As filed with the Securities and Exchange Commission on January 21, 2003.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
----
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_X__/
----
Pre-Effective Amendment No. __ /____/
----
Post-Effective Amendment No. ___ /____/
(Check appropriate box or boxes)
JOHN HANCOCK INVESTMENT TRUST III
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
101 Huntington Avenue, Boston, Massachusetts 02199-7603
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(Address of principal executive office) Zip Code
(617) 375-1702
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
Susan S. Newton, Esq.
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199
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(Name and address of agent for service)
Title of Securities Being Registered: shares of beneficial interest of John
Hancock Investment Trust III.
Approximate Date of Proposed Public Offering: As soon as practicable after the
effectiveness of the registration statement.
No filing fee is required because an indefinite number of shares has previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended. This Registration Statement relates to shares previously registered
on Form N-1A (File Nos. 33-4559 and 811-4630).
It is proposed that this filing will become effective on January 21, 2003
pursuant to Rule 488 under the Securities Act of 1933.
January 21, 2003
Dear Fellow Shareholder:
I am writing to ask for your vote on an important matter that will affect your
investment in John Hancock Global Fund and/or John Hancock European Equity Fund.
The enclosed proxy statement contains information about proposals to reorganize
both of these funds and transfer their assets into John Hancock International
Fund.
The reorganizations are intended to consolidate the funds' international
strategies into one unified approach that eliminates both the regional
concentration of John Hancock European Equity Fund and the U.S.-oriented
investment focus of John Hancock Global Fund in favor of an international
investment strategy. This change benefits you in several ways. First, unlike the
European Equity Fund, the International Fund is not geographically concentrated
and can therefore invest in a broader range of countries and regions, offering
greater diversification. In addition, we believe shareholders in the Global
Fund, which currently invests 80% of its assets in both U.S. and overseas
stocks, may be better served by a fund that targets mainly international
investments.
Moreover, by focusing on core international investments, the combined fund may
be better positioned in the market to increase asset size and achieve economies
of scale. Each Fund incurs substantial operating costs for insurance,
accounting, legal, and custodial services. The merger of these funds may enable
you to benefit from the ability to achieve better net prices on securities
trades and spread fixed expenses in a manner that may contribute to a lower
expense ratio. If the proposals are approved, you will receive shares of the
International Fund in proportion to the value of your shares in the Global Fund
and/or the European Equity Fund.
It is important to note that your fund's current expenses will not increase as a
result of the reorganizations. On May 9, 2003, the existing expense cap on
European Equity Fund is due to expire, causing the expense ratio of the fund to
increase to 3.09% for Class A shares and 3.79% for Class B and C shares.
However, John Hancock Funds has agreed to cap the International Fund's expenses
at the lower Global Fund expense level, which is 2.35% for Class A and 3.05% for
Class B and Class C shares, until at least March 1, 2004.
After careful consideration, your Fund's trustees have unanimously agreed to the
reorganization of the assets of John Hancock Global Fund and John Hancock
European Equity Fund into John Hancock International Fund. The enclosed proxy
statement contains further explanation and important details of the
reorganizations, which I strongly encourage you to read before voting. If
approved by the shareholders, the reorganizations are scheduled to take place at
the close of business on May 9, 2003.
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 at your Fund's expense. For your
convenience, you may vote one of three ways: via telephone by calling
1-800-XXX-XXXX; 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 8:00A.M.
and 8:00P.M. Eastern Time. I thank you for your prompt vote on this matter.
Sincerely,
Maureen R. Ford
Chairman and Chief Executive Officer
JOHN HANCOCK GLOBAL FUND (a series of John Hancock Investment Trust III)
JOHN HANCOCK EUROPEAN EQUITY FUND (a series of John Hancock World Fund)
(each a "fund")
101 Huntington Avenue
Boston, MA 02199
Notice of Joint Special Meeting of Shareholders
Scheduled for May 7, 2003
This is the formal agenda for each 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 each fund:
A joint shareholder meeting for your fund(s) will be held at 101 Huntington
Avenue, Boston, Massachusetts on Wednesday, May 7, 2003 at 9:00 a.m., Eastern
time, to consider the following:
1. A proposal to approve an Agreement and Plan of Reorganization between John
Hancock Global Fund ("your fund" or "Global Fund") and John Hancock
International Fund ("International Fund"). Under this Agreement, your fund
would transfer all of its assets to International Fund in exchange for
shares of International Fund. These shares would be distributed
proportionately to you and the other shareholders of Global Fund.
International Fund would also assume Global Fund's liabilities. Global
Fund's board of trustees recommends that you vote FOR this proposal.
2. A proposal to approve an Agreement and Plan of Reorganization between John
Hancock European Equity Fund ("your fund" or "European Equity Fund") and
John Hancock International Fund ("International Fund"). Under this
Agreement, your fund would transfer all of its assets to International
Fund in exchange for shares of International Fund. These shares would be
distributed proportionately to you and the other shareholders of European
Equity Fund. International Fund would also assume European Equity Fund's
liabilities. European Equity Fund's board of trustees recommends that you
vote FOR this proposal.
3. Any other business that may properly come before the meeting.
Shareholders of record as of the close of business on February 14, 2003 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 solicitations.
By order of the board of trustees,
Susan S. Newton
Secretary
February 25, 2003
PROXY STATEMENT of
John Hancock Global Fund (a series of John Hancock Investment Trust III)
John Hancock European Equity Fund (a series of John Hancock World Fund)
(each an "Acquired Fund" or "your fund")
101 Huntington Avenue
Boston, MA 02199
PROSPECTUS for
John Hancock International Fund
(the "Acquiring Fund" and a series of John Hancock Investment Trust III)
101 Huntington Avenue
Boston, MA 02199
This proxy statement and prospectus contains the information shareholders should
know before voting on the proposed reorganizations. Please read it carefully and
retain it for future reference.
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Acquired Fund Acquiring Fund Shareholders Entitled to Vote
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Proposal 1 Global Fund International Fund Global Fund shareholders
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Proposal 2 European Equity Fund International Fund European Equity Fund shareholders
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How Each Reorganization Will Work
o Each Acquired Fund will transfer all of its assets to the Acquiring Fund.
The Acquiring Fund will assume the Acquired Fund's liabilities.
o The Acquiring Fund will issue Class A shares to each Acquired Fund in an
amount equal to the value of each Acquired Fund's net assets attributable
to its Class A shares. These shares will be distributed to each Acquired
Fund's Class A shareholders in proportion to their holdings on the
reorganization date.
o The Acquiring Fund will issue Class B shares to each Acquired Fund in an
amount equal to the value of each Acquired Fund's net assets attributable
to its Class B shares. These shares will be distributed to each Acquired
Fund's Class B shareholders in proportion to their holdings on the
reorganization date.
o The Acquiring Fund will issue Class C shares to each Acquired Fund in an
amount equal to the value of each Acquired Fund's net assets attributable
to its Class C shares. These shares will be distributed to each Acquired
Fund's Class C shareholders in proportion to their holdings on the
reorganization date.
o Each Acquired Fund will be terminated and fund shareholders will become
shareholders of the Acquiring Fund.
o Each reorganization is intended to result in no income, gain or loss for
federal income tax purposes to the Acquiring Fund, the Acquired Fund or
the shareholders of the Acquired Fund.
Rationale for the Reorganizations
The reorganizations are intended to consolidate the funds' international
strategies into one unified approach that eliminates the regional concentration
of John Hancock European Equity Fund and the U.S.-oriented investment focus of
John Hancock Global Fund. Instead, the reorganizations would consolidate these
funds into the Acquiring Fund, which invests primarily in non-U.S. equity
securities and has no fixed allocation of assets to specific countries or
regions. In addition, because the Acquiring Fund will be John Hancock Funds'
primary vehicle for international equity investing, it is expected to be better
positioned to build upon the economies of scale resulting from the
reorganization and attract additional investments. As a result, the Acquiring
Fund's greater asset size may allow the Acquiring Fund to (i) obtain better net
prices on securities trades, (ii) achieve greater diversification of
international portfolio holdings and (iii) reduce per share expenses as fixed
expenses are shared over a larger asset base. Therefore, the trustees of your
fund(s) recommend that you vote FOR the reorganizations.
In connection with the reorganizations, the funds' investment adviser has agreed
to reduce the Acquiring Fund's management fee rate so that it is the same or
lower than the management fee rate paid by either of the Acquired Funds.
Accordingly, the management fee paid by your fund will not increase as a result
of the reorganization. Also in connection with the reorganizations, the funds'
investment adviser has agreed until at least March 1, 2004 to limit the
Acquiring Fund's total operating expenses to 2.35% of average daily net assets
for Class A shares and 3.05% of average daily net assets for Class B and Class C
shares. This expense limitation, based on the Acquired Funds' most recent fiscal
year, is (i) equal to John Hancock Global Fund's operating expenses and (ii)
lower than John Hancock European Equity Fund's total operating expenses before
its expense limitation. Although the Acquiring Fund's net annual operating
expenses after expense limitation are higher than John Hancock European Equity
Fund's net
-1-
annual operating expenses after its current expense limitation, John Hancock
European Equity Fund's current expense limitation is in effect only until May 9,
2003 or the closing of the reorganization, if later.
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.
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Where to Get More Information
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Class A, B and C prospectus of In the same envelope as this proxy
International Fund dated February 14, statement and prospectus. These
2003. documents are incorporated by
- -------------------------------------- reference into (and therefore legally
part of) this proxy statement and
The International Fund's annual report prospectus.
to shareholders dated October 31,
2002.
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Class A, B and C prospectus for the
Acquired Funds dated February 14,
2003. On file with the Securities and
- -------------------------------------- Exchange Commission ("SEC") or
available at no charge by calling our
The Acquired Funds' annual reports toll-free number: 1-800-225-5291.
to shareholder dated October 31, 2002. Incorporated by reference into (and
- -------------------------------------- therefore legally part of) this proxy
statement and prospectus.
A statement of additional information
dated February 14, 2003. It contains
additional information about the
Acquired Funds and the Acquiring Fund.
- --------------------------------------------------------------------------------
To ask questions about this proxy Call our toll-free telephone number:
statement and prospectus. 1-800-225-5291
- --------------------------------------------------------------------------------
The date of this proxy statement and prospectus is February 25, 2003.
-2-
TABLE OF CONTENTS
Page
INTRODUCTION [3]
PROPOSAL 1 -- GLOBAL FUND [__]
Summary [__]
Comparison of Investment Risks [__]
Proposal to Approve the Agreement and Plan of Reorganization [__]
PROPOSAL 2 -- EUROPEAN EQUITY FUND [__]
Summary [__]
Comparison of Investment Risks [__]
Proposal to Approve the Agreement and Plan of Reorganization [__]
FURTHER INFORMATION ON EACH 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 [__]
INTRODUCTION
This proxy statement and prospectus is being used by the Acquired Funds' board
of trustees to solicit proxies to be voted at a special meeting of each Acquired
Fund's shareholders. This meeting will be held at 101 Huntington Avenue, Boston,
Massachusetts on Wednesday, May 7, 2003 at 9:00 a.m., Eastern time. The purpose
of the meeting is to consider proposals to approve Agreements and Plans of
Reorganization providing for the reorganization of the Acquired Funds into the
Acquiring Fund. This proxy statement and prospectus is being mailed to your
fund's shareholders on or about February 25, 2003.
For each proposal, this proxy statement and prospectus includes information that
is specific to that proposal, including a comparison summary. Please read
carefully the sections of the proxy statement related specifically to your
fund(s), the information relevant to all proposals, as well as Exhibit A and the
enclosed materials.
Who is Eligible to Vote?
Shareholders of record on February 14, 2003 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.
-3-
PROPOSAL 1
Approval of Agreement and Plan of Reorganization Between
Global Fund and International Fund
A proposal to approve an Agreement and Plan of Reorganization between Global
Fund and International Fund. Under this Agreement, Global Fund would transfer
all of its assets to International Fund in exchange for shares of International
Fund. These shares would be distributed proportionately to the shareholders of
Global Fund. International Fund would also assume Global Fund's liabilities.
Global Fund's board of trustees recommends that shareholders vote FOR this
proposal.
SUMMARY
Comparison of Global Fund to International Fund
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Global Fund International Fund
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Business A diversified series of John Hancock Investment A diversified series of John Hancock Investment
Trust III, an open-end investment management Trust III, an open-end investment management
company organized as a Massachusetts business company organized as a Massachusetts business
trust. trust.
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Net assets as of $47.0 million $11.5 million
December 31, 2002
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Investment adviser, Investment Adviser: Investment Adviser:
subadviser and John Hancock Advisers, LLC John Hancock Advisers, LLC
portfolio managers
Subadviser: Subadviser:
Nicholas Applegate Capital Management Nicholas Applegate Capital Management
-A subsidiary of Allianz AG, a German publicly -A subsidiary of Allianz AG, a German publicly
traded company, which, together with its traded company, which, together with its
subsidiaries, comprises the world's largest subsidiaries, comprises the world's largest
insurance group insurance group
-Supervised by the adviser -Supervised by the adviser
-Founded in 1984 -Founded in 1984
Portfolio managers: Portfolio managers:
U.S. - based team responsible for day-to-day U.S. - based team responsible for day-to-day
investment management investment management
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Investment objective The fund seeks long-term growth of capital. This The fund seeks long-term growth of capital. This
objective is fundamental and can be changed only objective is non-fundamental and can be changed
with shareholder approval. without shareholder approval.
- ------------------------------------------------------------------------------------------------------------------------------------
Primary investments The fund normally invests at least 80% of its The fund normally invests at least 80% of its
assets in common stocks of foreign and U.S. assets in stocks of foreign companies. The fund may
companies of any size. The fund does not maintain a invest up to 30% of assets in emerging markets as
fixed allocation of assets, either with respect to classified by Morgan Stanley Capital International
securities type or geography. Historically, U.S. (MSCI). The fund does not maintain a fixed
issuers have represented the largest single country allocation of assets, either with respect to
allocation of the Fund's assets. securities type or geography.
- ------------------------------------------------------------------------------------------------------------------------------------
Diversification The fund is diversified, which means that, with The fund is diversified, which means that, with
respect to 75% of total assets, the fund cannot respect to 75% of total assets, the fund cannot
invest (i) more than 5% of total assets in invest (i) more than 5% of total assets in
securities of a single issuer or (ii) in securities securities of a single issuer or (ii) in securities
representing more than 10% of the outstanding representing more than 10% of the outstanding
voting securities of an issuer. voting securities of an issuer. In addition, the
fund cannot invest more than 5% of total assets in
a single security (other than U.S. Government
securities).
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Derivatives Each fund may make limited use of certain derivatives (investments whose value is based on indexes,
securities or currencies).
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Temporary defensive In abnormal conditions, each fund may temporarily invest more than 20% of assets in investment-grade
positions short-term securities. In these and other cases, the funds might not achieve their respective goals.
- ------------------------------------------------------------------------------------------------------------------------------------
In deciding whether to approve the reorganization, you should consider the
similarities and differences between Global Fund and International Fund. In
particular, you should consider whether the amount and character of investment
risk involved in the authorized investments of International Fund is
commensurate with the amount of risk involved in the authorized investments of
Global Fund. Although the investment objectives of the two funds are identical,
their
-4-
investment policies and risks are different, particularly with respect to the
portion of each Fund's assets invested in U.S. issuers. Your fund invests at
least 80% of its assets in stocks of both foreign and U.S. companies, whereas
International Fund invests at least 80% of its assets in foreign companies,
without a U.S. investment component. At September 30, 2002, approximately 53% of
Global Fund's net assets were invested in U.S. issuers. In addition,
International Fund has a stated policy that it may invest up to 30% of assets in
emerging markets. Global Fund may invest in emerging markets but does not have a
stated percentage policy. International Fund also has a more restrictive
diversification policy than your fund, limiting investment in any single
security to 5% of the fund's assets.
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CLASSES OF SHARES
- --------------------------------------------------------------------------------
Global Fund International Fund
- --------------------------------------------------------------------------------
Class A sales charges The Class A shares of both funds have the same
and 12b-1 fees characteristics and fee structure.
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 are subject to a 12b-1 distribution
fee equal to 0.30% 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 charges The Class B shares of both funds have the same
and 12b-1 fees characteristics and fee structure.
o Class B shares are offered without a front-end
sales charge, but are subject to a contingent
deferred sales charge (CDSC) if sold within six
years after purchase. The CDSC ranges from 1.00%
to 5.00% depending on how long 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 charges The Class C shares of both funds have the same
and 12b-1 fees characteristics and fee structure.
o Class C shares are offered with a front-end sales
charge equal to 1.00% of the fund's offering
price.
o Class C shares are 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
on-going basis. Over time these fees will increase
the cost of investments and may cost more than
other types of sales charges.
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- --------------------------------------------------------------------------------
BUYING, SELLING AND EXCHANGING SHARES
- --------------------------------------------------------------------------------
Global Fund and International Fund
- --------------------------------------------------------------------------------
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 February 14, 2003, investors will not be allowed
to open new accounts in Global Fund but can add to
existing accounts.
- --------------------------------------------------------------------------------
Minimum initial Class A, Class B and Class C Shares: $1,000 for
investment non-retirement accounts and $250 for retirement accounts
and group investments.
- --------------------------------------------------------------------------------
Exchanging shares Shareholders may exchange their shares at net asset
value with no sales charge for shares of the same class
of any other John Hancock fund.
- --------------------------------------------------------------------------------
Selling shares Shareholders 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 expense table appearing below shows the expenses for the fiscal year ended
October 31, 2002, adjusted to reflect any changes. Future expenses for all
classes may be greater or less. The examples contained in the expense table show
what you would pay if you invested
-5-
$10,000 over the various time periods indicated. Each example assumes that you
reinvested all dividends and that the average annual return was 5%. The examples
are for comparison purposes only and are not a representation of either fund's
actual expenses or returns, either past or future.
Pro Forma Expenses
The board of trustees of another John Hancock fund, John Hancock European Equity
Fund, has recommended that European Equity Fund also reorganize into
International Fund. The reorganization of Global Fund with International Fund,
however, does not depend upon whether the reorganization involving European
Equity Fund occurs. In connection with the reorganization, the adviser has
agreed to reduce its management fee rate to match the lower management fee rate
of your fund (see "Other Consequences of the Reorganization"). The adviser also
has agreed until at least March 1, 2004 to limit International Fund's total
operating expenses to 2.35% of average daily net assets for Class A shares and
3.05% of average daily net assets for Class B and Class C shares. This expense
limitation is the same as your fund's total annual operating expenses for the
most recent fiscal year. Your fund does not currently have any expense
limitation.
The following expense table shows the hypothetical ("pro forma") expenses of
International Fund assuming both (1) that a reorganization with Global Fund, but
not John Hancock European Equity Fund, occurred on November 1, 2001 and (2) that
a reorganization with both your fund and John Hancock European Equity Fund
occurred on November 1, 2001. The expenses shown in both tables are based on
fees and expenses incurred during the twelve month period ended October 31,
2002. International Fund's actual expenses after the reorganization may be
greater or less than those shown.
The pro forma examples contained in the expense table show what you would pay on
a $10,000 investment if the reorganization had occurred on November 1, 2001.
Each example assumes that you reinvested all dividends and that the average
annual return was 5%. The pro forma examples are for comparison purposes only
and are not a representation of International Fund's actual expenses or returns,
either past or future.
- ------------------------------------------------------------------------------------------------------------------------------------
International Fund
International Fund (PRO FORMA
(PRO FORMA for the year
for the year ended 10/31/02)
ended 10/31/02) (Assuming
(Assuming reorganization with
Global International reorganization with Global Fund
Fund Fund Global Fund only) and European Equity Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholder transaction expenses Class A Class A Class A Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as a % of purchase price) 5.00% 5.00% 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum sales charge imposed on reinvested
dividends none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) as a % of
purchase or sale price, whichever is less(1) none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Redemption fee(2) none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange fee none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses Class A Class A Class A Class A
(as a % of average net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Management fee 0.90% 1.00% 0.90%(3) 0.90%(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fee 0.30% 0.30% 0.30% 0.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Other expenses 1.15% 3.13% 1.34% 1.23%
- ------------------------------------------------------------------------------------------------------------------------------------
Total fund operating expenses 2.35% 4.43% 2.54% 2.43%
- ------------------------------------------------------------------------------------------------------------------------------------
Expense reduction none [2.05%](4) [0.19%](5) [0.08%](5)
- ------------------------------------------------------------------------------------------------------------------------------------
Net fund operating expenses 2.35% 2.38% 2.35% 2.35%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Except for investments of $1 million or more.
(2) Does not include wire redemption fee (currently $4.00).
(3) Effective with the reorganization, the adviser has agreed to reduce its
management fee to match the lower management fee rate of your fund.
(4) These numbers reflect International Fund's current limitation on expenses
(excluding 12b-1 and transfer agent fees) of 0.90% until February 28, 2004.
(5) Effective with the reorganization, the adviser has agreed to limit
International Fund's Class A operating expenses to 2.35% of the Fund's Class A
average daily net assets at least until March 1, 2004.
-6-
- -----------------------------------------------------------------------------------------------------------------------
International Fund
(PRO FORMA
International Fund for the year
(PRO FORMA ended 10/31/02)
for the year (Assuming
ended 10/31/02) reorganization with
(Assuming Global Fund
Global International reorganization with and European Equity
Fund Fund Global Fund only) Fund)
- -----------------------------------------------------------------------------------------------------------------------
Shareholder transaction expenses Class B Class B Class B Class B
- -----------------------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases (as a % of purchase price) none none none none
- -----------------------------------------------------------------------------------------------------------------------
Maximum sales charge imposed on reinvested
dividends none none none none
- -----------------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) as a
% of purchase or sale price, whichever is
less 5.00% 5.00% 5.00% 5.00%
- -----------------------------------------------------------------------------------------------------------------------
Redemption fee(2) none none none none
- -----------------------------------------------------------------------------------------------------------------------
Exchange fee none none none none
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses Class B Class B Class B Class B
(as a % of average net assets)
- -----------------------------------------------------------------------------------------------------------------------
Management fee 0.90% 1.00% 0.90%(3) 0.90%(3)
- -----------------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fee 1.00% 1.00% 1.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------
Other expenses 1.15% 3.13% 1.34% 1.23%
- -----------------------------------------------------------------------------------------------------------------------
Total fund operating expenses 3.05% 5.13% 3.24% 3.13%
- -----------------------------------------------------------------------------------------------------------------------
Expense reduction none [2.05%](4) [0.19%](5) [0.08%](5)
- -----------------------------------------------------------------------------------------------------------------------
Net fund operating expenses 3.05% 3.08% 3.05% 3.05%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Shareholder transaction expenses Class C Class C Class C Class C
- -----------------------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases (as a % of purchase price) 1.00% 1.00% 1.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------
Maximum sales charge imposed on reinvested
dividends none none none none
- -----------------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) as a
% of purchase or sale price, whichever is
less 1.00% 1.00% 1.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------
Redemption fee(2) none none none none
- -----------------------------------------------------------------------------------------------------------------------
Exchange fee none none none none
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses Class C Class C Class C Class C
(as a % of average net assets)
- -----------------------------------------------------------------------------------------------------------------------
Management fee 0.90% 1.00% 0.90%(3) 0.90%(3)
- -----------------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fee 1.00% 1.00% 1.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------
Other expenses 1.15% 3.13% 1.34% 1.23%
- -----------------------------------------------------------------------------------------------------------------------
Total fund operating expenses 3.05% 5.13% 3.24% 3.13%
- -----------------------------------------------------------------------------------------------------------------------
Expense reduction none [2.05%](4) [0.19%](5) [0.08%](5)
- -----------------------------------------------------------------------------------------------------------------------
Net fund operating expenses 3.05% 3.08% 3.05% 3.05%
- -----------------------------------------------------------------------------------------------------------------------
(1) Except for investments of $1 million or more.
(2) Does not include wire redemption fee (currently $4.00).
(3) Effective with the reorganization, the adviser has agreed to reduce its
management fee to match the lower management fee rate of your fund.
(4) These numbers reflect International Fund's current limitation on expenses
(excluding 12b-1 and transfer agent fees) of 0.90% until February 28, 2004.
(5) Effective with the reorganization, the adviser has agreed to limit
International Fund's Class B and Class C operating expenses to 3.05%,
respectively, of the Fund's Class B and Class C average daily net assets at
least until March 1, 2004.
-7-
Examples
- ------------------------------------------------------------------------------------------------------
International Fund
(PRO FORMA)
International Fund (Assuming
(PRO FORMA) reorganization with
(Assuming Global Fund
Global International reorganization with and European Equity
Class A Fund Fund Global Fund only) Fund)
- ------------------------------------------------------------------------------------------------------
Year 1 $ 726 $ 761 $ 729 $ 727
- ------------------------------------------------------------------------------------------------------
Year 3 $1,197 $1,627 $1,237 $1,213
- ------------------------------------------------------------------------------------------------------
Year 5 $1,693 $2,503 $1,769 $1,725
- ------------------------------------------------------------------------------------------------------
Year 10 $3,052 $4,736 $3,220 $3,123
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Class B -- assuming redemption
at end of period
- ------------------------------------------------------------------------------------------------------
Year 1 $ 808 $ 845 $ 811 $ 809
- ------------------------------------------------------------------------------------------------------
Year 3 $1,242 $1,686 $1,283 $1,259
- ------------------------------------------------------------------------------------------------------
Year 5 $1,801 $2,624 $1,879 $1,834
- ------------------------------------------------------------------------------------------------------
Year 10 $3,202 $4,873 $3,369 $3,272
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Class B -- assuming no redemption
- ------------------------------------------------------------------------------------------------------
Year 1 $ 308 $ 345 $ 311 $ 309
- ------------------------------------------------------------------------------------------------------
Year 3 $ 942 $1,386 $ 983 $ 959
- ------------------------------------------------------------------------------------------------------
Year 5 $1,601 $2,424 $1,679 $1,634
- ------------------------------------------------------------------------------------------------------
Year 10 $3,202 $4,873 $3,369 $3,272
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Class C -- assuming redemption
at end of period
- ------------------------------------------------------------------------------------------------------
Year 1 $ 504 $ 540 $ 507 $ 505
- ------------------------------------------------------------------------------------------------------
Year 3 $1,033 $1,472 $1,073 $1,050
- ------------------------------------------------------------------------------------------------------
Year 5 $1,685 $2,499 $1,762 $1,717
- ------------------------------------------------------------------------------------------------------
Year 10 $3,431 $5,057 $3,594 $3,500
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Class C -- assuming no redemption
- ------------------------------------------------------------------------------------------------------
Year 1 $ 405 $ 441 $ 408 $ 406
- ------------------------------------------------------------------------------------------------------
Year 3 $1,033 $1,472 $1,073 $1,050
- ------------------------------------------------------------------------------------------------------
Year 5 $1,685 $2,499 $1,762 $1,717
- ------------------------------------------------------------------------------------------------------
Year 10 $3,431 $5,057 $3,594 $3,500
- ------------------------------------------------------------------------------------------------------
Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets. As
described above, the adviser has agreed to reduce International Fund's pro forma
management fees on as a percentage of assets to match those of your fund.
---------------------------------------------------------
Fund Asset Breakpoints Fee Rate
---------------------------------------------------------
Global Fund
---------------------------------------------------------
First $100 million 0.900%
---------------------------------------------------------
Next $200 million 0.800%
---------------------------------------------------------
Next $200 million 0.750%
---------------------------------------------------------
Amount over $500 million 0.625%
---------------------------------------------------------
-8-
---------------------------------------------------------
International Fund (current)
---------------------------------------------------------
First $250 million 1.000%
---------------------------------------------------------
Next $250 million 0.800%
---------------------------------------------------------
Next $250 million 0.750%
---------------------------------------------------------
Amount over $750 million 0.625%
---------------------------------------------------------
International Fund (pro forma)
---------------------------------------------------------
First $100 million 0.900%
---------------------------------------------------------
Next $200 million 0.800%
---------------------------------------------------------
Next $200 million 0.750%
---------------------------------------------------------
Amount over $500 million 0.625%
---------------------------------------------------------
Each fund's subadviser is Nicholas-Applegate Capital Management, an indirect
wholly-owned subsidiary of Allianz AG, a German publicly traded company, which,
together with its subsidiaries, comprises the world's largest insurance group
("Nicholas Applegate"). Nicholas Applegate is responsible for providing
investment advice to the funds, subject to the review of the Trustees and
overall supervision of the adviser. Nicholas Applegate also provides the funds
on a continuous basis with economic, financial and political information,
research and assistance concerning international markets. Nicholas Applegate
receives its compensation directly from the adviser, not the funds. For each of
Global Fund and International Fund, the adviser pays Nicholas Applegate a
subadvisory fee at the same annual rate: (i) 0.50% of the first $500,000,000 of
the average daily net asset value of the fund; and (ii) 0.45% of the average
daily net asset value of the fund in excess of $500,000,000. However, Nicholas
Applegate has agreed to reduce its subadvisory fees in connection with the
reorganization so that they will be equal on an annual basis to (i) 0.45% of the
first $200,000,000 of the average daily net asset value of the Fund; and (ii)
0.40% of the average daily net asset value of the Fund in excess of
$200,000,000. This reduction will have no effect on the fund's advisory fees or
other expenses.
International Fund's pro forma management fee rate (0.90% at current asset
levels) is identical to Global Fund's management fee rate at all asset levels.
