FILE NO. 33-86102
FILE NO. 811-8852
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 11 (X)
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 12 (X)
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JOHN HANCOCK INSTITUTIONAL SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, (617) 375-1700
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SUSAN S. NEWTON
Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
(Name and Address of Agent for Service)
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
( ) on (date) pursuant to paragraph (b) of Rule 485
( ) 75 days after filing pursuant to paragraph (a) of Rule 485
(X) on October 1, 1999 pursuant to paragraph (a) of Rule 485
If appropiate, check the following box:
( ) This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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Independence
Investment
Associates
CLASS P
[LOGO] Prospectus
October 1, 1999
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As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved this fund or determined whether the information in this
prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a federal crime.
Independence Growth & Income Fund
[LOGO] Independence Investment Associates, Inc.,
and subsidiaries
53 State Street, Boston, Massachusetts 02109
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Contents
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A summary of the fund's goals, Independence Growth & Income Fund 4
strategies, risks, performance
and expenses.
Policies and instructions for Your account
opening, maintaining and
closing an account. Understanding your expenses 6
Opening an account 6
Buying shares 7
Selling shares 8
Transaction policies 10
Dividends and account policies 10
Further information on the Fund details
fund.
Business structure 12
For more information back cover
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Independence Growth & Income Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks above-average total return, consisting of capital
appreciation and income. To pursue this goal, the fund invests in a diversified
portfolio of primarily large-capitalization stocks. The portfolio's risk profile
is substantially similar to that of the S&P 500 Index.
The managers select from a menu of stocks of approximately 550 companies that
evolves over time. Approximately 70% to 80% of these companies also are included
in the S&P 500 Index. The subadviser's investment research team is organized by
industry and tracks these companies to develop earnings estimates and five-year
projections for growth. A series of proprietary computer models use this
in-house research to rank the stocks according to their combination of:
o value, meaning they appear to be underpriced
o momentum, meaning they show potential for strong growth
This process, together with a risk/return analysis against the S&P 500 Index,
results in a portfolio of approximately 100 to 130 of the stocks from the top
60% of the menu. The fund must sell any stocks that fall into the bottom 20% of
the menu.
In normal market conditions, the fund is almost entirely invested in stocks.
In abnormal market conditions, the fund may temporarily invest more than 35% of
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
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SUBADVISER
Independence Investment
Associates, Inc.
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Team responsible for day-to-day
investment management
A subsidiary of John Hancock
Mutual Life Insurance Company
Founded in 1982
Supervised by the adviser
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The year-by-year and average annual figures are for Class I
shares, which are offered in a separate prospectus. Annual returns should be
substantially similar since both classes invest in the same portfolio. However,
Class I shares' average annual figures do not reflect 12b-1 fees, which are
imposed on Class P shares. Year-by-year, average annual and index figures do not
reflect these fees and would be lower if they did. All figures assume dividend
reinvestment. Past performance does not indicate future results.
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Class I year-by-year total returns -- calendar years
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1996 1997 1998
20.08% 29.49% 30.16%
1999 total return as of March 31: 2.25%
Best quarter: Q4 '98, 25.14% Worst quarter: Q3 '98, -13.20%
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Class I average annual total returns -- for periods ending 12/31/98
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Fund Index
1 year 30.16% 28.58%
Life of fund - began 3/10/95 27.78% 30.20%
Index: Standard &Poor's 500 Stock Index, an unmanaged index of 500 stocks.
4
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MAIN RISKS
[Clip Art] The value of your investment will go up and down in response to stock
market movements. Large-capitalization stocks as a group could fall out of favor
with the market, causing the fund to underperform funds that focus on small- or
medium-capitalization stocks.
The fund's management strategy will influence performance significantly. If the
investment research team's earnings estimates or projections turn out to be
inaccurate, or if the proprietary computer models do not perform as expected,
the fund could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Foreign investments carry additional risks, including potentially inadequate
or inaccurate financial information and social or political upheavals.
Investments in the fund are not bank deposits and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency. You
could lose money by investing in this fund.
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YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly. Because Class P shares are new, their expenses are based on Class I
expenses.
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Annual operating expenses
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Management fee 0.50%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.14%
Total fund operating expenses(1) 0.89%
The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions, that the average annual return was 5% and that your shares were
redeemed at the end of the time frame. The example is for comparison only, and
does not represent the fund's actual expenses and returns, either past or
future.
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Expenses Year 1 Year 3 Year 5 Year 10
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$91 $284 $493 $1,096
FUND CODES
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Ticker --
CUSIP --
Newspaper --
Fund number 680
(1) The adviser has agreed to limit the fund's expenses excluding 12b-1 fees to
0.70% of the fund's average daily net assets. The funds expenses shown
above, excluding 12b-1 fees, are below 0.70%. If the expenses, exclusive of
12b-1 fees, were to exceed 0.70% the total fund operating expenses would be
limited to 0.95%.
5
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Your account
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UNDERSTANDING YOUR EXPENSES
The fund's expenses are to pay the operating costs of the fund. Some of these
costs include:
o portfolio management
o custody services
o transfer agent services
The Class P shares have a Rule 12b-1 plan that allows them to pay fees for the
sales distribution and service of these shares.
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Class P
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o No sales charges; all your money goes to work for you right away.
o Distribution and service (12b-1) fees of 0.25%.
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OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest.
o minimum initial investments: $1,000
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must invest
at least $25 a month
3 Complete the account application, carefully following the instructions. You
must submit additional documentation when opening trust, corporate or power
of attorney accounts. You must notify your financial representative or
Signature Services if this information changes. For more details, please
contact your financial representative or call Signature Services at
1-800-225-5291.
4 Make your initial investment using the table on the next page. You and your
financial representative can initiate any purchase, exchange or sale of
shares.
6 YOUR ACCOUNT
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Buying shares
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Opening an account Adding to an account
By check
[Clip Art] o Make out a check for the o Make out a check for the
investment amount, payable investment amount payable
to "John Hancock Signature to "John Hancock Signature
Services, Inc." Services, Inc."
o Deliver the check and your o Fill out the detachable
completed application to investment slip from an
your financial account statement. If no
representative, or mail slip is available, include
them to Signature Services a note specifying the fund
(address below). 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
[Clip Art] o Call your financial o Call your financial
representative or Signature representative or Signature
Services to request an Services to request an
exchange. exchange.
By wire
[Clip Art] o Deliver your completed o Instruct your bank to wire
application to your the amount of your
financial representative, investment to:
or mail it to Signature First Signature Bank & Trust
Services. Account # 900000260
Routing # 211475000
o Obtain your account number
by calling your financial Specify the fund name, your
representative or Signature share class, your account
Services. number and the name(s) in
which the account is
o Instruct your bank to wire registered. Your bank may
the amount of your charge a fee to wire funds.
investment to:
First Signature Bank & Trust
Account # 900000260
Routing # 211475000
Specify the fund name, your
choice of share class, the new
account number and the name(s)
in which the account is
registered. Your bank may
charge a fee to wire funds.
By phone
[Clip Art] 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.
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Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Phone Number: 1-800-225-5291
Or contact your financial representative
for instructions and assistance.
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To open or add to an account using the Monthly Automatic
Accumulation Program, see "Additional investor services."
YOUR ACCOUNT 7
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Selling shares
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Designed for To sell some or all of your shares
By letter
[Clip Art] o Accounts of any type. o Write a letter of
instruction or complete a
o Sales of any amount. 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
[Clip Art] o Most accounts. o For automated service 24
hours a day using your
o Sales of up to $100,000. touch-tone phone, call the
EASI-Line at
1-800-338-8080.
o To place your order, call
your financial
representative or Signature
Services between 8 A.M. and
4 P.M. Eastern Time on most
business days.
By wire or electronic funds transfer (EFT)
[Clip Art] o Requests by letter to sell o To verify that the
any amount (accounts of any telephone redemption
type). privilege is in place on an
account, or to request the
o Requests by phone to sell form to add it to an
up to $100,000 (accounts existing account, call
with telephone redemption Signature Services.
privileges).
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
[Clip Art] o Accounts of any type. o Obtain a current prospectus
for the fund into which you
o Sales of any amount. are exchanging by calling
your financial
representative or Signature
Services.
o Call your financial
representative or Signature
Services to request an
exchange.
8 YOUR ACCOUNT
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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, unless they were previously provided to Signature Services and are
still accurate. These items are 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 will need to obtain your signature guarantee from a member of the Signature
Guarantee Medallion Program. Most brokers and securities dealers are members of
this program. A notary public CANNOT provide a signature guarantee.
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Seller Requirements for written requests
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[Clip Art]
Owners of individual, joint, o Letter of instruction.
sole proprietorship, UGMA/UTMA
(custodial accounts for o On the letter, the
minors) or general partner signatures and titles of
accounts. all persons authorized to
sign for the account,
exactly as the account is
registered.
o Signature guarantee if
applicable (see above).
Owners of corporate or o Letter of instruction.
association accounts.
o Corporate resolution,
certified within the past
12 months, or a
business/organization
certification form.
o On the letter and the
resolution, the signature
of the person(s) authorized
to sign for the account.
o Signature guarantee if
applicable (see above).
Owners or trustees of trust o Letter of instruction.
accounts.
o On the letter, the
signature(s) of the
trustee(s).
o Copy of the trust document
certified within the past
12 months or a trust
certification form.
o Signature guarantee if
applicable (see above).
Joint tenancy shareholders o Letter of instruction
with rights of survivorship signed by surviving tenant.
whose co-tenants are deceased.
o Copy of death certificate.
o Signature guarantee if
applicable (see above).
Executors of shareholder o Letter of instruction
estates. signed by executor.
o Copy of order appointing
executor, certified within
the past 12 months.
o Signature guarantee if
applicable (see above).
Administrators, conservators, o Call 1-800-225-5291 for
guardians and other sellers or instructions.
account types not listed
above.
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Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Phone Number: 1-800-225-5291
Or contact your financial representative
for instructions and assistance.
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To sell shares through a systematic withdrawal plan, see
"Additional investor services."
YOUR ACCOUNT 9
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TRANSACTION POLICIES
Valuation of shares The net asset value per share (NAV) for the 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). The fund uses market prices in
valuing portfolio securities, but may use fair-value estimates if reliable
market prices are unavailable. The fund may trade portfolio securities on U.S.
holidays and weekends, even though the fund's shares will not be priced on those
days. This may change the fund's NAV on days when you cannot buy or sell shares.
Buy and sell prices When you buy shares, you pay the NAV. When you sell shares,
you receive the NAV.
Execution of requests The 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 Signature Services receives your
request in good order.
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, the 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. 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.
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.
