Fund represents, warrants and
covenants to the Acquired Fund as follows:
(a) The Trust II 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 II 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 II 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 II 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 diversified series of the Trust II;
(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 March 1, 1997, 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
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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 II on behalf of the Acquiring Fund will
have good and marketable title to the assets of the Acquiring Fund;
(e) The Trust II 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 II's
Declaration, or By-Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Trust II or the
Acquiring Fund is a party or by which the Trust II 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 II or the Acquiring Fund or
any of the Acquiring Fund's properties or assets. The Trust II knows
of no facts which might form the basis for the institution of such
proceedings, and neither the Trust II 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 April 30, 1997
and the related statement of operations for the six months then ended,
and the statement of changes in net assets for the year ended December
31, 1995, and the period from January 1, 1996 to October 31, 1996, and
the six months ended April 30, 1997 (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 April 30,
1997 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
therein;
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(h) Since April 30, 1997, 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 II on behalf of the Acquiring
Fund 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) Each of the Acquiring Fund and its predecessors has qualified as a
regulated investment company for each taxable year of its operation
and the Acquiring Fund will qualify as such as of the Closing Date;
(j) The authorized capital of the Trust II 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 II. 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 II 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 II;
(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 and the 1940 Act.
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5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 Except as expressly contemplated herein to the contrary, the Trust on
behalf of the Acquired Fund and the Trust II 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.
5.2 The Trust 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 Trust on behalf of the Acquired Fund will provide such information
within its possession or reasonably obtainable as the Trust II on behalf of
the Acquiring Fund requests concerning the beneficial ownership of the
Acquired Fund's shares of beneficial interest.
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 Trust on behalf of the Acquired Fund shall furnish to the Trust II 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 II, 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 II on behalf of the Acquiring Fund will prepare and file with the
Commission the Registration Statement in compliance with the 1933 Act
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and the 1940 Act in connection with the issuance of the Acquiring Fund
Shares as contemplated herein.
5.8 The Trust 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 TRUST ON BEHALF OF THE ACQUIRED
FUND
The obligations of the Trust 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 II 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:
6.1 All representations and warranties of the Trust II 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 II on behalf of the Acquiring Fund shall have delivered to the
Acquired Fund a certificate executed in its name by the Trust II'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 II 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 Trust on behalf of the Acquired Fund shall reasonably
request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST II ON BEHALF OF THE
ACQUIRING FUND
The obligations of the Trust II 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
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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 Trust on behalf of the Acquired Fund shall have delivered to the Trust
II 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 Trust;
7.3 The Trust on behalf of the Acquired Fund shall have delivered to the Trust
II 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 Trust, in form and substance
satisfactory to the Trust II 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
II on behalf of the Acquiring Fund shall reasonably request; and
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 expense
limitation.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST AND THE TRUST II
The obligations hereunder of the Trust II on behalf of the Acquiring Fund and
the Trust 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
beneficial interest of the Acquired Fund in accordance with the provisions
of the Trust's Declaration 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 II 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;
A-13
<PAGE>
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 their "no-action" positions) deemed necessary by the Trust
or the Trust II 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, in a
distribution or distributions qualifying for the deduction for dividends
paid under Section 561 of the Code, all of its investment company taxable
income (as defined in Section 852(b)(2) of the Code determined without
regard to Section 852(b)(2)(D) of the Code) for its taxable year ending on
the Closing Date, all of the excess of (i) its interest income excludable
from gross income under Section 103(a) of the Code over (ii) its deductions
disallowed under Sections 265 and 171(a)(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 Sections 852(b)(3)(A) and (C) of the Code), after reduction
by any available capital loss carryforward, for its taxable year ending on
the Closing Date; and
8.6 The parties shall have received an opinion of Hale and Dorr LLP,
satisfactory to the Trust on behalf of the Acquired Fund and the Trust II
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 beneficial interest 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;
A-14
<PAGE>
(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 beneficial interest 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 beneficial interest 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.
The Trust II and the Trust 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 LLP to deliver an opinion
substantially as set forth in this Paragraph 8.6. Notwithstanding anything
herein to the contrary, neither the Trust nor the Trust II may waive the
conditions set forth in this Paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1 The Trust II on behalf of the Acquiring Fund, and the Trust on behalf of
the Acquired Fund each represent and warrant to the other that there are no
A-15
<PAGE>
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 II on behalf of the Acquiring Fund, and the Trust 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 II,
on behalf of the Acquiring Fund, and the Trust 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 II'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
(d) 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 Acquired Fund's
shareholders.
A-16
<PAGE>
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Trust II, the Acquiring Fund, the Trust, or the
Acquired Fund, or the Trustees or officers of the Trust II 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 Trust and the Trust II.
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 LLP, 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
A-17
<PAGE>
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5 All persons dealing with the Trust or the Trust II must look solely to the
property of the Trust or the Trust II, respectively, for the enforcement of
any claims against the Trust or the Trust II as the Trustees, officers,
agents and shareholders of the Trust or the Trust II assume no personal
liability for obligations entered into on behalf of the Trust or the Trust
II, respectively. None of the other series of the Trust or the Trust II
shall be responsible for any obligations assumed by on or behalf of the
Acquired Fund or the Acquiring Fund, respectively, 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.
JOHN HANCOCK INVESTMENT TRUST III on behalf of
JOHN HANCOCK GROWTH FUND
By: /s/ Anne C. Hodsdon
-----------------------------------------
Anne C. Hodsdon
President
JOHN HANCOCK INVESTMENT TRUST II on behalf of
JOHN HANCOCK DISCIPLINED GROWTH FUND
By: /s/ Susan S. Newton
------------------------------------------
Susan S. Newton
Vice President and Secretary
350PX 9/97
A-18
<PAGE>
JOHN HANCOCK
Growth
Funds
[GRAPHIC]
- --------------------------------------------------------------------------------
Prospectus Disciplined Growth Fund
March 1, 1997*
Discovery Fund
This prospectus gives vital
information about these funds. For Emerging Growth Fund
your own benefit and protection,
please read it before you invest, Financial Industries Fund
and keep it on hand for future
reference. Growth Fund
Please note that these funds: Regional Bank Fund
o are not bank deposits
o are not federally insured Special Equities Fund
o are not endorsed by any bank
or government agency Special Opportunities Fund
o 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.
*Revised August 5, 1997
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue, Boston, Massachusetts 02199-7603
<PAGE>
Contents
- --------------------------------------------------------------------------------
A fund-by-fund look at Disciplined Growth Fund 4
goals, strategies, risks,
expenses and financial Discovery Fund 6
history.
Emerging Growth Fund 8
Financial Industries Fund 10
Growth Fund 12
Regional Bank Fund 14
Special Equities Fund 16
Special Opportunities Fund 18
Policies and instructions Your account
for opening, maintaining Choosing a share class 20
and closing an account in How sales charges are calculated 20
any growth fund. Sales charge reductions and waivers 21
Opening an account 21
Buying shares 22
Selling shares 23
Transaction policies 25
Dividends and account policies 25
Additional investor services 26
Details that apply to the Fund details
growth funds as a group. Business structure 27
Sales compensation 28
More about risk 30
For more information back cover
<PAGE>
Overview
- --------------------------------------------------------------------------------
GOAL OF THE GROWTH FUNDS
John Hancock growth funds seek long-term growth by investing primarily in common
stocks. Each fund has its own strategy and 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:
o have longer time horizons
o are willing to accept higher short-term risk along with higher potential
long-term returns
o want to diversify their portfolios
o are seeking funds for the growth portion of an asset allocation portfolio
o are investing for retirement or other goals that are many years in the
future
Growth funds may NOT be appropriate if you:
o are investing with a shorter time horizon in mind
o 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 $22 billion in assets.
