As filed with the Securities and Exchange Commission on January 25, 2005
File No. 333-121480
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
Post-Effective Amendment No. ___
(Check appropriate box or boxes)
JOHN HANCOCK CAPITAL SERIES
---------------------------
(Exact Name of Registrant as Specified in Charter)
(617) 375-1702
--------------
(Area Code and Telephone Number)
101 Huntington Avenue, Boston, Massachusetts 02199-7603
-------------------------------------------------------
(Address of Principal Executive Offices: Number, Street, City, State, Zip Code)
Susan S. Newton, Esq.
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199
----------------
(Name and address of agent for service)
Title of Securities Being Registered: Shares of beneficial interest of John
Hancock Capital Series.
Approximate Date of Proposed Public Offering: As soon as practicable after the
effectiveness of the registration statement.
No filing fee is required because an indefinite number of shares has previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended.
The Registrant hereby amends the Registration Statement to delay its effective
date until the Registrant shall file a further amendment which specifically
states that the Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the commission,
acting pursuant to section 8(a), may determine.
IMPORTANT INFORMATION
February 4, 2005
Dear Fellow Shareholder:
I am writing to ask for your vote on an important matter that will affect your
investment in John Hancock Large Cap Growth Fund. The enclosed proxy statement
contains information about a proposal to approve the reorganization of John
Hancock Large Cap Growth Fund into another John Hancock fund, John Hancock U.S.
Global Leaders Growth Fund. If the reorganization of your fund is approved,
shareholders of your fund will become shareholders of U.S. Global Leaders Growth
Fund upon the closing of the reorganization and will receive shares of U.S.
Global Leaders Growth Fund in proportion to the value of your shares in Large
Cap Growth Fund.
Why is the reorganization being proposed?
The reorganization will combine your fund with another equity fund managed by
John Hancock Advisers that also invests in large cap stocks. However, the
investment approach of U.S. Global Leaders Growth Fund has proven to be more
successful than your fund's approach. The successful investment performance of
U.S. Global Leaders Growth Fund has enabled that fund to attract a significantly
larger amount of investment than your fund.
By combining the two funds, it is hoped that you will benefit in two important
ways. First, you will be invested in a fund with an investment style that has
proven over the past few years to be very successful compared with most other
growth-oriented large-cap stock funds. Second, you will become a shareholder in
a much larger fund and obtain the benefits of a lower expense ratio. While at
current asset levels the management fee of both funds is the same, U.S. Global
Leaders Growth Fund has a significantly lower total expense ratio.
Your Vote Matters
After careful consideration, your fund's trustees have unanimously approved the
reorganization of John Hancock Large Cap Growth Fund into John Hancock U.S.
Global Leaders Growth Fund. The enclosed proxy statement contains further
explanation and important details of the reorganization, which I strongly
encourage you to read before voting. If approved by the shareholders, the
reorganization is scheduled to take place at the close of business on April 8,
2005.
Your vote makes a difference, no matter what the size of your investment. Please
review the enclosed proxy materials and submit your vote promptly to help us
avoid the need for additional mailings. For your convenience, you may vote one
of three ways: via telephone by calling the toll-free number on the enclosed
voting card; via mail by returning the enclosed voting card; or via the Internet
by visiting www.jhfunds.com and selecting the shareholder entryway. If you have
any questions or need additional information, please contact a John Hancock
Funds Customer Service Representative at 1-800-225-5291 between 8:00 A.M. and
7:00 P.M. Eastern Time. I thank you for your prompt vote on this matter.
Sincerely,
James A. Shepherdson
Chief Executive Officer
JOHN HANCOCK LARGE CAP GROWTH FUND
(a series of John Hancock Investment Trust III)
(the "fund")
101 Huntington Avenue
Boston, MA 02199
Notice of Special Meeting of Shareholders
Scheduled for March 23, 2005
This is the formal agenda for your fund's shareholder meeting. It tells you what
matters will be voted on and the time and place of the meeting, in case you want
to attend in person.
To the shareholders of John Hancock Large Cap Growth Fund:
A shareholder meeting for your fund will be held at 101 Huntington Avenue,
Boston, Massachusetts on Wednesday, March 23, 2005, at 9:00 A.M., Eastern Time,
to consider the following:
1. A proposal to approve an Agreement and Plan of Reorganization (the
"Agreement") between John Hancock Large Cap Growth Fund ("your fund" or "Large
Cap Growth Fund") and John Hancock U.S. Global Leaders Growth Fund ("U.S. Global
Leaders Growth Fund"). Under this Agreement, your fund would transfer all of its
assets to U.S. Global Leaders Growth Fund in exchange for shares of U.S. Global
Leaders Growth Fund. These shares would be distributed proportionately to you
and the other shareholders of Large Cap Growth Fund. U.S. Global Leaders Growth
Fund would also assume Large Cap Growth Fund's liabilities. Large Cap Growth
Fund's board of trustees recommends that you vote FOR this proposal.
2. Any other business that may properly come before the meeting.
Shareholders of record as of the close of business on January 24, 2005 are
entitled to vote at the meeting and any related follow-up meetings.
Whether or not you expect to attend the meeting, please complete and return the
enclosed proxy card. If shareholders do not return their proxies in sufficient
numbers, it may result in additional shareholder solicitation.
By order of the board of trustees,
Susan S. Newton
Secretary
February 4, 2005
PROXY STATEMENT of
John Hancock Large Cap Growth Fund
a series of John Hancock Investment Trust III
("Large Cap Growth Fund," the "Acquired Fund," or "your fund")
PROSPECTUS for
John Hancock U.S. Global Leaders Growth Fund
a series of John Hancock Capital Series
(the "Acquiring Fund" or "U.S. Global Leaders Growth Fund")
The address of the Acquired Fund and the Acquiring Fund is 101 Huntington
Avenue, Boston, Massachusetts 02199, 1-800-225-5291.
* * * * * *
This proxy statement and prospectus contains the information shareholders should
know before voting on the proposed reorganization. Please read it carefully and
retain it for future reference.
=====================================================================================================
Acquired Fund Acquiring Fund Shareholders Entitled to Vote
=====================================================================================================
Proposal 1 Large Cap Growth Fund U.S. Global Leaders Large Cap Growth Fund shareholders
Growth Fund
=====================================================================================================
How The Reorganization Will Work
o Your fund will transfer all of its assets to U.S. Global Leaders Growth Fund.
U.S. Global Leaders Growth Fund will assume your fund's liabilities.
o U.S. Global Leaders Growth Fund will issue Class A shares to your fund in an
amount equal to the value of your fund's net assets attributable to its Class A
shares. These shares will be distributed to your fund's Class A shareholders in
proportion to their holdings on the reorganization date.
o U.S. Global Leaders Growth Fund will issue Class B shares to your fund in an
amount equal to the value of your fund's net assets attributable to its Class B
shares. These shares will be distributed to your fund's Class B shareholders in
proportion to their holdings on the reorganization date.
o U.S. Global Leaders Growth Fund will issue Class C shares to your fund in an
amount equal to the value of your fund's net assets attributable to its Class C
shares. These shares will be distributed to your fund's Class C shareholders in
proportion to their holdings on the reorganization date.
o Your fund will be terminated and shareholders of your fund will become
shareholders of U.S. Global Leaders Growth Fund.
o For federal income tax purposes, the reorganization is not intended to result
in income, gain or loss being recognized by your fund, the U.S. Global Leaders
Growth Fund or the shareholders of your fund.
Shares of the Acquiring Fund are not deposits or obligations of, or guaranteed
or endorsed by, any bank or other depository institution. These shares are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency.
Shares of the Acquiring Fund have not been approved or disapproved by the
Securities and Exchange Commission. The Securities and Exchange Commission has
not passed upon the accuracy or adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
1
Rationale for the Reorganization
In approving the reorganization, the trustees of each fund considered the
following benefits of the reorganization to shareholders of your fund:
o The investment approach of U.S. Global Leaders Growth Fund has proven
to be more successful than your fund's investments. For the one, three
and five year periods ended December 31, 2004, U.S. Global Leaders
Growth Fund had an average annual return of 8.51%, 3.42% and 1.43%,
respectively, at net asset value. Past performance is no guarantee of
future results.
o U.S. Global Leaders Growth Fund, although it has been in existence for
a shorter period, has attracted substantially greater investment than
your fund. Its size has allowed U.S. Global Leaders Growth Fund to
realize substantial economies of scale. While at current asset levels,
the management fee of both funds is the same, U.S. Global Leaders
Growth Fund has a significantly lower expense ratio.
o The reorganization is being completed on a tax-free basis.
o Your investment will continue to be part of the John Hancock Funds,
with the opportunity to exchange your shares for shares of over 30
other funds to meet your changing investment needs.
====================================================================================================================
Where to Get More Information
====================================================================================================================
Prospectus of U.S. Global Leaders Growth Fund In the same envelope as this proxy statement and
dated March 1, 2004 as revised January 24, 2005. prospectus. These documents are incorporated by reference
into (and therefore legally part of) this proxy statement
and prospectus.
=================================================
The semiannual report to shareholders of U.S.
Global Leaders Growth Fund dated June 30, 2004.
The annual report to shareholders of U.S.
Global Leaders Growth Fund dated December 31,
2003.
====================================================================================================================
Prospectus of Large Cap Growth Fund dated On file with the Securities and Exchange Commission ("SEC")
March 1, 2004 as revised January 24, 2005. The or available at no charge by calling our toll-free number: 1-800-
annual report to shareholders of Large Cap 225-5291. These documents are incorporated by reference into
Growth Fund, dated October 31, 2004. (and therefore legally part of) this proxy statement and
=================================================
A statement of additional information dated
February 4, 2005. It contains additional
information about the Acquired Fund and the
Acquiring Fund.
====================================================================================================================
To ask questions about this proxy statement and Call our toll-free telephone number: 1-800-225-5291
prospectus.
====================================================================================================================
The date of this proxy statement and prospectus is February 4, 2005.
2
TABLE OF CONTENTS
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Page
=================================================================================================
INTRODUCTION 3
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PROPOSAL 1 -- LARGE CAP GROWTH FUND 4
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Summary 4
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Comparison of Investment Risks
=================================================================================================
Comparison of Fund Performance
=================================================================================================
Proposal to Approve the Agreement and Plan of Reorganization
=================================================================================================
PAST PERFORMANCE OF EACH FUND
=================================================================================================
FURTHER INFORMATION ON THE REORGANIZATION
=================================================================================================
CAPITALIZATION
=================================================================================================
ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES
=================================================================================================
BOARDS' EVALUATION AND RECOMMENDATION
=================================================================================================
VOTING RIGHTS AND REQUIRED VOTE
=================================================================================================
INFORMATION CONCERNING THE MEETING
=================================================================================================
OWNERSHIP OF SHARES OF THE FUNDS
=================================================================================================
EXPERTS
=================================================================================================
AVAILABLE INFORMATION
=================================================================================================
EXHIBIT A -- Form of Agreement and Plan of Reorganization
=================================================================================================
3
INTRODUCTION
This proxy statement and prospectus is being used by your fund's board of
trustees to solicit proxies to be voted at a special meeting of your fund's
shareholders. This meeting will be held at 101 Huntington Avenue, Boston,
Massachusetts on Wednesday, March 23, 2005 at 9:00 A.M., Eastern Time. The
purpose of the meeting is to consider a proposal to approve an Agreement and
Plan of Reorganization providing for the reorganization of your fund into U.S.
Global Leaders Growth Fund. This proxy statement and prospectus is being mailed
to your fund's shareholders on or about February 4, 2005.
Who is Eligible to Vote?
Shareholders of record on January 24, 2005 are entitled to attend and vote at
the meeting or any adjourned meeting. Each share is entitled to one vote. Shares
represented by properly executed proxies, unless revoked before or at the
meeting, will be voted according to shareholders' instructions. If you sign a
proxy but do not fill in a vote, your shares will be voted to approve the
Agreement and Plan of Reorganization. If any other business comes before the
meeting, your shares will be voted at the discretion of the persons named as
proxies.
4
PROPOSAL 1
Approval of Agreement and Plan of Reorganization Between
Large Cap Growth Fund and U.S. Global Leaders Growth Fund
A proposal to approve an Agreement and Plan of Reorganization (the "Agreement")
between Large Cap Growth Fund and U.S. Global Leaders Growth Fund. Under this
Agreement, Large Cap Growth Fund would transfer all of its assets to U.S. Global
Leaders Growth Fund in exchange for shares of U.S. Global Leaders Growth Fund.
These shares would be distributed proportionately to the shareholders of Large
Cap Growth Fund. U.S. Global Leaders Growth Fund would also assume Large Cap
Growth Fund's liabilities. Large Cap Growth Fund's board of trustees recommends
that shareholders vote FOR this proposal.
SUMMARY
The following is a summary of more complete information appearing later in this
proxy statement. You should read carefully the entire proxy statement and the
Agreement attached as Exhibit A because they contain details that are not in the
summary.
Comparison of Large Cap Growth Fund to U.S. Global Leaders Growth Fund
====================================================================================================================
COMPARISON OF FUNDS AND INVESTMENT OBJECTIVES, STRATEGIES AND POLICIES
====================================================================================================================
Large Cap Growth Fund U.S. Global Leaders Growth Fund
====================================================================================================================
Business A diversified series of John Hancock A non-diversified series of John Hancock Capital
Trust III, an open-end investment Capital Series, an open-end investment management
company organized as a management company organized as a Massachusetts business trust.
Massachusetts business trust.
====================================================================================================================
Net assets as $174.8 million $1.354 million
of December
31, 2004
====================================================================================================================
Investment Investment Adviser: Investment Adviser:
adviser, John Hancock Advisers, LLC John Hancock Advisers, LLC
subadviser and
portfolio Portfolio managers: Investment Subadviser:
managers Roger C. Hamilton Sustainable Growth Advisers, LP
-Joined fund team in 2004 Founded in 2003
-Joined Adviser in 1994
-Began business career in 1980 Portfolio managers:
Gordon M. Marchand, CFA, CIC
Robert C. Junkin, CPA -Managed fund since 1995
-Joined fund team in 2003 -Chief financial and operating officer of
-Joined Adviser in 2003 Yeager, Wood & Marshall, Inc. (1984-2003)
-Vice president, Pioneer Investments, Inc. -Began business career in 1978
(1997-2002)
-Began business career in 1988 George P. Fraise
-Joined fund team in 2000
-Executive vice president of Yeager, Wood &
Marshall, Inc. (2000-2003)
-Portfolio manager of Scudder Kemper
Investments (1997-2000)
-Began business career in 1987
Robert L. Rohn
-Joined fund team in 2003
-Chairman and chief executive officer, W.P.
Stewart, Inc. (1991-2003)
-Began business career in 1983
====================================================================================================================
Investment The fund seeks long-term capital The fund seeks long-term growth of capital.
objective appreciation.
This objective is non-fundamental and can
This objective is fundamental and can be be changed by the fund's trustees without
changed only with shareholder approval. shareholder approval.
====================================================================================================================
5
====================================================================================================================
COMPARISON OF FUNDS AND INVESTMENT OBJECTIVES, STRATEGIES AND POLICIES
====================================================================================================================
Large Cap Growth Fund U.S. Global Leaders Growth Fund
====================================================================================================================
Primary The fund normally invests at least 80% of The fund invests primarily in common stocks
investments its assets in stocks of large-capitalization of "U.S. Global Leaders" (as defined
companies (companies in the capitalization below). Under normal market conditions, at
range of the Russell Top 200 Growth Index, least 80% of the fund's assets will be
which was $481.8 million to $290.3 billion invested in stocks of companies the
as of December 31, 2004). portfolio managers regard as U.S. Global Leaders.
The fund may invest in preferred stocks and
other types of equity securities. The managers consider U.S. Global Leaders
to be U.S. companies with multinational
operations that typically exhibit the
following key sustainable growth
characteristics:
o Hold leading market shares of their relevant
industries that result in high profit margins and
high investment returns.
o Supply consumable products or services so
that their revenue streams are recurring.
The fund may invest in preferred stocks
and other types of equity securities.
====================================================================================================================
Investment In managing the portfolio, the managers use The managers seek to identify companies
Strategy fundamental financial analysis to identify with superior long-term earnings prospects
companies with: and to continue to own them as long as the
o Strong cash flows managers believe they will continue to
o Secure market franchises enjoy favorable prospects for capital
o Sales growth that outpaces their growth and are not overvalued in the
industry marketplace.
The fund has tended to emphasize, or As a result of its investment strategy, the
overweight, certain sectors such as health fund typically invests in
care, technology or consumer goods. These large-capitalization companies (companies
weightings may change in the future. in the capitalization range of the Standard
& Poor's 500 Index, which was $748.7 million to
The managers use various means to access the $385.9 billion as of December 31, 2004.
depth and stability of companies' senior
management including interviews and company
visits. The fund favors companies for which
the managers project an above-average growth
rate.
====================================================================================================================
Foreign The fund generally invests in a portfolio of The fund may invest up to 25% of its net
Securities U.S. companies. However, the fund may assets in foreign companies (although
invest up to 15% of its assets in foreign foreign securities are not expected to
securities, including foreign-denominated exceed 15% of net assets under normal
securities and sponsored and unsponsored circumstances). The fund intends to invest
depository receipts. primarily in large-capitalization, well
established foreign securities that are
traded in the United States.
====================================================================================================================
Diversifica-tion The fund is diversified, which means that, The fund is non-diversified, which means
with respect to 75% of total assets, the that, with respect to 50% of its assets,
fund cannot invest (i) more than 5% of total the fund may make larger investments in
assets in securities of a single issuer, or individual companies than a fund that is
(ii) in securities representing more than diversified. However, with respect to the
10% of the outstanding voting securities of other 50% of its assets, the fund may only
an issuer. invest up to 5% of its assets in any
individual issuer.
====================================================================================================================
Active The fund may trade securities actively. Trading Historically, the fund has not traded
securities actively, but may do so in the future.
====================================================================================================================
Derivatives The fund may make limited use of certain The fund does not typically use derivatives.
derivatives (investments whose value is
based on indexes, securities or currencies).
====================================================================================================================
Temporary In abnormal circumstances, each fund may temporarily invest extensively in
defensive investment-grade short-term securities, cash and cash equivalents.
positions
====================================================================================================================
6
In deciding whether to approve the reorganization, you should consider the
similarities and differences between Large Cap Growth Fund and U.S. Global
Leaders Growth Fund. In particular, you should consider whether the amount and
character of investment risk involved in the authorized investments of U.S.
Global Leaders Growth Fund is commensurate with the amount of risk involved in
the authorized investments of Large Cap Growth Fund.
The funds have similar, but not identical investment objectives. Large Cap
Growth Fund seeks long-term capital appreciation, while U.S. Global Leaders
Growth Fund seeks long-term growth of capital. Both funds invest in companies
that are considered large-cap. However, Large Cap Growth Fund must invest at
least 80% of its assets in large capitalization companies under normal market
conditions. U.S. Global Leaders Growth Fund is not subject to such a
requirement. Your fund emphasizes investments in companies with above average
growth rates, strong cash flows and secure franchises. U.S. Global Leaders
Growth Fund, on the other hand, invests at least 80% of its assets in "U.S.
Global Leaders" as defined above. Your fund is diversified, and with respect to
75% of its assets, cannot invest more than 5% of its assets in securities of a
single issuer, while U.S. Global Leaders Fund is non-diversified and therefore
is not subject to that limit. For a comparison of the principal risks of
investing in the funds, please see "Comparison of Investment Risks" below.
COMPARISON OF INVESTMENT RISKS
The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table compares the risks
affecting each fund.
=============================================================================================================
Large Cap Growth Fund U.S. Global Leaders Growth Fund
=============================================================================================================
Stock market The value of securities in the fund may fluctuate in response to
risk overall stock market movements. Markets tend to move in cycles, with periods of
rising prices and periods of falling prices. Stocks tend to go up and down in
value more than bonds. If the fund concentrates in certain sectors, its
performance could be worse than that of the overall stock market.
=============================================================================================================
Investment Large capitalization stocks as a group could fall out of favor with the market,
category risk causing the fund to underperform investments that focus on small or medium
capitalization stocks or on value stocks.
=============================================================================================================
Management The fund's management strategy may The fund's management strategy may
risk fail to produce the intended fail to produce the intended
results. The fund could results. The fund could
underperform its peers or lose underperform its peers or lose
money if the investment strategy, money if the investment strategy,
including industry or security including industry or security
selection, does not perform as selection, does not perform as
expected. expected.
Companies that have substantial
multinational operations may be
affected by fluctuations in
currency exchanges rates and by
economic and political conditions
in foreign countries. These
conditions may include restrictions
on monetary repatriation and
possible seizure, nationalization
or expropriation of assets.
=============================================================================================================
Derivatives risk Certain derivative instruments can produce disproportionate gains or losses and
are riskier than direct investments. Also, in a down market derivatives could
become harder to value or sell at a fair price.
=============================================================================================================
Foreign Foreign investments are more risky than domestic investments. Investments in foreign
securities risk securities may be affected by fluctuations in currency exchange rates, incomplete or
inaccurate financial information on companies, social
instability and political actions ranging from tax code
changes to governmental collapse.
=============================================================================================================
Active trading Active trading could increase the fund's To the extent the fund trades securities
transaction costs (thus lowering actively, active trading could increase
performance) and increase your taxable the fund's transaction cost (thus lowering
distributions. The fund's turnover rate performance) and increase your taxable
may exceed 100%, which is considered distributions.
relatively high.
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=============================================================================================================
COMPARISON OF CLASSES OF SHARES
=============================================================================================================
Class A sales The Class A shares of both funds have the same characteristics and fee
charges and structure, except for Rule 12b-1 fees, as described below.
12b-1 fees o Class A shares are offered with front-end sales charges ranging from 2% to 5%
of the fund's offering price, depending on the amount invested.
o Class A shares of Large Cap Growth Fund are subject to a 12b-1 distribution
fee equal to 0.30% annually of average net assets, whereas the Class A shares of
U.S. Global Leaders Growth Fund are subject to a 12b-1 distribution fee equal to
0.25% annually of average net assets.
o There is no front-end sales charge for investments of $1 million or more, but
there is a contingent deferred sales charge ranging from 0.25% to 1.00% on
shares sold within one year of purchase.
o Investors can combine multiple purchases of Class A shares to take advantage
of breakpoints in the sales charge schedule.
o Sales charges are waived for the categories of investors listed in the funds'
prospectuses.
=============================================================================================================
Class B sales The Class B shares of both funds have the same characteristics and fee
charges and structure.
12b-1 fees o Class B shares are offered without a front-end sales charge, but are subject
to a contingent deferred sales charge (CDSC) if sold within six years after
purchase. The CDSC ranges from 1.00% to 5.00% depending on how long the shares
are held. No CDSC is imposed on shares held more than six years.
o Class B shares are subject to 12b-1 distribution and service fees equal to
1.00% annually of average net assets.
o CDSCs are waived for the categories of investors listed in the funds'
prospectus.
o Class B shares automatically convert to Class A shares after eight years.
=============================================================================================================
Class C sales The Class C shares of both funds have the same characteristics and fee
charges and structure.
12b-1 fees o Class C shares are offered without a front-end sales charge, but subject to a
contingent deferred sales charge of 1.00% on shares sold within one year of
purchase.
o Class C shares are subject to 12b-1 distribution and service fees equal to
1.00% annually of average net assets.
o No automatic conversion to Class A shares, so annual expenses continue at the
Class C level throughout the life of the investment.
=============================================================================================================
12b-1 fees o These fees are paid out of a fund's assets on an ongoing basis. Over time
these fees will increase the cost of investments and may cost more than other
types of sales charges.
=============================================================================================================
7
=============================================================================================================
COMPARISON OF BUYING, SELLING AND EXCHANGING SHARES
=============================================================================================================
Buying shares Investors may buy shares at their public offering price through a financial
representative or the funds' transfer agent, John Hancock Signature Services,
Inc. After January 24, 2005, investors will not be allowed to open new accounts
in Large Cap Growth Fund but can add to existing accounts.
=============================================================================================================
Minimum Class A, Class B and Class C Shares: $1,000 for non-retirement accounts and $500
initial for retirement accounts and group investments.
investment
=============================================================================================================
Exchanging Shareholders may exchange their shares at net asset value with no sales charge
shares for shares of the same class of any other John Hancock fund.
=============================================================================================================
Selling shares Shareholders may sell their shares by submitting a proper written or telephone
request to John Hancock Signature Services, Inc.
=============================================================================================================
Net asset value All purchases, exchanges and sales are made at a price based on the next
determined net asset value (NAV) per share of the fund. Both funds' NAVs are
determined at the close of regular trading on the New York Stock Exchange, which
is normally 4:00 P.M. Eastern Time.
=============================================================================================================
The Funds' Expenses
Shareholders of both funds pay various expenses, either directly or indirectly.
The following expense tables show expenses of each fund for the twelve month
period ended June 30, 2004, adjusted to reflect any changes. Future expenses for
all classes may be greater or less. The tables also show the hypothetical ("pro
forma") expenses of each class of shares of U.S. Global Leaders Growth Fund
assuming that a reorganization with Large Cap Growth Fund occurred on June 30,
2003. U.S. Global Leaders Growth Fund's actual expenses after the reorganization
may be greater or less than those shown.
Pro Forma Expenses
The adviser has agreed to limit U.S. Global Leaders Growth Fund's total
operating expenses for at least one year from the date of the reorganization to
1.35% of average daily net assets for Class A shares and 2.10% of average daily
net assets for Class B and Class C shares. This expense limitation is lower than
your fund's total operating expenses for its most recent fiscal year.
8
=========================================================================================
U.S. Global
Leaders Growth Fund
(PRO FORMA
for the twelve
month period
ended 6/30/04)
(Assuming
U.S. Global reorganization
Large Cap Leaders with Large Cap
Growth Fund Growth Fund Growth Fund)
=========================================================================================
Shareholder transaction expenses Class A Class A Class A
=========================================================================================
Maximum sales charge (load) imposed 5.00% 5.00% 5.00%
on purchases (as a % of purchase
price)
=========================================================================================
Maximum sales charge (load) imposed none none none
on reinvested dividends
=========================================================================================
Maximum deferred sales charge (load) none none none
as a % of purchase or sale price,
whichever is less (1)
=========================================================================================
Redemption fee (2) none none none
=========================================================================================
Exchange fee none none none
=========================================================================================
=========================================================================================
Annual fund operating expenses Class A Class A Class A
(as a % of average net assets)
=========================================================================================
Management fee 0.75% 0.75% 0.75%
=========================================================================================
Distribution and service (12b-1) fee 0.30% 0.25% 0.25%
=========================================================================================
Other expenses 0.73% 0.36% 0.43%
=========================================================================================
Total fund operating expenses 1.78% 1.36% 1.43%
=========================================================================================
Expense reduction 0.02% 0.01% 0.08% (3)
=========================================================================================
Net fund operating expenses 1.76% 1.35% 1.35%
=========================================================================================
- ----------------------
(1) Except for investments of $1 million or more.
(2) Does not include wire redemption fee (currently $4.00).
(3) The adviser has contractually agreed to limit U.S. Global Leaders Growth
Fund's Class A operating expenses for at least one year from the date of
the reorganization to 1.35% of the fund's Class A average daily net assets.
9
===============================================================================================
U.S. Global Leaders
Growth Fund
(PRO FORMA
for the twelve month
period
ended 6/30/04)
U.S. (Assuming
Global reorganization
Large Cap Leaders with Large Cap
Growth Fund Growth Fund Growth Fund)
===============================================================================================
Shareholder transaction expenses Class B Class B Class B
===============================================================================================
Maximum sales charge (load) none none none
imposed on purchases (as a % of
purchase price)
===============================================================================================
Maximum sales charge (load) none none none
imposed on reinvested dividends
===============================================================================================
Maximum deferred sales charge 5.00% 5.00% 5.00%
(load) as a % of purchase or
sale price, whichever is less
===============================================================================================
Redemption fee(1) none none none
===============================================================================================
Exchange fee none none none
===============================================================================================
===============================================================================================
Annual fund operating expenses Class B Class B Class B
(as a % of average net assets)
===============================================================================================
Management fee 0.75% 0.75% 0.75%
===============================================================================================
Distribution and service (12b-1) 1.00% 1.00% 1.00%
fee
===============================================================================================
Other expenses 0.73% 0.36% 0.43%
===============================================================================================
Total fund operating expenses 2.48% 2.11% 2.18%
===============================================================================================
Expense reduction 0.02% 0.01% 0.08% (2)
===============================================================================================
Net fund operating expenses 2.46% 2.10% 2.10%
===============================================================================================
- ----------------------
(1) Does not include wire redemption fee (currently $4.00).
(2) The adviser has contractually agreed to limit U.S. Global Leaders Growth
Fund's Class B operating expenses for at least one year from the date of
the reorganization to 2.10% of the fund's Class B average daily net assets.
10
=======================================================================================
U.S. Global
Leaders Growth Fund
(PRO FORMA
for the twelve
month period
ended 6/30/04)
U.S. (Assuming
Global reorganization
Large Cap Leaders with Large Cap
Growth Fund Growth Fund Growth Fund)
=======================================================================================
Shareholder transaction expenses Class C Class C Class C
=======================================================================================
Maximum sales charge (load) imposed none none none
on purchases (as a % of purchase
price)
=======================================================================================
Maximum sales charge (load) imposed none none none
on reinvested dividends
=======================================================================================
Maximum deferred sales charge (load) 1.00% 1.00% 1.00%
as a % of purchase or sale price,
whichever is less
=======================================================================================
Redemption fee (1) none none none
=======================================================================================
Exchange fee none none none
=======================================================================================
=======================================================================================
Annual fund operating expenses Class C Class C Class C
(as a % of average net assets)
=======================================================================================
Management fee 0.75% 0.75% 0.75%
=======================================================================================
Distribution and service (12b-1) fee 1.00% 1.00% 1.00%
=======================================================================================
Other expenses 0.73% 0.36% 0.43%
=======================================================================================
Total fund operating expenses 2.48% 2.11% 2.18%
=======================================================================================
Expense reduction 0.02% 0.01% 0.08% (2)
=======================================================================================
Net fund operating expenses 2.46% 2.10% 2.10%
=======================================================================================
- ----------------------
(1) Does not include wire redemption fee (currently $4.00).
(2) The adviser has contractually agreed to limit U.S. Global Leaders Growth
Fund's Class C operating expenses for at least one year from the date of
the reorganization to 2.10% of the fund's Class C average daily net assets.
11
Examples
The hypothetical examples below show what your expenses would be if you invested
$10,000 over different time periods for your fund and U.S. Global Leaders Growth
Fund, based on fees and expenses incurred during the twelve month period ended
June 30, 2004. Pro forma expenses for U.S. Global Leaders Growth Fund are
included assuming that a reorganization with Large Cap Growth Fund occurred on
June 30, 2003. Each example assumes that you reinvested all dividends and that
the average annual return was 5%. The example also assumes that each fund's
operating expenses remain the same. The pro forma examples are for comparison
purposes only and are not a representation of U.S. Global Leaders Growth Fund's
actual expenses or returns, either past or future.
===========================================================================================
U.S. Global Leaders
Growth Fund
(PRO FORMA)
Large Cap U.S. Global (Assuming
Growth Leaders Growth reorganization with
Fund Fund Large Cap Growth Fund)
===========================================================================================
Class A
===========================================================================================
Year 1 $672 $632 $631
===========================================================================================
Year 3 $1,032 $909 $922
===========================================================================================
Year 5 $1,416 $1,207 $1,235
===========================================================================================
Year 10 $2,490 $2,053 $2,121
===========================================================================================
Class B-assuming redemption at end of period
===========================================================================================
Year 1 $751 $714 $713
===========================================================================================
Year 3 $1,073 $961 $974
===========================================================================================
Year 5 $1,521 $1,334 $1,362
===========================================================================================
Year 10 $2,644 $2,250 $2,317
===========================================================================================
Class B-assuming no redemption
===========================================================================================
Year 1 $251 $214 $213
===========================================================================================
Year 3 $773 $661 $674
===========================================================================================
Year 5 $1,321 $1,134 $1,162
===========================================================================================
Year 10 $2,644 $2,250 $2,317
===========================================================================================
Class C-assuming redemption at end of period
===========================================================================================
Year 1 $351 $314 $313
===========================================================================================
Year 3 $773 $661 $674
===========================================================================================
Year 5 $1,321 $1,134 $1,162
===========================================================================================
Year 10 $2,816 $2,441 $2,507
===========================================================================================
Class C-assuming no redemption
===========================================================================================
Year 1 $251 $214 $213
===========================================================================================
Year 3 $773 $661 $674
===========================================================================================
Year 5 $1,321 $1,134 $1,162
===========================================================================================
Year 10 $2,816 $2,441 $2,507
===========================================================================================
12
Advisory Fees
Each fund pays monthly advisory fees equal to the following annual
percentage of its average daily net assets.
=========================================================================================
Fund Asset Breakpoints Fee Rate
=========================================================================================
Large Cap Growth Fund
=========================================================================================
First $750 million 0.75%
=========================================================================================
Amount over $750 million 0.70%
=========================================================================================
U.S. Global Leaders Growth Fund
=========================================================================================
First $2 billion* 0.75%
=========================================================================================
Next $3 billion * 0.70%
=========================================================================================
Amount over $5 billion* 0.65%
=========================================================================================
*Breakpoint added effective as of the close of business June 30, 2004
ADDITIONAL INFORMATION ABOUT JOHN HANCOCK U.S. GLOBAL
LEADERS GROWTH FUND
Investment Adviser
John Hancock Advisers, LLC ("JHA") is the investment adviser to John Hancock
U.S. Global Leaders Growth Fund. JHA, located at 101 Huntington Avenue, Boston,
Massachusetts 02199-7603, was organized in 1968 and has approximately $29
billion in assets under management as of September 30, 2004 in its capacity as
investment adviser to the funds in the John Hancock group of funds, as well as
retail and institutional privately managed accounts.
JHA is an indirect, wholly-owned subsidiary of John Hancock Financial Services,
Inc. ("JHFS") a financial services company with national headquarters at John
Hancock Place, Boston, Massachusetts. JHFS is wholly owned by Manulife Financial
Corporation ("Manulife"), a Canadian financial services company.
The board of trustees of the fund is responsible for overseeing the performance
of the fund's investment adviser and subadviser and determining whether to
approve and renew the fund's investment management contract and the
sub-investment management contract.
Sustainable Growth Advisers, LP ("SGA") serves as investment subadviser to
U.S. Global Leaders Growth Fund. SGA is a Delaware limited partnership founded
in 2003 to provide investment advice to private accounts of institutional and
individual clients, private investment companies and mutual funds. George
Fraise, Gordon Marchand and Robert L. Rohn each owns 33 1/3% of SGA. Total
assets under management by SGA principals as of September 30, 2004 were
approximately $1 billion.
SGA receives its compensation for subadvising U.S. Global Leaders Growth Fund
from JHA, and the Acquiring Fund pays no subadvisory fees over and above the
management fees it pays to JHA. The subadvisory contract requires the adviser to
pay monthly to the subadviser a subadvisory fee which is accrued daily, and on
an annual basis is equal to: (i) 35% of the gross management fee received by JHA
for average daily net assets less than $500,000,000; (ii) 30% of the gross
management fee received by JHA for average daily net assets equal to
$500,000,000 and less than $1 billion; (iii) 25% of the gross management fee
received by the adviser for average daily net assets equal to $1 billion and
less than $1.5 billion; and (iv) 20% of the gross management fee received by JHA
for average daily net assets equal to or in excess of $1.5 billion.
13
Summary of Expense Comparison
The pro forma expense ratios for each class of U.S. Global Leaders Growth Fund
are lower than your fund's expense ratios. In addition, U.S. Global Leaders
Growth Fund's pro forma management fee rate is the same as your fund's
management fee rate at asset levels below $750 million.
The adviser has agreed to limit U.S. Global Leaders Growth Fund's total
operating expenses for at least one year from the date of the reorganization to
1.35% of average daily net assets for Class A shares and 2.10% of average daily
net assets for Class B and Class C shares. Without this expense limitation, U.S.
Global Leaders Growth Fund's pro forma expenses would still be lower than your
fund's total operating expenses. However, your fund's management fee rate for
asset levels between $750 million and $2 billion (0.70%) is lower than U.S.
Global Leaders Growth Fund's management fee rate for assets between these asset
levels (0.75%). U.S. Global Leaders Growth Fund's pro forma management fee rate
at current asset levels of 0.75% is the same as your fund's management fee rate
of 0.75% at current asset levels. The maximum 12b-1 fee is 0.05% lower for Class
A Shares of U.S. Global Leaders Growth Fund, as set forth above. Both funds have
the same 12b-1 fees for Class B and C shares. U.S. Global Leaders Growth Fund's
pro forma other expenses of 0.43% are lower than your fund's other expenses of
0.73%.
14
COMPARISON OF FUND PERFORMANCE
Past performance records of each fund through December 31, 2004, including (1)
calendar year total returns (without sales charges) and (2) average annual total
returns (including imposition of sales charges) are set forth under "Past
Performance of Each Fund" on page __ of this proxy statement and prospectus.
PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION
Description of Reorganization
You are being asked to approve an Agreement and Plan of Reorganization, a form
of which is attached to this proxy statement as Exhibit A. Additional
information about the reorganization and the Agreement is set forth below under
"Further Information on the reorganization." The Agreement provides for a
Reorganization on the following terms:
o The reorganization is scheduled to occur at 5:00 P.M., Eastern Time, on April
8, 2005, but may occur on any later date before June 30, 2005 unless your fund
and U.S. Global Leaders Growth Fund agree in writing to a later date. Large Cap
Growth Fund will transfer all of its assets to U.S. Global Leaders Growth Fund
and U.S. Global Leaders Growth Fund will assume all of Large Cap Growth Fund's
liabilities. This will result in the addition of Large Cap Growth Fund's assets
to U.S. Global Leaders Growth Fund's portfolio. The net asset value of both
funds will be computed as of 5:00 P.M., Eastern Time, on the reorganization
date.
o U.S. Global Leaders Growth Fund will issue to Large Cap Growth Fund Class A
shares in an amount equal to the net assets attributable to Large Cap Growth
Fund's Class A shares. As part of the liquidation of Large Cap Growth Fund,
these shares will immediately be distributed to Class A shareholders of record
of Large Cap Growth Fund in proportion to their holdings on the reorganization
date. As a result, Class A shareholders of Large Cap Growth Fund will end up as
Class A shareholders of U.S. Global Leaders Growth Fund.
o U.S. Global Leaders Growth Fund will issue to Large Cap Growth Fund Class B
shares in an amount equal to the net assets attributable to Large Cap Growth
Fund's Class B shares. As part of the liquidation of Large Cap Growth Fund,
these shares will immediately be distributed to Class B shareholders of record
of Large Cap Growth Fund in proportion to their holdings on the reorganization
date. As a result, Class B shareholders of Large Cap Growth Fund will end up as
Class B shareholders of U.S. Global Leaders Growth Fund.
o U.S. Global Leaders Growth Fund will issue to Large Cap Growth Fund Class C
shares in an amount equal to the net assets attributable to Large Cap Growth
Fund's Class C shares. As part of the liquidation of Large Cap Growth Fund,
these shares will immediately be distributed to Class C shareholders of record
of Large Cap Growth Fund in proportion to their holdings on the reorganization
date. As a result, Class C shareholders of Large Cap Growth Fund will end up as
Class C shareholders of U.S. Global Leaders Growth Fund.
o After the shares are issued, Large Cap Growth Fund will be terminated.
Reasons for the Proposed Reorganization
The board of trustees of Large Cap Growth Fund believes that the proposed
reorganization will be advantageous to the shareholders of Large Cap Growth Fund
for several reasons. The board of trustees considered the following matters,
among others, in approving the proposal.
First, although your fund and U.S. Global Leaders Growth Fund both focus on
large cap stock and pursue similar investment strategies, U.S. Global Leaders
Growth Fund has better average annual total returns than Large Cap Growth Fund
for the 1-year and 5-year periods, and since the inception of U.S. Global
Leaders
15
Growth Fund in 1995. In addition to having a more favorable long-term
record, U.S. Global Leaders Growth Fund offers an investment focus, like your
fund, on large cap equity securities.
Second, at current asset levels, the management fee for both funds is the same.
Although your fund's management fee reduces to 0.70% at $750 million of net
assets while U.S. Global Leaders Growth Fund's management fee does not reduce to
0.70% until the fund reaches $2 billion in net assets, the trustees considered
that based upon historic growth rates for each fund, U.S. Global Leaders Growth
Fund is more likely to reach the breakpoint in the management fee than your
fund.
Third, regardless of the management fee rate, the total expenses ratio of U.S.
Global Leaders Growth Fund is substantially lower than your fund's expense
ratio, reflecting the relative size of the two funds. For the 12 month period
ended June 30, 2004, the expense ratio for Class A shares of your fund was
1.76%, or 41 basis points higher than the Class A expense ratio for the same
period of U.S. Global Leaders Growth Fund.
Fourth, by combining the funds into a single fund pursuing a large
capitalization growth strategy, the combined fund may be better positioned to
attract additional assets than Large Cap Growth Fund. U.S. Global Leaders Growth
Fund's greater asset size may allow it, relative to Large Cap Growth Fund, to
(i) obtain better net prices on securities trades and (ii) reduce per share
expenses as fixed expenses are shared over a larger asset base.
The board of trustees of U.S. Global Leaders Growth Fund considered that the
reorganization presents an excellent opportunity for U.S. Global Leaders Growth
Fund to acquire substantial investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to U.S.
Global Leaders Growth Fund and its shareholders.
In evaluating the proposed reorganization, the trustees also considered that the
adviser proposes to sell as much of your fund's portfolio prior to the closing
as is consistent with the treatment of the reorganization as tax-free. The
subadviser for U.S. Global Leaders Growth Fund has indicated that many of the
portfolio holdings of your fund are not consistent with U.S. Global Leaders
Growth Fund's investment strategy. Your fund will incur brokerage commissions
and other transaction costs in connection with such transactions, reducing the
net asset value of your shares. While these transactions may also generate
capital gains, your fund has capital losses that will be available to offset any
capital gains.
Each fund has approximately the same percentage of its assets represented by
unrealized capital gains. Your fund may realize much of that unrealized gain
prior to the closing of the reorganization; however, your fund has capital loss
carryforwards which will be used to offset any capital gains realized. Pursuant
to the reorganization, the remaining capital loss carryforwards of your fund
will be transferred to U.S. Global Leaders Growth Fund, which will be subject to
certain limitations under the Internal Revenue Code of 1986, as amended (the
"Code") on its ability to fully utilize such capital loss carryforwards.
The boards of both funds also considered that the adviser and the funds'
distributor, John Hancock Funds, LLC (the "Distributor") will benefit from the
reorganization. For example, the adviser might achieve cost savings from
managing one larger fund compared to managing more than one fund following
similar investment policies. The boards believe, however, that these savings
will not amount to a significant economic benefit to the adviser.
Comparative Fees and Expense Ratios.
The adviser has agreed to limit U.S. Global Leaders Growth Fund's total
operating expenses for at least one year from the date of the reorganization to
1.35% of the average daily net assets for Class A shares and 2.10% of average
daily net assets for Class B and Class C shares. These are lower than your
fund's total operating expenses for the twelve months ended June 30, 2004. For
example, Large Cap Growth Fund's total Class A operating expenses for the twelve
months ended June 30, 2004 were 1.76%. In addition, U.S. Global Leaders Growth
Fund's management fee at current asset levels is the same as your fund's
management fee at current asset levels. A full comparison of advisory fee rates
and expense ratios is included above.
16
Unreimbursed Distribution and Shareholder Service Expenses
The boards of trustees of Large Cap Growth Fund and U.S. Global Leaders Growth
Fund have determined that, if the reorganization occurs, unreimbursed
distribution and shareholder service expenses incurred under Large Cap Growth
Fund's Rule 12b-1 Plans will be reimbursable expenses under U.S. Global Leaders
Growth Fund's Rule 12b-1 Plans. However, the maximum amounts payable annually
under U.S. Global Leaders Growth Fund's Rule 12b-1 Plans (0.25%, 1.00% and 1.00%
of average daily net assets attributable to Class A shares, Class B shares and
Class C shares, respectively) will not increase.
The following table shows the actual and pro forma unreimbursed distribution and
shareholder service expenses of shares of Large Cap Growth Fund and U.S. Global
Leaders Growth Fund. The table shows both the dollar amount of these expenses
and the percentage of each class' average net assets that they represent. Class
I shares of U.S. Global Leaders Growth Fund are not included in the table
because this class does not have a Rule 12b-1 Plan.
Rule 12b-1 Payments and Unreimbursed Expenses
====================================================================================================
Aggregate Dollar Unreimbursed
Amount of 12b-1 Fees Rule 12b-1 Unreimbursed
Paid (for twelve Expenditures Expenses as %
month period ended (as of June 30, of Each Class'
Name of Fund June 30, 2004) 2004) Average Net Assets
====================================================================================================
Large Cap Growth Fund $ 442,245 (A) $ 140,811 (A) 0.10% (A)
====================================================================================================
$ 488,020 (B) $ 3,901,912 (B) 8.00% (B)
====================================================================================================
$ 35,770 (C) $ 64,344 (C) 1.80% (C)
====================================================================================================
U.S. Global Leaders Growth Fund $ 982,854 (A) $ 1,480,628 (A) 0.38% (A)
====================================================================================================
$ 1,600,393 (B) $ 2,339,709 (B) 1.46% (B)
====================================================================================================
$ 1,561,655 (C) $ 1,152,637 (C) 0.74% (C)
====================================================================================================
Pro Forma (U.S. Global Leaders Growth Fund):
====================================================================================================
$ 1,425,099 (A) $ 1,621,439 (A) 0.30% (A)
Assuming reorganization ===============================================================
with Large Cap Growth Fund $ 2,088,413 (B) $ 6,241,621 (B) 2.99% (B)
===============================================================
$ 1,597,425 (C) $ 1,216,981 (C) 0.76% (C)
====================================================================================================
If the reorganization had taken place on June 30, 2003, the pro forma combined
unreimbursed expenses of U.S. Global Leaders Growth Fund's Class A shares would
be lower than if no reorganization had occurred. Class B and Class C shares
would have been higher than if no reorganization had occurred. Nevertheless,
U.S. Global Leaders Growth Fund's assumption of Large Cap Growth Fund's
unreimbursed Rule 12b-1 expenses will have no immediate effect upon the payments
made under U.S. Global Leaders Growth Fund's Rule 12b-1 Plans. These payments
will be 0.25% of average daily net assets attributable to Class A shares (as
opposed to 0.30% for Large Cap Growth Fund), will continue to be 1.00% and 1.00%
of average daily net assets attributable to Class B and Class C shares,
respectively.
John Hancock Funds, LLC may recover unreimbursed distribution and shareholder
service expenses for Class B and Class C shares in future years. However, if
U.S. Global Leaders Growth Fund's board terminates either class' Rule 12b-1
Plan, that class will not be obligated to reimburse these distribution and
shareholder service expenses. Accordingly, until they are paid or accrued,
unreimbursed distribution and shareholder service expenses do not and will not
appear as an expense or liability in the financial statements of either fund. In
addition, unreimbursed expenses are not reflected in a fund's net asset value or
the formula for calculating Rule 12b-1 payments. The staff of the SEC has not
approved or disapproved the treatment of the unreimbursed distribution and
shareholder service expenses described in this proxy statement.
17
PAST PERFORMANCE OF EACH FUND
Set forth below is past performance information for each fund, which indicates
some of the risks of investing in each fund. The bar charts under "Calendar Year
Total Returns" show how each fund's total return (not including any deduction
for sales charges) has varied from year to year. The tables under "Average
Annual Total Returns" show each fund's average annual total return for each
class of shares (including deductions for sales charges) over time compared with
a broad-based securities market index. Class A performance is shown both before
and after taxes. Past performance before and after taxes does not indicate
future results.
Calendar Year Total Returns
(Class A without sales charges)
[The folowing information is represented by
a bar chart in the original document]
U.S. Global Large Cap
Leaders Growth Fund Growth Fund
1995 27.17%
1996 22.94% 20.40%
1997 40.68% 16.70%
1998 31.98% 26.42%
1999 7.88% 20.52%
2000 4.15% -30.74%
2001 -6.83% -30.89%
2002 -14.51% -30.97%
2003 19.24% 25.48%
2004 8.51% -0.61%
Sales loads are not reflected in the bar chart. If these amounts were reflected,
returns would be less than those shown.
Quarterly Returns
During the period shown in the bar chart, U.S. Global Leaders Growth Fund's
highest quarterly return was 29.43% for the quarter ended December 31, 1998 and
the lowest quarterly return was -16.69% for the quarter ended September 30,
1998.
During the period shown in the bar chart, the Large Cap Growth Fund's highest
quarterly return was 22.38% for the quarter ended December 31, 1998 and the
lowest quarterly return was -30.71% for the quarter ended March 31, 2001.
18
Average Annual Total Returns as of December 31, 2004
10 Years
1 Year 5 Years (or life of Class*)
------ ------- -------------------
U.S. Global Leaders Growth Fund
Class A - Before Taxes 3.10% 0.39% 11.24%
Class A - After Taxes on Distributions (1) 3.01% 0.37% 11.19%
Class A - After Taxes on Distributions and 2.02% 0.32% 10.02%
Sale of Fund Shares (1)
Class B - Before Taxes 2.67% -- 1.14%
Class C ** - Before Taxes 6.67% -- 2.25%
Large Cap Growth Fund
Class A - Before Taxes -5.57% -17.10% 0.64%*
Class A - After Taxes on Distributions (1) -5.57% -17.24% -0.65%*
Class A - After Taxes on Distributions and -3.62% -13.52% 0.56%*
Sale of Fund Shares (1)
Class B - Before Taxes -6.26% -17.15% 0.58%*
Class C** - Before Taxes -2.31% -16.82% -8.56%*
S&P 500 Index (2) 10.88% -2.30% 12.07%
Russell Top 200 Growth Index(3) 3.74% -10.70% 9.54%
- ----------------
(1) After-tax returns are shown for Class A shares only and would be different
for the other classes. After-tax returns are calculated using the
historical highest individual federal marginal income tax rates and do not
reflect the impact of state and local taxes. Actual after-tax returns
depend on your situation and may differ from those shown. Furthermore, the
after-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements such as 401(k) plans or IRAs.
(2) The S&P 500 Index is the Standard & Poor's Composite Index of 500 Stocks,
which is a commonly recognized unmanaged price index of 500 widely held
common stocks. Unlike the funds' returns, index returns do not reflect any
fees, expenses or taxes.
(3) The Russell Top 200 Growth Index is an unmanaged index containing
growth-oriented stocks from the Russell Top 200 Index. The Russell Top 200
Index is an unmanaged index representing 200 U.S. large capitalization
companies. Unlike the funds' returns, index returns do not reflect any
fees, expenses, or taxes.
* Inception dates for each class are as follows: U.S. Global Leaders Growth
Fund: Class A-September 29, 1995; Class B-May 20, 2002; Class C-May 20,
2002; Large Cap Growth Fund: Class C-June 1, 1998. The corresponding S&P
500 Index returns for periods since these dates were as follows: since
September 29, 1995, 9.97%; since June 1, 1998, 3.13%; since May 20, 2002,
5.92%. The corresponding Russell Top 200 growth Index returns for periods
since these dates were as follows: since September 29, 1995, 7.17%; since
June 1, 1998, -1.06%; since May 20, 2002, 1.99%.
** The average annual total returns for Class C shares have been adjusted to
reflect the elimination of the 1% front-end sales charge effective July 15,
2004.
FURTHER INFORMATION ON THE REORGANIZATION
Tax Status of the Reorganization
The reorganization is not intended to result in income, gain or loss for United
States federal income tax purposes and will not take place unless the funds
receive a satisfactory opinion from Wilmer Cutler Pickering Hale and Dorr LLP,
substantially to the effect that the reorganization described above will be a
"reorganization" within the meaning of Section 368(a) of the Code.
19
As a result, for federal income tax purposes:
o No gain or loss will be recognized by your fund upon (1) the transfer of all
of its assets to U.S. Global Leaders Growth Fund as described above or (2) the
distribution by your fund of U.S. Global Leaders Growth Fund shares to your
fund's shareholders;
o No gain or loss will be recognized by U.S. Global Leaders Growth Fund upon the
receipt of your fund's assets solely in exchange for the issuance of U.S. Global
Leaders Growth Fund shares to your fund and the assumption of your fund's
liabilities by U.S. Global Leaders Growth Fund;
The basis of the assets of your fund acquired by U.S. Global Leaders Growth
Fund will be the same as the basis of those assets in the hands of your fund
immediately before the transfer;
o The tax holding period of the assets of your fund in the hands of U.S. Global
Leaders Growth Fund will include your fund's tax holding period for those
assets;
o You will not recognize gain or loss upon the exchange of your shares of your
fund solely for U.S. Global Leaders Growth Fund shares as part of the
reorganization;
o The basis of U.S. Global Leaders Growth Fund shares received by you in the
reorganization will be the same as the basis of your shares of your fund
surrendered in exchange; and
o The tax holding period of U.S. Global Leaders Growth Fund shares you receive
will include the tax holding period of the shares of your fund that you
surrender in the exchange, provided that the shares of your fund were held by
you as capital assets on the date of the exchange.
In rendering its opinion, counsel shall rely upon, among other things,
reasonable assumptions as well as representations of your fund and U.S. Global
Leaders Growth Fund.
No tax ruling has been or will be received from the Internal Revenue Service
("IRS") in connection with the reorganization. An opinion of counsel is not
binding on the IRS or a court, and no assurance can be given that the IRS would
not assert, or a court would not sustain, a contrary position.
You should consult your tax adviser for the particular tax consequences to you
of the transaction, including the applicability of any state, local or foreign
tax laws.
Additional Terms of the Agreement and Plan of Reorganization
Certain terms of the Agreement and Plan of Reorganization are described above.
The following is a summary of certain additional terms of the Agreement and Plan
of Reorganization. This summary and any other description of the terms of the
Agreement and Plan of Reorganization contained in this proxy statement and
prospectus are qualified in their entirety by Exhibit A, which is the Form of
Agreement and Plan of Reorganization in its entirety, that is proposed for the
reorganization.
Surrender of Share Certificates. If your shares are represented by one or more
share certificates before the reorganization date, you must either surrender the
certificates to your fund or deliver to your fund a lost certificate affidavit,
in the form and accompanied by the surety bonds that your fund may require
(collectively, an "Affidavit"). On the reorganization date, all certificates
that have not been surrendered will be canceled, will no longer evidence
ownership of your fund's shares and will evidence ownership of U.S. Global
Leaders Growth Fund shares. Shareholders may not redeem or transfer U.S. Global
Leaders Growth Fund shares received in the reorganization until they have
surrendered their fund share certificates or delivered an Affidavit. U.S. Global
Leaders Growth Fund will not issue share certificates in the reorganization.
Conditions to Closing the Reorganization. The obligation of the Acquired Fund to
consummate the reorganization is subject to the satisfaction of certain
conditions, including the performance by the
20
Acquiring Fund of all its obligations under the Agreement and the receipt of all
consents, orders and permits necessary to consummate the reorganization (see
Agreement, paragraph 6).
The obligation of the Acquiring Fund to consummate the reorganization is subject
to the satisfaction of certain conditions, including the Acquired Fund's
performance of all of its obligations under the Agreement, the receipt of
certain documents and financial statements from the Acquired Fund and the
receipt of all consents, orders and permits necessary to consummate the
reorganization (see Agreement, paragraph 7).
The obligations of the Acquired Fund and the Acquiring Fund are subject to
approval of the Agreement by the necessary vote of the outstanding shares of the
Acquired Fund, in accordance with the provisions of the Acquired Fund's
declaration of trust and by-laws. The funds' obligations are also subject to the
receipt of a favorable opinion of Wilmer Cutler Pickering Hale and Dorr LLP as
to the qualification of the transaction as a "reorganization" for federal income
tax purposes. (see Agreement, paragraph 8).
Termination of Agreement. The board of trustees of the Acquired Fund or the
Acquiring Fund may terminate the Agreement (even if the shareholders of an
Acquired Fund have already approved it) at or prior to the reorganization date,
if that board believes that proceeding with the reorganization would no longer
be advisable.
Expenses of the Reorganization. John Hancock Advisers, LLC will pay the
reorganization costs incurred in connection with entering into and carrying out
the provisions of the Agreement, whether or not the reorganization occurs.
CAPITALIZATION
With respect to the proposal, the following tables set forth the capitalization
of each fund as of June 30, 2004 and the pro forma combined capitalization of
both funds as if the reorganization had occurred on that date. If a
reorganization is consummated, the actual exchange ratios on the reorganization
date may vary from the exchange ratios indicated. This is due to changes in the
market value of the portfolio securities of both funds between June 30, 2004 and
the reorganization date, changes in the amount of undistributed net investment
income and net realized capital gains of both funds during that period resulting
from income and distributions, and changes in the accrued liabilities of both
funds during the same period. It is impossible to predict how many shares of the
Acquiring Fund will actually be received and distributed by Acquired Fund on the
reorganization date. The tables should not be relied upon to determine the
amount of Acquiring Fund shares that will actually be received and distributed.
If the reorganization of your fund had taken place on June 30, 2004:
================================================================================
U.S. Global
U.S. Global Leaders
Large Cap Growth Leaders Growth Growth Fund
Proposal 1 Fund Fund Pro Forma(1)
================================================================================
Net Assets (millions) 192.5 881.6 1,074.1
================================================================================
Net Asset Value Per Share
================================================================================
Class A 9.86 26.82 26.82
================================================================================
Class B 8.97 26.40 26.40
================================================================================
Class C 8.97 26.40 26.40
================================================================================
Shares Outstanding
================================================================================
Class A 14,758,015 18,121,293 23,549,413
================================================================================
Class B 4,837,626 7,087,690 8,731,971
================================================================================
Class C 394,093 7,549,062 7,682,939
================================================================================
(1) Assuming the reorganization of Large Cap Growth Fund into U.S. Global
Leaders Growth Fund occurs.
21
The table reflects pro forma exchange ratios of approximately 0.368 Class A,
0.340 Class B, and 0.340 Class C shares of U.S. Global Leaders Growth Fund being
issued for each share of Large Cap Growth Fund, respectively.
ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES
The following table shows where in each fund's prospectus you can find
additional information about the business of each fund.
=============================================================================================================
Type of Information Headings in Each Prospectus
=============================================================================================================
Investment objective Goal and Strategy / Main Risks
and policies
=============================================================================================================
Portfolio management Portfolio Managers/Management Biographies/Acquired Fund and Acquiring Fund)
subadviser (Acquiring Fund)
=============================================================================================================
Expenses Your Expenses
=============================================================================================================
Custodian Business Structure
=============================================================================================================
Shares of beneficial Your Account: Choosing a Share Class
interest
=============================================================================================================
Purchase of shares Your Account: Choosing a Share Class, How Sales Charges are Calculated, Sales
Charge Reductions and Waivers, Opening an Account, Buying Shares, Transaction
Policies, Additional Investor Services
=============================================================================================================
Redemption or sales of Your Account: Selling Shares, How Sales Charges are Calculated, Transaction
shares Policies
=============================================================================================================
Dividends, Dividends and Account Policies
distributions and taxes
=============================================================================================================
BOARDS' EVALUATION AND RECOMMENDATION
For the reasons described above, the board of trustees of the Acquired Fund,
including the trustees who are not "interested persons" of the fund or the
adviser ("independent trustees"), approved the reorganization. In particular,
the trustees determined that the reorganization is in the best interests of the
Acquired Fund and that the interests the Acquired Fund shareholders would not be
diluted as a result of the reorganization. Similarly, the board of trustees U.S.
Global Leaders Growth Fund, including the independent trustees, approved the
reorganization. They also determined that the reorganization is in the best
interests of U.S. Global Leaders Growth Fund and that the interests of U.S.
Global Leaders Growth Fund's shareholders would not be diluted as a result of
the reorganization.
The trustees of the Acquired Fund recommend that
shareholders of the Acquired Fund vote FOR the proposal to
approve the Agreement and Plan of Reorganization.
VOTING RIGHTS AND REQUIRED VOTE
Each Acquired Fund share is entitled to one vote. Approval of each proposal
described above requires the affirmative vote of a majority of the outstanding
shares of the Acquired Fund that are entitled to vote on each respective
proposal. For this purpose, a majority of the outstanding shares of your fund
means the vote of the lesser of:
(1) 67% or more of the shares present at the meeting, if the holders of more
than 50% of the shares of the fund are present or represented by proxy, or
(2) more than 50% of the outstanding shares of the fund.
22
=============================================================================================================
Shares Quorum Voting
=============================================================================================================
In General All shares "present" in Shares "present" in person will be voted in person at
person or by proxy are the meeting. Shares present by proxy will be voted in
counted toward a quorum. accordance with instructions.
=============================================================================================================
Proxy with no Voting Considered "present" at Voted "for" a proposal.
Instruction (other than meeting.
Broker Non-Vote)
=============================================================================================================
Broker Non-Vote Considered "present" at Not voted. Same effect as a vote "against" a proposal.
meeting.
=============================================================================================================
Vote to Abstain Considered "present" at Not voted. Same effect as a vote "against" a proposal.
meeting.
=============================================================================================================
If the required approval of shareholders is not obtained with respect to a
proposal, the Acquired Fund will continue to engage in business as a separate
mutual fund and the board of trustees will consider what further action may be
appropriate. This action could include, among other things, closing the fund.
INFORMATION CONCERNING THE MEETING
Solicitation of Proxies
In addition to the mailing of these proxy materials, proxies may be solicited:
by telephone, by fax or in person by the trustees, officers and employees of
your fund; by personnel of your fund's investment adviser, John Hancock
Advisers, LLC and its transfer agent, John Hancock Signature Services, Inc.; or
by broker-dealer firms. Signature Services, together with a third party
solicitation firm, has agreed to provide proxy solicitation services to the
Acquired Fund at a cost of approximately $30,000. The Adviser will pay the costs
of preparing, mailing, and soliciting proxies, including payments to
unafiliated solicitation firms.
Revoking Proxies
Acquired Fund shareholders signing and returning a proxy have the power to
revoke it at any time before it is exercised:
o By filing a written notice of revocation with the Acquired Fund's transfer
agent, John Hancock Signature Services, Inc., 1 John Hancock Way, Suite 1000,
Boston, Massachusetts 02217-1000, or
o By returning a duly executed proxy with a later date before the time of the
meeting, or
o If a shareholder has executed a proxy but is present at the meeting and wishes
to vote in person, by notifying the secretary of your fund (without complying
with any formalities) at any time before it is voted. Being present at the
meeting alone does not revoke a previously executed and returned proxy.
Outstanding Shares and Quorum
As of January 24, 2005 (the "record date"), the number of shares of beneficial
interest of the Acquired Fund outstanding were as follows:
==================================================================================================
FUND SHARES OUTSTANDING
==================================================================================================
Large Cap Growth Fund
==================================================================================================
Class A _______
==================================================================================================
Class B _______
==================================================================================================
Class C _______
==================================================================================================
Only shareholders of record on the record date are entitled to notice of and to
vote at the meeting. A majority of the outstanding shares of the Acquired Fund
that are entitled to vote will be considered a quorum for the transaction of
business.
23
Other Business
The Acquired Fund's board of trustees knows of no business to be presented for
consideration at the meeting other than the proposals. If other business is
properly brought before the meeting, proxies will be voted according to the best
judgment of the persons named as proxies.
Adjournments
If a quorum is not present in person or by proxy at the time any session of the
meeting is called to order, the persons named as proxies may vote those proxies
that have been received to adjourn the meeting to a later date. If a quorum is
present but there are not sufficient votes in favor of a proposal, the persons
named as proxies may propose one or more adjournments of the meeting to permit
further solicitation of proxies concerning the proposal. Any adjournment will
require the affirmative vote of a majority of the Acquired Fund's shares at the
session of the meeting to be adjourned. If an adjournment of the meeting is
proposed because there are not sufficient votes in favor of a proposal, the
persons named as proxies will vote those proxies favoring the proposal in favor
of adjournment, and will vote those proxies against the reorganization against
adjournment.
Telephone Voting
In addition to soliciting proxies by mail, by fax or in person, your fund may
also arrange to have votes recorded by telephone by officers and employees of
your fund or by personnel of the adviser or transfer agent or a third party
solicitation firm. The telephone voting procedure is designed to verify a
shareholder's identity, to allow a shareholder to authorize the voting of shares
in accordance with the shareholder's instructions and to confirm that the voting
instructions have been properly recorded. If these procedures were subject to a
successful legal challenge, these telephone votes would not be counted at the
meeting. Your fund has not obtained an opinion of counsel about telephone
voting, but is currently not aware of any challenge.
o A shareholder will be called on a recorded line at the telephone number in a
fund's account records and will be asked to provide the shareholder's social
security number or other identifying information.
o The shareholder will then be given an opportunity to authorize proxies to vote
his or her shares at the meeting in accordance with the shareholder's
instructions.
o To ensure that the shareholder's instructions have been recorded correctly,
the shareholder will also receive a confirmation of the voting instructions by
mail.
o A toll-free number will be available in case the voting information contained
in the confirmation is incorrect.
o If the shareholder decides after voting by telephone to attend the meeting,
the shareholder can revoke the proxy at that time and vote the shares at the
meeting.
Internet Voting
You will also have the opportunity to submit your voting instructions via the
Internet by utilizing a program provided through a vendor. Voting via the
Internet will not affect your right to vote in person if you decide to attend
the meeting. Do not mail the proxy card if you are voting via the Internet. To
vote via the Internet, you will need the "control number" that appears on your
proxy card. These Internet voting procedures are designed to authenticate
shareholder identities, to allow shareholders to give their voting instructions,
and to confirm that shareholders' instructions have been recorded properly. If
you are voting via the Internet you should understand that there may be costs
associated with electronic access, such as usage charges from Internet access
providers and telephone companies, that must be borne to you.
o Read the proxy statement and have your proxy card(s) at hand.