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DIVIDENDS AND ACCOUNT POLICIES
Account statements In general, you will receive account statements as follows:
o after every transaction (except a dividend reinvestment) that affects your
account balance
o after any changes of name or address of the registered owner(s)
o in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
Dividends The fund declares and pays any income dividends quarterly. Capital
gains dividends, if any, are distributed 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 Dividends you receive from a fund, whether reinvested or
taken as cash, are generally considered taxable. Dividends from a fund's
short-term capital gains are taxable as ordinary income. Dividends from a fund's
long-term capital gains are taxable at a lower rate. Whether gains are
short-term or long-term depends on the fund's holding period. Some dividends
paid in January may be taxable as if they had been paid the previous December.
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 shares, it is considered a taxable
event for you. Depending on the purchase price and the sale price of the shares
you sell, you may have a gain or a loss on the transaction. You are responsible
for any tax liabilities generated by your transactions.
10 YOUR ACCOUNT
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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. Your account will not be closed if its
drop in value is due to fund performance.
Year 2000 compliance The adviser and the fund's service providers are taking
steps to address any year 2000-related computer problems. However, there is some
risk that these problems could disrupt the issuers in which the fund invests,
the fund's operations or financial markets generally.
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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).
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.
YOUR ACCOUNT 11
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Fund details
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BUSINESS STRUCTURE
The diagram below shows the basic business structure used by the fund. The
funds' board of trustees oversees the fund's business activities and retains the
services of the various firms that carry out the fund's operations. The trustees
have the power to change this fund's investment goals without shareholder
approval.
Management fees For the fiscal year ended February 28, 1999, the fund paid the
investment adviser management fees at an annual rate of 0.50% of the fund's net
assets.
The management firm The fund is managed by John Hancock Advisers, Inc. Founded
in 1968, John Hancock Advisers is a wholly owned sudsidiary of John Hancock
Mutual Life Insurance Company and manages more than $30 billion in assets.
[The following information was represented as a flow chart in the printed
material.]
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Shareholders
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Distribution and
shareholder services
-------------------------------------------------
Financial services firms and
their representatives
Advise current and prospective share-
holders on their fund investments, often
in the context of an overall financial plan.
-------------------------------------------------
-------------------------------------------------
Principal distributor
John Hancock Funds, Inc.
Markets the fund and distributes shares
through selling brokers, financial planners
and other financial representatives.
-------------------------------------------------
------------------------------------------------------
Transfer agent
John Hancock Signature Services, Inc.
Handles shareholder services, including record-
keeping and statements, distribution of dividends
and processing of buy and sell requests.
------------------------------------------------------
Asset
management
------------------------------------
Subadviser
Independence Investment
Associates, Inc.
53 State Street
Boston, MA 02109
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------------------------------------
Investment adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
Manages the funds' business and
investment activities.
------------------------------------
------------------------------------
Custodian
Investors Bank & Trust Co.
Holds the funds' assets, settles all
portfolio trades and collects most of
the valuation data required for
calculating each fund's NAV.
------------------------------------
------------------------------------
Trustees
Oversee the funds' activities.
------------------------------------
12 FUND DETAILS
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For more information
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Two documents are available that offer further information on Independence
Growth & Income Fund:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, a discussion of the market conditions and
investment strategies that significantly affected performance, as well as the
auditor's report (in annual report only).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on all aspects of the fund. The
current annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into (is legally a part of) this prospectus.
To request a free copy of the current annual/semiannual report or the SAI,
please contact John Hancock:
By mail:
John Hancock Signature
Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By phone: 1-800-225-5291
By EASI-Line: 1-800-338-8080
By TDD: 1-800-544-6713
On the Internet: www.jhancock.com/funds
Or you may view or obtain these documents from the SEC:
In person: at the SEC's Public Reference Room in Washington, DC
By phone: 1-800-SEC-0330
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
SEC number: 811-8852
(C) 1999 John Hancock Funds, Inc.
KGIPN 10/99
<PAGE>
INDEPENDENCE GROWTH & INCOME FUND
Class P Shares
Statement of Additional Information
October 1, 1999
This Statement of Additional Information provides information about Independence
Growth & Income Fund (the "Fund") in addition to the information that is
contained in the Fund's Prospectus. The Fund is a diversified series of John
Hancock Institutional Series Trust (the "Trust").
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.
1 John Hancock Way, Suite 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............................................... 9
Those Responsible for Management...................................... 11
Investment Advisory and Other Services................................ 21
Distribution Contracts................................................ 24
Net Asset Value....................................................... 25
Special Redemptions................................................... 25
Additional Services and Programs...................................... 26
Description of the Fund's Shares...................................... 26
Tax Status............................................................ 28
Calculation of Performance............................................ 32
Brokerage Allocation.................................................. 33
Transfer Agent Services............................................... 35
Custody of Portfolio.................................................. 35
Independent Auditors.................................................. 36
Appendix A- Description of Investment Risk............................ A-1
Appendix B-Description of Bond Ratings................................ B-1
Financial Statements.................................................. F-1
1
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ORGANIZATION OF THE FUND
The Fund is a series of the Trust, an open-end investment management company
organized as a Massachusetts business trust under the laws of The Commonwealth
of Massachusetts. Prior to October 1, 1999, the Fund was called John Hancock
Independence Diversified Core Equity Fund II.
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. The Subadviser of the Fund is Independence Investment Associates,
Inc. ("IIA") referred to herein as the "Subadviser" and is an affiliate of the
Life Company.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies as discussed in the Prospectus. Appendix A contains
further information describing investment risks. The investment objective of the
Fund is non-fundamental and may be changed without shareholder approval. There
is no assurance that the Fund will achieve its investment objective.
The Fund seeks above-average total return consisting of capital appreciation and
income. The Fund emphasizes investments in companies offering capital growth
and/or income potential over both the intermediate and long term. The Fund's
performance and risk profile benchmark is the Standard & Poor's 500 Stock Index
(the "S&P 500 Index") which is comprised of 500 industrial, utility,
transportation and financial companies in the United States markets. Most of
these companies are listed on the New York Stock Exchange (the "Exchange").
Companies included in the S&P 500 Index represent about 75% of the Exchange's
market capitalization and 30% of the Exchange's issuers. The S&P 500 Index is a
capitalization-weighted index calculated on a total return basis with dividends
reinvested.
The Fund has adopted certain investment restrictions that are detailed under
"Investment Restrictions" in this Statement of Additional Information where they
are classified as fundamental or nonfundamental. Those restrictions designated
as fundamental may not be changed without shareholder approval. The Fund's
investment objective, investment policies and nonfundamental restrictions,
however, may be changed by a vote of the Trustees without shareholder approval.
If there is a change in the Fund's investment objective, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then current financial position and needs.
For a further description of the Fund's investment objectives, policies and
restrictions see "Goal and Strategy" and "Main Risks" in the Fund's Prospectus
and "Investment Restrictions" in this Statement of Additional Information.
2
<PAGE>
Common stocks. The Fund may invest in common stocks. Common stocks are shares of
a corporation or other entity that entitle the holder to a pro rata share of the
profits of the corporation, if any, without preference over any other
shareholder or class of shareholders, including holders of such entity's
preferred stock and other senior equity. Ownership of common stock usually
carries with it the right to vote and, frequently, an exclusive right to do so.
The Fund will diversify its investments in common stocks of companies in a
number of industry groups without concentrating in any particular industry.
Common stocks have the potential to outperform fixed-income securities over the
long term. Common stocks provide the most potential for growth, yet are the more
volatile of the two asset classes.
Debt securities. Debt securities in which the Fund may invest are subject to the
risk of an issuer's inability to meet principal and interest payments on the
obligations (credit risk) and may also be subject to price volatility due to
such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer and general market liquidity (market risk).
Particular debt securities will be selected based upon credit risk analysis of
potential issuers, the characteristics of the security and the interest rate
sensitivity of the various debt issues available with respect to a particular
issuer, and analysis of the anticipated volatility and liquidity of the
particular debt instruments.
Preferred stocks. The Fund may invest in preferred stocks. Preferred stock
generally has a preference to dividends and, upon liquidation, over an issuer's
common stock but ranks junior to debt securities in an issuer's capital
structure. Preferred stock generally pays dividends in cash (or additional
shares of preferred stock) at a defined rate but, unlike interest payments on
debt securities, preferred stock dividends are payable only if declared by the
issuer's board of directors. Dividends on preferred stock may be cumulative,
meaning that, in the event the issuer fails to make one or more dividend
payments on the preferred stock, no dividends may be paid on the issuer's common
stock until all unpaid preferred stock dividends have been paid. Preferred stock
also may be subject to optional or mandatory redemption provisions.
Investment in Foreign Securities. The Fund may invest in the securities of
foreign issuers in the form of sponsored and unsponsored American Depository
Receipts ("ADRs") and U.S. dollar-denominated securities of foreign issuers
traded on U.S. exchanges. ADRs (sponsored and unsponsored) are receipts,
typically issued by U.S. banks, which evidence ownership of underlying
securities issued by a foreign corporation. ADRs are publicly traded on a U.S.
stock exchange or in the over-the-counter market. An investment in foreign
securities including ADRs may be affected by changes in currency rates and in
exchange control regulations. Issuers of unsponsored ADRs are not contractually
obligated to disclose material information including financial information, in
the United States and, therefore, there may not be a correlation between such
information and the market value of the unsponsored ADR. Foreign companies may
not be subject to accounting standards or government supervision comparable to
U.S. companies, and there is often less publicly available information about
their operations. Foreign companies may also be affected by political or
financial inability abroad. These risk considerations may be intensified in the
case of investments in ADRs of foreign companies that are located in emerging
market countries. ADRs of companies 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.
3
<PAGE>
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 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 as well as the expense of enforcing its rights.
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 its repurchase. To minimize various risks associated with reverse
repurchase agreements, the Fund will establish 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 enter into reverse repurchase
agreements or borrow money, except from banks temporarily for extraordinary or
emergency purposes (not for leveraging) in amounts not to exceed 33 1/3% of the
Fund's total assets (including the amount borrowed) taken at market value. The
Fund will not use leverage to attempt to increase income. The Fund will not
purchase securities while outstanding borrowings exceed 5% of the Fund's total
assets. 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 the 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 the monitoring and 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.
4
<PAGE>
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 losing the opportunity to obtain a price and yield considered to be
advantageous. The purchase of securities on a when-issued and 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.
Government Securities. The Fund may invest in government securities. Certain
U.S. Government securities, including U.S. Treasury bills, notes and bonds, and
Government National Mortgage Association certificates ("GNMA"), are supported by
the full faith and credit of the United States. Certain other U.S. Government
securities, issued or guaranteed by Federal agencies or government sponsored
enterprises, are not supported by the full faith and credit of the United
States, but may be supported by the right of the issuer to borrow from the U.S.
Treasury. These securities include obligations of the Federal Home Loan Mortgage
Corporation ("FHLMC"), and obligations supported by the credit of the
instrumentality, such as Federal National Mortgage Association Bonds ("FNMA").