Both funds have the same 12b-1 fees for Class A shares (0.30%) and Class B and
Class C shares (1.00%). International Fund's pro forma other expenses of 1.34%
(or 1.23% assuming reorganization with European Equity Fund as well as Global
Fund) are slightly higher than Global Fund's other expenses of 1.15%. Although
this results in International Fund's pro forma total annual operating expenses
for all share classes being slightly higher than Global Fund's total annual
operating expenses, the pro forma net annual operating expenses of International
Fund after the expense limitation will be equal to your fund's annual operating
expenses for all share classes. The adviser is not required to extend this
expense limitation beyond March 1, 2004.
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.
- --------------------------------------------------------------------------------
Global Fund International Fund
- --------------------------------------------------------------------------------
Stock market risk The value of securities in the fund may go down in
response to 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.
- --------------------------------------------------------------------------------
Management risk The fund's management strategy may fail to produce the
intended results. The fund could underperform its peers
or lose money if the investment strategy, including
country, industry or security selection, does not
perform as expected.
- --------------------------------------------------------------------------------
Foreign securities Foreign investments are more risky than domestic
risk investments. Investments in foreign 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.
- --------------------------------------------------------------------------------
Emerging markets risk To the extent the fund invests in emerging markets, the
risks of investment in foreign securities are more
significant. Also, in a down market emerging markets
investments could become harder to value or sell at a
fair price.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Active trading The fund may trade securities actively, which could
increase its transaction costs (thus lowering
performance) and increase your taxable distributions.
- --------------------------------------------------------------------------------
-9-
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 Each 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
May 9, 2003, but may occur on any later date before December 31, 2003.
Global Fund will transfer all of its assets to International Fund and
International Fund will assume all of Global Fund's liabilities. This will
result in the addition of Global Fund's assets to International 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 International Fund will issue to Global Fund Class A shares in an amount
equal to the net assets attributable to Global Fund's Class A shares. As
part of the liquidation of Global Fund, these shares will immediately be
distributed to Class A shareholders of record of Global Fund in proportion
to their holdings on the reorganization date. As a result, Class A
shareholders of Global Fund will end up as Class A shareholders of
International Fund.
o International Fund will issue to Global Fund Class B shares in an amount
equal to the net assets attributable to Global Fund's Class B shares. As
part of the liquidation of Global Fund, these shares will immediately be
distributed to Class B shareholders of record of Global Fund in proportion
to their holdings on the reorganization date. As a result, Class B
shareholders of Global Fund will end up as Class B shareholders of
International Fund.
o International Fund will issue to Global Fund Class C shares in an amount
equal to the net assets attributable to Global Fund's Class C shares. As
part of the liquidation of Global Fund, these shares will immediately be
distributed to Class C shareholders of record of Global Fund in proportion
to their holdings on the reorganization date. As a result, Class C
shareholders of Global Fund will end up as Class C shareholders of
International Fund.
o After the shares are issued, the existence of Global Fund will be
terminated.
Reasons for the Proposed Reorganization
The board of trustees of Global Fund believes that the proposed reorganization
will be advantageous to the shareholders of Global Fund for several reasons. The
board of trustees considered the following matters, among others, in approving
the proposal.
First, that shareholders in the Global Fund, which currently invests 80% of its
assets in both U.S. and overseas stocks, may be better served by a fund that
targets mainly international investments. The adviser believes that investors,
when seeking international exposure, prefer to invest in a fund that invests
only in non-U.S. issuers. Consequently, the adviser believes that the combined
fund will be better positioned to attract additional assets to the Acquiring
Fund. The Acquiring Fund's greater asset size may allow the Acquiring Fund to
(i) obtain better net prices on securities trades, (ii) achieve greater
diversification of international portfolio holdings and (iii) reduce per share
expenses as fixed expenses are shared over a larger asset base.
Second, that the adviser has agreed, until at least March 1, 2004, to limit the
International Fund's total expenses to match Global Fund's total fund operating
expenses, as a percentage of average daily net assets, based on Global Fund's
most recent fiscal year. As a result of the reorganization, shareholders of
Global Fund will experience no increase in the total amount of fees, as a
percentage of average net assets, that they indirectly pay, until at least March
1, 2004.
Third, that International Fund's Class A and B shares have performed better than
Global Fund's Class A, B and C shares over the three year and five year periods,
both before and after taxes. While past performance cannot predict future
results, the trustees believe that International Fund is better positioned than
Global Fund to continue to generate strong returns.
Fourth, that a combined fund offers economies of scale that may lead to lower
per share expenses. Both funds incur substantial costs for accounting, legal,
transfer agency services, insurance, and custodial and administrative services.
Many of these expenses are duplicative and there may be an opportunity to reduce
International Fund's expense ratio over time because of economies of scale if
the funds are combined.
The board of trustees of International Fund considered that the reorganization
presents an excellent opportunity for International 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 International Fund and its shareholders.
The boards of both funds also considered that the adviser and the funds'
distributor will benefit from the reorganization. For example, the adviser might
achieve cost savings due to the fund's lower fixed costs, which may result in a
reduction in the adviser's expense limitation over time, as well as any reduced
costs resulting from a consolidated portfolio
-10-
management effort. The boards believe, however, that these savings will not
amount to a significant economic benefit to the adviser or distributor.
Comparative Fees and Expense Ratios. As discussed above, the adviser has agreed
until at least March 1, 2004 to limit International Fund's total operating
expenses to 2.35% of average daily net assets for Class A shares and 3.05% of
average daily net assets for Class B and Class C shares. Therefore, after giving
effect to the expense limitation , International Fund's pro forma annual
operating expenses would be equal to your fund's current annual operating
expenses. A full comparison of advisory fee rates and expense ratios is included
above.
Comparative Performance. The trustees also considered details of the relative
performance of your fund and International Fund.
Unreimbursed Distribution and Shareholder Service Expenses
The boards of trustees of Global Fund and International Fund have determined
that, if the reorganization occurs, unreimbursed distribution and shareholder
service expenses incurred under Global Fund's Rule 12b-1 Plans will be
reimbursable expenses under International Fund's Rule 12b-1 Plans. However, the
maximum amounts payable annually under International Fund's Rule 12b-1 Plans
(0.30%, 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 Global Fund and International 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
International Fund are not included in the table because this class does not
have a Rule 12b-1 Plan. Global fund does not have Class I shares.
Rule 12b-1 Payments and Unreimbursed Expenses
- ------------------------------------------------------------------------------------------------------------
Aggregate Dollar Unreimbursed Unreimbursed
Amount of 12b-1 Fees Rule 12b-1 Expenses as %
Paid (for year ended Expenditures of Each Class'
Name of Fund October 31, 2002) (as of October 31, 2002) Average Net Assets
- ------------------------------------------------------------------------------------------------------------
Global Fund $145,228 (A) $ 350,376 (A) 0.72% (A)
- ------------------------------------------------------------------------------------------------------------
$150,712 (B) $2,160,046 (B) 14.33% (B)
- ------------------------------------------------------------------------------------------------------------
$ 8,291 (C) $ 168,779 (C) 20.36% (C)
- ------------------------------------------------------------------------------------------------------------
International Fund $ 21,175 (A) $ 182,123 (A) 2.58% (A)
- ------------------------------------------------------------------------------------------------------------
$ 58,879 (B) $1,526,298 (B) 25.92% (B)
- ------------------------------------------------------------------------------------------------------------
$ 9,672 (C) $ 133,752 (C) 13.83% (C)
- ------------------------------------------------------------------------------------------------------------
Pro Forma:
- ------------------------------------------------------------------------------------------------------------
International Fund $166,403 (A) $ 532,499 (A) 0.96% (A)
Assuming reorganization --------------------------------------------------------------------------
with Global Fund only $209,591 (B) $3,686,344 (B) 17.59% (B)
--------------------------------------------------------------------------
$ 17,963 (C) $ 302,531 (C) 16.84% (C)
- ------------------------------------------------------------------------------------------------------------
Assuming reorganization $187,371 (A) $ 555,655 (A) 0.89% (A)
with Global Fund --------------------------------------------------------------------------
and European Equity Fund $283,147 (B) $4,341,335 (B) 15.33% (B)
--------------------------------------------------------------------------
$ 21,036 (C) $ 361,569 (C) 17.19% (C)
- ------------------------------------------------------------------------------------------------------------
If the reorganization had taken place on November 1, 2001, the pro forma
combined unreimbursed expenses of International Fund's Class A, Class B and
Class C shares would have been higher than if no reorganization had occurred.
Nevertheless, International Fund's assumption of Global Fund's unreimbursed Rule
12b-1 expenses will have no immediate effect upon the payments made under
International Fund's Rule 12b-1 Plans. These payments will continue to be 0.30%,
1.00% and 1.00% of average daily net assets attributable to Class A, 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
International 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.
-11-
PROPOSAL 2
Approval of Agreement and Plan of Reorganization Between
European Equity Fund and International Fund
A proposal to approve an Agreement and Plan of Reorganization between European
Equity Fund and International Fund. Under this Agreement, European Equity Fund
would transfer all of its assets to International Fund in exchange for shares of
International Fund. These shares would be distributed proportionately to the
shareholders of European Equity Fund. International Fund would also assume
European Equity Fund's liabilities. European Equity Fund's board of trustees
recommends that shareholders vote FOR this proposal.
SUMMARY
Comparison of European Equity Fund to International Fund
- ----------------------------------------------------------------------------------------------------------------------------
European Equity Fund International Fund
- ----------------------------------------------------------------------------------------------------------------------------
Business A diversified series of John Hancock World Fund, A diversified series of John Hancock Investment
an open-end investment management company Trust III, an open-end investment management
organized as a Massachusetts business trust. company organized as a Massachusetts business
trust.
- ----------------------------------------------------------------------------------------------------------------------------
Net assets as of $11.4 million $11.5 million
December 31, 2002
- ----------------------------------------------------------------------------------------------------------------------------
Investment adviser, Investment Adviser: Investment Adviser:
subadviser and John Hancock Advisers, LLC John Hancock Advisers, LLC
portfolio managers
Subadviser: Subadviser:
Nicholas Applegate Capital Management Nicholas Applegate Capital Management
-A subsidiary of Allianz AG, a German publicly -A subsidiary of Allianz AG, a German publicly
traded company, which, together with its traded company, which, together with its
subsidiaries, comprises the world's largest subsidiaries, comprises the world's largest
insurance group insurance group
-Supervised by the adviser -Supervised by the adviser
-Founded in 1984 -Founded in 1984
Portfolio managers: Portfolio managers:
U.S. - based team responsible for day-to-day U.S. - based team responsible for day-to-day
investment management investment management
- ----------------------------------------------------------------------------------------------------------------------------
Investment The fund seeks long-term growth of capital. This The fund seeks long-term growth of capital. This
objective objective is non-fundamental and can be changed objective is non-fundamental and can be changed
without shareholder approval. without shareholder approval.
- ----------------------------------------------------------------------------------------------------------------------------
Primary investments The fund normally invests at least 80% of its The fund normally invests at least 80% of its
assets in equity securities (including common assets in stocks of foreign companies. The fund
and preferred stocks and their equivalents) of may invest up to 30% of assets in emerging
European companies. These companies derive more markets as classified by Morgan Stanley Capital
than half of their revenues from European International (MSCI). The fund does not maintain
operations, are organized under European law or a fixed allocation of assets, either with
are traded principally on European stock respect to securities type or geography.
exchanges. While the fund invests most heavily
in developed economies, it is permitted to
invest in securities of European emerging market
companies.
- ----------------------------------------------------------------------------------------------------------------------------
Diversification The fund is diversified, which means that, with The fund is diversified, which means that, with
respect to 75% of total assets, the fund cannot respect to 75% of total assets, the fund cannot
invest (i) more than 5% of total assets in invest (i) more than 5% of total assets in
securities of a single issuer or (ii) in securities of a single issuer or (ii) in
securities representing more than 10% of the securities representing more than 10% of the
outstanding voting securities of an issuer. outstanding voting securities of an issuer. In
addition, the fund cannot invest more than 5% of
total assets in a single security (other than U.S.
Government securities).
- ----------------------------------------------------------------------------------------------------------------------------
Derivatives Each fund may make limited use of certain derivatives (investments whose value is based on indexes,
securities or currencies).
- ----------------------------------------------------------------------------------------------------------------------------
Temporary defensive In abnormal conditions, each fund may temporarily invest more than 20% of assets in investment-grade
positions short-term securities. In these and other cases, the funds might not achieve their respective goals.
- ----------------------------------------------------------------------------------------------------------------------------
In deciding whether to approve the reorganization, you should consider the
similarities and differences between your fund and International Fund. In
particular, you should consider whether the amount and character of investment
risk involved in the authorized investments of International Fund is
commensurate with the amount of risk involved in the authorized
-12-
investments of your fund. Although the investment objectives of the two funds
are identical, their investment policies and risks are different. Your fund
concentrates its investments in securities of European companies. International
Fund, however, does not maintain any geographical concentration and invests in
securities of foreign companies without any fixed allocation of assets. In
addition, International Fund may invest up to 30% of assets in emerging markets,
whereas your fund, which invests most heavily in developed countries, is
permitted only to invest in securities of European emerging markets companies.
International Fund also has a more restrictive diversification policy than your
fund, limiting investment in any single security to 5% of the fund's assets.
- --------------------------------------------------------------------------------
CLASSES OF SHARES
- --------------------------------------------------------------------------------
European Equity Fund and International Fund
- --------------------------------------------------------------------------------
Class A sales charges The Class A shares of both funds have the same
and 12b-1 fees characteristics and fee structure.
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 are subject to a 12b-1 distribution
fee equal to 0.30% 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 charges The Class B shares of both funds have the same
and 12b-1 fees characteristics and fee structure.
o Class B shares are offered without a front-end
sales charge, but are subject to a contingent
deferred sales charge (CDSC) if sold within six
years after purchase. The CDSC ranges from 1.00%
to 5.00% depending on how long 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 charges The Class C shares of both funds have the same
and 12b-1 fees characteristics and fee structure.
o Class C shares are offered with a front-end sales
charge equal to 1.00% of the fund's offering
price.
o Class C shares are 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BUYING, SELLING AND EXCHANGING SHARES
- --------------------------------------------------------------------------------
European Equity Fund and International Fund
- --------------------------------------------------------------------------------
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 February 14, 2003, investors will not be allowed
to open new accounts in European Equity Fund but can add
to existing accounts.
- --------------------------------------------------------------------------------
Minimum initial Class A, Class B and Class C Shares: $1,000 for
investment non-retirement accounts and $250 for retirement accounts
and group investments.
- --------------------------------------------------------------------------------
Exchanging shares Shareholders may exchange their shares at net asset
value with no sales charge for shares of the same class
of any other John Hancock fund.
- --------------------------------------------------------------------------------
Selling shares Shareholders 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 expense table appearing below shows the expenses for the fiscal year ended
October 31, 2002, adjusted to reflect any changes. Future expenses for all
-13-
share classes may be greater or less. The examples contained in the expense
table show what you would pay if you invested $10,000 over the various time
periods indicated. Each example assumes that you reinvested all dividends and
that the average annual return was 5%. The examples are for comparison purposes
only and are not a representation of either fund's actual expenses or returns,
either past or future.
Pro Forma Expenses
The board of trustees of another John Hancock fund, John Hancock Global Fund,
has recommended that Global Fund also reorganize into International Fund. The
reorganization of European Equity Fund with International Fund, however, does
not depend upon whether the reorganization involving Global Fund occurs. In
connection with the reorganization, the adviser has agreed to reduce its
management fee rate to match the lower management fee rate of Global Fund, which
is the same as or lower than your fund's management fee rate at all asset levels
(see "Other Consequences of the Reorganization" below). The adviser also has
agreed until at least March 1, 2004 to limit International Fund's total
operating expenses to 2.35% of average daily net assets for Class A shares and
3.05% of average daily net assets for Class B and Class C shares. This expense
limitation, based on the your fund's most recent fiscal year, is lower than your
fund's total operating expenses before its current expense limitation. Although
this expense limitation is higher than your fund's net annual operating expenses
after its current expense limitation, your fund's current expense limitation is
in effect only until May 9, 2003, or the closing date of the reorganization, if
later.
The following expense table shows the hypothetical ("pro forma") expenses of
International Fund assuming (1) that a reorganization with European Equity Fund,
but not John Hancock Global Fund, occurred on November 1, 2001 or (2) that a
reorganization with both European Equity Fund and John Hancock Global Fund
occurred on November 1, 2001. The expenses shown in both tables are based on
fees and expenses incurred during the twelve month period ended October 31,
2002. The pro forma examples contained in the expense table show what you would
pay on a $10,000 investment if the reorganization had occurred on November 1,
2001. Each example assumes that you reinvested all dividends and that the
average annual return was 5%. The pro forma examples are for comparison purposes
only and are not a representation of International Fund's actual expenses or
returns, either past or future.
- ------------------------------------------------------------------------------------------------------------------------------------
International Fund International Fund
(PRO FORMA (PRO FORMA
for the year for the year
ended 10/31/02) ended 10/31/02)
(Assuming (Assuming
European reorganization with reorganization with
Equity International European Equity European Equity Fund
Fund Fund Fund only) and Global Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholder transaction expenses Class A Class A Class A Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as a % of purchase price) 5.00% 5.00% 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum sales charge imposed on reinvested
dividends none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) as a % of
purchase or sale price, whichever is less(1) none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Redemption fee(2) none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange fee none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses Class A Class A Class A Class A
(as a % of average net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Management fee 0.90% 1.00% 0.90%(3) 0.90%(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fee 0.30% 0.30% 0.30% 0.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Other expenses 1.45% 3.13% 1.88% 1.23%
- ------------------------------------------------------------------------------------------------------------------------------------
Total fund operating expenses 2.65% 4.43% 3.08% 2.43%
- ------------------------------------------------------------------------------------------------------------------------------------
Expense reduction [0.75%](4) [2.05%](5) [0.73]%(6) [0.08%](6)
- ------------------------------------------------------------------------------------------------------------------------------------
Net fund operating expenses 1.90% 2.38% 2.35% 2.35%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Except for investments of $1 million or more.
(2) Does not include wire redemption fee (currently $4.00).
(3) Effective with the reorganization, the adviser has agreed to reduce its
management fee to match the management fee rate of Global Fund, which is the
same as or lower than your fund's management fee rate at all asset levels.
-14-
(4) The adviser has agreed to limit European Equity Fund's Class A operating
expenses, to 1.90% of the fund's average daily net assets only until May 9, 2003
or the closing of the reorganization, if later. As of October 31, 2002 and
before the expense limitation, European Equity Fund's Class A actual operating
expenses were 2.65%.
(5) These numbers reflect International Fund's current limitation on expenses
(excluding 12b-1 and transfer agent fees) of 0.90% until February 28, 2004.
(6) Effective with the reorganization, the adviser has agreed to limit
International Fund's Class A operating expenses to 2.35% of the Fund's Class A
average daily net assets at least until March 1, 2004.
-15-
- ------------------------------------------------------------------------------------------------------------------------
International Fund International Fund
(PRO FORMA (PRO FORMA
for the year for the year
ended 10/31/02) ended 10/31/02)
(Assuming (Assuming
European reorganization with reorganization with
Equity International European Equity European Equity Fund
Fund Fund Fund only) and Global Fund)
- ------------------------------------------------------------------------------------------------------------------------
Shareholder transaction expenses Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases (as a % of purchase price) none none none none
- ------------------------------------------------------------------------------------------------------------------------
Maximum sales charge imposed on reinvested
dividends none none none none
- ------------------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) as a %
of purchase or sale price, whichever is less 5.00% 5.00% 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------------
Redemption fee(2) none none none none
- ------------------------------------------------------------------------------------------------------------------------
Exchange fee none none none none
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses Class B Class B Class B Class B
(as a % of average net assets)
- ------------------------------------------------------------------------------------------------------------------------
Management fee 0.90% 1.00% 0.90%(3) 0.90%(3)
- ------------------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fee 1.00% 1.00% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------
Other expenses 1.45% 3.13% 1.88% 1.23%
- ------------------------------------------------------------------------------------------------------------------------
Total fund operating expenses 3.35% 5.13% 3.78% 3.13%
- ------------------------------------------------------------------------------------------------------------------------
Expense reduction [0.75%](4) [2.05%](5) [0.73%](6) [0.08%](6)
- ------------------------------------------------------------------------------------------------------------------------
Net fund operating expenses 2.60% 3.08% 3.05% 3.05%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Shareholder transaction expenses Class C Class C Class C Class C
- ------------------------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases (as a % of purchase price) 1.00% 1.00% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------
Maximum sales charge imposed on reinvested
dividends None None none None
- ------------------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) as a %
of purchase or sale price, whichever is less 1.00% 1.00% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------
Redemption fee(2) None None none None
- ------------------------------------------------------------------------------------------------------------------------
Exchange fee None None none None
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses Class C Class C Class C Class C
(as a % of average net assets)
- ------------------------------------------------------------------------------------------------------------------------
Management fee 0.90% 1.00% 0.90%(3) 0.90%(3)
- ------------------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fee 1.00% 1.00% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------
Other expenses 1.45% 3.13% 1.88% 1.23%
- ------------------------------------------------------------------------------------------------------------------------
Total fund operating expenses 3.35% 5.13% 3.78% 3.13%
- ------------------------------------------------------------------------------------------------------------------------
Expense reduction [0.75%](4) [2.05%](5) [0.73%](6) [0.08%](6)
- ------------------------------------------------------------------------------------------------------------------------
Net fund operating expenses 2.60% 3.08% 3.05% 3.05%
- ------------------------------------------------------------------------------------------------------------------------
(1) Except for investments of $1 million or more.
(2) Does not include wire redemption fee (currently $4.00).
(3) Effective with the reorganization, the adviser has agreed to reduce its
management fee to match the management fee rate of Global Fund, which is the
same as or lower than your fund's management fee rate at all asset levels.
(4) The adviser has agreed to limit European Equity Fund's Class B and C
operating expenses to 2.60% and 2.60% of the fund's average daily net assets
only until May 9, 2003 or the closing of the reorganization, if later. As of
October 31, 2002, and before the expense limitation , European Equity's Class B
and Class C actual operating expenses were 3.35% and 3.35% , respectively.
(5) These numbers reflect International Fund's current limitation on expenses
(excluding 12b-1 and transfer agent fees) of 0.90% until February 28, 2004.
(6) Effective with the reorganization, the adviser has agreed to limit
International Fund's Class B and Class C operating expenses to 3.05%,
respectively, of the Fund's Class B and Class C average daily net assets at
least until March 1, 2004.
-16-
Examples
- ------------------------------------------------------------------------------------------------------
International Fund International Fund
(PRO FORMA) (PRO FORMA)
(Assuming (Assuming
European reorganization with reorganization with
Equity International European Equity European Equity Fund
Class A Fund(1) Fund Fund only) and Global Fund)
- ------------------------------------------------------------------------------------------------------
Year 1 $ 755 $ 761 $ 738 $ 727
- ------------------------------------------------------------------------------------------------------
Year 3 $1,282 $1,627 $1,349 $1,213
- ------------------------------------------------------------------------------------------------------
Year 5 $1,835 $2,503 $1,985 $1,725
- ------------------------------------------------------------------------------------------------------
Year 10 $3,334 $4,736 $3,683 $3,123
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Class B -- assuming redemption
at end of period
- ------------------------------------------------------------------------------------------------------
Year 1 $ 838 $ 845 $ 820 $ 809
- ------------------------------------------------------------------------------------------------------
Year 3 $1,330 $1,686 $1,399 $1,259
- ------------------------------------------------------------------------------------------------------
Year 5 $1,945 $2,624 $2,098 $1,834
- ------------------------------------------------------------------------------------------------------
Year 10 $3,482 $4,873 $3,828 $3,272
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Class B -- assuming no redemption
- ------------------------------------------------------------------------------------------------------
Year 1 $ 338 $ 345 $ 320 $ 309
- ------------------------------------------------------------------------------------------------------
Year 3 $1,030 $1,386 $1,099 $ 959
- ------------------------------------------------------------------------------------------------------
Year 5 $1,745 $2,424 $1,898 $1,634
- ------------------------------------------------------------------------------------------------------
Year 10 $3,482 $4,873 $3,828 $3,272
- ------------------------------------------------------------------------------------------------------
Class C -- assuming redemption
at end of period
- ------------------------------------------------------------------------------------------------------
Year 1 $ 533 $ 540 $ 516 $ 505
- ------------------------------------------------------------------------------------------------------
Year 3 $1,120 $1,472 $1,188 $1,050
- ------------------------------------------------------------------------------------------------------
Year 5 $1,828 $2,499 $1,979 $1,717
- ------------------------------------------------------------------------------------------------------
Year 10 $3,703 $5,057 $4,041 $3,500
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Class C -- assuming no redemption
- ------------------------------------------------------------------------------------------------------
Year 1 $ 434 $ 441 $ 417 $ 406
- ------------------------------------------------------------------------------------------------------
Year 3 $1,120 $1,472 $1,188 $1,050
- ------------------------------------------------------------------------------------------------------
Year 5 $1,828 $2,499 $1,979 $1,717
- ------------------------------------------------------------------------------------------------------
Year 10 $3,703 $5,057 $4,041 $3,500
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
(1) Expenses exclude limitation which was not extended beyond February 28, 2003.
-17-
Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets:
---------------------------------------------------------
Fund Asset Breakpoints Fee Rate
---------------------------------------------------------
European Equity Fund
---------------------------------------------------------
First $500 million 0.900%
---------------------------------------------------------
Amount over $500 million 0.700%
---------------------------------------------------------
---------------------------------------------------------
International Fund (current)
---------------------------------------------------------
First $250 million 1.000%
---------------------------------------------------------
Next $250 million 0.800%
---------------------------------------------------------
Next $250 million 0.750%
---------------------------------------------------------
Amount over $750 million 0.625%
---------------------------------------------------------
International Fund (pro forma)
---------------------------------------------------------
First $100 million 0.900%
---------------------------------------------------------
Next $200 million 0.800%
---------------------------------------------------------
Next $200 million 0.750%
---------------------------------------------------------
Amount over $500 million 0.625%
---------------------------------------------------------
Each fund's subadviser is Nicholas Applegate, an indirect wholly-owned
subsidiary of Allianz AG, a German publicly traded company, which, together with
its subsidiaries, comprises the world's largest insurance group. Nicholas
Applegate is responsible for providing investment advice to the funds, subject
to the review of the Trustees and overall supervision of the adviser. Nicholas
Applegate also provides the funds on a continuous basis with economic, financial
and political information, research and assistance concerning international
markets. Nicholas Applegate receives its compensation directly from the adviser,
not the funds. For European Equity Fund, the adviser pays Nicholas Applegate a
subadvisory fee equal on an annual basis to: (i) 0.60% of the first $100,000,000
of the average daily net asset value of the Fund; and (ii) 0.50% of the average
daily net asset value of the Fund in excess of $100,000,000. For International
Fund, the annual rate is equal to (i) 0.50% of the first $500,000,000 of the
average daily net asset value of the Fund; and (ii) 0.45% of the average daily
net asset value of the Fund in excess of $500,000,000. However, Nicholas
Applegate has agreed to reduce its subadvisory fees in connection with the
reorganization so that they will be equal on an annual basis to (i) 0.45% of the
first $200,000,000 of the average daily net asset value of the Fund; and (ii)
0.40% of the average daily net asset value of the Fund in excess of
$200,000,000. This reduction will have no effect on the fund's advisory fees or
other expenses.
International Fund's pro forma management fee rate of 0.90% is identical to your
fund's management fee rate at current asset levels, and is the same as, or lower
than, your fund's management fee at higher asset levels. Both funds have the
same 12b-1 fees for Class A shares (0.30%) and Class B and Class C shares
(1.00%). International Fund's pro forma other expenses of 1.88% are higher than
European Equity Fund's other expenses of 1.45%. However, assuming reorganization
with Global Fund as well as European Equity Fund, International Fund's pro forma
other expenses of 1.23% are substantially lower than European Equity Fund's
other expenses of 1.45%. This results in International Fund's pro forma total
annual operating expenses for all share classes being lower than European Equity
Fund's total annual operating expenses, in each case, before expense
limitations. Although European Equity Fund's net annual operating expenses after
its current expense limitation are lower than International Fund's pro forma net
annual operating expenses after its expense limitation, the adviser has
indicated that it will not extend European Equity Fund's expense limitation
beyond May 9, 2003, or the closing of the reorganization, if later. In addition,
the adviser is not required to extend International Fund's existing expense
limitation beyond March 1, 2004.
-18-
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.
- ----------------------------------------------------------------------------------------------------------------------------
European Equity Fund International Fund
- ----------------------------------------------------------------------------------------------------------------------------
Stock market risk The value of securities in the fund may go down in response to 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.
- ----------------------------------------------------------------------------------------------------------------------------
Management risk The fund's management strategy may fail to produce the intended results. The fund could underperform
its peers or lose money if the investment strategy, including country, industry or security (or in
the case of International Fund, region) selection, does not perform as expected.
- ----------------------------------------------------------------------------------------------------------------------------
Foreign securities Foreign investments are more risky than domestic investments. Investments in foreign securities may
risk 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.