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[Clip art] Goal and strategy The fund's particular investment goals and the
strategies it intends to use in pursuing those goals.
[Clip art] 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.
[Clip art] Risk factors The major risk factors associated with the fund.
[Clip art] Portfolio management The individual or group (including subadvisers,
if any) designated by the investment adviser to handle the fund's day-to-day
management.
[Clip art] Expenses The overall costs borne by an investor in the fund,
including sales charges and annual expenses.
[Clip art] 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.
<PAGE>
Disciplined Growth Fund
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST II
TICKER SYMBOL CLASS A: SVAAX CLASS B: FEQVX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clip art] The fund seeks long-term growth of capital. To pursue this goal, the
fund invests in established, growing companies that have demonstrated superior
earnings growth and stability. Under normal circumstances, the fund invests at
least 65% of assets in these companies, without concentration in any one
industry. The fund also looks for the following characteristics:
o predictability of earnings
o a low level of debt
o seasoned management
o 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
[Clip art] The fund 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 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
[Clip art] 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 30.
PORTFOLIO MANAGEMENT
[Clip art] 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
[Clip art] 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 0.75% 0.75%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.43% 0.43%
Total fund operating expenses 1.48% 2.18%
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 $64 $94 $127 $218
Class B shares
Assuming redemption
at end of period $72 $98 $137 $234
Assuming no redemption $22 $68 $117 $234
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.
4 DISCIPLINED GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clip art] 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 (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
(16.44)(4) 26.69 14.27 (16.46) 30.21 7.22 12.34 0.78 11.51 21.89
10/87(1) 10/88 10/89 10/90 10/91 10/92 10/93 10/94 10/95 10/96
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Class A - period ended: 10/92(1) 10/93 10/94 10/95 10/96
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $12.81 $10.99 $12.39 $12.02 $12.77
Net investment income (loss) 0.06(2) 0.08(2) 0.10 0.08(2) 0.07(2)
Net realized and unrealized gain (loss) on investments (0.06) 1.34 0.07 1.29 2.82
Total from investment operations 0.00 1.42 0.17 1.37 2.89
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) (0.10)
Distributions from capital paid-in (0.01) -- -- -- --
Total distributions (1.82) (0.02) (0.54) (0.62) (0.10)
Net asset value, end of period $10.99 $12.39 $12.02 $12.77 $15.56
Total investment return at net asset value(3) (%) 0.19(4) 12.97 1.35 12.21 22.78
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,771 23,372 23,292 27,692 28,760
Ratio of expenses to average net assets (%) 1.73(5) 1.60 1.53 1.46 1.47
Ratio of net investment income (loss) to average net assets (%) 0.62(5) 0.64 0.83 0.69 0.46
Portfolio turnover rate (%) 246 71 60 65 78
Average brokerage commission rate(6) ($) N/A N/A N/A N/A 0.0698
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Class B - period ended: 10/87(1) 10/88 10/89 10/90 10/91 10/92
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
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
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Class B - period ended: 10/93 10/94 10/95 10/96
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $10.97 $12.31 $11.95 $12.69
Net investment income (loss) 0.02(2) 0.03 0.01(2) (0.03)(2)
Net realized and unrealized gain (loss) on investments 1.33 0.07 1.28 2.79
Total from investment operations 1.35 0.10 1.29 2.76
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) (0.10)
Distributions from capital paid-in -- -- -- --
Total distributions (0.01) (0.46) (0.55) (0.10)
Net asset value, end of period $12.31 $11.95 $12.69 $15.35
Total investment return at net asset value(3) (%) 12.34 0.78 11.51 21.89
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 93,853 94,431 86,178 92,555
Ratio of expenses to average net assets (%) 2.09 2.10 2.11 2.17
Ratio of net investment income (loss) to average net assets (%) 0.17 0.25 0.06 (0.24)
Portfolio turnover rate (%) 71 60 65 78
Average brokerage commission rate(6) ($) N/A N/A N/A 0.0698
</TABLE>
<PAGE>
(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.
DISCIPLINED GROWTH FUND 5
<PAGE>
Discovery Fund
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST IV
TICKER SYMBOL CLASS A: FRDAX CLASS B: FRDIX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clip art] 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 invests 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:
o occupy a profitable market niche
o have products or technologies that are new, unique or proprietary
o be in an industry that has a favorable long-term growth outlook
o 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
[Clip art] 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
[Clip art] 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
30.
PORTFOLIO MANAGEMENT
[Clip art] Bernice S. Behar, CFA, 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.
INVESTOR EXPENSES
[Clip art] 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 0.75% 0.75%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.61% 0.61%
Total fund operating expenses 1.66% 2.36%
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 $66 $100 $136 $237
Class B shares
Assuming redemption
at end of period $74 $104 $146 $252
Assuming no redemption $24 $74 $126 $252
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.
6 DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clip art] The figures below for each of the five periods ended July 1993 to
October 1996 have been audited by the fund's independent auditors, Ernst & Young
LLP. Figures for the period ended July 1992 were audited by other independent
auditors.
Volatility, as indicated by Class B
year-by-year total investment return (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
7/92(1,2) 7/93 7/94 7/95 7/96 10/96(3)
10.88(6) 21.63 (7.18) 54.97 16.85 6.69(6)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A - period ended: 7/92(1,2) 7/93 7/94 7/95 7/96 10/96(3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $9.40 $8.95 $10.81 $8.56 $12.95 $15.09
Net investment income (loss) (0.05) (0.16) (0.16)(4) (0.17)(4) (0.19)(4) (0.05)(4)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (0.40) 2.15 (0.43) 4.83 2.46 1.09
Total from investment operations (0.45) 1.99 (0.59) 4.66 2.27 1.04
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 $15.09 $16.13
Total investment return at net asset value(5)(%) (4.79)(6) 22.33 (6.45) 55.80 17.72 6.89(6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 3,866 4,692 3,226 5,075 32,009 52,479
Ratio of expenses to average net assets (%) 1.78(7) 2.17 2.01 2.10 1.72 1.65(7)
Ratio of net investment income (loss) to average net assets (%) (1.20)(7) (1.61) (1.64) (1.73) (1.26) (1.20)(7)
Portfolio turnover rate (%) 138 148 108 118 116 45
Average brokerage commission rate(8)($) N/A N/A N/A N/A N/A 0.0628
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class B - period ended: 7/92(1,2) 7/93 7/94 7/95 7/96 10/96(3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.00 $8.87 $10.65 $8.34 $12.54 $14.50
Net investment income (loss) (0.11) (0.23) (0.22)(4) (0.22)(4) (0.27)(4) (0.08)(4)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.98 2.14 (0.43) 4.69 2.36 1.05
Total from investment operations 0.87 1.91 (0.65) 4.47 2.09 0.97
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 $14.50 $15.47
Total investment return at net asset value(5) (%) 10.88(6) 21.63 (7.18) 54.97 16.85 6.69(6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 34,636 38,672 26,537 31,645 68,591 96,042
Ratio of expenses to average net assets (%) 2.56(7) 2.86 2.62 2.70 2.42 2.37(7)
Ratio of net investment income (loss) to average net assets (%) (1.56)(7) (2.26) (2.24) (2.34) (1.96) (1.93)(7)
Portfolio turnover rate (%) 138 148 108 118 116 45
Average brokerage commission rate(8) ($) N/A N/A N/A N/A N/A 0.0628
</TABLE>
(1) Class A and Class B shares commenced operations on January 3, 1992 and
August 30, 1991, respectively.
