As filed with the Securities and Exchange Commission on August 14, 1997.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_X__/
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Pre-Effective Amendment No. __ /____/
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Post-Effective Amendment No. ___ /____/
(Check appropriate box or boxes)
JOHN HANCOCK INVESTMENT TRUST III
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(Exact name of registrant as specified in charter)
101 Huntington Avenue, Boston, Massachusetts 02199-7603
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(Address of principal executive office) Zip Code
(617) 375-1700
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(Registrant's Telephone Number, including Area Code)
Susan S. Newton, Esq.
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199
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(Name and address of agent for service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effectiveness of the registration statement.
No filing fee is required because an indefinite number of shares has previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended. This Registration Statement relates to shares previously registered
on Form N-1A (File Nos. 33-4559 and 811-4630).
It is proposed that this filing will become effective on September 13, 1997
pursuant to Rule 488 under the Securities Act of 1933.
<PAGE>
JOHN HANCOCK INVESTMENT TRUST III
CROSS-REFERENCE SHEET
Items Required by Form N-14
<TABLE>
<CAPTION>
PART A
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Item No. Item Caption Prospectus Caption
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<S> <C> <C>
1. Beginning of Registration COVER PAGE OF REGISTRATION
Statement and Outside Front STATEMENT; FRONT COVER PAGE OF
Cover Page of Prospectus PROSPECTUS
2. Beginning and Outside Back TABLE OF CONTENTS
Cover Page of Prospectus
3. Synopsis and Risk Factors SUMMARY; INVESTMENT RISKS
4. Information About the INTRODUCTION; SUMMARY; INVESTMENT
RISKS; INFORMATION CONCERNING THE
Transaction MEETING; PROPOSAL TO APPROVE THE
AGREEMENT AND PLAN OF REORGANIZATION;
CAPITALIZATION
5. Information About the PROSPECTUS COVER PAGE; INTRODUCTION;
Registrant SUMMARY; ADDITIONAL INFORMATION
ABOUT THE FUNDS' BUSINESSES
6. Information About the PROSPECTUS COVER PAGE; INTRODUCTION;
Company Being Acquired SUMMARY; ADDITIONAL INFORMATION
ABOUT THE FUNDS' BUSINESSES
7. Voting Information PROSPECTUS COVER PAGE; NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS;
SUMMARY; INFORMATION CONCERNING
THE MEETING; VOTING RIGHTS AND
REQUIRED VOTE
8. Interest of Certain Persons EXPERTS
and Experts
9. Additional Information NOT APPLICABLE
Required for Reoffering by
Persons Deemed to be
Underwriters
<PAGE>
PART B
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Caption in Statement of
Item No. Item Caption Additional Information
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10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. Additional Information ADDITIONAL INFORMATION ABOUT
About the Registrant GLOBAL FUND
13. Additional Information About ADDITIONAL INFORMATION ABOUT
the Company Being Acquired GLOBAL MARKETPLACE FUND
14. Financial Statements ADDITIONAL INFORMATION ABOUT GLOBAL
FUND; ADDITIONAL INFORMATION ABOUT
GLOBAL MARKETPLACE FUND; PRO FORMA
COMBINED FINANCIAL STATEMENTS
PART C
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Item No. Item Caption
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15. Indemnification INDEMNIFICATION
16. Exhibits EXHIBITS
17. Undertakings UNDERTAKINGS
</TABLE>
2
<PAGE>
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 Global Marketplace Fund.
Although your Fund has offered an intriguing opportunity to capitalize on global
consumer spending trends, your Fund's Board of Trustees believes the retail
sector does not offer the diversity found in other industries, and that
considerable volatility could result from your Fund's highly specialized
investment focus. Accordingly, your Fund's Trustees are recommending the merger
of your Fund into the John Hancock Global Fund, a fund with a broader investment
approach. The Global Fund offers you the opportunity to participate in a wide
range of foreign and domestic investment opportunities, including the global
retail sector. The Global Fund also offers you a more consistent performance
record, as well as a larger asset base, that can help protect your investment
through greater diversification.
This proposed merger has been unanimously approved by your Fund's Board of
Trustees, who believe it will benefit you and your fellow shareholders. The
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 before 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,
Edward J. Boudreau, Jr.
Chairman and CEO
<PAGE>
Q: What are the benefits of merging the Global Marketplace Fund into the Global
Fund?
A: Although both funds seek long-term capital appreciation, the Global Fund has
a much wider investment scope. As you know, the Global Marketplace Fund is
primarily limited to investments in retail companies or related consumer
businesses. The Global Fund, on the other hand, invests in stocks of companies
from a wide range of industries including retail and consumer businesses. As a
Global Fund shareholder, you can continue to participate in the global retail
sector while opening your portfolio to a broad range of opportunities in other
industries. This diversification will also make your investment less dependent
upon the success of the retail sector.
Q: What is the Global Fund's strategy?
A: The Global Fund seeks long-term capital appreciation by investing in stocks
of large, medium and small companies in the U.S. and abroad that the management
team believes have above-average earnings growth potential. The Fund will
continue to invest a portion of its assets in retail stocks, seeking to
capitalize on a global trend of rising consumption.
Q: Who manages the Global Fund?
A: The Global Fund is managed by our international investment team, led by
portfolio managers Miren Etcheverry, Gerardo J. Espinoza and John L. F. Wills,
who average 22 years of international investment experience. Our international
team includes analytical staff from eight different countries speaking 12
foreign languages fluently. With offices in the U.S., Europe and Asia, our team
studies companies and economies first-hand, seeking the best opportunities in
countries with the greatest potential for growth and stability.
Q: How has the Global Fund performed?
A: Although past performance does not necessarily guarantee future results, the
Global Fund has been a steady performer over the years. Its Class B shares have
posted average annual total returns of 12.94% over the past year, 11.74% over
the past five years and 7.72% over the past ten years at public offering price
as of June 30, 1997. Since the Fund's Class A shares were first offered to the
public on January 3, 1992, they have compiled an average annual total return of
10.34%, 11.53% over the past five years and 12.86% over the past year.* To
review the Global Fund in more detail, please refer to the John Hancock Global
Funds prospectus and the Global Fund's most recent annual and semi-annual
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 Global Marketplace Fund shares will be
converted to Global Fund shares, using the Funds' net asset value share prices,
excluding sales charges, as of the close of trading on December 5, 1997. This
conversion will not affect the total dollar value of your investment.
<PAGE>
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.
<PAGE>
JOHN HANCOCK GLOBAL MARKETPLACE FUND
(a series of John Hancock World Fund)
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 Global Marketplace 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 Global Fund. Under this Agreement your fund
would transfer all of its assets to Global Fund in exchange for shares
of Global Fund. These shares would be distributed proportionately to
you and the other shareholders of your fund. Global 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. Please take a few minutes to vote now and help save the
cost of additional solicitations.
By order of the board of trustees,
Susan S. Newton
Secretary
September 22, 1997
300PX 9/97
<PAGE>
PROXY STATEMENT OF
JOHN HANCOCK GLOBAL MARKETPLACE FUND
(a series of John Hancock World Fund)
PROSPECTUS FOR
CLASS A AND CLASS B SHARES OF
JOHN HANCOCK GLOBAL 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
Global 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 Global Fund.
Global Fund will assume your fund's liabilities.
o Global Fund will issue to your fund 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 Global Fund will issue to your fund 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
shareholder of Global Fund.
Shares of Global 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.
Shares of Global 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.
2
<PAGE>
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
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Global Marketplace Global
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Investment Long-term capital Long-term growth of capital.
objective. appreciation.
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Where to Get More Information
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Prospectus of your fund and Global Fund In the same envelope as this proxy
dated 3/1/97. statement and prospectus.
Incorporated by reference into this
proxy statement and
prospectus.
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Global Fund's annual and semi-
annual reports to shareholders.
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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.
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A statement of additional information
dated 9/22/97. It contains additional
information about your fund and Global
Fund.
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To ask questions about this proxy Call our toll-free telephone
statement and prospectus. number: 1-800-225-5291
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The date of this proxy statement and prospectus is September 22, 1997.
3
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION 5
SUMMARY 5
INVESTMENT RISKS 17
PROPOSAL TO APPROVE AGREEMENT
AND PLAN OF REORGANIZATION 18
CAPITALIZATION 25
ADDITIONAL INFORMATION ABOUT
THE FUNDS' BUSINESSES 26
BOARDS' EVALUATION AND RECOMMENDATION 26
VOTING RIGHTS AND REQUIRED VOTE 27
INFORMATION CONCERNING THE MEETING 28
OWNERSHIP OF SHARES OF THE FUNDS 30
EXPERTS 31
AVAILABLE INFORMATION 31
EXHIBITS
A - Agreement and Plan of Reorganization between John Hancock Global
Marketplace Fund and John Hancock Global Fund (attached to this
document).
4
<PAGE>
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 Global 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
<PAGE>
Comparison of Global Marketplace Fund to Global Fund
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Global Marketplace Global
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Business: Your fund is a diversified Global Fund is a diversified
series of John Hancock World series of John Hancock
Fund. The trust is an Investment Trust III. The
open-end investment company trust is an open-end
organized as a Massachusetts investment company organized
business trust. as a Massachusetts business
trust.
- ------------------- ------------------------------ -----------------------------
Net assets as of $51.5 million. $123.8 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. Bernice S. Advisers, Inc. Miren
managers: Behar, CFA, has led your Etcheverry, John L.F. Wills
fund's portfolio management and Gerardo J. Espinoza lead
team since the Fund's Global Fund's portfolio
inception in September management team.
1994. Ms. Behar is a senior Ms. Etcheverry and
vice president of the Mr. Espinoza are senior vice
adviser. Ms. Behar joined presidents, joined John
the adviser in 1991 and has Hancock Funds in December
been in the investment 1996, and have been in the
business since 1986. investment business since
1978 and 1979,
respectively. Mr. Wills is
a senior vice president of
the adviser and managing
director of the subadviser,
John Hancock Advisers
International. Mr. Wills
joined John Hancock Funds in
1987 and has been in the
investment business since
1969.
- ------------------- ------------------------------ -----------------------------
6
<PAGE>
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INVESTMENT OBJECTIVES AND POLICIES
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Global Marketplace Global
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Investment Long-term capital Long-term growth of capital
objective: appreciation. This objective primarily through investment
cannot be changed without in common stocks of companies
shareholder approval. domiciled in foreign
countries and in the U.S.
Global Fund's objective
cannot be changed without
shareholder approval.
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Primary At least 65% of assets in At least 65% of assets in
investments: common stocks, warrants, common stocks and convertible
preferred stocks and securities of U.S. and
convertible debt securities foreign companies, but Global
of U.S. and foreign companies Fund may invest in virtually
that merchandise goods and any type of security, foreign
services to consumers or to or domestic, including
consumer companies. Your fund preferred and convertible
looks for companies of any securities, warrants and
size that appear to possess a investment-grade debt
competitive advantage, such securities. Global Fund
as a unique product or expects to invest in the
distribution method, new securities markets of at
technologies or innovative least three countries at any
marketing or sales methods. one time, potentially
Your fund expects to invest including the U.S.
in the securities markets of
at least three countries at
any one time, potentially
including the U.S.
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Investments in For liquidity and flexibility, both funds may place up to
debt 35% of assets in cash or investment grade short-term
securities: securities. In abnormal market conditions, both funds may
invest up to 100% in these securities as a defensive tactic.
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- --------------------------------------------------------------------------------
Foreign Your fund may invest up to Global Fund may invest up to
debt securities: 35% of assets in debt 5% of assets in debt
securities issued by foreign securities issued by foreign
governments or foreign governments or foreign
companies. No more than 25% companies.
of your fund's assets will be
invested in the securities of
any one foreign government.
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7
<PAGE>
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INVESTMENT OBJECTIVES AND POLICIES
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Global Marketplace Global
- ------------------- ------------------------------ -----------------------------
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.
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Financial futures Both funds may use financial futures and options on and
related futures. Both funds may also, but typically do not, use options; options
options on securities and indices. There are no percentage on securities and
limits on the amount of fund assets that may be invested in indices: these
instruments.
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Structured Both funds may invest without limitation in structured
securities: securities.
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Currency Both funds may enter into currency contracts for hedging
contracts: purposes. Both funds may, but typically do not, enter into
currency contracts for speculative purposes.
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Currency trading: Both funds may trade foreign currencies directly or
hold foreign currencies as assets.
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Asset-backed and Both funds may, but typically do not, invest in asset-
mortgage-backed backed or mortgage-backed securities.
securities:
- ------------------- ------------------------------ -----------------------------
Short sales: Your fund may, but typically Global Fund may not engage
does not, engage in short in short sales.
sales.
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When-issued and Both funds may purchase when-issued securities and purchase
forward or sell securities in forward commitment transactions.
commitment
transactions:
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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 Global Fund may lend
lending: securities representing up portfolio securities
to 33.3% of assets. representing up to 10% of
assets.
- ------------------- ------------------------------ -----------------------------
8
<PAGE>
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INVESTMENT OBJECTIVES AND POLICIES
- ------------------- ------------------------------ -----------------------------
Global Marketplace Global
- ------------------- ------------------------------ -----------------------------
Borrowing and Your fund may temporarily Global Fund may temp-
reverse borrow from banks or through orarily borrow from banks or
repurchase reverse repurchase through reverse repurchase
agreements: agreements for extraordinary agreements for extraordinary
or emergency purposes. These or emergency purposes. These
borrowings may not exceed borrowings may not exceed
33.3% of assets. 10% of assets.
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CLASSES OF SHARES
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Both Global Marketplace and Global Funds
- ------------------- ------------------------------------------------------------
Class A shares: The Class A shares of both funds have the same
characteristics and fee structure. 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. 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. Investors can combine multiple
purchases of Class A shares to take advantage of breakpoints
in the sales charge schedule. Sales charges are waived for
the categories of investors listed in the funds' prospectus.
Class A shares are subject to a 12b-1 distribution fee equal
to 0.30% annually of average net assets.
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9
<PAGE>
- ------------------- ------------------------------------------------------------
Class B shares: The Class B shares of both funds have the same
characteristics and fee structure. 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. CDSCs are waived for the
categories of investors listed in the funds' prospectus.
Class B shares are subject to 12b-1 distribution and service
fees equal to 1.00% annually of average net assets. Class B
shares automatically convert to Class A shares after eight
years.
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BUYING, SELLING AND EXCHANGING SHARES
- ------------------- ------------------------------------------------------------
Both Global Marketplace and Global Funds
- ------------------- ------------------------------------------------------------
Buying shares: The procedures for buying shares of both funds are
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 initial The funds have the same initial investment minimums, which
investments: are $1,000 for non-retirement accounts and $250 for
retirement accounts and group investments.
- ------------------- ------------------------------------------------------------
Exchanging shares: Shareholders of both funds may exchange their shares at net
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 value: All purchases, exchanges and sales of each fund's shares are
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. Eastern Time.
- ------------------- ------------------------------------------------------------
10
<PAGE>
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 periods 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.
Global Marketplace 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 (after expense limitation)(3) 0.54% 0.54%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.77% 0.77%
Total fund operating expenses
(after expense limitation)(3) 1.61% 2.31%
Example
Share class Year 1 Year 3 Year 5 Year 10
Class A shares $66 $98 $133 $232
Class B shares
Assuming redemption
at end of period $73 $102 $144 $247
Assuming no redemption $23 $72 $124 $247
11
<PAGE>
Global 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 0.96% 0.96%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.62% 0.62%
Total fund operating expenses 1.88% 2.58%
Example
Share class Year 1 Year 3 Year 5 Year 10
Class A shares $68 $106 $147 $259
Class B shares
Assuming redemption
at end of period $76 $110 $157 $274
Assuming no redemption $26 $80 $137 $274
(1) Except for investments of $1 million or more.
(2) Does not include wire redemption fee (currently $4.00).
(3) Reflects the adviser's voluntary agreement to limit expenses (except
for 12b-1 and transfer agent expenses). Without this limitation,
management fees would be 0.80% for each class and total fund operating
expenses would be 1.87% for Class A and 2.57% for Class B. The adviser
may discontinue this limitation at any time.
(4) 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 Table
The next expense table shows the hypothetical ("pro forma") expenses of Global
Fund assuming that a reorganization with your fund occurred on April 30, 1997.
The expenses shown in the table are based on fees and expenses incurred during
the twelve months ended April 30, 1997. Global Fund's actual expenses after the
reorganization may be greater or less than those shown. The example contained in
the pro forma expense table shows what you would pay on a $1,000 investment if
the reorganization had occurred on April 30, 1997. The example assumes that you
reinvested all dividends and that the average annual return was 5%. The pro
12
<PAGE>
forma example is for comparison purposes only and is not a representation of
Global Fund's actual expenses or returns, either past or future.
Global Fund (PRO FORMA)
(Assuming reorganization with Global Marketplace 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(3) 0.86% 0.86%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.61% 0.61%
Total fund operating expenses 1.77% 2.47%
Pro Forma Example
Share class Year 1 Year 3 Year 5 Year 10
Class A shares $67 $103 $141 $248
Class B shares
Assuming redemption
at end of period $75 $107 $152 $263
Assuming no redemption $25 $77 $132 $263
(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 Global Fund approved a
reduction in the advisory fee rates paid by Global Fund to take effect
on the reorganization date. The pro forma management fees in the table
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.
13
<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 Global Fund. Global 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 Global 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 Global Fund.
o Global 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 Global 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.
14
<PAGE>
Other Consequences of the Reorganization. Your fund pays, and Global Fund will
pay after the reorganization, monthly advisory fees equal to the following
annual percentage of average daily net assets:
- ---------------------------------------------- ---------------- ----------------
Fund Asset
Breakpoints Global Global
Marketplace
- ---------------------------------------------- ---------------- ----------------
First $100 million 0.80% 0.90%
- ---------------------------------------------- ---------------- ----------------
Next $150 million 0.80% 0.80%
- ---------------------------------------------- ---------------- ----------------
Next $50 million 0.70% 0.80%
- ---------------------------------------------- ---------------- ----------------
Next $200 million 0.70% 0.75%
- ---------------------------------------------- ---------------- ----------------
Over $500 million 0.70% 0.625%
- ---------------------------------------------- ---------------- ----------------
Thus, at asset levels of up to $100 million, the advisory fee rates paid by
Global Fund would be 0.10% of assets higher than the rates that would have been
paid by your fund at the same asset levels. At asset levels between $100 million
and $250 million, the advisory fee rates paid by your fund and Global Fund would
be the same. At asset levels between $250 million and $300 million, the advisory
fee rates paid by Global Fund would be 0.10% of assets higher than the rates
that would have been paid by your fund. At asset levels between $300 million and
$500 million, that differential drops to 0.05% of assets. For assets over $500
million Global Fund would pay an advisory fee rate that would be 0.075% lower
than the rate your fund would pay.
Your fund's historical growth pattern suggests that its asset size probably
would not have increased significantly in the near future to qualify for the
0.70% fee rate. Global Fund is already of sufficient size to qualify for the
0.80% fee rate on assets over $100 million, which is the rate your fund
currently pays. Combining the assets of your fund and Global Fund will enable
Global Fund to more quickly reach the next fee reduction breakpoint, which would
qualify Global Fund for a rate that is lower than the rate currently paid by
your fund.
In addition, Global Fund's other expenses of 0.62%, as well as its pro forma
other expenses of 0.61%, are substantially lower than your fund's other expenses
of 0.77%. However, Global Fund's annual Class A and Class B expense ratios
(equal to 1.88% and 2.58%, respectively, of average net assets) are higher than
your fund's expense ratios (equal to 1.61% and 2.31%, respectively, of average
net assets). If the reorganization had occurred on April 30, 1997, the
differential between Global Fund's pro forma Class A and Class B expense ratios
(equal to 1.77% and 2.47%, respectively, of average net assets) and your fund's
current expense ratios would have been smaller.
15
<PAGE>
The reason Global Fund's annual total expenses are higher than your fund's (even
though Global Fund's other expenses are substantially lower) is that the adviser
has voluntarily agreed to limit your fund's expenses. If the adviser had not
limited your fund's expenses, your fund's annual Class A and Class B expense
ratios would have been equal to 1.87% and 2.57%, respectively, of average net
assets, and would have been substantially similar to Global Fund's current
expense ratios and higher than Global Fund's pro forma expense ratios. In light
of your fund's inability to attract a significant amount of new assets, the
adviser does not plan to continue to subsidize a portion of your fund's expenses
indefinitely. When the adviser discontinues this voluntary limitation, your
fund's expense ratio will rise close to Global Fund's current expense ratio.
The following diagram shows how the reorganization would be carried out.
Global Marketplace Global Marketplace Global Fund receives
Fund transfers assets & Fund's assets assets & assumes
liabilities to Global and liabilities liabilities of Global
Fund Marketplace Fund
Class A Class B Issues Class Issues Class
shareholders shareholders B Shares A Shares
Your fund receives Global Fund
Class B shares and
distributes them to your fund's Class B shareholders
Your fund receives Global Fund
Class A shares and
distributes them to your fund's Class A shareholders
[This diagram represents a graphic illustration of the reorganization]
16
<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.
- ------------------- ------------------------------ -----------------------------
Global Marketplace Global
- ------------------- ------------------------------------------------------------
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 each fund are subject to
the risk that the issuer of a security will default or
otherwise fail to meet its obligations.
- ------------------- ------------------------------------------------------------
Interest A rise in interest rates typically causes the value of debt
rate risk securities to fall. A fall in interest rates typically
causes the value of debt securities to rise.
- ------------------- ------------------------------------------------------------
Foreign Each fund's investments in foreign securities are subject
securities and to the risks of adverse foreign government actions,
currency risks political instability or a lack of adequate and accurate
information. Also, currency exchange rate movements could
reduce gains or create losses. These risks of international
investing are higher in emerging markets such as those of
Latin America, Southeast Asia and Eastern Europe.
- ------------------- ------------------------------------------------------------
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
currency than if it had not used derivatives. Since both funds may
contracts. enter into currency contracts, they are exposed to the
risks that fluctuating exchange rates may negatively affect
their investments.
- ------------------- ------------------------------------------------------------
17
<PAGE>
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., 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 Global Fund and Global Fund will assume all of your fund's
liabilities. This will result in the addition of your fund's
assets to Global 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 Global 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 Global Fund.
o Global 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 Global 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 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, Global 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.
Second, that the Global 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.
Third, if, as expected, the voluntary limitation on your fund's expenses is
discontinued, Global Fund's pro forma total expenses would be lower than your
fund's total expenses. Shareholders of your fund would then pay indirectly less
in fees each month as shareholders of Global Fund than they would if the
reorganization did not occur and the voluntary expense limitation on your fund's
expenses were discontinued.
Fourth, that a combined fund offers economies of scale that are 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.
The board of trustees of Global Fund considered that the reorganization presents
an excellent opportunity for Global 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 Global Fund and its shareholders.
The boards of trustees of both funds also considered that the adviser and the
funds' distributor 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 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.
19
<PAGE>
Comparative Fees and Expense Ratios.
As discussed above in the Summary, Global Fund pays a higher advisory fee rate
at certain asset levels than your fund, pays the same advisory fee rate as your
fund at other asset levels, and pays a lower advisory fee rate than your fund
for all assets over $500 million.
Your fund's historical growth pattern suggests that its asset size probably
would not have increased significantly in the near future to qualify for the
0.70% fee rate. Global Fund is already of sufficient size to qualify for the
0.80% fee rate on assets over $100 million, which is the rate your fund
currently pays. Combining the assets of your fund and Global Fund will enable
Global Fund to more quickly reach the next fee reduction breakpoint, which would
qualify Global Fund for a rate that is lower than the rate currently paid by
your fund.
In addition, Global Fund's other expenses of 0.62%, as well as its pro forma
other expenses of 0.61%, are substantially lower than your fund's other expenses
of 0.77%. However, Global Fund's current annual Class A and Class B expense
ratios (equal to 1.88% and 2.58%, respectively, of average net assets) are
higher than your fund's current expense ratios (equal to 1.61% and 2.31%,
respectively, of average net assets). If the reorganization had occurred on
April 30, 1996, the differential between Global Fund's pro forma Class A and
Class B expense ratios (equal to 1.77% and 2.47%, respectively, of average net
assets) and your fund's current expense ratios would have been smaller.
The reason Global Fund's annual total expenses are higher than your fund's (even
though Global Fund's other expenses are significantly lower) is that the adviser
has voluntarily agreed to limit your fund's expenses. If the adviser had not
limited your fund's expenses, your fund's annual Class A and Class B expense
ratios would have been equal to 1.87% and 2.57%, respectively, of average net
assets and would have been substantially similar to Global Fund's current
expense ratios and higher than Global Fund's pro forma expense ratios. The
adviser had decided to voluntarily limit your fund's expenses in combination
with a concerted marketing effort by your fund's distributor, John Hancock
Funds, Inc., in order to promote asset growth in your fund.
In spite of these efforts, your fund has not been able to significantly increase
its asset size. The trustees do not believe, given your fund's current size and
growth rate, that your fund will grow to an asset size which would allow your
fund to realize the benefits of economies of scale, including better control
over expenses. The trustees also do not believe that your fund will reach an
asset size which will allow your fund to significantly improve the
diversification of its investment portfolio. In light of your fund's inability
20
<PAGE>
to attract a significant amount of new assets, the adviser does not plan to
continue to subsidize a portion of your fund's expenses indefinitely. When the
adviser discontinues this voluntary limitation, your fund's expense ratio will
be close to Global Fund's current expense ratio.
In approving the reorganization, the trustees concluded that Global Fund's
advisory fee rates, although higher at certain asset levels, are reasonable.
They also believe that these higher advisory fee rates would be more than offset
by the lower overall expense ratio likely to be achieved by Global Fund after
the reorganization assuming that the voluntary expense limitations were not
continued.
Comparative Performance. The trustees also took into consideration the relative
performance of your fund and Global Fund. As shown in the table below, your fund
has had better performance for some periods while Global Fund has had better
performance for other periods.
- -------------------------------- ------------------------ ----------------------
Average Annual
Total Return Global Marketplace Global
(without including sales
charges)
------------------------ ----------------------
Class A Class B Class A Class B
- -------------------------------- ----------- ------------ ----------- ----------
1 year ended 4/30/97 (7.64)% (8.24)% 4.81% 4.07%
- -------------------------------- ----------- ------------ ----------- ----------
3 years ended 4/30/97 22.36%* 14.22%* 7.87% 7.13%
- -------------------------------- ----------- ------------ ----------- ----------
5 years ended 4/30/97 N/A N/A 10.04% 9.37%
- -------------------------------- ----------- ------------ ----------- ----------
10 years ended 4/30/97 N/A N/A 9.33%* 7.05%
- -------------------------------- ----------- ------------ ----------- ----------
*Since inception.
Your fund experienced a negative return during the one year period ending April
30, 1997. Due to its larger asset size and more diversified portfolio of
investments, Global Fund achieved a positive return over that same period. The
trustees believe that Global Fund's ability to achieve greater diversification
may provide for more consistent positive returns in the future. This conclusion
is supported by the fact that all of Global Fund's one, three, five and ten year
total return figures are positive.
Unreimbursed Distribution and Shareholder Service Expenses
The boards of trustees of your fund and Global 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 Global Fund's Rule 12b-1 Plans. However, the maximum amounts
21
<PAGE>
payable annually under Global 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 Global Fund. The
table shows both the dollar amount of these expenses and the percentage of each
class' average net assets that they represent.
- -------------------------------- ------------------------ ----------------------
Unreimbursed Distribution and
Shareholder Service Expenses Global Marketplace Global
- -------------------------------- ----------- ------------ ----------- ----------
Class A Class B Class A Class B
- -------------------------------- ----------- ------------ ----------- ----------
Actual expenses as of April $153,975 $160,558 $135,738 $805,109
30, 1997 0.69% 0.55% 0.14% 2.78%
- -------------------------------- ------------------------ ----------- ----------
Pro forma combined expenses as $289,713 $965,667
of April 30, 1997 0.25% 1.66%
- -------------------------------- ------------------------ ----------- ----------
Thus, if the reorganization had taken place on April 30, 1997, the pro forma
combined unreimbursed expenses of Global Fund's Class A and Class B shares would
have been higher than if no reorganization had occurred. Nevertheless, Global
Fund's assumption of your fund's unreimbursed Rule 12b-1 expenses will have no
immediate effect upon the payments made under Global 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 Global 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.
22
<PAGE>
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 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 Global Fund as described
above or (2) the distribution by your fund of Global Fund
shares to your fund's shareholders;
o No gain or loss will be recognized by Global Fund upon the
receipt of your fund's assets solely in exchange for the
issuance of Global Fund shares and the assumption of all of
your fund's liabilities by Global Fund;
o The basis of the assets of your fund acquired by Global 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 Global 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
Global Fund shares as part of the reorganization;
o The basis of Global 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 Global 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.
23
<PAGE>
Additional Tax Considerations
As of October 31, 1996, Global Marketplace Fund had capital loss carryovers of
approximately $2,061,437, of which $849 expires on October 31, 2003, and
$2,060,588 expires on October 31, 2004. Capital loss carryovers are used to
reduce the amount of realized capital gains that a fund is required to
distribute to its shareholders in order to avoid paying taxes on undistributed
capital gain.
If the reorganization occurs, Global Fund will be able to use Global Marketplace
Fund's capital loss carryovers to offset future realized capital gains, subject
to limitations that may, in certain circumstances, result in the expiration of a
portion of these carryovers before they can be used.
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
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
Global Fund shares. Shareholders may not redeem or transfer Global Fund shares
received in the reorganization until they have surrendered their fund share
certificates or delivered an Affidavit. Global 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 Global 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 Global 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
24
<PAGE>
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 Global
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. Global 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 $107,903 in total.
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 1.1281 Class A Global Fund shares being issued
for each Class A share of your fund and approximately 1.1644 Class B Global 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 Global 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 Global Fund and your fund
during that period resulting from income and distributions, and changes in the
accrued liabilities of Global Fund and your fund during the same period.
APRIL 30, 1997
Global
Marketplace Global Pro Forma
Net Assets $51,489,490 $123,811,817 $175,297,802
Net Asset Value Per Share
Class A $14.27 $12.65 $12.65
Class B $14.15 $12.15 $12.15
Shares Outstanding
Class A 1,568,073 7,498,137 9,267,144
Class B 2,057,887 2,384,165 4,780,266
(1) The deferred organization expense of John Hancock Global Marketplace Fund
was written off as the fund would no longer be in existence. As a result, the
net assets of the surviving fund after the reorganization will be less than the
combined net assets of the surviving fund and acquiring fund prior to the
reorganization.
It is impossible to predict how many Class A shares and Class B shares of Global
25
<PAGE>
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 Global 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
-------------------------- ------------------------
Global Marketplace Global
- ---------------------------- ---------------------------------------------------
Organization Fund Details: Business Structure: How the Funds
and operation are Organized
- ---------------------------- ---------------------------------------------------
Investment objective and Goal and Strategy, Portfolio Securities, Risk
policies Factors; Fund Details: Business Structure:
Portfolio Trades, Investment Goals,
Diversification; More About Risk
- ---------------------------- -------------------------- ------------------------
Portfolio Global Marketplace Fund: Global Fund: Management/
management Portfolio Subadviser
Management
- ---------------------------- ---------------------------------------------------
Investment adviser and Overview: The Management Firm; Fund Details:
distributor Business Structure: How the Funds are Organized,
Sales Compensation
- ---------------------------- ---------------------------------------------------
Expenses Investor Expenses
- ---------------------------- ---------------------------------------------------
Custodian and Fund Details: Business Structure: How the Funds
transfer agent are Organized
- ---------------------------- ---------------------------------------------------
Shares of beneficial Your Account: Choosing a Share Class
interest
- ---------------------------- ---------------------------------------------------
Purchase of shares Your Account: Choosing a Share Class; How Sales
Charges are Calculated; Sales Charge Reductions
and Waivers; Opening an Account; Buying Shares;
Transaction Policies; Additional Investor Services
- ---------------------------- ---------------------------------------------------
Redemption Your Account: Selling Shares, How Sales Charges
or sale of shares are Calculated; Transaction Policies; Additional
Investor Services; Systematic Withdrawal Plan
- ---------------------------- ---------------------------------------------------
Dividends, distributions Dividends and Account Policies
and taxes
- ---------------------------- ---------------------------------------------------
26
<PAGE>
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 Global Fund,
including the independent trustees, approved the reorganization. They also
determined that the reorganization was in the best interests of Global Fund and
that the interests of Global 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.
- --------------------------------------------------------------------------------
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
27
<PAGE>
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
solicitation firm, has agreed to provide proxy solicitation services to your
fund at a cost of approximately $3,000.
Revoking Proxies
A Global Marketplace 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, Suite 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.
28
<PAGE>
Outstanding Shares and Quorum
As of September 17, 1997, _______ and _______ Class A and 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.
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
29
<PAGE>
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.
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 31, 1997, the following persons owned
of record or beneficially 5% or more of the outstanding Class A and Class B
shares of your fund and Global Fund:
- -------------------------------- ---------------------- ------------------------
Pro forma ownership of
Names and Addresses of Owners Global Marketplace Global Fund as of
of More Than 5% of Shares Fund August 31, 1997
---------- ----------- ------------ -----------
Class A Class B Class A Class B
- -------------------------------- ---------- ----------- ------------ -----------
- -------------------------------- ---------- ----------- ------------ -----------
- -------------------------------- ---------------------- ------------------------
Pro forma ownership of
Global Fund Global Fund as of
August 31, 1997
- -------------------------------- ---------- ----------- ------------ -----------
- -------------------------------- ---------- ----------- ------------ -----------
- -------------------------------- ---------- ----------- ------------ -----------
As of August 31, 1997, the trustees and officers of your fund and Global Fund,
each as a group, owned in the aggregate less than 1% of the outstanding shares
of their respective funds.
30
<PAGE>
EXPERTS
The financial statements and the financial highlights of Global Marketplace Fund
and Global Fund, each as of October 31, 1996 and for the years then ended, are
incorporated by reference into this proxy statement and prospectus. These
financial statements and highlights have been independently audited by Price
Waterhouse LLP as stated in their reports appearing in the statement of
additional information. These financial statements and highlights are included
in reliance upon the reports given upon the authority of such firms 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
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 Global Fund (the "Acquiring
Fund"), a series of John Hancock Investment Trust III, a Massachusetts business
trust (the "Trust II"), and John Hancock Global Marketplace Fund (the "Acquired
Fund"), a series of John Hancock World Fund, 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 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
<PAGE>
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
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
-2-
<PAGE>
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 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.
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<PAGE>
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 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-
<PAGE>
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 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 August 31,
1996, and the period from September 1, 1996 to 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
-5-
<PAGE>
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 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
-6-
<PAGE>
in accordance with its terms, subject to the approval of the Acquired
Fund's shareholders;
(m) The information to be furnished by the Acquired Fund to the Acquiring
Fund for use in applications for orders, registration statements,
proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate
and complete and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable
thereto;
(n) The proxy statement of the Acquired Fund (the "Proxy Statement") to be
included in the Registration Statement referred to in Paragraph 5.7
hereof (other than written information furnished by the Acquiring Fund
for inclusion therein, as covered by the Acquiring Fund's warranty in
Paragraph 4.2(m) hereof), on the effective date of the Registration
Statement, on the date of the meeting of the Acquired Fund
shareholders and on the Closing Date, shall not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading;
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquired Fund of the transactions contemplated by this Agreement;
(p) All of the issued and outstanding shares of 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;
-7-
<PAGE>
(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 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 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
-8-
<PAGE>
consistently applied, and there were no known actual or contingent
liabilities of the Acquiring Fund as of the respective dates thereof
not disclosed therein;
(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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<PAGE>
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 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
-10-
<PAGE>
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
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;
-11-
<PAGE>
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;
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;
-12-
<PAGE>
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;
(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;
-13-
<PAGE>
(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
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:
-14-
<PAGE>
(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.
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.
-15-
<PAGE>
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by any party
without the prior written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
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 GLOBAL FUND
By:
-----------------------------------------
Anne C. Hodsdon
President
JOHN HANCOCK WORLD FUND on behalf of
JOHN HANCOCK GLOBAL MARKETPLACE FUND
By:
------------------------------------------
Susan S. Newton
Vice President and Secretary
-16-
<PAGE>
JOHN HANCOCK
INTERNATIONAL/
GLOBAL FUNDS
[graphic omitted]
PROSPECTUS
MARCH 1, 1997
This prospectus gives vital information about these funds. For your own benefit
and protection, please read it before you invest, and keep it on hand for future
reference.
Please note that these funds:
o are not bank deposits
o are not federally insured
o are not endorsed by any bank or government agency
o are not guaranteed to achieve their goal(s)
Short-Term Strategic Income Fund may invest up to 67% in junk bonds; read risk
information carefully.
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.
GROWTH
GLOBAL FUND
GLOBAL MARKETPLACE FUND
GLOBAL RX FUND
GLOBAL TECHNOLOGY FUND
INTERNATIONAL FUND
PACIFIC BASIN EQUITIES FUND
INCOME
SHORT-TERM STRATEGIC INCOME FUND
WORLD BOND FUND
[GRAPHIC OMITTED] JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue, Boston, Massachusetts 02199-7603
<PAGE>
CONTENTS
- -------------------------------------------------------------------------------
A fund-by-fund look at goals, strategies, risks, expenses and financial history.
[GRAPHIC OMITTED] GROWTH
GLOBAL FUND 4
GLOBAL MARKETPLACE FUND 6
GLOBAL RX FUND 8
GLOBAL TECHNOLOGY FUND 10
INTERNATIONAL FUND 12
PACIFIC BASIN EQUITIES FUND 14
[GRAPHIC OMITTED] INCOME
SHORT-TERM STRATEGIC INCOME FUND 16
WORLD BOND FUND 18
Policies and instructions for opening, maintaining and closing an account in any
international/global fund.
YOUR ACCOUNT
CHOOSING A SHARE CLASS 20
HOW SALES CHARGES ARE CALCULATED 20
SALES CHARGE REDUCTIONS AND WAIVERS 21
OPENING AN ACCOUNT 22
BUYING SHARES 23
SELLING SHARES 24
TRANSACTION POLICIES 26
DIVIDENDS AND ACCOUNT POLICIES 26
ADDITIONAL INVESTOR SERVICES 27
Details that apply to the international/global funds as a group.
FUND DETAILS
BUSINESS STRUCTURE 28
SALES COMPENSATION 29
MORE ABOUT RISK 31
FOR MORE INFORMATION BACK COVER
<PAGE>
OVERVIEW
- -------------------------------------------------------------------------------
GOAL OF THE INTERNATIONAL/GLOBAL FUNDS
John Hancock international/global funds invest in foreign and U.S. securities.
Most of the funds invest primarily in stocks and seek long-term growth of
capital. Two funds invest primarily in bonds and seek current income or maximum
total return. Each fund has its own strategy and 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 are seeking to diversify a portfolio of domestic investments
o are seeking access to markets that can be less accessible to individual
investors
o are seeking funds for the growth or income portion of an asset allocation
portfolio
o are investing for goals that are many years in the future
International/global funds may NOT be appropriate if you:
o are investing with a shorter time horizon in mind
o are uncomfortable with an investment whose value may vary substantially
o want to limit your exposure to foreign securities
THE MANAGEMENT FIRM
All John Hancock international/global funds are managed by John Hancock
Advisers, Inc. Founded in 1968, John Hancock Advisers is a wholly owned
subsidiary of John Hancock Mutual Life Insurance Company and manages more than
$19 billion in assets.
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[GRAPHIC OMITTED] Goal and strategy The fund's particular investment goals and
the strategies it intends to use in pursuing those goals.
[GRAPHIC OMITTED] 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.
[GRAPHIC OMITTED] Risk factors The major risk factors associated with the fund.
[GRAPHIC OMITTED] Portfolio management The individual or group (including
subadvisers, if any) designated by the investment adviser to handle the fund's
day-to-day management.
[GRAPHIC OMITTED] Expenses The overall costs borne by an investor in the fund,
including sales charges and annual expenses.
[GRAPHIC OMITTED] 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>
GLOBAL FUND
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A: JHGAX
CLASS B: FGLOX
- -------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC OMITTED] The fund seeks long-term growth of capital. To pursue this
goal, the fund invests primarily in common stocks of foreign and U.S. companies.
The fund maintains a diversified portfolio of company and government securities
from around the world. Under normal circumstances, the fund expects to invest in
the securities markets of at least three countries at any one time, potentially
including the U.S.
The fund does not maintain a fixed allocation of assets, either with respect to
securities type or to geography.
PORTFOLIO SECURITIES
[GRAPHIC OMITTED] Under normal circumstances, the fund invests at least 65% of
assets in common stocks and convertible securities, but may invest in virtually
any type of security, foreign or domestic, including preferred and convertible
securities, warrants and investment-grade debt securities. Not counting
short-term securities, the fund generally expects that no more than 5% of assets
will be invested in debt securities.
For liquidity and flexibility, the fund may place up to 35% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest up to 100% 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
[GRAPHIC OMITTED] As with any growth fund, the value of your investment will
fluctuate in response to stock market movements.
Because it invests internationally, the fund carries additional risks, including
currency, information, natural event and political risks. These risks, which may
make the fund more volatile than a comparable domestic growth fund, are defined
in "More about risk" starting on page 31. The risks of international investing
are higher in emerging markets such as those of Latin America, Southeast Asia
and Eastern Europe.
To the extent that the fund utilizes higher-risk securities and practices, it
takes on further risks that could adversely affect its performance. Please read
"More about risk" carefully before investing.
MANAGEMENT/SUBADVISER
[GRAPHIC OMITTED] Miren Etcheverry, John L.F. Wills and Gerardo J. Espinoza lead
the portfolio management team. Ms. Etcheverry and Mr. Espinoza are senior vice
presidents and joined John Hancock Funds in December 1996, having been in the
investment business since 1978 and 1979, respectively. Mr. Wills is a senior
vice president of the adviser and managing director of the subadviser, John
Hancock Advisers International. He joined John Hancock Funds in 1987 and has
been in the investment business since 1969.
- -------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC OMITTED] 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
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
- -------------------------------------------------------------------------------
Management fee(3) 0.96% 0.96%
- -------------------------------------------------------------------------------
12b-1 fee(4) 0.30% 1.00%
- -------------------------------------------------------------------------------
Other expenses 0.63% 0.63%
- -------------------------------------------------------------------------------
Total fund operating expenses 1.89% 2.59
- -------------------------------------------------------------------------------
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 $68 $106 $147 $260
- -------------------------------------------------------------------------------
Class B shares
Assuming redemption at end of period $76 $111 $158 $275
- -------------------------------------------------------------------------------
Assuming no redemption $26 $ 81 $138 $275
- -------------------------------------------------------------------------------
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 0.70% 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.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[GRAPHIC OMITTED] The figures below have been audited by the fund's independent
auditors, Price Waterhouse LLP.
<TABLE>
<CAPTION>
VOLATILITY, AS
INDICATED BY CLASS
B YEAR-BY-YEAR TOTAL
INVESTMENT
RETURN (%) 35.42(4) 7.05 30.22 14.04 34.95 7.97 9.10
- ---------------------------------------------------------------------------------------------------------------------------------
(scale varies from (16.97)(4) (10.42) (3.85) (1.01)
fund to fund)
- ---------------------------------------------------------------------------------------------------------------------------------
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 $11.31 $10.55 $14.30 $14.16 $12.67
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.04)(2) (0.10)(2) (0.07)(2) (0.03)(2) (0.02)(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign
currency transactions (0.72) 3.85 1.24 (0.13) 1.20
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.76) 3.75 1.17 (0.16) 1.18
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net realized gain on investments
sold and foreign currency transactions -- -- (1.31) (1.33) (0.88)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.55 $14.30 $14.16 $12.67 $12.97
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) (6.72)(4) 35.55 8.64 (0.37) 9.87
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 76,980 90,787 100,973 93,597 94,746
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 2.47(5) 2.12 1.98 1.87 1.88
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) (0.60)(5) (0.86) (0.54) (0.23) (0.19)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 69 108 61 60 98
- ---------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate(6) ($) N/A N/A N/A N/A 0.0221
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B -
PERIOD ENDED: 5/87(7) 10/87(8) 10/88 10/89 10/90 10/91 10/92 10/93 10/94 10/95 10/96
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning
of period $9.60 $13.00 $10.42 $10.67 $13.58 $ 9.94 $10.92 $10.50 $14.17 $13.93 $12.36
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment
income (loss) 0.08 (0.05) 0.01 (0.10) (0.02) (0.01)(2) (0.12)(2) (0.15)(2) (0.15)(2) (0.11)(2) (0.10)(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions 3.32 (2.08) 0.69 3.25 (1.12) 1.35 (0.30) 3.82 1.22 (0.13) 1.16
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment
operations 3.40 (2.13) 0.70 3.15 (1.14) 1.34 (0.42) 3.67 1.07 (0.24) 1.06
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions
from ne
investment
income -- (0.12) -- (0.01) -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions
from net
realized
gain on
investments
sold and
foreign
currency
transactions -- (0.33) (0.45) (0.23) (2.50) (0.36) -- -- (1.31) (1.33) (0.88)
- ---------------------------------------------------------------------------------------------------------------------------------
Total
distributions -- (0.45) (0.45) (0.24) (2.50) (0.36) -- -- (1.31) (1.33) (0.88)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.00 $10.42 $10.67 $13.58 $9.94 $10.92 $10.50 $14.17 $13.93 $12.36 $12.54
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT
RETURN AT NET
ASSET
VALUE(3)(%) 35.42(4) (16.97)(4) 7.05 30.22 (10.42) 14.04 (3.85) 34.95 7.97 (1.01) 9.10
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND
SUPPLEMENTAL
DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets,
end of period
(000s omitted)($) 62,264 50,883 34,380 35,596 33,281 28,686 11,475 19,340 31,822 24,570 27,599
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of
expenses to
average net
assets (%) 2.38(5 2.56(5) 2.55 2.30 2.46 2.60 2.68 2.49 2.59 2.57 2.54
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net
investment
income (loss)
to average
net assets(%) 0.99(5) (0.78)(5) 0.09 (0.47) (0.59) (0.12) (1.03) (1.25) (1.12) (0.89) (0.83)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio
turnover rate(%) 91 81 142 138 58 106 69 108 61 60 98
- ---------------------------------------------------------------------------------------------------------------------------------
Average brokerage
commission
rate(6)($) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.0221
- ---------------------------------------------------------------------------------------------------------------------------------
(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) For the period September 2, 1986 (commencement of operations) to May 31, 1987.
(8) For the period June 1, 1987 to October 31, 1987.
</TABLE>
<PAGE>
GLOBAL MARKETPLACE FUND
REGISTRANT NAME: JOHN HANCOCK WORLD FUND TICKER SYMBOL CLASS A: JHGMX
CLASS B: JHMBX
- -------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC OMITTED] The fund seeks long-term capital appreciation. To pursue this
goal, the fund invests primarily in foreign and U.S. stocks of companies that
merchandise goods and services to consumers or to consumer companies. The fund
seeks companies of any size that appear to possess a competitive advantage, such
as a unique product or distribution method, new technologies or innovative
marketing or sales methods. Under normal circumstances, the fund invests at
least 65% of assets in these companies, and expects to invest in the securities
markets of at least three countries at any one time, potentially including the
U.S.
PORTFOLIO SECURITIES
[GRAPHIC OMITTED] The fund invests primarily in the common stocks of U.S. and
foreign companies. It also may invest in warrants, preferred stocks and
convertible securities.
For liquidity and flexibility, the fund may invest up to 35% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest up to 100% 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
[GRAPHIC OMITTED] As with any growth fund, the value of your investment will
fluctuate in response to stock market movements. Because the fund concentrates
on a single sector (consumer businesses), its performance may be
disproportionately affected by a few key factors, such as economic conditions
and consumer confidence levels.
Also, because the fund invests internationally, it carries additional risks,
including currency, information, natural event and political risks. These risks,
which may make the fund more volatile than a comparable domestic growth fund,
are defined in "More about risk" starting on page 31.
To the extent that the fund invests in smaller capitalization companies or
emerging markets, or utilizes higher-risk securities and practices, it takes on
further risks that could adversely affect its performance. Please read "More
about risk" carefully before investing.
PORTFOLIO MANAGEMENT
[GRAPHIC OMITTED] Bernice S. Behar, CFA, leader of the fund's portfolio
management team since the fund's inception in September 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
[GRAPHIC OMITTED] Fund investors pay various expenses, either directly or
indirectly. The figures below are based on 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
- -------------------------------------------------------------------------------
<PAGE>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
- -------------------------------------------------------------------------------
Management fee (after expense limitation)(3) 0.22% 0.22%
- -------------------------------------------------------------------------------
12b-1 fee(4) 0.30% 1.00%
- -------------------------------------------------------------------------------
Other expenses 1.02% 1.02%
- -------------------------------------------------------------------------------
Total fund operating expenses (after limitation)(3) 1.54% 2.24%
- -------------------------------------------------------------------------------
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 $96 $130 $224
- -------------------------------------------------------------------------------
Class B shares
- -------------------------------------------------------------------------------
Assuming redemption at end of period $73 $100 $140 $240
- -------------------------------------------------------------------------------
Assuming no redemption $23 $ 70 $120 $240
- -------------------------------------------------------------------------------
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
transfer agent expenses). Without this limitation, management fees would be
0.80% for each class and total fund operating expenses would be 2.12% for
Class A and 2.82% for Class B. The adviser may terminate this limitation at
any time.
(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.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[GRAPHIC OMITTED] The figures below have been audited by the fund's independent
auditors, Price Waterhouse LLP.
<TABLE>
<CAPTION>
VOLATILITY, AS INDICATED BY CLASS A YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) 35.61(5) 31.94 0.99(5)
- -----------------------------------------------------------------------------------------------------------------------------------
(scale varies from fund to fund) two
months
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A - PERIOD ENDED: 8/95(1) 8/96 10/96(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.50 $11.49 $15.16
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.01(3) (0.08)(3) (0.02)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 3.01 3.75 0.17
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.02 3.67 0.15
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.01) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.02) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.03) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.49 $15.16 $15.31
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) 35.61(5) 31.94 0.99(5)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Adjusted Investment Return at Net Asset Value(4,6) (%) 28.69(5) 29.69 0.89(5)
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 712 16,966 21,782
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 1.50(7) 1.45 1.54(7)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted expenses to average net assets(8) (%) 9.00(7) 3.70 2.12(7)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) 0.06(7) (0.57) (0.70)(7)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted net investment income (loss) to average net assets(8) (%) (7.44)(7) (2.82) (1.28)(7)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 63 52 12
- -----------------------------------------------------------------------------------------------------------------------------------
Fee reduction per share ($) 0.65(3) 0.31 0.02
- -----------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate(9) ($) N/A 0.0140 0.0079
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 8/96(1) 10/96(2)
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.95 $15.09
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.11)(3) (0.04)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency transactions 3.25 0.17
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.14 0.13
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.09 $15.22
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) 26.28(5) 0.86(5)
- -----------------------------------------------------------------------------------------------------------------------------------
Total adjusted investment return at net asset value(4,6) (%) 25.50(5) 0.76(5)
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 22,246 30,133
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 2.15(7) 2.24(7)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted expenses to average net assets(8) (%) 3.49(7) 2.82(7)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) (1.28)(7) (1.42)(7)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted net investment income (loss) to average net assets(8) (%) (2.62)(7) (2.00)(7)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 52 12
- -----------------------------------------------------------------------------------------------------------------------------------
Fee reduction per share ($) 0.11 0.02
- -----------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate(9) ($) 0.0140 0.0079
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Class A and Class B shares commenced operations September 29, 1994 and January 22, 1996, respectively.
(2) Effective October 31, 1996, the fiscal year end changed from August 31 to October 31.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(5) Not annualized.
(6) An estimated total return calculation that does not take into consideration fee reductions by the adviser during the
periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
</TABLE>
<PAGE>
GLOBAL RX FUND
REGISTRANT NAME: JOHN HANCOCK WORLD FUND TICKER SYMBOL CLASS A: JHGRX
CLASS B: JHRBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC OMITTED] The fund seeks long-term growth of capital. To pursue this
goal, the fund invests primarily in stocks of foreign and U.S. health care
companies. The fund defines health care companies as those deriving at least
half of their gross revenues, or committing at least half of their gross assets,
to health care-related activities. Under normal circumstances, the fund invests
at least 65% of assets in these companies, including small- and medium-sized
companies. The fund expects to invest in the securities markets of at least
three countries at any one time, potentially including the U.S. Because the fund
is non-diversified, it may invest more than 5% of assets in securities of a
single issuer.
The fund has an independent advisory board composed of scientific and medical
experts to provide advice and consultation on health care developments.
PORTFOLIO SECURITIES
[GRAPHIC OMITTED] The fund invests primarily in foreign and domestic common
stocks, and may invest in warrants, preferred stocks and convertible debt
securities.
For liquidity and flexibility, the fund may place up to 35% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest up to 100% 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
[GRAPHIC OMITTED] As with any growth fund, the value of your investment will
fluctuate in response to stock market movements. Because the fund concentrates
on a single sector (health care), and because this sector has historically been
volatile, investors should expect above-average volatility.
Also, because the fund invests internationally, it carries additional risks,
including currency, information, natural event and political risks. These risks,
which may make the fund more volatile than a comparable domestic growth fund,
are defined in "More about risk" starting on page 31.
To the extent that the fund invests in smaller capitalization companies or
utilizes higher-risk securities and practices, it takes on further risks that
could adversely affect its performance. Please read "More about risk" carefully
before investing.
PORTFOLIO MANAGEMENT
[GRAPHIC OMITTED] Linda I. Miller, CFA, leader of the fund's portfolio
management team since January 1996, is a vice president of the adviser. She
joined John Hancock Funds in November 1995 and has been in the investment
business with a focus on the health care industry since 1980.
INVESTOR EXPENSES
[GRAPHIC OMITTED] 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 0.82% 0.82%
- --------------------------------------------------------------------------------
Total fund operating expenses 1.92% 2.62%
- --------------------------------------------------------------------------------
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 $69 $107 $148 $263
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption
at end of period $77 $111 $159 $278
- --------------------------------------------------------------------------------
Assuming no redemption $27 $81 $139 $278
- --------------------------------------------------------------------------------
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.
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[GRAPHIC OMITTED] The figures below have been audited by the fund's independent
auditors, Price Waterhouse LLP.
<TABLE>
<CAPTION>
VOLATILITY, AS INDICATED BY CLASS A YEAR-BY-YEAR TOTAL
INVESTMENT RETURN (%) 33.40(5) 30.89 23.39 18.39 0.30
- ----------------------------------------------------------------------------------------------------------------------------------
(scale varies from fund to fund) (1.26)(5)
two
months
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A - PERIOD ENDED: 8/92(1) 8/93 8/94 8/95 8/96 10/96(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.00 $13.34 $13.38 $16.51 $21.61 $25.43
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.03) (0.23) (0.32) (0.36)(3) (0.19)(3) (0.05)(3)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 3.37 0.27 3.45 5.46 4.15 (0.27)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.34 0.04 3.13 5.10 3.96 (0.32)
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments
sold and foreign currency transactions -- -- -- -- (0.14) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.34 $13.38 $16.51 $21.61 $25.43 $25.11
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) 33.40(5) 0.30 23.39 30.89 18.39 (1.26)(5)
- ----------------------------------------------------------------------------------------------------------------------------------
Total adjusted investment return at net asset
value(4,6) (%) 32.11(5) 0.04 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 14,702 15,647 18,643 24,394 42,405 42,618
Ratio of expenses to average net assets (%) 1.98(7) 2.50 2.55 2.56 1.80 1.92(7)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted expenses to average net assets(8) (%) 3.39(7) 2.76 -- -- -- --
Ratio of net investment income (loss) to average net
assets (%) (0.51)(7) (1.67) (2.01) (1.99) (0.75) (1.04)(7)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) (1.92)(7) (1.93) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 48 93 52 38 68 24
- ----------------------------------------------------------------------------------------------------------------------------------
Fee reduction per share ($) 0.085 0.035 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate(9) ($) N/A N/A N/A N/A 0.0181 0.0726
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 8/94(1) 8/95 8/96 10/96(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $17.29 $16.46 $21.35 $24.94
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.17)(3) (0.55)(3) (0.34)(3) (0.08)(3)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (0.66) 5.44 4.07 (0.26)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.83) 4.89 3.73 (0.34)
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments
sold and foreign currency transactions -- -- (0.14) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.46 $21.35 $24.94 $24.60
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) (4.80)(5) 29.71 17.53 (1.36)(5)
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 1,071 6,333 36,591 37,521
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 3.34(7) 3.45 2.42 2.62(7)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets (%) (2.65)(7) (2.91) (1.33) (1.74)(7)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 52 38 68 24
- ----------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate(9) ($) N/A N/A 0.0181 0.0726
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Class A and Class B shares commenced operations on October 1, 1991 and March 7, 1994, respectively.
(2) Effective October 31, 1996, the fiscal year end changed from August 31 to October 31.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(5) Not annualized.
(6) An estimated total return calculation that does not take into consideration fee reductions by the adviser during the periods
shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
</TABLE>
<PAGE>
GLOBAL TECHNOLOGY FUND
REGISTRANT NAME: JOHN HANCOCK SERIES TRUST TICKER SYMBOL CLASS A: NTTFX
CLASS B: FGTBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC OMITTED] The fund seeks long-term growth of capital. To pursue this
goal, the fund invests primarily in stocks of foreign and U.S. companies that
rely extensively on technology in their product development or operations. Under
normal circumstances, the fund invests at least 65% of assets in these
companies, and expects to invest in the securities markets of at least three
countries at any one time, potentially including the U.S. Income is a secondary
goal.
PORTFOLIO SECURITIES
[GRAPHIC OMITTED] The fund invests primarily in foreign and domestic common
stocks, and may invest in warrants, preferred stocks and convertible debt
securities. The fund may invest up to 10% of assets in debt securities of any
maturity. These may include securities rated as low as CC/Ca and their unrated
equivalents. Bonds rated lower than BBB/Baa are considered junk bonds.
For liquidity and flexibility, the fund may place up to 35% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest up to 100% in these securities as a defensive tactic. The fund also may
invest in certain higher-risk securities, including restricted securities, and
may engage in other investment practices.
RISK FACTORS
[GRAPHIC OMITTED] As with any growth fund, the value of your investment will
fluctuate in response to stock market movements. Because the fund concentrates
on a single sector (technology), and because this sector has historically been
volatile, investors should expect above-average volatility.
Also, because the fund invests internationally, it carries additional risks,
including currency, information, natural event and political risks. These risks,
which may make the fund more volatile than a comparable domestic growth fund,
are defined in "More about risk" starting on page 31. The risks of international
investing are higher in emerging markets such as those of Latin America, Asia
and Eastern Europe. To the extent that the fund invests in smaller
capitalization companies or junk bonds, it further increases the chances for
fluctuations in share price and total return. Please read "More about risk"
carefully before investing.
MANAGEMENT/SUBADVISER
[GRAPHIC OMITTED] Barry J. Gordon and Marc H. Klee lead the fund's management
team, as they have since the fund's inception in 1983. They are principals of
American Fund Advisors, Inc. (AFA), which was the fund's adviser until 1991.
Since 1991, AFA has been the fund's subadviser.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC OMITTED] 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) 0.79% 0.79%
- --------------------------------------------------------------------------------
12b-1 fee(4) 0.30% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.48% 0.48%
- --------------------------------------------------------------------------------
Total fund operating expenses 1.57% 2.27%
- --------------------------------------------------------------------------------
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 $97 $131 $227
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption
at end of period $73 $101 $142 $243
- --------------------------------------------------------------------------------
Assuming no redemption $23 $71 $122 $243
- --------------------------------------------------------------------------------
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 that will not exceed 0.40% 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.
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[GRAPHIC OMITTED] The figures below have been audited by the fund's
independent auditors, Price Waterhouse LLP.
<TABLE>
<CAPTION>
VOLATILITY, AS
INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL
INVESTMENT RETURN (%) 2.89 2.84 10.48 16.61 33.05 5.70 32.06 9.62 46.53 5.22(4)
- ----------------------------------------------------------------------------------------------------------------------------------
(scale varies from fund (18.46) ten
to fund) months
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A - PERIOD
ENDED: 12/86 12/87 12/88 12/89 12/90 12/91 12/92 12/93 12/94 12/95 10/96(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $13.57 $13.80 $13.98 $15.31 $16.93 $12.44 $15.60 $14.94 $17.45 $17.84 $24.51
Net investment
income (loss) 0.14 0.15 0.15 0.10 (0.04) 0.05 (0.15) (0.21) (0.22)(2) (0.22)(2) (0.14)(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions 0.25 0.26 1.32 2.43 (3.09) 4.11 1.00 4.92 1.87 8.53 1.42
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.39 0.41 1.47 2.53 (3.13) 4.16 0.85 4.71 1.65 8.31 1.28
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.16) (0.23) (0.14) (0.13) -- (0.04) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from
net realized gain on
investments and
foreign currency
transactions -- -- -- (0.78) (1.36) (0.96) (1.51) (2.20) (1.26) (1.64) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.16) (0.23) (0.14) (0.91) (1.36) (1.00) (1.51) (2.20) (1.26) (1.64) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $13.80 $13.98 $15.31 $16.93 $12.44 $15.60 $14.94 $17.45 $17.84 $24.51 $25.79
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT
RETURN AT NET ASSET
VALUE(3) (%) 2.89 2.84 10.48 16.61 (18.46) 33.05 5.70 32.06 9.62 46.53 5.22(4)
- ----------------------------------------------------------------------------------------------------------------------------------
Total adjusted
investment return
at net asset
value(3,5) -- -- -- -- -- -- 5.53 -- -- 46.41 --
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of
period (000s
omitted) ($) 56,927 44,224 38,594 40,341 28,864 31,580 32,094 41,749 52,193 155,001 166,010
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) 1.75 1.63 1.75 1.90 2.36 2.32 2.05 2.10 2.16 1.67 1.57(6)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted
expenses to average
net assets(7) (%) -- -- -- -- -- -- 2.22 -- -- 1.79 --
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net
investment income
(loss) to average
net assets (%) 0.77 0.75 0.89 0.60 (0.28) 0.34 (0.88) (1.49) (1.25) (0.89) (0.68)(6)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted
net investment
income (loss) to
average net
assets(7) (%) -- -- -- -- -- -- (1.05) -- -- (1.01) --
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate (%) 6 9 12 30 38 67 76 86 67 70 64
- ----------------------------------------------------------------------------------------------------------------------------------
Fee reduction per
share ($) -- -- -- -- -- -- 0.03 -- -- 0.02(2) --
- ----------------------------------------------------------------------------------------------------------------------------------
Average brokerage
commission rate(8) ($) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.0685
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 12/94(9) 12/95 10/96(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $17.24 $17.68 $24.08
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) (0.35)(2) (0.39)(2) (0.28)(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss)
on investments 2.05 8.43 1.40
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 1.70 8.04 1.12
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from
net realized gain
on investments sold (1.26) (1.64) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $17.68 $24.08 $25.20
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN
AT NET ASSET VALUE(3) (%) 10.02 45.42 4.65(4)
- ----------------------------------------------------------------------------------------------------------------------------------
Total adjusted investment
return at net asset
value(3,5) -- 45.30 --
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) ($) 9,324 35,754 50,949
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) 2.90(6) 2.41 2.27(6)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted
expenses to average
net assets(7) (%) -- 2.53 --
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets (%) (1.98)(6) (1.62) (1.38)(6)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted net
investment income (loss) to
average net assets(7) (%) -- (1.74) --
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 67 70 64
- ----------------------------------------------------------------------------------------------------------------------------------
Fee reduction per share ($) -- 0.03(2) --
- ----------------------------------------------------------------------------------------------------------------------------------
Average brokerage
commission rate(8) ($) N/A N/A 0.0685
- ----------------------------------------------------------------------------------------------------------------------------------
(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) An estimated total return calculation that does not take into consideration fee reductions by the adviser during the periods
shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
(9) Class B shares commenced operations on January 3, 1994.
</TABLE>
<PAGE>
International Fund
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A: FINAX
CLASS B: FINBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC OMITTED] The fund seeks long-term growth of capital. To pursue this
goal, the fund invests primarily in stocks of foreign companies. Under normal
circumstances, the fund invests at least 65% of assets in these companies. The
fund maintains a diversified portfolio of company and government securities from
around the world, and generally expects that at any one time it will invest in
the securities markets of at least three non-U.S. countries.
The fund does not maintain a fixed allocation of assets, either with respect to
securities type or to geography. The fund looks for companies of any size whose
earnings show strong growth or that appear to be undervalued.
PORTFOLIO SECURITIES
[GRAPHIC OMITTED] Under normal circumstances, the fund invests primarily in
common stocks and other equity securities, but may invest in almost any type of
security, foreign or domestic, including preferred and convertible securities,
warrants and investment-grade debt securities.
For liquidity and flexibility, the fund may place up to 35% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest up to 100% 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
[GRAPHIC OMITTED] As with any growth fund, the value of your investment will
fluctuate in response to stock market movements.
Because it invests internationally, the fund carries additional risks, including
currency, information, natural event and political risks. These risks, which may
make the fund more volatile than a comparable domestic growth fund, are defined
in "More about risk" starting on page 31. The risks of international investing
are higher in emerging markets such as those of Latin America, Asia and Eastern
Europe.
To the extent that the fund invests in smaller capitalization companies or
utilizes higher-risk securities and practices, it takes on further risks that
could adversely affect its performance. Please read "More about risk" carefully
before investing.
MANAGEMENT/SUBADVISER
[GRAPHIC OMITTED] Miren Etcheverry, John L.F. Wills and Gerardo J. Espinoza lead
the fund's portfolio management team. Ms. Etcheverry and Mr. Espinoza are senior
vice presidents and joined John Hancock Funds in December 1996, having been in
the investment business since 1978 and 1979, respectively. Mr. Wills is a senior
vice president of the adviser and managing director of the subadviser, John
Hancock Advisers International. He joined John Hancock Funds in 1987 and has
been in the investment business since 1969.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC OMITTED] Fund investors pay various expenses, either directly or
indirectly. The figures below show the expenses for the past fiscal 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 (after expense limitation)(3,4) 0.00% 0.00%
- --------------------------------------------------------------------------------
12b-1 fee(5) 0.30% 1.00%
- --------------------------------------------------------------------------------
Other expenses (after limitation)(3) 1.45% 1.45%
- --------------------------------------------------------------------------------
Total fund operating expenses (after limitation)(3) 1.75% 2.45%
- --------------------------------------------------------------------------------
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 $67 $102 $140 $246
- --------------------------------------------------------------------------------
Class B shares
Assuming redemption
at end of period $75 $106 $151 $261
- --------------------------------------------------------------------------------
Assuming no redemption $25 $76 $131 $261
- --------------------------------------------------------------------------------
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
transfer agent expenses). Without this limitation, management fees would be
1.00% for each class, other expenses would be 2.02% for each class and total
fund operating expenses would be 3.32% for Class A and 4.02% for Class B.
The adviser may terminate this limitation at any time.
(4) Includes a subadviser fee equal to 0.70% of the fund's net assets.
(5) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[GRAPHIC OMITTED] The figures below have been audited by the fund's independent
auditors, Price Waterhouse LLP.
<TABLE>
<CAPTION>
VOLATILITY, AS INDICATED BY CLASS A YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) 1.77(4) 6.88
- -----------------------------------------------------------------------------------------------------------------------------------
(scale varies from fund to fund) (4.96)
- -----------------------------------------------------------------------------------------------------------------------------------
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 $8.65 $8.14
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.07(2) 0.04 0.06(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 0.08 (0.47) 0.50
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.15 (0.43) 0.56
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income -- (0.03) --
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments
sold and foreign currency transactions -- (0.05) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (0.08) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.65 $8.14 $8.70
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 1.77(4) (4.96) 6.88
- -----------------------------------------------------------------------------------------------------------------------------------
Total adjusted investment return at net asset value(3,5) (%) (0.52)(4) (8.12) 5.33
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 4,426 4,215 5,098
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 1.50(6) 1.64 1.75
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted expenses to average net assets(7) (%) 3.79(6) 4.80 3.30
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) 1.02(6) 0.56 0.68
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted net investment income (loss) to average
net assets(7) (%) (1.27)(6) (2.60) (0.87)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 50 69 83
- -----------------------------------------------------------------------------------------------------------------------------------
Fee reduction per share ($) 0.16(2) 0.25(2) 0.14(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate(8) ($) N/A N/A 0.0192
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 10/94(1) 10/95 10/96
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.50 $8.61 $8.05
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.02(2) (0.03) 0.00(2,9)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 0.09 (0.48) 0.50
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.11 (0.51) 0.50
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments
sold and foreign currency transactions -- (0.05) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.61 $8.05 $8.55
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 1.29(4) (5.89) 6.21
- -----------------------------------------------------------------------------------------------------------------------------------
Total adjusted investment return at net asset value(3,5) (%) (1.00)(4) (9.05) 4.66
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 3,948 3,990 8,175
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 2.22(6) 2.52 2.45
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted expenses to average net assets(7) (%) 4.51(6) 5.68 4.00
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) 0.31(6) (0.37) 0.02
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted net investment income (loss) to average
net assets(7) (%) (1.98)(6) (3.53) (1.53)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 50 69 83
- -----------------------------------------------------------------------------------------------------------------------------------
Fee reduction per share ($) 0.16(2) 0.25(2) 0.14(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate(8) ($) N/A N/A 0.0192
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Class A and Class B shares commenced operations on January 3, 1994.
(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) An estimated total return calculation that does not take into consideration fee reductions by the adviser during the periods
shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
(9) Less than one cent per share.