24
o Go to the Web site on the proxy card.
o Enter the "control number" found on your proxy card.
o Follow the instructions on the Web site. Please call us at 1-800-225-5291 if
you have any problems.
o To insure that your instructions have been recorded correctly, you will
receive a confirmation of your voting instructions immediately after your
submission and also by e-mail if chosen.
Shareholders' Proposals
The funds are not required, and do not intend, to hold meetings of shareholders
each year. Instead, meetings will be held only when and if required. Any
shareholders desiring to present a proposal for consideration at the next
meeting for shareholders of their respective funds must submit the proposal in
writing, so that it is received by the appropriate fund at 101 Huntington
Avenue, Boston, Massachusetts 02199 within a reasonable time before any meeting.
OWNERSHIP OF SHARES OF THE FUNDS
To the knowledge of each fund, as of January 24, 2005, the following persons
owned of record or beneficially 5% or more of the outstanding shares of a class
of each fund, respectively:
===================================================================
Large Cap Growth Fund
===================================================================
Names and Addresses of Owners of Class A Class B Class C
More Than 5% of Shares
===================================================================
[ ] ---% ---% ---%
===================================================================
[ ] ---% ---% ---%
===================================================================
===========================================================================
U.S. Global Leaders Growth Fund
===========================================================================
Names and Addresses of Owners of
More Than 5% of Shares Class A Class B Class C Class I
===========================================================================
[ ] ---% ---% ---% ---%
===========================================================================
[ ] ---% ---% ---% ---%
===========================================================================
[ ] ---% ---% ---% ---%
===========================================================================
[ ] ---% ---% ---% ---%
===========================================================================
As of January 24, 2005, the trustees and officers of each fund owned in the
aggregate less than 1% of the outstanding shares of their respective funds.
EXPERTS
The financial highlights and financial statements of Large Cap Growth Fund for
the fiscal year ended October 31, 2004, and for U.S. Global Leaders Growth Fund,
for the periods ended December 31, 2003 and June 30, 2004, are incorporated by
reference into this proxy statement and prospectus. These financial statements
and financial highlights (other than for the semiannual period ended June 30,
2004 for U.S. Global Leaders Growth Fund) have been independently audited by
PricewaterhouseCoopers LLP, independent registered public accounting firm, as
stated in their reports appearing in the statement of
25
additional information. These financial statements and financial highlights have
been included in reliance on their reports given on their authority as experts
in accounting and auditing.
AVAILABLE INFORMATION
Each fund is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended and the Investment Company Act of 1940 as
amended, and will file reports, proxy statements and other information with the
Securities and Exchange Commission ("SEC"). These reports, proxy statements and
other information filed by the funds can be inspected and copied (for a
duplication fee) at the public reference facilities of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C., Northeast
Regional Office, The Woolworth Building, 233 Broadway, New York, New York 10279,
and at the Midwest Regional Office 500 West Madison Street, Suite 1400,
Chicago, Illinois. Copies of these materials can also be obtained by mail from
the Public Reference Section of the Securities and Exchange Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
copies of these documents may be viewed on-screen or downloaded from the SEC's
Internet site at http://www.sec.gov.
26
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
this [__]st day of [________], 2004, by and between John Hancock Capital Series,
a Massachusetts business trust (the "Trust") on behalf of its series, John
Hancock U.S. Global Leaders Growth Fund (the "Acquiring Fund") and John Hancock
Investment Trust III, a Massachusetts business trust (the "Trust II"), on behalf
of its series, John Hancock Large Cap Growth Fund (the "Acquired Fund"), each
with their principal place of business at 101 Huntington Avenue, Boston,
Massachusetts 02199. The Acquiring Fund and the Acquired Fund are sometimes
referred to collectively herein as the "Funds" and individually as a "Fund."
This Agreement is intended to be and is adopted as a plan of "reorganization,"
as such term is used in Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization will consist of: (1) the transfer of
all of the assets of the Acquired Fund to the Acquiring Fund in exchange solely
for (A) the issuance of Class A shares, Class B shares and Class C shares of
beneficial interest of the Acquiring Fund (the "Acquiring Fund Shares") to the
Acquired Fund and (B) the assumption by the Acquiring Fund of all of the
liabilities of the Acquired Fund, followed by (2) the distribution by the
Acquired Fund, on or promptly after the Closing Date hereinafter referred to, of
the Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation and termination of the Acquired Fund as provided herein, all upon
the terms and conditions set forth in this Agreement.
In consideration of the premises of the covenants and agreements hereinafter set
forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ISSUANCE OF ACQUIRING FUND SHARES; LIQUIDATION OF THE ACQUIRED
FUND
1.1 The Acquired Fund will transfer all of its assets (consisting, without
limitation, of portfolio securities and instruments, dividends and
interest receivables, cash and other assets), as set forth in the
statement of assets and liabilities referred to in Paragraph 7.2 hereof
(the "Statement of Assets and Liabilities"), to the Acquiring Fund free
and clear of all liens and encumbrances, except as otherwise provided
herein, in exchange for (i) the assumption by the Acquiring Fund of the
known and unknown liabilities of the Acquired Fund, including the
liabilities set forth in the Statement of Assets and Liabilities (the
"Acquired Fund Liabilities"), which shall be assigned and transferred
to the Acquiring Fund by the Acquired Fund and assumed by the Acquiring
Fund, and (ii) delivery by the Acquiring Fund to the Acquired Fund, for
distribution pro rata by the Acquired Fund to its shareholders in
proportion to their respective ownership of Class A, Class B and Class
C shares of beneficial interest of the Acquired Fund, as of the close
of business on April 8, 2005 (the "Closing Date"), of a number of the
Acquiring Fund Shares having an aggregate net asset value equal, in the
case of each class of Acquiring Fund Shares, to the value of the
assets, less such liabilities (herein referred to as the "net value of
the assets") attributable to the applicable class, assumed, assigned
and delivered, all determined as provided in Paragraph 2.1 hereof and
as of a date and time as specified therein. Such transactions shall
take place at the Closing, as defined in Paragraph 3.1 hereof. All
computations shall be provided by The Bank of New York (the
"Custodian"), as custodian and pricing agent for the Acquiring Fund and
the Acquired Fund.
1.2 The Acquired Fund has provided the Acquiring Fund with a list of the
current securities holdings of the Acquired Fund as of the date of
execution of this Agreement. The Acquired Fund reserves the right to
sell any of these securities (except to the extent sales may be limited
by representations made in connection with issuance of the tax opinion
provided for in paragraph 8.6 hereof) but will not, without the prior
approval of the Acquiring Fund, acquire any additional securities other
than securities of the type in which the Acquiring Fund is permitted to
invest.
1.3 John Hancock Advisers, LLC, the investment adviser to the Acquiring
Fund and the Acquired Fund, will bear the expenses allocable to each
fund in connection with the transactions contemplated by this
Agreement, whether or not the transactions contemplated hereby are
consummated.
27
1.4 On or as soon after the Closing Date as is conveniently practicable
(the "Liquidation Date"), the Acquired Fund will liquidate and
distribute pro rata to shareholders of record (the "Acquired Fund
shareholders"), determined as of the close of regular trading on the
New York Stock Exchange on the Closing Date, the Acquiring Fund Shares
received by the Acquired Fund pursuant to Paragraph 1.1 hereof. Such
liquidation and distribution will be accomplished by the transfer of
the Acquiring Fund Shares then credited to the account of the Acquired
Fund on the books of the Acquiring Fund, to open accounts on the share
records of the Acquiring Fund in the names of the Acquired Fund
shareholders and representing the respective pro rata number and class
of Acquiring Fund Shares due such shareholders. Acquired Fund
shareholders who own Class A shares of the Acquired Fund will receive
Class A Acquiring Fund Shares. Acquired Fund shareholders who own Class
B shares of the Acquired Fund will receive Class B Acquiring Fund
Shares. Acquired Fund shareholders who own Class C shares of the
Acquired Fund will receive Class C Acquiring Fund Shares. The Acquiring
Fund shall not issue certificates representing Acquiring Fund Shares in
connection with such exchange.
1.5 The Acquired Fund shareholders holding certificates representing their
ownership of shares of beneficial interest of the Acquired Fund shall
surrender such certificates or deliver an affidavit with respect to
lost certificates in such form and accompanied by such surety bonds as
the Acquired Fund may require (collectively, an "Affidavit"), to John
Hancock Signature Services, Inc. prior to the Closing Date. Any
Acquired Fund share certificate which remains outstanding on the
Closing Date shall be deemed to be canceled, shall no longer evidence
ownership of shares of beneficial interest of the Acquired Fund and
shall evidence ownership of Acquiring Fund Shares. Unless and until any
such certificate shall be so surrendered or an Affidavit relating
thereto shall be delivered, dividends and other distributions payable
by the Acquiring Fund subsequent to the Liquidation Date with respect
to Acquiring Fund Shares shall be paid to the holder of such
certificate(s), but such shareholders may not redeem or transfer
Acquiring Fund Shares received in the reorganization. The Acquiring
Fund will not issue share certificates in the reorganization.
1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than the registered holder of the Acquired Fund shares on
the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 The existence of the Acquired Fund shall be terminated as promptly as
practicable following the Liquidation Date.
1.8 Any reporting responsibility of the Acquired Fund, including, but not
limited to, the responsibility for filing of regulatory reports, tax
returns, or other documents with the Securities and Exchange Commission
(the "Commission"), any state securities commissions, and any federal,
state or local tax authorities or any other relevant regulatory
authority, is and shall remain the responsibility of the Acquired Fund.
2. VALUATION
2.1 The net asset values of the Class A, Class B and Class C Acquiring Fund
Shares and the net values of the assets and liabilities of the Acquired
Fund attributable to its Class A, Class B and Class C shares to be
transferred shall, in each case, be determined as of the close of
business (4:00 p.m. Boston time) on the Closing Date. The net asset
values of the Class A, Class B and Class C Acquiring Fund Shares shall
be computed by the Custodian in the manner set forth in the Acquiring
Fund's Declaration of Trust as amended and restated (the
"Declaration"), or By-Laws and the Acquiring Fund's then-current
prospectus and statement of additional information and shall be
computed in each case to not fewer than four decimal places. The net
value of the assets of the Acquired Fund attributable to its Class A,
Class B and Class C shares to be transferred shall be computed by the
Custodian by calculating the value of the assets of each class
transferred by the Acquired Fund and by subtracting therefrom the
amount of the liabilities of each class assigned and transferred to and
assumed by the Acquiring Fund on the Closing Date, said assets and
liabilities to be valued in the manner set forth in the Acquired Fund's
then current prospectus and statement of additional information and
shall be computed in each case to not fewer than four decimal places.
28
2.2 The number of shares of each class of Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for the
Acquired Fund's assets shall be determined by dividing the value of the
Acquired Fund's assets attributable to that class, less the liabilities
attributable to that class assumed by the Acquiring Fund, by the
Acquiring Fund's net asset value per share of the same class, all as
determined in accordance with Paragraph 2.1 hereof.
2.3 All computations of value shall be made by the Custodian in accordance
with its regular practice as pricing agent for the Funds.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be April 8, 2005 or such other date on or before
June 30, 2005 as the parties may agree (unless the parties agree in
writing to a later date). The closing of the reorganization (the
"Closing") shall be held as of 5:00 p.m. at the offices of the Trust
and the Trust II, 101 Huntington Avenue, Boston, Massachusetts 02199,
or at such other time and/or place as the parties may agree.
3.2 Portfolio securities that are not held in book-entry form in the name
of the Custodian as record holder for the Acquired Fund shall be
presented by the Acquired Fund to the Custodian for examination no
later than three business days preceding the Closing Date. Portfolio
securities which are not held in book-entry form shall be delivered by
the Acquired Fund to the Custodian for the account of the Acquiring
Fund on the Closing Date, duly endorsed in proper form for transfer, in
such condition as to constitute good delivery thereof in accordance
with the custom of brokers, and shall be accompanied by all necessary
federal and state stock transfer stamps or a check for the appropriate
purchase price thereof. Portfolio securities held of record by the
Custodian in book-entry form on behalf of the Acquired Fund shall be
delivered to the Acquiring Fund by the Custodian by recording the
transfer of beneficial ownership thereof on its records. The cash
delivered shall be in the form of currency or by the Custodian
crediting the Acquiring Fund's account maintained with the Custodian
with immediately available funds.
3.3 In the event that on the Closing Date (a) the New York Stock Exchange
shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on said Exchange or elsewhere
shall be disrupted so that accurate appraisal of the value of the net
assets of the Acquiring Fund or the Acquired Fund is impracticable, the
Closing Date shall be postponed until the first business day after the
day when trading shall have been fully resumed and reporting shall have
been restored; provided that if trading shall not be fully resumed and
reporting restored on or before June 30, 2005, this Agreement may be
terminated by the Acquiring Fund or by the Acquired Fund upon the
giving of written notice to the other party.
3.4 The Acquired Fund shall deliver at the Closing a list of the names,
addresses, federal taxpayer identification numbers and backup
withholding and nonresident alien withholding status of the Acquired
Fund shareholders and the number of outstanding shares of each class of
beneficial interest of the Acquired Fund owned by each such
shareholder, all as of the close of business on the Closing Date,
certified by its Treasurer, Secretary or other authorized officer (the
"Shareholder List"). The Acquiring Fund shall issue and deliver to the
Acquired Fund a confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date, or provide evidence satisfactory to the
Acquired Fund that such Acquiring Fund Shares have been credited to the
Acquired Fund's account on the books of the Acquiring Fund. At the
Closing, each party shall deliver to the other such bills of sale,
checks, assignments, stock certificates, receipts or other documents as
such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Trust II on behalf of the Acquired Fund represents, warrants and
covenants to the Acquiring Fund as follows:
(a) The Trust II is a business trust, duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts
and has the power to own all of its properties and assets and, subject to
approval by the shareholders of the Acquired Fund, to carry out the
transactions contemplated by this Agreement. Neither the Trust II nor the
Acquired Fund is required to qualify to
29
do business in any jurisdiction in which it is not so qualified or where
failure to qualify would subject it to any material liability or
disability. The Trust II has all necessary federal, state and local
authorizations to own all of its properties and assets and to carry on
its business as now being conducted;
(b) The Trust II is a registered investment company classified as a
management company and its registration with the Commission as an
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"), is in full force and effect. The Acquired Fund is a
diversified series of the Trust II;
(c) The Trust II and the Acquired Fund are not, and the execution,
delivery and performance of their obligations under this Agreement will
not result, in violation of any provision of the Trust II's Declaration
of Trust, as amended and restated (the "Trust II's Declaration") or
By-Laws or of any agreement, indenture, instrument, contract, lease or
other undertaking to which the Trust II or the Acquired Fund is a party
or by which it is bound;
(d) Except as otherwise disclosed in writing and accepted by the
Acquiring Fund, no material litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or threatened against the Trust II or the Acquired Fund or any of
the Acquired Fund's properties or assets. The Trust II knows of no facts
which might form the basis for the institution of such proceedings, and
neither the Trust II nor the Acquired Fund is a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects the Acquired
Fund's business or its ability to consummate the transactions herein
contemplated;
(e) The Acquired Fund has no material contracts or other commitments
(other than this Agreement or agreements for the purchase of securities
entered into in the ordinary course of business and consistent with its
obligations under this Agreement) which will not be terminated without
liability to the Acquired Fund at or prior to the Closing Date;
(f) The audited statement of assets and liabilities, including the
schedule of investments, of the Acquired Fund as of October 31, 2004 and
the related statement of operations (copies of which have been furnished
to the Acquired Fund), present fairly in all material respects the
financial condition of the Acquired Fund as of October 31, 2004 and the
results of its operations for the period then ended in accordance with
generally accepted accounting principles consistently applied, and there
were no known actual or contingent liabilities of the Acquired Fund as of
the respective dates thereof not disclosed therein;
(g) Since October 31, 2004, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquired Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except
as otherwise disclosed to and accepted by the Acquiring Fund;
(h) At the date hereof and by the Closing Date, all federal, state and
other tax returns and reports, including information returns and payee
statements, of the Acquired Fund required by law to have been filed or
furnished by such dates shall have been filed or furnished, and all
federal, state and other taxes, interest and penalties shall have been
paid so far as due, or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge no such return
is currently under audit and no assessment has been asserted with respect
to such returns or reports;
(i) The Acquired Fund has qualified for the favorable tax treatment as a
regulated investment company for each taxable year of its operation and
the Acquired Fund will qualify as such as of the Closing Date with
respect to its taxable year ending on the Closing Date;
(j) The authorized capital of the Acquired Fund consists of an unlimited
number of shares of beneficial interest, no par value. All issued and
outstanding shares of beneficial interest of the Acquired Fund are, and
at the Closing Date will be, duly and validly issued and outstanding,
fully paid and nonassessable by the Trust II. All of the issued and
outstanding shares of beneficial interest of the Acquired Fund will, at
the time of Closing, be held by the persons and in the amounts and
30
classes set forth in the Shareholder List submitted to the Acquiring Fund
pursuant to Paragraph 3.4 hereof. The Acquired Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of its shares of beneficial interest, nor is there
outstanding any security convertible into any of its shares of beneficial
interest;
(k) At the Closing Date, the Acquired Fund will have good and marketable
title to the assets to be transferred to the Acquiring Fund pursuant to
Paragraph 1.1 hereof, and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder, and upon delivery and
payment for such assets, the Acquiring Fund will acquire good and
marketable title thereto subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the Securities
Act of 1933, as amended (the "1933 Act");
(l) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Trust II on
behalf of the Acquired Fund, and this Agreement constitutes a valid and
binding obligation of the Acquired Fund enforceable in accordance with
its terms, subject to the approval of the Acquired Fund's shareholders;
(m) The information to be furnished by the Acquired Fund to the Acquiring
Fund for use in applications for orders, registration statements, proxy
materials and other documents which may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete and
shall comply in all material respects with federal securities and other
laws and regulations thereunder applicable thereto;
(n) The proxy statement of the Acquired Fund (the "Proxy Statement") to
be included in the Registration Statement referred to in Paragraph 5.7
hereof (other than written information furnished by the Acquiring Fund
for inclusion therein, as covered by the Acquiring Fund's warranty in
Paragraph 4.2(m) hereof), on the effective date of the Registration
Statement, on the date of the meeting of the Acquired Fund shareholders
and on the Closing Date, shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading;
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Acquired
Fund of the transactions contemplated by this Agreement;
(p) All of the issued and outstanding shares of beneficial interest of
the Acquired Fund have been offered for sale and sold in conformity with
all applicable federal and state securities laws;
(q) The Class A, Class B, and Class C prospectus of the Acquired Fund,
dated _________, (the "Acquired Fund Prospectus"), furnished to the
Acquiring Fund, does not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading; and
(r) The Acquired Fund Tax Representation Certificate to be delivered by
the Acquired Fund to the Acquiring Fund at Closing pursuant to Section
7.5 (the "Acquired Fund Tax Representation Certificate") will not on the
Closing Date contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not
misleading.
4.2 The Trust on behalf of the Acquiring Fund represents, warrants and
covenants to the Acquired Fund as follows:
(a) The Trust is a business trust duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts and has
the power to own all of its properties and assets and to carry out the
Agreement. Neither the Trust nor the Acquiring Fund is required to
qualify to do business in any jurisdiction in which it is not so
qualified or where failure to qualify would subject it to any material
liability or disability. The Trust has all necessary federal, state and
local authorizations to own all of its properties and assets and to carry
on its business as now being conducted;
31
(b) The Trust is a registered investment company classified as a
management company and its registration with the Commission as an
investment company under the 1940 Act is in full force and effect. The
Acquiring Fund is a non-diversified series of the Trust;
(c) The Class A, Class B, and Class C prospectus of the Acquiring Fund
dated ________ (the "Acquiring Fund Prospectus") and statement of
additional information for Class A, Class B and Class C shares of the
Acquiring Fund, dated March 1, 2004, and any amendments or supplements
thereto on or prior to the Closing Date, and the Registration Statement
on Form N-14 filed in connection with this Agreement (the "Registration
Statement") (other than written information furnished by the Acquired
Fund for inclusion therein, as covered by the Acquired Fund's warranty in
Paragraph 4.1(m) hereof) will conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations of the Commission thereunder, the Acquiring Fund
Prospectus does not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading and the Registration Statement
will not include any untrue statement of material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(d) At the Closing Date, the Trust on behalf of the Acquiring Fund will
have good and marketable title to the assets of the Acquiring Fund;
(e) The Trust and the Acquiring Fund are not, and the execution, delivery
and performance of their obligations under this Agreement will not result
in a violation of any provisions of the Trust's Declaration, or By-Laws
or of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Trust or the Acquiring Fund is a party or by
which the Trust or the Acquiring Fund is bound;
(f) Except as otherwise disclosed in writing and accepted by the Acquired
Fund, no material litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or threatened against the Trust or the Acquiring Fund or any of
the Acquiring Fund's properties or assets. The Trust knows of no facts
which might form the basis for the institution of such proceedings, and
neither the Trust nor the Acquiring Fund is a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects the Acquiring Fund's business
or its ability to consummate the transactions herein contemplated;
(g) The audited statement of assets and liabilities, including the
schedule of investments, of the Acquiring Fund as of December 31, 2003
and the unaudited statement of assets and liabilities of the Acquiring
Fund as of June 30, 2004 and the related statement of operations for each
such periods (copies of which have been furnished to the Acquired Fund),
present fairly in all material respects the financial condition of the
Acquiring Fund as of December 31, 2003 and June 30, 2004, respectively,
the results of its operations for the period then ended in accordance
with generally accepted accounting principles consistently applied, and
there were no known actual or contingent liabilities of the Acquiring
Fund as of the respective dates thereof not disclosed therein;
(h) Since June 30, 2004, there has not been any material adverse change
in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Trust on behalf of the Acquiring Fund of
indebtedness maturing more than one year from the date such indebtedness
was incurred, except as disclosed to and accepted by the Acquired Fund;
(i) Each of the Acquiring Fund and its predecessors has qualified for the
favorable tax treatment as a regulated investment company for each
taxable year of its operation and the Acquiring Fund will continue to
qualify as such as of the Closing Date and thereafter;
(j) The authorized capital of the Trust consists of an unlimited number
of shares of beneficial interest, no par value per share. All issued and
outstanding shares of beneficial interest of the Acquiring Fund are, and
at the Closing Date will be, duly and validly issued and outstanding,
fully paid and nonassessable by the Trust. The Acquiring Fund does not
have outstanding any options,
32
warrants or other rights to subscribe for or purchase any of its
shares of beneficial interest, nor is there outstanding any security
convertible into any of its shares of beneficial interest;
(k) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action on the part of the Trust on
behalf of the Acquiring Fund, and this Agreement constitutes a valid and
binding obligation of the Acquiring Fund enforceable in accordance with
its terms;
(l) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund pursuant to the terms of this Agreement, when so issued and
delivered, will be duly and validly issued shares of beneficial interest
of the Acquiring Fund and will be fully paid and nonassessable by the
Trust;
(m) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete and shall
comply in all material respects with federal securities and other laws
and regulations applicable thereto;
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Acquiring
Fund of the transactions contemplated by the Agreement, except for the
registration of the Acquiring Fund Shares under the 1933 Act and the 1940
Act; and
(o) The Acquiring Fund Tax Representation Certificate to be delivered by
the Acquiring Fund to the Acquired Fund at Closing pursuant to Section
6.3 (the "Acquiring Fund Tax Representation Certificate") will not on the
Closing Date contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not
misleading.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 Except as expressly contemplated herein to the contrary, the Trust II
on behalf of the Acquired Fund and the Trust on behalf of the Acquiring
Fund, will operate their respective businesses in the ordinary course
between the date hereof and the Closing Date, it being understood that
such ordinary course of business will include customary dividends and
distributions and any other distributions necessary or desirable to
avoid federal income or excise taxes.
5.2 The Trust II will call a meeting of the Acquired Fund shareholders to
consider and act upon this Agreement and to take all other action
necessary to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be issued
hereunder are not being acquired by the Acquired Fund for the purpose
of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4 The Trust II on behalf of the Acquired Fund will provide such
information within its possession or reasonably obtainable as the Trust
on behalf of the Acquiring Fund requests concerning the beneficial
ownership of the Acquired Fund's shares of beneficial interest.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund each shall take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or
advisable to consummate the transactions contemplated by this
Agreement.
5.6 The Trust II on behalf of the Acquired Fund shall furnish to the Trust
on behalf of the Acquiring Fund on the Closing Date the Statement of
Assets and Liabilities of the Acquired Fund as of the Closing Date,
which statement shall be prepared in accordance with generally accepted
accounting principles consistently applied and shall be certified by
the Acquired Fund's Treasurer or Assistant Treasurer. As promptly as
practicable but in any case within 60 days after the Closing Date, the
Acquired Fund shall furnish to the Acquiring Fund, in such form as is
reasonably satisfactory to the Trust, a statement of the earnings and
profits of the Acquired Fund for federal income tax purposes and of any
capital loss carryovers and other items that will be carried over to
the Acquiring Fund as a result of Section 381 of the Code, and which
statement will be certified by the President of the Acquired Fund.
33
5.7 The Trust on behalf of the Acquiring Fund will prepare and file with
the Commission the Registration Statement in compliance with the 1933
Act and the 1940 Act in connection with the issuance of the Acquiring
Fund Shares as contemplated herein.
5.8 The Trust II on behalf of the Acquired Fund will prepare a Proxy
Statement, to be included in the Registration Statement in compliance
with the 1933 Act, the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the 1940 Act and the rules and regulations thereunder
(collectively, the "Acts") in connection with the special meeting of
shareholders of the Acquired Fund to consider approval of this
Agreement.
5.9 Neither the Acquired Fund nor the Acquiring Fund shall take any action
that is inconsistent with the representations set forth in, with
respect to the Acquired Fund, the Acquired Fund Tax Representation
Certificate, and with respect to the Acquiring Fund, the Acquiring Fund
Tax Representation Certificate, to the extent such action would prevent
the reorganization from qualifying as a "reorganization" under Section
368(a) of the Code.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST II ON BEHALF OF THE ACQUIRED
FUND
The obligations of the Trust II on behalf of the Acquired Fund to complete the
transactions provided for herein shall be, at its election, subject to the
performance by the Trust on behalf of the Acquiring Fund of all the obligations
to be performed by it hereunder on or before the Closing Date, and, in addition
thereto, the following further conditions:
6.1 All representations and warranties of the Trust on behalf of the
Acquiring Fund contained in this Agreement shall be true and correct in
all material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Agreement, as of the
Closing Date with the same force and effect as if made on and as of the
Closing Date;
6.2 The Trust on behalf of the Acquiring Fund shall have delivered to the
Trust II on behalf of the Acquired Fund a certificate executed in its
name by the Trust's President or Vice President and its Treasurer or
Assistant Treasurer, in form and substance satisfactory to the Trust II
on behalf of the Acquired Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Trust on behalf
of the Acquiring Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other
matters as the Trust II on behalf of the Acquired Fund shall reasonably
request; and
6.3 The Acquiring Fund shall have delivered to the Acquired Fund an
Acquiring Fund Tax Representation Certificate in a form acceptable to
Wilmer Cutler Pickering Hale and Dorr LLP, the Acquired Fund and the
Acquiring Fund concerning certain tax-related matters with respect to
the Acquiring Fund.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST ON BEHALF OF THE ACQUIRING
FUND
The obligations of the Trust on behalf of the Acquiring Fund to complete
the transactions provided for herein shall be, at its election, subject
to the performance by the Trust II on behalf of the Acquired Fund of
all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Trust II on behalf of the
Acquired Fund contained in this Agreement shall be true and correct in
all material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Agreement, as of the
Closing Date with the same force and effect as if made on and as of the
Closing Date;
7.2 The Trust II on behalf of the Acquired Fund shall have delivered to the
Trust on behalf of the Acquiring Fund the Statement of Assets and
Liabilities of the Acquired Fund, together with a list of its portfolio
securities showing the federal income tax bases and holding periods of
such securities, as of the Closing Date, certified by the Treasurer or
Assistant Treasurer of the Acquired Fund;
34
7.3 The Trust II on behalf of the Acquired Fund shall have delivered to the
Trust on behalf of the Acquiring Fund on the Closing Date a certificate
executed in the name of the Acquired Fund by a President or Vice
President and a Treasurer or Assistant Treasurer of the Acquired Fund,
in form and substance satisfactory to the Trust on behalf of the
Acquiring Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquired Fund in this Agreement
are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement, and as
to such other matters as the Trust on behalf of the Acquiring Fund
shall reasonably request;
7.4 At or prior to the Closing Date, the Acquired Fund's investment
adviser, or an affiliate thereof, shall have made all payments, or
applied all credits, to the Acquired Fund required by any applicable
contractual expense limitation; and
7.5 The Acquired Fund shall have delivered to the Acquiring Fund an
Acquired Fund Tax Representation Certificate in a form acceptable to
Wilmer Cutler Pickering Hale and Dorr LLP, the Acquired Fund and the
Acquiring Fund concerning certain tax-related matters with respect to
the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST II ON BEHALF OF THE
ACQUIRED FUND AND THE TRUST ON BEHALF OF THE ACQUIRING FUND
The obligations hereunder of the Trust II on behalf of the Acquired Fund and the
Trust on behalf of the Acquiring Fund are each subject to the further conditions
that on or before the Closing Date:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares
of beneficial interest of the Acquired Fund in accordance with the
provisions of the Trust II's Declaration and By-Laws, and certified
copies of the resolutions evidencing such approval by the Acquired
Fund's shareholders shall have been delivered by the Acquired Fund to
the Trust on behalf of the Acquiring Fund;
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought
to restrain or prohibit, or obtain changes or other relief in
connection with, this Agreement or the transactions contemplated
herein;
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including
those of the Commission and their "no-action" positions) deemed
necessary by the Trust II or the Trust to permit consummation, in all
material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order
or permit would not involve a risk of a material adverse effect on the
assets or properties of the Acquiring Fund or the Acquired Fund,
provided that either party hereto may waive any such conditions for
itself;
8.4 The Registration Statement shall have become effective under the 1933
Act and the 1940 Act and no stop orders suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the
parties hereto, no investigation or proceeding for that purpose shall
have been instituted or be pending, threatened or contemplated under
the 1933 Act or the 1940 Act;
8.5 The Acquired Fund shall have distributed to its shareholders, in a
distribution or distributions qualifying for the deduction for
dividends paid under Section 561 of the Code, all of its investment
company taxable income (as defined in Section 852(b)(2) of the Code
determined without regard to Section 852(b)(2)(D) of the Code) for its
taxable year ending on the Closing Date, all of the excess of (i) its
interest income excludable from gross income under Section 103(a) of
the Code over (ii) its deductions disallowed under Sections 265 and
171(a)(2) of the Code for its taxable year ending on the Closing Date,
and all of its net capital gain (as such term is used in Sections
852(b)(3)(A) and (C) of the Code), after reduction by any available
capital loss carryforward, for its taxable year ending on the Closing
Date; and
8.6 The parties shall have received an opinion of Wilmer Cutler Pickering
Hale and Dorr LLP, satisfactory to the Trust II on behalf of the
Acquired Fund and the Trust on behalf of the Acquiring Fund,
substantially to the effect that for federal income tax purposes the
acquisition by the Acquiring Fund of all of the assets of the Acquired
Fund solely in exchange for the issuance of
35
Acquiring Fund Shares to the Acquired Fund and the assumption of all
of the Acquired Fund Liabilities by the Acquiring Fund, followed by
the distribution by the Acquired Fund, in liquidation of the Acquired
Fund, of Acquiring Fund Shares to the shareholders of the Acquired
Fund in exchange for their shares of beneficial interest of the
Acquired Fund and the termination of the Acquired Fund, will
constitute a "reorganization" within the meaning of Section 368(a) of
the Code. Notwithstanding anything herein to the contrary, neither the
Trust II nor the Trust may waive the conditions set forth in this
Paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1 The Trust on behalf of the Acquiring Fund and the Trust II on behalf of
the Acquired Fund each represent and warrant to the other that there
are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2 John Hancock Advisers, LLC, the investment adviser to the Acquiring
Fund and the Acquired Fund, will bear the expenses allocable to each
fund in connection with the transactions contemplated by this
Agreement, whether or not the transactions contemplated hereby are
consummated.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust on behalf of the Acquiring Fund and the Trust II on behalf of
the Acquired Fund agree that neither party has made any representation,
warranty or covenant not set forth herein or referred to in Paragraph 4
hereof and that this Agreement constitutes the entire agreement between
the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions
contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the Trust
on behalf of the Acquiring Fund and the Trust II on behalf of the
Acquired Fund. In addition, either party may at its option terminate
this Agreement at or prior to the Closing Date:
(a) because of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be performed at
or prior to the Closing Date;
(b) because of a condition herein expressed to be precedent to the
obligations of the terminating party which has not been met and which
reasonably appears will not or cannot be met;
(c) by resolution of the Trust's Board of Trustees if circumstances
should develop that, in the good faith opinion of such Board, make
proceeding with the Agreement not in the best interests of the
Acquiring Fund's shareholders; or
(d) by resolution of the Trust II's Board of Trustees if
circumstances should develop that, in the good faith opinion of such
Board, make proceeding with the Agreement not in the best interests
of the Acquired Fund's shareholders.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Trust, the Acquiring Fund, the Trust II,
or the Acquired Fund, or the Trustees or officers of the Trust or the
Trust II, but each party shall bear the expenses incurred by it
incidental to the preparation and carrying out of this Agreement.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon by the authorized officers of the Trust and the Trust II.
However, following the meeting of shareholders of the Acquired Fund held
pursuant to Paragraph 5.2 of this Agreement, no such amendment may have the
effect of changing the provisions regarding the method for determining the
number of Acquiring Fund Shares to be received by the Acquired Fund shareholders
under this Agreement to the detriment of such shareholders without their further
approval; provided that nothing contained in this
36
Article 12 shall be construed to prohibit the parties from amending this
Agreement to change the Closing Date.
13. NOTICES
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Acquiring Fund or to the Acquired
Fund, each at 101 Huntington Avenue, Boston, Massachusetts 02199, Attention:
President, and, in either case, with copies to Wilmer Cutler Pickering Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109, Attention: David C.
Phelan, Esq.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment
or transfer hereof or of any rights or obligations hereunder shall be
made by any party without the prior written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed
to confer upon or give any person, firm or corporation, other than the
parties hereto and their respective successors and assigns, any rights
or remedies under or by reason of this Agreement.
14.5 All persons dealing with the Trust or the Trust II must look solely to
the property of the Trust or the Trust II, respectively, for the
enforcement of any claims against the Trust or the Trust II as the
Trustees, officers, agents and shareholders of the Trust or the Trust
II assume no personal liability for obligations entered into on behalf
of the Trust or the Trust II, respectively. None of the other series of
the Trust or the Trust II shall be responsible for any obligations
assumed by or on behalf of the Acquiring Fund or the Acquired Fund
under this Agreement.
37
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first set forth above by its President or Vice President
and has caused its corporate seal to be affixed hereto.
JOHN HANCOCK CAPITAL SERIES on behalf of
JOHN HANCOCK U.S. GLOBAL LEADERS
GROWTH FUND
By:________________________________________
James A. Shepherdson
President and Chief Executive Officer
JOHN HANCOCK INVESTMENT TRUST III, on behalf of
JOHN HANCOCK LARGE CAP GROWTH FUND
By:________________________________________
Susan S. Newton
Senior Vice President and Secretary
38
Thank
you
for mailing
your proxy card
promptly!
39
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
JOHN HANCOCK LARGE CAP GROWTH FUND
SPECIAL MEETING OF SHAREHOLDERS -March 23, 2005
PROXY SOLICITATION BY THE BOARD OF TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) James A.
Shepherdson, Susan S. Newton and William H. King, with full power of
substitution in each, to vote all the shares of beneficial interest of John
Hancock Large Cap Growth Fund ("Large Cap Growth Fund") which the undersigned is
(are) entitled to vote at the Special Meeting of Shareholders (the "Meeting") of
Large Cap Growth Fund to be held at 101 Huntington Avenue, Boston,
Massachusetts, on March 23, 2005 at 9:00 a.m., Boston time, and at any
adjournment(s) of the Meeting. All powers may be exercised by a majority of all
proxy holders or substitutes voting or acting, or, if only one votes and acts,
then by that one. Receipt of the Proxy Statement dated February 4, 2005 is
hereby acknowledged. If not revoked, this proxy shall be voted for the proposal.
Date , 2005
----------------------------------------
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
-----------------------------------------------
-----------------------------------------------
Signature(s)
NOTE: Signature(s) should agree with the name(s)
printed herein. When signing as attorney, executor,
administrator, trustee or guardian, please give
your full name as such. If a corporation, please
sign in full corporate name by president or
other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
SPECIFY YOUR DESIRED ACTION BY A CHECK MARK IN THE APPROPRIATE SPACE. THIS PROXY
WILL BE VOTED IN FAVOR OF (FOR) PROPOSAL 1 IF NO SPECIFICATION IS MADE BELOW. AS
TO ANY OTHER MATTER, THE PROXY OR PROXIES WILL VOTE IN ACCORDANCE WITH THEIR
BEST JUDGEMENT.
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW.
(1) To approve an Agreement and Plan of Reorganization between John Hancock
Large Cap Growth Fund ("Large Cap Growth Fund") and John Hancock U.S.
Global Leaders Growth Fund ("U.S. Global Leaders Growth Fund"). Under
this Agreement, Large Cap Growth Fund would transfer all of its assets
to U.S. Global Leaders Growth Fund in exchange for shares of U.S.
Global Leaders Growth Fund. These shares will be distributed
proportionately to you and the other shareholders of Large Cap Growth
Fund. U.S. Global Leaders Growth Fund will also assume Large Cap Growth
Fund's liabilities.
FOR |_| AGAINST |_| ABSTAIN |_|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
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JOHN HANCOCK FUNDS
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Proxy Voting Form
John Hancock Funds
Large Cap Growth Fund
THE TRUSTEES RECOMMEND A VOTE "FOR" THE FOLLOWING PROPOSAL.
Proposal 1. [ ]FOR [ ]AGAINST [ ]ABSTAIN
To approve an Agreement and Plan of Reorganization between John Hancock
Large Cap Growth Fund ("Large Cap Growth Fund") and John Hancock U.S.
Global Leaders Growth Fund ("U.S. Global Leaders Growth Fund"). Under this
Agreement, Large Cap Growth Fund would transfer all of its assets to U.S.
Global Leaders Growth Fund in exchange for shares of U.S. Global Leaders
Growth Fund. These shares will be distributed proportionately to you and
the other shareholders of Large Cap Growth Fund. U.S. Global Leaders Growth
Fund will also assume Large Cap Growth Fund's liabilities.
- --------------------------------------------------------------------------------
Please refer to the proxy statement for discussion of each of these matters.
If not revoked, this proxy shall be voted "FOR" the proposal. Thank you for
voting.
- --------------------------------------------------------------------------------
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Press this button to {SUBMIT] your Proxy Vote.
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John Hancock
- ------------
JOHN HANCOCK FUNDS
Internet Proxy Voting Services
Proxy Voting Form
John Hancock Funds
Large Cap Growth Fund
- --------------------------------------------------------------------------------
Thank You! Your vote has been submitted
- --------------------------------------------------------------------------------
THE TRUSTEES RECOMMEND A VOTE "FOR" THE FOLLOWING PROPOSAL.
Proposal 1.
To approve an Agreement and Plan of Reorganization between John Hancock
Large Cap Growth Fund ("Large Cap Growth Fund") and John Hancock U.S.
Global Leaders Growth Fund ("U.S. Global Leaders Growth Fund"). Under this
Agreement, Large Cap Growth Fund would transfer all of its assets to U.S.
Global Leaders Growth Fund in exchange for shares of U.S. Global Leaders
Growth Fund. These shares will be distributed proportionately to you and
the other shareholders of Large Cap Growth Fund. U.S. Global Leaders Growth
Fund will also assume Large Cap Growth Fund's liabilities.
Please refer to the proxy statement for discussion of each of these matters.
- --------------------------------------------------------------------------------
[Change Vote] [Exit Internet Proxy Voting Service] [Vote Another Proxy]
Part B
Statement of Additional Information
JOHN HANCOCK U.S. GLOBAL LEADERS GROWTH FUND
(the "Acquiring Fund", and a series of John Hancock Capital Series)
JOHN HANCOCK LARGE CAP GROWTH FUND
(the "Acquired Fund", and a series of John Hancock Investment Trust III)
101 Huntington Avenue
Boston, MA 02199
1-800-225-5291
February 4, 2005
This Statement of Additional Information provides additional information and is
not a prospectus. It should be read in conjunction with the related proxy
statement and prospectus dated February 4, 2005. This Statement of Additional
Information provides additional information about John Hancock U.S. Global
Leaders Growth Fund and the Fund that it is acquiring, John Hancock Large Cap
Growth Fund. Please retain this Statement of Additional Information for future
reference. A copy of the proxy statement and prospectus can be obtained free of
charge by calling John Hancock Signature Services, Inc., at 1-800-225-5291.
Table Of Contents
Page
Introduction 3
Additional Information about the Acquiring Fund 3
General Information and History 3
Investment Objective and Policies 3
Management of the Acquiring Fund 3
Control Persons and Principal Holders of Shares 3
Investment Advisory and Other Services 3
Brokerage Allocation and Other Practices 3
Capital Stock and Other Securities 3
Purchase, Redemption and Pricing of Acquiring Fund Shares 3
Tax Status 4
Underwriters 4
Calculation of Performance Data 4
Financial Statements 4
Description of Portfolio Holdings Disclosure Policy 4
Additional Information about the Acquired Fund 5
General Information and History 5
Investment Objective and Policies 5
Management of the Acquired Fund 5
Control Persons and Principal Holders of Shares 5
Investment Advisory and Other Services 5
Brokerage Allocation and Other Practices 6
Capital Stock and Other Securities 6
Purchase, Redemption and Pricing of Acquired Fund Shares 6
Tax Status 6
Underwriters 6
Calculation of Performance Data 6
Financial Statements 6
Description of Portfolio Holdings Disclosure Policy 6
Exhibits
A- Statement of Additional Information, dated March 1, 2004 as revised
July 15, 2004, of the Acquiring Fund including audited financial
statements as of December 31, 2003.
B- Statement of Additional Information, dated March 1, 2004 as revised
July 15, 2004, of the Acquired Fund including audited financial
statements as of October 31, 2003.
C- Proforma combined financial statements as of June 30, 2004, assuming
the reorganization of John Hancock Large Cap Growth Fund into John
Hancock U.S. Global Leaders Growth Fund occurred on that date.
2
INTRODUCTION
This Statement of Additional Information ("SAI") is intended to supplement the
information provided in a proxy statement and prospectus dated February 4, 2005.
The proxy statement and prospectus has been sent to the shareholders of the
Acquired Fund in connection with the solicitation by the Trustees of the
Acquired Fund of proxies to be voted at the Special Meeting of Shareholders of
the Acquired Fund to be held on March 23, 2005. This Statement of Additional
Information incorporates by reference the Statement of Additional Information of
the Acquiring Fund, dated March 1, 2004 as revised July 15, 2004, and the
Statement of Additional Information of the Acquired Fund, dated March 1, 2004 as
revised July 15, 2004. The SAI for the Acquiring Fund and the SAI for the
Acquired Fund are included with this Statement of Additional Information.
Additional Information About the Acquiring Fund
General Information and History
- -------------------------------
For additional information about the Acquiring Fund generally and its history,
see "Organization of the Fund" in the Acquiring Fund SAI attached hereto as
Exhibit A.
Investment Objective and Policies
- ---------------------------------
For additional information about the Acquiring Fund's investment objective,
policies and restrictions, see "Investment Objective and Policies" and
"Investment Restrictions" in the Acquiring Fund SAI attached hereto as Exhibit
A.
Management of the Acquiring Fund
- --------------------------------
For additional information about the Acquiring Fund's Board of Trustees,
officers and management personnel, see "Those Responsible for Management" in the
Acquiring Fund SAI attached hereto as Exhibit A.
Control Persons and Principal Holders of Shares
- -----------------------------------------------
For additional information about control persons of the Acquiring Fund and
principal holders of shares of the Acquiring Fund, see "Those Responsible for
Management" in the Acquiring Fund SAI attached hereto as Exhibit A.
Investment Advisory and Other Services
- --------------------------------------
For additional information about the Acquiring Fund's investment adviser,
investment subadviser, custodian, transfer agent and independent accountants,
see "Investment Advisory and Other Services", "Distribution Contracts",
"Transfer Agent Services", "Custody of Portfolio", and "Independent Auditors" in
the Acquiring Fund SAI attached hereto as Exhibit A.
Brokerage Allocation and Other Practices
- ----------------------------------------
For additional information about the Acquiring Fund's brokerage allocation
practices, see "Brokerage Allocation" in the Acquiring Fund SAI attached hereto
as Exhibit A.
Capital Stock and Other Securities
- ----------------------------------
For additional information about the voting rights and other characteristics of
the Acquiring Fund's shares of beneficial interest, see "Description of the
Fund's Shares" in the Acquiring Fund SAI attached hereto as Exhibit A.
Purchase, Redemption and Pricing of Acquiring Fund Shares
- ---------------------------------------------------------
For additional information about the purchase, redemption and pricing of the
Acquiring Fund's shares, see "Net Asset Value", "Initial Sales Charge on Class A
shares", "Deferred Sales Charge on Class B and Clas C shares" Sales
Compensation", "Special Redemptions", "Additional Services and Programs", and
"Purchase and Redemptions through Third Parties" in the Acquiring Fund SAI
attached hereto as Exhibit A.
Tax Status
- ----------
For additional information about the tax status of the Acquiring Fund, see "Tax
Status" in the Acquiring Fund SAI, attached hereto as Exhibit A.
Underwriters
- ------------
For additional information about the Acquiring Fund's principal underwriter and
the distribution contract between the principal underwriter and the Acquiring
Fund, see "Distribution Contracts" in the Acquiring Fund SAI attached hereto as
Exhibit A.
Calculation of Performance Data
- -------------------------------
For additional information about the investment performance of the Acquiring
Fund, see "Calculation of Performance" in the Acquiring Fund SAI attached hereto
as Exhibit A.
Financial Statements
- --------------------
Audited annual financial statements of the Acquiring Fund at December 31, 2003
are attached to the Acquiring Fund SAI, which is attached hereto as Exhibit A.
Pro forma combined financial statements as of June 30, 2004 are also attached
hereto.
Description of Portfolio Holdings Disclosure Policy
- ---------------------------------------------------
General. The Board of Trustees has adopted a policy that governs when and by
whom portfolio holdings information may be provided to investors, service
providers to the fund or market participants. It is the policy of the fund to
provide nonpublic information regarding fund's portfolio holdings only in the
limited circumstances permitted by the policy and only where there is a
legitimate business purpose for providing the information. The policy applies to
the officers of the fund, the adviser, any subadviser, John Hancock Funds, its
affiliates and their employees. This is a summary of the fund's policy. The
Board of Trustees has approved this policy and must approve any material
changes. In doing so, the Board has concluded that the limited circumstances
where disclosure of non-public information is permitted are in the best
interests of the fund. Under no circumstances may any person receive
compensation for providing non-public information regarding the fund's holdings
to any person.
The following defined terms are used in the policy and this summary.
Nonpublic Information. Portfolio holdings are considered Nonpublic Information
until such holdings are posted on a publicly available website which is
disclosed in the fund prospectus or until filed with the SEC via Edgar on either
Form N-CSR or Form N-Q.
"Affiliated Persons" are: (a) persons affiliated with the Funds, (b) the Funds'
investment adviser or principal underwriter or any affiliate of either entity,
(c) the investment adviser's ultimate parent, Manulife Financial Corporation
("MFC") or any affiliate thereof, (d) in the case of a particular Fund
portfolio, the subadviser to the portfolio, or any affiliate of the subadviser,
(e) the Funds' custodian and (f) the Funds' certified public accountants.
"Nonaffiliated Persons" is any person who is not an Affiliated Person.
Board Oversight
The Board is responsible for overseeing the policy and has delegated to the
Chief Compliance Officer ("CCO") the responsibility for monitoring the use of
nonpublic information and the fund's and the Adviser's compliance with this
policy. In connection with the Board's oversight of the policy, the CCO will
provide periodic reports to the Board on the implementation of the policy, and
the Board will review at least annually a list of the entities that have
received nonpublic information, the frequency of such disclosures and the
business purpose thereof. In addition, the Board must approve any modifications
to the policy. The CCO is required to report any material issues that may arise
under the policy or disclosure in violation of this policy to the Board of
Trustees.
2
Conflicts of Interest
If the fund or another party subject to this policy desire to provide
portfolio information that has not already been made public to a Nonaffiliated
Person (as defined below), the Board or the CCO determines if the interests of
the fund and the services providers may be in conflict in determining whether to
supply that such information. If the Board or the CCO determines that no
conflict exists, the Board or the CCO may authorize release of the information.
If the CCO determines that a conflict exists, the CCO refers the conflict to the
Board of Trustees. When considering a potential conflict, the Board of Trustees
shall only permit such disclosure of the nonpublic information if in their
reasonable business judgment they conclude such disclosure will be in the best
interest of shareholders.
Public Disclosure. The Funds' portfolio holdings are disclosed in publicly
available filings with the SEC (e.g. Form N-CSR or Form N-Q). The Funds also
publish the following information on their website jhfunds.com:
(1) On the fifth business day after month-end, the following information
for each fund will be posted on www.jhfunds.com: top ten holdings (% of
each position); top ten sector analysis; total return/yield; top ten
countries/SIC; average quality/maturity; beta/alpha/r2 (open-end funds
only); top ten portfolio composition
(2) The following information regarding portfolio holdings will be posted
on www.jhfunds.com each month on a one-month lag (i.e., information as
of December 31 will be posted on February 1): security name; cusip;
market value; shares/amount; coupon rate; maturity date
(3) With respect to Money Market Fund and U.S. Government Cash Reserve, the
following information regarding portfolio holdings will be posted
weekly on www.jhfunds.com: net assets; seven day yield; thirty day
yield; % maturing in last seven days; portfolio breakdown by securities
type; weighted average maturity
The information referenced in (1), (2), and (3) above will be available on the
funds' website until a fund files its next Form N-CSR or Form N-Q with the
Securities and Exchange Commission.
Disclosure of Portfolio Holdings to Nonaffiliated Persons
Subject to monitoring and authorization by the CCO, persons subject to the
policy may provide Nonpublic Information regarding portfolio holdings to
Nonaffiliated Persons in the circumstances listed below in connection with the
day-to-day operations and management of the funds. Each Nonaffiliated Person
must agree to keep such information confidential and to prohibit its employees
from trading on such information for personal or proprietary purposes. In
addition, each Nonaffiliated Person subject to a confidentiality agreement must
provide certification at least annually to the CCO stating that they have
complied with the restrictions referenced above. The funds have ongoing
relationships with any entities referenced below.
Rating / Ranking Organizations. Nonpublic Information regarding
portfolio holdings will be provided to rating / ranking organizations, such as
Moodys, S&P, Morningstar and Lipper, for the purpose of reviewing the portfolio,
the adviser or, if applicable, subadviser. Generally, this information is
provided on a monthly basis, as soon as practical after the end of each month.
The funds generally expect that they will continue to provide these rating
and/or ranking organizations with such information. The Board believes that
allowing rating organizations to have this information will provide the market
with a rating for the fund and is in the best interests of shareholders.
Risk Management, Attribution, Portfolio Analysis tools. Nonpublic
Information regarding portfolio holdings may be provided to Factset, BondEdge,
Investools, Salomon Yieldbook, Lehman Brothers Municipal Index Group, Wilshire,
or other entities for the purpose of compiling reports and preparing data for
use by the fund and its service providers. Generally, this information is
provided on a daily or monthly basis, as soon as practical after the end of each
day or month respectively. The fund
3
generally expects that it will continue to provide these service providers with
such information.The Board believes that having these analytical tools available
to the fund and its service providers is in the best interests of shareholders.
Proxy Voting Services. Nonpublic Information regarding portfolio
holdings may be provided to IRRC, the fund's proxy voting service, for the
purpose of voting proxies relating to portfolio holdings. The proxy voting
service has regular access to the fund's portfolio holdings in order to
determine if there are any securities held by the fund as to which there is
upcoming shareholder action in which the fund is entitled to vote. The provision
of this information is necessary in order to carry out the fund's proxy voting
policy. The fund expects that it will continue to provide IRRC with such
information.
Computer Products and Services. Nonpublic Information regarding
portfolio holdings may be provided to entities providing computer products and
services to the Funds (for example, for the purpose of generating compliance
reports or reports relating to proxy voting). These services may require
regular, normally daily, access to the fund's portfolio holdings in order to
provide the contracted services to the fund.
Institutional Traders. Nonpublic Information regarding portfolio
holdings may be provided to institutional traders to assist in research and
trade execution. This information, which identifies current holdings without a
time lag, is provided on an irregular basis and is normally only used to
identify portfolio positions as to which the fund would welcome bids. The
provision of this information is in the fund's best interest because it assists
the fund in receiving the best possible price on the sale of portfolio holdings.
Financial Printers. Nonpublic information regarding portfolio holdings
may be provided to financial printers and independent contractors involved in
the production of a Fund's regulatory reports and filings. This information,
which identifies current holdings without a time lag at the end of a Fund's
reporting period, is used in connection with producing such reports and filings.
The Funds currently provide portfolio information to McMunn Associates, Inc., a
financial printer, for the purpose of preparing fund shareholder reports and
regulatory filings, typically within a week following the end of a reporting
period.
Courts and Regulators. Nonpublic Information regarding portfolio
holdings may be provided to any court or regulator with appropriate
jurisdiction. The frequency and time lag depends upon the request. In providing
this information, the fund is merely complying with its legal obligations.
Other Nonaffiliated Persons or Other Circumstances. Nonpublic Information
regarding portfolio holdings may be provided to other Nonaffiliated Persons or
in other circumstances, if approved by the Board, the CCO or his or her
designee. In determining whether to approve such disclosure, the Board or the
CCO considers: (a) the purpose of providing such information, (b) the procedures
that will be used to ensure that such information remains confidential and is
not traded upon and (c) whether such disclosure is in the best interest of the
shareholders of the Fund. The time lag and frequency of the information being
provided depends upon the nature of the request. The CCO only provides such
information where the CCO has determined, in accordance with the authority
delegated by the Board of Trustees, that the provision of the information is
beneficial to the fund. The CCO is required to report to the Board of Trustees
any provision of Non-Public information that falls in this category.
Disclosure of Portfolio Holdings to Affiliated Persons
Certain affiliated persons of the fund or its service providers need access
to Non-Public information regarding portfolio holdings in order to provide their
services to the fund. For example, employees of the Adviser or a subadviser who
provide portfolio management or administrative services to the funds need
current access to portfolio holdings to perform those services. Accountants need
access to portfolio holdings in performing audits. In addition, some persons who
work for the affiliates of the adviser may need access to Non-Public information
to perform their roles. For example, risk management personnel of the Adviser's
parent, may need to know the portfolio holdings in order to evaluate whether the
Adviser's internal controls are being properly implemented or designed.
Generally, affiliated persons that have
4
access to Non-Public Information are provided that information without time lag
and with such frequency as is necessary to perform their duties, which
frequently is daily. The fund generally expects that it will continue to provide
these service providers with such information. The following is a list of the
categories of affiliated persons who may be given access to portfolio holdings.
o The Adviser or, if applicable, any subadviser (as identified under
"Investment Advisory and Other Services" in this Statement of
Additional Information) and their employees - provision of information
on-going and daily.
o The fund's custodian, the Bank of New York, (and its employees) which
requires information in order to provide its assigned services to the
fund - provision of information on-going and daily.
o The fund's certified public accounting firm, as identified under
"Independent Registered Public Accounting Firm" in this Statement of
Additional Information, and its employees who provide audit or other
services to the fund - provision of information on an annual basis,
such information being provided immediately after the end of the
fund's fiscal year, in connection with the accounting firm's audit of
financial statements.
Each Affiliated Person must agree to keep such information
confidential and to prohibit its employees from trading on such information for
personal or proprietary purposes. In addition, each Affiliated Person must
provide certification at least annually to the CCO stating that they have
complied with the restrictions referenced above. As with any of the fund's
policies, the CCO is charged with reviewing its implementation and evaluating
periodically if it is reasonably designed to comply with the federal securities
laws. The CCO will, in that process, consider whether the access outlined above
to Affiliated Persons continues to be appropriate.
The Board or the CCO may authorize the provision of any Nonpublic
Information regarding portfolio holdings to other Affiliated Persons. If
authorized by the CCO, the CCO must report such approval to the Board of
Trustees.
Additional Information About the Acquired Fund
General Information and History
- -------------------------------
For additional information about the Acquired Fund generally and its history,
see "Organization of the Fund" in the Acquired Fund SAI attached hereto as
Exhibit B.
Investment Objective and Policies
- ---------------------------------
For additional information about the Acquired Fund's investment objectives,
policies and restrictions, see "Investment Objective and Policies" and
"Investment Restrictions" in the Acquired Fund SAI attached hereto as Exhibit B.
Management of Acquired Fund
- ---------------------------
For additional information about the Acquired Fund's Board of Trustees, officers
and management personnel, see "Those Responsible for Management" in the Acquired
Fund SAI attached hereto as Exhibit B.
Control Persons and Principal Holders of Shares
- -----------------------------------------------
For additional information about control persons of the Acquiring Fund and
principal holders of shares of the Acquiring Fund, see "Those Responsible for
Management" in the Acquiring Fund SAI attached hereto as Exhibit A.
Investment Advisory and Other Services
- --------------------------------------
For additional information about the Acquired Fund's investment adviser,
custodian, transfer agent and independent accountants, see "Investment Advisory
and Other Services", "Distribution Contracts", "Transfer Agent Services",
"Custody of Portfolio" and "Independent Auditors" in the Acquired Fund SAI
attached hereto as Exhibit B.
5
Brokerage Allocation and Other Practices
- ----------------------------------------
For additional information about the Acquired Fund's brokerage allocation
practices, see "Brokerage Allocation" in the Acquired Fund SAI attached hereto
as Exhibit B.
Capital Stock and Other Securities
- ----------------------------------
For additional information about the voting rights and other characteristics of
the Acquired Fund's shares of beneficial interest, see "Description of the
Fund's Shares" in the Acquired Fund SAI attached hereto as Exhibit B.
Purchase, Redemption and Pricing of Acquired Fund Shares
- --------------------------------------------------------
For additional information about the purchase, redemption and pricing of the
Acquired Fund's shares, see "Net Asset Value", "Initial Sales Charge on Class A
shares", "Deferred Sales Charge on Class B and Class C shares", "Sales
Compensation", "Additional Services and Programs", "Special Redemptions" and
"Purchases and Redemptions Through Third Parties" in the Acquired Fund SAI
attached hereto as Exhibit B.
Tax Status
- ----------
For additional information about the tax status of the Acquired Fund, see "Tax
Status" in the Acquired Fund SAI attached hereto as Exhibit B.
Underwriters
- ------------
For additional information about the Acquired Fund's principal underwriter and
the distribution contract between the principal underwriter and the Acquired
Fund, see "Distribution Contracts" in the Acquired Fund SAI attached hereto as
Exhibit B.
Calculation of Performance Data
- -------------------------------
For additional information about the investment performance of the Acquired
Fund, see "Calculation of Performance" in the Acquired Fund SAI attached hereto
as Exhibit B.
Financial Statements
- --------------------
Audited annual financial statements of the Acquired Fund at October 31, 2003 are
attached to the Acquired Fund SAI, which is attached hereto as Exhibit B.
Pro forma combined financial statements as of June 30, 2004 are also attached
hereto.
Description of Portfolio Holdings Disclosure Policy
- ---------------------------------------------------
General. The Board of Trustees has adopted a policy that governs when and by
whom portfolio holdings information may be provided to investors, service
providers to the fund or market participants. It is the policy of the fund to
provide nonpublic information regarding fund's portfolio holdings only in the
limited circumstances permitted by the policy and only where there is a
legitimate business purpose for providing the information. The policy applies to
the officers of the fund, the adviser, any subadviser, John Hancock Funds, its
affiliates and their employees. This is a summary of the fund's policy. The
Board of Trustees has approved this policy and must approve any material
changes. In doing so, the Board has concluded that the limited circumstances
where disclosure of non-public information is permitted are in the best
interests of the fund. Under no circumstances may any person receive
compensation for providing non-public information regarding the fund's holdings
to any person.
The following defined terms are used in the policy and this summary.
Nonpublic Information. Portfolio holdings are considered Nonpublic Information
until such holdings are posted on a publicly available website which is
disclosed in the fund prospectus or until filed with the SEC via Edgar on either
Form N-CSR or Form N-Q.
"Affiliated Persons" are: (a) persons affiliated with the Funds, (b) the Funds'
investment adviser or principal underwriter or any affiliate of either entity,
(c) the investment adviser's ultimate parent, Manulife
6
Financial Corporation ("MFC") or any affiliate thereof, (d) in the case of a
particular Fund portfolio, the subadviser to the portfolio, or any affiliate of
the subadviser, (e) the Funds' custodian and (f) the Funds' certified public
accountants.
"Nonaffiliated Persons" is any person who is not an Affiliated Person.
Board Oversight
The Board is responsible for overseeing the policy and has delegated to the
Chief Compliance Officer ("CCO") the responsibility for monitoring the use of
nonpublic information and the fund's and the Adviser's compliance with this
policy. In connection with the Board's oversight of the policy, the CCO will
provide periodic reports to the Board on the implementation of the policy, and
the Board will review at least annually a list of the entities that have
received nonpublic information, the frequency of such disclosures and the
business purpose thereof. In addition, the Board must approve any modifications
to the policy. The CCO is required to report any material issues that may arise
under the policy or disclosure in violation of this policy to the Board of
Trustees.
Conflicts of Interest
If the fund or another party subject to this policy desire to provide
portfolio information that has not already been made public to a Nonaffiliated
Person (as defined below), the Board or the CCO determines if the interests of
the fund and the services providers may be in conflict in determining whether to
supply that such information. If the Board or the CCO determines that no
conflict exists, the Board or the CCO may authorize release of the information.
If the CCO determines that a conflict exists, the CCO refers the conflict to the
Board of Trustees. When considering a potential conflict, the Board of Trustees
shall only permit such disclosure of the nonpublic information if in their
reasonable business judgment they conclude such disclosure will be in the best
interest of shareholders.
Public Disclosure. The Funds' portfolio holdings are disclosed in publicly
available filings with the SEC (e.g. Form N-CSR or Form N-Q). The Funds also
publish the following information on their website jhfunds.com:
(4) On the fifth business day after month-end, the following information
for each fund will be posted on www.jhfunds.com: top ten holdings (% of
each position); top ten sector analysis; total return/yield; top ten
countries/SIC; average quality/maturity; beta/alpha/r2 (open-end funds
only); top ten portfolio composition
(5) The following information regarding portfolio holdings will be posted
on www.jhfunds.com each month on a one-month lag (i.e., information as
of December 31 will be posted on February 1): security name; cusip;
market value; shares/amount; coupon rate; maturity date
(6) With respect to Money Market Fund and U.S. Government Cash Reserve, the
following information regarding portfolio holdings will be posted
weekly on www.jhfunds.com: net assets; seven day yield; thirty day
yield; % maturing in last seven days; portfolio breakdown by securities
type; weighted average maturity
The information referenced in (1), (2), and (3) above will be available on the
funds' website until a fund files its next Form N-CSR or Form N-Q with the
Securities and Exchange Commission.
Disclosure of Portfolio Holdings to Nonaffiliated Persons
Subject to monitoring and authorization by the CCO, persons subject to the
policy may provide Nonpublic Information regarding portfolio holdings to
Nonaffiliated Persons in the circumstances listed below in connection with the
day-to-day operations and management of the funds. Each Nonaffiliated Person
must agree to keep such information confidential and to prohibit its employees
from trading on such information for personal or proprietary purposes. In
addition, each Nonaffiliated Person subject to a
7
confidentiality agreement must provide certification at least annually to the
CCO stating that they have complied with the restrictions referenced above. The
funds have ongoing relationships with any entities referenced below.
Rating / Ranking Organizations. Nonpublic Information regarding
portfolio holdings will be provided to rating / ranking organizations, such as
Moodys, S&P, Morningstar and Lipper, for the purpose of reviewing the portfolio,
the adviser or, if applicable, subadviser. Generally, this information is
provided on a monthly basis, as soon as practical after the end of each month.
The funds generally expect that they will continue to provide these rating
and/or ranking organizations with such information. The Board believes that
allowing rating organizations to have this information will provide the market
with a rating for the fund and is in the best interests of shareholders.
Risk Management, Attribution, Portfolio Analysis tools. Nonpublic
Information regarding portfolio holdings may be provided to Factset, BondEdge,
Investools, Salomon Yieldbook, Lehman Brothers Municipal Index Group, Wilshire,
or other entities for the purpose of compiling reports and preparing data for
use by the fund and its service providers. Generally, this information is
provided on a daily or monthly basis, as soon as practical after the end of each
day or month respectively. The fund generally expects that it will continue to
provide these service providers with such information.The Board believes that
having these analytical tools available to the fund and its service providers is
in the best interests of shareholders.
Proxy Voting Services. Nonpublic Information regarding portfolio
holdings may be provided to IRRC, the fund's proxy voting service, for the
purpose of voting proxies relating to portfolio holdings. The proxy voting
service has regular access to the fund's portfolio holdings in order to
determine if there are any securities held by the fund as to which there is
upcoming shareholder action in which the fund is entitled to vote. The provision
of this information is necessary in order to carry out the fund's proxy voting
policy. The fund expects that it will continue to provide IRRC with such
information.
Computer Products and Services. Nonpublic Information regarding
portfolio holdings may be provided to entities providing computer products and
services to the Funds (for example, for the purpose of generating compliance
reports or reports relating to proxy voting). These services may require
regular, normally daily, access to the fund's portfolio holdings in order to
provide the contracted services to the fund.