(2) Covered by report of other independent auditors (not included herein).
(3) Effective October 31, 1996, the fiscal year end changed from July 31 to
October 31.
(4) Based on the average of the shares outstanding at the end of each month.
(5) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(6) Not annualized.
(7) Annualized.
(8) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
DISCOVERY FUND 7
<PAGE>
- --------------------------------------------------------------------------------
Emerging Growth Fund
REGISTRANT NAME: JOHN HANCOCK SERIES TRUST
TICKER SYMBOL CLASS A: TAEMX CLASS B: TSEGX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clip art] 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 invests 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
[Clip art] 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 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
[Clip art] 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:
o may be in the early stages of development
o may be dependent on a small number of products or services
o may lack substantial capital reserves
o 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 30.
PORTFOLIO MANAGEMENT
[Clip art] Bernice S. Behar, CFA, 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.
INVESTOR EXPENSES
[Clip art] 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 0.75% 0.75%
12b-1 fee(3) 0.25% 1.00%
Other expenses 0.32% 0.32%
Total fund operating expenses 1.32% 2.07%
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 $63 $90 $119 $201
Class B shares
Assuming redemption
at end of period $71 $95 $131 $221
Assuming no redemption $21 $65 $111 $221
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.
8 EMERGING GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clip art] 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 (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
10/87(1) 10/88 10/89 10/90 10/91(1) 10/92 10/93 10/94 10/95(2) 10/96
0.00 33.59 27.40 (11.82) 73.78 6.19 24.53 2.80 33.60 12.48
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Class A period ended: 10/91(1) 10/92 10/93 10/94 10/95(2) 10/96
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $18.12 $19.26 $20.60 $25.89 $26.82 $36.09
Net investment income (loss)(3) (0.03) (0.20) (0.16) (0.18) (0.25) (0.34)
Net realized and unrealized gain (loss) on investments 1.17 1.60 5.45 1.11 9.52 5.13
Total from investment operations 1.14 1.40 5.29 0.93 9.27 4.79
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 $40.88
Total investment return at net asset value(4) (%) 6.29 7.32 25.68 3.59 34.56 13.27
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 38,859 46,137 81,263 131,053 179,481 218,497
Ratio of expenses to average net assets (%) 0.33 1.67 1.40 1.44 1.38 1.32
Ratio of net investment income (loss) to average net assets (%) (0.15) (1.03) (0.70) (0.71) (0.83) (0.86)
Portfolio turnover rate (%) 66 48 29 25 23 44
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A 0.0669
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Class B - period ended: 10/87(1) 10/88 10/89 10/90 10/91 10/92
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
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
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Class B - period ended: 10/93 10/94 10/95(2) 10/96
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $20.34 $25.33 $26.04 $34.79
Net investment income (loss)(3) (0.36) (0.36) (0.45) (0.60)
Net realized and unrealized gain (loss) on investments 5.35 1.07 9.20 4.94
Total from investment operations 4.99 0.71 8.75 4.34
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 $39.13
Total investment return at net asset value(4) (%) 24.53 2.80 33.60 12.48
Total adjusted investment return at net asset value(4,6) (%) -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 219,484 283,435 393,478 451,268
Ratio of expenses to average net assets (%) 2.28 2.19 2.11 2.05
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) (1.59)
Ratio of adjusted net investment income (loss) to
average net assets(7) (%) -- -- -- --
Portfolio turnover rate (%) 29 25 23 44
Fee reduction per share ($) -- -- -- --
Average brokerage commission rate(5) ($) N/A N/A N/A 0.0669
</TABLE>
(1) Class A shares 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 that does not take into
consideration fee reductions by the adviser during the periods shown.
(7) Unreimbursed, without fee reduction.
EMERGING GROWTH FUND 9
<PAGE>
Financial Industries Fund
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST II
TICKER SYMBOL CLASS A: FIDAX CLASS B: FIDBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clip art] The fund seeks capital appreciation. To pursue this goal, the fund
invests in U.S. and foreign financial services companies. These include banks,
thrifts, finance companies, brokerage and advisory firms, real estate-related
firms and insurance companies.
Under normal circumstances, the fund invests at least 65% of assets in these
companies.
PORTFOLIO SECURITIES
[Clip art] The fund invests primarily in the common stocks of U.S. and foreign
companies. It may also invest in warrants, preferred stocks and debt securities.
The fund may invest up to 5% of net assets in junk bonds.
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
[Clip art] 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
sector, its performance is largely dependent on the sector's performance, which
may differ from that of the overall stock market. Falling interest rates or
deteriorating economic conditions can adversely affect the performance of
financial services companies' 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 30.
PORTFOLIO MANAGEMENT
[Clip art] James K. Schmidt, CFA, and Thomas Finucane lead the fund's portfolio
management team. Mr. Schmidt has been in the investment business since 1974. He
joined the adviser in 1985 and is an executive vice president. Mr. Finucane has
been in the investment business since joining the adviser in 1990. He is a
second vice president.
INVESTOR EXPENSES
[Clip art] Fund investors pay various expenses, either directly or indirectly.
The figures below are based on Class A expenses for the past year, adjusted to
reflect any changes. No Class B shares were issued or outstanding during the
past year. 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 0.00% 0.00%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.90% 0.90%
Total fund operating expenses 1.20% 1.90%
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 $62 $86 $113 $188
Class B shares
Assuming redemption
at end of period $69 $90 $123 $204
Assuming no redemption $19 $60 $103 $204
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) Reflects the adviser's agreement to limit expenses (except for 12b-1 and
other class-specific expenses). Without this limitation, management fees
would be 0.80% for each class, other expenses would be 5.97% for each
class and total fund operating expenses would be 7.07% for Class A and
7.77% for Class B.
(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.
10 FINANCIAL INDUSTRIES FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clip art] The figures below have been audited by the fund's independent
auditors, Price Waterhouse LLP.
[The table below was represented as a bar graph in the printed material.]
Volatility, as indicated by Class A
year-by-year total investment return (%)
(scale varies from fund to fund) 10/96(1)
29.76(4)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Class A - period ended: 10/96(1)
- --------------------------------------------------------------------------------------
<S> <C>
Per share operating performance
Net asset value, beginning of period $8.50
Net investment income (loss) 0.02(2)
Net realized and unrealized gain (loss) on investments 2.51
Total from investment operations 2.53
Less distributions:
Dividends from net investment income --
Distributions from net realized gain on investments sold --
Total distributions --
Net asset value, end of period $11.03
Total investment return at net asset value(3) (%) 29.76(4)
Total adjusted investment return at net asset value(3,5) (%) 26.04(4)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 895
Ratio of expenses to average net assets (%) 1.20(6)
Ratio of adjusted expenses to average net assets(5) (%) 7.07(6)
Ratio of net investment income (loss) to average net assets (%) 0.37(6)
Ratio of adjusted net investment income (loss) to average net assets(5) (%) (5.50)(6)
Portfolio turnover rate (%) 31
Average brokerage commission rate(7) ($) 0.0649
<CAPTION>
- --------------------------------------------------------------------------------------
Class B - period ended: 10/96
- --------------------------------------------------------------------------------------
<S> <C>
Per share operating performance
Net asset value, beginning of period --
Net investment income (loss) --
Net realized and unrealized gain (loss) on investments --
Total from investment operations --
Less distributions:
Dividends from net investment income --
Distributions from net realized gain on investments sold --
Total distributions --
Net asset value, end of period --
Total investment return at net asset value(3) (%) --
Total adjusted investment return at net asset value(3,5) (%) --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) --
Ratio of expenses to average net assets (%) --
Ratio of adjusted expenses to average net assets(5) (%) --
Ratio of net investment income (loss) to average net assets (%) --
Ratio of adjusted net investment income (loss) to average net assets(5) (%) --
Portfolio turnover rate (%) --
Average brokerage commission rate(7) ($) --
</TABLE>
(1) Class A shares commenced operations on March 14, 1996.