</TABLE>
<PAGE>
PACIFIC BASIN EQUITIES FUND
REGISTRANT NAME: JOHN HANCOCK WORLD FUND TICKER SYMBOL CLASS A: JHWPX
CLASS B: FPBBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC OMITTED] The fund seeks long-term growth of capital. To pursue this
goal, the fund invests primarily in a diversified portfolio of stocks of Pacific
Basin companies. The Pacific Basin includes countries bordering the Pacific
Ocean. Under normal circumstances, the fund invests at least 65% of assets in
these companies, with the balance invested in equities of companies not in the
Pacific Basin countries and in investment-grade debt securities of U.S.,
Japanese, Australian and New Zealand issuers.
The fund does not maintain a fixed allocation of assets. The fund may at times
invest less than 65% of assets in Pacific Basin equities.
PORTFOLIO SECURITIES
[GRAPHIC OMITTED] Under normal circumstances, the fund invests primarily in
common stocks and other equity securities, but may invest in virtually any type
of security, foreign or domestic, including preferred and convertible
securities, warrants and investment-grade debt securities.
For liquidity and flexibility, the fund may place up to 35% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest up to 100% 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
[GRAPHIC OMITTED] As with any growth fund, the value of your investment will
fluctuate in response to stock market movements. Because the fund concentrates
on one region, investors should expect above-average volatility.
Also, because the fund invests internationally, it carries additional risks,
including currency, information, natural event and political risks. These risks,
which may make the fund more volatile than a comparable domestic growth fund,
are defined in "More about risk" starting on page 31. The risks of international
investing are higher in emerging markets, a category that includes many Pacific
Basin countries.
To the extent that the fund utilizes higher-risk securities practices, it takes
on further risks that could adversely affect its performance. Please read "More
about risk" carefully before investing.
MANAGEMENT/SUBADVISERS
[GRAPHIC OMITTED] The fund's management is carried out jointly by the adviser's
international equities portfolio management team and two subadvisers, Indosuez
Asia Advisers Limited and John Hancock Advisers International. Indosuez is
majority owned by Caisse Nationale de Credit Agricole, a French banking
institution.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC OMITTED] 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) 0.80% 0.80%
- --------------------------------------------------------------------------------
12b-1 fee(4) 0.30% 1.00%
- --------------------------------------------------------------------------------
Other expenses 1.10% 1.10%
- --------------------------------------------------------------------------------
Total fund operating expenses 2.20% 2.90%
- --------------------------------------------------------------------------------
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 $71 $115 $162 $291
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption
at end of period $79 $120 $173 $306
- --------------------------------------------------------------------------------
Assuming no redemption $29 $90 $153 $306
- --------------------------------------------------------------------------------
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 0.35% 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.
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[GRAPHIC OMITTED] The figures below have been audited by the fund's
independent auditors, Price Waterhouse LLP.
<TABLE>
<CAPTION>
VOLATILITY, AS INDICATED BY CLASS
A YEAR-BY-YEAR TOTAL INVESTMENT
RETURN (%) 18.06 49.61 22.82 4.47
- ----------------------------------------------------------------------------------------------------------------------------------
(scale varies from fund to fund) (3.61)(6) (0.44) (2.15) (1.99) (7.65) (1.83)(6)
two
months
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A - PERIOD ENDED: 8/88(1) 8/89 8/90 8/91 8/92 8/93 8/94 8/95 8/96 10/96(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $10.00 $9.61 $11.10 $10.34 $9.05 $8.87 $13.27 $15.88 $14.11 $14.74
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.01 (0.02) (0.04) (0.01) (0.07)(3) (0.11)(3) (0.10)(3) 0.02(3,4) (0.02)(3) (0.02)(3)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions (0.37) 1.75 0.11 (0.33) (0.11) 4.51 3.12 (1.24) 0.65 (0.25)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.36) 1.73 0.07 (0.34) (0.18) 4.40 3.02 (1.22) 0.63 (0.27)
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment
income (0.03) (0.01) -- -- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gain on investments sold
and foreign currency
transactions -- (0.23) (0.83) (0.95) -- -- (0.41) (0.55) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.03) (0.24) (0.83) (0.95) -- -- (0.41) (0.55) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.61 $11.10 $10.34 $9.05 $8.87 $13.27 $15.88 $14.11 $14.74 $14.47
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET
ASSET VALUE(5) (%) (3.61)(6) 18.06 (0.44) (2.15) (1.99) 49.61 22.82 (7.65) 4.47 (1.83)(6)
- ----------------------------------------------------------------------------------------------------------------------------------
Total adjusted investment return
at net asset value(5,7) (%) (8.05)(6) 15.12 (2.86) (5.19) (5.57) 48.31 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) ($) 4,771 5,116 4,578 4,065 3,222 14,568 50,261 37,417 41,951 38,694
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) 1.75(8) 1.75 2.45 2.75 2.73 2.94 2.43 2.05 1.97 2.21(8)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted expenses to
average net assets(9) (%) 6.19(8) 4.69 4.89 5.79 6.31 4.24 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) 0.04(8) (0.15) (0.28) (0.06) (0.82) (0.98) (0.66) 0.13(4) (0.15) (0.83)(8)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted net investment
income (loss) to average
net assets(9) (%) (4.40)(8) (3.09) (2.70) (3.10) (4.40) (2.28) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 148 227 154 151 179 171 68 48 73 15
- ----------------------------------------------------------------------------------------------------------------------------------
Fee reduction per share ($) 1.15 0.39 0.31 0.24 0.31(3) 0.14(3) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission
rate(10) ($) N/A N/A N/A N/A N/A N/A N/A N/A 0.0183 0.0221
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 8/94(1) 8/95 8/96 10/96(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $15.11 $15.84 $13.96 $14.49
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.09)(3)(0.09)(3) (0.13)(3) (0.04)(3)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions 0.82 (1.24) 0.66 (0.25)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.73 (1.33) 0.53 (0.29)
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gain on investments sold
and foreign currency transactions -- (0.55) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.84 $13.96 $14.49 $14.20
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET
ASSET VALUE(5) (%) (4.83)(6)(8.38) 3.80 (2.00)(6)
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s
omitted) ($) 9,480 14,368 32,342 30,147
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net
assets (%) 3.00(8) 2.77 2.64 2.90(8)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (1.40)(8)(0.66) (0.86) (1.52)(8)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 68 48 73 15
- ----------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate(10) ($) N/A N/A 0.0183 0.0221
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Class A and Class B shares commenced operations on September 8, 1987 and March 7, 1994, respectively.
(2) Effective October 31, 1996, the fiscal year end changed from August 31 to October 31.
(3) Based on the average of the shares outstanding at the end of each month.
(4) May not accord to amounts shown elsewhere in the financial statements due to the timing of sales and repurchases of fund
shares in relation to fluctuating market values of the investments of the fund.
(5) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(6) Not annualized.
(7) An estimated total return calculation that does not take into consideration fee reductions by the adviser during the periods
shown.
(8) Annualized.
(9) Unreimbursed, without fee reduction.
(10) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
</TABLE>
<PAGE>
SHORT-TERM STRATEGIC INCOME FUND
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A: JHSAX
CLASS B: FRSWX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC OMITTED] The fund seeks a high level of current income. To pursue this
goal, the fund invests primarily in debt securities issued or guaranteed by:
o foreign governments and companies including those in emerging markets
o the U.S. Government, its agencies or instrumentalities
o U.S. companies
Under normal circumstances, the fund invests assets in all three of these
sectors, but may invest up to 100% in any one sector. The fund maintains an
average portfolio maturity of three years or less.
PORTFOLIO SECURITIES
[GRAPHIC OMITTED] The fund may invest in all types of debt securities. The
fund's U.S. Government securities may include mortgage-backed securities. The
fund may invest up to 67% of assets in securities rated as low as B and their
unrated equivalents. Bonds rated lower than BBB/Baa are considered junk bonds.
However, the fund maintains an average portfolio quality rating of A, which is
an investment-grade rating.
Because the fund is non-diversified, it may invest more than 5% of assets in
securities of a single issuer, but no more than 25% of assets in the securities
of any one foreign government. The fund also may invest in certain other
investments, including derivatives, and may engage in other investment
practices.
RISK FACTORS
[GRAPHIC OMITTED] The value of your investment in the fund will fluctuate with
changes in currency exchange rates as well as interest rates. Typically, a rise
in interest rates causes a decline in the market value of fixed income
securities.
International investing, particularly in emerging markets, carries additional
risks, including currency information, natural event and political risks. Junk
bonds may carry above-average credit and market risks and mortgage-backed
securities may carry extension and prepayment risks. These risks are defined in
"More about risk" starting on page 31.
To the extent that the fund utilizes higher-risk securities practices, it takes
on further risks that could adversely affect its performance. Please read "More
about risk" carefully before investing.
PORTFOLIO MANAGEMENT
[GRAPHIC OMITTED] Anthony A. Goodchild, Lawrence J. Daly and Janet L. Clay lead
the portfolio management team. Messrs. Goodchild and Daly are senior vice
presidents and joined John Hancock Funds in July 1994, having been in the
investment business since 1968 and 1972, respectively. Ms. Clay, a second vice
president, joined John Hancock Funds in August 1995 and has been in the
investment business since 1990.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC OMITTED] 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) 3.00% none
- --------------------------------------------------------------------------------
Maximum sales charge imposed on
reinvested dividends none none
- --------------------------------------------------------------------------------
Maximum deferred sales charge none(1) 3.00%
- --------------------------------------------------------------------------------
Redemption fee(2) none none
- --------------------------------------------------------------------------------
Exchange fee none none
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
Management fee 0.65% 0.65%
- --------------------------------------------------------------------------------
12b-1 fee(3) 0.30% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.52% 0.52%
- --------------------------------------------------------------------------------
Total fund operating expenses 1.47% 2.17%
- --------------------------------------------------------------------------------
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 $45 $75 $108 $200
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption
at end of period $52 $88 $116 $209
- --------------------------------------------------------------------------------
Assuming no redemption $22 $68 $116 $209
- --------------------------------------------------------------------------------
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.
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[GRAPHIC OMITTED] The figures below have been audited by the fund's independent
auditors, Price Waterhouse LLP.
<TABLE>
<CAPTION>
VOLATILITY, AS INDICATED BY CLASS B YEAR-BY-YEAR TOTAL INVESTMENT
RETURN (%) 8.85(4) 0.64 5.98 1.93 7.97 7.89
- ----------------------------------------------------------------------------------------------------------------------------------
(scale varies from fund to fund)
- ----------------------------------------------------------------------------------------------------------------------------------
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 $9.86 $9.32 $9.12 $8.47 $8.41
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.65 0.83(2) 0.76(2) 0.77(2) 0.65
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.55) (0.20) (0.53) (0.06) 0.05
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.10 0.63 0.23 0.71 0.70
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.64) (0.83) (0.62) (0.61) (0.57)
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income -- -- (0.04) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments sold -- -- (0.12) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from capital paid-in -- -- (0.10) (0.16) (0.08)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.64) (0.83) (0.88) (0.77) (0.65)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.32 $9.12 $8.47 $8.41 $8.46
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 1.16(4) 6.78 2.64 8.75 8.60
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 20,468 11,130 13,091 16,997 49,338
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 1.37(4) 1.21 1.26 1.33 1.48
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) 8.09(4) 8.59 8.71 9.13 7.59
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 86 306 150 147 77
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 10/91(1) 10/92 10/93 10/94 10/95 10/96
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.00 $10.01 $9.31 $9.11 $8.46 $8.40
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.76 0.87 0.75(2) 0.70(2) 0.70(2) 0.59
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.01 (0.80) (0.20) (0.53) (0.06) 0.05
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.77 0.07 0.55 0.17 0.64 0.64
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.76) (0.77) (0.75) (0.56) (0.56) (0.52)
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income -- -- -- (0.04) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on
investments sold -- -- -- (0.12) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from capital paid-in -- -- -- (0.10) (0.14) (0.07)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.76) (0.77) (0.75) (0.82) (0.70) (0.59)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.01 $9.31 $9.11 $8.46 $8.40 $8.45
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 8.85(4) 0.64 5.98 1.93 7.97 7.89
- ----------------------------------------------------------------------------------------------------------------------------------
Total adjusted investment return at net asset
value(3,5) (%) 8.81(4) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 218,562 236,059 142,873 98,390 84,601 48,137
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 1.89(4) 2.07 2.01 1.99 2.07 2.12
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted expenses to average net assets(6) (%) 1.93(4) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 8.72(4) 8.69 7.81 8.00 8.40 7.07
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted net investment income to average net
assets(6) (%) 8.68(4) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 22 86 306 150 147 77
- ----------------------------------------------------------------------------------------------------------------------------------
Fee reduction per share ($) 0.0039 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Class A and Class B shares commenced operations on January 3, 1992 and December 28,1990, 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) Annualized.
(5) An estimated total return calculation that does not take into consideration fee reductions by the adviser during the periods
shown.
(6) Unreimbursed, without fee reduction.
</TABLE>
<PAGE>
WORLD BOND FUND
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A: FGLAX
CLASS B: FGLIX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC OMITTED] The fund seeks a high total investment return -- a combination
of current income and capital appreciation. To pursue this goal, the fund
invests at least 65% of assets in debt securities issued or guaranteed by: o
foreign governments and companies including those in emerging markets o
multinational organizations such as the World Bank o the U.S. Government, its
agencies or instrumentalities
Under normal circumstances, the fund expects to invest in the securities markets
of at least three countries at any one time, potentially including the U.S. The
fund does not maintain a fixed allocation of assets.
PORTFOLIO SECURITIES
[GRAPHIC OMITTED] The fund may invest in all types of debt securities of any
maturity, including preferred and convertible securities. Less than 35% of
assets may be invested in junk bonds rated as low as CCC/Caa, or equivalent.
Because the fund is non-diversified, it may invest more than 5% of assets in
securities of a single issuer, but no more than 25% of assets in the securities
of any one foreign government.
For liquidity and flexibility, the fund may place up to 35% of assets 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 other investments, including derivatives, and may engage in
other investment practices.
RISK FACTORS
[GRAPHIC OMITTED] As with most bond funds, the value of your investment in the
fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the market value of fixed income securities.
International investing, particularly in emerging markets, carries additional
risks, including currency, information, natural event and political risks. Junk
bonds may carry above-average credit and market risks and mortgage-backed
securities may carry extension and prepayment risks. These risks are defined in
"More about risk" starting on page 31.
To the extent that the fund utilizes higher-risk securities practices, it takes
on further risks that could adversely affect its performance. Please read "More
about risk" carefully before investing.
PORTFOLIO MANAGEMENT
[GRAPHIC OMITTED] Anthony A. Goodchild, Lawrence J. Daly and Janet L. Clay lead
the portfolio management team. Messrs. Goodchild and Daly are senior vice
presidents and joined John Hancock Funds in July 1994, having been in the
investment business since 1968 and 1972, respectively. Ms. Clay, a second vice
president, joined John Hancock Funds in August 1995 and has been in the
investment business since 1990.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC OMITTED] 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) 4.50% 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 0.54% 0.54%
- --------------------------------------------------------------------------------
Total fund operating expenses 1.59% 2.29%
- --------------------------------------------------------------------------------
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
- --------------------------------------------------------------------------------
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
- --------------------------------------------------------------------------------
Class A shares $60 $93 $128 $225
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption
at end of period $73 $102 $143 $245
- --------------------------------------------------------------------------------
Assuming no redemption $23 $72 $123 $245
- --------------------------------------------------------------------------------
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[GRAPHIC OMITTED] The figures below have been audited by the fund's independent
auditors, Price Waterhouse LLP.
<TABLE>
<CAPTION>
VOLATILITY, AS INDICATED BY
CLASS B YEAR-BY-YEAR TOTAL
INVESTMENT RETURN (%) 65.96(4) 1.59(4) 20.09 5.47 11.84 10.44 1.72 6.77 11.51 4.78
----------------------------------------------------------------------------------------------------------------------------------
(scale varies from fund to fund) (1.88)
- ----------------------------------------------------------------------------------------------------------------------------------
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 $10.57 $9.76 $9.62 $8.85 $9.30
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.64 0.76 0.64(2) 0.57(2) 0.51(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (0.74) (0.10) (0.78) 0.48 (0.02)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.10) 0.66 (0.14) 1.05 0.49
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.71) (0.38) (0.11) (0.59) (0.50)
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income -- (0.04) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from capital paid-in -- (0.38) (0.52) (0.01) (0.01)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.71) (0.80) (0.63) (0.60) (0.51)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.76 $9.62 $8.85 $9.30 $9.28
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) (0.88)(4) 7.14 (1.30) 12.25 5.48
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 12,880 12,882 8,949 35,334 27,537
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 1.41(4) 1.46 1.59 1.48 1.58
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets (%) 7.64(4) 7.89 7.00 6.43 5.54
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 476 363 174 263 214
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 5/87(5) 10/87(6) 10/88 10/89 10/90 10/91 10/92 10/93 10/94 10/95 10/96
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $9.60 $10.79 $10.32 $10.98 $10.21 $10.38 $10.44 $9.74 $9.62 $8.85 $9.30
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.31 0.25 0.67 0.83 0.85 0.90 0.78 0.72 0.59(2) 0.55(2) 0.45(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 1.29 (0.18) 1.31 (0.27) 0.28 0.13 (0.59) (0.09) (0.78) 0.44 (0.02)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 1.60 0.07 1.98 0.56 1.13 1.03 0.19 0.63 (0.19) 0.99 0.43
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends from net
investment income (0.26) (0.28) (0.68) (0.84) (0.85) (0.73) (0.89) (0.33) (0.06) (0.53) (0.44)
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gain on
investments (0.15) (0.26) (0.64) (0.49) -- (0.24) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions in excess
of net investment income -- -- -- -- -- -- -- (0.04) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from capital
paid-in -- -- -- -- (0.11) -- -- (0.38) (0.52) (0.01) (0.01)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.41) (0.54) (1.32) (1.33) (0.96) (0.97) (0.89) (0.75) (0.58) (0.54) 0.45
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $10.79 $10.32 $10.98 $10.21 $10.38 $10.44 $9.74 $9.62 $8.85 $9.30 $9.28
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN
AT NET ASSET VALUE(3) (%) 65.96(4) 1.59(4) 20.09 5.47 11.84 10.44 1.72 6.77 (1.88) 11.51 4.78
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) ($) 18,253 58,658 174,833 255,214 186,524 192,687 199,102 197,166 114,656 65,600 45,897
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) 2.41(4) 2.19(4) 1.74 1.75 1.82 1.90 1.91 1.91 2.17 2.16 2.25
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets (%) 8.69(4) 6.32(4) 6.04 8.07 8.67 8.74 7.59 7.45 6.41 6.03 4.87
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 140(4) 152(4) 364 333 186 159 476 363 174 263 214
- ----------------------------------------------------------------------------------------------------------------------------------
(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) Annualized.
(5) For the period December 17, 1986 (commencement of operations) to May 31, 1987.
(6) For the period June 1, 1987 to October 31, 1987.
</TABLE>
<PAGE>
YOUR ACCOUNT
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
All John Hancock international/global 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 your
described below. There are several money goes to work for you right
ways to reduce these charges, also away.
described below.
o Higher annual expenses than Class A
o Lower annual expenses than Class B shares.
shares.
o A deferred sales charge, as
described below.
o Automatic conversion to Class A
shares after eight years (five years
for Short-Term Strategic Income
Fund), 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.
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
CLASS A Sales charges are as follows:
- --------------------------------------------------------------------------------
CLASS A SALES CHARGES - SHORT-TERM STRATEGIC INCOME
- --------------------------------------------------------------------------------
AS A % OF AS A % OF YOUR
YOUR INVESTMENT OFFERING PRICE INVESTMENT
- --------------------------------------------------------------------------------
Up to $99,999 3.00% 3.09%
- --------------------------------------------------------------------------------
$100,000 - $499,999 2.50% 2.56%
- --------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 2.04%
- --------------------------------------------------------------------------------
$1,000,000 and over See below
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A SALES CHARGES - WORLD BOND
- --------------------------------------------------------------------------------
AS A % OF AS A % OF YOUR
YOUR INVESTMENT OFFERING PRICE INVESTMENT
- --------------------------------------------------------------------------------
Up to $99,999 4.50% 4.71%
- --------------------------------------------------------------------------------
$100,000 - $249,999 3.75% 3.90%
- --------------------------------------------------------------------------------
$250,000 - $499,999 2.75% 2.83%
- --------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 2.04%
- --------------------------------------------------------------------------------
$1,000,000 and over See below
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A SALES CHARGES - GROWTH FUNDS
- --------------------------------------------------------------------------------
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 (ALL FUNDS)
- --------------------------------------------------------------------------------
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.
<PAGE>
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 a certain time after you bought them, as
described in the table below. 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 CDSC ON SHORT-TERM CDSC ON ALL
PURCHASE STRATEGIC INCOME OTHER FUND SHARES
SHARES BEING SOLD BEING SOLD
- --------------------------------------------------------------------------------
1st year 3.00% 5.00%
- --------------------------------------------------------------------------------
2nd year 2.00% 4.00%
- --------------------------------------------------------------------------------
3rd year 2.00% 3.00%
- --------------------------------------------------------------------------------
4th year 1.00% 3.00%
- --------------------------------------------------------------------------------
5th year None 2.00%
- --------------------------------------------------------------------------------
6th year None 1.00%
- --------------------------------------------------------------------------------
After 6 years None 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.
- --------------------------------------------------------------------------------
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 (see
the back cover of this prospectus).
GROUP INVESTMENT PROGRAM Allows established groups of four or more investors to
invest as a group. Each investor has an individual account, but for sales charge
purposes the group's investments are lumped together, making the investors
potentially eligible for reduced sales charges. There is no charge, no
obligation to invest (although initial aggregate investments must be at least
$250) and you may terminate the program at any time.
To utilize: contact your financial representative or Signature Services to find
out how to qualify.
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 (see the back
cover of this prospectus).
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.
<PAGE>
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)
o clients of AFA, when their funds are transferred directly to Global Technology
Fund from accounts managed by AFA
o certain former shareholders of John Hancock National Aviation & Technology
Fund and Nova Fund (applies to Global Technology Fund only).
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
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 can
initiate any purchase, exchange or sale of shares through your financial
representative.
<PAGE>
- --------------------------------------------------------------------------------
BUYING SHARES
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- --------------------------------------------------------------------------------
BY CHECK
- --------------------------------------------------------------------------------
[graphic omitted]
o Make out a check for the investment o Make out a check for the investment
amount, payable to "John Hancock amount payable to "John Hancock
Signature Services, Inc." Signature Services, Inc."
o Deliver the check and your completed o Fill out the detachable investment
application to your financial slip from an account statement. If
representative, or mail them to no slip is available, include a note
Signature Services (address below). specifying the fund name, your 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
below).
- --------------------------------------------------------------------------------
BY EXCHANGE
- --------------------------------------------------------------------------------
[graphic omitted]
o Call your financial representative o Call Signature Services to request
or Signature Services to request an an exchange.
exchange.
- --------------------------------------------------------------------------------
By wire
- --------------------------------------------------------------------------------
[graphic omitted]
o Deliver your completed application o Instruct your bank to wire the
to your financial representative, or amount of your investment to:
mail it to Signature Services. First Signature Bank & Trust
o Obtain your account number by Account # 900000260
calling your financial Routing # 211475000
representative or Signature Specify the fund name, your share
Services. class, your account number and the
o Instruct your bank to wire the name(s) in which the account is
amount of your investment to: registered. Your bank may charge a
First Signature Bank & Trust fee to wire funds.
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
- --------------------------------------------------------------------------------
[graphic omitted]
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.
ADDRESS
John Hancock Signature Services, Inc.
1 John Hancock Way STE 1000
Boston, MA 02217-1000
PHONE NUMBER
1-800-225-5291
Or contact your financial To open or add to an account using the
representative for instructions and Monthly Automatic Accumulation
assistance. Program, see "Additional investor
services."
<PAGE>
- --------------------------------------------------------------------------------
SELLING SHARES
- --------------------------------------------------------------------------------
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
- --------------------------------------------------------------------------------
BY LETTER
- --------------------------------------------------------------------------------
[graphic omitted]
o Accounts of any type. o Write a letter of instruction or
o Sales of any amount. complete a stock power indicating
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
- --------------------------------------------------------------------------------
[graphic omitted]
o Most accounts. o For automated service 24 hours a day
o Sales of up to $100,000. 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)
- --------------------------------------------------------------------------------
[graphic omitted]
o Requests by letter to sell any o Fill out the "Telephone Redemption"
amount (accounts of any type). section of your new account
o Requests by phone to sell up to application.
$100,000 (accounts with telephone o To verify that the telephone
redemption privileges). redemption privilege is in place on
an account, or to 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
- --------------------------------------------------------------------------------
[graphic omitted]
o Accounts of any type. o Obtain a current prospectus for the
o Sales of any amount. fund into which you are exchanging
by calling your financial
representative or Signature
Services.
o Call Signature Services to request
an exchange.
- --------------------------------------------------------------------------------
BY CHECK
- --------------------------------------------------------------------------------
[graphic omitted]
o Short-Term Strategic Income Fund o Request checkwriting on your account
only. application.
o Any account with checkwriting o Verify that the shares to be sold
privileges. were purchased more than 10 days
o Sales of over $100. earlier or were purchased by wire.
o Write a check for any amount over
$100.
ADDRESS
John Hancock Signature Services, Inc.
1 John Hancock Way STE 1000
Boston, MA 02217-1000
PHONE NUMBER
1-800-225-5291
Or contact your financial
To sell shares through a systematic representative for instructions and
withdrawal plan, see "Additional assistance.
investor services."
<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
- --------------------------------------------------------------------------------
[graphic omitted]
Owners of individual, joint, sole o Letter of instruction.
proprietorship, UGMA/UTMA (custodial o On the letter, the signatures and
accounts for minors) or general titles of all persons authorized to
partner accounts. 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 90 days.
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 accounts. o Letter of instruction.
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
60 days.
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 account instructions.
types not listed above.
- --------------------------------------------------------------------------------
<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.
FOREIGN CURRENCIES Purchases must be made in U.S. dollars. Purchases in foreign
currencies must be converted, which may result in a fee and delayed execution.
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.
<PAGE>
DIVIDENDS The income funds generally declare income dividends daily and pay them
monthly. These income dividends begin accruing the day after payment is received
by the fund and continue through the day your shares are actually sold. The
growth funds pay income dividends, if any, annually. All funds distribute
capital gains, if any, annually.
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 from the growth funds.
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, 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.
<PAGE>
FUND DETAILS
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
HOW THE FUNDS ARE ORGANIZED Each John Hancock international/global 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 international/global
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").
------------
SHAREHOLDERS
------------
| --------------------------------------------
| FINANCIAL SERVICES FIRMS AND
| THEIR REPRESENTATIVES
| DISTRIBUTION AND
| SHAREHOLDERS SERVICES Advise current and prospective share-
| holders on their fund investments, often
| in the context of an overall financial plan.
| --------------------------------------------
|
| <TABLE>
| <S> <C>
| ------------------------------------------- -------------------------------------------------
| PRINCIPAL DISTRIBUTOR TRANSFER AGENT
|
| John Hancock Funds, Inc. John Hancock Signature Services, Inc.
| 101 Huntington Avenue 1 John Hancock Way STE 1000
| Boston, MA 02199-7603
| Handles shareholder services, including record-
| Markets the funds and distributes shares keeping and statements, distribution of dividends
| through selling brokers, financial planners and processing of buy and sell requests.
| and other financial representatives. -------------------------------------------------
| -------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ------------------------------- ------------------------------------ |
SUBADVISERS INVESTMENT ADVISER CUSTODIANS |
American Fund Advisors, Inc. John Hancock Advisers, Inc. Investors Bank & Trust Co. |
1415 Kelium Place 101 Huntington Avenue 89 South Street |
Garden City, NY 11530 Boston, MA 02199-7603 Boston, MA 02111 ASSET |
MANAGEMENT |
John Hancock Advisers Manages the fund's business and State Street Bank and Trust Company |
International Limited investment activities. 225 Franklin Street |
34 Dover Street ------------------------------- Boston, MA 02110 |
London, UK W1X 3RA |
Hold the funds' assets , settle all |
Indosuez Asia Advisers Limited portfolio trades and collect most of |
One Exchange Square the valuation data required for |
Hong Kong calculating each fund's NAV. |
------------------------------------ |
Provide portfolio management
to certain funds.
- ------------------------------
</TABLE>
-------------------------------
TRUSTEES
Supervise the funds' activities
-------------------------------
<PAGE>
ACCOUNTING COMPENSATION The funds (except for Global Technology) 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.
Global Technology pays a $100,000 administration fee to the adviser.
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 Global Rx Fund,
International Fund and World Bond Fund, each fund's investment goal is
fundamental and may only be changed with shareholder approval.
DIVERSIFICATION Except for Global Rx Fund, Short-Term Strategic Income Fund and
World Bond Fund, all of the international/global 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
- --------------------------------------------------------------------------------
Global $ 800,320 3.06%
- --------------------------------------------------------------------------------
Global Marketplace $ 172,913 0.64%
- --------------------------------------------------------------------------------
Global Rx $ 461,009 1.19%
- --------------------------------------------------------------------------------
Global Technology $ 1,170,398 2.59%
- --------------------------------------------------------------------------------
International $ 435,589 3.59%
- --------------------------------------------------------------------------------
Pacific Basin Equities $ 979,454 3.04%
- --------------------------------------------------------------------------------
Short-Term Strategic Income $ 2,532,676 3.87%
- --------------------------------------------------------------------------------
World Bond $ 4,967,286 9.07%
- --------------------------------------------------------------------------------
(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.
<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)
- ---------------------------------------------------------------------------------------------------------------------------
SHORT-TERM STRATEGIC INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Up to $99,999 3.00% 2.26% 0.25% 2.50%
- ---------------------------------------------------------------------------------------------------------------------------
$100,000 - $499,999 2.50% 2.01% 0.25% 2.25%
- ---------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 1.51% 0.25% 1.75%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
WORLD BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------
Up to $99,999 4.50% 3.76% 0.25% 4.00%
- ---------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.75% 3.01% 0.25% 3.25%
- ---------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.75% 2.06% 0.25% 2.30%
- ---------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 1.51% 0.25% 1.75%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
GROWTH FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
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 (ALL FUNDS)
- ---------------------------------------------------------------------------------------------------------------------------
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%
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B INVESTMENTS
- ---------------------------------------------------------------------------------------------------------------------------
MAXIMUM
REALLOWANCE FIRST YEAR MAXIMUM
OR COMMISSION SERVICE FEE TOTAL COMPENSATION
(% of offering price) (% of net investment) (% of offering price)
- ---------------------------------------------------------------------------------------------------------------------------
SHORT-TERM STRATEGIC INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
All amounts 2.25% 0.25% 2.50%
- ---------------------------------------------------------------------------------------------------------------------------
ALL OTHER FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
All amounts 3.75% 0.25% 4.00%
- ---------------------------------------------------------------------------------------------------------------------------
(1) Reallowance/commission percentages and service fee percentages are calculated from different amounts, and therefore may
not equal total compensation percentages if combined using simple addition.
(2) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members that take
advantage of the sales charge waivers described earlier in this prospectus.
CDSC revenues collected by John Hancock Funds may be used to pay commissions
when there is no initial sales charge.
</TABLE>
<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 pages 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 international/global fund will be positive over any period of time --
days, months or years. However, international markets have performed better over
the past two decades than domestic markets.
- --------------------------------------------------------------------------------
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).
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.
EXTENSION RISK The risk that an unexpected rise in interest rates will extend
the life of a mortgage-backed security beyond the expected prepayment time,
typically reducing the security's value.
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 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.
PREPAYMENT RISK The risk that unanticipated prepayments may occur, reducing the
value of mortgage-backed securities.
VALUATION RISK The risk that a fund has valued certain of its securities at a
higher price than it can sell them for.
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
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 ( [ ] )
10 Percent of net assets (roman type)
X No policy limitation on usage; fund may be using currently
o Permitted, but has not typically been used
- -- Not permitted
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific Short-Term
Global Global Basin Strategic World
Global Marketplace Global Rx Technology International Equities Income Bond
------ ----------- --------- ---------- ------------- -------- ----------- -----
<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. [10] [33.3] [33.3] 10 [33.3] [33.3] [10] 10
CURRENCY TRADING The direct trading or
holding of foreign currencies as an
asset. Currency risk. X X X X X X X X
REPURCHASE AGREEMENTS The purchase of
a security that must later be sold
back to the issuer at the same price
plus interest. Credit risk. X X X X X X X X
SECURITIES LENDING The lending of
securities to financial institutions,
which provide cash or government
securities as collateral. Credit risk. [10] [33.3] [33.3] [33.3] [33.3] [33.3] [30] [30]
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 Speculative. Speculative leverage,
market, liquidity risks. -- o o -- o -- -- --
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. X X X X X X X X
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. X X X X X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
CONVENTIONAL SECURITIES
FOREIGN DEBT SECURITIES Debt
securities issued by foreign
governments or companies. Credit,
currency, interest rate, market,
political risks. [5] [35](1) [35](1) 10(2) [35](1) [35](1) X(1) X(1)
NON-INVESTMENT-GRADE DEBT SECURITIES
Debt securities rated below BBB/Baa
are considered junk bonds. Credit,
market, interest rate, liquidity,
valuation, information risks. -- -- [35] 10(2) -- -- [67] [35]
RESTRICTED AND ILLIQUID SECURITIES
Securities not traded on the open
market. May include illiquid Rule 144A
securities. Liquidity, valuation,
market risks. 15 15 15 15 15 15 15 15
- ------------------------------------------------------------------------------------------------------------------------------------
UNLEVERAGED DERIVATIVE SECURITIES
ASSET-BACKED SECURITIES Securities
backed by unsecured debt, such as
credit card debt; these securities are
often guaranteed or
over-collateralized to enhance their
credit quality. Credit, interest rate
risks. o o o o o o X X
MORTGAGE-BACKED SECURITIES Securities
backed by pools of mortgages,
including passthrough certificates,
PACs, TACs and other senior classes of
collateralized mortgage obligations
(CMOs). Credit, extension, prepayment,
interest rate risks. o o o o o o X X
PARTICIPATION INTERESTS Securities
representing an interest in another
security or in bank loans. Credit,
interest rate, liquidity, valuation
risks. -- -- -- 10(2) -- -- 15(3) 15(3)
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
HIGHER-RISK SECURITIES AND PRACTICES (cont'd)
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific Short-Term
Global Global Basin Strategic World
Global Marketplace Global Rx Technology International Equities Income Bond
------ ----------- --------- ---------- ------------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LEVERAGED DERIVATIVE SECURITIES
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. X X X X X X X X
o SPECULATIVE. Currency, speculative
leverage, liquidity risks. o o o o o o o o
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. X X X o X X X X
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 o o
STRUCTURED SECURITIES Indexed and/or
leveraged mortgage-backed and other
debt securities, including
principal-only and interest-only
securities, leveraged floating rate
securities and others. These
securities tend to be highly sensitive
to interest rate movements and their
performance may not correlate to these
movements in a conventional fashion.
Credit, interest rate, extension,
prepayment, market, speculative
leverage, liquidity, valuation risks. X X X 10(2) X X X X
(1) No more than 25% of the fund's assets will be invested in securities of any one foreign government.
(2) Included in the 10% limitation on debt securities.
(3) Included in the 15% limitation on illiquid securities.
(4) Applies to purchased options only.
</TABLE>
- --------------------------------------------------------------------------------
ANALYSIS OF FUNDS WITH 5% OR MORE JUNK BONDS(1)
- --------------------------------------------------------------------------------
INVESTMENT-GRADE BONDS
QUALITY RATING SHORT-TERM STRATEGIC
(S&P/MOODY'S)(2) INCOME FUND
----------------- --------------------
AAA/Aaa 12.8%
AA/Aa 26.6%
A/A 6.0%
BBB/Baa 7.6%
- --------------------------------------------------------------------------------
JUNK BONDS
QUALITY RATING SHORT-TERM STRATEGIC
(S&P/MOODY'S)(2) INCOME FUND
----------------- --------------------
BB/Ba 26.2%
B/B 14.9%
CCC/Caa 1.0%
CC/Ca 0.0%
C/C 0.0%
D 0.2%
% OF PORTFOLIO IN BONDS 95.3%
- --------------------------------------------------------------------------------
INVESTMENT-GRADE BONDS
QUALITY RATING WORLD BOND
(S&P/MOODY'S)(2) FUND
----------------- ----------
AAA/Aaa 65.7%
AA/Aa 25.5%
A/A 2.3%
BBB/Baa 0.3%
- --------------------------------------------------------------------------------
JUNK BONDS
QUALITY RATING WORLD BOND
(S&P/MOODY'S)(2) FUND
----------------- ----------
BB/Ba 2.6%
B/B 1.3%
CCC/Caa 0.0%
CC/Ca 0.0%
C/C 0.0%
D 0.0%
% OF PORTFOLIO IN BONDS 97.7%
- --------------------------------------------------------------------------------
(1) Average weighted quality distribution for the most recent fiscal year.
(2) In cases where the S&P and Moody's ratings for a given bond issue do not
agree, the issue has been counted in the higher category.
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
Two documents are available that offer further information on John Hancock
international/global funds:
ANNUAL/SEMI-ANNUAL 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/ semi-annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference (is legally a part of this prospectus).
To request a free copy of the current annual/semi-annual report or SAI, please
write or call:
John Hancock Signature Services, Inc.
1 John Hancock Way STE 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
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(C) 1996 John Hancock Funds, Inc.
GLIPN 3/97
<PAGE>
John Hancock Funds
Global
Fund
Annual Report
October 31, 1996
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
Gail D. Fosler*
William F. Glavin*
Anne C. Hodsdon
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt*
Richard S. Scipione
Edward Spellman*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and Compliance Officer
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to first paragraph.
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Since late 1994, prospectus simplification has been a major topic in
the mutual fund industry. At that time, Securities and Exchange
Commission Chairman Arthur Levitt called on fund companies to
make their prospectuses more user-friendly. He noted that
prospectuses are often overloaded with technical detail and are hard
for most investors to understand. Many industry observers agreed,
and rightly so.
So it is my pleasure to let you know that after being under
development for a year, John Hancock Funds has introduced new
simplified and consolidated prospectuses. The prospectuses feature
shorter, clearer language with a streamlined design, and they
incorporate several funds with similar investment objectives into
one document. They cover our income, growth, growth and income, tax-
free income, international/global and money market funds. We are
gratified at the favorable reviews that our new prospectuses have
received from shareholders, financial advisers, industry analysts
and the press. We believe they are a bold but sensible step forward.
And while they are easier to read, they still comply with all
federal and state guidelines.
We have taken the initiative to create a prospectus that
dramatically departs from the norm. Among its most innovative
features is a two-page spread highlighting each fund's goals and
investment strategy, the types of securities it buys, its portfolio
management and risk factors, all in plainer language. Fund expenses
and financial highlights are now found here, too, as is a new bar
chart that shows year-to-year volatility for each fund. Other
features include a better presentation of fund services, a new
glossary of investment risks and a discussion about how funds are
organized, including a diagram showing the connection of the various
players that provide services to your Hancock fund(s).
We believe we have made a significant advancement in the drive
toward better mutual fund prospectuses. We hope you will agree
because in the end, we did it for you, our shareholders.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JOHN L. F. WILLS, PORTFOLIO MANAGER
John Hancock
Global Fund
International stock markets gain ground;
U.S. remains the leader
"Foreign stocks finally began to show signs of life over the past
12 months."
Foreign stocks finally began to show signs of life over the past 12
months. Declining interest rates, low inflation, steady or
rebounding economies around the world and ample liquidity fueling
the markets combined to move many foreign stocks forward. While the
progress still wasn't enough to push the major world markets ahead
of the United States, it at least narrowed the gap and gave
international investors positive returns.
For the 12 months ended October 31, 1996, John Hancock Global Fund
posted total returns for its Class A and Class B shares of 9.87% and
9.10%, respectively, at net asset value. That compared to the 15.52%
return for the average global fund, according to Lipper Analytical
Services.1 Please see pages six and seven for longer-term
performance information. There are several reasons for the Fund's
modest performance. Those included our underweighted position in the
United States and a strong position in Japan, where results were
disappointing for U.S.-dollar based investors because of a 10%
decline in the yen during the period. What's more, by trimming our
stake in continental Europe to boost our stakes in Japan and Hong
Kong, the Fund also benefited less from Europe's strong performance.
Even with currency declines, Europe turned in better dollar-based
results than Japan. Partially offsetting those drags were the Fund's
strong exposure to the United Kingdom, whose economic recovery is
leading the rest of Europe, and our increased position in Hong Kong,
whose market rose by 31% in the last 12 months. Here's a closer look
at the Fund's strategies and performance, region by region.
"Foreign stocks
finally began
to show signs
of life over
the past
12 months."
A 2" x 3 1/4" photo of the portfolio management team. Caption reads:
"John L.F. Wills (center) and Fund management team members: (l-r) Ben
Hock and Rob Hallisey".
Pie Chart with the heading "Portfolio Diversification" at top left hand
column. The chart is divided into seven sections. Going from top left to
right: Japan 18%; Continental Europe 14%; United Kingdom 7%; South
America 3%; North America 36%; Pacific Rim 6%; Hong Kong 16%. Footnote
below states "As a percentage of net assets on October 31, 1996."
"Hong Kong
dominated
the Fund's
investment
in emerging
markets."
Japan
As the Japanese economy finally began to improve early this year, we
added more Japanese stocks, raising our stake from 12% at the
beginning of the period to 18% by the end of October, although at
one point during the year we were as high as 26%. Overall, the
trends in Japan continue to be promising. While the decline of the
yen versus the dollar undercut the profits of U.S. dollar-based
investors, it also sparked a sharp rise in exports, contributing to
higher profits for Japanese companies and an accelerating economic
growth rate. Corporate restructuring efforts have also helped
profits. We focused on sectors of the Japanese market that we
believe have the best potential to perform. They include large
exporters, such as Bridgestone Tire, Honda Motors and consumer
electronics companies such as Sony and Matsushita Electric
Industrial Co. We also built up our technology holdings, including
Matsushita-Kotobuki Electronics Industries, which is involved in
digital video disc technology. We're keeping our positions in Japan,
because we expect continued strong earnings growth, while the yen
appears to have bottomed out.
Table entitled "Scorecard" at bottom of left hand column. The header for
the left column is "Investments"; the header for the right column is
"Recent performance ... and what's behind the numbers". The first listing
is Dixons Group followed by an up arrow and the phrase "U.K. consumer
confidence at eight-year high." The second listing is TDK followed by an
up arrow and the phrase "Weak yen aids Japanese exports." The third
listing is Plutonic Resources followed by a down arrow and the phrase
"Low inflation makes for weak gold prices." Footnote below reads: "See
Schedule of Investments. Investment holdings are subject to change."
United States
Our stake in domestic equities declined from 29% at the beginning of
the period to as low as 15% in the summer. But we've increased our
stake since then. By the end of October, we were holding 31% of the
Fund's net assets in U.S. stocks, a level we intend to maintain. Our
focus was on consumer stocks such as Colgate Palmolive and Johnson &
Johnson, one of the Fund's largest holdings, and retail stocks,
including clothes manufacturer Tommy Hilfiger, luxury department
store Neiman Marcus and slot machine maker International Game
Technology. We also boosted our exposure to the energy sector, with
Enron and Apache Corp., and cyclical companies, whose fortunes are
more sensitive to changes in the economy, such as U.S. Filter,
Eastman Chemical and Monsanto.
Hong Kong: Fund's top emerging market
Hong Kong dominated the Fund's investment in emerging markets. It
rose from 6% of the Fund's net assets at the beginning of the period
to 16% by the end of October. The main factor influencing Hong Kong
stock prices, other than U.S. interest rates, was the colony's
planned transfer to China next summer. Already, there's been a
significant influx of Chinese investment capital into Hong Kong,
much of it into real estate, which has been a key focus for the
Fund. Real estate development companies such as Cheung Kong, Sun
Hung Kai Properties and Wharf Holdings have benefited from rising
real estate prices. We've also had great success investing in
companies that do most of their business in China. First Sign
International, which has numerous chains of retail clothes stores,
has seen its stock price rise by 40% in the last six months. Two
other top performers were Hong Kong & Shanghai Hotels, the largest
hotel chain in China, and China Resources Enterprise, a huge
conglomerate supplying everything from beer to building materials.
Elsewhere in Asia, we cut the Fund's Southeast Asian holdings from
7% to 3% of net assets, eliminating our stake in Thailand in
response to rising interest rates and a sharp slowdown in the rate
of economic growth. The Fund is less involved in the emerging
markets of Latin America than in Asia, with only a few holdings in
Brazil, Argentina and Chile.
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the year ended October 31,
1996." The chart is scaled in increments of 4% from bottom to top, with
16% at the top and 0% at the bottom. Within the chart there are three
solid bars. The first represents the 9.87% total return for the John
Hancock Global Fund: Class A. The second represents the 9.10% total
return for John Hancock Global Fund: Class B. The third represents the
15.52% total return for the average global fund. A footnote below reads:
"Total returns for John Hancock Global Fund are at net asset value with
all distributions reinvested. The average global fund is tracked by
Lipper Analytical Services. (1) See following two pages for historical
performance information."
Europe
Of the Fund's 21% stake in Europe, at one stage half was in the
United Kingdom. Because interest rates are low in Britain and
consumer confidence is at an eight-year high, we've focused on
consumer stocks, such as Dixons Group, an electronics retailer;
clothing retailer Burton Group and a theme pub chain J.D.
Wetherspoon. During the last six months, we've invested more in
France because it has some very attractive exporters such as luxury
goods producer LVMH Moet Henessey Louis Vuitton. It also has the
best choices in Europe of undervalued blue-chip companies, including
Lyonnaise des Eaux Dumez, an industrial conglomerate. With the
recent jump in oil prices, we increased the Fund's energy stake by
adding Norwegian oil & gas producer Saga Petroleum. One top
performer in Europe was Switzerland's Ciba Geigy, whose stock rose
by 60% after a proposed merger with Swiss drug company Sandoz was
announced.
Australia/New Zealand
We de-emphasized our holdings in this part of the world, eliminating
New Zealand stocks, but keeping our Australian mining stocks.
Outlook
The outlook for the international markets appears promising for
several reasons. Long term, the markets should be bolstered by a
growing amount of investor cash stemming from corporate takeovers,
stock buybacks and increased equities investment by new European
private pension funds. For now, we'll continue to watch interest
rates and inflation. Even if rates rise, which they well could in
the next six to 12 months, we think it won't be by much. There are
no signs of inflation picking up but if energy prices keep rising,
it could be a cloud on the distant inflation horizon. Another reason
for optimism is that foreign stocks still look inexpensive by most
traditional standards of value.
"...foreign
stocks still
look inexpen-
sive by most
traditional
standards
of value."
- -------------------------------------------------------------------
This commentary reflects the views of the portfolio manager through
the end of the Fund's period discussed in this report. Of course,
the manager's views are subject to change as market and other
conditions warrant.
International investing involves special risks such as currency
risks, political risks and differences in accounting standards and
financial reporting. See prospectus for additional information.
1Figures from Lipper Analytical Services include reinvested
dividends and do not take into account sales charges. Actual load-
adjusted performance is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the
average annual total returns for the John Hancock Global Fund. Total
return is a performance measure that equals the sum of all income
and capital gain distributions, assuming reinvestment of these
distributions and the change in the price of the Fund's shares,
expressed as a percentage of the Fund's net asset value per share.
Performance figures include the maximum applicable sales charge of
5% for Class A shares. Prior to August 1992, different sales charges
were in effect for Class A shares and are not reflected in the
performance data. The effect of the maximum contingent deferred
sales charge for Class B shares (maximum 5% and declining to 0% over
six years) is included in Class B performance. Remember that all
figures represent past performance and are no guarantee of how the
Fund will perform in the future. Also, keep in mind that the total
return and share price of the Fund's investments will fluctuate. As
a result, your Fund's shares may be worth more or less than their
original cost, depending on when you sell them. Please see your
prospectus for a discussion of the risks associated with
international investing, including currency and political risks and
differences in accounting standards and financial reporting.
CUMULATIVE TOTAL RETURNS
For the period ended September 30, 1996
ONE FIVE MOST RECENT
YEAR YEARS TEN YEARS
--------- -------- ---------
John Hancock Global
Fund: Class A 2.57% N/A 42.34%(1)
John Hancock Global
Fund: Class B 2.27% 56.30% 132.18%
AVERAGE ANNUAL TOTAL RETURNS
For the period ended September 30, 1996
ONE FIVE MOST RECENT
YEAR YEARS TEN YEARS
--------- -------- ---------
John Hancock Global
Fund: Class A 2.57% N/A 7.73%(1)
John Hancock Global
Fund: Class B 2.27% 9.34% 8.79%
Notes to Performance
(1) Class A shares commenced on January 3, 1992.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the
John Hancock Global Fund would be worth on October 31, 1996,
assuming you had invested on the day each class of shares started or
have been invested for the most recent ten years and reinvested all
distributions. For comparison, we've shown the same $10,000
investment in the Morgan Stanley World Index -- an unmanaged index
that measures the performance of a diverse range of global stock
markets.
Global Fund
Class A shares
Line chart with the heading Global Fund: Class A, representing the
growth of a hypothetical $10,000 investment over the life of the fund.
Within the chart are three lines. The first line represents the value
of the Morgan Stanley World Index and is equal to $16,490 as of October
31, 1996. The second line represents the value of the hypothetical
$10,000 investment made in the Global Fund on January 3, 1992, before
sales charge, and is equal to $15,036 as of October 31, 1996. The third
line represents the Global Fund, after sales charge and is equal to
$14,278 as of October 31, 1996.
Global Fund
Class B shares
Line chart with the heading Global Fund: Class B*, representing the
growth of a hypothetical $10,000 investment over the life of the fund.
Within the chart are two lines. The first line represents the value of
the Morgan Stanley World Index and is equal to $29,545 as of October 31,
1996. The second line represents the value of the hypothetical $10,000
investment made in the Global Fund, before sales charge, on October 31,
1986, and is equal to $24,351 as of October 31, 1996.
* No contingent deferred slaes charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet and shows the
value of what the Fund owns, is due and owes on October 31, 1996. You'll also find
the net asset value and the maximum offering price per share as of that date.
Statement of Assets and Liabilities
October 31, 1996
- -----------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks and Warrant (cost - $96,100,593) $ 117,697,956
Joint repurchase agreement (cost - $5,417,000) 5,417,000
-------------
123,114,956
Cash 591
Receivable for shares sold 27,076
Interest receivable 834
Dividends receivable 182,432
Foreign tax receivable 27,273
Other assets 8,584
-------------
Total Assets 123,361,746
- -----------------------------------------------------------------------------------
Liabilities:
Payable for shares repurchased 37,653
Payable for investments purchased 716,090
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 158,080
Accounts payable and accrued expenses 104,559
-------------
Total Liabilities 1,016,382
- -----------------------------------------------------------------------------------
Net Assets:
Capital paid-in 89,831,018
Accumulated net realized gain on investments
and foreign currency transactions 10,920,842
Net unrealized appreciation of investments
and foreign currency transactions 21,597,204
Accumulated net investment loss ( 3,700)
-------------
Net Assets $ 122,345,364
===================================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of
beneficial interest outstanding - unlimited
number of shares authorized with no par
value, respectively)
Class A - $94,746,355/7,307,652 $ 12.97
===================================================================================
Class B - $27,599,009/2,201,055 $ 12.54
===================================================================================
Maximum Offering Price Per Share *
Class A - ($12.97 x 105.26%) $ 13.65
===================================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and on
group sales the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains (losses) for the
period stated.
Statement of Operations
Year ended October 31, 1996
- -----------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes
of $204,741) $ 1,817,203
Interest 255,374
-----------
2,072,577
-----------
Expenses:
Investment management fee - Note B 1,175,079
Distribution/service fee - Note B
Class A 287,162
Class B 250,860
Transfer agent fee - Note B 444,762
Custodian fee 158,807
Auditing fee 40,372
Printing 39,495
Registration and filing fees 35,066
Trustees' fees 18,058
Financial services fee - Note B 7,669
Legal fees 4,498
Miscellaneous 4,495
-----------
Total Expenses 2,466,323
- -----------------------------------------------------------------------------------
Net Investment Loss ( 393,746)
- -----------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold 10,856,491
Net realized loss on foreign currency transactions ( 346,601)
Change in net unrealized appreciation/depreciation
of investments 1,332,928
Change in net unrealized appreciation/depreciation
of foreign currency transactions 24,919
-----------
Net Realized and Unrealized Gain
on Investments and Foreign
Currency Transactions 11,867,737
- -----------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $11,473,991
===================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------
1995 1996
---------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($ 455,315) ($ 393,746)
Net realized gain on investments sold
and foreign currency transactions 7,707,727 10,509,890
Change in net unrealized appreciation/
depreciation of investments ( 8,441,382) 1,357,847
------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations ( 1,188,970) 11,473,991
------------ ------------
Distributions to Shareholders:
Distributions from net realized gain
on investments sold and foreign
currency transactions
Class A - ($1.3307 and $0.8842
per share, respectively) ( 9,441,512) ( 6,456,924)
Class B - ($1.3307 and $0.8842
per share, respectively) ( 3,043,184) ( 1,721,689)
Class C** - ( $1.3307 and none
per share, respectively) ( 73,482) --
------------ ------------
Total Distributions to Shareholders ( 12,558,178) ( 8,178,613)
------------ ------------
From Fund Share Transactions - Net* ( 1,632,583) 882,664
------------ ------------
Net Assets:
Beginning of period 133,547,053 118,167,322
------------ ------------
End of period (including accumulated net
investment loss of none
and $3,700, respectively) $118,167,322 $122,345,364
============ ============
* and ** -- See page 10.
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment and foreign currency gains and losses,
distributions paid to shareholders, if any, and any increase or decrease in money
shareholders invested in the Fund. The footnote illustrates the number of Fund
shares sold, reinvested and repurchased during the last two periods, along with
the corresponding dollar value.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (continued)
- -------------------------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
YEAR ENDED OCTOBER 31,
---------------------------------------------------
1995 1996
-------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ---------- --------- ---------
<S> <C> <C> <C> <C>
Shares sold 881,102 $10,949,764 8,943,917 $114,915,031
Shares issued to shareholders in reinvestment
of distributions 781,667 9,168,928 516,713 6,236,722
--------- ----------- --------- ------------
1,662,769 20,118,692 9,460,630 121,151,753
Less shares repurchased (1,407,258) ( 17,445,162) (9,539,925) ( 122,803,879)
--------- ----------- --------- ------------
Net increase (decrease) 255,511 $ 2,673,530 ( 79,295) ($ 1,652,126)
========= =========== ========= ============
CLASS B
Shares sold 546,939 $ 6,634,570 583,478 $ 7,131,162
Shares issued to shareholders in reinvestment
of distributions 239,739 2,759,391 134,330 1,577,033
--------- ----------- --------- ------------
786,678 9,393,961 717,808 8,708,195
Less shares repurchased (1,082,302) ( 13,070,250) ( 504,739) ( 6,173,405)
--------- ----------- --------- ------------
Net increase (decrease) ( 295,624) ($ 3,676,289) 213,069 $ 2,534,790
========= =========== ========= ============
CLASS C**
Shares sold 10,813 $ 130,313
Shares issued to shareholders in reinvestment
of distributions 6,201 73,482
--------- -----------
17,014 203,795
Less shares repurchased ( 69,733) ( 833,619)
--------- -----------
Net decrease ( 52,719) ($ 629,824)
========= ===========
** All Class C shares were redeemed on March 31, 1995.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the period indicated, investment returns, key
ratios and supplemental data are listed as follows:
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
CLASS A(1)
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 11.31 $ 10.55 $ 14.30 $ 14.16 $ 12.67
------- ------- -------- ------- -------
Net Investment Loss(2) ( 0.04) ( 0.10) ( 0.07) ( 0.03) ( 0.02)
Net Realized and Unrealized Gain
(Loss) on Investments
and Foreign Currency Transactions ( 0.72) 3.85 1.24 ( 0.13) 1.20
------- ------- -------- ------- -------
Total from Investment Operations ( 0.76) 3.75 1.17 ( 0.16) 1.18
------- ------- -------- ------- -------
Less Distributions:
Distributions from Net Realized
Gain on Investments Sold and
Foreign Currency Transactions -- -- ( 1.31) ( 1.33) ( 0.88)
------- ------- -------- ------- -------
Net Asset Value, End of Period $ 10.55 $ 14.30 $ 14.16 $ 12.67 $ 12.97
======= ======= ======== ======= =======
Total Investment Return
at Net Asset Value(4) ( 6.72%)(5) 35.55% 8.64% ( 0.37%) 9.87%
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $76,980 $90,787 $100,973 $93,597 $94,746
Ratio of Expenses to Average Net Assets 2.47%(6) 2.12% 1.98% 1.87% 1.88%
Ratio of Net Investment Loss
to Average Net Assets ( 0.60%)(6) ( 0.86%) ( 0.54%) ( 0.23%) (0.19%)
Portfolio Turnover Rate 69% 108% 61% 60% 98%
Average Broker Commission Rate(7) N/A N/A N/A N/A $0.0221
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 10.92 $ 10.50 $ 14.17 $ 13.93 $ 12.36
------- ------- -------- ------- -------
Net Investment Loss(2) ( 0.12) ( 0.15) ( 0.15) ( 0.11) ( 0.10)
Net Realized and Unrealized Gain
(Loss) on Investments
and Foreign Currency Transactions ( 0.30) 3.82 1.22 ( 0.13) 1.16
------- ------- -------- ------- -------
Total from Investment Operations ( 0.42) 3.67 1.07 ( 0.24) 1.06
------- ------- -------- ------- -------
Less Distributions:
Dividends from Net Realized Gain
on Investments Sold and Foreign
Currency Transactions -- -- ( 1.31) ( 1.33) ( 0.88)
------- ------- -------- ------- -------
Net Asset Value, End of Period $ 10.50 $ 14.17 $ 13.93 $ 12.36 $ 12.54
======= ======= ======== ======= =======
Total Investment Return
at Net Asset Value(4) ( 3.85%) 34.95% 7.97% ( 1.01%) 9.10%
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $11,475 $19,340 $ 31,822 $24,570 $27,599
Ratio of Expenses to Average
Net Assets 2.68% 2.49% 2.59% 2.57% 2.54%
Ratio of Net Investment Loss
to Average Net Assets ( 1.03%) ( 1.25%) ( 1.12%) ( 0.89%) ( 0.83%)
Portfolio Turnover Rate 69% 108% 61% 60% 98%
Average Broker Commission Rate(7) N/A N/A N/A N/A $0.0221
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- -------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED
------------------------------ MARCH 31, 1995
1993 1994 (UNAUDITED)
----------- ----------- --------------
<S> <C> <C> <C>
CLASS C(3)
Per Share Operating Performance
Net Asset Value, Beginning of Period $11.75 $14.34 $14.27
------ ------ ------
Net Investment Loss ( 0.02) -- --
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions 2.61 1.24 ( 0.97)
------ ------ ------
Total from Investment Operations 2.59 1.24 ( 0.97)
------ ------ ------
Less Distributions:
Distributions from Net Realized Gain
on Investments Sold and Foreign
Currency Transactions -- ( 1.31) ( 1.33)
------ ------ ------
Net Asset Value, End of Period $14.34 $14.27 $11.97
====== ====== ======
Total Investment Return
at Net Asset Value(4) 22.04% 9.15% ( 6.70%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 406 $ 752 $ 795
Ratio of Expenses to Average Net Assets 1.43%(6) 1.42% 1.37%(6)
Ratio of Net Investment Income (Loss)
to Average Net Assets ( 0.35%)(6) 0.03% 0.06%(6)
Portfolio Turnover Rate 108% 61% 60%(8)
(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) Class C shares commenced operations on May 7, 1993. Net asset value and net assets at the
end of the period ended March 31, 1995 reflect amounts prior to the redemption of all
shares on March 31, 1995.
(4) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(5) Not annualized.
(6) Annualized.
(7) Per portfolio share traded. Required for the fiscal years that began September 1, 1995 or later.
(8) For the year ended October 31, 1995.
The Financial Highlights summarizes the impact of the following factors on a single share for each period
indicated: net investment income, gains (losses), distributions and total investment return of the Fund. It
shows how the Fund's net asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the financial statements are expressed
in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 1996
- ---------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Global Fund on October 31,
1996. It's divided into three main categories: common stocks, warrants and short-term investments. Common
stocks and warrants are further broken down by country. Short-term investments, which represent the Fund's
"cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
<S> <C> <C> <C>
COMMON STOCKS
Argentina (0.83%)
Disco S.A.* American Depositary
Receipts (ADR) (Retail) 45,000 $ 1,012,500
------------
Australia (3.20%)
Aristocrat Leisure Ltd. (Leisure) 220,000 653,932
Plutonic Resources Ltd. (Metal) 315,000 1,498,098
RGC Ltd. (formerly Renison Goldfields
Consolidated Ltd.) (Metal) 390,007 1,762,080
------------
3,914,110
------------
Brazil (0.73%)
Telecomunicacoes Brasileiras S/A (ADR)
(Telecommunications) 12,000 894,000
------------
Canada (1.44%)
CanWest Global Communications Corp.
(Media) 120,000 1,275,000
Cinar Films, Inc. (Class B)* (Leisure) 20,000 490,000
------------
1,765,000
------------
Chile (1.14%)
Santa Isabel S.A. ADR (Retail) 49,600 1,395,000
------------
France (3.21%)
LVMH Moet Hennessy Louis Vuitton
(Beverages) 9,250 2,120,489
Lyonnaise Des Eaux Dumez
(Diversified Operations) 20,500 1,812,421
------------
3,932,910
------------
Germany (1.97%)
Schering AG (Medical) 30,000 2,413,827
------------
Hong Kong (16.25%)
Cheung Kong (Holdings) Ltd.
(Real Estate Operations) 325,000 2,605,985
China Resources Enterprise Ltd.
(Real Estate Operations) 1,750,000 1,969,039
CITIC Pacific Ltd. (Diversified Operations) 500,000 2,431,391
First Sign International Holdings Ltd.
(Textile) 4,050,000 1,374,932
Hong Kong & Shanghai Hotels Ltd.
(Leisure) 1,080,000 1,983,394
HSBC Holdings Ltd. (Banks - Foreign) 100,200 2,041,010
Hutchison Whampoa Ltd.
(Diversified Operations) 400,000 2,793,513
Sun Hung Kai Properties Ltd.
(Real Estate Operations) 190,000 2,162,386
Wharf Holdings Ltd.
(Real Estate Operations) 610,000 2,516,619
------------
19,878,269
------------
Japan (17.77%)
Bridgestone Corp.
(Rubber - Tires & Misc) 153,000 2,580,124
Honda Motor Co., Ltd.
(Automobile / Trucks) 100,000 2,389,004
Matsushita Electric Industrial Co., Ltd.
(Electronics) 160,000 2,557,639
Matsushita-Kotobuki Electronics
Industries, Ltd. (Electronics) 122,000 2,818,146
Mitsubishi Heavy Industries, Ltd.
(Machinery) 350,000 2,689,825
Nippon Steel Corp. (Steel) 550,000 1,603,794
Rohm Co., Ltd. (Electronics) 32,800 1,944,579
Sony Corp. (Electronics) 42,000 2,519,520
TDK Corp. (Electronics) 45,000 2,640,200
------------
21,742,831
------------
Luxembourg (0.92%)
Scandinavian Broadcasting System SA*
(Media) 55,000 1,127,500
------------
Malaysia (0.77%)
Sime Darby Berhad
(Diversified Operations) 265,000 938,749
------------
Netherlands (1.15%)
Gucci Group, NV (Retail) 15,000 1,035,000
PolyGram NV (Household) 8,000 375,788
------------
1,410,788
------------
Norway (1.34%)
Saga Petroleum ASA (Oil & Gas) 96,300 1,637,498
------------
Pakistan (0.03%)
Crescent Textile Mills* (Textile) 119,701 36,585
------------
South Korea (2.32%)
Hanil Bank (Banks - Foreign) 126,910 1,119,726
L.G. Construction Ltd. (Building) 86,530 1,717,509
------------
2,837,235
------------
Sweden (1.56%)
Investor AB (Diversified Operations) 47,500 1,914,245
------------
Switzerland (3.91%)
Ciba Geigy AG (Medical) 2,000 2,463,608
SMH AG (Consumer Products Misc.) 16,500 2,317,049
------------
4,780,657
------------
United Kingdom (6.71%)
Burton Group PLC (Retail) 1,000,000 2,433,268
Dixons Group PLC (Retail) 325,000 2,911,987
Pearson PLC (Media) 115,000 1,418,783
Wetherspoon (J.D.) PLC (Retail) 75,000 1,446,533
------------
8,210,571
------------
United States (30.91%)
Adaptec, Inc.* (Computers) 16,000 974,000
American International Group, Inc.
(Insurance) 12,000 1,303,500
Apache Corp. (Oil & Gas) 25,000 887,500
Cisco Systems, Inc.* (Computers) 28,000 1,732,500
Colgate-Palmolive Co. (Soap &
Cleaning Preparations) 20,000 1,840,000
CUC International, Inc. * (Retail) 75,938 1,860,469
Dean Witter Discover & Co. (Finance) 25,000 1,471,875
Disney (Walt) Co., (The) (Leisure) 32,093 2,114,126
Eastman Chemical Co. (Chemicals) 10,000 527,500
Enron Corp. (Oil & Gas) 25,000 1,162,500
Gannett Co., Inc. (Media) 20,000 1,517,500
General Dynamics Corp. (Aerospace) 15,000 1,029,375
General Electric Co. (Electronics) 15,000 1,451,250
Great Western Financial Corp. (Finance) 25,000 700,000
Home Depot, Inc. (The) (Retail) 35,000 1,916,250
Intel Corp. (Electronics) 15,000 1,648,125
International Business Machines Corp.
(Computers) 15,000 1,935,000
International Game Technology (Leisure) 50,000 1,056,250
Johnson & Johnson (Medical) 60,000 2,955,000
Men's Wearhouse, Inc. (The)* (Retail) 30,000 618,750
Monsanto Co. (Chemicals) 40,000 1,585,000
Neiman Marcus Group, Inc. (The)*
(Retail) 25,000 815,625
Omnicare, Inc. (Medical) 40,000 1,090,000
Phillips Petroleum Co. (Oil & Gas) 30,000 1,230,000
Schering-Plough Corp. (Medical) 15,000 960,000
Tommy Hilfiger Corp.* (Textile) 39,400 2,048,800
US Filter Corp.* (Pollution Control) 40,000 1,380,000
------------
37,810,895
------------
TOTAL COMMON STOCKS
(Cost $96,051,407) (96.16%) 117,653,170
------------
WARRANT
Sweden (0.04%)
Scania AB (Automobile / Trucks) 47,500 44,786
------------
TOTAL WARRANT
(Cost $49,186) ( 0.04%) 44,786
------ ------------
TOTAL COMMON STOCK AND WARRANT
(Cost $96,100,593) ( 96.20%) $117,697,956
------ ------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- -------- ------------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement
(4.43%) Investment in a
joint repurchase agreement
transaction with SBC
Capital Markets, Inc. Dated
10-31-96, Due 11-01-96
(secured by U.S. Treasury
Bonds, 7.25% Due 05-15-16,
and 6.25% Due 08-15-23)
Note A. 5.54% $ 5,417 5,417,000
------------
TOTAL SHORT-TERM INVESTMENTS ( 4.43%) 5,417,000
------ ------------
TOTAL INVESTMENTS (100.63%) $123,114,956
====== ============
* Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Industry Diversification (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other countries. The performance
of the Fund is closely tied to the economic conditions within the countries it invests. The
concentration of investments by country for individual securities held by the Fund is shown in
the schedule of investments. In addition, the concentration of investments can be aggregated by
various industry groups. The table below shows the percentages of the Fund's investments at
October 31, 1996 assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A %
INVESTMENT CATEGORIES OF NET ASSETS
- --------------------- -------------
<S> <C>
Aerospace 1.24%
Automobile/Trucks 1.97
Banks - Foreign 2.58
Beverages 1.73
Building 1.40
Chemicals 2.16
Computers 3.79
Consumer Products Misc. 1.89
Diversified Operations 8.08
Electronics 12.73
Finance 1.78
Household 0.31
Insurance 1.07
Leisure 5.15
Machinery 2.20
Media 4.36
Medical 7.29
Metals 2.66
Oil & Gas 4.02
Pollution Control 1.13
Real Estate Operations 7.56
Retail 12.62
Rubber - Tires & Misc. 2.11
Soap & Cleaning Preparations 1.50
Steel 1.31
Telecommunications 0.73
Textile 2.83
Short-Term Investments 4.43
------
TOTAL INVESTMENTS 100.63%
======
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust II (the "Trust") is an open-end management
investment company, registered under the Investment Company Act of
1940. The Trust consists of six series portfolios: John Hancock
Global Fund (the "Fund"), John Hancock Special Opportunities Fund,
John Hancock World Bond Fund, John Hancock Short-Term Strategic
Income Fund, John Hancock Growth Fund and John Hancock International
Fund. The other five series of the Trust are reported in separate
financial statements. The investment objective of the Fund is to
achieve long-term growth of capital primarily through investment in
common stocks of companies domiciled in foreign countries and the
United States.