No assurance can be given that the U.S. Government will provide financial
support to such Federal agencies, authorities, instrumentalities and government
sponsored enterprises in the future.
Mortgage-Backed Securities. The Fund may invest in mortgage pass-through
certificates and multiple-class pass-through securities, such as real estate
mortgage investment conduits ("REMIC") pass-through certificates, collateralized
mortgage obligations ("CMOs") and stripped mortgage-backed securities ("SMBS"),
and other types of "Mortgage-Backed Securities" that may be available in the
future.
Guaranteed Mortgage Pass-Through Securities. Guaranteed mortgage pass-through
securities represent participation interests in pools of residential mortgage
loans and are issued by U.S. Governmental or private lenders and guaranteed by
the U.S. Government or one of its agencies or instrumentalities, including but
not limited to the GNMA, the FNMA and the FHLMC. GNMA certificates are
guaranteed by the full faith and credit of the U.S. Government for timely
payment of principal and interest on the certificates. FNMA certificates are
guaranteed by FNMA, a federally chartered and privately owned corporation, for
full and timely payment of principal and interest on the certificates. FHLMC
certificates are guaranteed by FHLMC, a corporate instrumentality of the U.S.
Government, for timely payment of interest and the ultimate collection of all
principal of the related mortgage loans.
5
<PAGE>
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
CMOs and REMIC pass-through or participation certificates may be issued by,
among others, U.S. Government agencies and instrumentalities as well as private
lenders. CMOs and REMIC certificates are issued in multiple classes and the
principal of and interest on the mortgage assets may be allocated among the
several classes of CMOs or REMIC certificates in various ways. Each class of
CMOs or REMIC certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Generally, interest is paid or accrues on all
classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by GNMA, FNMA or FHLMC certificates but also
may be collateralized by other mortgage assets such as whole loans or private
mortgage pass-through securities. Debt service on CMOs is provided from payments
of principal and interest on collateral of mortgaged assets and any reinvestment
income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Fund does
not intend to invest in residual interests.
Stripped Mortgage-Backed Securities. SMBS are derivative multiple-class
mortgage-backed securities. SMBS are usually structured with two classes that
receive different proportions of interest and principal distributions on a pool
of mortgage assets. A typical SMBS will have one class receiving some of the
interest and most of the principal, while the other class will receive most of
the interest and the remaining principal. In the most extreme case, one class
will receive all of the interest (the "interest only" class) while the other
class will receive all of the principal (the "principal only" class). The yields
and market risk of interest only and principal only SMBS, respectively, may be
more volatile than those of other fixed income securities. The staff of the SEC
considers privately issued SMBS to be illiquid.
Structured or Hybrid Notes. Funds that may invest in mortgage-backed securities
may invest in "structured" or "hybrid" notes. The distinguishing feature of a
structured or hybrid note is that the amount of interest and/or principal
payable on the note is based on the performance of a benchmark asset or market
other than fixed-income securities or interest rates. Examples of these
benchmarks include stock prices, currency exchange rates and physical commodity
prices. Investing in a structured note allows the 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 note, the Fund may forego all or part of the interest and principal that
would be payable on a comparable conventional note; the 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.
6
<PAGE>
Risk Factors Associated with Mortgage-Backed Securities. Investing in
Mortgage-Backed Securities involves certain risks, including the failure of a
counter-party to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. In addition, investing in the
lowest tranche of CMOs and REMIC certificates involves risks similar to those
associated with investing in equity securities. Further, the yield
characteristics of Mortgage-Backed Securities differ from those of traditional
fixed income securities. The major differences typically include more frequent
interest and principal payments (usually monthly), the adjustability of interest
rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, the Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental, agency or other guarantee. When the Fund reinvests amounts
representing payments and unscheduled prepayments of principal, it may receive a
rate of interest that is lower than the rate on existing adjustable rate
mortgage pass-through securities. Thus, Mortgage-Backed Securities, and
adjustable rate mortgage pass-through securities in particular, may be less
effective than other types of U.S. Government securities as a means of "locking
in" interest rates.
Conversely, in a rising interest rate environment, a declining prepayment rate
will extend the average life of many Mortgage-Backed Securities. This
possibility is often referred to as extension risk. Extending the average life
of a Mortgage-Backed Security increases the risk of depreciation due to future
increases in market interest rates.
Risk Associated With Specific Types of Derivative Debt Securities. Different
types of derivative debt securities are subject to different combinations of
prepayment, extension and/or interest rate risk. Conventional mortgage
pass-through securities and sequential pay CMOs are subject to all of these
risks, but are typically not leveraged. Thus, the magnitude of exposure may be
less than for more leveraged Mortgage-Backed Securities.
The risk of early prepayments is the primary risk associated with interest only
debt securities ("IOs"), super floaters, other leveraged floating rate
instruments and Mortgage-Backed Securities purchased at a premium to their par
value. In some instances, early prepayments may result in a complete loss of
investment in certain of these securities. The primary risks associated with
certain other derivative debt securities are the potential extension of average
life and/or depreciation due to rising interest rates.
These securities include floating rate securities based on the Cost of Funds
Index ("COFI floaters"), other "lagging rate" floating rate securities, floating
rate securities that are subject to a maximum interest rate ("capped floaters"),
Mortgage-Backed Securities purchased at a discount, leveraged inverse floating
rate securities ("inverse floaters"), principal only debt securities ("POs"),
certain residual or support tranches of CMOs and index amortizing notes. Index
amortizing notes are not Mortgage-Backed Securities, but are subject to
extension risk resulting from the issuer's failure to exercise its option to
call or redeem the notes before their stated maturity date. Leveraged inverse
IOs combine several elements of the Mortgage-Backed Securities described above
and thus present an especially intense combination of prepayment, extension and
interest rate risks.
7
<PAGE>
Planned amortization class ("PAC") and target amortization class ("TAC") CMO
bonds involve less exposure to prepayment, extension and interest rate risk than
other Mortgage-Backed Securities, provided that prepayment rates remain within
expected prepayment ranges or "collars." To the extent that prepayment rates
remain within these prepayment ranges, the residual or support tranches of PAC
and TAC CMOs assume the extra prepayment, extension and interest rate risk
associated with the underlying mortgage assets.
Other types of floating rate derivative debt securities present more complex
types of interest rate risks. For example, range floaters are subject to the
risk that the coupon will be reduced to below market rates if a designated
interest rate floats outside of a specified interest rate band or collar. Dual
index or yield curve floaters are subject to depreciation in the event of an
unfavorable change in the spread between two designated interest rates. X-reset
floaters have a coupon that remains fixed for more than one accrual period.
Thus, the type of risk involved in these securities depends on the terms of each
individual X-reset floater.
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 Funds 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 B
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 the minimum required for purchase by
the Fund. Neither of these events will require the sale of the securities by the
Fund, but the Adviser will consider the event in its determination of whether
the Fund should continue to hold the securities.
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
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. The
Fund can lend portfolio securities having a total value of 33 1/3% of its total
assets.
Short-Term Trading. 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 turnover (100% or grater)
involves correspondingly greater brokerage expenses. The Fund's portfolio
turnover rate is set forth in the table under the caption "Financial Highlights"
in the prospectus.
8
<PAGE>
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The Fund has adopted the following
investment restrictions which may not be changed without the approval of a
majority of the Fund's outstanding voting securities which, as used in the
Prospectus and this Statement of Additional Information means the 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 or (2) more than 50% of the outstanding shares.
The Fund may not:
1. Issue senior securities, except as permitted by paragraphs 3, 6 and 7
below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the deferral of
trustees' fees, the purchase or sale of options, futures contracts,
forward commitments and repurchase agreements entered into in
accordance with the Fund's investment policies or within the meaning of
paragraph 6 below, are not deemed to be senior securities.
2. Purchase securities on margin or make short sales, or unless, by virtue
of its ownership of other securities, the Fund has the right to obtain
securities equivalent in kind and amount to the securities sold and, if
the right is conditional, the sale is made upon the same conditions,
except (i) in connection with arbitrage transactions, (ii) for hedging
the Fund's exposure to an actual or anticipated market decline in the
value of its securities, (iii) to profit from an anticipated decline in
the value of a security, and (iv) obtaining such short-term credits as
may be necessary for the clearance of purchases and sales of
securities.
3. Borrow money, except for the following extraordinary or emergency
purposes: (i) from banks for temporary or short-term purposes or for
the clearance of transactions 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; (ii) in connection with the redemption of Fund shares
or to finance failed settlements of portfolio trades without
immediately liquidating portfolio securities or other assets; (iii) in
order to fulfill commitments or plans to purchase additional securities
pending the anticipated sale of other portfolio securities or assets;
and (iv) The Fund may not borrow money for the purpose of leveraging
the Fund's assets. For purposes of this investment restriction, the
deferral of Trustees' fees and transactions in short sales, futures
contracts, options on futures contracts, securities or indices and
forward commitment transactions shall not constitute borrowing. .
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 purpose of the 1933 Act.
5. Purchase or sell real estate except that the Fund may (i) acquire or
lease office space for its own use, (ii) invest in securities of
issuers that invest in real estate or interests therein, (iii) invest
in securities that are secured by real estate or interests therein,
(iv) purchase and sell mortgage-related securities and (v) hold and
sell real estate acquired by the Fund as a result of the ownership of
securities.
9
<PAGE>
6. Invest in commodities, except the Fund may purchase and sell options on
securities, securities indices and currency, futures contracts on
securities, securities indices and currency 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.
7. Make loans, except that the Fund (1) 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, (2) enter into repurchase
agreements, and (3) purchase all or a portion of an issue of debt
securities, bank loan participation interests, bank certificates of
deposit, bankers' acceptances, debentures or other securities, whether
or not the purchase is made upon the original issuance of the
securities.
8. Purchase the securities of issuers conducting their principal activity
in the same industry if, immediately after such purchase, the value of
its investments in such industry would exceed 25% of its total assets
taken at market value at the time of such investment. This limitation
does not apply to investments in obligations of the U.S.
Government or any of its agencies, instrumentalities or authorities.
9. The Fund, with respect to 75% of total assets, purchase securities of
an issuer (other than the U. S. Government, its agencies,
instrumentalities or authorities), if:
(a) 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
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by
the Fund.
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:
1. Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or purchase of
marketable portfolio securities with other accounts under the
management of the Adviser or any Subadviser to save commissions or to
average prices among them is not deemed to result in a joint securities
trading account.
2. 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.
10
<PAGE>
3. Invest more than 15% of the net assets of the Fund, taken at market
value, in illiquid securities.
4. Purchase securities while outstanding borrowings exceed 5% of the
Fund's total assets.
5. Invest for the purpose of exercising control over or management of
any company.
If a percentage restriction on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the values of a Fund's assets will not be
considered a violation of the restriction.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by the Trustees 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 Fund are
also officers or directors of the Fund's Adviser and/or Subadviser, or officers
and/or directors of the Fund's principal distributor, John Hancock Funds, Inc.