(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) Unreimbursed, without fee reduction.
(6) Annualized.
(7) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
FINANCIAL INDUSTRIES FUND 11
<PAGE>
Growth Fund
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST III TICKER SYMBOL CLASS A: JHNGX
- --------------------------------------------------------------------------------
CLASS B: JHGBX
- --------------
Goal and strategy
[Clip art] 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 over
the past five years, although not all stocks in the fund's portfolio will meet
this criterion.
Portfolio securities
[Clip art] 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
[Clip art] 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 30.
Portfolio management
[Clip art] Anurag Pandit, CFA, is leader of the fund's portfolio management
team. A second vice president of the adviser, Mr. Pandit has been a member of
the management team since joining John Hancock Funds in April 1996. He assumed
leadership of the team on January 1, 1997. Mr. Pandit has been in the investment
business since 1984.
Investor expenses
[Clip art] 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 0.79% 0.79%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.39% 0.39%
Total fund operating expenses 1.48% 2.18%
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 $64 $94 $127 $218
Class B shares
Assuming redemption
at end of period $72 $98 $137 $234
Assuming no redemption $22 $68 $117 $234
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.
12 GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clip art] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
Volatility, as indicated by Class A year-by-year total investment return (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
12/86 12/87 12/88 12/89 12/90 12/91 12/92 12/93 12/94 12/95 10/96(1)
13.83 6.03 11.23 30.96 (8.34) 41.68 6.06 13.03 (7.50) 27.17 19.32(4)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Class A - period ended: 12/86 12/87 12/88 12/89 12/90
- ----------------------------------------------------------------------------------------------------------
<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(3) (%) 13.83 6.03 11.23 30.96 (8.34)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 87,468 86,426 101,497 105,014 102,416
Ratio of expenses to average net assets (%) 1.03 1.00 1.06 0.96 1.46
Ratio of net investment income (loss) to average
net assets (%) 0.77 1.41 1.76 1.73 1.12
Portfolio turnover rate (%) 62 68 47 61 102
Average brokerage commission rate(7) ($) N/A N/A N/A N/A N/A
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Class A - period ended: 12/91 12/92 12/93 12/94 12/95 10/96(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 12.93 $ 17.48 $ 17.32 $ 17.40 $ 15.89 $ 19.51
Net investment income (loss) 0.04 (0.06) (0.11) (0.10) (0.09)(2) (0.13)(2)
Net realized and unrealized gain (loss) on investments 5.36 1.10 2.33 (1.21) 4.40 3.90
Total from investment operations 5.40 1.04 2.22 (1.31) 4.31 3.77
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 $ 23.28
Total investment return at net asset value(3) (%) 41.68 6.06 13.03 (7.50) 27.17 19.32(4)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 145,287 153,057 162,937 146,466 241,700 279,425
Ratio of expenses to average net assets (%) 1.44 1.60 1.56 1.65 1.48 1.48(5)
Ratio of net investment income (loss) to average
net assets (%) 0.27 (0.36) (0.67) (0.64) (0.46) (0.73)(5)
Portfolio turnover rate (%) 82 71 68 52 68(6) 59
Average brokerage commission rate(7) ($) N/A N/A N/A N/A N/A 0.0695
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Class B - period ended: 12/94(8) 12/95 10/96(1)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $17.16 $15.83 $19.25
Net investment income (loss) (0.20)(2) (0.26)(2) (0.26)(2)
Net realized and unrealized gain (loss) on investments (0.93) 4.37 3.84
Total from investment operations (1.13) 4.11 3.58
Less distributions:
Distributions from net realized gain on
investments sold (0.20) (0.69) --
Net asset value, end of period $15.83 $19.25 $22.83
Total investment return at net asset value(3) (%) (6.56)(4) 26.01 18.60(4)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 3,807 15,913 25,474
Ratio of expenses to average net assets (%) 2.38(8) 2.31 2.18(8)
Ratio of net investment income (loss) to
average net assets (%) (1.25)(8) (1.39) (1.42)(8)
Portfolio turnover rate (%) 52 68(6) 59
Average brokerage commission rate(7) ($) N/A N/A 0.0695
</TABLE>
(1) Effective October 31, 1996, the fiscal year end changed from December 31
to October 31.
(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) Excludes merger activity.
(7) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(8) Class B shares commenced operations on January 3, 1994.
GROWTH FUND 13
<PAGE>
Regional Bank Fund
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST II
TICKER SYMBOL CLASS A: FRBAX CLASS B: FRBFX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clip art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund invests in regional banks and lending institutions, including:
o commercial and industrial banks
o savings and loan associations
o 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 invests 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. The fund may
invest up to 5% of net assets in stocks of non-financial services companies and
up to 5% in junk bonds issued by banks. Because regional banks typically pay
regular dividends, moderate income is an investment goal.
PORTFOLIO SECURITIES
[Clip art] 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
[Clip art] 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 30.
PORTFOLIO MANAGEMENT
[Clip art] James K. Schmidt, CFA, joined John Hancock in 1985 and has served as
the fund's portfolio manager since its inception that year. An executive vice
president of the adviser, he has been in the investment business since 1974.
The fund is temporarily closed to new investments except for existing accounts
(see the statement of additional information).
INVESTOR EXPENSES
[Clip art] 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 0.76% 0.76%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.32% 0.32%
Total fund operating expenses 1.38% 2.08%
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 $63 $92 $122 $207
Class B shares
Assuming redemption
at end of period $71 $95 $132 $223
Assuming no redemption $21 $65 $112 $223
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.