The Trustees have authorized the issuance of multiple classes of
shares of the Fund, designated as Class A and Class B shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting,
redemptions, dividends, and liquidation, except that certain
expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission and the
Internal Revenue Service. Shareholders of a class which bears
distribution and service expenses under terms of a distribution plan
have exclusive voting rights to that distribution plan. Class C
shares were outstanding during the period from November 1, 1994
through March 31, 1995, but the Trustees abolished Class C shares as
of May 1, 1995.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are
valued on the basis of market quotations, valuations provided by
independent pricing services or, at fair value as determined in good
faith in accordance with procedures approved by the Trustees. Short-
term debt investments maturing within 60 days are valued at
amortized cost which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have
been translated into U.S. dollars as described in "Foreign Currency
Translation" below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with
John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned
subsidiary of The Berkeley Financial Group, may participate in a
joint repurchase agreement transaction. Aggregate cash balances are
invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the
underlying securities for the joint account on the Fund's behalf.
The Adviser is responsible for ensuring that the agreement is fully
collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of
the date of purchase, sale or maturity. Net realized gains and
losses on sales of investments are determined on the identified cost
basis. Capital gains realized on some foreign securities are subject
to foreign taxes and are accrued, as applicable.
FEDERAL INCOME TAXES The Fund's policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of its taxable
income, including any net realized gain on investment, to its
shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, net currency exchange
gains and losses from sales of foreign debt securities must be
treated as ordinary income even though such items are gains and
losses for accounting purposes.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of
some foreign securities, on the date thereafter when the Fund is
made aware of the dividend. Interest income on investment securities
is recorded on the accrual basis. Foreign income may be subject to
foreign withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net
investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax
regulations, which may differ from generally accepted accounting
principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and
will be in the same amount, except for the effect of expenses that
may be applied differently to each class.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual fund. Expenses which are not readily
identifiable to a specific fund are allocated in such a manner as
deemed equitable, taking into consideration, among other things, the
nature and type of expense and the relative sizes of the funds.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles
incorporates estimates made by management in determining the
reported amounts of assets, liabilities, revenues, and expenses of
the Fund. Actual results could differ from these estimates.
CLASS ALLOCATIONS Income, common expenses and realized and
unrealized gains (losses) are determined at the Fund level and
allocated daily to each class of shares based on the relative net
assets of the respective classes. Distribution and service fees if
any, are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense
rate(s) applicable to each class.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00
p.m., London time, on the date of any determination of the net asset
value of the Fund. Transactions affecting statement of operations
accounts and net realized gain/(loss) on investments are translated
at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from
sales of foreign currency, currency gains or losses realized between
the trade and settlement dates on securities transactions and the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains or losses arise from changes in the value of
assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into
forward foreign currency exchange contracts as a hedge against the
effect of fluctuations in currency exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date at a set price. The
aggregate principal amounts of the contracts are marked-to-market
daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the
determination of the Fund's daily net assets. The Fund records
realized gains and losses at the time the forward foreign currency
contract is closed out or offset by a matching contract. Risks may
arise upon entering these contracts from potential inability of
counterparties to meet the terms of the contract and from
unanticipated movements in the value of a foreign currency relative
to the U.S. dollar.
These contracts involve market or credit risk in excess of the
unrealized gain or loss reflected in the Fund's Statement of Assets
and Liabilities. The Fund may also purchase and sell forward
contracts to facilitate the settlement of foreign currency
denominated portfolio transactions, under which it intends to take
delivery of the foreign currency. Such contracts normally involve no
market risk other than that offset by the currency amount of the
underlying transaction.
At October 31, 1996, there were no open forward foreign currency
exchange contracts.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial
futures contracts for speculative purposes and/or to hedge against
the effects of fluctuations in interest rates, currency exchange
rates and other market conditions. Buying futures tends to increase
the Fund's exposure to the underlying instrument. Selling futures
tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund instruments. At the time the Fund enters into a
financial futures contract, it is required to deposit with its
custodian a specified amount of cash or U.S. government securities,
known as "initial margin," equal to a certain percentage of the
value of the financial futures contract being traded. Each day, the
futures contract is valued at the official settlement price of the
board of trade or U.S. commodities exchange on which it trades.
Subsequent payments, known as "variation margin," to and from the
broker are made on a daily basis as the market price of the
financial futures contract fluctuates. Daily variation margin
adjustments, arising from this "mark to market," are recorded by the
Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss.
Risks of entering into futures contracts include the possibility
that there may be an illiquid market and/or that a change in the
value of the contract may not correlate with changes in the value of
the underlying securities.
For Federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of
futures contracts.
At October 31, 1996, there were no open positions in financial
futures contracts.
NOTE B --
MANAGEMENT FEE, AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
The Adviser is solely responsible for advising the Fund with respect
to investments in the United States and Canada. The Fund and the
Adviser also have a sub-investment management contract with John
Hancock Advisers International Limited (the "Sub-Adviser"), a
wholly-owned subsidiary of the Adviser, under which the Sub-Adviser,
subject to the review of the Trustees and overall supervision of the
Adviser, provides the Fund with investment management services and
advice with respect to the portion of the Fund's assets invested in
countries other than the United States and Canada.
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser, for a continuous investment
program equivalent, on an annual basis, to the sum of: (a) 1.00% of
the first $100,000,000 of the Fund's average daily net asset value,
(b) 0.80% of the next $200,000,000, (c) 0.75% of the next
$200,000,000 and (d) 0.625% of the Fund's average daily net asset
value in excess of $500,000,000. The Adviser pays the Sub-Adviser a
fee equivalent, on an annual basis to the sum of (a) 0.70% of the
first $200,000,000 of the Fund's average daily net asset value and
(b) 0.6375% of the Fund's average daily net asset value in excess of
$200,000,000. The Fund is not responsible for the payment of the
Sub-Adviser's fee.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most
restrictive state limit where the Fund is registered to sell shares
of beneficial interest, the fee payable to the Adviser will be
reduced to the extent of such excess, and the Adviser will make
additional arrangements necessary to eliminate any remaining excess
expenses. The current limits are 2.5% of the first $30,000,000 of
the Fund's average daily net asset value, 2.0% of the next
$70,000,000 and 1.5% of the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly owned subsidiary of
the Adviser, and Freedom Distributors Corporation ("FDC") act as Co-
Distributors for shares of the Fund. For the period ended October
31, 1996, net sales charges received with regard to sales of Class A
shares amounted to $139,302. Out of this amount, $21,673 was
retained and used for printing prospectuses, advertising, sales
literature and other purposes, $43,534 was paid as sales commissions
to unrelated broker-dealers and $74,095 was paid as sales
commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony")
and Sutro & Co., ("Sutro"), all of which are broker dealers. The
Adviser's indirect parent, John Hancock Mutual Life Insurance
Company, is the indirect sole shareholder of Distributors and John
Hancock Freedom Securities Corporation and its subsidiaries which
include FDC, Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will
be subject to a contingent deferred sales charge ("CDSC") at
declining rates beginning at 5.0% of the lesser of the current
market value at the time of redemption or the original purchase cost
of the shares being redeemed. Proceeds from CDSC are paid to JH
Funds and are used in whole or in part to defray its expenses for
providing distribution related services to the Fund in connection
with the sale of Class B shares. For the period ended October 31,
1996, contingent deferred sales charges paid to JH Funds amounted to
$47,547.
In addition, to reimburse the Co-Distributors for the services they
provide as distributors of shares of the Fund, the Fund has adopted
Distribution Plans with respect to Class A and Class B pursuant to
Rule 12b-1 under the Investment Company Act of 1940. Accordingly,
the Fund will make payments to the Co-Distributors for distribution
and service expenses, at an annual rate not to exceed 0.30% of Class
A average daily net assets and 1.00% of Class B average daily net
assets to reimburse the Co-Distributors for their distribution and
service costs. Up to a maximum of 0.25% of such payments may be
service fees as defined by the amended Rules of Fair Practice of the
National Association of Securities Dealers. Under the amended Rules
of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances. In order to comply
with this rule, the 12b-1 fee on Class B ranged from 0.90% to 1.00%
of average daily net assets throughout the period.
The Fund has a transfer agent agreement with John Hancock Investor
Services Corporation ("Investor Services"), a wholly-owned
subsidiary of The Berkeley Financial Group. The Fund pays transfer
agent fees based on the number of shareholder accounts and certain
out-of-pocket expenses.
On August 27, 1996, the Board of Trustees approved retroactively to
July 1, 1996, an agreement with the Adviser to perform necessary tax
and financial management services for the Fund. The compensation for
1996 is estimated to be at an annual rate of 0.01875% of the average
net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Richard S. Scipione and Ms. Anne C.
Hodsdon are directors and/or officers of the Adviser, and/or its
affiliates as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees
paid for 1995, the unaffiliated Trustees may elect to defer for tax
purposes their receipt of this compensation under the John Hancock
Group of Funds Deferred Compensation Plan. The Fund makes
investments into other John Hancock funds, as applicable, to cover
its liability for the deferred compensation. Investments to cover
the Fund's deferred compensation liability are recorded on the
Fund's books as an other asset. The deferred compensation liability
and the related other asset are always equal and are marked to
market on a periodic basis to reflect any income earned by the
investment as well as any unrealized gains or losses. At October 31,
1996, the Fund's investments to cover the deferred compensation
liability had unrealized appreciation of $362.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than other
than obligations of the U.S. government and its agencies and short-
term securities, during the period ended October 31, 1996 aggregated
$113,492,145 and $122,961,495 respectively. There were no purchases
or sales of obligations of the U.S. government and its agencies
during the period ended October 31, 1996.
The cost of investments owned at October 31, 1996 (including the
joint repurchase agreement) for Federal income tax purposes was
$101,517,593. Gross unrealized appreciation and depreciation of
investments aggregated $23,915,739 and $2,318,376, respectively,
resulting in net unrealized appreciation of $21,597,363.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the period ended October 31, 1996, the Fund has reclassified
amounts to reflect an increase in accumulated net realized gain on
investments of $411,052, a decrease in accumulated net investment
loss of $390,046 and a decrease in capital paid-in of $801,098. This
represents the amount necessary to report these balances on a tax
basis, excluding certain temporary differences, as of October 31,
1996. Additional adjustments may be needed in subsequent reporting
periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to the treatment
of net operating losses in the computation of distributable income
and capital gains under federal tax rules versus generally accepted
accounting principles. The calculation of net investment income per
share in the financial highlights excludes these adjustments.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Global Fund
and the Trustees of Freedom Investment Trust II
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and the related
statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the
financial position of John Hancock Global Fund (the "Fund") (a
series of Freedom Investment Trust II) at October 31, 1996, and the
results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements
and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
the significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31,
1996 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 12, 1996
SHAREHOLDER MEETING (UNAUDITED)
On June 26, 1996, a special meeting of John Hancock Global Fund was
held.
The Shareholders approved a new investment management contract
between John Hancock Advisers, Inc. and the Fund. The shareholder
votes were 5,003,860 FOR, 128,240 AGAINST and 418,038 ABSTAINING.
The Shareholders approved an Amended and Restated Declaration of
Trust. The shareholder votes were 4,921,570 FOR, 148,677 AGAINST and
424,438 ABSTAINING.
The Shareholders eliminated the Fund's fundamental investment
restriction on investing in a single class of securities of an
issuer. The shareholder votes were 4,897,857 FOR, 140,875 AGAINST
and 455,953 ABSTAINING.
The Shareholders redesignated as nonfundamental the Fund's
fundamental investment restriction on investing in other investment
companies. The shareholder votes were 4,828,255 FOR, 195,933 AGAINST
and 470,496 ABSTAINING.
The Shareholders elected the following Trustees with the votes as
indicated:
NAME OF TRUSTEE FOR WITHHELD
- --------------- ------------ -------------
Dennis S. Aronowitz 5,751,069 181,143
Edward J. Boudreau, Jr. 5,748,166 184,046
Richard P. Chapman, Jr. 5,757,339 174,874
William J. Cosgrove 5,733,263 198,949
Douglas M. Costle 5,758,277 173,936
Leland O. Erdahl 5,749,243 182,969
Richard A. Farrell 5,757,757 174,456
Gail D. Fosler 5,741,218 190,994
William F. Glavin 5,731,282 200,930
Anne C. Hodsdon 5,756,182 176,030
Dr. John A. Moore 5,741,218 190,994
Patti McGill Peterson 5,756,029 176,183
John W. Pratt 5,751,505 180,707
Richard S. Scipione 5,732,077 200,135
Edward J. Spellman 5,757,992 174,220
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is
furnished with respect to the distributions of the Fund during the
fiscal year ended October 31, 1996.
The Fund designated distributions to shareholders of $8,178,613 as a
long-term capital gain dividend. These amounts were reported on 1995
U.S. Treasury Department Form 1099-DIV in January 1996 representing
their proportionate share. It is anticipated that there will be a
distribution from net realized gains from sales of securities to
shareholders of record on December 3, 1996, and payable on December
30, 1996. Shareholders will receive a 1996 U.S. Treasury Department
Form 1099-DIV in January 1997 representing their proportionate
share. The Fund did not pay any ordinary income dividends during the
fiscal year ended October 31, 1996.
None of the distributions qualify for the dividend received
deduction available to corporations.
NOTES
John Hancock Funds - Global Fund
THIS PAGE INTENTIONALLY LEFT BLANK
NOTES
John Hancock Funds - Global Fund
THIS PAGE INTENTIONALLY LEFT BLANK
A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads: "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John
Hancock Global Fund. It may be used as sales literature when
preceded or accompanied by the current prospectus, which details
charges, investment objectives and operating policies.
A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper." 0300A 10/96
12/96
<PAGE>
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John Hancock Funds
- --------------------------------------------------------------------------------
Global
Fund
Semi-Annual Report
April 30, 1997
<PAGE>
================================================================================
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
Gail D. Fosler*
William F. Glavin*
Anne C. Hodsdon
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt*
Richard S. Scipione
Edward J. Spellman*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and
Compliance Officer
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
After two years of spectacular performance, the stock market in 1997 has given
investors its starkest reminder in a while of one of investing's basic tenets:
markets move down as well as up. It's understandable if investors had lost sight
of that fact. The bull market that began six years ago has given investors
annual double-digit returns and more modest price declines than usual. And in
the two years encompassing 1995 and 1996, the S&P 500 Index gained more than
50%. This Pollyanna environment has tracked along with a sustained economic
recovery, now in its seventh year, that has been marked by moderate growth, low
interest rates and tame inflation.
But recently, many have begun to wonder about this bull market. Since
reaching new highs in early March, the Dow Jones Industrial Average tumbled by
more than 7% at the end of March and wiped out nearly all it had gained since
the start of the year. It was the worst decline that the market had seen since
1990. In early April, the Dow was down by 9.8%, within shouting distance of a
10% correction. By the end of the month, it had bounced back into record
territory again.
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
As the market continues to fret over interest rates and inflation, investors
should be prepared for more volatility. It also makes sense to do something
we've always advocated: set realistic expectations. Keep in mind that the stock
market's historic yearly average has been about 10%, not the 20%-plus annual
average of the last two years or even the 16% annual average over the last 10
years. Remember that the kind of market volatility we've seen lately is more
like the way the market really works. Fluctuations go with the territory. And
market corrections can be healthy, serving to bring inflated stock prices down
to more reasonable levels, thereby reducing some of the market's risk.
Use this time of heightened volatility as an opportunity to review your
portfolio's asset allocations with your investment professional. Make sure that
your investment strategies reflect your individual time horizons, objectives and
risk tolerance, and that they are based upon your needs. Despite turbulence, one
thing remains constant. A well-constructed plan and a cool head can be the best
tools for reaching your financial goals.
Sincerely,
/s/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
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By Miren Etcheverry, John L.F. Wills and
Gerardo J. Espinoza, Co-Portfolio Managers
John Hancock
Global Fund
Latin American and European markets perform well;
Asian nations fall behind
At the end of 1996, Miren Etcheverry and Gerardo J. Espinoza joined the
management team of John Hancock Global Fund. Prior to joining John Hancock
Funds, Ms. Etcheverry and Mr. Espinoza were portfolio managers at Baring Asset
Management. Ms. Etcheverry was the head of Baring's Latin American equities
team. Mr. Wills is based in London and has been with Hancock since 1987.
Overseas markets turned in a mixed performance during the last six months, while
the U.S. stock market continued to hold investors' attention. At the beginning
of the period last November, equities were boosted around the globe by falling
interest rates and a healthy U.S. stock market. And while Europe and the
emerging markets of Latin America and eastern Europe continued to have a good
run through April, many Asian markets had a rougher time. Japan's economy
remained stubbornly stalled, banking problems persisted, and a falling yen
compounded the problem for U.S. dollar-based investors. Even Hong Kong, after
its sharp advance last year, took a brief breather in the period. Overall, most
major markets still could not compete with the U.S., where stocks continued
their bull market run in a frenzy of volatility sparked by a faster-growing
economy and inflation fears. Its strong performance diverted investors'
attention away from many world markets.
- --------------------------------------------------------------------------------
"Overseas markets turned in a mixed performance during the last six months..."
- --------------------------------------------------------------------------------
For the six months ended April 30, 1997, John Hancock Global Fund posted a
total return for its Class A and Class B shares of 6.91% and 6.56%,
respectively, at net asset value, which was in line
[A 2 1/4" x 3 3/4" photo of the Global fund managers. Caption reads: "Global
fund co-portfolio managers (l-r) Geraldo J. Espinoza, Miren Etcheverry and John
L.F. Wills."]
3
<PAGE>
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John Hancock Funds - Global Fund
[Pie chart with heading "Portfolio Diversification" at top of left hand column.
The pie is divided into eight sections. From top clockwise : Latin America 9%;
North America 39%; Continental Europe 16%; United Kingsom 7%; Hong Kong 9%;
Japan 12%; Pacific Rim 6%; Short-Term Investments and Other 2%. A footnote below
reads: "As a percentage of net assets on April 30, 1997."]
- --------------------------------------------------------------------------------
"...we combine top-down country allocation with bottom-up stock picking."
- --------------------------------------------------------------------------------
with the 6.83% return of the average global fund according to Lipper Analytical
Services, Inc.1 Longer-term performance information can be found on pages six
and seven.
U.S. stocks help performance
Our significant position in the United States, at 39% of the Fund's net assets,
served us well as the stock market moved forward on strong earnings reports.
Most of the market advance was limited to the large-company stocks that were the
focus of our investments. Top performers were such household names as Johnson &
Johnson, General Electric, Colgate Palmolive, Walt Disney, IBM and Microsoft.
Hong Kong and Japan drag
In Japan, stocks remained under pressure with the country's economic woes,
banking problems and government tax increases. A weakening yen compounded the
market's decline for U.S. dollar-based investors, but helped the exporters and
technology companies, such as Sony and TDK, which remained the Fund's focus. We
took profits in some of them and cut our Japanese position from 18% last
November to 12% at the end of April. We probably will not reduce our stake
further, however, because we believe that the economy is bottoming out after
absorbing hefty tax increases and that economic deregulation is beginning.
Another positive sign is that international fund managers are currently very
underweighted in Japan, which suggests they could soon be returning.
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is " Recent
performance .... and what's behind the numbers." The first listing is
Telecomunicacoes Brasileiras followed by an up arrow and the phrase "Pending
Brazilian privitization boosts stock." The second listing is Novartis followed
by an up arrow and the phrase "Merger of Switzerland's largest drug companies."
The third is Wharf (Holdings) followed by a down arrow and the phrase "Rising
rates hurt Hong Kong property stocks." Footnote below reads: "See "Schedule of
Investments." Investment holdings are subject to change."]
Although Hong Kong fell in the first part of 1997, it began rebounding in
April and we remain encouraged about the longer term for both Hong Kong and its
impact on the Chinese economy. That would continue to bode well for our
China-related "red-chip" holdings, such as China Resources and Hong Kong &
Shanghai Hotels. That said, after the market's stellar advance last year we
decided to lighten our exposure to a less overweighted position. We took profits
and almost halved our stake from 16% last November to 9% by the period's end.
Latin American position grows
In place of Hong Kong and Japan, we significantly increased our holdings in the
emerging market countries of Latin America to 9% of the Fund's assets, up from
3% last November. Our efforts were rewarded especially in the latter part of the
period. These markets have embraced economic reform and in so doing unleashed
significant investment opportunities. Within the region, our two top choices are
Brazil, at 3% of the Fund's net assets and Mexico at 4%. Brazil -- the "sleeping
giant" -- is just awakening, with economic reform that has sent inflation
plunging from over 3000% several years ago to single digits today. One solid
4
<PAGE>
================================================================================
John Hancock Funds - Global Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1997." The chart is
scaled in increments of 2% from top to bottom, with 8% at the top and 0% at the
bottom. Within the chart, there are three solid bars. The first represents the
6.91% total return for John Hancock Global Fund: Class A. The second represents
the 6.56% total return for John Hancock Global Fund: Class B. The third
represents the 6.83% total return for the Average global fund. Footnote below
reads: "Total returns for John Hancock Global Fund are at net asset value with
all distributions reinvested. The average global fund is tracked by Lipper
Analytical Services.(1) See following page for historical performance
information."]
performer is Telecomunicacoes Brasileiras, the telecommunications giant that is
benefiting from the government's move toward privatization.
Europe still a favorite
Reform -- economic and political -- is a key investment theme for us, which is
why we continue to favor many European countries, with an eye lately toward
eastern Europe. During the period, weak currencies, low inflation, slow growth
and further government efforts toward reaching a monetary union were positives
for many markets. The notion of corporate restructuring has also caught on in
Europe and increased profits for shareholders. Of our 23% stake in Europe, the
U.K. remains our largest country weighting at 7% of net assets. We also shifted
some assets to Germany, whose economy is in an earlier stage of rebound than
Britain's.
Investment strategy
In managing the portfolio, we combine top-down country allocation with bottom-up
stock picking. The cornerstone of our process is in-depth fundamental research,
which involves substantial travel to the countries in which the Fund invests.
We've also gained an important edge by having a team of analysts who speak more
than a dozen languages combined. In country allocation, our emphasis is on
selecting countries with favorable political trends, growing economies and
improving liquidity dynamics. In stock selection, the emphasis is on management
quality, sustainable earnings growth and attractive valuations.
- --------------------------------------------------------------------------------
"We are optimistic about the long-term prospects for foreign equity markets."
- --------------------------------------------------------------------------------
Looking ahead
We are optimistic about the long-term prospects for foreign equity markets. As
more markets are freed from centralized control and major industries continue
shifting to private control, it is likely for global growth and rising profits
to remain strong. Moreover, new technologies worldwide are driving down the cost
of production, distribution and investment. What makes this environment so
attractive is that we believe this global expansion will occur without
significant inflation. We'll continue to tap into these trends, for now keeping
our emphasis on the emerging markets of Latin America eastern Europe and Asia,
while seeking out restructuring plays in Europe. We're more cautious about the
U.S. market for now, after the strong performance of the last two years.
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the end of
the Fund's period discussed in this report. Of course, the managers' views are
subject to change as market and other conditions warrant.
International investing involves special risks such as political and currency
risks and differences in accounting standards and financial reporting.
1 Figures from Lipper Analytical Services, Inc. include reinvested dividends and
do not take into account sales charges. Actual load-adjusted performance is
lower.
5
<PAGE>
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- --------------------------------------------------------------------------------
A LOOK AT PERFORMANCE
- --------------------------------------------------------------------------------
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Global Fund. Total return is a performance
measure that equals the sum of all dividends and capital gains, assuming
reinvestment of these distributions and the change in the price of the Fund's
shares, expressed as a percentage of the Fund's net asset value per share.
Performance figures include the maximum applicable sales charge of 5% for Class
A shares. Prior to August 1992, different sales charges were in effect for Class
A shares and are not reflected in the performance data. The effect of the
maximum contingent-deferred sales charge for Class B shares (maximum 5% and
declining to 0% over six years) is included in Class B performance. Remember
that all figures represent past performance and are no guarantee of how the Fund
will perform in the future. Also, keep in mind that the total return and share
price of the Fund's investments will fluctuate. As a result, your Fund's shares
may be worth more or less than their original cost, depending on when you sell
them. Please see your prospectus for a discussion of the risks associated with
international investing, including currency and political risks and differences
in accounting standards and financial reporting.
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS
- --------------------------------------------------------------------------------
For the period ended March 31, 1997
ONE FIVE MOST RECENT
YEAR YEARS TEN YEARS
---- ----- ---------
John Hancock Global Fund: Class A 1.05% 48.43% 48.18%(1)
John Hancock Global Fund: Class B 0.60% 49.59% 101.57%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
For the period ended March 31, 1997
ONE FIVE MOST RECENT
YEAR YEARS TEN YEARS
---- ----- ---------
John Hancock Global Fund: Class A 1.05% 8.22% 7.79%(1)
John Hancock Global Fund: Class B 0.60% 8.39% 7.26%
Notes to Performance
(1) Class A shares commenced on January 3, 1992.
6
<PAGE>
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- --------------------------------------------------------------------------------
WHAT HAPPENED TO A $10,000 INVESTMENT...
- --------------------------------------------------------------------------------
The charts on the right show how much a $10,000 investment in the John Hancock
Global Fund would be worth on April 30, 1997, assuming you had invested on the
day each class of shares started or have been invested for the most recent ten
years and reinvested all distributions. For comparison, we've shown the same
$10,000 investment in the Morgan Stanley World Index -- an unmanaged index that
measures the performance of a diverse range of global stock markets.
[Line chart with the heading Global Fund: Class A, representing the growth of a
hypothetical $10,000 investment over the life of the fund. Within the chart are
three lines. The first line represents the value of the Morgan Stanley World
Index and is equal to $17,774 as of April 30, 1997. The second line represents
the value of the hypothetical $10,000 investment made in the Global Fund on
January 3, 1992, before sales charge, and is equal to $16,074 as of April 30,
1997. The third line represents the Global Fund, after sales charge and is equal
to $15,271 as of April 30, 1997.]
[Line chart with the heading Global Fund: Class B, representing the growth of a
hypothetical $10,000 investment over the life of the fund. Within the chart are
two lines. The first line represents the value of the Morgan Stanley World Index
and is equal to $31,846 as of April 30, 1997. The second line represents the
value of the hypothetical $10,000 investment made in the Global Fund, before
sales charge, on Spetember 2, 1986, and is equal to $25,949 as of April 30,
1997.]
* No contingent-deferred sales charge applicable.
7
<PAGE>
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FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on April 30, 1997. You'll also
find the net asset value and the maximum offering price per share as of that
date.
Statement of Assets and Liabilities
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value -- Note C:
Common stocks and warrants
(cost -- $97,596,401) ................................... $ 119,487,373
Joint repurchase agreement (cost -- $2,217,000) ........... 2,217,000
-------------
121,704,373
Cash ........................................................ 200,914
Foreign currency, at value (cost -- $2,930,011) ............. 2,911,491
Receivable for investments sold ............................. 2,309,811
Receivable for shares sold .................................. 2,663
Receivable for open forward foreign currency
contracts sold -- Note A .................................. 1,298
Interest receivable ......................................... 331
Dividends receivable ........................................ 273,093
Foreign tax receivable ...................................... 26,903
Other assets ................................................ 12,473
-------------
Total Assets .................... 127,443,350
-------------------------------------------------
Liabilities:
Payable for shares repurchased .............................. 28,261
Payable for investments purchased ........................... 3,376,188
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B .................................. 153,507
Accounts payable and accrued expenses ....................... 73,577
-------------
Total Liabilities ............... 3,631,533
-------------------------------------------------
Net Assets:
Capital paid-in ............................................. 93,596,645
Accumulated net realized gain on investments
and foreign currency transactions ......................... 8,770,928
Net unrealized appreciation of investments
and foreign currency transactions ......................... 21,881,757
Accumulated net investment loss ............................. ( 437,513)
-------------
Net Assets ...................... $ 123,811,817
=================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial
interest outstanding -- unlimited number of shares
authorized with no par value, respectively)
Class A -- $94,847,960/7,498,137 ............................ $ 12.65
================================================================================
Class B --$28,963,857/2,384,165 ............................. $ 12.15
================================================================================
Maximum Offering Price Per Share *
Class A -- ($12.65 x 105.26%) ............................... $ 13.32
================================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
Statement of Operations
Six months ended April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends (net of foreign withholding
taxes of $45,606) ......................................... $ 753,282
Interest .................................................... 77,761
-----------
.............................................................. 831,043
-----------
Expenses:
Investment management fee -- Note B ....................... 594,024
Distribution and service fee -- Note B
Class A ................................................. 143,713
Class B ................................................. 139,522
Transfer agent fee -- Note B ................................ 243,378
Custodian fee ............................................... 74,370
Registration and filing fees ................................ 18,804
Auditing fee ................................................ 18,125
Financial services fee -- Note B ............................ 11,598
Printing .................................................... 11,347
Trustees' fees .............................................. 5,990
Miscellaneous ............................................... 2,631
Legal fees .................................................. 1,354
-----------
Total Expenses .................. 1,264,856
-------------------------------------------------
Net Investment Loss ( 433,813)
--------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold 8,973,124
Net realized loss on foreign currency transactions ( 202,105)
Change in net unrealized appreciation/depreciation
of investments 293,609
Change in net unrealized appreciation/depreciation
of foreign currency transactions ( 9,056)
-----------
Net Realized and Unrealized Gain
on Investments and Foreign
Currency Transactions 9,055,572
-------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $ 8,621,759
=================================================
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
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FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1997
OCTOBER 31, 1996 (UNAUDITED)
---------------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss .................................................................... ($ 393,746) ($ 433,813)
Net realized gain on investments sold and foreign currency transactions ................ 10,509,890 8,771,019
Change in net unrealized appreciation/depreciation of investments and foreign
currency transactions ................................................................ 1,357,847 284,553
------------ ------------
Net Increase in Net Assets Resulting from Operations ................................. 11,473,991 8,621,759
------------ ------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold and foreign
currency transactions
Class A -- ($0.8842 and $1.1872 per share, respectively) ............................. ( 6,456,924) ( 8,357,133)
Class B -- ($0.8842 and $1.1872 per share, respectively) ............................. ( 1,721,689) ( 2,563,800)
------------ ------------
Total Distributions to Shareholders .................................................. ( 8,178,613) ( 10,920,933)
------------ ------------
From Fund Share Transactions -- Net* ..................................................... 882,664 3,765,627
------------ ------------
Net Assets:
Beginning of period .................................................................. 118,167,322 122,345,364
------------ ------------
End of period (including accumulated net investment loss of $3,700
and $437,513 , respectively) ....................................................... $122,345,364 $123,811,817
============ ============
* Analysis of Fund Share Transactions:
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1997
OCTOBER 31, 1996 (UNAUDITED)
------------------------- ------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
CLASS A
Shares sold 8,943,917 $114,915,031 8,024,968 $102,471,932
Shares issued to shareholders in reinvestment of distributions 516,713 6,236,722 653,260 8,071,948
--------- ------------- --------- ------------
9,460,630 121,151,753 8,678,228 110,543,880
Less shares repurchased (9,539,925) ( 122,803,879) (8,487,743) ( 108,918,068)
--------- ------------ --------- ------------
Net Increase (Decrease) ( 79,295) ($ 1,652,126) 190,485 $ 1,625,812
========= ============ ========= ============
CLASS B
Shares sold 583,478 $ 7,131,162 336,924 $ 4,108,216
Shares issued to shareholders in reinvestment of distributions 134,330 1,577,033 197,719 2,350,882
--------- ------------ --------- ------------
717,808 8,708,195 534,643 6,459,098
Less shares repurchased ( 504,739) ( 6,173,405) ( 351,533) ( 4,319,283)
--------- ------------ --------- ------------
Net Increase 213,069 $ 2,534,790 183,110 $ 2,139,815
========= ============ ========= ============
</TABLE>
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment and foreign currency gains and losses,
distributions paid to shareholders, if any, and any increase or decrease in
money shareholders invested in the Fund. The footnote illustrates the number of
Fund shares sold, reinvested and repurchased during the last two periods, along
with the corresponding dollar value.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, SIX MONTHS ENDED
------------------------------------------------------- APRIL 30, 1997
1992 1993 1994 1995 1996 (UNAUDITED)
------------------------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A(1)
Per Share Operating Performance
Net Asset Value, Beginning of Period .................. $ 11.31 $ 10.55 $ 14.30 $ 14.16 $ 12.67 $ 12.97
------- ------- -------- ------- ------- -------
Net Investment Loss(2) ................................ ( 0.04) ( 0.10) ( 0.07) ( 0.03) ( 0.02) ( 0.03)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions ....... ( 0.72) 3.85 1.24 ( 0.13) 1.20 0.90
------- ------- -------- ------- ------- -------
Total from Investment Operations .................. ( 0.76) 3.75 1.17 ( 0.16) 1.18 0.87
------- ------- -------- ------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments
Sold and Foreign Currency Transactions .............. -- -- ( 1.31) ( 1.33) ( 0.88) ( 1.19)
------- ------- -------- ------- ------- -------
Net Asset Value, End of Period ........................ $ 10.55 $ 14.30 $ 14.16 $ 12.67 $ 12.97 $ 12.65
======= ======= ======== ======= ======= =======
Total Investment Return at Net Asset Value(4) ......... ( 6.72%)(5) 35.55% 8.64% ( 0.37%) 9.87% 6.91%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .............. $76,980 $90,787 $100,973 $93,597 $94,746 $94,848
Ratio of Expenses to Average Net Assets ............... 2.47%(6) 2.12% 1.98% 1.87% 1.88% 1.89%(6)
Ratio of Net Investment Loss to Average Net Assets .... ( 0.60%)(6) ( 0.86%) (0.54%) ( 0.23%) ( 0.19%) ( 0.54%)(6)
Portfolio Turnover Rate ............................... 69% 108% 61% 60% 98% 45%
Average Broker Commission Rate(7) ..................... N/A N/A N/A N/A $0.0221 $0.0222
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period .................. $ 10.92 $ 10.50 $ 14.17 $ 13.93 $ 12.36 $ 12.54
------- ------- -------- ------- ------- -------
Net Investment Loss(2) ................................ ( 0.12) ( 0.15) ( 0.15) ( 0.11) ( 0.10) ( 0.08)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions ....... ( 0.30) 3.82 1.22 ( 0.13) 1.16 0.88
------- ------- -------- ------- ------- -------
Total from Investment Operations .................. ( 0.42) 3.67 1.07 ( 0.24) 1.06 0.80
------- ------- -------- ------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments
Sold and Foreign Currency Transactions .............. -- -- ( 1.31) ( 1.33) ( 0.88) ( 1.19)
------- ------- -------- ------- ------- -------
Net Asset Value, End of Period ........................ $ 10.50 $ 14.17 $ 13.93 $ 12.36 $ 12.54 $ 12.15
======= ======= ======== ======= ======= =======
Total Investment Return at Net Asset Value(4) ......... ( 3.85%) 34.95% 7.97% ( 1.01%) 9.10% 6.56%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .............. $11,475 $19,340 $ 31,822 $24,570 $27,599 $28,964
Ratio of Expenses to Average Net Assets ............... 2.68% 2.49% 2.59% 2.57% 2.54% 2.59%(6)
Ratio of Net Investment Loss to Average Net Assets .... ( 1.03%) ( 1.25%) ( 1.12%) ( 0.89%) ( 0.83%) ( 1.24%)(6)
Portfolio Turnover Rate ............................... 69% 108% 61% 60% 98% 45%
Average Broker Commission Rate(7) ..................... N/A N/A N/A N/A $0.0221 $0.0222
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, PERIOD ENDED
---------------------- MARCH 31, 1995
1993 1994 (UNAUDITED)
---------------------- -----------
<S> <C> <C> <C>
CLASS C(3)
Per Share Operating Performance
Net Asset Value, Beginning of Period ................................. $11.75 $14.34 $14.27
------ ------ ------
Net Investment Loss .................................................. ( 0.02) -- --
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions ...................................... 2.61 1.24 ( 0.97)
------ ------ ------
Total from Investment Operations ................................... 2.59 1.24 ( 0.97)
------ ------ ------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold and
Foreign Currency Transactions ...................................... -- ( 1.31) ( 1.33)
------ ------ ------
Net Asset Value, End of Period ....................................... $14.34 $14.27 $11.97
====== ====== ======
Total Investment Return at Net Asset Value(4) ........................ 22.04%(5) 9.15% ( 6.70%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ............................. $ 406 $ 752 $ 795
Ratio of Expenses to Average Net Assets .............................. 1.43%(6) 1.42% 1.37%(6)
Ratio of Net Investment Income (Loss) to Average Net Assets ...... ( 0.35%)(6) 0.03% 0.06%(6)
Portfolio Turnover Rate .............................................. 108% 61% 60%(8)
(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) Class C shares commenced operations on May 7, 1993. Net asset value and net assets at the end of the period
ended March 31, 1995, reflect amounts prior to the redemption of all shares on March 31, 1995.
(4) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(5) Not annualized.
(6) Annualized.
(7) Per portfolio share traded. Required for the fiscal years that began September 1, 1995 or later.
(8) For the year ended October 31, 1995.
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: net investment income, gains (losses),
distributions and total investment return of the Fund. It shows how the Fund's
net asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
Schedule of Investments
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Global Fund on April 30, 1997. It's divided into three main categories: common
stocks, warrants and short-term investments. Common stocks are further broken
down by country. Short-term investments, which represent the Fund's "cash"
position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Argentina (1.53%)
Perez Companc S.A., American
Depositary Receipts (ADR)
(Oil & Gas) ................................... 117,300 $ 1,888,976
------------
Australia (2.58%)
Newcrest Mining Ltd. (Metal) .................... 100,000 297,122
RGC Ltd. (Metal) ................................ 390,007 1,414,281
WMC Ltd. (Metal) ................................ 250,000 1,481,713
------------
3,193,116
------------
Brazil (3.16%)
Centrais Electricas Brasileiras S/A
(ADR) (Utilities) ............................. 51,600 1,135,200
Telecomunicacoes Brasileiras S/A
(ADR) (Telecommunications) .................... 24,200 2,776,950
------------
3,912,150
------------
Canada (0.37%)
Cinar Films, Inc. (Class B) (Leisure)* .......... 20,000 455,000
------------
Chile (0.23%)
Maderas y Sinteticos SA (ADR)
(Building) .................................... 17,800 284,800
------------
France (3.32%)
LVMH Moet Hennessy Louis Vuitton
(Beverages) ................................... 9,250 2,258,417
Lyonnaise des Eaux SA (Diversified
Operations) ................................... 20,500 1,854,536
------------
4,112,953
------------
Germany (3.82%)
Schering AG (Medical) ........................... 30,000 2,875,621
VEBA AG (Diversified Operations) ................ 36,000 1,854,256
------------
4,729,877
------------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Hong Kong (8.90%)
Cheung Kong (Holdings) Ltd.
(Real Estate Operations) ...................... 265,000 $ 2,326,212
China Resources Enterprise Ltd.
(Real Estate Operations) ...................... 605,000 1,671,335
CITIC Pacific Ltd.
(Diversified Operations) ...................... 250,000 1,352,224
Hong Kong & Shanghai Hotels Ltd.
(Leisure) ..................................... 1,080,000 1,568,450
Hutchison Whampoa Ltd.
(Diversified Operations) ...................... 400,000 2,969,083
Wharf (Holdings) Ltd.
(Real Estate Operations) ...................... 300,000 1,134,706
------------
11,022,010
------------
India (1.01%)
State Bank of India, Global Depositary
Receipts (Banks - Foreign)* ................... 51,300 1,247,873
------------
Japan (11.77%)
Fujitsu Ltd. (Computers) ........................ 150,000 1,559,853
Ito-Yokado Co. (Retail) ......................... 35,000 1,679,206
Matsushita-Kotobuki Electronics
Industries, Ltd. (Electronics) ................ 122,000 3,892,543
Rohm Co., Ltd. (Electronics) .................... 800 62,016
Sony Corp. (Electronics) ........................ 42,000 3,057,313
TDK Corp. (Electronics) ......................... 60,000 4,325,048
------------
14,575,979
------------
Malaysia (0.66%)
Sime Darby Berhad
(Diversified Operations) ...................... 265,000 817,966
------------
Mexico (3.74%)
Empresas La Moderna S.A. de C.V.
(ADR) (Tobacco) ............................... 26,200 543,650
Grupo Industrial Maseca SA de CV
(ADR) (Food) .................................. 100,900 1,488,275
Panamerican Beverages, Inc.
(Beverages) ................................... 89,800 2,604,200
------------
4,636,125
------------
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Netherlands (1.16%)
Gucci Group, NV (Retail) ........................ 15,000 $ 1,040,625
PolyGram NV (Household) ......................... 8,000 392,137
------------
1,432,762
------------
Norway (1.36%)
Saga Petroleum ASA (Oil & Gas) .................. 96,300 1,683,614
------------
Singapore (1.04%)
DBS Land Ltd. (Real Estate Operations) .......... 400,000 1,293,264
------------
South Korea (0.44%)
L.G. Construction Ltd. (Building) ............... 36,530 540,578
------------
Sweden (1.68%)
Investor AB (Diversified Operations) ............ 47,500 2,076,880
------------
Switzerland (4.18%)
Ciba Specialty Chemicals AG
(Chemicals)* .................................. 2,133 183,767
Novartis AG (Medical) ........................... 2,133 2,810,044
SMH AG (Consumer Products) ...................... 16,500 2,182,688
------------
5,176,499
------------
United Kingdom (6.78%)
Dixons Group PLC (Retail) ....................... 275,000 2,253,039
EMAP PLC (Media) ................................ 100,000 1,235,008
Marks & Spencer PLC (Retail) .................... 275,000 2,179,498
Pearson PLC (Media) ............................. 115,000 1,327,066
Wetherspoon (J.D.) PLC (Retail) ................. 75,000 1,403,971
------------
8,398,582
------------
United States (38.74%)
Adaptec, Inc. (Computers)* ...................... 32,000 1,184,000
American International Group, Inc.
(Insurance) ................................... 30,000 3,855,000
Apache Corp. (Oil & Gas) ........................ 25,000 850,000
Cisco Systems, Inc. (Computers)* ................ 33,000 1,707,750
Colgate-Palmolive Co.
(Soap & Cleaning Preparations) ................ 20,000 2,220,000
Dean Witter Discover & Co. (Finance) ............ 80,000 3,060,000
Disney (Walt) Co., (The) (Leisure) .............. 32,093 2,631,626
Du Pont (E.I.) De Nemours & Co.
(Diversified Operations) ...................... 30,000 3,183,750
Eli Lilly & Co. (Medical) ....................... 25,000 2,196,875
Enron Corp. (Oil & Gas) ......................... 50,000 1,881,250
Fannie Mae (Mortgage Banking) ................... 20,000 822,500
General Electric Co. (Electronics) .............. 35,000 3,880,625
Intel Corp. (Electronics) ....................... 20,000 3,062,500
International Business Machines Corp.
(Computers) ................................... 15,000 2,411,250
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
United States (continued)
Johnson & Johnson (Medical) ..................... 40,000 $ 2,450,000
Microsoft Corp. (Computers)* .................... 20,000 2,430,000
Omnicare, Inc. (Medical) ........................ 40,000 975,000
Phillips Petroleum Co. (Oil & Gas) .............. 50,000 1,968,750
Schering-Plough Corp. (Medical) ................. 35,000 2,800,000
US Filter Corp. (Pollution Control)* ............ 40,000 1,215,000
Warner-Lambert Co. (Medical) .................... 10,000 980,000
Williams Cos., Inc. (The) (Oil & Gas) ........... 50,000 2,193,750
------------
47,959,626
------------
TOTAL COMMON STOCKS
(Cost $97,547,215) ( 96.47%) 119,438,630
------- ------------
WARRANTS
Sweden (0.04%)
Scania AB (Automobile / Trucks) ................. 47,500 48,743
------------
TOTAL WARRANTS (0.04%)
(Cost $49,186) ( 0.04%) 48,743
------- ------------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $97,596,401) ( 96.51%) 119,487,373
------- ------------
INTEREST PAR VALUE MARKET
ISSUER DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------ ---- --------------- -----
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.79%)
Investment in a joint repurchase
agreement transaction with
Aubrey G. Lanston & Co. -
Dated 04-30-97,
Due 05-01-97 (secured by
U.S. Treasury Notes, 5.50%
thru 6.625%, Due 05-15-98
thru 09-30-01) - Note A. .......... 5.38% $ 2,217 2,217,000
TOTAL SHORT-TERM INVESTMENTS ( 1.79%) 2,217,000
------- ------------
TOTAL INVESTMENTS ( 98.30%) $121,704,373
======= ============
*Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
Portfolio Concentration (Unaudited)
- --------------------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other countries.
The performance of the Fund is closely tied to the economic conditions within
the countries it invests. The concentration of investments by country for
individual securities held by the Fund is shown in the schedule of investments.
In addition, the concentration of investments can be aggregated by various
industry groups. The table below shows the percentages of the Fund's investments
at April 30, 1997 assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
INVESTMENT CATEGORIES OF FUND NET ASSETS
- --------------------- ------------------
Automobile/Trucks ....................................... 0.04%
Banks - Foreign ......................................... 1.01
Beverages ............................................... 3.93
Building ................................................ 0.60
Chemicals ............................................... 0.15
Computers ............................................... 7.51
Consumer Products ....................................... 1.76
Diversified Operations .................................. 11.40
Electronics ............................................. 14.70
Finance ................................................. 2.47
Food .................................................... 1.20
Household ............................................... 0.32
Insurance ............................................... 3.11
Leisure ................................................. 3.76
Media ................................................... 2.07
Medical ................................................. 12.19
Metal ................................................... 2.58
Mortgage Banking ........................................ 0.66
Oil & Gas ............................................... 8.45
Pollution Control ....................................... 0.98
Real Estate Operations .................................. 5.19
Retail .................................................. 6.91
Soap & Cleaning Preparations ............................ 1.79
Telecommunications ...................................... 2.24
Tobacco ................................................. 0.44
Utilities ............................................... 0.92
Short-Term Investments .................................. 1.79
------
TOTAL INVESTMENTS 98.30%
======
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Investment Trust III (the "Trust") (formerly Freedom Investment
Trust II) is an open-end management investment company, registered under the
Investment Company Act of 1940. The Trust consists of six series: John Hancock
Global Fund (the "Fund"), John Hancock Special Opportunities Fund, John Hancock
World Bond Fund, John Hancock Short-Term Strategic Income Fund, John Hancock
Growth Fund and John Hancock International Fund. The other five series of the
Trust are reported in separate financial statements. The investment objective of
the Fund is to achieve long-term growth of capital primarily through investment
in common stocks of companies domiciled in foreign countries and the United
States.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemptions, dividends and liquidation, except that
certain expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution and service expenses under
terms of a distribution plan have exclusive voting rights to that distribution
plan. Class C shares were outstanding during the period from May 7, 1993,
through March 31, 1995, but the Trustees abolished Class C shares as of May 1,
1995.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment securities
is recorded on the ex-dividend date or, in the case of some foreign securities,
on the date thereafter when the Fund identifies the dividend. Interest income on
investment securities is recorded on the accrual basis. Foreign income may be
subject to foreign withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and will be in
the same amount, except for the effect of expenses that may be applied
differently to each class.
15
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the relative net assets of the respective classes. Distribution
and service fees, if any, are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense rate(s) applicable
to each class.
EXPENSE The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which are not readily identifiable to a specific
fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the funds.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. The fund had no borrowing
activity for the period ended April 30, 1997.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked to market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities. The
Fund may also purchase and sell forward contracts to facilitate the settlement
of foreign currency denominated portfolio transactions, under which it intends
to take delivery of the foreign currency. Such contracts normally involve no
market risk other than that not offset by the currency amount of the underlying
transaction.
At April 30, 1997, open forward foreign currency exchange contracts were as
follows:
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT DATE APPRECIATION
- -------- ------------------- ---- ------------
SELLS
British Pounds 1,034,595 May 97 $1,298
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. Buying futures tends to increase the Fund's exposure to the
underlying instrument. Selling futures tends to decrease the Fund's exposure
16
<PAGE>
to the underlying instrument or hedge other Fund instruments. At the time the
Fund enters into a financial futures contract, it is required to deposit with
its custodian a specified amount of cash or U.S. government securities, known as
"initial margin," equal to a certain percentage of the value of the financial
futures contract being traded. Each day, the futures contract is valued at the
official settlement price of the board of trade or U.S. commodities exchange on
which it trades. Subsequent payments, known as "variation margin," to and from
the broker are made on a daily basis as the market price of the financial
futures contract fluctuates. Daily variation margin adjustments, arising from
this "mark to market," are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contract may not
correlate with changes in the value of the underlying securities.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At April 30, 1997, there were no open positions in financial futures
contracts.
OPTIONS Listed options will be valued at the last quoted sales price on the
exchange on which they are primarily traded. Purchased put or call
over-the-counter options will be valued at the average of the "bid" prices
obtained from two independent brokers. Written put or call over-the-counter
options will be valued at the average of the "asked" prices obtained from two
independent brokers. Upon the writing of a call or put option, an amount equal
to the premium received by the Fund will be included in the Statement of Assets
and Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked to market to reflect the current market
value of the written option.
The Fund may use option contracts to manage its exposure to the stock market.
Writing puts and buying calls will tend to increase the Fund's exposure to the
underlying instrument and buying puts and writing calls will tend to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited to the
premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value will reflect the maximum exposure
of the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contract's
terms, or if the Fund is unable to offset a contract with a counterparty on a
timely basis ("liquidity risk"). Exchange-traded options have minimal credit
risk as the exchanges act as counterparties to each transaction, and only
present liquidity risk in highly unusual market conditions. To minimize credit
and liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit risk
may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
There were no written option transactions for the period ended April 30,
1997.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
The Adviser is solely responsible for advising the Fund with respect to
investments in the United States and Canada. The Fund and the Adviser also have
a sub-investment management contract with John Hancock Advisers International
Limited (the "Sub-Adviser"), a wholly owned subsidiary of the Adviser, under
which the Sub-Adviser, subject to the review of the Trustees and overall
supervision of the Adviser, provides the Fund with investment management
services and advice with respect to the portion of the Fund's assets invested in
countries other than the United States and Canada.
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of: (a) 1.00% of the first $100,000,000 of the
Fund's average daily net asset value, (b) 0.80%
17
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
of the next $200,000,000, (c) 0.75% of the next $200,000,000 and (d) 0.625% of
the Fund's average daily net asset value in excess of $500,000,000. The Adviser
pays the Sub-Adviser a fee equivalent, on an annual basis to the sum of (a)
0.70% of the first $200,000,000 of the Fund's average daily net asset value and
(b) 0.6375% of the Fund's average daily net asset value in excess of
$200,000,000. The Fund is not responsible for the payment of the Sub-Adviser's
fee.
John Hancock Funds, Inc. ("JH Funds"), a wholly owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. For the period ended April 30, 1997, net sales charges
received with regard to sales of Class A shares amounted to $63,693. Of this
amount, $9,938 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $16,057 was paid as sales commissions to
unrelated broker-dealers and $37,698 was paid as sales commissions to sales
personnel of John Hancock Distributors, Inc. ("Distributors"), Tucker Anthony,
Incorporated ("Tucker Anthony") and Sutro & Co., ("Sutro"), all of which are
broker-dealers. The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company ("JHMLICo"), is the indirect sole shareholder of Distributors
and was the indirect sole shareholder until November 29, 1996, of John Hancock
Freedom Securities Corporation and its subsidiaries which include FDC, Tucker
Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent-deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from CDSC are paid to JH Funds and are used in whole or in part to defray its
expenses for providing distribution related services to the Fund in connection
with the sale of Class B shares. For the period ended April 30, 1997,
contingent-deferred sales charges paid to JH Funds amounted to $31,876.
In addition, to reimburse the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted Distribution Plans
with respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors for distribution and service expenses, at an annual rate not to
exceed 0.30% of Class A average daily net assets and 1.00% of Class B average
daily net assets to reimburse the Co-Distributors for their distribution and
service costs. Up to a maximum of 0.25% of such payments may be service fees as
defined by the amended Rules of Fair Practice of the National Association of
Securities Dealers. Under the amended Rules of Fair Practice, curtailment of a
portion of the Fund's 12b-1 payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature Services,
Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The Fund pays
transfer agent fees based on the number of shareholder accounts and certain
out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the period was
at an annual rate of 0.01875% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon, and Mr. Richard S. Scipione
are trustees and/or officer of the Adviser and/or its affiliates, as well as
Trustees of the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock funds, as
applicable, to cover its liability for the deferred compensation. Investments to
cover the Fund's deferred compensation liability are recorded on the Fund's
books as an other asset. The deferred compensation liability and the related
other asset are always equal and are marked to market on a periodic basis to
reflect any income earned by the investment as well as any unrealized gains or
losses. At April 30, 1997, the Fund's investments to cover the deferred
compensation liability had unrealized appreciation of $362.
18
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended April 30, 1997, aggregated $55,123,859 and $62,601,174, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended April 30, 1997.
The cost of investments owned at April 30, 1997 (including the joint
repurchase agreement) for federal income tax purposes was $99,813,401. Gross
unrealized appreciation and depreciation of investments aggregated $24,635,142
and $2,744,170, respectively, resulting in net unrealized appreciation of
$21,890,972.
19
<PAGE>
================================================================================
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A Global Investment Management Firm U.S. Postage
PAID
101 Huntington Avenue, Boston, MA 02199-7603 Randolph, MA
1-800-225-5291 1-800-554-6713 (TDD) Permit No. 75
Internet: www.jhancock.com/funds
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock Global
Fund. It may be used as sales literature when preceded or accompanied by the
current prospectus, which details charges, investment objectives and operating
policies.
[RECYCLE LOGO] Printed on Recycled Paper 030SA 4/97
6/97
<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 GLOBAL MARKETPLACE 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 Global Marketplace Fund ("Global Marketplace Fund") which the
undersigned is (are) entitled to vote at the Special Meeting of Shareholders
(the "Meeting") of Global Marketplace Fund to be held at 101 Huntington Avenue,
Boston, Massachusetts, on November 22, 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 Global
Marketplace Fund and John Hancock Global Fund. Under this Agreement, Global
Marketplace Fund would transfer all of its assets to Global Fund in
exchange for shares of Global Fund. These shares will be distributed
proportionately to you and the other shareholders of Global Marketplace
Fund. Global Fund will also assume Global Marketplace Fund's liabilities.
---- ---- ----
FOR |____| AGAINST |____| ABSTAIN |____|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
JOHN HANCOCK GLOBAL FUND
September 22, 1997
This statement of additional information is not a prospectus. It should be read
in conjunction with the related proxy statement and prospectus which is also
dated September 22, 1997. This statement of additional information provides
additional information about John Hancock Global Fund and the fund that it is
acquiring, John Hancock Global Marketplace Fund. Please retain this statement of
additional information for future reference. A copy of the proxy statement and
prospectus can be obtained free of charge by calling John Hancock Signature
Services, Inc., at 1-800-225-5291.
<TABLE>
TABLE OF CONTENTS
<S> <C>
Page
Introduction3
Additional Information About Global Fund3
General Information and History
Investment Objective and Policies
Management of Global Fund
Control Persons and Principal Holders of Shares Investment Advisory and
Other Services Brokerage Allocation Capital Stock and Other Securities
Purchase, Redemption and Pricing of Global Fund Shares Tax Status
Underwriters Calculation of Performance Data Financial Statements
Additional Information about Global Marketplace Fund4
General Information and History
Investment Objective and Policies
Management of Global Marketplace Fund
Investment Advisory and Other Services
Brokerage Allocation
Capital Stock and Other Securities
Purchase, Redemption and Pricing of Global Marketplace Fund Shares
Tax Status
Underwriters
Calculation of Performance Data
Financial Statements
</TABLE>
<PAGE>
Exhibits
A - Statement of additional information, dated March 1, 1997, of John
Hancock Global Fund including audited financial statements as of
October 31, 1996 and unaudited semi-annual financial statements as of
April 30, 1997.
B - Statement of additional information, dated March 1, 1997, of John
Hancock Global Marketplace Fund including audited financial statements
as of October 31, 1996 and unaudited semi-annual financial statements
as of April 30, 1997.
C - Pro forma combined financial statements as of April 30, 1997 assuming
the reorganization of John Hancock Global Marketplace Fund into John
Hancock Global Fund occurred on that date.
<PAGE>
INTRODUCTION
------------
This statement of additional information is intended to supplement the
information provided in a proxy statement and prospectus dated September 22,
1997. The proxy statement and prospectus has been sent to the shareholders of
Global Marketplace Fund in connection with the solicitation by the trustees of
Global Marketplace Fund of proxies to be voted at the special meeting of
shareholders of Global Marketplace Fund to be held on November 12, 1997. This
statement of additional information incorporates by reference the statement of
additional information of Global Fund, dated March 1, 1997, and the statement of
additional information of Global Marketplace Fund, also dated March 1, 1997. The
Global Fund SAI and the Global Marketplace Fund SAI are included with this
statement of additional information.
Additional Information About Global Fund
----------------------------------------
General Information and History
- -------------------------------
For additional information about Global Fund generally and its history,
see "Organization of the Funds" in the Global Fund SAI.
Investment Objective and Policies
- ---------------------------------
For additional information about Global Fund's investment objective,
policies and restrictions see "Investment Objective and Policies" and
"Investment Restrictions" in the Global Fund SAI.
Management of Global Fund
- -------------------------
For additional information about the Global Fund's Board of Trustees,
officers and management personnel, see "Those Responsible for Management" in the
Global Fund SAI.
Control Persons and Principal Holders of Shares
- -----------------------------------------------
For additional information about control persons of Global Fund and
principal holders of shares of Global Fund, see "Those Responsible for
Management" in the Global Fund SAI.
Investment Advisory and Other Services
- --------------------------------------
For additional information about Global Fund's investment adviser,
custodian, transfer agent and independent accountants, see "Investment Advisory
and Other Services," "Distribution Contracts," "Transfer Agent Services,"
"Custody of Portfolio" and "Independent Auditors" in the Global Fund SAI.
Brokerage Allocation and Other Practices
- ----------------------------------------
For additional information about Global Fund's brokerage allocation
practices, see "Brokerage Allocation" in the Global Fund SAI.
Capital Stock and Other Securities
- ----------------------------------
For additional information about the voting rights and other
characteristics of Global Fund's shares of beneficial interest, see "Description
of the Funds' Shares" in the Global Fund SAI.
Purchase, Redemption and Pricing of Global Fund Shares
- ------------------------------------------------------
For additional information about the determination of net asset value,
see "Net Asset Value" in the Global Fund SAI.
<PAGE>
Tax Status
- ----------
For additional information about the tax status of Global Fund, see
"Tax Status" in the Global Fund SAI.
Underwriters
- ------------
For additional information about Global Fund's principal underwriter
and the distribution contract between the principal underwriter and Global Fund,
see "Distribution Contracts" in the Global Fund SAI.
Calculation of Performance Data
- -------------------------------
For additional information about the investment performance of Global
Fund, see "Calculation of Performance" in the Global Fund SAI.
Financial Statements
- --------------------
Audited financial statements of Global Fund at October 31, 1996 and
unaudited semi-annual financial statements as of April 30, 1997 are attached to
the Global Fund SAI.
Pro Forma combined financial statements as of April 30, 1997 are also
attached hereto.
Additional Information About Global Marketplace Fund
----------------------------------------------------
General Information and History
- -------------------------------
For additional information about Global Marketplace Fund generally and
its history, see "Organization of the Fund" in the Global Marketplace Fund SAI.
Investment Objectives and Policies
- ----------------------------------
For additional information about Global Marketplace Fund's investment
objectives, policies and restrictions, see "Investment Objective and Policies"
and "Investment Restrictions" in the Global Marketplace Fund SAI.
Management of Global Marketplace Fund
- -------------------------------------
For additional information about Global Marketplace Fund's Board of
Trustees, officers and management personnel, see "Those Responsible for
Management" in the Global Marketplace Fund SAI.
Investment Advisory and Other Services
- --------------------------------------
For additional information about Global Marketplace Fund's investment
adviser, custodian, transfer agent and independent accountants, see "Investment
Advisory and Other Services," "Distribution Contracts," "Transfer Agent
Services," "Custody of Portfolio" and "Independent Auditors" in the Global
Marketplace Fund SAI.
Brokerage Allocation and Other Practices
- ----------------------------------------
For additional information about Global Marketplace Fund's brokerage
allocation practices, see "Brokerage Allocation" in the Global Marketplace Fund
SAI.
<PAGE>
Capital Stock and Other Securities
- ----------------------------------
For additional information about the voting rights and other
characteristics of Global Marketplace Fund's shares of beneficial interest, see
"Description of the Fund's Shares" in the Global Marketplace Fund SAI.
Purchase, Redemption and Pricing of Global Marketplace Fund Shares
- ------------------------------------------------------------------
For additional information about the net asset value of Global
Marketplace Fund's shares, see "Net Asset Value" in the Global Marketplace Fund
SAI.
Tax Status
- ----------
For additional information about the tax status of Global Marketplace
Fund, see "Tax Status" in the Global Marketplace Fund's SAI.
Underwriters
- ------------
For additional information about Global Marketplace Fund's principal
underwriter and the distribution contract between the principal underwriter and
Global Marketplace Fund, see "Distribution Contracts" in the Global Marketplace
Fund SAI.
Calculation of Performance Data
- -------------------------------
For additional information about the investment performance of Global
Marketplace Fund, see "Calculation of Performance" in the Global Marketplace
Fund SAI.
Financial Statements
- --------------------
Audited financial statements of Global Marketplace Fund at October 31,
1996 and unaudited semi-annual financial statements as of April 30, 1997 are
attached to the Global Marketplace Fund SAI.
<PAGE>
John Hancock Funds
Supplement to Statement of Additional Information
The "INITIAL SALES CHARGE ON CLASS A SHARES" section is supplemented under the
heading "Without Sales Charge" by adding:
o Retirement plans participating in Merrill Lynch servicing programs, if
the Plan has more than $3 million in assets or 500 eligible employees
at the date the Plan Sponsor signs the Merrill Lynch Recordkeeping
Service Agreement. See your Merrill Lynch financial consultant for
further information.
The "INITIAL SALES CHARGE ON CLASS A AND CLASS B SHARES" section is supplemented
under the heading "Without Sales Charge" by adding:
o For retirement plans participating in Merrill Lynch's servicing
programs, Class A shares are not available at net asset value for
Plans with less than $3 million or 500 eligible employees at the date
the Plan Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement. Class B shares are available. See your Merrill Lynch
financial consultant for further information.
The "DEFERRED SALES CHARGE ON CLASS B SHARES" section is supplemented under the
heading "Waiver of Contingent Deferred Sales Charge" by adding:
o Retirement plans participating in Merrill Lynch servicing programs, if
the Plan has more than $3 million in assets or 500 eligible employees
at the date the Plan Sponsor signs the Merrill Lynch Recordkeeping
Service Agreement. See your Merrill Lynch financial consultant for
further information.
The "DEFERRED SALES CHARGE ON CLASS B SHARES" section is supplemented under the
heading "For Retirement Accounts" by adding:
o For retirement plans participating in Merrill Lynch's servicing
programs that are investing in Class B shares, shares will convert to
Class A shares after eight years, (5 years for Short-Term Strategic
Income Fund, Intermediate Maturity Fund and Limited-Term Government
Fund) or sooner if the plan attains assets of $5 million (by means of
a CDSC-free redemption/purchase at net asset value).
<PAGE>
The "ADDITIONAL SERVICES AND PROGRAMS" section is supplemented as follows:
Retirement plans participating in Merrill Lynch's servicing programs:
---------------------------------------------------------------------
Class A shares are available at net asset value for plans with $3
million in plan assets or 500 eligible employees at the date the Plan
Sponsor signs the Merrill Lynch Recordkeeping Service Agreement. If
the plan does not meet either of these limits, Class A shares are not
available.
For participating retirement plans investing in Class B shares, shares
will convert to Class A shares after eight years, or sooner if the
plan attains assets of $5 million (by means of a CDSC-free
redemption/purchase at net asset value).
6/1/97
MF2SS 6/97
<PAGE>
<TABLE>
<S> <C>
John Hancock Special Equities Fund dated 3/1/97 John Hancock Sovereign U.S. Government
John Hancock World Bond Fund dated 3/1/97 Income Fund dated 3/1/97
John Hancock Strategic Income Fund dated 3/1/97 John Hancock Massachusetts Tax-Free
John Hancock Tax Free Bond Fund dated 1/1/97 Income Fund dated 1/1/97
John Hancock Pacific Basin Equities Fund John Hancock New York Tax-Free Income Fund
dated 3/1/97 dated 1/1/97
John Hancock Global Marketplace Fund John Hancock Disciplined Growth Fund
dated 3/1/97 dated 3/1/97
John Hancock Global Rx Fund dated 3/1/97 John Hancock Financial Industries Fund
John Hancock Emerging Growth Fund dated 3/1/97 dated 3/1/97
John Hancock Global Fund dated 3/1/97 John Hancock Regional Bank Fund dated 3/1/97
John Hancock Growth Fund dated 3/1/97 John Hancock Discovery Fund dated 3/1/97
John Hancock Global Technology Fund John Hancock Government Income Fund
dated 3/1/97 dated 3/1/97
John Hancock Short-Term Strategic Income Fund John Hancock High Yield Bond Fund
dated 3/1/97 dated 3/1/97
John Hancock Special Opportunities Fund John Hancock Intermediate Maturity
dated 3/1/97 Government Fund dated 3/1/97
John Hancock California Tax-Fee Income Fund John Hancock High Yield Tax-Free Fund
dated 1/1/97 dated 1/1/97
John Hancock International Fund dated 3/1/97
</TABLE>
Supplement to Statement of Additional Information
The "Distribution Contracts" section is supplemented as follows:
John Hancock Funds, Inc. may pay extra compensation to financial services firms
selling large amounts of fund shares. This compensation may be calculated as a
percentage of fund shares sold by the firm.
5/20/97
MFSAI 5/97
<PAGE>
JOHN HANCOCK GLOBAL FUND
JOHN HANCOCK WORLD BOND FUND
Class A and Class B Shares
Statement of Additional Information
March 1, 1997
This Statement of Additional Information provides information about John Hancock
Global Fund("Global Fund") and John Hancock World Bond Fund ("World Bond Fund")
(collectively, the "Funds") in addition to the information that is contained in
the combined International/Global Funds' Prospectus dated March 1, 1997 (the
"Prospectus"). The Funds are a diversified (Global Fund) and a non-diversified
(World Bond Fund) series of John Hancock Investment Trust III (the "Trust"),
formerly Freedom Investment Trust II.
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus, a copy of which can be obtained free of
charge by writing or telephoning:
John Hancock Signature Services, Inc.
John Hancock Way STE 1000
Boston MA 02217-1000
1-800-225-5291
TABLE OF CONTENTS
Page
Organization of the Funds 2
Investment Objectives and Policies 2
- --- John Hancock Global Fund
- --- John Hancock World Bond Fund
Investment Restrictions 18
Those Responsible for Management 21
Investment Advisory and Other Services 30
Distribution Contracts 32
Net Asset Value 34
Initial Sales Charge on Class A Shares 35
Deferred Sales Charge on Class B Shares 38
Special Redemptions 41
Additional Services and Programs 41
Description of the Funds' Shares 43
Tax Status 44
Calculation of 49
Performance 52
Brokerage
Allocation
Transfer Agent Services 55
Custody of Portfolio 55
Independent Auditors 55
Appendix A A-1
Financial Statements F-1
1
<PAGE>
ORGANIZATION OF THE FUNDS
The Fund are series of the Trust, an open-end investment management company
organized as a Massachusetts business trust on March 31, 1986 under the laws of
The Commonwealth of Massachusetts. The Funds commenced operations on March 31,
1986 (Global Fund) and on July 31, 1986 (World Bond Fund).
John Hancock Advisers, Inc. (the "Adviser") is the Funds' investment adviser.
John Hancock Advisers International Limited ("JH Advisers International") is the
sub-Adviser for Global Fund. The Adviser is an indirect wholly-owned subsidiary
of John Hancock Mutual Life Insurance Company (the "Life Company"), a
Massachusetts life insurance company chartered in 1862, with national
headquarters at John Hancock Place, Boston, Massachusetts.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of each Fund's investment
objectives and policies in the Prospectus. There is no assurance that either
Fund will achieve its investment objective.
Global Fund
The Global Fund's investment objective is to achieve long-term growth of capital
primarily through investment in common stocks of companies domiciled in foreign
countries and in the United States. Any income received on the Fund's
investments will be incidental to the Fund's objective of long-term growth of
capital. Normally, the Fund will invest in the securities markets of at least
three countries, including the United States.
Under normal circumstances, at least 65% of the Global Fund's total assets will
consist of common stocks and securities convertible into common stock. However,
if deemed advisable by the Adviser, the Fund may invest in any other type of
security including preferred stocks, warrants, bonds, notes and other debt
securities (including Eurodollar securities) or obligations of domestic or
foreign governments and their political subdivisions. The Fund will only invest
in investment grade debt securities, which are securities rated within the four
highest rating categories of Standard & Poor's Rating Group ("S&P") (AAA, AA, A,
BBB) or Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, Baa).
Investments in the lowest investment grade rating category may have speculative
characteristics and therefore may involve higher risks. Investment grade debt
securities are subject to market fluctuations and changes in interest rates;
however, the risk of loss of income and principal is generally expected to be
less than with lower quality debt securities. In the event a debt security is
downgraded below investment grade, the Adviser will consider this event in its
determination of whether the Fund should continue to hold the security. See
Appendix A to this Statement of Additional Information for a description of the
various ratings of investment grade debt securities.
2
<PAGE>
The global allocation of assets is not fixed, and will vary from time to time
based on the judgment of the Adviser and JH Advisers International. Global Fund
will maintain a flexible investment policy and will invest in a diversified
portfolio of securities of companies and governments located throughout the
world. In making the allocation of assets among various countries and geographic
regions, the Adviser and JH Advisers International ordinarily consider such
factors as prospects for relative economic growth between foreign countries;
expected levels of inflation and interest rates; government policies influencing
business conditions; and other pertinent financial, tax, social, political,
currency and national factors -- all in relation to the prevailing prices of the
securities in each country or region.