("John Hancock Funds").
11
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman, Director and Chief
101 Huntington Avenue Executive Officer (1, 2) Executive Officer, the Adviser;
Boston, MA 02199 Chairman, Director and Chief
October 1944 Executive Officer, The Berkeley
Financial Group, Inc. ("The
Berkeley Group"); Chairman and
Director, NM Capital Management,
Inc. ("NM Capital"), John Hancock
Advisers International Limited
("Advisers International") and
Sovereign Asset Management
Corporation ("SAMCorp"); Chairman
and Chief Executive Officer, John
Hancock Funds, Inc. ("John Hancock
Funds"); Chairman, First Signature
Bank and Trust Company; Director,
John Hancock Insurance Agency, Inc.
("Insurance Agency, Inc."), John
Hancock Advisers International
(Ireland) Limited ("International
Ireland"), 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;
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.
12
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Stephen L. Brown* Trustee Chairman and Chief Executive
John Hancock Place Officer, John Hancock Mutual Life
P.O. Box 111 Insurance Company; Director, the
Boston, MA 02117 Adviser, John Hancock Funds,
July 1937 Insurance Agency, John Hancock
Subsidiaries, Inc., The Berkeley
Group, Federal Reserve Bank of
Boston, Signature Services (until
January 1997;) Trustee, John
Hancock Asset Management (until
March 1997).
James F. Carlin Trustee Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments); Director,
April 1940 Arbella Mutual (insurance), Health
Plan Services, Inc., Massachusetts
Health and Education Tax Exempt
Trust, Flagship Healthcare, Inc.,
Carlin Insurance Agency, Inc., West
Insurance Agency, Inc. (until May
1995), Uno Restaurant Corp.;
Chairman, Massachusetts Board of
Higher Education (until July 1999).
- -------------------
* 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.
13
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
William H. Cunningham Trustee Chancellor, University of Texas
601 Colorado Street System and former President of the
O'Henry Hall University of Texas, Austin, Texas;
Austin, TX 78701 Lee Hage and Joseph D. Jamail
January 1944 Regents Chair of Free Enterprise;
Director, LaQuinta Motor Inns, Inc.
(hotel management company)
(1985-1998); Jefferson-Pilot
Corporation (diversified life
insurance company) and LBJ
Foundation Board (education
foundation); Advisory Director,
Chase Bank (formerly Texas Commerce
Bank - Austin).
Ronald R. Dion Trustee President and Chief Executive
250 Boylston Street Officer, R.M. Bradley & Co., Inc.;
Boston, MA 02116 Director, The New England Council
March 1946 and Massachusetts Roundtable;
Trustee, North Shore Medical Center
and a corporator of the Eastern
Bank; Trustee, Emmanuel College.
Harold R. Hiser, Jr. Trustee Executive Vice President,
123 Highland Avenue Schering-Plough Corporation
Short Hill, NJ 07078 (pharmaceuticals) (retired 1996);
October 1931 Director, ReCapital Corporation
(reinsurance) (until 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.
14
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Anne C. Hodsdon * Trustee and President (1,2) President, Chief Operating Officer,
101 Huntington Avenue Chief Investment Officer and
Boston, MA 02199 Director, the Adviser, The Berkeley
August 1953 Group; Executive Vice President and
Director, John Hancock Funds;
Director, Advisers International,
Insurance Agency, Inc. and
International Ireland; President and
Director, SAMCorp. and NM Capital;
Executive Vice President, the
Adviser (until December 1994);
Director, Signature Services (until
January 1997).
Charles L. Ladner Trustee Senior Vice President and Chief
UGI Corporation Financial Officer, UGI Corporation
P.O. Box 858 (Public Utility Holding Company)
Valley Forge, PA 19482 (retired 1998); Vice President and
February 1938 Director for AmeriGas, Inc. (retired
1998); Vice President of AmeriGas
Partners, L.P. (until 1997);
Director, EnergyNorth, Inc. (until
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.
15
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Leo E. Linbeck, Jr. Trustee Chairman, President, Chief Executive
3810 W. Alabama Officer and Director, Linbeck
Houston, TX 77027 Corporation (a holding company
August 1934 engaged in various phases of the
construction industry and
warehousing interests); Former
Chairman, Federal Reserve Bank of
Dallas (1992, 1993); Chairman of
the Board, Linbeck Construction
Corporation; Director, Duke Energy
Corporation (a diversified energy
company), Daniel Industries, Inc.
(manufacturer of gas measuring
products and energy related
equipment), GeoQuest International
Holdings, Inc. (a geophysical
consulting firm); Director, Greater
Houston Partnership.
Steven R. Pruchansky Trustee (1) Director and President, Mast
4327 Enterprise Avenue Holdings, Inc. (since 1991);
Naples, FL 34104 Director, First Signature Bank &
August 1944 Trust Company (until August 1991);
Director, Mast Realty Trust (until
1994); President, Maxwell Building
Corp. (until 1991).
- -------------------
* 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.
16
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Mutual
John Hancock Place Life Insurance Company; Director,
P.O. Box 111 the Adviser, John Hancock Funds,
Boston, MA 02117 Signator Investors, Inc., Insurance
August 1937 Agency, Inc., John Hancock
Subsidiaries, Inc., SAMCorp. and NM
Capital; The Berkeley Group; JH
Networking Insurance Agency, Inc.;
Signature Services (until January
1997).
Norman H. Smith Trustee Lieutenant General, United States
243 Mt. Oriole Lane Marine Corps; Deputy Chief of Staff
Linden, VA 22642 for Manpower and Reserve Affairs,
March 1933 Headquarters Marine Corps;
Commanding General III Marine
Expeditionary Force/3rd Marine
Division (retired 1991).
- -------------------
* 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.
17
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
John P. Toolan Trustee Director, The Smith Barney Muni Bond
13 Chadwell Place Funds, The Smith Barney Tax-Free
Morristown, NJ 07960 Money Funds, Inc., Vantage Money
September 1930 Market Funds (mutual funds), The
Inefficient-Market Fund, Inc.
(closed-end investment company) and
Smith Barney Trust Company of
Florida; Chairman, Smith Barney
Trust Company (retired December,
1991); Director, Smith Barney,
Inc., Mutual Management Company and
Smith Barney Advisers, Inc.
(investment advisers) (retired
1991); Senior Executive Vice
President, Director and member of
the Executive Committee, Smith
Barney, Harris Upham & Co.,
Incorporated (investment bankers)
(until 1991).
Osbert M. Hood Senior Vice President and Chief Senior Vice President , Chief
101 Huntington Avenue Financial Officer Financial Officer and Treasurer, the
Boston, MA 02199 Adviser, the Berkeley Group and John
August 1952 Hancock Funds, Inc.; Vice President
and Chief Financial Officer, John
Hancock Mutual Life Insurance
Company Retail Sector (until 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.
18
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Signature Services, John Hancock
July 1950 Funds, NM Capital and SAMCorp.;
Clerk, Insurance Agency, Inc.;
Counsel, John Hancock Mutual Life
Insurance Company (until February
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.
March 1950
James J. Stokowski Vice President, Treasurer and Chief Vice President, the Adviser.
101 Huntington Avenue Accounting Officer
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.
</TABLE>
19
<PAGE>
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, Brown, 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.
Aggregate Total Compensation From the
Compensation Fund and John Hancock Fund
Independent Trustees From the Fund(1) Complex to Trustees(2)
- -------------------- ---------------- ----------------------
James F. Carlin $ 41 $ 74,000
William H. Cunningham 41 74,000
Ronald R. Dion 44 18,500
Charles F. Fretz 6 57,121
Harold R. Hiser, Jr. 39 70,000
Charles L. Ladner 42 77,100
Leo E. Linbeck, Jr. 41 74,000
Patricia P. McCarter 3 43,696
Steven R. Pruchansky 42 77,100
Norman H. Smith 44 79,350
John P. Toolan 42 77,100
------------- -----------
Total $ 385 $721,967
(1) Compensation is for the fiscal year ended February 28, 1999.
(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 1998. As of this date, there were sixty-seven
funds in the John Hancock Fund Complex, with each of these Independent Trustees
serving on thirty-two funds. Effective October 1, 1998, Mr. Fretz and Ms.
McCarter resigned as Trustees of the Complex.
*As of December 31, 1998, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Cunningham was $320,943, Mr. Hiser was $115,084, Ms. McCarter was $183,645 and
for Mr. Pruchansky was $75,016, for Mr. Smith was $109,807, for Mr. Toolan was
$403,714 under the John Hancock Group of Funds Deferred Compensation Plan for
Independent Trustees.
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.
As of July 13, 1999, the officers and Trustees of the Fund as a group
beneficially owned less than 1% of the outstanding shares of the Fund. As of
that date, the following shareholders of record beneficially owned 5% or more of
the outstanding shares of the Fund.
20
<PAGE>
- --------------------------------------------------------------------------------
Name and Address of Shareholder Percentage of Total Outstanding Shares
- --------------------------------------------------------------------------------
Invesco Retirement Plan Services 18.26%
Att: Brad Echols
400 Colony Square Ste 2100
1201 Peachtree Street NE
Atlanta GA 30361-3500
- --------------------------------------------------------------------------------
Weil Gotshal & Manges Section 7.79%
401K Savings & Investment Trust
767 Fifth Avenue
New York NY 10153-0023
- --------------------------------------------------------------------------------
Charles Schwabb Trust Company FBO 5.22%
Gaylord Entertainment Co.
401K Savings Plan
1 Montgomery Street 7th Floor
San Francisco CA
- --------------------------------------------------------------------------------
Boeing Information Services, Inc. 5.80%
7990 Boeing Court, M/S CV-42
Att: Dede O'Donnell 401K
Vienna VA 22182-3925
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has more than $30 billion in assets under management
in its capacity as investment adviser to the Fund and the other mutual funds and
publicly traded investment companies in the John Hancock group of funds having a
combined total of over 1,400,000 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 $100
billion, the Life Company is one of the ten largest life insurance companies in
the United States, and carries a high rating with Standard & Poor's and A. M.
Best. 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 which was approved by the Fund's shareholders.
Pursuant to the Advisory Agreement, 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.
The Fund bears all costs of its organization and operation, including but not
limited to 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
21
<PAGE>
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, maintaining a committed line of credit, 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 memberships; insurance premiums; and any
extraordinary expenses.
The Adviser has entered into a Sub-Advisory Agreement with IIA. Under the
Sub-Advisory Agreement, the Subadviser, subject to the review of the Trustees
and the overall supervision of the Adviser, is responsible for managing the
investment operations of the Fund and the composition of the Fund's investment
portfolio and furnishing the Fund with advice and recommendations with respect
to investments, investment policies and the purchase and sale of securities.
IIA, located at 53 State Street, Boston, Massachusetts 02109, and organized in
1982, is a wholly owned indirect subsidiary of John Hancock Subsidiaries, Inc.