Institutional Traders. Nonpublic Information regarding portfolio
holdings may be provided to institutional traders to assist in research and
trade execution. This information, which identifies current holdings without a
time lag, is provided on an irregular basis and is normally only used to
identify portfolio positions as to which the fund would welcome bids. The
provision of this information is in the fund's best interest because it assists
the fund in receiving the best possible price on the sale of portfolio holdings.
Financial Printers. Nonpublic information regarding portfolio holdings
may be provided to financial printers and independent contractors involved in
the production of a Fund's regulatory reports and filings. This information,
which identifies current holdings without a time lag at the end of a Fund's
reporting period, is used in connection with producing such reports and filings.
The Funds currently provide portfolio information to McMunn Associates, Inc., a
financial printer, for the purpose of preparing fund shareholder reports and
regulatory filings, typically within a week following the end of a reporting
period.
Courts and Regulators. Nonpublic Information regarding portfolio
holdings may be provided to any court or regulator with appropriate
jurisdiction. The frequency and time lag depends upon the request. In providing
this information, the fund is merely complying with its legal obligations.
Other Nonaffiliated Persons or Other Circumstances. Nonpublic Information
regarding portfolio holdings may be provided to other Nonaffiliated Persons or
in other circumstances, if approved by the Board, the CCO or his or her
designee. In determining whether to approve such disclosure, the Board or
8
the CCO considers: (a) the purpose of providing such information, (b) the
procedures that will be used to ensure that such information remains
confidential and is not traded upon and (c) whether such disclosure is in the
best interest of the shareholders of the Fund. The time lag and frequency of the
information being provided depends upon the nature of the request. The CCO only
provides such information where the CCO has determined, in accordance with the
authority delegated by the Board of Trustees, that the provision of the
information is beneficial to the fund. The CCO is required to report to the
Board of Trustees any provision of Non-Public information that falls in this
category.
Disclosure of Portfolio Holdings to Affiliated Persons
Certain affiliated persons of the fund or its service providers need access
to Non-Public information regarding portfolio holdings in order to provide their
services to the fund. For example, employees of the Adviser or a subadviser who
provide portfolio management or administrative services to the funds need
current access to portfolio holdings to perform those services. Accountants need
access to portfolio holdings in performing audits. In addition, some persons who
work for the affiliates of the adviser may need access to Non-Public information
to perform their roles. For example, risk management personnel of the Adviser's
parent, may need to know the portfolio holdings in order to evaluate whether the
Adviser's internal controls are being properly implemented or designed.
Generally, affiliated persons that have access to Non-Public Information are
provided that information without time lag and with such frequency as is
necessary to perform their duties, which frequently is daily. The fund generally
expects that it will continue to provide these service providers with such
information. The following is a list of the categories of affiliated persons who
may be given access to portfolio holdings.
o The Adviser or, if applicable, any subadviser (as identified under
"Investment Advisory and Other Services" in this Statement of
Additional Information) and their employees - provision of information
on-going and daily.
o The fund's custodian, the Bank of New York, (and its employees) which
requires information in order to provide its assigned services to the
fund - provision of information on-going and daily.
o The fund's certified public accounting firm, as identified under
"Independent Registered Public Accounting Firm" in this Statement of
Additional Information, and its employees who provide audit or other
services to the fund - provision of information on an annual basis,
such information being provided immediately after the end of the
fund's fiscal year, in connection with the accounting firm's audit of
financial statements.
Each Affiliated Person must agree to keep such information
confidential and to prohibit its employees from trading on such information for
personal or proprietary purposes. In addition, each Affiliated Person must
provide certification at least annually to the CCO stating that they have
complied with the restrictions referenced above. As with any of the fund's
policies, the CCO is charged with reviewing its implementation and evaluating
periodically if it is reasonably designed to comply with the federal securities
laws. The CCO will, in that process, consider whether the access outlined above
to Affiliated Persons continues to be appropriate.
The Board or the CCO may authorize the provision of any Nonpublic
Information regarding portfolio holdings to other Affiliated Persons. If
authorized by the CCO, the CCO must report such approval to the Board of
Trustees.
9
JOHN HANCOCK
U.S. Global Leaders
Growth Fund
PROSPECTUS 3.1.2004
as revised
1.24.2005
[JOHN HANCOCK(R) LOGO]
----------------------
JOHN HANCOCK FUNDS
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.
CONTENTS
- --------------------------------------------------------------------------------
JOHN HANCOCK U.S. GLOBAL LEADERS GROWTH FUND 4
YOUR ACCOUNT
------------------------------------------------------------------
CHOOSING A SHARE CLASS 6
HOW SALES CHARGES ARE CALCULATED 6
SALES CHARGE REDUCTIONS AND WAIVERS 7
OPENING AN ACCOUNT 8
BUYING SHARES 9
SELLING SHARES 10
TRANSACTION POLICIES 12
DIVIDENDS AND ACCOUNT POLICIES 14
ADDITIONAL INVESTOR SERVICES 14
FUND DETAILS
------------------------------------------------------------------
BUSINESS STRUCTURE 15
FINANCIAL HIGHLIGHTS 16
FOR MORE INFORMATION BACK COVER
------------------------------------------------------------------
U.S. GLOBAL LEADERS GROWTH FUND
GOAL AND STRATEGY
[GRAPHIC]
The fund seeks long-term growth of capital. To pursue this goal, the fund
invests primarily in common stocks of "U.S. Global Leaders." Under normal market
conditions, at least 80% of the fund's assets will be invested in stocks of
companies the managers regard as U.S. Global Leaders.
The managers consider U.S. Global Leaders to be U.S. companies with
multinational operations that typically exhibit the following key sustainable
growth characteristics:
o Hold leading market shares of their relevant industries that result in high
profit margins and high investment returns.
o Supply consumable products or services so that their revenue streams are
recurring.
The managers seek to identify companies with superior long-term earnings
prospects and to continue to own them as long as the managers believe they will
continue to enjoy favorable prospects for capital growth and are not overvalued
in the marketplace.
As a result of its investment strategy, the fund typically invests in
large-capitalization companies (companies in the capitalization range of the
Standard & Poor's 500 Index, which was $748.7 million to $385.9 billion as of
December 31, 2004).
The fund is non-diversified, which allows it to make larger investments in
individual companies.
The fund may invest in other types of equity securities and foreign stocks.
In abnormal circumstances, the fund may temporarily invest in short-term cash
equivalents. In these and other cases, the fund might not achieve its goal.
================================================================================
PAST PERFORMANCE
[GRAPHIC]
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 to provide an indication of the fund's
risks. Year-by-year and average annual figures for the period prior to May 17,
2002 reflect the actual performance of the sole class of U.S. Global Leaders
Growth Fund, the fund's predecessor. On May 17, 2002, the fund acquired all of
the assets of U.S. Global Leaders Growth Fund pursuant to an agreement and plan
of reorganization in exchange for Class A shares of the fund. The total expenses
for the fund's Class A shares are estimated to be substantially the same as the
predecessor fund's sole class of shares. The average annual returns for Class A
have been restated to reflect applicable sales charges. This adjustment will
have the effect of reducing the previously reported performance of the U.S.
Global Leaders Growth Fund. Year-by-year and index figures do not reflect sales
charges and would be lower if they did. The average annual total returns for
Class C have been adjusted to reflect the elimination of the front-end sales
charge effective July 15, 2004. All figures assume dividend reinvestment. Past
performance before and after taxes does not indicate future results.
CLASS A, TOTAL RETURNS
BEST QUARTER: Q4 '98, 29.43%
WORST QUARTER: Q3 '98, -16.69%
AFTER-TAX RETURNS
After-tax returns are shown for Class A shares only and would be different for
the other classes. They are calculated using the historical highest individual
federal marginal income-tax rates and do not reflect the impact of state and
local taxes. Actual after-tax returns depend on the investor's tax situation and
may differ from those shown. The after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements such as
401(k) plans or individual retirement accounts.
INDEX (reflects no fees or taxes)
STANDARD & POOR'S 500 INDEX, an unmanaged index that includes 500 widely traded
stocks.
CLASS A CALENDAR YEAR TOTAL RETURNS (WITHOUT SALES CHARGES)
[THE FOLLOWING TABLE WAS REPRESENTED BY A GRAPH IN THE PRINTED MATERIAL.]
1996 22.94%
1997 40.68%
1998 31.98%
1999 7.88%
2000 4.15%
2001 -6.83%
2002 -14.51%
2003 19.24%
2004 8.51%
AVERAGE ANNUAL TOTAL RETURNS (INCLUDING SALES CHARGE) FOR PERIODS ENDING
12-31-04
LIFE OF LIFE OF LIFE OF
1 YEAR 5 YEAR CLASS A CLASS B CLASS C
Class A before tax (began 9-29-95) 3.10% 0.39% 11.24% -- --
Class A after tax on distributions 3.01% 0.37% 11.19% -- --
Class A after tax on distributions, with sale 2.02% 0.32% 10.02% -- --
Class B before tax (began 5-20-02) 2.67% -- -- 1.14% --
Class C before tax (began 5-20-02) 6.67% -- -- -- 2.25%
- ---------------------------------------------------------------------------------------------
Standard & Poor's 500 Index 7.07% -1.94% 8.88% 5.06% 5.06%
4
MAIN RISKS
[GRAPHIC]
The value of your investment will fluctuate in response to stock market
movements.
The fund's management strategy has a significant influence on fund performance.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform investments that focus on small- or
medium-capitalization stocks. Similarly, growth stocks could underperform value
stocks.
Companies that have substantial multinational operations may be affected by
fluctuations in currency exchange rates and by economic and political conditions
in foreign countries. These conditions may include restrictions on monetary
repatriation and possible seizure, nationalization or expropriation of assets.
To the extent the fund invests in a given industry, its performance will be hurt
if that industry performs poorly. In addition, if the managers' security
selection strategies 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, these risks
could increase volatility or reduce performance:
o If the fund invests heavily in a single issuer, its performance could
suffer significantly from adverse events affecting that issuer.
o In a down market, higher-risk securities could become harder to value or to
sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
================================================================================
YOUR EXPENSES
[GRPAHIC]
Transaction expenses are charged directly to your account. Operating expenses
are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C
Maximum front-end sales charge (load) on purchases
as a % of purchase price 5.00% none none
Maximum deferred sales charge (load)
as a % of purchase or sale price, whichever is less none(2) 5.00% 1.00%
ANNUAL OPERATING EXPENSES CLASS A CLASS B CLASS C
Management fee 0.75% 0.75% 0.75%
Distribution and service (12b-1) fees 0.25% 1.00% 1.00%
Other expenses 0.36% 0.36% 0.36%
Total fund operating expenses 1.36% 2.11% 2.11%
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 and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.
EXPENSES YEAR 1 YEAR 3 YEAR 5 YEAR 10
Class A $ 632 $ 909 $ 1,207 $ 2,053
Class B with redemption $ 714 $ 961 $ 1,334 $ 2,250
Class B without redemption $ 214 $ 661 $ 1,134 $ 2,250
Class C with redemption $ 314 $ 661 $ 1,134 $ 2,441
Class C without redemption $ 214 $ 661 $ 1,134 $ 2,441
(1) A $4.00 FEE WILL BE CHARGED FOR WIRE REDEMPTIONS.
(2) EXCEPT FOR INVESTMENTS OF $1 MILLION OR MORE; SEE "HOW SALES CHARGES ARE
CALCULATED."
================================================================================
SUBADVISER
SUSTAINABLE GROWTH ADVISERS, LP
Responsible for day-to-day investment management
Founded in 2003
Supervised by the adviser
PORTFOLIO MANAGERS
GORDON M. MARCHAND, CFA, CIC
Managed fund since 1995
GEORGE P. FRAISE
Joined fund team in 2000
ROBERT L. ROHN
Joined fund team in 2003
SEE PAGE 15 FOR THE MANAGEMENT BIOGRAPHIES.
FUND CODES
CLASS A Ticker USGLX
CUSIP 409902830
Newspaper USGlobLdrs
SEC number 811-1677
JH fund number 26
CLASS B Ticker USLBX
CUSIP 409902822
Newspaper --
SEC number 811-1677
JH fund number 126
CLASS C Ticker USLCX
CUSIP 409902814
Newspaper --
SEC number 811-1677
JH fund number 526
5
YOUR ACCOUNT
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Each share class has its own cost structure, including a Rule 12b-1 plan that
allows it to pay fees for the sale, distribution and service of its shares. Your
financial representative can help you decide which share class is best for you.
CLASS A
o A front-end sales charge, as described at right.
o Distribution and service (12b-1) fees of 0.25%.
CLASS B
o No front-end sales charge; all your money goes to work for you right away.
o Distribution and service (12b-1) fees of 1.00%.
o A deferred sales charge, as described on following page.
o Automatic conversion to Class A shares after eight years, thus reducing
future annual expenses.
CLASS C
o No front-end sales charge; all your money goes to work for you right away.
o Distribution and service (12b-1) fees of 1.00%.
o A 1.00% contingent deferred sales charge on shares sold within one year of
purchase.
o No automatic conversion to Class A shares, so annual expenses continue at
the Class C level throughout the life of your investment.
INVESTORS PURCHASING $1 MILLION OR MORE OF CLASS B OR CLASS C SHARES MAY WANT TO
CONSIDER THE LOWER OPERATING EXPENSES OF CLASS A SHARES.
FOR ACTUAL PAST EXPENSES OF EACH SHARE CLASS, SEE THE FUND INFORMATION EARLIER
IN THIS PROSPECTUS.
BECAUSE 12b-1 FEES ARE PAID ON AN ONGOING BASIS, THEY MAY COST SHAREHOLDERS MORE
THAN OTHER TYPES OF SALES CHARGES.
YOUR BROKER/DEALER RECEIVES A PERCENTAGE OF THESE SALES CHARGES AND FEES. IN
ADDITION, JOHN HANCOCK FUNDS MAY PAY SIGNIFICANT COMPENSATION OUT OF ITS OWN
RESOURCES TO YOUR BROKER-DEALER. THESE PAYMENTS ARE DESCRIBED IN THE STATEMENT
OF ADDITIONAL INFORMATION.
YOUR BROKER/DEALER OR AGENT MAY CHARGE YOU A FEE TO EFFECT TRANSACTIONS IN FUND
SHARES.
OTHER CLASSES OF SHARES OF THE FUND, WHICH HAVE THEIR OWN EXPENSE STRUCTURE, MAY
BE OFFERED IN SEPARATE PROSPECTUSES.
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
CLASS A Sales charges are as follows:
CLASS A SALES CHARGES
AS A % OF AS A % OF YOUR
YOUR INVESTMENT OFFERING PRICE* INVESTMENT
Up to $49,999 5.00% 5.26%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,000 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 and over See below
*OFFERING PRICE IS THE NET ASSET VALUE PER SHARE PLUS ANY INITIAL SALES CHARGE.
You may qualify for a reduced Class A sales charge if you own or are purchasing
Class A, Class B, Class C, Class I or Class R shares of John Hancock mutual
funds. TO RECEIVE THE REDUCED SALES CHARGE, YOU MUST TELL YOUR BROKER OR
FINANCIAL ADVISER AT THE TIME YOU PURCHASE A FUND'S CLASS A SHARES ABOUT ANY
OTHER JOHN HANCOCK MUTUAL FUNDS HELD BY YOU, YOUR SPOUSE OR YOUR CHILDREN UNDER
THE AGE OF 21. This includes investments held in a retirement account, an
employee benefit plan or at a broker or financial adviser other than the one
handling your current purchase. John Hancock will credit the combined value, at
the current offering price, of all eligible accounts to determine whether you
qualify for a reduced sales charge on your current purchase. You may need to
provide documentation for these accounts, such as an account statement. For more
information about these reduced sales charges, you may visit the funds' Web site
at www.jhfunds.com. You may also consult your broker or financial adviser or
refer to the section entitled "Initial Sales Charge on Class A Shares" in the
funds' Statement of Additional Information. You may request a Statement of
Additional Information from your broker or financial adviser, access the funds'
Web site at www.jhfunds.com or call 1-800-225-5291.
INVESTMENTS OF $1 MILLION OR MORE Class A shares are available with no front-end
sales charge. There is a contingent deferred sales charge (CDSC) on any Class A
shares upon which a commission or finder's fee was paid that are sold within one
year of purchase, as follows:
CLASS A DEFERRED CHARGES ON $1 MILLION+ INVESTMENTS
CDSC ON SHARES
YOUR INVESTMENT BEING SOLD
First $1M - $4,999,999 1.00%
Next $1 - $5M above that 0.50%
Next $1 or more above that 0.25%
FOR PURPOSES OF THIS CDSC, ALL PURCHASES MADE DURING A CALENDAR MONTH ARE
COUNTED AS HAVING BEEN MADE ON THE FIRST DAY OF THAT MONTH.
6 YOUR ACCOUNT
The CDSC is based on the lesser of the original purchase cost or the current
market value of the shares being sold, and is not charged on shares you acquired
by reinvesting your dividends. To keep your CDSC as low as possible, each time
you place a request to sell shares we will first sell any shares in your account
that are not subject to a CDSC.
CLASS B AND CLASS C Shares are offered at their net asset value per share,
without any initial sales charge.
A CDSC may be charged if a commission has been paid and you sell Class B or
Class C shares within a certain time after you bought them, as described in the
tables below. There is no CDSC on shares acquired through reinvestment of
dividends. The CDSC is based on the original purchase cost or the current market
value of the shares being sold, whichever is less. The CDSCs are as follows:
CLASS B DEFERRED CHARGES
CDSC ON SHARES
YEARS AFTER PURCHASE BEING SOLD
1st year 5.00%
2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
After 6th year none
CLASS C DEFERRED CHARGES
YEARS AFTER PURCHASE CDSC
1st year 1.00%
After 1st year none
FOR PURPOSES OF THESE CDSCS, ALL PURCHASES MADE DURING A CALENDAR MONTH ARE
COUNTED AS HAVING BEEN MADE ON THE FIRST DAY OF THAT MONTH.
To keep your CDSC as low as possible, each time you place a request to sell
shares we will first sell any shares in your account that carry no CDSC. If
there are not enough of these to meet your request, we will sell those shares
that have the lowest CDSC.
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES There are several ways you can combine
multiple purchases of Class A shares of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
o Accumulation Privilege -- lets you add the value of any class of shares of
any John Hancock funds you already own to the amount of your next Class A
investment for purposes of calculating the sales charge. However, Class A
shares of money market funds will not quality unless you have already paid
a sales charge on those shares.
o Letter of Intention -- lets you purchase Class A shares of a fund over a
13-month period and receive the same sales charge as if all shares had been
purchased at once. You can use a Letter of Intention to qualify for reduced
sales charges if you plan to invest at least $50,000 in a fund's Class A
shares during the next 13 months. The calculation of this amount would
include accumulations and combinations, as well as your current holdings of
all classes of John Hancock funds, which includes any reinvestment of
dividends and capital gains distributions. However, Class A shares of money
market funds will be excluded unless you have already paid a sales charge.
When you sign this letter, the funds agree to charge you the reduced sales
charges listed above. Completing a Letter of Intention does not obligate
you to purchase additional shares. However, if you do not buy enough shares
to qualify for the lower sales charges by the earlier of the end of the
13-month period or when you sell your shares, your sales charges will be
recalculated to reflect your actual purchase level. Also available for
retirement plan investors is a 48-month Letter of Intention, described in
the SAI.
o Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
TO UTILIZE ANY REDUCTION YOU MUST: COMPLETE THE APPROPRIATE SECTION OF YOUR
APPLICATION, OR CONTACT YOUR FINANCIAL REPRESENTATIVE OR SIGNATURE SERVICES.
CONSULT THE SAI FOR ADDITIONAL DETAILS (SEE THE BACK COVER OF THIS PROSPECTUS).
GROUP INVESTMENT PROGRAM A group may be treated as a single purchaser under the
accumulation and combination privileges. Each investor has an individual
account, but the group's investments are lumped together for sales charge
purposes, making the investors potentially eligible for reduced sales charges.
There is no charge or obligation to invest (although initial investments must
total at least $250) and individual investors may close their accounts at any
time.
TO UTILIZE THIS PROGRAM YOU MUST: CONTACT YOUR FINANCIAL REPRESENTATIVE OR
SIGNATURE SERVICES TO FIND OUT HOW TO QUALIFY. CONSULT THE SAI FOR ADDITIONAL
DETAILS (SEE THE BACK COVER OF THIS PROSPECTUS).
YOUR ACCOUNT 7
CDSC WAIVERS As long as Signature Services is notified at the time you sell, the
CDSC for each share class will generally be waived in the following cases:
o to make payments through certain systematic withdrawal plans
o certain retirement plans participating in Merrill Lynch or PruArray
programs
o redemptions pursuant to the fund's right to liquidate an account less than
$1,000
o redemptions of Class A shares made after one year from the inception of a
retirement plan at John Hancock
o to make certain distributions from a retirement plan
o because of shareholder death or disability
TO UTILIZE THIS WAIVER YOU MUST: CONTACT YOUR FINANCIAL REPRESENTATIVE OR
SIGNATURE SERVICES. CONSULT THE SAI FOR ADDITIONAL DETAILS (SEE THE BACK COVER
OF THIS PROSPECTUS).
REINSTATEMENT PRIVILEGE If you sell shares of a John Hancock fund, you may
reinvest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge, as long as Signature Services is
notified before you reinvest. If you paid a CDSC when you sold your shares, you
will be credited with the amount of the CDSC. All accounts involved must have
the same registration.
TO UTILIZE THIS PRIVILEGE YOU MUST: CONTACT YOUR FINANCIAL REPRESENTATIVE OR
SIGNATURE SERVICES.
WAIVERS FOR CERTAIN INVESTORS Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
o selling brokers and their employees and sales representatives (and their
Immediate Family, as defined in the SAI)
o financial representatives utilizing fund shares in fee-based investment
products under signed agreement with John Hancock Funds
o fund trustees and other individuals who are affiliated with these or other
John Hancock funds (and their Immediate Family, as defined in the SAI)
o individuals transferring assets from an employee benefit plan into a John
Hancock fund
o participants in certain retirement plans with at least 100 eligible
employees (one-year CDSC applies)
o participants in certain 529 plans that have a signed agreement with John
Hancock Funds (one-year CDSC may apply)
o certain retirement plans participating in Merrill Lynch or PruArray
programs
TO UTILIZE A WAIVER YOU MUST: CONTACT YOUR FINANCIAL REPRESENTATIVE OR SIGNATURE
SERVICES. CONSULT THE SAI FOR ADDITIONAL DETAILS (SEE THE BACK COVER OF THIS
PROSPECTUS).
OTHER WAIVERS Front-end sales charges and CDSCs are generally not imposed in
connection with the following transactions:
o exchanges from one John Hancock Fund to the same class of any other John
Hancock Fund (see "Transactions Policies" in this prospectus for additional
details)
o dividend reinvestments (see "Dividends and Account Policies" in this
prospectus for additional details)
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investments for
the John Hancock funds are as follows:
o non-retirement account: $1,000
o retirement account:$500
o group investments: $250
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
3 All shareholders must complete the account application, carefully following
the instructions. When opening a corporate account, you must submit: (1) a
new account application; (2) a corporate business/organization resolution
certified within the past 12 months or a John Hancock Funds
business/organization certification form; and (3) articles of incorporation
or a government-issued business license. When opening a trust account, you
must submit: (1) a new account application and (2) a copy of the trust
document certified within the past 12 months. You must notify your
financial representative or Signature Services if this information changes.
Signature Services reserves the right to require additional documentation
prior to opening any account. For more details, please contact your
financial representative or call Signature Services at 1-800-225-5291.
4 Complete the appropriate parts of the account privileges application. By
applying for privileges now, you can avoid the delay and inconvenience of
having to file an additional application if you want to add privileges
later.
5 Make your initial investment using the table on the next page. You and your
financial representative can initiate any purchase, exchange or sale of
shares.
8 YOUR ACCOUNT
BUYING SHARES
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
BY CHECK
[GRAPHIC] o Make out a check for the investment amount, o Make out a check for the investment amount
payable to "John Hancock Signature Services, payable to "John Hancock Signature Services,
Inc." Inc."
o Deliver the check and your completed o Fill out the detachable investment slip from
application to your financial representative, an account statement. If no slip is available,
or mail them to Signature Services (address include a note specifying the fund name, your
below). share class, your account number and the
name(s) in which the account is registered.
o Deliver the check and your investment slip or
note to your financial representative, or mail
them to Signature Services (address below).
BY EXCHANGE
[GRAPHIC] o Call your financial representative or o Log on to www.jhfunds.com to process exchanges
Signature Services to request an exchange. between funds.
o Call EASI-Line for automated service 24 hours
a day using your touch-tone phone at
1-800-338-8080.
o Call your financial representative or
Signature Services to request an exchange.
BY WIRE
[GRAPHIC] o Deliver your completed application to your o Instruct your bank to wire the amount of your
financial representative, or mail it to investment to:
Signature Services. First Signature Bank & Trust
Account # 900000260
o Obtain your account number by calling your Routing # 211475000
financial representative or Signature
Services. Specify the fund name, your share class, your
account number and the name(s) in which the
o Instruct your bank to wire the amount of your account is registered. Your bank may charge a fee
investment to: to wire funds.
First Signature Bank & Trust
Account # 900000260
Routing # 211475000
Specify the fund name, your choice of share class,
the new account number and the name(s) in which
the account is registered. Your bank may charge a
fee to wire funds.
BY INTERNET
[GRAPHIC] See "By exchange" and "By wire." o Verify that your bank or credit union is a
member of the Automated Clearing House (ACH)
system.
o Complete the "Bank Information" section on
your account application.
o Log on to www.jhfunds.com to initiate
purchases using your authorized bank account.
BY PHONE
[GRAPHIC] See "By exchange" and "By wire." o Verify that your bank or credit union is a
member of the Automated Clearing House (ACH)
system.
o Complete the "Bank Information" section on
your account application.
o Call EASI-Line for automated service 24 hours
a day using your touch-tone phone at
1-800-338-8080.
o Call your financial representative or call
Signature Services between 8 A.M. and 7 P .M.
Eastern Time on most business days.
TO OPEN OR ADD TO AN ACCOUNT USING THE MONTHLY AUTOMATIC ACCUMULATION PROGRAM,
SEE "ADDITIONAL INVESTOR SERVICES."
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.
YOUR ACCOUNT 9
SELLING SHARES
TO SELL SOME OR ALL OF YOUR SHARES
BY LETTER
[GRAPHIC] o Accounts of any type. o Write a letter of instruction or complete a
stock power indicating the fund name, your
o Sales of any amount. 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 INTERNET
[GRAPHIC] o Most accounts. o Log on to www.jhfunds.com to initiate
redemptions from your funds.
o Sales of up to $100,000.
BY PHONE
[GRAPHIC] o Most accounts. o Call EASI-Line for automated service 24 hours
a day using your touch-tone phone at
o Sales of up to $100,000. 1-800-338-8080.
o Call your financial representative or call
Signature Services between 8 A.M. and 7 P .M.
Eastern Time on most business days.
BY WIRE OR ELECTRONIC FUNDS TRANSFER (EFT)
[GRAPHIC] o Requests by letter to sell any amount. o To verify that the Internet or telephone
redemption privilege is in place on an
o Requests by Internet or phone to sell up to account, or to request the form to add it to
$100,000. an existing account, call Signature Services.
o Amounts of $1,000 or more will be wired on the
next business day. A $4 fee will be deducted
from your account.
o Amounts of less than $1,000 may be sent by EFT
or by check. Funds from EFT transactions are
generally available by the second business
day. Your bank may charge a fee for this
service.
BY EXCHANGE
[GRAPHIC] o Accounts of any type. o Obtain a current prospectus for the fund into
which you are exchanging by Internet or by
o Sales of any amount. calling your financial representative or
Signature Services.
o Log on to www.jhfunds.com to process exchanges
between your funds.
o Call EASI-Line for automated service 24 hours
a day using your touch-tone phone at
1-800-338-8080.
o Call your financial representative or
Signature Services to request an exchange.
TO SELL SHARES THROUGH A SYSTEMATIC WITHDRAWAL PLAN, SEE "ADDITIONAL INVESTOR
SERVICES."
10 YOUR ACCOUNT
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.
SELLER REQUIREMENTS FOR WRITTEN REQUESTS [GRAPHIC]
Owners of individual, joint or UGMA/UTMA accounts (custodial o Letter of instruction.
accounts for minors).
o On the letter, the signatures and titles of all persons
authorized to sign for the account, exactly as the
account is registered.
o Signature guarantee if applicable (see above).
Owners of corporate, sole proprietorship, general partner or o Letter of instruction.
association accounts.
o Corporate business/organization resolution, certified
within the past 12 months, or a John Hancock Funds
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 accounts. o Letter of instruction.
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 John Hancock Funds trust certification form.
o Signature guarantee if applicable (see above).
Joint tenancy shareholders with rights of survivorship whose o Letter of instruction signed by surviving tenant.
co-tenants are deceased.
o Copy of death certificate.
o Signature guarantee if applicable (see above).
Executors of shareholder estates. o Letter of instruction signed by executor.
o Copy of order appointing executor, certified within the
past 12 months.
o Signature guarantee if applicable (see above).
Administrators, conservators, guardians and other sellers or o Call 1-800-225-5291 for instructions.
account types not listed above.
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.
YOUR ACCOUNT 11
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TRANSACTION POLICIES
VALUATION OF SHARES The net asset value (NAV) per share for each fund and class
is determined each business day at the close of regular trading on the New York
Stock Exchange (typically 4 P.M. Eastern Time). The funds use market prices in
valuing portfolio securities, but may use fair-value estimates if reliable
market prices are unavailable. For example, the funds may value securities at
fair value if the value of these securities has been materially affected by
events occurring after the close of a foreign market. Because developments that
could affect the values of foreign securities may occur between the close of the
foreign market where the security is principally traded and the funds' valuation
time, such closing prices may not be reflective of current market prices and
current market prices may not be readily available when the funds determine
their net asset values, and therefore the funds may adjust closing market prices
of foreign securities to reflect what it believes to be the fair value of the
securities as of the funds' valuation time. Foreign stock or other portfolio
securities held by the funds may trade on U.S. holidays and weekends, even
though the funds' shares will not be priced on those days. This may change the
funds' NAV on days when you cannot buy or sell shares. For more information on
the valuation of shares, please see the Statement of Additional Information.
BUY AND SELL PRICES When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable deferred sales charges.
EXECUTION OF REQUESTS 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, accessing www.jhfunds.com, 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
redemption transactions are not permitted on accounts whose names or addresses
have changed within the past 30 days. Proceeds from telephone transactions can
only be mailed to the address of record.
EXCHANGES You may exchange shares of one John Hancock fund for shares of the
same class of any other, generally without paying any additional sales charges.
The registration for both accounts involved must be identical.
Class B and Class C shares will continue to age from the original date and will
retain the same CDSC rate. A CDSC rate that has increased will drop again with a
future exchange into a fund with a lower rate. A fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders. For
further details, see "Additional Services and Programs" in the SAI (see the back
cover of this prospectus).
EXESSIVE TRADING The fund is intended for long-term investment purposes only
and does not knowingly accept shareholders who engage in "market timing" or
other types of excessive short-term trading. Short-term trading into and out of
a fund can disrupt portfolio investment strategies and may increase fund
expenses for all shareholders, including long-term shareholders who do not
generate these costs.
RIGHT TO REJECT OR RESTRICT PURCHASE AND EXCHANGE ORDERS
Purchases and exchanges should be made primarily for investment purposes. The
fund reserves the right to restrict, reject or cancel, consistent with
applicable law, for any reason and without any prior notice, any purchase or
exchange order, including transactions representing excessive trading and
transactions accepted by any shareholder's financial intermediary. For example,
the fund may in its discretion restrict, reject or cancel a purchase or exchange
order even if the transaction is not subject to the specific "Limitations on
exchange activity" described below if the fund or its agents determine that
accepting the order could interfere with the efficient management of the fund's
portfolio or otherwise not be in the fund's best interest in light of unusual
trading activity related to your account. In the event that the fund rejects or
cancels an exchange request, neither the redemption nor the purchase side of the
exchange will be processed. If you would like the redemption request to be
processed even if the purchase order is rejected, you should submit separate
redemption and purchase orders rather than placing an exchange order. The fund
reserves the right to delay for up to one business day, consistent with
applicable law, the processing of exchange requests in the event that, in the
fund's judgment, such delay would be in the fund's best interest, in which case
both the redemption and purchase side of the exchange will receive the fund's
net asset values at the conclusion of the delay period. The fund, through its
agents in their sole discretion, may impose these remedial actions at the
account holder level or the underlying shareholder level.
EXCHANGE LIMITATION POLICIES The fund's Board of Trustees has adopted the
following policies and procedures by which the fund, subject to the limitations
described below, take steps reasonably designed to curtail excessive trading
practices.
LIMITATIONS ON EXCHANGE ACTIVITY The fund, through its agents, undertakes to use
its best efforts to exercise the fund's right to restrict, reject or cancel
purchase and exchange orders, as described above, if an account holder, who
purchases or exchanges into a fund account in an amount of $5,000 or more,
exchanges $1,000 or more out of that fund account within 30 calendar days on
three occasions during any 12-month period. Nothing in this paragraph limits the
right of the fund to refuse any purchase or exchange order, as discussed above
under "Right to reject or restrict purchase and exchange orders".
12 YOUR ACCOUNT
Exchanges made on the same day in the same account are aggregated for purposes
of counting the number and dollar amount of exchanges made by the account
holder. The exchange limits referenced above will not be imposed or may be
modified under certain circumstances. For example: these exchange limits may be
modified for accounts held by certain retirement plans to conform to plan
exchange limits, ERISA considerations or Department of Labor regulations.
Certain automated or pre-established exchange, asset allocation and dollar cost
averaging programs are not subject to these exchange limits. These programs are
excluded from the exchange limitation since the fund believes that they are
advantageous to shareholders and do not offer an effective means for market
timing or excessive trading strategies. These investment tools involve regular
and predetermined purchase or redemption requests made well in advance of any
knowledge of events effecting the market on the date of the purchase or
redemption.
These exchange limits are subject to the fund's ability to monitor exchange
activity, as discussed under "Limitations on the ability to detect and curtail
excessive trading practices" below. Depending upon the composition of the fund's
shareholder accounts and in light of the limitations on the ability of the fund
to detect and curtail excessive trading practices, a significant percentage of a
fund's shareholders may not be subject to the exchange limitation policy
described above. In applying the exchange limitation policy, the fund considers
information available to it at the time and reserves the right to consider
trading activity in a single account or multiple accounts under common
ownership, control or influence.
LIMITATION ON THE ABILITY TO DETECT AND CURTAIL EXCESSIVE TRADING PRACTICES
Shareholders seeking to engage in excessive trading practices sometimes deploy a
variety of strategies to avoid detection, and, despite the efforts of the fund
to prevent its excessive trading, there is no guarantee that the fund or its
agents will be able to identify such shareholders or curtail their trading
practices. The ability of the fund and its agents to detect and curtail
excessive trading practices may also be limited by operational systems and
technological limitations. Because the fund will not always be able to detect
frequent trading activity, investors should not assume that the fund will be
able to detect or prevent all frequent trading or other practices that
disadvantage the funds. For example, the ability of the fund to monitor trades
that are placed by omnibus or other nominee accounts is severely limited in
those instances in which the financial intermediary, including a financial
adviser, broker, retirement plan administrator or fee-based program sponsor,
maintains the record of the fund's underlying beneficial owners. Omnibus or
other nominee account arrangements are common forms of holding shares of the
fund, particularly among certain financial intermediaries such as financial
advisers, brokers, retirement plan administrators or fee-based program sponsors.
These arrangements often permit the financial intermediary to aggregate their
clients' transactions and ownership positions and do not identify the particular
underlying shareholder(s) to the fund.
EXCESSIVE TRADING RISK To the extent that the fund or its agents are unable to
curtail excessive trading practices in the fund, these practices may interfere
with the efficient management of the fund's portfolio, and may result in the
fund engaging in certain activities to a greater extent than it otherwise would,
such as maintaining higher cash balances, using its line of credit and engaging
in portfolio transactions. Increased portfolio transactions and use of the line
of credit would correspondingly increase the fund's operating costs and decrease
the fund's investment performance, and maintenance of higher levels of cash
balances would likewise result in lower fund investment performance during
periods of rising markets.
While excessive trading can potentially occur in any fund, certain types of
funds are more likely than others to be targets of excessive trading. For
example: A fund that invests a material portion of its assets in securities of
non-U.S. issuers may be a potential target for excessive trading if investors
seek to engage in price arbitrage based upon general trends in the securities
markets that occur subsequent to the close of the primary market for such
securities.
ACCOUNT INFORMATION John Hancock Funds is required by law to obtain information
for verifying an account holder's identity. For example, an individual will be
required to supply name, address, date of birth and social security number. If
you do not provide the required information, we may not be able to open your
account. If verification is unsuccessful, John Hancock Funds may close your
account, redeem your shares at the next NAV minus any applicable sales charges
and take any other steps that it deems reasonable.
CERTIFICATED SHARES The fund does not issue share certificates. Shares are
electronically recorded.
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.
YOUR ACCOUNT 13
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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 automatic
investment or systematic withdrawal) 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 generally distributes most or all of its net earnings
annually in the form of dividends. The fund declares and pays any income
dividends annually. Capital gains, if any, are typically 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 and capital gains in the amount of more than $10 mailed to you.
However, if the check is not deliverable or the combined dividend and capital
gains amount is $10 or less, your proceeds will be reinvested. If five or more
of your dividend or capital gains checks remain uncashed after 180 days, all
subsequent dividends and capital gains will be reinvested. No front-end sales
charge or CDSC will be imposed on shares derived from reinvestment of dividends
or capital gains distributions.
TAXABILITY OF DIVIDENDS Dividends you receive from a fund, whether reinvested or
taken as cash, are generally considered taxable. Dividends from the fund's
long-term capital gains are taxable as capital gains; dividends from the fund's
income and short-term capital gains are generally taxable as ordinary income.
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 or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
SMALL ACCOUNTS (NON-RETIREMENT ONLY) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, your fund may charge you $20 a
year to maintain your account. You will not be charged a CDSC if your account is
closed for this reason. Your account will not be closed or charged this fee if
its drop in value is due to fund performance or the effects of sales charges. If
your account balance is $100 or less and no action is taken, the account will be
liquidated.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
MAAP lets you set up regular investments from your paycheck or bank account to
the John Hancock fund(s) of your choice. You determine the frequency and amount
of your investments, and you can terminate your program at any time. To
establish:
o Complete the appropriate parts of your account application.
o If you are using MAAP to open an account, make out a check ($25 minimum)
for your first investment amount payable to "John Hancock Signature
Services, Inc." Deliver your check and application to your financial
representative or Signature Services.
SYSTEMATIC WITHDRAWAL PLAN This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account (buying
shares during a period when you are also selling shares of the same fund is
not advantageous to you, because of sales charges).
o Specify the payee(s). The payee may be yourself or any other party, and
there is no limit to the number of payees you may have, as long as they are
all on the same payment schedule.
o Determine the schedule: monthly, quarterly, semiannually, annually or in
certain selected months.
o Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial
representative or Signature Services.
RETIREMENT PLANS John Hancock Funds offers a range of retirement plans,
including traditional and Roth IRAs, Coverdell ESAs, SIMPLE plans and SEPs.
Using these plans, you can invest in any John Hancock fund (except tax-free
income funds) with a low minimum investment of $500 or, for some group plans, no
minimum investment at all. To find out more, call Signature Services at
1-800-225-5291.
FUND SECURITIES The funds' portfolio securities disclosure policy can be found
in the Statement of Additional Information and on the funds' Web site,
www.jhfunds.com. The funds' Web site also lists fund holdings.
14 YOUR ACCOUNT
FUND DETAILS
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
The diagram below shows the basic business structure used by the fund. The
fund's 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 the fund's investment goal without
shareholder approval. The trustees also have the power to change the fund's
policy of investing at least 80% of its assets in "U.S. Global Leaders"
without shareholder approval. The fund will provide shareholders with written
notice at least 60 days prior to a change in this 80% policy.
THE MANAGEMENT FIRM The fund is managed by John Hancock Advisers, LLC. Founded
in 1968, John Hancock Advisers is a wholly owned subsidiary of John Hancock
Financial Services, Inc. (a subsidiary of Manulife Financial Corporation) and
managed approximately $29 billion in assets as of September 30, 2004.
THE SUBADVISER Sustainable Growth Advisers, LP ("SGA") subadvises U.S. Global
Leaders Growth Fund. SGA is a Delaware limited partnership founded in 2003 to
provide investment advice to private accounts of institutional and individual
clients, private investment companies and mutual funds. George P. Fraise, Gordon
M. Marchand and Robert L. Rohn each own 33 1/3% of SGA. Total assets under
management by SGA principals as of September 30, 2004 were approximately
$1 billion.
MANAGEMENT FEE For the fiscal year ended December 31, 2003, the fund paid the
investment adviser management fees at a rate of 0.75% of average net assets.
[CHART]
15 FUND DETAILS FUND DETAILS 15
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MANAGEMENT BIOGRAPHIES
Below is an alphabetical list of the portfolio managers for the John Hancock
U.S. Global Leaders Growth Fund. It is a brief summary of their business careers
over the past five years.
GEORGE P. FRAISE
- ------------------------------------------
Principal of subadviser
Executive vice president of Yeager, Wood &
Marshall, Inc. (2000-2003)
Portfolio manager of Scudder Kemper
Investments (1997-2000)
Began business career in 1987
GORDON M. MARCHAND, CFA, CIC
- ------------------------------------------
Principal of subadviser
Chief financial and operating officer of
Yeager, Wood & Marshall, Inc. (1984-2003)
Began business career in 1978
ROBERT L. ROHN
- ------------------------------------------
Principal of subadviser
Chairman and chief executive officer,
W.P. Stewart, Inc. (1991-2003)
Began business career in 1983
16 FUND DETAILS
FINANCIAL HIGHLIGHTS
These tables detail the performance of the fund's share classes, including total
return information showing how much an investment in the fund has increased or
decreased each year.
U.S. GLOBAL LEADERS GROWTH FUND
FIGURES FOR THE YEAR ENDED 12-31-03 WERE AUDITED BY PRICEWATERHOUSECOOPERS LLP.
CLASS A SHARES PERIOD ENDED: 6-30-99(1) 6-30-00(1) 6-30-01(1) 6-30-02(1),(2)
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.35 $ 25.65 $ 26.37 $ 24.98
Net investment income (loss)(4) (0.13) (0.07) (0.14) (0.09)
Net realized and unrealized gain (loss) on investments 3.43 0.79 (1.25) (0.86)
TOTAL FROM INVESTMENT OPERATIONS 3.30 0.72 (1.39) (0.95)
NET ASSET VALUE, END OF PERIOD $ 25.65 $ 26.37 $ 24.98 $ 24.03
TOTAL RETURN(6)(%) 14.77 2.81 (5.27) (3.80)(7)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 129 $ 87 $ 81 $ 150
Ratio of expenses to average net assets (%) 1.31 1.31 1.38 1.37
Ratio of adjusted expenses to average net assets(10)(%) -- -- -- 1.40
Ratio of net investment income (loss) to average net assets (%) (0.66) (0.23) (0.54) (0.36)
Portfolio turnover (%) 14 25 3 3
CLASS A SHARES PERIOD ENDED: 12-31-02(1),(3) 12-31-03 6-30-04(12)
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.03 $ 21.57 $ 25.72
Net investment income (loss)(4) 0.01 --(5) (0.01)
Net realized and unrealized gain (loss) on investments (2.47) 4.15 1.11
TOTAL FROM INVESTMENT OPERATIONS (2.46) 4.15 1.10
NET ASSET VALUE, END OF PERIOD $ 21.57 $ 25.72 $ 26.82
TOTAL RETURN(6)(%) (10.24)(7),(8) 19.24(7) 4.28(8)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 237 $ 392 $486
Ratio of expenses to average net assets (%) 1.27(9) 1.35 1.32(9)
Ratio of adjusted expenses to average net assets(10)(%) 1.36(9) 1.36 --
Ratio of net investment income (loss) to average net assets (%) 0.07(9) (0.02) (0.09)(9)
Portfolio turnover (%) 1 15 6
CLASS B SHARES PERIOD ENDED: 6-30-02(1),(11) 12-31-02(1),(3) 12-31-03 6-30-04(12)
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.81 $ 24.01 $ 21.47 $ 25.41
Net investment loss(4) (0.02) (0.07) (0.18) (0.11)
Net realized and unrealized gain (loss) on investments (1.78) (2.47) 4.12 1.10
TOTAL FROM INVESTMENT OPERATIONS (1.80) (2.54) 3.94 0.99
NET ASSET VALUE, END OF PERIOD $ 24.01 $ 21.47 $ 25.41 $ 26.40
TOTAL RETURN(6)(%) (6.97)(7) (10.58)(7,8) 18.35 (7) 3.90(8)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 12 $ 73 $ 164 $ 187
Ratio of expenses to average net assets (%) 2.13(9) 2.02(9) 2.10 2.07(9)
Ratio of adjusted expenses to average net assets(10)(%) 2.39(9) 2.11(9) 2.11 --
Ratio of net investment loss to average net assets (%) (0.93)(9) (0.67)(9) (0.77) (0.84)(9)
Portfolio turnover (%) 3 1 15 6
CLASS C SHARES PERIOD ENDED: 6-30-02(1),(11) 12-31-02(1,3) 12-31-03 6-30-04(12)
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.81 $ 24.01 $ 21.47 $ 25.41
Net investment loss(4) (0.02) (0.07) (0.18) (0.11)
Net realized and unrealized gain (loss) on investments (1.78) (2.47) 4.12 1.10
TOTAL FROM INVESTMENT OPERATIONS (1.80) (2.54) 3.94 0.99
NET ASSET VALUE, END OF PERIOD $ 24.01 $ 21.47 $ 25.41 $ 26.40
TOTAL RETURN(6)(%) (6.97)(7) (10.58)(7,8) 18.35(7) 3.90(8)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 6 $ 49 $ 160 $ 199
Ratio of expenses to average net assets (%) 2.12(9) 2.02(9) 2.10 2.07(9)
Ratio of adjusted expenses to average net assets(10)(%) 2.38(9) 2.11(9) 2.11 --
Ratio of net investment loss to average net assets (%) (0.96)(9) (0.67)(9) (0.77) (0.84)(9)
Portfolio turnover (%) 3 1 15 6
(1) AUDITED BY PREVIOUS AUDITOR.
(2) EFFECTIVE 5-17-02, SHAREHOLDERS OF THE FORMER U.S. GLOBAL LEADERS GROWTH
FUND BECAME OWNERS OF THAT NUMBER OF FULL AND FRACTIONAL SHARES OF CLASS A
SHARES OF THE JOHN HANCOCK U.S. GLOBAL LEADERS GROWTH FUND. ADDITIONALLY,
THE ACCOUNTING AND PERFORMANCE HISTORY OF THE FORMER U.S. GLOBAL LEADERS
GROWTH FUND WAS REDESIGNATED AS THAT OF CLASS A OF JOHN HANCOCK U.S. GLOBAL
LEADERS GROWTH FUND.
(3) EFFECTIVE 12-31-02, THE FISCAL PERIOD END CHANGED FROM JUNE 30 TO DECEMBER
31.
(4) BASED ON THE AVERAGE OF THE SHARES OUTSTANDING.
(5) LESS THAN $0.01 PER SHARE.
(6) ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES
CHARGES.
(7) TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
(8) NOT ANNUALIZED.
(9) ANNUALIZED.
(10) DOES NOT TAKE INTO CONSIDERATION EXPENSE REDUCTIONS DURING THE PERIODS
SHOWN.
(11) CLASS B AND CLASS C SHARES BEGAN OPERATIONS ON 5-20-02.
(12) SEMIANNUAL PERIOD FROM 1-1-04 THROUGH 6-30-04. UNAUDITED.
================================================================================
THE FOLLOWING RETURNS ARE NOT AUDITED AND ARE NOT PART OF THE AUDITED FINANCIAL
HIGHLIGHTS PRESENTED ABOVE:
WITHOUT THE EXPENSE REDUCTIONS, RETURNS FOR THE PERIODS ENDED JUNE 30, 2002,
DECEMBER 31, 2002, THE YEAR ENDED DECEMBER 31, 2003 WOULD HAVE BEEN (3.83%),
(10.29%) AND 19.23% FOR CLASS A, (7.00%), (10.63%) AND 18.34% FOR CLASS B, AND
(7.00%), (10.63%) AND 18.34% FOR CLASS C, RESPECTIVELY.
FUND DETAILS 17
For more information
Two documents are available that offer further information on the John Hancock
U.S. Global Leaders Growth 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
auditors' 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. Each fund's SAI includes a summary
of the fund's policy regarding disclosure of its portfolio holdings. 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: 1-800-554-6713
On the Internet: www.jhfunds.com
OR YOU MAY VIEW OR OBTAIN THESE DOCUMENTS FROM THE SEC:
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
In person: at the SEC's Public Reference Room in Washington, DC.
For access to the Reference Room call 1-202-942-8090
By electronic request: publicinfo@sec.gov
(duplicating fee required)
On the Internet: www.sec.gov
(C)2005 JOHN HANCOCK FUNDS, LLC 260PN 1/05
[JOHN HANCOCK(R) LOGO]
JOHN HANCOCK FUNDS, LLC
MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603
www.jhfunds.com
John Hancock U.S. Global Leaders Growth Fund
SUPPLEMENT TO THE STATEMENT OF ADDITIONAL INFORMATION
Dated March 1, 2004 as revised July 15, 2004
The section "Those Responsible for Management" in the Statement of Additional
Information has been deleted and replace with the following:
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its Trustees, including certain Trustees
who are not "interested persons" of the Fund or the Trust (as defined by the
Investment Company Act of 1940) (the "Independent 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 Adviser, or officers and Directors of
the Fund's principal distributor, John Hancock Funds, LLC (prior to February 1,
2002, John Hancock Funds, Inc.) ("John Hancock Funds").
- -------------------------------------------------------------------------------------------------------------------------
Number of John
Position(s) Trustee/ Hancock Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Charles L. Ladner Chairman 2004 Chairman and Trustee, Dunwoody Village, Inc. 49
Born: 1938 and Trustee (retirement services) (until 2003); Senior Vice
President and Chief Financial Officer, UGI
Corporation (public utility holding company)
(retired 1998); Vice President and Director for
AmeriGas, Inc. (retired 1998); Director of
AmeriGas Partners, L.P. (until 1997)(gas
distribution); Director, EnergyNorth, Inc. (until
1995); Director, Parks and History Association
(since 2001).
- -------------------------------------------------------------------------------------------------------------------------
James F. Carlin Trustee 2005 Director and Treasurer, Alpha Analytical 47
Born: 1940 Laboratories (chemical analysis); Part Owner
and Treasurer, Lawrence Carlin Insurance
Agency, Inc. (since 1995); Part Owner and Vice
President, Mone Lawrence Carlin Insurance
Agency, Inc. (since 1996); Director/Treasurer,
Rizzo Associates (until 2000); Chairman and
CEO, Carlin Consolidated, Inc.
(management/investments); Director/Partner,
Proctor Carlin & Co., Inc. (until 1999);
Trustee, Massachusetts Health and Education Tax
Exempt Trust; Director of the following: Uno
Restaurant Corp. (until 2001), Arbella Mutual
(insurance) (until 2000), HealthPlan Services,
Inc. (until 1999), Flagship Healthcare, Inc.
(until 1999), Carlin Insurance Agency, Inc.
(until 1999); Chairman, Massachusetts Board of
Higher Education (until 1999).
- -------------------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. Trustee 2002 President and Chief Executive Officer, 39
Born: 1935 Brookline Bancorp., Inc. (lending) (since
1972); Chairman and Director, Lumber Insurance
Co. (insurance) (until 2000); Chairman and
Director, Northeast Retirement Services, Inc.
(retirement administration) (since 1998).
- -------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
- -------------------------------------------------------------------------------------------------------------------------
Number of John
Position(s) Trustee/ Hancock Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------
William J. Cosgrove Trustee 2002 Vice President, Senior Banker and Senior Credit 39
Born: 1933 Officer, Citibank, N.A. (banking) (retired
1991); Executive Vice President, Citadel Group
Representatives, Inc.; (financial
reinsurance); Director, Hudson City Savings
Bank (since 1995); Director, Hudson City
Bancorp (banking); Trustee, Scholarship Fund
for Inner City Children (since 1986).
- -------------------------------------------------------------------------------------------------------------------------
William H. Cunningham Trustee 2005 Former Chancellor, University of Texas System 47
Born: 1944 and former President of the University of
Texas, Austin, Texas; Chairman and CEO, IBT
Technologies (until 2001); Director of the
following: The University of Texas Investment
Management Company (until 2000), Hire.com (until
2004), STC Broadcasting, Inc. and Sunrise
Television Corp. (until 2001), Symtx, Inc.
(electronic manufacturing) (since 2001),
Adorno/Rogers Technology, Inc. (until 2004),
Pinnacle Foods Corporation (until 2003),
rateGenius (since 2001), Jefferson-Pilot
Corporation (diversified life insurance company),
New Century Equity Holdings (formerly Billing
Concepts) (until 2001), eCertain (until 2001),
ClassMap.com (until 2001), Agile Ventures (until
2001), LBJ Foundation (until 2000), Golfsmith
International, Inc. (until 2000), Metamor
Worldwide (until 2000), AskRed.com (until 2001),
Southwest Airlines (since 2000) and Introgen
(since 2000); Advisory Director, Q Investments
(until 2003); Advisory Director, Chase Bank
(formerly Texas Commerce Bank - Austin) (since
1988), LIN Television (since 2002) and WilTel
Communications (until 2003) and Hayes Lemmerz
International, Inc. (diversified automobile parts
supply company) (since 2003).
- -------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
- -------------------------------------------------------------------------------------------------------------------------
Number of John
Position(s) Trustee/ Hancock Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Ronald R. Dion Trustee 2005 Chairman and Chief Executive Officer, R.M. 47
Born: 1946 Bradley & Co., Inc.; Director, The New England
Council and Massachusetts Roundtable; Director,
Boston Stock Exchange; Trustee, North Shore
Medical Center; Director, BJ's Wholesale Club,
Inc. and a corporator of the Eastern Bank;
Trustee, Emmanuel College.
- -------------------------------------------------------------------------------------------------------------------------
John A. Moore Trustee 2002 President and Chief Executive Officer, 49
Born: 1939 Institute for Evaluating Health Risks,
(nonprofit institution) (until 2001); Chief
Scientist, Sciences International (health
research)(since 1998); Principal, Hollyhouse
(consulting)(since 2000); Director, CIIT(nonprofit
research) (since 2002).
- -------------------------------------------------------------------------------------------------------------------------
Patti McGill Peterson Trustee 2002 Executive Director, Council for International 49
Born: 1943 Exchange of Scholars and Vice President,
Institute of International Education (since 1998);
Senior Fellow, Cornell Institute of Public
Affairs, Cornell University (until 1998); Former
President of Wells College and St. Lawrence
University; Director, Niagara Mohawk Power
Corporation (until 2003); Director, Ford
Foundation, International Fellowships Program
(since 2002); Director, Lois Roth Endowment (since
2002); Director, Council for International
Educational Exchange (since 2003).
- -------------------------------------------------------------------------------------------------------------------------
Steven Pruchansky Trustee 2005 Chairman and Chief Executive Officer, Mast 47
Born: 1944 Holdings, Inc. (since 2000); Director and
President, Mast Holdings, Inc. (until 2000);
Managing Director, JonJames, LLC (real
estate)(since 2001); Director, First Signature
Bank & Trust Company (until 1991); Director,
Mast Realty Trust (until 1994); President,
Maxwell Building Corp. (until 1991).
- -------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
- -------------------------------------------------------------------------------------------------------------------------
Number of John
Position(s) Trustee/ Hancock Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Norman H. Smith Trustee 2005 Lieutenant General, United States Marine 47
Born: 1933 Corps; Deputy Chief to Staff for Manpower
and Reserve Affairs, Headquarters Marine
Corps; Commanding General III Marine
Expeditionary Force/3rd Marine Division
(retired 1991).
- -------------------------------------------------------------------------------------------------------------------------
Non-Independent Trustee
- -------------------------------------------------------------------------------------------------------------------------
James A. Shepherdson (3) Trustee, 2004 Executive Vice President, Manulife 49
Born: 1952 President Financial Corporation (since 2004);
and Chief Chairman, Director, President and Chief
Executive Executive Officer, John Hancock Advisers,
Officer LLC (the "Adviser") and The Berkeley
Financial Group, LLC ("The Berkeley Group");
Chairman, Director, President and Chief Executive
Officer, John Hancock Funds, LLC. ("John Hancock
Funds"); Chairman, Director, President and Chief
Executive Officer, Sovereign Asset Management
Corporation ("SAMCorp."); Director, Chairman and
President, NM Capital Management, Inc. ("NM
Capital"); President, John Hancock Retirement
Services, John Hancock Life Insurance Company
(until 2004); Chairman, Essex Corporation (until
2004); Co-Chief Executive Officer MetLife
Investors Group (until 2003); Senior Vice
President, AXA/Equitable Insurance Company (until
2000).
- -------------------------------------------------------------------------------------------------------------------------
Principal Officers who are
not Trustees
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
William H. King Vice 2002 Vice President and Assistant Treasurer, the N/A
Born: 1952 President Adviser; Vice President and Treasurer of
and Treasurer each of the John Hancock funds; Assistant
Treasurer of each of the John Hancock funds (until
2001).
- -------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
- -------------------------------------------------------------------------------------------------------------------------
Number of John
Position(s) Trustee/ Hancock Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Susan S. Newton Senior Vice 2002 Senior Vice President, Secretary and Chief N/A
Born: 1950 President, Legal Officer, SAMCorp., the Adviser and
Secretary each of the John Hancock funds, John
and Chief Hancock Funds and The Berkeley Group; Vice
Legal Officer President, Signature Services (until 2000),
Director, Senior Vice President and
Secretary, NM Capital.
- -------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
The Fund's Board of Trustees currently has four standing Committees: the Audit
Committee, the Administration Committee, the Contracts/Operations Committee and
the Investment Performance Committee. Each Committee is comprised of Independent
Trustees, who are not "interested persons".
The Audit Committee members are Messrs. Chapman, Ladner, Moore and Ms. McGill
Peterson. All of the members of the Audit Committee are independent under the
New York Stock Exchange's Revised Listing Rules, and each member is financially
literate with at least one having accounting or financial management expertise.
The Board has adopted a written charter for the Audit Committee. The Audit
Committee recommends to the full board auditors for the Fund, monitors and
oversees the audits of the Fund, communicates with both independent auditors and
internal auditors on a regular basis and provides a forum for the auditors to
report and discuss any matters they deem appropriate at any time. The Audit
Committee held four meetings during the fiscal year end December 31, 2004.
The Administration Committee members are all of the independent Trustees. The
Administration Committee reviews the activities of the other four standing
committees and makes the final selection and nomination of candidates to serve
as Independent Trustees. All members of the Administration Committee are
independent under the New York Stock Exchange's Revised Listing Rules and are
not interested persons, as defined in the 1940 Act, of John Hancock or the Fund
(the "Independent Trustees"). Among other things, the Administration Committee
acts as a nominating committee of the Board. The Trustees who are not
Independent Trustees and the officers of the Fund are nominated and selected by
the Board. The Administration Committee does not have at this time formal
criteria for the qualifications of candidates to serve as an Independent
Trustee, although the Administration Committee may develop them in the future.
In reviewing a potential nominee and in evaluating the renomination of current
Independent Trustees, the Administration Committee expects to apply the
following criteria: (i) the nominee's reputation for integrity, honesty and
adherence to high ethical standards, (ii) the nominee's business acumen,
experience and ability to exercise sound judgments, (iii) a commitment to
understand the Fund and the responsibilities of a trustee of an investment
company, (iv) a commitment to regularly attend and participate in meetings of
the Board and its committees, (v) the ability to understand potential conflicts
of interest involving management of the Fund and to act in the interests of all
shareholders, and (vi) the absence of a real or apparent conflict of interest
that would impair the nominee's ability to represent the interests of all the
shareholders and to fulfill the responsibilities of an Independent Trustee. The
Administration Committee does not necessarily place the same emphasis on each
criteria and each nominee may not have each of these qualities. The
Administration Committee does not discriminate on the basis of race, religion,
national origin, sex, sexual orientation, disability or any other basis
proscribed by law. The Administration Committee held four meetings during the
fiscal year ended December 31, 2004.
As long as an existing Independent Trustee continues, in the opinion of the
Administration Committee, to satisfy these criteria, the Fund anticipates that
the Committee would favor the renomination of an existing Trustee rather than a
new candidate. Consequently, while the Administration Committee will consider
nominees recommended by shareholders to serve as trustees, the Administration
Committee may only act upon such recommendations if there is a vacancy on the
Board or the Administration Committee determines that the selection of a new or
additional Independent Trustee is in the best interests of the Fund. In the
event that a vacancy arises or a change in Board membership is determined to be
advisable, the Administration Committee will, in addition to any shareholder
recommendations, consider candidates identified by other means, including
candidates proposed by members of the Administration Committee. While it has not
done so in the past, the Administration Committee may retain a consultant to
assist the Committee in a search for a qualified candidate.
Any shareholder recommendation must be submitted in compliance with all of the
pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, to be considered by the Administration Committee. In evaluating a
nominee recommended by a shareholder, the Administration Committee, in addition
to the criteria discussed above, may consider the objectives of the shareholder
in submitting that nomination and whether such objectives are consistent with
the interests of all shareholders. If the Board determines to include a
shareholder's candidate among the slate of nominees, the candidate's name will
be placed on the Fund's proxy card. If the Administration Committee or the Board
determines not to include such candidate among the Board's designated nominees
and the shareholder has satisfied the requirements of Rule 14a-8, the
shareholder's candidate will be treated as a nominee of the shareholder who
originally nominated the candidate. In that case, the candidate will not be
named on the proxy card distributed with the Fund's proxy statement.
Shareholders may communicate with the members of the Board as a group or
individually. Any such communication should be sent to the Board or an
individual Trustee c/o the Secretary of the Fund at the following address: 101
Huntington Avenue, Boston, MA 02199-7603. The Secretary may determine not to
forward any letter to the members of the Board that does not relate to the
business of the Fund.
The Contracts/Operations Committee members are Messrs. Carlin, Dion, Pruchansky
and Smith. The Contracts/Operations Committee oversees the initiation,
operation, and renewal of contracts between the Fund and other entities. These
contracts include advisory and subadvisory agreements (if applicable), custodial
and transfer agency agreements and arrangements with other service providers.
The Contracts/Operations Committee held five meetings during the fiscal year
ended December 31, 2004.
The Investment Performance Committee members are all of the Independent
Trustees. The Investment Performance Committee monitors and analyzes the
performance of the Fund generally, consults with the adviser as necessary if the
Fund requires special attention, and reviews peer groups and other comparative
standards as necessary. The Investment Performance Committee held four meetings
during the fiscal year ended December 31, 2004.
The following table provides a dollar range indicating each Trustee's ownership
of equity securities of the Fund, as well as aggregate holdings of shares of
equity securities of all John Hancock Funds overseen by the Trustee, as of
December 31, 2003.
- -------------------------------------------------------------------------------------------------------------
Dollar Range of Fund shares Aggregate Dollar Range of holdings in John
Name of Trustee Owned by Trustee Hancock funds overseen by Trustee
- -------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------
James F. Carlin none Over $100,000
- -------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr.* none Over $100,000
- -------------------------------------------------------------------------------------------------------------
William J. Cosgrove none Over $100,000
- -------------------------------------------------------------------------------------------------------------
William H. Cunningham none $10,001-$50,000
- -------------------------------------------------------------------------------------------------------------
Ronald R. Dion none Over $100,000
- -------------------------------------------------------------------------------------------------------------
Charles L. Ladner** $10,001-50,000 Over $100,000
- -------------------------------------------------------------------------------------------------------------
Dr. John A. Moore* $10,001-50,000 Over $100,000
- -------------------------------------------------------------------------------------------------------------
Patti McGill Peterson* none Over $100,000
- -------------------------------------------------------------------------------------------------------------
Steven Pruchansky none Over $100,000
- -------------------------------------------------------------------------------------------------------------
Norman H. Smith* $10,001-50,000 Over $100,000
- -------------------------------------------------------------------------------------------------------------
Non-Independent Trustee
- -------------------------------------------------------------------------------------------------------------
James A. Shepherdson** $1-10,000 $10,001-50,000
- -------------------------------------------------------------------------------------------------------------
(1) This Fund does participate in the John Hancock Deferred Compensation Plan
for Independent Trustees (the "Plan"). Under the Plan, an Independent Trustee
may elect to earn a return on his deferred fees equal to the amount that he
would have earned if the deferred fees amount were invested in one or more funds
in the John Hancock fund complex. Under these circumstances, a trustee is not
the legal owner of the underlying shares, but participates in any positive or
negative return on those shares to the same extent as other shareholders. If the
Trustees were deemed to own the shares used in computing the value of his
deferred compensation, as of December 31, 2003, the respective "Dollar Range of
Fund Shares Owned by Trustee" and the "Aggregate Dollar Range of holdings in
John Hancock funds overseen by Trustee" would be as follows: none and over
$100,000 for Mr. Chapman, none and over $100,000 for Mr. Cosgrove, none and over
$100,000 for Mr. Cunningham, none and over $100,000 for Mr. Dion,
$50,001-100,000 and over $100,000 for Mr. Moore, none and over $100,000 for Mr.
Pruchansky, over $100,000 and over $100,000 for Mr. Smith.
*Messrs. Carlin, Cunningham, Dion and Pruchansky were elected to the Board by
shareholders on December 1, 2004 effective January 1, 2005. Mr. Smith was
appointed to the Board by the Trustees on December 14, 2004 effective January 1,
2005.
** Mr. Shepherdson was appointed Trustee of the John Hancock Funds as of May 12,
2004. As of June 16, 2004, the Independent Trustees elected Charles L. Ladner as
a Trustee of the Fund and Independent Chairman of the Board.