When the Adviser believes that adverse market conditions are present, for
temporary defensive purposes, the Fund may hold or invest all or part of its
assets in cash and in domestic and foreign money market instruments, including
but not limited to, governmental obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate debt securities and
repurchase agreements.
Any income received on the Fund's investments will be incidental to the Fund's
objective of long-term growth of capital.
World Bond Fund
The World Bond Fund's investment objective is to achieve a high total investment
return, a combination of current income and capital appreciation, by investing
in a global portfolio of fixed income securities. Normally, the Fund will invest
in fixed income securities denominated in at least three currencies or
multi-currency units, including the U. S. Dollar.
Under normal circumstances, World Bond Fund will invest primarily (at least 65%
of total assets) in fixed income securities issued or guaranteed by: (i) the
U.S. Government, its agencies or instrumentalities; (ii) foreign governments
(including foreign states, provinces and municipalities) or their political
subdivisions, authorities, agencies or instrumentalities; (iii) international
organizations backed or jointly owned by more than one national government, such
as the International Bank for Reconstruction and Development, European
Investment Bank, Asian Development Bank, European Coal and Steel Community and
Inter-American Development Bank; and (iv) foreign corporations or financial
institutions. The term "fixed income securities" includes debt obligations of
all types, including bonds, debentures and notes, and certain stocks such as
preferred stocks. A fixed income security may itself be convertible into or
exchangeable for equity securities, or may carry with it the right to acquire
equity securities evidenced by warrants attached to the security or acquired as
part of a unit with a security. The Fund has registered as a "non-diversified"
fund so that it will be able to invest more than 5% of its assets in obligations
of a single foreign government or other issuer. The Fund will not invest more
than 25% of its total assets in securities issued by any one foreign government.
World Bond Fund may invest less than 35% of its total assets in fixed income
securities which are high yield, high risk securities in the lower rating
categories of the established rating services. These securities are rated below
Baa by Moody's or below BBB by S&P. The Fund may invest in securities rated as
low as Ca by Moody's or CC by S&P, which may indicate that the obligations are
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speculative to a high degree and in default. These securities are generally
referred to as "emerging market" or "junk" bonds. See the Appendix attached to
this Statement of Additional Information for a description of the
characteristics of the various ratings categories. The Fund is not obligated to
dispose of securities whose issuers subsequently are in default or which are
downgraded below the minimum ratings noted above. The credit ratings of Moody's
and S&P (the "Rating Agencies") may not be changed by the Rating Agencies in a
timely fashion to reflect subsequent economic events. These credit ratings
evaluate credit risk but not general market risk. The Fund may also invest in
unrated securities which, in the opinion of the Adviser, offer comparable yields
and risks to the rated securities in which the Fund may invest.
Debt securities that are rated in the lower ratings categories, or which are
unrated, involve greater volatility of price and risk of loss of principal and
income. In addition, lower ratings reflect a greater possibility of an adverse
change in financial condition affecting the ability of the issuer to make
payments of interest and principal. The market price and liquidity of lower
rated fixed income securities generally respond to short-term corporate and
market developments to a greater extent than the price and liquidity of higher
rated securities, because these developments are perceived to have a more direct
relationship to the ability of an issuer of lower rated securities to meet its
ongoing debt obligations. Although the Adviser seeks to minimize these risks
through diversification, investment analysis and attention to current
developments in interest rates and economic conditions, there can be no
assurance that the Adviser will be successful in limiting the Fund's exposure to
the risks associated with lower rated securities. Because the World Bond Fund
may invest in securities in the lower rated categories, the achievement of the
Fund's goals is more dependent on the Adviser's ability than would be the case
if the Fund were investing in securities in the higher rated categories.
Reduced volume and liquidity in the high yield high risk bond market or the
reduced availability of market quotations may make it more difficult to dispose
of the World Bond Fund's investments in high yield high risk securities and to
value accurately these assets. The reduced availability of reliable, objective
data may increase the Fund's reliance on management's judgment in valuing high
yield high risk bonds. In addition, the Fund's investments in high yield high
risk securities may be susceptible to adverse publicity and investor
perceptions, whether or not justified by fundamental factors. The Fund's
investments, and consequently its net asset value, will be subject to the market
fluctuations and risk inherent in all securities.
World Bond Fund may invest in fixed income securities denominated in any
currency or a multi-national currency unit. The European Currency Unit ("ECU")
is a composite currency consisting of specified amounts of each of the
currencies of ten member countries of the European Economic Community. The Fund
may also invest in fixed income securities denominated in the currency of one
country although issued by a governmental entity, corporation or financial
institution of another country. For example, the Fund may invest in a Japanese
yen-denominated fixed income security issued by a United States corporation.
This type of investment involves credit risks associated with the issuer and
currency risks associated with the currency in which the obligation is
denominated.
World Bond Fund will maintain a flexible investment policy and its portfolio
assets may be shifted among fixed income securities denominated in various
foreign currencies that the Adviser believes will provide relatively high rates
of income or potential capital appreciation in U.S. Dollars. As with all debt
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securities, the prices of the Fund's portfolio securities will generally
increase when interest rates decline and decrease when interest rates rise.
Similarly, if the foreign currency in which a portfolio security is denominated
appreciates against the U.S. Dollar, the total investment return from that
security will be enhanced further. Conversely, if the foreign currency in which
a portfolio security is denominated depreciates against the U.S. Dollar, total
investment return from that security will be adversely affected.
With respect to the international organizations described above, the
governmental members of such organizations, or "stockholders," usually make
initial capital contributions to the organization and in many cases are
committed to make additional capital contributions if the organization is unable
to repay its borrowings. In accordance with guidelines promulgated by the Staff
of the Securities and Exchange Commission (the "SEC"), the Fund will consider as
an industry any category of international organizations designated by the SEC.
The Fund may invest in corporate and commercial obligations, such as medium-term
notes and commercial paper, which may be indexed to foreign currency exchange
rates.
In selecting fixed income securities for World Bond Fund's portfolio, the
Adviser ordinarily considers such factors as the strengths and weaknesses of the
currencies in which the securities are denominated; expected levels of inflation
and interest rates; government policies influencing business conditions; the
financial condition of the issuer; and other pertinent financial, tax, social,
political and national factors. The average maturity of the Fund's portfolio
securities will vary based upon the Adviser's assessment of economic and market
conditions.
When the Adviser determines that adverse market conditions are present, for
temporary defensive purposes, the Fund may hold or invest all or part of its
assets in cash and in domestic and foreign money market instruments, including
but not limited to governmental obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate debt securities and
repurchase agreements.
World Bond Fund is a "non-diversified" fund in order to permit more than 5% of
its assets to be invested in the obligations of any one issuer. Since a
relatively high percentage of the Fund's assets may be invested in the
obligations of a limited number of issuers, the value of the Fund's shares may
be more susceptible to a single economic, political or regulatory event, and to
the credit and market risks associated with a single issuer.
Ratings as Investment Criteria. In general, the ratings of Moody's and S&P
represent the opinions of these agencies as to the quality of the securities
which they rate. It should be emphasized however, that ratings are relative and
subjective and are not absolute standards of quality. These ratings will be used
by the Fund as initial criteria for the selection of portfolio securities. Among
the factors which will be considered are the long-term ability of the issuer to
pay principal and interest and general economic trends. Appendix A contains
further information concerning the rating of Moody's and S&P and their
significance. Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated, or its rating may be reduced below minimum required for
purchase by the Fund. Neither of these events will require the sale of the
securities by the Fund.
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Time Deposits. The Fund's time deposits are non-negotiable deposits maintained
for a stated period of time at a stated interest rate. If the Fund purchases
time deposits maturing in seven days or more, it will treat those longer-term
time deposits as illiquid.
Investments in Foreign Securities. The Fund may invest in the securities of
foreign issuers including securities in the form of sponsored or unsponsored
American Depository Receipts ("ADRs"), European Depository Receipts ("EDRs") or
other securities convertible into securities of corporations domiciled in
foreign countries. These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. Generally,
ADRs, in registered form, are designed for use in the U.S. securities markets
and EDRs, in bearer form, are designed for use in European securities markets.
ADRs are receipts typically issued by a United States bank or trust company
evidencing ownership of the underlying securities. EDRs are European receipts
evidencing a similar arrangement. It is the current intention of JH Advisers
International that no more than 5% of the Global Fund's assets will be invested
in ADRs and EDRs.
Foreign Currency Transactions. The foreign currency transactions of each Fund
may be conducted on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market. Each Fund may also
enter into forward foreign currency contracts involving currencies of the
different countries in which it will invest either as a hedge against possible
variations in the foreign exchange rate between these currencies, for
speculative purposes, as a substitute for investing in securities denominated in
that currency or in order to create a synthetic position consisting of a
security issued in one country and denominated in the currency of another
country. Forward foreign currency contracts involve contractual agreements to
purchase or sell a specified currency at a specified future date and price set
at the time of the contract. Transaction hedging is the purchase or sale of
forward foreign currency contracts with respect to specific receivables for
payables of the Fund accruing in connection with the purchase and sale of its
portfolio securities denominated in foreign currencies. Portfolio hedging is the
use of forward foreign currency contracts to offset portfolio security positions
denominated or quoted in such foreign currencies. The Funds will not attempt to
hedge all of their foreign portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by the Adviser, in
the case of Global Fund or the Adviser or JH Advisers International, in the case
of World Bond Fund. There is no limitation on the value of a Fund's assets that
may be committed to forward contracts or on the term of a forward contract.
If the Fund enters into a forward contract requiring it to purchase foreign
currency, its custodian bank will segregate cash or liquid securities, of any
type or maturity, in a separate account of the Fund in an amount equal to the
value of the Fund's total assets committed to the consummation of such forward
contract. Those assets will be valued at market daily and if the value of the
assets in the separate account declines, additional cash or liquid assets will
be placed in the account so that the value of the account will equal the amount
of the Fund's commitment with respect to such contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates.
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When the Adviser or JH Advisers International believes that the currency of a
particular foreign country may suffer or enjoy a substantial movement against
another currency, a Fund may enter into a forward contract to sell or buy the
amount of the former foreign currency approximating the value of some or all of
that Fund's portfolio securities denominated in such foreign currency. This
second investment practice is generally referred to as "cross-hedging". The
precise matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the value
of these securities between the date on which the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain.
It is impossible to forecast the market value of a particular portfolio security
at the expiration of the contract. Accordingly, it may be necessary for a Fund
to purchase additional foreign currency on the spot market (and bear the expense
of such purchase) if the market value of the security is less than the amount of
foreign currency that the Fund is obligated to deliver and if a decision is made
to sell the security and make delivery of the foreign currency.
The cost to the Fund of engaging in foreign currency transactions varies with
such factors as that currency involved, the length of the contract period and
the market conditions then prevailing. Since transactions in foreign currency
are usually conducted on a principal basis, no fees or commissions are involved.
Although the Funds value their assets daily in terms of United States dollars,
neither Fund intends to convert its holdings of foreign currencies into United
States dollars on a daily basis. A Fund will do so from time to time, and
investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell the currency to the dealer.
Risks in Foreign Securities. Investments in foreign securities may involve
certain risks not present in domestic securities. Because of the following
considerations, shares of the Global Fund and the World Bond Fund should not be
considered a complete investment program. There is generally less publicly
available information about foreign companies and other issuers comparable to
reports and ratings that are published about issuers in the United States. There
may be difficulty in enforcing legal rights outside the United States. Foreign
issuers are also generally not subject to uniform accounting and auditing and
financial reporting standards, practices and requirements comparable to those
applicable to United States issuers.
Security trading practices abroad may offer less protection to investors such as
the Funds. It is contemplated that most foreign securities will be purchased in
over-the-counter markets or on exchanges located in the countries in which the
respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Similarly, volume
and liquidity in most foreign bond markets is less than in the United States and
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at times, volatility of price can be greater than in the United States. Fixed
commissions on foreign exchanges are generally higher than negotiated
commissions on United States exchanges, although each Fund will endeavor to
achieve the most favorable net results on its portfolio transactions. There is
generally less government supervision and regulation of securities exchanges,
brokers and listed issuers than in the United States. In addition, foreign
securities may be denominated in the currency of the country in which the issuer
is located. Consequently, changes in the foreign exchange rate will affect the
value of the Funds' shares and dividends.
With respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of a
Fund, political or social instability, or diplomatic developments which could
affect United States investments in those countries. Moreover, individual
foreign economies may differ favorably or unfavorably from the United States'
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
The dividends and interest payable on certain of the Funds' foreign portfolio
securities (and, in some cases, capital gains) may be subject to foreign
withholding or other foreign taxes, thus reducing the net amount of income
available for distribution to each Fund's shareholders. See "TAX STATUS".
Investors should understand that the expense ratio of each Fund will be higher
than that of investment companies investing in domestic securities since the
expenses of the Funds, such as the cost of maintaining the custody of foreign
securities and the rate of advisory fees paid by the Funds, are higher.
These risks may be intensified in the case of investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominantly based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens,
inflation rates or currency exchange rates. Local securities markets may trade a
small number of securities and may be unable to respond effectively to increases
in trading volume, potentially making prompt liquidation of substantial holdings
difficult or impossible at times. The Funds may be required to establish special
custodial or other arrangements before making certain investments in those
countries. Securities of issuers located in these countries may have limited
marketability and may be subject to more abrupt or erratic price movements.
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Repurchase Agreements. The Funds may invest in repurchase agreements. In a
repurchase agreement a Fund buys a security for a relatively short period
(usually not more than 7 days) subject to the obligation to sell it back to the
issuer at a fixed time and price, plus accrued interest. A Fund will enter into
repurchase agreements only with member banks of the Federal Reserve System and
with "primary dealers" in U.S. Government securities. The Adviser or Advisers,
as appropriate, will continuously monitor the creditworthiness of the parties
with whom a Fund enters into repurchase agreements.
Each Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, a Fund could experience delays in liquidating
the underlying securities during the period in which the Fund seeks to enforce
its rights thereto, possible subnormal levels of income decline in value of the
underlying securities or lack of access to income during this period and the
expense of enforcing its rights.
Reverse Repurchase Agreements. Each Fund may also enter into reverse purchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. Reverse repurchase agreements
involve the risk that the market value of securities purchased by the Fund with
proceeds of the transaction may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. A Fund will
also continue to be subject to the risk of a decline in the market value of the
securities sold under the agreements because it will reacquire those securities
upon effecting their repurchase. To minimize various risks associated with
reverse repurchase agreements, a Fund will establish and maintain with the
Fund's custodian a separate account consisting of liquid securities, of any type
or maturity, in an amount at least equal to the repurchase prices of the
securities (plus any accrued interest thereon) under such agreements. In
addition, a Fund will not borrow money or enter into reverse repurchase
agreements from banks temporarily for extraordinary or emergency purposes (not
leveraging or investment) and then in an aggregate amount not in excess of 10%
of the value of a Fund's total assets at the time of such borrowing, provided
that the Fund will not purchase securities for investment while borrowing
equaling 5% or more of the Fund's total assets outstanding. A Fund will enter
into reverse repurchase agreements only with federally insured banks which are
approved in advance as being creditworthy by the of Trustees. Under the
procedures established by the of Trustees, the Adviser will monitor the
creditworthiness of the banks involved.
Restricted Securities. Each Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. A Fund will not invest more than 15% of its net assets
in illiquid investments. If the Trustees determine, based upon a continuing
review of the trading markets for specific Section 4(2) paper or Rule 144A
securities that they are liquid, they will not be subject to the 15% limit on
illiquid investments. The Trustees may adopt guidelines and delegate to the
Adviser or Advisers, as appropriate, the daily function of determining and
monitoring the liquidity of restricted securities. The Trustees, however, will
retain sufficient oversight and be ultimately responsible for the
determinations. The Trustees will carefully monitor a Fund's investments in
these securities, focusing on such important factors, among others, as
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valuation, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in a Fund if
qualified institutional buyers become for a time uninterested in purchasing
these restricted securities.
A Fund may acquire other restricted securities including securities for which
market quotations are not readily available. These securities may be sold only
in privately negotiated transactions or in public offerings with respect to
which a registration statement is in effect under the 1933 Act. Where
registration is required, a Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time a Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, a Fund might obtain a less favorable price
than prevailed when it decided to sell. Restricted securities will be priced at
fair market value as determined in good faith by the Funds' Trustees.
Options on Securities, Securities Indices and Currency. The Fund may purchase
and write (sell) call and put options on any securities in which it may invest,
on any securities index based on securities in which it may invest or on any
currency in which Fund investments may be denominated. These options may be
listed on national domestic securities exchanges or foreign securities exchanges
or traded in the over-the-counter market. The Fund may write covered put and
call options and purchase put and call options to enhance total return, as a
substitute for the purchase or sale of securities or currency, or to protect
against declines in the value of portfolio securities and against increases in
the cost of securities to be acquired.
Writing Covered Options. A call option on securities or currency written by the
Fund obligates the Fund to sell specified securities or currency to the holder
of the option at a specified price if the option is exercised at any time before
the expiration date. A put option on securities or currency written by the Fund
obligates the Fund to purchase specified securities or currency from the option
holder at a specified price if the option is exercised at any time before the
expiration date. Options on securities indices are similar to options on
securities, except that the exercise of securities index options requires cash
settlement payments and does not involve the actual purchase or sale of
securities. In addition, securities index options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. Writing covered call options may
deprive the Fund of the opportunity to profit from an increase in the market
price of the securities or foreign currency assets in its portfolio. Writing
covered put options may deprive the Fund of the opportunity to profit from a
decrease in the market price of the securities or foreign currency assets to be
acquired for its portfolio.
All call and put options written by the Fund are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities,
either of which may be quoted or denominated in any currency, in a segregated
account maintained by the Fund's custodian with a value at least equal to the
Fund's obligation under the option, (ii) entering into an offsetting forward
commitment and/or (iii) purchasing an offsetting option or any other option
which, by virtue of its exercise price or otherwise, reduces the Fund's net
exposure on its written option position. A written call option on securities is
typically covered by maintaining the securities that are subject to the option
in a segregated account. The Fund may cover call options on a securities index
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by owning securities whose price changes are expected to be similar to those of
the underlying index.
The Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."
Purchasing Options. The Fund would normally purchase call options in
anticipation of an increase, or put options in anticipation of a decrease
("protective puts"), in the market value of securities or currencies of the type
in which it may invest. The Fund may also sell call and put options to close out
its purchased options.
The purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities or currency at a specified price during
the option period. The Fund would ordinarily realize a gain on the purchase of a
call option if, during the option period, the value of such securities or
currency exceeded the sum of the exercise price, the premium paid and
transaction costs; otherwise the Fund would realize either no gain or a loss on
the purchase of the call option.
The purchase of a put option would entitle the Fund, in exchange for the premium
paid, to sell specified securities or currency at a specified price during the
option period. The purchase of protective puts is designed to offset or hedge
against a decline in the market value of the Fund's portfolio securities or the
currencies in which they are denominated. Put options may also be purchased by
the Fund for the purpose of affirmatively benefiting from a decline in the price
of securities or currencies which it does not own. The Fund would ordinarily
realize a gain if, during the option period, the value of the underlying
securities or currency decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Fund would realize either no
gain or a loss on the purchase of the put option. Gains and losses on the
purchase of put options may be offset by countervailing changes in the value of
the Fund's portfolio securities.
The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
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particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
currencies or dispose of assets held in a segregated account until the options
expire or are exercised. Similarly, if the Fund is unable to effect a closing
sale transaction with respect to options it has purchased, it would have to
exercise the options in order to realize any profit and will incur transaction
costs upon the purchase or sale of underlying securities or currencies.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
The Fund's ability to terminate over-the-counter options is more limited than
with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities or currency markets.
Futures Contracts and Options on Futures Contracts. To seek to increase total
return or hedge against changes in interest rates, securities prices or currency
exchange rates, the Fund may purchase and sell various kinds of futures
contracts, and purchase and write call and put options on these futures
contracts. The Fund may also enter into closing purchase and sale transactions
with respect to any of these contracts and options. The futures contracts may be
based on various securities (such as U.S. Government securities), securities
indices, foreign currencies and any other financial instruments and indices. All
futures contracts entered into by the Fund are traded on U.S. or foreign
exchanges or boards of trade that are licensed, regulated or approved by the
Commodity Futures Trading Commission ("CFTC").
Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments or
currencies for an agreed price during a designated month (or to deliver the
final cash settlement price, in the case of a contract relating to an index or
otherwise not calling for physical delivery at the end of trading in the
contract).
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Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or currency will usually be
liquidated in this manner, the Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically advantageous
to do so. A clearing corporation associated with the exchange on which futures
contracts are traded guarantees that, if still open, the sale or purchase will
be performed on the settlement date.
Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire or the
exchange rate of currencies in which portfolio securities are quoted or
denominated. When interest rates are rising or securities prices are falling,
the Fund can seek to offset a decline in the value of its current portfolio
securities through the sale of futures contracts. When interest rates are
falling or securities prices are rising, the Fund, through the purchase of
futures contracts, can attempt to secure better rates or prices than might later
be available in the market when it effects anticipated purchases. The Fund may
seek to offset anticipated changes in the value of a currency in which its
portfolio securities, or securities that it intends to purchase, are quoted or
denominated by purchasing and selling futures contracts on such currencies.
The Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated rise in
interest rates or a decline in market prices or foreign currency rates that
would adversely affect the dollar value of the Fund's portfolio securities. Such
futures contracts may include contracts for the future delivery of securities
held by the Fund or securities with characteristics similar to those of the
Fund's portfolio securities. Similarly, the Fund may sell futures contracts on
any currencies in which its portfolio securities are quoted or denominated or in
one currency to hedge against fluctuations in the value of securities
denominated in a different currency if there is an established historical
pattern of correlation between the two currencies.
If, in the opinion of the Adviser, there is a sufficient degree of correlation
between price trends for the Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in the Fund's portfolio
may be more or less volatile than prices of such futures contracts, the Adviser
will attempt to estimate the extent of this volatility difference based on
historical patterns and compensate for any differential by having the Fund enter
into a greater or lesser number of futures contracts or by attempting to achieve
only a partial hedge against price changes affecting the Fund's portfolio
securities.
When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of the Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.
13
<PAGE>
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices that are currently available. The Fund
may also purchase futures contracts as a substitute for transactions in
securities or foreign currency, to alter the investment characteristics of or
currency exposure associated with portfolio securities or to gain or increase
its exposure to a particular securities market or currency.
Options on Futures Contracts. The Fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
put and call options on futures contracts will give the Fund the right (but not
the obligation) for a specified price to sell or to purchase, respectively, the
underlying futures contract at any time during the option period. As the
purchaser of an option on a futures contract, the Fund obtains the benefit of
the futures position if prices move in a favorable direction but limits its risk
of loss in the event of an unfavorable price movement to the loss of the premium
and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium (upon exercise
of the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that the Fund intends to purchase. However,
the Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by the Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
Other Considerations. The Fund will engage in futures and related options
transactions either for bona fide hedging purposes or to seek to increase total
return as permitted by the CFTC. To the extent that the Fund is using futures
and related options for hedging purposes, futures contracts will be sold to
protect against a decline in the price of securities (or the currency in which
they are quoted or denominated) that the Fund owns or futures contracts will be
purchased to protect the Fund against an increase in the price of securities (or
the currency in which they are quoted or denominated) it intends to purchase.
The Fund will determine that the price fluctuations in the futures contracts and
options on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or securities or instruments which
it expects to purchase. As evidence of its hedging intent, the Fund expects that
on 75% or more of the occasions on which it takes a long futures or option
position (involving the purchase of futures contracts), the Fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
14
<PAGE>
related securities (or assets denominated in the related currency) in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
To the extent that the Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. The Fund will engage in
transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), for maintaining its qualification as a
regulated investment company for federal income tax purposes.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities or currencies, require the Fund to
establish with the custodian a segregated account consisting of cash or liquid
securities in an amount equal to the underlying value of such contracts and
options.
While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates, securities prices or currency
exchange rates may result in a poorer overall performance for the Fund than if
it had not entered into any futures contracts or options transactions.
Perfect correlation between the Fund's futures positions and portfolio positions
will be impossible to achieve. There are no futures contracts based upon
individual securities, except certain U.S. Government securities. The only
futures contracts available to hedge the Fund's portfolio are various futures on
U.S. Government securities, securities indices and foreign currencies. In the
event of an imperfect correlation between a futures position and a portfolio
position which is intended to be protected, the desired protection may not be
obtained and the Fund may be exposed to risk of loss. In addition, it is not
possible to hedge fully or protect against currency fluctuations affecting the
value of securities denominated in foreign currencies because the value of such
securities is likely to fluctuate as a result of independent factors not related
to currency fluctuations.
Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.
Lending of Securities. The Funds may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
15
<PAGE>
Funds may reinvest any cash collateral in short-term securities and money market
funds. When the Funds lend portfolio securities, there is a risk that the
borrower may fail to return the securities involved in the transaction. As a
result, the Funds may incur a loss or, in the event of the borrower's
bankruptcy, the Funds may be delayed in or prevented from liquidating the
collateral. It is a fundamental policy of each of Global Fund and World Bond
Fund not to lend portfolio securities having a total value exceeding 10% and
30%, respectively, of its total assets.
Rights and Warrants. The Funds may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price, subject to the Fund's Investment
Restrictions. Generally, warrants and stock purchase rights do not carry with
them the right to receive dividends or exercise voting rights with respect to
the underlying securities, and they do not represent any rights in the assets of
the issuer. As a result, an investment in warrants and rights may be considered
to entail greater investment risk than certain other types of investments. In
addition, the value of warrants and rights does not necessarily change with the
value of the underlying securities, and they cease to have value if they are not
exercised on or prior to their expiration date. Investment in warrants and
rights increases the potential profit or loss to be realized from the investment
of a given amount of the Fund's assets as compared with investing the same
amount in the underlying stock.
Forward Commitment and When-Issued Securities. The Funds may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. A Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, a Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When a Fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in a Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date a Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the Fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, a Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
Structured or Hybrid Notes. Each Fund may invest in "structured" or "hybrid"
notes, bonds or debentures. The distinguishing feature of a structured or hybrid
note, bond or debenture is that the amount of interest and/or principal payable
on the security is based on the performance of a benchmark asset or market other
than fixed income securities or interest rates. Examples of these benchmark
16
<PAGE>
include stock prices, currency exchange rates and physical commodity prices.
Investing in a structured note allows a Fund to gain exposure to the benchmark
market while fixing the maximum loss that the Fund may experience in the event
that market does not perform as expected. Depending on the terms of the
security, the Fund may forego all or part of the interest and principal that
would be payable on a comparable conventional note, bond or debenture; a Fund's
loss cannot exceed this foregone interest and/or principal. An investment in
structured or hybrid notes involves risks similar to those associated with a
direct investment in the benchmark asset.
Asset-Backed Securities. Each Fund may invest a portion of its assets in
asset-backed securities which, in the case of Global Fund, are rated within the
four highest rating categories of S&P or Moody's and, in the case of World Bond
Fund, may be rated as investment grade or below by S&P or Moody's. In each case,
if the securities are not so rated, they must be of equivalent investment
quality in the opinion of the Adviser or Advisers, as appropriate.
Asset-backed securities are often subject to more rapid repayment than their
stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying loans. During periods of declining
interest rates, prepayment of loans underlying asset-backed securities can be
expected to accelerate. Accordingly, the Funds' ability to maintain positions in
these securities will be affected by reductions in the principal amount of such
securities resulting from prepayments, and its ability to reinvest the returns
of principal at comparable yields is subject to generally prevailing interest
rates at that time.
Credit card receivables are generally unsecured and the debtors on such
receivables are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set-off
certain amounts owed on the credit cards, thereby reducing the balance due.
Automobile receivables generally are secured, but by automobiles rather than
residential real property. Most issuers of automobile receivables permit the
loan services to retain possession of the underlying obligations. If the service
were to sell these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
asset-backed securities. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of the automobile receivables may not have a proper
security interest in the underlying automobiles. Therefore, there is the
possibility that, in some cases, recoveries on repossessed collateral may not be
available to support payments on these securities.
Participation Interests (World Bond Fund only). Participation interests, which
may take the form of interests in, or assignments of certain loans, are acquired
from banks who have made these loans or are members of a lending syndicate. The
Fund's investments in participation interests are subject to its 15% limitation
on investments in illiquid securities.
Short-Term Trading and Portfolio Turnover. Each Fund may attempt to maximize
current income through short-term portfolio trading. This will involve selling
portfolio instruments and purchasing different instruments to take advantage of
yield disparities in different segments of the market for government
obligations. Short-term trading may have the effect of increasing portfolio
turnover rate. A high rate of portfolio turnover (100% or greater) involves
correspondingly greater brokerage expenses and may make it more difficult for a
Fund to qualify as a regulated investment company for federal income tax
17
<PAGE>
purposes. The Funds' portfolio turnover rate is set forth in the table under the
caption "Financial Highlights" in the Prospectus .
The World Bond Fund's portfolio turnover rate may vary widely from year to year
and may be higher than that of many other mutual funds with similar investment
objectives. For example, if the World Bond Fund writes a substantial number of
call options and the market prices of the underlying securities appreciate, or
if it writes a substantial number of put options and the market prices of the
underlying securities depreciate, there may be a very substantial turnover of
the portfolio. While the Fund will pay commissions in connection with its
options transactions, government securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission. Nevertheless, high portfolio turnover may involve correspondingly
greater commissions and other transaction costs, which will be borne directly by
the Fund.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions will
not be changed without approval of a majority of a Fund's outstanding voting
securities which, as used in the Prospectus and this Statement of Additional
Information, means approval by the lesser of (1) the holders of 67% or more of
the Fund's shares represented at a meeting if more than 50% of the Fund's
outstanding shares are present in person or by proxy at that meeting or (2) more
than 50% of the Fund's outstanding shares.
A Fund may not:
1. Purchases on Margin and Short Sales. Purchase securities on
margin or sell short, except that a Fund may obtain such short term credits as
are necessary for the clearance of securities transactions. The deposit or
payment by a Fund of initial or maintenance margin in connection with futures
contracts or related options transactions is not considered the purchase of a
security on margin.
2. Borrowing. Borrow money, except from banks temporarily for
extraordinary or emergency purposes (not for leveraging or investment) and then
in an aggregate amount not in excess of 10% of the value of the Fund's total
assets at the time of such borrowing, provided that the Fund will not purchase
securities for investment while borrowings equaling 5% or more of the Fund's
total assets are outstanding.
3. Underwriting Securities. Act as an underwriter of securities
of other issuers, except to the extent that it may be deemed to act as an
underwriter in certain cases when disposing of restricted securities. (See also
Restriction 12.)
4. Senior Securities. Issue senior securities except as
appropriate to evidence indebtedness which a Fund is permitted to incur,
provided that, to the extent applicable, (i) the purchase and sale of futures
contracts or related options, (ii) collateral arrangements with respect to
futures contracts, related options, forward foreign currency exchange contracts
or other permitted investments of a Fund as described in the Prospectus,
including deposits of initial and variation margin, and (iii) the establishment
of separate classes of shares of a Fund for providing alternative distribution
18
<PAGE>
methods are not considered to be the issuance of senior securities for purposes
of this restriction.
5. Warrants. Invest more than 5% of the Fund's total assets in
warrants, whether or not the warrants are listed on the New York or American
Stock Exchanges, or more than 2% of the value of the Fund's total assets in
warrants which are not listed on those exchanges. Warrants acquired in units or
attached to securities are not included in this restriction.
6. Single Issuer Limitation/Diversification. Purchase securities
of any one issuer, except securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, if immediately after such
purchase more than 5% of the value of a Fund's total assets would be invested in
such issuer or the Fund would own or hold more than 10% of the outstanding
voting securities of such issuer; provided, however, that with respect to each
Fund, up to 25% of the value of the Fund's total assets may be invested without
regard to these limitations. This restriction does not apply to World Bond Fund,
which is a non-diversified fund under the 1940 Act.
7. Real Estate. Purchase or sell real estate although a Fund may
purchase and sell securities which are secured by real estate, mortgages or
interests therein, or issued by companies which invest in real estate or
interests therein; provided, however, that no Fund will purchase real estate
limited partnership interests.
8. Commodities; Commodity Futures; Oil and Gas Exploration and
Development Programs. Purchase or sell commodities or commodity futures
contracts or interests in oil, gas or other mineral exploration or development
programs, except a Fund may engage in such forward foreign currency contracts
and/or purchase or sell such futures contracts and options thereon as described
in the Prospectus.
9. Making Loans. Make loans, except that a Fund may purchase or
hold debt instruments and may enter into repurchase agreements (subject to
Restriction 12) in accordance with its investment objectives and policies and
make loans of portfolio securities provided that as a result, no more than 10%
of the Global Fund's total assets and 30% of the total assets of the World Bond
Fund, taken at current value would be so loaned.
10. Industry Concentration. Purchase any securities which would
cause more than 25% of the market value of a Fund's total assets at the time of
such purchase to be invested in the securities of one or more issuers having
their principal business activities in the same industry, provided that there is
no limitation with respect to investments in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. With respect to World
Bond Fund, this restriction will apply to obligations of a foreign government
unless the Securities and Exchange Commission permits their exclusion.
Non-fundamental Investment Restrictions. The following restrictions are
designated as non-fundamental and may be changed by the Trustees without
shareholder approval.
19
<PAGE>
A Fund may not:
11. Options Transactions. Write, purchase, or sell puts, calls or
combinations thereof except that a Fund may write, purchase or sell puts and
calls on securities as described in this Statement of Additional Information,
and the World Bond Fund may purchase or sell puts and calls on foreign
currencies as described in this Statement of Additional Information.
12. Illiquid Securities. Purchase or otherwise acquire any
security if, as a result, more than 15% of a Fund's net assets (taken at current
value) would be invested in securities that are illiquid by virtue of the
absence of a readily available market or legal or contractual restrictions on
resale. This policy includes repurchase agreements maturing in more than seven
days. This policy does not include restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 which the Board of
Trustees or the Adviser has determined under Board-approved guidelines are
liquid.
13. Acquisition for Control Purposes. Purchase securities of any
issuer for the purpose of exercising control or management, except in connection
with a merger, consolidation, acquisition or reorganization.
14. Unseasoned Issuers. Purchase securities of any issuer with a
record of less than three years continuous operations, including predecessors,
if such purchase would cause the investments of a Fund in all such issuers to
exceed 5% of the total assets of the Fund taken at market value, except this
restriction shall not apply to (i) obligations of the U.S. Government, its
agencies or instrumentalities and (ii) securities of such issuers which are
rated by at least one nationally recognized statistical rating organization.
With respect to the World Bond Fund, this restriction shall not apply to
obligations issued or guaranteed by any foreign government or its agencies or
instrumentalities.
15. Beneficial Ownership of Officers and Directors of Trust and
Adviser. Purchase or retain the securities of any issuer if those officers or
trustees of the Trust or officers or directors of the Adviser who each own
beneficially more than 1/2 of 1% of the securities of that issuer together own
more than 5% of the securities of such issuer.
16. Hypothecating, Mortgaging and Pledging Assets. Hypothecate,
mortgage or pledge any of its assets except as may be necessary in connection
with permitted borrowings and then not in excess of 5% of the Fund's total
assets, taken at cost. For the purpose of this restriction, (i) forward foreign
currency exchange contracts are not deemed to be a pledge of assets, (ii) the
purchase or sale of securities by a Fund on a when-issued or delayed delivery
basis and collateral arrangements with respect to the writing of options on debt
securities or on futures contracts are not deemed to be a pledge of assets; and
(iii) the deposit in escrow of underlying securities in connection with the
writing of call options is not deemed to be a pledge of assets.
17. Joint Trading Accounts. Participate on a joint or joint and
several basis in any trading account in securities (except for a joint account
with other funds managed by the Adviser for repurchase agreements permitted by
the Securities and Exchange Commission pursuant to an exemptive order).
20
<PAGE>
18. Securities of Other Investment Companies. Purchase a security
if, as a result, (i) more than 10% of the Fund's total assets would be invested
in the securities of other investment companies, (ii) the Fund would hold more
than 3% of the total outstanding voting securities of any one investment
company, or (iii) more than 5% of the Fund's total assets would be invested in
the securities of any one investment company. These limitations do not apply to
(a) the investment of cash collateral, received by the Fund in connection with
lending the Fund's portfolio securities, in the securities of open-end
investment companies or (b) the purchase of shares of any investment company in
connection with a merger, consolidation, reorganization or purchase of
substantially all of the assets of another investment company. Subject to the
above percentage limitations, the Fund may, in connection with the John Hancock
Group of Funds Deferred Compensation Plan for Independent Trustees/Directors,
purchase securities of other investment companies within the John Hancock Group
of Funds. The Fund may not purchase the shares of any closed-end investment
company except in the open market where no commission or profit to a sponsor or
dealer results from the purchase, other than customary brokerage fees.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amounts of net assets will not be considered a violation
of any of the foregoing restrictions.
The World Bond Fund has registered as a "non-diversified" investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"). However, the Fund intends to limit its investments to the extent required
by the diversification requirements of the Code. See "Taxes".
THOSE RESPONSIBLE FOR MANAGEMENT
The business of each Fund is managed by its Trustees, who elect officers who are
responsible for the day-to-day operations of the Trust and who execute policies
formulated by the Trustees. Several of the officers and Trustees of the Trust
are also officers and directors of the Adviser or officers and Directors of the
Funds' principal distributor, John Hancock Funds, Inc. ("John Hancock Funds").
21
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<TABLE>
<CAPTION>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman and Chief Executive
101 Huntington Avenue Executive Officer (1, 2) Officer, the Adviser and The
Boston, MA 02199 Berkeley Financial Group ("Berkeley
October 1944 Group"); Chairman, NM Capital
Management, Inc. ("NM Capital") and
John Hancock Advisers International
Limited ("Advisers International");
Chairman, Chief Executive Officer
and President, John Hancock Funds,
Inc. ("John Hancock Funds"), First
Signature Bank and Trust Company
and Sovereign Asset Management
Corporation ("SAMCorp."); Director,
John Hancock Insurance Agency, Inc.
("Insurance Agency, Inc."), John
Hancock Capital Corporation and New
England/Canada Business Council;
Member, Investment Company
Institute Board of Governors;
Director, Asia Strategic Growth
Fund, Inc.; Trustee, Museum of
Science; Vice Chairman and
President, the Adviser (until July
1992); Chairman, John Hancock
Distributors, Inc. (until April
1994); Director, John Hancock
Freedom Securities Corporation
(until September 1996); Director,
John Hancock Signature Services,
Inc. ("Signature Services") (until
January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
22
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Dennis S. Aronowitz Trustee (3) Professor of Law, Emeritus, Boston
Boston University University School of Law; Trustee,
Boston, Massachusetts Brookline Savings Bank.
June 1931
Richard P. Chapman, Jr. Trustee (1, 3) President, Brookline Savings Bank;
160 Washington Street Director, Federal Home Loan Bank of
Brookline, MA 02147 Boston (lending); Director, Lumber
February 1935 Insurance Companies (fire and
casualty insurance); Trustee,
Northeastern University (education);
Director, Depositors Insurance Fund,
Inc. (insurance).
William J. Cosgrove Trustee (3) Vice President, Senior Banker and
20 Buttonwood Place Senior Credit Officer, Citibank,
Saddle River, NJ 07458 N.A. (retired September 1991);
January 1933 Executive Vice President, Citadel
Group Representatives, Inc.; EVP
Resource Evaluation, Inc.
(consulting) (until October 1993);
Trustee, the Hudson City Savings
Bank (since 1995).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
23
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Douglas M. Costle Trustee (1, 3) Director, Chairman of the Board and
RR2 Box 480 Distinguished Senior Fellow,
Woodstock, VT 05091 Institute for Sustainable
July 1939 Communities, Montpelier, Vermont
(since 1991); Dean Vermont Law
School (until 1991); Director, Air
and Water Technologies Corporation
(environmental services and
equipment), Niagara Mohawk Power
Company (electric services) and
Mitretek Systems (governmental
consulting services).
Leland O. Erdahl Trustee (3) Director, Santa Fe Ingredients
8046 Mackenzie Court Company of California, Inc. and
Las Vegas, NV 89129 Santa Fe Ingredients Company, Inc.
December 1928 (private food processing companies),
Uranium Resources, Inc.; President,
Stolar, Inc. (1987-1991); President,
Albuquerque Uranium Corporation
(1985-1992); Director,
Freeport-McMoRan Copper & Gold
Company, Inc., Hecla Mining Company,
Canyon Resources Corporation and
Original Sixteen to One Mines, Inc.
(1984-1987 and 1991-1995)
(management consultant).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
24
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Richard A. Farrell Trustee(3) President of Farrell, Healer & Co.,
Venture Capital Partners (venture capital management firm)
160 Federal Street (since 1980); Prior to 1980, headed
23rd Floor the venture capital group at Bank of
Boston, MA 02110 Boston Corporation.
November 1932
Gail D. Fosler Trustee (3) Vice President and Chief Economist,
4104 Woodbine Street The Conference Board (non-profit
Chevy Chase, MD 20815 economic and business research);
December 1947 Director, Unisys Corp.; and H.B.
Fuller Company.
William F. Glavin Trustee (3) President, Babson College; Vice
Babson College Chairman, Xerox Corporation (until
Horn Library June 1989); Director, Caldor Inc.,
Babson Park, MA 02157 Reebok, Ltd. (since 1994) and Inco
March 1931 Ltd.
Anne C. Hodsdon * Trustee and President (1,2) President, Chief Operating Officer
101 Huntington Avenue and Director, the Adviser; Director,
Boston, MA 02199 The Berkeley Group, John Hancock
April 1953 Funds; Director, Advisers
International; Executive Vice
President, the Adviser (until
December 1994); Senior Vice
President, the Adviser (until
December 1993); Director, Signature
Services (until January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
25
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Dr. John A. Moore Trustee (3) President and Chief Executive
Institute for Evaluating Health Risks Officer, Institute for Evaluating
1629 K Street NW Health Risks, (nonprofit
Suite 402 institution) (since September 1989).
Washington, DC 20006-1602
February 1939
Patti McGill Peterson Trustee (3) Cornell Institute of Public Affairs,
Cornell University Cornell University (since August
Institute of Public Affairs 1996); President Emeritus of Wells
364 Upson Hall College and St. Lawrence University;
Ithica, NY 14853 Director, Niagara Mohawk Power
May 1943 Corporation (electric utility) and
Security Mutual Life (insurance).
John W. Pratt Trustee (3) Professor of Business Administration
2 Gray Gardens East at Harvard University Graduate
Cambridge, MA 02138 School of Business Administration
September 1931 (since 1961).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
26
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John Hancock
Boston, MA 02117 Funds, John Hancock Distributors,
August 1937 Inc., Insurance Agency, Inc., John
Hancock Subsidiaries, Inc.,
SAMCorp. and NM Capital; Trustee,
The Berkeley Group; Director, JH
Networking Insurance Agency, Inc.;
Director, John Hancock Property and
Casualty Insurance and its
affiliates (until November 1993);
Director, Signature Services (until
January 1997).
Edward J. Spellman, CPA Trustee (3) Partner, KPMG Peat Marwick LLP
259C Commercial Bld. (retired June 1990).
Lauderdale, FL 33308
November 1932
Robert G. Freedman Vice Chairman and Chief Investment Vice Chairman and Chief Investment
101 Huntington Avenue Officer (2) Officer, the Adviser; Director, the
Boston, MA 02199 Adviser, Advisers International,
July 1938 John Hancock Funds, SAMCorp.,
Insurance Agency, Inc.,
Southeastern Thrift & Bank Fund and
NM Capital; Senior Vice President,
The Berkeley Group; President, the
Adviser (until December 1994);
Director, Signature Services (until
January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
27
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
James B. Little Senior Vice President and Chief Senior Vice President, the Adviser,
101 Huntington Avenue Financial Officer The Berkeley Group, John Hancock
Boston, MA 02199 Funds.
February 1935
John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Signature Services and John Hancock
July 1950 Funds; Secretary, SAMCorp.,
Insurance Agency, Inc. and NM
Capital; Counsel, John Hancock
Mutual Life Insurance Company (until
January 1996).
Susan S. Newton Vice President and Secretary Vice President, the Adviser, John
101 Huntington Avenue Hancock Funds, Signature Services
Boston, MA 02199 and The Berkeley Group; Vice
March 1950 President, John Hancock
Distributors, Inc. (until 1994).
James J. Stokowski Vice President and Treasurer Vice President, the Adviser.
101 Huntington Avenue
Boston, MA 02199
November 1946
</TABLE>
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
28
<PAGE>
All of the officers listed are officers or employees of the Adviser or
affiliated companies. Some of the Trustees and officers may also be officers
and/or directors and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
The following table provides information regarding the compensation paid by the
Funds and the other investment companies in the John Hancock Fund Complex to the
Independent Trustees for their services. Trustees not listed below were not
Trustees of the Trust as of the end of the Funds' last completed fiscal years.
Messrs. Boudreau and Scipione and Ms. Hodsdon, each a non-Independent Trustee,
and each of the officers of the Funds are interested persons of the Adviser, are
compensated by the Adviser and receive no compensation from the Funds for their
services.
<TABLE>
<CAPTION>
Total Compensation
From the Funds and
Global World Bond John Hancock Fund ]
Independent Trustee Fund(1) Fund (1) Complex to Trustee(2)
------------------- ------- -------- ---------------------
<S> <C> <C> <C>
Dennis S. Aronowitz++ $ 53 $ 34 $ 72,450
William A. Barron III* 157 134 --
Richard P. Chapman, Jr.++ 64 41 72,200
William J. Cosgrove++ 62 34 72,450
Douglas M. Costle 2,436 1,977 72,350
Leland O. Erdahl 2,385 1,935 72,350
Richard A. Farrell ,444 1,977 75,350
Gail D. Fosler++ 53 34 68,450
William F. Glavin+ 2,385 1,935 72,250
Patrick Grant* 157 134 --
Ralph Lowell, Jr.* 157 134 --
Dr. John A. Moore 2,256 1,849 68,350
Patti McGill Peterson 2,376 1,929 72,100
John W. Pratt 2,385 1,935 72,350
Edward J. Spellman++ 64 41 73,950
------- ------- --------
Total $17,434 $14,123 $870,600
</TABLE>
(1) Compensation is for the fiscal year ended October 31, 1996
(2) The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of calendar year ended December 31, 1996 As of
such date there were sixty-seven funds in the John Hancock Fund Complex, of
which each of these Independent Trustees served on thirty-five of the
funds.
* As of January 1, 1996, Messrs. Barron, Grant and Lowell resigned as
Trustees.
+ As of December 31, 1996 the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Fund Complex for Mr.
29
<PAGE>
Chapman was $63,164, for Mr. Cosgrove was $131,317 and for Mr. Glavin was
$109,059 under the John Hancock Deferred Compensation Plan for Independent
Trustees.
++ Became Trustees of the Trust on June 26, 1996.
As of January 31, 1997, the officers and trustees of the Trust as a group owned
less than 1% of the outstanding shares of each class of each of the Funds. As of
that date, no person of record owned beneficially 5% or more of the outstanding
shares of the Funds.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and presently has more than $19 billion in assets under
management in its capacity as investment adviser to the Funds and the other
mutual funds and publicly traded investment companies in the John Hancock group
of funds having a combined total of over approximately 1,080,000 shareholders.
The Adviser is an affiliate of the Life Insurance Company, one of the most
recognized and respected financial institutions in the nation. With total assets
under management of more than $80 billion, the Life Company is one of the ten
largest life insurance companies in the United States, and carries high ratings
from Standard & Poor's and A.M. Best's. Founded in 1862, the Life Company has
been serving clients for over 130 years.
The Funds have entered into an investment management contract (the "Advisory
Agreements"), each dated as of July 1, 1996, with the Adviser. Pursuant to the
Advisory Agreements, the Adviser agreed to act as investment adviser and manager
to the Funds. As manager and investment adviser, the Adviser will: (a) furnish
continuously an investment program for each of the Funds and determine, subject
to the overall supervision and review of the Trustees, which investments should
be purchased, held, sold or exchanged, and (b) provide supervision over all
aspects of each Fund's operations except those which are delegated to a
custodian, transfer agent or other agent.
The Funds bear all costs of their organization and operation, including expenses
of preparing, printing and mailing all shareholders' reports, notices,
prospectuses, proxy statements and reports to regulatory agencies; expenses
relating to the issuance, registration and qualification of shares; government
fees; interest charges; expenses of furnishing to shareholders their account
statements; taxes; expenses of redeeming shares; brokerage and other expenses
connected with the execution of portfolio securities transactions; expenses
pursuant to the Fund's plans of distribution; fees and expenses of custodians
including those for keeping books and accounts and calculating the net asset
value of shares; fees and expenses of transfer agents and dividend disbursing
agents; legal, accounting, financial, management, tax and auditing fees and
expenses of the Funds (including an allowable portion of the cost of the
Adviser's employees rendering such services to the Funds); the compensation and
expenses of Trustees who are not otherwise affiliated with the Trust, the
Adviser or any of their affiliates; expenses of Trustees' and shareholders'
meetings; trade association memberships; insurance premiums; and any
extraordinary expenses.
As compensation for its services under the Advisory Agreements, the Adviser
receives from each Fund a fee computed and paid monthly based upon the following
annual rates: (a) for Global Fund, 1% on the first $100 million of average daily
net assets of the Fund, 0.80% on the next $200 million of average daily net
30
<PAGE>
assets, 0.75% on the next $200 million of average daily net assets and 0.625% of
average daily net assets in excess of $500 million; and (b) for World Bond Fund,
0.75% on the first $250 million of average daily net assets, and 0.70% of
average daily net assets in excess of $250 million.
From time to time, the Adviser may reduce its fee or make other arrangements to
limit the Fund's expenses to a specified percentage of average daily net assets.
The Adviser retains the right to reimpose a fee and recover any other payments
to the extent that, at the end of any fiscal year, the Fund's annual expenses
fall below this limit.
Securities held by the Funds may also be held by other funds or investment
advisory clients for which the Adviser or its affiliates provide investment
advice. Because of different investment objectives or other factors, a
particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
securities by the Adviser for the Fund or for other funds or clients for which
the Adviser renders investment advice arise for consideration at or about the
same time, transactions in such securities will be made insofar as feasible, for
the respective funds or clients in a manner deemed equitable to all of them. To
the extent that transactions on behalf of more than one client of the Adviser or
its affiliates may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on price.
Pursuant to the investment management contract, the Adviser is not liable to the
Fund or its shareholders for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with the matters to which the investment
management contract relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Adviser in the performance of
its duties or from reckless disregard by the Adviser of its obligations and
duties under the investment management contract.
Under the investment management contract, the Fund may use the name "John
Hancock" or any name derived from or similar to it only for so long as the
contract or any extension, renewal or amendment thereof remains in effect. If
the contract is no longer in effect, the Fund (to the extent that it lawfully
can) will cease to use such a name or any other name indicating that it is
advised by or otherwise connected with the Adviser. In addition, the Adviser or
the Life Company may grant the nonexclusive right to use the name "John Hancock"
or any similar name to any other corporation or entity, including but not
limited to any investment company of which the Life Company or any subsidiary or
affiliate thereof or any successor to the business of any subsidiary or
affiliate thereof shall be the investment adviser.
Each Advisory Agreement was approved on March 5, 1996 by all of the Trustees,
including all of the Trustees who are not parties to the Advisory Agreements or
"interested persons" of any such party. The shareholders of the Funds also
approved their respective Fund's Advisory Agreement on June 26, 1996. The
investment management contract and the distribution agreement discussed below
continue in effect from year to year if approved annually by vote of a majority
of the Trustees who are not interested persons of one of the parties to the
contract, cast in person at a meeting called for the purpose of voting on such
approval, and by either the Trustees or the holders of a majority of the Fund's
outstanding voting securities. Both agreements automatically terminate upon
assignment and may be terminated without penalty on 60 days' written notice by
either party or by vote of a majority of the outstanding voting securities of
the Fund.
31
<PAGE>
The Global Fund and the Adviser have entered into a sub-investment management
contract with JH Advisers International under which JH Advisers International,
subject to the review of the Trustees and the overall supervision of the
Adviser, is responsible for providing the Fund with advice with respect to that
portion of the assets invested in countries other than the United States and
Canada. JH Advisers International, with offices located at 34 Dover Street,
London, England W1X 3RA, is a wholly-owned subsidiary of the Adviser formed in
1987 to provide international investment research and advisory services to U.S.
institutional clients. As compensation for its services under the Sub-Advisory
Agreement, JH Advisers International receives from the Adviser a monthly fee
equal to 0.70% on an annual basis of the average daily net asset value of the
Global Fund for each calendar month up to $200 million of average daily net
assets; and 0.6375% on an annual basis of the average daily net asset value over
$200 million. Global Fund is not responsible for paying JH Advisers
International's fee.
For the fiscal years ended October 31, 1994, 1995 and 1996, the Trust paid the
Adviser, on behalf of Global Fund, an investment advisory fee of $1,175,313,
$1,169,884 and $1,175,079, respectively.
For the fiscal years ended October 31, 1994, 1995 and 1996, the Trust paid the
Adviser, on behalf of World Bond Fund, investment advisory fees of $1,207,673,
$840,527 and $645,661, respectively.
Accounting and Legal Services Agreement. The Trust, on behalf of the Funds, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services. For the fiscal year ended October 31, 1996, the Global Fund
and World Bond Fund paid the Adviser $7,669 and $4,879, respectively.
In order to avoid conflicts with portfolio trades for the Funds, the Adviser, JH
Advisers International and each Fund have adopted extensive restrictions on
personal securities trading by personnel of the Adviser and its affiliates. In
the case of the Adviser, some of these restrictions are: pre-clearance for all
personal trades and a ban on the purchase of initial public offerings, as well
as contributions to specified charities of profits on securities held for less
than 91 days. JH Advisers International's restrictions may differ where
appropriate, as long as they maintain the same intent. These restrictions are a
continuation of the basic principle that the interests of the Funds and their
shareholders come first.
DISTRIBUTION CONTRACTS
Each Fund has a Distribution Agreement with John Hancock Funds and Freedom
Distributors Corporation (together the "Distributors"). Under the agreement
Distributors are obligated to use their best efforts to sell shares of each
class of each Fund. Shares of each class of each Fund are sold to selected
broker-dealers (the "Selling Brokers") which have entered into selling agency
agreements with the Distributors. The Distributors accepts orders for the
purchase of the shares of the Funds which are continually offered at net asset
value next determined, plus an applicable sales charge, if any. In connection
with the sale of Class A or Class B shares, the Distributors and Selling Brokers
receive compensation from a sales charge imposed, in the case of Class A shares
at the time of sale or, in the case of Class B shares, on a deferred basis. The
sales charges are discussed further in the Prospectus.
32
<PAGE>
The Funds' Trustees adopted Distribution Plans with respect to Class A and Class
B shares ("the Plans"), pursuant to Rule 12b-1 under the Investment Company Act
of 1940. Under the Plans, each Fund will pay distribution and service fees at an
aggregate annual rate of up to 0.30% and 1.00%, respectively, of the Funds'
daily net assets attributable to shares of that class. However, the service fee
will not exceed 0.25% of the applicable Fund's average daily net assets
attributable to each class of shares. The distribution fees will be used to
reimburse the Distributors for their distribution expenses, including but not
limited to: (i) initial and ongoing sales compensation to Selling Brokers and
others (including affiliates of the Distributors) engaged in the sale of each
Fund's shares; (ii) marketing, promotional and overhead expenses incurred in
connection with the distribution of each Fund's shares; and (iii) with respect
to Class B shares only, interest expenses on unreimbursed distribution expenses.
The service fees will be used to compensate Selling Brokers and others for
providing personal and account maintenance services to shareholders. In the
event that the Distributors are not fully reimbursed for payments or expenses
they incur under the Class A Plan, these expenses will not be carried beyond
twelve months from the date they were incurred. Unreimbursed expenses under the
Class B Plan will be carried forward together with interest on the balance of
these unreimbursed expenses. The Funds do not treat unreimbursed expenses
relating to Class B Plan as a liability of the Funds, because the Trustees may
terminate the Class B Plan at any time. For the fiscal year ended October 31,
1996, an aggregate of $800,320 and $4,967,286 of distribution expenses or 3.059%
and 9.069%, respectively, of the average net assets of the Class B shares of
each of Global Fund and World Bond Fund were not reimbursed or recovered by the
Distributors through the receipt of deferred sales charges or 12b-1 fees in
prior periods.
The Plans were approved by a majority of the voting securities of each Fund. The
Plans and all amendments were approved by the Trustees, including a majority of
the Trustees who are not interested persons of the applicable Fund and who have
no direct or indirect financial interest in the operation of the Plans (the
"Independent Trustees"), by votes cast in person at meetings called for the
purpose of voting on such Plans.
Pursuant to the Plans, at least quarterly, the Distributors provide the Funds
with a written report of the amounts expended under the Plans and the purpose
for which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their continued appropriateness.
Each of the Plans provides that it will continue in effect only so long as its
continuance is approved at least annually by a majority of both the Trustees and
the Independent Trustees. Each of the Plans may be terminated without penalty,
(a) by vote of a majority of the Independent Trustees, (b) by a vote of a
majority of the applicable Fund's outstanding shares of the applicable class
upon 60 days' written notice to the Distributors and (c) automatically in the
event of assignment. Each of the Plans further provides that it may not be
amended to increase the maximum amount of the fees for the services described
therein without the approval of a majority of the outstanding shares of the
class of the applicable Fund which has voting rights with respect to the Plan.
Each of the Plans provides that no material amendment to the Plan will be
effective unless it is approved by a vote of the Trustees and the Independent
Trustees of the applicable Fund. The holders of Class A and Class B shares have
exclusive voting rights with respect to the Plan applicable to their respective
class of shares. In adopting the Plans the Trustees concluded that, in their
judgment, there is a reasonable likelihood that the Plans will benefit the
holders of the applicable shares of each Fund.
33
<PAGE>
Amounts paid to Distributors by any class of shares of the Funds will not be
used to pay the expenses incurred with respect to any other class of shares of
the Funds; provided, however, that expenses attributable to the Fund as a whole
will be allocated, to the extent permitted by law, according to a formula based
upon gross sales dollars and/or average daily net assets of each such class, as
may be approved from time to time by vote of a majority of Trustees. From time
to time, the Fund may participate in joint distribution activities with other
Funds and the costs of those activities will be borne by each Fund in proportion
to the relative net asset value of the
During the fiscal year ended October 31, 1996, the Funds paid the Distributors
the following amounts of expenses with respect to the Class A shares and Class B
shares of each of the Funds:
<TABLE>
<CAPTION>
Expense Items
Printing and Interest,
Mailing of Compensation Carrying or
Prospectuses Expenses of to Selling Other Finance
Advertising to New Shareholders Distributors Brokers Charges
----------- ------------------- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Global Fund
Class A Shares $33,172 $(1,147) $80,563 $174,574 $ --
Class B Shares $25,134 $ 1,869 $57,825 $ 97,211 $ 68,820
World Bond Fund
Class A Shares $ 8,789 $ 2,495 $17,775 $ 64,882 $ --
Class B Shares $26,492 $ 1,196 $46,572 $160,047 $296,448
</TABLE>
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of a Fund's shares, the
following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned categories for which no sales are reported and
other securities traded over-the-counter are generally valued at the mean
between the current closing bid and asked prices.
Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
34
<PAGE>
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. If quotations are not readily available or the value
has been materially affected by events occurring after the closing of a foreign
market, assets are valued by a method that the Trustees believe accurately
reflects their value. Any assets or liabilities expressed in terms of foreign
currencies are translated into U.S. dollars by the custodian bank based on
London currency exchange quotations as of 5:00 p.m., London time ( 12:00 noon,
New York time) on the date of any determination of a Fund's NAV.
The NAV for each fund and class is determined each business day at the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m. Eastern
Time) by dividing a class's net assets by the number of its shares outstanding.
On any day an international market is closed and the New York Stock Exchange is
open, any foreign securities will be valued at the prior day's close with the
current day's exchange rate. Trading of foreign securities may take place on
Saturdays and U.S. business holidays on which a Fund's NAV is not calculated.
Consequently, a Fund's portfolio securities may trade and the NAV of the Fund's
redeemable securities may be significantly affected on days when a shareholder
has no access to the Fund.
INITIAL SALES CHARGE ON CLASS A SHARES
Shares of the Funds are offered at a price equal to their net asset value plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase (the "initial sales charge alternative") or on a contingent
deferred basis (the "deferred sales charge alternative"). Share certificates
will not be issued unless requested by the shareholder in writing, and then they
will only be issued for full shares. The Trustees of each Fund reserve the right
to change or waive each Fund's minimum investment requirements and to reject any
order to purchase shares (including purchase by exchange) when in the judgment
of the Adviser such rejection is in the respective Fund's best interest.
The sales charges applicable to purchases of Class A shares of the Funds are
described in the Prospectus. Methods of obtaining reduced sales charges referred
to generally in the Prospectus are described in detail below. In calculating the
sales charge applicable to current purchases of Class A shares, the investor is
entitled to cumulate current purchases with the greater of the current value (at
offering price) of the Class A shares of the Funds, owned by the investor, or if
John Hancock Signature Services, Inc. ("Signature Services") is notified by the
investor's dealer or the investor at the time of the purchase, the cost of the
Class A shares owned.
Combined Purchases. In calculating the sales charge applicable to purchases of
Class A shares made at one time, the purchases will be combined if made by (a)
an individual, his or her spouse and their children under the age of 21,
purchasing securities for his, her or their own account, (b) a trustee or other
fiduciary purchasing for a single trust, estate or fiduciary account and (c)
certain groups of four or more individuals making use of salary deductions or
similar group methods of payment whose funds are combined for the purchase of
mutual fund shares. Further information about combined purchases, including
35
<PAGE>
certain restrictions on combined group purchases, is available from Signature
Services or a Selling Broker's representative.
Without Sales Charges. Class A shares may be offered without a front-end sales
charge or contingent deferred sales charge ("CDSC") to various individuals and
institutions as follows:
o Any state, county or any instrumentality, department, authority, or
agency of these entities that is prohibited by applicable investment
laws from paying a sales charge or commission when it purchases shares
of any registered investment management company.*
o A bank, trust company, credit union, savings institution or other
depository institution, its trust department or common trust funds if
it is purchasing $1 million or more for non-discretionary customers or
accounts.*
o A Trustee or officer of the Trust; a Director or officer of the
Adviser and its affiliates or Selling Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees
or Directors of any of the foregoing; a member of the immediate family
(spouse, children, grandchildren, mother, father, sister, brother,
mother-in-law, father-in-law) of any of the foregoing; or any fund,
pension, profit sharing or other benefit plan for the individuals
described above.
o A broker, dealer, financial planner, consultant or registered
investment advisor that has entered into an agreement with John Hancock
Funds providing specifically for the use of a Fund's shares in
fee-based investment products or services made available to their
clients.
o A former participant in an employee benefit plan with John Hancock
funds, when he or she withdraws from his or her plan and transfers any
or all of his or her plan distributions directly to a Fund.
o A member of an approved affinity group financial services plan.*
o Existing full service clients of the Life Company who were group
annuity contract holders as of September 1, 1994, and participant
directed defined contribution plans with at least 100 eligible
employees at the inception of the subject Fund's account, may purchase
Class A shares with no initial sales charge. However, if the shares are
redeemed within 12 months after the end of the calendar year in which
the purchase was made, a CDSC will be imposed at the following rate:
Amount Invested CDSC Rate
--------------- ---------
$1 to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts to $10 million and over 0.25%
36
<PAGE>
Class A shares may also be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
*For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Accumulation Privilege. Investors (including investors combining purchases) who
are already Class A shareholders may also obtain the benefit of the reduced
sales charge by taking into account not only the amount then being invested but
also the purchase price or current account value of the Class A shares already
held by such person.
Combination Privilege. Reduced sales charges also are available to an investor
based on the aggregate amount of his concurrent and prior investments in Class A
shares and shares of all other John Hancock funds which carry a sales charge.
Letter of Intention. Reduced sales charges are also applicable to investments
made pursuant to a Letter of Intention (the "LOI"), which should be read
carefully prior to its execution by an investor. The Funds offer two options
regarding the specified period for making investments under the LOI. All
investors have the option of making their investments over a specified period of
thirteen (13) months. Investors who are using a Fund as a funding medium for a
qualified retirement plan, however, may opt to make the necessary investments
called for by the LOI over a forty-eight (48) month period. These qualified
retirement plans include IRA, SEP, SARSEP, 401(k), 403(b) (including TSAs), and
Section 457 plans. Such an investment (including accumulations and combinations)
must aggregate $100,000 or more with respect to World Bond Fund and $50,000 or
more with respect to Global Fund, in each case invested during the specified
period from the date of the LOI or from a date within ninety (90) days prior
thereto, upon written request to Signature Services. The sales charge applicable
to all amounts invested under the LOI is computed as if the aggregate amount
intended to be invested had been invested immediately. If such aggregate amount
is not actually invested, the difference in the sales charge actually paid and
the sales charge payable had the LOI not been in effect is due from the
investor. However, for the purchases actually made within the specified period
(either 13 or 48 months) the sales charge applicable will not be higher than
that which would have applied (including accumulations and combinations) had the
LOI been for the amount actually invested.
The LOI authorizes Signature Services to hold in escrow sufficient Class A
shares (approximately 5% of the aggregate) to make up any difference in sales
charges on the amount intended to be invested and the amount actually invested,
until such investment is completed within the specified period, at which time
the escrowed Class A shares will be released. If the total investment specified
in the LOI is not completed, the Class A shares held in escrow may be redeemed
and the proceeds used as required to pay the sales charge as may be due. By
signing the LOI, the investor authorizes Signature Services to act as his or her
attorney-in-fact to redeem any escrowed Class A shares and adjust the sales
charge, if necessary. A LOI does not constitute a binding commitment by an
investor to purchase, or by the Funds to sell, any additional Class A shares and
may be terminated at any time.
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<PAGE>
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per share without
the imposition of an initial sales charge so the Funds will receive the full
amount of the purchase payment.
Contingent Deferred Sales Charge. Class B shares which are redeemed within six
years of purchase will be subject to a CDSC at the rates set forth in the
Prospectus as a percentage of the dollar amount subject to the CDSC. The charge
will be assessed on an amount equal to the lesser of the current market value or
the original purchase cost of the Class B shares being redeemed. No CDSC will be
imposed on increases in account value above the initial purchase prices,
including Class B shares derived from reinvestment of dividends or capital gains
distributions. No CDSC will be imposed on shares derived from reinvestment of
dividends or capital gains distributions.
Class B shares are not available to full-service defined contribution plans
administered by Signature Services or the Life Company that had more than 100
eligible employees at the inception of the Fund account.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchases of shares, all payments
during a month will be aggregated and deemed to have been made on the first day
of the month.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
dividend and capital gain reinvestment, and next from the shares you have held
the longest during the six-year period. For this purpose, the amount of any
increase in a share's value above its initial purchase price is not regarded as
a share exempt from CDSC. Thus, when a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial purchase
price. However, you cannot redeem appreciation value only in order to avoid a
CDSC.
When requesting a redemption for a specific dollar amount please indicate if you
require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.
Example:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time your CDSC will be calculated as follows:
* Proceeds of 50 shares redeemed at $12 per share $600
* Minus proceeds of 10 shares not subject to CDSC
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<PAGE>
(dividend reinvestment) -120
* Minus appreciation on remaining shares (40 shares X $2) -80
----
* Amount subject to CDSC $400
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole or
in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Funds in connection with the sale of the
Class B shares, such as the payment of compensation to select Selling Brokers
for selling Class B shares. The combination of the CDSC and the distribution and
service fees facilitates the ability of the Funds to sell the Class B shares
without a sales charge being deducted at the time of the purchase. See the
Prospectus for additional information regarding the CDSC.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to CDSC,
unless indicated otherwise, in the circumstances defined below:
For all account types:
* Redemptions made pursuant to the Funds' right to liquidate your account
if you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability.
* Redemptions made under the Reinstatement Privilege, as described in
"Sales Charge Reductions and Waivers" of the Prospectus.
* Redemptions of Class B shares made under a periodic withdrawal plan, as
long as your annual redemptions do not exceed 12% of your account value
at the time you established your periodic withdrawal plan and 12% of
the value of subsequent investments (less redemptions) in that account
at the time you notify Signature Services. (Please note, this waiver
does not apply to periodic withdrawal plan redemptions of Class A
shares that are subject to a CDSC.)
For retirement Accounts (such as IRA, Rollover IRA, TSA, 457, 403(b), 401(k),
Money Purchase Pension Plan, Profit-Sharing Plan and other qualified plans as
described in the Internal Revenue Code) unless otherwise noted.
* Redemptions made to effect mandatory distributions under the Internal
Revenue Code.
* Returns of excess contributions made to these plans.
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<PAGE>
* Redemptions made to effect distributions to participants or
beneficiaries from employer sponsored retirement plans such as 401(a)
of the Code (such as 401(k), Money Purchase Pension Plan,
Profit-Sharing Plan).
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares
prior to May 15, 1995.
Please see matrix for reference.
CDSC Waiver Matrix
<TABLE>
<CAPTION>
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Type of 401(a) Plan 403(b) 457 IRA, IRA Non-
Distribution (401(k), MPP, Rollover Retirement
PSP)
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Death or Waived Waived Waived Waived Waived
Disability
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Over 70 1/2 Waived Waived Waived Waived for 12% of
mandatory account value
distributions annually in
or 12% of periodic
account value payments
annually in
periodic
payments.
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Between 59 1/2 Waived Waived Waived Waived for Life 12% of
and 70 1/2 Expectancy or account value
12% of account annually in
value annually periodic
in periodic payments
payments.
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Under 59 1/2 Waived Waived for Waived for Waived for 12% of
annuity annuity annuity account value
payments (72t) payments (72t) payments (72t) annually in
or 12% of or 12% of or 12% of periodic
account value account value account value payments
annually in annually in annually in
periodic periodic periodic
payments. payments. payments.