As compensation for its services under the Advisory Agreement, the Fund pays the
Adviser monthly a fee based on a stated percentage of the average of the daily
net assets of the Fund as follows:
Net Asset Value Annual Rate
- --------------- -----------
First $1 billion 0.50%
Amount over $1 billion 0.45%
The advisory fees paid by the Fund are greater than those paid by most funds,
but they are comparable to those paid by many investment companies with similar
investment objectives and policies. The Adviser (not the Fund) pays a portion of
its fee to the Subadviser at the rate of 80% of the advisory fee payable on the
Fund's average daily net assets.
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 its average daily net
assets. The Adviser has agreed to limit Fund expenses (excluding 12b-1 and
transfer agent fees) to 0.70% of the Fund's average daily net assets at least
until July 1, 2000. 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 Fund may also be held by other funds or investment
advisory clients for which the Adviser, the Subadviser 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 other funds or clients are selling the same security. If opportunities for
purchase or sale of securities by the Adviser or Subadviser for the Fund or for
other funds or clients for which the Adviser or Subadviser 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, Subadviser 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.
22
<PAGE>
Pursuant to its Advisory Agreement and Sub-Advisory Agreement, the Adviser and
Subadviser are 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 the respective
Agreements relate, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Adviser or Subadviser in the performance
of its duties or from reckless disregard of the obligations and duties under the
applicable Agreement.
Under the Sub-Advisory Agreement of the Fund, the Fund may use the name
"Independence" or any name derived from or similar to it only for as long as the
Sub-Advisory Agreement is in effect. When the Sub-Advisory Agreement is no
longer in effect, the Fund (to the extent that it lawfully can) will cease to
use any name indicating that it is advised by or otherwise connected with IIA.
In addition, IIA or the Life Company may grant the non-exclusive right to use
the name "Independence" or any similar name to any other corporation or entity,
including but not limited to any investment company of which IIA or any
subsidiary or affiliate thereof or any successor to the business of any
subsidiary or affiliate thereof shall be the investment adviser.
The continuation of the Advisory Agreement, Sub-Advisory Agreement and the
Distribution Agreement (discussed below) was approved by all Trustees. The
Advisory Agreement, Sub-Advisory Agreement and the Distribution Agreement, will
continue in effect from year to year, provided that its continuance is approved
annually both (i) by the holders of a majority of the outstanding voting
securities of the Trust or by the Trustees, and (ii) by a majority of the
Trustees who are not parties to the Agreement or "interested persons" of any
such parties. Both Agreements may be terminated on 60 days written notice by any
party or by vote of a majority of the outstanding voting securities of the Fund
and will terminate automatically if assigned.
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 fiscal year ended February 28, 1999, 1998 and 1997,
the Fund paid the Adviser $84,538, $79,447 and $48,011, respectively, for
services under this agreement.
In order to avoid conflicts with portfolio trades for the Fund, the Adviser, the
Subadviser and the 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. IIA has adopted similar restrictions which may differ where
appropriate, as long as they have the same intent. These restrictions are a
continuation of the basic principle that the interests of the Fund and its
shareholders come first.
23
<PAGE>
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 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.
The Fund's Trustees adopted a Distribution Plan with respect to Class P shares
(the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Under the Plan, the Fund will pay distribution and service fees at an aggregate
annual rate of up to 0.25% of the Fund's Class P average daily net assets.
Service fees will not exceed 0.25% of the Class P average daily net assets. The
distribution fees will be used to reimburse John Hancock Funds for its
distribution expenses, including but not limited to: (i) initial and ongoing
sales compensation to Selling Brokers and others (including affiliates of the
John Hancock Funds) engaged in the sale of Fund shares and (ii) marketing,
promotional and overhead expenses incurred in connection with the distribution
of Fund shares. 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 John Hancock Funds is not fully reimbursed for payments or
expenses it incurs under the Class P Plan, these expenses will not be carried
beyond twelve months from the date they were incurred. The Plans 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 (the "Independent Trustees"), by votes cast in person at
a meeting called for the purpose of voting on this Plan.
Pursuant to the Plan, at least quarterly, John Hancock Funds provide 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 its
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 a 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 vote of the Trustees and the Independent Trustees of the Fund.
Amounts paid to the 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 the
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 the
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
Fund.
24
<PAGE>
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
other 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.
The NAV of 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.
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, the shareholders will 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.
25
<PAGE>
ADDITIONAL SERVICES AND PROGRAMS
Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of Fund shares which may result in realization 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 shares of
the Fund could be disadvantageous to a shareholder because redemptions are
taxable events. Therefore, a shareholder should not purchase shares at the same
time a Systematic Withdrawal Plan is in effect. The Fund reserves 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"). 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 order date of any investment.
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 ten other
series. Additional series may be added in the future. The Declaration of Trust
also authorizes the Trustees to classify and reclassify the shares of the Fund,
or any new series of the Trust, into one or more classes. The Trustees have
authorized the issuance of Class P and Class I.
The shares of each class of the Fund represent an equal proportionate interest
in the assets belonging to that class of the Fund. Holders of Class P shares
have exclusive voting rights on matters relating to the Class P distribution
plan. 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. When issued, shares are fully paid and
nonassessable. In the event of liquidation of the Fund, shareholders of each
class are entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders. Shares of the Trust are freely transferable and
have no preemptive, subscription or conversion rights.
26
<PAGE>
In accordance with the provisions of the Declaration of Trust, the Trustees have
initially determined that shares entitle their holders to one vote per share on
any matter on which such shares are entitled to vote. The Trustees may determine
in the future, without the vote or consent of shareholders, that each dollar of
net asset value (number of shares owned times net asset value per share) will be
entitled to one vote on any matter on which such shares are entitled to vote.
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) the
distribution and service fees relating to Class P will be borne exclusively by
that class, and (ii) each class of 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 which class of
shares are purchased. No interest will be paid on uncashed dividend or
redemption checks.
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 Fund. However, the Fund's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Fund. The Declaration of Trust also provides for indemnification out of the
Fund's assets for all losses and expenses of any shareholder held personally
liable for 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 Fund itself would
be unable to meet its obligations, and the possibility of this occurrence is
remote.
The Fund reserves the right to reject any application which conflicts with the
Fund's internal policies or the policies of any regulatory authority. John
Hancock Funds does not accept starter, credit card or third party checks. All
checks returned by the post office as undeliverable will be reinvested at net
asset value in the fund or funds from which a redemption was made or dividend
paid. Information provided on the account application may be used by the Fund to
verify the accuracy of the information or for background or financial history
purposes. A joint account will be administered as a joint tenancy with right of
survivorship, unless the joint owners notify Signature Services of a different
intent. A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts. For telephone transactions, the transfer agent 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, the transfer agent 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.
27
<PAGE>
Selling activities for the Fund may not take place outside the U.S. except with
U.S. military bases, APO addresses and U.S. diplomats. Brokers of record on
Non-U.S. investors' accounts with foreign mailing addresses are required to
certify that all sales activities have occurred, and in the future will occur,
only in the U.S. A foreign corporation may purchase shares of the Fund only if
it has a U.S. mailing address.
TAX STATUS
The Fund is treated as a separate entity for accounting and tax purposes, has
qualified and elected to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
intends to continue to 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 of its assets, the Fund
will not be subject to Federal income tax on its 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 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. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.
Distribution 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 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.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Some tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. Because more than 50% of the Fund's total assets at the close of any
taxable year will not consist of stocks or securities of foreign corporations,
the Fund will be unable to pass such taxes through to shareholders, who
consequently will not include any portion of such taxes in their incomes and
will not be entitled to any associated tax credits or deductions with respect to
such taxes. The Fund will deduct the foreign taxes it pays in determining the
amount it has available for distribution to shareholders.
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<PAGE>
If the Fund invests in stock or ADRs representing stock (including an option to
acquire stock such as is inherent in a convertible bond) in certain foreign
corporations that receive at least 75% of their annual gross income from passive
sources (such as interest, dividends, certain rents and royalties or capital
gain) or hold at least 50% of their asset 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 such 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. An election may be
available to ameliorate these adverse tax consequences, but could require the
Fund to recognize taxable income or gain without the concurrent receipt of cash.
These investments could also result in the treatment of associated capital gains
as ordinary income. The Fund may limit and/or manage its holdings in passive
foreign investment companies or make an available election to minimize its tax
liability or maximize its return from these investments.
The amount of the Fund's net realized 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 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 or other disposition of shares of the Fund (including by
exercise of the exchange privilege)in a transaction that is treated as a sale
for tax purposes, 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. A sales charge paid in purchasing
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.
Also, 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. Shareholders should consult their own tax advisers regarding
their particular circumstances to determine whether a disposition of Fund shares
is properly treated as a sale for tax purposes, as is assumed in the foregoing
discussion.
29
<PAGE>
Although its 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
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 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, 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
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. As of February 28, 1999, the Fund did not have any capital loss
carryforwards.
For purposes of the dividends-received deduction available to corporations,
dividends received by the Fund, if any, from U.S. domestic corporations in
respect of the stock of such corporations 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) during a prescribed period extending before and after each such
dividend and distributed and properly designated by the Fund may be treated as
qualifying dividends. Corporate shareholders must meet the holding period
requirements stated above with respect to their shares of the Fund for each
dividend 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 a
corporate shareholder's 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, and, to the extent such basis would be reduced below zero, that
current recognition of income would be required.
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. 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 borrow cash, to
satisfy these distribution requirements.
30
<PAGE>
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 intangible property 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 it 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 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 provisions.
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 Federal income tax law as applicable
to U.S. persons (i.e., U.S. citizens and 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 types 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 shares of the Fund 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 Fund in their particular
circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the 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 non-resident 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, Form
W-8BEN, or other authorized withholding certificate 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.
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<PAGE>
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
The Fund anticipates that, 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 on Class I shares of the Fund for the 1 year
period ended February 28, 1999 was 18.98% Performance calculations for Class I
do not reflect distribution fees.
Class P shares did not commence operations until October 1, 1999; therefore,
there is no average total return on Class P shares of the Fund for the 1 year
period ended February 28, 1999 and since inception.
Total return is computed by finding the average annual compounded rate of return
over the 1 year, 5 year and 10 year 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 year, and 10 year periods.
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.
The Fund may advertise yield, where appropriate. The Fund's yield is computed by
dividing net investment income per share determined for a 30-day period by the
maximum offering price per share (which includes the full sales charge) on the
last day of the period, according to the following standard formula:
32
<PAGE>
6
Yield = 2 ( [ ( a - b ) + 1 ] - 1 )
-----
cd
Where:
a = dividends and interest earned during the period.
b = net expenses accrued during the period.
c = the average daily number of fund shares outstanding during
the period that would be entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period (NAV where applicable).
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 Fund 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 are all examples of items that can increase or decrease
the Fund's performance.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by 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 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". 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 these transactions.