14 REGIONAL BANK FUND
<PAGE>
FINANCIAL HIGHLIGHTS
[Clip art] 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 (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
<TABLE>
<CAPTION>
3/87(7) 10/87(8) 10/88 10/89 10/90 10/91 10/92(1) 10/93 10/94 10/95 10/96
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
17.44 (17.36)(4) 36.89 20.46 (32.29) 75.35 37.20 36.71 5.69 30.11 27.89
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Class A - period ended: 10/92(1) 10/93 10/94 10/95 10/96
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 13.47 $ 17.47 $ 21.62 $ 21.52 $ 27.14
Net investment income (loss) 0.21 0.26(2) 0.39(2) 0.52(2) 0.63(2)
Net realized and unrealized gain (loss) on investments 3.98 5.84 0.91 5.92 7.04
Total from investment operations 4.19 6.10 1.30 6.44 7.67
Less distributions:
Dividends from net investment income (0.19) (0.26) (0.34) (0.48) (0.60)
Distributions from net realized gain on
investments sold -- (1.69) (1.06) (0.34) (0.22)
Total distributions (0.19) (1.95) (1.40) (0.82) (0.82)
Net asset value, end of period $ 17.47 $ 21.62 $ 21.52 $ 27.14 $ 33.99
Total investment return at net asset value(3) (%) 31.26(4) 37.45 6.44 31.00 28.78
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 31,306 94,158 216,978 486,631 860,843
Ratio of expenses to average net assets (%) 1.41(5) 1.35 1.34 1.39 1.36
Ratio of net investment income to average net assets (%) 1.64(5) 1.29 1.78 2.23 2.13
Portfolio turnover rate (%) 53 35 13 14 8
Average brokerage commission rate(6) ($) N/A N/A N/A N/A 0.0694
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Class B - period ended: 3/87(7) 10/87(8) 10/88 10/89 10/90 10/91
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $ 8.13
Net investment income (loss) 0.20 0.05 0.16 0.20 0.30 0.29
Net realized and unrealized gain (loss) on investment 1.74 (2.17) 3.12 2.02 (4.19) 5.68
Total from investment operations 1.94 (2.12) 3.28 2.22 (3.89) 5.97
Less distributions:
Dividends from net investment income (0.26) (0.04) (0.15) (0.16) (0.19) (0.34)
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) (0.34)
Net asset value, end of period $ 12.68 $ 10.02 $ 11.89 $ 13.00 $ 8.13 $ 13.76
Total investment return at net asset value(3) (%) 17.44 (17.36)(4) 36.89 20.46 (32.29) 75.35
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 54,626 38,721 50,965 81,167 38,992 52,098
Ratio of expenses to average net assets (%) 1.48 2.47(5) 2.17 1.99 1.99 2.04
Ratio of net investment income (loss) to average
net assets (%) 1.62 0.73(5) 1.50 1.67 2.51 2.65
Portfolio turnover rate (%) 89 58(5) 87 85 56 75
Average brokerage commission rate(6) ($) N/A N/A N/A N/A N/A N/A
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Class B - period ended: 10/92 10/93 10/94 10/95 10/96
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 13.76 $ 17.44 $ 21.56 $ 21.43 $ 27.02
Net investment income (loss) 0.18 0.15(2) 0.23(2) 0.36(2) 0.42(2)
Net realized and unrealized gain (loss) on investment 4.56 5.83 0.91 5.89 7.01
Total from investment operations 4.74 5.98 1.14 6.25 7.43
Less distributions:
Dividends from net investment income (0.28) (0.17) (0.21) (0.32) (0.40)
Distributions from net realized gain on
investments sold (0.78) (1.69) (1.06) (0.34) (0.22)
Distributions from capital paid-in -- -- -- -- --
Total distributions (1.06) (1.86) (1.27) (0.66) (0.62)
Net asset value, end of period $ 17.44 $ 21.56 $ 21.43 $ 27.02 $ 33.83
Total investment return at net asset value(3) (%) 37.20 36.71 5.69 30.11 27.89
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 56,016 171,808 522,207 1,236,447 2,408,514
Ratio of expenses to average net assets (%) 1.96 1.88 2.06 2.09 2.07
Ratio of net investment income (loss) to average
net assets (%) 1.21 0.76 1.07 1.53 1.42
Portfolio turnover rate (%) 53 35 13 14 8
Average brokerage commission rate(6) ($) N/A N/A N/A N/A 0.0694
</TABLE>
(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.
REGIONAL BANK FUND 15
<PAGE>
Special Equities Fund
REGISTRANT NAME: JOHN HANCOCK SPECIAL EQUITIES FUND
TICKER SYMBOL CLASS A: JHNSX CLASS B: SPQBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clipart] 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 invests 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
[Clipart] 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
[Clipart] 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:
o may lack proven track records
o may be dependent on a small number of products or services
o may be undercapitalized
o 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 30.
MANAGEMENT/SUBADVISER
[Clipart] 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
[Clipart] 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(3) 0.81% 0.81%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.31% 0.35%
Total fund operating expenses 1.42% 2.16%
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 $64 $93 $124 $212
Class B shares
Assuming redemption
at end of period $72 $98 $136 $231
Assuming no redemption $22 $68 $116 $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) 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.
16 SPECIAL EQUITIES FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clipart] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
Volatility, as indicated by Class A year-by-year total investment return (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
(28.68) 13.72 31.82 (21.89) 95.37 20.25 47.83 (0.12) 37.49 12.96
10/87 10/88 10/89 10/90 10/91 10/92 10/93 10/94 10/95 10/96
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Class A - period ended: 10/87 10/88 10/89 10/90 10/91
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 6.08 $ 4.30 $ 4.89 $ 6.38 $ 4.97
Net investment income (loss) (0.03) 0.04 0.01 (0.12) (0.10)
Net realized and unrealized gain (loss) on
investments (1.26) 0.55 1.53 (1.27) 4.84
Total from investment operations (1.29) 0.59 1.54 (1.39) 4.74
Less distributions:
Dividends from net investment income -- -- (0.05) (0.02) --
Distributions from net realized gain on
investments sold (0.45) -- -- -- --
Distributions from capital paid-in (0.04) -- -- -- --
Total distributions (0.49) -- (0.05) (0.02) --
Net asset value, end of period $ 4.30 $ 4.89 $ 6.38 $ 4.97 $ 9.71
Total investment return at net asset
value (2)(%) (28.68) 13.72 31.82 (21.89) 95.37
Total adjusted investment return at net
asset value(2,3) (29.41) 12.28 30.75 (21.22) 95.33
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 10,637 11,714 12,285 8,166 19,713
Ratio of expenses to average net assets (%) 1.50 1.50 1.50 2.63 2.75
Ratio of adjusted expenses to average
net assets(4)(%) 2.23 2.94 2.57 2.95 2.79
Ratio of net investment income (loss) to
average net assets(%) (0.57) 0.82 0.47 (1.58) (2.12)
Ratio of adjusted net investment income
(loss) to average net assets(4) (%) (1.30) (0.62) (0.60) (1.90) (2.16)
Portfolio turnover rate (%) 93 91 115 113 163
Fee reduction per share ($) 0.04 0.07 0.03 0.02 0.002
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Class A - period ended: 10/92 10/93 10/94 10/95 10/96
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 9.71 $ 10.99 $ 16.13 $ 16.11 $ 22.15
Net investment income (loss) (0.19)(1) (0.20)(1) (0.21)(1) (0.18)(1) (0.22)
Net realized and unrealized gain (loss) on
investments 2.14 5.43 0.19 6.22 3.06
Total from investment operations 1.95 5.23 (0.02) 6.04 2.84
Less distributions:
Dividends from net investment income -- -- -- -- --
Distributions from net realized gain on
investments sold (0.67) (0.09) -- -- (0.46)
Distributions from capital paid-in -- -- -- -- --
Total distributions (0.67) (0.09) -- -- (0.46)
Net asset value, end of period $ 10.99 $ 16.13 $ 16.11 $ 22.15 $ 24.53
Total investment return at net asset
value (2)(%) 20.25 47.83 (0.12) 37.49 12.96
Total adjusted investment return at net
asset value(2,3) -- -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 10,637 44,665 296,793 310,625 555,655 972,312
Ratio of expenses to average net assets (%) 2.24 1.84 1.62 1.48 1.42
Ratio of adjusted expenses to average
net assets(4)(%) -- -- -- -- --
Ratio of net investment income (loss) to
average net assets(%) (1.91) (1.49) (1.40) (0.97) (0.89)
Ratio of adjusted net investment income
(loss) to average net assets(4) (%) -- -- -- -- --
Portfolio turnover rate (%) 114 33 66 82 59
Fee reduction per share ($) -- -- -- -- --
Average brokerage commission rate(5) ($) N/A N/A N/A N/A 0.0677
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Class B - period ended: 10/93(6) 10/94 10/95 10/96
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $12.30 $16.08 $15.97 $21.81
Net investment income (loss) (0.18)(1) (0.30)(1) (0.31)(1) (0.40)(1)
Net realized and unrealized gain (loss) on investments 3.96 0.19 6.15 3.01
Total from investment operations 3.78 (0.11) 5.84 2.61
Less distributions:
Distributions from net realized gain on investments sold -- -- -- (0.46)
Net asset value, end of period $16.08 $15.97 $21.81 $23.96
Total investment return at net asset value(2) (%) 30.73(7) (0.68) 36.57 12.09
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 158,281 191,979 454,934 956,374
Ratio of expenses to average net assets (%) 2.34(8) 2.25 2.20 2.16
Ratio of net investment income (loss) to average net assets (%) (2.03)(8) (2.02) (1.69) (1.65)
Portfolio turnover rate (%) 33 66 82 59
Average brokerage commission rate(5) ($) N/A N/A N/A 0.0677
</TABLE>
(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 that 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 17
<PAGE>
Special Opportunities Fund
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST III
TICKER SYMBOL CLASS A: SPOAX CLASS B: SPOBX
- -------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clipart] 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 75% of the fund's equity securities is
invested within five or fewer sectors (e.g., financial services, 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
[Clipart] 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, and may invest in certain higher-risk
securities. The fund also may make short sales of securities and may engage in
other investment practices.