- ----------------------------------------------------------------------------------------------------------------------------
Regional Because the fund focuses on a single region Not applicable.
concentration risk of the world, its performance may be more
volatile than that of a fund that invests
globally. European issues denominated in
euros are subject to the risk that the euro
may decline in value against the U.S.
dollar. Also, applying a single monetary
policy to countries with different economic
trends could hurt issuers in some
countries, and the failure of a monetary
union could disrupt European economies.
- ----------------------------------------------------------------------------------------------------------------------------
Emerging markets risk To the extent the fund invests in emerging markets, the risks of investment in foreign securities
are more significant. Also, in a down market emerging markets investments could become harder to
value or sell at a fair price.
- ----------------------------------------------------------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------------------------------------------------------
Active trading The fund may trade securities actively, which could increase its transaction costs (thus lowering
performance) and increase your taxable distributions.
- ----------------------------------------------------------------------------------------------------------------------------
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 Each 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
May 9, 2003, but may occur on any later date before December 31, 2003.
European Equity Fund will transfer all of its assets to International Fund
and International Fund will assume all of European Equity Fund's
liabilities. This will result in the addition of European Equity Fund's
assets to International 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 International Fund will issue to European Equity Fund Class A shares in an
amount equal to the net assets attributable to European Equity Fund's
Class A shares. As part of the liquidation of European Equity Fund, these
shares will immediately be distributed to Class A shareholders of record
of European Equity Fund in proportion to their holdings on the
reorganization date. As a result, Class A shareholders of European Equity
Fund will end up as Class A shareholders of International Fund.
o International Fund will issue to European Equity Fund Class B shares in an
amount equal to the net assets attributable to European Equity Fund's
Class B shares. As part of the liquidation of European Equity Fund, these
shares will immediately be distributed to Class B shareholders of record
of European Equity Fund in proportion to their holdings on the
reorganization date. As a result, Class B shareholders of European Equity
Fund will end up as Class B shareholders of International Fund.
-19-
o International Fund will issue to European Equity Fund Class C shares in an
amount equal to the net assets attributable to European Equity Fund's
Class C shares. As part of the liquidation of European Equity Fund, these
shares will immediately be distributed to Class C shareholders of record
of European Equity Fund in proportion to their holdings on the
reorganization date. As a result, Class C shareholders of European Equity
Fund will end up as Class C shareholders of International Fund.
o After the shares are issued, the existence of European Equity Fund will be
terminated.
Reasons for the Proposed Reorganization
The board of trustees of European Equity Fund believes that the proposed
reorganization will be advantageous to the shareholders of European Equity Fund
for several reasons. The board of trustees considered the following matters,
among others, in approving the proposal.
First, that, unlike your fund, International Fund is not geographically
concentrated and therefore can invest in a broader range of countries and
regions. International Fund is similar in size to your fund and invests in
similar types of securities. Combining the funds' assets into a single
investment portfolio will afford greater diversification. Moreover, the
international focus may result in a more concentrated marketing effort with a
goal of increased fund assets.
Second, that Nicholas Applegate has indicated that it intends to discontinue its
European-only equity management strategy. Accordingly, if the reorganization is
not approved, the board of trustees would need to evaluate other options,
including the possible liquidation of European Equity Fund.
Third, that the adviser has agreed, until at least March 1, 2004, to limit the
International Fund's total expenses to 2.35% of average daily net asset for
Class A Shares and 3.05% of average daily net assets for Class B and Class C
shares. These are lower than European Equity Fund's total annual operating
expenses for its most recent fiscal year before reductions for its current
expense limitation. For example, European Equity Fund's total Class A operating
expenses as of October 31, 2002 were 2.65%. Although the expense limitations are
higher than European Equity Fund's net annual operating expenses (i.e., after
its current expense limitation) for its most recent fiscal year, the adviser has
indicated that it will not extend European Equity Fund's current expense
limitations beyond May 9, 2003, or the closing of the reorganization, if later.
Fourth, that a combined fund offers economies of scale that may lead to lower
per share expenses. Both funds incur substantial costs for accounting, legal,
transfer agency services, insurance, and custodial and administrative services.
Many of these expenses are duplicative and there may be an opportunity to reduce
International Fund's expense ratio over time because of economies of scale if
the funds are combined.
The board of trustees of International Fund considered that the reorganization
presents an excellent opportunity for International 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 International Fund and its shareholders.
The boards of both funds also considered that the adviser and the funds'
distributor will benefit from the reorganization. For example, the adviser might
achieve cost savings due to the fund's lower fixed costs, which may result in a
reduction in the adviser's expense limitation over time, as well as any reduced
costs resulting from a consolidated portfolio management effort. The boards
believe, however, that these savings will not amount to a significant economic
benefit to the adviser or distributor.
Comparative Fees and Expense Ratios. As discussed above, the adviser has agreed
until at least March 1, 2004 to limit International Fund's total operating
expenses to 2.35% of average daily net assets for Class A shares and 3.05% of
average daily net assets for Class B and Class C shares. Therefore, after giving
effect to the expense limitation , International Fund's pro forma annual
operating expenses would be higher than your fund's current annual operating
expenses after giving effect to your fund's current limitations. However,
without these limitations, International Fund's pro forma annual operating
expenses would be lower than your fund's current annual operating expenses. A
full comparison of advisory fee rates and expense ratios is included above.
Comparative Performance. The trustees also considered details of the relative
performance of your fund and International Fund.
Unreimbursed Distribution and Shareholder Service Expenses
The boards of trustees of European Equity Fund and International Fund have
determined that, if the reorganization occurs, unreimbursed distribution and
shareholder service expenses incurred under European Equity Fund's Rule 12b-1
Plans will be reimbursable expenses under International Fund's Rule 12b-1 Plans.
However, the maximum amounts payable annually under International Fund's Rule
12b-1 Plans (0.30%, 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.
-20-
The following table shows the actual and pro forma unreimbursed distribution and
shareholder service expenses of shares of European Equity Fund and International
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 International Fund are not included in the table because this class does not
have a Rule 12b-1 Plan. European Equity Fund does not have Class I shares.
Rule 12b-1 Payments and Unreimbursed Expenses
- ---------------------------------------------------------------------------------------------
Aggregate
Dollar Amount
of 12b-1 Fees Unreimbursed Unreimbursed
Paid (for year Rule 12b-1 Expenses as %
ended Expenditures of Each Class'
October 31, (as of October Average Net
Name of Fund 2002) 31, 2002) Assets
- ---------------------------------------------------------------------------------------------
European Equity Fund $ 20,968 (A) $ 23,156 (A) 0.33% (A)
- ---------------------------------------------------------------------------------------------
$ 73,556 (B) $ 654,991 (B) 8.90% (B)
- ---------------------------------------------------------------------------------------------
$ 3,073 (C) $ 59,038 (C) 19.21% (C)
- ---------------------------------------------------------------------------------------------
International Fund $ 21,175 (A) $ 182,123 (A) 2.58% (A)
- ---------------------------------------------------------------------------------------------
$ 58,879 (B) $1,526,298 (B) 25.92% (B)
- ---------------------------------------------------------------------------------------------
$ 9,672 (C) $ 133,752 (C) 13.83% (C)
- ---------------------------------------------------------------------------------------------
Pro Forma:
- ---------------------------------------------------------------------------------------------
International Fund $ 42,143 (A) $ 205,279 (A) 1.46% (A)
Assuming reorganization ------------------------------------------------------------
with European Equity Fund only $132,435 (B) $2,181,289 (B) 16.47% (B)
------------------------------------------------------------
$ 12,745 (C) $ 192,790 (C) 15.13% (C)
- ---------------------------------------------------------------------------------------------
Assuming reorganization $187,371 (A) $ 555,655 (A) 0.89% (A)
with European Equity Fund ------------------------------------------------------------
and Global Fund $283,147 (B) $4,341,335 (B) 15.33% (B)
------------------------------------------------------------
$ 21,036 (C) $ 361,569 (C) 17.19% (C)
- ---------------------------------------------------------------------------------------------
If the reorganization had taken place on November 1, 2001, the pro forma
combined unreimbursed expenses of International Fund's Class A, Class B and
Class C shares would have been higher than if no reorganization had occurred.
Nevertheless, International Fund's assumption of European Equity Fund's
unreimbursed Rule 12b-1 expenses will have no immediate effect upon the payments
made under International Fund's Rule 12b-1 Plans. These payments will continue
to be 0.30%, 1.00% and 1.00% of average daily net assets attributable to Class
A, 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
International 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.
FURTHER INFORMATION ON EACH REORGANIZATION
Tax Status of Each 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 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.
As a result, with respect to each reorganization, for federal income tax
purposes:
o No gain or loss will be recognized by the Acquired Fund upon (1) the
transfer of all of its assets to the Acquiring Fund as described above or
(2) the distribution by the Acquired fund of the Acquiring Fund shares to
the Acquired fund's shareholders;
-21-
o No gain or loss will be recognized by the Acquiring Fund upon the receipt
of the Acquired fund's assets solely in exchange for the issuance of the
Acquiring Fund shares to the Acquired fund and the assumption of the
Acquired fund's liabilities by the Acquiring Fund;
o The basis of the assets of the Acquired fund acquired by the Acquiring
Fund will be the same as the basis of those assets in the hands of the
Acquired fund immediately before the transfer;
o The tax holding period of the assets of the Acquired fund in the hands of
the Acquiring Fund will include the Acquired fund's tax holding period for
those assets;
o You will not recognize gain or loss upon the exchange of your shares of
the Acquired fund solely for the Acquiring Fund shares as part of the
reorganization;
o The basis of the Acquiring Fund shares received by you in the
reorganization will be the same as the basis of your shares of the
Acquired fund surrendered in exchange; and
o The tax holding period of the Acquiring Fund shares you receive will
include the tax holding period of the shares of the Acquired fund
surrendered in the exchange, provided that the shares of the Acquired fund
were held as capital assets on the date of the exchange.
In rendering such opinions, counsel shall rely upon, among other things,
reasonable assumptions as well as representations of each Acquired fund and the
Acquiring 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 each Agreement and Plan of 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(s) or deliver to your fund(s) a lost certificate
affidavit, in the form and accompanied by the surety bonds that your fund(s) 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
International Fund shares. Shareholders may not redeem or transfer International
Fund shares received in the reorganization until they have surrendered their
fund share certificates or delivered an Affidavit. International Fund will not
issue share certificates in the reorganization.
Conditions to Closing each Reorganization. The obligation of each Acquired Fund
to consummate the reorganization is subject to the satisfaction of certain
conditions, including the performance by the 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 each respective Acquired Fund
and the receipt of all consents, orders and permits necessary to consummate the
reorganization (see Agreement, paragraph 7).
The obligations of each respective 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 Acquired
Funds' declaration of trust and by-laws. The funds' obligations are also subject
to the receipt of a favorable opinion of Hale and Dorr LLP as to the federal
income tax consequences of the reorganization (see Agreement, paragraph 8).
Termination of Agreement. The board of trustees of each respective Acquired Fund
or the Acquiring Fund may terminate the Agreement (even if the shareholders of
an Acquired Fund have already approved it) at any time before the reorganization
date, if that board believes that proceeding with the reorganization would no
longer be advisable.
Expenses of the Reorganization. John Hancock Advisers, LLC will pay the
reorganization costs of each Acquired Fund and the Acquiring Fund in connection
with entering into and carrying out the provisions of the Agreements, whether or
not the reorganization occurs.
CAPITALIZATION
With respect to each Proposal, the following tables set forth the capitalization
of each fund as of October 31, 2002, and the pro forma combined capitalization
of both funds as if each reorganization had occurred on that date. If a
-22-
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 October 31, 2002
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 each corresponding 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(s) had taken place on October 31, 2002:
- ------------------------------------------------------------------------------------------------
Global International Pro Pro
Proposal 1 Fund Fund Forma(1) Forma(2)
- ------------------------------------------------------------------------------------------------
Net Assets (millions) $50.4 $12.1 $62.5 $73.9
- ------------------------------------------------------------------------------------------------
Net Asset Value Per Share
- ------------------------------------------------------------------------------------------------
Class A $6.60 $5.10 $5.10 $5.10
- ------------------------------------------------------------------------------------------------
Class B $5.90 $4.81 $4.81 $4.81
- ------------------------------------------------------------------------------------------------
Class C $5.90 $4.81 $4.81 $4.81
- ------------------------------------------------------------------------------------------------
Shares Outstanding
- ------------------------------------------------------------------------------------------------
Class A 5,919,275 1,092,159 8,757,304 9,859,523
- ------------------------------------------------------------------------------------------------
Class B 1,802,131 978,559 3,187,354 4,347,236
- ------------------------------------------------------------------------------------------------
Class C 115,405 162,819 304,341 355,931
- ------------------------------------------------------------------------------------------------
(1) Assuming the reorganization of European Equity Fund into International Fund
does not occur. If the reorganization of your fund only had taken place on
October 31, 2002, approximately 1.29, 1.23 and 1.23 International Fund Class A,
B and C shares would have been issued for each share of Global Fund Class A, B
and C shares, respectively.
(2) Assuming the reorganization of European Equity Fund into International Fund
occurs. If both reorganizations had taken place on October 31, 2002, approx-
imately __, __, and __ International Fund shares would have been issued for each
share of Global Fund.
- ------------------------------------------------------------------------------------------------
European
Equity International Pro Pro
Proposal 2 Fund Fund Forma(1) Forma(2)
- ------------------------------------------------------------------------------------------------
Net Assets (millions) $11.4 $12.1 $23.5 $73.9
- ------------------------------------------------------------------------------------------------
Net Asset Value Per Share
- ------------------------------------------------------------------------------------------------
Class A $6.44 $5.10 $5.10 $5.10
- ------------------------------------------------------------------------------------------------
Class B $6.24 $4.81 $4.81 $4.81
- ------------------------------------------------------------------------------------------------
Class C $6.24 $4.81 $4.81 $4.81
- ------------------------------------------------------------------------------------------------
Shares Outstanding
- ------------------------------------------------------------------------------------------------
Class A 873,321 1,092,159 2,194,739 9,859,523
- ------------------------------------------------------------------------------------------------
Class B 893,734 978,559 2,138,373 4,347,236
- ------------------------------------------------------------------------------------------------
Class C 39,749 162,819 214,434 355,931
- ------------------------------------------------------------------------------------------------
(1) Assuming the reorganization of Global Fund into International Fund does not
occur. If the reorganization of your fund only had taken place on October 31,
2002, approximately 1.26, 1.30 and 1.30 International Fund Class A, B and C
shares would have been issued for each share of European Equity Fund Class A, B
and C shares, respectively.
(2) Assuming the reorganization of Global Fund into International Fund occurs.
If both reorganizations had taken place on October 31, 2002, approx-
imately __, __, and __ International Fund shares would have been issued for each
share of European Equity Fund.
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.
-23-
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Type of Information Headings in Each Prospectus
- -------------------------------------------------------------------------------------------------------------------------------
Investment objective and policies Goal and Strategy / Main Risks
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio management Subadviser
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Expenses Your Expenses
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Custodian Business Structure
- -------------------------------------------------------------------------------------------------------------------------------
Shares of beneficial interest Your Account: Choosing a Share Class
- -------------------------------------------------------------------------------------------------------------------------------
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 of sales of shares Your Account: Selling Shares, How Sales Charges are Calculated, Transaction Policies
- -------------------------------------------------------------------------------------------------------------------------------
Dividends, distributions and taxes Dividends and Account Policies
- -------------------------------------------------------------------------------------------------------------------------------
BOARDS' EVALUATION AND RECOMMENDATION
For the reasons described above, the board of trustees of each Acquired Fund,
including the trustees who are not "interested persons" of either fund in each
respective reorganization or the adviser ("independent trustees"), approved the
reorganization. In particular, the trustees determined that each reorganization
is in the best interests of each Acquired Fund and that the interests of
Acquired Fund shareholders would not be diluted as a result of the
reorganization. Similarly, the board of trustees of International Fund,
including the independent trustees, approved each reorganization. They also
determined that each reorganization is in the best interests of International
Fund and that the interests of International Fund's shareholders would not be
diluted as a result of either reorganization.
The trustees of each Acquired Fund recommend that shareholders of the Acquired
Funds vote FOR each proposal to approve an 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 shares of
each Acquired Fund outstanding and 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.
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Shares Quorum Voting
- ------------------------------------------------------------------------------------------------------------------------------------
In General All shares "present" in Shares "present" in person will be voted in person at the
person or by proxy are meeting. Shares present by proxy will be voted in accordance
counted toward a quorum. with instructions.
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Proxy with no Voting Considered "present" at Voted "for" a proposal.
Instruction (other than meeting.
Broker Non-Vote)
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Broker Non-Vote Considered "present" at Not voted. Same effect as a vote "against" a proposal.
meeting.
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Vote to Abstain Considered "present" at Not voted. Same effect as a vote "against" a proposal.
meeting.
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If the required approval of shareholders is not obtained with respect to a
proposal, the Acquired Fund subject to the proposal 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, terminating a fund's expense limitation or 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 each
Acquired Fund at a cost of approximately $10,000 per fund.
-24-
Revoking Proxies
Each Acquired Fund shareholder signing and returning a proxy has the power to
revoke it at any time before it is exercised:
o By filing a written notice of revocation with the Acquired Funds' 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 February 14, 2003 (the "record date"), the number of shares of beneficial
interest of each Acquired Fund outstanding were as follows:
---------------------------------------------------------
FUND SHARES OUTSTANDING
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Global Fund
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Class A [___________]
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Class B [___________]
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Class C [___________]
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European Equity Fund
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Class A [___________]
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Class B [___________]
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Class C [___________]
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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 each Acquired Fund
that are entitled to vote will be considered a quorum for the transaction of
business.
Other Business
Each 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 an 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(s) may
also arrange to have votes recorded by telephone by officers and employees of
your fund(s) 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.
-25-
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 meting. 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 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.
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 February 14, 2003, the following persons
owned of record or beneficially 5% or more of the outstanding shares of a class
of each fund, respectively:
- --------------------------------------------------------------------------------
Global Fund
- --------------------------------------------------------------------------------
Names and Addresses of Owners of
More Than 5% of Shares Class A Class B Class C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
European Equity Fund
- --------------------------------------------------------------------------------
Names and Addresses of Owners of
More Than 5% of Shares Class A Class B Class C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
International Fund
- -----------------------------------------------------------------------------------------
Names and Addresses of Owners of
More Than 5% of Shares Class A Class B Class C Class I
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
As of February 14, 2003, 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 Global Fund, European
Equity Fund and International Fund, each for the period ended October 31, 2002
are incorporated by reference into this proxy statement and prospectus. These
financial statements and financial highlights have been independently audited by
PricewaterhouseCoopers LLP, as stated in their reports appearing in the
statement of 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 and the Investment Company Act of 1940 and files reports,
proxy statements and other information with the SEC. These reports, proxy
statements and other information filed by the funds can be inspected and copied
(for a duplication fee) at the public reference facilities of the SEC at 450
Fifth Street, N.W., Washington, D.C., 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 SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
copies of these documents may be viewed on-screen or downloaded from the SEC's
Internet site at http://www.sec.gov.
-27-
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this ___ day
of _______, 2003, by and between John Hancock Investment Trust III, a
Massachusetts business trust (the "Trust") on behalf of its series, John Hancock
International Fund (the "Acquiring Fund") and ______________________, a
Massachusetts business trust (the "Trust II"), on behalf of its series,
____________ (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 May 9, 2003 (the "Closing Date"), of a
number of the Acquiring Fund Shares having an aggregate net asset
value equal, in the case of each class of Acquiring Fund Shares, to
the value of the assets, less such liabilities (herein referred to
as the "net value of the assets") attributable to the applicable
class, assumed, assigned and delivered, all determined as provided
in Paragraph 2.1 hereof and as of a date and time as specified
therein. Such transactions shall take place at the closing provided
for in Paragraph 3.1 hereof (the "Closing"). All computations shall
be provided by 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 The Acquiring Fund and the Acquired Fund shall each bear its own
expenses in connection with the transactions contemplated by this
Agreement.
1.4 On or as soon after the Closing Date as is conveniently practicable
(the "Liquidation Date"), the Acquired Fund will liquidate and
distribute pro rata to shareholders of record (the "Acquired Fund
shareholders"), determined as of the close of regular trading on the
New York Stock Exchange on the Closing Date, the Acquiring Fund
Shares received by the Acquired Fund pursuant to Paragraph 1.1
hereof. Such liquidation and distribution will be accomplished by
the transfer of the Acquiring Fund Shares then credited to the
account of the Acquired Fund on the books of the Acquiring Fund, to
open accounts on the share records of the Acquiring Fund in the
names of the Acquired Fund shareholders and representing the
respective pro rata number and class of Acquiring Fund Shares due
such shareholders. Acquired Fund shareholders who own Class A shares
of the Acquired Fund will receive Class A Acquiring Fund Shares,
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
-28-
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 values 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.
2.2 The number of shares of each class of Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for the
Acquired Fund's assets shall be determined by dividing the value of
the Acquired Fund's assets attributable to a class, less the
liabilities attributable to that class assumed by the Acquiring
Fund, by the Acquiring Fund's net asset value per share of the same
class, all as determined in accordance with Paragraph 2.1 hereof.
2.3 All computations of value shall be made by the Custodian in
accordance with its regular practice as pricing agent for the Funds.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be May 9, 2003 or such other date on or
before December 31, 2003 as the parties may agree. 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
-29-
check for the appropriate purchase price thereof. Portfolio
securities held of record by the Custodian in book-entry form on
behalf of the Acquired Fund shall be delivered to the Acquiring Fund
by the Custodian by recording the transfer of beneficial ownership
thereof on its records. The cash delivered shall be in the form of
currency or by the Custodian crediting the Acquiring Fund's account
maintained with the Custodian with immediately available funds.
3.3 In the event that on the Closing Date (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be
restricted or (b) trading or the reporting of trading on said
Exchange or elsewhere shall be disrupted so that accurate appraisal
of the value of the net assets of the Acquiring Fund or the Acquired
Fund is impracticable, the Closing Date shall be postponed until the
first business day after the day when trading shall have been fully
resumed and reporting shall have been restored; provided that if
trading shall not be fully resumed and reporting restored on or
before December 31, 2003, 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 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 and the related
statement of operations (copies of which have been furnished to the
Acquiring Fund) and the unaudited statements as of , present fairly in all
material respects the financial condition of the Acquired Fund as of
-30-
and 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 , 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 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 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 February 14, 2003, (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
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(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;
(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 diversified series of the Trust;
(c) The prospectus (the "Acquiring Fund Prospectus") and statement of
additional information for Class A, Class B, Class C and Class I shares of
the Acquiring Fund, dated February 14, 2003, 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 October 31, 2002 and
the related statement of operations (copies of which have been furnished
to the Acquired Fund), present fairly in all material respects the
financial condition of the Acquiring Fund as of October 31, 2002 and the
results of its operations for the period then ended in accordance with
generally accepted accounting principles consistently applied, and there
were no known actual or contingent liabilities of the Acquiring Fund as of
the respective dates thereof not disclosed therein;
(h) Since October 31, 2002, 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 as a
regulated investment company for each taxable year of its operation and
the Acquiring Fund will qualify as such as of the Closing Date;
(j) The authorized capital of the Trust 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
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Fund does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of its shares of beneficial interest, nor is
there outstanding any security convertible into any of its shares of
beneficial interest;
(k) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action on the part of the Trust on behalf
of the Acquiring Fund, and this Agreement constitutes a valid and binding
obligation of the Acquiring Fund enforceable in accordance with its terms;
(l) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund pursuant to the terms of this Agreement, when so issued and
delivered, will be duly and validly issued shares of beneficial interest
of the Acquiring Fund and will be fully paid and nonassessable by the
Trust;
(m) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with federal securities and other laws and regulations
applicable thereto;
(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.
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"),
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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 substantially in the
form attached to this Agreement as Annex A 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;
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 substantially in the
form attached to this Agreement as Annex B concerning certain
tax-related matters with respect to the Acquired Fund.
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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 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 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 The Acquiring Fund and the Acquired Fund shall each be liable solely
for its own expenses incurred in connection with entering into and
carrying out the provisions of this Agreement whether or not the
transactions contemplated hereby are consummated.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust on behalf of the Acquiring Fund and the 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.
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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 Article 12 shall be construed
to prohibit the parties from amending this Agreement to change the Closing Date.
13. NOTICES
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Acquiring Fund or to the Acquired
Fund, each at 101 Huntington Avenue, Boston, Massachusetts 02199, Attention:
President, and, in either case, with copies to Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts 02109, Attention: David 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.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first set forth above by its President or Vice President
and has caused its corporate seal to be affixed hereto.
JOHN HANCOCK INVESTMENT TRUST III on behalf of
JOHN HANCOCK INTERNATIONAL FUND
By:______________________________________________________
Maureen R. Ford
Chairman, President and Chief Executive Officer
[______________________] TRUST on behalf of
[________________________ FUND]
By:______________________________________________________
Susan S. Newton
Senior Vice President and Secretary
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Sign up for electronic delivery at www.jhancock.com/funds/edelivery
JOHN HANCOCK
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Prospectus 2.14.03 International funds
International Fund
Pacific Basin Equities Fund
[LOGO](R) As with all mutual funds, the Securities and Exchange
- ------------------ Commission has not approved or disapproved these
JOHN HANCOCK FUNDS funds or determined whether the information in this
prospectus is adequate and accurate. Anyone who
indicates otherwise is committing a federal crime.
Contents
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A fund-by-fund summary International Fund 4
of goals, strategies, risks,
performance and expenses. Pacific Basin Equities Fund 6
Policies and instructions for Your account
opening, maintaining and
closing an account in any Choosing a share class 8
international fund. How sales charges are calculated 8
Sales charge reductions and waivers 9
Opening an account 10
Buying shares 11
Selling shares 12
Transaction policies 14
Dividends and account policies 14
Additional investor services 15
Further information on the Fund details
international funds.
Business structure 16
Financial highlights 17
For more information back cover
Overview
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FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[Clip Art] Goal and strategy The fund's particular investment goals and the
strategies it intends to use in pursuing those goals.
[Clip Art] Main risks The major risk factors associated with the fund.
[Clip Art] Past performance The fund's total return, measured year-by-year and
over time.
[Clip Art] Your expenses The overall costs borne by an investor in the fund,
including sales charges and annual expenses.
JOHN HANCOCK INTERNATIONAL FUNDS
These funds invest primarily in foreign stocks and seek long-term growth of
capital. Each fund has its own strategy and its own risk profile.
WHO MAY WANT TO INVEST
These funds may be appropriate for investors who:
o are seeking to diversify a portfolio of domestic investments
o are seeking access to markets that can be less accessible to individual
investors
o are seeking funds for the growth portion of an asset allocation portfolio
o are investing for retirement or other goals that are many years in the
future
International funds may NOT be appropriate if you:
o are investing with a shorter time horizon in mind
o are uncomfortable with an investment whose value may vary substantially
o want to limit your exposure to foreign securities
RISKS OF MUTUAL FUNDS
Mutual funds are not bank deposits and are not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Because
you could lose money by investing in these funds, be sure to read all risk
disclosure carefully before investing.
THE MANAGEMENT FIRM
All John Hancock international funds are managed by John Hancock Advisers, LLC.
Founded in 1968, John Hancock Advisers is a wholly owned subsidiary of John
Hancock Financial Services, Inc. and as of _________________ managed
approximately $___ billion in assets.
3
International Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term growth of capital. To pursue this goal, the
fund normally invests at least 80% of its assets in stocks of foreign companies.
The fund may invest up to 30% of assets in emerging markets as classified by
Morgan Stanley Capital International (MSCI). The fund does not maintain a fixed
allocation of assets, either with respect to securities type or geography.
In managing the portfolio, the managers focus on a "bottom-up" analysis on the
financial conditions and competitiveness of individual foreign companies. In
analyzing specific companies for possible investment, the managers ordinarily
look for several of the following characteristics that will enable the companies
to compete successfully in their respective markets:
o above-average per share earnings growth
o high return on invested capital
o a healthy balance sheet
o sound financial and accounting policies and overall financial strength
o strong competitive advantages
o effective research, product development and marketing.
The managers consider whether to sell a particular security when any of those
factors materially changes. The managers allocate the fund's assets among
securities of countries that are expected to provide the best opportunities for
meeting the fund's investment objective.
To manage risk, the fund does not invest more than 5% of assets in any one
security.
The fund may use certain derivatives (investments whose value is based on
indexes, securities or currencies).
In abnormal conditions, the fund may temporarily invest more than 20% of assets
in investment-grade short-term securities. In these and other cases, the fund
might not achieve its goal.
================================================================================
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The average annual figures reflect sales charges; the
year-by-year and index figures do not, and would be lower if they did. All
figures assume dividend reinvestment. Past performance before and after taxes
does not indicate future results.
Class A, total returns
Best quarter: Q4 '99, 25.37%
Worst quarter: Q1 '01, -19.47%
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)
MSCI All Country World Ex-U.S. Free Index, an unmanaged index of freely traded
stocks of foreign companies.