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Loans Waived Waived N/A N/A N/A
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Termination of Not Waived Not Waived Not Waived Not Waived N/A
Plan
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Hardships Waived Waived Waived N/A N/A
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Return of Excess Waived Waived Waived Waived N/A
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
</TABLE>
If you qualify for a CDSC waiver under one of these situations, you must notify
Signature Services at the time you make your redemption. The waiver will be
granted once Signature Services has confirmed that you are entitled to the
waiver.
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<PAGE>
SPECIAL REDEMPTIONS
Although they would not normally do so, the Funds have the right to pay the
redemption price of shares of the Funds in whole or in part in portfolio
securities as prescribed by the Trustees. If the shareholder were to sell
portfolio securities received in this fashion, he would incur a brokerage
charge. Any such securities would be valued for the purposes of making such
payment at the same value as used in determining net asset value. The Funds
have, however, elected to be governed by Rule 18f-1 under the Investment Company
Act. Under that rule, the Funds must redeem their shares for cash except to the
extent that the redemption payments to any shareholder during any 90-day period
would exceed the lesser of $250,000 or 1% of the applicable Fund's net asset
value at the beginning of such period.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of shares of any class of a fund
for shares of the same class in any other John Hancock fund offering that class.
Exchanges between funds with shares that are not subject to a CDSC are based on
their respective net asset values. No sales charge or transaction charge is
imposed. Shares of the Fund which are subject to a CDSC may be exchanged into
shares of any of the other John Hancock funds that are subject to a CDSC without
incurring the CDSC; however, the shares acquired in an exchange will be subject
to the CDSC schedule of the shares acquired if and when such shares are redeemed
(except that shares exchanged into John Hancock Short-Term Strategic Income
Fund, John Hancock Intermediate Maturity Government Fund and John Hancock
Limited-Term Government Fund will retain the exchanged fund's CDSC schedule).
For purposes of computing the CDSC payable upon redemption of shares acquired in
an exchange, the holding period of the original shares is added to the holding
period of the shares acquired in an exchange.
If a shareholder exchanges Class B shares purchased prior to January 1, 1994
(except John Hancock Short-Term Strategic Income Fund) for Class B shares of any
other John Hancock fund, the acquired shares will continue to be subject to the
CDSC schedule that was in effect when the exchanged shares were purchased.
Each Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
Each Fund may refuse any exchange order. Each Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
Systematic Withdrawal Plan. Each Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds from the redemption
of shares of the applicable Fund. Since the redemption price of the shares of a
Fund may be more or less than the shareholder's cost, depending upon the market
41
<PAGE>
value of the securities owned by the Fund at the time of redemption, the
distribution of cash pursuant to this plan may result in recognition of gain or
loss for purposes of Federal, state and local income taxes. The maintenance of a
Systematic Withdrawal Plan concurrently with purchases of additional Class A or
Class B shares could be disadvantageous to a shareholder because of the initial
sales charge payable on such purchases of Class A shares and the CDSC imposed on
redemptions of Class B shares and because redemptions are taxable events.
Therefore, a shareholder should not purchase Class A or Class B shares at the
same time a Systematic Withdrawal Plan is in effect. The Funds reserve the right
to modify or discontinue the Systematic Withdrawal Plan of any shareholder on 30
days' prior written notice to such shareholder, or to discontinue the
availability of such plan in the future. The shareholder may terminate the plan
at any time by giving proper notice to Signature Services.
Monthly Automatic Accumulation Program ("MAAP"). This program is explained in
the Prospectus. The program, as it relates to automatic investment checks, is
subject to the following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the MAAP may be revoked by Signature
Services without prior notice if any investment is not honored by the
shareholder's bank. The bank shall be under no obligation to notify the
shareholder as to the non-payment of any checks.
The program may be discontinued by the shareholder either by calling Signature
Services or upon written notice to Signature Services which is received at least
five (5) business days prior to the processing date of any investment.
Reinstatement or Reinvestment Privilege. Upon notification of Signature
Services, a shareholder who has redeemed Fund shares may, within 120 days after
the date of redemption, reinvest without payment of a sales charge any part of
the redemption proceeds in shares of the same class of the same Fund or in any
other John Hancock funds, subject to the minimum investment limit in that fund.
The proceeds from the redemption of Class A shares may be reinvested at net
asset value without paying a sales charge in Class A shares of the same Fund or
in Class A shares of any John Hancock fund. If a CDSC was paid upon a
redemption, a shareholder may reinvest the proceeds from this redemption at net
asset value in additional shares of the class from which the redemption was
made. The shareholder's account will be credited with the amount of any CDSC
charged upon the prior redemption and the new shares will continue to be subject
to the CDSC. The holding period of the shares acquired through reinvestment
will, for purposes of computing the CDSC payable upon a subsequent redemption,
include the holding period of the redeemed shares.
To protect the interests of other investors in each Fund, each Fund may cancel
the reinvestment privilege of any parties that, in the opinion of each Fund, are
using market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. Also, each Fund may refuse any reinvestment
request.
Each Fund may change or cancel its reinvestment policies at any time.
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<PAGE>
A redemption on exchange of Fund shares is a taxable transaction for Federal
income tax purposes even if the reinvestment privilege is exercised, and any
gain or loss realized by a shareholder on the redemption or other disposition of
Fund shares will be treated for tax purposes as described under the caption "TAX
STATUS."
DESCRIPTION OF THE FUNDS' SHARES
The Trustees of the Trust are responsible for the management and supervision of
the Funds. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund, without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this Statement of Additional
Information, the Trustees have authorized the issuance of two classes of shares
of the Funds, designated as Class A and Class B.
The shares of each class of a Fund represent an equal proportionate interest in
the aggregate net assets attributable to the classes of the Fund. Holders of
Class A and Class B shares have certain exclusive voting rights on matters
relating to their respective distribution plans. The different classes of a Fund
may bear different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares.
Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and will be in the same amount,
except for differences resulting from the facts that (i) the distribution and
service fees relating to the Class A and Class B shares will be borne
exclusively by that class (ii) Class B shares will pay higher distribution and
service fees than Class A shares and (iii) Class A and Class B shares will bear
any class expenses properly allocable to that class of shares, subject to the
conditions the Internal Revenue Service imposes with respect to multiple-class
structures. Similarly, the net asset value per share may vary depending on
whether Class A or Class B shares are purchased.
In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the applicable Fund available for distribution to
such shareholders. Shares entitle their holders to one vote per share, are
freely transferable and have no preemptive, subscription or conversion rights.
When issued, shares are fully paid and non-assessable, except as set forth
below.
Unless otherwise required by the Investment Company Act or the Declaration of
Trust, each Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares, and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with a request for a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
43
<PAGE>
of the Trust. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts, obligations or affairs of each Fund. The
Declaration of Trust also provides for indemnification out of the Funds' assets
for all losses and expenses of any shareholder held personally liable by reason
of being or having been a shareholder. The Declaration of Trust also provides
that no series of the Trust shall be liable for the liabilities of any other
series. Furthermore, no fund included in the Funds' prospectus shall be liable
for the liabilities of any other John Hancock fund. Liability is therefore
limited to circumstances in which a Fund itself would be unable to meet its
obligations, and the possibility of this occurrence is remote.
A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts.
TAX STATUS
Each Fund is treated as a separate entity for accounting and tax purposes. Each
Fund has qualified and elected to be treated as a "regulated investment company"
under Subchapter M of the Code, and intends to continue to so qualify for each
taxable year. As such and by complying with the applicable provisions of the
Code regarding the sources of its income, the timing of its distributions, and
the diversification if its assets, each Fund will not be subject to Federal
income tax on taxable income (including net realized capital gains) which is
distributed to shareholders in accordance with the timing requirements of the
Code.
Each Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. Each Fund
intends under normal circumstances to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.
Distributions from each Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from a Fund's "investment company taxable income,"
they will be taxable as ordinary income; and if they are paid from the Fund's
"net capital gain," they will be taxable as long-term capital gain. (Net capital
gain is the excess (if any) of net long-term capital gain over net short-term
capital loss, and investment company taxable income is all taxable income and
capital gains, other than net capital gain, after reduction by deductible
expenses.) Some distributions from investment company taxable income and/or net
capital gain may be paid in January but may be taxable to shareholders as if
they had been received on December 31 of the previous year. The tax treatment
described above will apply without regard to whether distributions are received
in cash or reinvested in additional shares of a Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
If a Fund invests in stock of certain foreign corporations that receive at least
75% of their annual gross income from passive sources (such as interest,
dividends, rents, royalties or capital gain) or hold at least 50% of their
44
<PAGE>
assets in investments producing such passive income ("passive foreign investment
companies"), that Fund could be subject to Federal income tax and additional
interest charges on "excess distributions" received from these passive foreign
investment companies or gain from the sale of stock in such companies, even if
all income or gain actually received by the Fund is timely distributed to its
shareholders. The Fund would not be able to pass through to its shareholders any
credit or deduction for such a tax. Certain elections may, if available,
ameliorate these adverse tax consequences, but any such election would require
the applicable Fund to recognize taxable income or gain without the concurrent
receipt of cash. Each Fund may limit and/or manage its holdings in passive
foreign investment companies to minimize its tax liability or maximize its
return from these investments.
Foreign exchange gains and losses realized by a Fund in connection with certain
transactions involving foreign currency-denominated debt securities, certain
foreign currency futures and options, foreign currency forward contracts,
foreign currencies, or payables or receivables denominated in a foreign currency
are subject to Section 988 of the Code, which generally causes such gains and
losses to be treated as ordinary income and losses and may affect the amount,
timing and character of distributions to shareholders. Any such transactions
that are not directly related to a Fund's investment in stock or securities,
possibly including speculative currency positions or currency derivatives not
used for hedging purposes, may increase the amount of gain it is deemed to
recognize from the sale of certain investments or derivatives held for less than
three months, which gain is limited under the Code to less than 30% of its gross
income for each taxable year, and could under future Treasury regulations
produce income not among the types of "qualifying income" from which the Fund
must derive at least 90% of its gross income for each taxable year. If the net
foreign exchange loss for a year treated as ordinary loss under Section 988 were
to exceed a Fund's investment company taxable income computed without regard to
such loss the resulting overall ordinary loss for such year would not be
deductible by the Fund or its shareholders in future years.
The Funds may be subject to withholding and other taxes imposed by foreign
countries with respect to their investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes in come cases. Investors may be entitled to claim U.S. foreign tax credits
or deductions with respect to foreign income taxes or certain other foreign
taxes ("qualified foreign taxes"), subject to certain provisions and limitations
contained in the Code. Specifically, if more than 50% of the value of a Fund's
total assets at the close of any taxable year consists of stock or securities of
foreign corporations, the Fund may file an election with the Internal Revenue
Service pursuant to which shareholders of the Fund will be required to (i)
include in ordinary gross income (in addition to taxable dividends and
distributions actually received) their pro rata shares of qualified foreign
taxes paid by the Fund even though not actually received by them, and (ii) treat
such respective pro rata portions as foreign taxes paid by them.
If a Fund makes this election, shareholders may then deduct such pro rata
portions of qualified foreign taxes in computing their taxable incomes, or
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of qualified foreign taxes paid by the Fund,
although such shareholders will be required to include their share of such taxes
in gross income. Shareholders who claim a foreign tax credit for such foreign
taxes may be required to treat a portion of dividends received from the Fund as
45
<PAGE>
a separate category of income for purposes of computing the limitations on the
foreign tax credit. Tax-exempt shareholders will ordinarily not benefit from
this election. Each year (if any) that a Fund files the election described
above, its shareholders will be notified of the amount of (i) each shareholder's
pro rata share of qualified foreign taxes paid by the Fund and (ii) the portion
of Fund dividends which represents income from each foreign country. A Fund that
cannot or does not make this election may deduct such taxes in determining the
amount it has available for distribution to shareholders, and shareholders would
not, in this event, include these foreign taxes in their income, nor would they
be entitled to any tax deductions or credits with respect to such taxes.
For each Fund, the amount of net short-term and long-term capital gains, if any,
in any given year will vary depending upon the Adviser's current investment
strategy and whether the Adviser believes it to be in the best interest of the
Fund to dispose of portfolio securities or enter into options or futures
transactions that will generate capital gains. At the time of an investor's
purchase of Fund shares, a portion of the purchase price is often attributable
to realized or unrealized appreciation in the Fund's portfolio or undistributed
taxable income of the Fund. Consequently, subsequent distributions on those
shares from such appreciation or income may be taxable to such investor even if
the net asset value of the investor's shares is, as a result of the
distributions, reduced below the investor's cost for such shares, and the
distributions in reality represent a return of a portion of the purchase price.
Upon a redemption of shares of a Fund (including by exercise of the exchange
privilege) a shareholder will ordinarily realize a taxable gain or loss
depending upon the amount of the proceeds and the investor's basis in his
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands and will be long-term or
short-term, depending upon the shareholder's tax holding period for the shares
and subject to the special rules described below. A sales charge paid in
purchasing Class A shares of a Fund cannot be taken into account for purposes of
determining gain or loss on the redemption or exchange of such shares within 90
days after their purchase to the extent shares of the Fund or another John
Hancock Fund are subsequently acquired without payment of a sales charge
pursuant to the reinvestment or exchange privilege. This disregarded charge will
result in an increase in the shareholder's tax basis in the shares subsequently
acquired. Also, any loss realized on a redemption or exchange may be disallowed
to the extent the shares disposed of are replaced with other shares of the same
Fund within a period of 61 days beginning 30 days before and ending 30 days
after the shares are disposed of, such as pursuant to the automatic dividend
reinvestments. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss. Any loss realized upon the redemption of shares
with a tax holding period of six months or less will be treated as a long-term
capital loss to the extent of any amounts treated as distributions of long-term
capital gain with respect to such shares.
Although its present intention is to distribute, at least annually, all net
capital gain, if any, each Fund reserves the right to retain and reinvest all or
any portion of the excess of net long-term capital gain over net short-term
capital loss in any year. The Funds will not in any event distribute net capital
gain realized in any year to the extend that a capital loss is carried forward
from prior years against such gain. To the extent such excess was retained and
not exhausted by the carryforward of prior years' capital losses, it would be
subject to Federal income tax in the hands of a Fund. Upon proper designation of
this amount by the Fund, each shareholder would be treated for Federal income
tax purposes as if such Fund had distributed to him on the last day of its
46
<PAGE>
taxable year his pro rata share of such excess, and he had paid his pro rata
share of the taxes paid by the Fund and reinvested the remainder in the Fund.
Accordingly, each shareholder would (a) include his pro rata share of such
excess as long-term capital gain in his return for his taxable year in which the
last day of the Fund's taxable year falls, (b) be entitled either to a tax
credit on his return for, or a refund of, his pro rata share of the taxes paid
by the Fund, and (c) be entitled to increase the adjusted tax basis for his
shares in the Fund by the difference between his pro rata share of such excess
and his pro rata share of such taxes.
For Federal income tax purposes, each Fund is permitted to carry forward a net
capital loss in any year to offset its own net capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent net capital
gains are offset by such losses, they would not result in Federal income tax
liability to the applicable Fund, and as noted above, would not be distributed
as such to shareholders. The capital loss carryforwards for each of the Funds
are as follows: (i) Global Fund has no capital loss carryforwards; and (ii)
World Bond Fund has $938,808 which will expire October 31, 2002.
A Fund is required to accrue income on any debt securities that have more than a
de minimis amount of original issue discount (or debt securities acquired at a
market discount, if the Fund elects to include market discount in income
currently) prior to the receipt of the corresponding cash payments. The mark to
market rules applicable to certain options, futures contracts, and forward
contracts may also require the Fund to recognize income or gain without a
concurrent receipt of cash. However, each Fund must distribute to shareholders
for each taxable year substantially all of its net income and net capital gains,
including such income or gain, to qualify as a regulated investment company and
avoid liability for any federal income or excise tax. Therefore, the Funds may
have to dispose of portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage by borrowing the cash, to satisfy these
distribution requirements.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) a Fund's distributions
are derived from interest on (or, in the case of intangibles taxes, the value of
its assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. The Funds will not seek to satisfy any
threshold or reporting requirements that may apply in particular taxing
jurisdictions, although either Fund may in its sole discretion provide relevant
information to shareholders.
Each Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish a Fund with their correct taxpayer
identification number and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholder
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. The Funds may refuse to
accept an application that does not contain any required taxpayer identification
47
<PAGE>
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in shares, will be reduced by the amounts
required to be withheld. Any amounts withheld may be credited against a
shareholder's U.S. federal income tax liability. Investors should consult their
tax advisers about the applicability of the backup withholding provisions.
For purposes of the dividends received deduction available to corporations,
dividends received by a Fund, if any, from U.S. domestic corporations in respect
of any share of stock held by the Fund, for U.S. Federal income tax purposes,
for at least 46 days (91 days in the case of certain preferred stock) and
distributed and properly designated by the Fund may be treated as qualifying
dividends. Dividends from World Bond Fund and most or all dividends from Global
Fund generally will not qualify for the dividends received deduction. Corporate
shareholders must meet the minimum holding period requirement stated above (46
or 91 days) with respect to their shares of the applicable Fund in order to
qualify for the deduction and, if they have any debt that is deemed under the
Code directly attributable to such shares, may be denied a portion of the
dividends received deduction. The entire qualifying dividend, including the
otherwise deductible amount, will be included in determining alternative minimum
tax liability, if any. Additionally, any corporate shareholder should consult
its tax adviser regarding the possibility that its tax basis in its shares may
be reduced, for Federal income tax purposes, by reason of "extraordinary
dividends" received with respect to the shares, for the purpose of computing its
gain or loss on redemption or other disposition of the shares.
Investment in debt obligations that are at risk of or in default presents
special tax issues for World Bond Fund. Tax rules are not entirely clear about
issues such as when the Fund may cease to accrue interest, original issue
discount, or market discount, when and to what extent deductions may be taken
for bad debts or worthless securities, how payments received on obligations in
default should be allocated between principal and income, and whether exchanges
of debt obligations in a workout context are taxable. These and other issues
will be addressed by World Bond Fund in order to reduce the risk of distributing
insufficient income to preserve its status as a regulated investment company and
seek to avoid becoming subject to Federal income or excise tax.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
Limitations imposed by the Code on regulated investment companies like the Funds
may restrict each Fund's ability to enter into futures and options contracts,
foreign currency positions, and foreign currency forward contracts. Certain of
these transactions undertaken by a Fund may cause the Fund to recognize gains or
losses from marking to market even though its positions have not been sold or
terminated and affect the character as long-term or short-term (or, in the case
of certain currency forwards, options and futures, as ordinary income or loss)
and timing of some capital gains and losses realized by the Fund. Also, certain
of a Fund's losses on its transactions involving options, futures or forward
contracts and/or offsetting or successor portfolio positions may be deferred
rather than being taken into account currently in calculating the Fund's taxable
income or gain. Certain of these transactions may also cause a Fund to dispose
of investments sooner than would otherwise have occurred. These transactions may
therefore affect the amount, timing and character of a Fund's distributions to
48
<PAGE>
shareholders. The Funds will take into account the special tax rules (including
consideration of available elections) applicable to options, futures or forward
contracts in order to minimize any potential adverse tax consequences.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may also be
subject to state and local taxes. Shareholders should consult their own tax
advisers as to the Federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Funds in their particular
circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in a Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from a Fund and, unless an effective IRS Form W-8 or authorized
substitute is on file, to 31% backup withholding on certain other payments from
the Fund. Non-U.S. investors should consult their tax advisers regarding such
treatment and the application of foreign taxes to an investment in a Fund.
The Funds are not subject to Massachusetts corporate excise or franchise taxes.
Provided that a Fund qualifies as a regulated investment company under the Code,
it will also not be required to pay any Massachusetts income tax.
CALCULATION OF PERFORMANCE
Total Return. Average annual total return is determined separately for each
class of shares.
Set forth below are tables showing the performance on a total return basis
(i.e., with all dividends and distributions reinvested) of a hypothetical $1,000
investment in the Class A and Class B shares of the Funds. The performance
information for each Fund is stated for the year ended October 31, 1996 and,
with respect to Class A shares of each Fund and Class B shares of World Bond
Fund, for the period from the commencement of operations (indicated by an
asterisk). With respect to Class B shares of each Fund, performance information
is also stated for the five year period ended October 31, 1996 and with respect
to Class A shares of Global Fund, performance information is stated for the ten
year period ended October 31, 1996.
<TABLE>
<CAPTION>
Global Fund
Class A Class A Class B Class B Class B
Shares Shares Shares Shares Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended Ten Years Ended
10/31/96 10/31/96 10/31/96 10/31/96 10/31/96
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
4.33% 7.66% 4.10% 8.35% 9.31%
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
World Bond Fund
Class A Class A Class B Class B Class B
Shares Shares Shares Shares Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 12/17/86* to
10/31/96 10/31/96 10/31/96 10/31/96 10/31/96
- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
0.71% 3.62% (0.22%) 4.15% 8.69%
</TABLE>
* Commencement of operations.
Total return is computed by finding the average annual compounded rates of
return over the designated periods that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
n _____
T = \ /ERV/P - 1
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment made
at the beginning of the 1 year, 5 years, and life-of-fund periods.
The result of the foregoing calculation is an average and is not the same as the
actual year-to-year results.
Because each share of each Fund has its own sales charge and fee structure, the
classes of each Fund have different performance results. This calculation
assumes that the maximum sales charge for Class A shares of 5% for Global Fund
and 4.50% for World Bond Fund is included in the initial investment or, for
Class B shares, the applicable CDSC is applied at the end of the period. This
calculation also assumes that all dividends and distributions are reinvested at
net asset value on the reinvestment dates during the period. The "distribution
rate" is determined by annualizing the result of dividing the declared dividends
of a Fund during the period stated by the maximum offering price and net asset
value at the end of the period. Excluding a Fund's sales charge from the
distribution rate produces a higher rate.
In addition to average annual total returns, the Funds may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total returns may be quoted as a percentage or
as a dollar amount, and may be calculated for a single investment, a series of
investments, and/or a series of redemptions, over any time period. Total returns
may be quoted with or without taking the Funds' sales charge on Class A shares
50
<PAGE>
or the CDSC on Class B shares into account. Excluding the Funds' sales charge on
Class A shares and the CDSC on Class B shares from a total return calculation
produces a higher total return figure.
World Bond Fund
Yield. Yield is determined separately for Class A and Class B shares. The yields
for the Class A and Class B shares of the World Bond Fund for the thirty days
ended October 31, 1996 were 5.72% and 5.35%, respectively.
Yield is computed by dividing the net investment income per share earned during
a specified 30 day period by the maximum offering price per share on the last
day of such period, according to the following formula:
Yield = 2 ([(a - b) + 1] 6 - 1)
---
cd
Where:
a= dividends and interest earned during the period
b= net expenses accrued for the period
c= the average daily number of share outstanding during the period
that were entitled to receive dividends
d= the maximum offering price per share on the last day of the period.
While the foregoing formula reflects the standard accounting method for
calculating yield, it does not reflect the Fund's actual bookkeeping; as a
result, the income reported or paid by the Fund may be different.
To calculate interest earned (for the purpose of "a" above) on debt obligations,
World Bond Fund computes the yield to maturity of each obligation held by the
Fund based on the market value of the obligation (including actual accrued
interest) at the close of last business day of the period, or, with respect to
obligations purchased during the period, the purchase price (plus actual accrued
interest). The yield to maturity is then divided by 360 and the quotient is
multiplied by the market value of the obligation (including actual accrued
interest) to determine the interest income on the obligation for each day of the
subsequent period that the obligation is in the portfolio.
To calculate interest earned (for the purpose of "a" above) on foreign debt
obligations, the Fund computes the yield to maturity of each obligation based on
the local foreign currency market value of the obligation (including actual
accrued interest) at the beginning of the period, or, with respect to
obligations purchased during the period, the purchase price plus accrued
interest. The yield to maturity is then divided by 360 and the quotient is
multiplied by the current market value of the obligation (including actual
accrued interest in local currency denomination), then converted to U.S. dollars
using exchange rates from the close of the last business day of the period to
51
<PAGE>
determine the interest income on the obligation for each day of the subsequent
period that the obligation is in the portfolio. Applicable foreign withholding
taxes, net of reclaim, are included in the "b" expense component.
Solely for the purpose of computing yield, the Fund recognizes dividend income
by accruing 1/360 of the stated dividend rate of a security each day that a
security is in the portfolio.
Undeclared earned income, computed in accordance with generally accepted
accounting principles, may be subtracted from the maximum offering price.
Undeclared earned income is the net investment income which, at the end of the
base period, has not been declared as a dividend, but is reasonably expected to
be declared as a dividend shortly thereafter.
All accrued expenses are taken to account as described later herein.
From time to time, in reports and promotional literature, the Funds' total
return and/or yield will be compared to indices of mutual funds such as Lipper
Analytical Services, Inc.'s "Lipper-Mutual Performance Analysis," a monthly
publication which tracks net assets, total return, and yield on mutual funds in
the United States. Ibottson and Associates, CDA Weisenberger and F.C. Towers are
also used for comparison purposes, as well as Russell and Wilshire indices.
Performance rankings and ratings reported periodically in national financial
publications such as MONEY Magazine, FORBES, BUSINESS WEEK, THE WALL STREET
JOURNAL, MORNINGSTAR, STANGER'S and BARRON'S, etc. may also be utilized. The
Funds' promotional and sales literature may make reference to the Funds' "beta".
Beta is a reflection of the market related risk of the Fund by showing how
responsive the Fund is to the market.
The performance of the Funds is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of the Funds for
any period in the future. The performance of any Fund is a function of many
factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales, and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Funds' performances.
BROKERAGE ALLOCATION
Each Advisory Agreement authorizes the Adviser (subject to the control of the
Board of Trustees) to select brokers and dealers to execute purchases and sales
of portfolio securities. It directs the Adviser to use its best efforts to
obtain the best overall terms for the Funds, taking into account such factors as
price (including dealer spread), the size, type and difficulty of the
transaction involved, and the financial condition and execution capability of
the broker or dealer.
The Sub-Advisory Agreement between the Adviser and JH Advisers International
authorizes JH Advisers International (subject to the control of the Trustees of
the Trust) to provide the Global Fund with a continuing and suitable investment
program with respect to investments by the Fund in countries other than the
United States and Canada.
52
<PAGE>
To the extent that the execution and price offered by more than one dealer are
comparable, the Adviser or JH Advisers International, as the case may be, may,
in their discretion, decide to effect transactions in portfolio securities with
dealers on the basis of the dealer's sales of shares of the Funds or with
dealers who provide the Funds, the Adviser or JH Advisers International with
services such as research and the provision of statistical or pricing
information. In addition, the Funds may pay brokerage commissions to brokers or
dealers in excess of those otherwise available upon a determination that the
commission is reasonable in relation to the value of the brokerage services
provided, viewed in terms of either a specific transaction or overall brokerage
services provided with respect to the Funds' portfolio transactions by such
broker or dealer. Any such research services would be available for use on all
investment advisory accounts of the Adviser or JH Advisers International. The
Funds may from time to time allocate brokerage on the basis of sales of their
shares. Review of compliance with these policies, including evaluation of the
overall reasonableness of brokerage commissions paid, is made by the Trustees.
The Adviser places all orders for purchases and sales of portfolio securities of
the Funds. In selecting broker-dealers, the Adviser may consider research and
brokerage services furnished to them. The Adviser may use this research
information in managing the Funds' assets, as well as assets of other clients.
Municipal securities, foreign debt securities and Government Securities are
generally traded on the over-the-counter market on a "net" basis without a
stated commission, through dealers acting for their own account and not as
brokers. The World Bond Fund (with respect to Government Securities in its
portfolio) will primarily engage in transactions with these dealers or deal
directly with the issuer. Prices paid to the dealer will generally include a
"spread", which is the difference between the prices at which the dealer is
willing to purchase and sell the specific security at that time.
During the fiscal years ended October 31, 1994, 1995 and 1996, the Trust paid
$509,845, $525,839 and $706,944 in negotiated brokerage commissions on behalf of
the Global Fund. During the fiscal years ended October 31, 1994, 1995 and 1996,
the Trust paid $0, $24,400, and $0 in brokerage commissions on behalf of the
World Bond Fund.
When a Fund engages in an option transaction, ordinarily the same broker will be
used for the purchase or sale of the option and any transactions in the
securities to which the option relates. The writing of calls and the purchase of
puts and calls by a Fund will be subject to limitations established (and changed
from time to time) by each of the Exchanges governing the maximum number of puts
and calls covering the same underlying security which may be written or
purchased by a single investor or group of investors acting in concert,
regardless of whether the options are written or purchased on the same or
different Exchanges, held or written in one or more accounts or through one or
more brokers. Thus, the number of options which a Fund may write or purchase may
be affected by options written or purchased by other investment companies and
other investment advisory clients of the Adviser and its affiliates or JH
Advisers International. An Exchange may order the liquidation of positions found
to be in violation of these limits, and it may impose certain other sanctions.
In the U.S. Government securities market, securities are generally traded on a
"net" basis with dealers acting as principal for their own account without a
stated commission, although the price of the security usually includes a profit
53
<PAGE>
to the dealer. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or premiums are paid.
Municipal securities are generally traded on the over-the-counter market on a
"net" basis without a stated commission, through dealers acting for their own
account and not as brokers. Prices paid to a municipal securities dealer will
generally include a "spread", which is the difference between the prices at
which the dealer is willing to purchase and sell the specific security at that
time.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Distributors, Inc., a broker-dealer ("Distributors"
or "Affiliated Brokers"). The Trustees have established that any portfolio
transaction for the Funds may be executed through Affiliated Brokers if, in the
judgment of the Adviser or JH Advisers International, as the case may be, the
use of Affiliated Brokers is likely to result in price and execution at least as
favorable as those of other qualified brokers, and if, in the transaction,
Affiliated Brokers charges the Funds a commission rate consistent with those
charged by Affiliated Brokers to comparable unaffiliated customers in similar
transactions. Affiliated Brokers will not participate in commissions in
brokerage given by a Fund to other brokers or dealers and neither will receive
any reciprocal brokerage business resulting therefrom. Over-the-counter
purchases and sales are transacted directly with principal market makers except
in those cases in which better prices and executions may be obtained elsewhere.
Affiliated Brokers will not receive any brokerage commissions for orders they
execute for a Fund in the over-the-counter market. A Fund will in no event
effect principal transactions with Affiliated Brokers in the over-the-counter
securities in which Affiliated Brokers makes a market.
During the fiscal periods ended October 31, 1994, 1995 and 1996 no brokerage
commissions were paid to Affiliated Brokers in connection with the portfolio
transactions of either the Global Fund or the World Bond Fund.
Other investment advisory clients advised by the Adviser or JH Advisers
International, as the case may be, may also invest in the same securities as a
Fund. When these clients buy or sell the same securities at substantially the
same time, the Adviser or JH Advisers International may average the transactions
as to price and allocate the amount of available investments in a manner which
the Adviser or JH Advisers International believes to be equitable to each
client, including the Funds. In some instances, this investment procedure may
adversely affect the price paid or received by a Fund or the size of the
position obtainable for it. On the other hand, to the extent permitted by law,
the Adviser or JH Advisers International may aggregate the securities to be sold
or purchased for a Fund with those to be sold or purchased for other clients
managed by it in order to obtain best execution.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the trustees that such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time. During the fiscal year ended October 31,
1996, Global Fund paid $20,720 and World Bond Fund paid $0.
54
<PAGE>
TRANSFER AGENT SERVICES
John Hancock Signature Services, Inc., 1 John Hancock Way STE 1000, Boston, MA
02217-1000, a wholly-owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Funds. Global Fund pays Signature
Services an annual fee of $19.00 for each Class A shareholder and of $21.50 for
each Class B shareholder. The World Bond Fund pays Signature Services an annual
fee of $20.00 for each Class A shareholder and $22.50 for each Class B
shareholder. Each Fund also pays certain out-of-pocket expenses and these
expenses are aggregated and charged to each Fund and allocated to each class on
the basis of their relative net asset values.
CUSTODY OF PORTFOLIO
Portfolio securities of the Funds are held pursuant to a custodian agreement
between the Trust and State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110. Under the custodian agreement, State Street Bank &
Trust Company performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Funds are Price Waterhouse LLP, 160 Federal
Street, Boston, Massachusetts, 02110. Price Waterhouse LLP audits and renders an
opinion on each Fund's annual financial statements and reviews each Fund's
annual Federal income tax return.
55
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS*
Moody's Bond Ratings
Bonds. "Bonds which are rated 'Aaa' are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge.' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most likely to impair
the fundamentally strong position of such issues.
"Bonds which are rated 'Aa' are judged to be of high quality by all standards.
Together with the 'Aaa' group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in 'Aaa' securities or fluctuation of
protective elements may be of grater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in 'Aaa'
securities
.
"Bonds which are rated 'A' possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
"Bonds which are rated 'Baa' are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Bonds which are rated 'Ba' are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position,
characterizes bonds in this class.
"Bonds which are rated 'B' generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
"Bonds which are rated 'Caa' are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
"Bonds which are rated 'Ca' represented obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
A-1
<PAGE>
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue. Should
no rating be assigned, the reason may be one of the following: (i) an
application for rating was not received or accepted; (ii) the issue or issuer
belongs to a group of securities that are not rated as a matter of policy; (iii)
there is a lack of essential data pertaining to the issue or issuer; or (iv) the
issue was privately placed, in which case the rating is not published in Moody's
publications.
- ------------
*As described by the rating companies themselves.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Standard & Poor's Bond Ratings
"AAA. Debt rated 'AAA' has the highest rating by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
"AA. Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
"A. Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
"BBB. Debt rated 'BBB' is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
Debt rated "BB," or "B," is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and pay principal in
accordance with the terms of the obligation. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major risk exposures to adverse conditions.
"CCC: Debt rated 'CCC' has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The 'CCC' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'B' or 'B-' rating.
"CC: The rating 'CC' is typically applied to debt subordinated to senior debt
that is assigned an actual or implied 'CCC' rating.
A-2
<PAGE>
Unrated. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper Ratings
Moody's ratings for commercial paper are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's two highest commercial paper rating categories
are as follows:
"P-1 -- "Prime-1" indicates the highest quality repayment capacity of the rated
issues.
"P-2 -- "Prime-2" indicates that the issuer has a strong capacity for repayment
of short-term promissory obligations. Earnings trends and coverage ratios, while
sound, will be more subjective to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained."
Standard & Poor's Commercial Paper Ratings
Standard & Poor's commercial paper ratings are current assessments of the
likelihood of timely payment of debts having an original maturity of no more
than 365 days. Standard & Poor's two highest commercial paper rating categories
are as follows:
"A-1 -- This designation indicates that the degree of safety regarding timely
payment is very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus (+) sign designation.
"A-2 -- Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1."
A-3
<PAGE>
FINANCIAL STATEMENTS
F-1
<PAGE>
John Hancock Funds
Supplement to Statement of Additional Information
The "INITIAL SALES CHARGE ON CLASS A SHARES" section is supplemented under the
heading "Without Sales Charge" by adding:
o Retirement plans participating in Merrill Lynch servicing programs, if
the Plan has more than $3 million in assets or 500 eligible employees
at the date the Plan Sponsor signs the Merrill Lynch Recordkeeping
Service Agreement. See your Merrill Lynch financial consultant for
further information.
The "INITIAL SALES CHARGE ON CLASS A AND CLASS B SHARES" section is supplemented
under the heading "Without Sales Charge" by adding:
o For retirement plans participating in Merrill Lynch's servicing
programs, Class A shares are not available at net asset value for
Plans with less than $3 million or 500 eligible employees at the date
the Plan Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement. Class B shares are available. See your Merrill Lynch
financial consultant for further information.
The "DEFERRED SALES CHARGE ON CLASS B SHARES" section is supplemented under the
heading "Waiver of Contingent Deferred Sales Charge" by adding:
o Retirement plans participating in Merrill Lynch servicing programs, if
the Plan has more than $3 million in assets or 500 eligible employees
at the date the Plan Sponsor signs the Merrill Lynch Recordkeeping
Service Agreement. See your Merrill Lynch financial consultant for
further information.
The "DEFERRED SALES CHARGE ON CLASS B SHARES" section is supplemented under the
heading "For Retirement Accounts" by adding:
o For retirement plans participating in Merrill Lynch's servicing
programs that are investing in Class B shares, shares will convert to
Class A shares after eight years, (5 years for Short-Term Strategic
Income Fund, Intermediate Maturity Fund and Limited-Term Government
Fund) or sooner if the plan attains assets of $5 million (by means of
a CDSC-free redemption/purchase at net asset value).
<PAGE>
The "ADDITIONAL SERVICES AND PROGRAMS" section is supplemented as follows:
Retirement plans participating in Merrill Lynch's servicing programs:
---------------------------------------------------------------------
Class A shares are available at net asset value for plans with $3
million in plan assets or 500 eligible employees at the date the Plan
Sponsor signs the Merrill Lynch Recordkeeping Service Agreement. If
the plan does not meet either of these limits, Class A shares are not
available.
For participating retirement plans investing in Class B shares, shares
will convert to Class A shares after eight years, or sooner if the
plan attains assets of $5 million (by means of a CDSC-free
redemption/purchase at net asset value).
6/1/97
MF2SS 6/97
<PAGE>
<TABLE>
<S> <C>
John Hancock Special Equities Fund dated 3/1/97 John Hancock Sovereign U.S. Government
John Hancock World Bond Fund dated 3/1/97 Income Fund dated 3/1/97
John Hancock Strategic Income Fund dated 3/1/97 John Hancock Massachusetts Tax-Free
John Hancock Tax Free Bond Fund dated 1/1/97 Income Fund dated 1/1/97
John Hancock Pacific Basin Equities Fund John Hancock New York Tax-Free Income Fund
dated 3/1/97 dated 1/1/97
John Hancock Global Marketplace Fund John Hancock Disciplined Growth Fund
dated 3/1/97 dated 3/1/97
John Hancock Global Rx Fund dated 3/1/97 John Hancock Financial Industries Fund
John Hancock Emerging Growth Fund dated 3/1/97 dated 3/1/97
John Hancock Global Fund dated 3/1/97 John Hancock Regional Bank Fund dated 3/1/97
John Hancock Growth Fund dated 3/1/97 John Hancock Discovery Fund dated 3/1/97
John Hancock Global Technology Fund John Hancock Government Income Fund
dated 3/1/97 dated 3/1/97
John Hancock Short-Term Strategic Income Fund John Hancock High Yield Bond Fund
dated 3/1/97 dated 3/1/97
John Hancock Special Opportunities Fund John Hancock Intermediate Maturity
dated 3/1/97 Government Fund dated 3/1/97
John Hancock California Tax-Fee Income Fund John Hancock High Yield Tax-Free Fund
dated 1/1/97 dated 1/1/97
John Hancock International Fund dated 3/1/97
</TABLE>
Supplement to Statement of Additional Information
The "Distribution Contracts" section is supplemented as follows:
John Hancock Funds, Inc. may pay extra compensation to financial services firms
selling large amounts of fund shares. This compensation may be calculated as a
percentage of fund shares sold by the firm.
5/20/97
MFSAI 5/97
<PAGE>
JOHN HANCOCK GLOBAL MARKETPLACE FUND
Class A and Class B Shares
Statement of Additional Information
March 1, 1997
This Statement of Additional Information provides information about John Hancock
Global Marketplace Fund (the "Fund") in addition to the information that is
contained in the combined International/Global Funds' Prospectus dated March 1,
1997 (the "Prospectus"). The Fund is a diversified series of John Hancock World
Fund (the "Trust").
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Fund's Prospectus, a copy of which can be obtained free
of charge by writing or telephoning:
John Hancock Signature Services, Inc.
1 John Hancock Way STE 1000
Boston MA 02217-1000
1-(800)-225-5291
TABLE OF CONTENTS
Page
Organization of the Fund ............................................... 2
Investment Objective And Policies ...................................... 2
Investment Restrictions ................................................ 13
Those Responsible for Management ....................................... 16
Investment Advisory And Other Services ................................. 25
Distribution Contracts ................................................. 27
Net Asset Value ........................................................ 29
Initial Sales Charge on Class A Shares ................................. 30
Deferred Sales Charge On Class B Shares ................................ 32
Special Redemptions .................................................... 36
Additional Services And Programs ....................................... 36
Description of The Fund's Shares ....................................... 37
Tax Status ............................................................. 38
Calculation of Performance ............................................. 43
Brokerage Allocation ................................................... 44
Transfer Agent Services ................................................ 46
Custody of Portfolio ................................................... 46
Independent Auditors ................................................... 46
Financial Statements ................................................... F-1
1
<PAGE>
ORGANIZATION OF THE FUND
The Fund is a series of the Trust, an open-end investment management company
organized as a Massachusetts business trust in August, 1986 under the laws of
the Commonwealth of Massachusetts. The Fund changed its name on December 11,
1995 from John Hancock Global Retail Fund to John Hancock Global Marketplace
Fund. The Fund was established in 1988.
John Hancock Advisers, Inc. (the "Adviser") is the Fund's investment adviser.
The Adviser is an indirect wholly-owned subsidiary of John Hancock Mutual Life
Insurance Company (the "Life Company"), a Massachusetts life insurance company
chartered in 1862, with national headquarters at John Hancock Place, Boston,
Massachusetts.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus.
The investment objective of the Fund is long-term capital appreciation. The Fund
will invest in a global portfolio consisting primarily equity securities of
issuers engaged in retail sales of consumer products and services. The types of
securities in which the Fund invests are listed in the Prospectus. See "Goal and
Strategy" and "Portfolio Securities" in the Prospectus. There can be no
assurance that the Fund will achieve its investment objective.
Under normal circumstances, the Fund invests at least 65% of its total assets in
the securities of companies that merchandise goods and services to consumers and
to consumer companies.
Investments in Foreign Securities. The Fund may invest in domestic or foreign
common stocks and securities convertible into or with rights to purchase common
stock of corporations in which the Fund is permitted to invest. The Fund may
invest in American Depository Receipts ("ADRs"), or European Depository Receipts
("EDRs") which are receipts typically issued by an American or European bank or
trust company representing underlying shares of foreign issuers. Issuers of
unsponsored ADRs are not required to disclose material information in the United
States. Because the Fund has a limited scope of investment through its
concentration in the retail sales group of industries, the Fund seeks
investments without regard to geographical borders. Normally, the Fund will
invest in the securities markets of at least three countries including the
United States. A significant portion of the Fund's investments are expected to
be in countries with developing markets; and in smaller capitalization,
developing growth companies with relatively limited operating histories as
publicly traded companies. These investments may be made without regard to a
record of profits or dividends.
The securities markets of many countries have in the past moved relatively
independently of one another, due to differing economic, financial, political
and social factors. When markets in fact move in different directions and offset
each other, there may be a corresponding reduction in risk for the Fund's
portfolio as a whole. This lack of correlation among the movements of the
world's securities markets may also affect unrealized gains the Fund has derived
from movements in any one market.
If the securities of markets moving in different directions are combined into a
single portfolio, such as that of the Fund, total portfolio volatility maybe
reduced. Since the Fund may invest in securities denominated in currencies other
than U.S. dollars, changes in foreign currency exchange rates will affect the
value of its portfolio securities. Exchange rates may not move in the same
direction as the securities markets in a particular country. As a result, market
gains may be offset by unfavorable exchange rate fluctuations.
2
<PAGE>
Foreign Currency Transactions. The Fund's foreign currency exchange transactions
may be conducted on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market. The Fund may also
enter into forward foreign currency exchange contracts. The Fund may also enter
into forward foreign currency exchange contracts to enhance return, to hedge
against fluctuations in currency exchange rates affecting a particular
transaction or portfolio position, or as a substitute for the purchase or sale
of a currency or assets denominated in that currency. Forward contracts are
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. Transaction hedging is the purchase
or sale of forward foreign currency contracts with respect to specific
receivables or payables of the Fund accruing in connection with the purchase and
sale of its portfolio securities quoted or denominated in the same or related
foreign currencies. Portfolio hedging is the use of forward foreign currency
contracts to offset portfolio security positions denominated or quoted in the
same or related foreign currencies. The Fund may elect to hedge less than all of
its foreign portfolio positions as deemed appropriate by the Adviser.
If the Fund purchases a forward contract or sells a forward contract for
non-hedging purposes, its custodian will segregate cash or liquid securities, of
any type or maturity, in a separate account of the Fund in an amount equal to
the value of the Fund's total assets committed to the consummation of such
forward contract. The assets in the segregated account will be valued at market
daily and if the value of the securities in the separate account declines,
additional cash or securities will be placed in the account so that the value of
the account will be equal the amount of the Fund's commitment with respect to
such contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates.
The cost to the Fund of engaging in foreign currency transactions varies with
such factors as the currency involved, the length of the contract period and the
market conditions then prevailing. Since transactions in foreign currency are
usually conducted on a principal basis, no fees or commissions are involved.
Risks in Foregin Securities. Investments in foreign securities may involve a
greater risk than those in domestic securities. There is generally less publicly
available information about foreign companies in the form of reports and ratings
similar to those that are published about issuers in the United States. Also,
foreign issuers are generally not subject to uniform accounting, auditing and
financial reporting requirements comparable to those applicable to United States
issuers.
Because foreign securities may be denominated in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will affect the Fund's net
asset value, the value of dividends and interest earned, gains and losses
realized on the sale of securities, and any net investment income and gains that
the Fund distributes to shareholders. Securities transactions undertaken in some
foreign markets may not be settled promptly, so that the Fund's investments on
foreign exchanges may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement.
Foreign securities will be purchased in the best available market, whether
through over-the-counter markets or exchanges located in the countries where
principal offices of the issuers are located. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
3
<PAGE>
States exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.
With respect to certain foreign countries, there is a possibility of adverse
changes in investment or exchange control regulations, expropriation,
nationalization or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the United States' economy in terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
The dividends in some cases, capital gains and interest payable on certain of
the Fund's foreign portfolio securities may be subject to foreign withholding or
other foreign taxes, thus reducing the net amount of income or gains available
for distribution to the Fund's shareholders.
These risks may be intensified in the case of investments in emerging markets or
countries with limited or developing capital markets and countries which are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainty of investing in
these established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of business, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominantly based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rates. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of substantial holdings difficult or
impossible at times. The Fund may be required to establish special custodial or
other arrangements before making certain investments in those countries.
Securities of issuers located in these countries may have limited marketability
and may be subject to more abrupt or erratic price movements.
Repurchase Agreements. In a repurchase agreement the Fund buys a security for a
relatively short period (usually not more than 7 days) subject to the obligation
to sell it back to the issuer at a fixed time and price, plus accrued interest.
The Fund will enter into repurchase agreements only with member banks of the
Federal Reserve System and with "primary dealers" in U.S. Government securities.
The Adviser will continuously monitor the creditworthiness of the parties with
whom the Fund enters into repurchase agreements.
The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities and could experience losses, including the
possible decline in the value of the underlying securities during the period
while the Fund seeks to enforce its rights thereto, possible subnormal levels of
income, decline in value of the underlying securities or lack of access to
income during this period, as well as expense of enforcing its rights.
4
<PAGE>
Reverse Repurchase Agreements. The Fund may also enter into reverse repurchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. Reverse repurchase agreements
involve the risk that the market value of securities purchased by the Fund with
proceeds of the transaction may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. The Fund will
also continue to be subject to the risk of a decline in the market value of the
securities sold under the agreements because it will reacquire those securities
upon effecting their repurchase. To minimize various risks associated with
reverse repurchase agreements, the Fund will establish and maintain with the
Fund's custodian a separate account consisting of liquid securities, of any type
or maturity, in an amount at least equal to the repurchase prices of the
securities (plus any accrued interest thereon) under such agreements. In
addition, the Fund will not borrow money or enter into reverse repurchase
agreements except from banks as a temporary measure for extraordinary emergency
purposes in amounts not to exceed 33 1/3% of the value of the Fund's total
assets (including the amount borrowed) taken at marekt value. The Fund will not
leverage to attempt to increase income. The Fund will enter into reverse
repurchase agreements only with federally insured banks which are approved in
advance as being creditworthy by the Trustees. Under procedures established by
the Trustees, the Adviser will monitor the creditworthiness of the banks
involved.
Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. The Fund will not invest more than 15% of its net
assets in illiquid investments. If the Trustees determine, based upon a
continuing review of the trading markets for specific Section 4(2) paper or Rule
144A securities that they are liquid, they will not be subject to the 15% limit
on illiquid investments. The Trustees may adopt guidelines and delegate to the
Adviser the daily function of determining and monitoring the liquidity of
restricted securities. The Trustees, however, will retain sufficient oversight
and be ultimately responsible for the determinations. The Trustees will
carefully monitor the Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund if qualified institutional buyers become for a
time uninterested in purchasing these restricted securities.
Options on Securities, Securities Indices and Currency. The Fund may purchase
and write (sell) call and put options on any securities in which it may invest,
on any securities index based on securities in which it may invest or on any
currency in which Fund investments may be denominated. These options may be
listed on national domestic securities exchanges or foreign securities exchanges
or traded in the over-the-counter market. The Fund may write covered put and
call options and purchase put and call options to enhance total return, as a
substitute for the purchase or sale of securities or currency, or to protect
against declines in the value of portfolio securities and against increases in
the cost of securities to be acquired.
Writing Covered Options. A call option on securities or currency written by the
Fund obligates the Fund to sell specified securities or currency to the holder
of the option at a specified price if the option is exercised at any time before
the expiration date. A put option on securities or currency written by the Fund
obligates the Fund to purchase specified securities or currency from the option
holder at a specified price if the option is exercised at any time before the
5
<PAGE>
expiration date. Options on securities indices are similar to options on
securities, except that the exercise of securities index options requires cash
settlement payments and does not involve the actual purchase or sale of
securities. In addition, securities index options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. Writing covered call options may
deprive the Fund of the opportunity to profit from an increase in the market
price of the securities or foreign currency assets in its portfolio. Writing
covered put options may deprive the Fund of the opportunity to profit from a
decrease in the market price of the securities or foreign currency assets to be
acquired for its portfolio.
All call and put options written by the Fund are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities,
either of which may be quoted or denominated in any currency, in a segregated
account maintained by the Fund's custodian with a value at least equal to the
Fund's obligation under the option, (ii) entering into an offsetting forward
commitment and/or (iii) purchasing an offsetting option or any other option
which, by virtue of its exercise price or otherwise, reduces the Fund's net
exposure on its written option position. A written call option on securities is
typically covered by maintaining the securities that are subject to the option
in a segregated account. The Fund may cover call options on a securities index
by owning securities whose price changes are expected to be similar to those of
the underlying index.
The Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."
Purchasing Options. The Fund would normally purchase call options in
anticipation of an increase, or put options in anticipation of a decrease
("protective puts") in the market value of securities or currencies of the type
in which it may invest. The Fund may also sell call and put options to close out
its purchased options.
The purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities or currency at a specified price during
the option period. The Fund would ordinarily realize a gain on the purchase of a
call option if, during the option period, the value of such securities or
currency exceeded the sum of the exercise price, the premium paid and
transaction costs; otherwise the Fund would realize either no gain or a loss on
the purchase of the call option.
The purchase of a put option would entitle the Fund, in exchange for the premium
paid, to sell specified securities or currency at a specified price during the
option period. The purchase of protective puts is designed to offset or hedge
against a decline in the market value of the Fund's portfolio securities or the
currencies in which they are denominated. Put options may also be purchased by
6
<PAGE>
the Fund for the purpose of affirmatively benefiting from a decline in the price
of securities or currencies which it does not own. The Fund would ordinarily
realize a gain if, during the option period, the value of the underlying
securities or currency decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Fund would realize either no
gain or a loss on the purchase of the put option. Gains and losses on the
purchase of put options may be offset by countervailing changes in the value of
the Fund's portfolio securities.
The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
currencies or dispose of assets held in a segregated account until the options
expire or are exercised. Similarly, if the Fund is unable to effect a closing
sale transaction with respect to options it has purchased, it would have to
exercise the options in order to realize any profit and will incur transaction
costs upon the purchase or sale of underlying securities or currencies.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist although outstanding options on that exchange that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
7
<PAGE>
The Fund's ability to terminate over-the-counter options is more limited than
with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities or currency markets.
Futures Contracts and Options on Futures Contracts. To seek to increase total
return or hedge against changes in interest rates, or securities prices or
currency exchange rates, the Fund may purchase and sell various kinds of futures
contracts, and purchase and write call and put options on these futures
contracts. The Fund may also enter into closing purchase and sale transactions
with respect to any of these contracts and options. The futures contracts may be
based on various securities (such as U.S. Government securities), securities
indices, foreign currencies and any other financial instruments and indices. All
futures contracts entered into by the Fund are traded on U.S. or foreign
exchanges or boards of trade that are licensed, regulated or approved by the
Commodity Futures Trading Commission ("CFTC").
Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments or
currencies for an agreed price during a designated month (or to deliver the
final cash settlement price, in the case of a contract relating to an index or
otherwise not calling for physical delivery at the end of trading in the
contract).
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or currency will usually be
liquidated in this manner, the Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically advantageous
to do so. A clearing corporation associated with the exchange on which futures
contracts are traded guarantees that, if still open, the sale or purchase will
be performed on the settlement date.
Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire or the
exchange rate of currencies in which portfolio securities are quoted or
denominated. When interest rates are rising or securities prices are falling,
the Fund can seek to offset a decline in the value of its current portfolio
securities through the sale of futures contracts. When interest rates are
8
<PAGE>
falling or securities prices are rising, the Fund, through the purchase of
futures contracts, can attempt to secure better rates or prices than might later
be available in the market when it effects anticipated purchases. The Fund may
seek to offset anticipated changes in the value of a currency in which its
portfolio securities, or securities that it intends to purchase, are quoted or
denominated by purchasing and selling futures contracts on such currencies.
The Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated rise in
interest rates or a decline in market prices or foreign currency rates that
would adversely affect the dollar value of the Fund's portfolio securities. Such
futures contracts may include contracts for the future delivery of securities
held by the Fund or securities with characteristics similar to those of the
Fund's portfolio securities. Similarly, the Fund may sell futures contracts on
any currencies in which its portfolio securities are quoted or denominated or in
one currency to hedge against fluctuations in the value of securities
denominated in a different currency if there is an established historical
pattern of correlation between the two currencies.
If, in the opinion of the Adviser, there is a sufficient degree of correlation
between price trends for the Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in the Fund's portfolio
may be more or less volatile than prices of such futures contracts, the Adviser
will attempt to estimate the extent of this volatility difference based on
historical patterns and compensate for any differential by having the Fund enter
into a greater or lesser number of futures contracts or by attempting to achieve
only a partial hedge against price changes affecting the Fund's portfolio
securities.
When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of the Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices that are currently available. The Fund
may also purchase futures contracts as a substitute for transactions in
securities or foreign currency, to alter the investment characteristics of or
currency exposure associated with portfolio securities or to gain or increase
its exposure to a particular securities market or currency.
Options on Futures Contracts. The Fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
9
<PAGE>
put and call options on futures contracts will give the Fund the right (but not
the obligation) for a specified price to sell or to purchase, respectively, the
underlying futures contract at any time during the option period. As the
purchaser of an option on a futures contract, the Fund obtains the benefit of
the futures position if prices move in a favorable direction but limits its risk
of loss in the event of an unfavorable price movement to the loss of the premium
and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium (upon exercise
of the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that the Fund intends to purchase. However,
the Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by the Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
Other Considerations. The Fund will engage in futures and related options
transactions either for bona fide hedging purposes or to seek to increase total
return as permitted by the CFTC. To the extent that the Fund is using futures
and related options for hedging purposes, futures contracts will be sold to
protect against a decline in the price of securities (or the currency in which
they are quoted or denominated) that the Fund owns or futures contracts will be
purchased to protect the Fund against an increase in the price of securities or
the currency in which they are quoted or denominated it intends to purchase. The
Fund will determine that the price fluctuations in the futures contracts and
options on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or securities or instruments which
it expects to purchase. As evidence of its hedging intent, the Fund expects that
on 75% or more of the occasions on which it takes a long futures or option
position (involving the purchase of futures contracts), the Fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities (or assets denominated in the related currency) in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
To the extent that the Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
10
<PAGE>
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. The Fund will engage in
transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), for maintaining its qualifications as a
regulated investment company for federal income tax purposes.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities or currencies, require the Fund to
establish with the custodian a segregated account consisting of cash or liquid
securities in an amount equal to the underlying value of such contracts and
options.
While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates, securities prices or currency
exchange rates may result in a poorer overall performance for the Fund than if
it had not entered into any futures contracts or options transactions.
Perfect correlation between the Fund's futures positions and portfolio positions
will be impossible to achieve. There are no futures contracts based upon
individual securities, except certain U.S. Government securities. The only
futures contracts available to hedge the Fund's portfolio are various futures on
U.S. Government securities, securities indices and foreign currencies. In the
event of an imperfect correlation between a futures position and a portfolio
position which is intended to be protected, the desired protection may not be
obtained and the Fund may be exposed to risk of loss. In addition, it is not
possible to hedge fully or protect against currency fluctuations affecting the
value of securities denominated in foreign currencies because the value of such
securities is likely to fluctuate as a result of independent factors not related
to currency fluctuations.
Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities and money market
11
<PAGE>
funds. When the Fund lends portfolio securities, there is a risk that the
borrower may fail to return the securities involved in the transaction. As a
result, the Fund may incur a loss or, in the event of the borrower's bankruptcy,
the Fund may be delayed in or prevented from liquidating the collateral. It is a
fundamental policy of the Fund not to lend portfolio securities having a total
value exceeding 33 1/3% of its total assets.
Rights and Warrants. The Fund may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price, subject to the Fund's Investment
Restrictions. Generally, warrants and stock purchase rights do not carry with
them the right to receive dividends or exercise voting rights with respect to
the underlying securities, and they do not represent any rights in the assets of
the issuer. As a result, an investment in warrants and rights may be considered
to entail greater investment risk than certain other types of investments. In
addition, the value of warrants and rights does not necessarily change with the
value of the underlying securities, and they cease to have value if they are not
exercised on or prior to their expiration date. Investment in warrants and
rights increases the potential profit or loss to be realized from the investment
of a given amount of the Fund's assets as compared with investing the same
amount in the underlying stock.
Short Sales. The Fund may engage in short sales in order to profit from an
anticipated decline in the value of a security. The Fund may also engage in
short sales to attempt to limit its exposure to a possible market decline in the
value of its portfolio securities through short sales of securities which the
Adviser believes possess volatility characteristics similar to those being
hedged. To effect such a transaction, the Fund must borrow the security sold
short to make delivery to the buyer. The Fund then is obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. Until the security is replaced the Fund is required to pay to the
lender any accrued interest or dividends and may be required to pay a premium.
The Fund will realize a gain if the security declines in price between the date
of the short sale and the date on which the Fund replaces the borrowed security.
On the other hand, the Fund will incur a loss as a result of the short sale if
the price of the security increases between those dates. The amount of any gain
will be decreased, and the amount of any loss increased, by the amount of any
premium, interest or dividends the Fund may be required to pay in connection
with a short sale. The successful use of short selling as a hedging device may
be adversely affected by imperfect correlation between movements in the price of
the security sold short and the securities being hedged.
Under applicable guidelines of the staff of the Securities and Exchange
Commission, if the Fund engages in short sales of the type referred to in
non-fundamental Investment Restriction No. (c) (ii) and (iii) below, it must put
in a segregated account (not with the broker) an amount of cash or U.S.
Government securities equal to the difference between (1) the market value of
the securities sold short at the time they were sold short and (2) any cash or
U.S. Government securities required to be deposited as collateral with the
broker in connection with the short sale (not including the proceeds from the
short sale). In addition, until the Fund replaces the borrowed security, it must
daily maintain the segregated account at such a level that the amount deposited
in it plus the amount deposited with the broker as collateral will equal the
current market value of the securities sold short.
Short selling may produce higher than normal portfolio turnover which may result
in increased transaction costs to the Fund and may result in gains from the sale
of securities deemed to have been held for less than three months, which gains
must be less than 30% of the Fund's gross income for a taxable year in order for
the Fund to qualify for treatment as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code") for that year. See "TAX
STATUS."
12
<PAGE>
The Fund does not intend to enter into short sales (other than those "against
the box") if immediately after such sale the aggregate of the value of all
collateral plus the amount in such segregated account exceeds 5% of the value of
the Fund's net assets. A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short.
Forward Commitment and When-Issued Securities. The Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. The Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When the Fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in the Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when- issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the Fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, the Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
Short Term Trading and Portfolio Turnover. Short-term trading means the purchase
and subsequent sale of a security after it has been held for a relatively brief
period of time. The Fund may engage in short-term trading in response to stock
market conditions, changes in interest rates or other economic trends and
developments, or to take advantage of yield disparities between various fixed
income securities in order to realize capital gains or improve income.
Short-term trading may have the effect of increasing portfolio turnover rate. A
high rate of portfolio turnover (100% or greater) involves correspondingly
greater brokerage expenses and may make it more difficult for the Fund to
qualify as a regulated investment company for federal income tax purposes. The
Fund's portfolio turnover rate is set forth in the table under the caption
"Financial Highlights" in the Prospectus.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions will
not be changed without approval of a majority of the Fund's outstanding voting
securities which, as used in the Prospectus and this Statement of Additional
Information, means approval by the lesser of (1) the holders of 67% or more of
the Fund's shares represented at a meeting if more than 50% of the Fund's
outstanding shares are present in person or by proxy at that meeting or (2) more
than 50% of the Fund's outstanding shares.
The Fund observes the following fundamental restrictions.
The Fund may not:
13
<PAGE>
(1) Issue senior securities, except as permitted by paragraphs (2), (6) and
(7) below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts, forward contracts, forward commitments and
repurchase agreements entered into in accordance with the Fund's investment
policy, and the pledge, mortgage or hypothecation of the Fund's assets within
the meaning of paragraph (3) below, are not deemed to be the issuance of senior
securities.
(2) Borrow money, except from banks as a temporary measure for
extraordinary emergency purposes in amounts not to exceed 33 1/3% of the value
of the Fund's total assets (including the amount borrowed) taken at market
value. The Fund will not leverage to attempt to increase income.
(3) Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such pledging,
mortgaging or hypothecating does not exceed 33 1/3% of the Fund's total assets
taken at market value.
(4) Act as an underwriter, except to the extent that, in connection with
the disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the Securities Act of 1933.
(5) Purchase or sell real estate, any interest therein, or real estate
limited partnership interests, except that the Fund may invest in securities of
corporate or governmental entities secured by real estate or marketable
interests therein or securities issued by companies that invest in real estate
or interests therein.
(6) Make loans, except that the Fund may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3 % of the Fund's
total assets taken at market value, enter into repurchase agreements and
purchase all or a portion of an issue of publicly distributed debt securities,
bank loan participation interests, bank certificates of deposit, banker's
acceptances, debentures or other securities, whether or not the purchase is made
upon the original issuance of the securities.
(7) Invest in commodities or in commodity contracts or in puts, calls, or
combinations of both, except options on currency, securities and securities
indices, futures contracts on currency, securities and securities indices and
options on such futures, forward foreign currency exchange contracts, forward
commitments, securities index put or call warrants and repurchase agreements
entered into in accordance with the Fund's investment policies.
(8) With respect to 75% of the Fund's total assets, purchase securities of
an issuer (other than the U.S. Government, its agencies or instrumentalities),
if (i) such purchase would cause more than 5% of the Fund's total assets taken
at market value to be invested in the securities of such issuer, or (ii) such
purchase would at the time result in more than 10% of the outstanding voting
securities of such issuer being held by the Fund.
(9) Purchase securities, other than obligations of the U.S. Government or
any of its agencies or instrumentalities, if such purchase would cause 25% or
more of the value of the Fund's total assets to be invested in securities of
issuers conducting their principal business activities in the same industry,
except that the Fund shall invest at least 25% of the value of its total assets
in securities of issuers in the retail sales group of industries.
For purposes of fundamental investment restriction (9) above, the "retail sales
group of industries" consists of the group of retail industries included under
the caption "Retail and Wholesale Trade-Retail" in the Directory of Companies
Filing Annual Reports with the Securities and Exchange Commission published by
the Securities and Exchange Commission.
14
<PAGE>
Non-Fundamental Investment Restrictions. The following investment restrictions
are designated as non-fundamental and may be changed by the Trustees without
shareholder approval.
The Fund may not:
(a) Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or repurchase of
marketable portfolio securities with other accounts under the
management of the Adviser to save commissions or to average prices
among them is not deemed to be participation in a joint securities
trading account.
(b) Purchase securities on margin except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities.
(c) Make short sales of securities or maintain a short position unless (i)
at all times when a short position is open the Fund owns an equal
amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities
sold short; (ii) for the purpose of hedging the Fund's exposure to an
actual or anticipated market decline in the value of its investments;
or (iii) in order to profit from an anticipated decline in the value of
a security.
(d) Knowingly purchase or retain securities of an issuer if one or more of
the Trustees or officers of the Trust or directors or officers of the
Adviser or any investment management subsidiary of the Adviser
individually owns beneficially more than 0.5% and together own
beneficially more than 5% of the securities of such issuer.
(e) Purchase a security if, as a result, (i) more than 10% of the Fund's
total assets would be invested in the securities of other investment
companies, (ii) the Fund would hold more than 3% of the total
outstanding voting securities of any one investment company, or (iii)
more than 5% of the Fund's total assets would be invested in the
securities of any one investment company. These limitations do not
apply to (a) the investment of cash collateral, received by the Fund in
connection with lending the Fund's portfolio securities, in the
securities of open- end investment companies or (b) the purchase of
shares of any investment company in connection with a merger,
consolidation, reorganization or purchase of substantially all of the
assets of another investment company. Subject to the above percentage
limitations, the Fund may, in connection with the John Hancock Group of
Funds Deferred Compensation Plan for Independent Trustees/Directors,
purchase securities of other investment companies within the John
Hancock Group of Fund. In addition, as a nonfundamental restriction,
the Fund may not purchase the shares of any closed-end investment
company except in the open market where no commission or profit to a
sponsor or dealer results from the purchase, other than customary
brokerage fees.
(f) Purchase securities of any issuer which, together with any predecessor,
has a record of less than three years' continuous operations prior to
the purchase if such purchase would cause investments of the Fund in
all such issuers to exceed 5% of the value of the total assets of the
Fund.
(g) Purchase any security, including any repurchase agreement maturing in
more than seven days, which is not readily marketable, if more than 15%
of the net assets of the Fund, taken at market value, would be invested
in such securities.
15
<PAGE>
(h) The Fund will not purchase warrants of any issuer, if, as a result of
such purchases, more than 2% of the value of the Fund's total assets
would be invested in warrants which are not listed on the New York
Stock Exchange or the American Stock Exchange or more than 5% of the
value of the total assets of the Fund would be invested in warrants
generally, whether or not so listed. For these purposes, warrants are
to be valued at the lesser of cost or market, but warrants acquired by
the Fund in units with or attached to debt securities shall be deemed
to be without value.
(i) The Fund will not purchase interests in oil, gas or other mineral
exploration programs; however, this policy will not prohibit the
acquisition of securities of companies engaged in the production or
transmission of oil, gas or other minerals.
(j) The Fund will not purchase securities while outstanding borrowings
exceed 5% of the Fund's total assets.
In order to permit the sale of shares of the Fund in certain states, the
Trustees may, in their sole discretion, adopt restrictions on investment policy
more restrictive than those described above. Should the Trustees determine that
any such more restrictive policy is no longer in the best interest of the Fund
and its shareholders, the Fund may cease offering shares in the state involved
and the Trustees may revoke such restrictive policy. Moreover, if the states
involved shall no longer require any such restrictive policy, the Trustees may,
in their sole discretion, revoke such policy. The Fund has agreed with state
securities administrators that it will not purchase the following securities:
The Fund may not purchase securities of any open-end investment company
except when such purchase is part of a plan of merger, consolidation,
reorganization or purchase of substantially all of the assets of any
other investment company.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its Trustees of the Trust who elect
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Trust are also officers or Directors of the Adviser or officers
or Directors of the Fund's principal distributor, John Hancock Funds, Inc.
("John Hancock Funds").
16
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman and Chief Executive
101 Huntington Avenue Executive Officer (1, 2) Officer, the Adviser and The
Boston, MA 02199 Berkeley Financial Group ("Berkeley
October 1944 Group"); Chairman, NM Capital
Management, Inc. ("NM Capital") and
John Hancock Advisers International
Limited ("Advisers International");
Chairman, Chief Executive Officer
and President, John Hancock Funds,
Inc. ("John Hancock Funds"), First
Signature Bank and Trust Company
and Sovereign Asset Management
Corporation ("SAMCorp."); Director,
John Hancock Insurance Agency, Inc.
("Insurance Agency, Inc."), John
Hancock Capital Corporation and New
England/Canada Business Council;
Member, Investment Company
Institute Board of Governors;
Director, Asia Strategic Growth
Fund, Inc.; Trustee, Museum of
Science; Vice Chairman and
President, the Adviser (until July
1992); Chairman, John Hancock
Distributors, Inc. (until April
1994); Director, John Hancock
Freedom Securities Corporation
(until September 1996); Director,
John Hancock Signature Services,
Inc. ("Signature Services") (until
January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
17
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Dennis S. Aronowitz Trustee (3) Professor of Law, Emeritus, Boston
Boston University University School of Law; Trustee,
Boston, Massachusetts Brookline Savings Bank.
June 1931
Richard P. Chapman, Jr. Trustee (1, 3) President, Brookline Savings Bank;
160 Washington Street Director, Federal Home Loan Bank of
Brookline, MA 02147 Boston (lending); Director, Lumber
February 1935 Insurance Companies (fire and
casualty insurance); Trustee,
Northeastern University (education);
Director, Depositors Insurance Fund,
Inc. (insurance).