The following tables provide 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. Any Non-Independent Trustee and each of
the officers of the Fund are interested persons of the Adviser, and/or
affiliates are compensated by the Adviser and received no compensation from the
Fund for their services.
Total Compensation From
Aggregate Compensation the Fund and John Hancock Fund
Independent Trustees from the Fund (1) Complex to Trustees (2)
- -------------------- ----------------- -----------------------
Dennis J. Aronowitz+ $ 3,317 $ 72,250
James F. Carlin++ 0 76,250
Richard P. Chapman* 3,690 79,000
William J. Cosgrove* 3,740 79,500
William H. Cunningham*++ 0 74,250
Ronald R. Dion*++ 0 77,250
Richard A. Farrell+ 3,730 79,250
William F. Glavin*+ 3,437 74,250
Charles L. Ladner+++ 0 78,000
Dr. John A. Moore* 2,475 74,000
Patti McGill Peterson 2,365 72,750
John Pratt+ 3,567 76,500
Steven R. Pruchansky*++ 0 79,250
Norman H. Smith*++ 0 77,750
---------- ----------
Total $ 26,331 $1,070,250
(1) Compensation is fo7r the fiscal year ended December 31, 2003.
(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 2003. As of this date, there were fifty-one funds
in the John Hancock Fund Complex: Messrs. Aronowitz, Chapman, Cosgrove, Farrell,
Glavin and Pratt serving on twenty-one funds; Messrs. Carlin, Cunningham, Dion,
Ladner, Pruchansky and Smith serving on thirty funds; Dr. Moore and Ms. McGill
Peterson serving on twenty-nine funds.
*As of December 31, 2003, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $63,573, Mr. Cosgrove was $210,257, Mr. Cunningham was $563,218, Mr.
Dion was $193,220, Mr. Glavin was $306,646, Dr. Moore was $248,464, Mr.
Pruchansky was $150,981 and Mr. Smith was $276,224 under the John Hancock Group
of Funds Deferred Compensation Plan for Independent Trustees (the "Plan").
+Messrs. Aronowitz, Farrell, Glavin and Pratt retired as of December 31, 2004.
++ Messrs. Carlin, Cunningham, Dion and Pruchansky each became a Trustee and
were elected to the Board by shareholders on December 1, 2004 effective January
1, 2005. Mr. Smith was appointed to the Board by the Trustees on December 14,
2004 effective January 1, 2005.
+++ As of June 16, 2004, the Independent Trustees elected Charles L. Ladner as a
Trustee of the Fund and Independent Chairman of the Board.
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 or
Trustees of one or more of the other funds for which the Adviser serves as
investment adviser.
As of February 3, 2004, the officers and Trustees of the Trust as a group
beneficially owned less than 1% of the Fund's outstanding shares. On that date,
no person owned of record or beneficially as much as 5% of the outstanding
shares of each class of the Fund.
Name and Address of Owners of More Class A Class B Class C Class I Class R
than 5% of Shares
MLPF&S For The Sole 13.34% 17.96% 32.37% -- 11.20%
Benefit of Its Customers
Attn Fund Administration
4800 Deer Lake Drive East 2nd Fl
Jacksonville FL 32246-6484
Charles Schwab & Co 6.73% -- -- -- --
101 Montgomery Street
San Francisco CA 94104-4122
Citigroup Global Markets Inc -- 6.82% 10.91% -- --
333 West 34th Street
New York, New York 10001-2402
Canal Securities Company -- -- -- 54.24% --
One Chemung Canal Plaza
Elmira NY 14901-3408
MCB Trust Services Custodian -- -- -- 25.33% --
The Investment Incentive Plan
700 17th St Ste 150
Denver Co. 80202-3502
Putnam Fiduciary Trust Co. TTEE FBO -- -- -- 7.94% --
Horizon Savings Investment plan
One Investors Way
Norwood, MA 02062
John Hancock Advisers LLC -- -- -- -- 80.25%
Attn: Kelly A. Conway
101 Huntington Avenue
Boston, MA 02199
January 4, 2005
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Balanced Fund John Hancock Massachusetts Tax-Free Income Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Biotechnology Fund John Hancock Mid Cap Growth Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock California Tax-Free Income Fund John Hancock Money Market Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Classic Value Fund John Hancock Multi Cap Growth Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Core Equity Fund John Hancock New York Tax-Free Income Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Financial Industries Fund John Hancock Real Estate Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Focused Equity Fund John Hancock Regional Bank Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Growth Trends Fund John Hancock Small Cap Equity Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Health Sciences Fund John Hancock Small Cap Growth Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock High Yield Municipal Bond Fund John Hancock Sovereign Investors Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Independence Diversified Core Equity John Hancock Tax-Free Bond Fund
Fund II
- ----------------------------------------------------- -------------------------------------------------------
John Hancock International Fund John Hancock Technology Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Large Cap Equity Fund John Hancock U.S. Global Leaders Growth Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Large Cap Growth Fund John Hancock U.S. Government Cash Reserve
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Large Cap Select Fund
- ----------------------------------------------------- -------------------------------------------------------
Supplement to Current Statement of Additional Information
Description of the Fund's Shares
The last paragraph in the "Description of the Fund's Shares" section has been
deleted and replaced with the following:
"Shares of the Fund generally may be sold only to U.S. citizens, U.S. residents,
and U.S. domestic corporations, partnerships, trusts or estates."
October 1, 2004
MFSAIS 10/04
JOHN HANCOCK U.S. GLOBAL LEADERS GROWTH FUND
Class A, Class B, Class C, Class I and Class R Shares
Statement of Additional Information
March 1, 2004 as revised July 15, 2004
This Statement of Additional Information provides information about John Hancock
U.S. Global Leaders Growth Fund (the "Fund") in addition to the information that
is contained in the combined John Hancock Equity Funds current Prospectus for
Class A, B and C and in the Fund's current Class I share and Class R share
prospectuses (the "Prospectuses"). The Fund is a non-diversified series of John
Hancock Capital Series (the "Trust").
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus. This Statement of Additional Information
incorporates by reference the Fund's Annual Report. A copy of the Prospectus or
Annual Report can be obtained free of charge by writing or telephoning:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
1-800-225-5291
TABLE OF CONTENTS
Page
Organization of the Fund .................................................. 2
Investment Objective and Policies ......................................... 2
Investment Restrictions ................................................... 8
Those Responsible for Management .......................................... 10
Investment Advisory and Other Services .................................... 18
Distribution Contracts .................................................... 23
Sales Compensation ........................................................ 25
Net Asset Value ........................................................... 28
Initial Sales Charge on Class A Shares .................................... 28
Deferred Sales Charge on Class B and Class C Shares ....................... 31
Eligible Investors for Class R Shares ..................................... 35
Special Redemptions ....................................................... 35
Additional Services and Programs .......................................... 35
Purchase and Redemptions through Third Parties ............................ 37
Description of the Fund's Shares .......................................... 37
Tax Status ................................................................ 39
Calculation of Performance ................................................ 43
Brokerage Allocation ...................................................... 46
Transfer Agent Services .................................................. 49
Custody of Portfolio ...................................................... 50
Independent Auditors ...................................................... 50
Fund Securities ........................................................... 50
Appendix A- Description of Investment Risk ................................ A-1
Appendix B-Description of Bond Ratings .................................... B-1
Appendix C-Proxy Voting Summary ........................................... C-1
Financial Statements ...................................................... F-1
1
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. The Fund is the successor to U.S. Global Leaders Growth Fund,
a series of Professionally Managed Portfolios, a Massachusetts business trust.
On May 17, 2002, the Fund acquired all of the assets of U.S. Global Leaders
Growth Fund pursuant to an agreement and plan of reorganization (the
"Reorganization") in exchange for Class A shares of the fund and the assumption
of certain liabilities of U.S. Global Leaders Growth Fund.
John Hancock Advisers, LLC (prior to February 1, 2002, John Hancock Advisers,
Inc.) (the "Adviser") is the Fund's investment adviser. The Adviser is a wholly
owned subsidiary of John Hancock Financial Services, Inc., a subsidiary of
Manulife Financial Corporation ("Manulife Financial"). Founded in 1862, John
Hancock Financial Services and its subsidiaries today offer a broad range of
financial products and services, including whole, term, variable, and universal
life insurance, as well as college savings products, mutual funds, fixed and
variable annuities, long-term care insurance and various forms of business
insurance.
Manulife Financial, is the fifth largest life insurer in the world, and the
second largest in North America, based on market capitalization as of April 27,
2004. Manulife Financial is a leading Canadian-based financial services group
serving millions of customers in 19 countries and territories worldwide. Pro
forma funds under management by Manulife Financial and its subsidiaries,
including John Hancock, were US$271.6 billion (Cdn$355.9 billion) as of March
31, 2004.
Manulife Financial Corporation trades as `MFC' on the TSX, NYSE and PSE, and
under `0945' on the SEHK.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus. Appendix A contains further
information describing investment risks. The investment objective is
non-fundamental and may be changed by the Trustees without shareholder approval.
There is no assurance that the Fund will achieve its investment objective.
The Fund's investment objective is long-term growth of capital. The Fund invests
primarily in common stocks of "U.S. Global Leaders." Under normal market
conditions, at least 80% of the Fund's assets will be invested in stocks of
companies the Portfolio Managers regard as U.S. Global Leaders.
The Portfolio Managers consider U.S. Global Leaders to be U.S. companies with
multinational operations that typically exhibit the following key sustainable
growth characteristics: i) Hold leading market shares of their relevant
industries, and hence possess the pricing flexibility that results in high
profit margins and high investment returns. ii) Supply consumable products or
services so that their revenue streams are recurring. The Portfolio Managers
believe that The Fund's investment objective is long-term growth of capital. The
Fund invests primarily in common stocks of "U.S. Global Leaders." Under normal
market conditions, at least 80% of the Fund's assets will be invested in stocks
of companies the Portfolio Managers regard as U.S. companies with these
characteristics should have relatively low business risk and relatively high
sustainability of earnings growth. The Portfolio Managers believe that leading
multi-national companies traded publicly in U.S. securities markets have a
number of advantages that make
2
them attractive investments. U.S. capital markets are large and liquid.
Accounting practices are consistent and well regulated. Currency and political
risks are minimized, and the costs associated with investing abroad are reduced.
Companies that have leading positions in growing markets in the U.S. and other
developed countries and also derive a significant portion of their profits in
fast-growing emerging markets are relatively limited in number at this time.
Because of the difficulty and expense in building broad-based distribution in
newer global markets, it appears likely that the number of such companies will
not expand rapidly. Thus, the Management Team believes that the stocks of
multi-national companies that can sustain superior global earnings growth are
likely to be accorded premium relative valuations.
With respect to the Fund's policy of investing at least 80% of its Assets in
Global Leaders, "Assets" means net assets plus the amount of any borrowings for
investment purposes. Also, with respect to this 80% investment policy, the Fund
will notify shareholders at least 60 days prior to any change in this policy.
The Fund's investment policy is to seek to identify companies with superior
long-term earnings prospects and to continue to own them as long as the
Portfolio Managers believe such companies continue to enjoy favorable prospects
for capital growth and that they are not overvalued in the marketplace.
Unlike mutual funds that are classified as "global" funds, the Fund does not
have a principal investment policy that calls for foreign investing. The Fund is
non-diversified. The Fund anticipates that its portfolio turnover rate will not
normally exceed 25%. This means that the Fund has the potential to be a tax
efficient investment. This should result in the realization and distribution to
shareholders of lower capital gains, which would be considered tax efficient.
This anticipated lack of frequent trading can also lead to lower transaction
costs, which could help to improve the Fund's performance.
Under normal market conditions, the Fund will stay fully invested in stocks.
However, in abnormal circumstances, such as situations where the Fund
experiences large cash inflows or anticipates unusually large redemptions, and
in abnormal market, economic, political, or other conditions, the Fund may
temporarily depart from its principal investment strategies by making short-term
investments in cash equivalents.
Non-Diversification: The Fund has elected "non-diversified" status under the
Investment Company Act of 1940 and may invest more than 5% of total assets in
securities of a single company. However, the Fund intends to comply with the
diversification standards applicable to regulated investment companies under
Subchapter M of the Internal Revenue Code of 1986, as amended. In order to meet
these standards, among other requirements, at the close of each quarter of its
taxable year (a) at least 50% of the value of the Fund's total assets must be
represented by one or more of the following: (i) cash and cash items, including
receivables; (ii) U.S. Government securities; (iii) securities of other
regulated investment companies; and (iv) securities (other than those in items
(ii) and (iii) above) of any one or more issuers as to which the Fund's
investment in an issuer does not exceed 5% of the value of the Fund's total
assets (valued at time of purchase); and (b) not more than 25% of its total
assets (valued at time of purchase) may be invested in the securities of any one
issuer (other than U.S. Government securities or securities of other regulated
investment companies).
The Fund's strategy of investing in a limited number of stocks may increase the
volatility of the Fund's investment performance. If the stocks the Fund invests
in perform poorly, the Fund could incur greater losses than if it had invested
in a larger number of stocks. As a result, the net asset
3
value of the Fund can be expected to fluctuate more than the net asset value of
a comparable "diversified" fund.
Investment Companies. The Fund may invest in shares of other invest companies in
pursuit of its investment objective. This may include investment in money market
mutual funds in connection with the Fund's management of daily cash positions.
In addition to the advisory and operational fees the Fund bears directly in
connection with its own operation, the Fund and its shareholders will also bear
the pro rata portion of each other investment company's advisory and operational
expenses.
Risks of Multinational Companies: Because the Fund invests primarily in the
securities of companies with foreign business operations, the Fund may be
riskier than Funds that focus on companies with primarily U.S. operations.
Multinational companies may face certain political and economic risks, such as
foreign controls over currency exchange; restrictions on monetary repatriation;
possible seizure, nationalization or expropriation of assets; and political,
economic or social instability. These risks are greater for companies with
significant operations in developing countries.
Foreign Investments. The Fund is permitted to invest up to 25% of its net assets
in foreign companies, (although the level of such investment is not expected to
exceed 15% under normal circumstances.) The Fund intends to invest primarily in
large capitalization, well established foreign issuers the securities of which
are traded in the U.S., and which present their financial data in accordance
with generally accepted accounting principles in the U.S.
American Depositary Receipts. The Fund may invest its assets in securities of
foreign issuers in the form of ADRs, which are receipts for the shares of a
foreign-based corporation. The Fund treats ADRs as interests in the underlying
securities for purposes of its investment policies. A purchaser of an
unsponsored ADR may not have unlimited voting rights and may not receive as much
information about the issuer of the underlying securities as with a sponsored
ADR.
Foreign Currency Transactions. The Fund may engage in foreign currency
transactions. Foreign currency transactions may be conducted on a spot (i.e.,
cash) basis at the spot rate for purchasing or selling currency prevailing in
the foreign exchange market.
The Fund may also enter into forward foreign currency exchange contracts to
hedge against fluctuations in currency exchange rates affecting a particular
transaction or portfolio position. Forward contracts are agreements to purchase
or sell a specified currency at a specified future date and price set at the
time of the contract. Transaction hedging is the purchase or sale of forward
foreign currency contracts with respect to specific receivables or payables of
the Fund accruing in connection with the purchase and sale of its portfolio
securities quoted or denominated in the same or related foreign currencies.
Portfolio hedging is the use of forward foreign currency contracts to offset
portfolio security positions denominated or quoted in the same or related
foreign currencies. The Fund may elect to hedge less than all of its foreign
portfolio positions as deemed appropriate by the Adviser. The Fund will not
engage in speculative forward foreign currency exchange transactions.
If the Fund purchases a forward contract, the Fund will segregate cash or liquid
securities in a separate account of the Fund in an amount equal to the value of
the Fund's total assets committed to the consummation of such forward contract.
The assets in the segregated account will be valued at market daily and if the
value of the securities in the separate account declines, additional cash or
securities will be placed in the account so that the value of the account will
be equal the amount of the Fund's commitment with respect to such contracts.
4
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it may
not be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level it anticipates.
Risks of Foreign Securities. Investments in foreign securities may involve a
greater degree of risk than those in domestic securities. There is generally
less publicly available information about foreign companies in the form of
reports and ratings similar to those that are published about issuers in the
United States. Also, foreign issuers are generally not subject to uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to United States issuers.
Because foreign securities may be denominated in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will affect the Fund's net
asset value, the value of dividends and interest earned, gains and losses
realized on the sale of securities, and any net investment income and gains that
the Fund distributes to shareholders. Securities transactions undertaken in some
foreign markets may not be settled promptly so that the Fund's investments on
foreign exchanges may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement.
Foreign securities will be purchased in the best available market, whether
through over-the-counter markets or exchanges located in the countries where
principal offices of the issuers are located. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
States exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.
With respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation,
nationalization or confiscatory taxation limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the United States' economy in terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
The dividends, in some cases capital gains and interest payable on certain of
the Fund's foreign portfolio securities, may be subject to foreign withholding
or other foreign taxes, thus reducing the net amount of income or gains
available for distribution to the Fund's shareholders.
Borrowing. The Fund may borrow money from banks in an aggregate amount not to
exceed one-third of the value of the Fund's total assets to meet temporary or
emergency purposes, and may pledge its assets in connection with such
borrowings.
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.
5
Government securities. The Adviser will continuously monitor the
creditworthiness of the parties with whom the Fund enters into repurchase
agreements.
The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period in which the Fund seeks
to enforce its rights thereto, possible subnormal levels of income decline in
value of the underlying securities or lack of access to income during this
period and the expense of enforcing its rights.
Reverse Repurchase Agreements and Other Borrowings. The Fund may also enter into
reverse repurchase agreements which involve the sale of U.S. Government
securities held in its portfolio to a bank with an agreement that the Fund will
buy back the securities at a fixed future date at a fixed price plus an agreed
amount of "interest" which may be reflected in the repurchase price. Reverse
repurchase agreements are considered to be borrowings by the Fund. Reverse
repurchase agreements involve the risk that the market value of securities
purchased by the Fund with proceeds of the transaction may decline below the
repurchase price of the securities sold by the Fund which it is obligated to
repurchase. The Fund will also continue to be subject to the risk of a decline
in the market value of the securities sold under the agreements because it will
reacquire those securities upon effecting their repurchase. To minimize various
risks associated with reverse repurchase agreements, the Fund will establish and
maintain 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.
The Fund will not enter into reverse repurchase agreements and other borrowings
except from banks as a temporary measure for extraordinary emergency purposes 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 total return. The Fund will enter into reverse repurchase agreements
only with federally insured banks which are approved in advance as being
creditworthy by the Trustees. Under procedures established by the Trustees, the
Advisers 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 have adopted guidelines and delegated 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.
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
6
may incur a loss or, in the event of the borrower's bankruptcy, the Fund may be
delayed in or prevented from liquidating the collateral. It is a fundamental
policy of the Fund not to lend portfolio securities having a total value
exceeding 33 1/3% of its total assets.
Rights and Warrants. The Fund may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price, subject to the Fund's Investment
Restrictions. Generally, warrants and stock purchase rights do not carry with
them the right to receive dividends or exercise voting rights with respect to
the underlying securities, and they do not represent any rights in the assets of
the issuer. As a result, an investment in warrants and rights may be considered
to entail greater investment risk than certain other types of investments. In
addition, the value of warrants and rights does not necessarily change with the
value of the underlying securities, and they cease to have value if they are not
exercised on or prior to their expiration date. Investment in warrants and
rights increases the potential profit or loss to be realized from the investment
of a given amount of the Fund's assets as compared with investing the same
amount in the underlying stock.
Short Sales. The Fund may engage in short sales "against the box". In a short
sale against the box, the Fund agrees to sell at a future date a security that
it either contemporaneously owns or has the right to acquire at no extra cost.
If the price of the security has declined at the time the Fund is required to
deliver the security, the Fund will benefit from the difference in the price. If
the price of the security has increased, the Fund will be required to pay the
difference.
Forward Commitment and When-Issued Securities. The Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. The Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When the Fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in the Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the Fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, the Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
Certificates of Deposit, Bankers' Acceptances and Time Deposits. The Fund may
acquire certificates of deposit, bankers' acceptances and time deposits.
Certificates of deposit are negotiable certificates issued against funds
Deposited in a commercial bank for a definite period of time and earning a
Specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
Merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by
7
the Fund will be dollar-denominated obligations of domestic banks, savings and
loan associations or financial institutions which, at the time of purchase, have
capital, surplus and undivided profits in excess of $100 million (including
assets of both domestic and foreign branches), based on latest published
reports, or less than $100 million if the principal amount of such bank
obligations are fully insured by the U.S. Government. In addition to purchasing
certificates of deposit and bankers' acceptances, to the extent permitted under
its investment objective and policies stated above and in its prospectus, the
Fund may make interest-bearing time or other interest-bearing deposits in
commercial or savings banks. Time deposits are non-negotiable deposits
maintained at a banking institution for a specified period of time at a
specified interest rate.
Commercial Paper and Short-Term Notes. The Fund may invest a portion of its
assets in commercial paper and short-term notes. Commercial paper consists of
unsecured promissory notes issued by corporations. Issues of commercial paper
and short-term notes will normally have maturates of less than nine months and
fixed rates of return, although such instruments may have maturates of up to one
year. Commercial paper and short-term notes will consist of issues rated at the
time of purchase "A-2" or higher by Standard & Poor's Ratings Group, "Prime-1"
or "Prime-2" by Moody's Investors Service, Inc., or similarly rated by another
nationally recognized statistical rating organization or, if unrated, will be
determined by the Adviser to be of comparable quality. These rating symbols are
described in the Appendix.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions will
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 at that meeting
or (2) more than 50% of the Fund's outstanding shares.
The Fund may not:
1. Issue senior securities, except as permitted by the Fund's fundamental
investment restrictions on borrowing, lending and investing in commodities,
and as otherwise permitted under the 1940 Act. 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 and options on futures contracts, forward
commitments, forward foreign exchange contracts and repurchase agreements
entered into in accordance with the Fund's investment policies are not
deemed to be senior securities.
2. Borrow money, except: (i) 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; (iv) in connection with entering into
reverse repurchase agreements and dollar rolls, but only if after each such
borrowing there is asset coverage of at least 300% as defined in the 1940
Act; and (v) as otherwise permitted under the 1940 Act. 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.
8
3. Act as an underwriter, except to the extent that in connection with the
disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the Securities Act of 1933.
4. Purchase, sell or invest in real estate, but subject to its other
investment policies and restrictions may invest in securities of companies
that deal in real estate or are engaged in the real estate business. These
companies include real estate investment trusts and securities secured by
real estate or interests in real estate. The fund may hold and sell real
estate acquired through default, liquidation or other distributions of an
interest in real estate as a result of the fund's ownership of securities.
5. Invest in commodities or commodity futures contracts, other than financial
derivative contracts. Financial derivatives include forward currency
contracts; financial futures contracts and options on financial futures
contracts; options and warrants on securities, currencies and financial
indices; swaps, caps, floors, collars and swaptions; and repurchase
agreements entered into in accordance with the fund's investment policies.
6. Make loans, except that the fund may (i) 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, (ii) enter into repurchase agreements,
and (iii) purchase all or a portion of an issue of publicly distributed
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.
7. 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.
Non-Fundamental Investment Restrictions. The following investment restrictions
are designated as non-fundamental and may be changed by the Trustees without
shareholder approval.
1. 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 of 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.
2. Invest in the securities of an issuer for the purpose of exercising control
or management.
3. Purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of securities
transactions.
4. Invest more than 15% of its net assets in securities which are illiquid.
9
Except with respect to borrowing money, 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 value of the Fund's assets will not be considered a violation of the
restriction.
The Fund will invest only in countries on the Adviser's Approved Country
Listing. The Approved Country Listing is a list maintained by the Adviser's
investment department that outlines all countries, including the United States,
that have been approved for investment by Funds managed by the Adviser.
If allowed by the Fund's other investment policies and restrictions, the Fund
may invest up to 5% of its total assets in Russian equity securities and up to
10% of its total assets in Russian fixed income securities. All Russian
securities must be: (1) denominated in U.S. or Canadian dollars, euros,
sterling, or yen; (2) traded on a major exchange; and (3) held physically
outside of Russia.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its Trustees, including certain Trustees
who are not "interested persons" of the Fund or the Trust (as defined by the
Investment Company Act of 1940) (the "Independent 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 Adviser, or officers and Directors of
the Fund's principal distributor, John Hancock Funds, LLC (prior to February 1,
2002, John Hancock Funds, Inc.) ("John Hancock Funds").
10
- ---------------------------------------------------------------------------------------------------------------------
Number of
John Hancock
Position(s) Trustee/ Principal Occupation(s) and other Funds
Name, Address (1) Held with Officer Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- ---------------------------------------------------------------------------------------------------------------------
Independent Trustees
- ---------------------------------------------------------------------------------------------------------------------
Charles L. Ladner Chairman 2004 Chairman and Trustee, Dunwoody Village, 49
Born: 1938 and Trustee Inc. (continuing care retirement
community); Senior Vice President and
Chief Financial Officer, UGI Corporation
(Public Utility Holding Company) (retired
1998); Vice President and Director for
AmeriGas, Inc. (retired 1998); Director of
AmeriGas Partners, L.P. (until 1997)(gas
distribution); Director, EnergyNorth, Inc.
(until 1995); Director, Parks and History
Association (since 2001).
- ---------------------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz Trustee 2002 Professor of Law, Emeritus, Boston 20
Born: 1931 University School of Law (as of 1996);
Director, Brookline Bancorp.
- ---------------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. Trustee 2002 President and Chief Executive Officer, 20
Born: 1935 Brookline Bancorp., Inc. (lending) (since
1972); Chairman and Director, Lumber
Insurance Co. (insurance) (until 2000);
Chairman and Director, Northeast
Retirement Services, Inc. (retirement
administration) (since 1998).
- ---------------------------------------------------------------------------------------------------------------------
William J. Cosgrove Trustee 2002 Vice President, Senior Banker and Senior 20
Born: 1933 Credit Officer, Citibank, N.A. (banking)
(retired 1991); Executive Vice President,
Citadel Group Representatives, Inc.
(financial reinsurance); Director, Hudson
City Bancorp (banking); Trustee,
Scholarship Fund for Inner City Children
(since 1986).
- ---------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustee and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment
adviser, underwriter, and or certain other affiliates.
11
- ---------------------------------------------------------------------------------------------------------------------
Number of
John Hancock
Position(s) Trustee/ Principal Occupation(s) and other Funds
Name, Address (1) Held with Officer Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Richard A. Farrell Trustee 2002 President, Farrell, Healer & Co., Inc., 20
Born: 1932 (venture capital management firm)(since
1980) and General Partner of the Venture
Capital Fund of NE; (since 1980); Trustee,
Marblehead Savings Bank (since 1994).
Prior to 1980, headed the venture capital
group at Bank of Boston Corporation.
- -----------------------------------------------------------------------------------------------------------------------
William F. Glavin Trustee 2002 President Emeritus, Babson College (as of 20
Born: 1932 1998); Vice Chairman, Xerox Corporation
(until 1989); Director, Reebok, Inc.
(until 2002) and Inco Ltd. (until 2002).
- -----------------------------------------------------------------------------------------------------------------------
John A. Moore Trustee 2002 President and Chief Executive Officer, 30
Born: 1939 Institute for Evaluating Health Risks,
(nonprofit institution) (until 2001);
Senior Scientist, Sciences International
(health research)(since 1998); Principal,
Hollyhouse (consulting)(since 2000);
Director, CIIT(nonprofit research) (since
2002).
- -----------------------------------------------------------------------------------------------------------------------
Patti McGill Peterson Trustee 2002 Executive Director, Council for 30
Born: 1943 International Exchange of Scholars (since
1998); Vice President, Institute of
International Education (since 1998);
Senior Fellow, Cornell Institute of Public
Affairs, Cornell University (until 1997);
President Emerita of Wells College and St.
Lawrence University; Director, Niagara
Mohawk Power Corporation (electric
utility); Director, Ford Foundation,
International Fellowships Program (since
2002); Director, Lois Roth Endowment
(since 2002); Director, Council for
International Exchange (since 2003);
Advisory Board, UNCF, Global Partnerships
Center (since 2002).
- -----------------------------------------------------------------------------------------------------------------------
John W. Pratt Trustee 2002 Professor of Business Administration 20
Born: 1931 Emeritus, Harvard University Graduate
School of Business Administration (as
of 1998).
- -----------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustee and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment
adviser, underwriter, and or certain other affiliates.
12
- ---------------------------------------------------------------------------------------------------------------------
Number of
John Hancock
Position(s) Trustee/ Principal Occupation(s) and other Funds
Name, Address (1) Held with Officer Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- ---------------------------------------------------------------------------------------------------------------------
Non-Independent Trustee
- ---------------------------------------------------------------------------------------------------------------------
James A. Shepherdson (3) Trustee, 2004 Executive Vice President, Manulife 49
Born: 1952 President and Financial Corporation (since 2004);
Chief Chairman, Director, President and Chief
Executive Executive Officer, John Hancock Advisers,
Officer LLC (the "Adviser") and The Berkeley
Group, LLC ("The Berkeley Group");
Chairman, Director, President and Chief
Executive Officer, John Hancock Funds,
LLC. ("John Hancock Funds"); Chairman,
Director, President and Chief Executive
Officer, Sovereign Asset Management
Corporation ("SAMCorp."); President, John
Hancock Retirement Services, John Hancock
Life Insurance Company (until 2004);
Chairman, Essex Corporation (until 2004);
Co-Chief Executive Office MetLife
Investors Group (until 2003), Senior Vice
President, AXA/Equitable Insurance Company
(until 2000).
- ---------------------------------------------------------------------------------------------------------------------
Principal Officers who are
not Trustees
- ---------------------------------------------------------------------------------------------------------------------
Richard A. Brown Senior Vice 2002 Senior Vice President, Chief Financial N/A
Born: 1949 President and Officer and Treasurer, the Adviser, John
Chief Hancock Funds, and The Berkeley Group;
Financial Second Vice President and Senior Associate
Officer Controller, Corporate Tax Department, John
Hancock Financial Services, Inc.(until 2001).
- ---------------------------------------------------------------------------------------------------------------------
William H. King Vice President 2002 Vice President and Assistant Treasurer, N/A
Born: 1952 and Treasurer the Adviser; Vice President and Treasurer
of each of the John Hancock funds;
Assistant Treasurer of each of the John
Hancock funds (until 2001).
- ---------------------------------------------------------------------------------------------------------------------
Susan S. Newton Senior Vice 2002 Senior Vice President, Secretary and Chief N/A
Born: 1950 President, Legal Officer, SAMCorp., the Adviser and
Secretary and each of the John Hancock funds, John
Chief Legal Hancock Funds and The Berkeley Group; Vice
Officer President, Signature Services (until
2000), Director, Senior Vice President and
Secretary, NM Capital.
- ---------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment
adviser, underwriter, and or certain other affiliates.
13
The Fund's Board of Trustees currently has four standing Committees: the Audit
Committee, the Administration Committee, the Contracts/Operations Committee and
the Investment Performance Committee. Each Committee is comprised of Independent
Trustees who are not "interested persons."
The Audit Committee members are Messrs. Moore (Chairman), Glavin and Ms. McGill
Peterson. All of the members of the Audit Committee are independent under the
New York Stock Exchange's Revised Listing Rules and each member is financially
literate with at least one having accounting or financial management expertise.
The Board has adopted a written charter for the Audit Committee. The Audit
Committee recommends to the full board auditors for the Fund, monitors and
oversees the audits of the Fund, communicates with both independent auditors and
internal auditors on a regular basis and provides a forum for the auditors to
report and discuss any matters they deem appropriate at any time. The Audit
Committee held four meetings during the fiscal year ended December 31, 2003.
The Administration Committee members are all of the independent Trustees. The
Administration Committee reviews the activities of the other four standing
committees and makes the final selection and nomination of candidates to serve
as Independent Trustees. All members of the Administration Committee are
independent under the New York Stock Exchange's Revised Listing Rules and are
not interested persons, as defined in the 1940 Act, of John Hancock or the Fund
(the "Independent Trustees"). Among other things, the Administration Committee
acts as a nominating committee of the Board. The Trustees who are not
Independent Trustees and the officers of the Fund are nominated and selected by
the Board. The Administration Committee does not have at this time formal
criteria for the qualifications of candidates to serve as an Independent
Trustee, although the Administration Committee may develop them in the future.
In reviewing a potential nominee and in evaluating the renomination of current
Independent Trustees, the Administration Committee expects to apply the
following criteria: (i) the nominee's reputation for integrity, honesty and
adherence to high ethical standards, (ii) the nominee's business acumen,
experience and ability to exercise sound judgments, (iii) a commitment to
understand the Fund and the responsibilities of a trustee of an investment
company, (iv) a commitment to regularly attend and participate in meetings of
the Board and its committees, (v) the ability to understand potential conflicts
of interest involving management of the Fund and to act in the interests of all
shareholders, and (vi) the absence of a real or apparent conflict of interest
that would impair the nominee's ability to represent the interests of all the
shareholders and to fulfill the responsibilities of an Independent Trustee. The
Administration Committee does not necessarily place the same emphasis on each
criteria and each nominee may not have each of these qualities. The
Administration Committee does not discriminate on the basis of race, religion,
national origin, sex, sexual orientation, disability or any other basis
proscribed by law. The Administration Committee held four meetings during the
fiscal year ended December 31, 2003.
As long as an existing Independent Trustee continues, in the opinion of the
Administration Committee, to satisfy these criteria, the Fund anticipates that
the Committee would favor the renomination of an existing Trustee rather than a
new candidate. Consequently, while the Administration Committee will consider
nominees recommended by shareholders to serve as trustees, the Administration
Committee may only act upon such recommendations if there is a vacancy on the
Board or the Administration Committee determines that the selection of a new or
additional Independent Trustee is in the best interests of the Fund. In the
event that a vacancy arises or a change in Board membership is determined to be
advisable, the Administration Committee will, in addition to any shareholder
recommendations, consider candidates identified by other means, including
candidates proposed by members of the Administration Committee. While it has not
done so in the past, the Administration Committee may retain a consultant to
assist the Committee in a search for a qualified candidate.
14
Any shareholder recommendation must be submitted in compliance with all of the
pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, to be considered by the Administration Committee. In evaluating a
nominee recommended by a shareholder, the Administration Committee, in addition
to the criteria discussed above, may consider the objectives of the shareholder
in submitting that nomination and whether such objectives are consistent with
the interests of all shareholders. If the Board determines to include a
shareholder's candidate among the slate of nominees, the candidate's name will
be placed on the Fund's proxy card. If the Administration Committee or the Board
determines not to include such candidate among the Board's designated nominees
and the shareholder has satisfied the requirements of Rule 14a-8, the
shareholder's candidate will be treated as a nominee of the shareholder who
originally nominated the candidate. In that case, the candidate will not be
named on the proxy card distributed with the Fund's proxy statement.
Shareholders may communicate with the members of the Board as a group or
individually. Any such communication should be sent to the Board or an
individual Trustee c/o the secretary of the Fund at the address on the notice of
this meeting. The Secretary may determine not to forward any letter to the
members of the Board that does not relate to the business of the Fund.
The Contracts/Operations Committee members are Messrs. Aronowitz (Chairman), and
Farrell. The Contracts/Operations Committee oversees the initiation, operation,
and renewal of contracts between the Fund and other entities. These contracts
include advisory and subadvisory agreements, custodial and transfer agency
agreements and arrangements with other service providers. The
Contracts/Operations Committee held five meetings during the fiscal year ended
December 31, 2003.
The Investment Performance Committee members are Messrs. Chapman (Chairman),
Cosgrove and Pratt. The Investment Performance Committee monitors and analyzes
the performance of the Fund generally, consults with the adviser as necessary if
the Fund requires special attention, and reviews peer groups and other
comparative standards as necessary. The Investment Performance Committee held
four meetings during the fiscal year ended December 31, 2003.
The following table provides a dollar range indicating each Trustee's ownership
of equity securities of the Fund, as well as aggregate holdings of shares of
equity securities of all funds in the John Hancock Fund Complex overseen by the
Trustee, as of December 31, 2003.
- ---------------------------------------------------------------------------------------------------------
Aggregate Dollar Range of holdings
Dollar Range of Fund Shares in John Hancock funds overseen by
Name of Trustee Owned by Trustee (1) Trustee (1)
- ---------------------------------------------------------------------------------------------------------
Independent Trustees
- ---------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz $10,001-$50,000 $50,001-$100,000
- ---------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. None Over $100,000
- ---------------------------------------------------------------------------------------------------------
William J. Cosgrove None $10,001-$50,000
- ---------------------------------------------------------------------------------------------------------
Richard A. Farrell $10,001-$50,000 Over $100,000
- ---------------------------------------------------------------------------------------------------------
William F. Glavin None None
- ---------------------------------------------------------------------------------------------------------
Dr. John A. Moore $10,001-$50,000 Over $100,000
- ---------------------------------------------------------------------------------------------------------
Patti McGill Peterson None Over $100,000
- ---------------------------------------------------------------------------------------------------------
John W. Pratt None Over $100,000
- ---------------------------------------------------------------------------------------------------------
*Non-Independent Trustees
- ---------------------------------------------------------------------------------------------------------
John M. DeCiccio None Over $100,000
- ---------------------------------------------------------------------------------------------------------
Maureen Ford Goldfarb $10,001-$50,000 Over $100,000
- ---------------------------------------------------------------------------------------------------------
(1) This Fund does not participate in the John Hancock Deferred Compensation
Plan for Independent Trustees (the "Plan"). Under the Plan, an Independent
Trustee may defer his fees by electing to have the Adviser invest his fees
in one of the funds in the John Hancock complex that participates in the
Plan. Under these circumstances,
15
the Trustee is not the legal owner of the underlying shares, but does
participate in any positive or negative return on those shares to the same
extent as all other shareholders. With regard to Trustees participating in
the Plan, if a Trustee was deemed to own the shares used in computing the
value of his deferred compensation, as of December 31, 2003, the respective
"Dollar Range of Fund Shares Owned by Trustee" and the "Aggregate Dollar
Range of holdings in John Hancock funds overseen by Trustee" would be as
follows: none and over $100,000 for Mr. Chapman, none and over $100,000 for
Mr. Cosgrove, $1-$10,000 and over $100,000 for Mr. Glavin and
$50,001-$100,000 and over $100,000 for Mr. Moore.
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. Any Non-Independent Trustee, and each
of the officers of the Fund who are interested persons of the Adviser, are
compensated by the Adviser and/or affiliates and receive no compensation from
the Fund for their services.
*Mr. DeCiccio resigned as of March 19, 2004 and Ms. Ford Goldfarb resigned as of
May 12, 2004. Both were Non-Independent Trustees.
Aggregate Total Compensation From the
Compensation from Fund and John Hancock Fund
Independent Trustees the Fund (1) Complex to Trustees (2)
- -------------------- ------------ -----------------------
Dennis J. Aronowitz $ 3,317 $ 72,250
Richard P. Chapman* 3,690 79,000
William J. Cosgrove* 3,740 79,500
Richard A. Farrell 3,730 79,250
Gail D. Fosler + 10 250
William F. Glavin* 3,437 74,250
Dr. John A. Moore* 2,475 74,000
Patti McGill Peterson 2,365 72,750
John Pratt 3,567 76,500
--------- ----------
Total $ 26,331 $ 607,750
(1) Compensation is for the fiscal year ending December 31, 2003.
(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 2003. As of this date, there were fifty funds in
the John Hancock Fund Complex, with Dr. Moore and Ms. Peterson serving on
twenty-nine funds and each of the other Independent Trustees serving on twenty
funds.
*As of December 31, 2003, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $63,573, Mr. Cosgrove was $210,257, Mr. Glavin was $306,646 and for
Dr. Moore was $248,464 under the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees (the "Plan").
+ As of December 31, 2002, Ms. Fosler resigned as a Trustee of the Complex.
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 or
Trustees of one or more of the other funds for which the Adviser serves as
investment adviser.
As of February 3, 2003, 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 beneficially owned 5% of or more of the
outstanding shares of the Fund listed below:
16
- -------------------------------------------------------------------------------------------------------
Percentage of Total Outstanding
Name and Address of Shareholders Class of Shares Shares of the Class of the Fund
- -------------------------------------------------------------------------------------------------------
MLPF&S For the A 13.34%
Sole Benefit of Its Customers
Attn Fund Administration 97C55
4800 Deer Lake Drive East 2nd Fl
Jacksonville FL 32446-6484
- -------------------------------------------------------------------------------------------------------
Charles Schwab & Co A 6.73%
101 Montgomery Street
San Francisco CA 94104-4122
- -------------------------------------------------------------------------------------------------------
MLPF&S For the B 17.96%
Sole Benefit of Its Customers
Attn: Fund Administration 97C55
4800 Deer Lake Drive East 2nd Fl
Jacksonville FL 32446-6484
- -------------------------------------------------------------------------------------------------------
Citigroup Global Markets Inc B 6.82%
333 West 34th Street
New York, New York 10001-2402
- -------------------------------------------------------------------------------------------------------
MLPF&S For the C 32.37%
Sole Benefit of Its Customers
Attn: Fund Administration 97C55
4800 Deer Lake Drive East 2nd Fl
Jacksonville FL 32446-6484
- -------------------------------------------------------------------------------------------------------
Citigroup Global Markets Inc C 10.91%
333 West 34th Street
New York, New York 10001-2402
- -------------------------------------------------------------------------------------------------------
Canal Securities Company I 54.24%
One Chemung Canal Plaza
Elmira NY 14901-3408
- -------------------------------------------------------------------------------------------------------
MCB Trust Services Custodian I 25.33%
The Investment Incentive Plan
700 17th St Ste 150
Denver Co. 80202-3502
- -------------------------------------------------------------------------------------------------------
Putnam Fiduciary Trust Co. TTEE I 7.94%
FBO
Horizon Savings Investment plan
One Investors Way
Norwood, MA 02062
- -------------------------------------------------------------------------------------------------------
17
- -------------------------------------------------------------------------------------------------------
Percentage of Total Outstanding
Name and Address of Shareholders Class of Shares Shares of the Class of the Fund
- -------------------------------------------------------------------------------------------------------
John Hancock Advisers LLC R 80.25%
Attn: Kelly A. Conway
101 Huntington Avenue
Boston, MA 02199
- -------------------------------------------------------------------------------------------------------
MLPF&S For the R 11.20%
Sole Benefit of Its Customers
Attn: Fund Administration 97C55
4800 Deer Lake Drive East 2nd Fl
Jacksonville FL 32446-6484
- -------------------------------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
a premier investment management company, managed $30.2 billion in open-end
funds, closed-end funds, private accounts and retirement plans for individual
and institutional investors as of March 31, 2004. Additional information about
John Hancock Advisers can be found on the website: www.jhfunds.com.
The Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser which was approved in connection with the
Reorganization by Professionally Managed Portfolios as the sole initial
shareholder of the Fund. 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 Adviser has entered into a Sub-Advisory Agreement with the Sub-Adviser under
which the Sub-Adviser, 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 portfolio and
furnishing the Fund with advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities.
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 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.
18
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.
Average Daily Net Assets Annual Rate
------------------------ -----------
First $2,000,000,000* 0.75%
Next $3,000,000,000* 0.70%
Amount over $5,000,000,000* 0.65%
*Breakpoint added as of the closed of business on June 30, 2004.
From time to time, the Adviser may reduce its fee or make other arrangements to
limit the Fund's annual ordinary operating expenses to a specified percentage of
its average daily net assets. The Adviser retains the right to reimpose a fee
and recover any other payments to the extent that, at the end of any fiscal
year, the Fund's annual ordinary operating expenses fall below this limit.
For the period from May 17, 2002 to December 31, 2002, the Adviser received a
fee of $944,765 after expense limitations. For the fiscal year ended December
31, 2003, the Adviser received a fee of $4,101,253.
The Adviser has agreed to limit the Fund's expenses (excluding transfer agent
and 12b-1 fees) to 0.86% of the Fund's average daily net assets. In addition,
the transfer agent has agreed to limit transfer agent fees on Class A, B and C
shares to 0.26% of each class's average daily net assets and net operating
expenses on Class A shares to 1.37%. The Adviser has agreed not to terminate
this limitation until at least May 17, 2004.
Under the prior investment management agreement between YWM and the Fund's
predecessor, U.S. Global Leaders Growth Fund, the predecessor fund paid a
management fee at an annual rate equal to 1.00% of the Fund's average daily net
assets. For the fiscal years ended June 30, 2001 and 2000, the Fund's
predecessor paid YWM (then Adviser to the Fund) aggregate fees of $845,254 and
$1,042,045, respectively.
The Sub-Adviser, Sustainable Growth Advisers, L.P. ("SGA"), is located at 3
Stamford Plaza, 301 Tresser Blvd, Suite 1310, Stamford, CT 06901. SGA is a
Delaware limited partnership founded in 2003 to provide investment advice to
private accounts of institutional and individual clients, private investment
companies, and mutual funds. George P. Fraise, Gordon M. Marchand and Robert L.
Rohn, each owns 33 1/3% of SGA. Total assets under management by these SGA
principals as of October 31, 2003 were approximately $706 million.
As provided in the Sub-Advisory Agreement, the Adviser (not the Fund) pays the
Sub-Adviser monthly a sub-Advisory fee which is accrued daily, and on an annual
basis is equal to (i) 35% of the gross management fee received by the Adviser
for average daily net assets less than $500,000,000; (ii) 30% of the gross
management fee received by the Adviser for average daily net assets equal to
$500,000,000 and less than $1 billion; (iii) 25% of the gross management fee
received by the adviser for average daily net assets equal to $1 billion and
less than $1.5 billion; and (iv) 20% of the gross management fee received by the
Adviser for average daily net assets equal to or in excess of $1.5 billion. In
the event that, and each time that, prior to the fifth anniversary of the
effective date of the sub-Advisory agreement (the "Effective Date"), Messrs.
Fraise, Marchand or any person designated as a co-portfolio manager in the
Fund's prospectus (collectively, a "Co-portfolio Manager") ceases to be employed
by SGA, the monthly fee paid to SGA by the Adviser will be reduced by 20% of the
fee that SGA would otherwise earn for such monthly period under the sub-Advisory
agreement until SGA retains a new Co-portfolio manager who is acceptable to the
Adviser. In the event that, and each time that, prior to the fifth
19
anniversary of the Effective Date, SGA does not have an analyst reasonably
acceptable to the Adviser, supporting the Co-portfolio Managers in the
management of the Fund, the monthly fee paid to SGA will be reduced by 10% of
the fee that SGA would otherwise earn for that monthly period until SGA retains
an analyst reasonably acceptable to the Adviser. A pro rata adjustment shall be
made for any month during which such condition existed only for a portion of
such month.
Until July 16, 2003, the Fund was Sub-Advised by Yeager, Wood & Marshall,
Incorporated ("YWM"), which was located at 630 Fifth Avenue, New York, NY 10111.
As provided in the Sub-Advisory Agreement with YWM, the Adviser (not the Fund)
paid YWM quarterly, in arrears, after the end of each quarter, a fee equal on an
annual basis to the following percentages of the Fund's average daily net
assets: (i) 0.3375% with respect to the first $500,000,000 of the average daily
net asset value of the Fund; (ii) 0.300% with respect to the average daily net
asset value of the Fund in excess of $500,000,000 up to $1,000,000,000; (iii)
0.2625% with respect to the average daily net asset value of the Fund in excess
of $1,000,000,000 up to $1,500,000,000; (iv) 0.225% of the average daily net
asset value of the Fund in excess of $1,500,000,000 up to $2,000,000,000; and
(v) 0.1875% of the average daily net asset value of the Fund in excess of
$2,000,000,000. From the Fund's inception date of May 17, 2002 through the
Fund's fiscal year end of December 31, 2002 the Adviser paid YWM $466,399 in
Sub-Advisory fees
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser, the Sub-Adviser or their 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 Sub-Adviser
for the Fund or for other funds or clients for which the Adviser or Sub-Adviser
renders investment advice arise for consideration at 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, the
Sub-Adviser or their affiliates may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse effect
on price.
Pursuant to its Advisory Agreement, the Adviser is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which their respective Agreements 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 their reckless disregard of
the obligations and duties under the applicable Agreements.
The Sub-Advisory Agreement provides that the Sub-Adviser will not be liable for
any losses, claims, damages, liabilities or litigation (including legal and
other expenses) incurred or suffered by the Adviser, the Trust, the Fund or any
of their affiliates as a result of any error of judgment or mistake of law by
the Sub-Adviser with respect to the Fund, except that nothing in this Agreement
shall waive or limit the liability of the Sub-Adviser for any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Adviser, the Fund or any affiliated persons may become
subject under any statute, at common law or otherwise arising out of or based on
(a) the Sub-Adviser's causing the Fund to be in violation of any applicable
federal or state law, rule or regulation or any investment policy or restriction
set forth in the Fund's Prospectus or this Statement of Additional Information
or any written policies, procedures, guidelines or instructions provided in
writing to the Sub-Adviser by the Trustees or the Adviser, (b) the Sub-Adviser's
causing the Fund to fail to satisfy the requirements of Subchapter M of the Code
for qualification as a regulated investment company, or (c) the Sub-Adviser's
willful misfeasance, bad faith or gross negligence generally in the
20
performance of its duties hereunder or its reckless disregard of its obligations
and duties under this Agreement.
Under the Advisory Agreement, the Fund may use the name "John Hancock" or any
name derived from or similar to it only for so long as the Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If the Advisory
Agreement is no longer in effect, the Fund (to the extent that it lawfully can)
will cease to use such a name or any other name indicating that it is advised by
or otherwise connected with the Adviser. In addition, the Adviser or the Life
Company may grant the nonexclusive right to use the name "John Hancock" or any
similar name to any other corporation or entity, including but not limited to
any investment company of which the Life Company or any subsidiary or affiliate
thereof or any successor to the business of any subsidiary or affiliate thereof
shall be the investment adviser.
The Advisory Agreement, Sub-Advisory Agreement and the Distribution Agreement
(discussed below) were 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. Each Agreement 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.
During the first year of the Sub-Advisory Agreement with YWM, the Adviser agreed
to pay a minimum fee of $750,000. The sub-advisory fee was subject to reduction
if George Yeager, George Fraise or any other person named as a portfolio manager
of the Fund ceased employment with the Sub-Adviser and was not replaced with a
new team member acceptable to the Adviser. Moreover, during the initial three
year term of the former Sub-Advisory Agreement, if the sub-advisory fee exceeded
certain annual targets, payment of any additional sub-Advisory fee for that year
was deferred until the Sub-Advisory Agreement had been in place for three years,
at which time the deferred amounts would be payable by Adviser only if George
Yeager continued to be employed by the Sub-Adviser as an active member of the
Fund's portfolio management team.
The Fund's Board of Trustees is responsible for overseeing the performance of
the Fund's investment Adviser and Sub-Adviser and determining whether to approve
and renew the Fund's Advisory Agreement and Sub-Advisory Agreement. The Board
has a standing request that the Adviser provide the Board with certain
information the Board has deemed important to evaluating the short- and
long-term performance of the Adviser and Sub-Adviser. This information includes
periodic performance analysis and status reports from the Adviser and quarterly
Portfolio and Investment Performance Reports. The Fund's portfolio managers meet
with the Board from time to time to discuss the management and performance of
the Fund and respond to the Board's questions concerning the performance of the
Adviser. When the Board considers whether to renew an investment advisory
contract, the Board takes into account numerous factors, including: (1) the
nature, extent and quality of the services provided by the Adviser and
Sub-Adviser; (2) the investment performance of the Fund; (3) the fair market
value of the services provided by the Adviser and Sub-Adviser; (4) a comparative
analysis of expense ratios of, and advisory fees paid by, similar funds; (5) the
extent to which the Adviser has realized or will realize economies of scale as
the Fund grows; (6) other sources of revenue to the Adviser or its affiliates
from its relationship with the Fund and intangible or "fall-out" benefits that
accrue to the adviser and its affiliates, if relevant; and (7) the Adviser's
control of the operating expenses of the fund, such as transaction costs,
including ways in which portfolio transactions for the fund are conducted and
brokers are selected.
In evaluating the Advisory Agreement and the Sub-Advisory Agreement, the
Independent Trustees considered the following factors when reviewing materials
furnished by Adviser,
21
including information regarding the Adviser, its respective affiliates and their
personnel, operations and financial condition.
In evaluating the proposed Sub-Advisory Agreement, the Trustees also reviewed
materials requested by the trustees relating to the Adviser's search for a
replacement for YWM and the reasons the Adviser recommended SGA and its
personnel. These materials indicated that the Adviser had considered and
rejected for various reasons other sub-Advisory firms as well as the feasibility
of managing the Fund itself.
The Independent Trustees also reviewed, among other things:
o The investment performance of the Fund. The Board determined that the
performance results of the Fund were reasonable, as compared with
relevant performance standards, including the performance results of
comparable large cap growth funds derived from data provided by Lipper
Inc. and appropriate market indexes.
o The fee charged by the Adviser for investment advisory and
administrative services, as well as other compensation received by
affiliates of the Adviser and the total operating expenses of the
Fund. The Independent Trustees determined that these fees and expenses
were reasonable based on the average advisory fees and operating
expenses for comparable funds.
o The Adviser's investment staff and portfolio management process, the
historical quality of services provided by the Adviser, the Adviser's
experience in supervising sub-advisers, and the overall performance of
the Fund's portfolio on both a short-term and long-term basis.
o The Trustees noted the cumulative expertise of SGA's three principals
and the fact that two of the principals had been on the YWM investment
management team, and therefore would provide continuity of management.
o In addition, the Trustees reviewed the historical performance record
of SGA's management team in managing the Fund as members of the YWM
team as well as managing other client accounts with objectives similar
to those of the Fund. The Trustees determined that the performance
results in these scenarios were reasonable compared with performance
data from appropriate market indexes.
o The Trustees also considered SGA's financial condition and the
reputation of its principals in the financial community, and
determined that SGA's business plan was sound and the reputation of
its principals was also sound.
o The Trustees also considered the qualifications of the SGA support
staff and compliance personnel as well as the quality of the resources
SGA was devoting to investment management. In this regard they noted
the extensive research qualifications of the third principal who had
joined SGA recently and determined that SGA would be devoting
sufficient resources to managing the Fund.
o The Trustees also considered the sub-advisory fee and the terms of the
Sub-Advisory Agreement, as well as the portion of the advisory fee
that the Adviser would retain for its management and supervisory
services to the Fund.
The Independent Trustees determined that the terms of the Fund's Advisory
Agreement and Sub-Advisory Agreement are fair and reasonable and that the
contracts are in the Fund's best interest. The Independent Trustees believe that
the advisory and sub-advisory contracts will enable the
22
Fund to enjoy high quality investment advisory services at a cost they deem
appropriate, reasonable and in the best interests of the Fund and its
shareholders. In making such determinations, the Independent Trustees met
independently from the Non-Independent Trustees of the Fund and any officers of
the Adviser or its affiliates. The Independent Trustees were advised by their
independent legal counsel, who was not counsel to the Fund, the Adviser or SGA.
The continuation of the Advisory Agreement and Distribution Agreement (discussed
below) was approved by all the Trustees. The Advisory Agreement, Sub-Advisory
Agreement and Distribution Agreement will continue in effect from year to year,
provided that their continuance is approved annually both by (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. These agreements may be
terminated on 60 days written notice by any party or by a vote of a majority of
the outstanding voting securities of the Fund and will terminate automatically
if it is assigned. The Sub-Advisory Agreement terminates automatically upon the
termination of the Advisory Agreement.
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. From the period from May 17, 2002 to December 31, 2002, the
Fund paid the Adviser $30,722 for services under this Agreement. For the fiscal
year ended December 31, 2003, the Fund paid the Adviser $166,361 for services
under this Agreement.
Proxy Voting. The Fund's Trustees have delegated to the Adviser the authority to
vote proxies on behalf of the Fund. The Trustees have approved the proxy voting
guidelines of the Adviser and will review the guidelines and suggest changes as
they deem advisable. A summary of the Adviser's proxy voting guidelines is
attached to this statement of additional information as Appendix C.
Personnel of the Adviser and its affiliates may trade securities for their
personal accounts. The Fund also may hold, or may be buying or selling, the same
securities. To prevent the Fund from being disadvantaged, the adviser(s),
principal underwriter and the Fund have adopted a code of ethics which restricts
the trading activity of those personnel.
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, banks and registered investment advisors ("Selling Firms") that
have entered into selling agreements with John Hancock Funds. These Selling
Firms are authorized to designate other intermediaries to receive purchase and
redemption orders on behalf of the Fund. John Hancock Funds accepts orders for
the purchase of the shares of the Fund that are continually offered at net asset
value next determined, plus any applicable sales charge, if any. In connection
with the sale of Fund shares, John Hancock Funds and Selling Firms receive
compensation from a sales charge imposed, in the case of Class A shares, at the
time of sale. In the case of Class B, Class C and Class R shares, the Selling
Firm receives compensation immediately but John Hancock Funds is compensated on
a deferred basis.
Total underwriting commissions (sales charges) for sales of the Fund's Class A
shares for the period from May 17, 2002 to June 30, 2002 was $251,520, for the
period from July 1, 2002 to December 31, 2002 was $1,828,467 and for the fiscal
year ended December 31, 2003 was $2,228,099. Of such amount $38,529, $282,805
and $327,494 were retained by John Hancock Funds in 2002. Total underwriting
commissions (sales charges) for sales of the Fund's Class C
23
shares for the period from May 17, 2002 to June 30, 2002 was $50,084, from July
1, 2002 to December 31, 2002 was $445,343 and for the fiscal year ended December
31, 2003 was $975,693. No Class C commissions were retained by John Hancock
Funds, the remainder of the underwriting commissions were paid/reallowed to
Selling Firms.
The Fund's Trustees adopted Distribution Plans with respect to each class of
shares (the "Plans"), pursuant to Rule 12b-1 under the Investment Company Act of
1940. Under the Plans, the Fund will pay distribution and service fees at an
aggregate annual rate of up to 0.25% for Class A, 1.00% for Class B and Class C
shares and 0.50% for Class R shares of the Fund's average daily net assets
attributable to the respective class of shares. However, the service fee will
not exceed 0.25% of the Fund's average daily net assets attributable to each
class of shares. The distribution fees will be used to reimburse John Hancock
Funds for its distribution expenses, including but not limited to: (i) initial
and ongoing sales compensation to Selling Firms and others (including affiliates
of John Hancock Funds) engaged in the sale of Fund shares, (ii) marketing,
promotional and overhead expenses incurred in connection with the distribution
of Fund shares, and (iii) with respect to Class B and Class C shares only,
interest expenses on unreimbursed distribution expenses. The service fees will
be used to compensate Selling Firms 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
A Plan, these expenses will not be carried beyond twelve months from the date
they were incurred. Unreimbursed expenses under the Class B and Class C Plans
will be carried forward together with interest on the balance of these
unreimbursed expenses. Unreimbursed expenses under the Class R Plan will be
carried forward to subsequent fiscal years. The Fund does not treat unreimbursed
expenses under the Class B, Class C and Class R Plans as a liability of the Fund
because the Trustees may terminate Class B, Class C and/or Class R Plans at any
time. For the fiscal period December 31, 2003 an aggregate of $714,152
distribution expenses or 0.59% of the average net assets of the Class B shares
of the Fund, was not reimbursed or recovered by John Hancock Funds through the
receipt of deferred sales charges or 12b-1 fees in prior periods. For the fiscal
year ended December 31, 2003 an aggregate of $714,152 of distribution expenses
or 0.59% of the average net assets of the Fund's Class B shares was not
reimbursed or recovered by John Hancock Funds through the receipt of deferred
sales charges or Rule 12b-1 fees in prior periods. For the fiscal year ended
December 31, 2003, an aggregate of $339,465 of distribution expenses or 0.33% of
the average net assets of the Fund's Class C shares was not reimbursed or
recovered by John Hancock Funds through the receipt of deferred sales charges or
Rule 12b-1 fees in prior periods.
The Fund has also adopted a separate Class R shares Service Plan ("the Service
Plan"). The Service Plan authorizes the Fund to pay securities dealers, plan
administrators or other service organizations who agree to provide certain
services to retirement plans or plan participants holding shares of the Fund a
service fee of up to 0.25% of the Fund's average daily net assets attributable
to Class R shares held by such plan participants. These services may include (a)
acting, directly or through an agent, as the shareholder and nominee for all
plan participants; (b) maintaining account records for each plan participant
that beneficially owns Class R shares; (c) processing orders to purchase, redeem
and exchange Class R shares on behalf of plan participants, and handling the
transmission of funds representing the purchase price or redemption proceeds;
(d) addressing plan participant questions regarding their accounts and the Fund;
and (e) other services related to servicing such retirement plans.
The Plans and all amendments were approved by the Trustees, including a majority
of the Trustees who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plans (the
"Independent Trustees"), by votes cast in person at meetings called for the
purpose of voting on these Plans.
24
Pursuant to the Plans, at least quarterly, John Hancock Funds provides the Fund
with a written report of the amounts expended under the Plans and the purpose
for which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their continued appropriateness.
The Plans provide that they will continue in effect only so long as 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 and (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. 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. The holders of Class A, Class B, Class C and
Class R shares have exclusive voting rights with respect to the Plan applicable
to their respective class of shares. In adopting the Plans, the Trustees
concluded that, in their judgment, there is a reasonable likelihood that the
Plans will benefit the holders of the applicable class of shares of the Fund.
Class I shares of the Fund are not subject to any distribution plan. Expenses
associated with the obligation of John Hancock Funds to use its best efforts to
sell Class I shares will be paid by the Adviser or by John Hancock Funds and
will not be paid from the fees paid under Class A, Class B, Class C or Class R
Plans.
Amounts paid to John Hancock Funds by any class of shares of the Fund will not
be used to pay the expenses incurred with respect to any other class of shares
of the Fund; provided, however, that expenses attributable to the Fund as a
whole will be allocated, to the extent permitted by law, according to 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.
During the period ended December 31, 2003, the Fund paid John Hancock Funds the
following amounts of expenses in connection with their services for the Fund.
Expense Items
-------------
Printing and
Mailing of Interest
Prospectus Expenses of Carrying or
To New Compensation to John Hancock Other Finance
Advertising Shareholders Selling Firms Funds Charges
----------- ------------ ------------- ----- -------
Class A $200,945 $ 979 $ 80,565 $509,575 $--
Class B $274,421 $ 1,413 $ 202,826 $723,265 $--
Class C $247,102 $ 658 $ 138,979 $646,735 $--
Class R $ 0 $ 0 $ 0 $ 0 --
SALES COMPENSATION
As part of their business strategies, the Fund, along with John Hancock Funds,
pay compensation to Selling Firms that sell the Fund's shares. These firms
typically pass along a portion of this compensation to your broker or financial
representative.
25
The two primary sources of Selling Firm compensation payments for Class A, Class
B, Class C and Class R are (1) the 12 b-1 fees that are paid out of the fund's
assets and (2) sales charges paid by investors. The sales charges and 12b-1 fees
are detailed in the prospectus and under the "Distribution Contracts" in this
Statement of Additional Information. The portions of these expenses that are
paid to Selling Firms are shown on the next page. For Class I shares, John
Hancock Funds may make a one-time payment at the time of initial purchase out of
its own resources to a Selling Firm which sells shares of the Fund. This payment
may not exceed 0.15% of the amount invested.
Initial compensation Whenever you make an investment in Class A, Class B or
Class C shares of the Fund, the Selling Firm receives a
reallowance/payment/commission as described on the next page. The Selling Firm
also receives the first year's 12b-1 service fee at this time.
Annual compensation For Class A, Class B and Class C shares of the Fund,
beginning in the second year after an investment is made, the Selling Firm
receives an annual 12b-1 service fee of 0.25% of its average daily net (aged)
assets. In addition, beginning in the second year after an investment is made in
Class C shares, the Distributor will pay the Selling Firm a distribution fee in
an amount not to exceed 0.75% of the average daily net (aged) assets. These
service and distribution fees are paid quarterly in arrears.
For Class R shares of the Fund, beginning with the first year an investment is
made, the Selling Firm receives an annual 12b-1 service fee of 0.25% of its
average daily net assets. In addition, the Distributor will pay the Selling Firm
a distribution fee in an amount not to exceed 0.25% of the average daily net
assets. These service and distribution fees are paid quarterly in arrears.
Selling Firms receive service and distribution fees if, for the preceding
quarter, (1) their clients/shareholders have invested combined average daily net
assets of no less than $1,000,000 in eligible (aged) assets; or (2) an
individual registered representative of the Selling Firm has no less than
$250,000 in eligible (aged) assets. The reason for these criteria is to save the
Fund the expense of paying out de minimus amounts. As a result, if a Selling
Firm does not meet one of the criteria noted above, the money for that firm's
fees remains in the Fund.
In addition, from time to time, John Hancock Funds, at its expense, and without
additional cost to the Fund or its shareholders, may provide significant
additional compensation to financial services firms in connection with their
promotion of the Fund or sale of shares of the Fund. Such compensation provided
by John Hancock Funds may include, for example, financial assistance to Selling
Firms in connection with their marketing and sales development programs for
their registered representatives and other employees, as well as payment for
travel expenses, including lodging, incurred by registered representatives and
other employees for such marketing and sales development programs, as well as
assistance for seminars for the public, advertising and sales campaigns
regarding one or more Funds, and other Selling Firm-sponsored events or
activities. From time to time, John Hancock Funds may provide expense
reimbursements for special training of a Selling Firm's registered
representatives and other employees in group meetings or non-cash compensation
in the form of occasional gifts, meals, tickets or other entertainment. Payments
may also include amounts for sub-administration and other services for
shareholders whose shares are held of record in omnibus or other group accounts.
Other compensation, such as asset retention fees, finder's fees and
reimbursement for wire transfer fees or other administrative fees and costs may
be offered to the extent not prohibited by law or any self-regulatory agency
such as the NASD.