For liquidity and flexibility, the fund may place assets in cash or invest in
investment-grade short-term securities.
RISK FACTORS
[Clipart] 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 30.
PORTFOLIO MANAGEMENT
[Clipart] Robert G. Freedman, Benjamin A. Hock, Jr., CFA and James
M. Boyd lead the portfolio management team. Mr. Freedman is vice chairman and
chief investment officer of the adviser. He joined the adviser in 1984 and has
been in the investment business since 1968. Mr. Hock, a senior vice president,
joined the adviser in 1994 and has been in the investment business since 1974.
Mr. Boyd, an assistant portfolio manager, has been with John Hancock Funds since
1992.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[Clipart] 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 0.50% 0.50%
Total fund operating expenses 1.60% 2.30%
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 $133 $231
Class B shares
Assuming redemption
at end of period $73 $102 $143 $246
Assuming no redemption $23 $72 $123 $246
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.
18 SPECIAL OPPORTUNITIES FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clipart] 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 (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
(6.71) 17.53 36.15
10/94(1) 10/95 10/96
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Class A - period ended: 10/94(1) 10/95 10/96
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 8.50 $ 7.93 $ 9.32
Net investment income (loss)(2) (0.03) (0.07) (0.11)
Net realized and unrealized gain (loss) on investments (0.54) 1.46 3.34
Total from investment operations (0.57) 1.39 3.23
Less distributions:
Distributions from net realized gain on investments sold -- -- (1.63)
Net asset value, end of period $ 7.93 $ 9.32 $ 10.92
Total investment return at net asset value(3) (%) (6.71) 17.53 36.15
Total adjusted investment return at net asset value(3,4) (%) (6.83) -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 92,325 101,562 156,578
Ratio of expenses to average net assets (%) 1.50 1.59 1.59
Ratio of adjusted expenses to average net assets(5) (%) 1.62 -- --
Ratio of net investment income (loss) to average net assets (%) (0.41) (0.87) (1.00)
Ratio of adjusted net investment (loss) to average net assets(5) (%) (0.53) -- --
Portfolio turnover rate (%) 57 155 240
Fee reduction per share ($) 0.01(2) -- --
Average brokerage commission rate(6) ($) N/A N/A 0.0600
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Class B - period ended: 10/94(1) 10/95 10/96
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 8.50 $ 7.87 $ 9.19
Net investment income (loss)(2) (0.09) (0.13) (0.18)
Net realized and unrealized gain (loss) on investments (0.54) 1.45 3.29
Total from investment operations (0.63) 1.32 3.11
Less distributions:
Distributions from net realized gain on investments sold -- -- (1.63)
Net asset value, end of period $ 7.87 $ 9.19 $ 10.67
Total investment return at net asset value(3) (%) (7.41)(4) 16.7 35.34
Total adjusted investment return at net asset value(3,4) (%) (7.53) -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 131,983 137,363 238,901
Ratio of expenses to average net assets (%) 2.22 2.30 2.29
Ratio of adjusted expenses to average net assets(5) (%) 2.34 -- --
Ratio of net investment income (loss) to average net assets (%) (1.13) (1.55) (1.70)
Ratio of adjusted net investment (loss) to average net assets(5) (%) (1.25) -- --
Portfolio turnover rate (%) 57 155 240
Fee reduction per share ($) 0.01(2) -- --
Average brokerage commission rate(6) ($) N/A N/A 0.0600
</TABLE>
(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 that 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.
SPECIAL OPPORTUNITIES FUND 19
<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
- --------------------------------------------------------------------------------
o Front-end sales charges, as o No front-end sales charge; all
described below. There are several your money goes to work for you
ways to reduce these charges, also right away.
described below.
o Higher annual expenses than Class
o Lower annual expenses than Class B A shares.
shares.
o A deferred sales charge on shares
you sell within six years of
purchase, as described below.
o 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 Signature
Services for more information (see the back cover of this prospectus).
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
Class A Sales charges are as follows:
- -------------------------------------------------------------------------------
Class A sales charges
- -------------------------------------------------------------------------------
As a % of As a % of your
Your investment offering price investment
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
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+ investments
- --------------------------------------------------------------------------------
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 year 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.
20 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 of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
o 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.
o 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.
o Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section of your application, or contact
your financial representative or Signature Services to add these options to an
existing account.
Group Investment Program A group may be treated as a single purchaser under the
accumulation and combination privileges. Each investor has an individual
account, but the group's investments are lumped together for sales charge
purposes, 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 individual investors may terminate their
account at any time.
To utilize: contact your financial representative or Signature Services to find
out how to qualify, or consult the SAI (see the back cover of this prospectus).
CDSC waivers As long as Signature Services is notified at the time you sell, the
CDSC for either share class will generally be waived in the following cases:
o to make payments through certain systematic withdrawal plans
o to make certain distributions from a retirement plan
o because of shareholder death or disability
To utilize: if you think you may be eligible for a CDSC waiver, contact your
financial representative or Signature Services, or consult the SAI.
Reinstatement privilege If you sell shares of a John Hancock fund, you may
reinvest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge, as long as Signature Services is
notified before you reinvest. 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 Signature Services.
Waivers for certain investors Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
o government entities that are prohibited from paying mutual fund sales charges
o financial institutions or common trust funds investing $1 million or more for
non-discretionary accounts
o selling brokers and their employees and sales representatives
o financial representatives utilizing fund shares in fee-based investment
products under agreement with John Hancock Funds
o fund trustees and other individuals who are affiliated with these or other
John Hancock funds
o individuals transferring assets to a John Hancock fund from an employee
benefit plan that has John Hancock funds
o members of an approved affinity group financial services program
o certain insurance company contract holders (one-year CDSC usually applies) o
participants in certain retirement 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
your financial representative or Signature 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 funds are as follows:
o non-retirement account: $1,000
o retirement account: $250
o group investments: $250
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must invest
at least $25 a month
o fee-based clients of selling brokers who placed at least $2 billion in
John Hancock Funds: $500
3 Complete the appropriate parts of the account application, carefully
following the instructions. If you have questions, please contact your
financial representative or call Signature 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 and your
financial representative can initiate any purchase, exchange or sale of
shares.