William J. Cosgrove Trustee (3) Vice President, Senior Banker and
20 Buttonwood Place Senior Credit Officer, Citibank,
Saddle River, NJ 07458 N.A. (retired September 1991);
January 1933 Executive Vice President, Citadel
Group Representatives, Inc.; EVP
Resource Evaluation, Inc.
(consulting) (until October 1993);
Trustee, the Hudson City Savings
Bank (since 1995).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
18
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Douglas M. Costle Trustee (1, 3) Director, Chairman of the Board and
RR2 Box 480 Distinguished Senior Fellow,
Woodstock, VT 05091 Institute for Sustainable
July 1939 Communities, Montpelier, Vermont
(since 1991); Dean Vermont Law
School (until 1991); Director, Air
and Water Technologies Corporation
(environmental services and
equipment), Niagara Mohawk Power
Company (electric services) and
Mitretek Systems (governmental
consulting services).
Leland O. Erdahl Trustee (3) Director, Santa Fe Ingredients
8046 Mackenzie Court Company of California, Inc. and
Las Vegas, NV 89129 Santa Fe Ingredients Company, Inc.
December 1928 (private food processing companies),
Uranium Resources, Inc.; President,
Stolar, Inc. (1987-1991); President,
Albuquerque Uranium Corporation
(1985-1992); Director,
Freeport-McMoRan Copper & Gold
Company, Inc., Hecla Mining Company,
Canyon Resources Corporation and
Original Sixteen to One Mines, Inc.
(1984-1987 and 1991-1995)
(management consultant).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
19
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Richard A. Farrell Trustee(3) President of Farrell, Healer & Co.,
Venture Capital Partners (venture capital management firm)
160 Federal Street (since 1980); Prior to 1980, headed
23rd Floor the venture capital group at Bank of
Boston, MA 02110 Boston Corporation.
November 1932
Gail D. Fosler Trustee (3) Vice President and Chief Economist,
4104 Woodbine Street The Conference Board (non-profit
Chevy Chase, MD 20815 economic and business research);
December 1947 Director, Unisys Corp.; and H.B.
Fuller Company.
William F. Glavin Trustee (3) President, Babson College; Vice
Babson College Chairman, Xerox Corporation (until
Horn Library June 1989); Director, Caldor Inc.,
Babson Park, MA 02157 Reebok, Ltd. (since 1994) and Inco
March 1931 Ltd.
Anne C. Hodsdon * Trustee and President (1,2) President, Chief Operating Officer
101 Huntington Avenue and Director, the Adviser; Director,
Boston, MA 02199 The Berkeley Group, John Hancock
April 1953 Funds; Director, Advisers
International; Executive Vice
President, the Adviser (until
December 1994); Senior Vice
President, the Adviser (until
December 1993); Director, Signature
Services (until January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
20
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Dr. John A. Moore Trustee (3) President and Chief Executive
Institute for Evaluating Health Risks Officer, Institute for Evaluating
1629 K Street NW Health Risks, (nonprofit
Suite 402 institution) (since September 1989).
Washington, DC 20006-1602
February 1939
Patti McGill Peterson Trustee (3) Cornell Institute of Public Affairs,
Cornell University Cornell University (since August
Institute of Public Affairs 1996); President Emeritus of Wells
364 Upson Hall College and St. Lawrence University;
Ithica, NY 14853 Director, Niagara Mohawk Power
May 1943 Corporation (electric utility) and
Security Mutual Life (insurance).
John W. Pratt Trustee (3) Professor of Business Administration
2 Gray Gardens East at Harvard University Graduate
Cambridge, MA 02138 School of Business Administration
September 1931 (since 1961).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
21
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John Hancock
Boston, MA 02117 Funds, John Hancock Distributors,
August 1937 Inc., Insurance Agency, Inc., John
Hancock Subsidiaries, Inc.,
SAMCorp. and NM Capital; Trustee,
The Berkeley Group; Director, JH
Networking Insurance Agency, Inc.;
Director, John Hancock Property and
Casualty Insurance and its
affiliates (until November 1993);
Director, Signature Services (until
January 1997).
Edward J. Spellman, CPA Trustee (3) Partner, KPMG Peat Marwick LLP
259C Commercial Bld. (retired June 1990).
Lauderdale, FL 33308
November 1932
Robert G. Freedman Vice Chairman and Chief Investment Vice Chairman and Chief Investment
101 Huntington Avenue Officer (2) Officer, the Adviser; Director, the
Boston, MA 02199 Adviser, Advisers International,
July 1938 John Hancock Funds, SAMCorp.,
Insurance Agency, Inc.,
Southeastern Thrift & Bank Fund and
NM Capital; Senior Vice President,
The Berkeley Group; President, the
Adviser (until December 1994);
Director, Signature Services (until
January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
22
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
James B. Little Senior Vice President and Chief Senior Vice President, the Adviser,
101 Huntington Avenue Financial Officer The Berkeley Group, John Hancock
Boston, MA 02199 Funds.
February 1935
John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Signature Services and John Hancock
July 1950 Funds; Secretary, SAMCorp.,
Insurance Agency, Inc. and NM
Capital; Counsel, John Hancock
Mutual Life Insurance Company (until
January 1996).
Susan S. Newton Vice President and Secretary Vice President, the Adviser, John
101 Huntington Avenue Hancock Funds, Signature Services
Boston, MA 02199 and The Berkeley Group; Vice
March 1950 President, John Hancock
Distributors, Inc. (until 1994).
James J. Stokowski Vice President and Treasurer Vice President, the Adviser.
101 Huntington Avenue
Boston, MA 02199
November 1946
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
</TABLE>
23
<PAGE>
All of the officers listed are officers or employees of the Adviser or
Affiliated Companies. Some of the Trustees and officers may also be officers
and/or directors and/or Trustees of one or more of the other funds for which the
Adviser serves as the investment adviser.
As of January 31, 1997, the officers and Trustees of the Trust as a group owned
less than 1% of the outstanding shares of the Fund. To the knowledge of the
Trust, only the following person owned of record or beneficially 5% or more of
any class of the Fund's outstanding securities:
Percentage of
Class A Shares Owned Outstanding Shares
------- ------------ ------------------
Boatmans Trust Co Agent For 134,953 8.02%
Lambros LP
PO Box 14737
St Louis MO
Percentage of
Class B Shares Owned Outstanding Shares
------- ------------ ------------------
MLPF & S For The 351,576 16.61%
Sole Benefit of Its Customers
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
The following table provides information regarding the compensation paid by the
Fund and the other investment companies in the John Hancock Fund Complex to the
Independent Trustees for their services. Messrs. Boudreau, Scipione and Ms.
Hodsdon, each a non-Independent Trustee, and each of the officers of the Fund
are interested persons of the Adviser, are compensated by the Adviser and
receive no compensation from the Fund for their services. The compensation to
the Trustees from the Fund shown below is for the period from September 1, 1996
to October 31, 1996.
24
<PAGE>
<TABLE>
<CAPTION>
Total Compensation From the
Aggregate Compensation Fund and John Hancock Fund
Independent Trustees From the Fund Complex to Trustees*
- -------------------- ------------- --------------------
<S> <C> <C>
Dennis S. Aronowitz $ -- $ 72,450
Richard P. Charpman, Jr.+ -- 75,200
William J. Cosgrove+ -- 72,450
Douglas M. Costle++ -- 75,350
Leland O. Erdahl++ -- 72,350
Richard A. Farrell++ -- 75,350
Gail D. Fosler -- 68,450
William F. Glavin+ ++ -- 72,250
Bayard Henry** -- 23,700
John A. Moore++ -- 68,350
Patti McGill Peterson++ -- 72,100
John W. Pratt++ -- 72,350
---- --------
$ $894,300
</TABLE>
* The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of the calendar year ended December 31,
1996. As of this date, there were sixty-seven funds in the John Hancock
Fund Complex of which each of these Independent Trustees served on
thirty-five of funds.
** Mr. Henry retired from his position as a Trustee of the Fund effective
April 26, 1996.
+ As of December 31, 1996 the value of the aggregate accrued deferred
compensation from each Fund in the John Hancock Fund Complex for Mr.
Chapman was $63,164 and for Mr. Cosgrove was $131,317 and for Mr.
Glavin was $109,059 under the John Hancock Deferred Compensation Plan
for Independent Trustees.
++ Became Trustees of the Trust on June 26, 1996.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and presently has more than $19 billion in assets under
management in its capacity as investment adviser to the Fund and other mutual
funds and publicly traded investment companies in the John Hancock group of
funds having over 1,080,000 shareholders. The Adviser is an affiliate of the
Life Company, one of the most recognized and respected financial institutions in
the nation. With total assets under management of more than $80 billion, the
Life Company is one of ten largest life insurance companies in the United
States, and carries high ratings from Standard & Poor's and A.M. Best's. Founded
in 1862, the Life Company has been serving clients for over 130 years.
The Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser. Pursuant to the Advisory Agreement, the Adviser
agreed to act as investment adviser and manager to the Fund. As manager and
investment adviser, the Adviser will: (a) furnish continuously an investment
program for the Fund and determine, subject to the overall supervision and
review of the Trustees, which investments should be purchased, held, sold or
exchanged, and (b) provide supervision over all aspects of the Fund's operations
except those which are delegated to a custodian, transfer agent or other agent.
25
<PAGE>
The Fund bears all costs of its organization and operation, including expenses
of preparing, printing and mailing all shareholders' reports, notices,
prospectuses, proxy statements and reports to regulatory agencies; expenses
relating to the issuance, registration and qualification of shares; government
fees; interest charges; expenses of furnishing to shareholders their account
statements; taxes; expenses of redeeming shares; brokerage and other expenses
connected with the execution of portfolio securities transactions; expenses
pursuant to the Fund's plan of distribution; fees and expenses of custodians
including those for keeping books and accounts and calculating the net asset
value of shares; fees and expenses of transfer agents and dividend disbursing
agents; legal, accounting, financial, management, tax and auditing fees and
expenses of the Fund (including an allocable portion of the cost of the
Adviser's employees rendering such services to the Fund; the compensation and
expenses of Trustees who are not otherwise affiliated with the Trust, the
Adviser or any of their affiliates; expenses of Trustees' and shareholders'
meetings; trade association membership; insurance premiums; and any
extraordinary expenses.
As provided by the investment management contract, the Fund pays the Adviser
monthly an investment management fee, which is accrued daily, based on a stated
percentage of the average of the daily net assets of the Fund as follows:
Net Asset Value Annual Rate
- --------------- -----------
First $250,000,000 0.80%
Amount over $250,000,000 0.70%
From time to time, the Adviser may reduce its fee or make other arrangements to
limit the Fund's expenses to a specified percentage of average daily net assets.
The Adviser retains the right to re-impose a fee and recover any other payments
to the extent that, at the end of any fiscal year, the Fund's annual expenses
fall below this limit.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser or affiliates provide investment advice.
Because of different investment objectives or other factors, a particular
security may be bought for one or more funds or clients when one or more are
selling the same security. If opportunities for purchase or sale of securities
by the Adviser for the Fund or for other funds or clients for which the Adviser
renders investment advice arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective funds or clients in a manner deemed equitable to all of them. To the
extent that transactions on behalf of more than one client of the Adviser or
affiliates may increase the demand for securities being purchased or the supply
of securities being sold, there may be an adverse effect on price.
Pursuant to the investment management contract, the Adviser is not liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which their respective contract relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless disregard
of the obligations and duties under the applicable contract.
Under the investment management contract, the Fund may use the name "John
Hancock" or any name derived from or similar to it only for so long as the
contract or any extension, renewal or amendment thereof remains in effect. If
the contract is no longer in effect, the Fund (to the extent that it lawfully
can) will cease to use such a name or any other name indicating that it is
advised by or otherwise connected with the Adviser. In addition, the Adviser or
the Life Company may grant the non-exclusive right to use the name "John
Hancock" or any similar name to any other corporation or entity, including but
26
<PAGE>
not limited to any investment company of which the Life Company or any
subsidiary or affiliate thereof or any successor to the business of any
subsidiary or affiliate thereof shall be the investment adviser.
The investment management contract and the distribution agreement discussed
below, continue in effect from year to year if approved annually by vote of a
majority of the Trustees who are not interested persons of one of the parties to
the contract, cast in person at a meeting called for the purpose of voting on
such approval, and by either the Trustees or the holders of a majority of the
Fund's outstanding voting securities. Each of these contracts automatically
terminates upon assignment and may be terminated on 60 days' written notice by
either party or by vote of a majority of the outstanding voting securities of
the Fund.
For the periods ended August 31, 1996 and 1995, the Adviser's management fee was
$79,077 and $4,205, respectively. After the expense reductions by the Adviser,
for the periods ended August 31, 1996 and 1995, the Adviser did not impose any
investment management fee. For the period from September 1, 1996 to October 31,
1996, the Adviser's management fee was $63,995. After the reduction by the
Adviser for the period ended September 1, 1996 to October 31, 1996, the Adviser
was paid an investment management fee of $17,973. In 1996, the Trustees changed
the fiscal year-end of the Fund to October 31.
Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement the Adviser provides the Fund with certain tax, accounting and
legal services. For the period from September 1, 1996 to October 31, 1996, the
Fund paid the Adviser $1,500 for services under this agreement.
In order to avoid conflicts with portfolio trades for the Fund, the Adviser and
the Fund have adopted extensive restrictions on personal securities trading by
personnel of the Adviser and its affiliates. Some of these restrictions are:
pre-clearance for all personal trades and a ban on the purchase of initial
public offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.
DISTRIBUTION CONTRACTS
The Fund has a Distribution Agreement with John Hancock Funds. Under the
agreement, John Hancock Funds is obligated to use its best efforts to sell
shares of each class on behalf of the Fund. Shares of the Fund are also sold by
selected broker-dealers (the "Selling Brokers") which have entered into selling
agency agreements with John Hancock Funds. John Hancock Funds accepts orders for
the purchase of the shares of the Fund which are continually offered at net
asset value next determined, plus an applicable sales charge, if any. In
connection with the sale of Class A or Class B shares, John Hancock Funds and
Selling Brokers receive compensation in the form of a sales charge imposed, in
the case of Class A shares, at the time of sale, or, in the case of Class B
shares, on a deferred basis. The sales charges are discussed further in the
Prospectus.
The Fund's Trustees adopted Distribution Plans with respect to Class A and Class
B shares (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act
of 1940. Under the Plans, the Fund will pay distribution and service fees at an
aggregate annual rate of up to 0.30% and 1.00%, respectively, of the Fund's
daily net assets attributable to shares of that class. However, the service fee
will not exceed 0.25% of the Fund's average daily net assets attributable to
each class of shares. The distribution fees will be used to reimburse John
Hancock Funds for their distribution expenses, including but not limited to: (i)
initial and ongoing sales compensation to Selling Brokers and others (including
affiliates of John Hancock Funds) engaged in the sale of Fund shares; (ii)
marketing, promotional and overhead expenses incurred in connection with the
27
<PAGE>
distribution of Fund shares; and (iii) with respect to Class B shares only,
interest expenses on unreimbursed distribution expenses. The service fees will
be used to compensate Selling Brokers and others for providing personal and
account maintenance services to shareholders. In the event the John Hancock
Funds is not fully reimbursed for payments or expenses they incur under the
Class A Plan, these expenses will not be carried beyond twelve months from the
date they were incurred. Unreimbursed expenses under the Class B Plan will be
carried forward together with interest on the balance of these unreimbursed
expenses. The Fund does not treat unreimbursed expenses under the Class B Plan
as a liability of the Fund because the Trustees may terminate Class B Plan at
any time. For the period from September 1, 1996 to October 31, 1996, an
aggregate of $172,913 of Distribution Expenses or 0.636% of the average net
assets of the Fund's Class B shares was not reimbursed or recovered by John
Hancock Funds through the receipt of deferred sales charge or Rule 12b-1 fees in
prior periods.
The Plans were approved by a majority of the voting securities of the Fund. The
Plans and all amendments were approved by the Trustees, including a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plans ("Independent
Trustees"), by votes cast in person at meetings called for the purpose of voting
on such Plans.
Pursuant to the Plans, at least quarterly, John Hancock Funds provides the Fund
with a written report of the amounts expended under the Plans and the purpose
for which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their continued appropriateness.
The Plans provide that they will continue in effect only so long as their
continuance is approved at least annually by a majority of both the Trustees and
the Independent Trustees. The Plans provide that they may be terminated without
penalty (a) by vote of a majority of the Independent Trustees, (b) by a vote of
a majority of the Fund's outstanding shares of the applicable class upon 60
days' written notice to John Hancock Funds and (c) automatically in the event of
assignment. The Plans further provide that they may not be amended to increase
the maximum amount of the fees for the services described therein without the
approval of a majority of the outstanding shares of the class of the Fund which
has voting rights with respect to that Plan. Each plan provides, that no
material amendment to the Plans will be effective unless it is approved by a
majority of the Trustees and the Independent Trustees of the Fund. The holders
of Class A and Class B shares have exclusive voting rights with respect to the
Plan applicable to their respective class of shares. In adopting the Plans, the
Trustees concluded that, in their judgment, there is a reasonable likelihood
that the Plans will benefit the holders of the applicable class of shares of the
Fund.
Amounts paid to John Hancock Funds by any class of shares of the Fund will not
be used to pay the expenses incurred with respect to any other class of shares
of the Fund; provided, however, that expenses attributable to the Fund as a
whole will be allocated, to the extent permitted by law, according to a formula
based upon gross sales dollars and/or average daily net assets of each such
class, as may be approved from time to time by vote of a majority of Trustees.
From time to time, the Fund may participate in joint distribution activities
with other Funds and the costs of those activities will be borne by each Fund in
proportion to the relative net asset value of the participating Funds.
During the period from September 1, 1996 to October 31, 1996, the Funds paid
John Hancock Funds the following amounts of expenses with respect to the Class A
and Class B shares of the Fund:
28
<PAGE>
<TABLE>
<CAPTION>
Expense Items
Printing and
Mailing of
Prospectus to Compensation to Expense Interest Carrying
New Selling of or Other Finance
Advertising Shareholders Brokers Distributor Charges
----------- ------------ ------- ----------- -------
<S> <C> <C> <C> <C> <C>
Class A shares $ 2,380 $ 693 $ 45 $ 7,241 $ --
Class B shares $10,645 $ (74) $ 335 $33,848 $ 710
</TABLE>
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
securities traded over- the-counter are generally valued at the last available
bid price.
Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00 p.m., London time (12:00 noon,
New York time) on the date of any determination of the Fund's NAV. If quotations
are not readily available, or the value has been materially affected by events
occurring after the closing of a foreign market, assets are valued by a method
that the Trustees believe accurately reflects fair value.
The NAV for each fund and class is determined each business day at the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m. Eastern
Time) by dividing a class's net assets by the number of its shares outstanding.
On any day an international market is closed and the New York Stock Exchange is
open, any foreign securities will be valued at the prior day's close with the
current day's exchange rate. Trading of foreign securities may take place on
Saturdays and U.S. business holidays on which the Fund's NAV is not calculated.
Consequently, the Fund's portfolio securities may trade and the NAV of the
Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.
29
<PAGE>
INITIAL SALES CHARGE ON CLASS A SHARES
Shares of the Fund are offered at a price equal to their net asset value, plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase (the "initial sales charge alternative") or on a contingent
deferred basis (the "deferred sales charge alternative"). Share certificates
will not be issued unless requested by the shareholder in writing, and then they
will only be issued for full shares. The Trustees reserve the right to change or
waive the Fund's minimum investment requirements and to reject any order to
purchase shares (including purchase by exchange) when in the judgment of the
Adviser such rejection is in the Fund's best interest.
The sales charges applicable to purchases of Class A shares of the Fund are
described in the Prospectus. Methods of obtaining reduced sales charges referred
to generally in the Prospectus are described in detail below. In calculating the
sales charge applicable to current purchases of Class A shares of the Fund, the
investor is entitled to cumulate current purchases with the greater of the
current value (at offering price) of the Class A shares of the Fund owned by the
investor, or if John Hancock Signature Services, Inc. ("Signature Services") is
notified by the investor's dealer or the investor at the time of the purchase,
the cost of the Class A shares owned.
Combined Purchases. In calculating the sales charge applicable to purchases of
shares made at one time, the purchases will be combined if made by (a) an
individual, his or her spouse and their children under the age of 21, purchasing
securities for his or their own account, (b) a trustee or other fiduciary
purchasing for a single trust, estate or fiduciary account and (c) certain
groups of four or more individuals making use of salary deductions or similar
group methods of payment whose funds are combined for the purchase of mutual
fund shares. Further information about combined purchases, including certain
restrictions on combined group purchases, is available from Signature Services
or a Selling Broker's representative.
Without Sales Charges. Class A shares may be offered without a front-end sales
charge or CDSC to various individuals and institutions as follows:
o Any state, county or any instrumentality, department, authority, or
agency of these entities that is prohibited by applicable investment
laws from paying a sales charge or commission when it purchases shares
of any registered investment management company.*
o A bank, trust company, credit union, savings institution or other
depository institution, its trust departments or common trust funds if
it is purchasing $1 million or more for non-discretionary customers or
accounts.*
o A Trustee or officer of the Trust; a Director or officer of the Adviser
and its affiliates or Selling Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family
(spouse, children, grandchildren, mother, father, sister, brother,
mother-in-law, father-in-law) of any of the foregoing; or any fund,
pension, profit sharing or other benefit plan for the individuals
described above.
o A broker, dealer, financial planner, consultant or registered
investment advisor that has entered into an agreement with John Hancock
Funds providing specifically for the use of Fund shares in fee-based
investment products or services made available to their clients.
o A former participant in an employee benefit plan with John Hancock
funds, when he or she withdraws from his or her plan and transfers any
or all of his or her plan distributions directly to the Fund.
30
<PAGE>
o A member of an approved affinity group financial services plan.*
o A member of a class action lawsuit against insurance companies who is
investing settlement proceeds.
Existing full service clients of the Life Company who were group annuity
contract holders as of September 1, 1994, and participant directed defined
contribution plans with at least 100 eligible employees at the inception of the
Fund account, may purchase Class A shares with no initial sales charge. However,
if the shares are redeemed within 12 months after the end of the calendar year
in which the purchase was made, a CDSC will be imposed at the following rate:
<PAGE>
Amount Invested CDSC Rate
- --------------- ---------
$1 to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
Class A shares may also be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
Shareholders of the John Hancock Global Technology Fund who were shareholders of
John Hancock National Aviation & Technology Fund ("National Aviation") who held
shares prior to May 1, 1984 are permitted for an indefinite period to purchase
additional shares of the John Hancock Global Technology Fund at net asset value,
without a sales charge, provided that the purchasing shareholder held shares of
National Aviation continuously from April 30, 1984 to July 28, 1995 (the date of
the merger of National Aviation into the John Hancock Global Technology Fund)
and shares of the John Hancock Global Technology Fund from that date to the date
of the purchase in question.
*For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Accumulation Privilege. Investors (including investors combining purchases) who
are already Class A shareholders may also obtain the benefit of a reduced sales
charge by taking into account not only the amount then being invested but also
the purchase price or current account value of the Class A shares already held
by such person.
Combination Privilege. Reduced sales charges also are available to an investor
based on the aggregate amount of his concurrent and prior investments in Class A
shares of the Fund and shares of all other John Hancock funds which carry a
sales charge.
Letter of Intention. Reduced sales charges are also applicable to investments
made pursuant to a Letter of Intention (the "LOI"), which should be read
carefully prior to its execution by an investor. The Fund offers two options
regarding the specified period for making investments under the LOI. All
investors have the option of making their investments over a specified period of
thirteen (13) months. Investors who are using the Fund as a funding medium for a
qualified retirement plan, however, may opt to make the necessary investments
called for by the LOI over a forty-eight (48) month period. These qualified
retirement plans include IRA, SEP, SARSEP, 401(k), 403(b) (including TSAs) and
457 plans. Such an investment (including accumulations and combinations) must
aggregate $50,000 or more invested during the specified period from the date of
the LOI or from a date within ninety (90) days prior thereto, upon written
request to Signature Services. The sales charge applicable to all amounts
invested under the LOI is computed as if the aggregate amount intended to be
31
<PAGE>
invested had been invested immediately. If such aggregate amount is not actually
invested, the difference between the sales charge actually paid and the sales
charge payable had the LOI not been in effect is due from the investor. However,
for the purchases actually made within the specified period (either 13 or 48
months) the sales charge applicable will not be higher than that which would
have applied (including accumulations and combinations) had the LOI been for the
amount actually invested.
The LOI authorizes Signature Services to hold in escrow sufficient shares
(approximately 5% of the aggregate) to make up any difference in sales charges
on the amount intended to be invested and the amount actually invested, until
such investment is completed within the specified period, at which time the
escrowed Class A shares will be released. If the total investment specified in
the LOI is not completed, the Class A shares held in escrow may be redeemed and
the proceeds used as required to pay the sales charge as may be due. By signing
the LOI, the investor authorizes Signature Services to act as his or her
attorney-in-fact to redeem any escrowed shares and adjust the sales charge, if
necessary. A LOI does not constitute a binding commitment by an investor to
purchase, or by the Fund to sell, any additional shares and may be terminated at
any time.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per share without
the imposition of an initial sales charge so the Fund will receive the full
amount of the purchase payment.
Contingent Deferred Sales Charge Class B shares which are redeemed within six
years of purchase will be subject to a contingent deferred sales charge ("CDSC")
at the rates set forth in the Prospectus as a percentage of the dollar amount
subject to the CDSC. The charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the Class B
shares being redeemed. Accordingly, no CDSC will be imposed on increases in
account value above the initial purchase prices, including Class B shares
derived from reinvestment of dividends or capital gains distributions. No CDSC
will be imposed on shares derived from reinvestment of dividends or capital
gains distributions.
Class B shares are not available to full-service defined contribution plans
administered by Signature Services or the Life Company that had more than 100
eligible employees at the inception of the Fund account.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchases of shares, all payments
during a month will be aggregated and deemed to have been made on the first day
of the month.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
dividend and capital gain reinvestment, and next from the shares you have held
the longest during the six-year period. For this purpose, the amount of any
increase in a share's value above its initial purchase price is not regarded as
a share exempt from CDSC. Thus, when a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial purchase
price. However, you cannot redeem appreciation value only in order to avoid a
CDSC.
32
<PAGE>
When requesting a redemption for a specific dollar amount, please indicate if
you require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.
Example:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time your CDSC will be calculated as follows:
* Proceeds of 50 shares redeemed at $12 per share $600
* Minus proceeds of 10 shares not subject to CDSC
(dividend reinvestment) -120
* Minus appreciation on remaining shares (40 shares X $2) -80
-----
* Amount subject to CDSC $400
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole or
in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B shares, such as the payment of compensation to select Selling Brokers
for selling Class B shares. The combination of the CDSC and the distribution and
service fees facilitates the ability of the Fund to sell the Class B shares
without a sales charge being deducted at the time of the purchase. See the
Prospectus for additional information regarding the CDSC.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to CDSC,
unless indicated otherwise, in the circumstances defined below:
For all account types:
* Redemptions made pursuant to the Fund's right to liquidate your account
if you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability.
* Redemptions made under the Reinstatement Privilege, as described in
"Sales Charge Reductions and Waivers" of the Prospectus.
* Redemptions of Class B shares made under a periodic withdrawal plan, as
long as your annual redemptions do not exceed 12% of your account
value, including reinvested dividends, at the time you established your
periodic withdrawal plan and 12% of the value of subsequent investments
(less redemptions) in that account at the time you notify Signature
Services. (Please note that this waiver does not apply to periodic
withdrawal plan redemptions of Class A shares that are subject to a
CDSC.)
For Retirement Accounts (such as IRA, Rollover IRA, TSA, 457, 403(b), 401(k),
Money Purchase Pension Plan, Profit-Sharing Plan and other qualified plans as
described in the Internal Revenue Code) unless otherwise noted.
33
<PAGE>
* Redemptions made to effect mandatory or life expectancy distributions
under the Internal Revenue Code.
* Returns of excess contributions made to these plans.
* Redemptions made to effect distributions to participants or
beneficiaries from employer sponsored retirement plans under Section
401(a) of the Code (such as 401(k), Money Purchase Pension Plan,
Profit-Sharing Plan).
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares
prior to May 15, 1995.
Please see matrix for reference.
34
<PAGE>
<TABLE>
<CAPTION>
CDSC Waiver Matrix for Class B Funds.
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Type of 401(a) Plan 403(b) 457 IRA, IRA Non-retirement
Distribution (401(k), MPP, Rollover
PSP)
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
Death or Waived Waived Waived Waived Waived
Disability
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Over 70 1/2 Waived Waived Waived Waived for 12% of account
mandatory value annually in
distributions or periodic payments
12% of account
value annually
in periodic
payments
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Between 59 1/2 Waived Waived Waived Waived for Life 12% of account
and 70 1/2 Expectancy or value annually in
12% of account periodic payments
value annually
in periodic
payments
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Under 59 1/2 Waived Waived for Waived for Waived for 12% of account
annuity payments annuity payments annuity payments value annually in
(72+) or 12% of (72+) or 12% of (72+) or 12% of periodic payments
account value account value account value
annually in annually in annually in
periodic payments periodic payments periodic payments
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Loans Waived Waived N/A N/A N/A
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Termination of Not Waived Not Waived Not Waived Not Waived N/A
Plan
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Hardships Waived Waived Waived N/A N/A
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Return of Waived Waived Waived Waived N/A
Excess
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
</TABLE>
If you qualify for a CDSC waiver under one of these situations, you
must notify Signature Services at the time you make your redemption. The waiver
will be granted once Signature Services has confirmed you are entitled to the
waiver.
35
<PAGE>
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion he would incur a brokerage charge. Any such
securities would be valued for the purposes of making such payment at the same
value as used in determining net asset value. The Fund has, however, elected to
be governed by Rule 18f-1 under the Investment Company Act. Under that rule, the
Fund must redeem its shares for cash except to the extent that the redemption
payments to any shareholder during any 90- day period would exceed the lesser of
$250,000 or 1% of the Fund's net asset value at the beginning of such period.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of shares of any class of a fund
for shares of the same class in any other John Hancock fund offering that class.
Exchanges between funds with shares that are not subject to a CDSC are based on
their respective net asset values. No sales charge or transaction charge is
imposed. Shares of the Fund which are subject to a CDSC may be exchanged into
shares of any of the other John Hancock funds that are subject to a CDSC without
incurring the CDSC; however, the shares acquired in an exchange will be subject
to the CDSC schedule of the shares acquired if and when such shares are redeemed
(except that shares exchanged into John Hancock Short-Term Strategic Income
Fund, John Hancock Intermediate Maturity Government Fund and John Hancock
Limited-Term Government Fund will retain the exchanged fund's CDSC schedule).
For purposes of computing the CDSC payable upon redemption of shares acquired in
an exchange, the holding period of the original shares is added to the holding
period of the shares acquired in an exchange.
If a shareholder exchanges Class B shares purchased prior to January 1, 1994
(except John Hancock Short-Term Strategic Income Fund) for Class B shares of any
other John Hancock fund, the acquired shares will continue to be subject to the
CDSC schedule that was in effect when the exchanged shares were purchased.
The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of the Fund's shares. Since the redemption price of the Fund shares
may be more or less than the shareholder's cost, depending upon the market value
of the securities owned by the Fund at the time of redemption, a withdrawal
pursuant to this plan may result in recognition of gain or loss for purposes of
Federal, state and local income taxes. The maintenance of a Systematic
Withdrawal Plan concurrently with purchases of additional Class A or Class B
shares of the Fund could be disadvantageous to a shareholder because of the
initial sales charge payable on purchases of Class A shares and the CDSC imposed
on redemptions of Class B shares and because redemptions are taxable events.
Therefore, a shareholder should not purchase Class A or Class B shares at the
same time that a Systematic Withdrawal Plan is in effect. The Fund reserves the
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right to modify or discontinue the Systematic Withdrawal Plan of any shareholder
on 30 days' prior written notice to such shareholder, or to discontinue the
availability of such plan in the future. The shareholder may terminate the plan
at any time by giving proper notice to Signature Services.
Monthly Automatic Accumulation Program ("MAAP"). The program is explained in the
Prospectus. The program, as it relates to automatic investment checks, is
subject to the following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the MAAP may be revoked by Signature
Services without prior notice if any investment is not honored by the
shareholder's bank. The bank shall be under no obligation to notify the
shareholder as to the non-payment of any checks.
The program may be discontinued by the shareholder either by calling Signature
Services or upon written notice to Signature Services which is received at least
five (5) business days prior to the due date of any investment.
Reinstatement or Reinvestment Privilege. Upon notification of Signature
Services, a shareholder who has redeemed shares of the Fund may, within 120 days
after the date of redemption, reinvest without payment of a sales charge any
part of the redemption proceeds in shares of the same class of the Fund or in
any John Hancock mutual fund, subject to the minimum investment limit of that
fund. The proceeds from the redemption of Class A shares may be reinvested at
net asset value without paying a sales charge in Class A shares of the Fund or
in Class A shares of any John Hancock mutual funds. If a CDSC was paid upon a
redemption, a shareholder may reinvest the proceeds from this redemption at net
asset value in additional shares of the class from which the redemption was
made. The shareholder's account will be credited with the amount of any CDSC
charged upon the prior redemption and the new shares will continue to be subject
to the CDSC. The holding period of the shares acquired through reinvestment
will, for purposes of computing the CDSC payable upon a subsequent redemption,
include the holding period of the redeemed shares.
To protect the interests of other investors in the Fund, the Fund may cancel the
reinvestment privilege 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. Also, the Fund may refuse any reinvestment
request.
The Fund may change or cancel its reinvestment policies at any time.
A redemption or exchange of shares of the Fund is a taxable transaction for
Federal income tax purposes even if the reinvestment privilege is exercised, and
any gain or loss realized by a shareholder on the redemption or other
disposition of Fund shares will be treated for tax purposes as described under
the caption "TAX STATUS."
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Trust are responsible for the management and supervision of
the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this Statement of Additional
Information, the Trustees have authorized shares of the Fund and two other
series. Additional series may be added in the future. The Declaration of Trust
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also authorizes the Trustees to classify and reclassify the shares of the Fund,
or any other series of the Trust, into one or more classes. As of the date of
this Statement of Additional Information, the Trustees have authorized the
issuance of two classes of shares of the Fund, designated as Class A and Class
B.
The shares of each class of the Fund represent an equal proportionate interest
in the aggregate net assets attributable to that class of the Fund. Holders of
Class A and Class B shares each have certain exclusive voting rights on matters
relating to their respective distribution plans. The different classes of the
Fund may bear different expenses relating to the cost of holding shareholder
meetings necessitated by the exclusive voting rights of any class of shares.
Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the facts that (i)
Class B shares will pay higher distribution and service fees than Class A shares
and (ii) each of Class A and Class B shares will bear any class expenses
properly allocable to that class of shares, subject to the conditions the
Internal Revenue Service imposes with respect to the multiple-class structures.
Similarly, the net asset value per share may vary depending on whether Class A
or Class B shares are purchased.
In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable, except as set forth below.
Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, the Fund's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Trust. The Declaration of Trust also provides for indemnification out of the
Trust assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Furthermore, no fund included in this Fund's prospectus shall
be liable for the liabilities of any other John Hancock fund. Liability is
therefore limited to circumstances in which the Trust itself would be unable to
meet its obligations, and the possibility of this occurrence is remote.
A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts.
TAX STATUS
Each series of the Trust, including the Fund, is treated as a separate entity
for tax purposes. The Fund has qualified and elected to be treated as a
"regulated investment company" under Subchapter M of the Code and intends to
continue to so qualify for each taxable year. As such and by complying with the
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applicable provisions of the Code regarding the sources of its income, the
timing of its distributions, and the diversification of its assets, the Fund
will not be subject to Federal income tax on taxable income (including net
realized capital gains) which is distributed to shareholders in accordance with
the timing requirements of the Code.
The Fund will be subject to a four percent nondeductible Federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements. The
Fund intends under normal circumstances to seek to avoid or minimize liability
for such tax by satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss, and investment company taxable income is all taxable
income and capital gains, other than net capital gain, after reduction by
deductible expenses.) Some distributions from investment company taxable income
and/or net capital gain may be paid in January but may be taxable to
shareholders as if they had been received on December 31 of the previous year.
The tax treatment described above will apply without regard to whether
distributions are received in cash or reinvested in additional shares of the
Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
foreign currency forward contracts, certain options or futures contracts on
foreign currencies, foreign currencies, or payables or receivables denominated
in a foreign currency are subject to Section 988 of the Code, which generally
causes such gains and losses to be treated as ordinary income and losses and may
affect the amount, timing and character of distributions to shareholders. Any
such transactions that are not directly related to the Fund's investment in
stock or securities, possibly including speculative currency positions or
currency derivatives not used for hedging purposes, may increase the amount of
gain it is deemed to recognize from the sale of certain investments or
derivatives held for less than three months, which gain is limited under the
Code to less than 30% of its gross income for each taxable year, and may under
future Treasury regulations produce income not among the types of "qualifying
income" from which the Fund must derive at least 90% of its gross income for
each taxable year. If the net foreign exchange loss for a year treated as
ordinary loss under Section 988 were to exceed the Fund's investment company
taxable income computed without regard to such loss the resulting overall
ordinary loss for such year would not be deductible by the Fund or its
shareholders in future years.
If the Fund invests in stock of certain non-U.S. corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, rentals, royalties or capital gain) or hold at least 50% of their
assets in investments producing such passive income ("passive foreign investment
companies"), the Fund could be subject to Federal income tax and additional
interest charges on "excess distributions" received from these passive foreign
investment companies or gain from the sale of stock in such companies, even if
all income or gain actually received by the Fund is timely distributed to its
shareholders. The Fund would not be able to pass through to its shareholders any
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credit or deduction for such a tax. Certain elections may, if available,
ameliorate these adverse tax consequences, but any such election could require
the Fund to recognize taxable income or gain without the concurrent receipt of
cash. The Fund may limit and/or manage its investments in passive foreign
investment companies to minimize its tax liability or maximize its return from
these investments.
Limitations imposed by the Code on regulated investment companies like the Fund
may restrict the Fund's ability to enter into options and futures contracts,
foreign currency positions and foreign currency forward contracts. Certain of
these transactions may cause the Fund to recognize gains or losses from marking
to market even though its positions have not been sold or terminated and may
affect the character as long-term or short-term (or, in the case of certain
foreign currency options, futures and forward contracts, as ordinary income or
loss) of some capital gains and losses realized by the Fund. Additionally,
certain of the Fund's losses on transactions involving options, futures, forward
contracts, and any offsetting or successor positions in its portfolio may be
deferred rather than being taken into account currently in calculating the
Fund's taxable income or gain. Certain of such transactions may also cause the
Fund to dispose of investments sooner than would otherwise have occurred. These
transactions may therefore affect the amount, timing and character of the Fund's
distributions to shareholders. The Fund will take into account the special tax
rules applicable to options, futures or forward contracts, including
consideration of available elections, in order to seek to minimize any potential
adverse tax consequences.
The amount of net realized capital gains, if any, in any given year will result
from sales of securities or the use of options or future contracts made with a
view to the maintenance of a portfolio believed by the Fund's management to be
most likely to attain the Fund's objective. Such sales and transactions, and any
resulting gains or losses, may therefore vary considerably from year to year. At
the time of an investor's purchase of Fund shares, a portion of the purchase
price is often attributable to realized or unrealized appreciation in the Fund's
portfolio or undistributed taxable income of the Fund. Consequently, subsequent
distributions on those shares from such appreciation or income may be taxable to
such investor even if the net asset value of the investor's shares is, as a
result of the distributions, reduced below the investor's cost for such shares
and the distributions in reality represent a return of a portion of the purchase
price.
Upon a redemption of shares of the Fund (including by exercise of the exchange
privilege) a shareholder will ordinarily realize a taxable gain or loss
depending upon the amount of the proceeds and the investor's basis in his
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands and will be long-term or
short-term, depending upon the shareholder's tax holding period for the shares
and subject to the special rules described below. A sales charge paid in
purchasing Class A shares of the Fund cannot be taken into account for purposes
of determining gain or loss on the redemption or exchange of such shares within
90 days after their purchase to the extent shares of the Fund or another John
Hancock fund are subsequently acquired without payment of a sales charge
pursuant to the reinvestment or exchange privilege. This disregarded charge will
result in an increase in the shareholder's tax basis in the shares subsequently
acquired. Also, any loss realized on a redemption or exchange may be disallowed
to the extent the shares disposed of are replaced with other shares of the Fund
within a period of 61 days, beginning 30 days before and ending 30 days after
the shares are disposed of, such as pursuant to automatic dividend
reinvestments. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss. Any loss realized upon the redemption of shares
with a tax holding period of six months or less will be treated as a long-term
capital loss to the extent of any amounts treated as distributions of long-term
capital gain with respect to such shares.
Although the Fund's present intention is to distribute, at least annually, all
net capital gain, if any, the Fund reserves the right to retain and reinvest all
or any portion of the excess, as computed for Federal income tax purposes, of
net long-term capital gain over net short-term capital loss in any year. The
Fund will not in any event distribute net capital gain realized in any year to
the extent that a capital loss is carried forward from prior years against such
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gain. To the extent such excess was retained and not exhausted by the
carryforward of prior years' capital losses, it would be subject to Federal
income tax in the hands of the Fund. Upon proper designation of this amount by
the Fund, each shareholder would be treated for Federal income tax purposes as
if the Fund had distributed to him on the last day of its taxable year his pro
rata share of such excess, and he had paid his pro rata share of the taxes paid
by the Fund and reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain in his return for his taxable year in which the last day of the
Fund's taxable year falls, (b) be entitled either to a tax credit on his return
for, or to a refund of, his pro rata share of the taxes paid by the Fund, and
(c) be entitled to increase the adjusted tax basis for his Fund shares by the
difference between his pro rata share of such excess and his pro rata share of
such taxes.
For Federal income tax purposes, the Fund is permitted to carry forward a net
realized capital loss in any year to offset net capital gains, if any, during
the eight years following the year of the loss. To the extent subsequent net
realized capital gains are offset by such losses, they would not result in
Federal income tax liability to the Fund and as noted above would not be
distributed as such to shareholders. The Fund has $2,061,437 of capital loss
carryforwards available to offset against future net realized capital gains. The
carryforwards expire as follows: October 31, 2003-$849 and October 31,
2004-$2,060,588.
For purposes of the dividends-received deduction available to corporations,
dividends received by the Fund from U.S. domestic corporations in respect of any
share of stock held by the Fund, for U.S. Federal income tax purposes, for at
least 46 days (91 days in the case of certain preferred stock) and distributed
and properly designated by the Fund may be treated as qualifying dividends.
Corporate shareholders must meet the minimum holding period requirement stated
above (46 or 91 days) with respect to their Fund shares in order to qualify for
the deduction and, if they have any debt that is deemed under the Code directly
attributable to Fund shares, may be denied a portion of the dividends received
deduction. The entire qualifying dividend, including the otherwise-deductible
amount, will be included in determining alternative minimum tax liability, if
any. Additionally, any corporate shareholder should consult its tax adviser
regarding the possibility that its tax basis in its shares may be reduced, for
Federal income tax purposes, by reason of "extraordinary dividends" received
with respect to the shares, for the purpose of computing its gain or loss on
redemption or other disposition of the shares.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. or deductions may reduce or eliminate
such taxes in some cases. Investors may be entitled to claim U.S. foreign tax
credits or deductions with respect to foreign income taxes or certain other
foreign taxes ("qualified foreign taxes"), subject to certain provisions and
limitations contained in the Code. Specifically, if more than 50% of the Fund's
total assets at the close of any taxable year consist of stock or securities of
foreign corporations, the Fund may file an election with the Internal Revenue
Service pursuant to which shareholders of the Fund will be required to (i)
include in ordinary gross income (in addition to taxable dividends and
distributions actually received) their pro rata shares of qualified foreign
taxes paid by the Fund even though not actually received by them, and (ii) treat
such respective pro rata portions as foreign taxes paid by them.
If the Fund makes this election, shareholders may then deduct such pro rata
portions of qualified foreign taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of qualified foreign taxes paid by the Fund,
although such shareholders will be required to include their shares of such
taxes in gross income. Shareholders who claim a foreign tax credit for such
foreign taxes may be required to treat a portion of dividends received from the
Fund as a separate category of income for purposes of computing the limitations
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on the foreign tax credit. Tax-exempt shareholders will ordinarily not benefit
from this election. Each year (if any) that the Fund files the election
described above, its shareholders will be notified of the amount of (i) each
shareholder's pro rata share of qualified foreign taxes paid by the Fund and
(ii) the portion of Fund dividends that represents income from each foreign
country. If the Fund cannot or does not make this election, the Fund will deduct
the foreign taxes it pays in determining the amount it has available for
distribution to shareholders, and shareholders will not include these foreign
taxes in their income, nor will they be entitled to any tax deductions or
credits with respect to such taxes.
The Fund is required to accrue income on any debt securities that have more than
a de minimis amount of original issue discount (or debt securities acquired at a
market discount, if the Fund elects to include market discount in income
currently) prior to the receipt of the corresponding cash payments. The mark to
market rules applicable to certain options, futures contracts, and forward
contracts may also require the Fund to recognize income or gain without a
concurrent receipt of cash. However, the Fund must distribute to shareholders
for each taxable year substantially all of its net income and net capital gains,
including such income or gain, to qualify as a regulated investment company and
avoid liability for any federal income or excise tax. Therefore, the Fund may
have to dispose of its portfolio securities under disadvantageous circumstances
to generate cash, or may have to leverage itself by borrowing the cash, to
satisfy these distribution requirements.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangibles taxes, the value of
its assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. The Fund will not seek to satisfy any
threshold or reporting requirements that may apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.
The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the Fund with their correct taxpayer
identification number and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholder
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. The Fund may refuse to
accept an application that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in shares, will be reduced by the amounts
required to be withheld. Any amounts withheld may be credited against a
shareholder's U.S. federal income tax liability. Investors should consult their
tax advisers about the applicability of the backup withholding provision.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
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of investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may also be
subject to state and local taxes. Shareholders should consult their own tax
advisers as to the Federal, state or local tax consequences of ownership of
shares of the Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their Fund
investment is effectively connected will be subject to U.S. Federal income tax
treatment that is different from that described above. These investors may be
subject to nonresident alien withholding tax at the rate of 30% (or a lower rate
under an applicable tax treaty) on amounts treated as ordinary dividends from
the Fund and, unless an effective IRS Form W-8 or authorized substitute for Form
W-8 is on file, to 31% backup withholding on certain other payments from the
Fund. Non-U.S. investors should consult their tax advisers regarding such
treatment and the application of foreign taxes to an investment in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
Provided that the Fund qualifies as a regulated investment company under the
Code, it will also not be required to pay any Massachusetts income tax.
CALCULATION OF PERFORMANCE
The average annual total return for Class A shares of the Fund for the one year
period ended October 31, 1996 and since commencement of operations on September
29, 1994 was 22.28% and 29.65%, respectively. The total return (not annualized)
for Class B shares of the Fund since commencement of operations on January 22,
1996 was 22.36%. The Fund's total return is computed by finding the average
annual compounded rate of return over the 1 year and life-of-fund periods that
would equate the initial amount invested to the ending redeemable value
according to the following formula:
n _____
T = \ /ERV/P - 1
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment made
at the beginning of the 1 year and life-of-fund periods.
Because each share has its own sales charge and fee structure, the classes have
different performance results. In the case of Class A or Class B shares, this
calculation assumes the maximum sales charge is included in the initial
investment or the CDSC is applied at the end of the period, respectively. This
calculation assumes that all dividends and distributions are reinvested at net
asset value on the reinvestment dates during the period. The "distribution rate"
is determined by annualizing the result of dividing the declared dividends of
the Fund during the period stated by the maximum offering price or net asset
value at the end of the period. Excluding the Fund's sales charge from the
distribution rate produces a higher rate.
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In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total returns may be quoted as a percentage or
as a dollar amount, and may be calculated for a single investment, a series of
investments and/or a series of redemptions over any time period. Total returns
may be quoted with or without taking the Fund's sales charge on Class A shares
or the CDSC on Class B shares into account. Excluding the Fund's sales charge on
Class A shares and the CDSC on Class B shares from a total return calculation
produces a higher total return figure.
From time to time, in reports and promotional literature, the Fund's total
return will be compared to indices of mutual funds such as Lipper Analytical
Services, Inc.'s "Lipper - Mutual Performance Analysis," a monthly publication
which tracks net assets, total return and yield on mutual funds in the United
States. Ibottson and Associates, CDA Weisenberger and F.C. Towers are also used
for comparison purposes, as well as the Russell and Wilshire Indices.
Performance rankings and ratings reported periodically in national financial
publications such as MONEY Magazine, FORBES, BUSINESS WEEK, THE WALL STREET
JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S may also be
utilized. The Fund's promotional and sales literature may make reference to the
Fund's "beta". Beta is a reflection of the market related risk of the Fund by
showing how responsive the Fund is to the market.
The performance of the Fund is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of the Fund for
any period in the future. The performance of the Fund is a function of many
factors including its earnings, expenses and number of outstanding shares;
fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the officers of the Adviser
pursuant to recommendations made by an investment committee of the Adviser,
which consists of officers and directors of the Adviser and affiliates and
officers and Trustees who are interested persons of the Fund. Orders for
purchases and sales of securities are placed in a manner which, in the opinion
of the officers of the Adviser, will offer the best price and market for the
execution of each such transaction. Purchases from underwriters of portfolio
securities may include a commission or commissions paid by the issuer and
transactions with dealers serving as market makers reflect a "spread."
Investments in debt securities are generally traded on a net basis through
dealers acting for their own account as principals and not as brokers; no
brokerage commissions are payable on such transactions.
In the U.S. and in some other countries, debt securities are traded principally
in the over-the-counter market on a net basis through dealers acting for their
own account and not as brokers. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less government supervision and
regulation of foreign stock exchanges and broker-dealers than in the U.S.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
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<PAGE>
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and other policies that the Trustees may determine, the Adviser may consider
sales of shares of the Fund as a factor in the selection of broker-dealers to
execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and to a
lesser extent statistical assistance furnished to the Adviser of the Fund, and
their value and expected contribution to the performance of the Fund. It is not
possible to place a dollar value on information and services to be received from
brokers and dealers, since it is only supplementary to the research efforts of
the Adviser. The receipt of research information is not expected to reduce
significantly the expenses of the Adviser. The research information and
statistical assistance furnished by brokers and dealers may benefit the Life
Company or other advisory clients of the Adviser, and, conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser may result
in research information and statistical assistance beneficial to the Fund. The
Fund will not make commitments to allocate portfolio transactions upon any
prescribed basis. While the Trust's officers will be primarily responsible for
the allocation of the Fund's brokerage business, their policies and practices in
this regard must be consistent with the foregoing and will at all times be
subject to review by the Trustees. For the period from September 1, 1996 to
October 31, 1996, the Fund paid negotiated brokerage commissions in the amount
of $38,488.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay a broker which provides brokerage and research services to the Fund an
amount of disclosed commission in excess of the commission which another broker
would have charged for effecting that transaction. This practice is subject to a
good faith determination by the Trustees that the commission is reasonable in
light of the services provided and to policies that the Trustees may adopt from
time to time. For the period from September 1, 1996 to October 31, 1996, the
Fund directed commissions in the amount of $7,448 to compensate brokers for
research services such as industry, economics, and company reviews and
evaluations of securities.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Distributors, Inc., a broker-dealer ("Distributors"
or "Affiliated Broker"). Pursuant to procedures determined by the Trustees and
consistent with the above policy of obtaining best net results, the Fund may
execute portfolio transactions with or through Affiliated Brokers. For the
period from September 1, 1996 to October 31, 1996, the Fund paid no brokerage
commissions to any Affiliated Broker.
Distributors may act as broker for the Fund on exchange transactions, subject,
however, to the general policy of the Fund set forth above and the procedures
adopted by the Trustees pursuant to the Investment Company Act. Commissions paid
to an Affiliated Broker must be at least as favorable as those which the
Trustees believe to be contemporaneously charged by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold. A transaction would not be placed with an Affiliated Broker if the Fund
would have to pay a commission rate less favorable than the Affiliated Broker's
contemporaneous charges for comparable transactions for its other most favored,
but unaffiliated, customers except for accounts for which the Affiliated Broker
acts as clearing broker for another brokerage firm, and any customers of the
Affiliated Broker not comparable to the Fund as determined by a majority of the
Trustees who are not "interested persons" (as defined in the Investment Company
Act) of the Fund, the Adviser or the Affiliated Broker. Because the Adviser,
which is affiliated with the Affiliated Brokers, has, as an investment adviser
to the Fund, the obligation to provide investment management services, which
include elements of research and related investment skills, such research and
related skills will not be used by the Affiliated Broker as a basis for
negotiating commissions at a rate higher than that determined in accordance with
the above criteria.
45
<PAGE>
Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Fund. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the Fund. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate securities to be
sold or purchased for the Fund with those to be sold or purchased for other
clients managed by it in order to obtain best execution.
TRANSFER AGENT SERVICES
John Hancock Signature Services, Inc., 1 John Hancock Way STE 1000, Boston, MA
02217-1000, a wholly owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays an annual fee of
$19.00 for each Class A shareholder and $21.50 for each Class B shareholder,
plus certain out-of-pocket expenses. These expenses are aggregated and charged
to the Fund and allocated to each class on the basis of their relative net asset
values.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and State Street Bank & Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110. Under the custodian agreement, State Street Bank &
Trust Company performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are Price Waterhouse LLP, 160 Federal
Street, Boston, Massachusetts 02110. Price Waterhouse audits and renders an
opinion on the Fund's annual financial statements and reviews the Fund's annual
Federal income tax return.
46
<PAGE>
FINANCIAL STATEMENTS
F-1
<PAGE>
John Hancock Funds
Global
Marketplace
Fund
Annual Report
October 31, 1996
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
Gail D. Fosler*
William F. Glavin*
Anne C. Hodsdon
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt*
Richard S. Scipione
Edward J. Spellman*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and Compliance Officer
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and
Chief Executive Officer, flush right, next to second
paragraph.
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Most analysts agree that the Social Security system will run out of
money by the year 2030 unless Congress makes some changes. Although
it seems a long way off, the issue is serious enough that at least
one group has already studied the problem, and experts and
politicians alike have weighed in with a slew of prescriptions.
Legislative action could be in the offing in 1997.
The problem stems from demographic and societal changes. The number
of retirees collecting Social Security is growing rapidly, while the
number of workers supporting the system is shrinking. Consider this:
in 1950, there were 16 workers paying into the Social Security
system for each retiree collecting benefits. Today, there are three
workers for each retiree and by 2019 there will be two. Starting
then, the Social Security Administration estimates that the amount
paid out in Social Security benefits will start to be greater than
the amount collected in Social Security taxes. Compounding the issue
is the fact that people are retiring earlier and living longer.
The state of the system has already left many people, especially
younger and middle-aged workers, feeling insecure about Social
Security. A recent survey by the Employee Benefits Research
Institute (EBRI) found that 79% of current workers polled had little
confidence in the ability of Social Security to maintain the same
level of benefits as those received by today's retirees. Instead,
they said they expect to use their own savings or employer-sponsored
pensions for their retirement. Yet, remarkably, another EBRI survey
revealed that only slightly more than half of America's current workers
are saving money for retirement. Fewer than half own IRAs or participate
in employer-sponsored pension or savings plans.
No matter how Social Security's problems get solved, one thing is
clear. Americans need to rely on themselves for accumulating the
bulk of their retirement savings. There's no law that says you
should have to reduce your standard of living once you stop working.
So we encourage you to save all that you can now, so you can live
the way you'd like to later.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGER
John Hancock
Global Marketplace Fund
Fund outpaces retail sector;
focus on niche players with unique methods
Recently, the Fund's fiscal year end changed from August to October.
What follows is a discussion of the Fund's performance for the 12
months ended October 31, 1996.
Despite a relatively tough operating environment for retailers,
improved economic conditions helped John Hancock Global Marketplace
Fund post strong absolute and relative performance for the year
ended October 31, 1996. The Fund's Class A shares had a total return
of 28.76% at net asset value. The Fund's Class B shares, which began
on January 22, 1996, had a total return of 27.36% at net asset value
through October 31, 1996. By comparison, the average global fund
returned 15.52% for the same period, according to Lipper Analytical
Services1 and the Merrill Lynch Retail Index returned 24.10%. Please
see pages six and seven for longer-term performance information. The
key to the Fund's outperformance is that we focus on finding the
strongest players in various categories, as well as on companies
that have an innovative distribution channel, a unique product,
service or competitive advantage or innovative marketing or sales
methods.
The key to
the Fund's
outperformance
is a focus on
the strongest
players in a
category.
A 2" x 3 1/2" photo of the portfolio management team. Caption
reads: Bernice Behar and Fund management team members William
Maffie (r) and Robert Hallisey (l)".
Dominant market players win store wars
Even though we've seen some recent consolidation among stores, U.S.
retail space per capita remains extremely high and has nearly
doubled over the past 20 years. To survive in today's difficult
retailing environment, companies generally must dominate their
category, offer unique goods or services, or occupy a unique niche
in order to distinguish themselves. If they don't, they find
themselves hard-pressed to attract consumers in a marketplace that
is literally glutted with stores. That helps explain why retailer
Tommy Hilfiger was so successful during a period when other apparel
makers were suffering. The company's early acknowledgment of the
trend toward business casual wear and its successful launch of a
women's clothing line have helped immunize it from the difficulties
facing many other apparel manufacturers and marketers. In another
arena, PETsMART, the nation's largest pet supply chain, has
dominated its rivals by offering an almost unrivaled number of pet
care products and services. Unfortunately, Urban Outfitters, which
sells trendy apparel and home accessories targeted at the youth
market, didn't fare as well. The stock stumbled when the company
disappointed investors by failing to meet expansion plans.
Chart with heading "Top Five Common Stock Holdings" at top of
left hand column. The chart lists five holdings: 1) CompUSA
2.0%; 2) Neiman Marcus Group 1.8%; 3) JDA Software Group
1.8%; 4) Quality Food Centers 1.8%; 5) Kohl's Corp. 1.7%.
Footnote below states "As a percentage of total net assets on
October 31, 1996."
"During the
past six
months we
increased
our holdings
in super-
markets."
Table entitled "Scorecard" at bottom of left hand column. The
header for the left column is "Investments"; the header for
the right column is "Recent performance ... and what's behind
the numbers. The first listing is Gucci followed by an up
arrow and the phrase "Broader distribution of this popular
brand. The second listing is CompUSA followed by an up arrow
and the phrase "Strong computer sales." The third listing is
Urban Outfitters followed by a down arrow and the phrase
"Unable to meet expansion plans". Footnote below reads: "See
Schedule of Investments. Investment holdings are subject
to change."
Companies catering to an affluent consumer proved to be among the
Fund's best performers over the past year. Consumer confidence was
its strongest among affluent Americans, thanks in part to a U.S.
bull equity market and rising wages for this group. Those trends
benefited "high-end" retailers and helped them buck the negative
trends that faced middle-market and discount stores. Gucci Group,
Neiman Marcus and Saks Holdings Group, the parent company of Saks
Fifth Avenue, were all strong performers during the year. Italian-
based Gucci, which designs, produces and distributes leather goods,
apparel and accessories, continues to leverage its brand name by
opening a number of new stores and striking up agreements with high-
end U.S. department stores to distribute its goods. Neiman Marcus
and Saks Holdings both benefited from higher sales of designer and
high-end apparel, as well as less competition in the high-end
sector.
Apart from increased spending on high-end goods, there were other
pockets of strength. Computers sales were quite healthy throughout
the year, which boosted the Fund's top holding CompUSA, the nation's
largest computer retail chain. While the stock faltered a bit at the
end of the period as market participants worried about the company's
Christmas sales, we believe that holiday spending on computers will
be good. In the leisure area, one of the Fund's strongest performers
was Family Golf Centers, which runs entertainment-oriented driving
ranges in metropolitan areas and caters to the growing popularity of
golf in the United States. The rising market share and acquisitions
have helped its profits.
New additions
During the past six months we increased our holdings in
supermarkets. In some areas of the country, grocery stores and
larger chains have benefited from a somewhat better pricing
environment. Vons is in acquisition talks with a larger chain,
while Quality Food Centers, a Seattle-based chain, rose on
improving profits and on the news that it was undertaking a
big growth initiative.
Bar chart with heading "Fund Performance" at top of left hand
column. Under the heading is the footnote "For Class A shares
and the average global fund, returns are for the year ended
October 31, 1996. For Class B shares, return is from January
22, 1996 through October 31, 1996." The chart is scaled in
increments of 10% from top to bottom with 30% at the top and
0% at the bottom. Within the chart, there are three solid
bars. the first represents the 28.76% total return for John
Hancock Global Marketplace Fund: Class A. The second
represents the 27.36% total return for the John Hancock
Global Marketplace Fund: Class B. The third represents the
15.52% total return for the average global fund. A footnote
below states "The total returns for John Hancock Global
Marketplace Fund are at net asset value with all reinvested.
the average global fund is tracked by Lipper Analytical
Services (1). See following two pages for historical
performance information."
Companies that provide goods and services to the retailing industry
also performed well. Catalina Marketing, which generates database
information about consumers for marketers by analyzing cash register
information, has experienced strong profit growth. Universal Outdoor
Holdings Inc., which sells billboard space, has profited from an
improving pricing environment for outdoor advertising.
International opportunities
At the end of the period, roughly 24% of the Fund's investments were
in overseas companies. In Asia, we emphasized companies that cater
to the rising middle class population in the region including
Giordano International, a Gap-like chain which offers attractive
mid-priced clothing, and Glorious Sun, which sells the popular Jeans
West brand, distributed in Australia and New Zealand as well. We
also added to our holdings in Chaifa Holdings and First Sign, Hong-
Kong-based retailers that sell popular licensed apparel in China. In
Europe we've favored restaurateurs PizzaExpress and Wetherspoon
(J.D.), as well as Dixons, a large U.K. computer retailer, which we
sold during the period.
"...economic
growth
appears to
be strong
enough to
keep
consumer
confidence
healthy..."
Outlook
Although the U.S. economy is flashing mixed signals, economic growth
appears to be strong enough to keep consumer confidence healthy, at
least over the near term. That will probably be positive for most
retailers going into the holiday season. On the other hand, competition
among stores shows no signs of abating. Until there's a bigger shakeout
among the players, the retailing environment will continue to be
intensely competitive. Our sense is that only the strongest players
will thrive in the years to come. So we'll continue to focus on
those retailers that show the most strength -- here or abroad -- by
offering unique products or services or dominating specialized areas,
and on those that can continue to take market share from their competitors.
- --------------------------------------------------------------------
This commentary reflects the views of the portfolio manager through
the end of the Fund's period discussed in this report. Of course,
the manager's views are subject to change as market and other
conditions warrant.
International investing involves special risks such as political and
currency risks and differences in accounting standards and financial
reporting. Sector investing is subject to greater risks than the
market as a whole.
1Figures from Lipper Analytical Services include reinvested
dividends and do not take into account sales charges. Actual load-
adjusted performance is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the
average annual total returns for the John Hancock Global Marketplace
Fund. Total return is a performance measure that equals the sum of
all income and capital gains dividends, assuming reinvestment of
these distributions, and the change in the price of the Fund's
shares, expressed as a percentage of the Fund's net asset value per
share. Performance figures include the maximum applicable sales
charge of 5% for Class A shares. The effect of the maximum
contingent sales charge for Class B shares (5% and declining to 0%
over six years) is included in Class B performance. Remember that
all figures represent past performance and are no guarantee of how
the Fund will perform in the future. Also, keep in mind that the
total return and share price of the Fund's investments will
fluctuate. As a result, your Fund's shares may be worth more or less
than their original cost, depending on when you sell them.
CUMULATIVE TOTAL RETURNS
For the period ended September 30, 1996
One Life of
Year Fund
---------- -----------
John Hancock Global Marketplace
Fund: Class A 27.54% 80.13%(1)
John Hancock Global Marketplace
Fund: Class B N/A 28.89%(2)
AVERAGE ANNUAL TOTAL RETURNS
One Life of
Year Fund
---------- -----------
John Hancock Global Marketplace
Fund: Class A 27.54% 34.21%(1,3)
John Hancock Global Marketplace
Fund: Class B N/A 28.89%(2,3)
Notes to Performance
(1) Class A shares commenced on September 29, 1994.
(2) Class B shares commenced on January 22, 1996.
(3) Effective September 29, 1994, the Adviser has voluntarily
undertaken to limit the Fund's expenses, including the
management fee (but not including the transfer agent fee and the
12b-1 fee) to 0.90% of the Fund's daily net asset value.
Without the limitations of expenses, the average annual total
return for the one-year period and since inception would have
been 26.88% and 29.84% for Class A shares, respectively. For
Class B shares, the total return since inception would have been
27.78%.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in John
Hancock Global Marketplace Fund would be worth on October 31, 1996,
assuming you invested on the day each class of shares started and
have reinvested all distributions. For comparison, we've shown the
same $10,000 investment in both the Standard & Poor's 500 Stock
Index and the Morgan Stanley World Index. The Standard & Poor's 500
Stock Index is an unmanaged index that includes 500 widely traded
common stocks and is often used as a measure of stock market
performance. The Morgan Stanley World Index is an unmanaged index
that measures the performance of a diverse range of global stock
markets.
Global Marketplace Fund
Class A shares
Line chart with the heading Disciplined Growth Fund: Class A,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are four lines.
The first line represents the value of the Global Marketplace Fund,
before sales charge, and is equal to $18,069 as of October 31, 1996.
The second line represents the value of the hypothetical $10,000
investment made in the Global Marketplace Fund on September 29, 1994,
after sales charge, and is equal to $17,161 as of October 31, 1996. The
third line represents the Standard & Poor's 500 Stock Index, and is
equal to $16,037 as of October 31, 1996. The fourth line represents the
Morgan Stanley World Index and is equal to $13,223 as of October 31,
1996.
Global Marketplace Fund
Class B shares
Line chart with the heading Global Marketplace Fund, representing the
growth of a hypothetical $10,000 investment over the life of the fund.
Within the chart are four lines.
The first line represents the value of the Global Marketplace Fund,
before sales charge, and is equal to $12,736 as of October 31, 1996.
The second line represents the value of the hypothetical $10,000
investment made in the Global Marketplace Fund, after sales charge, on
January 22, 1996, and is equal to $12,236 as of October 31, 1996. The
third line represents the value of the Standard & Poor's 500 Stock Index
and is equal to $11,662 as of October 31, 1996. The fourth line
represents the Morgan Stanley World Index and is equal to $10,967 as of
October 31, 1996.
FINANCIAL STATEMENTS
John Hancock Funds - Global Marketplace Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
October 31, 1996
- -------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $46,988,920) $ 49,502,689
Joint repurchase agreement (cost - $835,000) 835,000
-------------
50,337,689
Cash 27,131
Receivable for shares sold 294,873
Receivable for investments sold 1,570,404
Dividends receivable 20,458
Foreign tax receivable 2,480
Deferred organization expense - Note A 4,225
Other Assets 14
-------------
Total Assets 52,257,274
- -------------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 217,794
Payable for shares repurchased 34,671
Payable to John Hancock Advisers, Inc. and affiliates - Note B 38,870
Accounts payable and accrued expenses 50,566
-------------
Total Liabilities 341,901
- -------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in $ 51,455,251
Accumulated net realized loss on investments and foreign currency transactions ( 2,061,451)
Accumulated net unrealized appreciation of investments and foreign currency transactions 2,521,573
-------------
Net Assets $ 51,915,373
=======================================================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial interest outstanding - unlimited
number of shares authorized with no par value, respectively) Class A - $21,782,280
(divided by) 1,423,053 $ 15.31
=======================================================================================================
Class B - $30,133,093 (divided by) 1,979,219 $ 15.22
=======================================================================================================
Maximum Offering Price Per Share *
Class A - ($15.31 x 105.26%) $ 16.12
=======================================================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
The Statement of Assets and Liabilities is the Fund's balance sheet and shows the value of what the Fund
owns, is due and owes on October 31, 1996. You'll also find the net asset value and the maximum offering
price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
- ---------------------------------------------------------------------------------------------------------------------
PERIOD FROM
SEPTEMBER 1, 1996
YEAR ENDED TO OCTOBER 31,
AUGUST 31, 1996 1996 (1)
----------------- -----------------
<S> <C> <C>
Investment Income:
Interest $ 44,926 $ 12,247
Dividends (net of foreign withholding taxes of $4,847 and $1,633, respectively) 41,556 54,722
----------- -----------
86,482 66,969
----------- -----------
Expenses:
Investment management fee - Note B 79,077 63,995
Registration and filing fees 66,454 12,078
Distribution/service fee - Note B
Class A 14,626 10,359
Class B 50,092 45,464
Custodian fee 59,574 14,500
Auditing fee 30,030 21,642
Transfer agent fee - Note B 24,624 27,389
Printing 21,071 3,339
Legal fees 3,458 190
Financial services fee - Note B 1,805 1,500
Organization expense - Note A 1,457 243
Miscellaneous 502 429
Trustees' fees 311 100
----------- -----------
Total Expenses 353,081 201,228
- ------------------------------------------------------------------------------------------------------------------
Less Expense Reductions - Note B ( 174,778) ( 46,022)
- ------------------------------------------------------------------------------------------------------------------
Net Expenses 178,303 155,206
- ------------------------------------------------------------------------------------------------------------------
Net Investment Loss ( 91,821) ( 88,237)
- ------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Transactions:
Net realized loss on investments sold ( 794,705) ( 1,254,430)
Net realized loss on foreign currency transactions ( 7,413) ( 9,571)
Change in net unrealized appreciation/depreciation of investments 1,009,133 1,306,530
Change in net unrealized appreciation/depreciation of foreign currency transactions 78 7,729
----------- -----------
Net Realized and Unrealized Gain on Investments and Foreign Currency Transactions 207,093 50,258
- ------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations $ 115,272 ($ 37,979)
==================================================================================================================
(1) Effective October 31, 1996, the fiscal period end changed from August 31 to October 31.