26
First Year Broker or Other Selling Firm Compensation
Investor pays
sales charge Selling Firm Selling Firm
(% of offering receives receives 12b-1 Total Selling Firm
Class A investments price) commission (1) service fee (2) compensation (3)(4)
- ------------------- ------ -------------- --------------- -------------------
Up to $49,999 5.00% 4.01% 0.25% 4.25%
$50,000 - $99,999 4.50% 3.51% 0.25% 3.75%
$100,000 - $249,999 3.50% 2.61% 0.25% 2.85%
$250,000 - $499,999 2.50% 1.86% 0.25% 2.10%
$500,000 - $999,999 2.00% 1.36% 0.25% 1.60%
Investments of Class A shares
of $1 million or more (5)
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50%
Next $1 or more above that -- 0.00% 0.25% 0.25%
Class B investments
All amounts -- 3.75% 0.25% 4.00%
Class C investments
All amounts -- 0.75% 0.25% 1.00%
Class I investments
All amounts -- 0.00% 0.00% 0.00%
Class R investments
All amounts -- 0.00% 0.50% 0.50%
(1) For Class A investments under $1 million, a portion of the Selling Firm's
commission is paid out of the sales charge.
(2) For Class A, B and C shares, the Selling Firm receives 12b-1 fees in the
first year as a % o the amount invested after the first year as a % of average
daily net eligible assets (paid quarterly in arrears). For Class R shares, the
Selling Firm receives 12b-1 fees effective at time of purchase as a % of average
daily assets (paid quarterly in arrears) See "Distribution Contracts" for
description of Class R Service Plan charges and payments.
(3) Selling Firm commission and 12b-1 service fee percentages are calculated
from different amounts, and therefore may not equal the total Selling Firm
compensation percentages if combined using simple addition.
(4) Underwriter retains the balance.
(5) See "Initial Sales Charge on Class A Shares" for discussion on how to
qualify for a reduced sales charge. John Hancock Funds may take recent
redemptions into account in determining if an investment qualifies as a new
investment.
(6) John Hancock Funds may make a one-time payment at time of initial purchase
out of its own resources to a Selling Firm that sells Class I shares of the
fund. This payment may be up to 0.15% of the amount invested.
27
CDSC revenues collected by John Hancock Funds may be used to pay Selling Firm
commissions when there is no initial sales charge.
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 are generally valued at last
sale price on the day of valuation or in the case of securities traded on
NASDAQ, the NASDAQ official closing price. 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.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 4:00 p.m., London time (11:00 a.m.,
New York time) on the date of a determination of the Fund's NAV. If quotations
are not readily available, or the value has been materially affected by the
events occurring after the closing of a foreign market, assets are valued by a
method that the Trustees believe accurately reflects fair value.
The NAV 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.
INITIAL SALES CHARGE ON CLASS A SHARES
Shares of the Fund are offered at a price equal to their net asset value plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase (the "initial sales charge") or on a contingent deferred basis
(the "contingent deferred sales charge or CDSC"). The fund no longer issues
share certificates. Shares are electronically recorded. The Trustees reserve the
right to change or waive the Fund's minimum investment requirements and to
reject any order to purchase shares (including purchase by exchange) when in the
judgment of the Adviser such rejection is in the Fund's best interest.
The sales charges applicable to purchases of Class A shares of the Fund are
described in the Prospectus. Methods of obtaining reduced sales charges referred
to generally in the Prospectus
28
are described in detail below. In calculating the sales charge applicable to
current purchases of Class A shares of the Fund, the investor is entitled to
accumulate current purchases with the current offering price of the Class A,
Class B, Class C, Class I, or Class R shares of the John Hancock mutual funds
owned by the investor (see "Accumulation Privilege" below).
In order to receive the reduced sales charge, the investor must notify his/her
financial adviser and/or the financial adviser must notify John Hancock
Signature Services, Inc. ("Signature Services") at the time of purchase of the
Class A shares, about any other John Hancock mutual funds owned by the investor,
the investor's spouse and their children under the age of 21 (see "Combination
Privilege" below). This includes investments held in a retirement account, an
employee benefit plan or at a broker or financial adviser other than the one
handling your current purchase. John Hancock will credit the combined value, at
the current offering price, of all eligible accounts to determine whether you
qualify for a reduced sales charge on your current purchase.
Without Sales Charges. Class A shares may be offered without a front-end sales
charge or contingent deferred sales charge ("CDSC") to various individuals and
institutions as follows:
o A Trustee or officer of the Trust; a Director or officer of the Adviser and
its affiliates, sub-adviser or Selling Firms; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family
(spouse, child, grandparent, grandchild, parent, sibling, mother-in-law,
father-in-law, daughter-in-law, son-in-law, niece, nephew and same sex
domestic partner; "Immediate Family") of any of the foregoing; or any fund,
pension, profit sharing or other benefit plan for the individuals described
above.
o A broker, dealer, financial planner, consultant or registered investment
advisor that has entered into a signed agreement with John Hancock Funds
providing specifically for the use of Fund shares in fee-based investment
products or services made available to their clients.
o A former participant in an employee benefit plan with John Hancock funds,
when he or she withdraws from his or her plan and transfers any or all of
his or her plan distributions directly to the Fund.
o A member of a class action lawsuit against insurance companies who is
investing settlement proceeds.
o Certain retirement plans participating in Merrill Lynch servicing programs
offered in Class A shares, including transferee recording arrangements,
Merrill Lynch Connect Arrangements and third party administrator
recordkeeping arrangements. See your Merrill Lynch Financial Consultant for
further information.
o Retirement plans investing through the PruArray Program sponsored by a
Prudential Financial company.
o Pension plans transferring assets from a John Hancock variable annuity
contract to the Fund pursuant to an exemptive application approved by the
Securities and Exchange Commission.
o Participants in certain 529 Plans that have a signed agreement with John
Hancock Funds. No CDSC will be due for redemptions on plan purchases made
at NAV with no finder's fee. However, if a plan had a finder's fee or
commission, and the entire plan redeemed within 12 months of the first
investment in the plan, a CDSC would be due.
29
o Participant directed retirement plans with at least 100 eligible employees
at the inception of the Fund account. Each of these employees may purchase
Class A shares with no initial sales charge, if the plan sponsor notifies
Signature Services of the number of employees at the time the account is
established. However, if the shares are redeemed within 12 months of the
inception of the plan, a CDSC will be imposed at the following rate:
Amount Invested CDSC Rate
--------------- ---------
First $1 to $4,999,999 1.00%
Next $1 to $5M above that 0.50%
Next $1 or more above that 0.25%
o Any shareholder account of U.S. Global Leaders Growth Fund ("USGLX")
registered on USGLX's books in the shareholder's name (and, except as noted
below, not in the name of a broker or other omnibus account) as of May 17,
2002. Any registered investment adviser now or in the future participating
in the Schwab Onesource NTF Adviser Platform or any successor platform
("Schwab") will be able to purchase Class A shares of the Fund without an
initial sales charge (provided that Schwab does not change the terms on
which the Fund participates in such platform from the terms in effect on
May 17, 2002 between Schwab and the Adviser). All USGLX shareholders with
accounts custodied at Schwab on May 17, 2002 will be able to purchase
additional Class A shares of the Fund through Schwab without an initial
sales charge. The Adviser will use reasonable efforts to enter into
arrangements with other omnibus account providers to permit USGLX
shareholders to purchase shares of the Fund without an initial sales charge
through such omnibus accounts; provided, however, that the Adviser will not
enter into any arrangement unless the Adviser is able to limit such
purchases to the beneficial owners of USGLX on May 17, 2002.
As of July 15, 2004, no Class C shares paid a front-end sales charge.
Class A shares may also be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
With Reduced Sales Charges
Combination Privilege. For all shareholders in calculating the sales charge
applicable to purchases of Class A shares made at one time, the purchases will
be combined to reduce sales charges if made by (a) an individual, his or her
spouse and their children under the age of 21, purchasing securities for his or
their own account, (b) a trustee or other fiduciary purchasing for a single
trust, estate or fiduciary account and (c) groups which qualify for the Group
Investment Program (see below). Qualified and non-qualified retirement plan
investments can be combined to take advantage of this privilege. Further
information about combined purchases, including certain restrictions on combined
group purchases, is available from Signature Services or a Selling Firm's
representative.
Accumulation Privilege. Class A investors may also reduce their Class A sales
charge by taking into account not only the amount being invested but also the
current offering price of all the Class A, Class B, Class C, Class I and Class R
shares of all John Hancock funds already held by such person. However, Class A
shares of John Hancock money market funds will only be eligible for the
accumulation privilege if the investor has previously paid a sales charge on the
amount of those shares. To receive a reduced sales charge, the investor must
tell his/her financial adviser or
30
Signature Services at the time of the purchase about any other John Hancock
mutual funds held by that investor or his/her Immediate Family.
Group Investment Program. Under the Combination and Accumulation Privileges, all
members of a group may combine their individual purchases of Class A shares to
potentially qualify for breakpoints in the sales charge schedule. This feature
is provided to any group which (1) has been in existence for more than six
months, (2) has a legitimate purpose other than the purchase of mutual fund
shares at a discount for its members, (3) utilizes salary deduction or similar
group methods of payment, and (4) agrees to allow sales materials of the fund in
its mailings to members at a reduced or no cost to John Hancock Funds.
Letter of Intention. Reduced Class A sales under the Accumulation Privilege are
also applicable to investments made pursuant to a Letter of Intention (the
"LOI"), which should be read carefully prior to its execution by an investor.
The Fund offers two options regarding the specified period for making
investments under the LOI. All investors have the option of making their
investments over a specified period of thirteen (13) months. Investors who are
using the Fund as a funding medium for a retirement plan, however, may opt to
make the necessary investments called for by the LOI over a forty-eight (48)
month period. These retirement plans include traditional, Roth IRAs and
Coverdell ESAs, SEP, SARSEP, 401(k), 403(b) (including TSAs), SIMPLE IRA, SIMPLE
401(k), Money Purchase Pension, Profit Sharing and Section 457 plans. An
individual's non-qualified and qualified retirement plan investments can be
combined to satisfy an LOI (either 13 or 48 months). Since some retirement plans
are held in an omnibus account, an investor wishing to count retirement plan
holdings towards a Class A purchase must notify Signature Services of these
holdings. Such an investment (including accumulations, combinations and
reinvested dividends) must aggregate $50,000 or more during the specified period
from the date of the LOI or from a date within ninety (90) days prior thereto,
upon written request to Signature Services. The sales charge applicable to all
amounts invested under the LOI is computed as if the aggregate amount intended
to be invested had been invested immediately. If such aggregate amount is not
actually invested, the difference in the sales charge actually paid and the
sales charge payable had the LOI not been in effect is due from the investor.
However, for the purchases actually made within the specified period (either 13
or 48 months) the sales charge applicable will not be higher than that which
would have applied (including accumulations and combinations) had the LOI been
for the amount actually invested.
The LOI authorizes Signature Services to hold in escrow sufficient Class A
shares (approximately 5% of the aggregate) to make up any difference in sales
charges on the amount intended to be invested and the amount actually invested,
until such investment is completed within the specified period, at which time
the escrowed Class A shares will be released. If the total investment specified
in the LOI is not completed, the Class A shares held in escrow may be redeemed
and the proceeds used as required to pay such sales charge as may be due. By
signing the LOI, the investor authorizes Signature Services to act as his
attorney-in-fact to redeem any escrowed Class A shares and adjust the sales
charge, if necessary. A LOI does not constitute a binding commitment by an
investor to purchase, or by the Fund to sell, any additional Class A shares and
may be terminated at any time.
DEFERRED SALES CHARGE ON CLASS B AND CLASS C SHARES
Investments in Class B and Class C shares are purchased at net asset value per
share without the imposition of an initial sales charge so that the Fund will
receive the full amount of the purchase payment.
Contingent Deferred Sales Charge. Class B and Class C shares which are redeemed
within six years or one year of purchase, respectively, will be subject to a
contingent deferred sales charge ("CDSC") at the rates set forth in the
Prospectus as a percentage of the dollar amount subject to the CDSC. The charge
will be assessed on an amount equal to the lesser of the current market
31
value or the original purchase cost of the Class B or Class C shares being
redeemed. No CDSC will be imposed on increases in account value above the
initial purchase prices or on shares derived from reinvestment of dividends or
capital gains distributions.
Class B shares are not available to retirement plans that had more than 100
eligible employees at the inception of the Fund account. You must notify
Signature Services of the number of eligible employees at the time your account
is established.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchases of both Class B and Class C
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period for Class B or one year CDSC
redemption period for Class C, or those you acquired through dividend and
capital gain reinvestment, and next from the shares you have held the longest
during the six-year period for Class B shares. For this purpose, the amount of
any increase in a share's value above its initial purchase price is not subject
to a CDSC. Thus, when a share that has appreciated in value is redeemed during
the CDSC period, a CDSC is assessed only on its initial purchase price.
When requesting a redemption for a specific dollar amount, please indicate if
you require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.
Example:
You have purchased 100 Class B shares at $10 per share. The second year after
your purchase, your investment's net asset value per share has increased by $2
to $12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time your CDSC will be calculated as follows:
o Proceeds of 50 shares redeemed at $12 per shares (50 x 12) $600.00
o *Minus Appreciation ($12 - $10) x 100 shares (200.00)
o Minus proceeds of 10 shares not subject to CDSC (dividend reinvestment) (120.00)
-------
o Amount subject to CDSC $280.00
*The appreciation is based on all 100 shares in the account not just
the shares being redeemed.
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole or
in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B and Class C shares, such as the payment of compensation to select
Selling Firms for selling Class B and Class C shares. The combination of the
CDSC and the distribution and service fees facilitates the ability of the Fund
to sell the Class B and Class C shares without a sales charge being deducted at
the time of the purchase.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B and Class C shares and Class A shares that are subject to
a CDSC, unless indicated otherwise, in the circumstances defined below:
32
For all account types:
* Redemptions made pursuant to the Fund's right to liquidate your account if
you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability. (Does not apply to trust accounts
unless trust is being dissolved.)
* Redemptions made under the Reinstatement Privilege, as described in "Sales
Charge Reductions and Waivers" of the Prospectus.
* Redemption of Class B and Class C shares made under a periodic withdrawal
plan or redemptions for fees charged by planners or advisors for advisory
services, as long as your annual redemptions do not exceed 12% of your
account value, including reinvested dividends, at the time you established
your periodic withdrawal plan and 12% of the value of subsequent
investments (less redemptions) in that account at the time you notify
Signature Services. (Please note, this waiver does not apply to periodic
withdrawal plan redemptions of Class A shares that are subject to a CDSC.)
* Certain retirement plans participating in Merrill Lynch servicing programs
offered in Class A, Class B, Class C and Class R shares, including
transferee recording arrangements, Merrill Lynch Connect Arrangements and
third party administrator recordkeeping arrangements. See your Merrill
Lynch Financial Consultant for further information.
* Redemptions of Class A shares made after one year from the inception date
of a retirement plan at John Hancock.
* Redemption of Class A shares by retirement plans that invested through the
PruArray Program sponsored by a Prudential Financial company.
For Retirement Accounts (such as traditional, Roth IRAs and Coverdell ESAs,
SIMPLE IRAs, SIMPLE 401(k), Rollover IRA, TSA, 457, 403(b), 401(k), Money
Purchase Pension Plan, Profit-Sharing Plan and other plans as described in the
Internal Revenue Code) unless otherwise noted.
* Redemptions made to effect mandatory or life expectancy distributions under
the Internal Revenue Code. (Waiver based on required, minimum distribution
calculations for John Hancock Mutual Fund IRA assets only.)
* Returns of excess contributions made to these plans.
* Redemptions made to effect certain distributions, as outlined in the chart
on the following page, to participants or beneficiaries from employer
sponsored retirement plans under sections 401(a) (such as Money Purchase
Pension Plans and Profit Sharing Plan/401(k) Plans), 403(b), 457 and 408
(SEPs and SIMPLE IRAs) of the Internal Revenue Code.
Please see matrix for some examples.
33
- ---------------------------------------------------------------------------------------------------------------
Type of 401 (a) Plan 403 (b) 457 IRA, IRA Non-retirement
Distribution (401 (k), MPP, Rollover
PSP) 457 & 408
(SEPs & Simple
IRAs)
- ---------------------------------------------------------------------------------------------------------------
Death or Disability Waived Waived Waived Waived Waived
- ---------------------------------------------------------------------------------------------------------------
Over 70-1/2 Waived Waived Waived Waived for 12% of account
required value annually
minimum in periodic
distributions* payments
or 12% of
account value
annually in
periodic
payments.
- ---------------------------------------------------------------------------------------------------------------
Between 59-1/2 and Waived Waived Waived Waived for Life 12% of account
70-1/2 Expectancy or value annually
12% of account in periodic
value annually payments
in periodic
payments.
- ---------------------------------------------------------------------------------------------------------------
Under 59-1/2 Waived for Waived for Waived for Waived for 12% of account
(Class B and Class C annuity annuity annuity annuity value annually
only) payments (72t) payments (72t) payments (72t) payments (72t) in periodic
or 12% of or 12% of or 12% of or 12% of payments
account value account value account value account value
annually in annually in annually in annually in
periodic periodic periodic periodic
payments. payments. payments. payments.
- ---------------------------------------------------------------------------------------------------------------
Loans Waived Waived N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Termination of Plan Not Waived Not Waived Not Waived Not Waived N/A
- ---------------------------------------------------------------------------------------------------------------
Hardships Waived Waived Waived N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Qualified Domestic Waived Waived Waived N/A N/A
Relations Orders
- ---------------------------------------------------------------------------------------------------------------
Termination of Waived Waived Waived N/A N/A
Employment Before
Normal Retirement Age
- ---------------------------------------------------------------------------------------------------------------
Return of Excess Waived Waived Waived Waived N/A
- ---------------------------------------------------------------------------------------------------------------
* Required minimum distributions based on John Hancock Mutual Fund IRA assets
only.
If you qualify for a CDSC waiver under one of these situations, you must notify
Signature Services at the time you make your redemption. The waiver will be
granted once Signature Services has confirmed that you are entitled to the
waiver.
34
ELIGIBLE INVESTORS FOR CLASS R SHARES
Class R shares are available only to 401(k) plans, 457 plans, employer-sponsored
403(b) plans, profit sharing and money purchase pension plans, defined benefit
plans and non-qualified deferred compensation plans (eligible retirement plans).
Class R shares are also available for Rollover IRA accounts for participants
whose plans are invested in Class R shares funds. Class R shares are not
available to retail non-retirement accounts, traditional and Roth IRAs,
Coverdell Educational Savings Accounts, SEPs, SAR-SEPs SIMPLE IRAs and
individual 403(b) plans.
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.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of shares of any class for shares
of the same class in any other John Hancock fund offering that same class.
Investors may exchange Class I shares for Class I shares of other John Hancock
funds, shares of any John Hancock institutional fund, or Class A shares of John
Hancock Money Market Fund. If an investor exchanges Class I shares for Class A
shares of Money Market Fund, any future exchanges out of the Money Market Fund
Class A must be to another Class I or institutional fund.
Investors may exchange Class R shares for Class R shares of other John Hancock
funds or Class A shares of John Hancock Money Market Fund. If an investor
exchanges Class R shares for Class A shares of Money Market Fund, any future
exchanges out of the Money Market Fund Class A must be to another Class R fund.
Exchanges between funds are based on their respective net asset values. No sales
charge is imposed, except on exchanges of Class A shares from Money Market Fund
or U.S. Government Cash Reserve Fund to another John Hancock fund, if a sales
charge has not previously been paid on those shares. However, the shares
acquired in an exchange will be subject to the CDSC schedule of the shares
acquired if and when such shares are redeemed. For purposes of computing the
CDSC payable upon redemption of shares acquired in an exchange, the holding
period of the original shares is added to the holding period of the shares
acquired in an exchange.
If a retirement plan exchanges the plan's Class A account in its entirety from
the Fund to a non-John Hancock investment, the one-year CDSC applies.
The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
The Fund does not permit market timing or other excessive trading practices
which may disrupt portfolio management strategies and increase fund expenses. To
protect the interests of other
35
investors in the Fund, the Fund may cancel the exchange privileges (or reject
any exchange or purchase orders) of any parties who, in the opinion of the Fund,
are engaging in market timing. For these purposes, the Fund may consider an
investor's trading history in the Fund or other John Hancock funds, and accounts
under common ownership or control. The Fund may change or cancel its exchange
policies at any time, upon 60 days' notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of 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 of the initial sales
charge payable on such purchases of Class A shares and the CDSC imposed on
redemptions of Class B and Class C shares and 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.
Reinstatement or Reinvestment Privilege. If Signature Services is notified prior
to reinvestment, a shareholder who has redeemed Fund shares may, within 120 days
after the date of redemption, reinvest without payment of a sales charge any
part of the redemption proceeds in shares of the same class of the Fund or
another John Hancock fund, subject to the minimum investment limit in that fund.
The proceeds from the redemption of Class A shares may be reinvested at net
asset value without paying a sales charge in Class A shares of the Fund or in
Class A shares of any John Hancock fund. If a CDSC was paid upon a redemption, a
shareholder may reinvest the proceeds from this redemption at net asset value in
additional shares of the class from which the redemption was made. The
shareholder's account will be credited with the amount of any CDSC charged upon
the prior redemption and the new shares will continue to be subject to the CDSC.
The holding period of the shares acquired through reinvestment will, for
purposes of computing the CDSC payable upon a subsequent redemption, include the
holding period of the redeemed shares.
The Fund may refuse any reinvestment request and may change or cancel its
reinvestment policies at any time.
36
A redemption or exchange of Fund shares is a taxable transaction for Federal
income tax purposes even if the reinvestment privilege is exercised, and any
gain or loss realized by a shareholder on the redemption or other disposition of
Fund shares will be treated for tax purposes as described under the caption "TAX
STATUS."
Retirement plans participating in Merrill Lynch's servicing programs:
Class A and R shares are available at net asset value for Merrill Lynch
retirement plans, including transferee recording arrangements, Merrill Lynch
Connect Arrangements and third party administrator recordkeeping arrangements.
See your Merrill Lynch Financial Consultant for further information.
For participating retirement plans investing in Class B shares, shares will
convert to Class A shares after eight years, or sooner if the plan attains
assets of $5 million (by means of a CDSC-free redemption/purchase at net asset
value).
PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES
Shares of the Fund may be purchased or redeemed through certain Selling Firms.
Selling Firms may charge the investor additional fees for their services. The
Fund will be deemed to have received a purchase or redemption order when an
authorized Selling Firm, or if applicable, a Selling Firm's authorized designee,
receives the order. Orders may be processed at the NAV next calculated after the
Selling Firm receives the order. The Selling Firm must segregate any orders it
receives after the close of regular trading on the New York Stock Exchange and
transmit those orders to the Fund for execution at NAV next determined. Some
Selling Firms that maintain network/omnibus/nominee accounts with the Fund for
their clients charge an annual fee on the average net assets held in such
accounts for accounting, servicing, and distribution services they provide with
respect to the underlying Fund shares. This fee is paid by the Adviser, the Fund
and/or John Hancock Funds, LLC (the Fund's principal distributor).
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 and classes
without further action by shareholders. As of the date of this Statement of
Additional Information, the Trustees have authorized shares of the Fund and four
other series. Additional series may be added in the future. The Trustees have
also authorized the issuance of five classes of shares of the Fund, designated
as Class A, Class B, Class C, Class I and Class R.
The shares of each class of the Fund represent an equal proportionate interest
in the aggregate net assets attributable to that class of the Fund. Holders of
each class of shares have certain exclusive voting rights on matters relating to
their respective distribution plans. The different classes of the Fund may bear
different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares.
Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the facts that (i) the
distribution and service fees relating to each class of shares will be borne
exclusively by that class, (ii) Class B and Class C shares will pay higher
distribution and service fees than Class A and Class R shares and Class R shares
will pay higher distribution and service fees than Class A shares (iii) each
class of shares will bear any other
37
class expenses properly allocable to such 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.
In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable, except as set forth below.
Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the 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.
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. Selling Firms 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.
38
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 distributions 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 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 their investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. Because more than 50% of the Fund's 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 (as additional income)
along with a corresponding entitlement to a foreign tax credit or deduction. The
Fund will deduct the foreign taxes it pays in determining the amount it has
available for distribution to shareholders.
If the Fund invests in stock (including an option to acquire stock such as is
inherent in a convertible bond) of 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
39
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 for these investments.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
certain foreign currency options, foreign currencies, or payables or receivables
denominated in foreign currency are subject to Section 988 of the Code, which
generally causes such gains and losses to be treated as ordinary income and
losses and may affect the amount, timing and character of distributions to
shareholders. Transactions in foreign currencies that are not directly related
to the Fund's investment in stock or securities, including speculative currency
positions could under future Treasury regulations produce income not among the
types of "qualifying income" from which the Fund must derive at least 90% of its
gross income from each taxable year. If the net foreign exchange loss for a year
treated as ordinary loss under Section 988 were to exceed the Fund's investment
company taxable income computed without regard to such loss the resulting
overall ordinary loss for such year would not be deductible by the Fund or its
shareholders in future years.
Certain options, futures, and forward foreign currency contracts undertaken by
the Fund could cause the Fund to recognize gains or losses from marking to
market even though its positions have not been sold or terminated and affect the
character as long-term or short-term (or, in the case of foreign currency
contracts, as ordinary income or loss) and timing of some capital gains and
losses realized by the Fund. Additionally, the Fund may be required to recognize
gain, but not loss, if an option, short sales or other transaction is treated as
a constructive sale of an appreciated financial position in the Fund's
portfolio. Also, certain of the Fund's losses on its transactions involving
options, futures or forward contracts and/or offsetting or successor portfolio
positions may be deferred rather than being taken into account currently in
calculating the Fund's taxable income or gains. Certain of such transactions may
also cause the Fund to dispose of investments sooner than would otherwise have
occurred. These transactions may therefore affect the amount, timing and
character of the Fund's distributions to shareholders. The Fund will take into
account the special tax rules (including consideration of available elections)
applicable to options, futures and forward contracts in order to seek to
minimize any potential adverse tax consequences.
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 and/or engage in options transactions that will generate
capital gains. At the time of an investor's purchase of Fund shares, a portion
of the purchase price is often attributable to realized or unrealized
appreciation in the Fund's portfolio or undistributed taxable income of the
Fund. Consequently, subsequent distributions on those shares from such
appreciation or income may be taxable to such investor even if the net asset
value of the investor's shares is, as a result of the distributions, reduced
below the investor's cost for such shares, and the distributions in reality
represent a return of a portion of the purchase price.
Upon a redemption or other disposition of shares of the Fund (including by
exercise of the exchange privilege) that in a transaction 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
40
realized on a redemption or exchange may be disallowed to the extent the shares
disposed of are replaced with other shares of the Fund within a period of 61
days beginning 30 days before and ending 30 days after the shares are disposed
of, such as pursuant to automatic dividend reinvestments. In such a case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.
Any loss realized upon the redemption of shares with a tax holding period of six
months or less will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain with respect to such
shares. 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.
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 carry
forward 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. The Fund has a $ 16,234,149 capital loss carryforward
available, to the extent provided by the regulations, to offset future net
realized capital gains. The Fund's carryforwards expire as follows: $524,262 on
December 31, 2005, $1,563,910 on December 31, 2006, $3,019,154 on December 31,
2007, $1,608,586 on December 31, 2008, $651,190 on December 31, 2009 and $
8,867,047 on December 31, 2011.
If the Fund should have dividend income that qualifies as Qualified Dividend
Income, as provided in the Jobs and Growth Tax Relief Reconciliation Act of
2003, the maximum amount allowable will be designated by the Fund. This amount
will be reflected on Form 1099-DIV for the current calendar year.
If the Fund should have dividend income that qualifies for the
dividends-received deduction for corporations, it will be subject to the
limitations applicable under the Code. The qualifying portion is limited to
properly designated distributions attributed to dividend income (if any) the
Fund receives from certain stock in U.S. domestic corporations and the deduction
is subject to holding period requirements and debt-financing limitations under
the Code.
Investment in debt obligations that are at risk of or in default present special
tax issues for the Fund. Tax rules are not entirely clear about issues such as
when the Fund may cease to accrue interest, original issue discount, or market
discount, when and to what extent deductions may be taken for bad debts or
worthless securities, how payments received on obligations in default should be
allocated between principal and income, and whether exchanges of debt
obligations in
41
a workout context are taxable. These and other issues will be addressed by the
Fund, in the event it acquires or holds any such obligations, in order to reduce
the risk of distributing insufficient income to preserve its status as a
regulated investment company and seeks to avoid becoming subject to Federal
income or excise tax.
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 the
excess (if any) of a corporate shareholder's adjusted current earnings over its
alternative minimum taxable income, which may increase its alternative minimum
tax liability. Additionally, any corporate shareholder should consult its tax
adviser regarding the possibility that its 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 extend 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. The mark to
market or constructive sale rules applicable to certain options, futures,
forwards, short sales or other transactions may also require the Fund to
recognize income or gain without a concurrent receipt of cash. Additionally,
some countries restrict repatriation which may make it difficult or impossible
for the Fund to obtain cash corresponding to its earnings or assets in those
countries. 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.
The Fund anticipates that its portfolio turnover rate will normally not exceed
25%. The lack of frequent trading has the potential to increase tax efficiency
and may lead to lower transaction costs, which could help to improve
performance.
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 taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding
42
of federal income tax 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 nor 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, W-8BEN
or other authorized withholding certificate is on file and to backup withholding
on certain other payments from the Fund. Non-U.S. investors should consult their
tax advisers regarding such treatment and the application of foreign taxes to an
investment in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
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
As of December 31, 2003, the average annual total returns before taxes of the
Class A shares of the Fund for the 1-year, 5-year period and since commencement
of operations on September 29, 1995, restated to reflect sales charges were
13.25%, 0.27% and 11.57%, respectively.
As of December 31, 2003, the average annual total returns before taxes for Class
B shares of the Fund for the one year period and since the commencement of
operations on May 20, 2002 were 13.35% and -3.43 %.
As of December 31, 2003, the average annual total returns before taxes for Class
C shares of the Fund for the one year period and since the commencement of
operations on May 20, 2002 were 17.35% and -0.96%. The average annual total
returns for Class C have been adjusted to reflect the elimination of the
front-end sales charge that became effective July 15, 2004.
43
As of December 31, 2003, the average annual total returns before taxes for Class
I shares of the Fund for the one year and since the commencement of operations
on May 20, 2002 were 19.77% and 0.14%.
As of December 31, 2003, the cumulative total return before taxes for Class R
shares of the Fund since the commencement of operations on August 5, 2003 was
11.56%.
n
P(1+T) = ERV
Where:
P = a hypothetical initial payment of $1,000.
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1-year, 5-year or 10-year periods (or
fractional portion).
The Fund discloses average annual total returns after taxes for Class A shares
for the one, five and 10 year periods, or the period since the commencement of
operations, ended December 31, 2003 in the prospectus. After tax returns are
computed using the historical highest individual federal marginal income-tax
rates and do not reflect the impact of state and local taxes. Actual after-tax
returns depend on the investor's tax situation and may differ from those shown.
The after-tax returns shown are not relevant to investors who hold their fund
shares through tax-deferred arrangements such as 401(k) plans or individual
retirement accounts.
The average annual total return (after taxes on distributions) is computed by
finding the average annual compounded rate of return over the 1-year, 5-year and
10-year periods, or the period since the commencement of operations, that would
equate the initial amount invested to the ending redeemable value according to
the following formula:
n
P(1+T) = ATV
D
Where:
P= a hypothetical initial payment of $1,000.
T= average annual total return (after taxes on distributions)
n= number of years
ATV = ending value of a hypothetical $1,000 payment made at
D the beginning of the 1-year, 5-year, or 10-year periods
(or fractional portion) after taxes on fund
distributions but not after taxes on redemption.
The average annual total return (after taxes on distributions and redemption) is
computed by finding the average annual compounded rate of return over the
1-year, 5-year and 10-year periods, or the period since the commencement of
operations, that would equate the initial amount invested to the ending
redeemable value according to the following formula:
44
n
P(1+T) = ATV
DR
Where:
P= a hypothetical initial payment of $1,000.
T= average annual total return (after taxes on distributions and
redemption)
n= number of years
ATV = ending value of a hypothetical $1,000 payment made at
DR the beginning of the 1-year, 5-year or 10-year periods
(or fractional portion), after taxes on fund
distributions and redemption.
Because each class has its own sales charge and fee structure, the classes have
different performance results. In the case of each class, these calculations
assume the maximum sales charge is included in the initial investment or the
CDSC is applied at the end of the period. These calculations assume that all
dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period. The "distribution rate" is determined by
annualizing the result of dividing the declared dividends of the Fund during the
period stated by the maximum offering price or net asset value at the end of the
period. Excluding the Fund's sales charge from the distribution rate produces a
higher rate.
In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total returns may be quoted as a percentage or
as a dollar amount, and may be calculated for a single investment, a series of
investments and/or a series of redemptions over any time period. Total returns
may be quoted with or without taking the Fund's sales charge on Class A or Class
C shares or the CDSC on Class B or Class C shares into account. Excluding the
Fund's sales charge on Class A and Class C shares and the CDSC on Class B or
Class C shares from a total return calculation produces a higher total return
figure. Total return may be calculated for periods prior to the inception of
Class R shares based on Class A share performance adjusted to reflect higher
12b-1 fees.
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:
Yield=2 ( 6 )
( [ (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
45
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, and excerpts from,
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's or Sub-Adviser's
investment and/or trading personnel. Orders for purchases and sales of
securities are placed in a manner, which, in the opinion of such personnel, will
offer the best price and market for the execution of each such transaction. The
Fund's trading practices and investments are reviewed monthly by the Adviser's
Senior Investment Policy Committee which consists of officers of the Adviser and
quarterly by the Adviser's Investment Committee which consists of officers and
directors of the Adviser and Trustees of the Trust who are interested persons of
the Fund.
Purchases from underwriters of portfolio securities may include a commission or
commissions paid by the issuer and transactions with dealers serving as market
maker reflect a "spread." Investments in debt securities are generally traded on
a "net" basis through dealers acting for their own account as principals and not
as brokers; no brokerage commissions are payable on these transactions. 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. Investments in equity securities are generally traded on exchanges or
on over-the-counter markets at fixed commission rates or on a net basis. 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.
The policy governs the selection of brokers and dealers and the market in which
a transaction is executed. The Adviser and Sub-Adviser do not 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 and Sub-Adviser of the Fund.
46
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Trustees that such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time. For the fiscal year ended December 31,
2003, the Fund paid $154,858 as compensation to brokers for research services
such as industry, economic and company reviews and evaluations of securities.
"Commissions", as interpreted by the SEC, include fees paid to brokers for
trades conducted on an agency basis, and certain mark-ups, mark-downs,
commission equivalents and other fees received by dealers in riskless principal
transactions placed in the over-the-counter market.
The term "brokerage and research services" includes research services received
from broker-dealers which supplement the Adviser's or Sub-Adviser's own research
(and the research of its affiliates), and may include the following types of
information: statistical and background information on the U.S. and foreign
economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; and information concerning prices and ratings of securities.
Broker-dealers may communicate such information electronically, orally, in
written form or on computer software. Research services may also include the
providing of electronic communication of trade information and, the providing of
specialized consultations with the Adviser's or Sub-Adviser's personnel with
respect to computerized systems and data furnished as a component of other
research services, the arranging of meetings with management of companies, and
the providing of access to consultants who supply research information.
The outside research assistance is useful to the Adviser or Sub-Adviser since
the broker-dealers used by the Adviser or Sub-Adviser tend to follow a broader
universe of securities and other matters than the Adviser's or Sub-Adviser's
staff can follow. In addition, the research provides the Adviser or Sub-Adviser
with a diverse perspective on financial markets. Research services provided to
the Adviser or Sub-Adviser by broker-dealers are available for the benefit of
all accounts managed or advised by the Adviser or by its affiliates, or by the
Sub-Adviser or by its affiliates. Some broker-dealers may indicate that the
provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by the Adviser's or
Sub-Adviser's clients, including the Fund. However, the Fund is not under any
obligation to deal with any broker-dealer in the execution of transactions in
portfolio securities.
The Adviser and Sub-Adviser believe that the research services are beneficial in
supplementing the Adviser's research and analysis and that they improve the
quality of the Adviser's or Sub-Adviser's investment advice. 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 or Sub-Adviser. The advisory fee paid by the Fund is not reduced because
the Adviser receives such services. The receipt of research information is not
expected to reduce significantly the expenses of the Adviser and Sub-Adviser.
However, to the extent that the Adviser or Sub-Adviser would have purchased
research services had they not been provided by broker-dealers, or would have
developed comparable information through its own staff, the expenses to the
Adviser or Sub-Adviser could be considered to have been reduced accordingly. The
research information and statistical assistance furnished by brokers and dealers
may benefit the Life Company or other advisory clients of the Adviser or
Sub-Adviser, and conversely, brokerage commissions and spreads paid by other
advisory clients of the Adviser or Sub-Adviser may result in research
information and statistical assistance beneficial to the Fund. The Fund will
make no commitment to allocate portfolio transactions upon any prescribed basis.
47
Broker-dealers may be willing to furnish statistical, research and other factual
information or service to the Adviser for no consideration other than brokerage
or underwriting commissions. Securities may be bought or sold from time to time
through such broker-dealers on behalf of the Fund or the Adviser's other
clients.
In effecting portfolio transactions on behalf of the Fund and the Adviser's
other clients, the Adviser may from time to time instruct the broker-dealer that
executes the transaction to allocate, or "step-out", a portion of the
transaction to another broker-dealer. The broker-dealer to which the Adviser
"stepped-out" would then settle and complete the designated portion of the
transaction. Each broker-dealer would receive a commission or brokerage fee with
respect to that portion of the transaction that it settles and completes.
While the Adviser and/or the Sub-Adviser will be primarily responsible for its
allocation of the Fund's brokerage business, the policies and practices of the
Adviser or Sub-Adviser in this regard must be consistent with the foregoing and
at all times be subject to review by the Trustees. For the period from May 17,
2002 to June 30, 2002, the Fund paid negotiated commissions of $61,205. For the
period from July 1, 2002 to December 31, 2002, the Fund paid negotiated
commissions of $306,417 and for the fiscal year ended December 31, 2003, the
Fund paid negotiated commissions of $531,465.
The Adviser or Sub-Adviser may determine target levels of commission business
with various brokers on behalf of its clients (including the Fund) over a
certain time period. The target levels will be based upon the following factors,
among others: (1) the execution services provided by the broker; (2) the
research services provided by the broker; and (3) the broker's interest in
mutual funds in general and in the Fund and other mutual funds advised by the
Adviser or Sub-Adviser in particular. In connection with (3) above, the Fund's
trades may be executed directly by dealers that sell shares of the John Hancock
funds or by other broker-dealers with which such dealers have clearing
arrangements, consistent with obtaining best execution and the Conduct Rules of
the National Association of Securities Dealers, Inc. The Adviser or Sub-Adviser
will not use a specific formula in connection with any of these considerations
to determine the target levels.
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 brokers affiliated with the Adviser and/or the
sub-adviser ("Affiliated Brokers"). Affiliated Brokers 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, the
Sub-Adviser or the Affiliated Broker. Because the Adviser or Sub-Adviser that is
affiliated with the Affiliated Broker has, as an investment adviser to the Fund,
the obligation to provide investment management services, which includes
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.
48
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"). The
Adviser's indirect parent, Manulife Financial, is the parent of another
broker-dealer, Manulife Financial Securities, LLC ("MF Securities" or
"Affiliated Broker"). For the fiscal years ended December 31, 2001, 2002 and
2003, the Fund paid no brokerage commissions to any Affiliated Broker.
Other investment advisory clients advised by the Adviser or Sub-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 or Sub-Adviser may
average the transactions as to price and allocate the amount of available
investments in a manner which the Adviser or Sub-Adviser believes to be
equitable to each client, including the Fund. Because of this, client accounts
in a particular style may sometimes not sell or acquire securities as quickly or
at the same prices as they might if each were managed and traded individually.
For purchases of equity securities, when a complete order is not filled, a
partial allocation will be made to each participating account pro rata based on
the order size. For high demand issues (for example, initial public offerings),
shares will be allocated pro rata by account size as well as on the basis of
account objective, account size ( a small account's allocation may be increased
to provide it with a meaningful position), and the account's other holdings. In
addition, an account's allocation may be increased if that account's portfolio
manager was responsible for generating the investment idea or the portfolio
manager intends to buy more shares in the secondary market. For fixed income
accounts, generally securities will be allocated when appropriate among accounts
based on account size, except if the accounts have different objectives or if an
account is too small to get a meaningful allocation. For new issues, when a
complete order is not filled, a partial allocation will be made to each account
pro rata based on the order size. However, if a partial allocation is too small
to be meaningful, it may be reallocated based on such factors as account
objectives, strategies, duration benchmarks and credit and sector exposure. For
example, value funds will likely not participate in initial public offerings as
frequently as growth funds. 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 or Sub-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 pays Signature
Services monthly a fee which is based on an annual rate of $16.00 for each Class
A shareholder account, $18.50 for each Class B shareholder account, $17.50 for
each Class C shareholder account and $20.00 for each Class R shareholder
account. For Class A, B and C shares, the Fund also pays certain out-of-pocket
expenses. These expenses are charged to the Fund by account, aggregated and
allocated to each class on the basis of their relative net asset values. The
Fund also pays Signature Services monthly a fee which is based on an annual rate
of 0.05% of net assets attributable to Class A, Class B, Class C, Class I and
Class R shares plus certain out-of pocket expenses. Signature Services has
agreed to limit transfer agent fees on Class A, B and C shares to 0.26% of each
class's average daily net assets. In accordance with this agreement Signature
Services reduced its fee by $44,081 for the fiscal year ended December 31, 2003.
For shares held of record in omnibus or there group accounts where
administration and other shareholder services are provided by the Selling Firm
or group administrator, the Selling Firm or administrator will charge a service
fee to the Fund. For such shareholders, Signature Services does not charge its
account fee.
49
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and The Bank of New York, One Wall Street, New York, New York
10286. Under the custodian agreement, The Bank of New York. is performing
custody, Foreign Custody Manager and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are PricewaterhouseCoopers LLP, 125 High
Street, Boston, Massachusetts 02110. PricewaterhouseCoopers LLP will audit and
render opinion on the Fund's annual financial statements and review the Fund's
annual Federal income tax returns. Until December 31, 2002, the independent
auditors of the Fund were Ernst & Young LLP, 200 Clarendon Street, Boston,
Massachusetts 02116.
FUND SECURITIES
The Fund has a policy for disclosure of its portfolio securities. Information
about the securities held by the Fund may not be disclosed except as follows:
On the fifth business day after month-end, certain information is published on
www.jhfunds.com, including but not limited to top ten holdings, sector analysis,
and investment performance. The complete portfolio is published on
www.jhfunds.com each month with a one-month lag (for example, information as of
December 31 will be published on February 1). Once published, the portfolio
information is available to the public and all categories of investors and
potential investors.
More current portfolio information is disclosed (subject always to
confidentiality agreements) when necessary for the efficient management of the
Fund's portfolio. Parties receiving more current information are: The Fund's
proxy voting service; publishers and writers for the Fund's financial reports;
risk management and portfolio analysis systems; and rating agencies. No
compensation or other consideration is received by the Fund, its adviser or any
affiliated party in regard to disclosure.
Exceptions to the above policy must be authorized by the Fund's chief legal
officer or chief compliance officer, and are subject to ratification by the
Board of Trustees.
50
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).
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
A-1
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).
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-2
APPENDIX B
Description of Bond Ratings
The ratings of Moody's Investors Service, Inc. and Standard & Poor's Ratings
Group represent their opinions as to the quality of various debt instruments
they undertake to rate. It should be emphasized that ratings are not absolute
standards of quality. Consequently, debt instruments with the same maturity,
coupon and rating may have different yields while debt instruments of the same
maturity and coupon with different ratings may have the same yield.
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment at some time in the future.
Baa: 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.
Ba: 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.
B: Bonds which are rated B generally lack the characteristics of 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.
B-1
STANDARD & POOR'S RATINGS GROUP
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having 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.
BB, B: Debt rated BB, and B is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
CCC Debt rated 'CCC' has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The 'CCC' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'B' or 'B-' rating.
CC The rating 'CC' is typically applied to debt subordinated to senior debt that
is assigned an actual or implied 'CCC' rating.
B-2
APPENDIX C
John Hancock Advisers, LLC
Sovereign Asset Management Corporation
Proxy Voting Summary
We believe in placing our clients' interests first. Before we invest in a
particular stock or bond, our team of portfolio managers and research analysts
look closely at the company by examining its earnings history, its management
team and its place in the market. Once we invest, we monitor all our clients'
holdings, to ensure that they maintain their potential to produce results for
investors.
As part of our active investment management strategy, we keep a close eye on
each company we invest in. Routinely, companies issue proxies by which they ask
investors like us to vote for or against a change, such as a new management
team, a new business procedure or an acquisition. We base our decisions on how
to vote these proxies with the goal of maximizing the value of our clients'
investments.
Currently, John Hancock Advisers, LLC ("JHA") and Sovereign Asset Management
Corporation ("Sovereign") manage open-end funds, closed-end funds and portfolios
for institutions and high-net-worth investors. Occasionally, we utilize the
expertise of an outside asset manager by means of a subadvisory agreement. In
all cases, JHA or Sovereign makes the final decision as to how to vote our
clients' proxies. There is one exception, however, and that pertains to our
international accounts. The investment management team for international
investments votes the proxies for the accounts they manage. Unless voting is
specifically retained by the named fiduciary of the client, JHA and Sovereign
will vote proxies for ERISA clients.
In order to ensure a consistent, balanced approach across all our investment
teams, we have established a proxy oversight group comprised of associates from
our investment, operations and legal teams. The group has developed a set of
policies and procedures that detail the standards for how JHA and Sovereign vote
proxies. The guidelines of JHA have been approved and adopted by each fund
client's board of trustees who have voted to delegate proxy voting authority to
their investment adviser, JHA. JHA and Sovereign's other clients have granted us
the authority to vote proxies in our advisory contracts or comparable documents.
JHA and Sovereign have hired a third party proxy voting service which has been
instructed to vote all proxies in accordance with our established guidelines
except as otherwise instructed.
In evaluating proxy issues, our proxy oversight group may consider information
from many sources, including the portfolio manager, management of a company
presenting a proposal, shareholder groups, and independent proxy research
services. Proxies for securities on loan through securities lending programs
will generally not be voted, however a decision may be made to recall a security
for voting purposes if the issue is material.
Below are the guidelines we adhere to when voting proxies. Please keep in mind
that these are purely guidelines. Our actual votes will be driven by the
particular circumstances of each proxy. From time to time votes may ultimately
be cast on a case-by-case basis, taking into consideration relevant facts and
circumstances at the time of the vote. Decisions on these matters (case-by-case,
abstention, recall) will normally be made by a portfolio manager under the
supervision of the chief investment officer and the proxy oversight group. We
may abstain from voting a proxy if we conclude that the effect on our clients'
economic interests or the value of the portfolio holding is indeterminable or
insignificant.
C-1
Proxy Voting Guidelines
Board of Directors
We believe good corporate governance evolves from an independent board.
We support the election of uncontested director nominees, but will withhold our
vote for any nominee attending less than 75% of the board and committee meetings
during the previous fiscal year. Contested elections will be considered on a
case by case basis by the proxy oversight group, taking into account the
nominee's qualifications. We will support management's ability to set the size
of the board of directors and to fill vacancies without shareholder approval but
will not support a board that has fewer than 3 directors or allows for the
removal of a director without cause.
We will support declassification of a board and block efforts to adopt a
classified board structure. This structure typically divides the board into
classes with each class serving a staggered term.
In addition, we support proposals for board indemnification and limitation of
director liability, as long as they are consistent with corporate law and
shareholders' interests. We believe that this is necessary to attract qualified
board members.
Selection of Auditors
We believe an independent audit committee can best determine an auditor's
qualifications.
We will vote for management proposals to ratify the board's selection of
auditors, and for proposals to increase the independence of audit committees.
Capitalization
We will vote for a proposal to increase or decrease authorized common or
preferred stock and the issuance of common stock, but will vote against a
proposal to issue or convert preferred or multiple classes of stock if the board
has unlimited rights to set the terms and conditions of the shares, or if the
shares have voting rights inferior or superior to those of other shareholders.
In addition, we will support a management proposal to: create or restore
preemptive rights; approve a stock repurchase program; approve a stock split or
reverse stock split; and, approve the issuance or exercise of stock warrants
Acquisitions, mergers and corporate restructuring
Proposals to merge with or acquire another company will be voted on a
case-by-case basis, as will proposals for recapitalization, restructuring,
leveraged buyout, sale of assets, bankruptcy or liquidation. We will vote
against a reincorporation proposal if it would reduce shareholder rights. We
will vote against a management proposal to ratify or adopt a poison pill or to
establish a supermajority voting provision to approve a merger or other business
combination. We would however support a management proposal to opt out of a
state takeover statutory provision, to spin-off certain operations or divisions
and to establish a fair price provision.
Corporate Structure and Shareholder Rights
In general, we support proposals that foster good corporate governance
procedures and that provide shareholders with voting power equal to their equity
interest in the company.
C-2
To preserve shareholder rights, we will vote against a management proposal to
restrict shareholders' right to: call a special meeting and to eliminate a
shareholders' right to act by written consent. In addition, we will not support
a management proposal to adopt a supermajority vote requirement to change
certain by-law or charter provisions or a non-technical amendment to by-laws or
a charter that reduces shareholder rights.
Equity-based compensation
Equity-based compensation is designed to attract, retain and motivate talented
executives and independent directors, but should not be so significant as to
materially dilute shareholders' interests.
We will vote against the adoption or amendment of a stock option plan if :
o the compensation committee is not fully independent
o plan dilution is more than 10% of outstanding common stock,
o the company allows or has allowed the re-pricing or replacement of
underwater options in the past three fiscal years (or the exchange of
underwater options) without shareholder approval.
o the option is not premium priced or indexed, or does not vest based on
future performance
With respect to the adoption or amendment of employee stock purchase plans or a
stock award plan, we will vote against management if:
o the plan allows stock to be purchased at less than 85% of fair market
value;
o this plan dilutes outstanding common equity greater than 10%
o all stock purchase plans, including the proposed plan, exceed 15% of
outstanding common equity
o if the potential dilution from all company plans is more than 85%
With respect to director stock incentive/option plans, we will vote against
management if:
o the minimum vesting period for options or time lapsing restricted
stock is less than one year
o the potential dilution for all company plans is more than 85%
Other Business
For routine business matters which are the subject of many proxy related
questions, we will vote with management proposals to:
o change the company name;
o approve other business;
o adjourn meetings;
o make technical amendments to the by-laws or charters;
o approve financial statements;
o approve an employment agreement or contract.
Shareholder Proposals
Shareholders are permitted per SEC regulations to submit proposals for inclusion
in a company's proxy statement. We will generally vote against shareholder
proposals and in accordance with the recommendation of management except as
follows where we will vote for proposals:
o calling for shareholder ratification of auditors;
o calling for auditors to attend annual meetings;
o seeking to increase board independence;
o requiring minimum stock ownership by directors;
C-3
o seeking to create a nominating committee or to increase the
independence of the nominating committee;
o seeking to increase the independence of the audit committee.
Corporate and social policy issues
We believe that "ordinary business matters" are primarily the responsibility of
management and should be approved solely by the corporation's board of
directors.
Proposals in this category, initiated primarily by shareholders, typically
request that the company disclose or amend certain business practices. We
generally vote against business practice proposals and abstain on social policy
issues, though we may make exceptions in certain instances where we believe a
proposal has substantial economic implications.
C-4
John Hancock Advisers, LLC
Sovereign Asset Management Corporation
Proxy Voting Procedures
The role of the proxy voting service
John Hancock Advisers, LLC ("JHA") and Sovereign Asset Management Corporation
("Sovereign") have hired a proxy voting service to assist with the voting of
client proxies. The proxy service coordinates with client custodians to ensure
that proxies are received for securities held in client accounts and acted on in
a timely manner. The proxy service votes all proxies received in accordance with
the proxy voting guidelines established and adopted by JHA and Sovereign. When
it is unclear how to apply a particular proxy voting guideline or when a
particular proposal is not covered by the guidelines, the proxy voting service
will contact the proxy oversight group coordinator for a resolution.
The role of the proxy oversight group and coordinator
The coordinator will interact directly with the proxy voting service to resolve
any issues the proxy voting service brings to the attention of JHA or Sovereign.
When a question arises regarding how a proxy should be voted the coordinator
contacts the firm's investment professionals and the proxy oversight group for a
resolution. In addition the coordinator ensures that the proxy voting service
receives responses in a timely manner. Also, the coordinator is responsible for
identifying whether, when a voting issue arises, there is a potential conflict
of interest situation and then escalating the issue to the firm's Executive
Committee. For securities out on loan as part of a securities lending program,
if a decision is made to vote a proxy, the coordinator will manage the
return/recall of the securities so the proxy can be voted.
The role of mutual fund trustees
The boards of trustees of our mutual fund clients have reviewed and adopted the
proxy voting guidelines of the funds' investment adviser, JHA. The trustees will
periodically review the proxy voting guidelines and suggest changes they deem
advisable.
Conflicts of interest
Conflicts of interest are resolved in the best interest of clients.
With respect to potential conflicts of interest, proxies will be voted in
accordance with JHA's or Sovereign's predetermined policies. If application of
the predetermined policy is unclear or does not address a particular proposal, a
special internal review by the JHA Executive Committee or Sovereign Executive
Committee will determine the vote. After voting, a report will be made to the
client (in the case of an investment company, to the fund's board of trustees),
if requested. An example of a conflict of interest created with respect to a
proxy solicitation is when JHA or Sovereign must vote the proxies of companies
that they provide investment advice to or are currently seeking to provide
investment advice to, such as to pension plans.
C-5
FINANCIAL STATEMENTS
The financial statements listed below are included in the Fund's 2003 Annual
Report to Shareholders for the year ended December 31, 2003 (filed
electronically on February 27, 2004 accession number 0000045291-04-000002) and
are included in and incorporated by reference into Part B of this Registration
Statement for John Hancock U.S. Global Leaders Growth Fund (file nos. 2-29502
and 811-1677).
John Hancock Capital Series
John Hancock U.S. Global Leaders Growth Fund
Statement of Assets and Liabilities as of December 31, 2003
Statement of Operations for the period ended December 31, 2003
Statement of Changes in Net Asset for each of the period indicated therein.
Financial Highlights for the period indicated therein.
Schedule of Investments as of December 31, 2003.
Notes to Financial Statements.
Report of Independent Auditors.
F-1
Supplement to the John Hancock Large Cap Growth Fund Prospectus
Dated March 1, 2004 as revised January 24, 2005
John Hancock Large Cap Growth Fund
On December 14, 2004, the Trustees of John Hancock Large Cap Growth Fund (the
"Fund") voted to recommend that the shareholders of the Fund approve a tax-free
reorganization of the Fund, as described below.
Under the terms of the reorganization, subject to shareholder approval at a
shareholder meeting scheduled to be held on March 23, 2005, the Fund would
transfer all of its assets and liabilities to John Hancock U.S. Global Leaders
Growth Fund ("U.S. Global Leaders Growth Fund") in a tax-free exchange for
shares of equal value of U.S. Global Leaders Growth Fund. Further information
regarding the proposed reorganization will be contained in a proxy statement and
prospectus which is scheduled to be mailed to the Fund's shareholders on or
about February 4, 2005.
Effective at the close of business on January 24, 2005, the Fund will be closed
to all new accounts.
December 15, 2004
12/05
JOHN HANCOCK
Large Cap Growth Fund
PROSPECTUS 3.1.2004
as revised
1.24.2005
[JOHN HANCOCK(R) LOGO]
----------------------
JOHN HANCOCK FUNDS
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.
CONTENTS
- --------------------------------------------------------------------------------
JOHN HANCOCK LARGE CAP GROWTH FUND 4
YOUR ACCOUNT
------------------------------------------------------------------
CHOOSING A SHARE CLASS 6
HOW SALES CHARGES ARE CALCULATED 6
SALES CHARGE REDUCTIONS AND WAIVERS 7
OPENING AN ACCOUNT 8
BUYING SHARES 9
SELLING SHARES 10
TRANSACTION POLICIES 12
DIVIDENDS AND ACCOUNT POLICIES 14
ADDITIONAL INVESTOR SERVICES 14
FUND DETAILS
------------------------------------------------------------------
BUSINESS STRUCTURE 15
FINANCIAL HIGHLIGHTS 16
FOR MORE INFORMATION BACK COVER
------------------------------------------------------------------
LARGE CAP GROWTH FUND
GOAL AND STRATEGY
[GRAPHIC]
The fund seeks long-term capital appreciation. To pursue this goal, the fund
normally invests at least 80% of its assets in stocks of large-capitalization
companies (companies in the capitalization range of the Russell Top 200 Growth
Index, which was $481.8 million to $290.3 billion as of December 31, 2004).
In managing the portfolio, the managers use fundamental financial analysis to
identify companies with:
o strong cash flows
o secure market franchises
o sales growth that outpaces their industries
The fund generally invests in a diversified portfolio of U.S. companies. The
fund has tended to emphasize, or overweight, certain sectors such as health
care, technology or consumer goods. These weightings may change in the future.
The managers use various means to assess the depth and stability of companies'
senior management, including interviews and company visits. The fund favors
companies for which the managers project an above-average growth rate.
The fund may invest in preferred stocks and other types of equity securities,
and may invest up to 15% of assets in foreign securities. The fund may also make
limited use of certain derivatives (investments whose value is based on indexes,
securities or currencies).
In abnormal circumstances, the fund may temporarily invest extensively 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) and increase your taxable distributions.
================================================================================
PAST PERFORMANCE
[GRAPHIC]
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 average annual figures reflect sales charges; the year-by-year and index
figures do not, and would be lower if they did. The average annual total returns
for Class C have been adjusted to reflect the elimination of the front-end sales
charge effective July 15, 2004. All figures assume dividend reinvestment. Past
performance before and after taxes does not indicate future results.
CLASS A, TOTAL RETURNS
BEST QUARTER: Q4 '98, 22.38%
WORST QUARTER: Q1 '01, -30.71%
AFTER-TAX RETURNS
After-tax returns are shown for Class A shares only and would be different for
the other classes. They are calculated using the historical highest individual
federal marginal income-tax rates and do not reflect the impact of state and
local taxes. Actual after-tax returns depend on the investor's tax situation and
may differ from those shown. The after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements such as
401(k) plans or individual retirement accounts.
INDEX (reflects no fees or taxes)
RUSSELL TOP 200 GROWTH INDEX, an unmanaged index containing growth-oriented
stocks from the Russell Top 200 Index.
CLASS A CALENDAR YEAR TOTAL RETURNS (WITHOUT SALES CHARGES)
[THE FOLLOWING TABLE WAS REPRESENTED BY A GRAPH IN THE PRINTED MATERIAL.]
1995 27.17%
1996 20.40%
1997 16.70%
1998 26.42%
1999 20.52%
2000 -30.74%
2001 -30.89%
2002 -30.79%
2003 25.48%
2004 -0.61%
AVERAGE ANNUAL TOTAL RETURNS (INCLUDING SALES CHARGE) FOR PERIODS ENDING
12-31-04
LIFE OF
1 YEAR 5 YEAR 10 YEAR CLASS C
Class A before tax -5.57% -17.10% 0.64% --
Class A after tax on distributions -5.57% -17.24% -0.65% --
Class A after tax on distributions, with sale -3.62% -13.52% 0.56% --
Class B before tax -6.26% -17.15% 0.58% --
Class C before tax (began 6-1-98) -2.31% -16.82% -- -8.56%
- -----------------------------------------------------------------------------------
Russell Top 200 Growth Index -2.43% -8.75% 8.52% -0.90%
4
MAIN RISKS
[GRAPHIC]
The value of your investment will fluctuate in response to stock market
movements.
The fund's management strategy has a significant influence on fund performance.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform investments that focus on small- or
medium-capitalization stocks. Similarly, growth stocks could underperform value
stocks. To the extent that the fund invests in a given industry, its performance
will be hurt if that industry performs poorly. In addition, if the managers'
security selection strategies do not perform as expected, the fund could
under-perform its peers or lose money.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
================================================================================
YOUR EXPENSES
[GRAPHIC]
Transaction expenses are charged directly to your account. Operating expenses
are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C
Maximum front-end sales charge (load) on purchases
as a % of purchase price 5.00% none none
Maximum deferred sales charge (load)
as a % of purchase or sale price, whichever is less none(2) 5.00% 1.00%
ANNUAL OPERATING EXPENSES CLASS A CLASS B CLASS C
Management fee 0.75% 0.75% 0.75%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.70% 0.70% 0.70%
Total fund operating expenses 1.75% 2.45% 2.45%
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 and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.
EXPENSES YEAR 1 YEAR 3 YEAR 5 YEAR 10
Class A $ 669 $ 1,024 $ 1,401 $ 2,459
Class B with redemption $ 748 $ 1,064 $ 1,506 $ 2,614
Class B without redemption $ 248 $ 764 $ 1,306 $ 2,614
Class C with redemption $ 348 $ 764 $ 1,306 $ 2,786
Class C without redemption $ 248 $ 764 $ 1,306 $ 2,786
(1) A $4.00 FEE WILL BE CHARGED FOR WIRE REDEMPTIONS.
(2) EXCEPT FOR INVESTMENTS OF $1 MILLION OR MORE; SEE "HOW SALES CHARGES ARE
CALCULATED."
================================================================================
PORTFOLIO MANAGERS
ROGER C. HAMILTON
Vice president
Joined John Hancock Advisers in 1994
Joined fund team in 2004
Began business career in 1980
ROBERT C. JUNKIN, CPA
Vice president
Joined John Hancock Advisers in 2003
Vice president, Pioneer Investments, Inc.
(1997-2002)
Joined fund team in 2003
Began business career in 1988
FUND CODES
CLASS A Ticker JHNGX
CUSIP 409906302
Newspaper LpCpGrA
SEC number 811-4630
JH fund number 20
CLASS B Ticker JHGBX
CUSIP 409906401
Newspaper LpCpGrB
SEC number 811-4630
JH fund number 120
CLASS C Ticker JLGCX
CUSIP 409906849
Newspaper --
SEC number 811-4630
JH fund number 520
5
YOUR ACCOUNT
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CHOOSING A SHARE CLASS
Each share class has its own cost structure, including a Rule 12b-1 plan that
allows it to pay fees for the sale, distribution and service of its shares. Your
financial representative can help you decide which share class is best for you.
CLASS A
o A front-end sales charge, as described at right.
o Distribution and service (12b-1) fees of 0.30%.
CLASS B
o No front-end sales charge; all your money goes to work for you right away.
o Distribution and service (12b-1) fees of 1.00%.
o A deferred sales charge, as described on following page.
o Automatic conversion to Class A shares after eight years, thus reducing
future annual expenses.
CLASS C
o No front-end sales charge; all your money goes to work for you right away.
o Distribution and service (12b-1) fees of 1.00%.
o A 1.00% contingent deferred sales charge on shares sold within one year of
purchase.
o No automatic conversion to Class A shares, so annual expenses continue at
the Class C level throughout the life of your investment.
INVESTORS PURCHASING $1 MILLION OR MORE OF CLASS B OR CLASS C SHARES MAY WANT TO
CONSIDER THE LOWER OPERATING EXPENSES OF CLASS A SHARES.
FOR ACTUAL PAST EXPENSES OF EACH SHARE CLASS, SEE THE FUND INFORMATION EARLIER
IN THIS PROSPECTUS.
BECAUSE 12B-1 FEES ARE PAID ON AN ONGOING BASIS, THEY MAY COST SHAREHOLDERS MORE
THAN OTHER TYPES OF SALES CHARGES.
OTHER CLASSES OF SHARES OF THE FUND, WHICH HAVE THEIR OWN EXPENSE STRUCTURE, MAY
BE OFFERED IN SEPARATE PROSPECTUSES.
YOUR BROKER/DEALER RECEIVES A PERCENTAGE OF THESE SALES CHARGES AND FEES. IN
ADDITION, JOHN HANCOCK FUNDS MAY PAY SIGNIFICANT COMPENSATION OUT OF ITS OWN
RESOURCES TO YOUR BROKER-DEALER. THESE PAYMENTS ARE DESCRIBED IN THE STATEMENT
OF ADDITIONAL INFORMATION.
YOUR BROKER/DEALER OR AGENT MAY CHARGE YOU A FEE TO EFFECT TRANSACTIONS IN FUND
SHARES.
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
CLASS A Sales charges are as follows:
CLASS A SALES CHARGES
AS A % OF AS A % OF YOUR
YOUR INVESTMENT OFFERING PRICE* INVESTMENT
Up to $49,999 5.00% 5.26%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,000 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 and over See below
*OFFERING PRICE IS THE NET ASSET VALUE PER SHARE PLUS ANY INITIAL SALES CHARGE.
You may qualify for a reduced Class A sales charge if you own or are purchasing
Class A, Class B, Class C, Class I or Class R shares of John Hancock mutual
funds. TO RECEIVE THE REDUCED SALES CHARGE, YOU MUST TELL YOUR BROKER OR
FINANCIAL ADVISER AT THE TIME YOU PURCHASE A FUND'S CLASS A SHARES ABOUT ANY
OTHER JOHN HANCOCK MUTUAL FUNDS HELD BY YOU, YOUR SPOUSE OR YOUR CHILDREN UNDER
THE AGE OF 21. This includes investments held in a retirement account, an
employee benefit plan or at a broker or financial adviser other than the one
handling your current purchase. John Hancock will credit the combined value, at
the current offering price, of all eligible accounts to determine whether you
qualify for a reduced sales charge on your current purchase. You may need to
provide documentation for these accounts, such as an account statement. For more
information about these reduced sales charges, you may visit the funds' Web site
at www.jhfunds.com. You may also consult your broker or financial adviser or
refer to the section entitled "Initial Sales Charge on Class A Shares" in the
funds' Statement of Additional Information. You may request a Statement of
Additional Information from your broker or financial adviser, access the funds'
Web site at www.jhfunds.com or call 1-800-225-5291.