33
<PAGE>
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
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. 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
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and such other policies as 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 Adviser'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 fiscal years ended on February 28,
1997, 1998 and 1999, the Fund paid negotiated brokerage commissions in the
amount of $357,443, $617,705, and $559,111, respectively.
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 such commission is reasonable in
light of the services provided and to such policies as the Trustees may adopt
from time to time. For the fiscal year ended February 28, 1999, the Fund did not
pay commissions as compensation to any brokers for research services such as
industry, economic and company reviews and evaluations of securities.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of Signator Investors, Inc., a broker-dealer (until January 1, 1999,
John Hancock Distributors, Inc.) ("Signator" 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 the Affiliated Broker. During the fiscal years ended February 28, 1997,
1998 and 1999, the Fund did not execute any portfolio transactions with the
Affiliated Broker.
34
<PAGE>
Signator 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 Broker, 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.
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, Suite 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 will pay Signature
Services an annual fee of 0.05% of the average daily net assets attributable to
the Class P shares.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and Investors Bank & Trust Company, 200 Clarendon Street,
Boston, Massachusetts 02116. Under the custodian agreement, Investors Bank &
Trust Company performs custody, portfolio and fund accounting services.
35
<PAGE>
INDEPENDENT AUDITORS
The independent auditors of the Funds are Deloitte & Touche LLP, 200 Berkeley
Street, Boston, Massachusetts 02116. Deloitte & Touche LLP audits and renders
opinions on the Fund's annual financial statements and reviews the Fund's annual
Federal income tax returns.
36
<PAGE>
APPENDIX A
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 the fund's
risk profile in the prospectus.
A fund is 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 the Fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively. On the following pages are brief definitions of
certain associated risks with them with examples of related securities and
investment practices included in brackets. See the "Investment Objective and
Policies" and "Investment Restrictions" sections of this Statement of Additional
Information for a description of this Fund's investment policies. The Fund
follows certain policies that may reduce these risks.
As with any mutual fund, there is no guarantee that the Fund will earn income or
show a positive return over any period of time -- days, months or years.
TYPES OF INVESTMENT RISK
Correlation risk The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment). Incomplete correlation can result
in unanticipated risks. (e.g., short sales, financial futures and options;
securities and index options, currency contracts).
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. (e.g., borrowing; reverse repurchase agreements, repurchase
agreements, securities lending, non-investment-grade securities, financial
futures and options; securities and index options).
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. (e.g., foreign
equities, financial futures and options; securities and index options, currency
contracts).
Information risk The risk that key information about a security or market is
inaccurate or unavailable. (e.g., non-investment-grade securities, foreign
equities).
A-1
<PAGE>
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. (e.g.,
non-investment-grade securities, financial futures and options; securities and
index options).
Leverage risk Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value. (e.g.,
borrowing; reverse repurchase agreements, when-issued securities and forward
commitments).
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. (e.g., short sales, financial futures and options
securities and index options; currency contracts).
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. (e.g., short sales, financial futures
and options securities and index options; currency contracts).
o 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. (e.g., non-investment-grand securities,
short sales, restricted and illiquid securities, financial futures and
options securities and index options; currency contracts).
Management risk The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
Market risk The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than the price originally paid for it, or less than it was worth
at an earlier time. Market risk may affect a single issuer, industry, sector of
the economy or the market as a whole. Common to all stocks and bonds and the
mutual funds that invest in them. (e.g., short sales, short-term trading,
when-issued securities and forward commitments, non-investment-grade securities,
foreign equities, financial futures and options; securities and index options
restricted and illiquid securities).
A-2
<PAGE>
Natural event risk The risk of losses attributable to natural disasters, crop
failures and similar events. (e.g., foreign equities).
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. (e.g., short sales, when-issued securities and forward commitments;
financial futures and options; securities and index options, currency
contracts).
Political risk The risk of losses attributable to government or political
actions, from changes in tax or trade statutes to governmental collapse and
war.(e.g., foreign equities).
Valuation risk The risk that a fund has valued certain of its securities at a
higher price than it can sell them for. (e.g., non-investment-grade securities,
restricted and illiquid securities).
A-3
<PAGE>
APPENDIX B
Moody's describes its lower ratings for corporate bonds as follows:
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.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
S&P describes its lower ratings for corporate bonds as follows:
Debt rated BBB is regarded as having an 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, B, CCC, or CC is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations. 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
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Moody's describes its three highest ratings for commercial paper as follows:
Issuers rated P-1 (or related supporting institutions) have a superior capacity
for repayment of short-term promissory obligations. P-1 repayment capacity will
normally be evidenced by the following characteristics: (1) leading market
positions in well-established industries; (2) high rates of return on funds
employed; (3) conservative capitalization structures with moderate reliance on
debt and ample asset protections; (4) broad margins in earnings coverage of
fixed financial charges and high internal cash generation; and (5) well
established access to a range of financial markets and assured sources of
alternate liquidity.
B-1
<PAGE>
Issuers rated P- (or related supporting institutions) have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Issuers rated P-3 (or supporting institutions) have an acceptable ability for
repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
S&P describes its three highest ratings for commercial paper as follows:
A-1. This designation indicated that the degree of safety regarding timely
payment is very strong.
A-2. Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated A-1.
A-3. Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B-2
<PAGE>
FINANCIAL STATEMENTS
The financial statements listed below are included in the Fund's 1999 Annual
Report to Shareholders for the year ended February 28, 1999; (filed
electronically on April 28, 1999, accession number 0001010521-99-000200) and are
included in and incorporated by reference into Part B of the Registration
Statement for John Hancock Institutional Series Trust (file nos. 33-86102 and
811-8852).
John Hancock Institutional Series Trust
John Hancock Independence Diversified Core Equity Fund II
Statement of Assets and Liabilities as of February 28, 1999 (audited).
Statement of Operations for the year ended February 28, 1999 (audited).
Statement of Changes in Net Asset for the years ended February 28, 1999 and
1998 (audited).
Notes to Financial Statements.
Financial Highlights for each of the years in the four year period ended
February 28, 1999 (audited).
Schedule of Investments as of February 28, 1999 (audited).
Independent Auditors' Report.
F-1
<PAGE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
PART C.
OTHER INFORMATION
Item. 23. Exhibits:
The exhibits to this Registration Statement are listed in the Exhibit Index
hereto and are incorporated herein by reference.
Item 24. Persons Controlled by or under Common Control with Registrant.
No person is directly or indirectly controlled by or under common control with
Registrant.
Item. 25. Indemnification.
Indemnification provisions relating to the Registrant's Trustees, officers,
employees and agents is set forth in Article VII of the Registrant's By Laws
included as Exhibit 2 herein.
Under Section 12 of the Distribution Agreement, John Hancock Funds, Inc. ("John
Hancock Funds") has agreed to indemnify the Registrant and its Trustees,
officers and controlling persons against claims arising out of certain acts and
statements of John Hancock Funds.
Section 9(a) of the By-Laws of John Hancock Mutual Life Insurance Company ("the
Insurance Company") provides, in effect, that the Insurance Company will,
subject to limitations of law, indemnify each present and former director,
officer and employee of the Insurance Company who serves as a Trustee or officer
of the Registrant at the direction or request of the Insurance Company against
litigation expenses and liabilities incurred while acting as such, except that
such indemnification does not cover any expense or liability incurred or imposed
in connection with any matter as to which such person shall be finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Insurance Company. In addition, no such
person will be indemnified by the Insurance Company in respect of any final
adjudication unless such settlement shall have been approved as in the best
interests of the Insurance Company either by vote of the Board of Directors at a
meeting composed of directors who have no interest in the outcome of such vote,
or by vote of the policyholders. The Insurance Company may pay expenses incurred
in defending an action or claim in advance of its final disposition, but only
upon receipt of an undertaking by the person indemnified to repay such payment
if he should be determined not to be entitled to indemnification.
C-1
<PAGE>
Article IX of the respective By-Laws of JH Funds, Inc. and the Adviser
provides as follows:
Section 9.01. Indemnity: Any person made or threatened to be made a
party to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or
was at any time since the inception of the Corporation a director,
officer, employee or agent of the Corporation, or is or was at any
time since the inception of the Corporation serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified by the Corporation against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and the liability
was not incurred by reason of gross negligence or reckless disregard
of the duties involved in the conduct of his office, and expenses in
connection therewith may be advanced by the Corporation, all to the
full extent authorized by law.
Section 9.02. Not Exclusive; Survival of Rights: The indemnification
provided by Section 9.01 shall not be deemed exclusive of any other
right to which those indemnified may be entitled, and shall continue
as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
C-2
<PAGE>
Under the Investment Management Contracts of Registrant on behalf of
each Fund. Each of the Registrant's Investment Management Contracts
(the "Contracts") provides that the Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with matters to which the 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 it of its obligations and duties under
the contract. Any person, even though also employed by the Adviser,
who may be or become an employee of and paid a Fund shall be deemed,
when acting within the scope of his employment by the Fund, to be
acting in such employment solely for the Fund and not as the Adviser's
employee or agent.
Under the Sub-Investment Management Contracts. Each of the
Sub-Investment Management Contracts (the "Sub-Investment Contracts")
provides that the Sub-Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust, the
Fund or the Adviser in connection with matters to which the
Sub-Investment Contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part
in the performance of its duties or from reckless disregard by it of
its obligations and duties under the contract. Any person, even though
also employed by the Sub-Adviser, who may be or become an employee of
and paid by the Trust or the Fund shall be deemed, when acting within
the scope of his employment by the Trust or the Fund, to be acting in
such employment solely for the Trust or the Fund and not as the
Sub-Adviser's employee or agent.
Insofar as indemnification for liabilities under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to Trustees,
officers and controlling persons of Registrant pursuant to the
foregoing provisions, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is
against policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such Trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the
1933 Act and will be governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
For all of the information required by this item reference is made to
the Forms ADV, as amended, filed under the Investment Advisers Act of
1940 of the Registrant's Adviser, John Hancock Advisers, Inc. (File
No. 801-8124), and the Registrant's Sub-Advisers; Independence
Investment Associates, Inc. (File No. 801- 18048), John Hancock
Advisers International, Ltd. (File No. 801-294981) and Sovereign Asset
C-3
<PAGE>
Management Corporation (File No. 801- 420231) incorporated herein by
reference.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) The Registrant's sole principal underwriter is John Hancock Funds,
Inc., which also acts as principal underwriter for the following
investment companies: John Hancock Capital Series, John Hancock
Sovereign Bond Fund, John Hancock Special Equities Fund, John Hancock
Strategic Series, John Hancock Tax-Exempt Series Fund, John Hancock
World Fund, John Hancock Investment Trust II, John Hancock Investment
Trust III, John Hancock Bond Trust, John Hancock California Tax-Free
Income Fund, John Hancock Cash Reserve, Inc., John Hancock Current
Interest, John Hancock Investment Trust, John Hancock Series Trust and
John Hancock Tax-Free Bond Trust.