The Statement of Operations summarizes the Fund's investment income earned and expenses incurred in operating
the Fund. It also shows net gains (losses) for the period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 29, 1994 PERIOD FROM
(COMMENCEMENT SEPTEMBER 1, 1996
OF OPERATIONS) TO YEAR ENDED TO OCTOBER 31,
AUGUST 31, 1995 AUGUST 31, 1996 1996(1)
------------------ --------------- -----------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) $ 321 ($ 91,821) ($ 88,237)
Net realized loss on investments sold and foreign
currency transactions ( 12,743) ( 802,118) ( 1,264,001)
Change in net unrealized appreciation/depreciation of
investments and foreign currency transactions 198,103 1,009,211 1,314,259
------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 185,681 115,272 ( 37,979)
------------ ------------ ------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.0133, none, and none per share, respectively) ( 803) -- --
Dividends in excess of net investment income
Class A - ($0.0140, none, and none per share, respectively) ( 844) -- --
------------ ------------ ------------
Total Distributions ( 1,647) -- --
------------ ------------ ------------
From Fund Share Transactions - Net* 27,566 38,385,073 12,741,407
------------ ------------ ------------
Net Assets:
Initial Investment by John Hancock Advisers, Inc. -
Note B / Beginning of period 500,000 711,600 39,211,945
------------ ------------ ------------
End of period $ 711,600 $ 39,211,945 $ 51,915,373
============ ============ ============
* Analysis of Fund Share Transactions:
<CAPTION>
FOR THE PERIOD
SEPTEMBER 29, 1994 PERIOD FROM
(COMMENCEMENT SEPTEMBER 1, 1996
OF OPERATIONS) TO YEAR ENDED TO OCTOBER 31,
AUGUST 31, 1995 AUGUST 31, 1996 1996(1)
-------------------------- ------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Class A
Shares sold 4,064 $ 36,313 1,349,557 $20,373,589 684,738 $10,778,771
Shares issued to shareholders in
reinvestment of distributions 5 44 -- -- -- --
------ ----------- --------- ----------- ------- -----------
4,069 $ 36,357 1,349,557 $20,373,589 684,738 $10,778,771
Less shares repurchased ( 947) ( 8,791) ( 292,024) ( 4,386,051) ( 381,164) ( 6,000,820)
------ ----------- --------- ----------- ------- -----------
Net increase 3,122 27,566 1,057,533 $15,987,538 303,574 $ 4,777,951
------ ----------- ========= =========== ======= ===========
Initial Investment by John Hancock
Advisers, Inc. - Note B 58,824 500,000
------ -----------
Net increase and shares outstanding
end of period 61,946 $ 527,566
====== ===========
Class B **
Shares sold 1,569,827 $23,824,449 555,243 $ 8,755,160
Less shares repurchased ( 95,769) ( 1,426,914) ( 50,082) ( 791,704)
--------- ----------- ------- -----------
Net increase 1,474,058 $22,397,535 505,161 $ 7,963,456
========= =========== ======= ===========
** Class B commenced operations on January 22, 1996.
(1) Effective October 31, 1996, the fiscal period end changed from August 31 to October 31.
The Statement of Changes in Net Assets shows how the value of the Fund's net assets has changed since the end of the previous
period. The difference reflects earnings less expenses, any investment and foreign currency gains and losses, distributions paid
to shareholders, if any, and any increase or decrease in money shareholders invested in the Fund. The footnote illustrates the
number of Fund shares sold, reinvested and repurchased during the last three periods, along with the corresponding dollar value.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each period indicated, investment returns, key ratios
and supplemental data are listed as follows:
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 29, 1994
(COMMENCEMENT PERIOD FROM
OF OPERATIONS) YEAR ENDED SEPTEMBER 1, 1996
TO AUGUST 31, 1995 AUGUST 31, 1996 TO OCTOBER 31,1996(8)
-------------------- ------------------ --------------------
<S> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50(1) $ 11.49 $ 15.16
------- ------- -------
Net Investment Income (Loss) 0.01(2) ( 0.08)(2) ( 0.02)(2)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions 3.01 3.75 0.17
------- ------- -------
Total from Investment Operations 3.02 3.67 0.15
------- ------- -------
Less Distributions:
Dividends from Net Investment Income ( 0.01) -- --
Distributions in Excess of Net Investment Income ( 0.02) -- --
------- ------- -------
Total Distributions ( 0.03) -- --
------- ------- -------
Net Asset Value, End of Period $ 11.49 $ 15.16 $ 15.31
======= ======= =======
Total Investment Return at Net Asset Value (5) 35.61%(4) 31.94% 0.99%(4)
Total Adjusted Investment Return at Net Asset Value (5)(6) 28.69%(4) 29.69% 0.89%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 712 $16,966 $21,782
Ratio of Expenses to Average Net Assets 1.50%* 1.45% 1.54%*
Ratio of Adjusted Expenses to Average Net Assets (3) 9.00%* 3.70% 2.12%*
Ratio of Net Investment Income (Loss) to Average Net Assets 0.06%* ( 0.57%) ( 0.70%)*
Ratio of Adjusted Net Investment Loss to
Average Net Assets (3) ( 7.44%)* ( 2.82%) ( 1.28%)*
Portfolio Turnover Rate 63% 52% 12%
Average Broker Commission Rate (7) N/A $0.0140 $0.0079
Fee Reduction Per Share (2) $ 0.65 $ 0.31 $ 0.02
The Financial Highlights summarizes the impact of the following factors on a single share for each period indicated: net
investment income, gains (losses), distributions of the Fund and total investment return of the Fund. It shows how the
Fund's net asset value for a share has changed since the end of the previous period. Additionally, important
relationships between some items presented in the financial statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- -----------------------------------------------------------------------------------------------------------
PERIOD FROM
FOR THE PERIOD JANUARY 22, 1996 SEPTEMBER 1, 1996
TO AUGUST 31, 1996 TO OCTOBER 31, 1996(8)
------------------------------- ----------------------
<S> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 11.95(1) $ 15.09
------- -------
Net Investment Loss ( 0.11)(2) ( 0.04)(2)
Net Realized and Unrealized Gain on Investments
and Foreign Currency Transactions 3.25 0.17
------- -------
Total from Investment Operations 3.14 0.13
------- -------
Net Asset Value, End of Period $ 15.09 $ 15.22
======= =======
Total Investment Return at Net Asset Value (5) 26.28%(4) 0.86%(4)
Total Adjusted Investment Return at Net Asset Value (5)(6) 25.50%(4) 0.76%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 22,246 $ 30,133
Ratio of Expenses to Average Net Assets 2.15%* 2.24%*
Ratio of Adjusted Expenses to Average Net Assets (3) 3.49%* 2.82%*
Ratio of Net Investment Loss to Average Net Assets ( 1.28%)* ( 1.42%)*
Ratio of Adjusted Net Investment Loss to
Average Net Assets (3) ( 2.62%)* ( 2.00%)*
Portfolio Turnover Rate 52% 12%
Average Broker Commission Rate (7) $ 0.0140 $ 0.0079
Fee Reduction Per Share (2) $ 0.11 $0.02
* On an annualized basis.
(1) Initial price to commence operations.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Unreimbursed, without fee reduction.
(4) Not annualized.
(5) Total investment return assumes dividend reinvestments and does not reflect the effect of sales charges.
(6) An estimated total return calculation that does not take into consideration reductions by the Adviser
during the periods shown.
(7) Per portfolio share traded. Required for fiscal years that began September 1, 1995, or later.
(8) Effective October 31, 1996 the fiscal period end changed from August 31 to October 31.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 1996
- ------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Global Marketplace Fund
on October 31, 1996. It's divided into two main categories: common stock and short-term investments.
The common stocks are further broken down by industry groups. Under each industry group is a list of
stocks owned by the Fund. Short-term investments, which represent the Fund's "cash" position are
listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------------ --------------
<S> <C> <C>
COMMON STOCK
Advertising (5.96%)
Catalina Marketing Corp. * 17,000 $ 864,875
Lamar Advertising Co. (Class A) * 27,000 729,000
Outdoor Systems, Inc. * 17,500 774,375
Universal Outdoor Holdings, Inc. * 25,000 725,000
------------
3,093,250
------------
Automobile / Trucks (1.14%)
Cross-Continent Auto Retailers, Inc. * 20,000 512,500
United Auto Group, Inc. * 2,300 79,063
------------
591,563
------------
Business Services (1.06%)
APAC Teleservices, Inc. * 12,000 550,500
------------
Computer (3.06%)
HNC Software, Inc. * 18,000 562,500
JDA Software Group, Inc. * 27,200 924,800
Midway Games, Inc. * 5,100 102,000
------------
1,589,300
------------
Cosmetics & Personal Care (1.57%)
Avon Products, Inc. 15,000 813,750
------------
Electronics (1.24%)
Ultrak, Inc. * 25,000 643,750
------------
Finance (2.11%)
Medallion Financial Corp. * 36,000 499,500
PMT Services, Inc. * 30,000 596,250
------------
1,095,750
------------
Leisure (10.92%)
Bandai Co., Ltd. (Japan) 16,000 462,342
Dover Downs Entertainment, Inc. * 16,000 322,000
Family Golf Centers, Inc.* 30,000 877,500
Gargoyles, Inc.* 15,000 195,000
Grand Optical Photoservice SA (France) 6,000 871,980
HFS, Inc. * 9,000 659,250
Oakley, Inc. * 30,000 446,250
Premier Parks Inc. * 9,900 309,375
Regal Cinemas, Inc. * 30,000 768,750
Silicon Gaming, Inc. * 54,000 756,000
------------
5,668,447
------------
Medical (0.97%)
CNS, Inc. * 30,000 502,500
------------
Paper & Paper Products (1.08%)
American Pad & Paper Co. * 30,000 562,500
------------
Pollution Control - Services (0.72%)
Republic Industries, Inc. * 12,000 372,000
------------
Real Estate Operations (1.32%)
Central Parking Corp. 19,800 685,575
------------
Retail - Apparel / Shoe Group (9.91%)
AnnTaylor Stores Corp. * 40,000 725,000
Footstar, Inc. * 3,743 82,339
Giordano International Ltd. (Hong Kong) 600,000 605,261
Gucci Group, NV (Netherlands) 9,000 621,000
Joyce Boutique Holdings Ltd. (Hong Kong) 794,000 195,106
Loehmann's Holdings, Inc. * 12,500 329,688
Melville Corp. 13,000 484,250
Men's Wearhouse, Inc. (The) * 34,000 697,000
Nike, Inc. (Class B) 6,000 353,250
Stage Stores, Inc. * 25,000 456,250
Vans, Inc. * 36,000 594,000
------------
5,143,144
------------
Retail - Department Stores (6.20%)
Kohl's Corp. * 25,000 900,000
Neiman Marcus Group, Inc. (The) * 29,200 952,650
Oasis Stores PLC (United Kingdom) 90,000 539,063
Saks Holdings, Inc. * 23,700 829,500
------------
3,221,213
------------
Retail - Drug Stores (1.44%)
Eckerd Corp. * 27,000 749,250
------------
Retail - Mail Order / Direct (3.01%)
CUC International, Inc. * 26,625 652,312
Global DirectMail Corp. * 9,900 487,575
Seattle Filmworks, Inc. * 22,200 424,575
------------
1,564,462
------------
Retail - Misc./Diversified (9.03%)
Burton Group PLC (United Kingdom) 268,000 652,116
Cost Plus, Inc. * 32,000 560,000
Hibbett Sporting Goods, Inc. * 21,300 436,650
Hot Topic Inc. * 22,500 523,125
Next, PLC (United Kingdom) 60,000 544,922
PETsMART, Inc. * 28,000 742,000
Ryohin Keikaku Co., Ltd. (Japan) 10,000 802,775
Urban Outfitters, Inc. * 28,000 427,000
------------
4,688,588
------------
Retail - Restaurants (7.38%)
Landry's Seafood Restaurants, Inc. * 23,000 454,250
Papa John's International, Inc. * 13,550 674,113
PizzaExpress PLC (United Kingdom) 100,000 834,961
PJ America, Inc. * 20,000 320,000
Rainforest Cafe, Inc. * 18,300 594,750
Starbucks Corp. * 10,000 325,000
Wetherspoon (J.D.) PLC
(United Kingdom) 32,687 630,438
------------
3,833,512
------------
Retail - Supermarkets (8.57%)
Albertson's, Inc. 15,000 515,625
Blue Square-Israel Ltd., American
Depositary Receipt, ADR (Israel) * 45,000 708,750
Carrefour SA (France) 1,490 826,822
Disco S.A. ADR (Argentina) * 30,000 675,000
Quality Food Centers, Inc. 25,000 912,500
Santa Isabel S.A. ADR (Chile) 15,000 421,875
Vons Co., Inc. (The) * 7,000 387,625
------------
4,448,197
------------
Retail / Wholesale - Building Products (4.12%)
Castorama Dubois Investissements
SA (France) 2,456 420,342
Central Garden & Pet Co. * 23,000 540,500
Home Centers (DIY) Ltd. (Israel) * 60,000 300,000
Home Depot, Inc. 16,000 876,000
------------
2,136,842
------------
Retail / Wholesale - Computers (1.96%)
CompUSA, Inc.* 22,000 1,017,500
------------
Retail / Wholesale - Food (0.04%)
Wild Oats Markets, Inc. * 1,000 21,250
------------
Retail / Wholesale - Jewelry (2.07%)
Marks Bros. Jewelers, Inc. * 30,000 667,500
Zale Corp. * 21,000 406,875
------------
1,074,375
------------
Schools / Education (1.33%)
Apollo Group, Inc. (Class A) * 25,650 692,550
------------
Telecommunications (0.36%)
RMH Teleservices, Inc. * 25,700 186,325
------------
Textiles (7.80%)
Chaifa Holdings Ltd. (Hong Kong) 2,420,090 727,698
Cutter & Buck, Inc. * 57,500 603,750
First Sign International Holdings Ltd.
(Hong Kong) 2,400,000 814,775
Glorious Sun Enterprises (Hong Kong) * 1,200,000 554,823
North Face, Inc. (The)* 28,000 563,500
Tommy Hilfiger Corp.* 15,100 785,200
------------
4,049,746
------------
Tobacco (0.98%)
Consolidated Cigar Holdings Inc. * 18,600 506,850
------------
TOTAL COMMON STOCK
(Cost $46,988,920) (95.35%) $ 49,502,689
===== ============
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- --------- ------------- ---------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase
Agreement (1.61%)
Investment in a joint
repurchase agreement
transaction with
SBC Capital Markets,
Inc. -Dated 10-31-96,
due 11-01-96 (secured
by US Treasury Bonds,
7.25% due 5-15-16,
and 6.25% due 8-15-23)
Note A 5.54% $ 835 $ 835,000
------------
TOTAL SHORT-TERM INVESTMENTS 1.61% 835,000
-------- ------------
TOTAL INVESTMENTS 96.96% $ 50,337,689
======== ============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Country Diversification (Unaudited)
- ---------------------------------------------------------------------------------------------
The concentration of investments by industry group for individual securities held by the
Fund is shown in the schedule of investments. In addition, the concentration of investments
can be aggregated by the countries in which the Fund invests. The table below shows the
percentage of the Fund's investments at October 31, 1996 assigned to the various countries.
MARKET VALUE
OF SECURITIES AS
A PERCENTAGE OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
- ----------------------- ------------------
<S> <C>
Argentina 1.30
Chile 0.81
France 4.08
Hong Kong 5.58
Israel 1.94
Japan 2.44
Netherlands 1.20
United Kingdom 6.17
United States 73.44
-----
96.96%
=====
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Marketplace Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock World Fund (the "Trust") is an open-end management
investment company, registered under the Investment Company Act of
1940. The Trust consists of three series: John Hancock Global
Marketplace Fund (the "Fund"), John Hancock Pacific Basin Equities
Fund and John Hancock Global Rx Fund. Prior to December 11, 1995,
the Fund was known as John Hancock Global Retail Fund. On May 21,
1996, the Board of Trustees voted to change the fiscal period end
from August 31 to October 31. This change is effective October 31,
1996. The other two series of the Trust are reported in separate
financial statements. The investment objective of the Fund is to
achieve long-term capital appreciation through investment primarily
in foreign and U.S. stocks of companies that merchandise goods and
services to consumers or to consumer companies.
The Trustees have authorized the issuance of multiple classes of
shares of the Fund, designated as Class A and Class B shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting, redemptions,
dividends, and liquidation, except that certain expenses, subject to
the approval of the Trustees, may be applied differently to each
class of shares in accordance with current regulations of the
Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution and service expenses
under terms of a distribution plan have exclusive voting rights to
that distribution plan. On January 22, 1996, Class B shares of
beneficial interest were sold to commence class activity. Significant
accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are
valued on the basis of market quotations, valuations provided by
independent pricing sources or, at fair value as determined in good
faith in accordance with procedures approved by the Trustees.
Securities traded on NASDAQ are valued at last available bid price.
Short-term debt investments maturing within 60 days or less are
valued at amortized cost, which approximates market value. All
portfolio transactions initially expressed in terms of foreign
currencies have been translated into U.S. dollars as described in
"Foreign Currency Translation" below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with
John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned
subsidiary of The Berkeley Financial Group, may participate in a
joint repurchase agreement transaction. Aggregate cash balances are
invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or
its agencies. The Fund's custodian bank receives delivery of the
underlying securities for the joint account on the Fund's behalf.
The Adviser is responsible for ensuring that the agreement is fully
collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of
the date of purchase, sale or maturity. Net realized gains and
losses on sales of investments are determined on the identified cost
basis. Capital gains realized on some foreign securities are subject
to foreign taxes and are accrued, as applicable.
FEDERAL INCOME TAXES The Fund intends to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of its taxable
income, including any net realized gain on investments, to its
shareholders. Therefore, no federal income tax provision is
required. For Federal income tax purposes, net currency exchange
gains and losses from sales of foreign debt securities may be
treated as ordinary income even though such items are gains and
losses for accounting purposes. For federal income tax purposes, the
Fund has $2,061,437 of capital loss carryforwards available, to the
extent provided by regulations, to offset future net realized
capital gains. To the extent such carryforwards are used by the
Fund, no capital gain distributions will be made. The carryforwards
expire as follows: October 31, 2003 -- $849, and October 31, 2004 --
$2,060,588.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment
securities is recorded on the ex-dividend date, or, in the case of
some foreign securities, on the date thereafter when the Fund is
made aware of the dividend. Interest income on investment securities
is recorded on the accrual basis. Foreign income may be subject to
foreign withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net
investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax
regulations, which may differ from generally accepted accounting
principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and
will be in the same amount, except for the effect of expenses that
may be applied differently to each class.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual fund. Expenses which are not
identifiable to a specific fund are allocated in such a manner as
deemed equitable, taking into consideration, among other things, the
nature and type of expense and the relative sizes of the funds.
CLASS ALLOCATIONS Income, common expenses and realized and
unrealized gains (losses) are calculated at the Fund level and
allocated daily to each class of shares based on the relative net
assets of the respective classes. Distribution and service fees are
calculated daily at the class level based on the appropriate net
assets of each class and the specific expense rate(s)applicable to
each class.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles
incorporates estimates made by management in determining the
reported amount of assets, liabilities, revenues, and expenses of
the Fund. Actual results could differ from these estimates.
ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged
to the Fund's operations ratably over a five year period that
commenced with the investment operations of the Fund.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00
p.m., London time, on the date of any determination of the net asset
value of the Fund. Transactions affecting statement of operations
accounts and net realized gain/(loss) on investments are translated
at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from
sales of foreign currency, currency gains or losses realized between
the trade and settlement dates on securities transactions and the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into
forward foreign currency exchange contracts as a hedge against the
effect of fluctuations in currency exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date at a set price. The
aggregate principal amounts of the contracts are marked-to-market
daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the
determination of the Fund's daily net assets. The Fund records
realized gains and losses at the time the forward foreign currency
contract is closed out or offset by a matching contract. Risks may
arise upon entering these contracts from potential inability of
counterparties to meet the terms of the contract and from
unanticipated movements in the value of a foreign currency relative
to the U.S. dollar.
These contracts involve market or credit risk in excess of the
unrealized gain or loss reflected in the Fund's Statement of Assets
and Liabilities. The Fund may also purchase and sell forward
contracts to facilitate the settlement of foreign currency
denominated portfolio transactions, under which it intends to take
delivery of the foreign currency. Such contracts normally involve no
market risk other than the offset by the currency amount of the
underlying transaction.
There were no open forward foreign currency contracts at October 31,
1996.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial
futures contracts for speculative purposes and/or to hedge against
the effects of fluctuations in interest rates, currency exchange
rates and other market conditions. Buying futures tends to increase
the Fund's exposure to the underlying instrument. Selling futures
tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund instruments. At the time the Fund enters into a
financial futures contract, it is required to deposit with its
custodian a specified amount of cash or U.S. government securities,
known as "initial margin", equal to a certain percentage of the
value of the financial futures contract being traded. Each day, the
futures contract is valued at the official settlement price of the
board of trade or U.S. commodities exchange. Subsequent payments,
known as "variation margin", to and from the broker are made on a
daily basis as the market price of the financial futures contract
fluctuates. Daily variation margin adjustments, arising from this
"mark to market", are recorded by the Fund as unrealized gains or
losses.
When the contracts are closed, the Fund recognizes a gain or loss.
Risks of entering into futures contracts include the possibility
that there may be an illiquid market and/or that a change in the
value of the contracts may not correlate with changes in the value
of the underlying securities.
For Federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of
futures contracts.
At October 31, 1996, there were no open positions in financial
futures contracts.
OPTIONS Listed options are valued at the last quoted sales price on
the exchange on which they are primarily traded. Over-the-counter
options are valued at the mean between the last bid and asked
prices. Upon the writing of a call or put option, an amount equal to
the premium received by the Fund is included in the Statement of
Assets and Liabilities as an asset and corresponding liability. The
amount of the liability is subsequently marked-to-market to reflect
the current market value of the written option.
The Fund may use options contracts to manage its exposure to the
stock market. Writing puts and buying calls tend to increase the
Fund's exposure to the underlying instrument and buying puts and
writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options will be
limited to the premium initially paid for the option. In all other
cases, the face (or "notional") amount of each contract at value
reflects the maximum exposure of the Fund in these contracts, but
the actual exposure will be limited to the change in value of the
contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the
contracts' terms, or if the Fund is unable to offset a contract with
a counterparty on a timely basis ("liquidity risk"). Exchange-traded
options have minimal credit risk as the exchanges act as
counterparties to each transaction, and only present liquidity risk
in highly unusual market conditions. To minimize credit risk and
liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or
credit risk may involve amounts in excess of those reflected in the
Fund's period-end Statement of Assets and Liabilities.
There were no written option transactions for the period ended
October 31, 1996.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment
program equivalent, on an annual basis, to the sum of (a) 0.80% of
the first $250,000,000 of the Fund's average daily net asset value
and (b) 0.70% of the Fund's average daily net asset value in excess
of $250,000,000.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most
restrictive state limit where the Fund is registered to sell shares
of beneficial interest, the fee payable to the Adviser will be
reduced to the extent of such excess, and the Adviser will make
additional arrangements necessary to eliminate any remaining excess
expenses. The current limits are 2.5% of the first $30,000,000 of
the Fund's average daily net asset value, 2.0% of the next
$70,000,000, and 1.5% of the remaining average daily net asset
value.
The Adviser has agreed to limit Fund expenses, including the
management fee (but not including the transfer agent fee and the
12b-1 fee), to 0.90% of the Fund's daily net assets. Accordingly,
the reduction in the Adviser's fee amounted to $46,022 for the
period ended October 31, 1996. The Adviser reserves the right to
terminate this limit in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly-owned subsidiary of the Adviser. For the
period ended October 31, 1996, net sales charges received with
regard to Class A shares amounted to $128,244. Out of this amount,
$19,376 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $82,288 was paid as sales
commissions to sales personnel of unrelated broker-dealers and
$26,580 was paid as sales commissions to personnel of John Hancock
Distributors, Inc. ("Distributors"), Tucker Anthony Incorporated
("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"), all of which are
broker dealers. The Adviser's indirect parent, John Hancock Mutual
Life Insurance Company, is the indirect sole shareholder of
Distributors and John Hancock Freedom Securities Corporation and its
subsidiaries, which include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will
be subject to a contingent deferred sales charge ("CDSC") at
declining rates beginning at 5.0% of the lesser of the current
market value at the time of redemption or the original purchase cost
of the shares being redeemed. Proceeds from the CDSC are paid to JH
Funds and are used in whole or in part to defray its expenses for
providing distribution related services to the Fund in connection
with the sale of Class B shares. For the period ended October 31,
1996, the contingent deferred sales charges paid to JH Funds
amounted to $24.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a
Distribution Plan with respect to Class A and Class B pursuant to
Rule 12b-1 under the Investment Company Act of 1940. Accordingly,
the Fund will make payments to JH Funds, for distribution and
service expenses at an annual rate not to exceed 0.30% of Class A
average daily net assets and 1.00% of Class B average daily net
assets to reimburse JH Funds for its distribution and service costs.
Up to a maximum of 0.25% of these payments may be service fees as
defined by the amended Rules of Fair Practice of the National
Association of Securities Dealers. Under the amended Rules of Fair
Practice, curtailment of a portion of the Fund's 12b-1 payments
could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor
Services, Corp. ("Investor Services"), a wholly-owned subsidiary of
The Berkeley Financial Group. The Fund pays a fee to Investors
Services fee based on the number of shareholder accounts and
certain-out-pocket expenses.
On March 5, 1996 the Board of Trustees approved retroactively to
January 1, 1996, and agreement with the Adviser to perform necessary
tax and financial management services for the Fund. The compensation
for 1996 is estimated to be at an annual rate of 0.01875% of the
average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Richard S. Scipione and Ms. Anne C.
Hodsdon are directors and/or officers of the Adviser, and/or its
affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees
paid for 1995, the unaffiliated Trustees may elect to defer for tax
purposes their receipt of this compensation under the John Hancock
Group of Funds Deferred Compensation Plan. The Fund makes
investments into other John Hancock funds, as applicable, to cover
its liability with regard to the deferred compensation. Investments
to cover the Fund's deferred compensation liability are recorded on
the Fund's books as an other asset. The deferred compensation
liability and the related other asset are marked to market on a
periodic basis to reflect any income earned by the investment as
well as any unrealized gain or losses. At October 31, 1996, the
Fund's investments to cover the deferred compensation liability had
unrealized appreciation of $1.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-
term securities, during the period ended October 31, 1996,
aggregated $16,471,399 and $5,390,349 respectively. There were no
purchases or sales of obligations of the U.S. government and its
agencies during the period ended October 31, 1996.
The cost of investments owned at October 31, 1996 (including the
joint repurchase agreement) for federal income tax purposes was
$47,823,920. Gross unrealized appreciation and depreciation of
investments aggregated $4,931,115 and $2,417,346, respectively,
resulting in net unrealized appreciation of $2,513,769.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the period ended October 31, 1996, the Fund has reclassified
amounts to reflect a decrease in accumulated net realized loss on
investments of $9,678, a decrease in accumulated net investment loss
of $88,237 and a decrease in capital paid-in of $97,915. This
represents the amount necessary to report these balances on a tax
basis, excluding certain temporary differences, as of October 31,
1996. Additional adjustments may be needed in subsequent reporting
periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to certain
differences in the computation of distributable income and capital
gains under federal tax rules versus generally accepted accounting
principles. The calculation of net investment income in the
financial highlights excludes these adjustments.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Global Marketplace Fund
and the Trustees of John Hancock World Fund
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and the related
statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the
financial position of John Hancock Global Marketplace Fund (the
"Fund") (a series of John Hancock World Fund) at October 31, 1996,
and the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and the significant estimates made by management,
and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities
at October 31, 1996 by correspondence with the custodian and brokers
and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 12, 1996
NOTES
John Hancock Funds - Global Marketplace Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
NOTES
John Hancock Funds - Global Marketplace Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
A 1/2" x 1/2" John Hancock Funds logo in upper left hand
corner of the page. A box sectioned in quadrants with a
triangle in upper left, a circle in upper right, a cube in
lower left and a diamond in lower right. A tag line below
reads "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John
Hancock Global Marketplace Fund. It may be used as sales literature
when preceded or accompanied by the current prospectus, which
details charges, investment objectives and operating policies.
A recycled logo in lower left hand corner with caption
"Printed on Recycled Paper." 3000A 10/96
12/96
<PAGE>
John Hancock Funds
Global
Marketplace
Fund
SEMI-ANNUAL REPORT
April 30, 1997
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
Gail D. Fosler*
William F. Glavin*
Anne C. Hodsdon
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt*
Richard S. Scipione
Edward J. Spellman*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and
Compliance Officer
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
After two years of spectacular performance, the stock market in 1997 has given
investors its starkest reminder in a while of one of investing's basic tenets:
markets move down as well as up. It's understandable if investors had lost
sight of that fact. The bull market that began six years ago has given
investors annual double-digit returns and more modest price declines than
usual. And in the two years encompassing 1995 and 1996, the S&P 500 Index
gained more than 50%. This Pollyanna environment has tracked along with a
sustained economic recovery, now in its seventh year, that has been marked by
moderate growth, low interest rates and tame inflation.
But recently, many have begun to wonder about this bull market. Since reaching
new highs in early March, the Dow Jones Industrial Average tumbled by more
than 7% at the end of March and wiped out nearly all it had gained since the
start of the year. It was the worst decline that the market had seen since
1990. In early April, the Dow was down by 9.8%, within shouting distance of a
10% correction. By the end of the month, it had bounced back into record
territory again.
As the market continues to fret over interest rates and inflation, investors
should be prepared for more volatility. It also makes sense to do something
we've always advocated: set realistic expectations. Keep in mind that the
stock market's historic yearly average has been about 10%, not the 20%-plus
annual average of the last two years or even the 16% annual average over the
last 10 years. Remember that the kind of market volatility we've seen lately
is more like the way the market really works. Fluctuations go with the
territory. And market corrections can be healthy, serving to bring inflated
stock prices down to more reasonable levels, thereby reducing some of the
market's risk.
Use this time of heightened volatility as an opportunity to review your
portfolio's asset allocations with your investment professional. Make sure
that your investment strategies reflect your individual time horizons,
objectives and risk tolerance, and that they are based upon your needs.
Despite turbulence, one thing remains constant. A well-constructed plan and a
cool head can be the best tools for reaching your financial goals.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.
BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGER
John Hancock
Global Marketplace Fund
Retailers struggling to attract consumers;
Fund shifting focus toward more resilient companies
In a market that overflows with shopping options, many retailers find
themselves hard-pressed to attract consumers. In order to distinguish
themselves these days, companies involved in the manufacture or distribution
of goods and services must dominate their category, offer unique goods or
services, or occupy a unique niche. Many times, the companies that best fit
the bill are small companies with aggressive- growth prospects. Since stock
prices generally follow earnings, we believe that fast-growing retail
companies tend to offer the best upside over the long term. And although
adhering to those criteria generally has rewarded us in the past, it did not
do so during the past six months.
Why? Aggressive-growth stocks of all kinds fell out of favor. While investors'
seemingly insatiable appetite for large-company stocks buoyed the big-
capitalization Dow Jones Industrial Average to consecutive new records,
aggressive- growth stocks went into a tailspin as investors were increasingly
less willing to pay the high prices for them. Rather, they tended to migrate
to large, blue-chip company stocks that they felt offered more stable and
predictable earnings at a lower price. For the six-month period ended April
30, 1997, the Dow Jones Industrials rose 17.42% while the Russell 2000 Index
- -- a broad measure of small-company stock performance -- posted a slight gain
of 1.61%. Although John Hancock Global Marketplace Fund has no market
capitalization restriction, our bias toward fast-growing growth stocks hurt us
in an environment that favored value-oriented stocks.
"Aggressive-
growth
stocks of all
kinds fell out
of favor."
A 2 1/4" x 3 1/2" photo of Fund management team at bottom right. Caption
reads: "Bernice Behar ( r ) and Fund management team members Robert Hallisey
(l) and William Maffie (center)."
Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) CVS Corp. 3.3% 2) Carrefour 3.0%
3) Kohl's Corp. 2.9% 4) PizzaExpress 2.8% 5) PetSmart 1.9%. A footnote below
reads "As a percentage of net assets on April 30, 1997."
Performance review
In our annual report to you six months ago, we were pleased to report returns
for the year on the order of 28%. But the past six months have served as a
reminder that aggressive-growth-company stocks are not immune to the vagaries
of the market and that they can also go down. For the six months ended April
30, 1997, John Hancock Global Marketplace Fund's Class A and Class B shares
had total returns of -6.79% and -7.03%, respectively, at net asset value,
lagging the average global fund. Please see pages six and seven for longer-
term performance information. Because of a typically higher exposure to Latin
American companies -- which posted some of the best gains across the globe --
the average global fund outpaced the Fund with a return of 6.83% for the same
period, according to Lipper Analytical Services, Inc.1
The Fund
boosted its
stake in
"defensive"
companies.
Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
performance ... and what's behind the numbers." The first listing is Avon
Products followed by a down arrow and the phrase "Weakness in Brazilian
sales." The second listing is Delia's followed by an up arrow and the phrase
"Leading catalogue company aimed at teens." The third listing is CVS followed
by an up arrow and the phrase "Acquisition of Revco = lower costs, bigger
market share." Footnote below reads: "See "Schedule of Investments."
Investment holdings are subject to change."
Among our hardest-hit holdings were technology-related stocks, including
CompUSA. Even though computer sales remained healthy and the company posted
earnings and growth in line with expectations, an across-the-board sell-off
in technology stocks dragged the stock price of the nation's largest computer
retail chain down with it. Although we had cut our CompUSA holdings in half,
locking in gains prior to the downdraft, we held onto the remainder of our
position based on our view of the company's future growth prospects. Our
patience was rewarded shortly after the period ended when CompUSA's stock
price retraced some of its losses. We also were hurt by our exposure to
outdoor advertising companies, which suffered from a bout of profit taking
at the end of 1996 after soaring to astronomical heights earlier.
But the period also saw its share of winners. One of our best performers was
CVS, which sells prescription drugs and health and beauty aids in stores in
the U.S., the United Kingdom, Czech Republic, Slovakia, Mexico and Singapore.
Jones Apparel Group, the designer and manufacturer of women's sportswear, rose
on the successful introduction of the Lauren line of clothing, licensed by
Ralph Lauren. Shoe companies Converse, which we sold during the period, and
Wolverine, manufacturer of Hush Puppies, benefited from a resurgence in
popularity of their products.
Defensive moves
The current U.S. economic expansion is long by historical measures and
consumer debt is high. If the economy slows, a slowdown in consumer spending
is likely. So during the period, we sold many apparel companies and department
stores, replacing them with "defensive" companies that are more resilient in a
slower economy. In addition to CVS, we bought Costco Cos., which operates a
chain of cash-and-carry membership warehouses and sells nationally branded and
private-label merchandise, and supermarket chains Riser Foods and Quality
Foods.
Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote "For the six months ended April 30, 1997." The
chart is scaled in increments of 5% from bottom to top, with 10% at the top
and -10% at the bottom. Within the chart there are three solid bars. The first
represents the -6.79% total return for the John Hancock Global Marketplace
Fund: Class A. The second represents the -7.03% total return for the John
Hancock Global Marketplace Fund: Class B. The third represents the 6.83% total
return for the average global fund. A footnote below reads: "The total returns
for John Hancock Global Marketplace Fund are at net asset value with all
distributions reinvested. The average global fund is tracked by Lipper
Analytical Services. (1) See the following two pages for historical
performance information."
To help sidestep any potential slowdown in the U.S. and to take advantage of
faster-growing economies, we increased our international holdings. Some of our
largest holdings include supermarket chain Disco in Latin America, and French
companies Grand Optical Photoservice and Carrefour.
One area of apparel that remains particularly attractive to us is the juniors'
market. A rekindled passion for fashion has brought this sector back to life.
With the collapse of stores such as Merry Go Round earlier in the decade, the
number of stores that cater to this market has shrunk. Meanwhile, the teen
population is growing and its purchasing power has increased. To take
advantage of these trends we invested in Hot Topic, a specialty retailer of
music-licensed apparel, accessories and gifts; and dELiA*s, a juniors catalog
merchant.
Outlook
In our view, there are still lots of opportunities to be found in the global
marketplace. In the short-term, we expect that consumer spending will remain
somewhat sluggish, and could potentially fall if the economy weakens.
Nonetheless, we'll continue to pursue fast-growing retail companies worldwide.
We'll keep our focus on those with unique products, or innovative methods of
distributing their products and services, with an eye toward those that can
continue to prosper even if spending weakens. Our sense is that these
companies will be the strongest retail players in the years to come.
"...there are
still lots of
opportunities
to be found
in the global
marketplace."
- ------------------------------------------------------------------------------
This commentary reflects the views of the portfolio manager through the end of
the Fund's period discussed in this report. Of course, the manager's views are
subject to change as market and other conditions warrant.
International investing involves special risks such as political and currency
risks and differences in accounting standards and financial reporting. Sector
investing is subject to greater risks than the market as a whole.
1 Figures from Lipper Analytical Services, Inc. include reinvested dividends
and do not take into account sales charges. Actual load-adjusted performance
is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average
annual total returns for the John Hancock Global Marketplace Fund. Total
return is a performance measure that equals the sum of all income and capital
gains dividends, assuming reinvestment of these distributions, and the change
in the price of the Fund's shares, expressed as a percentage of the Fund's net
asset value per share. Performance figures include the maximum applicable
sales charge of 5% for Class A shares. The effect of the maximum contingent-
deferred sales charge for Class B shares (5% and declining to 0% over six
years) is included in Class B performance. Remember that all figures represent
past performance and are no guarantee of how the Fund will perform in the
future. Also, keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth more
or less than their original cost, depending on when you sell them.
CUMULATIVE TOTAL RETURNS
For the period ended March 31, 1997
ONE LIFE OF
YEAR FUND
---------- ----------
John Hancock Global Marketplace Fund: Class A (5.49%) 60.29%(1)
John Hancock Global Marketplace Fund: Class B (6.13%) 14.66%(2)
AVERAGE ANNUAL TOTAL RETURNS
For the period ended March 31, 1997
ONE LIFE OF
YEAR FUND
---------- ----------
John Hancock Global Marketplace Fund: Class A(3) (5.49%) 20.77%(1)
John Hancock Global Marketplace Fund: Class B(3) (6.13%) 12.18%(2)
Notes to Performance
(1) Class A shares commenced on September 29, 1994.
(2) Class B shares commenced on January 22, 1996.
(3) Effective September 9, 1994, the Adviser has voluntarily undertaken
to limit the Fund's expenses, including the management fee (but not
including the transfer agent fee and 12b-1 fee) to 0.90% of the Fund's
daily net asset value. Without the limitations of expenses, the average
annual total return for the one-year period and since inception would have
been (5.81%) and 17.20% for Class A shares and (6.45%) and 11.09% for
Class B shares, respectively.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in John Hancock
Global Marketplace Fund would be worth on April 30, 1997, assuming you
invested on the day each class of shares started and have reinvested all
distributions. For comparison, we've shown the same $10,000 investment in both
the Standard & Poor's 500 Stock Index and the Morgan Stanley World Index. The
Standard & Poor's 500 Stock Index is an unmanaged index that includes 500
widely traded common stocks and is often used as a measure of stock market
performance. The Morgan Stanley World Index is an unmanaged index that
measures the performance of a diverse range of global stock markets.
Global Marketplace Fund
Class A shares
Line chart with the heading Global Marketplace Fund: Class A, representing the
growth of a hypothetical $10,000 investment over the life of the fund. Within
the chart are four lines.
The first line represents the Standard & Poor's 500 Stock Index, and is equal
to $17,946 as of April 30, 1997. The second line represents the value of the
Global Marketplace Fund, before sales charge, and is equal to $16,842 as of
April 30, 1997. The third line represents the value of the hypothetical
$10,000 investment made in the Global Marketplace Fund on September 29, 1994,
after sales charge, and is equal to $16,000 as of April 30, 1997. The fourth
line represents the Morgan Stanley World Index and is equal to $13,881 as of
April 30, 1997.
Global Marketplace Fund
Class B shares
Line chart with the heading Global Marketplace Fund, representing the growth
of a hypothetical $10,000 investment over the life of the fund. Within the
chart are four lines.
The first line represents the value of the Standard & Poor's 500 Stock Index
and is equal to $13,378 as of April 30, 1997. The second line represents the
value of the Global Marketplace Fund, before sales charge, and is equal to
$11,841 as of April 30, 1997. The third line represents the value of the
hypothetical $10,000 investment made in the Global Marketplace Fund, after
sales charge, on January 22, 1996, and is equal to $11,821 as of April 30,
1997. The fourth line represents the Morgan Stanley World Index and is equal
to $11,441 as of April 30, 1997.
FINANCIAL STATEMENTS
John Hancock Funds - Global Marketplace Fund
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on April 30, 1997. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
April 30, 1997 (Unaudited)
- -------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $41,314,495) $ 44,524,544
Joint repurchase agreement (cost - $7,921,000) 7,921,000
-------------
52,445,544
Cash 183
Foreign currency, at value (cost - $9,444) 9,428
Receivable for shares sold 49,411
Receivable for forward foreign currency exchange
contracts sold - Note A 10
Dividends receivable 9,730
Interest receivable 1,183
Foreign tax receivable 7,916
Deferred organization expenses - Note A 3,505
Other assets 14
-------------
Total Assets 52,526,924
- -------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 936,798
Payable for shares repurchased 6,359
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 46,649
Accounts payable and accrued expenses 47,628
-------------
Total Liabilities 1,037,434
- -------------------------------------------------------------------------------
Net Assets:
Capital paid-in $ 54,878,973
Accumulated net realized loss on investments
and foreign currency transactions ( 6,291,728)
Net unrealized appreciation of investments
and foreign currency transactions 3,209,765
Accumulated net investment loss ( 307,520)
-------------
Net Assets $ 51,489,490
===============================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of
beneficial interest outstanding - unlimited
number of shares authorized with no par
value, respectively)
Class A - $22,378,657 / 1,568,073 $ 14.27
===============================================================================
Class B - $29,110,833 / 2,057,887 $ 14.15
===============================================================================
Maximum Offering Price Per Share *
Class A - ($14.27 x 105.26%) $ 15.02
===============================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
Statement of Operations
Six months ended April 30, 1997 (Unaudited)
- -----------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $5,557) $ 130,011
Interest 109,590
-----------
239,601
Expenses:
Investment management fee - Note B 217,546
Distribution and service fee - Note B
Class A 35,554
Class B 153,419
Transfer agent fee - Note B 110,268
Custodian fee 39,659
Registration and filing fees 21,692
Auditing fee 15,125
Printing 12,057
Financial services fee - Note B 5,099
Trustees' fees 2,241
Miscellaneous 1,030
Legal fees 768
Organization expense - Note A 720
-----------
Total Expenses 615,178
- -----------------------------------------------------------------------
Less Expense Reductions - Note B ( 68,057)
- -----------------------------------------------------------------------
Net Expenses 547,121
- -----------------------------------------------------------------------
Net Investment Loss ( 307,520)
- -----------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized loss on investments sold ( 4,232,427)
Net realized gain on foreign currency transactions 2,150
Change in net unrealized appreciation/depreciation
of investments 696,280
Change in net unrealized appreciation/depreciation
of foreign currency transactions ( 8,088)
-----------
Net Realized and Unrealized
Loss on Investments and
Foreign Currency Transactions ( 3,542,085)
=======================================================================
Net Decrease in Net Assets
Resulting from Operations ( $3,849,605)
=======================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference
reflects earnings less expenses, any investment and foreign currency gains and
losses, distributions paid to shareholders, if any, and any increase or
decrease in money shareholders invested in the Fund. The footnote illustrates
the number of Fund shares sold, reinvested, if any, and repurchased during the
last three periods, along with the corresponding dollar value.
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 1, 1996 TO APRIL 30, 1997
AUGUST 31, 1996 OCTOBER 31, 1996(1) (UNAUDITED)
--------------- ------------------ ------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($ 91,821) ($ 88,237) ($ 307,520)
Net realized loss on investments sold and foreign currency transactions
( 802,118) ( 1,264,001) ( 4,230,277)
Change in net unrealized appreciation/depreciation of investments and
foreign currency transactions 1,009,211 1,314,259 688,192
------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 115,272 ( 37,979) ( 3,849,605)
------------ ------------ ------------
From Fund Share Transactions - Net* 38,385,073 12,741,407 3,423,722
------------ ------------ ------------
Net Assets:
Beginning of period 711,600 39,211,945 51,915,373
------------ ------------ ------------
End of period
(including net investment loss of none; none; and $307,520, respectively) $ 39,211,945 $ 51,915,373 $ 51,489,490
============ ============ ============
* Analysis of Fund Share Transactions:
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 1, 1996 TO APRIL 30, 1997
AUGUST 31, 1996 OCTOBER 31, 1996(1) (UNAUDITED)
--------------------------- --------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A
Shares sold 1,349,557 $20,373,589 684,738 $10,778,771 651,621 $ 9,780,468
Less shares repurchased ( 292,024) ( 4,386,051) ( 381,164) ( 6,000,820) ( 506,601) ( 7,492,608)
--------- ----------- --------- ----------- --------- -----------
Net Increase 1,057,533 $15,987,538 303,574 $ 4,777,951 145,020 $ 2,287,860
========= =========== ========= =========== ========= ===========
Class B **
Shares sold 1,569,827 $23,824,449 555,243 $ 8,755,160 654,404 $ 9,742,597
Less shares repurchased ( 95,769) ( 1,426,914) ( 50,082) ( 791,704) ( 575,736) ($ 8,606,735)
Net Increase 1,474,058 $22,397,535 505,161 $ 7,963,456 78,668 $ 1,135,862
** Class B commenced operations on January 22, 1996.
(1) Effective October 31, 1996, the fiscal period end changed from August 31 to October 31.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 29, 1994
(COMMENCEMENT PERIOD FROM SIX MONTHS ENDED
OF OPERATIONS) YEAR ENDED SEPTEMBER 1, 1996 APRIL 30, 1997
TO AUGUST 31, 1995 AUGUST 31, 1996 TO OCTOBER 31, 1996(8) (UNAUDITED)
------------------ --------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50 $ 11.49 $ 15.16 $ 15.31
------- ------- ------- -------
Net Investment Income (Loss) (1) 0.01 ( 0.08) ( 0.02) ( 0.05)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions 3.01 3.75 0.17 ( 0.99)
------- ------- ------- -------
Total from Investment Operations 3.02 3.67 0.15 ( 1.04)
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ( 0.01) -- -- --
Distributions in Excess of Net Investment Income ( 0.02) -- -- --
------- ------- ------- -------
Total Distributions ( 0.03) -- -- --
------- ------- ------- -------
Net Asset Value, End of Period $ 11.49 $ 15.16 $ 15.31 $1 4.27
======= ======= ======= =======
Total Investment Return at Net Asset Value (2) 35.61%(4) 31.94% 0.99%(4) ( 6.79%)(4)
Total Adjusted Investment Return
at Net Asset Value (2,3) 28.69%(4) 29.69% 0.89%(4) ( 6.91%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $ 712 $16,966 $21,782 $22,379
Ratio of Expenses to Average Net Assets 1.50%(5) 1.45% 1.54%(5) 1.62%(5)
Ratio of Adjusted Expenses
to Average Net Assets (6) 9.00%(5) 3.70% 2.12%(5) 1.87%(5)
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.06%(5) ( 0.57%) ( 0.70%)(5) ( 0.74%)(5)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (6) ( 7.44%)(5) ( 2.82%) ( 1.28%)(5) ( 0.99%)(5)
Portfolio Turnover Rate 63% 52% 12% 76%
Average Broker Commission Rate (7) N/A $0.0140 $0.0079 $0.0144
Fee Reduction Per Share (1) $ 0.65 $ 0.31 $ 0.02 $ 0.02
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: net investment income, gains (losses),
distributions of the Fund, and total investment return of the Fund. It shows
how the Fund's net asset value for a share has changed since the end of the
previous period. Additionally, important relationships between some items
presented in the financial statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD PERIOD FROM SIX MONTHS ENDED
JANUARY 22, 1996 SEPTEMBER 1, 1996 APRIL 30, 1997
TO AUGUST 31, 1996 TO OCTOBER 31, 1996(8) (UNAUDITED)
------------------ ---------------------- --------------------
<S> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 11.95 $ 15.09 $ 15.22
------- ------- -------
Net Investment Loss (1) ( 0.11) ( 0.04) ( 0.11)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions 3.25 0.17 ( 0.96)
------- ------- -------
Total from Investment Operations 3.14 0.13 ( 1.07)
------- ------- -------
Net Asset Value, End of Period $ 15.09 $ 15.22 $ 14.15
======= ======= =======
Total Investment Return at Net Asset Value (2) 26.28%(4) 0.86%(4) ( 7.03%)(4)
Total Adjusted Investment Return at Net Asset Value (2,3) 25.50%(4) 0.76%(4) ( 7.15%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $22,246 $30,133 $29,111
Ratio of Expenses to Average Net Assets 2.15%(5) 2.24%(5) 2.32%(5)
Ratio of Adjusted Expenses to Average Net Assets (6) 3.49%(5) 2.82%(5) 2.57%(5)
Ratio of Net Investment Loss to Average Net Assets ( 1.28%)(5) ( 1.42%)(5) ( 1.44%)(5)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (6) ( 2.62%)(5) ( 2.00%)(5) ( 1.69%)(5)
Portfolio Turnover Rate 52% 12% 76%
Average Broker Commission Rate (7) $0.0140 $0.0079 $0.0144
Fee Reduction Per Share (1) $ 0.11 $ 0.02 $ 0.02
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestments and does not reflect the effect of sales charges.
(3) An estimated total return calculation that does not take into
consideration reductions by the Adviser during the periods shown.
(4) Not annualized.
(5) On an annualized basis.
(6) Unreimbursed, without fee reduction.
(7) Per portfolio share traded. Required for fiscal years that began September
1, 1995, or later.
(8) Effective October 31, 1996, the fiscal period end changed from August 31
to October 31.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
April 30, 1997 (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Global Marketplace Fund on April 30, 1997. It's divided into two main
categories: common stocks and short-term investments. Common stocks are
further broken down by industry group. Short-term investments, which represent
the Fund's "cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----------
<S> <C> <C>
COMMON STOCKS
Advertising (1.41%)
Outdoor Systems, Inc.* 26,250 $ 728,438
-----------
Auto - Leasing / Rentals (0.28%)
Budget Group, Inc. * 6,400 144,000
-----------
Beverages - Alcoholic (1.89%)
Mondavi (Robert) Corp. (Class A)* 26,000 975,000
-----------
Consumer Products Miscellaneous (2.60%)
Samsonite Corp.* 32,200 1,336,300
-----------
Diversified Operations (1.49%)
Moulin International Holdings Ltd.
(Hong Kong) 1,006,730 766,760
-----------
Leisure (4.99%)
Disney (Walt) Co., (The) 15,000 1,230,000
Premier Parks Inc.* 24,900 737,663
Silicon Gaming, Inc.* 44,000 599,500
-----------
2,567,163
-----------
Printing - Commercial (1.60%)
Mail-Well, Inc.* 30,000 821,250
-----------
Real Estate Operations (1.06%)
Central Parking Corp. 19,800 544,500
-----------
Retail - Apparel / Shoe Group (3.93%)
AnnTaylor Stores Corp.* 30,000 727,500
Footstar, Inc.* 3,742 77,647
Gap, Inc. (The) 22,000 701,250
Stage Stores, Inc.* 25,000 518,750
-----------
2,025,147
-----------
Retail - Consumer Electronics (1.64%)
Grupo Elektras, S.A. de C.V.,
Global Depositary Receipts
(Mexico) 45,000 $ 843,750
-----------
Retail - Department Stores (5.36%)
Kohl's Corp.* 30,000 1,466,250
Oasis Stores PLC (United Kingdom) 90,000 568,882
Proffitt's, Inc.* 15,000 560,625
Saks Holdings, Inc.* 8,700 166,388
-----------
2,762,145
-----------
Retail - Discount & Variety (4.57%)
Consolidated Stores Corp.* 23,000 920,000
Dollar General Corp. 27,500 869,687
Filene's Basement Corp* 70,000 411,250
99 Cents Only Stores * 7,100 153,538
-----------
2,354,475
-----------
Retail - Drug Stores (4.88%)
Arbor Drugs, Inc. 45,000 826,875
CVS Corp. 34,000 1,687,250
-----------
2,514,125
-----------
Retail - Home Furnishings (2.39%)
Cost Plus, Inc.* 32,000 528,000
Linens 'N Things, Inc.* 33,000 701,250
-----------
1,229,250
-----------
Retail - Mail Order / Direct (2.33%)
dELiA*s Inc.* 40,000 680,000
Micro Warehouse, Inc.* 30,000 517,500
-----------
1,197,500
-----------
Retail - Major Chains (3.06%)
Costco Cos., Inc.* 35,000 1,010,625
Wal-Mart Stores, Inc. 20,000 565,000
-----------
1,575,625
-----------
Retail - Miscellaneous/Diversified (10.88%)
Borders Group, Inc. * 30,000 637,500
Burton Group PLC (United Kingdom) 268,000 660,227
Coles Myer Ltd., American Depositary
Receipts, (ADR) (Australia) 8,000 312,000
Grand Optical Photoservice SA (France) 7,000 1,042,234
Guitar Center, Inc.* 28,500 402,562
Hibbett Sporting Goods, Inc.* 31,300 500,800
Hot Topic, Inc.* 37,500 965,625
Next, PLC (United Kingdom) 60,000 633,549
Staples, Inc.* 25,000 450,000
-----------
5,604,497
-----------
Retail - Restaurants (5.83%)
PizzaExpress PLC (United Kingdom) 130,000 1,455,916
Starbucks Corp.* 25,000 746,875
Wetherspoon (J.D.) PLC
(United Kingdom) 42,687 799,084
-----------
3,001,875
-----------
Retail - Supermarkets (11.41%)
Blue Square-Israel Ltd., (ADR) (Israel) * 50,000 931,250
Carrefour SA (France) 2,490 1,554,623
Disco S.A., (ADR) (Argentina) * 38,000 1,178,000
Quality Food Centers, Inc. * 30,000 1,203,750
Riser Foods, Inc. (Class A) 15,000 519,375
Santa Isabel S.A., (ADR) (Chile) 20,000 487,500
-----------
5,874,498
-----------
Retail / Wholesale - Building Products (3.26%)
Castorama Dubois Investissements
SA (France) 2,456 363,150
Home Centers (DIY) Ltd. (Israel) * 60,000 270,000
Home Depot, Inc. 18,000 1,044,000
-----------
1,677,150
-----------
Retail / Wholesale - Computers (1.35%)
CompUSA, Inc.* 36,200 696,850
-----------
Shoes & Related Apparel (3.06%)
Candie's, Inc.* 100,000 450,000
Wolverine World Wide, Inc. 28,000 1,127,000
-----------
1,577,000
-----------
Textiles - Apparel Manufacturing (5.96%)
Cutter & Buck, Inc.* 37,500 450,000
First Sign International Holdings Ltd.
(Hong Kong) 3,000,000 596,398
Glorious Sun Enterprises (Hong Kong) * 1,800,000 894,598
Jones Apparel Group, Inc.* 27,000 1,127,250
-----------
3,068,246
-----------
TOTAL COMMON STOCKS
(Cost $41,314,495) (86.47%) $44,524,544
========= ===========
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------- ---------------- -----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (15.39%)
Investment in a joint repurchase
agreement transaction with
Aubrey G. Lanston & Co. -
Dated 4-30-97, Due 5-01-97
(Secured by US Treasury Notes,
5.500% thru 6.625%, Due
5-15-98 thru 9-30-01)
Note A 5.375% 7,921 $ 7,921,000
-----------
TOTAL SHORT-TERM INVESTMENTS (15.39%) 7,921,000
-------- -----------
TOTAL INVESTMENTS (101.86%) $52,445,544
======== ===========
* Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
</TABLE>
Country Diversification (Unaudited)
- ------------------------------------------------------------------------------
The concentration of investments by industry group for individual securities
held by the Fund is shown in the schedule of investments. In addition, the
concentration of investments can be aggregated by the countries in which the
Fund invests. The table below shows the percentage of the Fund's investments
at April 30, 1997 assigned to the various countries.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
OF FUND'S
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- ---------------
Argentina 2.29%
Australia 0.61
Chile 0.95
France 5.75
Hong Kong 4.38
Israel 2.33
Mexico 1.64
United Kingdom 8.00
United States 75.91
------
101.86%
======
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Marketplace Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock World Fund (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust
consists of three series: John Hancock Global Marketplace Fund (the "Fund"),
John Hancock Pacific Basin Equities Fund and John Hancock Global Rx Fund. The
other two series of the Trust are reported in separate financial statements.
The investment objective of the Fund is to achieve long-term capital
appreciation through investment primarily in a foreign and U.S. stocks of
companies that merchandise goods and services to consumers or to consumer
companies.
The Trustees have authorized the issuance of multiple classes of shares of the
Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and
have equal rights to voting, redemptions, dividends and liquidation, except
that certain expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution and service expenses under
terms of a distribution plan have exclusive voting rights to that distribution
plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing sources
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
or less are valued at amortized cost, which approximates market value. All
portfolio transactions initially expressed in terms of foreign currencies have
been translated into U.S. dollars as described in "Foreign Currency
Translation" below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial
Group, may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains
realized on some foreign securities are subject to foreign taxes and are
accrued, as applicable.
FEDERAL INCOME TAXES The Fund intends to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies
and to distribute all of its taxable income, including any net realized gain
on investment, to its shareholders. Therefore, no federal income tax provision
is required. For federal income tax purposes, the Fund has $2,061,437 of
capital loss carryforwards available, to the extent provided by regulations,
to offset future net realized capital gains. To the extent that such
carryforwards are used by the Fund, no capital distribution will be made.
The carryforwards expire as follows: October 31, 2003 - $849, and October 31,
2004 - $2,060,588.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date or, in the case of some foreign
securities, on the date thereafter when the Fund identifies the dividend.
Interest income on investment securities is recorded on the accrual basis.
Foreign income may be subject to foreign withholding taxes which are accrued
as applicable.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined
in conformity with income tax regulations, which may differ from generally
accepted accounting principles. Dividends paid by the Fund with respect to
each class of shares will be calculated in the same manner, at the same time
and will be in the same amount, except for the effect of expenses that may be
applied differently to each class.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the relative net assets of the respective classes.
Distribution and service fees are calculated daily at the class level based on
the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable
to an individual fund. Expenses which are not identifiable to a specific fund
are allocated in such a manner as deemed equitable, taking into consideration,
among other things, the nature and type of expense and the relative sizes of
the funds.
ORGANIZATION EXPENSES Expenses incurred in connection with the organization of
the Fund have been capitalized and are being charged to the Fund's operations
ratably over a five-year period that commenced with the investment operations
of the Fund.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amount of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities. The fund had
no borrowing activity for the period ended April 30, 1997.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments
are translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts
are marked to market daily at the applicable foreign currency exchange rates.
Any resulting unrealized gains and losses are included in the determination
of the Fund's daily net assets. The Fund records realized gains and losses
at the time the forward foreign currency contract is closed out or offset
by a matching contract. Risks may arise upon entering these contracts from
potential inability of counterparties to meet the terms of the contract and
from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized gain
or loss reflected in the Fund's Statement of Assets and Liabilities. The Fund
may also purchase and sell forward contracts to facilitate the settlement of
foreign currency denominated portfolio transactions transactions, under which
it intends to take delivery of the foreign currency. Such contracts normally
involve no market risk other than that not offset by the currency amount of
the underlying transaction.
Open forward foreign currency contracts at April 30, 1997, were as follows:
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT DATE APPRECIATION
- -------- ------------------- ---- ------------
SELLS
French Francs 55,029 May 97 $10
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. Buying futures tends to increase the Fund's exposure to the
underlying instrument. Selling futures tends to decrease the Fund's exposure
to the underlying instrument or hedge other Fund instruments. At the time the
Fund enters into a financial futures contract, it is required to deposit with
its custodian a specified amount of cash or U.S. government securities, known
as "initial margin," equal to a certain percentage of the value of the
financial futures contract being traded. Each day, the futures contract is
valued at the official settlement price of the board of trade or U.S.
commodities exchange. Subsequent payments, known as "variation margin," to and
from the broker are made on a daily basis as the market price of the financial
futures contract fluctuates. Daily variation margin adjustments, arising from
this "mark to market," are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At April 30, 1997, there were no open positions in financial futures
contracts.
OPTIONS Listed options are valued at the last quoted sales price on the
exchange on which they are primarily traded. Over-the-counter options are
valued at the mean between the last bid and asked prices. Upon the writing of
a call or put option, an amount equal to the premium received by the Fund is
included in the Statement of Assets and Liabilities as an asset and
corresponding liability. The amount of the liability is subsequently marked to
market to reflect the current market value of the written option.
The Fund may use option contracts to manage its exposure to the stock market.
Writing puts and buying calls tend to increase the Fund's exposure to the
underlying instrument and buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options will be limited to the
premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value reflects the maximum exposure of
the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contracts'
terms, or if the Fund is unable to offset a contract with a counterparty on a
timely basis ("liquidity risk"). Exchange-traded options have minimal credit
risk as the exchanges act as counterparties to each transaction, and only
present liquidity risk in highly unusual market conditions. To minimize credit
risk and liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit risk
may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
There were no written option transactions for the period ended April 30, 1997.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.80% of the first $250,000,000 of the
Fund's average daily net asset value and (b) 0.70% of the Fund's average
daily net asset value in excess of $250,000,000.
The Adviser has agreed to limit Fund expenses, including the management fee
(but not including the transfer agent fee and the 12b-1 fee), to 0.90% of the
Fund's daily net assets. Accordingly, the reduction in the Adviser's fee
amounted to $68,057 for the period ended April 30, 1997. The Adviser reserves
the right to terminate this limit in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended April
30, 1997, net sales charges received with regard to Class A shares amounted to
$185,961. Out of this amount, $29,323 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $102,027 was
paid as sales commissions to sales personnel of unrelated broker-dealers and
$54,611 was paid as sales commissions to personnel of John Hancock
Distributors, Inc. ("Distributors"), Tucker Anthony Incorporated ("Tucker
Anthony") and Sutro & Co., Inc. ("Sutro"), all of which are broker-dealers.
The Adviser's indirect parent, John Hancock Mutual Life Insurance Company
("JHMLICo"), is the indirect sole shareholder of Distributors and was the sole
shareholder until November 29, 1996 of John Hancock Freedom Securities
Corporation and its subsidiaries, which include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be subject
to a contingent-deferred sales charge ("CDSC") at declining rates beginning at
5.0% of the lesser of the current market value at the time of redemption or
the original purchase cost of the shares being redeemed. Proceeds from the
CDSC are paid to JH Funds and are used in whole or in part to defray its
expenses for providing distribution related services to the Fund in connection
with the sale of Class B shares. For the period ended April 30, 1997, the
contingent-deferred sales charges paid to JH Funds amounted to $54,632.
In addition, to reimburse JH Funds for the services it provides as distributor
of shares of the Fund, the Fund has adopted a Distribution Plans with respect
to Class A and Class B pursuant to Rule 12b-1 under the Investment Company Act
of 1940. Accordingly, the Fund will make payments to JH Funds, for
distribution and service expenses at an annual rate not to exceed 0.30% of
Class A average daily net assets and 1.00% of Class B average daily net assets
to reimburse JH Funds for its distribution and service costs. Up to a maximum
of 0.25% of these payments may be service fees as defined by the amended Rules
of Fair Practice of the National Association of Securities Dealers. Under the
amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature Services,
Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The Fund pays
a transfer agent fee based on the number of shareholder accounts and
certain-out-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the period
was at an annual rate of 0.01875% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon, and Mr. Richard S. Scipione
are trustees and/or officers of the Adviser, and/or its affiliates, as well as
Trustees of the Fund. The compensation of unaffiliated Trustees is borne by
the Fund. The unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock funds,
as applicable, to cover its liability with regard to the deferred
compensation. Investments to cover the Fund's deferred compensation liability
are recorded on the Fund's books as an other asset. The deferred compensation
liability and the related other asset are marked to market on a periodic basis
to reflect any income earned by the investment as well as any unrealized gain
or losses. At April 30, 1997, the Fund's investments to cover the deferred
compensation liability had unrealized appreciation of $1.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the period ended April 30, 1997, aggregated $38,400,014 and
$39,842,012, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the period ended April 30, 1997.
The cost of investments owned at April 30, 1997 (including the joint
repurchase agreement) for federal income tax purposes was $49,235,495. Gross
unrealized appreciation and depreciation of investments aggregated $5,371,767
and $2,161,718, respectively, resulting in net unrealized appreciation of
$3,210,049.
NOTES
John Hancock Funds - Global Marketplace Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
1-800-225-5291 1-800-554-6713 (TDD)
Internet: www.jhancock.com/funds
This report is for the information of shareholders of the John Hancock Global
Marketplace Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
A recycled logo in lower left hand corner with caption "Printed on Recycled
Paper."
300SA 4/97
6/97
<PAGE>
John Hancock Global Fund
Pro forma Combined Statement of Assets and Liabilities
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
John Hancock John Hancock Pro
Global Global Marketplace Forma
Fund Fund Adjustments Combined
------------ ------------------ ----------- -------------
<S> <C> <C> <C> <C>
Assets
Investments at value $121,704,373 $52,445,544 $ -- $ 174,149,917
Cash 200,914 183 -- 201,097
Foreign Currency, at value 2,911,491 9,428 -- 2,920,919
Receivable for shares sold 2,663 49,411 -- 52,074
Receivable for open forward
foreign currency contracts sold 1,298 10 -- 1,308
Dividends receivable 273,093 9,730 -- 282,823
Foreign tax receivable 26,903 7,916 -- 34,819
Interest receivable 331 1,183 -- 1,514
Deferred organization expense -- 3,505 (3,505)(b) --
Receivable for investments sold 2,309,811 -- -- 2,309,811
Other assets 12,473 14 -- 12,487
------------ ----------- ------------ -------------
Total assets 127,443,350 52,526,924 (3,505) 179,966,769
------------ ----------- ------------ -------------
Liabilities
Payable for investments purchased 3,376,188 936,798 -- 4,312,986
Payable for shares repurchased 28,261 6,359 -- 34,620
Payable to John Hancock
Advisers, Inc. and affiliates 153,507 46,649 -- 200,156
Accounts payable and accrued expenses 73,577 47,628 -- 121,205
------------ ----------- ------------ -------------
Total liabilities 3,631,533 1,037,434 -- 4,668,967
------------ ----------- ------------ -------------
Net Assets
Capital paid-in 93,596,645 54,878,973 (3,505)(b) 148,472,113
Net unrealized appreciation of investments
and foreign currency transactions 21,881,757 3,209,765 -- 25,091,522
Accumulated net realized gain (loss) on investments
and foreign currency transactions 8,770,928 (6,291,728) -- 2,479,200
Accumulated net investment loss (437,513) (307,520) -- (745,033)
------------ ----------- ------------ -------------
Net assets $123,811,817 $51,489,490 ($3,505) $ 175,297,802
============ =========== ============ =============
Net assets:
Global Fund
Class A $94,847,960 $ -- $ 22,377,134(a) $ 117,225,094
Class B 28,963,857 -- 29,108,851(a) 58,072,708
Global Marketplace Fund
Class A -- 22,378,657 (22,378,657)(a) --
Class B -- 29,110,833 (29,110,833)(a) --
------------ ----------- ------------ -------------
$123,811,817 $51,489,490 $ (3,505) $ 175,297,802
============ =========== ============ =============
Shares outstanding:
Global Fund
Class A 7,498,137 -- 1,769,007 (a) 9,267,144
Class B 2,384,165 -- 2,396,101 (a) 4,780,266
Global Marketplace Fund
Class A -- 1,568,073 (1,568,073)(a) --
Class B -- 2,057,887 (2,057,887)(a) --
Net asset value per share:
Global Fund
Class A $ 12.65 -- -- $ 12.65
Class B $ 12.15 -- -- $ 12.15
Global Marketplace Fund
Class A -- $ 14.27 $ (14.27)(a) --
Class B -- $ 14.15 $ (14.27)(a) --
</TABLE>
<PAGE>
John Hancock Global Fund
Projected Pro forma Combined Statement of Operations
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
John Hancock John Hancock
Global Global Marketplace Pro Forma
Fund Fund Adjustments Combined
------------ ------------------ ----------- ---------
<S> <C> <C> <C> <C>
Investment Income:
Interest & Dividends
(net of foreign withholding taxes) $ 2,181,695 $ 380,017 $ -- $ 2,561,712
------------ ----------- --------- -----------
Expenses:
Management Fee 1,190,231 351,135 (100,000)(c) 1,441,366
Distribution/Service Fee
Class A 288,785 57,855 -- 346,640
Class B 269,944 246,065 -- 516,009
Transfer Agent Fee (e) 474,107 161,327 -- 635,434
Registration & Filing Fees 32,663 91,391 (71,465)(e) 52,589
Custodian Fee 149,327 105,814 (49,784)(e) 205,357
Auditing Fee 40,472 62,805 (58,277)(e) 45,000
Legal Fees 3,434 3,956 -- 7,390
Trustee Fees 14,373 2,611 -- 16,984
Printing 27,182 33,666 (16,833)(e) 44,015
Financial Services Fee 23,120 8,164 -- 31,284
Organization expense -- 2,226 (2,226)(b) --
Miscellaneous 4,030 1,894 (474)(e) 5,450
------------ ----------- --------- -----------
Gross Fund Total Expenses 2,517,668 1,128,909 (299,059) 3,347,518
Less Expense Reductions -- (268,101) 268,101(g) --
------------ ----------- --------- -----------
Total Expenses 2,517,668 860,808 (30,958) 3,347,518
------------ ----------- --------- -----------
Net Investment Income/(Loss) (335,973) (480,791) 30,958 (785,806)
------------ ----------- --------- -----------
Realized and Unrealized Gain (Loss) on Investments,
and Foreign Currency Transactions:
Net realized gain/(loss) on investments sold 13,402,485 (6,354,606) -- 7,047,879
Net realized gain/(loss) on foreign
currency transactions (346,068) (3,810) -- (349,878)
Change in appreciation/(depreciation) of investments (6,635,407) 2,202,588 -- (4,432,819)
Change in appreciation/(depreciation)
of foreign currency transactions 126,101 (359) -- 125,742
------------ ----------- --------- -----------
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 6,547,111 (4,156,187) -- 2,390,924
------------ ----------- --------- -----------
Net Increase/(Decrease) in Net Assets
Resulting from Operations $ 6,211,138 $(4,636,978) $ 30,958 $ 1,605,118
============ =========== ========= ===========
</TABLE>
See notes to Pro forma Combined Financial Statements
<PAGE>
JOHN HANCOCK GLOBAL FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS - (UNAUDITED)
APRIL 30, 1997
Pro forma information is intended to provide shareholders of John Hancock Global
Marketplace Fund with information about the impact of the proposed merger by
indicating how the merger might have affected information had the merger been
consummated as of May 1, 1996.