INVESTMENTS OF $1 MILLION OR MORE Class A shares are available with no front-end
sales charge. There is a contingent deferred sales charge (CDSC) on any Class A
shares upon which a commission or finder's fee was paid that are sold within one
year of purchase, as follows:
CLASS A DEFERRED CHARGES ON $1 MILLION+ INVESTMENTS
CDSC ON SHARES
YOUR INVESTMENT BEING SOLD
First $1M - $4,999,999 1.00%
Next $1 - $5M above that 0.50%
Next $1 or more above that 0.25%
FOR PURPOSES OF THIS CDSC, ALL PURCHASES MADE DURING A CALENDAR MONTH ARE
COUNTED AS HAVING BEEN MADE ON THE FIRST DAY OF THAT MONTH.
6 YOUR ACCOUNT
The CDSC is based on the lesser of the original purchase cost or the current
market value of the shares being sold, and is not charged on shares you acquired
by reinvesting your dividends. To keep your CDSC as low as possible, each time
you place a request to sell shares we will first sell any shares in your account
that are not subject to a CDSC.
CLASS B AND CLASS C Shares are offered at their net asset value per share,
without any initial sales charge.
A CDSC may be charged if a commission has been paid and you sell Class B or
Class C shares within a certain time after you bought them, as described in the
tables below. There is no CDSC on shares acquired through reinvestment of
dividends. The CDSC is based on the original purchase cost or the current market
value of the shares being sold, whichever is less. The CDSCs are as follows:
CLASS B DEFERRED CHARGES
CDSC ON SHARES
YEARS AFTER PURCHASE BEING SOLD
1st year 5.00%
2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
After 6th year none
CLASS C DEFERRED CHARGES
YEARS AFTER PURCHASE CDSC
1st year 1.00%
After 1st year none
FOR PURPOSES OF THESE CDSCS, ALL PURCHASES MADE DURING A CALENDAR MONTH ARE
COUNTED AS HAVING BEEN MADE ON THE FIRST DAY OF THAT MONTH.
To keep your CDSC as low as possible, each time you place a request to sell
shares we will first sell any shares in your account that carry no CDSC. If
there are not enough of these to meet your request, we will sell those shares
that have the lowest CDSC.
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES There are several ways you can combine
multiple purchases of Class A shares of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
o Accumulation Privilege -- lets you add the value of any Class A shares you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge. Retirement plans investing $1 million in
Class B shares may add that value to Class A purchases to calculate
charges.
o Letter of Intention -- lets you purchase Class A shares of a fund over a
13-month period and receive the same sales charge as if all shares had been
purchased at once. You can use a Letter of Intention to qualify for reduced
sales charges if you plan to invest at least $50,000 in a fund's Class A
shares during the next 13 months. The calculation of this amount would
include accumulations and combinations, as well as your current holdings of
all classes of John Hancock funds, which includes any reinvestment of
dividends and capital gains distributions. However, Class A shares of money
market funds will be excluded unless you have already paid a sales charge.
When you sign this letter, the funds agree to charge you the reduced sales
charges listed above. Completing a Letter of Intention does not obligate
you to purchase additional shares. However, if you do not buy enough shares
to qualify for the lower sales charges by the earlier of the end of the
13-month period or when you sell your shares, your sales charges will be
recalculated to reflect your actual purchase level. Also available for
retirement plan investors is a 48-month Letter of Intention, described in
the SAI.
o Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
TO UTILIZE ANY REDUCTION YOU MUST: COMPLETE THE APPROPRIATE SECTION OF YOUR
APPLICATION, OR CONTACT YOUR FINANCIAL REPRESENTATIVE OR SIGNATURE SERVICES.
CONSULT THE SAI FOR ADDITIONAL DETAILS (SEE THE BACK COVER OF THIS PROSPECTUS).
GROUP INVESTMENT PROGRAM A group may be treated as a single purchaser under the
accumulation and combination privileges. Each investor has an individual
account, but the group's investments are lumped together for sales charge
purposes, making the investors potentially eligible for reduced sales charges.
There is no charge or obligation to invest (although initial investments must
total at least $250) and individual investors may close their accounts at any
time.
TO UTILIZE THIS PROGRAM YOU MUST: CONTACT YOUR FINANCIAL REPRESENTATIVE OR
SIGNATURE SERVICES TO FIND OUT HOW TO QUALIFY. CONSULT THE SAI FOR ADDITIONAL
DETAILS (SEE THE BACK COVER OF THIS PROSPECTUS).
YOUR ACCOUNT 7
CDSC WAIVERS As long as Signature Services is notified at the time you sell, the
CDSC for each share class will generally be waived in the following cases:
o to make payments through certain systematic withdrawal plans
o to make certain distributions from a retirement plan
o because of shareholder death or disability
TO UTILIZE THIS WAIVER YOU MUST: CONTACT YOUR FINANCIAL REPRESENTATIVE OR
SIGNATURE SERVICES. CONSULT THE SAI FOR ADDITIONAL DETAILS (SEE THE BACK COVER
OF THIS PROSPECTUS).
REINSTATEMENT PRIVILEGE If you sell shares of a John Hancock fund, you may
reinvest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge, as long as Signature Services is
notified before you reinvest. If you paid a CDSC when you sold your shares, you
will be credited with the amount of the CDSC. All accounts involved must have
the same registration.
TO UTILIZE THIS PRIVILEGE YOU MUST: CONTACT YOUR FINANCIAL REPRESENTATIVE OR
SIGNATURE SERVICES.
WAIVERS FOR CERTAIN INVESTORS Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
o selling brokers and their employees and sales representatives (and their
Immediate Family, as defined in the SAI)
o financial representatives utilizing fund shares in fee-based investment
products under signed agreement with John Hancock Funds
o fund trustees and other individuals who are affiliated with these or other
John Hancock funds (and their Immediate Family, as defined in the SAI)
o individuals transferring assets from an employee benefit plan into a John
Hancock fund
o participants in certain retirement plans with at least 100 eligible
employees (one-year CDSC applies)
o participants in certain 529 plans that have a signed agreement with John
Hancock Funds (one-year CDSC may apply)
o certain retirement plans participating in Merrill Lynch or PruArray
programs
TO UTILIZE A WAIVER YOU MUST: CONTACT YOUR FINANCIAL REPRESENTATIVE OR SIGNATURE
SERVICES. CONSULT THE SAI FOR ADDITIONAL DETAILS (SEE THE BACK COVER OF THIS
PROSPECTUS).
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investments for
the John Hancock funds are as follows:
o non-retirement account: $1,000
o retirement account:$500
o group investments: $250
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
3 Complete the appropriate parts of the account application, carefully
following the instructions. You must submit the following additional
documentation when opening a corporate account: new account application,
corporate business/ organization resolution certified within the past 12
months or a John Hancock Funds business/organization certification form.
You must submit the following additional documentation when opening a trust
account: new account application and a copy of the trust document certified
within the past 12 months or a John Hancock Funds trust certification form.
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 Complete the appropriate parts of the account privileges application. By
applying for privileges now, you can avoid the delay and inconvenience of
having to file an additional application if you want to add privileges
later.
5 Make your initial investment using the table on the next page. You and your
financial representative can initiate any purchase, exchange or sale of
shares.
8 YOUR ACCOUNT
BUYING SHARES
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
BY CHECK
[GRAPHIC] o Make out a check for the investment amount, o Make out a check for the investment amount
payable to "John Hancock Signature Services, payable to "John Hancock Signature Services,
Inc." Inc."
o Deliver the check and your completed o Fill out the detachable investment slip from
application to your financial representative, an account statement. If no slip is available,
or mail them to Signature Services (address include a note specifying the fund name, your
below). share class, your account number and the
name(s) in which the account is registered.
o Deliver the check and your investment slip or
note to your financial representative, or mail
them to Signature Services (address below).
BY EXCHANGE
[GRAPHIC] o Call your financial representative or o Log on to www.jhfunds.com to process exchanges
Signature Services to request an exchange. between funds.
o Call EASI-Line for automated service 24 hours
a day using your touch-tone phone at
1-800-338-8080.
o Call your financial representative or
Signature Services to request an exchange.
BY WIRE
[GRAPHIC] o Deliver your completed application to your o Instruct your bank to wire the amount of your
financial representative, or mail it to investment to:
Signature Services. First Signature Bank & Trust
Account # 900000260
o Obtain your account number by calling your Routing # 211475000
financial representative or Signature
Services.
Specify the fund name, your share class, your
o Instruct your bank to wire the amount of your account number and the name(s) in which the account
investment to: is registered. Your bank may charge a fee to wire
First Signature Bank & Trust funds.
Account # 900000260
Routing # 211475000
Specify the fund name, your choice of share class,
the new account number and the name(s) in which
the account is registered. Your bank may charge a
fee to wire funds.
BY INTERNET
[GRAPHIC] See "By exchange" and "By wire." o Verify that your bank or credit union is a
member of the Automated Clearing House (ACH)
system.
o Complete the "Bank Information" section on
your account application.
o Log on to www.jhfunds.com to initiate
purchases using your authorized bank account.
BY PHONE
[GRAPHIC] See "By exchange" and "By wire." o Verify that your bank or credit union is a
member of the Automated Clearing House (ACH)
system.
o Complete the "Bank Information" section on
your account application.
o Call EASI-Line for automated service 24 hours
a day using your touch-tone phone at
1-800-338-8080.
o Call your financial representative or call
Signature Services between 8 A.M. and 7 P .M.
Eastern Time on most business days.
TO OPEN OR ADD TO AN ACCOUNT USING THE MONTHLY AUTOMATIC ACCUMULATION PROGRAM,
SEE "ADDITIONAL INVESTOR SERVICES."
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.
YOUR ACCOUNT 9
SELLING SHARES
TO SELL SOME OR ALL OF YOUR SHARES
BY LETTER
[GRAPHIC] o Accounts of any type. o Write a letter of instruction or complete a
stock power indicating the fund name, your
o Sales of any amount. 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 INTERNET
[GRAPHIC] o Most accounts. o Log on to www.jhfunds.com to initiate
redemptions from your funds.
o Sales of up to $100,000.
BY PHONE
[GRAPHIC] o Most accounts. o Call EASI-Line for automated service 24 hours
a day using your touch-tone phone at
o Sales of up to $100,000. 1-800-338-8080.
o Call your financial representative or call
Signature Services between 8 A.M. and 7 P .M.
Eastern Time on most business days.
BY WIRE OR ELECTRONIC FUNDS TRANSFER (EFT)
[GRAPHIC] o Requests by letter to sell any amount. o To verify that the Internet or telephone
redemption privilege is in place on an
o Requests by Internet or phone to sell up to account, or to request the form to add it to
$100,000. an existing account, call Signature Services.
o Amounts of $1,000 or more will be wired on the
next business day. A $4 fee will be deducted
from your account.
o Amounts of less than $1,000 may be sent by EFT
or by check. Funds from EFT transactions are
generally available by the second business
day. Your bank may charge a fee for this
service.
BY EXCHANGE
[GRAPHIC] o Accounts of any type. o Obtain a current prospectus for the fund into
which you are exchanging by Internet or by
o Sales of any amount. calling your financial represen- tative or
Signature Services.
o Log on to www.jhfunds.com to process exchanges
between your funds.
o Call EASI-Line for automated service 24 hours
a day using your touch-tone phone at
1-800-338-8080.
o Call your financial representative or
Signature Services to request an exchange.
TO SELL SHARES THROUGH A SYSTEMATIC WITHDRAWAL PLAN, SEE "ADDITIONAL INVESTOR
SERVICES."
10 YOUR ACCOUNT
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.
SELLER REQUIREMENTS FOR WRITTEN REQUESTS [GRAPHIC]
Owners of individual, joint or UGMA/UTMA accounts (custodial o Letter of instruction.
accounts for minors).
o On the letter, the signatures and titles of all persons
authorized to sign for the account, exactly as the
account is registered.
o Signature guarantee if applicable (see above).
Owners of corporate, sole proprietorship, general partner or o Letter of instruction.
association accounts.
o Corporate business/organization resolution, certified
within the past 12 months, or a John Hancock Funds
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 accounts. o Letter of instruction.
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 John Hancock Funds trust certification form.
o Signature guarantee if applicable (see above).
Joint tenancy shareholders with rights of survivorship whose o Letter of instruction signed by surviving tenant.
co-tenants are deceased.
o Copy of death certificate.
o Signature guarantee if applicable (see above).
Executors of shareholder estates. o Letter of instruction signed by executor.
o Copy of order appointing executor, certified within the
past 12 months.
o Signature guarantee if applicable (see above).
Administrators, conservators, guardians and other sellers or o Call 1-800-225-5291 for instructions.
account types not listed above.
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.
YOUR ACCOUNT 11
- --------------------------------------------------------------------------------
TRANSACTION POLICIES
VALUATION OF SHARES The net asset value (NAV) per share 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. For example, the fund may value securities at
fair value if the value of these securities has been materially affected by
events occurring after the close of a foreign market. Because developments that
could affect the values of foreign securities may occur between the close of the
foreign market where the security is principally traded and the fund's valuation
time, such closing prices may not be reflective of current market prices and
current market prices may not be readily available when the fund determines its
net asset values, and therefore the fund may adjust closing market prices of
foreign securities to reflect what it believes to be the fair value of the
securities as of the fund's valuation time. Foreign stock or other portfolio
securities held by the fund may trade 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. For more information on the
valuation of shares, please see the Statement of Additional Information.
BUY AND SELL PRICES When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable deferred sales charges.
EXECUTION OF REQUESTS 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, accessing www.jhfunds.com, 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
redemption transactions are not permitted on accounts whose names or addresses
have changed within the past 30 days. Proceeds from telephone transactions can
only be mailed to the address of record.
EXCHANGES You may exchange shares of one John Hancock fund for shares of the
same class of any other, generally without paying any additional sales charges.
The registration for both accounts involved must be identical.
Class B and Class C shares will continue to age from the original date and will
retain the same CDSC rate. A CDSC rate that has increased will drop again with a
future exchange into a fund with a lower rate. A fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders. For
further details, see "Additional Services and Programs" in the SAI (see the back
cover of this prospectus).
EXCESSIVE TRADING The fund is intended for long-term investment purposes only
and does not knowingly accept shareholders who engage in "market timing" or
other types of excessive short-term trading. Short-term trading into and out of
a fund can disrupt portfolio investment strategies and may increase fund
expenses for all shareholders, including long-term shareholders who do not
generate these costs.
RIGHT TO REJECT OR RESTRICT PURCHASE AND EXCHANGE ORDERS
Purchases and exchanges should be made primarily for investment purposes. The
fund reserves the right to restrict, reject or cancel, consistent with
applicable law, for any reason and without any prior notice, any purchase or
exchange order, including transactions representing excessive trading and
transactions accepted by any shareholder's financial intermediary. For example,
the fund may in its discretion restrict, reject or cancel a purchase or exchange
order even if the transaction is not subject to the specific "Limitations on
exchange activity" described below if the fund or its agents determine that
accepting the order could interfere with the efficient management of the fund's
portfolio or otherwise not be in the fund's best interest in light of unusual
trading activity related to your account. In the event that the fund rejects or
cancels an exchange request, neither the redemption nor the purchase side of the
exchange will be processed. If you would like the redemption request to be
processed even if the purchase order is rejected, you should submit separate
redemption and purchase orders rather than placing an exchange order. The fund
reserves the right to delay for up to one business day, consistent with
applicable law, the processing of exchange requests in the event that, in the
fund's judgment, such delay would be in the fund's best interest, in which case
both the redemption and purchase side of the exchange will receive the fund's
net asset values at the conclusion of the delay period. The fund, through its
agents in their sole discretion, may impose these remedial actions at the
account holder level or the underlying shareholder level.
EXCHANGE LIMITATION POLICIES The fund's Board of Trustees has adopted the
following policies and procedures by which the fund, subject to the limitations
described below, take steps reasonably designed to curtail excessive trading
practices.
LIMITATIONS ON EXCHANGE ACTIVITY The fund, through its agents, undertakes to use
its best efforts to exercise the fund's right to restrict, reject or cancel
purchase and exchange orders, as described above, if an account holder, who
purchases or exchanges into a fund account in an amount of $5,000 or more,
exchanges $1,000 or more out of that fund account within 30 calendar days on
three occasions during any 12-month period. Nothing in this paragraph limits the
right of the fund to refuse any purchase or exchange order, as discussed above
under "Right to reject or restrict purchase and exchange orders".
12 YOUR ACCOUNT
Exchanges made on the same day in the same account are aggregated for purposes
of counting the number and dollar amount of exchanges made by the account
holder. The exchange limits referenced above will not be imposed or may be
modified under certain circumstances. For example: these exchange limits may be
modified for accounts held by certain retirement plans to conform to plan
exchange limits, ERISA considerations or Department of Labor regulations.
Certain automated or pre-established exchange, asset allocation and dollar cost
averaging programs are not subject to these exchange limits. These programs are
excluded from the exchange limitation since the fund believes that they are
advantageous to shareholders and do not offer an effective means for market
timing or excessive trading strategies. These investment tools involve regular
and predetermined purchase or redemption requests made well in advance of any
knowledge of events effecting the market on the date of the purchase or
redemption.
These exchange limits are subject to the fund's ability to monitor exchange
activity, as discussed under "Limitations on the ability to detect and curtail
excessive trading practices" below. Depending upon the composition of the fund's
shareholder accounts and in light of the limitations on the ability of the fund
to detect and curtail excessive trading practices, a significant percentage of a
fund's shareholders may not be subject to the exchange limitation policy
described above. In applying the exchange limitation policy, the fund considers
information available to it at the time and reserves the right to consider
trading activity in a single account or multiple accounts under common
ownership, control or influence.
LIMITATION ON THE ABILITY TO DETECT AND CURTAIL EXCESSIVE TRADING PRACTICES
Shareholders seeking to engage in excessive trading practices sometimes deploy a
variety of strategies to avoid detection, and, despite the efforts of the fund
to prevent its excessive trading, there is no guarantee that the fund or its
agents will be able to identify such shareholders or curtail their trading
practices. The ability of the fund and its agents to detect and curtail
excessive trading practices may also be limited by operational systems and
technological limitations. Because the fund will not always be able to detect
frequent trading activity, investors should not assume that the fund will be
able to detect or prevent all frequent trading or other practices that
disadvantage the funds. For example, the ability of the fund to monitor trades
that are placed by omnibus or other nominee accounts is severely limited in
those instances in which the financial intermediary, including a financial
adviser, broker, retirement plan administrator or fee-based program sponsor,
maintains the record of the fund's underlying beneficial owners. Omnibus or
other nominee account arrangements are common forms of holding shares of the
fund, particularly among certain financial intermediaries such as financial
advisers, brokers, retirement plan administrators or fee-based program sponsors.
These arrangements often permit the financial intermediary to aggregate their
clients' transactions and ownership positions and do not identify the particular
underlying shareholder(s) to the fund.
EXCESSIVE TRADING RISK To the extent that the fund or its agents are unable to
curtail excessive trading practices in the fund, these practices may interfere
with the efficient management of the fund's portfolio, and may result in the
fund engaging in certain activities to a greater extent than it otherwise would,
such as maintaining higher cash balances, using its line of credit and engaging
in portfolio transactions. Increased portfolio transactions and use of the line
of credit would correspondingly increase the fund's operating costs and decrease
the fund's investment performance, and maintenance of higher levels of cash
balances would likewise result in lower fund investment performance during
periods of rising markets.
While excessive trading can potentially occur in any fund, certain types of
funds are more likely than others to be targets of excessive trading. For
example: A fund that invests a material portion of its assets in securities of
non-U.S. issuers may be a potential target for excessive trading if investors
seek to engage in price arbitrage based upon general trends in the securities
markets that occur subsequent to the close of the primary market for such
securities.
ACCOUNT INFORMATION John Hancock Funds is required by law to obtain information
for verifying an account holder's identity. For example, an individual will be
required to supply name, address, date of birth and social security number. If
you do not provide the required information, we may not be able to open your
account. If verification is unsuccessful, John Hancock Funds may close your
account, redeem your shares at the next NAV and take any other steps that it
deems reasonable.
CERTIFICATED SHARES The fund does not issue share certificates. Shares are
electronically recorded.
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.
YOUR ACCOUNT 13
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
o after every transaction (except a dividend reinvestment automatic
investment or systematic withdrawal) 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 generally distributes most or all of its net earnings
annually in the form of dividends. The fund declares and pays any income
dividends annually. Capital gains, if any, are typically 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 and capital gains in the amount of more than $10 mailed to you.
However, if the check is not deliverable or the combined dividend and capital
gains amount is $10 or less, your proceeds will be reinvested. If five or more
of your dividend or capital gains checks remain uncashed after 180 days, all
subsequent dividends and capital gains will be reinvested.
TAXABILITY OF DIVIDENDS Dividends you receive from a fund, whether reinvested or
taken as cash, are generally considered taxable. Dividends from the fund's
long-term capital gains are taxable as capital gains; dividends from the fund's
income and short-term capital gains are generally taxable as ordinary income.
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 or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
SMALL ACCOUNTS (NON-RETIREMENT ONLY) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, your fund may charge you $20 a
year to maintain your account. You will not be charged a CDSC if your account is
closed for this reason. Your account will not be closed or charged this fee if
its drop in value is due to fund performance or the effects of sales charges. If
your account balance is $100 or less and no action is taken, the account will be
liquidated.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
MAAP lets you set up regular investments from your paycheck or bank account to
the John Hancock fund(s) of your choice. You determine the frequency and amount
of your investments, and you can terminate your program at any time. To
establish:
o Complete the appropriate parts of your account application.
o If you are using MAAP to open an account, make out a check ($25 minimum)
for your first investment amount payable to "John Hancock Signature
Services, Inc." Deliver your check and application to your financial
representative or Signature Services.
SYSTEMATIC WITHDRAWAL PLAN This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account (buying
shares during a period when you are also selling shares of the same fund is
not advantageous to you, because of sales charges).
o Specify the payee(s). The payee may be yourself or any other party, and
there is no limit to the number of payees you may have, as long as they are
all on the same payment schedule.
o Determine the schedule: monthly, quarterly, semiannually, annually or in
certain selected months.
o Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial
representative or Signature Services.
RETIREMENT PLANS John Hancock Funds offers a range of retirement plans,
including traditional and Roth IRAs, Coverdell ESAs, SIMPLE plans and SEPs.
Using these plans, you can invest in any John Hancock fund (except tax-free
income funds) with a low minimum investment of $500 or, for some group plans, no
minimum investment at all. To find out more, call Signature Services at
1-800-225-5291.
FUND SECURITIES The funds' portfolio securities disclosure policy can be found
in the Statement of Additional Information and on the funds' Web site,
www.jhfunds.com. The funds' Web site also lists fund holdings.
14 YOUR ACCOUNT
FUND DETAILS
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
The diagram below shows the basic business structure used by the fund. The
fund's 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 the fund's policy of investing at least
80% of its assets in large-capitalization companies without shareholder
approval. The fund will provide shareholders with written notice at least 60
days prior to a change in this 80% policy.
THE MANAGEMENT FIRM The fund is managed by John Hancock Advisers, LLC. Founded
in 1968, John Hancock Advisers is a wholly owned subsidiary of John Hancock
Financial Services, Inc. and managed approximately $29 billion in assets as of
September 30, 2004.
MANAGEMENT FEE For the fiscal year ended October 31, 2004, the fund paid the
investment adviser a management fee at an annual rate of 0.75% of the fund's
average net assets.
[CHART]
FUND DETAILS 15
FINANCIAL HIGHLIGHTS
These tables detail the performance of the fund's share classes, including total
return information showing how much an investment in the fund has increased or
decreased each year.
LARGE CAP GROWTH FUND
FIGURES FOR THE YEAR ENDED 10-31-03 AND 10-31-04 WERE AUDITED BY
PRICEWATERHOUSECOOPERS LLP.
CLASS A SHARES PERIOD ENDED: 10-31-00(1) 10-31-01(1) 10-31-02(1) 10-31-03 10-31-04
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.04 $ 20.73 $ 10.38 $ 8.14 $ 9.54
Net investment loss(2) (0.23) (0.13) (0.10) (0.07) (0.08)
Net realized and unrealized gain (loss) on investments (1.48) (9.42) (2.14) 1.47 (0.21)
TOTAL FROM INVESTMENT OPERATIONS (1.71) (9.55) (2.24) 1.40 (0.29)
LESS DISTRIBUTIONS
From net realized gain (2.60) (0.80) -- -- --
NET ASSET VALUE, END OF PERIOD $ 20.73 $ 10.38 $ 8.14 $ 9.54 $ 9.25
TOTAL RETURN(3) (%) (8.15) (47.77) (21.58) 17.20(4) (3.04)(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 421 $ 209 $ 140 $ 148 $ 132
Ratio of expenses to average net assets (%) 1.36 1.59 1.75 1.86 1.71
Ratio of adjusted expenses to average net assets(5) (%) -- -- -- 1.87 1.75
Ratio of net investment loss to average net assets (%) (0.97) (0.99) (0.96) (0.82) (0.83)
Portfolio turnover (%) 162 131 228 121 96
CLASS B SHARES PERIOD ENDED: 10-31-00(1) 10-31-01(1) 10-31-02(1) 10-31-03 10-31-04
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 23.74 $ 19.40 $ 9.62 $ 7.49 $ 8.72
Net investment loss(2) (0.37) (0.21) (0.15) (0.12) (0.13)
Net realized and unrealized gain (loss) on investments (1.37) (8.77) (1.98) 1.35 (0.20)
TOTAL FROM INVESTMENT OPERATIONS (1.74) (8.98) (2.13) 1.23 (0.33)
LESS DISTRIBUTIONS
From net realized gain (2.60) (0.80) -- -- --
NET ASSET VALUE, END OF PERIOD $ 19.40 $ 9.62 $ 7.49 $ 8.72 $ 8.39
TOTAL RETURN(3)(%) (8.79) (48.12) (22.14) 16.42(4) (3.78)(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 239 $ 88 $ 51 $ 50 $ 36
Ratio of expenses to average net assets (%) 2.05 2.24 2.45 2.56 2.41
Ratio of adjusted expenses to average net assets(5)(%) -- -- -- 2.57 2.45
Ratio of net investment loss to average net assets (%) (1.66) (1.65) (1.66) (1.52) (1.53)
Portfolio turnover (%) 162 131 228 121 96
CLASS C SHARES PERIOD ENDED: 10-31-00(1) 10-31-01(1) 10-31-02(1) 10-31-03 10-31-04
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 23.73 $ 19.39 $ 9.61 $ 7.49 $ 8.71
Net investment loss(2) (0.37) (0.20) (0.15) (0.12) (0.31)
Net realized and unrealized gain (loss) on investments (1.37) (8.78) (1.97) 1.34 (0.19)
TOTAL FROM INVESTMENT OPERATIONS (1.74) (8.98) (2.12) 1.22 (0.32)
LESS DISTRIBUTIONS
From net realized gain (2.60) (0.80) -- -- --
NET ASSET VALUE, END OF PERIOD $ 19.39 $ 9.61 $ 7.49 $ 8.71 $ 8.39
TOTAL RETURN(3)(%) (8.80) (48.15) (22.06) 16.29(4) (3.67)(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 3 $ 4 $ 3 $ 4 $ 3
Ratio of expenses to average net assets (%) 2.06 2.29 2.45 2.56 2.41
Ratio of adjusted expenses to average net assets(5)(%) -- -- -- 2.57 2.45
Ratio of net investment loss to average net assets (%) (1.71) (1.68) (1.66) (1.53) (1.53)
Portfolio turnover (%) 162 131 228 121 96
(1) AUDITED BY PREVIOUS AUDITOR.
(2) BASED ON THE AVERAGE OF THE SHARES OUTSTANDING.
(3) ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES
CHARGES.
(4) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
(5) DOES NOT TAKE INTO CONSIDERATION EXPENSE REDUCTIONS DURING THE PERIODS
SHOWN.
================================================================================
THE FOLLOWING RETURNS ARE NOT AUDITED AND ARE NOT PART OF THE AUDITED FINANCIAL
HIGHLIGHTS PRESENTED ABOVE:
WITHOUT THE EXPENSE REDUCTIONS, RETURNS FOR THE YEARS ENDED OCTOBER 31, 2003 AND
2004 FOR CLASS A SHARES WOULD HAVE BEEN 17.19% AND (3.00%), FOR CLASS B SHARES
16.41% AND (3.74%) AND FOR CLASS C SHARES 16.28% AND (3.73%) RESPECTIVELY.
16 FUND DETAILS
For more information
Two documents are available that offer further information on the John Hancock
Large Cap Growth 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
auditors' 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. The fund's SAI includes a summary
of the fund's policy regarding disclosure of its portfolio holdings. 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: 1-800-554-6713
On the Internet: www.jhfunds.com
OR YOU MAY VIEW OR OBTAIN THESE DOCUMENTS FROM THE SEC:
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
In person: at the SEC's Public Reference Room in Washington, DC.
For access to the Reference Room call 1-202-942-8090
By electronic request: publicinfo@sec.gov
(duplicating fee required)
On the Internet: www.sec.gov
(C)2005 JOHN HANCOCK FUNDS, LLC 200PN 1/05
[JOHN HANCOCK(R) LOGO]
JOHN HANCOCK FUNDS, LLC
MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603
www.jhfunds.com
John Hancock Large Cap Growth Fund
SUPPLEMENT TO THE STATEMENT OF ADDITIONAL INFORMATION
Dated March 1, 2004 as revised July 15, 2004
The section "Those Responsible for Management" in the Statement of Additional
Information has been deleted and replace with the following:
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its Trustees, including certain Trustees
who are not "interested persons" of the Fund or the Trust (as defined by the
Investment Company Act of 1940) (the "Independent 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 Adviser, or officers and Directors of
the Fund's principal distributor, John Hancock Funds, LLC (prior to February 1,
2002, John Hancock Funds, Inc.) ("John Hancock Funds").
- -------------------------------------------------------------------------------------------------------------------------
Number of
John Hancock
Position(s) Trustee/ Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Charles L. Ladner Chairman 2004 Chairman and Trustee, Dunwoody Village, Inc. 49
Born: 1938 and Trustee (retirement services) (until 2003); Senior Vice
President and Chief Financial Officer, UGI
Corporation (public utility holding company)
(retired 1998); Vice President and Director
for AmeriGas, Inc. (retired 1998); Director
of AmeriGas Partners, L.P. (until 1997)(gas
distribution); Director, EnergyNorth, Inc.
(until 1995); Director, Parks and History
Association (since 2001).
- -------------------------------------------------------------------------------------------------------------------------
James F. Carlin Trustee 2005 Director and Treasurer, Alpha Analytical 47
Born: 1940 Laboratories (chemical analysis); Part Owner and
Treasurer, Lawrence Carlin Insurance Agency, Inc.
(since 1995); Part Owner and Vice President, Mone
Lawrence Carlin Insurance Agency, Inc. (since
1996); Director/Treasurer, Rizzo Associates (until
2000); Chairman and CEO, Carlin Consolidated, Inc.
(management/investments); Director/Partner, Proctor
Carlin & Co., Inc. (until 1999); Trustee,
Massachusetts Health and Education Tax Exempt
Trust; Director of the following: Uno Restaurant
Corp. (until 2001), Arbella Mutual (insurance)
(until 2000), HealthPlan Services, Inc. (until
1999), Flagship Healthcare, Inc. (until 1999),
Carlin Insurance Agency, Inc. (until 1999);
Chairman, Massachusetts Board of Higher Education
(until 1999).
- -------------------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. Trustee 1978 President and Chief Executive Officer, Brookline 39
Born: 1935 Bancorp., Inc. (lending) (since 1972); Chairman and
Director, Lumber Insurance Co. (insurance) (until
2000); Chairman and Director, Northeast Retirement
Services, Inc. (retirement administration) (since
1998).
- -------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
- -------------------------------------------------------------------------------------------------------------------------
Number of
John Hancock
Position(s) Trustee/ Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Overseen by
And Age Fund since(2) Directorships During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------
William J. Cosgrove Trustee 1991 Vice President, Senior Banker and Senior Credit 39
Born: 1933 Officer, Citibank, N.A. (banking) (retired 1991);
Executive Vice President, Citadel Group
Representatives, Inc.; (financial reinsurance);
Director, Hudson City Savings Bank (since 1995);
Director, Hudson City Bancorp (banking); Trustee,
Scholarship Fund for Inner City Children (since
1986).
- -------------------------------------------------------------------------------------------------------------------------
William H. Cunningham Trustee 2005 Former Chancellor, University of Texas System and 47
Born: 1944 former President of the University of Texas,
Austin, Texas; Chairman and CEO, IBT
Technologies (until 2001); Director of the
following: The University of Texas Investment
Management Company (until 2000), Hire.com
(until 2004), STC Broadcasting, Inc. and
Sunrise Television Corp. (until 2001), Symtx,
Inc. (electronic manufacturing) (since 2001),
Adorno/Rogers Technology, Inc. (until 2004),
Pinnacle Foods Corporation (until 2003),
rateGenius (since 2001), Jefferson-Pilot
Corporation (diversified life insurance
company), New Century Equity Holdings
(formerly Billing Concepts) (until 2001),
eCertain (until 2001), ClassMap.com (until
2001), Agile Ventures (until 2001), LBJ
Foundation (until 2000), Golfsmith
International, Inc. (until 2000), Metamor
Worldwide (until 2000), AskRed.com (until
2001), Southwest Airlines (since 2000) and
Introgen (since 2000); Advisory Director, Q
Investments (until 2003); Advisory Director,
Chase Bank (formerly Texas Commerce Bank -
Austin) (since 1988), LIN Television (since
2002) and WilTel Communications (until 2003)
and Hayes Lemmerz International, Inc.
(diversified automobile parts supply company)
(since 2003).
- -------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
- -------------------------------------------------------------------------------------------------------------------------
Number of
John Hancock
Position(s) Trustee/ Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Overseen by
And Age Fund since(2) Directorships During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------
Ronald R. Dion Trustee 2005 Chairman and Chief Executive Officer, R.M. Bradley 47
Born: 1946 & Co., Inc.; Director, The New England Council and
Massachusetts Roundtable; Director, Boston Stock
Exchange; Trustee, North Shore Medical Center;
Director, BJ's Wholesale Club, Inc. and a
corporator of the Eastern Bank; Trustee, Emmanuel
College.
- -------------------------------------------------------------------------------------------------------------------------
John A. Moore Trustee 1996 President and Chief Executive Officer, Institute 49
Born: 1939 for Evaluating Health Risks, (nonprofit
institution) (until 2001); Chief Scientist,
Sciences International (health
research)(since 1998); Principal, Hollyhouse
(consulting)(since 2000); Director,
CIIT(nonprofit research) (since 2002).
- -------------------------------------------------------------------------------------------------------------------------
Patti McGill Peterson Trustee 1996 Executive Director, Council for International 49
Born: 1943 Exchange of Scholars and Vice President, Institute
of International Education (since 1998);
Senior Fellow, Cornell Institute of Public
Affairs, Cornell University (until 1998);
Former President of Wells College and St.
Lawrence University; Director, Niagara Mohawk
Power Corporation (until 2003); Director,
Ford Foundation, International Fellowships
Program (since 2002); Director, Lois Roth
Endowment (since 2002); Director, Council for
International Educational Exchange (since
2003).
- -------------------------------------------------------------------------------------------------------------------------
Steven Pruchansky Trustee 2005 Chairman and Chief Executive Officer, Mast 47
Born: 1944 Holdings, Inc. (since 2000); Director and
President, Mast Holdings, Inc. (until 2000);
Managing Director, JonJames, LLC (real
estate)(since 2001); Director, First Signature Bank
& Trust Company (until 1991); Director, Mast Realty
Trust (until 1994); President, Maxwell Building
Corp. (until 1991).
- -------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
- -------------------------------------------------------------------------------------------------------------------------
Number of
John Hancock
Position(s) Trustee/ Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------
Norman H. Smith Trustee 2005 Lieutenant General, United States Marine Corps; 47
Born: 1933 Deputy Chief to Staff for Manpower and Reserve
Affairs, Headquarters Marine Corps; Commanding
General III Marine Expeditionary Force/3rd Marine
Division (retired 1991).
- -------------------------------------------------------------------------------------------------------------------------
Non-Independent Trustee
- -------------------------------------------------------------------------------------------------------------------------
James A. Shepherdson (3) Trustee, 2004 Executive Vice President, Manulife Financial 49
Born: 1952 President Corporation (since 2004); Chairman, Director,
and Chief President and Chief Executive Officer, John
Executive Hancock Advisers, LLC (the "Adviser") and The
Officer Berkeley Financial Group, LLC ("The Berkeley
Group"); Chairman, Director, President and
Chief Executive Officer, John Hancock Funds,
LLC. ("John Hancock Funds"); Chairman,
Director, President and Chief Executive
Officer, Sovereign Asset Management
Corporation ("SAMCorp."); Director, Chairman
and President, NM Capital Management, Inc.
("NM Capital"); President, John Hancock
Retirement Services, John Hancock Life
Insurance Company (until 2004); Chairman,
Essex Corporation (until 2004); Co-Chief
Executive Officer MetLife Investors Group
(until 2003); Senior Vice President,
AXA/Equitable Insurance Company (until 2000).
- -------------------------------------------------------------------------------------------------------------------------
Principal Officers who
are not Trustees
- -------------------------------------------------------------------------------------------------------------------------
William H. King Vice 1988 Vice President and Assistant Treasurer, the N/A
Born: 1952 President Adviser; Vice President and Treasurer of each of
and Treasurer the John Hancock funds; Assistant Treasurer of
each of the John Hancock funds (until 2001).
- -------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
- -------------------------------------------------------------------------------------------------------------------------
Number of
John Hancock
Position(s) Trustee/ Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------
Susan S. Newton Senior Vice 1984 Senior Vice President, Secretary and Chief N/A
Born: 1950 President, Legal Officer, SAMCorp., the Adviser and each
Secretary of the John Hancock funds, John Hancock Funds
and Chief and The Berkeley Group; Vice President,
Legal Officer Signature Services (until 2000), Director,
Senior Vice President and Secretary, NM
Capital.
- -------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
The Fund's Board of Trustees currently has four standing Committees: the Audit
Committee, the Administration Committee, the Contracts/Operations Committee and
the Investment Performance Committee. Each Committee is comprised of Independent
Trustees, who are not "interested persons".
The Audit Committee members are Messrs. Chapman, Ladner, Moore and Ms. McGill
Peterson. All of the members of the Audit Committee are independent under the
New York Stock Exchange's Revised Listing Rules, and each member is financially
literate with at least one having accounting or financial management expertise.
The Board has adopted a written charter for the Audit Committee. The Audit
Committee recommends to the full board auditors for the Fund, monitors and
oversees the audits of the Fund, communicates with both independent auditors and
internal auditors on a regular basis and provides a forum for the auditors to
report and discuss any matters they deem appropriate at any time. The Audit
Committee held four meetings during the fiscal year ended October 31, 2004.
The Administration Committee members are all of the independent Trustees. The
Administration Committee reviews the activities of the other four standing
committees and makes the final selection and nomination of candidates to serve
as Independent Trustees. All members of the Administration Committee are
independent under the New York Stock Exchange's Revised Listing Rules and are
not interested persons, as defined in the 1940 Act, of John Hancock or the Fund
(the "Independent Trustees"). Among other things, the Administration Committee
acts as a nominating committee of the Board. The Trustees who are not
Independent Trustees and the officers of the Fund are nominated and selected by
the Board. The Administration Committee does not have at this time formal
criteria for the qualifications of candidates to serve as an Independent
Trustee, although the Administration Committee may develop them in the future.
In reviewing a potential nominee and in evaluating the renomination of current
Independent Trustees, the Administration Committee expects to apply the
following criteria: (i) the nominee's reputation for integrity, honesty and
adherence to high ethical standards, (ii) the nominee's business acumen,
experience and ability to exercise sound judgments, (iii) a commitment to
understand the Fund and the responsibilities of a trustee of an investment
company, (iv) a commitment to regularly attend and participate in meetings of
the Board and its committees, (v) the ability to understand potential conflicts
of interest involving management of the Fund and to act in the interests of all
shareholders, and (vi) the absence of a real or apparent conflict of interest
that would impair the nominee's ability to represent the interests of all the
shareholders and to fulfill the responsibilities of an Independent Trustee. The
Administration Committee does not necessarily place the same emphasis on each
criteria and each nominee may not have each of these qualities. The
Administration Committee does not discriminate on the basis of race, religion,
national origin, sex, sexual orientation, disability or any other basis
proscribed by law. The Administration Committee held four meetings during the
fiscal year ended October 31, 2004.
As long as an existing Independent Trustee continues, in the opinion of the
Administration Committee, to satisfy these criteria, the Fund anticipates that
the Committee would favor the renomination of an existing Trustee rather than a
new candidate. Consequently, while the Administration Committee will consider
nominees recommended by shareholders to serve as trustees, the Administration
Committee may only act upon such recommendations if there is a vacancy on the
Board or the Administration Committee determines that the selection of a new or
additional Independent Trustee is in the best interests of the Fund. In the
event that a vacancy arises or a change in Board membership is determined to be
advisable, the Administration Committee will, in addition to any shareholder
recommendations, consider candidates identified by other means, including
candidates proposed by members of the Administration Committee. While it has not
done so in the past, the Administration Committee may retain a consultant to
assist the Committee in a search for a qualified candidate.
Any shareholder recommendation must be submitted in compliance with all of the
pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, to be considered by the Administration Committee. In evaluating a
nominee recommended by a shareholder, the Administration Committee, in addition
to the criteria discussed above, may consider the objectives of the shareholder
in submitting that nomination and whether such objectives are consistent with
the interests of all shareholders. If the Board determines to include a
shareholder's candidate among the slate of nominees, the candidate's name will
be placed on the Fund's proxy card. If the Administration Committee or the Board
determines not to include such candidate among the Board's designated nominees
and the shareholder has satisfied the requirements of Rule 14a-8, the
shareholder's candidate will be treated as a nominee of the shareholder who
originally nominated the candidate. In that case, the candidate will not be
named on the proxy card distributed with the Fund's proxy statement.
Shareholders may communicate with the members of the Board as a group or
individually. Any such communication should be sent to the Board or an
individual Trustee c/o the Secretary of the Fund at the following address: 101
Huntington Avenue, Boston, MA 02199-7603. The Secretary may determine not to
forward any letter to the members of the Board that does not relate to the
business of the Fund.
The Contracts/Operations Committee members are Messrs. Carlin, Dion, Pruchansky
and Smith. The Contracts/Operations Committee oversees the initiation,
operation, and renewal of contracts between the Fund and other entities. These
contracts include advisory and subadvisory agreements (if applicable), custodial
and transfer agency agreements and arrangements with other service providers.
The Contracts/Operations Committee held five meetings during the fiscal year
ended October 31, 2004.
The Investment Performance Committee members are all of the Independent
Trustees. The Investment Performance Committee monitors and analyzes the
performance of the Fund generally, consults with the adviser as necessary if the
Fund requires special attention, and reviews peer groups and other comparative
standards as necessary. The Investment Performance Committee held four meetings
during the fiscal year ended October 31, 2004.
The following table provides a dollar range indicating each Trustee's ownership
of equity securities of the Fund, as well as aggregate holdings of shares of
equity securities of all John Hancock Funds overseen by the Trustee, as of
December 31, 2003.
- -------------------------------------------------------------------------------------------------------------
Name of Trustee Dollar Range of Fund Aggregate Dollar Range of holdings in John
shares Owned by Hancock funds overseen by Trustee
Trustee
- -------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------
James F. Carlin $1-10,000 Over $100,000
- -------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr.* $50,001-100,000 Over $100,000
- -------------------------------------------------------------------------------------------------------------
William J. Cosgrove $1-10,000 Over $100,000
- -------------------------------------------------------------------------------------------------------------
William H. Cunningham $10,001-50,000 $10,001-$50,000
- -------------------------------------------------------------------------------------------------------------
Ronald R. Dion none Over $100,000
- -------------------------------------------------------------------------------------------------------------
Charles L. Ladner** $1-10,000 Over $100,000
- -------------------------------------------------------------------------------------------------------------
Dr. John A. Moore* $1-10,000 Over $100,000
- -------------------------------------------------------------------------------------------------------------
Patti McGill Peterson* $10,001-50,000 Over $100,000
- -------------------------------------------------------------------------------------------------------------
Steven Pruchansky none Over $100,000
- -------------------------------------------------------------------------------------------------------------
Norman H. Smith* none Over $100,000
- -------------------------------------------------------------------------------------------------------------
Non-Independent Trustee
- -------------------------------------------------------------------------------------------------------------
James A. Shepherdson** $1-10,000 $10,001-50,000
- -------------------------------------------------------------------------------------------------------------
(1) This Fund does participate in the John Hancock Deferred Compensation Plan
for Independent Trustees (the "Plan"). Under the Plan, an Independent Trustee
may elect to earn a return on his deferred fees equal to the amount that he
would have earned if the deferred fees amount were invested in one or more funds
in the John Hancock fund complex. Under these circumstances, a trustee is not
the legal owner of the underlying shares, but participates in any positive or
negative return on those shares to the same extent as other shareholders. If the
Trustees were deemed to own the shares used in computing the value of his
deferred compensation, as of December 31, 2003, the respective "Dollar Range of
Fund Shares Owned by Trustee" and the "Aggregate Dollar Range of holdings in
John Hancock funds overseen by Trustee" would be as follows: $50,001-100,000 and
over $100,000 for Mr. Chapman, $1-10,000 and over $100,000 for Mr. Cosgrove,
$10,001-50,000 and over $100,000 for Mr. Cunningham, none and over $100,000 for
Mr. Dion, $1-10,000 and over $100,000 for Mr. Moore, none and over $100,000 for
Mr. Pruchansky, none and over $100,000 for Mr. Smith.
*Messrs. Carlin, Cunningham, Dion and Pruchansky were elected to the Board by
shareholders on December 1, 2004 effective January 1, 2005. Mr. Smith was
appointed to the Board by the Trustees on December 14, 2004 effective January 1,
2005.
** Mr. Shepherdson was appointed Trustee of the John Hancock Funds as of May 12,
2004. As of June 16, 2004, the Independent Trustees elected Charles L. Ladner as
a Trustee of the Fund and Independent Chairman of the Board.
The following tables provide 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. Any Non-Independent Trustee and each of
the officers of the Fund are interested persons of the Adviser, and/or
affiliates are compensated by the Adviser and received no compensation from the
Fund for their services.
Total Compensation From
Aggregate Compensation the Fund and John Hancock Fund
Independent Trustees from the Fund (1) Complex to Trustees (2)
- -------------------- ---------------- -----------------------
Dennis J. Aronowitz+ $ 1,415 $ 72,250
James F. Carlin++ 0 76,250
Richard P. Chapman* 1,564 79,000
William J. Cosgrove* 1,559 79,500
William H. Cunningham*++ 0 74,250
Ronald R. Dion*++ 0 77,250
Richard A. Farrell+ 1,554 79,250
William F. Glavin*+ 1,470 74,250
Charles L. Ladner+++ 0 78,000
Dr. John A. Moore* 1,144 74,000
Patti McGill Peterson 1,083 72,750
John Pratt+ 1,499 76,500
Steven R. Pruchansky*++ 0 79,250
Norman H. Smith*++ 0 77,750
------- ----------
Total $11,288 $1,070,250
(1) Compensation is for the fiscal year ended October 31, 2003.
(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 2003. As of this date, there were fifty-one funds
in the John Hancock Fund Complex: Messrs. Aronowitz, Chapman, Cosgrove,,
Farrell, Glavin and Pratt serving on twenty-one funds; Messrs. Carlin,
Cunningham, Dion, Ladner, Pruchansky and Smith serving on thirty funds; Dr.
Moore and Ms. McGill Peterson serving on twenty-nine funds.
*As of December 31, 2003, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $63,573, Mr. Cosgrove was $210,257, Mr. Cunningham was $563,218, Mr.
Dion was $193,220, Mr. Glavin was $306,646, Dr. Moore was $248,464, Mr.
Pruchansky was $150,981 and Mr. Smith was $276,224 under the John Hancock Group
of Funds Deferred Compensation Plan for Independent Trustees (the "Plan").
+Messrs. Aronowitz, Farrell, Glavin and Pratt retired as of December 31, 2004.
++ Messrs. Carlin, Cunningham, Dion and Pruchansky each became a Trustee and
were elected to the Board by shareholders on December 1, 2004 effective January
1, 2005. Mr. Smith was appointed to the Board by the Trustees on December 14,
2004 effective January 1, 2005.
+++ As of June 16, 2004, the Independent Trustees elected Charles L. Ladner as a
Trustee of the Fund and Independent Chairman of the Board.
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 or
Trustees of one or more of the other funds for which the Adviser serves as
investment adviser.
As of February 3, 2004, the officers and Trustees of the Fund as a group
beneficially owned les than 1% of the outstanding shares of the Fund. As of that
date, the following shareholders beneficially owned 5% or more of the
outstanding shares of the Fund.
Name and Address of Owners of More Class A Class B Class C
than 5% of Shares
MLPF&S For The Sole -- 7.80% --
Benefit of Its Customers
Attn Fund Administration
4800 Deer Lake Drive East 2nd Fl
Jacksonville FL 32246-6484
Citigroup Global Markets, Inc. -- -- 7.04%
00109801250
Attn: Cindy Tempesta, 7th Fl
333 West 34th Street
New York, NY 10001-2402
January 4, 2005
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Balanced Fund John Hancock Massachusetts Tax-Free Income Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Biotechnology Fund John Hancock Mid Cap Growth Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock California Tax-Free Income Fund John Hancock Money Market Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Classic Value Fund John Hancock Multi Cap Growth Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Core Equity Fund John Hancock New York Tax-Free Income Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Financial Industries Fund John Hancock Real Estate Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Focused Equity Fund John Hancock Regional Bank Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Growth Trends Fund John Hancock Small Cap Equity Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Health Sciences Fund John Hancock Small Cap Growth Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock High Yield Municipal Bond Fund John Hancock Sovereign Investors Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Independence Diversified Core Equity John Hancock Tax-Free Bond Fund
Fund II
- ----------------------------------------------------- -------------------------------------------------------
John Hancock International Fund John Hancock Technology Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Large Cap Equity Fund John Hancock U.S. Global Leaders Growth Fund
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Large Cap Growth Fund John Hancock U.S. Government Cash Reserve
- ----------------------------------------------------- -------------------------------------------------------
John Hancock Large Cap Select Fund
- ----------------------------------------------------- -------------------------------------------------------
Supplement to Current Statement of Additional Information
Description of the Fund's Shares
The last paragraph in the "Description of the Fund's Shares" section has been
deleted and replaced with the following:
"Shares of the Fund generally may be sold only to U.S. citizens, U.S. residents,
and U.S. domestic corporations, partnerships, trusts or estates."
October 1, 2004
MFSAIS 10/04
JOHN HANCOCK LARGE CAP GROWTH FUND
Class A, Class B and Class C Shares
Statement of Additional Information
March 1, 2004 as revised July 15, 2004
This Statement of Additional Information provides information about John Hancock
Large Cap Growth Fund (the "Fund") in addition to the information that is
contained in the combined Equity Funds' current Prospectus (the "Prospectus").
The Fund is a diversified series of John Hancock Investment Trust III (the
"Trust").
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus. This Statement of Additional Information
incorporates by reference the Fund's Annual Report. A copy of the Prospectus or
Annual Report 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 ................................................... 14
Those Responsible for Management .......................................... 17
Investment Advisory and Other Services .................................... 26
Distribution Contracts .................................................... 29
Sales Compensation ........................................................ 31
Net Asset Value ........................................................... 34
Initial Sales Charge on Class A Shares .................................... 34
Deferred Sales Charge on Class B and Class C Shares ....................... 38
Special Redemptions ....................................................... 42
Additional Services and Programs .......................................... 42
Purchases and Redemptions Through Third Parties ........................... 44
Description of the Fund's Shares .......................................... 44
Tax Status ................................................................ 46
Calculation of Performance ................................................ 51
Brokerage Allocation ...................................................... 54
Transfer Agent Services .................................................. 57
Custody of Portfolio ...................................................... 58
Independent Auditors ...................................................... 58
Fund Securities ........................................................... 58
Appendix A- Description of Investment Risk ................................ A-1
Appendix B-Description of Bond Ratings .................................... B-1
Appendix C-Proxy Voting Summary ........................................... C-1
Financial Statements ...................................................... F-1
1
ORGANIZATION OF THE FUND
The Fund is a series of the Trust, an open-end investment management company
organized as a Massachusetts business trust in 1984 under the laws of The
Commonwealth of Massachusetts. Prior to July 1996, the Fund was a series of John
Hancock Capital Series. Prior to June 1, 1999, the Fund was called John Hancock
Growth Fund.
John Hancock Advisers, LLC (prior to February 1, 2002, John Hancock Advisers,
Inc.) (the "Adviser") is the Fund's investment adviser. The Adviser is a wholly
owned subsidiary of John Hancock Financial Services, Inc., a subsidiary of
Manulife Financial Corporation ("Manulife Financial"). Founded in 1862, John
Hancock Financial Services and its subsidiaries today offer a broad range of
financial products and services, including whole, term, variable, and universal
life insurance, as well as college savings products, mutual funds, fixed and
variable annuities, long-term care insurance and various forms of business
insurance.
Manulife Financial, is the fifth largest life insurer in the world, and the
second largest in North America, based on market capitalization as of April 27,
2004. Manulife Financial is a leading Canadian-based financial services group
serving millions of customers in 19 countries and territories worldwide. Pro
forma funds under management by Manulife Financial and its subsidiaries,
including John Hancock, were US$271.6 billion (Cdn$355.9 billion) as of March
31, 2004.
Manulife Financial Corporation trades as 'MFC' on the TSX, NYSE and PSE, and
under '0945' on the SEHK.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus. Appendix A contains further
information describing investment risks. The investment objective of the Fund is
fundamental and may only be changed with shareholder approval. There is no
assurance that the Fund will achieve its investment objective.
The Fund's investment objective is to seek long-term capital appreciation. To
pursue this goal, the Fund normally invests at least 80% of its Assets in stocks
of large-capitalization companies - companies in the capitalization range of the
Russell Top 200 Growth Index.
With respect to the Fund's investment policy of investing at least 80% of its
Assets in large capitalization companies, "Assets" is defined as net assets plus
the amount of any borrowings for investment purposes. In addition, the Fund will
notify shareholders at least 60 days prior to any change in this policy.
The Fund invests principally in common stocks (and in securities convertible
into or with rights to purchase common stocks) of companies which the Fund's
management believes offer outstanding growth potential over both the
intermediate and long term. The Fund generally invests in a diversified
portfolio of U.S. companies. The Fund has tended to emphasize, or
2
overweight, certain sectors such as health care, technology or consumer goods.
These weightings may change in the future.
In choosing individual stocks, the managers use fundamental financial analysis
to identify companies with:
o Strong cash flows
o Secure market franchises
o Sales growth that outpaces their industries
The management team uses various means to assess the depth and stability of
companies' senior management, including interviews and company visits. The fund
favors companies for which the managers project an above average growth rate.
When management believes that current market or economic conditions warrant, the
Fund temporarily may retain cash or invest in preferred stock, nonconvertible
bonds or other fixed-income securities. Fixed income securities in the Fund's
portfolio will generally be rated at least BBB by Standard & Poor's Ratings
Group ("S&P") or Baa by Moody's Investor's Service, Inc. ("Moody's"), or if
unrated, determined by the Adviser to be of comparable quality. The Fund may,
however, invest up to 5% of its net assets in lower rated securities, commonly
known as "junk bonds".
In abnormal circumstances, such as situations where the Fund experiences
unusually large cash inflows or anticipates unusually large redemptions, and in
adverse market, economic, political or other conditions, the Fund may
temporarily invest extensively in investment-grade short-term securities, cash
and cash equivalents.
Lower Rated High Yield Debt Obligations. The Fund may invest in debt securities
rated as low as C by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Ratings Group ("S&P") and unrated securities deemed of equivalent quality
by the Adviser. These securities are speculative to a high degree and often have
very poor prospects of attaining real investment standing. Lower rated
securities are generally referred to as junk bonds. No more than 5% of the
Fund's net assets, however, will be invested in securities rated lower than BBB
by S&P or Baa by Moody's. In addition, no more than 5% of the Fund's net assets
may be invested in securities rated BBB or Baa and unrated securities deemed of
equivalent quality. See the Appendix attached to this Statement of Additional
Information which describes the characteristics of the securities in the various
ratings categories. The Fund may invest in comparable quality unrated securities
which, in the opinion of the Adviser, offer comparable yields and risks to those
securities which are rated.
Debt obligations rated in the lower ratings categories, or which are unrated,
involve greater volatility of price and risk of loss of principal and income. In
addition, lower ratings reflect a greater possibility of an adverse change in
financial condition affecting the ability of the issuer to make payments of
interest and principal. The high yield fixed income market is relatively new and
its growth occurred during a period of economic expansion. The market has not
yet been fully tested by an economic recession.
3
The market price and liquidity of lower rated fixed income securities generally
respond to short term corporate and market developments to a greater extent than
do the price and liquidity of higher rated securities because such developments
are perceived to have a more direct relationship to the ability of an issuer of
such lower rated securities to meet its ongoing debt obligations. The market
prices of zero coupon bonds are affected to a greater extent by interest rate
changes, and thereby tend to be more volatile than securities which pay interest
periodically. Increasing rate note securities are typically refinanced by the
issuers within a short period of time.
Reduced volume and liquidity in the high yield bond market or the reduced
availability of market quotations will make it more difficult to dispose of the
bonds and to value accurately the Fund's assets. The reduced availability of
reliable, objective data may increase the Fund's reliance on management's
judgment in valuing high yield bonds. In addition, the Fund's investments in
high yield securities may be susceptible to adverse publicity and investor
perceptions, whether or not justified by fundamental factors. The Fund's
investments, and consequently its net asset value, will be subject to the market
fluctuations and risks inherent in all securities.
Ratings as Investment Criteria. In general, the ratings of Moody's and S&P
represent the opinions of these agencies as to the quality of the securities
which they rate. It should be emphasized, however, that ratings are relative and
subjective and are not absolute standards of quality. These ratings will be used
by the Fund as initial criteria for the selection of debt 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 minimum required for purchase by the
Fund. Neither of these events will require the sale of the securities by the
Fund.
Investments In Foreign Securities. The Fund may invest up to 15% of its total
assets in securities of foreign issuers as well as securities in the form of
sponsored or unsponsored American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs") or other securities convertible into securities of
foreign issuers. ADRs are receipts typically issued by an American bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Issuers of unsponsored ADRs are not contractually
obligated to disclose material information, including financial information, in
the United States. Generally, ADRs are designed for use in the United States
securities markets and EDRs are designed for use in European securities markets.
Issuers of unsponsored ADRs are not contractually obligated to disclose material
information including financial information in the U.S.
Foreign Currency Transactions. The Fund's foreign currency transactions may be
conducted on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market.
The Fund may also enter into forward foreign currency exchange contracts to
hedge against fluctuations in currency exchange rates affecting a particular
transaction or portfolio position. Forward contracts are agreements to purchase
or sell a specified currency at a specified future date and price set at the
time of the contract. Transaction hedging is the purchase or sale of
4
forward foreign currency contracts with respect to specific receivables or
payables of the Fund accruing in connection with the purchase and sale of its
portfolio securities quoted or denominated in the same or related foreign
currencies. Portfolio hedging is the use of forward foreign currency contracts
to offset portfolio security positions denominated or quoted in the same or
related foreign currencies. The Fund may elect to hedge less than all of its
foreign portfolio positions as deemed appropriate by the Adviser and
Sub-Adviser.
If the Fund purchases a forward contract, the Fund will segregate cash or liquid
securities in a separate account of the Fund in an amount equal to the value of
the Fund's total assets committed to the consummation of such forward contract.
The assets in the segregated account will be valued at market daily and if the
value of the securities in the separate account declines, additional cash or
securities will be placed in the account so that the value of the account will
be equal the amount of the Fund's commitment with respect to such contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it may
not be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level it anticipates.
Risks in Foreign Securities. Investments in foreign securities may involve a
greater degree of risk than those in domestic securities. There is generally
less publicly available information about foreign companies in the form of
reports and ratings similar to those that are published about issuers in the
United States. Also, foreign issuers are generally not subject to uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to United States issuers.
Because foreign securities may be denominated in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will affect the Fund's net
asset value, the value of dividends and interest earned, gains and losses
realized on the sale of securities, and any net investment income and gains that
the Fund distributes to shareholders. Securities transactions undertaken in some
foreign markets may not be settled promptly, so that the Fund's investments on
foreign exchanges may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement.
Foreign securities will be purchased in the best available market, whether
through over-the-counter markets or exchanges located in the countries where
principal offices of the issuers of the are located. Foreign securities markets
are generally not as developed or efficient as those in the United States. While
growing in volume they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
States exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.
5
With respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation,
nationalization or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the United States' economy in terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
The dividends, interest and in some cases, capital gains payable on certain
Fund's foreign portfolio securities may be subject to foreign withholding or
other foreign taxes, thus reducing the net amount of income or gains available
for distribution to the Fund's shareholders
Repurchase Agreements. In a repurchase agreement the Fund buys a security for a
relatively short period (usually not more than 7 days) subject to the obligation
to sell it back to the issuer at a fixed time and price, plus accrued interest.
The Fund will enter into repurchase agreements only with member banks of the
Federal Reserve System and with "primary dealers" in U.S. Government securities.
The Adviser will continuously monitor the creditworthiness of the parties with
whom the Fund enters into repurchase agreements.
The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian physically or in book-entry form and that the collateral must be
marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities and could experience losses, including the
possible decline in the value of the underlying securities during the period 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 their repurchase. To minimize various risks associated with
reverse repurchase agreements, the Fund will establish and maintain a separate
account consisting of liquid securities, of any type or maturity, in an amount
at least equal to the repurchase prices of these securities (plus any accrued
interest thereon) under such agreements. In addition, the Fund will not borrow
money or enter into reverse repurchase agreements except from banks as a
temporary measure for extraordinary emergency purposes in amounts not to exceed
33 1/3% of the 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
6
creditworthy by the Trustees. Under procedures established by the Trustees, the
Adviser will monitor the creditworthiness of the banks involved.
Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. The Fund will not invest more than 15% of its net
assets in illiquid investments. If the Trustees determine, based upon a
continuing review of the trading markets for specific Section 4 (2) paper or
Rule 144A securities, that they are liquid, they will not be subject to the 15%
limit on illiquid securities. The Trustees have adopted guidelines and delegated
to the Adviser the daily function of determining and monitoring the liquidity of
restricted securities. The Trustees, however, will retain sufficient oversight
and be ultimately responsible for the determinations. The Trustees will
carefully monitor the Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund if qualified institutional buyers become for a
time uninterested in purchasing these restricted securities.
Options on Securities, Securities Indices and Currency. The Fund may purchase
and write (sell) call and put options on any securities in which it may invest,
on any securities index based on securities in which it may invest or on any
currency in which Fund investments may be denominated. These options may be
listed on national domestic securities exchanges or foreign securities exchanges
or traded in the over-the-counter market. The Fund may write covered put and
call options and purchase put and call options to enhance total return, as a
substitute for the purchase or sale of securities or currency, or to protect
against declines in the value of portfolio securities and against increases in
the cost of securities to be acquired.
Writing Covered Options. A call option on securities or currency written by the
Fund obligates the Fund to sell specified securities or currency to the holder
of the option at a specified price if the option is exercised at any time before
the expiration date. A put option on securities or currency written by the Fund
obligates the Fund to purchase specified securities or currency from the option
holder at a specified price if the option is exercised at any time before the
expiration date. Options on securities indices are similar to options on
securities, except that the exercise of securities index options requires cash
settlement payments and does not involve the actual purchase or sale of
securities. In addition, securities index options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. Writing covered call options may
deprive the Fund of the opportunity to profit from an increase in the market
price of the securities or foreign currency assets in its portfolio. Writing
covered put options may deprive the Fund of the opportunity to profit from a
decrease in the market price of the securities or foreign currency assets to be
acquired for its portfolio.
All call and put options written by the Fund are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities,
either of which may be quoted or denominated in any currency, in a segregated
account with a value at least equal to the Fund's obligation under the option,
(ii) entering into an offsetting forward commitment and/or (iii) purchasing an
offsetting option or any other option which, by virtue of its exercise price or
otherwise, reduces the Fund's net exposure on its written option position. A
written call option
7
on securities is typically covered by maintaining the securities that are
subject to the option in a segregated account. The Fund may cover call options
on a securities index by owning securities whose price changes are expected to
be similar to those of the underlying index.
The Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."
Purchasing Options. The Fund would normally purchase call options in
anticipation of an increase, or put options in anticipation of a decrease
("protective puts") in the market value of securities or currencies of the type
in which it may invest. The Fund may also sell call and put options to close out
its purchased options.
The purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities or currency at a specified price during
the option period. The Fund would ordinarily realize a gain on the purchase of a
call option if, during the option period, the value of such securities or
currency exceeded the sum of the exercise price, the premium paid and
transaction costs; otherwise the Fund would realize either no gain or a loss on
the purchase of the call option.
The purchase of a put option would entitle the Fund, in exchange for the premium
paid, to sell specified securities or currency at a specified price during the
option period. The purchase of protective puts is designed to offset or hedge
against a decline in the market value of the Fund's portfolio securities or the
currencies in which they are denominated. Put options may also be purchased by
the Fund for the purpose of affirmatively benefiting from a decline in the price
of securities or currencies which it does not own. The Fund would ordinarily
realize a gain if, during the option period, the value of the underlying
securities or currency decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Fund would realize either no
gain or a loss on the purchase of the put option. Gains and losses on the
purchase of put options may be offset by countervailing changes in the value of
the Fund's portfolio securities.
The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying
8
securities or currencies or dispose of assets held in a segregated account until
the options expire or are exercised. Similarly, if the Fund is unable to effect
a closing sale transaction with respect to options it has purchased, it would
have to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying securities or
currencies.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
The Fund's ability to terminate over-the-counter options is more limited than
with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities or currency markets.