(b) The following table lists, for each director and officer of JH
Funds, Inc., the information indicated.
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- --------------
<S> <C> <C>
Edward J. Boudreau, Jr. Director, Chairman, Chairman and
101 Huntington Avenue and Chief Executive Officer Chief Executive
Boston, Massachusetts Officer
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
David F. D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
Robert H. Watts Director, Executive None
101 Huntington Avenue Vice President and
Boston, Massachusetts Chief Compliance Officer
Anne C. Hodsdon Director and President, Chief Investment
101 Huntington Avenue Executive Vice President Officer and Chief
Boston, Massachusetts Operating Officer
Maureen R. Ford Director None
101 Huntington Avenue
Boston, Massachusetts
C-4
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- --------------
James V. Bowhers President None
101 Huntington Avenue
Boston, Massachusetts
Osbert Hood Senior Vice President, Senior Vice President
101 Huntington Avenue Chief Financial Officer and Chief Financial
Boston, Massachusetts and Treasurer Officer
David A. King Director None
101 Huntington Avenue
Boston, Massachusetts
Peter Mawn Senior Vice President None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John A. Morin Vice President Vice President
101 Huntington Avenue and Secretary
Boston, Massachusetts
Susan S. Newton Vice President Vice President and
101 Huntington Avenue Secretary
Boston, Massachusetts
C-5
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- --------------
J. William Benintende Vice President None
101 Huntington Avenue
Boston, Massachusetts
Gary Cronin Vice President None
101 Huntington Avenue
Boston, Massachusetts
Kathleen M. Graveline Senior Vice President None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Renee M. Humphrey Vice President None
101 Huntington Avenue
Boston, Massachusetts
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director Trustee
John Hancock Place
P.O. Box 111
Boston, Massachusetts
C-6
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- --------------
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Keith Hartstein Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Karen Walsh Vice President None
101 Huntington Avenue
Boston, Massachusetts
Kristine Pancare Vice President None
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Registrant maintains the records required to be maintained by it under
Rules 31a-1(a), 31a-1(b) and 31a-2(a) under the Investment Company Act of
1940 at its principal executive offices at 101 Huntington Avenue, Boston,
Massachusetts 02199- 7603. Certain records, including records relating to
Registrant's shareholders and the physical possession of its securities,
may be maintained pursuant to Rule 31a-3 at the main office of Registrant's
Transfer Agent or Custodian.
ITEM 31. MANAGEMENT SERVICES
The Registrant is not a party to any management-related service contract,
except as described in this Registration Statement.
ITEM 32. UNDERTAKINGS
The Registrant undertakes:
(a) not applicable;
C-7
<PAGE>
(b) to furnish each person to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to shareholders upon request and
without charge; and
(c) if requested to do so by holders of at least 10% of the outstanding
shares of the Registrant, to call and hold a meeting of shareholders of the
Registrant for the purpose of voting upon the question of removal of a
trustee or trustees and to assist shareholders in the communication with
other shareholders.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly cause the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts on the
29th day of July, 1999.
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
By: *
-------------------------------
Edward J. Boudreau, Jr.
Chairman
<TABLE>
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.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman
- --------------------------- (Principal Executive Officer)
Edward J. Boudreau, Jr.
/s/ James J. Stokowski Vice President, Treasurer and July 29, 1999
- --------------------------- Chief Accounting Officer
James J. Stokowski
*
- --------------------------- Trustee
Stephen L. Brown
*
- --------------------------- Trustee
James F. Carlin
*
- --------------------------- Trustee
William H. Cunningham
*
- --------------------------- Trustee
Ronald R. Dion
- --------------------------- Trustee
Anne C. Hodsdon
C-9
<PAGE>
Signature Title Date
--------- ----- ----
*
- --------------------------- Trustee
Harold R. Hiser, Jr.
*
- --------------------------- Trustee
Charles L. Ladner
*
- --------------------------- Trustee
Leo E. Linbeck, Jr.
*
- --------------------------- Trustee
Steven R. Pruchansky
*
- --------------------------- Trustee
Richard S. Scipione
*
- --------------------------- Trustee
Norman H. Smith
*
- --------------------------- Trustee
John P. Toolan
*By:
/s/Susan S. Newton July 29, 1999
- ---------------------------
Susan S. Newton
Attorney-in-Fact under
Powers of Attorney dated
January 1, 1999 and March 17, 1999.
</TABLE>
C-10
<PAGE>
JOHN HANCOCK INSTITUTIONAL SERIES
---------------------------------
INDEX TO EXHIBITS
-----------------
99.(a) Articles of Incorporation. Declaration of Trust dated
October 31, 1994.*
99.(a).1 Instrument Changing Names of Series of Shares of
Trust, Increasing the Number of Trustees and Appointing
Individuals to Fill the Vacancies, and Establishing
New Series.**
99.(a).2 Instrument Increasing the Number of Trustees and Appointing
Individual to Fill the Vacancy.****
99.(a).3 Instrument Changing Names of Series of Shares of the
Trust dated December 3, 1997.******
99.(a).4 Abolition of John Hancock Global Fund dated
February 26, 1999.*******
99.(a).5 Instrument changing Name of a Series of Shares of the Trust from
John Hancock Multi-Sector Growth Fund to John Hancock Medium
Capitalization Growth Fund dated April 27, 1999.#
99.(a).6 Amendment of Section 5.11 to establish the following Series:
John Hancock Independence Diversified Core Equity Fund II, John
Hancock Independence Medium Capitalization Fund, John Hancock
Independence Balanced Fund, John Hancock Active Bond Fund, John
Hancock Dividend Performers Fund, John Hancock International
Equity Fund, John Hancock Medium Capitalization Growth Fund,
John Hancock Small Capitalization Growth Fund, and John Hancock
Small Capitalization Value Fund, each consisting of a single
class of shares: John Hancock Core Growth Fund and John Hancock
Core Value Fund, each consisting of Class A, Class B, Class C
and Class I Shares (The "Existing Series") dated
April 27, 1999.#
99.(a).7 Instrument designation of existing Class of Shares,
establishment and Designation of New Class B, Class C and Class
I Shares, Change of Names of two Series of Shares of Beneficial
Interest of John Hancock Independence Growth Fund and John
Hancock Independence Value Fund each a Series of John Hancock
Institutional Trust.#
99.(a).8 Designation of Existing Class of Shares for Core Growth and Core
Value and change of names of funds effective 7/1/99.+
99.(b) By laws. Amended and Restated By-Laws dated
November 19, 1996.*****
99.(c) Instruments Defining Rights of Securities Holders. See exhibits
99.(a) and 99.(b).
99.(d) Investment Advisory Contracts. Investment Management Contracts
between John Hancock Advisers, Inc. and the Registrant on behalf
of John Hancock Berkeley Bond Fund, John Hancock Berkeley Sector
Opportunity Fund, John Hancock Independence Diversified Core
Equity Fund II, John Hancock Berkeley Dividend Performers Fund,
John Hancock Berkeley Global Bond Fund, John Hancock Berkeley
Fundamental Value Fund, John Hancock Berkeley Overseas Growth
Fund.*
99.(d).1 Sub-Investment Management Contracts among the
Registrant on behalf of John Hancock Independence
Diversified Core Equity Fund II and John Hancock
Independence Balanced Fund, John Hancock Advisers,
Inc., and Independence Investment Associates, Inc.*
99.(d).2 Sub-Investment Management Contract among the Registrant
on behalf of John Hancock Berkeley Dividend Performers
Fund, John Hancock Advisers, Inc., and Sovereign Asset
Management Corporation.*
99.(d).3 Sub-Investment Management Contact among the Registrant
on behalf of John Hancock Berkeley Overseas Growth
Fund, John Hancock Advisers, Inc., and John Hancock
Advisers International, Ltd.*
C-11
<PAGE>
99.(d).4 Sub-Investment Management Contract among the Registrant
on behalf of John Hancock Berkeley Fundamental Value
Fund, John Hancock Advisers, Inc., and NM Capital
Management, Inc.*
99.(d).5 Investment Management Contracts between John Hancock
Advisers, Inc. and the Registrant on behalf of John
Hancock Independence Value Fund, John Hancock Independence
Growth Fund, John Hancock Independence Balanced Fund, John
Hancock Small Capitalization Equity Fund, and John Hancock
Independence Medium Capitalization Fund.***
99.(d).6 Sub-Investment Management Contract among the Registrant on
behalf of John Hancock Independence Value Fund, John Hancock
Independence Medium Capitalization Fund, and John Hancock
Independence Growth Fund, John Hancock Advisers, Inc., and
Independence Investment Associates, Inc.***
99.(e) Underwriting Contracts. Distribution Agreement between the
Registrant and John Hancock Funds, Inc. dated January 30, 1995.*
99.(e).1 Amendment to Distribution Agreement between the Registrant and
John Hancock Funds, Inc. dated December 11, 1995.***
99.(e).2 Distribution Plans between the Registrant and John Hancock Funds
for John Hancock Core Growth Fund Classes A, B and C dated
July 1, 1999.#
99.(e).3 Distribution Plans between the Registrant and John Hancock
Funds for John Hancock Core Value Fund Classes A, B and C dated
July 1, 1999.#
99.(f) Bonus or Profit Sharing Contracts. Not Applicable.
99.(g) Custodian Agreements. Master Custodian Agreement between John
Hancock Mutual Funds and Investors Bank and Trust Company. *
99.(g).1 Master Custodian Agreement between John Hancock Mutual
Funds and State Street Bank and Trust Company.*
99.(g).2 Amendment to Master Custodian Agreement between
Registrant on behalf of John Hancock Berkeley Global
Bond Fund and John Hancock Berkeley Overseas Growth
Fund and State Street Bank and Trust Company.*
99.(g).3 Amended and Restated Master Custodian Agreement between John
Hancock Mutual Funds for John Hancock International Equity Fund
and State Street Bank and Trust Company dated
March 9, 1999.*******
99.(g).4 Amended and Restated Master Custodian Agreement between John
Hancock Mutual Funds for John Hancock Multi-Sector Growth Fund,
John Hancock Small Capitalization Value Fund, John Hancock
Dividend Performers Fund, John Hancock Active Bond Fund, John
Hancock Small Capitalization Growth Fund, John Hancock
Independence Core Equity Fund II, John Hancock Independence
Value Fund, John Hancock Independence Growth Fund, John Hancock
Independence Medium Capitalization Fund and John Hancock
Balanced Fund and Investors Bank and Trust Company dated
March 9, 1999.*******
99.(h) Other Material Contracts. Transfer Agency and Service
Agreement between the Registrant and John Hancock Investor
Services Corporation dated January 30, 1995.*
99.(h).1 Amendment to Transfer Agency and Service Agreement between the
Registrant and John Hancock Investor Services Corporation dated
December 11, 1995.***
C-12
<PAGE>
99.(h).2 Accounting and Legal Services Agreement between John Hancock
Advisers, Inc. and Registrant as of January 1, 1996.****
99.(i) Legal Opinion. Legal Opinion with respect to the
Registrant.+
99.(j) Other Opinions. Auditors consent+
99.(k) Omitted Financial Statements. Not Applicable.