[THE FOLLOWING DATA WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
- --------------------------------------------------------------------------------
Class A calendar year total returns (without sales charges)
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001 2002
-6.61% 5.34% 11.37% -7.73% 17.67% 31.19% -27.68% -29.76%
- --------------------------------------------------------------------------------
Average annual total returns (including sales charge) for periods ending
12-31-02
- --------------------------------------------------------------------------------
1 year 5 year Life of Life of Life of
Class A Class B Class C
Class A before tax (began 1-3-94) -33.30% -7.21% -3.49% -- --
Class A after tax on distributions -33.30% -7.39% -3.66% -- --
Class A after tax on distributions,
with sale -20.28% -5.50% -2.68% -- --
Class B before tax (began 1-3-94) -33.62% -7.23% -- -3.52% --
Class C before tax (began 6-1-98) -31.62% -- -- -- -10.75%
- --------------------------------------------------------------------------------
MSCI All Country World Ex-U.S.
Free Index -20.98% -0.85% 1.56% 1.56% -3.91%
4
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
Foreign investments are more risky than domestic investments. Investments in
foreign 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.
These risks are more significant in emerging markets.
The fund's management strategy has a significant influence on fund performance.
If the fund invests in countries or regions that experience economic downturns,
performance could suffer. In addition, if certain investments or industries do
not perform as expected, or 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 In a down market, emerging market securities, other higher-risk securities
and derivatives could become harder to value or to sell at a fair price.
o Certain derivatives could produce disproportionate losses.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) 5.00% 5.00% 2.00%
Maximum front-end sales charge (load) on
purchases as a % of purchase price 5.00% none 1.00%
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 1.00% 1.00% 1.00%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 3.13% 3.13% 3.13%
Total fund operating expenses 4.43% 5.13% 5.13%
Expense reimbursement (at least until 2-28-04) 2.05% 2.05% 2.05%
Annual operating expenses 2.38% 3.08% 3.08%
The hypothetical example below shows what your expenses would be after the
expense reimbursement (first year only) 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 $729 $1,598 $2,476 $4,717
Class B with redemption $811 $1,655 $2,597 $4,854
Class B without redemption $311 $1,355 $2,397 $4,854
Class C with redemption $507 $1,442 $2,473 $5,039
Class C without redemption $408 $1,442 $2,473 $5,039
(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
Nicholas-Applegate Capital Management
U.S.-based team responsible for day-to-day
investment management since December 2000
Founded in 1984
Supervised by the adviser
FUND CODES
Class A Ticker FINAX
CUSIP 409906500
Newspaper IntlA
SEC number 811-4630
JH fund number 40
Class B Ticker FINBX
CUSIP 409906609
Newspaper IntlB
SEC number 811-4630
JH fund number 140
Class C Ticker JINCX
CUSIP 409906831
Newspaper --
SEC number 811-4630
JH fund number 540
5
Pacific Basin Equities Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term growth of capital. To pursue this goal, the
fund normally invests at least 80% of its assets in equity securities (including
common and preferred stocks and their equivalents) of Pacific Basin companies.
These companies derive more than half of their revenues from Pacific Basin
operations, are organized under the laws of Pacific Basin countries, or are
traded principally on Pacific Basin exchanges. Although the Pacific Basin
includes all countries bordering the Pacific Ocean, the managers focus on Japan,
Hong Kong, Australia, Singapore, South Korea, China and Taiwan. Some Pacific
Basin countries may be considered emerging markets.
The fund may also invest in stocks of Asian companies outside the Pacific Basin.
The fund does not maintain a fixed allocation of assets, either with respect to
securities or geography.
In managing the portfolio, the managers focus on a "bottom-up" analysis on the
financial conditions and competitiveness of individual companies located in the
Pacific Basin. In analyzing specific companies for possible investment, the
managers ordinarily look for several of the following characteristics that will
enable the companies to compete successfully in their respective markets:
o above-average per share earnings growth
o high return on invested capital
o a healthy balance sheet
o sound financial and accounting policies and overall financial strength
o strong competitive advantages
o effective research, product development and marketing
The managers consider whether to sell a particular security when any of those
factors materially changes. The managers allocate the fund's assets among
securities of countries that are expected to provide the best opportunities for
meeting the fund's investment objective.
The fund may use certain derivatives (investments whose value is based on
indexes, securities or currencies).
In abnormal circumstances, the fund may temporarily invest more than 20% of its
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
================================================================================
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The average annual figures reflect sales charges; the
year-by-year and index figures do not, and would be lower if they did. All
figures assume dividend reinvestment. Past performance before and after taxes
does not indicate future results.
Class A, total returns
Best quarter: Q4 '99, 38.03%
Worst quarter: Q4 '97, -25.64%
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)
MSCI All Country Pacific Free Index, an unmanaged index of stocks of companies
in Australia, Japan and certain other Pacific Basin Countries.
[THE FOLLOWING DATA WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
- --------------------------------------------------------------------------------
Class A calendar year total returns (without sales charges)
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
70.45% -9.28% 4.95% 3.37% -27.87% -10.72% 99.47% -30.55% -23.60%
- --------------------------------------------------------------------------------
Average annual total returns (including sales charge) for periods ending
12-31-02
- --------------------------------------------------------------------------------
1 year 5 year 10 year Life of Life of
Class B Class C
Class A before tax -27.44% -8.33% 1.03% -- --
Class A after tax on distributions -27.44% -8.51% 0.68% -- --
Class A after tax on distributions,
with sale -16.71% -6.47% 0.73% -- --
Class B before tax (began 3-7-94) -27.97% -8.40% -- -4.99% --
Class C before tax (began 3-1-99) -25.71% -- -- -- 1.84%
- --------------------------------------------------------------------------------
MSCI All Country Pacific Free Index -21.84% -8.98% -3.37% -7.03%* -4.56%
* As of March 1, 1994.
6
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements. Because the fund focuses on a single region of the world, its
performance may be more volatile than that of a fund that invests globally.
Foreign investments are more risky than domestic investments. Investments in
foreign 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.
These risks are more significant in emerging markets, which include much of the
Pacific Basin.
The fund's management strategy has a significant influence on fund performance.
Pacific Basin stocks as a group could fall out of favor with the market, causing
the fund to underperform investments that focus on other types of stocks. In
addition, if the managers' securities 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 In a down market, emerging market securities, other higher-risk securities
and derivatives could become harder to value or to sell at a fair price.
o Stocks of small- and medium-capitalization companies tend to be more
volatile than those of larger companies.
o Certain derivatives could produce disproportionate losses.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) 5.00% 5.00% 2.00%
Maximum front-end sales charge (load)
on purchases as a % of purchase price 5.00% none 1.00%
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 0.80% 0.80% 0.80%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 1.47% 1.47% 1.47%
Total fund operating expenses 2.57% 3.27% 3.27%
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 $747 $1,260 $1,797 $3,260
Class B with redemption $830 $1,307 $1,907 $3,408
Class B without redemption $330 $1,007 $1,707 $3,408
Class C with redemption $526 $1,097 $1,790 $3,632
Class C without redemption $427 $1,097 $1,790 $3,632
(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
Nicholas-Applegate Capital Management
U.S.-based team responsible for day-to-day
investment management since December 2000
Founded in 1984
Supervised by the adviser
FUND CODES
Class A Ticker JHWPX
CUSIP 410233209
Newspaper PacBasA
SEC number 811-4932
JH fund number 58
Class B Ticker FPBBX
CUSIP 410233506
Newspaper PacBasB
SEC number 811-4932
JH fund number 158
Class C Ticker JPBCX
CUSIP 410233605
Newspaper --
SEC number 811-4932
JH fund number 558
7
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 0.30%.
- --------------------------------------------------------------------------------
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 the following page.
o Automatic conversion to Class A shares after eight years, thus reducing
future annual expenses.
- --------------------------------------------------------------------------------
Class C
- --------------------------------------------------------------------------------
o A front-end sales charge, as described at right.
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.
For actual past expenses of each share class, see the fund-by-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.
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.
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.
Your broker/dealer or agent may charge you a fee to effect transactions in fund
shares.
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
Class A and Class C Sales charges are as follows:
- --------------------------------------------------------------------------------
Class A sales charges
- --------------------------------------------------------------------------------
As a % of As a % of your
Your investment offering price investment
Up to $49,999 5.00% 5.26%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 and over See below
- --------------------------------------------------------------------------------
Class C sales charges
- --------------------------------------------------------------------------------
As a % of As a % of your
Your investment offering price investment
Up to $1,000,000 1.00% 1.01%
$1,000,000 and over none
Investments of $1 million or more Class A and Class C shares are available with
no front-end sales charge. However, there is a contingent deferred sales charge
(CDSC) on any Class A shares sold within one year of purchase, as follows:
- --------------------------------------------------------------------------------
CDSC 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.
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.
8 YOUR ACCOUNT
Class B Shares are offered at their net asset value per share, without any
initial sales charge.
Class B and Class C A CDSC may be charged if 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 year 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 on shares
being sold
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.
CDSC calculations are based on the number of shares involved, not on the value
of your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that carry
no CDSC. If there are not enough of these to meet your request, we will sell
those shares that have the lowest CDSC.
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
Reducing your Class A sales charges There are several ways you can combine
multiple purchases of Class A shares of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
o Accumulation Privilege -- lets you add the value of any Class A shares you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge. 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.
o Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section of your application, or contact
your financial representative or Signature Services, or consult the SAI (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: contact your financial representative or Signature Services to find
out how to qualify, or consult the SAI (see the back cover of this prospectus).
CDSC waivers As long as Signature Services is notified at the time you sell, the
CDSC for 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: if you think you may be eligible for a CDSC waiver, contact your
financial representative or Signature Services, or consult the SAI (see the back
cover of this prospectus).
YOUR ACCOUNT 9
Reinstatement privilege If you sell shares of a John Hancock fund, you may
reinvest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge, as long as Signature Services is
notified before you reinvest. If you paid a CDSC when you sold your shares, you
will be credited with the amount of the CDSC. All accounts involved must have
the same registration.
To utilize: contact your financial representative or Signature Services.
Waivers for certain investors Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
o selling brokers and their employees and sales representatives
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
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)
Class C shares may be offered without front-end sales charges to various
individuals and institutions, including certain retirement plans.
To utilize: if you think you may be eligible for a sales charge waiver, contact
Signature Services or consult the SAI (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: $250
o group investments: $250
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
o fee-based clients of selling brokers who have placed at least $2
billion in John Hancock funds: $250
3 Complete the appropriate parts of the account application, carefully
following the instructions. You must submit additional documentation when
opening trust, corporate or power of attorney accounts. You must notify
your financial representative or Signature Services if this information
changes. For more details, please contact your financial representative or
call Signature Services at 1-800-225-5291.
4 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.
10 YOUR ACCOUNT
- --------------------------------------------------------------------------------
Buying shares
- --------------------------------------------------------------------------------
Opening an account Adding to an account
By check
[Clip Art] o Make out a check for the o Make out a check for the
investment amount, payable to investment amount payable to
"John Hancock Signature "John Hancock Signature
Services, Inc." Services, Inc."
o Deliver the check and your o Fill out the detachable
completed application to your investment slip from an
financial representative, or account statement. If no slip
mail them to Signature is available, include a note
Services (address below). specifying the fund name,
your share class, your
account number and the
name(s) in which the account
is registered.
o Deliver the check and your
investment slip or note to
your financial
representative, or mail them
to Signature Services
(address below).
By exchange
[Clip Art] o Call your financial o Log on to www.jhfunds.com to
representative or Signature process exchanges between
Services to request an funds.
exchange.
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
[Clip Art] o Deliver your completed o Instruct your bank to wire
application to your financial the amount of your investment
representative, or mail it to to:
Signature Services. First Signature Bank & Trust
Account # 900000260
o Obtain your account number by Routing # 211475000
calling your financial
representative or Signature Specify the fund name, your
Services. share class, your account
number and the name(s) in which
o Instruct your bank to wire the account is registered. Your
the amount of your investment bank may charge a fee to wire
to: 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
[Clip Art] See "By exchange" and "By o Verify that your bank or
wire." 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
[Clip Art] See "By exchange" and "By o Verify that your bank or
wire." 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 Signature
Services between 8 A.M. and 4
P.M. Eastern Time on most
business days.
- ----------------------------------------------
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.
- ----------------------------------------------
To open or add to an account using the Monthly Automatic Accumulation Program,
see "Additional investor services."
YOUR ACCOUNT 11
- --------------------------------------------------------------------------------
Selling shares
- --------------------------------------------------------------------------------
Designed for To sell some or all of your shares
By letter
[Clip Art] o Accounts of any type. o Write a letter of instruction
or complete a stock power
o Sales of any amount. indicating the fund name,
your share class, your
account number, the name(s)
in which the account is
registered and the dollar
value or number of shares you
wish to sell.
o Include all signatures and
any additional documents that
may be required (see next
page).
o Mail the materials to
Signature Services.
o A check will be mailed to the
name(s) and address in which
the account is registered, or
otherwise according to your
letter of instruction.
By Internet
[Clip Art] o Most accounts. o Log on to www.jhfunds.com to
initiate redemptions from
o Sales of up to $100,000. your funds.
By phone
[Clip Art] o Most accounts. o Call EASI-Line for automated
service 24 hours a day using
o Sales of up to $100,000. your touch tone phone at
1-800-338-8080.
o Call your financial
representative or Signature
Services between 8 A.M. and 4
P.M. Eastern Time on most
business days.
By wire or electronic funds transfer (EFT)
[Clip Art] o Requests by letter to sell o To verify that the Internet
any amount. or telephone redemption
privilege is in place on an
o Requests by Internet or phone account, or to request the
to sell up to $100,000. form to add it to an existing
account, call Signature
Services.
o Amounts of $1,000 or more
will be wired on the next
business day. A $4 fee will
be deducted from your
account.
o Amounts of less than $1,000
may be sent by EFT or by
check. Funds from EFT
transactions are generally
available by the second
business day. Your bank may
charge a fee for this
service.
By exchange
[Clip Art] o Accounts of any type. o Obtain a current prospectus
for the fund into which you
o Sales of any amount. are exchanging by Internet or
by 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."
12 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
- --------------------------------------------------------------------------------
[Clip Art]
Owners of individual, joint, o Letter of instruction.
UGMA/UTMA accounts (custodial
accounts for minors). o On the letter, the signatures 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 o Letter of instruction.
proprietorship, general partner or
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 o Letter of instruction signed by
rights of survivorship whose 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, o Call 1-800-225-5291 for
guardians and other sellers or 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 13
- --------------------------------------------------------------------------------
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. The Funds may also 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. 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 a
fund's NAV on days when you cannot buy or sell shares.
Buy and sell prices When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable deferred sales charges.
Execution of requests Each fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated after 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, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.
Telephone transactions For your protection, telephone requests may be recorded
in order to verify their accuracy. 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. However, if the new fund's CDSC rate is higher, then the rate will
increase. A CDSC rate that has increased will drop again with a future exchange
into a fund with a lower rate.
To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties who, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. A fund may also refuse any exchange order.
A fund may change or cancel its exchange policies at any time, upon 60 days'
notice to its shareholders.
Account Information John Hancock Funds is required by law to obtain information
for verifying an account holder's identity. 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 NAV minus any applicable sales charges and take other steps that it deems
reasonable.
Certificated shares The funds no longer issue share certificates. Shares are
electronically recorded. Any existing certificated shares can only be sold by
returning the certificated shares to Signature Services, along with a letter of
instruction or a stock power and a signature guarantee.
Sales in advance of purchase payments When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten business days after
the purchase.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
Account statements In general, you will receive account statements as follows:
o after every transaction (except a dividend reinvestment) that affects your
account balance
o after any changes of name or address of the registered owner(s)
o in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
Dividends The funds generally distribute most or all of their net earnings
annually in the form of dividends. The funds declare and pay any income
dividends. 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
14 YOUR ACCOUNT
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 a fund's income
and short-term capital gains are taxable as ordinary income. Dividends from a
fund's long-term capital gains are taxable at a lower rate. Whether gains are
short-term or long-term depends on the fund's holding period. Some dividends
paid in January may be taxable as if they had been paid the previous December.
Dividends may include a return of capital.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
Taxability of transactions Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
Small accounts (non-retirement only) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Signature Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
Monthly Automatic Accumulation Program (MAAP) MAAP lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
o Complete the appropriate parts of your account application.
o If you are using MAAP to open an account, make out a check ($25 minimum)
for your first investment amount payable to "John Hancock Signature
Services, Inc." Deliver your check and application to your financial
representative or Signature Services.
Systematic withdrawal plan This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account
(buying shares during a period when you are also selling shares of the
same fund is not advantageous to you, because of sales charges).
o Specify the payee(s). The payee may be yourself or any other party, and
there is no limit to the number of payees you may have, as long as they
are all on the same payment schedule.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial
representative or Signature Services.
Retirement plans John Hancock Funds offers a range of retirement plans,
including traditional, Roth and 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 $250 or, for some group plans, no
minimum investment at all. To find out more, call Signature Services at
1-800-225-5291.
YOUR ACCOUNT 15
Fund details
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
The diagram below shows the basic business structure used by the John Hancock
international funds. Each 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 of the International Fund have the power to change the fund's
investment goal without shareholder approval.
The trustees of Pacific Basin Equities Fund have the power to change the focus
of the fund's 80% investment policy without shareholder approval. The fund will
provide written notice to shareholders at least 60 days prior to a change in its
80% investment policy.
Management fees The management fees paid to the investment adviser by the John
Hancock international funds last fiscal year are as follows:
- --------------------------------------------------------------------------------
Fund % of net assets
- --------------------------------------------------------------------------------
International 0.00%
Pacific Basin Equities 0.80%
------------
Shareholders
------------
Distribution and
shareholder services
-------------------------------------------------
Financial services firms and
their representatives
Advise current and prospective share-
holders on their fund investments, often
in the context of an overall financial plan.
-------------------------------------------------
-------------------------------------------------
Principal distributor
John Hancock Funds, LLC
Markets the funds and distributes shares
through selling brokers, financial planners
and other financial representatives.
-------------------------------------------------
-------------------------------------------------
Transfer agent
John Hancock Signature Services, Inc.
Handles shareholder services, including record-
keeping and statements, distribution of dividends
and processing of buy and sell requests.
-------------------------------------------------
-------------------------------------------------
Subadviser
Nicholas-Applegate
Capital Management
600 West Broadway
San Diego, California 92101
Provides portfolio management
to the funds.
-------------------------------------------------
-------------------------------------------------
Investment adviser
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Manages the funds' business and
investment activities.
-------------------------------------------------
-------------------------------------------------
Custodian
The Bank of New York
One Wall Street
New York, New York 10286
Holds the funds' assets, settles all
portfolio trades and collects most
of the valuation data required for
calculating each fund's NAV.
-------------------------------------------------
Asset
management
-------------------------------------------------
Trustees
Oversee the funds' activities.
-------------------------------------------------
16 FUND DETAILS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
These tables detail the performance of each fund's share classes, including
total return information showing how much an investment in the fund has
increased or decreased each year.
International Fund
Figures audited by PricewaterhouseCoopers LLP.
CLASS A SHARES PERIOD ENDED: 10-31-98 10-31-99 10-31-00 10-31-01 10-31-02
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.41 $8.81 $10.95 $9.45 $6.18
Net investment income (loss)(1) --(2) (0.02) (0.04) (0.05) (0.04)
Net realized and unrealized gain (loss) on investments 0.47 2.16 (1.01) (3.22) (1.04)
Total from investment operations 0.47 2.14 (1.05) (3.27) (1.08)
Less distributions
From net realized gain (0.07) -- (0.45) -- --
Net asset value, end of period $8.81 $10.95 $9.45 $6.18 $5.10
Total return(3,4) (%) 5.61 24.29 (10.15) (34.60) (17.48)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $6 $7 $15 $8 $6
Ratio of expenses to average net assets (%) 1.79 1.96 1.88 2.23 2.38
Ratio of adjusted expenses to average net assets(5) (%) 3.65 3.81 3.44 3.83 4.43
Ratio of net investment income (loss) to average net assets (%) 0.04 (0.20) (0.43) (0.65) (0.68)
Portfolio turnover (%) 129 113 163 278 228
CLASS B SHARES PERIOD ENDED: 10-31-98 10-31-99 10-31-00 10-31-01 10-31-02
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.22 $8.55 $10.55 $9.04 $5.86
Net investment income (loss)(1) (0.06) (0.09) (0.12) (0.10) (0.08)
Net realized and unrealized gain (loss) on investments 0.46 2.09 (0.94) (3.08) (0.97)
Total from investment operations 0.40 2.00 (1.06) (3.18) (1.05)
Less distributions
From net realized gain (0.07) -- (0.45) -- --
Net asset value, end of period $8.55 $10.55 $9.04 $5.86 $4.81
Total return(3,4) (%) 4.88 23.39 (10.65) (35.18) (17.92)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $10 $9 $12 $6 $5
Ratio of expenses to average net assets (%) 2.49 2.63 2.57 2.93 3.08
Ratio of adjusted expenses to average net assets(5) (%) 4.35 4.48 4.13 4.53 5.13
Ratio of net investment loss to average net assets (%) (0.66) (0.91) (1.13) (1.34) (1.38)
Portfolio turnover (%) 129 113 163 278 228
FUND DETAILS 17
International Fund continued
CLASS C SHARES PERIOD ENDED: 10-31-98(6) 10-31-99 10-31-00 10-31-01 10-31-02
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.36 $8.55 $10.57 $9.05 $5.87
Net investment loss(1) (0.03) (0.10) (0.11) (0.10) (0.08)
Net realized and unrealized gain (loss) on investments,
futures and foreign currency transactions (0.78) 2.12 (0.96) (3.08) (0.98)
Total from investment operations (0.81) 2.02 (1.07) (3.18) (1.06)
Less distributions
From net realized gain -- -- (0.45) -- --
Net asset value, end of period $8.55 $10.57 $9.05 $5.87 $4.81
Total return(3,4) (%) (8.65)(7) 23.63 (10.72) (35.14) (18.06)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) --(8) --(8) $1 $1 $1
Ratio of expenses to average net assets (%) 2.29(9) 2.66 2.57 2.93 3.08
Ratio of adjusted expenses to average net assets(5) (%) 4.15(9) 4.51 4.13 4.53 5.13
Ratio of net investment loss to average net assets (%) (1.27)(9) (1.04) (1.07) (1.35) (1.38)
Portfolio turnover (%) 129 113 163 278 228
(1) Based on the average of the shares outstanding at the end of each month.
(2) Less than $0.01 per share.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) The total returns 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.
(6) Class C shares began operations on 6-1-98.
(7) Not annualized.
(8) Less than $500,000.
(9) Annualized.
================================================================================
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, 1998,
1999, 2000, 2001 and 2002 for Class A would have been 3.75%, 22.44%, (11.71%),
(36.20%) and ______, for Class B 3.02%, 21.54%, (12.21%), (36.78%) and
__________, and for Class C the returns for the period or year ended October 31,
1998, 1999, 2000, 2001 and 2002 would have been (9.43%), 21.78%, (12.28%),
(36.74%) and __________, respectively.
18 FUND DETAILS
Pacific Basin Equities Fund
Figures audited by PricewaterhouseCoopers LLP.
CLASS A SHARES PERIOD ENDED: 10-31-98 10-31-99 10-31-00 10-31-01 10-31-02
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.63 $8.76 $14.46 $14.02 $9.62
Net investment income (loss)(1) 0.02 (0.09) (0.14) (0.08) (0.10)
Net realized and unrealized gain (loss) on investments (2.89) 5.79 0.08 (4.32) (0.29)
Total from investment operations (2.87) 5.70 (0.06) (4.40) (0.39)
Less distributions
From net investment income -- -- (0.37) -- --
In excess of net investment income -- -- (0.01) -- --
-- -- (0.38) -- --
Net asset value, end of period $8.76 $14.46 $14.02 $9.62 $9.23
Total return(2) (%) (24.68) 65.07 (0.57) (31.38) (4.05)
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $15 $33 $23 $12 $11
Ratio of expenses to average net assets (%) 2.46 2.37 2.06 2.67 2.57
Ratio of net investment income (loss) to average net assets (%) 0.22 (0.77) (0.81) (0.64) (0.99)
Portfolio turnover (%) 230 174 258 448 293
CLASS B SHARES PERIOD ENDED: 10-31-98 10-31-99 10-31-00 10-31-01 10-31-02
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.32 $8.47 $13.89 $13.43 $9.15
Net investment loss(1) (0.04) (0.17) (0.25) (0.15) (0.17)
Net realized and unrealized gain (loss) on investments (2.81) 5.59 0.09 (4.13) (0.26)
Total from investment operations (2.85) 5.42 (0.16) (4.28) (0.43)
Less distributions
From net investment income -- -- (0.29) -- --
In excess of net investment income -- -- (0.01) -- --
-- -- (0.30) -- --
Net asset value, end of period $8.47 $13.89 $13.43 $9.15 $8.72
Total return(2) (%) (25.18) 63.99 (1.30) (31.87) (4.70)
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $13 $37 $29 $14 $10
Ratio of expenses to average net assets (%) 3.16 3.07 2.77 3.37 3.27
Ratio of net investment loss to average net assets (%) (0.48) (1.47) (1.51) (1.36) 1.69
Portfolio turnover (%) 230 174 258 448 293
CLASS C SHARES PERIOD ENDED: 10-31-99(3) 10-31-00 10-31-01 10-31-02
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.09 $13.89 $13.43 $9.15
Net investment loss(1) (0.13) (0.24) (0.17) (0.17)
Net realized and unrealized gain (loss) on investments 4.93 0.08 (4.11) (0.26)
Total from investment operations 4.80 (0.16) (4.28) (0.43)
Less distributions
From net investment income -- (0.29) -- --
In excess of net investment income -- (0.01) -- --
-- (0.30) -- --
Net asset value, end of period $13.89 $13.43 $9.15 $8.72
Total return(2) (%) 52.81(4) (1.30) (31.87) (4.70)
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $1 $1 --(6) $1
Ratio of expenses to average net assets (%) 3.14(5) 2.77 3.37 3.27
Ratio of net investment loss to average net assets (%) (1.76)(5) (1.48) (1.48) 1.69
Portfolio turnover (%) 174 258 448 293
(1) Based on the average of the shares outstanding.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Class C shares began operations on 3-1-99.
(4) Not annualized.
(5) Annualized.
(6) Less than $500,000.
FUND DETAILS 19
For more information
Two documents are available that offer further information on John Hancock
international funds:
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 funds. The current annual report is included
in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into (is legally a part of) this prospectus.
To request a free copy of the current annual/semiannual report or the SAI,
please contact John Hancock:
By mail:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By phone: 1-800-225-5291
By EASI-Line: 1-800-338-8080
By TDD: 1-800-554-6713
On the Internet: www.jhfunds.com
Or you may view or obtain these documents from the SEC:
In person: at the SEC's Public Reference Room in
Washington, DC. For access to the Reference Room
call 1-202-942-8090
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
By electronic request: publicinfo@sec.gov
(duplicating fee required)
On the Internet: www.sec.gov
(C)2003 JOHN HANCOCK FUNDS, LLC INTPN 2/03
[LOGO](R) -------------
PRSRT STD
John Hancock Funds, LLC U.S. POSTAGE
MEMBER NASD P A I D
101 Huntington Avenue BOSTON, MA
Boston, MA 02199-7603 PERMIT NO. 11
-------------
www.jhfunds.com
John Hancock
International
Fund
ANNUAL
REPORT
10.31.02
Sign up for electronic delivery at
www.jhancock.com/funds/edelivery
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Maureen R. Ford, Chairman and Chief Executive Officer,
flush left next to first paragraph.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
A look at performance
page 6
Growth of $10,000
page 7
Fund's investments
page 8
Financial statements
page 13
Trustees & officers
page 30
For your information
page 33
Dear Fellow Shareholders,
The year 2002 has been an extremely difficult one for the stock market. A
steady stream of accounting scandals and corporate misdeeds has shaken
investors' faith in corporate America. Plus, questions about the strength
of the economic rebound and prospects for corporate earnings have hung over
the financial markets, along with increased fears about Middle East
tensions and terrorism.
With all these concerns, the major stock market indexes have fallen
significantly for much of the year. Despite a strong rally in October, the
broad Standard & Poor's 500 Index is down 22% year to date through October,
the Dow Jones Industrial Average is off 15% and the technology-laden Nasdaq
Composite Index has fallen 32%. Investors in equity mutual funds have been
unable to escape the market's descent, as 99% of all U.S. diversified
equity funds have produced negative results through October, according to
Lipper, Inc., and the average equity fund has lost 23%. Bonds, on the other
hand, outperformed stocks and gained some ground, as often happens when
investors seek safer havens.
At such trying times as these, the impulse to flee is understandable,
especially after the negative stock market returns in 2000 and 2001. But we
urge you to stay the course and keep a well-diversified portfolio and a
longer-term investment perspective. Working with your investment
professional on your long-term plan is especially critical in turbulent
times. Financial markets have always moved in cycles, and even though the
current down cycle is painful, it comes after five straight years of
20%-plus returns between 1995 and 1999.
As discouraging as conditions may seem in the short-term, history shows us
that the bad times do pass. We believe that remains the case today. The
economy is sound and the vast majority of U.S. corporations are honest
institutions striving to do their best for their shareholders. And the
efforts of both the private sector and the U.S. government should address
the current issues of corporate governance, so that corporate credibility
and therefore investor confidence are restored.
Sincerely,
/S/ MAUREEN R. FORD
Maureen R. Ford,
Chairman and Chief Executive Officer
YOUR FUND
AT A GLANCE
The Fund seeks
long-term growth
of capital by
investing primarily
in stocks of foreign
companies.