Futures Contracts and Options on Futures Contracts. To seek to increase total
return or hedge against changes in interest rates, securities prices or currency
exchange rates, the Fund may purchase and sell various kinds of futures
contracts, and purchase and write call and put options on these futures
contracts. The Fund may also enter into closing purchase and sale transactions
with respect to any of these contracts and options. The futures contracts may be
based on various securities (such as U.S. Government securities), securities
indices, foreign currencies and any other financial instruments and indices. All
futures contracts entered into by the Fund are traded on U.S. or foreign
exchanges or boards of trade that are licensed, regulated or approved by the
Commodity Futures Trading Commission ("CFTC").
Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments [or
currencies] for an agreed price during a designated month (or to deliver the
final cash settlement price, in the case of a contract relating to an index or
otherwise not calling for physical delivery at the end of trading in the
contract).
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or currency will usually be
liquidated in this manner, the Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically
9
advantageous to do so. A clearing corporation associated with the exchange on
which futures contracts are traded guarantees that, if still open, the sale or
purchase will be performed on the settlement date.
Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire or the
exchange rate of currencies in which portfolio securities are quoted or
denominated. When interest rates are rising or securities prices are falling,
the Fund can seek to offset a decline in the value of its current portfolio
securities through the sale of futures contracts. When interest rates are
falling or securities prices are rising, the Fund, through the purchase of
futures contracts, can attempt to secure better rates or prices than might later
be available in the market when it effects anticipated purchases. The Fund may
seek to offset anticipated changes in the value of a currency in which its
portfolio securities, or securities that it intends to purchase, are quoted or
denominated by purchasing and selling futures contracts on such currencies.
The Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated rise in
interest rates or a decline in market prices or foreign currency rates that
would adversely affect the dollar value of the Fund's portfolio securities. Such
futures contracts may include contracts for the future delivery of securities
held by the Fund or securities with characteristics similar to those of the
Fund's portfolio securities. Similarly, the Fund may sell futures contracts on
any currencies in which its portfolio securities are quoted or denominated or in
one currency to hedge against fluctuations in the value of securities
denominated in a different currency if there is an established historical
pattern of correlation between the two currencies.
If, in the opinion of the Adviser, there is a sufficient degree of correlation
between price trends for the Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in the Fund's portfolio
may be more or less volatile than prices of such futures contracts, the Adviser
will attempt to estimate the extent of this volatility difference based on
historical patterns and compensate for any differential by having the Fund enter
into a greater or lesser number of futures contracts or by attempting to achieve
only a partial hedge against price changes affecting the Fund's portfolio
securities.
When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of the Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices that are currently available. The Fund
may also purchase futures contracts as a substitute for transactions in
securities or foreign currency, to alter the investment characteristics of or
currency exposure associated with
10
portfolio securities or to gain or increase its exposure to a particular
securities market or currency.
Options on Futures Contracts. The Fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
put and call options on futures contracts will give the Fund the right (but not
the obligation) for a specified price to sell or to purchase, respectively, the
underlying futures contract at any time during the option period. As the
purchaser of an option on a futures contract, the Fund obtains the benefit of
the futures position if prices move in a favorable direction but limits its risk
of loss in the event of an unfavorable price movement to the loss of the premium
and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium (upon exercise
of the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that the Fund intends to purchase. However,
the Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by the Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
Other Considerations. The Fund will engage in futures and related options
transactions either for bona fide hedging purposes or to seek to increase total
return as permitted by the CFTC. To the extent that the Fund is using futures
and related options for hedging purposes, futures contracts will be sold to
protect against a decline in the price of securities (or the currency in which
they are quoted or denominated) that the Fund owns or futures contracts will be
purchased to protect the Fund against an increase in the price of securities (or
the currency in which they are quoted or denominated) it intends to purchase.
The Fund will determine that the price fluctuations in the futures contracts and
options on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or securities or instruments which
it expects to purchase. As evidence of its hedging intent, the Fund expects that
on 75% or more of the occasions on which it takes a long futures or option
position (involving the purchase of futures contracts), the Fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities (or assets denominated in the related currency) in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
To the extent that the Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. The Fund will engage in
transactions in
11
futures contracts and related options only to the extent such transactions are
consistent with the requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), for maintaining its qualifications as a regulated
investment company for federal income tax purposes.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities or currencies, require the Fund to
establish a segregated account consisting of cash or liquid securities in an
amount equal to the underlying value of such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates or securities prices may result
in a poorer overall performance for the Fund than if it had not entered into any
futures contracts or options transactions.
Perfect correlation between the Fund's futures positions and portfolio positions
will be impossible to achieve. In the event of an imperfect correlation between
a futures position and a portfolio position which is intended to be protected,
the desired protection may not be obtained and the Fund may be exposed to risk
of loss. In addition, it is not possible to hedge fully or protect against
currency fluctuations affecting the value of securities denominated in foreign
currencies because the value of such securities is likely to fluctuate as a
result of independent factors not related to currency fluctuations.
Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities and money market
funds. When the Fund lends portfolio securities, there is a risk that the
borrower may fail to return the securities involved in the transaction. As a
result, the Fund may incur a loss or, in the event of the borrower's bankruptcy,
the Fund may be delayed in or prevented from liquidating the collateral. It is a
fundamental policy of the Fund not to lend portfolio securities having a total
value exceeding 33 1/3% of its total assets.
Rights and Warrants. The Fund may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price, subject to the Fund's Investment
Restrictions. Generally, warrants and stock purchase rights do not carry with
them the right to receive dividends or exercise voting rights with respect to
the underlying securities, and they do not represent any rights in the assets of
the issuer. As a result, an investment in warrants and rights may be considered
to entail greater investment risk than certain other types of investments. In
addition, the value of warrants and rights does not necessarily change with the
value of the underlying securities, and they cease to have value if they are not
exercised on or prior to their expiration date. Investment in warrants
12
and rights increases the potential profit or loss to be realized from the
investment of a given amount of the Fund's assets as compared with investing the
same amount in the underlying stock.
Short Sales. The Fund may engage in short sales in order to profit from an
anticipated decline in the value of a security. The Fund may also engage in a
short sales to attempt to limit its exposure to a possible market decline in the
value of its portfolio securities through short sales of securities which the
Adviser believes possesses volatility characteristics similar to those being
hedged. To effect such transaction, the Fund must borrow the security sold short
to make delivery to the buyer. The Fund then is obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. Until the security is replaced the Fund is required to pay to the
lender an accrued interest and may be required to pay a premium.
The Fund will realize a gain if the security declines in price between the date
of the short sale and the date on which the Fund replaces the borrowed security.
On the other hand, the Fund will incur a loss as a result of the short sale if
the price of the security increases between those dates. The amount of any gain
will be decreased, and the amount of any loss increased, by the amount of any
premium, interest or dividends the Fund may be required to pay in connection
with a short sale. The successful use of short selling as a hedging device may
be adversely affected by imperfect correlation between movements in the price of
the security sold short and the securities being hedged.
Under applicable guidelines of the staff of the SEC, if the Fund engages in
short sales, it must put in a segregated account (not with the broker) an amount
of cash or liquid securities of any type of maturity equal to the difference
between (a) the market value of the securities sold short at the time they were
sold short and (b) any cash or liquid securities required to be deposited as
collateral with the broker in connection with the short sale (not including the
proceeds from the short sale). In addition, until the Fund replaces the borrowed
security, it must daily maintain the segregated account at such a level that the
amount deposited in it plus the amount deposited with the broker as collateral
will equal the current market value of the securities sold short.
Short selling may produce higher than normal portfolio turnover which may result
in increased transaction costs to the Fund and may result in gains from the sale
of securities deemed to have been held for less than three months, which gains
must be less than 30% of the Fund's gross income in order for the Fund to
qualify as a regulated investment company under the Code for that year.
The Fund does not intend to enter into short sale (other than those "against the
box") if immediately after such sale the aggregate of the value of all
collateral plus the amount in such segregated account exceeds 5% of the value of
the Fund's assets. A short sale is "against the box" to the extent that the Fund
contemporaneously owns or has the right to obtain at no added cost securities
identical to those sold short.
Forward Commitment and When-Issued Securities. The Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. The Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
13
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When the Fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in the Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the Fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, the Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
Short-Term Trading and Portfolio Turnover. Short-term trading means the purchase
and subsequent sale of a security after it has been held for a relatively brief
period of time. The Fund may engage in short-term trading in response to stock
market conditions, changes in interest rates or other economic trends and
developments, or to take advantage of yield disparities between various fixed
income securities in order to realize capital gains or improve income. Short
term trading may have the effect of increasing portfolio turnover rate. A high
rate of portfolio turnover (100% or greater) involves correspondingly greater
brokerage expenses. The Fund's portfolio turnover rate is set forth in the table
under the caption "Financial Highlights" in the Prospectus.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions will
not be changed without 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 at that meeting
or (2) more than 50% of the Fund's outstanding shares.
The Fund may not:
1. Issue senior securities, except as permitted by the Fund's fundamental
investment restrictions on borrowing, lending and investing in commodities
and as otherwise permitted under the 1940 Act. 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 and options on futures contracts, forward
commitments, forward foreign exchange contracts and repurchase agreements
entered into in accordance with the Fund's investment policies are not
deemed to be senior securities.
14
2. Borrow money, except: (i) 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; (iv) in connection with entering into
reverse repurchase agreements and dollar rolls, but only if after each such
borrowing there is asset coverage of at least 300% as defined in the 1940
Act; and (v) as otherwise permitted under the 1940 Act. 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.
3. Act as an underwriter, except to the extent that in connection with the
disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the Securities Act of 1933.
4. Purchase, sell or invest in real estate, but subject to its other
investment policies and restrictions may invest in securities of companies
that deal in real estate or are engaged in the real estate business. These
companies include real estate investment trusts and securities secured by
real estate or interests in real estate. The fund may hold and sell real
estate acquired through default, liquidation or other distributions of an
interest in real estate as a result of the fund's ownership of securities.
5. Invest in commodities or commodity futures contracts, other than financial
derivative contracts. Financial derivatives include forward currency
contracts; financial futures contracts and options on financial futures
contracts; options and warrants on securities, currencies and financial
indices; swaps, caps, floors, collars and swaptions; and repurchase
agreements entered into in accordance with the fund's investment policies.
6. Make loans, except that the fund may (i) 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, (ii) enter into repurchase agreements,
and (iii) purchase all or a portion of an issue of publicly distributed
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.
7. 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.
8. With respect to 75% of the fund's total assets, the fund may not invest
more than 5% of the fund's total assets in the securities of any single
issuer or own more than 10% of the outstanding voting securities of any one
issuer, in each case other than (i) securities issued or guaranteed by the
U.S. Government, its agencies or its instrumentalities or (ii)
15
securities of other investment companies.
In connection with the lending of portfolio securities under item (6) above,
such loans must at all times be fully collateralized by cash or securities of
the U.S. Government or its agencies or instrumentalities, and the Fund's
custodian must take possession of the collateral either physically or in book
entry form. Any cash collateral will consist of short-term high quality debt
instruments. Securities used as collateral must be marked to market daily.
Non-fundamental Investment Restrictions
The following restrictions are designated as non-fundamental and may be changed
by the Trustees without shareholder approval.
The Fund may not:
(a) Purchase securities on margin or make short sales, except in connection
with arbitrage transactions, 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 that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities.
(b) Invest for the purpose of exercising control over or management of any
company.
(c) Purchase a security if, as a result, (i) more than 10% of the Fund's total
assets would be invested in securities of other investment companies, (ii)
such purchase would result in more than 3% of the total outstanding voting
securities of any one investment company being held by the Fund, or (iii)
more than 5% of the Fund's total assets would be invested in the securities
of any one such investment company.
(d) Invest more than 15% of its net assets in illiquid securities.
(e) Notwithstanding any investment restriction to the contrary, 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 provided that,
as a result, (i) no more than 10% of the Fund's assets would be invested in
securities of all other investment companies, (ii) such purchase would not
result in more than 3% of the total outstanding voting securities of any
one such investment company being held by the Fund and (iii) no more than
5% of the Fund's assets would be invested in any one such investment
company.
Except with respect to borrowing money, 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 the Fund's assets will not be considered a violation of the
restriction.
The Funds will invest only in countries on the Adviser's Approved Country
Listing. The Approved Country Listing is a list maintained by the Adviser's
investment department that
16
outlines all countries, including the United States, that have been approved for
investment by Funds managed by the Adviser.
If allowed by the Fund's other investment policies and restrictions, the Fund
may invest up to 5% of its total assets in Russian equity securities and up to
10% of its total assets in Russian fixed income securities. All Russian
securities must be: (1) denominated in U.S. dollars, Canadian dollars, euros,
sterling, or yen; (2) traded on a major exchange; and (3) held physically
outside of Russia.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its Trustees, including certain Trustees
who are not "interested persons" of the Fund or the Trust (as defined by the
Investment Company Act of 1940) (the "Independent 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 Adviser, or officers and Directors of
the Fund's principal distributor, John Hancock Funds, LLC (prior to February 1,
2002, John Hancock Funds, Inc.) ("John Hancock Funds").
17
- --------------------------------------------------------------------------------------------------------------------------------
Number of John
Position(s) Trustee/ Hancock Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- --------------------------------------------------------------------------------------------------------------------------------
Charles L. Ladner Chairman 2004 Chairman and Trustee, Dunwoody Village, Inc. 49
Born: 1938 and Trustee (continuing care retirement community); Senior Vice
President and Chief Financial Officer, UGI
Corporation (Public Utility Holding Company) (retired
1998); Vice President and Director for AmeriGas, Inc.
(retired 1998); Director of AmeriGas Partners, L.P.
(until 1997)(gas distribution); Director,
EnergyNorth, Inc. (until 1995); Director, Parks and
History Association (since 2001).
- --------------------------------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz Trustee 1988 Professor of Law, Emeritus, Boston University School 20
Born: 1931 of Law (as of 1996); Director, Brookline Bancorp.
- --------------------------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. Trustee 1978 President and Chief Executive Officer, Brookline 20
Born: 1935 Bancorp., Inc. (lending) (since 1972); Chairman and
Director, Lumber Insurance Co. (insurance) (until
2000); Chairman and Director, Northeast Retirement
Services, Inc. (retirement administration) (since
1998).
- --------------------------------------------------------------------------------------------------------------------------------
William J. Cosgrove Trustee 1991 Vice President, Senior Banker and Senior Credit 20
Born: 1933 Officer, Citibank, N.A. (banking) (retired 1991);
Executive Vice President, Citadel Group
Representatives, Inc. (financial reinsurance);
Director, Hudson City Bancorp (banking); Trustee,
Scholarship Fund for Inner City Children (since 1986).
- --------------------------------------------------------------------------------------------------------------------------------
Richard A. Farrell Trustee 1996 President, Farrell, Healer & Co., Inc., (venture 20
Born: 1932 capital management firm)(since 1980) and General
Partner of the Venture Capital Fund of NE; (since
1980); Trustee, Marblehead Savings Bank (since 1994).
Prior to 1980, headed the venture capital group at
Bank of Boston Corporation.
- --------------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment
adviser, underwriter, and or certain other affiliates.
18
- ---------------------------------------------------------------------------------------------------------------------------------
Number of
John Hancock
Position(s) Trustee/ Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- ---------------------------------------------------------------------------------------------------------------------------------
William F. Glavin Trustee 1996 President Emeritus, Babson College (as of 1998); Vice 20
Born: 1932 Chairman, Xerox Corporation (until 1989); Director,
Reebok, Inc. (until 2002) and Inco Ltd. (until 2002).
- ---------------------------------------------------------------------------------------------------------------------------------
John A. Moore Trustee 1996 President and Chief Executive Officer, Institute for 30
Born: 1939 Evaluating Health Risks, (nonprofit institution) (until
2001); Senior Scientist, Sciences International (health
research)(since 1998); Principal, Hollyhouse
(consulting)(since 2000); Director, CIIT(nonprofit
research) (since 2002).
- ---------------------------------------------------------------------------------------------------------------------------------
Patti McGill Peterson Trustee 1996 Executive Director, Council for International Exchange 30
Born: 1943 of Scholars (since 1998); Vice President, Institute of
International Education (since 1998); Senior Fellow,
Cornell Institute of Public Affairs, Cornell University
(until 1997); President Emerita of Wells College and
St. Lawrence University; Director, Niagara Mohawk Power
Corporation (electric utility); Director, Ford
Foundation, International Fellowships Program (since
2002); Director Lois Roth Endowment (2002); Director,
Council for International Exchange (since 2003);
Advisory Board, UNCF, Global Partnerships Center (since
2002) .
- ---------------------------------------------------------------------------------------------------------------------------------
John W. Pratt Trustee 1996 Professor of Business Administration Emeritus, Harvard 20
Born: 1931 University Graduate School of Business Administration
(as of 1998).
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
19
- -------------------------------------------------------------------------------------------------------------------------------
Number of John
Position(s) Trustee/ Hancock Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Non-Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------------
James A. Shepherdson (3) Trustee, 2004 Executive Vice President, Manulife Financial 49
Born: 1952 President Corporation; Chairman, Director, President and
and Chief Chief Executive Officer, John Hancock Advisers
Executive LLC and The Berkeley Group; Chairman, Director,
Officer President and Chief Executive Officer, John
Hancock Funds; Chairman, President, Director
and Chief Executive Officer, Sovereign Asset
Management Corporation ("SAMCorp; President,
John Hancock Retirement Services, John Hancock
Life Insurance Company (until 2004); Chairman,
Essex Corporation, (until 2004); Co-Chief
Executive Officer, MetLife Investors Group
(until 2003); Senior Vice President, AXA/
Equitable Insurance Company (until 2000).
- -------------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
20
- ----------------------------------------------------------------------------------------------------------------------------
Number of
John Hancock
Position(s) Trustee/ Funds
Name, Address (1) Held with Officer Principal Occupation(s) and other Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- ----------------------------------------------------------------------------------------------------------------------------
Principal Officers who
are not Trustees
- ----------------------------------------------------------------------------------------------------------------------------
Richard A. Brown Senior Vice 2000 Senior Vice President, Chief Financial Officer N/A
Born: 1949 President and Treasurer, the Adviser, John Hancock Funds,
and Chief and The Berkeley Group; Second Vice President
Financial and Senior Associate Controller, Corporate Tax
Officer Department, John Hancock Financial Services, Inc.
(until 2001).
- ----------------------------------------------------------------------------------------------------------------------------
William H. King Vice 1988 Vice President and Assistant Treasurer, the N/A
Born: 1952 President Adviser; Vice President and Treasurer of each of
and Treasurer the John Hancock funds; Assistant Treasurer of
each of the John Hancock funds (until 2001).
- ----------------------------------------------------------------------------------------------------------------------------
Susan S. Newton Senior Vice 1984 Senior Vice President, Secretary and Chief Legal N/A
Born: 1950 President, Officer, SAMCorp., the Adviser and each of the
Secretary John Hancock funds, John Hancock Funds and The
and Chief Berkeley Group; Vice President, Signature
Legal Officer Services (until 2000), Director, Senior Vice
President and Secretary, NM Capital.
- ----------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and non-independent Trustees and officers
is 101 Huntington Avenue, Boston, Massachusetts 02199.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Non-Independent Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
21
The Fund's Board of Trustees currently has four standing Committees: the Audit
Committee, the Administration Committee, the Contracts/Operations Committee and
the Investment Performance Committee. Each Committee is comprised of Independent
Trustees who are not "interested persons."
The Audit Committee members are Messrs. Moore (Chairman), Glavin and Ms. McGill
Peterson. All of the members of the Audit Committee are independent under the
New York Stock Exchange's Revised Listing Rules, and each member is financially
literate with at least one having accounting or financial management expertise.
The Board has adopted a written charter for the Audit Committee. The Audit
Committee recommends to the full board auditors for the Fund, monitors and
oversees the audits of the Fund, communicates with both independent auditors and
internal auditors on a regular basis and provides a forum for the auditors to
report and discuss any matters they deem appropriate at any time. The Audit
Committee held four meetings during the fiscal year ended October 31, 2003.
The Administration Committee members are all of the independent Trustees. The
Administration Committee reviews the activities of the other four standing
committees and makes the final selection and nomination of candidates to serve
as Independent Trustees. All members of the Administration Committee are
independent under the New York Stock Exchange's Revised Listing Rules and are
not interested persons, as defined in the 1940 Act, of John Hancock or the Fund
(the "Independent Trustees"). Among other things, the Administration Committee
acts as a nominating committee of the Board. The Trustees who are not
Independent Trustees and the officers of the Fund are nominated and selected by
the Board. The Administration Committee does not have at this time formal
criteria for the qualifications of candidates to serve as an Independent
Trustee, although the Administration Committee may develop them in the future.
In reviewing a potential nominee and in evaluating the renomination of current
Independent Trustees, the Administration Committee expects to apply the
following criteria: (i) the nominee's reputation for integrity, honesty and
adherence to high ethical standards, (ii) the nominee's business acumen,
experience and ability to exercise sound judgments, (iii) a commitment to
understand the Fund and the responsibilities of a trustee of an investment
company, (iv) a commitment to regularly attend and participate in meetings of
the Board and its committees, (v) the ability to understand potential conflicts
of interest involving management of the Fund and to act in the interests of all
shareholders, and (vi) the absence of a real or apparent conflict of interest
that would impair the nominee's ability to represent the interests of all the
shareholders and to fulfill the responsibilities of an Independent Trustee. The
Administration Committee does not necessarily place the same emphasis on each
criteria and each nominee may not have each of these qualities. The
Administration Committee does not discriminate on the basis of race, religion,
national origin, sex, sexual orientation, disability or any other basis
proscribed by law. The Administration Committee held four meetings during the
fiscal year ended October 31, 2003.
As long as an existing Independent Trustee continues, in the opinion of the
Administration Committee, to satisfy these criteria, the Fund anticipates that
the Committee would favor the renomination of an existing Trustee rather than a
new candidate. Consequently, while the Administration Committee will consider
nominees recommended by shareholders to serve as trustees, the Administration
Committee may only act upon such recommendations if there is a vacancy on the
Board or the Administration Committee determines that the selection of a new or
additional Independent Trustee is in the best interests of the Fund. In the
event that a vacancy
22
arises or a change in Board membership is determined to be advisable, the
Administration Committee will, in addition to any shareholder recommendations,
consider candidates identified by other means, including candidates proposed by
members of the Administration Committee. While it has not done so in the past,
the Administration Committee may retain a consultant to assist the Committee in
a search for a qualified candidate.
Any shareholder recommendation must be submitted in compliance with all of the
pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, to be considered by the Administration Committee. In evaluating a
nominee recommended by a shareholder, the Administration Committee, in addition
to the criteria discussed above, may consider the objectives of the shareholder
in submitting that nomination and whether such objectives are consistent with
the interests of all shareholders. If the Board determines to include a
shareholder's candidate among the slate of nominees, the candidate's name will
be placed on the Fund's proxy card. If the Administration Committee or the Board
determines not to include such candidate among the Board's designated nominees
and the shareholder has satisfied the requirements of Rule 14a-8, the
shareholder's candidate will be treated as a nominee of the shareholder who
originally nominated the candidate. In that case, the candidate will not be
named on the proxy card distributed with the Fund's proxy statement.
Shareholders may communicate with the members of the Board as a group or
individually. Any such communication should be sent to the Board or an
individual Trustee c/o the secretary of the Fund at the address on the notice of
this meeting. The Secretary may determine not to forward any letter to the
members of the Board that does not relate to the business of the Fund.
The Contracts/Operations Committee members are Messrs. Aronowitz (Chairman), and
Farrell. The Contracts/Operations Committee oversees the initiation, operation,
and renewal of contracts between the Fund and other entities. These contracts
include advisory and subadvisory agreements, custodial and transfer agency
agreements and arrangements with other service providers. The
Contracts/Operations Committee held five meetings during the fiscal year ended
October 31, 2003.
The Investment Performance Committee members are Messrs. Chapman (Chairman),
Cosgrove and Pratt. The Investment Performance Committee monitors and analyzes
the performance of the Fund generally, consults with the adviser as necessary if
the Fund requires special attention, and reviews peer groups and other
comparative standards as necessary. The Investment Performance Committee held
four meetings during the fiscal year ended October 31, 2003.
The following table provides a dollar range indicating each Trustee's ownership
of equity securities of the Fund, as well as aggregate holdings of shares of
equity securities of all John Hancock Funds overseen by the Trustee, as of
December 31, 2003.
23
- -----------------------------------------------------------------------------------------------------------
Aggregate Dollar Range of holdings
Dollar Range of Fund Shares Owned in John Hancock funds overseen by
Name of Trustee by Trustee (1) Trustee (1)
- -----------------------------------------------------------------------------------------------------------
Independent Trustees
- -----------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz $1-$10,000 $50,001-$100,000
- -----------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. $50,001-$100,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
William J. Cosgrove $1-$10,000 $10,000-$50,000
- -----------------------------------------------------------------------------------------------------------
Richard A. Farrell $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
William F. Glavin None None
- -----------------------------------------------------------------------------------------------------------
Dr. John A. Moore $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
Patti McGill Peterson $10,001-$50,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
John W. Pratt $10,001-$50,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
*Non-Independent Trustees
- -----------------------------------------------------------------------------------------------------------
John M. DeCiccio None Over $100,000
- -----------------------------------------------------------------------------------------------------------
Maureen Ford Goldfarb $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
(1) This Fund does participate in the John Hancock Deferred Compensation Plan
for Independent Trustees (the "Plan"). Under the Plan, an Independent
Trustee may defer his fees by electing to have the Adviser invest his fees
in one of the funds in the John Hancock complex that participates in the
Plan. Under these circumstances, the Trustee is not the legal owner of the
underlying shares, but does participate in any positive or negative return
on those shares to the same extent as all other shareholders. With regard
to Trustees participating in the Plan, if a Trustee was deemed to own the
shares used in computing the value of his deferred compensation, as of
December 31, 2003, the respective "Dollar Range of Fund Shares Owned by
Trustee" and the "Aggregate Dollar Range of holdings in John Hancock funds
overseen by Trustee" would be as follows: $10,001-$50,000 and over $100,000
for Mr. Chapman, $1-$10,000 and over $100,000 for Mr. Cosgrove,
$10,001-$50,000 and over $100,000 for Mr. Glavin, $1-$10,000 and over
$100,000 for Dr. Moore.
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. Any Non-Independent Trustee and each of
the officers of the Fund who are interested persons of the Adviser, and/or
affiliates are compensated by the Adviser and received no compensation from the
Fund for their services.
*Mr. John M. DeCiccio resigned as of March 19, 2004 and Ms. Maureen Ford
Goldfarb resigned as of May 12, 2004. Both were Non-Independent Trustees.
24
Total Compensation From the
Aggregate Compensation from Fund and John Hancock Fund
Independent Trustees the Fund (1) Complex to Trustees (2)
- -------------------- ------------ -----------------------
Dennis J. Aronowitz $ 1,415 $ 72,250
Richard P. Chapman* 1,564 79,000
William J. Cosgrove* 1,559 79,500
Richard A. Farrell 1,554 79,250
Gail D. Fosler + 88 250
William F. Glavin* 1,470 74,250
Dr. John A. Moore* 1,144 74,000
Patti McGill Peterson 1,083 72,750
John Pratt 1,499 76,500
------- --------
Total $11,376 $607,750
(1) Compensation is for the fiscal year ending October 31, 2003.
(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 2003. As of this date, there were fifty-one funds
in the John Hancock Fund Complex, with Dr. Moore and Ms. McGill Peterson serving
on thirty funds and each other Independent Trustees servicing on twenty funds.
*As of December 31, 2003, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $63,573, Mr. Cosgrove was $210,257, Mr. Glavin was $306,646 and for
Dr. Moore was $248,464 under the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees (the "Plan").
+ As of December 31, 2002, Ms. Fosler resigned as a Trustee of the Complex.
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 or
Trustees of one or more of the other funds for which the Adviser serves as
investment adviser.
As of February 3, 2004, 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 beneficially owned 5% or more of
outstanding shares of each class of the Fund.
25
Percentage of Total Outstanding
Name and Address of Shareholder Class of Shares Shares of the Class of the Fund
- ------------------------------- --------------- -------------------------------
MLPF&S For The B 7.80%
Sole Benefit of Its Customers
Attn: Fund Administration 97DA7
4800 Deer Lake Drive East 2nd Fl
Jacksonville, FL 32246-6484
Citigroup Global Markets, Inc. C 7.04%
00109801250
Attn: Cindy Tempesta, 7th Fl
333 West 34th Street
New York, NY 10001-2402
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
a premier investment management company, managed $30.2 billion in open-end
funds, closed-end funds, private accounts and retirement plans for individual
and institutional investors as of March 31, 2004. Additional information about
John Hancock Advisers can be found on the website: www.jhfunds.com.
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 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.
26
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:
Average Daily Net Assets Annual Rate
- ------------------------ -----------
First $750,000,000 0.75%
Amount over $750,000,000 0.70%
From time to time, the Adviser may reduce its fee or make other arrangements to
limit the Fund's expenses to a specified percentage of its average daily net
assets. The Adviser retains the right to reimpose a fee and recover any other
payments to the extent that, at the end of any fiscal year, the Fund's annual
expenses fall below this limit.
For the fiscal years ended October 31, 2001, 2002 and 2003, the Fund paid the
Adviser an investment advisory fees of $3,200,186, $2,000,022 and $1,418,015,
respectively.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser or its affiliates provide investment
advice. Because of different investment objectives or other factors, a
particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
securities by the Adviser for the Fund or for other funds or clients for which
the Adviser renders investment advice arise for consideration at or about the
same time, transactions in such securities will be made, insofar as feasible,
for the respective funds or clients in a manner deemed equitable to all of them.
To the extent that transactions on behalf of more than one client of the Adviser
or its affiliates may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on price.
Pursuant to its Advisory Agreement, the Adviser is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which its Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under the Advisory Agreement.
Under the Advisory Agreement, the Fund may use the name "John Hancock" or any
name derived from or similar to it only for so long as the Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If the Advisory
Agreement is no longer in effect, the Fund (to the extent that it lawfully can)
will cease to use such a name or any other name indicating that it is advised by
or otherwise connected with the Adviser. In addition, the Adviser or the Life
Company may grant the nonexclusive right to use the name "John Hancock" or any
similar name to any other corporation or entity, including but not limited to
any investment company of which the Life Company or any subsidiary or affiliate
thereof or any successor to the business of any subsidiary or affiliate thereof
shall be the investment adviser.
The Fund's Board of Trustees is responsible for overseeing the performance of
the Fund's investment adviser and determining whether to approve and renew the
Fund's Advisory Agreement. The Board has a standing request that the Adviser
provide the Board with certain
27
information the Board has deemed important to evaluating the short- and
long-term performance of the Adviser. This information includes periodic
performance analysis and status reports from the Adviser and quarterly Portfolio
and Investment Performance Reports. The Fund's portfolio managers meet with the
Board from time to time to discuss the management and performance of the Fund
and respond to the Board's questions concerning the performance of the Adviser.
When the Board considers whether to renew an investment advisory contract, the
Board takes into account numerous factors, including: (1) the nature, extent and
quality of the services provided by the Adviser; (2) the investment performance
of the Fund's assets managed by the adviser; (3) the fair market value of the
services provided by the adviser; (4) a comparative analysis of expense ratios
of, and advisory fees paid by, similar funds; (5) the extent to which the
adviser has realized or will realize economies of scale as the Fund grows; (6)
other sources of revenue to the Adviser or its affiliates from its relationship
with the Fund and intangible or "fall-out" benefits that accrue to the adviser
and its affiliates, if relevant; and (7) the Adviser's control of the operating
expenses of the fund, such as transaction costs, including ways in which
portfolio transactions for the fund are conducted and brokers are selected.
In evaluating the Advisory Agreement, the Independent Trustees reviewed
materials furnished by the Adviser, including information regarding the Adviser,
its respective affiliates and their personnel, operations and financial
condition. The Independent Trustees also reviewed among other things:
o The investment performance of the Fund. The Board determined that the
performance results of the Fund and the Adviser's responsive actions were
reasonable, as compared with relevant performance standards, including the
performance results of comparable large-cap growth funds derived from data
provided by Lipper Inc. and appropriate market indexes.
o The fee charged by the Adviser for investment advisory and administrative
services. The Board decided that the advisory fee paid by the Fund was
reasonable based on the average advisory fee for comparable funds. The
Board also took into account the nature of the fee arrangements which
include breakpoints that will adjust the fee downward as the size of the
Fund's portfolio increases.
o The Board evaluated the Adviser's investment staff and portfolio management
process, and reviewed the composition and overall performance of the Fund's
portfolio on both a short-term and long-term basis.
The Independent Trustees determined that the terms of the Fund's Advisory
Agreement are fair and reasonable and that the contract is in the Fund's best
interest. The Independent Trustees believe that the advisory contract will
enable the Fund to enjoy high quality investment advisory services at a cost
they deem appropriate, reasonable and in the best interests of the Fund and its
shareholders. In making such determinations, the Independent Trustees met
independently from the Non-Independent Trustees of the Fund and any officers of
the Adviser or its affiliates. The Independent Trustees also relied upon the
assistance of counsel to the Independent Trustees and counsel to the Fund.
The continuation of the Advisory Agreement and Distribution Agreement (discussed
below) was approved by all Trustees. The Advisory Agreement and the Distribution
Agreement, will continue in effect from year to year, provided that its
continuance is approved annually both (i)
28
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 years ended October 31, 2001, 2002 and 2003,
the Fund paid the Adviser $85,263, $56,337 and $68,290, respectively, for
services under this Agreement.
Proxy Voting. The Fund's Trustees have delegated to the Adviser the authority to
vote proxies on behalf of the Fund. The Trustees have approved the proxy voting
guidelines of the Adviser and will review the guidelines and suggest changes as
they deem advisable. A summary of the Adviser's proxy voting guidelines is
attached to this statement of additional information as Appendix C.
Personnel of the Adviser and its affiliates may trade securities for their
personal accounts. The Fund also may hold, or may be buying or selling, the same
securities. To prevent the Fund from being disadvantaged, the adviser(s),
principal underwriter and the Fund have adopted a code of ethics which restricts
the trading activity of those personnel.
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, banks and registered investment advisors ("Selling Firms") that
have entered into selling agreements with John Hancock Funds. These Selling
Firms are authorized to designate other intermediaries to receive purchase and
redemption orders on behalf of the Fund. John Hancock Funds accepts orders for
the purchase of the shares of the Fund that are continually offered at net asset
value next determined, plus an applicable sales charge, if any. In connection
with the sale of Fund shares, John Hancock Funds and Selling Firms receive
compensation from a sales charge imposed, in the case of Class A shares, at the
time of sale. In the case of Class B or Class C shares, the Selling Firm
receives compensation immediately but John Hancock Funds is compensated on a
deferred basis.
Total underwriting commissions (sales charges) for sales of the Fund's Class A
shares for the fiscal years ended October 31, 2001, 2002 and 2003 were $415,911,
$173,752 and $115,505 respectively. Of such amounts, $31,084, $24,430 and
$15,970 respectively, were retained by John Hancock Funds in 2001, 2002 and
2003. Total underwriting commissions (sales charges) for sales of the Fund's
Class C shares for the fiscal years ended October 31, 2001, 2002 and 2003 were
$17,798, $9,552 and $5,707, respectively. No Class C commissions were retained
by John Hancock Funds, the remainder of the underwriting commissions were
paid/reallowed to Selling Firms.
29
The Fund's Trustees adopted Distribution Plans with respect to each class of
shares (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of
1940. Under the Plans, the Fund will pay distribution and service fees at an
aggregate annual rate of up to 0.30% for Class A and 1.00% for Class B and Class
C shares of the Fund's average daily net assets attributable to shares of that
class. However, the service fees will not exceed 0.25% of the Fund's average
daily net assets attributable to each class of shares. The distribution fees
will be used to reimburse the John Hancock Funds for its distribution expenses,
including but not limited to: (i) initial and ongoing sales compensation to
Selling Firms and others (including affiliates of the John Hancock Funds)
engaged in the sale of Fund shares; (ii) marketing, promotional and overhead
expenses incurred in connection with the distribution of Fund shares; and (iii)
with respect to Class B and Class C shares only, interest expenses on
unreimbursed distribution expenses. The service fees will be used to compensate
Selling Firms 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 A Plan, these expenses will
not be carried beyond twelve months from the date they were incurred.
Unreimbursed expenses under the Class B and Class C Plans will be carried
forward together with interest on the balance of these unreimbursed expenses.
The Fund does not treat unreimbursed expenses under the Class B and Class C
Plans as a liability of the Fund because the Trustees may terminate the Class B
and /or Class C Plans at any time. For the fiscal year ended October 31, 2003,
an aggregate of $6,126,413 distribution expenses or 12.66% of the average net
assets of the Class B shares of the Fund, was not reimbursed or recovered by
John Hancock Funds through the receipt of deferred sales charges or Rule 12b-1
fees in prior periods. For the fiscal year ended October 31, 2003, an aggregate
of $70,884 distribution expenses or 2.30% of the average net assets of the Class
C share of the Fund, was not reimbursed or recovered by John Hancock Funds
through the receipt of deferred sales charges or Rule12b-1 fees in prior
periods.
The Plans and all amendments were approved by the Trustees, including a majority
of the Trustees who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plans (the
"Independent Trustees"), by votes cast in person at meetings called for the
purpose of voting on these Plans.
Pursuant to the Plans, 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. The
holders of Class A, Class B and Class C shares have exclusive voting rights with
respect to the Plan applicable to their respective class of shares. In adopting
the Plans, the Trustees concluded
30
that, in their judgment, there is a reasonable likelihood that the Plans will
benefit the holders of the applicable class of shares of the Fund.
Amounts paid to 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.
During the fiscal year ended October 31, 2003, the Fund paid John Hancock Funds
the following amounts of expenses in connection with their services.
Expense Items
-------------
Printing and
Mailing of Interest
Prospectus Carrying or
to New Compensation to Expenses of John Other Finance
Advertising Shareholders Selling Firms Hancock Funds Charges
----------- ------------ ------------- ------------- -------
Class A $20,888 $107 $238,651 $153,119 $0
Class B $33,747 $224 $212,663 $237,303 $0
Class C $ 1,333 $0 $ 18,884 $ 10,648 $0
SALES COMPENSATION
As part of their business strategies, the Fund, along with John Hancock Funds,
pay compensation to Selling Firms that sell the Fund's shares. These firms
typically pass along a portion of this compensation to your broker or financial
representative.
The two primary sources of Selling Firm compensation payments are (1) the 12b-1
fees that are paid out of the Fund's assets and (2) sales charges paid by
investors. The sales charges and 12b-1 fees are detailed in the prospectus and
under "Distribution Contracts" in this Statement of Additional Information. The
portions of these expenses that are paid to Selling Firms are shown on the next
page.
Initial compensation Whenever you make an investment in Class A, Class B or
Class C shares of the Fund, the Selling Firm receives a
reallowance/payment/commission as described on the next page. The Selling Firm
also receives the first year's 12b-1 service fee at this time.
Annual compensation For Class A, Class B and Class C shares of the Fund,
beginning in the second year after an investment is made, the Selling Firm
receives an annual 12b-1 service fee of 0.25% of its average daily net (aged)
assets. In addition, beginning in the second year after an investment is made in
Class C shares, the Distributor will pay the Selling Firm a distribution fee
31
in an amount not to exceed 0.75% of the average daily net (aged) assets. These
service and distribution fees are paid quarterly in arrears.
Selling Firms receive service and distribution fees if, for the preceding
quarter, (1) their clients/shareholders have invested combined average daily net
assets of no less than $1,000,000 in eligible (aged) assets; or (2) an
individual registered representative of the Selling Firm has no less than
$250,000 in eligible (aged) assets. The reason for these criteria is to save the
Fund the expense of paying out de minimus amounts. As a result, if a Selling
Firm does not meet one of the criteria noted above, the money for that firm's
fees remains in the Fund.
In addition, from time to time, John Hancock Funds, at its expense, and without
additional cost to the Fund or its shareholders, may provide significant
additional compensation to Selling Firms in connection with their promotion of
the Fund or sale of shares of the Fund. Such compensation provided by John
Hancock Funds may include, for example, financial assistance to financial
services firms in connection with their marketing and sales development programs
for their registered representatives and other employees, as well as payment for
travel expenses, including lodging, incurred by registered representatives and
other employees for such marketing and sales development programs, as well as
assistance for seminars for the public, advertising and sales campaigns
regarding one or more Funds, and other Selling Firms-sponsored events or
activities. From time to time, John Hancock Funds may provide expense
reimbursements for special training of a Selling Firm's registered
representatives and other employees in group meetings or non-cash compensation
in the form of occasional gifts, meals, tickets or other entertainment. Payments
may also include amounts for sub-administration and other services for
shareholders whose shares are held of record in omnibus or other group accounts.
Other compensation, such as asset retention fees, finder's fees and
reimbursement for wire transfer fees or other administrative fees and costs may
be offered to the extent not prohibited by law or any self-regulatory agency
such as the NASD.
32
First Year Broker or Other Selling Firm Compensation
Investor pays Selling Firm Selling Firm
sales charge receives receives 12b-1 Total Selling Firm
Class A investments (% of offering price) commission (1) service fee (2) compensation (3) (4)
- ------------------- --------------------- -------------- --------------- --------------------
Up to $49,999 5.00% 4.01% 0.25% 4.25%
$50,000 - $99,999 4.50% 3.51% 0.25% 3.75%
$100,000 - $249,999 3.50% 2.61% 0.25% 2.85%
$250,000 - $499,999 2.50% 1.86% 0.25% 2.10%
$500,000 - $999,999 2.00% 1.36% 0.25% 1.60%
Investments of Class A share of
$1 million or more (5)
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50%
Next $1 or more above that -- 0.00% 0.25% 0.25%
Class B investments
All amounts -- 3.75% 0.25% 4.00%
Class C investments
All amounts -- 0.75% 0.25% 1.00%
(1) For Class A investments under $1 million, a portion of the Selling Firm's
commission is paid out of the sales charge.
(2) For Class A, B and C shares, the Selling Firm receives 12b-1 fees in the
first year as a % of the amount invested and after the first year as a % of
average daily net eligible assets (paid quarterly in arrears).
(3) Selling Firm commission and 12b-1 service fee percentages are calculated
from different amounts, and therefore may not equal the total Selling Firm
compensation percentages if combined using simple addition.
(4) Underwriter retains the balance.
(5) See "Initial Sales Charge on Class A Shares" for discussion on how to
qualify for a reduced sales charge. John Hancock Funds may take recent
redemptions into account in determining if an investment qualifies as a new
investment
CDSC revenues collected by John Hancock Funds may be used to pay Selling Firm
commissions when there is no initial sales charge.
33
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 are generally valued at last
sale price on the day of valuation or in the case of securities traded on
NASDAQ, the NASDAQ official closing price. 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 market value, the fair value of
the security may be determined in good faith in accordance with procedures
approved by the Trustees.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 4:00 p.m., London time (11:00 a.m.,
New York time) on the date of a determination of the Fund's NAV. If quotations
are not readily available, or the value has been materially affected by the
events occurring after the closing of a foreign market, assets are valued by a
method that the Trustees believe accurately reflects fair value.
The NAV 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.
INITIAL SALES CHARGE ON CLASS A SHARES
Shares of the Fund are offered at a price equal to their net asset value plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase ("initial sales charge") or on a contingent deferred basis
("contingent deferred sales charge" or "CDSC"). The fund no longer issues share
certificates. Shares are electronically recorded. The Trustees reserve the right
to change or waive the Fund's minimum investment requirements and to reject any
order to purchase shares (including purchase by exchange) when in the judgment
of the Adviser such rejection is in the Fund's best interest.
34
The sales charges applicable to purchases of Class A shares of the Fund are
described in the Prospectus. Methods of obtaining reduced sales charges referred
to generally in the Prospectus are described in detail below. In calculating the
sales charge applicable to current purchases of Class A shares of the Fund, the
investor is entitled to accumulate current purchases with the current offering
price of the Class A, Class B, Class C, Class I, or Class R shares of the John
Hancock mutual funds owned by the investor (see "Accumulation Privilege" below).
In order to receive the reduced sales charge, the investor must notify his/her
financial adviser and/or the financial adviser must notify John Hancock
Signature Services, Inc. ("Signature Services") at the time of purchase of the
Class A shares, about any other John Hancock mutual funds owned by the investor,
the investor's spouse and their children under the age of 21 (see "Combination
Privilege" below). This includes investments held in a retirement account, an
employee benefit plan or at a broker or financial adviser other than the one
handling your current purchase. John Hancock will credit the combined value, at
the current offering price, of all eligible accounts to determine whether you
qualify for a reduced sales charge on your current purchase.
Without Sales Charges. Class A shares may be offered without a front-end sales
charge or contingent deferred sales charge ("CDSC") to various individuals and
institutions as follows:
o A Trustee or officer of the Trust; a Director or officer of the Adviser and
its affiliates, subadviser or Selling Firms; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the Immediate Family
(spouse, child, grandparent, grandchild, parent, sibling, mother-in-law,
father-in-law, daughter-in-law, son-in-law, niece, nephew and same sex
domestic partner; "Immediate Family") of any of the foregoing; or any fund,
pension, profit sharing or other benefit plan for the individuals described
above.
o A broker, dealer, financial planner, consultant or registered investment
advisor that has entered into a signed agreement with John Hancock Funds
providing specifically for the use of Fund shares in fee-based investment
products or services made available to their clients.
o A former participant in an employee benefit plan with John Hancock funds,
when he or she withdraws from his or her plan and transfers any or all of
his or her plan distributions directly to the Fund.
o A member of a class action lawsuit against insurance companies who is
investing settlement proceeds.
o Certain retirement plans participating in Merrill Lynch servicing programs
offered in Class A shares, including transferee recording arrangements,
Merrill Lynch Connect Arrangements and third party administrator
recordkeeping arrangements. See your Merrill Lynch Financial Consultant for
further information.
o Retirement plans investing through the PruArray Program sponsored by a
Prudential Financial company.
35
o Pension plans transferring assets from a John Hancock variable annuity
contract to the Fund pursuant to an exemptive application approved by the
Securities and Exchange Commission.
o Participants in certain 529 Plans that have a signed agreement with John
Hancock Funds. No CDSC will be due for redemptions on plan purchases made
at NAV with no finder's fee. However, if a plan had a finder's fee or
commission, and the entire plan redeemed within 12 months of the first
investment in the plan, a CDSC would be due.
o Participant directed retirement plans with at least 100 eligible employees
at the inception of the Fund account. Each of these employees may purchase
Class A shares with no initial sales charge, if the plan sponsor notifies
Signature Services of the number of employees at the time the account is
established. However, if the shares are redeemed within 12 months of the
inception of the plan, a CDSC will be imposed at the following rate:
Amount Invested CDSC Rate
--------------- ---------
First $1 to $4,999,999 1.00%
Next $1-$5 million above that 0.50%
Next $1 or more above that 0.25%
As of July 15, 2004, no Class C investors pay a front-end sales charge.
Class A shares may also be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
With Reduced Sales Charges
Combination Privilege. For all shareholders in calculating the sales charge
applicable to purchases of Class A shares made at one time, the purchases will
be combined to reduce sales charges if made by (a) an individual, his or her
spouse and their children under the age of 21, purchasing securities for his or
their own account, (b) a trustee or other fiduciary purchasing for a single
trust, estate or fiduciary account and (c) groups which qualify for the Group
Investment Program (see below). Qualified and non-qualified retirement plan
investments can be combined to take advantage of this privilege. Further
information about combined purchases, including certain restrictions on combined
group purchases, is available from Signature Services or a Selling Firm's
representative.
Accumulation Privilege. Class A investors may also reduce their Class A sales
charge by taking into account not only the amount being invested but also the
current offering price of all the Class A, Class B, Class C, Class I and Class R
shares of all John Hancock funds already held by such person. However, Class A
shares of John Hancock money market funds will only be eligible for the
accumulation privilege if the investor has previously paid a sales charge on the
amount of those shares. To receive a reduced sales charge, the investor must
tell his/her financial adviser or
36
Signature Services at the time of the purchase about any other John Hancock
mutual funds held by that investor or his/her Immediate Family.
Group Investment Program. Under the Combination and Accumulation Privileges, all
members of a group may combine their individual purchases of Class A shares to
potentially qualify for breakpoints in the sales charge schedule. This feature
is provided to any group which (1) has been in existence for more than six
months, (2) has a legitimate purpose other than the purchase of mutual fund
shares at a discount for its members, (3) utilizes salary deduction or similar
group methods of payment, and (4) agrees to allow sales materials of the fund in
its mailings to members at a reduced or no cost to John Hancock Funds.
Letter of Intention. Reduced Class A sales charges under the Accumulation
Privilege are also applicable to investments made pursuant to a Letter of
Intention (the "LOI"), which should be read carefully prior to its execution by
an investor. The Fund offers two options regarding the specified period for
making investments under the LOI. All investors have the option of making their
investments over a period of thirteen (13) months. Investors who are using the
Fund as a funding medium for a retirement plan, however, may opt to make the
necessary investments called for by the LOI over a forty-eight (48) month
period. These retirement plans include traditional, Roth IRAs and Coverdell
ESAs, SEP, SARSEP, 401(k), 403(b) (including TSAs), SIMPLE IRA, SIMPLE 401(k),
Money Purchase Pension, Profit Sharing and Section 457 plans. An individual's
non-qualified and qualified retirement plan investments can be combined to
satisfy the LOI (either 13 or 48 months). Since some retirement plans are held
in an omnibus account, an investor wishing to count retirement plan holdings
towards a Class A purchase must notify Signature Services of these holdings.
Such an investment (including accumulations, combinations and reinvested
dividends) must aggregate $50,000 or more during the specified period from the
date of the LOI or from a date within ninety (90) days prior thereto, upon
written request to Signature Services. The sales charge applicable to all
amounts invested under the LOI is computed as if the aggregate amount intended
to be invested had been invested immediately. If such aggregate amount is not
actually invested, the difference in the sales charge actually paid and the
sales charge payable had the LOI not been in effect is due from the investor.
However, for the purchases actually made within the specified period (either 13
or 48 months) the sales charge applicable will not be higher than that which
would have applied (including accumulations and combinations) had the LOI been
for the amount actually invested.
The LOI authorizes Signature Services to hold in escrow sufficient Class A
shares (approximately 5% of the aggregate) to make up any difference in sales
charges on the amount intended to be invested and the amount actually invested,
until such investment is completed within the specified period, at which time
the escrowed Class A shares will be released. If the total investment specified
in the LOI is not completed, the Class A shares held in escrow may be redeemed
and the proceeds used as required to pay such sales charge as may be due. By
signing the LOI, the investor authorizes Signature Services to act as his or her
attorney-in-fact to redeem any escrowed Class A shares and adjust the sales
charge, if necessary. A LOI does not constitute a binding commitment by an
investor to purchase, or by the Fund to sell, any additional Class A shares and
may be terminated at any time.
37
DEFERRED SALES CHARGE ON CLASS B AND CLASS C SHARES
Investments in Class B and Class C shares are purchased at net asset value per
share without the imposition of an initial sales charge so that the Fund will
receive the full amount of the purchase payment.
Contingent Deferred Sales Charge. Class B and Class C shares which are redeemed
within six years or one year of purchase, respectively, will be subject to a
contingent deferred sales charge ("CDSC") at the rates set forth in the
Prospectus as a percentage of the dollar amount subject to the CDSC. The charge
will be assessed on an amount equal to the lesser of the current market value or
the original purchase cost of the Class B or Class C shares being redeemed. No
CDSC will be imposed on increases in account value above the initial purchase
prices or on shares derived from reinvestment of dividends or capital gains
distributions.
Class B shares are not available to retirement plans that had more than 100
eligible employees at the inception of the Fund account. You must notify
Signature Services of the number of eligible employees at the time your account
is established.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchases of both Class B and Class C
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period for Class B or one year CDSC
redemption period for Class C, or those you acquired through dividend and
capital gain reinvestment, and next from the shares you have held the longest
during the six-year period for Class B shares. For this purpose, the amount of
any increase in a share's value above its initial purchase price is not subject
to a CDSC. Thus, when a share that has appreciated in value is redeemed during
the CDSC period, a CDSC is assessed only on its initial purchase price.
When requesting a redemption for a specific dollar amount, please indicate if
you require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.
Example:
You have purchased 100 Class B shares at $10 per share. The second year after
your purchase, your investment's net asset value per share has increased by $2
to $12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time your CDSC will be calculated as follows:
o Proceeds of 50 shares redeemed at $12 per shares (50 x 12) $600.00
o *Minus Appreciation ($12 - $10) x 100 shares (200.00)
o Minus proceeds of 10 shares not subject to CDSC
(dividend reinvestment) (120.00)
-------
o Amount subject to CDSC $280.00
38
*The appreciation is based on all 100 shares in the account not just the
shares being redeemed.
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole or
in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B and Class C shares, such as the payment of compensation to select
Selling Firms for selling Class B and Class C shares. The combination of the
CDSC and the distribution and service fees facilitates the ability of the Fund
to sell the Class B and Class C shares without a sales charge being deducted at
the time of the purchase.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B and Class C shares and Class A shares that are subject to
a CDSC, unless indicated otherwise, in the circumstances defined below:
For all account types:
* Redemptions made pursuant to the Fund's right to liquidate your account if
you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability. (Does not apply to trust accounts
unless trust is being dissolved.)
* Redemptions made under the Reinstatement Privilege, as described in "Sales
Charge Reductions and Waivers" of the Prospectus.
* Redemptions of Class B and Class C shares made under a periodic withdrawal
plan or redemptions for fees charged by planners or advisors for advisory
services, as long as your annual redemptions do not exceed 12% of your
account value, including reinvested dividends, at the time you established
your periodic withdrawal plan and 12% of the value of subsequent
investments (less redemptions) in that account at the time you notify
Signature Services. (Please note, this waiver does not apply to periodic
withdrawal plan redemptions of Class A shares that are subject to a CDSC.)
* Certain retirement plans participating in Merrill Lynch servicing programs
offered in Class A, Class B and Class C shares, including transferee
recording arrangements, Merrill Lynch Connect Arrangements and third party
administrator recordkeeping arrangements. See your Merrill Lynch Financial
Consultant for further information.
* Redemptions of Class A shares by retirement plans that invested through the
PruArray Program sponsored by a Prudential Financial company.
* Redemptions of Class A shares made after one year from the inception date
of a retirement plan at John Hancock.
39
For Retirement Accounts (such as traditional, Roth IRAs and Coverdell ESAs,
SIMPLE IRAs, SIMPLE 401(k), Rollover IRA, TSA, 457, 403(b), 401(k), Money
Purchase Pension Plan, Profit-Sharing Plan and other plans as described in the
Internal Revenue Code) unless otherwise noted.
* Redemptions made to effect mandatory or life expectancy distributions under
the Internal Revenue Code. (Waiver based on required minimum distribution
calculations for John Hancock Mutual Fund IRA assets only.)
* Returns of excess contributions made to these plans.
* Redemptions made to effect certain distributions, as outlined in the chart
on the following page, to participants or beneficiaries from employer
sponsored retirement plans under sections 401(a) (such as Money Purchase
Pension Plans and Profit Sharing Plan/401(k) Plans), 403(b), 457 and 408
(SEPs and SIMPLE IRAs) of the Internal Revenue Code.
Please see matrix for some examples.
40
- ---------------------------------------------------------------------------------------------------------------
Type of 401 (a) Plan 403 (b) 457 IRA, IRA Non-retirement
Distribution (401 (k), MPP, Rollover
PSP) 457 & 408
(SEPs & Simple
IRAs)
- ---------------------------------------------------------------------------------------------------------------
Death or Disability Waived Waived Waived Waived Waived
- ---------------------------------------------------------------------------------------------------------------
Over 70 1/2 Waived Waived Waived Waived for 12% of account
required value annually
minimum in periodic
distributions* payments
or 12% of
account value
annually in
periodic
payments.
- ---------------------------------------------------------------------------------------------------------------
Between 59 1/2 Waived Waived Waived Waived for Life 12% of account
and 70 1/2 Expectancy or value annually
12% of account in periodic
value annually payments
in periodic
payments.
- ---------------------------------------------------------------------------------------------------------------
Under 59 1/2 Waived for Waived for Waived for Waived for 12% of account
(Class B and Class C annuity payments annuity annuity annuity value annually
only) (72t) or 12% of payments (72t) payments (72t) payments (72t) in periodic
account value or 12% of or 12% of or 12% of payments
annually in account value account value account value
periodic annually in annually in annually in
payments. periodic periodic periodic
payments. payments. payments.
- ---------------------------------------------------------------------------------------------------------------
Loans Waived Waived N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Termination of Plan Not Waived Not Waived Not Waived Not Waived N/A
- ---------------------------------------------------------------------------------------------------------------
Hardships Waived Waived Waived N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Qualified Domestic Waived Waived Waived N/A N/A
Relations Orders
- ---------------------------------------------------------------------------------------------------------------
Termination of Waived Waived Waived N/A N/A
Employment Before
Normal Retirement Age
- ---------------------------------------------------------------------------------------------------------------
Return of Excess Waived Waived Waived Waived N/A
- ---------------------------------------------------------------------------------------------------------------
41
*Required minimum distributions based on John Hancock Mutual Fund IRA assets
only.
If you qualify for a CDSC waiver under one of these situations, you must notify
Signature Services at the time you make your redemption. The waiver will be
granted once Signature Services has confirmed that you are entitled to the
waiver.
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.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of shares of any class of a fund
for shares of the same class in any other John Hancock fund offering that class.
Exchanges between funds are based on their respective net asset values. No sales
charge is imposed, except on exchanges of Class A shares from Money Market Fund
or U.S. Government Cash Reserve Fund to another John Hancock fund, if a sales
charge has not previously been paid on those shares. However, the shares
acquired in an exchange will be subject to the CDSC schedule of the shares
acquired if and when such shares are redeemed. For purposes of computing the
CDSC payable upon redemption of shares acquired in an exchange, the holding
period of the original shares is added to the holding period of the shares
acquired in an exchange.
If a retirement plan exchanges the plan's Class A account in its entirety from
the Fund to a non-John Hancock investment, the one-year CDSC applies.
The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
The Fund does not permit market timing or other excessive trading practices
which may disrupt portfolio management strategies and increase fund expenses. To
protect the interests of other investors in the Fund, the Fund may cancel the
exchange privileges (or reject any exchange or purchase orders) of any parties
who, in the opinion of the Fund, are engaging in market timing. For these
purposes, the Fund may consider an investor's trading history in the Fund or
other John Hancock funds, and accounts under common ownership or control. The
Fund may change or cancel its exchange policies at any time, upon 60 days'
notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
42
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 of the initial sales
charge payable on such purchases of Class A shares and the CDSC imposed on
redemptions of Class B and Class C shares and 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.
Reinstatement or Reinvestment Privilege. If Signature Services is notified prior
to reinvestment, a shareholder who has redeemed Fund shares may, within 120 days
after the date of redemption, reinvest without payment of a sales charge any
part of the redemption proceeds in shares of the same class of the Fund or
another John Hancock fund, subject to the minimum investment limit in that fund.
The proceeds from the redemption of Class A shares may be reinvested at net
asset value without paying a sales charge in Class A shares of the Fund or in
Class A shares of any John Hancock fund. If a CDSC was paid upon a redemption, a
shareholder may reinvest the proceeds from this redemption at net asset value in
additional shares of the class from which the redemption was made. The
shareholder's account will be credited with the amount of any CDSC charged upon
the prior redemption and the new shares will continue to be subject to the CDSC.
The holding period of the shares acquired through reinvestment will, for
purposes of computing the CDSC payable upon a subsequent redemption, include the
holding period of the redeemed shares.
The Fund may refuse any reinvestment request and may change or cancel its
reinvestment policies at any time.
A redemption or exchange of Fund shares is a taxable transaction for Federal
income tax purposes even if the reinvestment privilege is exercised, and any
gain or loss realized by a
43
shareholder on the redemption or other disposition of Fund shares will be
treated for tax purposes as described under the caption "TAX STATUS."
Retirement plans participating in Merrill Lynch's servicing programs:
Class A shares are available at net asset value for Merrill Lynch retirement
plans, including transferee recording arrangements, Merrill Lynch Connect
Arrangements and third party administrator recordkeeping arrangements. See
Merrill Lynch Financial Consultant for further information.
For participating retirement plans investing in Class B shares, shares will
convert to Class A shares after eight years, or sooner if the plan attains
assets of $5 million (by means of a CDSC-free redemption/purchase at net asset
value).
PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES
Shares of the Fund may be purchased or redeemed through certain Selling Firms.
Selling Firms may charge the investor additional fees for their services. The
Fund will be deemed to have received a purchase or redemption order when an
authorized Selling Firm, or if applicable, a Selling Firm's authorized designee,
receives the order. Orders may be processed at the NAV next calculated after the
Selling Firm receives the order. The Selling Firm must segregate any orders it
receives after the close of regular trading on the New York Stock Exchange and
transmit those orders to the Fund for execution at NAV next determined. Some
Selling Firms that maintain network/omnibus/nominee accounts with the Fund for
their clients charge an annual fee on the average net assets held in such
accounts for accounting, servicing, and distribution services they provide with
respect to the underlying Fund shares. This fee is paid by the Adviser, the Fund
and/or John Hancock Funds, LLC (the Fund's principal distributor).
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 and
classes, without further action by shareholders. As of the date of this
Statement of Additional Information, the Trustees have authorized shares of the
Fund and three other series. Additional series may be added in the future. The
Trustees have also authorized the issuance of three classes of shares of the
Fund, designated as Class A, Class B and Class C.
The shares of each class of the Fund represent an equal proportionate interest
in the aggregate net assets attributable to that class of the Fund. Holders of
each class of shares have certain exclusive voting rights on matters relating to
their respective distribution plans. The different classes of the Fund may bear
different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares.
Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the facts that (i) the
distribution and service fees relating to each class
44
of shares will be borne exclusively by that class, (ii) Class B and Class C
shares will pay higher distribution and service fees than Class A shares and
(iii) each class of shares will bear any other 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.
In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable, except as set forth below.
Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the 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.
45
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. Selling Firms 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 distributions 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 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 their investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. Because more than 50% of the Fund's 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 (as additional income)
along with a corresponding entitlement to a foreign tax credit or deduction. The
Fund will deduct the foreign taxes it pays in determining the amount it has
available for distribution to shareholders.
46
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 for these investments.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
certain foreign currency options, foreign currencies, or payables or receivables
denominated in foreign currency are subject to Section 988 of the Code, which
generally causes such gains and losses to be treated as ordinary income and
losses and may affect the amount, timing and character of distributions to
shareholders. Transactions in foreign currencies that are not directly related
to the Fund's investment in stock or securities, including speculative currency
positions could under future Treasury regulations produce income not among the
types of "qualifying income" from which the Fund must derive at least 90% of its
gross income from each taxable year. If the net foreign exchange loss for a year
treated as ordinary loss under Section 988 were to exceed the Fund's investment
company taxable income computed without regard to such loss the resulting
overall ordinary loss for such year would not be deductible by the Fund or its
shareholders in future years.
Certain options, futures, and forward foreign currency contracts undertaken by
the Fund could cause the Fund to recognize gains or losses from marking to
market even though its positions have not been sold or terminated and affect the
character as long-term or short-term (or, in the case of foreign currency
contracts, as ordinary income or loss) and timing of some capital gains and
losses realized by the Fund. Additionally, the Fund may be required to recognize
gain, but not loss, if an option, short sales or other transaction is treated as
a constructive sale of an appreciated financial position in the Fund's
portfolio. Also, certain of the Fund's losses on its transactions involving
options, futures or forward contracts and/or offsetting or successor portfolio
positions may be deferred rather than being taken into account currently in
calculating the Fund's taxable income or gains. Certain of such transactions may
also cause the Fund to dispose of investments sooner than would otherwise have
occurred. These transactions may therefore affect the amount, timing and
character of the Fund's distributions to shareholders. The Fund will take into
account the special tax rules (including consideration of available elections)
applicable to options, futures and forward contracts in order to seek to
minimize any potential adverse tax consequences.
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 and/or engage in options transactions
47
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) that in a transaction 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.
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.
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 carry
forward 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.
48
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. The Fund has a $271,450,368 capital loss carryforward
available, to the extent provided by regulations, to offset future net capital
gains. The Fund's carryforwards expire as follows: $216,254,383 on October 31,
2009 and $55,195,985 on October 31, 2010.
If the Fund should have dividend income that qualifies as Qualified Dividend
Income, as provided in the Jobs and Growth Tax Relief Reconciliation Act of
2003, the maximum amount allowable will be designated by the Fund. This amount
will be reflected on Form 1099-DIV for the current calendar year.
If the Fund should have dividend income that qualifies for the
dividends-received deduction for corporations, it will be subject to the
limitations applicable under the Code. The qualifying portion is limited to
properly designated distributions attributed to dividend income (if any) the
Fund receives from certain stock in U.S. domestic corporations and the deduction
is subject to holding period requirements and debt-financing limitations under
the Code.
Investment in debt obligations that are at risk of or in default present special
tax issues for the Fund. Tax rules are not entirely clear about issues such as
when the Fund may cease to accrue interest, original issue discount, or market
discount, when and to what extent deductions may be taken for bad debts or
worthless securities, how payments received on obligations in default should be
allocated between principal and income, and whether exchanges of debt
obligations in a workout context are taxable. These and other issues will be
addressed by the Fund, in the event it acquires or holds any such obligations,
in order to reduce the risk of distributing insufficient income to preserve its
status as a regulated investment company and seeks to avoid becoming subject to
Federal income or excise tax.
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 the
excess (if any) of a corporate shareholder's adjusted current earnings over its
alternative minimum taxable income, which may increase its alternative minimum
tax liability. Additionally, any corporate shareholder should consult its tax
adviser regarding the possibility that its 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 extend 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
49
elects to include market discount in income currently) prior to the receipt of
the corresponding cash payments. The mark to market or constructive sale rules
applicable to certain options, futures, forwards, short sales or other
transactions may also require the Fund to recognize income or gain without a
concurrent receipt of cash. Additionally, some countries restrict repatriation
which may make it difficult or impossible for the Fund to obtain cash
corresponding to its earnings or assets in those countries. 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.