YOUR ACCOUNT 21
<PAGE>
- --------------------------------------------------------------------------------
Buying shares
- --------------------------------------------------------------------------------
Opening an account Adding to an account
By check
[Clipart] o Make out a check for the o Make out a check for the
investment amount, payable investment amount payable to
to "John Hancock Signature "John Hancock Signature
Services, Inc." Services, Inc."
o Deliver the check and your o Fill out the detachable
completed application to your investment slip from an
financial representative, or account statement. If no slip
mail them to Signature is available, include a note
Services (address on next specifying the fund name, your
page). share class, your account
number and the name(s) in
which the account is
registered.
o Deliver the check and your
investment slip or note to
your financial representative,
or mail them to Signature
Services (address on next page.
By exchange
[Clipart] o Call your financial o Call your financial
representative or Signature representative or Signature
Services to request an Services to request an
exchange. exchange.
By wire
[Clipart] o Deliver your completed o Instruct your bank to wire
application to your financial the amount of your
representative, or mail it to investment to:
Signature Services. First Signature Bank & Trust
Account # 900000260
o Obtain your account number by Routing # 211475000
calling your financial Specify the fund name, your
representative or Signature share class, your account
Services. number and the name(s) in
which the account is
o Instruct your bank to registered. Your bank may
wire the amount of your charge a fee to wire funds.
investment to:
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
[Clipart] See "By wire" and "By exchange." o Verify that your bank or
credit union is a member of
the Automated Clearing House
(ACH) system.
o Complete the
"Invest-By-Phone" and "Bank
Information" sections on
your account application.
o Call Signature Services to
verify that these features
are in place on your
account.
o Tell the Signature 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."
22 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
Selling shares
- --------------------------------------------------------------------------------
Designed for To sell some or all of your shares
By letter
[Clipart] o Accounts of any type. o Write a letter of instruction or
complete a stock power indicating
o Sales of any amount. the fund name, your share class,
your account number, the name(s)
in which the account is registered
and the dollar value or number of
shares you wish to sell.
o Include all signatures and any
additional documents that may be
required (see next page).
o Mail the materials to Signature
Services.
o 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
[Clipart] o Most accounts.
o Sales of up to $100,000. o For automated service 24 hours a
day using your touch-tone phone,
call the EASI-Line at
1-800-338-8080.
o To place your order with a
representative at John Hancock
Funds, call Signature Services
between 8 A.M. and 4 P.M. Eastern
Time on most business days.
By wire or electronic funds transfer (EFT)
[Clipart] o Requests by letter to sell o Fill out the "Telephone
any amount (accounts of any Redemption" section of your
type). new account application.
o Requests by phone to sell up o To verify that the telephone
to $100,000 (accounts with redemption privilege is in
telephone redemption place on an account, or to
privileges). request the forms to add it
to an existing account, call
Signature Services.
o Amounts of $1,000 or more
will be wired on the next
business day. A $4 fee will
be deducted from your
account.
o Amounts of less than $1,000
may be sent by EFT or by
check. Funds from EFT
transactions are generally
available by the second
business day. Your bank may
charge a fee for this
service.
By exchange
[Clipart] o Accounts of any type. o Obtain a current prospectus
for the fund into which you
o Sales of any amount. are exchanging by calling
your financial
representative or Signature
Services.
o Call your financial
representative or Signature
Services to request an
exchange.
- ------------------------------------------
Address
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
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 23
<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:
o your address of record has changed within the past 30 days
o you are selling more than $100,000 worth of shares
o 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:
o a broker or securities dealer
o a federal savings, cooperative or other type of bank
o a savings and loan or other thrift institution
o a credit union
o a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
- --------------------------------------------------------------------------------
Seller Requirements for written requests
- --------------------------------------------------------------------------------
Owners of individual, joint, sole o Letter of instruction.
proprietorship, UGMA/UTMA (custodial
accounts for minors) or general o On the letter, the signatures and
partner accounts. titles of all persons authorized
to sign for the account, exactly
as the account is registered.
o Signature guarantee if applicable
(see above).
Owners of corporate or association o Letter of instruction.
accounts.
o Corporate resolution, certified
within the past two years.
o On the letter and the resolution,
the signature of the person(s)
authorized to sign for the
account.
o Signature guarantee if applicable
(see above).
Owners or trustees of trust o Letter of instruction.
accounts.
o On the letter, the signature(s) of
the trustee(s).
o 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 six months.
o Signature guarantee if applicable
(see above).
Joint tenancy shareholders whose o Letter of instruction signed by
co-tenants are deceased. surviving tenant.
o Copy of death certificate.
o Signature guarantee if applicable
(see above).
Executors of shareholder estates. o Letter of instruction signed by
executor.
o Copy of order appointing executor.
o Signature guarantee if applicable
(see above).
Administrators, conservators, o Call 1-800-225-5291 for
guardians and other sellers or instructions.
account types not listed above.
24 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 through Friday. Buy and sell requests are
executed at the next NAV to be calculated after your request is accepted by
Signature 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, Signature Services will take
measures to verify the identity of the caller, such as asking for name, account
number, Social Security or other taxpayer ID number and other relevant
information. If appropriate measures are taken, Signature Services is not
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.
The registration for both accounts involved must be identical. 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 the new
fund's rate if that 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 also refuse any exchange order.
A fund may change or cancel its exchange policies at any time, upon 60 days'
notice to its shareholders.
Certificated shares Most shares are electronically recorded. If you wish to have
certificates for your shares, please write to Signature Services. Certificated
shares can only be sold by returning the certificates to Signature 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 business 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:
o after every transaction (except a dividend reinvestment) that affects your
account balance
o after any changes of name or address of the registered owner(s)
o 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 25
<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, Signature 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:
o Complete the appropriate parts of your account application.
o If you are using MAAP to open an account, make out a check ($25 minimum) for
your first investment amount payable to "John Hancock Signature Services,
Inc." Deliver your check and application to your financial representative or
Signature Services.
Systematic withdrawal plan This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
o Make sure you have at least $5,000 worth of shares in your account.
o 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).
o 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.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial representative
or Signature Services.
Retirement plans John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SIMPLE plans, SEPs, 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 (except tax-free income funds) with a low
minimum investment of $250 or, for some group plans, no minimum investment at
all. To find out more, call Signature Services at 1-800-225-5291.
26 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, an independent body that 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 company if the board believes 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").
[Diagram outlining the business structure of John Hancock Funds.]
<TABLE>
<S><C>
SHAREHOLDERS
FINANCIAL SERVICES FIRMS AND
DISTRIBUTION AND THEIR REPRESENTATIVES
SHAREHOLDER SERVICES
Advise current and prospective
shareholders on their fund
investments, often in the context
of an overall financial plan.
PRINCIPAL DISTRIBUTOR TRANSFER AGENT
John Hancock Funds, Inc. John Hancock Signature Services, Inc.