Over the last twelve months
* Global economic growth remained sluggish and concerns over Middle East
violence and terrorism dampened investor enthusiasm for stocks.
* The Fund's holdings in Japan hampered relative performance.
* International stocks staged a solid rebound late in the period.
[Bar chart with heading "John Hancock International Fund." Under the
heading is a note that reads "Fund performance for the year ended
October 31, 2002." The chart is scaled in increments of 5% with -20% at
the bottom and 0% at the top. The first bar represents the -17.48% total
return for Class A. The second bar represents the -17.92% total return
for Class B. The third bar represents the -18.06% total return for Class
C. The fourth bar represents the -17.15%* total return for Class I. A
note below the chart reads "Total returns for the Fund are at net asset
value with all distributions reinvested. *From inception March 1, 2002
through October 31, 2002."]
Top 10 holdings
1.9% Royal Bank of Scotland Group
1.9% Nokia
1.8% Unilever
1.6% Axa
1.5% Autostrade
1.5% SAP
1.5% HSBC Holdings
1.4% Nestle
1.4% TotalFinaElf
1.4% Barclays
As a percentage of net assets on October 31, 2002.
BY LORETTA MORRIS FOR THE NICHOLAS-APPLEGATE
CAPITAL MANAGEMENT PORTFOLIO MANAGEMENT TEAM
John Hancock
International Fund
MANAGERS'
REPORT
Following two consecutive years of decline in the global stock market,
investors could not be faulted for hoping that better days lay ahead. Alas,
these hopes were dashed as equity markets around the world continued to
retreat during the 12-month period ended October 31, 2002.
The reporting period began with a powerful rally as investors rebuilt their
shattered confidence and sentiment improved following the September 11,
2001 terrorist attacks on U.S. soil. In the wake of the attacks,
coordinated action by the world's central bankers led to unprecedented
stimulus in the form of interest-rate reductions and injections of
liquidity into the markets. The stimulus began to have its desired effect
late in 2001 as encouraging economic reports indicated that a recovery was
indeed underway.
Increasing evidence of a pickup in economic growth, as well as the support
of low interest rates, buoyed international markets during the first
quarter of 2002. While developed markets in Europe and Japan posted modest
gains, emerging markets did significantly better.
As the year unfolded, however, evidence of a slowing global economy,
accounting scandals in the United States, an escalation of violence in the
Middle East and the prospect of U.S. military action in Iraq dampened
investor sentiment. One notable exception was in Japan, where stocks surged
on a combination of technical reforms and hints that its beleaguered
economy might be bottoming.
"...equity markets
around the world
continued to retreat..."
Late in the period, the major international developed stock markets, with
the exception of Japan, staged a solid rebound. On a macroeconomic level,
worries of a possible double-dip recession in global growth were offset by
a number of positive data. A bull market indicator emerged when oil prices
fell even as other commodity prices increased. Prices for dynamic random
access memory chips continued to rise and the Baltic freight rate index,
which measures the cost of shipping cargo worldwide, is up 55%
year-over-year.
FUND PERFORMANCE EXPLAINED
For the 12 months ended October 31, 2002, John Hancock International Fund's
Class A, Class B and Class C shares posted total returns of -17.48%,
- -17.92% and -18.06%, respectively, at net asset value. During the same
period, the average international fund returned -12.72%, according to
Lipper, Inc.,1 while the benchmark MSCI All Country World Free Ex-U.S.
Index fell -10.88%. Class I shares, which were launched on March 1, 2002,
returned -17.15% from inception through October 31, 2002. Keep in mind
that your net asset value return will be different from the Fund's
performance if you were not invested in the Fund for the entire period and
did not reinvest all distributions. Please see pages six and seven for
historical performance information.
"...financial services stocks
were the largest detractor
to performance."
In the latter part of 2002, companies that met or exceeded their earnings
expectations began to be rewarded by investors. The renewed focus on
fundamentals was conducive to our investment philosophy and approach, which
is centered on positive, sustainable change and timeliness of investment.
Our bottom-up approach to selecting individual stocks helped us identify
areas of strength in consumer non-durables -- the only sector in both the
portfolio and the benchmark to post positive returns -- as well as consumer
durables and energy.
On a relative basis, holdings in the insurance services, technology and
utilities sectors benefited the portfolio, while financial services stocks
were the largest detractors to performance. Electric utilities in the
portfolio gained even as those in the benchmark posted a double-digit
decline. Meanwhile, holdings in finance companies registered steep losses.
[Table at top left-hand side of page entitled "Top five industry
groups." The first listing is Banks--foreign 14%, the second is Utilities
8%, the third Telecommunications 7%, the fourth Oil & gas 7%, and the
fifth Medical 6%.]
By country basis, stock selection in Germany, Canada and Italy proved
favorable, while holdings in Japan hampered relative performance. Among the
few bright spots were Indonesia and Russia, where portfolio holdings surged
more than 30%.
PORTFOLIO SHIFTS
During the reporting period, we added to holdings in the consumer
non-durables sector, where consumer spending on staple products remained
solid, and reduced exposure to the health-care and insurance services
groups. By country, we trimmed holdings in France and the United Kingdom on
signs of economic weakness, while increasing exposure to Japan, where
modest reform efforts are being made.
[Bar chart at middle of page with heading "Top five countries As a
percentage of net assets on 10-31-02." The chart is divided into five
sections: United Kingdom 19%, Japan 15%, Italy 7%, France 6% and Germany 5%.]
The list of best-performing stocks included Nissan Motor and Sony Corp. of
Japan, Banque National de Paris of France and Bank of Ireland. Decliners
included Corus Group, British Airways and Rohm Co.
[Table at top of page entitled "SCORECARD." The header for the left
column is "INVESTMENT" and the header for the right column is "RECENT
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is
Nissan Motor followed by an up arrow with the phrase "New models prove
popular." The second listing is Corus Group followed by a down arrow
with the phrase "Sliding steel prices and reduced output." The third
listing is Samsung Electronics followed by an up arrow with the phrase
"Strong growth in three business units."]
OUTLOOK
Looking ahead, the international equity markets are sending mixed signals.
Economic data have been disappointing in the United States, Eurozone and
Japan, and the Iraq situation continues to hang over the markets.
We are especially cautious about our outlook for Germany and Japan. In
Germany, which amounts to 35% of the total European Union economy, German
business confidence fell to a nine-month low in October, manufacturing
orders declined, and leading German research institutes cut their growth
forecasts for 2003 by more than half. The persistent concerns of excessive
debt could continue to constrain the telecommunications industry, although
we began to see signs of positive change late in the period. In Japan,
resistance to reform is blocking the government from making meaningful
progress.
"...the international
equity markets are
sending mixed signals."
For investors to regain confidence and rekindle enthusiasm for equities, a
return to profitability and increased visibility regarding corporate
earnings in the fourth quarter and into 2003 is paramount. Also, we believe
that the European Central Bank (ECB) must lower interest rates to stimulate
growth. Currently, the ECB has remained committed to its mission of
combating inflation, but inflationary pressures are easing even as the
Eurozone economy weakens.
This commentary reflects the views of the portfolio management team through
the end of the Fund's period discussed in this report. Of course, the
team's views are subject to change as market and other conditions warrant.
International investing involves special risks such as political, economic
and currency risks and differences in accounting standards and financial
reporting.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
A LOOK AT
PERFORMANCE
For the period ended
October 31, 2002
The index used for
comparison is the
Morgan Stanley
Capital International
(MSCI) All Country
World Free Ex-U.S.
Index, an unman-
aged index of freely
traded stocks of
foreign companies.
It is not possible to
invest in an index.
Class A Class B Class C Class I 1 Index
Inception date 1-3-94 1-3-94 6-1-98 3-1-02 --
Average annual returns with maximum sales charge (POP)
One year -21.66% -22.02% -19.70% -- -10.88%
Five years -9.57% -9.61% -- -- -2.95%
Since inception -5.54% -5.64% -13.36% -17.15% 2 --
Cumulative total returns with maximum sales charge (POP)
One year -21.66% -22.02% -19.70% -- -10.88%
Five years -39.52% -39.65% -- -- -13.92%
Since inception -39.53% -40.11% -46.93% -17.15% --
Performance figures assume all distributions are reinvested. Returns with
maximum sales charge reflect a sales charge on Class A shares of 5% and
Class C shares of 1%, and the applicable contingent deferred sales charge
(CDSC) on Class B and Class C shares. The Class B shares' CDSC declines
annually between years 1-6 according to the following schedule: 5, 4, 3,
3, 2, 1%. No sales charge will be assessed after the sixth year. Class C
shares held for less than one year are subject to a 1% CDSC. Sales charge
is not applicable for Class I shares. The return and principal value of an
investment in the Fund will fluctuate, so that shares, when redeemed, may
be worth more or less than the original cost. Index figures do not reflect
sales charges and would be lower if they did.
The returns reflect past results and should not be considered indicative of
future performance. The performance table above and the chart on the next
page do not reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares.
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future. See the
prospectus for details.
1 For certain types of investors as described in the Fund's prospectus for
Class I shares.
2 Not annualized.
GROWTH OF
$10,000
This chart shows what happened to a hypothetical $10,000 investment in
Class A shares for the period indicated. For comparison, we've shown the
same investment in the MSCI All Country World Free Ex-U.S. Index.
Line chart with the heading "GROWTH OF $10,000." Within the chart are
three lines. The first line represents the Index and is equal to $10,997
as of October 31, 2002. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock International
Fund, before sales charge, and is equal to $6,367 as of October 31,
2002. The third line represents the value of the same hypothetical
investment made in the John Hancock International Fund, after sales
charge, and is equal to $6,047 as of October 31, 2002.
Class B 1 Class C 1 Class I 2
Period beginning 1-3-94 6-1-98 3-1-02
Without sales charge $5,989 $5,358 $8,285
With maximum sales charge -- $5,305 --
Index $10,997 $7,667 $8,727
Assuming all distributions were reinvested for the period indicated, the
chart above shows the value of a $10,000 investment in the Fund's Class B,
Class C shares and Class I shares, respectively, as of October 31, 2002.
Performance of the classes will vary based on the difference in sales
charges paid by shareholders investing in the different classes and the fee
structure of those classes.
1 No contingent deferred sales charge applicable.
2 For certain types of investors as described in the Fund's prospectus for
Class I shares.
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
October 31, 2002
This schedule is divided into three main categories: common stocks,
warrants and short-term investments. Common stocks and warrants are further
broken down by country. Short-term investments, which represent the Fund's
cash position, are listed last.
SHARES ISSUER VALUE
COMMON STOCKS 92.53% $11,162,958
(Cost $11,728,128)
Australia 2.33% $280,807
7,600 Commonwealth Bank of Australia (Banks -- Foreign) 128,227
22,333 Woolworths Ltd. (Retail) 152,580
Belgium 1.23% 148,319
6,300 Dexia SA (Banks -- Foreign) 60,455
3,900 Interbrew SA (Beverages) 87,864
Bermuda 0.29% 34,970
1,000 Nabors Industries Ltd.* (Oil & Gas) 34,970
Brazil 1.17% 141,679
4,100 Aracruz Celulose SA American Depositary
Receipts (ADR) (Paper & Paper Products) 65,559
11,000 Tele Norte Leste Participacoes SA (ADR) (Telecommunications) 76,120
Canada 4.85% 584,715
7,900 Barrick Gold Corp. (Metal) 119,053
2,100 Canadian National Railway Co. (Transport) 89,607
2,700 Loblaw Cos., Ltd. (Retail) 97,531
1,500 Petro-Canada (Oil & Gas) 41,460
3,600 Shoppers Drug Mart Corp.* (Retail) 57,237
3,800 Suncor Energy, Inc. (Oil & Gas) 54,979
3,400 Talisman Energy, Inc. (Oil & Gas) 124,848
Denmark 0.52% 62,601
2,900 TDC AS (Telecommunications) 62,601
Finland 1.86% 224,370
13,500 Nokia Oyj (ADR) (Telecommunications) 224,370
France 5.78% 697,717
13,200 Axa SA (Insurance) 196,993
1,200 L'Oreal SA (Cosmetics & Personal Care) 89,364
1,800 Sanofi-Synthelabo SA (Medical) 110,071
1,189 TotalFinaElf SA (Oil & Gas) 163,785
5,800 Vivendi Environnement SA (Utilities) 137,504
Germany 4.92% 593,683
2,600 Bayerische Motoren Werke AG (Automobile / Trucks) 92,692
2,900 Degussa AG (Chemicals) 86,156
5,900 Deutsche Telekom AG (Telecommunications) 67,717
3,600 E.ON AG (Utilities) 162,923
2,400 SAP AG (Computers) 184,195
Greece 1.01% 121,593
4,800 Coca-Cola Hellenic Bottling Co. SA (Beverages) 67,594
4,800 Hellenic Telecommunications Organization SA
(Telecommunications) 53,999
Hong Kong 2.98% 358,906
31,000 China Mobile Ltd.* (Telecommunications) 76,115
37,500 CLP Holdings Ltd. (Utilities) 151,935
21,000 Sun Hung Kai Properties, Ltd. (Real Estate Operations) 130,856
India 0.50% 59,885
18,059 Hindustan Lever Ltd.* (Soap & Cleaning Preparations) 59,885
Indonesia 0.14% 17,324
52,000 PT Telekomunikasi Indonesia (Telecommunications) 17,324
Ireland 1.75% 211,650
11,000 Bank of Ireland (Banks -- Foreign) 122,004
7,100 CRH Plc (Building) 89,646
Israel 1.35% 162,603
2,100 Teva Pharmaceutical Industries Ltd. (ADR) (Medical) 162,603
Italy 6.65% 802,588
22,500 Autostrade SpA (Transport) 186,052
9,600 ENI SpA (Oil & Gas) 133,286
152,400 Finmeccanica SpA (Aerospace) 83,761
10,300 Mediaset SpA (Media) 71,910
8,216 Riunione Adriatica di Sicurta SpA (Insurance) 102,354
43,600 Snam Rete Gas SpA (Utilities) 130,394
25,200 UniCredito Italiano SpA (Banks -- Foreign) 94,831
Japan 14.99% 1,808,238
11,000 Asahi Glass Co., Ltd. (Building) 65,815
10,000 Bridgestone Corp (Rubber -- Tires & Miscellaneous) 124,643
13,000 Dai Nippon Printing Co., Ltd. (Printing -- Commercial) 132,854
20,000 Daiwa Securities Group, Inc. (Finance) 93,380
200 Fanuc Ltd. (Electronics) 7,918
2,000 Hoya Corp. (Electronics) 137,295
2,000 Ito-Yokado Co., Ltd. (Retail) 62,362
6,000 Kao Corp. (Cosmetics & Personal Care) 137,132
600 Keyence Corp. (Electronics) 99,323
11 Millea Holdings, Inc.* (Insurance) 82,157
1,900 Murata Manufacturing Co., Ltd. (Electronics) 89,797
900 Nintendo Co., Ltd. (Leisure) 86,687
100 Rohm Co., Ltd. (Electronics) 12,595
2,200 Shin-Etsu Chemical Co., Ltd. (Chemicals) 67,880
10,000 Shiseido Co., Ltd. (Cosmetics & Personal Care) 111,175
3,200 Sony Corp. (Electronics) 137,654
18,000 Sumitomo Mitsu Banking Corp. (Banks -- Foreign) 74,492
3,600 Takeda Chemical Industries, Ltd. (Medical) 149,571
22,000 Tokyo Gas Co., Ltd. (Utilities) 64,289
5,000 Yamato Transport Co., Ltd. (Transport) 71,219
Luxembourg 1.07% 128,569
11,900 Arcelor SA* (Steel) 128,569
Mexico 0.55% 66,943
31,100 Wal-Mart de Mexico SA de CV (Series C) (Retail) 66,943
Netherlands 3.76% 454,171
2,700 Heineken NV (Beverages) 108,476
3,100 Royal Dutch Petroleum Co. (Oil & Gas) 134,094
3,300 Unilever NV (Food) 211,601
Singapore 1.88% 226,312
8,000 Singapore Press Holdings Ltd. (Media) 89,709
18,000 United Overseas Bank Ltd. (Banks -- Foreign) 136,603
South Korea 2.33% 280,852
2,280 Hyundai Motor Co., Ltd. (Automobile / Trucks) 57,912
1,500 Kookmin Bank (Banks -- Foreign) 49,979
700 Samsung Electronics, Ltd.* Global Depositary Receipts
(Electronics) (R) 99,100
400 SK Telecom Co., Ltd. (Telecommunications) 73,861
Spain 3.43% 414,143
13,954 Banco Bilbao Vizcaya Argentaria SA (Banks -- Foreign) 132,93
1,900 Banco Popular Espanol SA (Banks -- Foreign) 81,359
7,500 Endesa SA (Utilities) 77,466
12,900 Telefonica SA* (Telecommunications) 122,383
Sweden 2.60% 313,799
4,400 Hennes & Mauritz AB (B Shares) (Retail) 85,480
16,100 Skandinaviska Enskilda Banken AB (A Shares) (Banks -- Foreign) 139,696
2,900 Svenska Cellulosa AB (B Shares) (Paper & Paper Products) 88,623
Switzerland 4.26% 514,458
1,700 Alcon, Inc.* (Medical) 69,734
2,300 Converium Holding AG* (Insurance) 92,860
800 Nestle SA (Food) 171,522
2,232 Novartis AG (Medical) 85,125
1,600 Syngenta AG (Chemicals) 95,217
Taiwan 0.70% 84,162
20,280 United Microelectronics Corp.* (ADR) (Electronics) 84,162
United Kingdom 19.06% 2,299,731
17,900 Allied Domecq Plc (Beverages) 106,974
23,660 Barclays Plc (Banks -- Foreign) 163,606
23,100 BG Group Plc (Oil & Gas) 92,245
15,963 BHP Billiton Plc (Metal) 77,917
4,800 BOC Group Plc (Chemicals) 67,509
11,800 British American Tobacco Plc (Tobacco) 120,732
11,100 British Sky Broadcasting Group Plc* (Media) 104,801
44,980 Centrica Plc (Utilities) 128,072
180,000 Corus Group Plc* (Steel) 119,681
12,800 Diageo Plc (Beverages) 144,280
6,500 Exel Plc (Transport) 66,810
5,000 GlaxoSmithKline Plc (Medical) 95,432
10,200 HBOS Plc (Banks -- Foreign) 112,899
16,000 HSBC Holdings Plc (Banks -- Foreign) 178,223
7,800 Man Group Plc (Finance) 116,170
21,300 National Grid Transco Plc (Utilities) 151,619
30,300 Rentokil Initial Plc (Diversified Operations) 102,746
9,622 Royal Bank of Scotland Group Plc (Banks -- Foreign) 226,400
76,900 Vodafone Group Plc (Telecommunications) 123,615
United States 0.57% 68,170
1,500 GlobalSantaFe Corp. (Oil & Gas) 35,850
1,000 Noble Corp.* (Oil & Gas) 32,320
WARRANTS 0.78% $94,029
(Cost $86,055)
India 0.78%
1,200 Infosys Technology Ltd* (Computers) 94,029
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 6.70% $808,000
(Cost $808,000)
Joint Repurchase Agreement 6.70%
Investment in a joint repurchase agreement
transaction with Barclays Capital, Inc., --
Dated 10-31-02, due 11-01-02 (Secured by
U.S. Treasury Inflation Indexed Note 3.000%
due 07-15-12) 1.90% $808 808,000
TOTAL INVESTMENTS 100.01% $12,064,987
OTHER ASSETS AND LIABILITIES, NET (0.01%) ($630)
TOTAL NET ASSETS 100.00% $12,064,357
* Non-Income producing security.
(R) This security is exempt from registration under rule 144A of the
Securities Act of 1933. Such security may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $99,100 or 0.82% of net assets as of October 31,
2002.
See notes to
financial statements.
PORTFOLIO
CONCENTRATION
October 31, 2002
(unaudited)
This table shows
the percentages
of the Fund's
investments
aggregated
by various
industry groups.
VALUE AS A PERCENTAGE
INVESTMENT DISTRIBUTION OF FUND'S NET ASSETS
Aerospace 0.69%
Automobile / Trucks 1.25
Banks -- Foreign 14.11
Beverages 4.27
Building 1.29
Chemicals 2.63
Computers 2.31
Cosmetics & Personal Care 2.80
Diversified Operations 0.85
Electronics 5.54
Finance 1.74
Food 3.18
Insurance 3.93
Leisure 0.72
Media 2.21
Medical 5.57
Metal 1.63
Oil & Gas 7.03
Paper & Paper Products 1.28
Printing -- Commercial 1.10
Real Estate Operations 1.08
Retail 4.32
Rubber -- Tires & Misc. 1.03
Soap & Cleaning Preparations 0.50
Steel 2.06
Telecommunications 7.44
Tobacco 1.00
Transport 3.43
Utilities 8.32
Short-term investments 6.70
Total investments 100.01%
See notes to
financial statements.
ASSETS AND
LIABILITIES
October 31, 2002
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the
net asset value
and the maximum
offering price
per share.
ASSETS
Investments at value (cost $12,622,183) $12,064,987
Cash 490
Receivable for investments sold 272,210
Receivable for shares sold 3,312
Dividends and interest receivable 32,259
Receivable from affiliates 26,936
Other assets 2,243
Total assets 12,402,437
LIABILITIES
Payable for investments purchased 201,661
Payable for shares repurchased 4,206
Other payables and accrued expenses 132,213
Total liabilities 338,080
NET ASSETS
Capital paid-in 26,588,761
Accumulated net realized loss on investments and
foreign currency transactions (13,966,036)
Net unrealized depreciation of investments and
translation of assets and liabilities in foreign currencies (557,744)
Accumulated net investment loss (624)
Net assets $12,064,357
NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($5,571,851 [DIV] 1,092,159 shares) $5.10
Class B ($4,706,547 [DIV] 978,559 shares) $4.81
Class C ($783,277 [DIV] 162,819 shares) $4.81
Class I ($1,002,682 [DIV] 195,952 shares) $5.12
MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($5.10 [DIV] 95%) $5.37
Class C ($4.81 [DIV] 99%) $4.86
1 On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
See notes to
financial statements.
OPERATIONS
For the year ended
October 31, 2002
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in
operating the
Fund. It also
shows net gains
(losses) for the
period stated.
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $27,493) $235,166
Interest (including securities lending income of $468) 9,520
Total investment income 244,686
EXPENSES
Investment management fee 143,908
Class A distribution and service fee 21,175
Class B distribution and service fee 58,879
Class C distribution and service fee 9,672
Class A, B and C transfer agent fee 164,099
Class I transfer agent fee 5,458
Custodian fee 162,080
Registration and filing fee 57,086
Auditing fee 36,633
Printing 17,017
Accounting and legal services fee 3,047
Miscellaneous 2,710
Trustees' fee 912
Legal fee 522
Interest expense 464
Total expenses 683,662
Less expense reductions (294,862)
Net expenses 388,800
Net investment loss (144,114)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on
Investments (2,537,653)
Foreign currency transactions (8,371)
Change in net unrealized appreciation (depreciation) of
Investments 92,047
Translation of assets and liabilities in foreign currencies (35,291)
Net realized and unrealized loss (2,489,268)
Decrease in net assets from operations ($2,633,382)
See notes to
financial statements.
CHANGES IN
NET ASSETS
This Statement
of Changes in
Net Assets
shows how the
value of the
Fund's net assets
has changed
since the end of
the previous
period. The dif-
ference reflects
earnings less
expenses, any
investment gains
and losses, distri-
butions paid to
shareholders, if
any, and any
increase or
decrease in
money share-
holders invested
in the Fund.
YEAR YEAR
ENDED ENDED
10-31-01 10-31-02
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss ($201,942) ($144,114)
Net realized loss (7,653,045) (2,546,024)
Change in net unrealized appreciation
(depreciation) (1,059,294) 56,756
Decrease in net assets resulting
from operations (8,914,281) (2,633,382)
From Fund share transactions (4,718,426) (280,938)
NET ASSETS
Beginning of period 28,611,384 14,978,677
End of period 1 $14,978,677 $12,064,357
1 Includes accumulated net investment loss of $35,941 and $624, respectively.
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS A SHARES
The Financial Highlights show how the Fund's net asset value for a share
has changed since the end of the previous period.
PERIOD ENDED 10-31-98 10-31-99 10-31-00 10-31-01 10-31-02
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.41 $8.81 $10.95 $9.45 $6.18
Net investment income (loss)1 -- 2 (0.02) (0.04) (0.05) (0.04)
Net realized and unrealized
gain (loss) on investments 0.47 2.16 (1.01) (3.22) (1.04)
Total from investment
operations 0.47 2.14 (1.05) (3.27) (1.08)
Less distributions
From net realized gain (0.07) -- (0.45) -- --
Net asset value, end of period $8.81 $10.95 $9.45 $6.18 $5.10
Total return 3,4 (%) 5.61 24.29 (10.15) (34.60) (17.48)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $6 $7 $15 $8 $6
Ratio of expenses
to average net assets (%) 1.79 1.96 1.88 2.23 2.38
Ratio of adjusted expenses
to average net assets 5 (%) 3.65 3.81 3.44 3.83 4.43
Ratio of net investment income
(loss) to average net assets (%) 0.04 (0.20) (0.43) (0.65) (0.68)
Portfolio turnover (%) 129 113 163 278 228
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS B SHARES
PERIOD ENDED 10-31-98 10-31-99 10-31-00 10-31-01 10-31-02
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.22 $8.55 $10.55 $9.04 $5.86
Net investment loss 1 (0.06) (0.09) (0.12) (0.10) (0.08)
Net realized and unrealized
gain (loss) on investments 0.46 2.09 (0.94) (3.08) (0.97)
Total from investment
operations 0.40 2.00 (1.06) (3.18) (1.05)
Less distributions
From net realized gain (0.07) -- (0.45) -- --
Net asset value,
end of period $8.55 $10.55 $9.04 $5.86 $4.81
Total return 3,4 (%) 4.88 23.39 (10.65) (35.18) (17.92)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $10 $9 $12 $6 $5
Ratio of expenses
to average net assets (%) 2.49 2.63 2.57 2.93 3.08
Ratio of adjusted expenses
to average net assets 5 (%) 4.35 4.48 4.13 4.53 5.13
Ratio of net investment loss
to average net assets (%) (0.66) (0.91) (1.13) (1.34) (1.38)
Portfolio turnover (%) 129 113 163 278 228
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS C SHARES
PERIOD ENDED 10-31-98 6 10-31-99 10-31-00 10-31-01 10-31-02
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $9.36 $8.55 $10.57 $9.05 $5.87
Net investment loss 1 (0.03) (0.10) (0.11) (0.10) (0.08)
Net realized and unrealized
gain (loss) on investments (0.78) 2.12 (0.96) (3.08) (0.98)
Total from investment
operations (0.81) 2.02 (1.07) (3.18) (1.06)
Less distributions
From net realized gain -- -- (0.45) -- --
Net asset value,
end of period $8.55 $10.57 $9.05 $5.87 $4.81
Total return 3,4 (%) (8.65) 7 23.63 (10.72) (35.14) (18.06)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) -- 8 -- 8 $1 $1 $1
Ratio of expenses
to average net assets (%) 2.29 9 2.66 2.57 2.93 3.08
Ratio of adjusted expenses
to average net assets 5 (%) 4.15 9 4.51 4.13 4.53 5.13
Ratio of net investment loss
to average net assets (%) (1.27) 9 (1.04) (1.07) (1.35) (1.38)
Portfolio turnover (%) 129 113 163 278 228
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS I SHARES
PERIOD ENDED 10-31-02 6
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $6.18
Net investment loss 1 (0.01)
Net realized and unrealized
loss on investments (1.05)
Total from investment
operations (1.06)
Net asset value,
end of period $5.12
Total return 3,4 (%) (17.15) 7
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $1
Ratio of expenses
to average net assets (%) 2.04 9
Ratio of adjusted expenses
to average net assets 5 (%) 4.09 9
Ratio of net investment loss
to average net assets (%) (0.34) 9
Portfolio turnover (%) 228
1 Based on the average of the shares outstanding.
2 Less than $0.01 per share.
3 Assumes dividend reinvestment and does not reflect the effect of
sales charges.
4 Total returns 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.
6 Class C and Class I shares began operations on 6-1-98 and 3-1-02,
respectively.
7 Not annualized.
8 Less than $500,000.
9 Annualized.
See notes to
financial statements.
NOTES TO
STATEMENTS
NOTE A
Accounting policies
John Hancock International Fund (the "Fund") is a diversified series of
John Hancock Investment Trust III, an open-end investment management
company registered under the Investment Company Act of 1940. The investment
objective of the Fund is to achieve long-term growth of capital.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B, Class C and Class I shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights as to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Com mission and the Internal Revenue Service. Shareholders of a
class that bears distribution and service expenses under terms of a
distribution plan have exclusive voting rights to that distribution plan.
Significant accounting policies of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or, if
quotations are not readily available, or the value has been materially
affected by events occurring after the closing of a foreign market, at fair
value as determined in good faith in accordance with procedures approved by
the Trustees. Short-term debt investments maturing within 60 days are
valued at amortized cost, which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign currency translation"
below.