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 taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax 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 nor
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
50
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 and to backup
withholding on certain other payments from the Fund. Non-U.S. investors should
consult their tax advisers regarding such treatment and the application of
foreign taxes to an investment in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
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
As of October 31, 2003, the average annual total returns for Class A shares of
the Fund for the one, five and ten year periods were 11.32%, -11.78% and -0.52%,
respectively.
As of October 31, 2003, the average annual total returns before taxes for Class
B shares of the Fund for the one and five year periods and since the
commencement of operations on January 3, 1994, were 11.42%, -11.75% and -0.34%,
respectively.
As of October 31, 2003, the average annual total returns before taxes for Class
C shares of the Fund for the one year and five year periods and since the
commencement of operations on June 1, 1998 were 15.29%, -11.49% and -10.70%,
respectively. The average annual total returns for Class C have been adjusted to
reflect the elimination of the front-end sales charge that became effective July
15, 2004.
The average annual total return before taxes is computed by finding the average
annual compounded rate of return over the 1-year, 5-year and 10-year periods, or
the period since the commencement of operations, that would equate the initial
amount invested to the ending redeemable value according to the following
formula:
n
P(1+T) = ERV
Where:
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1-year, 5-year, and 10-year periods (or
fractional portion).
51
The Fund discloses average annual total returns after taxes for Class A shares
for the one, five and 10 year periods ended December 31, 2003 in the prospectus.
After tax returns are computed using the historical highest individual federal
marginal income-tax rates and do not reflect the impact of state and local
taxes. Actual after-tax returns depend on the investor's tax situation and may
differ from those shown. The after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements such as
401(k) plans or individual retirement accounts.
The average annual total return (after taxes on distributions) is computed by
finding the average annual compounded rate of return over the 1-year, 5-year and
10-year periods, or the period since the commencement of operations, that would
equate the initial amount invested to the ending redeemable value according to
the following formula:
n
P(1+T) = ATV
D
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return (after taxes on distributions)
n = number of years
ATV = ending value of a hypothetical $1,000 payment made at the
D beginning of the 1-year, 5-year or 10-year periods (or fractional
portion) after taxes on fund distributions but not after taxes on
redemption.
The average annual total return (after taxes on distributions and redemption) is
computed by finding the average annual compounded rate of return over the
1-year, 5-year, and 10-year periods, or the period since the commencement of
operations, that would equate the initial amount invested to the ending
redeemable value according to the following formula:
n
P(1+T) = ATV
DR
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return (after taxes on distributions and
redemption)
n = number of years
ATV = ending value of a hypothetical $1,000 payment made at the
DR beginning of the 1-year, 5-year or 10-year periods (or fractional
portion) after taxes on fund distributions and redemption.
Because each class has its own sales charge and fee structure, the classes have
different performance results. In the case of each class, these calculations
assume the maximum sales charge is included in the initial investment or the
CDSC is applied at the end of the period. These calculations assume that all
dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period. The "distribution rate" is determined by
annualizing the result of dividing the declared dividends of the Fund during the
period stated by the maximum offering price or net asset value at the end of the
period. Excluding the Fund's sales charge from the distribution rate produces a
higher rate.
52
In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total returns may be quoted as a percentage or
as a dollar amount, and may be calculated for a single investment, a series of
investments and/or a series of redemptions over any time period. Total returns
may be quoted with or without taking the Fund's sales charge on Class A shares
or the CDSC on Class B or Class C shares into account. Excluding the Fund's
sales charge on Class A shares and the CDSC on Class B or Class C shares from a
total return calculation produces a higher total return figure.
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:
a-b 6
Yield = 2([(---)+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, and excerpts from,
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
53
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's investment and/or
trading personnel. Orders for purchases and sales of securities are placed in a
manner, which, in the opinion of such personnel, will offer the best price and
market for the execution of each such transaction. The Fund's trading practices
and investments are reviewed monthly by the Adviser's Senior Investment Policy
Committee which consists of officers of the Adviser and quarterly by the
Adviser's Investment Committee which consists of officers and directors of the
Adviser and Trustees of the Trust who are interested persons of the Fund.
Purchases from underwriters of portfolio securities may include a commission or
commissions paid by the issuer and transactions with dealers serving as market
maker reflect a "spread." Investments in debt securities are generally traded on
a "net" basis through dealers acting for their own account as principals and not
as brokers; no brokerage commissions are payable on these transactions. 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. Investments in equity securities are generally traded on exchanges or
on over-the-counter markets at fixed commission rates or on a net basis. 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.
The policy governs the selection of brokers and dealers and the market in which
a transaction is executed. The Adviser does not 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.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Adviser that such price 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 October 31,
2003, the Fund paid $228,933 as compensation to brokers for research services
such as industry, economic and company reviews and evaluations of securities.
"Commissions", as interpreted by the SEC, include fees paid to
54
brokers for trades conducted on an agency basis, and certain mark-ups,
mark-downs, commission equivalents and other fees received by dealers in
riskless principal transactions placed in the over-the-counter market.
The term "brokerage and research services" includes research services received
from broker-dealers which supplement the Adviser's own research (and the
research of its affiliates), and may include the following types of information:
statistical and background information on the U.S. and foreign economies,
industry groups and individual companies; forecasts and interpretations with
respect to the U.S. and foreign economies, securities, markets, specific
industry groups and individual companies; information on federal, state, local
and foreign political developments; portfolio management strategies; performance
information on securities, indexes and investment accounts; and information
concerning prices and ratings of securities. Broker-dealers may communicate such
information electronically, orally, in written form or on computer software.
Research services may also include the providing of electronic communication of
trade information and the providing specialized consultations with the Adviser's
personnel with respect to computerized systems and data furnished as a component
of other research services, the arranging of meetings with management of
companies, and the providing of access to consultants who supply research
information.
The outside research assistance is useful to the Adviser since the
broker-dealers used by the Adviser tend to follow a broader universe of
securities and other matters than the Adviser's staff can follow. In addition,
the research provides the Adviser with a diverse perspective on financial
markets. Research services provided to the Adviser by broker-dealers are
available for the benefit of all accounts managed or advised by the Adviser or
by its affiliates. Some broker-dealers may indicate that the provision of
research services is dependent upon the generation of certain specified levels
of commissions and underwriting concessions by the Adviser's clients, including
the Fund. However, the Fund is not under any obligation to deal with any
broker-dealer in the execution of transactions in portfolio securities.
The Adviser believes that the research services are beneficial in supplementing
the Adviser's research and analysis and that they improve the quality of the
Adviser's investment advice. 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 advisory fee paid
by the Fund is not reduced because the Adviser receives such services. The
receipt of research information is not expected to reduce significantly the
expenses of the Adviser. However, to the extent that the Adviser would have
purchased research services had they not been provided by broker-dealers, or
would have developed comparable information through its own staff, the expenses
to the Adviser could be considered to have been reduced accordingly. 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 make no commitment to allocate portfolio
transactions upon any prescribed basis.
Broker-dealers may be willing to furnish statistical, research and other factual
information or service to the Adviser for no consideration other than brokerage
or underwriting commissions. Securities may be bought or sold from time to time
through such broker-dealers on behalf of the Fund or the Adviser's other
clients.
55
In effecting portfolio transactions on behalf of the Fund and the Adviser's
other clients, the Adviser may from time to time instruct the broker-dealer that
executes the transaction to allocate, or "step-out", a portion of the
transaction to another broker-dealer. The broker-dealer to which the Adviser
"stepped-out" would then settle and complete the designated portion of the
transaction. Each broker-dealer would receive a commission or brokerage fee with
respect to that portion of the transaction that it settles and completes.
While the Adviser will be primarily responsible for its allocation of the Fund's
brokerage business, the policies and practices of the Adviser in this regard
must be consistent with the foregoing and at all times be subject to review by
the Trustees. For the fiscal years ended October 31, 2001, 2002 and 2003, the
Fund paid negotiated brokerage commissions of $999,129, $1,616,943 and $840,176,
respectively.
The Adviser may determine target levels of commission business with various
brokers on behalf of its clients (including the Fund) over a certain time
period. The target levels will be based upon the following factors, among
others: (1) the execution services provided by the broker; (2) the research
services provided by the broker; and (3) the broker's interest in mutual funds
in general and in the Fund and other mutual funds advised by the Adviser in
particular. In connection with (3) above, the Fund's trades may be executed
directly by dealers that sell shares of the John Hancock funds or by other
broker-dealers with which such dealers have clearing arrangements, consistent
with obtaining best execution and the Conduct Rules of the National Association
of Securities Dealers, Inc. The Adviser will not use a specific formula in
connection with any of these considerations to determine the target levels.
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 brokers affiliated with the Adviser ("Affiliated
Brokers"). Affiliated Brokers 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 that is affiliated with the Affiliated
Broker has, as an investment adviser to the Fund, the obligation to provide
investment management services, which includes 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.
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 an "Affiliated Broker"). The
Adviser's indirect parent, Manulife Financial, is the
56
parent of another broker-dealer, Manulife Financial Securities, LLC ("MF
Securities" or "Affiliated Broker"). For the fiscal years ended October 31,
2001, 2002 and 2003, the Fund paid no brokerage commissions to any Affiliated
Broker.
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. Because of
this, client accounts in a particular style may sometimes not sell or acquire
securities as quickly or at the same prices as they might if each were managed
and traded individually.
For purchases of equity securities, when a complete order is not filled, a
partial allocation will be made to each participating account pro rata based on
the order size. For high demand issues (for example, initial public offerings),
shares will be allocated pro rata by account size as well as on the basis of
account objective, account size ( a small account's allocation may be increased
to provide it with a meaningful position), and the account's other holdings. In
addition, an account's allocation may be increased if that account's portfolio
manager was responsible for generating the investment idea or the portfolio
manager intends to buy more shares in the secondary market. For fixed income
accounts, generally securities will be allocated when appropriate among accounts
based on account size, except if the accounts have different objectives or if an
account is too small to get a meaningful allocation. For new issues, when a
complete order is not filled, a partial allocation will be made to each account
pro rata based on the order size. However, if a partial allocation is too small
to be meaningful, it may be reallocated based on such factors as account
objectives, strategies, duration benchmarks and credit and sector exposure. For
example, value funds will likely not participate in initial public offerings as
frequently as growth funds. 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 pays Signature
Services monthly a fee which is based on an annual rate of $16.00 for each Class
A shareholder account and $18.50 for each Class B shareholder account and $17.50
for each Class C shareholder account. The Fund also pays Signature Services
monthly a fee which is based on an annual rate of 0.05% of average daily net
assets attributable to Class A, Class B and Class C shares. For Class A, B, and
C shares, the Fund also pays certain out-of pocket expenses. Expenses for Class
A, B and C shares are aggregated and allocated to each class on the basis of
their relative net asset values. For shares held of record in omnibus or other
group accounts where administration and other shareholder services are provided
by the broker or group administrator, the broker or administrator will charge a
service fee to the Fund. For such shareholders, Signature Services does not
charge its account fee. The Fund pays Signature Services monthly a fee which is
based on an annual rate of 0.05% of average daily net assets attributable to
Class I shares. For shares held of record in omnibus or other group accounts
where administration and other shareholder services are
57
provided by the Selling Firm or group administrator, the Selling Firm or
administrator will charge a service fee to the Fund. For such shareholders,
Signature Services does not charge its account fee.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and The Bank of New York, One Wall Street, New York, New York
10286. Under the custodian agreement, The Bank of New York is performing
custody, Foreign Custody Manager and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are PricewaterhouseCoopers LLP, 125 High
Street, Boston, Massachusetts 02110. PricewaterhouseCoopers LLP audits and
renders an opinion on the Fund's annual financial statements and reviews the
Fund's annual Federal income tax return. Until October 31, 2002, the independent
auditors of the Fund were Ernst & Young LLP, 200 Clarendon Street, Boston,
Massachusetts 02116.
FUND SECURITIES
The Fund has a policy for disclosure of its portfolio securities. Information
about the securities held by the Fund may not be disclosed except as follows:
On the fifth business day after month-end, certain information is published on
www.jhfunds.com, including but not limited to top ten holdings, sector analysis,
and investment performance. The complete portfolio is published on
www.jhfunds.com each month with a one-month lag (for example, information as of
December 31 will be published on February 1). Once published, the portfolio
information is available to the public and all categories of investors and
potential investors.
More current portfolio information is disclosed (subject always to
confidentiality agreements) when necessary for the efficient management of the
Fund's portfolio. Parties receiving more current information are: The Fund's
proxy voting service; publishers and writers for the Fund's financial reports;
risk management and portfolio analysis systems; and rating agencies. No
compensation or other consideration is received by the Fund, its adviser or any
affiliated party in regard to disclosure.
Exceptions to the above policy must be authorized by the Fund's chief legal
officer or chief compliance officer, and are subject to ratification by the
Board of Trustees.
58
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).
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).
A-1
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).
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-2
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
B-1
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.
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
APPENDIX C
SUMMARY OF PROXY VOTING
John Hancock Advisers, LLC
Sovereign Asset Management Corporation
Proxy Voting Summary
We believe in placing our clients' interests first. Before we invest in a
particular stock or bond, our team of portfolio managers and research analysts
look closely at the company by examining its earnings history, its management
team and its place in the market. Once we invest, we monitor all our clients'
holdings, to ensure that they maintain their potential to produce results for
investors.
As part of our active investment management strategy, we keep a close eye on
each company we invest in. Routinely, companies issue proxies by which they ask
investors like us to vote for or against a change, such as a new management
team, a new business procedure or an acquisition. We base our decisions on how
to vote these proxies with the goal of maximizing the value of our clients'
investments.
Currently, John Hancock Advisers, LLC ("JHA") and Sovereign Asset Management
Corporation ("Sovereign") manage open-end funds, closed-end funds and portfolios
for institutions and high-net-worth investors. Occasionally, we utilize the
expertise of an outside asset manager by means of a subadvisory agreement. In
all cases, JHA or Sovereign makes the final decision as to how to vote our
clients' proxies. There is one exception, however, and that pertains to our
international accounts. The investment management team for international
investments votes the proxies for the accounts they manage. Unless voting is
specifically retained by the named fiduciary of the client, JHA and Sovereign
will vote proxies for ERISA clients.
In order to ensure a consistent, balanced approach across all our investment
teams, we have established a proxy oversight group comprised of associates from
our investment, operations and legal teams. The group has developed a set of
policies and procedures that detail the standards for how JHA and Sovereign vote
proxies. The guidelines of JHA have been approved and adopted by each fund
client's board of trustees who have voted to delegate proxy voting authority to
their investment adviser, JHA. JHA and Sovereign's other clients have granted us
the authority to vote proxies in our advisory contracts or comparable documents.
JHA and Sovereign have hired a third party proxy voting service which has been
instructed to vote all proxies in accordance with our established guidelines
except as otherwise instructed.
In evaluating proxy issues, our proxy oversight group may consider information
from many sources, including the portfolio manager, management of a company
presenting a proposal, shareholder groups, and independent proxy research
services. Proxies for securities on loan through securities lending programs
will generally not be voted, however a decision may be made to recall a security
for voting purposes if the issue is material.
Below are the guidelines we adhere to when voting proxies. Please keep in mind
that these are purely guidelines. Our actual votes will be driven by the
particular circumstances of each proxy. From time to time votes may ultimately
be cast on a case-by-case basis, taking into consideration relevant facts and
circumstances at the time of the vote. Decisions on these matters (case-by-case,
C-1
abstention, recall) will normally be made by a portfolio manager under the
supervision of the chief investment officer and the proxy oversight group. We
may abstain from voting a proxy if we conclude that the effect on our clients'
economic interests or the value of the portfolio holding is indeterminable or
insignificant.
Proxy Voting Guidelines
Board of Directors
We believe good corporate governance evolves from an independent board.
We support the election of uncontested director nominees, but will withhold our
vote for any nominee attending less than 75% of the board and committee meetings
during the previous fiscal year. Contested elections will be considered on a
case by case basis by the proxy oversight group, taking into account the
nominee's qualifications. We will support management's ability to set the size
of the board of directors and to fill vacancies without shareholder approval but
will not support a board that has fewer than 3 directors or allows for the
removal of a director without cause.
We will support declassification of a board and block efforts to adopt a
classified board structure. This structure typically divides the board into
classes with each class serving a staggered term.
In addition, we support proposals for board indemnification and limitation of
director liability, as long as they are consistent with corporate law and
shareholders' interests. We believe that this is necessary to attract qualified
board members.
Selection of Auditors
We believe an independent audit committee can best determine an auditor's
qualifications.
We will vote for management proposals to ratify the board's selection of
auditors, and for proposals to increase the independence of audit committees.
Capitalization
We will vote for a proposal to increase or decrease authorized common or
preferred stock and the issuance of common stock, but will vote against a
proposal to issue or convert preferred or multiple classes of stock if the board
has unlimited rights to set the terms and conditions of the shares, or if the
shares have voting rights inferior or superior to those of other shareholders.
In addition, we will support a management proposal to: create or restore
preemptive rights; approve a stock repurchase program; approve a stock split or
reverse stock split; and, approve the issuance or exercise of stock warrants
Acquisitions, mergers and corporate restructuring
Proposals to merge with or acquire another company will be voted on a
case-by-case basis, as will proposals for recapitalization, restructuring,
leveraged buyout, sale of assets, bankruptcy or liquidation. We will vote
against a reincorporation proposal if it would reduce shareholder rights. We
will vote against a management proposal to ratify or adopt a poison pill or to
establish a supermajority voting provision to approve a merger or other business
combination. We would
C-2
however support a management proposal to opt out of a state takeover statutory
provision, to spin-off certain operations or divisions and to establish a fair
price provision.
Corporate Structure and Shareholder Rights
In general, we support proposals that foster good corporate governance
procedures and that provide shareholders with voting power equal to their equity
interest in the company.
To preserve shareholder rights, we will vote against a management proposal to
restrict shareholders' right to: call a special meeting and to eliminate a
shareholders' right to act by written consent. In addition, we will not support
a management proposal to adopt a supermajority vote requirement to change
certain by-law or charter provisions or a non-technical amendment to by-laws or
a charter that reduces shareholder rights.
Equity-based compensation
Equity-based compensation is designed to attract, retain and motivate talented
executives and independent directors, but should not be so significant as to
materially dilute shareholders' interests.
We will vote against the adoption or amendment of a stock option plan if:
o the compensation committee is not fully independent
o plan dilution is more than 10% of outstanding common stock,
o the company allows or has allowed the re-pricing or replacement of
underwater options in the past three fiscal years (or the exchange of
underwater options) without shareholder approval.
o the option is not premium priced or indexed, or does not vest based on
future performance
With respect to the adoption or amendment of employee stock purchase plans or a
stock award plan, we will vote against management if:
o the plan allows stock to be purchased at less than 85% of fair market
value;
o this plan dilutes outstanding common equity greater than 10%
o all stock purchase plans, including the proposed plan, exceed 15% of
outstanding common equity
o the potential dilution from all company plans is more than 85%
With respect to director stock incentive/option plans, we will vote against
management if:
1. the minimum vesting period for options or time lapsing restricted
stock is less than one year
2. the potential dilution for all company plans is more than 85%
Other Business
For routine business matters which are the subject of many proxy related
questions, we will vote with management proposals to:
o change the company name;
o approve other business;
o adjourn meetings;
o make technical amendments to the by-laws or charters;
o approve financial statements;
o approve an employment agreement or contract.
C-3
Shareholder Proposals
Shareholders are permitted per SEC regulations to submit proposals for inclusion
in a company's proxy statement. We will generally vote against shareholder
proposals and in accordance with the recommendation of management except as
follows where we will vote for proposals:
o calling for shareholder ratification of auditors;
o calling for auditors to attend annual meetings;
o seeking to increase board independence;
o requiring minimum stock ownership by directors;
o seeking to create a nominating committee or to increase the
independence of the nominating committee;
o seeking to increase the independence of the audit committee.
Corporate and social policy issues
We believe that "ordinary business matters" are primarily the responsibility of
management and should be approved solely by the corporation's board of
directors.
Proposals in this category, initiated primarily by shareholders, typically
request that the company disclose or amend certain business practices. We
generally vote against business practice proposals and abstain on social policy
issues, though we may make exceptions in certain instances where we believe a
proposal has substantial economic implications.
John Hancock Advisers, LLC
Sovereign Asset Management Corporation
Proxy Voting Procedures
The role of the proxy voting service
John Hancock Advisers, LLC ("JHA") and Sovereign Asset Management Corporation
("Sovereign") have hired a proxy voting service to assist with the voting of
client proxies. The proxy service coordinates with client custodians to ensure
that proxies are received for securities held in client accounts and acted on in
a timely manner. The proxy service votes all proxies received in accordance with
the proxy voting guidelines established and adopted by JHA and Sovereign. When
it is unclear how to apply a particular proxy voting guideline or when a
particular proposal is not covered by the guidelines, the proxy voting service
will contact the proxy oversight group coordinator for a resolution.
The role of the proxy oversight group and coordinator
The coordinator will interact directly with the proxy voting service to resolve
any issues the proxy voting service brings to the attention of JHA or Sovereign.
When a question arises regarding how a proxy should be voted the coordinator
contacts the firm's investment professionals and the proxy oversight group for a
resolution. In addition the coordinator ensures that the proxy voting service
receives responses in a timely manner. Also, the coordinator is responsible for
identifying whether, when a voting issue arises, there is a potential conflict
of interest situation and then escalating the issue to the firm's Executive
Committee. For securities out on loan as part of a securities lending program,
if a decision is made to vote a proxy, the coordinator will manage the
return/recall of the securities so the proxy can be voted.
C-4
The role of mutual fund trustees
The boards of trustees of our mutual fund clients have reviewed and adopted the
proxy voting guidelines of the funds' investment adviser, JHA. The trustees will
periodically review the proxy voting guidelines and suggest changes they deem
advisable.
Conflicts of interest
Conflicts of interest are resolved in the best interest of clients.
With respect to potential conflicts of interest, proxies will be voted in
accordance with JHA's or Sovereign's predetermined policies. If application of
the predetermined policy is unclear or does not address a particular proposal, a
special internal review by the JHA Executive Committee or Sovereign Executive
Committee will determine the vote. After voting, a report will be made to the
client (in the case of an investment company, to the fund's board of trustees),
if requested. An example of a conflict of interest created with respect to a
proxy solicitation is when JHA or Sovereign must vote the proxies of companies
that they provide investment advice to or are currently seeking to provide
investment advice to, such as to pension plans.
C-5
FINANCIAL STATEMENTS
The financial statements listed below are included in the Fund's 2003 Annual
Report to Shareholder's for the year ended October 31, 2003 (filed
electronically on January 2, 2004, accession number 0000791271-04-000001 and are
included in and incorporated by reference into Part B of the Registration
Statement for John Hancock Large Cap Growth Fund (file no. 811-4630 and
33-4559).
John Hancock Investment Trust III
John Hancock Large Cap Growth Fund
Statement of Assets and Liabilities as of October 31, 2003 Statement
of Operations for the year ended of October 31, 2003. Statement of
Changes in Net Asset for each of the two years in the period ended
October 31, 2003. Financial Highlights for each of the five years in
the period ended October 31, 2003. Schedule of Investments as of
October 31, 2003. Notes to Financial Statements. Report of Independent
Auditors.
F-1
JOHN HANCOCK U.S. GLOBAL LEADERS GROWTH FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS - (UNAUDITED)
JUNE 30, 2004
Pro forma combined financial statements are intended to provide shareholders of
John Hancock U.S. Global Leaders Growth Fund and John Hancock Large Cap Growth
Fund with information about the impact of the proposed merger by indicating how
the funds might have been affected had the merger been consummated as of June
30, 2003.
The unaudited pro forma combined statements of assets and liabilities and
results of operations as of June 30, 2004, have been prepared to reflect the
merger of the John Hancock U.S. Global Leaders Growth Fund and the John Hancock
Large Cap Growth Fund. The statements also include the pro forma adjustments
described in the notes below.
(a) Acquisition by John Hancock U.S. Global Leaders Growth Fund of all the
assets of the John Hancock Large Cap Growth Fund and the issuance of
John Hancock U.S. Global Leaders Growth Fund Class A, Class B, and
Class C shares in exchange for all of the outstanding Class A, Class B,
and Class C shares, respectively of John Hancock Large Cap Growth Fund.
(b) The 12b-1 fee reflects the application of the fee structure which will
be in effect for the John Hancock U.S. Global Leaders Growth Fund:
0.25% of Class A average daily net assets and 1.00% of Class B and
Class C average daily net assets.
(c) The transfer agent fee for each of the Class A, Class B, and Class C
shares is the total of the respective individual fund's transfer agent
fees.
(d) The actual expenses incurred by the John Hancock U.S. Global Leaders
Growth Fund and the John Hancock Large Cap Growth Fund for various
expenses included on a pro forma basis were reduced to reflect the
estimated savings arising from the merger.
(e) The Adviser has agreed to limit U.S. Global Leaders Growth Fund's total
operating expenses for at least one year from the date of the
reorganization, to 1.35% of average daily net assets for Class A shares
and 2.10% of average daily net assets for Class B and Class C shares.
The Subadviser to U.S. Global Leaders Growth Fund has indicated that many of the
portfolio holdings of Large Cap Growth Fund are not consistent with U.S. Global
Leaders Growth Fund's investment strategy. The Adviser anticipates selling as
many of these securities prior to the closing of the reorganization that is
consistent with the treatment of the reorganization as tax-free. As a result,
securities listed in the Schedule of Investments that are held by Large Cap
Growth Fund but not U.S. Global Leaders Growth Fund may be sold prior to the
closing of the reorganization.
John Hancock U.S. Global Leaders Growth Fund
Pro-forma Statement of Assets and Liabilities
For the twelve month period ended June 30, 2004
(Unaudited)
US GLOBAL LEADERS GROWTH LARGE CAP GROWTH
FUND FUND
- ------------------------------------ --------------------------------
Assets:
Investments at value
(cost - $944,991,762 and $201,776,996, respectively) $ 1,092,119,871 $ 237,392,200
Cash 117 82
Receivable for investments sold 3,618,395 -
Receivable for shares sold - 383
Dividends and interest receivable 514,980 124,165
Other assets 29,416 41,553
------------------------------------ ---------------------------------
Total Assets 1,096,282,779 237,558,383
------------------------------------------------------------- ---------------------------------
Liabilities:
Payable for investments purchased 14,852,599 -
Payable for shares repurchased 539,905 71,934
Payable for securities on loan 198,440,533 44,550,161
Payable to affiliates 859,065 301,743
Accounts payable and accrued expenses 12,520 108,995
------------------------------------ ---------------------------------
Total Liabilities 214,704,622 45,032,833
------------------------------------------------------------- ---------------------------------
Net Assets:
Capital paid-in 756,945,518 419,048,001
Accumulated net realized gain (loss) on investments (20,821,741) (260,740,596)
Net unrealized appreciation of investments 147,128,109 35,615,204
Accumulated net investment loss (1,673,729) (1,397,059)
------------------------------------ ---------------------------------
$ 881,578,157 $ 192,525,550
=================================================================================================================================
Net Assets
US Global Leaders Growth Fund
Class A $ 486,102,503
Class B $ 187,146,227
Class C $ 199,330,069
Class I $ 7,533,836
Class R $ 1,465,522
Large Cap Growth Fund
Class A - $ 145,582,177
Class B - $ 43,409,017
Class C - $ 3,534,356
===================================================================================================================================
Shares outstanding
US Global Leaders Growth Fund
Class A 18,121,293 -
Class B 7,087,690 -
Class C 7,549,062 -
Class I 278,598 -
Class R 54,832 -
Large Cap Growth Fund
Class A 14,758,530
Class B 4,837,626
Class C 394,093
=============================================================================================== =======================
Net Asset Value Per Share
Class A $ 26.82 $ 9.86
Class B $ 26.40 $ 8.97
Class C $ 26.40 $ 8.97
Class I $ 27.04
Class R $ 26.73
================================================================================================ ========================
PRO FORMA
ADJUSTMENTS COMBINED
------------------------- ------------------------------
Assets:
Investments at value
(cost - $944,991,762 and $201,776,996, respectively) $ - $ 1,329,512,071
Cash - 199
Receivable for investments sold - 3,618,395
Receivable for shares sold - 383
Dividends and interest receivable - 639,145
Other assets - 70,969
-------------------------- ------------------------------
Total Assets - 1,333,841,162
---------------------------------------------------------------- ------------------------------
Liabilities:
Payable for investments purchased - 14,852,599
Payable for shares repurchased - 611,839
Payable for securities on loan - 242,990,694
Payable to affiliates - 1,160,808
Accounts payable and accrued expenses - 121,515
-------------------------- ------------------------------
Total Liabilities - 259,737,455
---------------------------------------------------------------- ------------------------------
Net Assets:
Capital paid-in - 1,175,993,519
Accumulated net realized gain (loss) on investments (281,562,337)
Net unrealized appreciation of investments - 182,743,313
Accumulated net investment loss - (3,070,788)
-------------------------- ------------------------------
$ - $ 1,074,103,707
================================================================================================= ==============================
Net Assets
US Global Leaders Growth Fund
Class A 145,582,177 $ 631,684,680
Class B 43,409,017 $ 230,555,244
Class C 3,534,356 $ 202,864,425
Class I - $ 7,533,836
Class R - $ 1,465,522
Large Cap Growth Fund
Class A (145,582,177) -
Class B (43,409,017) -
Class C (3,534,356) -
====================================================================================================================================
Shares outstanding
US Global Leaders Growth Fund
Class A 5,428,120 (a) 23,549,413
Class B 1,644,281 (a) 8,731,971
Class C 133,877 (a) 7,682,939
Class I 278,598
Class R 54,832
Large Cap Growth Fund
Class A (14,758,530)(a) -
Class B (4,837,626)(a) -
Class C (394,093)(a) -
================================================================================================= =====================
Net Asset Value Per Share
Class A - (a) $ 26.82
Class B - (a) $ 26.40
Class C - (a) $ 26.40
Class I - (a) $ 27.04
Class R - (a) $ 26.73
================================================================================================= =====================
Restated to include John Hancock Large Cap Growth Fund merged into John Hancock
U.S. Global Leaders Growth Fund on June 30, 2004.
See notes to pro-forma financial statements
John Hancock U.S. Global Leaders Growth Fund
Pro-forma Statement of Assets and Liabilities
For the twelve month period ended June 30, 2004
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
US GLOBAL LEADERS GROWTH LARGE CAP GROWTH
FUND FUND
---------------------------- -------------------------------
Investment Income:
Dividends (net of foreign withholding tax of none
and $10,559, respectively) $ 8,804,995 $ 1,686,834
Securities lending 192,565 94,567
Interest 157,287 14,377
---------------------------- -------------------------------
9,154,847 1,795,778
---------------------------- -------------------------------
Expenses:
Investment management fees 5,367,602 1,498,453
Class A distribution and service fees 982,854 442,245
Class B distribution and service fees 1,600,393 488,020
Class C distribution and service fees 1,561,655 35,770
Class R distribution and service fees 1,732 -
Class A, Class B and Class C transfer agent fees 1,957,303 1,191,509
Transfer agent fee Class I 3,051 -
Transfer agent fee Class R 1,738 -
Accounting and legal services fees 206,661 57,521
Registration and filing fees 92,055 44,252
Custodian fees 87,428 41,258
Printing 49,301 44,763
Miscellaneous 40,482 15,974
Professional fees 33,739 41,529
Trustees' fees 29,219 11,362
Interest expense 3,457 8,353
Securities lending fees 2,996 2,310
---------------------------- -------------------------------
Total Expenses 12,021,666 3,923,319
Less Expense Reductions (44,081) (44,046)
---------------------------------------------------------------------------------- -------------------------------
Net Expenses 11,977,585 3,879,273
---------------------------------------------------------------------------------- -------------------------------
---------------------------- -------------------------------
Net Investment loss (2,822,738) (2,083,495)
---------------------------------------------------------------------------------- -------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (5,152,999) 18,591,265
Written options - 272,877
Change in net unrealized appreciation (depreciation) of
Investments 101,200,397 6,125,320
---------------------------- -------------------------------
Net realized and unrealized gain 96,047,398 24,989,462
---------------------------- -------------------------------
Increase in net assets resulting from operations $ 93,224,660 $ 22,905,967
============================================================================================= ===============================
PRO-FORMA
ADJUSTMENTS COMBINED
----------------------------- ---------------------------
Investment Income:
Dividends (net of foreign withholding tax of none
and $10,559, respectively) $ - $ 10,491,829
Securities lending - 287,132
Interest - 171,664
----------------------------- ----------------------------
- 10,950,625
----------------------------- ----------------------------
Expenses:
Investment management fees - 6,866,055
Class A distribution and service fees (74,040)(b) 1,351,059
Class B distribution and service fees - 2,088,413
Class C distribution and service fees - 1,597,425
Class R distribution and service fees - 1,732
Class A, Class B and Class C transfer agent fees - 3,148,812
Transfer agent fee Class I - 3,051
Transfer agent fee Class R - 1,738
Accounting and legal services fees - 264,182
Registration and filing fees (22,126)(d) 114,181
Custodian fees (13,751)(d) 114,935
Printing (22,382)(d) 71,682
Miscellaneous (7,987)(d) 48,469
Professional fees (15,238)(d) 60,030
Trustees' fees - 40,581
Interest expense - 11,810
Securities lending fees - 5,306
----------------------------- ----------------------------
Total Expenses (155,524) 15,789,461
Less Expense Reductions (643,407)(d) (731,534)
----------------------------------------------- ----------------------------- ----------------------------
Net Expenses (798,931) 15,057,927
----------------------------------------------- ----------------------------- ----------------------------
----------------------------- ----------------------------
Net Investment loss 798,931 (4,107,302)
----------------------------------------------- ----------------------------- ----------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments - 13,438,266
Written options - 272,877
Change in net unrealized appreciation (depreciation) of
Investments - 107,325,717
----------------------------- ----------------------------
Net realized and unrealized gain - 121,036,860
----------------------------- ----------------------------
Increase in net assets resulting from operations $ 798,931 $ 116,929,558
========================================================== ============================= ============================
See notes to pro-forma financial statements
John Hancock U.S. Global Leaders Growth Fund
Schedule of Investments
June 30, 2004 (unaudited)
---------------------------------------------------------------
U.S. Global Leaders Large U.S. Global Leaders
Growth Cap Growth Growth Combined
- ------------------------------------------------------------------------------------------------------------------------------------
Issuer, Description % of Net Interest Maturity Market Market Market
Assets Rate Date Shares Value Shares Value Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
Air Freight & Logistics 4.10%
United Parcel Service, Inc (Class B)(A) 585,800 44,034,586 585,800 44,034,586
---------- ----------
Aluminum 0.11%
Alcoa, Inc. (A) 35,000 1,156,050 35,000 1,156,050
---------- ----------
Biotechnology 2.24%
Amgen, Inc. 70,000 3,819,900 70,000 3,819,900
Biogen Idec, Inc. (A)(B) 42,000 2,656,500 42,000 2,656,500
Genzyme Corp (A) (B) 371,400 17,578,362 371,400 17,578,362
---------- ---------- ----------
6,476,400 24,054,762
---------- ----------
Brewers 4.21%
Anheuser-Busch Cos., Inc. 797,800 43,081,200 40,163 2,168,802 837,963 45,250,002
---------- ---------- ----------
Broadcasting & Cable TV 1.37%
Comcast Corp. (Special Class A) (A) 199,125 5,497,841 199,125 5,497,841
DIRECTV Group, Inc. (The) 164,642 2,815,378 164,642 2,815,378
Liberty Media Corp. (Class A) (B) 140,000 1,258,600 140,000 1,258,600
Liberty Media International, Inc. (B) 7,000 259,700 7,000 259,700
Time Warner, Inc. (A) 280,000 4,922,400 280,000 4,922,400
---------- ----------
14,753,919 14,753,919
---------- ----------
Casinos & Gaming 0.11%
International Game Technology 30,000 1,158,000 30,000 1,158,000
---------- ----------
Computer Hardware 5.33%
Dell, Inc. (A) (B) 1,597,250 57,213,495 1,597,250 57,213,495
---------- ----------
Communications Equipment 1.47%
Avaya, Inc. (B) 105,000 1,657,950 105,000 1,657,950
Cisco Systems, Inc. (B) 214,500 5,083,650 214,500 5,083,650
Emulex Corp. (A)(B) 160,000 2,289,600 160,000 2,289,600
Motorola, Inc. 215,000 3,923,750 215,000 3,923,750
Nortel Networks Corp. (Canada) 560,000 2,794,400 560,000 2,794,400
---------- ----------
15,749,350 15,749,350
---------- ----------
Computer & Electronics Retail 0.26%
Best Buy Co., Inc. 55,000 2,790,700 55,000 2,790,700
---------- ----------
John Hancock U.S. Global Leaders Growth Fund
Schedule of Investments
June 30, 2004 (unaudited)
---------------------------------------------------------------
U.S. Global Leaders Large U.S. Global Leaders
Growth Cap Growth Growth Combined
- ------------------------------------------------------------------------------------------------------------------------------------
Issuer, Description % of Net Interest Maturity Market Market Market
Assets Rate Date Shares Value Shares Value Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Storage & Peripherals 0.48%
EMC Corp. 455,000 5,187,000 455,000 5,187,000
--------- ----------
Construction & Farm Machinery &
Heavy Trucks 0.28%
Caterpillar, Inc. 38,000 3,018,720 38,000 3,018,720
--------- ----------
Consumer Finance 0.14%
Capital One Financial Corp. 22,000 1,504,360 22,000 1,504,360
--------- ----------
Data Processing & Outsourced Services 3.40%
Paychex, Inc. 60,000 2,032,800 60,000 2,032,800
--------- ----------
Automatic Data Processing, Inc. 823,750 34,498,650 823,750 34,498,650
---------- ----------
36,531,450
----------
Diversified Commercial Services 0.27%
Cendant Corp. 120,000 2,937,600 120,000 2,937,600
--------- ----------
Electronic Components & Equipment 0.24%
Emerson Electric Co. 40,000 2,542,000 40,000 2,542,000
--------- ----------
Electronic Manufacturing Services 0.11%
Flextronics International Ltd. (A)(B)
(Singapore) 72,000 1,148,400 72,000 1,148,400
--------- ----------
Employment Services 0.28%
Manpower, Inc. 59,450 3,018,276 59,450 3,018,276
--------- ----------
General Merchandise Stores 0.31%
Family Dollar Stores, Inc. 60,000 1,825,200 60,000 1,825,200
Target Corp. 35,000 1,486,450 35,000 1,486,450
--------- ----------
3,311,650 3,311,650
--------- ----------
Health Care Equipment 4.11%
Medtronic, Inc. (A) 795,400 38,751,888 64,776 3,155,887 860,176 41,907,775
----------
Zimmer Holdings, Inc. (A)(B) 25,000 2,205,000 25,000 2,205,000
--------- ----------
5,360,887 44,112,775
--------- ----------
Health Care Services 0.22%
Express Scripts, Inc. (A)(B) 30,000 2,376,900 30,000 2,376,900
--------- ----------
John Hancock U.S. Global Leaders Growth Fund
Schedule of Investments
June 30, 2004 (unaudited)
---------------------------------------------------------------
U.S. Global Leaders Large U.S. Global Leaders
Growth Cap Growth Growth Combined
- ------------------------------------------------------------------------------------------------------------------------------------
Issuer, Description % of Net Interest Maturity Market Market Market
Assets Rate Date Shares Value Shares Value Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care Supplies 3.72%
Johnson & Johnson (B) 638,300 35,553,310 80,017 4,456,947 718,317 40,010,257
---------- ---------- ----------
Home Improvement Retail 4.29%
Home Depot, Inc. (The) 1,237,700 43,567,040 70,000 2,464,000 1,307,700 46,031,040
---------- ---------- ----------
Household Products 7.76%
Clorox Co. (The) 27,000 1,452,060 27,000 1,452,060
Procter & Gamble Co. (The) (A) 690,300 37,579,932 50,000 2,722,000 740,300 40,301,932
Colgate-Palmolive Co. (A) 711,250 41,572,562 711,250 41,572,562
---------- ---------- ----------
79,152,494 4,174,060 83,326,554
---------- ---------- ----------
Hypermarkets & Super Centers 3.47%
Costco Wholesale Corp. 30,000 1,232,100 30,000 1,232,100
Wal-Mart Stores, Inc. 665,763 35,125,656 16,564 873,917 682,327 35,999,573
---------- ---------- ----------
2,106,017 37,231,673
---------- ----------
Industrial Conglomerates 1.00%
3M Co. 20,000 1,800,200 20,000 1,800,200
General Electric Co. 75,456 8,924,774 275,456 8,924,774
---------- ----------
10,724,974 10,724,974
---------- ----------
Industrial Machinery 0.19%
Parker- Hannifin Corp. 35,000 2,081,100 35,000 2,081,100
---------- ----------
Insurance Brokers 2.09%
Marsh & McLennan Cos., Inc. (A) 495,200 22,472,176 495,200 22,472,176
---------- ----------
Internet Retail 0.11%
InterActiveCorp (A)(B) 40,000 1,205,600 40,000 1,205,600
---------- ----------
Internet Software & Services 0.44%
Yahoo! Inc. (A)(B) 30,000 4,722,900 130,000 4,722,900
---------- ----------
Investment Banking & Brokerage 0.41%
Goldman Sachs Group, Inc. (The) 15,600 1,468,896 15,600 1,468,896
Merrill Lynch & Co., Inc. 55,000 2,968,900 55,000 2,968,900
---------- ----------
4,437,796 4,437,796
---------- ----------
Managed Health Care 0.21%
UnitedHealth Group, Inc. (A) 36,000 2,241,000 36,000 2,241,000
---------- ----------
John Hancock U.S. Global Leaders Growth Fund
Schedule of Investments
June 30, 2004 (unaudited)
---------------------------------------------------------------
U.S. Global Leaders Large U.S. Global Leaders
Growth Cap Growth Growth Combined
- ------------------------------------------------------------------------------------------------------------------------------------
Issuer, Description % of Net Interest Maturity Market Market Market
Assets Rate Date Shares Value Shares Value Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Movies & Entertainment 0.18%
Viacom, Inc. (Class B) 55,000 1,964,600 55,000 1,964,600
---------- ---------
Multi-Line Insurance 4.29%
American International Group, Inc. 601,262 42,857,955 45,000 3,207,600 646,262 46,065,555
---------- ---------- ----------
Oil & Gas Drilling 0.16%
ENSCO International, Inc. 60,000 1,746,000 60,000 1,746,000
---------- ---------
Oil & Gas Equipment & Services 0.28%
BJ Services Co. 65,000 2,979,600 65,000 2,979,600
---------- ---------
Oil & Gas Exploration & Production 0.38%
Apache Corp. 40,000 1,742,000 40,000 1,742,000
EOG Resources, Inc. 40,000 2,388,400 40,000 2,388,400
---------- ---------
4,130,400 4,130,400
---------- ---------
Other Diversified Financial Services 0.15%
Citigroup, Inc. 35,000 1,627,500 35,000 1,627,500
---------- ---------
Packaged Food & Meats 2.82%
Wrigley (Wm.) Jr. Co. (A) 480,500 30,295,525 480,500 30,295,525
---------- ----------
Personal Products 3.68%
Estee Lauder Cos., Inc. (The) (Class A) 45,000 2,195,100 45,000 2,195,100
----------
Gillette Co. (The) (A) 880,092 37,315,901 880,092 37,315,901
---------- ----------
39,511,001
----------
Pharmaceuticals 7.03%
Abbot Laboratories 410,150 16,717,714 40,000 1,630,400 450,150 18,348,114
----------
Alnylam Pharmaceuticals, Inc. (A)(B) 470,450 3,556,602 470,450 3,556,602
Forest Laboratories, Inc. (B) 30,000 1,698,900 30,000 1,698,900
Merck & Co., Inc. 25,000 1,187,500 25,000 1,187,500
Pfizer, Inc. 1,292,100 44,293,188 186,561 6,395,311 1,478,661 50,688,499
---------- ---------- ----------
14,468,713 75,479,615
---------- ---------
Regional Banks 3.52%
State Street Corp. (A) 770,550 37,787,772 770,550 37,787,772
---------- ----------
John Hancock U.S. Global Leaders Growth Fund
Schedule of Investments
June 30, 2004 (unaudited)
---------------------------------------------------------------
U.S. Global Leaders Large U.S. Global Leaders
Growth Cap Growth Growth Combined
- -----------------------------------------------------------------------------------------------------------------------------------
Issuer, Description % of Net Interest Maturity Market Market Market
Assets Rate Date Shares Value Shares Value Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Reinsurance 0.17%
RenaissanceRe Holdings Ltd. (Bermuda) 33,000 1,780,350 33,000 1,780,350
---------- ----------
Restaurants 3.71%
McDonald's Corp. 75,000 1,950,000 75,000 1,950,000
----------
Starbucks Corp. (A)(B) 872,820 37,950,214 872,820 37,950,214
---------- ----------
39,900,214
----------
Semiconductor Equipment 0.45%
Applied Materials, Inc. (A)(B) 155,000 3,041,100 155,000 3,041,100
ASML Holding NV (NY Reg Shares)
(Netherlands) (A)(B) 105,000 1,796,550 105,000 1,796,550
---------- ----------
4,837,650 4,837,650
---------- ----------
Semiconductors 1.13%
Analog Devices, Inc. 65,000 3,060,200 65,000 3,060,200
Fairchild Semiconductor
International, Inc. (B) 135,000 2,209,950 135,000 2,209,950
Intel Corp. (A) 249,000 6,872,400 249,000 6,872,400
---------- ----------
12,142,550 12,142,550
---------- ----------
Soft Drinks 3.78%
Coca-Cola Co. (The) 764,500 38,591,960 40,000 2,019,200 804,500 40,611,160
---------- ---------- ----------
Specialty Stores 7.90%
Staples, Inc. (A)(B) 1,820,125 53,347,864 55,400 1,623,774 1,875,525 54,971,638
----------
Tiffany & Co. 810,320 29,860,292 810,320 29,860,292
---------- ----------
83,208,156 84,831,930
---------- ----------
Systems Software 5.73%
Microsoft Corp. 1,729,100 49,383,096 302,650 8,643,684 2,031,750 58,026,780
---------
Oracle Corp. (B) 160,000 1,908,800 160,000 1,908,800
VERITAS Software Corp. (A)(B) 60,000 1,662,000 60,000 1,662,000
---------- ----------
12,214,484 61,597,580
---------- ----------
Telecommunications Equipment 0.18%
Nokia Oyj (Finland) 135,000 1,962,900 135,000 1,962,900
---------- ----------
Thrifts & Mortgage Finance 0.34%
Fannie Mae 27,360 1,952,410 27,360 1,952,410
Sovereign Bancorp, Inc. (A) 75,000 1,657,500 75,000 1,657,500
---------- ----------
3,609,910 3,609,910
---------- ----------
John Hancock U.S. Global Leaders Growth Fund
Schedule of Investments
June 30, 2004 (unaudited)
-----------------------------------------------------
U.S. Global Leaders Large
Growth Cap Growth
- ------------------------------------------------------------------------------------------------------------------------------
Issuer, Description % of Net Interest Maturity Market Market
Assets Rate Date Shares Value Shares Value
- ------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunications Services 0.26%
Vodafone Group Plc, American
Depository Receipt
(United Kingdom) 125,000 2,762,500
-----------
TOTAL COMMON STOCKS 98.87% 869,430,338 192,529,039
(Cost $879,216,064) ------------- -----------
--------------- ---------------
Par Value Par Value
(000's Omitted) (000's Omitted)
--------------- ---------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement 2.28%
Investment in a joint repurchase
agreement transaction with USB
Warburg, Inc. - Dated 06-30-04
(Securted by U.S. Treasury Inflation
Indexed Bonds 3.625% due 04-15-28
and 3.375% due 04-15-32, U.S.
Treasury Inflation Indexed Note
2.000% due 01-15-14) 1.30% 07-01-04 24,249 24,249,000 313 313,000
------------- -----------
--------------- ---------------
Shares Shares
--------------- ---------------
Cash Equivalents 22.62%
AIM Cash Investment Trust (C) 198,440,533 198,440,533 44,550,161 44,550,161
------------- -----------
------------- -----------
TOTAL SHORT-TERM INVESTMENTS 24.91% 222,689,533 44,863,161
(Cost $267,552,694) ------------- -----------
TOTAL INVESTMENTS 123.78% 1,092,119,871 237,392,200
------------- -----------
OTHER ASSETS AND LIABILITIES, NET -23.78% (210,541,714) (44,866,650)
------------- -----------
TOTAL NET ASSETS 100.00% 881,578,157 192,525,550
============= ===========
-------------------------------
U.S. Global Leaders
Growth Combined
- ----------------------------------------------------------------------
Issuer, Description % Market
Shares Value
- ----------------------------------------------------------------------
Wireless Telecommunications Services
Vodafone Group Plc, American
Depository Receipt
(United Kingdom) 125,000 2,762,500
-------------
TOTAL COMMON STOCKS 1,061,959,377
(Cost $879,216,064) -------------
---------------
Par Value
(000's Omitted)
---------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement
Investment in a joint repurchase
agreement transaction with USB
Warburg, Inc. - Dated 06-30-04
(Securted by U.S. Treasury Inflation
Indexed Bonds 3.625% due 04-15-28
and 3.375% due 04-15-32, U.S.
Treasury Inflation Indexed Note
2.000% due 01-15-14) 24,562 24,562,000
-------------
---------------
Shares
---------------
Cash Equivalents
AIM Cash Investment Trust (C) 242,990,694 242,990,694
-------------
-------------
TOTAL SHORT-TERM INVESTMENTS 267,552,694
(Cost $267,552,694) -------------
TOTAL INVESTMENTS 1,329,512,071
-------------
OTHER ASSETS AND LIABILITIES, NET (255,408,364)
-------------
TOTAL NET ASSETS 1,074,103,707
=============
(A) All or a portion of this securities is on loan as of June 30, 2004.
(B) Non-income-producing security.
(C) Represents investment of securities lending collateral.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer. The percentage shown for each investment
category is the total of that category as a percentage of the net assets of the
Fund.
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
No change from the information set forth in Item 27 of the Registration
Statement of John Hancock Capital Series (the "Registrant") on Form N-1A under
the Securities Act of 1933 and the Investment company Act of 1940 (File Nos.
2-29502 and 811-1677), which information is incorporated herein by reference.
ITEM 16. EXHIBITS:
1 Registrant's Amended and Restated Filed as Exhibit 99.a to Registrant's
Declaration of Trust Registration Statement on Form N-1A and
incorporated herein by reference to
post-effective amendment no. 54 (file
nos. 811-1677 and 2-29502 on February 29,
2000; accession no. 0001010521-00-000204)
("PEA 54 ")
1.1 Amendment to Declaration of Trust Filed as Exhibit 99.a.1 to PEA 54 and
incorporated herein by reference
1.2 Amendment to Declaration of Trust Filed as Exhibit 99.a.2 to Registrant's
Registration Statement on Form N-1A and
incorporated herein by reference to
post-effective amendment no. 58 (file
nos. 811-1677 and 2-29502 on December 27,
2001; accession no. 0001010521-01-500304)
("PEA 58")
1.3 Amendment to Declaration of Trust Filed as Exhibit 99.a.3 to Registrant's
Registration Statement on Form N-1A and
incorporated herein by reference to post-
effective amendment no. 61 (file no.
811-1677 and 2-29502 on April 3, 2002;
accession no. 0001010521-02-000150.
1.4 Amendment to Declaration of Trust Filed as Exhibit 99.a.4 to Registrant's
Registration Statement on Form N-1A and
incorporated herein by reference to post-
effective amendment no. 63 (file no.
811-1677 and 2-29502 on August 27, 2002;
accession no. 0001010521-02-000293.
1.5 Amendment to Declaration of Trust Filed as Exhibit 99.a.5 to Registrant's
Registration Statement on Form N-1A and
incorporated herein by reference to post-
effective amendment no. 66 (file no.
811-1677 and 2-29502 on May 21, 2003;
accession no. 0001010521-03-148).
2 Amended and Restated By-Laws of Filed as Exhibit 99.b to Registrant's
Registrant Registration Statement on Form N-1A and
incorporated herein by reference to
post-effective amendment no. 48 (file
nos. 811-1677 and 2-29502 on February 27,
1997; accession no. 0001010521-97-000229)
("PEA 48 ")
2.1 Amendment to Amended and Restated Filed as Exhibit 99.(b).1 to PEA 61 and
By-Laws of Registrant incorporated by reference
3 Not applicable
4 Form of Agreement and Plan of Filed herewith as Exhibit A to the Proxy
reorganization Statement and Prospectus included as Part
A of this Registration Statement
5 Not applicable
6 Investment Management Contract Filed as Exhibit 99.d. to Registrant's
between Core Equity Fund and John Registration Statement on Form N-1A and
Hancock Advisers, LLC incorporated herein by reference to
post-effective amendment no. 52 (file
nos. 811-1677 and 2-29502 on February
22,1999; accession no.
0001010521-99-000135) ("PEA 52")
6.1 Sub-Investment Advisory Contract Filed as Exhibit 99.d.1 to PEA 48 and
between Core Equity Fund, incorporated herein by reference
Independence Investment LLC and John
Hancock Advisers, LLC
6.2 Investment Management Filed as Exhibit 99.(d).2 to PEA
Contract between John Hancock U.S. 61 and incorporated herein by
Global Leaders Growth Fund and John reference
Hancock Advisers, LLC
6.3 Sub-Investment Advisory Filed as Exhibit 99.d.4 to PEA 63 and
Contract between U.S. Global Leaders incorporated herein by reference
Growth Fund, Yeager, Wood & Marshall,
Inc. and John Hancock Advisers, LLC
6.4 Amendment to Sub-Investment Management Filed as exhibit 99.(d).3 to Registrant's
Contract on behalf of John Hancock Registration Statement on Form N-1A and
Core Equity Fund, John Hanccok incorporated herein by reference to post-
Advisers, LLC and Independence effective amendment no 64 (file nos. 811-1677
Investment LLC. and 2-29502 on February 28, 2003;
accession no. 0001010521-03-000101)("PEA 64")
6.5 Investment Management Contract Filed as Exhibit 99.d.3 to PEA 64 and
between John Hancock Classic Value incorporated herein by reference
Fund and John Hancock Advisers, LLC
6.6 Sub-Investment Management Filed as Exhibit 99.(d).6 to PEA 64 and
Contract between John Hancock Classic incorporated herein by reference.
Value Fund, John Hancock Advisers, LLC
and Pzena Investment Management, LLC.
6.7 Investment Management Contract Filed as Exhibit 99.d.7 to PEA 66 and
between John Hancock Large Cap Select incorporated herein by reference
Fund and John Hancock Advisers, LLC
6.8 Sub-Investment Management Filed as Exhibit 99.(d).8 to PEA 66 and
Contract between John Hancock Large incorporated herein by reference.
Cap Select Fund, John Hancock Advisers,
LLC and Shay Assets Management, Inc.
7 Distribution Agreement between the Filed as Exhibit 99.e to Registrant's
Registrant and John Hancock Funds, Registration Statement on Form N-1A and
LLC. (formerly named John Hancock incorporated herein by reference to
Broker Distribution Services, Inc) post-effective amendment no. 44 (file
nos. 811-1677 and 2-29502 on April 26,
1995; accession
no.0000950146-95-000180)
("PEA 44 ")
7.1 Amendment to Distribution Agreement Filed as Exhibit 99.e.1 to PEA 44 and
between the Registrant and John incorporated herein by reference
Hancock Funds, LLC
7.2 Form of Soliciting Dealer Agreement Filed as Exhibit 99.e.2 to PEA 52 and
between John Hancock Funds, LLC and incorporated herein by reference
Selected Dealers
7.3 Form of Financial Institution Sales Filed as Exhibit 99.e.3 to PEA 44 and
and Services Agreement incorporated herein by reference
7.4 Amendment to Distribution Agreement Filed as Exhibit 99.e.4 to PEA 48 and
between the Registrant and John incorporated herein by reference
Hancock Funds, LLC
7.5 Amendment to Distribution Agreement Filed as Exhibit 99.e.5 to PEA 64 and
between the Registrant and John incorporated herein by reference
Hancock Funds, LLC
7.6 Amendment to Distribution Agreement Filed as Exhibit 99.e.6 to PEA 64 and
between the Registrant and John incorporated herein by reference
Hancock Funds, LLC
8 Not applicable.
9 Master Custodian Agreement between Filed as Exhibit 99.g to PEA 58 and
John Hancock Mutual Funds (including incorporated herein by reference
Registrant) and The Bank of New York
9.1 Amendment to Custodian Agreement Filed as Exhibit 99.g.1 to PEA 64
and incorporated herein by reference
10 Amended & Restate Master Transfer Filed as Exhibit 99.h to PEA 52 and
Agent Service Agreement between John incorporated herein by reference
Hancock Mutual Funds (including
Registrant) and John Hancock Funds,
LLC
10.1 Form of Accounting and Legal Services Filed as Exhibit 99.h.1 to Registrant's
Agreement Statement on Form N-1A and incorporated
herein by reference to post-effective
amendment no. 46 (file nos. 811-1677
and 2-29502 on June 14, 1996, accession
number 0001010521-96-000095.
10.2 Amendment to Master Transfer Agent Filed as Exhibit 99.h.2 to PEA 61
Service Agreement and incorporated herein by reference
10.3 Amendment to Master Transfer Agent Filed as Exhibit 99.h.3 to PEA 52
Service Agreement and incorporated herein by reference
11 Class A and Class B Distribution Filed as Exhibit 99.m to PEA 48 and
Plans between Registrant, John incorporated herein by reference
Hancock Core Equity Fund, and John
Hancock Funds, LLC
11.1 Class C Distribution Plans between Filed as Exhibit 99.m.1 to PEA 52 and
Registrant and John Hancock Funds, LLC incorporated herein by reference
11.2 Class A, Class B and Class C Filed as Exhibit 99.m.2 to PEA 61 and
Distribution Plan between Registrant, incorporated herein by reference
John Hancock U.S. Global Leaders Growth
Fund and John Hancock Funds, LLC dated
May 13, 2002
11.3 Class A, Class B and Class C Filed as Exhibit 99.m.3 to PEA 64 and
Distribution Plan between Registrant, incorporated herein by reference
John Hancock Classic Value Fund
and John Hancock Funds, LLC dated
November 8, 2002
11.4 Class A, Class B and Class C Filed as Exhibit 99.m.4 to PEA 66 and
Distribution Plan between Registrant, incorporated herein by reference
John Hancock Large Cap Select Fund
and John Hancock Funds, LLC dated
August 25, 2003
12 John Hancock Funds Class A, Class B, Filed herewith as Exhibit 12
Class C and Class I Amended and
restated Multiple Class Plan pursuant
to Rule 18f-3. John Hancock Funds
Class A, Class B, Class C and Class I
and Class R Amended and restated Multiple
Class Plan pursuant to Rule 18f-3
13 Opinion as to legality of shares and Filed herewith as Exhibit 14
consent
14 Form of opinion as to tax matters and Filed herewith as Exhibit 15
consent
15 Consents of Ernst & Young LLP Filed herewith as Exhibit 17
regarding the audited financial
statements of M.S.B. Fund, Inc.
16 Not applicable
17 Powers of Attorney Filed as addendum to signature pages and
incorporated herein
17.1 Annual Report to shareholders of Filed on December 21, 2004 with the initial
the U.S. Global Leaders Growth Fund filing of this Registration Statement
for the year ended December 31, 2003. (accession no. 0001010521-04-000312)
17.2 Semiannual Report to shareholders of Filed on December 21, 2004 with the initial
the U.S. Global Leaders Growth Fund filing of this Registration Statement
for the period ended June 30, 2004. (accession no. 0001010521-04-000312)
17.3 Annual Report to shareholders of Filed on December 21, 2004 with the initial
the Large Cap Growth Fund for the filing of this Registration Statement
year ended October 31, 2004. (accession no. 0001010521-04-000312)
18 Code of Ethics- John Hancock Funds, Filed as Exhibit 99.p to Registrant's
LLC and Independence Investment LLC Registration Statement on Form N-1A and
incorporated herein by reference to
post-effective amendment no. 55 (file
nos. 811-1677 and 2-29502 on June 14,
1996; accession no. 0001010521-00-000251)
("PEA 55")
18.1 Code of Ethics-John Hancock Funds, LLC Filed as Exhibit 99(p).1 to PEA 61 and
incorporated herein by reference
18.2 Code of Ethics-Yeager, Woods and Filed as Exhibit 99.(p).2 to PEA 61 and
Marshall, Inc. incorporated herein by reference
18.3 Amended and Restated Code of Ethics Filed as Exhibit 99.p.3 to Registrant's
of Pzena Investment Management, LLC Registration Statement on Form N-1A and
incorporated herein by reference to
post-effective amendment no. 64 (file
nos. 811-1677 and 2-29502 on February 28,
2003; accession no. 0001010521-03-000101)
("PEA 64")
18.4 Addendum to Amended and Restated Code Filed as Exhibit 99.p.4 to PEA 66 and
of Ethics of Pzena Investment incorporated herein by reference
Management, LLC
18.5 Code of Ethics-Shay Assets Management, Filed as Exhibit 99.p.5 to PEA 66 and
Inc. incorporated herein by reference
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is part of this
registration statement by any person or party which is deemed to be an
underwriter within the meaning of Rule 145(c) under the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective amendment, an
opinion of counsel supporting the tax consequence of the proposed reorganization
within a reasonable time after receipt of such opinion.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement on Form N-14 to be
signed on its behalf by the undersigned, duly authorized, in the City of Boston,
and Commonwealth of Massachusetts on the 25th day of January, 2005.
JOHN HANCOCK CAPITAL SERIES
By: *
--------------------------------------------
James A. Shepherdson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
* Trustee and Chief
- --------------------------- Executive Officer
James A. Shepherdson
/s/William H. King Vice President, Treasurer January 25, 2004
- --------------------------- (Chief Accounting Officer)
William H. King
* Trustee
- ---------------------------
James F. Carlin
* Trustee
- ---------------------------
Richard P. Chapman, Jr.
* Trustee
- ---------------------------
William J. Cosgrove
* Trustee
- ---------------------------
William H. Cunningham
* Trustee
- ---------------------------
Ronald R. Dion
* Chairman and Trustee
- ---------------------------
Charles L. Ladner
* Trustee
- ---------------------------
John A. Moore
* Trustee
- ---------------------------
Patti McGill Peterson
* Trustee
- ---------------------------
Steven R. Pruchansky
* Trustee
- ---------------------------
Norman H. Smith
* By: /s/Susan S. Newton January 25, 2004
---------------------------
Susan S. Newton, Attorney-in-Fact,
under Powers of Attorney dated
January 1, 2005.
John Hancock Bond Trust John Hancock Series Trust
John Hancock California Tax-Free Income Fund John Hancock Sovereign Bond Fund
John Hancock Capital Series John Hancock Strategic Series
John Hancock Current Interest John Hancock Tax-Free Bond Trust
John Hancock Equity Trust John Hancock Tax-Exempt Series Trust
John Hancock Institutional Series Trust John Hancock World Fund
John Hancock Investment Trust
John Hancock Investment Trust II
John Hancock Investment Trust III
POWER OF ATTORNEY
The undersigned Trustee of each of the above listed Trusts, each a
Massachusetts business trust, does hereby severally constitute and appoint Susan
S. Newton, WILLIAM H. KING AND ALFRED P. OUELLETTE, and each acting singly, to
be my true, sufficient and lawful attorneys, with full power to each of them,
and each acting singly, to sign for me, in my name and in the capacity indicated
below, any Registration Statement on Form N-1A and any Registration Statement on
Form N-14 to be filed by the Trust under the Investment Company Act of 1940, as
amended (the "1940 Act"), and under the Securities Act of 1933, as amended (the
"1933 Act"), and any and all amendments to said Registration Statements, with
respect to the offering of shares and any and all other documents and papers
relating thereto, and generally to do all such things in my name and on my
behalf in the capacity indicated to enable the Trust to comply with the 1940 Act
and the 1933 Act, and all requirements of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
said attorneys or each of them to any such Registration Statements and any and
all amendments thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as
of the 1st day of January, 2005.
/s/James F. Carlin /s/Charles L. Ladner
- ------------------------------------ ------------------------------------------
James F. Carlin Charles L. Ladner, as Chairman
/s/ Richard P. Chapman, Jr. /s/John A. Moore
- ------------------------------------ ------------------------------------------
Richard P. Chapman, Jr. John A. Moore
/s/ William J. Cosgrove /s/Patti McGill Peterson
- ------------------------------------ ------------------------------------------
William J. Cosgrove Patti McGill Peterson
/s/William H. Cunningham /s/Steven R. Pruchansky
- ------------------------------------ ------------------------------------------
William H. Cunningham Steven R. Pruchansky
/s/Ronald R. Dion /s/James A. Shepherdson
- ------------------------------------ ------------------------------------------
Ronald R. Dion James A. Shepherdson
/s/Norman H. Smith
------------------------------------------
Norman H. Smith
EXHIBIT INDEX
The following exhibits are filed as part of this Registration Statement:
Exhibit No. Description
4 Form of Agreement and Plan of Reorganization between the John Hancock
U.S. Global Leaders Growth Fund (the "Acquiring Fund") and John Hancock
Large Cap Growth Fund (the "Acquired Fund") (filed as EXHIBIT A to Part
A of this Registration Statement).
12 John Hancock Funds Class A, Class B, Class C and Class I Amended and
restated Multiple Class Plan pursuant to Rule 18f-3. John Hancock Funds
Class A, Class B, Class C, Class I and Class R Amended and restated
Multiple Class Plan pursuant to Rule 18f-3.
14 Opinion as to legality of shares and consent.
15 Form of opinion as to tax matters and consent.
17 Consent of PricewaterhouseCoopers LLP regarding the audited financial
statements and highlights of the John Hancock Large Cap Growth Fund and
John Hancock U.S. Global Leaders Growth Fund.