99.(l) Initial Capital Agreement Subscription agreement between
Registrant and John Hancock Advisers, Inc. dated
January 12, 1995.*
99.(m) Rule 12b-1 Plans. None
99.(n) Rule 18f-3 Plan. John Hancock Funds Class A, Class B, Class C
and Class I Multiple Class Plan Pursuant to Rule 18f-3 for John
Hancock Core Growth Fund and John Hancock Core Value Fund.#
* Previously filed electronically with post-effective amendment number 1
(file nos. 811-8852 and 33-86102) on September 8, 1995, accession
number 0000950135-95-001879.
** Previously filed electronically with post-effective amendment number 2
(file nos. 811-8852 and 33-86102) on September 25, 1995, accession
number 0000950135-95-001978.
*** Previously filed electronically with post-effective amendment number 4
(file nos. 811-8852 and 33-86102) on January 5, 1996, accession number
0000950135-96-000075.
**** Previously filed electronically with post-effective amendment number 5
(file nos. 811-8852 and 33-86102) on June 24, 1996, accession number
0001010521-96-000102.
***** Previously Filed electronically with post-effective amendment number 7
file nos. 811-8852 and 33-86102) on April 30, 1997, accession number
0001010521-97-000281.
****** Previously filed electronically with post-effective amendment number
8 file nos. 811-8852 and 33-86102 on April 29, 1998, accession number
0001010521-98-000241.
******* Previously filed electronically with post-effective amendment number
9 (file nos. 811-8852 and 33-86102) on April 27, 1999, accession number
0001010521-99-000192.
# Previously filed electronically with post-effective amendment number
10 (file number 811-8852 and 33-86102) on July 28, 1999, accession
number 0001010521-99-000251.
+ Filed herewith.
C-13
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
John Hancock Independence Growth Fund
John Hancock Independence Value Fund
Designation of Existing Class of Shares
John Hancock Independence Growth Fund
Establishment and Designation of New Class A, Class B and Class C Shares
John Hancock Independence Value Fund
Establishment and Designation of New Class B, Class C and Class I Shares
Change of Names of Two Series of Shares
of Beneficial Interest of
John Hancock Independence Growth Fund
John Hancock Independence Value Fund
Each a Series of John Hancock Institutional Series Trust
Designation of Existing Class of Shares as Class I Shares
Establishment and Designation of New Class A, Class B and Class C Shares
The undersigned, being a majority of the Trustees of John Hancock
Institutional Series Trust, a Massachusetts business trust (the "Trust"), acting
pursuant to Sections 5.1 and 5.11 of the Declaration of Trust dated October 31,
1994, as amended from time to time (the "Declaration of Trust"), do hereby
designate the existing class of shares and establish and designate additional
classes of shares of John Hancock Independence Growth Fund (the "Fund") as
follows:
1. The existing class of shares is hereby designated as Class I Shares.
2. The additional classes of Shares of the Fund established and designated
hereby are "Class A Shares", "Class B Shares" and "Class C Shares".
3. Class A Shares, Class B Shares and Class C Shares shall be entitled to
all of the rights and preferences accorded to Shares under the
Declaration of Trust.
4. The purchase price of Class A Shares, Class B Shares and Class C
Shares, the method of determining the net asset value of Class A
Shares, Class B Shares and Class C Shares, and the relative dividend
rights of holders of Class A Shares, Class B Shares and Class C Shares
shall be established by the Trustees of the Trust in accordance with
the provisions of the Declaration of Trust and shall be as set forth in
the Prospectus and Statement of Additional Information of the Fund
included in the Trust's Registration Statement, as amended from time to
time, under the Securities Act of 1933, as amended and/or the
Investment Company Act of 1940, as amended.
<PAGE>
Designation of Existing Class of Shares as Class A Shares
Establishment and Designation of New Class B, Class C and Class I Shares
The undersigned, being a majority of the Trustees of John Hancock
Institutional Series Trust, a Massachusetts business trust (the "Trust"), acting
pursuant to Sections 5.1 and 5.11 of the Declaration of Trust dated October 31,
1994, as amended from time to time (the "Declaration of Trust"), do hereby
designate the existing class of shares and establish and designate additional
classes of shares of John Hancock Independence Value Fund (the "Fund") as
follows:
1. The existing class of shares is hereby designated as Class A Shares.
2. The additional classes of Shares of the Fund established and designated
hereby are "Class B Shares", "Class C Shares" and "Class I Shares".
3. Class B Shares, Class C Shares and Class I Shares shall be entitled to
all of the rights and preferences accorded to Shares under the
Declaration of Trust.
4. The purchase price of Class B Shares, Class C Shares and Class I
Shares, the method of determining the net asset value of Class B
Shares, Class C Shares and Class I Shares, and the relative dividend
rights of holders of Class B Shares, Class C Shares and Class I Shares
shall be established by the Trustees of the Trust in accordance with
the provisions of the Declaration of Trust and shall be as set forth in
the Prospectus and Statement of Additional Information of the Fund
included in the Trust's Registration Statement, as amended from time to
time, under the Securities Act of 1933, as amended and/or the
Investment Company Act of 1940, as amended.
Change of Names of Two Series of Shares
The undersigned, being a majority of the Trustees of John Hancock
Institutional Series Trust, a Massachusetts business trust (the "Trust"), hereby
amend the Trust's Declaration of Trust dated October 31, 1994, as amended from
time to time, to the extent necessary to reflect the change of the names of John
Hancock Independence Growth Fund to John Hancock Core Growth Fund and John
Hancock Independence Value Fund to John Hancock Core Value Fund.
The Declaration of Trust is hereby amended to the extent necessary to
reflect the following: 1) for John Hancock Independence Growth Fund, the
designation of the existing class of shares as Class I Shares, the establishment
and designation of new Class A, Class B, and Class C Shares; 2) for John Hancock
Independence Value Fund, the designation of the existing class of shares as
Class A Shares and the establishment and designation of new Class I, Class B,
and Class C Shares; and 3) the change of names of two series of shares, all
effective July 1, 1999.
Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Declaration of Trust.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument on
the 8th day of June 1999.
/s/Edward J. Boudreau, Jr. /s/Charles L. Ladner
- -------------------------- --------------------
Edward J. Boudreau, Jr. Charles L. Ladner
/s/Stephen L. Brown
- ------------------- -------------------
Stephen L. Brown Leo E. Linbeck, Jr.
/s/James F. Carlin /s/Steven R. Pruchansky
- ------------------ -----------------------
James F. Carlin Steven R. Pruchansky
/s/William H. Cunningham /s/Richard S. Scipione
- ------------------------ ----------------------
William H. Cunningham Richard S. Scipione
/s/Ronald R. Dion /s/Norman H. Smith
- ----------------- ------------------
Ronald R. Dion Norman H. Smith
/s/ Harold R. Hiser, Jr /s/John P. Toolan
- ----------------------- -----------------
Harold R. Hiser, Jr. John P. Toolan
/s/Anne C. Hodsdon
- ------------------
Anne C. Hodsdon
<PAGE>
The Declaration of Trust, a copy of which, together with all amendments
thereto, is on file in the office of the Secretary of State of The Commonwealth
of Massachusetts, provides that no Trustee, officer, employee or agent of the
Trust or any Series thereof shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its shareholders, in
connection with Trust Property or the affairs of the Trust, save only that
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard of his/her duties with respect to such Person; and all such Persons
shall look solely to the Trust Property, or to the Trust Property of one or more
specific Series of the Trust if the claim arises from the conduct of such
Trustee, officer, employee or agent with respect to only such Series, for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust.
COMMONWEALTH OF MASSACHUSETTS )
)ss
COUNTY OF SUFFOLK )
Then personally appeared the above-named Edward J. Boudreau, Jr.,
Stephen L. Brown, James F. Carlin, William H. Cunningham, Ronald R. Dion, Harold
R. Hiser, Jr., Anne C. Hodsdon, Charles L. Ladner, Steven R. Pruchansky, Richard
S. Scipione, Norman H. Smith and John P. Toolan, who acknowledged the foregoing
instrument to be his or her free act and deed, before me, this 8th day of June,
1999.
/s/ Anne Marie White
--------------------
Notary Public
My Commission Expires:10/20/00
July 27, 1999
John Hancock Institutional Series Trust
101 Huntington Avenue
Boston, MA 02199
RE: John Hancock Institutional Series Trust
John Hancock Active Bond Fund
John Hancock Dividend Performers Fund
John Hancock Independence Balanced Fund
John Hancock Independence Diversified Core Equity Fund II
John Hancock Independence Growth Fund
John Hancock Independence Medium Capitalization Fund
John Hancock Independence Value Fund
John Hancock International Equity Fund
John Hancock Multi-Sector Growth Fund
John Hancock Small Capitalization Growth Fund
John Hancock Small Capitalization Value Fund
File Nos. 33-86102; 811-8852 (0000932683)
Ladies and Gentlemen:
In connection with the filing of Post-Effective Amendment No. 11 under the
Securities Act of 1933, as amended, Amendment No. 12 under the Investment
Company Act of 1940, as amended, John Hancock Institutional Series Trust (the
"Trust") it is the opinion of the undersigned that such shares when sold will be
legally issued, fully paid and nonassessable.
In connection with this opinion it should be noted that the Fund is an entity of
the type generally known as a "Massachusetts business trust." The Trust has been
duly organized and is validly existing under the laws of the Commonwealth of
Massachusetts. 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 the shareholders of a Fund, with this
indemnification to be paid solely out of the assets of that Fund. Therefore, the
shareholder's risk is limited to circumstances in which the assets of a Fund are
insufficient to meet the obligations asserted against that Fund's assets.
Sincerely,
/s/ Theresa Apruzzese
- ---------------------
Theresa Apruzzese
Assistant Secretary
Member of Massachusetts Bar
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference into the Prospectus and Statement
of Additional Information in this Post-Effective Amendment No. 11 to the
Registration Statement (1933 Act File No. 33-86102) of John Hancock
Institutional Series Trust of our report dated April 2, 1999 on the financial
statements and financial highlights included in the Annual Report to
Shareholders of John Hancock Independence Growth & Income Fund (formerly John
Hancock Independence Diversified Core Equity Fund II),
We further consent to the references to our firm under the heading "Independent
Auditors" in the Statement of Additional Information.
/s/Deloitte & Touche LLP
- ------------------------
Deloitte & Touche LLP
Boston, Massachusetts
July 28, 1999