Joint repurchase agreement
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with other registered investment companies
having a management contract with John Hancock Advisers, LLC (the
"Adviser"), a wholly owned subsidiary of The Berkeley Financial Group, LLC,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
Foreign currency translation
All assets or liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars based on London currency
exchange quotations as of 5:00 P.M., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain (loss) on
investments are translated at the rates prevailing at the dates of the
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales of
for eign currency, currency gains or losses realized be tween the trade and
settle ment dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabil ities, other than
investments in securities, resulting from changes in the exchange rates.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis. Capital gains realized on some
foreign securities are subject to foreign taxes, which are accrued as
applicable.
Class allocations
Income, common expenses and realized and unrealized gains (losses) are
determined at the fund level and allocated daily to each class of shares
based on the appropriate net assets of the respective classes. Distribution
and service fees, if any, and transfer agent fees for Class I shares, are
calculated daily at the class level based on the appropriate net assets of
each class and the specific expense rate(s) applicable to each class.
Expenses
The majority of the expenses are directly identifiable to an individual
fund. Expenses that are not readily identifiable to a specific fund will be
allocated in such a manner as deemed equitable, taking into consideration,
among other things, the nature and type of expense and the relative sizes
of the funds.
Bank borrowings
The Fund is permitted to have bank borrowings for temporary or emergency
purposes, including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. The Fund has entered into a
syndicated line of credit agreement with various banks. This agreement
enables the Fund to participate with other funds managed by the Adviser in
an unsecured line of credit with banks, which permit borrowings of up to
$475 million, collectively. Interest is charged to each fund, based on its
borrowing. In addition, a commitment fee is charged to each fund based on
the average daily unused portion of the line of credit and is allocated
among the participating funds. The Fund had no outstanding borrowing under
the line of credit during the year ended October 31, 2002.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the Fund
negotiated lender fees. These fees are included in interest income. The
loans are collateralized at all times with cash or securities with a market
value at least equal to the market value of the securities on loan. As with
other extensions of credit, the Fund may bear the risk of delay of the
loaned securities in recovery or even loss of rights in the collateral,
should the borrower of the securities fail financially. There were no
securities loaned on October 31, 2002.
Forward foreign currency exchange contracts
The Fund may enter into forward foreign currency exchange contracts as a
hedge against the effect of fluctuations in currency exchange rates. A
forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date at a set price. The
aggregate principal amounts of the contracts are marked to market daily at
the applicable foreign currency exchange rates. Any resulting unrealized
gains and losses are included in the determination of the Fund's daily net
assets. The Fund records realized gains and losses at the time the forward
foreign currency exchange contract is closed out. Risks may arise upon
entering these contracts from the potential inability of counterparties to
meet the terms of the contract and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. These contracts
involve market or credit risk in excess of the unrealized gain or loss
reflected in the Fund's statement of assets and liabilities.
The Fund may also purchase and sell forward contracts to facilitate the
settlement of foreign currency denominated portfolio transactions, under
which it intends to take delivery of the foreign currency. Such contracts
normally involve no market risk if they are offset by the currency amount
of the underlying transaction. The Fund had no open forward foreign
currency exchange contracts on October 31, 2002.
Federal income taxes
The Fund qualifies as a "regulated investment company" by complying with
the applicable provisions of the Internal Revenue Code and will not be
subject to federal income tax on taxable income that is distributed to
shareholders. Therefore, no federal income tax provision is required. For
federal income tax purposes, the Fund has $13,267,565 of a capital loss
carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. To the extent that such carryforward is
used by the Fund, no capital gain distributions will be made. The loss
carryforward expires as follows: October 31, 2007 -- $32,250, October 31,
2008 -- $2,888,578, October 31, 2009 -- $7,757,736, and October 31, 2010 --
$2,589,001. Availability of a certain amount of this loss carryforward that
was acquired on June 7, 2002 in a merger with John Hancock International
Equity Fund may be limited in a given year.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend
date or, in the case of some foreign securities, on the date thereafter
when the Fund identifies the dividend. Interest income on investment
securities is recorded on the accrual basis. Foreign income may be subject
to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment income
and net realized gains on the ex-dividend date. Distributions paid by the
Fund with respect to each class of shares are calculated in the same
manner, at the same time and are in the same amount, except for the effect
of expenses that may be applied differently to each class.
As of October 31, 2002, there were no distributable earnings on a tax
basis. Such distributions and distributable earnings on a tax basis are
determined in conformity with income tax regulations, which may differ from
accounting principles generally accepted in the United States of America.
Distributions in excess of tax basis earnings and profits, if any, are
reported in the Fund's financial statements as a return of capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of America,
incorporates estimates made by management in determining the reported
amount of assets, liabilities, revenues and expenses of the Fund. Actual
results could differ from these estimates.
NOTE B
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under the
investment management contract, the Fund pays a monthly management fee to
the Adviser equivalent, on an annual basis, to the sum of: (a) 1.00% of the
first $250,000,000 of the Fund's average daily net asset value, (b) 0.80%
of the next $250,000,000, (c) 0.75% of the next $250,000,000 and (d) 0.625%
of the Fund's average daily net asset value in excess of $750,000,000. The
Adviser has a subadvisory agreement with Nicholas-Applegate Capital
Management LP. The Fund is not responsible for the payment of the
subadvisory fees.
The Adviser has agreed to limit the Fund's expenses, excluding the
distribution and service fees and transfer agent fee to 0.90% of the Fund's
average daily net assets, at least until February 28, 2003. Accordingly,
the expense reduction amounted to $294,862 for the year ended October 31,
2002. The Adviser reserves the right to terminate this limitation in the
future.
The Fund has Distribution Plans with John Hancock Funds, LLC ("JH Funds"),
a wholly owned subsidiary of the Adviser. The Fund has adopted Distribution
Plans with respect to Class A, Class B and Class C pursuant to Rule 12b-1
under the Investment Company Act of 1940 to reimburse JH Funds for the
services it provides as distributor of shares of the Fund. Accordingly, the
Fund makes monthly payments to JH Funds at an annual rate not to exceed
0.30% of Class A average daily net assets and 1.00% of Class B and Class C
average daily net assets. A maximum of 0.25% of such payments may be
service fees as defined by the Conduct Rules of the National Association of
Securities Dealers. Under the Conduct Rules, curtailment of a portion of
the Fund's 12b-1 payments could occur under certain circumstances.
Class A and Class C shares are assessed up-front sales charges. During the
year ended October 31, 2002, JH Funds received net up-front sales charges
of $21,199 with regard to sales of Class A shares. Of this amount, $2,406
was retained and used for printing prospectuses, advertising, sales
literature and other purposes, $17,181 was paid as sales commissions to
unrelated broker-dealers and $1,612 was paid as sales commissions to sales
personnel of Signator Investors, Inc. ("Signator Investors"), a related
broker-dealer. The Adviser's indirect parent, John Hancock Life Insurance
Company ("JHLICo"), is the indirect sole shareholder of Signator Investors.
During the year ended October 31, 2002, JH Funds received net up-front
sales charges of $3,285 with regard to sales of Class C shares. Of this
amount, $2,884 was paid as sales commissions to unrelated broker-dealers
and $401 was paid as sales commissions to sales personnel of Signator
Investors.
Class B shares that are redeemed within six years of purchase are subject
to a contingent deferred sales charge ("CDSC") at declining rates,
beginning at 5.00% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed.
Class C shares that are redeemed within one year of purchase are subject to
a CDSC at a rate of 1.00% of the lesser of the current market value at the
time of redemption or the original purchase cost of the shares being
redeemed. Proceeds from the CDSCs are paid to JH Funds and are used in
whole or in part to defray its expenses for providing distribution related
services to the Fund in connection with the sale of Class B and Class C
shares. During the year ended October 31, 2002, CDSCs received by JH Funds
amounted to $15,620 for Class B shares and $155 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature Ser
vices, Inc., an indirect subsidiary of JHLICo. For Class A, B and C shares,
the Fund pays a monthly transfer agent fee based on the number of
shareholder accounts, plus certain out-of-pocket expenses, aggregated and
allocated to each class on the basis of its relative net asset value. For
Class I shares, the Fund pays a monthly transfer agent fee at an annual
rate of 0.05% of the average daily net asset value attributable to Class I
shares, plus certain out-of-pocket expenses. Effective January 1, 2003, for
Class A, B and C shares, the Fund will pay a monthly transfer agent fee at
an annual rate of 0.05% of the average daily net asset value, plus a fee
based on the number of shareholder accounts and reimbursement for certain
out-of-pocket expenses. (Class I structure transfer agent fee will not be
changing.)
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the year
was at an annual rate of 0.02% of the average net assets of the Fund.
Ms. Maureen R. Ford and Mr. John M. DeCiccio are directors and/or officers
of the Adviser and/or its affiliates, as well as Trustees of the Fund. The
compensation of unaffiliated Trustees is borne by the Fund. The
unaffiliated Trustees may elect to defer for tax purposes their receipt of
this compensation under the John Hancock Group of Funds Deferred Compen
sation Plan. The Fund makes investments into other John Hancock funds, as
applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability are
recorded on the Fund's books as an other asset. The deferred compensation
liability and the related other asset are always equal and are marked to
market on a periodic basis to reflect any income earned by the investment
as well as any unrealized gains or losses. The Deferred Compen sa tion Plan
investments had no impact on the operations of the Fund.
NOTE C
Fund share transactions
This listing illustrates the number of Fund shares sold, issued in
reorganization and repurchased during the last two periods, along with the
corresponding dollar value. The Fund has an unlimited number of shares
authorized with no par value.
YEAR ENDED 10-31-01 PERIOD ENDED 10-31-02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Sold 3,334,883 $26,461,859 1,608,472 $9,646,755
Repurchased (3,716,888) (29,457,682) (1,773,317) (10,715,750)
Net decrease (382,005) ($2,995,823) (164,845) ($1,068,995)
CLASS B SHARES
Sold 460,496 $3,277,285 397,117 $2,291,714
Repurchased (686,822) (4,979,294) (510,300) (2,891,269)
Net decrease (226,326) ($1,702,009) (113,183) ($599,555)
CLASS C SHARES
Sold 612,584 $4,971,952 295,202 $1,675,337
Repurchased (606,501) (4,992,546) (271,816) (1,534,260)
Net increase (decrease) 6,083 ($20,594) 23,386 $141,077
CLASS I SHARES 1
Sold -- -- 34,945 $187,366
Issued in reorganization -- -- 257,801 1,609,274
Repurchased -- -- (96,794) (550,105)
Net increase -- -- 195,952 $1,246,535
NET DECREASE (602,248) ($4,718,426) (58,690) ($280,938)
1 Class I shares began operations on 3-1-02.
NOTE D
Investment transactions
Purchases and proceeds from sales of securities other than short-term
securities and obligations of the U.S. government, during the year ended
October 31, 2002, aggregated $31,275,171 and $32,379,175, respectively.
The cost of investments owned on October 31, 2002, including short-term
investments, for federal income tax purposes was $12,716,456. Gross
unrealized appreciation and depreciation of investments aggregated $435,088
and $1,086,557, respectively, resulting in net unrealized depreciation of
$651,469. The difference between book basis and tax basis net unrealized
depreciation of investments is attributable primarily to the tax deferral
of losses on wash sales.
NOTE E
Reclassification of accounts
During the year ended October 31, 2002, the Fund reclassified amounts to
reflect an increase in accumulated net realized loss on investments of
$2,541,170, a decrease in accumulated net investment loss of $179,431 and
an increase in capital paid-in of $2,361,739. This represents the amount
necessary to report these balances on a tax basis, excluding certain
temporary differences, as of October 31, 2002. Additional adjustments may
be needed in subsequent reporting periods. These reclassifications, which
have no impact on the net asset value of the Fund, are primarily
attributable to net operating loss and foreign currency gains and losses in
the computation of distributable income and capital gains under federal tax
rules versus accounting principles generally accepted in the United States
of America and book and tax differences in accounting for deferred
compensation and federal excise tax. The calculation of net investment loss
per share in the financial highlights excludes these adjustments.
NOTE F
Reorganization
On May 29, 2002, the shareholders of John Hancock International Equity Fund
("Inter national Equity Fund") approved an Agreement and Plan of
Reorganization, which provided for the transfer of substantially all of the
assets and liabilities of International Equity Fund in exchange solely for
Class I shares of the Fund. The acquisition was accounted for as a tax-free
exchange of 257,801 Class I shares of the Fund for the net assets of the
Inter national Equity Fund, which amounted to $1,609,274 for Class I
shares, including $62,490 of unrealized appreciation, after the close of
business on June 7, 2002.
NOTE G
Proposed reorganization
On November 19, 2002, the Trustees approved the reorganization of John
Hancock European Equity Fund and John Hancock Global Fund into John Hancock
International Fund, subject to the approval by shareholders.
AUDITORS' REPORT
Report of
Pricewaterhouse-
Coopers LLP,
Independent Auditors
To the Board of Trustees and Shareholders
of John Hancock International Fund,
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of the
John Hancock International Fund (a series of John Hancock Investment Trust
III) (the "Fund") at October 31, 2002, and the results of its operations,
the changes in its net assets and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in
the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities owned at October 31,
2002 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 13, 2002
TAX INFORMATION
Unaudited
For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund, if any, paid during its
taxable year ended October 31, 2002.
With respect to the ordinary dividends paid by the Fund for the fiscal year
ended October 31, 2002, none of the dividends qualify for the
dividends-received deduction.
If the fund paid dividends during the fiscal year, shareholders will be
mailed 2002 U.S. Treasury Department Form 1099-DIV in January 2003. This
will reflect the total of all distributions which are taxable for the
calendar year 2002.
TRUSTEES
& OFFICERS
This chart provides information about the Trustees and Officers who oversee
your John Hancock fund. Officers elected by the Trustees manage the
day-to-day operations of the Fund and execute policies formulated by the
Trustees.
INDEPENDENT TRUSTEES
NUMBER OF
NAME, AGE TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
Dennis S. Aronowitz, Born: 1931 1996 31
Professor of Law, Emeritus, Boston University School of Law
(as of 1996); Director, Brookline Bancorp.
Richard P. Chapman, Jr., Born: 1935 1996 31
President and Chief Executive Officer, Brookline Bancorp Inc. (lending)
(since 1972); Trustee, Northeastern University (education); Chairman
and Director, Lumber Insurance Co. (insurance) (until 2000); Chairman
and Director, Northeast Retirement Services, Inc. (retirement administration)
(since 1998).
William J. Cosgrove, Born: 1933 1996 31
Vice President, Senior Banker and Senior Credit Officer, Citibank, N.A.
(retired 1991); Executive Vice President, Citadel Group Representatives,
Inc.; Director, Hudson City Bancorp; Trustee, Scholarship Fund for
Inner City Children (since 1986).
Richard A. Farrell 2, Born: 1932 1994 31
President, Farrell, Healer & Co., Inc. (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.
Gail D. Fosler 2, Born: 1947 1996 31
Senior Vice President and Chief Economist, The Conference Board
(non-profit economic and business research) (since 1989); Director, Unisys
Corp. (since 1993); Director, H.B. Fuller Company (since 1992) and
DBS Holdings (Singapore) (banking and financial services) (since 1999);
Director, National Bureau of Economic Research (academic) (since 1989);
Director, Baxter International (medical health care) (since 2001).
William F. Glavin, Born: 1932 1994 31
President Emeritus, Babson College (as of 1998); Vice Chairman, Xerox
Corporation (until 1989); Director, Reebok, Inc. (until 2002) and Inco Ltd.
(until 2002).
Patti McGill Peterson, Born: 1943 1994 39
Executive Director, Council for 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).
John A. Moore 2, Born: 1939 1994 39
President and Chief Executive Officer, 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).
John W. Pratt, Born: 1931 1994 31
Professor of Business Administration Emeritus, Harvard University
Graduate School of Business Administration (as of 1998).
INTERESTED TRUSTEES 3
NAME, AGE NUMBER OF
POSITION(S) HELD WITH FUND TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
John M. DeCiccio, Born: 1948 2001 61
Trustee
Executive Vice President and Chief Investment Officer, John Hancock
Financial Services, Inc.; Director, Executive Vice President and Chief
Investment Officer, John Hancock Life Insurance Company; Chairman of
the Committee of Finance of John Hancock Life Insurance Company;
Director, John Hancock Subsidiaries, LLC, Hancock Natural Resource
Group, Independence Investment LLC, Independence Fixed Income LLC,
John Hancock Advisers, LLC (the "Adviser") and The Berkeley Financial
Group, LLC ("The Berkeley Group"), John Hancock Funds, LLC ("John
Hancock Funds"), Massachusetts Business Development Corporation;
Director, John Hancock Insurance Agency, Inc. ("Insurance Agency, Inc.")
(until 1999) and John Hancock Signature Services, Inc. ("Signature
Services") (until 1997).
Maureen R. Ford, Born: 1955 2000 61
Trustee, Chairman, President and Chief Executive Officer
Executive Vice President, John Hancock Financial Services, Inc., John
Hancock Life Insurance Company; Chairman, Director, President and
Chief Executive Officer, the Adviser and The Berkeley Group; Chairman,
Director and Chief Executive Officer, John Hancock Funds; Chairman,
Director and Chief Executive Officer, Sovereign Asset Management
Corporation ("SAMCorp."); Director, Independence Investment LLC,
Independence Fixed Income LLC and Signature Services; Senior Vice
President, MassMutual Insurance Co. (until 1999).
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME, AGE
POSITION(S) HELD WITH FUND OFFICER
PRINCIPAL OCCUPATION(S) AND OF FUND
DIRECTORSHIPS DURING PAST 5 YEARS SINCE
William L. Braman, Born: 1953 2000
Executive Vice President and Chief Investment Officer
Executive Vice President and Chief Investment Officer, the Adviser and each of the John
Hancock funds; Director, SAMCorp., Executive Vice President and Chief Investment
Officer, Baring Asset Management, London UK (until 2000).
Richard A. Brown, Born: 1949 2000
Senior Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, the Adviser, John Hancock
Funds, and The Berkeley Group; Second Vice President and Senior Associate Controller,
Corporate Tax Department, John Hancock Financial Services, Inc. (until 2001).
Thomas H. Connors, Born: 1959 1994
Vice President and Compliance Officer
Vice President and Compliance Officer, the Adviser and each of the John Hancock funds;
Vice President, John Hancock Funds.
William H. King, Born: 1952 1994
Vice President and Treasurer
Vice President and Assistant 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, Born: 1950 1994
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Vice President,
Signature Services (until 2000); Director, Senior Vice President and Secretary, NM Capital.
The business address for all Trustees and Officers is 101 Huntington
Avenue, Boston Massachusetts, 02199.
The Statement of Additional Information of the Fund includes additional
information about members of the Board of Trustees of the Fund and is
available, without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee serves until resignation, retirement age or until his or
her successor is elected.
2 Member of Audit Committee.
3 Interested Trustees hold positions with the Fund's investment adviser,
underwriter and certain other affiliates.
FOR YOUR
INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUBADVISER
Nicholas-Applegate Capital Management LP
600 West Broadway
San Diego, California 92101
PRINCIPAL DISTRIBUTOR
John Hancock Funds, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By express mail John Hancock Signature Services, Inc.
Attn: Mutual Fund Image Operations
529 Main Street
Charlestown, MA 02129
Customer service representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhancock.com/funds/edelivery
This report is for the information of
the shareholders of the John Hancock
International Fund.
4000A 10/02
12/02
VOTE THIS PROXY CARD TODAY!
JOHN HANCOCK EUROPEAN EQUITY FUND
SPECIAL MEETING OF SHAREHOLDERS - MAY 7, 2003
PROXY SOLICITATION BY THE BOARD OF TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Maureen
R. Ford, 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 European
Equity Fund ("European Equity Fund") which the undersigned is (are) entitled to
vote at the Special Meeting of Shareholders (the "Meeting") of European Equity
Fund to be held at 101 Huntington Avenue, Boston, Massachusetts, on May 7, 2003
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 25, 2003 is hereby acknowledged. If not revoked, this
proxy shall be voted for the proposal.
Date , 2003
----------------------------------
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!
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
European Equity Fund ("European Equity Fund") and John Hancock
International Fund ("International Fund"). Under this Agreement,
European Equity Fund would transfer all of its assets to International
Fund in exchange for shares of International Fund. These shares will be
distributed proportionately to you and the other shareholders of
European Equity Fund. International Fund will also assume European
Equity Fund's liabilities.
FOR |_| AGAINST |_| ABSTAIN |_|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
VOTE THIS PROXY CARD TODAY!
JOHN HANCOCK GLOBAL FUND
SPECIAL MEETING OF SHAREHOLDERS - MAY 7, 2003
PROXY SOLICITATION BY THE BOARD OF TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Maureen
R. Ford, 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 Global Fund
("Global Fund") which the undersigned is (are) entitled to vote at the Special
Meeting of Shareholders (the "Meeting") of Global Fund to be held at 101
Huntington Avenue, Boston, Massachusetts, on May 7, 2003 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
25, 2003 is hereby acknowledged. If not revoked, this proxy shall be voted for
the proposal.
Date , 2003
--------------------------------
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
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NOTE: Signature(s) should
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printed herein. When
signing as attorney,
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trustee or guardian, please
give your full name as
such. If a corporation,
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corporate name by president
or other authorized
officer. If a partnership,
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name by authorized person.
VOTE THIS PROXY CARD TODAY!
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
Global Fund ("Global Fund") and John Hancock International Fund
("International Fund"). Under this Agreement, Global Fund would
transfer all of its assets to International Fund in exchange for shares
of International Fund. These shares will be distributed proportionately
to you and the other shareholders of Global Fund. International Fund
will also assume Global 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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Inc.
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Someoldtown, TS 12345-
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Acount: ALAMO-TST01 / 271-XXXX- John Hancock
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JOHN HANCOCK FUNDS
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John Hancock European Equity Fund
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Applicable Campaign Proposals Mark All For Against Board
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1 A proposal to approve an agreement and ( ) For ( ) Against ( ) Board
Plan of Reorganization between John Hancock
European Equity Fund ("European Equity Fund") and
John Hancock International Fund ("International Fund").
Under this Agreement, your fund would transfer all
of its assets to International Fund in exchange for
Class I shares of International Fund. These shares
would be distributed proportionately to you
and the other shareholders of European Equity
Fund. International Fund would also assume European
Equity Fund's liabilities.
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Any other business that may properly come before the meeting.
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JOHN HANCOCK FUNDS
Thank you. Your voting instructions have been submitted for processing.
If necessary, you can revisit Internet Voting site any time before the Meeting
Date on Wednesday, May 7, 2003 at 9:00 AM [ET] to submit new voting
instructions.
This is the summary of your voting instructions delivered to John Hancock Funds.
It is not a receipt or vote confirmation. You may print this page for your
records.
Instructions submitted on _________, 2003
Transaction Code: __________________
John Hancock European Equity Fund
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Statement of Additional Information
JOHN HANCOCK INTERNATIONAL FUND
(the "Acquiring Fund", and a series of John Hancock Investment Trust III)
JOHN HANCOCK EUROPEAN EQUITY FUND
(the "Acquired Fund", and a series of John Hancock World Fund)
101 Huntington Avenue
Boston, MA 02199
1-800-225-5291
February 25, 2003
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 that is also dated February 25, 2003. This Statement of
Additional Information provides additional information about John Hancock
International Fund and the Fund that it is acquiring, John Hancock European
Equity 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 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
Additional Information about the Acquired Fund 4
General Information and History 4
Investment Objective and Policies 4
Management of the Acquired Fund 4
Control Persons and Principal Holders of Shares 4
Investment Advisory and Other Services 4
Brokerage Allocation 4
Capital Stock and Other Securities 4
Purchase, Redemption and Pricing of Acquired Fund Shares 5
Tax Status 5
Underwriters 5
Calculation of Performance Data 5
Financial Statements 5
Exhibits
A - Statement of Additional Information, dated February 14, 2003, of the
Acquiring Fund including audited financial statements as of October 31,
2002.
B - Statement of Additional Information, dated February 14, 2003, of the
Acquired Fund including audited financial statements as of October 31,
2002.
2
INTRODUCTION
This Statement of Additional Information ("SAI") is intended to supplement the
information provided in a proxy statement and prospectus dated February 25, 2003
.. 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 May 7, 2003. This Statement of Additional
Information incorporates by reference the Statement of Additional Information of
the Acquiring Fund, dated February 14, 2003, and the Statement of Additional
Information of the Acquired Fund, dated February 14, 2003. 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 accounts, 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", "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 October 31, 2002
are attached to the Acquiring Fund SAI, which is attached hereto as Exhibit A.
Pro forma combined financial statements as of October 31, 2002 are also attached
hereto.
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 B.
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.
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.
2
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", "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, 2002 are
attached to the Acquired Fund SAI, which is attached hereto as Exhibit B.
3
JOHN HANCOCK INTERNATIONAL FUND
Class A, Class B, Class C and Class I Shares
Statement of Additional Information
February 14, 2003
This Statement of Additional Information provides information about John Hancock
Internaitonal Fund (the "Fund") in addition to the information that is contained
in the combined International Funds' current Prospectus and in the Fund's
current Prospectus for Class I shares, (the "Prospectuses"). 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 ................................................. 12
Those Responsible for Management ........................................ 15
Investment Advisory and Other Services .................................. 22
Distribution Contracts .................................................. 26
Sales Compensation ...................................................... 28
Net Asset Value ......................................................... 30
Initial Sales Charge on Class A and Class C Shares ...................... 30
Deferred Sales Charge on Class B and Class C Shares ..................... 33
Special Redemptions ..................................................... 37
Additional Services and Programs ........................................ 37
Purchases and Redemptions through Third Parties ......................... 39
Description of the Fund's Shares ........................................ 39
Tax Status .............................................................. 40
Calculation of Performance .............................................. 45
Brokerage Allocation .................................................... 47
Transfer Agent Services ................................................. 50
Custody of Portfolio .................................................... 51
Independent Auditors .................................................... 51
Appendix A- Description of Investment Risk .............................. A-1
Appendix B-Description of Bond Ratings .................................. B-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.
John Hancock Advisers, LLC (prior to February 1, 2002, John Hancock Advisers,
Inc.) (the "Adviser") is the Fund's investment adviser. The Adviser is an
indirect, wholly-owned subsidiary of John Hancock Life Insurance Company
(formerly John Hancock Mutual Life Insurance Company)(the "Life Company"), a
Massachusetts life insurance company chartered in 1862, with national
headquarters at John Hancock Place, Boston, Massachusetts. The Life Company is
wholly owned by John Hancock Financial Services, Inc., a Delaware corporation
organized in February, 2000.
The Fund's Subadviser is Nicholas-Applegate Capital Management
("Nicholas-Applegate"), (the "Subadviser"). Nicholas-Applegate is responsible
for providing investment advice to the Fund, subject to the review of the
Trustees and overall supervision of the Adviser.
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
non-fundamental. 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 seeks
to achieve its investment objective by investing primarily in foreign equity
securities. The Fund's investments will be subject to the market fluctuations
and risks inherent in all securities.
Under normal circumstances, at least 80% of the Fund's total assets will be
invested in equity securities of issuers located in various countries around the
world. Generally, the Fund's portfolio will contain securities of issuers from
at least three countries other than the United States. The Fund normally will
invest substantially all of its assets in equity securities, such as common
stock, preferred stock, and securities convertible into common and preferred
stock. However, if deemed advisable by the Adviser, the Fund may invest in any
other type of security including warrants, bonds, notes and other debt
securities (including Eurodollar securities) or obligations of domestic or
foreign governments and their political subdivisions, or domestic or foreign
corporations.
The Fund will maintain a flexible investment policy and will invest in a
diversified portfolio of securities of companies and governments located
throughout the world. In making the allocation of assets among various countries
and geographic regions, the Adviser and the Subdviser ordinarily consider such
factors as prospects for relative economic growth between foreign countries;
expected levels of inflation and interest rates; government policies influencing
business conditions; and other pertinent financial, tax, social, political,
currency and national factors - all in relation to the prevailing prices of the
securities in each country or region.
In abnormal conditions, the Fund may hold cash or invest all or a portion of its
assets in short-term domestic as well as foreign instruments, including:
short-term U.S. Government securities and repurchase agreements in connection
with such instruments; bank certificates of deposit, bankers' acceptances, time
deposits and letters of credit; and commercial paper (including so called
Section 4(2) paper rated at least A-1 or A-2 by Standard & Poor's Ratings Group
("S&P") or P-1 or P-2 by Moody's Investors Service, Inc. ("Moody's") or if
unrated considered by the Adviser to be of comparable value. The Fund's
temporary defensive investments may also
2
include: short-term debt obligations of U.S. companies, rated at least BBB or
Baa by S&P or Moody's, respectively, or, if unrated, of comparable quality in
the opinion of the Adviser; commercial paper and short-term corporate debt
obligations not satisfying the above credit standards if they are (a) subject to
demand features or puts or (b) guaranteed as to principal and interest by a
domestic or foreign bank having total assets in excess of $1 billion, by a
corporation whose commercial paper may be purchased by the Fund, or by a foreign
government having an existing debt security rated at least BBB or Baa by S&P or
Moody's, respectively; and other short-term investments which the Trustees of
the Fund determine present minimal credit risks and which are of "high quality"
as determined by any major rating service or, in the case of an instrument that
is not rated, of comparable quality as determined by the Adviser.
Government Securities. Certain U.S. Government securities, including U.S.
Treasury bills, notes and bonds, and GNMA certificates ("Ginnie Maes"), are
supported by the full faith and credit of the United States. Certain other U.S.