The unaudited pro forma combined statements of assets and liabilities and
results of operations as of April 30, 1997, have been prepared to reflect the
merger of the John Hancock Global Fund and the John Hancock Global Marketplace
Fund after giving effect to pro forma adjustments described in the notes listed
below.
(a) Acquisition by John Hancock Global Fund of all the assets of John Hancock
Global Marketplace Fund and issuance of John Hancock Global Fund Class A
and Class B shares in exchange for all of the outstanding Class A and
Class B shares, respectively, of John Hancock Global Marketplace Fund.
(b) The deferred organization expense of John Hancock Global Marketplace Fund
was written off as the Fund would no longer be in existence.
(c) The investment advisory fee was adjusted to reflect the application of the
fee structure which will be in effect for John Hancock Global Fund: 0.90%
of the first $100,000,000 of the Fund's average daily net asset value
0.80% of the next $200,000,000, 0.75% of the next $200,000,000 and 0.625%
of the Fund's average daily net asset value in excess of $500,000,000.
(d) The transfer agent fee for each of the Class A and Class B shares is the
total of the respective individual fund's transfer agent fees. The main
criteria in determining the transfer agent fees for a specific class is
the number of the shareholders accounts.
(e) The actual expenses incurred by the John Hancock Global Fund and John
Hancock Global Marketplace Fund for various expenses included on a pro
forma basis were reduced to reflect the estimated savings arising from the
merger.
(f) The amount of the expense reduction was adjusted to reflect that John
Hancock Global Fund has no voluntary limitation on expenses.
<PAGE>
John Hancock Global Fund
Pro forma Schedule of Investments
April 30, 1997 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
Global Fund and Global Marketplace Fund combined on April 30, 1997
<TABLE>
<CAPTION>
-------------------------------
Global Fund
-------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer - Description Assets Rate % Date Shares Omitted) Value**
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Argentina 1.75%
Disco S.A., American Depositary Receipts (ADR)
(Retail - Supermarkets)*
Perez Companc S.A. (ADR) (Oil & Gas) 117,300 1,888,976
-----------
Australia
Coles Myer Ltd., (ADR) 2.00%
(Retail - Miscellaneous/Diversified)
Newcrest Mining Ltd. (Metal) 100,000 297,122
RGC Ltd. (Metal) 390,007 1,414,281
WMC Ltd. (Metal) 250,000 1,481,713
------------
3,193,116
------------
Brazil 2.23%
Centrais Electricas Brasileiras S/A (ADR) (Utilities) 51,600 1,135,200
Telecomunicacoes Brasileiras S/A (ADR)
(Telecommunications) 24,200 2,776,950
------------
3,912,150
------------
Canada 0.26%
Cinar Films, Inc. (Class B) (Leisure)* 20,000 455,000
------------
Chile 0.44%
Maderas y Sinteticos SA (ADR) (Building) 17,800 284,800
------------
Santa Isabel S.A., (ADR) (Retail - Supermarkets)
France 4.03%
Carrefour SA (Retail - Supermarkets)
Castorama Dubois Investissements SA
(Retail/Wholesale-Building Products)
Grand Optical Photoservice SA
(Retail - Miscellaneous/Diversified)
LVMH Moet Hennessy Louis Vuitton (Beverages) 9,250 2,258,417
Lyonnaise des Eaux SA (Diversified Operations) 20,500 1,854,536
------------
4,112,953
------------
Germany 2.70%
Schering AG (Medical) 30,000 2,875,621
VEBA AG (Diversified Operations) 36,000 1,854,256
------------
4,729,877
------------
Hong Kong 7.58%
Cheung Kong (Holdings) Ltd. (Real Estate Operations) 265,000 2,326,212
China Resources Enterprise Ltd. (Real Estate Operations) 605,000 1,671,335
CITIC Pacific Ltd. (Diversified Operations) 250,000 1,352,224
First Sign International Holdings Ltd.
(Textiles - Apparel Manufacturing)
Glorious Sun Enterprises
(Textiles - Apparel Manufacturing)*
Hong Kong & Shanghai Hotels Ltd. (Leisure) 1,080,000 1,568,450
Hutchison Whampoa Ltd. (Diversified Operations) 400,000 2,969,083
Moulin International Holdings Ltd.
(Diversified Operations)
Wharf (Holdings) Ltd. (Real Estate Operations) 300,000 1,134,706
------------
11,022,010
------------
<CAPTION>
------------------------------------------------------------
Global Marketplace Combined
------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer - Description Shares Omitted) Value** Shares Omitted) Value**
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Argentina
Disco S.A., American Depositary Receipts (ADR) 38,000 1,178,000 38,000 1,178,000
(Retail - Supermarkets)* -----------
Perez Companc S.A. (ADR) (Oil & Gas) 117,300 1,888,976
-----------
3,066,976
-----------
Australia
Coles Myer Ltd., (ADR) 8,000 312,000 8,000 312,000
(Retail - Miscellaneous/Diversified) -----------
Newcrest Mining Ltd. (Metal) 100,000 297,122
RGC Ltd. (Metal) 390,007 1,414,281
WMC Ltd. (Metal) 250,000 1,481,713
-----------
3,505,116
-----------
Brazil
Centrais Electricas Brasileiras S/A (ADR) (Utilities) 51,600 1,135,200
Telecomunicacoes Brasileiras S/A (ADR)
(Telecommunications) 24,200 2,776,950
-----------
3,912,150
-----------
Canada
Cinar Films, Inc. (Class B) (Leisure)* 20,000 455,000
-----------
Chile
Maderas y Sinteticos SA (ADR) (Building) 17,800 284,800
Santa Isabel S.A., (ADR) (Retail - Supermarkets) 20,000 487,500 20,000 487,500
----------- -----------
772,300
-----------
France
Carrefour SA (Retail - Supermarkets) 2,490 1,554,623 2,490 1,554,623
Castorama Dubois Investissements SA 2,456 363,150 2,456 363,150
(Retail/Wholesale-Building Products)
Grand Optical Photoservice SA 7,000 1,042,234 7,000 1,042,234
(Retail - Miscellaneous/Diversified)
LVMH Moet Hennessy Louis Vuitton (Beverages) 9,250 2,258,417
Lyonnaise des Eaux SA (Diversified Operations) 20,500 1,854,536
----------- -----------
2,960,007 7,072,960
----------- -----------
Germany
Schering AG (Medical) 30,000 2,875,621
VEBA AG (Diversified Operations) 36,000 1,854,256
-----------
4,729,877
-----------
Hong Kong
Cheung Kong (Holdings) Ltd. (Real Estate Operations) 265,000 2,326,212
China Resources Enterprise Ltd. (Real Estate Operations 605,000 1,671,335
CITIC Pacific Ltd. (Diversified Operations) 250,000 1,352,224
First Sign International Holdings Ltd. 3,000,000 596,398 3,000,000 596,398
(Textiles - Apparel Manufacturing)
Glorious Sun Enterprises
(Textiles - Apparel Manufacturing)* 1,800,000 894,598 1,800,000 894,598
Hong Kong & Shanghai Hotels Ltd. (Leisure) 1,080,000 1,568,450
Hutchison Whampoa Ltd. (Diversified Operations) 400,000 2,969,083
Moulin International Holdings Ltd.
(Diversified Operations) 1,006,730 766,760 1,006,730 766,760
-----------
Wharf (Holdings) Ltd. (Real Estate Operations) 2,257,756 300,000 1,134,706
----------- -----------
13,279,766
-----------
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
-------------------------------
Global Fund
-------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer - Description Assets Rate % Date Shares Omitted) Value**
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
India 0.71%
State Bank of India, Global Depositary Receipts 51,300 1,247,873
(GDR) (Banks - Foreign)* -----------
Israel 0.68%
Blue Square-Israel Ltd. (ADR) (Retail-Supermarkets)*
Home Centers (DIY) Ltd.
(Retail/Wholesale - Building Products)*
Japan 8.31%
Fujitsu Ltd. (Computers) 150,000 1,559,853
Ito-Yokado Co. (Retail) 35,000 1,679,206
Matsushita-Kotobuki Electronics Industries, Ltd.
(Electronics) 122,000 3,892,543
Rohm Co., Ltd. (Electronics) 800 62,016
Sony Corp. (Electronics) 42,000 3,057,313
TDK Corp. (Electronics) 60,000 4,325,048
-----------
14,575,979
-----------
Malaysia 0.47%
Sime Darby Berhad (Diversified Operations) 265,000 817,966
-----------
Mexico 3.13%
Empresas La Moderna S.A. de C.V. (ADR) (Tobacco) 26,200 543,650
Grupo Elektras, S.A. de C.V. (GDR)
(Retail - Consumer Electronics)
Grupo Industrial Maseca SA de C.V. (ADR) (Food) 100,900 1,488,275
Panamerican Beverages, Inc. (Beverages) 89,800 2,604,200
-----------
4,636,125
-----------
Netherlands 0.82%
Gucci Group, NV (Retail) 15,000 1,040,625
PolyGram NV (Household) 8,000 392,137
-----------
1,432,762
-----------
Norway 0.96%
Saga Petroleum ASA (Oil & Gas) 96,300 1,683,614
-----------
Singapore 0.74%
DBS Land Ltd. (Real Estate Operations) 400,000 1,293,264
-----------
South Korea 0.31%
L.G. Construction Ltd. (Building) 36,530 540,578
-----------
Sweden 1.18%
Investor AB (Diversified Operations) 47,500 2,076,880
-----------
Switzerland 2.95%
Ciba Specialty Chemicals AG (Chemicals)* 2,133 183,767
<CAPTION>
-----------------------------------------------------------
Global Marketplace Combined
-----------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer - Description Shares Omitted) Value** Shares Omitted) Value**
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
India
State Bank of India, Global Depositary Receipts 51,300 1,247,873
(GDR) (Banks - Foreign)* ----------
Israel
Blue Square-Israel Ltd. (ADR) (Retail-Supermarkets)* 50,000 931,250 50,000 931,250
Home Centers (DIY) Ltd.
(Retail/Wholesale - Building Products)* 60,000 270,000 60,000 270,000
--------- ----------
1,201,250 1,201,250
--------- ----------
Japan
Fujitsu Ltd. (Computers) 150,000 1,559,853
Ito-Yokado Co. (Retail) 35,000 1,679,206
Matsushita-Kotobuki Electronics Industries, Ltd.
(Electronics) 122,000 3,892,543
Rohm Co., Ltd. (Electronics) 800 62,016
Sony Corp. (Electronics) 42,000 3,057,313
TDK Corp. (Electronics) 60,000 4,325,048
----------
14,575,979
----------
Malaysia
Sime Darby Berhad (Diversified Operations) 265,000 817,966
----------
Mexico
Empresas La Moderna S.A. de C.V. (ADR) (Tobacco) 26,200 543,650
Grupo Elektras, S.A. de C.V. (GDR)
(Retail - Consumer Electronics) 45,000 843,750
---------
Grupo Industrial Maseca SA de C.V. (ADR) (Food) 100,900 1,488,275
Panamerican Beverages, Inc. (Beverages) 89,800 2,604,200
----------
5,479,875
----------
Netherlands
Gucci Group, NV (Retail) 15,000 1,040,625
PolyGram NV (Household) 8,000 392,137
----------
1,432,762
----------
Norway
Saga Petroleum ASA (Oil & Gas) 96,300 1,683,614
----------
Singapore
DBS Land Ltd. (Real Estate Operations) 400,000 1,293,264
----------
South Korea
L.G. Construction Ltd. (Building) 36,530 540,578
----------
Sweden
Investor AB (Diversified Operations) 47,500 2,076,880
----------
Switzerland
Ciba Specialty Chemicals AG (Chemicals)* 2,133 183,767
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
------------------------------
Global Fund
------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer - Description Assets Rate % Date Shares Omitted) Value**
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Novartis AG (Medical) 2,133 2,810,044
SMH AG (Consumer Products) 16,500 2,182,688
----------
5,176,499
----------
United Kingdom 7.14%
Burton Group PLC (Retail - Miscellaneous/Diversified)
Dixons Group PLC (Retail) 275,000 2,253,039
EMAP PLC (Media) 100,000 1,235,008
Marks & Spencer PLC (Retail) 275,000 2,179,498
Oasis Stores PLC (Retail - Department Stores)
Next, PLC (Retail - Miscellaneous/Diversified)
Pearson PLC (Media) 115,000 1,327,066
PizzaExpress PLC (Retail - Restaurants)
Wetherspoon (J.D.) PLC (Retail) 75,000 1,403,971
----------
8,398,582
----------
United States 45.14%
Adaptec, Inc. (Computers)* 32,000 1,184,000
American International Group, Inc. (Insurance) 30,000 3,855,000
AnnTaylor Stores Corp. (Retail - Apparel/Shoe Group)*
Apache Corp. (Oil & Gas) 25,000 850,000
Arbor Drugs, Inc. (Retail - Drug Stores)
Borders Group, Inc. (Retail - Miscellaneous/Diversified)*
Budget Group, Inc. (Auto - Leasing/Rentals)*
Candie's, Inc. (Shoes & Related Apparel)*
Central Parking Corp. (Real Estate Operations)
Cisco Systems, Inc. (Computers)* 33,000 1,707,750
Colgate-Palmolive Co. (Soap & Cleaning Preparations) 20,000 2,220,000
CompUSA, Inc. (Retail/Wholesale - Computers)*
Consolidated Stores Corp. (Retail - Discount & Variety)*
Costco Cos., Inc. (Retail - Major Chains)*
Cost Plus, Inc. (Retail - Home Furnishings)*
Cutter & Buck, Inc. (Textile - Apparel Manufacturing)*
CVS Corp. (Retail - Drug Stores)
Dean Witter Discover & Co. (Finance) 80,000 3,060,000
dELiA*s Inc. (Retail - Mail Order/Direct)*
Disney (Walt) Co., (The) (Leisure) 32,093 2,631,626
Dollar General Corp. (Retail - Discount & Variety)
Du Pont (E.I.) De Nemours & Co. (Diversified Operations) 30,000 3,183,750
Eli Lilly & Co. (Medical) 25,000 2,196,875
Enron Corp. (Oil & Gas) 50,000 1,881,250
Fannie Mae (Mortgage Banking) 20,000 822,500
Filene's Basement Corp. (Discount & Variety)*
Footstar, Inc. (Retail - Apparel/Shoe Group)*
Gap, Inc. (The) (Retail - Apparel/Shoe Group)
General Electric Co. (Electronics) 35,000 3,880,625
Guitar Center Inc. (Retail - Miscellaneous/Diversified)*
Hibbett Sporting Goods, Inc.
(Retail - Miscellaneous/Diversified)*
Home Depot, Inc. (Retail/Wholesale - Building Products)
Hot Topic, Inc. (Retail - Miscellaneous/Diversified)*
Intel Corp. (Electronics) 20,000 3,062,500
International Business Machines Corp. (Computers) 15,000 2,411,250
Johnson & Johnson (Medical) 40,000 2,450,000
Jones Apparel Group, Inc. (Textiles - Apparel Manufacturing)*
<CAPTION>
------------------------------------------------------------
Global Marketplace Combined
------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer - Description Shares Omitted) Value** Shares Omitted) Value**
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Novartis AG (Medical) 2,133 2,810,044
SMH AG (Consumer Products) 16,500 2,182,688
-----------
5,176,499
United Kingdom
Burton Group PLC (Retail - Miscellaneous/Diversified) 268,000 660,227 268,000 660,227
Dixons Group PLC (Retail) 275,000 2,253,039
EMAP PLC (Media) 100,000 1,235,008
Marks & Spencer PLC (Retail) 275,000 2,179,498
Oasis Stores PLC (Retail - Department Stores) 90,000 568,882 90,000 568,882
Next, PLC (Retail - Miscellaneous/Diversified) 60,000 633,549 60,000 633,549
Pearson PLC (Media) 115,000 1,327,066
PizzaExpress PLC (Retail - Restaurants) 130,000 1,455,916 130,000 1,455,916
Wetherspoon (J.D.) PLC (Retail) 42,687 799,084 117,687 2,203,055
---------- ----------
4,117,658 12,516,240
---------- ----------
United States
Adaptec, Inc. (Computers)* 32,000 1,184,000
American International Group, Inc. (Insurance) 30,000 3,855,000
AnnTaylor Stores Corp. (Retail - Apparel/Shoe Group)* 30,000 727,500 30,000 727,500
Apache Corp. (Oil & Gas) 25,000 850,000
Arbor Drugs, Inc. (Retail - Drug Stores) 45,000 826,875 45,000 826,875
Borders Group, Inc. (Retail - Miscellaneous/Diversified)* 30,000 637,500 30,000 637,500
Budget Group, Inc. (Auto - Leasing/Rentals)* 6,400 144,000 6,400 144,000
Candie's, Inc. (Shoes & Related Apparel)* 100,000 450,000 100,000 450,000
Central Parking Corp. (Real Estate Operations) 19,800 544,500 19,800 544,500
Cisco Systems, Inc. (Computers)* 33,000 1,707,750
Colgate-Palmolive Co. (Soap & Cleaning Preparations) 20,000 2,220,000
CompUSA, Inc. (Retail/Wholesale - Computers)* 36,200 696,850 36,200 696,850
Consolidated Stores Corp. (Retail - Discount & Variety)* 23,000 920,000 23,000 920,000
Costco Cos., Inc. (Retail - Major Chains)* 35,000 1,010,625 35,000 1,010,625
Cost Plus, Inc. (Retail - Home Furnishings)* 32,000 528,000 32,000 528,000
Cutter & Buck, Inc. (Textile - Apparel Manufacturing)* 37,500 450,000 37,500 450,000
CVS Corp. (Retail - Drug Stores) 34,000 1,687,250 34,000 1,687,250
Dean Witter Discover & Co. (Finance) 80,000 3,060,000
dELiA*s Inc. (Retail - Mail Order/Direct)* 40,000 680,000 40,000 680,000
Disney (Walt) Co., (The) (Leisure) 15,000 1,230,000 47,093 3,861,626
Dollar General Corp. (Retail - Discount & Variety) 27,500 869,687 27,500 869,687
Du Pont (E.I.) De Nemours & Co. (Diversified Operations) 30,000 3,183,750
Eli Lilly & Co. (Medical) 25,000 2,196,875
Enron Corp. (Oil & Gas) 50,000 1,881,250
Fannie Mae (Mortgage Banking) 20,000 822,500
Filene's Basement Corp. (Discount & Variety)* 70,000 411,250 70,000 411,250
Footstar, Inc. (Retail - Apparel/Shoe Group)* 3,742 77,647 3,742 77,647
Gap, Inc. (The) (Retail - Apparel/Shoe Group) 22,000 701,250 22,000 701,250
General Electric Co. (Electronics) 35,000 3,880,625
Guitar Center Inc. (Retail - Miscellaneous/Diversified)* 28,500 402,562 28,500 402,562
Hibbett Sporting Goods, Inc.
(Retail - Miscellaneous/Diversified)* 31,300 500,800 31,300 500,800
Home Depot, Inc. (Retail/Wholesale - Building Products) 18,000 1,044,000 18,000 1,044,000
Hot Topic, Inc. (Retail - Miscellaneous/Diversified)* 37,500 965,625 37,500 965,625
Intel Corp. (Electronics) 20,000 3,062,500
International Business Machines Corp. (Computers) 15,000 2,411,250
Johnson & Johnson (Medical) 40,000 2,450,000
Jones Apparel Group, Inc. (Textiles - Apparel
Manufacturing)* 27,000 1,127,250 27,000 1,127,250
</TABLE>
Page 3
<PAGE>
<TABLE>
<CAPTION>
--------------------------------
Global Fund
--------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer - Description Assets Rate % Date Shares Omitted) Value**
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kohl's Corp. (Retail - Department Stores)*
Linens 'N Things, Inc. (Retail - Home Furnishings)*
Mail-Well, Inc. (Printing - Commercial)*
Medallion Financial Corp. (Finance)
Microsoft Corp. (Computers)* 20,000 2,430,000
Micro Warehouse, Inc.(Retail - Mail Order/Direct)*
Mondavi (Robert) Corp. (Class A) (Beverages - Alcoholic)*
99 Cents Only Stores (Retail - Discount & Variety)*
Omnicare, Inc. (Medical) 40,000 975,000
Outdoor Systems, Inc.(Advertising)*
Phillips Petroleum Co. (Oil & Gas) 50,000 1,968,750
Premier Parks Inc. (Leisure)*
Proffitt's, Inc. (Retail - Department Stores)*
Quality Food Centers, Inc. (Retail - Supermarkets)*
Riser Foods, Inc. (Class A) (Retail - Supermarkets)
Saks Holdings, Inc. (Retail - Department Stores)*
Samsonite Corp. (Consumer Products Miscellaneous)*
Schering-Plough Corp. (Medical) 35,000 2,800,000
Silicon Gaming, Inc. (Leisure)*
Stage Stores, Inc. (Retail - Apparel/Shoe Group)*
Staples, Inc. (Retail - Miscellaneous/Diversified)*
Starbucks Corp. (Retail - Restaurants)*
US Filter Corp. (Pollution Control)* 40,000 1,215,000
Wal-Mart Stores, Inc. (Retail - Major Chains)
Warner-Lambert Co. (Medical) 10,000 980,000
Williams Cos., Inc. (The) (Oil & Gas) 50,000 2,193,750
Wolverine World Wide, Inc. (Shoes & Related Apparel)
------------
47,959,626
------------
TOTAL COMMON STOCKS
(Cost $138,861,710) 93.53% 119,438,630
------------
WARRANTS
Sweden 0.03%
Scania AB (Automobile/Trucks) 47,500 48,743
------------
TOTAL WARRANTS 0.03%
(Cost $49,186) 48,743
------------
TOTAL COMMON STOCKS AND WARRANTS 93.56%
(Cost $138,910,896) 119,487,373
------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement 5.78%
Investment in a joint repurchase agreement
transaction with Aubrey G. Lanston & Co.
Dated 04-30-97, Due 05-01-97 (secured by
U.S. Treasury Notes, 5.50% thru 6.625%,
due 05-15-98 thru 09-30-01) - Note A. 5.375% 5/1/97 $2,217 $ 2,217,000
------------
TOTAL SHORT-TERM INVESTMENTS 5.78% 2,217,000
------------
TOTAL INVESTMENTS 99.34% $121,704,373
============
<CAPTION>
-----------------------------------------------------------------------
Global Marketplace Combined
-----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer - Description Shares Omitted) Value** Shares Omitted) Value**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kohl's Corp. (Retail - Department Stores)* 30,000 1,466,250 30,000 1,466,250
Linens 'N Things, Inc. (Retail - Home Furnishings)* 33,000 701,250 33,000 701,250
Mail-Well, Inc. (Printing - Commercial)* 30,000 821,250 30,000 821,250
Medallion Financial Corp. (Finance) 36,000 639,000 36,000 639,000
Microsoft Corp. (Computers)* 20,000 2,430,000
Micro Warehouse, Inc.(Retail - Mail Order/Direct)* 30,000 517,500 30,000 517,500
Mondavi (Robert) Corp. (Class A)
(Beverages - Alcoholic)* 26,000 975,000 26,000 975,000
99 Cents Only Stores (Retail - Discount & Variety)* 7,100 153,538 7,100 153,538
Omnicare, Inc. (Medical) 40,000 975,000
Outdoor Systems, Inc.(Advertising)* 26,250 728,438 26,250 728,438
Phillips Petroleum Co. (Oil & Gas) 50,000 1,968,750
Premier Parks Inc. (Leisure)* 24,900 737,663 24,900 737,663
Proffitt's, Inc. (Retail - Department Stores)* 15,000 560,625 15,000 560,625
Quality Food Centers, Inc. (Retail - Supermarkets)* 30,000 1,203,750 30,000 1,203,750
Riser Foods, Inc. (Class A) (Retail - Supermarkets) 15,000 519,375 15,000 519,375
Saks Holdings, Inc. (Retail - Department Stores)* 8,700 166,388 8,700 166,388
Samsonite Corp. (Consumer Products Miscellaneous)* 32,200 1,336,300 32,200 1,336,300
Schering-Plough Corp. (Medical) 35,000 2,800,000
Silicon Gaming, Inc. (Leisure)* 44,000 599,500 44,000 599,500
Stage Stores, Inc. (Retail - Apparel/Shoe Group)* 25,000 518,750 25,000 518,750
Staples, Inc. (Retail - Miscellaneous/Diversified)* 25,000 450,000 25,000 450,000
Starbucks Corp. (Retail - Restaurants)* 25,000 746,875 25,000 746,875
US Filter Corp. (Pollution Control)* 40,000 1,215,000
Wal-Mart Stores, Inc. (Retail - Major Chains) 20,000 565,000 20,000 565,000
Warner-Lambert Co. (Medical) 10,000 980,000
Williams Cos., Inc. (The) (Oil & Gas) 50,000 2,193,750
Wolverine World Wide, Inc. (Shoes & Related Apparel) 28,000 1,127,000 28,000 1,127,000
----------- ------------
31,166,623 79,126,249
----------- ------------
TOTAL COMMON STOCKS
(Cost $138,861,710) 44,524,544 163,963,174
----------- ------------
WARRANTS
Sweden
Scania AB (Automobile/Trucks) 47,500 48,743
-----------
TOTAL WARRANTS
(Cost $49,186) 48,743
-----------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $138,910,896) 44,524,544 164,011,917
----------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement
Investment in a joint repurchase agreement
transaction with Aubrey G. Lanston & Co.
Dated 04-30-97, Due 05-01-97 (secured by
U.S. Treasury Notes, 5.50% thru 6.625%,
due 05-15-98 thru 09-30-01) - Note A. $7,921 $ 7,921,000 $10,138 $ 10,138,000
----------- ------------
TOTAL SHORT-TERM INVESTMENTS 7,921,000 10,138,000
----------- ------------
TOTAL INVESTMENTS $52,445,544 $174,149,917
=========== ============
</TABLE>
Page 4
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
* Non-income producing security.
** Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or, at
fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60
days are valued at amortized cost which approximates market value. All
portfolio transactions initially expressed in terms of foreign currencies
have been translated into U.S. dollars.
The percentage shown for each investment category is the total value of that
category as a percentage of the combined net assets of each Fund.
Page 5
<PAGE>
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
No change from the information set forth in Item 27 of the Registration
Statement of John Hancock Investment Trust III (the "Registrant") on Form N-1A
under the Securities Act of 1933 and the Investment company Act of 1940 (File
Nos. 33-4559 and 811-4630), which information is incorporated herein by
reference.
ITEM 16. EXHIBITS:
1. Registrant's Amended and Restated Filed as Exhibits 1.2 to
Declaration of Trust dated July Registrant's Registration
1, 1996 Statement on Form N-1A and
incorporated herein by reference
to post-effective amendment no.
32 (file nos. 811-4630 and
33-4559 on August 30, 1996;
accession no.
0001010521-96-00151) ("PEA 32")
1.1 Amendment to Declaration of Trust Filed herewith as Exhibit 1.1.
2 Amended and Restated By-Laws of Filed as Exhibit 2 to
Registrant. Registrant's Registration
Statement on Form N-1A and
incorporated herein by reference
to post-effective amendment no.
33 (file nos. 811-4630 and
33-4559 on February 27, 1997;
accession no.
0001010521-97-000227) ("PEA 33")
3 Not applicable
4 Form of Agreement and Plan of Filed herewith as Exhibit A to
reorganization between the the Proxy Statement and
Registrant and John Hancock Prospectus included as Part A of
Global Marketplace Fund this Registration Statement.
5 Not applicable
6 Investment Management Contract Filed as Exhibit 5.3 to PEA 32
between the Registrant and John and incorporated herein by
Hancock Advisers, Inc. reference.
7 Distribution Agreement between Filed as Exhibit 6 to PEA 33 and
the Registrant and John Hancock incorporated herein by reference.
Funds, Inc. (formerly named John
Hancock Broker Distribution
Services, Inc.)
7.1 Form of Soliciting Dealer Filed as Exhibit 6.2 to PEA 32
Agreement between John Hancock and incorporated herein by
Funds, Inc. and Selected Dealers reference.
7.2 Form of Financial Institution Filed as Exhibit 6.3 to PEA 32
Sales and Service Agreement and incorporated herein by
reference.
8 Not applicable.
9 Master Custodian Agreement Filed as Exhibit 8.1 to PEA 32
between John Hancock Mutual Funds and incorporated herein by
(including Registrant) and reference.
Investors Bank & Trust Company.
10 Class A and Class B Distribution Filed herewith as Exhibit 10.1.
Plans between Registrant and John
Hancock Funds, Inc.
11 Opinion as to legality of shares Filed herewith as Exhibit 11
and consent.
<PAGE>
12 Form of opinion as to tax matters Filed herewith as Exhibit 12
and consent.
13 Not applicable
14 Consent of Price Waterhouse LLP Filed herewith as Exhibit 14
regarding the audited financial
statements of Registrant and John
Hancock Global Marketplace Fund.
15 Not applicable
16 Powers of Attorney Filed as addendum to signature
pages of PEA 32 and incorporated
herein by reference.
17 Declaration of the Registrant Filed herewith as Exhibit 17.
pursuant to Rule 24f-2 under the
Investment Company Act of 1940
18 Prospectus of John Hancock Global Included with Part A as part of the
Marketplace Fund dated March 1, Combined Prospectus of Global Fund.
1997
18.1 Statement of Additional Filed herewith as Exhibit B to
Information of John Hancock Part B of this Registration
Global Fund dated March 1, 1997 Statement Filed herewith as
18.2 Statement of Additional Exhibit B to Part B of this
Information of John Hancock Registration Statement
Global Marketplace Fund dated
March 1, 1997
ITEM 17
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a propectus which is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) under the Securities Act of 1933,
as amended (the "1933 Act"), the reoffering prospectus will contain the
information called for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and The
Commonwealth of Massachusetts, on the 14th day of August, 1997.
JOHN HANCOCK INVESTMENT TRUST III
By: *
-----------------------------
Edward J. Boudreau, Jr.
Chairman
Pursuant to the requirements of the Securities Act of 1933, the
Registration has been signed below by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman
- ----------------------- (Principal Executive Officer)
Edward J. Boudreau, Jr.
/s/James B. Little Senior Vice President and Chief August 14, 1997
- ----------------------- Financial Officer (Principal
James B. Little Financial and Accounting Officer)
* Trustee
- -----------------------
Dennis S. Aronowitz
* Trustee
- -----------------------
Richard P. Chapman, Jr.
* Trustee
- -----------------------
William J. Cosgrove
* Trustee
- -----------------------
Douglas M. Costle
* Trustee
- -----------------------
Leland O. Erdahl
* Trustee
- -----------------------
Richard A. Farrell
* Trustee
- -----------------------
Gail D. Fosler
* Trustee
- -----------------------
William F. Glavin
<PAGE>
Signature Title Date
--------- ----- ----
* Trustee
- -----------------------
Anne C. Hodsdon
* Trustee
- -----------------------
John A. Moore
* Trustee
- -----------------------
Patti McGill Peterson
* Trustee
- -----------------------
John W. Pratt
* Trustee
- -----------------------
Richard S. Scipione
* Trustee
- -----------------------
Edward J. Spellman
*By: /s/Susan S. Newton August 14, 1997
-------------------
Susan S. Newton,
Attorney-in-Fact under
Powers of Attorney dated
May 21, 1996 and August 27,
1996.
</TABLE>
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Registration Statement
Exhibit No. Description
- ----------- -----------
4. Agreement and Plan of Regorganization between the Registrant
and John Hancock Global Marketplace Fund (filed as EXHIBIT
A to Part A of this Registration Statement).
10.1 Amended Class A and Class B Rule 12b-1 Plans for Registrant
on behalf of Global Fund.
11. Opinion as to legality of shares and consent.
12. Form of opinion as to tax matters and consent.
14. Consents of Price Waterhouse, LLP regarding the audited
financial statements and highlights of the Registrant and
John Hancock Global Marketplace Fund.
17. Declaration of the Registrant pursuant to Rule 24f-2 under
the Investment Company Act of 1940.
JOHN HANCOCK INVESTMENT TRUST III
JOHN HANCOCK GLOBAL FUND
Amended and Restated Distribution Plan
Class A Shares
June 3, 1997
Article I. This Plan
This amended and restated Distribution Plan (the "Plan") sets forth the
terms and conditions on which John Hancock Investment Trust III (the "Trust"),
on behalf of John Hancock Global Fund (the "Fund"), a series portfolio of the
Trust, on behalf of its Class A shares, will, after the effective date hereof,
pay certain amounts to John Hancock Funds, Inc. ("JH Funds") in connection with
the provision by JH Funds of certain services to the Fund and its Class A
shareholders, as set forth herein. Certain of such payments by the Fund may,
under Rule 12b-1 of the Securities and Exchange Commission, as from time to time
amended (the "Rule"), under the Investment Company Act of 1940, as amended (the
"Act"), be deemed to constitute the financing of distribution by the Fund of its
shares. This Plan describes all material aspects of such financing as
contemplated by the Rule and shall be administered and interpreted, and
implemented and continued, in a manner consistent with the Rule. The Trust and
JH Funds heretofore entered into a Distribution Agreement, dated November 13,
1996 (the "Agreement"), the terms of which, as heretofore and from time to time
continued, are incorporated herein by reference.
Article II. Distribution and Service Expenses
The Fund shall pay to JH Funds a fee in the amount specified in Article
III hereof. Such fee may be spent by JH Funds on any activities or expenses
primarily intended to result in the sale of Class A shares of the Fund,
including, but not limited to the payment of Distribution Expenses (as defined
below) and Service Expenses (as defined below). Distribution Expenses include
but are not limited to, (a) initial and ongoing sales compensation out of such
fee as it is received by JH Funds or other broker-dealers ("Selling Brokers")
that have entered into an agreement with JH Funds for the sale of Class A shares
of the Fund, (b) direct out-of-pocket expenses incurred in connection with the
distribution of Class A shares of the Fund, including expenses related to
printing of prospectuses and reports to other than existing Class A shareholders
of the Fund, and preparation, printing and distribution of sales literature and
advertising materials, (c) an allocation of overhead and other branch office
expenses of JH Funds related to the distribution of Class A shares of the Fund,
and (d) distribution expenses incurred in connection with the distribution of a
corresponding class of any open-end, registered investment company which sells
all or substantially all its assets to the Fund or which merges or otherwise
combines with the Fund.
Service Expenses include payments made to, or on account of, account
executives of selected broker-dealers (including affiliates of JH Funds) and
others who furnish personal and shareholder account maintenance services to
Class A shareholders of the Fund.
-1-
<PAGE>
Article III. Maximum Expenditures
The expenditures to be made by the Fund pursuant to this Plan, and the
basis upon which such expenditures will be made, shall be determined by the
Fund, and in no event shall such expenditures exceed 0.30% of the average daily
net asset value of the Class A shares of the Fund (determined in accordance with
the Fund's prospectus as from time to time in effect) on an annual basis to
cover Distribution Expenses and Service Expenses, provided that the portion of
such fee used to cover Service Expenses shall not exceed an annual rate of up to
0.25% of the average daily net asset value of the Class A shares of the Fund.
These expenditures shall be calculated and accrued daily and paid monthly or at
such other intervals as the Trustees shall determine. In the event JH Funds is
not fully reimbursed for payments made or other expenses incurred by it under
this Plan, these expenses will not be carried beyond one year from the date the
expenses were incurred. Any fees paid to JH Funds under this Plan during any
fiscal year of the Fund and not expended or allocated by JH Funds for actual or
budgeted Distribution Expenses and Service Expenses during that fiscal year will
be promptly returned to the Fund.
Article IV. Expenses Borne by the Fund
Notwithstanding any other provision of this Plan, the Trust, the Fund
and its investment adviser, John Hancock Advisers, Inc. (the "Adviser"), shall
bear the respective expenses to be borne by them under the Investment Management
Contract, dated July 1, 1996, (the "Management Contract"), and under the Fund's
current prospectus as it is from time to time in effect. Except as otherwise
contemplated by this Plan, the Trust and the Fund shall not, directly or
indirectly, engage in financing any activity which is primarily intended to or
should reasonably result in the sale of shares of the Fund.
Article V. Approval by Trustees, etc.
This Plan shall not take effect until it has been approved, together
with any related agreements, by votes, cast in person at a meeting called for
the purpose of voting on this Plan or such agreements, of a majority (or
whatever greater percentage may, from time to time, be required by Section 12(b)
of the Act or the rules and regulations thereunder) of (a) all of the Trustees
of the Fund and (b) those Trustees of the Fund who are not "interested persons"
of the Fund, as such term may be from time to time defined under the Act, and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it (the "Independent Trustees").
Article VI. Continuance
This Plan and any related agreements shall continue in effect for so
long as such continuance is specifically approved at least annually in advance
in the manner provided for the approval of this Plan in Article V.
-2-
<PAGE>
Article VII. Information
JH Funds shall furnish the Fund and its Trustees quarterly, or at such
other intervals as the Fund shall specify, a written report of amounts expended
or incurred for Distribution Expenses and Service Expenses pursuant to this Plan
and the purposes for which such expenditures were made and such other
information as the Trustees may request.
Article VIII. Termination
This Plan may be terminated (a) at any time by vote of a majority of
the Trustees, a majority of the Independent Trustees, or a majority of the
Fund's outstanding voting Class A shares, or (b) by JH Funds on 60 days' notice
in writing to the Fund.
Article IX. Agreements
Each agreement with any person relating to implementation of this Plan
shall be in writing, and each agreement related to this Plan shall provide:
(a) That, with respect to the Fund, such agreement may be
terminated at any time, without payment of any penalty, by
vote of a majority of the Independent Trustees or by vote of a
majority of the Fund's then outstanding voting Class A shares.
(b) That such agreement shall terminate automatically in the event
of its assignment.
Article X. Amendments
This Plan may not be amended to increase the maximum amount of the fees
payable by the Fund hereunder without the approval of a majority of the
outstanding voting Class A shares of the Fund. No material amendment to the Plan
shall, in any event, be effective unless it is approved in the same manner as is
provided for approval of this Plan in Article V.
Article XI. Limitation of Liability
The names "John Hancock Investment Trust III" and "John Hancock Global
Fund" are the designations of the Trustees under the Amended and Restated
Declaration of Trust dated July 1, 1996, as amended from time to time. The
Amended and Restated Declaration of Trust has been filed with the Secretary of
State of the Commonwealth of Massachusetts. The obligations of the Trust and the
Fund are not personally binding upon, nor shall resort be had to the private
property of, any of the Trustees, shareholders, officers, employees or agents of
the Fund, but only the Fund's property shall be bound. No series of the Trust
shall be responsible for the obligations of any other series of the Trust.
-3-
<PAGE>
IN WITNESS WHEREOF, the Fund has executed this Distribution Plan
effective as of the 3rd day of June, 1997 in Boston, Massachusetts.
JOHN HANCOCK INVESTMENT TRUST III --
JOHN HANCOCK GLOBAL FUND
By /s/ Anne C. Hodsdon
------------------------------
President
JOHN HANCOCK FUNDS, INC.
By /s/ Edward J. Boudreau, Jr.
------------------------------
Chairman, President & CEO
-4-
<PAGE>
JOHN HANCOCK INVESTMENT TRUST III
JOHN HANCOCK GLOBAL FUND
Amended and Restated Distribution Plan
Class B Shares
June 3, 1997
Article I. This Plan
This Amended and Restated Distribution Plan (the "Plan") sets forth the
terms and conditions on which John Hancock Investment Trust III (the "Trust") on
behalf of John Hancock Global Fund (the "Fund"), a series portfolio of the
Trust, on behalf of its Class B shares, will, after the effective date hereof,
pay certain amounts to John Hancock Funds, Inc. ("JH Funds") in connection with
the provision by JH Funds of certain services to the Fund and its Class B
shareholders, as set forth herein. Certain of such payments by the Fund may,
under Rule 12b-1 of the Securities and Exchange Commission, as from time to time
amended (the "Rule"), under the Investment Company Act of 1940, as amended (the
"Act"), be deemed to constitute the financing of distribution by the Fund of its
shares. This Plan describes all material aspects of such financing as
contemplated by the Rule and shall be administered and interpreted, and
implemented and continued, in a manner consistent with the Rule. The Trust and
JH Funds heretofore entered into a Distribution Agreement, dated November 13,
1996 (the "Agreement"), the terms of which, as heretofore and from time to time
continued, are incorporated herein by reference.
Article II. Distribution and Service Expenses
The Fund shall pay to JH Funds a fee in the amount specified in Article
III hereof. Such fee may be spent by JH Funds on any activities or expenses
primarily intended to result in the sale of Class B shares of the Fund,
including, but not limited to the payment of Distribution Expenses (as defined
below) and Service Expenses (as defined below). Distribution Expenses include
but are not limited to, (a) initial and ongoing sales compensation out of such
fee as it is received by JH Funds or other broker-dealers ("Selling Brokers")
that have entered into an agreement with JH Funds for the sale of Class B shares
of the Fund, (b) direct out-of pocket expenses incurred in connection with the
distribution of Class B shares of the Fund, including expenses related to
printing of prospectuses and reports to other than existing Class B shareholders
of the Fund, and preparation, printing and distribution of sales literature and
advertising materials, (c) an allocation of overhead and other branch office
expenses of JH Funds related to the distribution of Class B shares of the Fund,
(d) interest expenses on unreimbursed distribution expenses related to Class B
shares, as described in Article IV and (e) distribution expenses incurred in
connection with the distribution of a corresponding class of any open-end,
registered investment company which sells all or substantially all its assets to
the Fund or which merges or otherwise combines with the Fund.
-1-
<PAGE>
Service Expenses include payments made to, or on account of, account
executives of selected broker-dealers (including affiliates of JH Funds) and
others who furnish personal and shareholder account maintenance services to
Class B shareholders of the Fund.
Article III. Maximum Expenditures
The expenditures to be made by the Fund pursuant to this Plan, and the
basis upon which such expenditures will be made, shall be determined by the
Fund, and in no event shall such expenditures exceed 1.00% of the average daily
net asset value of the Class B shares of the Fund (determined in accordance with
the Fund's prospectus as from time to time in effect) on an annual basis to
cover Distribution Expenses and Service Expenses, provided that the portion of
such fee used to cover Service Expenses, shall not exceed an annual rate of up
to 0.25% of the average daily net asset value of the Class B shares of the Fund.
These expenditures shall be calculated and accrued daily and paid monthly or at
such other intervals as the Trustees shall determine.
Article IV. Unreimbursed Distribution Expenses
In the event that JH Funds is not fully reimbursed for payments made or
expenses incurred by it under this Plan, in any fiscal year, JH Funds shall be
entitled to carry forward these expenses to subsequent fiscal years for
submission to the Class B shares of the Fund for payment, subject always to the
annual maximum expenditures set forth in Article III hereof; provided, however,
that nothing herein shall prohibit or limit the Trustees from terminating this
Plan and all payments hereunder at any time pursuant to Article IX hereof.
Article V. Expenses Borne by the Fund
Notwithstanding any other provision of this Plan, the Trust, the Fund
and its investment adviser, John Hancock Advisers, Inc. (the "Adviser"), shall
bear the respective expenses to be borne by them under the Investment Management
Contract, dated July 1, 1996 (the "Management Contract"), and under the Fund's
current prospectus as it is from time to time in effect. Except as otherwise
contemplated by this Plan, the Trust and the Fund shall not, directly or
indirectly, engage in financing any activity which is primarily intended to or
should reasonably result in the sale of shares of the Fund.
Article VI. Approval by Trustees, etc.
This Plan shall not take effect until it has been approved, together
with any related agreements, by votes, cast in person at a meeting called for
the purpose of voting on this Plan or such agreements, of a majority (or
whatever greater percentage may, from time to time, be required by Section 12(b)
of the Act or the rules and regulations thereunder) of (a) all of the Trustees
of the Fund and (b) those Trustees of the Fund who are not "interested persons"
of the Fund, as such term may be from time to time defined under the Act, and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it (the "Independent Trustees").
-2-
<PAGE>
Article VII. Continuance
This Plan and any related agreements shall continue in effect for so
long as such continuance is specifically approved at least annually in advance
in the manner provided for the approval of this Plan in Article VI.
Article VIII. Information
JH Funds shall furnish the Fund and its Trustees quarterly, or at such
other intervals as the Fund shall specify, a written report of amounts expended
or incurred for Distribution Expenses and Services Expenses pursuant to this
Plan and the purposes for which such expenditures were made and such other
information as the Trustees may request.
Article IX. Termination
This Plan may be terminated (a) at any time by vote of a majority of
the Trustees, a majority of the Independent Trustees, or a majority of the
Fund's outstanding voting Class B shares, or (b) by JH Funds on 60 days' notice
in writing to the Fund.
Article X. Agreements
Each Agreement with any person relating to implementation of this Plan
shall be in writing, and each agreement related to this Plan shall provide:
(a) That, with respect to the Fund, such agreement may be
terminated at any time, without payment of any penalty, by
vote of a majority of the Independent Trustees or by vote of a
majority of the Fund's then outstanding voting Class B shares.
(b) That such agreement shall terminate automatically in the event
of its assignment.
Article XI. Amendments
This Plan may not be amended to increase the maximum amount of the fees
payable by the Fund hereunder without the approval of a majority of the
outstanding voting Class B shares of the Fund. No material amendment to the Plan
shall, in any event, be effective unless it is approved in the same manner as is
provided for approval of this Plan in Article VII.
Article XII. Limitation of Liability
The names "John Hancock Investment Trust III" and "John Hancock Global
Fund" are the designations of the Trustees under the Amended and Restated
Declaration of Trust, dated July 1, 1996, as amended from time to time. The
Amended and Restated Declaration of Trust has been filed with the Secretary of
State of the Commonwealth of Massachusetts. The obligations of the Trust and the
Fund are not personally binding upon, nor shall resort be had to the private
property of, any of the Trustees, shareholders, officers, employees or agents of
the Fund, but only the Fund's property shall be bound. No series of the Trust
shall be responsible for the obligations of any other series of the Trust.
-3-
<PAGE>
IN WITNESS WHEREOF, the Fund has executed this Distribution Plan
effective as of the 3rd day of June, 1997 in Boston, Massachusetts.
JOHN HANCOCK INVESTMENT TRUST III --
JOHN HANCOCK GLOBAL FUND
By: /s/ Anne C. Hodsdon
-----------------------------
President
JOHN HANCOCK FUNDS, INC.
By: /s/ Edward J. Boudreau, Jr.
-----------------------------
Chairman, President & CEO
-4-
August 4, 1997
John Hancock Investment Trust III
on behalf of John Hancock Global Fund
101 Huntington Avenue
Boston, MA 02199
Ladies and Gentlemen:
In connection with the filing of a registration statement under the Securities
Act of 1933, as amended (the "Act"), on Form N-14, with respect to the shares of
beneficial interest of John Hancock Global Fund (the "Fund"), a series of John
Hancock Investment Trust III, a Massachusetts business trust (the "Trust"), it
is the opinion of the undersigned that these shares when issued, will be legally
issued, fully paid and non-assessable.
In connection with this opinion it should be noted that the Trust is an entity
of the type generally known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of a Massachusetts business trust may be held
personally liable for the obligations of the trust. However, the Trust's
Declaration of Trust disclaims shareholder liability for obligations of the
Trust and indemnifies any shareholder of the Fund, with this indemnification to
be paid solely out of the assets of the Fund. Therefore, the shareholder's risk
is limited to circumstances in which the assets of the Fund are insufficient to
meet the obligations asserted against the Fund's assets.
The undersigned hereby consents to the filing of a copy of this opinion as an
exhibit to the Trust's registration statement on Form N-14 and with the
Securities and Exchange Commission.
Sincerely,
/s/ Avery P. Maher
Avery P. Maher
Second Vice President and
Assistant Secretary
John Hancock Advisers, Inc.
DRAFT: 7/22/97
HADL
Counsellors at Law
60 State Street, Boston, Massachusetts 02109
617-526-6000 o fax 617-526-5000
December 5, 1997
Board of Trustees
John Hancock World Fund, on behalf of
John Hancock Global Marketplace Fund
101 Huntington Avenue
Boston, Massachusetts 02199
Board of Trustees
John Hancock Investment Trust III, on behalf of
John Hancock Global Fund
101 Huntington Avenue
Boston, Massachusetts 02199
Dear Members of the Boards of Trustees:
You have requested our opinion regarding the federal income tax
consequences described below of the acquisition by John Hancock Global Fund
("Acquiring Fund"), a series of John Hancock Investment Trust III ("Trust III"),
of all of the assets of John Hancock Global Marketplace Fund ("Acquired Fund"),
a series of John Hancock World Fund ("World Trust"), in exchange solely for (i)
the assumption by Acquiring Fund of all of the liabilities of Acquired Fund and
(ii) the issuance of Class A and Class B voting shares of beneficial interest of
Acquiring Fund (the "Acquiring Fund Shares") to Acquired Fund, followed by the
Washington, DC Boston, MA London, UK*
HALE AND DORR LLP INCLUDES PROFESSIONAL CORPORATIONS
*BROBECK HALE AND DORR INTERNATIONAL (AN INDEPENDENT JOINT VENTURE LAW FIRM)
<PAGE>
distribution by Acquired Fund, in liquidation of Acquired Fund, of the Acquiring
Fund Shares to the shareholders of Acquired Fund and the termination of Acquired
Fund (the foregoing together constituting the "reorganization" or the
"transaction").
In rendering this opinion, we have examined and relied upon the facts
stated and representations made in (i) the combined prospectus for Acquiring
Fund, Acquired Fund, and certain other John Hancock mutual funds, dated March 1,
1997, (ii) the statement of additional information for Acquiring Fund and
another John Hancock mutual fund, dated March 1, 1997, (iii) the statement of
additional information for Acquired Fund, dated March 1, 1997, (iv) the
registration statement on Form N-14 of Acquiring Fund relating to the
transaction (the "Registration Statement") filed with the Securities and
Exchange Commission (the "SEC") on ____________, 1997, (v) the proxy statement
and prospectus relating to the transaction dated September 22, 1997 (the "Proxy
Statement"), (vi) the Agreement and Plan of Reorganization, made September 22,
1997, between Acquiring Fund and Acquired Fund (the "Agreement"), (vii) the
representation letters on behalf of Acquiring Fund and Acquired Fund referred to
below and (viii) such other documents as we deemed appropriate.
In our examination of documents, we have assumed the authenticity of
original documents, the accuracy of copies, the genuineness of signatures, and
the legal capacity of signatories. We have assumed that all parties to the
Agreement have acted and will act in accordance with the terms of the Agreement
and all other documents relating to the transaction and that the transaction
will be consummated pursuant to the terms and conditions set forth in the
Agreement without the waiver or modification of any such terms and conditions.
Furthermore, we have assumed that all representations contained in the
Agreement, as well as those representations contained in the representation
letters referred to below are, on the date hereof, true and complete in all
material respects, and that any representation made in any of the documents
referred to herein "to the best of the knowledge and belief" (or similar
qualification) of any person or party is correct without such qualification. We
have not attempted to verify independently such representations, but in the
course of our representation, nothing has come to our attention that would cause
us to question the accuracy thereof.
The conclusions expressed herein represent our judgment regarding the
proper treatment of certain aspects of the transaction affecting Acquiring Fund,
Acquired Fund and the shareholders of Acquired Fund on the basis of our analysis
of the Internal Revenue Code of 1986, as amended (the "Code"), case law,
Treasury regulations and the rulings and other pronouncements of the Internal
Revenue Service (the "Service") which exist at the time this opinion is
WASHINGTON, DC BOSTON, MA MANCHESTER, NH
HALE AND DORR IS A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
<PAGE>
Boards of Trustees
John Hancock World Fund
John Hancock Investment Trust III
December 5, 1997
Page 3
rendered. Such authorities are subject to prospective or retroactive change, and
we do not undertake any responsibility to advise you of any such change. Our
opinion represents our best judgment regarding how a court would decide if
presented with the issues addressed herein and is not binding upon the Service
or any court. Moreover, our opinion does not provide any assurance that a
position taken in reliance on such opinion will not be challenged by the Service
and does not constitute any representation or warranty that such position, if so
challenged, will not be rejected by a court.
This opinion addresses only the specific United States federal income
tax consequences of the transaction set forth below, and does not address any
other federal, state, local, or foreign income, estate, gift, transfer, sales,
or other tax consequences that may result from the transaction or any other
transaction.
FACTS
We understand the facts relating to the transaction to be as described
hereinafter.
Acquiring Fund is a series of Trust III, a business trust established
under the laws of The Commonwealth of Massachusetts in 1986. Trust III is
registered as an open-end investment company under the Investment Company Act of
1940, as amended (the "1940 Act"). Acquiring Fund commenced operations in 1986.
The investment objective of Acquiring Fund is to achieve long-term
growth of capital primarily through investment in common stocks of companies
domiciled in foreign countries and in the United States. Acquiring Fund invests
at least 65% of its assets in common stocks and convertible securities under
normal circumstances but may also invest in virtually any type of security,
foreign or domestic, including preferred stock, warrants, investment-grade debt
securities, and certain other investments described in its prospectus or
statement of additional information.
Acquired Fund is a series of World Trust, a business trust established
under the laws of The Commonwealth of Massachusetts in 1986. World Trust is
registered as an open-end investment company under the 1940 Act. Acquired Fund
commenced operations in 1988 and changed its name from John Hancock Global
<PAGE>
Boards of Trustees
John Hancock World Fund
John Hancock Investment Trust III
December 5, 1997
Page 4
Retail Fund (referred to herein as Acquired Fund's predecessor) to its present
name on December 11, 1995.
The investment objective of Acquired Fund is long-term capital
appreciation. Acquired Fund seeks to achieve this objective by investing
primarily (at least 65% of its assets under normal circumstances) in foreign and
U.S. stocks of companies that merchandise goods and services to consumers or to
consumer companies. Acquired Fund may also invest in warrants, preferred stocks,
convertible securities, and certain other investments described in its
prospectus or statement of additional information.
The steps comprising the reorganization, as set forth in the Agreement,
are as follows:
(i) Acquired Fund will transfer to Acquiring Fund all of its
assets (consisting, without limitation, of portfolio securities and instruments,
dividend and interest receivables, cash and other assets). In exchange for the
assets transferred to it, Acquiring Fund will (A) assume all of the liabilities
of Acquired Fund (comprising all of its known and unknown liabilities and
referred to hereinafter as the "Acquired Fund Liabilities") and (B) issue
Acquiring Fund Shares to Acquired Fund that have an aggregate net asset value
equal to the value of the assets transferred to Acquiring Fund by Acquired Fund,
less the value of the Acquired Fund Liabilities assumed by Acquiring Fund.
(ii) Promptly after the transfer of its assets to Acquiring Fund,
Acquired Fund will distribute in liquidation the Acquiring Fund Shares it
receives in the exchange to Acquired Fund shareholders pro rata in exchange for
their surrender of their shares of beneficial interest of Acquired Fund
("Acquired Fund Shares"). In these exchanges, holders of Acquired Fund Shares
designated as Class A ("Class A Acquired Fund Shares") will receive Acquiring
Fund Shares designated as Class A ("Class A Acquiring Fund Shares"), and holders
of Acquired Fund Shares designated as Class B ("Class B Acquired Fund Shares")
will receive Acquiring Fund Shares designated as Class B ("Class B Acquiring
Fund Shares").
(iii) After such exchanges, liquidation and distribution, the
existence of Acquired Fund will be promptly terminated in accordance with
Massachusetts law.
<PAGE>
Boards of Trustees
John Hancock World Fund
John Hancock Investment Trust III
December 5, 1997
Page 5
The Agreement and the transactions contemplated thereby were approved
by the Board of Trustees of Trust III, on behalf of Acquiring Fund, at a meeting
held on September 9, 1997. Acquiring Fund shareholders are not required and were
not asked to approve the transaction. The Agreement and the transactions
contemplated thereby were approved by the Board of Trustees of World Trust, on
behalf of Acquired Fund, at a meeting held on September 9, 1997, subject to the
approval of Acquired Fund shareholders. Acquired Fund shareholders approved the
transaction at a meeting held on November 12, 1997.
Massachusetts law does not provide dissenters' rights for Acquired Fund
shareholders in the transaction. Additionally, it is the position of the
Division of Investment Management of the SEC that appraisal rights, in contexts
such as the reorganization, are inconsistent with Rule 22c-1 under the 1940 Act
and are therefore preempted and invalidated by such rule. Consequently, Acquired
Fund shareholders will not have dissenters' or appraisal rights in the
transaction.
Our opinions set forth below are subject to the following factual
assumptions being true and correct (including statements relating to future
actions and facts represented to be to the best knowledge of management, whether
or not known). Authorized representatives of Acquiring Fund and Acquired Fund
have represented to us by letters of even date herewith that the following
assumptions are true and correct:
(a) Acquiring Fund has no plan or intention to redeem or otherwise
reacquire any of the Acquiring Fund Shares received by shareholders of Acquired
Fund in the transaction except in the ordinary course of its business in
connection with its legal obligation under Section 22(e) of the 1940 Act as a
registered open-end investment company to redeem its own shares.
(b) After the transaction, Acquiring Fund will continue the
historic business of Acquired Fund and will use all of the assets acquired from
Acquired Fund, which are Acquired Fund's historic business assets, i.e., assets
not acquired as part of or in contemplation of the transaction, in the ordinary
course of a business.
<PAGE>
Boards of Trustees
John Hancock World Fund
John Hancock Investment Trust III
December 5, 1997
Page 6
(c) Acquiring Fund has no plan or intention to sell or otherwise
dispose of any assets of Acquired Fund acquired in the transaction, except for
dispositions made in the ordinary course of its business (i.e., dispositions
resulting from investment decisions made after the reorganization on the basis
of investment considerations independent of the reorganization) or to maintain
its qualification as a regulated investment company under Subchapter M of the
Code.
(d) The shareholders of Acquiring Fund and the shareholders of
Acquired Fund will bear their respective expenses, if any, in connection with
the transaction.
(e) Acquiring Fund and Acquired Fund will each bear its own
expenses incurred in connection with the transaction. Any liabilities of
Acquired Fund attributable to such expenses that remain unpaid on the closing
date of the transaction and are assumed by Acquiring Fund in the transaction are
attributable to Acquired Fund's expenses that are solely and directly related to
the transaction in accordance with the guidelines established in Rev. Rul.
73-54, 1973-1 C.B. 187.
(f) There is no indebtedness between Acquiring Fund and Acquired
Fund.
(g) Acquired Fund or its predecessor has elected to be treated as
a regulated investment company under Subchapter M of the Code. Each of Acquired
Fund and its predecessor has qualified as a regulated investment company for
each taxable year since inception, and Acquired Fund qualifies as such for its
taxable year ending on the closing date of the transaction.
(h) Acquiring Fund has elected to be treated as a regulated
investment company under Subchapter M of the Code, has qualified as a regulated
investment company for each taxable year since its inception, and qualifies as
such as of the date of the transaction.
(i) Neither Acquiring Fund nor Acquired Fund is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
(j) Acquiring Fund does not own, nor has it ever owned, directly
or indirectly, any shares of Acquired Fund or its predecessor.
<PAGE>
Boards of Trustees
John Hancock World Fund
John Hancock Investment Trust III
December 5, 1997
Page 7
(k) Acquiring Fund will not pay cash in lieu of fractional shares
in connection with the transaction.
(l) As of the date of the transaction, the fair market value of
the Acquiring Fund Shares issued to Acquired Fund in exchange for the assets of
Acquired Fund is approximately equal to the fair market value of the assets of
Acquired Fund received by Acquiring Fund, minus the value of the Acquired Fund
Liabilities assumed by Acquiring Fund.
(m) Acquired Fund shareholders will not be in control (within the
meaning of Sections 368(a)(2)(H) and 304(c) of the Code, which provide that
control means the ownership of shares possessing at least 50% of the total
combined voting power of all classes of shares that are entitled to vote or at
least 50% of the total value of shares of all classes) of Acquiring Fund after
the transaction.
(n) The principal business purposes of the transaction are to
combine the assets of Acquiring Fund and Acquired Fund in order to capitalize on
economies of scale in expenses, including the costs of accounting, legal,
transfer agency, insurance, custodial, and administrative services, to eliminate
the potential adverse effects on each fund's asset growth of competing with the
other fund, and to increase diversification.
(o) As of the date of the transaction, the fair market value of
the Class A Acquiring Fund Shares received by each holder of Class A Acquired
Fund Shares is approximately equal to the fair market value of the Class A
Acquired Fund Shares surrendered by such shareholder, and the fair market value
of the Class B Acquiring Fund Shares received by each holder of Class B Acquired
Fund Shares is approximately equal to the fair market value of the Class B
Acquired Fund Shares surrendered by such shareholder.
(p) There is no plan or intention on the part of any shareholder
of Acquired Fund that owns beneficially 5% or more of the Acquired Fund Shares
and, to the best knowledge of management of Acquired Fund, there is no plan or
intention on the part of the remaining shareholders of Acquired Fund to sell,
redeem, exchange or otherwise dispose of a number of the Acquiring Fund Shares
received in the transaction that would reduce the aggregate ownership of the
<PAGE>
Boards of Trustees
John Hancock World Fund
John Hancock Investment Trust III
December 5, 1997
Page 8
Acquiring Fund Shares by former Acquired Fund shareholders to a number of shares
having a value, as of the date of the transaction, of less than fifty percent
(50%) of the value of all of the formerly outstanding Acquired Fund Shares as of
the same date. Shares of Acquired Fund and Acquiring Fund held by Acquired Fund
shareholders and sold, redeemed, exchanged or otherwise disposed of prior or
subsequent to the transaction as part of the plan of reorganization are taken
into account for purposes of this representation.
(q) Acquired Fund assets transferred to Acquiring Fund comprise at
least ninety percent (90%) of the fair market value of the net assets and at
least seventy percent (70%) of the fair market value of the gross assets held by
Acquired Fund immediately prior to the transaction. For purposes of this
representation, amounts used by Acquired Fund to pay its outstanding
liabilities, including reorganization expenses, and all redemptions and
distributions (except for redemptions in the ordinary course of business upon
demand of a shareholder that Acquired Fund is required to make as an open-end
investment company pursuant to Section 22(e) of the 1940 Act and regular, normal
dividends, which dividends include any final distribution of previously
undistributed investment company taxable income and net capital gain for
Acquired Fund's final taxable year ending on the closing date of the
transaction) made by Acquired Fund immediately preceding the transaction are
taken into account as assets of Acquired Fund held immediately prior to the
transaction.
(r) The Acquired Fund Liabilities assumed by Acquiring Fund plus
the liabilities, if any, to which the transferred assets are subject were
incurred by Acquired Fund in the ordinary course of its business or are expenses
of the transaction.
(s) The fair market value of the Acquired Fund assets transferred
to Acquiring Fund equals or exceeds the sum of the Acquired Fund Liabilities
assumed by Acquiring Fund and the amount of liabilities, if any, to which the
transferred assets are subject.
(t) Acquired Fund does not pay compensation to any
shareholder-employee.
<PAGE>
Boards of Trustees
John Hancock World Fund
John Hancock Investment Trust III
December 5, 1997
Page 9
OPINION
On the basis of and subject to the foregoing and in reliance upon the
representations described above, we are of the opinion that
(a) The acquisition by Acquiring Fund of all of the assets of
Acquired Fund solely in exchange for the issuance of Acquiring Fund Shares to
Acquired Fund and the assumption of all of the Acquired Fund Liabilities by
Acquiring Fund, followed by the distribution by Acquired Fund, in liquidation of
Acquired Fund, of Acquiring Fund Shares to Acquired Fund shareholders in
exchange for their Acquired Fund Shares and the termination of Acquired Fund,
will constitute a "reorganization" within the meaning of Section 368(a)(1)(C) of
the Code. Acquiring Fund and Acquired Fund will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
(b) No gain or loss will be recognized by Acquired Fund upon (i)
the transfer of all of its assets to Acquiring Fund solely in exchange for the
issuance of Acquiring Fund Shares to Acquired Fund and the assumption of all of
the Acquired Fund Liabilities by Acquiring Fund and (ii) the distribution by
Acquired Fund of such Acquiring Fund Shares to the shareholders of Acquired Fund
(Sections 361(a) and 361(c) of the Code).
(c) No gain or loss will be recognized by Acquiring Fund upon the
receipt of the assets of Acquired Fund solely in exchange for the issuance of
Acquiring Fund Shares to Acquired Fund and the assumption of all of the Acquired
Fund Liabilities by Acquiring Fund (Section 1032(a) of the Code).
(d) The basis of the assets of Acquired Fund acquired by Acquiring
Fund will be, in each instance, the same as the basis of those assets in the
hands of Acquired Fund immediately prior to the transfer (Section 362(b) of the
Code).
(e) The tax holding period of the assets of Acquired Fund in the
hands of Acquiring Fund will, in each instance, include Acquired Fund's tax
holding period for those assets (Section 1223(2) of the Code).
(f) The shareholders of Acquired Fund will not recognize gain or
loss upon the exchange of all of their Acquired Fund Shares solely for Acquiring
Fund Shares as part of the transaction (Section 354(a)(1) of the Code).
<PAGE>
Boards of Trustees
John Hancock World Fund
John Hancock Investment Trust III
December 5, 1997
Page 10
(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 Acquired Fund Shares surrendered in exchange therefor (Section 358(a)(1) of
the Code).
(h) The tax holding period of the Acquiring Fund Shares received
by Acquired Fund shareholders will include, for each shareholder, the tax
holding period for the Acquired Fund Shares surrendered in exchange therefor,
provided that the Acquired Fund Shares were held as capital assets on the date
of the exchange (Section 1223(1) of the Code).
No opinion is expressed or implied regarding the federal income tax
consequences to Acquiring Fund, Acquired Fund or Acquired Fund shareholders of
any conditions existing at the time of, effects resulting from, or other aspects
of the transaction except as expressly set forth above. This opinion may not be
relied upon except with respect to the consequences specifically discussed
herein nor may it be relied upon by persons or entities to whom it is not
addressed other than with our prior written consent.
Very truly yours,
Hale and Dorr LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the Proxy Statement
and Prospectus (the Proxy/Prospectus) constituting part of this Registration
Statement on Form N-14 (the Registration Statement) of John Hancock Investment
Trust III, of our reports dated December 12, 1996 on the financial statements
and financial highlights included in the October 31, 1996 Annual Reports to
Shareholders of John Hancock Global Fund and John Hancock Global Marketplace
Fund.
We consent to the reference to our Firm under the heading "Experts" in the
Proxy/Prospectus and to the references to our Firm under the headings
"Financial Highlights" in the Prospectus for the John Hancock Global Fund and
John Hancock Global Marketplace Fund, dated March 1, 1997, and "Independent
Auditors" in the Statement of Additional Information for the John Hancock
Global Fund and John Hancock Global Marketplace Fund, dated March 1, 1997,
which are also incorporated by reference into the Proxy/Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 8, 1997
EXHIBIT 17
As filed with the Securities and Exchange Commission on August 14, 1986
1933 Act File No. 33-4559
1940 Act File No. 811-4630
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. __ / /
Post-Effective Amendment No. 1 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 2 / X /
(Check appropriate box or boxes.)
FREEDOM INVESTMENT TRUST II
---------------------------
(Exact Name of Registrant)
Three Center Plaza, Boston, MA 02108
------------------------------------
(Address of Principal Executive Offices)
(617) 523-3170
--------------
Registrant's Telephone Number
Hugh A. Dunlap, Jr., President
Freedom Investment Trust II
Three Center Plaza
Boston, Massachusetts 02108
---------------------------
(Name and Address of Agent for Service)
Copy to:
Edward T. O'Dell, Jr., P.C.
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
Approximate date of proposed public offering:
/ X / on October 13, 1986 pursuant to paragraph (a) of Rule 485
- --------------------------------------------------------------------------------
Registrant hereby declares its intention to register an indefinite number
of shares of beneficial interest, no par value, of the Freedom Global Income
Plus Fund series pursuant to Rule 24f-2(a)(1) under the Investment Company Act
of 1940, as amended. Registrant has heretofore declared its intention to
register an indefinite number of shares of beneficial interest, no par value, of
the Freedom Global Fund series pursuant to Rule 24f-2(a)(1) under the Investment
Company Act of 1940, as amended.
Exhibit Index may be found on page ___.