101 Huntington Avenue 1 John Hancock Way, Suite 1000
Boston, MA 02199-7603 Boston, MA 02217-1000
Markets the funds and distributes Handles shareholder services,
shares through selling brokers, including record-keeping and
financial planners and other statements, distribution of dividends
financial representatives. and processing of buy and sell
requests.
SUBADVISER INVESTMENT ADVISER CUSTODIAN
DFS Advisors LLC John Hancock Advisers, Inc. State Street Bank & Trust Co.
75 State Street 101 Huntington Avenue 225 Franklin Street ASSET
Boston, MA 02109 Boston, MA 02199-7603 Boston, MA 02110 MANAGEMENT
Provides portfolio Manages the funds' business and Holds the funds' assets, settles all
management services investment activities. portfolio trades and collects most of
to Special Equities Fund the valuation data required for
calculating each fund's NAV.
TRUSTEES
Supervise the funds' activities.
</TABLE>
FUND DETAILS 27
<PAGE>
Accounting compensation The funds compensate the adviser for performing tax and
financial management services. Annual compensation is not expected to 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, Emerging Growth Fund, Financial
Industries Fund and Special Opportunities Fund, each fund's investment goal is
fundamental and may only be changed with shareholder approval.
Diversification Except for Special Opportunities Fund, all of the 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 funds' 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.
- --------------------------------------------------------------------------------
Class B unreimbursed distribution expenses(1)
- --------------------------------------------------------------------------------
Unreimbursed As a % of
Fund expenses net assets
Disciplined Growth $ 3,798,216 4.19%
Discovery $ 886,207 1.01%
Emerging Growth $ 11,288,492 2.59%
Financial Industries N/A N/A
Growth $ 208,458 0.79%
Regional Bank $ 59,994,035 3.42%
Special Equities $ 19,220,716 2.54%
Special Opportunities $ 7,346,826 4.20%
(1) As of the most recent fiscal year end covered by each fund's financial
highlights. These expenses may be carried forward indefinitely.
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.
Financial services firms selling large amounts of fund shares may receive extra
compensation. This compensation, which John Hancock funds pays out of its own
resources, may include asset retention fees as well as reimbursement for
marketing expenses.
28 FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Class A investments
- ---------------------------------------------------------------------------------------------------------------------------
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 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50%
Next $1 or more above that -- 0.00% 0.25% 0.25%
Waiver investments(2) -- 0.00% 0.25% 0.25%
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Class B investments
- ---------------------------------------------------------------------------------------------------------------------------
Maximum
reallowance First year Maximum
or commission service fee total compensation
(% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C>
All amounts 3.75% 0.25% 4.00%
</TABLE>
(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 pay commissions
when there is no initial sales charge.
FUND DETAILS 29
<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 that 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.
o Hedged When a derivative (a security whose value is based on another security
or index) is used as a hedge against an opposite position that 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.
o 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 less advantageous
investments.
Political risk The risk of losses attributable to government or political
actions, from changes in tax or trade statutes to 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.
30 FUND DETAILS
<PAGE>
- --------------------------------------------------------------------------------
Higher-risk securities and practices
- --------------------------------------------------------------------------------
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). Numbers in this table show allowable usage only; for actual
usage, consult the fund's annual/semi-annual reports.
10 Percent of total assets (italic type)
10 Percent of net assets (roman type)
* No policy limitation on usage;
fund may be using currently
o Permitted, but has not typically been used
- -- Not permitted
<TABLE>
<CAPTION>
Special
Disciplined Emerging Financial Regional Special Oppor-
Growth Discovery Growth Industries Growth Bank Equities tunities
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 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 33.3
Short sales The selling of securities which have been
borrowed on the expectation that the market price will drop.
o Hedged. Hedged leverage, market, correlation, liquidity,
opportunity risks. -- o o o o -- o *
o Speculative. Speculative leverage, market, liquidity risks. -- o -- o o -- o 5
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 securities Securities rated below
BBB/Baa are considered junk bonds. Credit, market,
interest rate, liquidity, valuation, information risks. -- -- 10 5 5 5 -- --
Foreign equities
o Stocks issued by foreign companies. Market, currency,
information, natural event, political risks. -- 25 * * 15 o * *
o 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 o * *
Restricted and illiquid securities Securities not traded
on the open market. May include illiquid Rule
144A securities. Liquidity, valuation, market risks. 15 15 10 15 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.
o Futures and related options. Interest rate, currency,
market, hedged or speculative leverage, correlation,
liquidity, opportunity risks. o * * o o -- o *
o Options on securities and indices. Interest rate,
currency, market, hedged or speculative leverage,
correlation, liquidity, credit, opportunity risks. o o * o o o o *
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.
o Hedged. Currency, hedged leverage, correlation, liquidity,
opportunity risks. -- 25 * o * -- o *
o Speculative. Currency, speculative leverage, liquidity
risks. -- -- -- o -- -- o --
</TABLE>
FUND DETAILS 31
<PAGE>
For more information
- --------------------------------------------------------------------------------
Two documents are available that offer further information on John Hancock
growth funds:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, detailed performance information, portfolio
holdings, a statement from portfolio management and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on all aspects of the funds. The
current annual/semiannual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference (is legally a part of
this prospectus).
To request a free copy of the current annual/semiannual report or SAI, please
write or call:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Telephone: 1-800-225-5291
EASI-Line: 1-800-338-8080
TDD: 1-800-544-6713
Internet: www.jhancock.com/funds
[Logo] JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(C) 1996 John Hancock Funds, Inc.
GROPN 8/97
John Hancock(R)
Financial Services
<PAGE>
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL
SAVE YOUR FUND THE EXPENSE OF ADDITIONAL MAILINGS
JOHN HANCOCK DISCIPLINED GROWTH FUND
101 HUNTINGTON AVENUE, BOSTON, MASSACHUSETTS 02199
SPECIAL MEETING OF SHAREHOLDERS - NOVEMBER 12, 1997
PROXY SOLICITATION BY THE BOARD OF TRUSTEES
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 beneficial interest of John
Hancock Disciplined Growth Fund ("Disciplined Growth Fund") which the
undersigned is (are) entitled to vote at the Special Meeting of Shareholders
(the "Meeting") of Disciplined Growth Fund to be held at 101 Huntington Avenue,
Boston, Massachusetts, on November 12, 1997 at 9:00 a.m., Boston time, and at
any adjournment(s) of the Meeting. All powers may be exercised by a majority of
all proxy holders or substitutes voting or acting, or, if only one votes and
acts, then by that one. Receipt of the Proxy Statement dated September 22, 1997
is hereby acknowledged. If not revoked, this proxy shall be voted for the
proposal:
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date __________________, 1997
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 full corporate name by president
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
-----------------------------------
Signature(s)
<PAGE>
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL SAVE YOUR FUND THE EXPENSE
OF ADDITIONAL MAILINGS.
THIS PROXY SHALL BE VOTED IN FAVOR OF (FOR) PROPOSAL 1 IF NO SPECIFICATION IS
MADE BELOW. AS TO ANY OTHER MATTER, THE 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.
(1) To approve an Agreement and Plan of Reorganization between Disciplined
Growth Fund and John Hancock Growth Fund. Under this Agreement, Disciplined
Growth Fund would transfer all of its assets to Growth Fund in exchange for
shares of Growth Fund. These shares will be distributed proportionately to
you and the other shareholders of Disciplined Growth Fund. Growth Fund will
also assume Disciplined Growth Fund's liabilities.
---- ---- ----
FOR |____| AGAINST |____| ABSTAIN |____|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