Government securities, issued or guaranteed by Federal agencies or government
sponsored enterprises, are not supported by the full faith and credit of the
United States, but may be supported by the right of the issuer to borrow from
the U.S. Treasury. These securities include obligations of the Federal Home Loan
Mortgage Corporation ("Freddie Macs"), and obligations supported by the credit
of the instrumentality, such as Federal National Mortgage Association Bonds
("Fannie Maes"). No assurance can be given that the U.S. Government will provide
financial support to such Federal agencies, authorities, instrumentalities and
government sponsored enterprises in the future.
Ginnie Maes, Freddie Macs and Fannie Maes are mortgage-backed securities which
provide monthly payments which are, in effect, a "pass-through" of the monthly
interest and principal payments (including any prepayments) made by the
individual borrowers on the pooled mortgage loans. Collateralized mortgage
obligations ("CMOs") in which the Fund may invest are securities issued by a
U.S. Government instrumentality that are collateralized by a portfolio of
mortgages or mortgage-backed securities. Mortgage-backed securities may be less
effective than traditional debt obligations of similar maturity at maintaining
yields during periods of declining interest rates.
Structured or Hybrid Notes. The Fund may invest in "structured" or "hybrid"
notes. The distinguishing feature of a structured or hybrid note is that the
amount of interest and/or principal payable on the note is based on the
performance of a benchmark asset or market other than fixed income securities or
interest rates. Examples of these benchmark include stock prices, currency
exchange rates and physical commodity prices. Investing in a structured note
allows the Fund to gain exposure to the benchmark market while fixing the
maximum loss that the Fund may experience in the event that market does not
perform as expected. Depending on the terms of the note, the Fund may forego all
or part of the interest and principal that would be payable on a comparable
conventional note; the Fund's loss cannot exceed this foregone interest and/or
principal. An investment in structured or hybrid notes involves risks similar to
those associated with a direct investment in the benchmark asset.
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 these 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 ability of the
issuer to pay principal and interest and general economic trends. Appendix B
contains further information concerning the ratings of Moody's and S&P and their
significance. Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. Neither of these events will require the sale of the
securities by the Fund.
3
Investments in Foreign Securities. The Fund may invest directly in the
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.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. 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 by banks or
depositories which evidence a similar ownership arrangement. Generally, ADRs, in
registered form, are designed for use in U.S. securities markets and EDRs, in
bearer form, are designed for use in European securities markets. Issuers of the
shares underlying unsponsored ADRs are not contractually obligated to disclose
material information in the United States. Foreign issuers may be assigned to
reasonable industry classifications that differ from the industry
classifications ordinarily assigned to U.S. issuers.
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
enhance return, to hedge against fluctuations in currency exchange rates
affecting a particular transaction or portfolio position, or as a substitute for
the purchase or sale of a currency or assets denominated in that currency.
Forward contracts are agreements to purchase or sell a specified currency at a
specified future date and price set at the time of the contract. Transaction
hedging is the purchase or sale of forward foreign currency contracts with
respect to specific receivables or payables of the Fund accruing in connection
with the purchase and sale of its portfolio securities quoted or denominated in
the same or related foreign currencies. Portfolio hedging is the use of forward
foreign currency contracts to offset portfolio security positions denominated or
quoted in the same or related foreign currencies. The Fund may elect to hedge
less than all of its foreign portfolio positions as deemed appropriate by the
Adviser and Subadviser.
If the Fund purchases a forward contract or sells a forward contract for
non-hedging purposes, 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 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
4
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.
The Fund normally invests at least 80% of total assets in a diversified
portfolio of foreign stocks from both developed and emerging countries. The Fund
may invest up to 30% of total assets in emerging markets as classified by the
Morgan Stanley (MCI). Foreign equities include but are not limited to common
stocks, convertible preferred stocks, preferred stocks, warrants, ADRs, GDRs and
EDRs. The risks of foreign investing may be intensified in the case of
investments in emerging markets or countries with limited or developing capital
markets. These countries are located in the Asia-Pacific region, Eastern Europe,
Latin and South America and Africa. Security prices in these markets can be
significantly more volatile than in more developed countries, reflecting the
greater uncertainties of investing in less established markets and economies.
Political, legal and economic structures in many of these emerging market
countries may be undergoing significant evolution and rapid development, and
they may lack the social, political, legal and economic stability characteristic
of more developed countries. Emerging market countries may have failed in the
past to recognize private property rights. They may have relatively unstable
governments, present the risk of nationalization of businesses, restrictions on
foreign ownership, or prohibitions on repatriation of assets, and may have less
protection of property rights than more developed countries. Their economies may
be predominantly based on only a few industries, may be highly vulnerable to
changes in local or global trade conditions, and may suffer from extreme and
volatile debt burdens or inflation rates. Local securities markets may trade a
small number of securities and may be unable to respond effectively to increases
in trading volume, potentially making prompt liquidation of substantial holdings
difficult or impossible at times. The Fund may be required to establish special
custodial or other arrangements before making certain investments in those
countries. Securities of issuers located in these countries may have limited
marketability and may be subject to more abrupt or erratic price movements.
5
The U.S. Government has from time to time in the past imposed restrictions,
through taxation and otherwise, on foreign investments by U.S. investors such as
the Fund. If such restrictions should be reinstituted, it might become necessary
for the Fund to invest all or substantially all of its assets in U.S.
securities. In such event, the Fund would review its investment objective and
investment policies to determine whether changes are appropriate.
Equity-Linked Securities The Fund may purchase equity-linked securities; also
known as participation notes, equity swaps, and zero strike calls and warrants.
Equity-linked securities are primarily used by a Fund as an alternative means to
access the securities market of a country. The Fund deposits an amount of cash
with its custodian (or broker, if legally permitted) in an amount equal to the
selling price of the underlying security in exchange for an equity linked
security. Upon sale, the Fund receives cash from the broker or custodian based
on the change in the value of the underlying security. Aside from market risk
there is of the underlying security, there is the risk of default by the other
party to the transaction. In the event of insolvency of the other party, the
Fund might be unable to obtain its expected benefit. In addition, while a Fund
will seek to enter into such transactions only with parties which are capable of
entering into closing transactions with the Fund, there can be no assurance that
the Fund will be able to close out such a transaction with the other party or
obtain an offsetting position with any other party, at any time prior to the end
of the term of the underlying agreement. This may impair the Fund's ability to
enter into other transactions at a time when doing so might be advantageous. The
Fund's investments in equity-linked securities may be subject to its 15% of net
assets limitation on investments in illiquid securities.
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 it 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 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 the securities (plus 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
6
(including the amount borrowed) taken at market value. The Fund will enter into
reverse repurchase agreements only with federally insured banks which are
approved in advance as being creditworthy by the Trustees. Under procedures
established by the Trustees, the Adviser will monitor the creditworthiness of
the banks involved.
Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. The Fund will not invest more than 15% of its net
assets in illiquid investments. If the Trustees determine, based upon a
continuing review of the trading markets for specific Section 4(2) paper or Rule
144A securities that they are liquid, they will not be subject to the 15% limit
on illiquid investments. The Trustees have adopted guidelines and delegated to
the Advisers 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 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 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.
7
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 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
8
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. The Fund may purchase and
sell futures contracts based on various securities (such as U.S. Government
securities) and securities indices, foreign currencies and any other financial
instruments and indices and purchase and write call and put options on these
futures contracts. The Fund may purchase and sell futures and options on futures
for hedging or other non-speculative purposes. The Fund may also enter into
closing purchase and sale transactions with respect to any of these contracts
and options. All futures contracts entered into by the Fund are traded on U.S.
or foreign exchanges or boards of trade that are licensed, regulated or approved
by the Commodity Futures Trading Commission ("CFTC").
Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments or
currencies for an agreed price during a designated month (or to deliver the
final cash settlement price, in the case of a contract relating to an index or
otherwise not calling for physical delivery at the end of trading in the
contract).
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or currency will usually be
liquidated in this manner, the Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically advantageous
to do so. A clearing corporation associated with the exchange on which futures
contracts are traded guarantees that, if still open, the sale or purchase will
be performed on the settlement date.
Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire or the
exchange rate of currencies in which the portfolio securities are quoted or
denominated. When 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 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 decline
in market prices or foreign currency rates that would adversely affect the value
of the Fund's portfolio securities. Such
9
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 rates then available in the applicable market to
be less favorable than prices that are currently available. The Fund may also
purchase futures contracts as a substitute for transactions in securities or
foreign currency, to alter the investment characteristics of or currency
exposure associated with portfolio securities or to gain or increase its
exposure to a particular securities market or currency.
Options on Futures Contracts. The 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 or for other non-speculative purposes
as permitted by the CFTC. These
10
purposes may include using futures and options on futures as a substitute for
the purchase or sale of securities or currencies to increase or reduce exposure
to particular markets. 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 in the cash market at the time when the futures or option
position is closed out. However, in particular cases, when it is economically
advantageous for the Fund to do so, a long futures position may be terminated or
an option may expire without the corresponding purchase of securities or other
assets.
To the extent that the Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. The Fund will engage in
transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), for maintaining its 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, securities prices or currency
exchange rates may result in a poorer overall performance for the Fund than if
it had not entered into any futures contracts or options transactions.
Perfect correlation between the Fund's futures positions and portfolio positions
will be impossible to achieve. 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.
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
11
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 Funds
losing the opportunity to obtain a price and yield considered to be
advantageous. The purchase of securities on a when-issued and forward commitment
basis also involves a risk of loss if the value of the security to be purchased
declines prior to the settlement date.
On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the Fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, the Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
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 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-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
12
the Fund's outstanding shares are present in person or by proxy at that meeting
or (2) more than 50% of the outstanding shares.
The Fund may not:
(1) Issue senior securities, except as permitted by paragraph (2) below.
For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or
sale of options, futures contracts and options on future contracts,
forward commitments, forward foreign exchange contracts and
repurchase agreements entered into in accordance with the Fund's
investment policy are not deemed to be senior securities.
(2) Borrow money, except for the following extraordinary or emergency
purposes (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. For purposes of this investment
restriction, the deferral of trustees' fees and transactions in
short sales, futures contracts, options on future contracts,
securities or indices and forward commitment transactions will 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.
(4) Purchase or sell real estate or any interest therein, except that
the Fund may invest in securities of corporate or governmental
entities secured by real estate or marketable interests therein or
issued by companies that invest in real estate or interests therein.
(5) Make loans, except that the Fund may purchase or hold debt
instruments in accordance with the Fund's investment policies and
may make loans of portfolio securities provided that as a result no
more than 33 1/3% of the Fund's total assets taken at current value
would be so loaned. The Fund does not, for this purpose, consider
the purchase of repurchase agreements, bank certificates of deposit,
bank loan participation agreements, bankers' acceptances, a portion
of an issue of publicly distributed bonds, debentures or other
securities, whether or not the purchase is made upon the original
issuance of the securities, to be the making of a loan.
(6) Invest in commodities or commodity futures contracts, other than
financial derivatives contracts. Financial derivatives include
forward foreign currency contracts; financial futures contracts and
options on financial futures contracts; options and warrants on
securities, currencies and financial indices; swaps, caps, floors,
collars, swapations; and repurchase agreements entered into in
accordance with the Fund's investment policies.
(7) Purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after such
purchase, the value of its investments in
13
such industry would exceed 25% of its total assets taken at market
value at the time of each investment. This limitation does not apply
to investments in obligations of the U.S. Government or any of its
agencies or instrumentalities.
(8) For each Fund with respect to 75% of total assets [see
nonfundamental investment restriction (e)], purchase securities of
an issuer (other than the U.S. government, its agencies,
instrumentalities or authorities):
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities
of such issuer; or
(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the
Fund.
In connection with the lending of portfolio securities under item (5) above,
such loans must at all times be fully collateralized and the Fund's custodian
must take possession of the collateral either physically or in book entry form.
Securities used as collateral must be marked to market daily.
Non-fundamental Investment Restrictions. The following restrictions, as well as
the Fund's investment objective, are designated as non-fundamental and may be
changed by the Trustees without shareholder approval:
The Fund may not:
(a) Make short sales
(b) Purchase a security if, as a result, (i) more than 10% of the
Fund's total assets would be invested in the securities of
other investment companies, (ii) the Fund would hold more than
3% of the total outstanding voting securities of any one
investment company, or (iii) more than 5% of the Fund's total
assets would be invested in the securities of any one
investment company. These limitations do not apply to (a) the
investment of cash collateral, received by the Fund in
connection with lending the Fund's portfolio securities, in
the securities of open-end investment companies or (b) the
purchase of shares of any investment company in connection
with a merger, consolidation, reorganization or purchase of
substantially all of the assets of another investment company.
Subject to the above percentage limitations, the Fund may, in
connection with the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees/Directors, purchase
securities of other investment companies within the John
Hancock Group of Funds.
(c) Invest for the purpose of exercising control over or
management of any company.
(d) Invest more than 15% of its net assets in illiquid securities.
(e) The Fund may not invest more than 5% of its total assets at
time of purchase in any one security (other than US Government
securities).
(f) The Fund normally invests at least 80% of total assets in a
diversified portfolio of foreign stocks form both developed
and emerging countries. The fund may invest up to 30% of total
assets in emerging markets as classified by the Morgan Stanley
(MSCI). Foreign equities include but are
14
not limited to common stocks, convertible preferred stocks,
preferred stocks, warrants, ADRs, GDRs and EDRs.
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 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 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").
15
- ---------------------------------------------------------------------------------------------------------------------
Number of
John
Hancock
Position(s) Trustee/ Principal Occupation(s) and other Funds
Name, Address (1) Held with Officer Directorships Overseen
And Age Fund since(2) During Past 5 Years by Trustee
- ---------------------------------------------------------------------------------------------------------------------
Independent Trustees
- ---------------------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz Trustee 1996 Professor of Law, Emeritus, Boston 31
Born: 1931 University School of Law (as of 1996);
Director, Brookline Bancorp.
- ---------------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. Trustee 1996 President and Chief Executive Officer, 31
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 1996 Vice President, Senior Banker and Senior 31
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).
- ---------------------------------------------------------------------------------------------------------------------
Richard A. Farrell Trustee 1994 President, Farrell, Healer & Co., Inc., 31
Born: 1932 (venture capital management firm)(since
1980) and General Partner of the Venture
Capital Fund of NE; 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 interested 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) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
16
- -------------------------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
William F. Glavin Trustee 1994 President Emeritus, Babson College (as of 1998); 31
Born: 1932 Vice Chairman, Xerox Corporation (until 1989);
Director, Reebok, Inc. (until 2002) and Inco
Ltd. (until 2002).
- -------------------------------------------------------------------------------------------------------------------------------
John A. Moore Trustee 1994 President and Chief Executive Officer, Institute 39
Born: 1939 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 1994 Executive Director, Council for International 39
Born: 1943 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).
- -------------------------------------------------------------------------------------------------------------------------------
John W. Pratt Trustee 1994 Professor of Business Administration Emeritus, 31
Born: 1931 Harvard University Graduate School of Business
Administration (as of 1998).
- -------------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and interested 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) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
17
- -------------------------------------------------------------------------------------------------------------------------------
Number of John
Position(s) Trustee/ Principal Occupation(s) and other Hancock Funds
Name, Address (1) Held with Officer Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Interested Trustees
- -------------------------------------------------------------------------------------------------------------------------------
John M. DeCiccio (3) Trustee 2001 Executive Vice President and Chief Investment 61
Born: 1948 Officer, John Hancock Financial Services,
Inc.; Director, Executive Vice President and
Chief Investment Officer, John Hancock Life
Insurance Company; Chairman of the Committee
of Finance of John Hancock Life Insurance
Company; Director, John Hancock Subsidiaries,
LLC, Hancock Natural Resource Group,
Independence Investment LLC, Independence
Fixed Income LLC, John Hancock Advisers, LLC
(the "Adviser") and The Berkeley Financial
Group, LLC ("The Berkeley Group"), John
Hancock Funds, LLC ("John Hancock Funds"),
Massachusetts Business Development
Corporation; Director, John Hancock Insurance
Agency, Inc. ("Insurance Agency, Inc.") (until
1999) and John Hancock Signature Services,
Inc. ("Signature Services") (until 1997).
- -------------------------------------------------------------------------------------------------------------------------------
Maureen R. Ford (3) Trustee, 2000 Executive Vice President, John Hancock 61
Born: 1955 Chairman, Financial Services, Inc., John Hancock Life
President Insurance Company; Chairman, Director,
and Chief President and Chief Executive Officer, the
Executive Advisers and The Berkeley Group; Chairman,
Officer President, Director and Chief Executive
Officer, John Hancock Funds; Chairman,
Director and Chief Executive Officer,
Sovereign Asset Management Corporation
("SAMCorp."); Director, John Hancock
Subsidiaries, LLC, Independence Investment
LLC, Independence Fixed Income LLC and
Signature Services; Senior Vice President,
MassMutual Insurance Co. (until 1999).
- -------------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and interested 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) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
18
- ---------------------------------------------------------------------------------------------------------------------
Number of
John
Hancock
Position(s) Trustee/ Principal Occupation(s) and other Funds
Name, Address (1) Held with Officer Directorships Overseen
And Age Fund since(2) During Past 5 Years by Trustee
- ---------------------------------------------------------------------------------------------------------------------
Principal Officers
who are not Trustees
- ---------------------------------------------------------------------------------------------------------------------
William L. Braman Executive 2000 Executive Vice President and Chief N/A
Born: 1953 Vice Investment Officer, the Adviser and each
President of the John Hancock funds; Director,
and Chief SAMCorp., Executive Vice President and
Investment Chief Investment Officer, Barring Asset
Officer Management, London U.K. (until 2000).
- ---------------------------------------------------------------------------------------------------------------------
Richard A. Brown Senior Vice 2000 Senior Vice President, Chief Financial N/A
Born: 1949 President Officer and Treasurer, the Adviser, John
and 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).
- ---------------------------------------------------------------------------------------------------------------------
Thomas H. Connors Vice 1994 Vice President and Compliance Officer, the N/A
Born: 1959 President Adviser and each of the John Hancock
and funds; Vice President, John Hancock Funds.
Compliance
Officer
- ---------------------------------------------------------------------------------------------------------------------
William H. King Vice 1994 Vice President and Assistant Treasurer, N/A
Born: 1952 President the Adviser; Vice President and Treasurer
and of each of the John Hancock funds;
Treasurer Assistant Treasurer of each of the John
Hancock funds (until 2001).
- ---------------------------------------------------------------------------------------------------------------------
Susan S. Newton Senior Vice 1994 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 interested 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) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
19
The Fund's Board of Trustees currently has five standing Committees: the Audit
Committee, the Administration Committee, the Contracts/Operations Committee, the
Investment Performance Committee and the Coordinating Committee. Each Committee
is comprised of Independent Trustees. The Audit Committee members are Messrs.
Glavin, Moore and Farrell. 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, 2002.
The Administration Committee's members are all of the Independent Trustees of
the Fund. 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. The Administration Committee will consider
nominees recommended by shareholders to serve as Independent Trustees, provided
that shareholders submit recommendations in compliance with all of the pertinent
provisions of Rule 14a-8 under the Securities Exchange Act of 1934. The
Administration Committee also works with all Trustees on the selection and
election of officers of the Fund. The Administration Committee held four
meetings during the fiscal year ended October 31, 2002.
The Contracts/Operations Committee members are Messrs. Chapman, Cosgrove and
Pratt. 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, 2002.
The Investment Performance Committee consists of Messrs. Aronowitz and Ms.
Peterson. 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, 2002.
The Coordinating Committee members are the chairpersons of the other four
standing committees. The Coordinating Committee assures consistency of action
among committees, reviews Trustee compensation, evaluates Trustee performance
and considers committee membership rotations as well as relevant corporate
governance issues.
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, 2002.
20
- -----------------------------------------------------------------------------------------------------------
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 $1-$10,000 $50,001-$100,000
- -----------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
William J. Cosgrove $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
Richard A. Farrell None Over $100,000
- -----------------------------------------------------------------------------------------------------------
William F. Glavin None $10,001-$50,000
- -----------------------------------------------------------------------------------------------------------
Dr. John A. Moore None Over $100,000
- -----------------------------------------------------------------------------------------------------------
Patti McGill Peterson $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
John W. Pratt $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
Interested Trustees
- -----------------------------------------------------------------------------------------------------------
John M. DeCiccio None Over $100,000
- -----------------------------------------------------------------------------------------------------------
Maureen R. Ford $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
(1) Under the John Hancock Deferred Compensation Plan for Independent
Trustees, 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, 2002, 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 none
and over $100,000 for Mr. Chapman, $1-$10,000 and over $100,000 for Mr.
Cosgrove, $1-$10,000 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. Mr. DeCiccio and Ms. Ford, each a
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.
Aggregate Compensation from Total Compensation From the Fund and
Independent Trustees the Fund (1) John Hancock Fund Complex to Trustees (2)
- -------------------- ------------ -----------------------------------------
Dennis J. Aronowitz
Richard P. Chapman*
William J. Cosgrove*
Richard A. Farrell
Gail D. Fosler +
William F. Glavin*
Dr. John A. Moore*
Patti McGill Peterson
John Pratt
Total
(1) Compensation is for the current fiscal year ending October 31, 2002.
(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 2002. As of this date, there were sixty-one
funds in the John Hancock
21
Fund Complex, with Mr. Moore and Ms. Peterson serving on thirty-nine funds and
each other Independent Trustees servicing on thirty-one funds.
*As of December 31, 2002, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $71,309, Mr. Cosgrove was $207,842, Mr. Glavin was $280,472 and for
Dr. Moore was $238,982 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 January 14, 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 of record beneficially owned 5% or more of
the outstanding shares of the Fund.
Class of Percentage of total Outstanding
Name and Address of Shareholders Shares Shares of the Class of the Fund
- -------------------------------- ------ -------------------------------
Sterling Trust Company A %
FBO Champion Energy Corp.
1380 Lawrence St Suite 1400
Denver CO 80204-2060
MLPF&S For The Benefit of Its Customers B %
Attn: Fund Administration 97DA3
4800 Deer Lake Drive East 2nd Fl
Jacksonville FL 32246-6484
Sterling Trust Company C %
FBO Merchants & Manufacturers
Bancorp Retirement Plan
1380 Lawrence St Suite 1400
Denver CO 80204-2060
Sterling Trust Company C %
FBO Starry Associates Ret Plan
1380 Lawrence St Suite 1400
Denver CO 80204-2060
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and as of has approximately $26 billion in
assets under management in its capacity as investment adviser to the Fund and
the other funds in the John Hancock group of funds as well as institutional
accounts. The Adviser is an affiliate of the Life Company, one of the most
recognized and respected financial institutions in the nation. With total assets
under management of more than $100 billion, the Life Company is one of ten
largest life insurance companies in the United States, and carries a high rating
from Standard & Poor's and A.M. Best. Founded in 1862, the Life Company has been
serving clients for over 130 years.
22
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
membership; insurance premiums; and any extraordinary expenses.
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 $250 million 1.00%
Next $250 million 0.80%
Next $250 million 0.75%
Amounts over $750 million 0.625%
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, 2000, 2001 and 2002, the Adviser's
management fee was $252,090, $208,015 and $ , respectively. After expense
reductions by the Adviser, the Adviser received no management fees for the
fiscal years ended October 31, 2000, 2001 and 2002.
As of December 14, 2000, the Adviser has entered into a sub-investment
management contract (the "sub-advisory agreement") with Nicholas-Applegate under
which, subject to the review of the Trustees and the overall supervision of the
Adviser, Nicholas-Applegate is responsible for providing the Fund with
investment advice. Nicholas-Applegate will also provide the Fund on a continuous
basis with economic, financial and political information, research and
assistance concerning international markets. Until May 11, 2001, as compensation
for its services under the Sub-Advisory Agreement, the Adviser paid
Nicholas-Applegate quarterly, in arrears, a fee at the annual rate of 55% of the
investment advisory fee received by the Adviser. Effective May 11, 2001, the
Adviser pays quarterly a sub-advisory fee to Nicholas-Applegate equal on an
annual basis to (i) 0.50% of the first $500,000,000 of the average daily net
asset value of the Fund; and
23
(ii) 0.45% of the average daily net asset value of the Fund in excess of
$500,000,000. Nicholas-Applegate is a limited liability company organized under
the laws of the State of Delaware partnership, with offices at 600 West
Broadway, 30th Floor, San Diego, California 92101. Nicholas-Applegate was
organized in August 1984 to manage discretionary accounts investing primarily in
publicly traded equity securities and securities convertible into or exercisable
for publicly traded equity securities, with the goal of capital appreciation.
Nicholas-Applegate is a wholly owned subsidiary of Allianz of America, Inc.
("AZOA"). Allianz AG, the parent of AZOA, is a German Aktiengesellschaft, a
German publicly traded company, which, together with its subsidiaries, comprises
the world's largest insurance group (the "Allianz Group"). Allianz Group
currently has assets under management of approximately $690 billion. Allianz
AG's address is: Koeniginstrasse 28, D-80802, Munich, Germany.
Until December 14, 2000, the Subadviser to the Fund was Indocam International
Investment Services ("IIIS"). IIIS is a French corporation and a subsidiary of
Indocam, the asset management affiliate of Credit Agricole, a French bank group
with a presence in financial centers around the world. IIIS is located at 90
Boulevard Pasteaur, Paris, France 75015. Indocam is an asset management firm
maintaining established relationships with institutional, corporate and
individual investors.
Credit Agricole is one of the largest bank groups in the world. As compensation
for its services under the Sub-Advisory Agreement, the Adviser was paying IIIS
quarterly, in arrears, a fee at the annual rate of 55% of the investment
advisory fee received by the Adviser. Until March 1, 2000, the Fund had another
subadviser, John Hancock Advisers International Limited ("JHAI") located at 6th
Floor, Duke's Court, 32-36 Duke Street, St. James's, London, England SW1Y6DF.
JHAI was a wholly-owned subsidiary of the Adviser formed in 1987 to provide
international investment research and advisory services to U.S. institutional
clients. As compensation for its services under the Sub-Advisory Agreement, JHAI
received from the Adviser a portion of its monthly fee equal to 0.70% on an
annual basis of the average daily net asset value of the Fund for each calendar
month up to $200 million of average daily net assets; and 0.6375% on an annual
basis of the average daily net asset value over $200 million. JHAI agreed to
waive all but 0.05% of its fee as of January 1, 2000 and its Sub-Advisory
contract was terminated effective March 1, 2000. The Fund is not responsible for
paying any Subadviser's fee.
The Adviser has agreed to limit the Fund's expenses (excluding 12b-1 and
transfer agent expenses) to 0.90% of the Fund's average daily net assets. The
Adviser reserves the right to terminate this limitation in the future.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser, a Subadviser or any of their respective
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 a
Subadviser for the Fund or for other funds or clients for which the Adviser or a
Subadviser renders investment advice arise for consideration at or about the
same time, transactions in such securities will be made, insofar as feasible,
for the respective funds or clients in a manner deemed equitable to all of them.
To the extent that transactions on behalf of more than one client of the
Adviser, a Subadviser or its affiliates may increase the demand for securities
being purchased or the supply of securities being sold, there may be an adverse
effect on price.
Pursuant to their Advisory Agreements, the Adviser and Subadviser are not liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which the Agreements relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser or Subadviser in the performance of their duties or from reckless
disregard by them of their obligations and duties under the applicable
Agreements.
24
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 Subadviser 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 Subadviser. 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
Subadviser; (2) the investment performance of the Fund; (3) the fair market
value of the services provided by the Adviser and Subadviser; (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.
The primary factors underlying the Board's decision to renew the Fund's Advisory
Agreement and Sub-Advisory Agreement were as follows:
o The Board determined that the performance results of the Fund and the
Adviser and Subadviser's responsive actions were reasonable, as compared
with relevant performance standards, including the performance results of
comparable international funds derived from data provided by Lipper Inc.
and appropriate market indexes.
o 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 and Subadviser'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 Board considered whether the Fund should obtain alternative
portfolio management services and concluded that, under all the
circumstances and based on its informed business judgement, the most
appropriate course of action in the best interest of the Fund's
shareholders was to renew the agreements with the Adviser and Subadviser.
The continuation of the Advisory Agreement, the Sub-Advisory Agreement and the
Distribution Agreement (discussed below) was approved by all of the Trustees in
June of 1999. On December
25
12, 2000, the Trustees approved the termination of IIIS as Subadviser and
appointed Nicholas-Applegate as Subadviser effective December 14, 2000. On April
25, 2001, the shareholders of the Fund approved the appointment of
Nicholas-Applegate as Subadviser. The Advisory Agreement, the Nicholas-Applegate
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 of these
Agreements may be terminated on 60 days written notice by any party or by vote
of a majority of the outstanding voting securities of the Fund and will
terminate automatically if assigned.
Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services. For the fiscal year ended October 31, 2000, 2001 and 2002,
the Fund paid the Adviser $4,779, $4,160 and $ , respectively, for services
under this Agreement.
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 (the "Selling Brokers") which have entered into selling agency
agreements with John Hancock Funds. These Selling Brokers 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 Brokers receive compensation from
a sales charge imposed, in the case of Class A and Class C shares, at the time
of sale. In the case of Class B or Class C shares, the broker receives
compensation immediately but John Hancock Funds is compensated on a deferred
basis.
Total underwriting commissions for sales of the Fund's Class A shares for the
fiscal years ended October 31, 2000, 2001 and 2002 were $122,328, $45,866 and
$ , respectively. Of such amounts $11,580, $5,706 and $ ,
respectively, were retained by John Hancock Funds in 2000, 2001 and 2002. Total
underwriting commissions for sales of the Fund's Class C shares for the period
from May 1, 2000 to October 31, 2000 and the fiscal year ended October 31, 200
and 2002 were $9,118, $4,901 and $ , respectively.. The remainder of the
underwriting commissions were reallowed to Selling Brokers.
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 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 Brokers and others (including affiliates of John Hancock Funds) engaged
in the sale of Fund shares; (ii) marketing, promotional and overhead expenses
incurred in connection with the distribution of Fund shares; and (iii) with
respect to Class B and Class C
26
shares only, interest expenses on unreimbursed distribution expenses. The
service fees will be used to compensate Selling Brokers and others for providing
personal and account maintenance services to shareholders. In the event that
John Hancock Funds is not fully reimbursed for payments or expenses they incur
under the Class A Plan, these expenses will not be carried beyond twelve months
from the date they were incurred. Unreimbursed expenses under the Class B 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, 2002, an aggregate of $ of distribution expenses or
% 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 October 31, 2002,
an aggregate of $ of distribution expenses or % 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 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 such 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 their
continuance is approved at least annually by a majority of both the Trustees and
Independent Trustees. The Plans provide that they may be terminated without
penalty, (a) by vote of a majority of the Independent Trustees, (b) by a vote of
a majority of the Fund's outstanding shares of the applicable class upon 60
days' written notice to John Hancock Funds, and (c) automatically in the event
of assignment. The Plans further provide that they may not be amended to
increase the maximum amount of the fees for the services described therein
without the approval of a majority of the outstanding shares of the class of the
Fund which has voting rights with respect to that Plan. Each Plan provides that
no material amendment to the Plans will be effective unless it is approved by a
majority 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 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 or Class C 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 a formula
based upon gross sales dollars and/or average daily net assets of each such
class, as may be approved from time to time by vote of a majority of Trustees.
From time to time, the Fund may participate in joint distribution activities
with other Funds and the costs of those activities will be borne by each Fund in
proportion to the relative net asset value of the participating Fund.
27
During the fiscal year ended October 31, 2002, the Fund paid John Hancock Funds
the following amount of expenses in connection with their services for the Fund.
Expense Items
-------------
Interest,
Printing and Carrying or
Mailing of Other
Prospectuses to Compensation to Expenses of John Finance
Advertising New Shareholders Selling Brokers Hancock Funds Charges
----------- ---------------- --------------- ------------- -------
Class A
Class B
Class C
SALES COMPENSATION
As part of their business strategies, the Fund, along with John Hancock Funds,
pay compensation to financial services 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 broker compensation payments for Class A, Class B and
Class C 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
financial services 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 Broker who sells shares of the Fund. This payment
may not exceed 0.15% of the amount invested.
Whenever you make an investment in the Fund, the financial services firm
receives a reallowance/payment, as described below. The firm also receives the
first year's 12b-1 service fee at this time. Beginning with the second year
after an investment is made, the financial services firm receives an annual
12b-1 service fee of 0.25% of its total eligible fund net assets. This fee is
paid quarterly in arrears by the Fund.
In addition, from time to time, John Hancock Funds, at its expense, 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 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 financial
services firms-sponsored events or activities. From time to time, John Hancock
Funds may provide expense reimbursements for special training of a financial
services firm's registered representatives and other employees in group
meetings. Other compensation, such as asset retention fees, finder's fees and
reimbursement for wire transfer fees may be offered to the extent not prohibited
by law or any self-regulatory agency, such as the NASD.
28
Broker receives
Sales charge Broker receives 12b-1 service fee Total broker
paid by investors maximum reallowance (% of net compensation (1)
Class A investments (% of offering price) (% of offering price) investment) (3) (% of offering price)
- ------------------- --------------------- --------------------- --------------- ---------------------
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 (4)
- ----------------------
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50% (2)
Next $1 or more above that -- 0.00% 0.25% 0.25% (2)
Broker receives Broker receives
maximum 12b-1 service fee Total broker
reallowance (% of net compensation (1)
Class B investments (% of offering price) investment) (3) (% of offering price)
- ------------------- --------------------- --------------- ---------------------
All amounts -- 3.75% 0.25% 4.00%
Broker receives Broker receives
maximum 12b-1 service fee Total broker
reallowance (% of net compensation (1)
Class C investments (% of offering price) Investment) (3) (% of offering price)
- ------------------- -------------------- --------------- ---------------------
Over $1,000,000 or amounts
purchased at NAV -- .75% 0.25% 1.00%
All other amounts 1.00% 1.75% 0.25% 2.00%
Broker receives Broker receives
maximum 12b-1 service Total broker
reallowance fee (% of net compensation (1)
Class I investments (% of offering price) investment) (3) (% of offering price)
- ------------------- -------------------- --------------- ---------------------
All amounts -- 0.00% 0.00% 0.00% (5)
(1) Broker percentages and 12b-1 service fee percentages are calculated from
different amounts, and therefore may not equal total broker compensation
percentages if combined using simple addition.
(2) For Group Investment Programs sales, the maximum total broker compensation
for investments of $1 million or more is 1.00% of the offering price (one year
CDSC of 1.00% applies for each sale).
(3) After first year broker receives 12b-1 fees quarterly in arrears.
(4) John Hancock Funds reduce aggregate investments by the amount of recent
redemptions.
29
(5) John Hancock Funds may make a one-time payment at the time of initial
purchase out of its own resources to a Selling Broker who sells Class I shares
of the Fund. This payment may be up to 0.15% of the amount invested.
CDSC revenues collected by John Hancock Funds may be used to pay broker
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 or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned categories for which no sales are reported and
other securities traded over-the-counter are generally valued at the mean
between the current closing bid and asked prices.
Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00 p.m., London time (12:00 noon,
New York time) on the date of any determination of the Fund's NAV. If quotations
are not readily available, or the value has been materially affected by events
occurring after the closing of a foreign market, assets are valued by a method
that the Trustees believe accurately reflects fair value.
The NAV for each fund and class is determined each business day at the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m. Eastern
Time) by dividing a class's net assets by the number of its shares outstanding.
On any day an international market is closed and the New York Stock Exchange is
open, any foreign securities will be valued at the prior day's close with the
current day's exchange rate. Trading of foreign securities may take place on
Saturdays and U.S. business holidays on which the Fund's NAV is not calculated.
Consequently, the Fund's portfolio securities may trade and the NAV of the
Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.
INITIAL SALES CHARGE ON CLASS A AND CLASS C SHARES
Shares of the Fund are offered at a price equal to their net asset value plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase (the "initial sales charge alternative") or on a contingent
deferred basis (the "deferred sales charge alternative"). 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.
30
The sales charges applicable to purchases of Class A and Class C 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
greater of the current value (at offering price) of the Class A shares of the
Fund owned by the investor, or if John Hancock Signature Services, Inc.
("Signature Services"), is notified by the investor's dealer or the investor at
the time of the purchase, the cost of the Class A shares owned.
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 Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family (spouse,
children, grandchildren, mother, father, sister, brother, mother-in-law,
father-in-law, daughter, son-in-law, niece, nephew, grandparents, and same sex
domestic partner) 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 Retirement plans participating in Merrill Lynch servicing programs, if the
Plan has more than $3 million in assets or 500 eligible employees at the date
the Plan Sponsor signs the Merrill Lynch Recordkeeping Service Agreement. See
your Merrill Lynch financial consultant for further information.
o Retirement plans investing through the PruArray Program sponsored by
Prudential Securities.
o Pension plans transferring assets from a John Hancock variable annuity
contract to the Fund pursuant to an exemptive application approval by the
Securities and Exchange Commission.
o Participant directed retirement plans with at least 100 eligible employees at
the inception the Fund account. Each of these investors may purchase Class A
shares with no initial sales charges. However, if the shares are redeemed within
12 months after the end of the calendar years in which the purchase was made, a
CDSC will be imposed at the following rate:
Amount Invested CDSC Rate
--------------- ---------
$1 to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
Class C shares may be offered without a front-end sales charge to:
o Investments of redemption proceeds from a non-John Hancock mutual fund.
31
o Group Retirement plan products for which John Hancock Signature Services
performs recordkeeping and administrative services. (These plans include
403(b), Simple IRA, SEP and SARSEP plans.)
o Group Retirement plan products sold through third party administrators
under the John Hancock SELECT retirement plan program. (These plans
include 401(k), Money Purchase and Profit Sharing plans.)
o An investor who buys through a Merrill Lynch omnibus account. However, a
CDSC may apply if the shares are sold within 12 months of purchase.
Class A and Class C 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.
Combination Privilege. 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). A company's (not an individual's) 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 Broker's
representative.
Accumulation Privilege. Investors (including investors combining purchases) who
are already Class A shareholders may also obtain the benefit of the reduced
sales charge by taking into account not only the amount being invested but also
the investor's purchase price or current value of the Class A shares of all John
Hancock funds which carry a sales charge already held by such person. 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. Retirement plan investors may include the value of Class
B shares if Class B shares held are greater than $1 million. Retirement plans
must notify Signature Services to utilize. A company's (not an individual's)
qualified and non-qualified retirement plan investments can be combined to take
advantage of this privilege.
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 sales charges are also applicable to investments
made pursuant to a Letter of Intention (the "LOI"), which should be read
carefully prior to its execution by an investor. The Fund offers two options
regarding the specified period for making investments under the LOI. All
investors have the option of making their investments over a specified period of
thirteen (13) months. Investors who are using the Fund as a funding medium for a
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
32
Purchase Pension, Profit Sharing and Section 457 plans. An individual's
non-qualified and qualified retirement plan investments cannot be combined to
satisfy LOI of 48 months. Such an investment (including accumulations and
combinations but not including 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 the sales charge as may be due. By
signing the LOI, the investor authorizes Signature Services to act as his or her
attorney-in-fact to redeem any escrowed Class A shares and adjust the sales
charge, if necessary. A LOI does not constitute a binding commitment by an
investor to purchase, or by the Fund to sell, any additional Class A shares and
may be terminated at any time.
Because Class I shares are sold at net asset value without the imposition of any
sales charge, none of the privileges described under these captions are
available to Class I investors.
DEFERRED SALES CHARGE ON CLASS B AND CLASS C SHARES
Investments in Class B 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
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 price 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.
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 this number of
years from the time of any payment for the purchase of both Class B and Class C
of shares, all payments during a month will be aggregated and deemed to have
been made on the first day of the month.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period 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
33
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 share (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 Brokers 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 of 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
34
Signature Services. (Please note, this waiver does not apply to periodic
withdrawal plan redemptions of Class A shares that are subject to a CDSC.)
* Redemptions by Retirement plans participating in Merrill Lynch servicing
programs, if the Plan has less than $3 million in assets or 500 eligible
employees at the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement. See your Merrill Lynch financial
consultant for further information.
* Redemptions of Class A shares by retirement plans that invested through
the PruArray Program sponsored by Prudential Securities.
* Redemptions of Class A shares made after one year from the inception date
of a retirement plan at John Hancock.
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 under
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 distributions 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), 457
and 408 (SEPs and SIMPLE IRAs) of the Internal Revenue Code.
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares prior
to May 15, 1995.
Please see matrix for some examples.
35
- ---------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------
*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.
36
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 a shareholder sells portfolio
securities received in this fashion, the shareholder 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 with shares that are not subject to a CDSC are based on
their respective net asset values. No sales charge or transaction charge is
imposed. Shares of the Fund which are subject to a CDSC may be exchanged into
shares of any of the other John Hancock funds that are subject to a CDSC without
incurring the CDSC; however, the shares acquired in an exchange will be subject
to the CDSC schedule of the shares acquired if and when such shares are redeemed
(except that shares exchanged into John Hancock 500 Index Fund will retain the
exchanged fund's CDSC schedule). For purposes of computing the CDSC payable upon
redemption of shares acquired in an exchange, the holding period of the original
shares is added to the holding period of the shares acquired in an exchange.
If a 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.
If a shareholder exchanges Class B shares purchased prior to January 1, 1994 for
Class B shares of any other John Hancock fund, the acquired shares will continue
to be subject to the CDSC schedule that was in effect when the exchanged shares
were purchased.
The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of 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
37
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 of that fund.
The proceeds from the redemption of Class A shares may be reinvested at net
asset value without paying a sales charge in Class A shares of the Fund or in
Class A shares of any John Hancock fund. If a CDSC was paid upon a redemption, a
shareholder may reinvest the proceeds from this redemption at net asset value in
additional shares of the class from which the redemption was made. The
shareholder's account will be credited with the amount of any CDSC charged upon
the prior redemption and the new shares will continue to be subject to the CDSC.
The holding period of the shares acquired through reinvestment will, for
purposes of computing the CDSC payable upon a subsequent redemption, include the
holding period of the redeemed shares.
To protect the interests of other investors in the Fund, the Fund may cancel the
reinvestment privilege of any parties that, in the opinion of the Fund, are
using market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. Also, the Fund may refuse any reinvestment
request.
The Fund may change or cancel its reinvestment policies at any time.
A redemption or exchange of 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 shares are available at net asset value for plans with $3 million in
plan assets or 500 eligible employees at the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement. If the plan does not meet either
of these limits, Class A shares are not available.
For participating retirement plans investing in Class B shares, shares will
convert to Class A shares after eight years, or sooner if the plan attains
assets of $5 million (by means of a CDSC-free redemption/purchase at net asset
value).
38
PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES
Shares of the Fund may be purchased or redeemed through certain broker-dealers
or Service Agents ("Brokers"). Brokers may charge for their services or place
limitations on the extent to which you may use the services of the Fund. The
Fund will be deemed to have received a purchase or redemption order when an
authorized broker, or if applicable, a broker's authorized designee, receives
the order. If a broker is an agent or designee of the Fund, orders are processed
at the NAV next calculated after the broker receives the order. The broker 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 brokers that maintain 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. The Adviser, the Fund, and/or John
Hancock Funds, Inc. (the Fund's principal distributor), share in the expense of
these fees.
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 one other series. Additional series may be added in the future. The
Trustees have also authorized the issuance of four classes of shares of the
Fund, designated as Class A, Class B, Class C and Class I. Class I shares are
discussed in a separate Statement of Additional Information.
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 matter 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 shares and (iii) each class of shares
will bear any class expenses properly allocable to that class of shares, subject
to the conditions the Internal Revenue Service imposes with respect to
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,
39
under certain circumstances, communicate with other shareholders in connection
with requesting a special meeting of shareholders. However, at any time that
less than a majority of the Trustees holding office were elected by the
shareholders, the Trustees will call a special meeting of shareholders for the
purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, the Fund's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
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 by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Furthermore, no fund included in this Fund's prospectus shall
be liable for the liabilities of any other John Hancock fund. Liability is
therefore limited to circumstances in which a 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. Brokers of record on
Non-U.S. investors' accounts with foreign mailing addresses are required to
certify that all sales activities have occurred, and in the future will occur,
only in the U.S. A foreign corporation may purchase shares of the Fund only if
it has a U.S. mailing address.
TAX STATUS
The Fund is treated as a separate entity for accounting and tax purposes, has
qualified and elected to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") and
intends to continue to qualify for each taxable year. As such and by complying
with the applicable provisions of the Code regarding the sources of its income,
the timing of its distributions, and the diversification of its assets, the Fund
will not be subject to Federal income tax on its taxable income (including net
realized capital gains) which is distributed to shareholders in accordance with
the timing requirements of the Code.
The Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.
40
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss, and investment company taxable income is all taxable
income and capital gains, other than net capital gain, after reduction by
deductible expenses.) Some distributions 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.
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 assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from these
passive foreign investment companies or gain from the sale of stock in such
companies, even if all income or gain actually received by the Fund is timely
distributed to its shareholders. The Fund would not be able to pass through to
its shareholders any 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 investments in passive
foreign investment companies or make an available election to minimize its tax
liability or maximize its return from 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 currency forward contracts, foreign
currencies, or payables or receivables denominated in a foreign currency are
subject to Section 988 of the Code, which generally causes such gains and losses
to be treated as ordinary income and losses and may affect the amount, timing
and character of distributions to shareholders. 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 for each taxable year. If
the net foreign exchange loss for a year treated as ordinary loss under Section
988 were to exceed the Fund's investment company taxable income computed without
regard to such loss the resulting overall ordinary loss for such year would not
be deductible by the Fund or its shareholders in future years.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes.
Investors may be entitled to claim U.S. foreign tax credits or deductions with
respect to foreign income taxes or certain other foreign taxes ("qualified
foreign taxes") paid by the Fund, subject to certain provisions and limitations
contained in the Code, if the Fund so elects. If more than 50% of the value of
the Fund's total assets at the close of any taxable year consists of stock or
securities of foreign corporations, the Fund may file
41
an election with the Internal Revenue Service pursuant to which shareholders of
the Fund will be required to (i) include in ordinary gross income (in addition
to taxable dividends and distributions actually received) their pro rata shares
of qualified foreign taxes paid by the Fund even though not actually received by
them, and (ii) treat such respective pro rata portions as foreign taxes paid by
them.
If the Fund makes this election, shareholders may then deduct such pro rata
portions of qualified foreign taxes in computing their taxable income, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of qualified foreign taxes paid by the Fund,
although such shareholders will be required to include their share of such taxes
in gross income. Shareholders who claim a foreign tax credit for such foreign
taxes may be required to treat a portion of dividends received from the Fund as
a separate category of income for purposes of computing the limitations on the
foreign tax credit. Tax-exempt shareholders will ordinarily not benefit from
this election. Each year (if any) that the Fund files the election described
above, its shareholders will be notified of the amount of (i) each shareholder's
pro rata share of qualified foreign taxes paid by the Fund and (ii) the portion
of Fund dividends which represents income from each foreign country. If the Fund
cannot or does not make this election, the Fund will deduct the foreign taxes it
pays in determining the amount it has available for distribution to
shareholders, and shareholders will not include these foreign taxes in their
income, nor will they be entitled to any tax deductions or credits with respect
to such taxes.
The 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, futures or forward 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) in a transaction that is treated as a sale
for tax purposes, a shareholder will ordinarily realize a taxable gain or loss
depending upon the amount of the proceeds and the investor's basis in his
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands. A sales charge paid in purchasing
shares of the Fund cannot be taken into account for purposes of determining gain
or loss on the redemption or exchange of such shares within 90 days after their
purchase to the extent shares of the Fund or another John Hancock Fund are
subsequently acquired without payment of a sales charge pursuant to the
reinvestment or exchange privilege. This disregarded charge will result in an
increase in the shareholder's tax basis in the shares subsequently acquired.
Also, any loss realized on a redemption or exchange will 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.
42
Although its present intention is to distribute, at least annually, all net
capital gain, if any, the Fund reserves the right to retain and reinvest all or
any portion of the excess, as computed for Federal income tax purposes, of net
long-term capital gain over net short-term capital loss in any year. The Fund
will not in any event distribute net capital gain realized in any year to the
extent that a capital loss is carried forward from prior years against such
gain. To the extent such excess was retained and not exhausted by the
carryforward of prior years' capital losses, it would be subject to Federal
income tax in the hands of the Fund. Upon proper designation of this amount by
the Fund, each shareholder would be treated for Federal income tax purposes as
if the Fund had distributed to him on the last day of its taxable year his pro
rata share of such excess, and he had paid his pro rata share of the taxes paid
by the Fund and reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain in his return for his taxable year in which the last day of the
Fund's taxable year falls, (b) be entitled either to a tax credit on his return
for, or to a refund of, his pro rata share of the taxes paid by the Fund, and
(c) be entitled to increase the adjusted tax basis for his shares in the Fund by
the difference between his pro rata share of such excess and his pro rata shares
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 its 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 capital loss carryforwards available, to
the extent provided by regulations, to offset future net realized capital gains.
The Fund's carryforwards expire as follows: $1,042,558 expires in October 31,
2008 and $7,695,523 expires October 31, 2009.
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,
forward, 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 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 the Fund may in its sole discretion provide relevant
information to shareholders.
The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax in the case of non-exempt shareholders
who fail to furnish the Fund with
43
their correct taxpayer identification number and certain certifications required
by the IRS or if the IRS or a broker notifies the Fund that the number furnished
by the shareholder is incorrect or that the shareholder is subject to backup
withholding as a result of failure to report interest or dividend income. The
Fund may refuse to accept an application that does not contain any required
taxpayer identification number or certification that the number provided is
correct. If the backup withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in shares, will
be reduced by the amounts required to be withheld. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability. Investors
should consult their tax advisors about the applicability of the backup
withholding provisions.
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 any share of stock held by the Fund, for U.S. Federal income tax
purposes, for at least 46 days (91 days in the case of certain preferred stock)
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. Because the Fund is not generally anticipated to invest a significant
portion of its assets in the stock of such U.S. corporations, it is unlikely
that a substantial portion of its distributions will qualify for the dividends
received deduction. 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
alternative minimum tax liability, if any. Additionally, any corporate
shareholder should consult its tax adviser regarding the possibility that its
tax basis in its shares may be reduced, for Federal income tax purposes, by
reason of "extraordinary dividends" received with respect to the shares and to
the extent such basis would be reduced below zero, that current recognition of
income would be required.
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.
Certain options, futures and forward foreign currency contracts undertaken by
the Fund may cause the Fund to recognize gains or losses from marking to market
even though its positions have not been sold or terminated and affect the
character as long-term or short-term (or, in the case of 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 these 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 or forward contracts in order to minimize any
potential adverse tax consequences.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain 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 Fund shares may also be
subject to state and local
44
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 nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8, 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, 2002, the average annual total returns before taxes of the
Class A shares of the Fund for the one and five year periods and from the
commencement of operations on January 3, 1994 were %, % and %,
respectively.
As of October 31, 2002, the average annual returns before taxes for the Fund's
Class B shares for the one and five year periods and from the commencement of
operations on January 3, 1994 were %, % and %, respectively.
As of October 31, 2002, the average annual returns before taxes for the Fund's
Class C shares for the one year period and from the commencement of operations
on June 1, 1998 was % and %.
As of October 31, 2002, the average annual returns before taxes for the Fund's
Class I shares for the one year period and from the commencement of operations
on March 1, 2002 was % and %.
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:
P(1+T)^n = 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).
The Fund discloses average annual total returns after taxes for Class A shares
for the one, five and 10 year periods ended December 31, 2002 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.
45
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:
P(1+T)^n = 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 and 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:
P(1+T)^n = 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 and 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 also 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 of time. 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 period of
time. 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.
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
46
equity 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
The Sub-Adviser is required to effect ll transacons in portfolio securities
through the Adviser's trading desk. Decisions concerning the purchase and sale
of portfolio securities and the allocation of brokerage commissions are made by
the subadviser under the supervision of and under the guidelines established by
the Adviser, which consists of officers and directors of the Adviser and
officers and Trustees who are interested persons of the Fund. Orders for
purchases and sales of securities are placed in a manner which, in the opinion
of the officers of the Adviser, will offer the best price and market for the
execution of each such transaction. Purchases from underwriters of portfolio
securities may include a commission or commissions paid by the issuer and
transactions with dealers serving as market maker reflect a "spread." Debt
securities are generally traded on a net basis through dealers acting for their
own account as principals and not as brokers; no brokerage commissions are
payable on these transactions.
In the U.S. Government securities market, securities are generally traded on a
"net" basis with dealers acting as principal for their own account without a
stated commission, although the price of the security usually includes a profit
to the dealer. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or premiums are paid. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less government supervision and
regulation of foreign stock exchanges and broker-dealers than in the U.S.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed.
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 or subadviser of
the Fund, and their value and expected contribution to the performance of the
Fund.
47
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 the price is
reasonable in light of the services provided and to policies that the Trustees
may adopt from time to time. For the fiscal year ended October 31, 2002, the
Fund paid $ in commissions to compensate brokers for research services.
Research services received from broker-dealers supplement the Adviser's or
Subadviser'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 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
custody services, as well as the providing of equipment used to communicate
research information, the providing of specialized consultations with the
Adviser's or subadviser's personnel with respect to computerized systems and
data furnished to the Adviser or subadviser's 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 subadviser's since
the broker-dealers used by the Adviser or subadviser's 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 or subadviser's with a diverse
perspective on financial markets. Research services provided to the Adviser or
subadviser's 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 or subadviser'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. In some cases, the
research services are available only from the broker-dealer providing them. In
other cases, the research services may be obtainable from alternative sources in
return for cash payments.
The Adviser or subadviser believe that the research services are beneficial in
supplementing the Adviser's or subadviser research and analysis and that they
improve the quality of the Adviser's or subadviser 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 subadviser. The advisory fee paid by the Fund is not reduced
because the Adviser or subadviser receives such services. However, to the extent
that the Adviser or subadviser's would have purchased research services had they
not been provided by broker-dealers, the expenses to the Adviser or subadviser's
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 subadviser, and conversely,
brokerage commissions and spreads paid by other advisory clients of the Adviser
or subadviser 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.
While the Adviser, in connecton with the subadviser, will be primarily
responsible for the allocation of the Fund's brokerage business, the policies
and practices of the Adviser or subadviser in this regard must be consistent
with the foregoing and at all times be subject to review by the
48
Trustees. For the fiscal years ended October 31, 2000, 2001 and 2002, the Fund
paid negotiated commissions of $101,052, $223,172 and $ .
The Adviser or subadviser 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 subadviser in particular, including sales of the Fund. 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 subadviser will not use a specific formula in connection with any of
these considerations to determine the target levels.
The Adviser's indirect parent, the Life Company is the indirect sole shareholder
of Signator Investors, Inc., a broker-dealer (until January 1, 1999, John
Hancock Distributors, Inc.) ("Signator" or "Affiliated Broker"). Pursuant to
procedures determined by the Trustees and consistent with the above policy of
obtaining best net results, the Fund may execute portfolio transactions with or
through Affiliated Brokers. For the fiscal years ended October 31, 2000, 2001
and 2002, the Fund paid no brokerage commissions to any Affiliated Broker.
Allianz AG, the parent of Nicholas Applegate Capital Management ("NACM"), has
several affiliates engaged in the brokerage business: Bayerische Hypo-und
Vereinsbank AG, HPV, HVB Capital Markets; Credit Lyonnais SA; Dresdner, Dresdner
Kleinwort Benson, Dresdner Kleinwort Wasserstein; Deutsche Bank AG, Deutsche
Bank Alex Brown, Deutsche Morgan Grenfell; Grantchester Securities Inc; IKB
Deutsche Industriebank AG; Munchener Ruckversicherungs-Gesellschaft AG, Munich
Re; National Discount Brokers Group, Inc., NDB Capital Markets; UniCredito
Italiano S.p.A., UniCredit Banco Mobiliare S.p.A.; US Allianz Securities, Inc.;
Williams Capital Group. (all "Affiliated Brokers"). Pursuant to procedures
determined by the Trustees and consistent with the above policy of obtaining
best net results, the Fund may execute portfolio transactions with or through
Affiliated Brokers. For the period from December 14, 2000 through October 31,
2001, the Fund paid $3,616 to Affiliated Brokers of NACM. During the fiscal year
ended October 31, 2001, this amounted to approximately 2.26% of the aggregate
brokerage commissions paid by the Fund for the transactions involving
approximately 1.79% of the aggregate dollar amount of transactions for which the
Fund paid brokerage commissions.
Credit Agricole, the parent of Indocam International Investment Services
("IIIS"), the Fund's subadviser until December 13, 2000, has several affiliates
engaged in the brokerage business in Europe and Asia: Credit Agricole Indosuez
Cheuvreux; CPR Action (ex-Schelcher Prince Cheuvreux de Virieu International
Ltd, London; Cheuvreux de Virieu, Nordic AB, Stockholm, Cheuvreux de Virieu,
Espana, Madrid, Credit Agricole Indosuez Cheuvreux Deutschland GMBH, Frankfourt/
Main; Caboto Sim in Italy; Carr Securities; Carr Futures SNC. (Paris) and Carr
Futures PTE, Singapore (all "Affiliated Brokers"). Pursuant to procedures
determined by the Trustees and consistent with the above policy of obtaining
best net results, the Fund may execute portfolio transactions with or through
Affiliated Brokers. For the fiscal years ended October 31, 1999, 2000 and for
the period from November 1, 2000 through October 12, 2000, the Fund paid $0, $0
and $1,899, respectively, for portfolio transactions with Affiliated Brokers of
IIIS. During the fiscal year ended October 31, 2001, this amounted to
approximately 1.18% of the aggregate brokerage commissions paid by the Fund for
transactions involving approximately 0.61% of the aggregate dollar amount of
transactions for when the Fund paid brokerage commissions.
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
49
pursuant to the Investment Company Act. Commissions paid to an Affiliated Broker
must be at least as favorable as those which the Trustees believe to be
contemporaneously charged by other brokers in connection with comparable
transactions involving similar securities being purchased or sold. A transaction
would not be placed with an Affiliated Broker if the Fund would have to pay a
commission rate less favorable than the Affiliated Broker's contemporaneous
charges for comparable transactions for its other most favored, but
unaffiliated, customers except for accounts for which the Affiliated Broker acts
as clearing broker for another brokerage firm, and any customers of the
Affiliated Broker not comparable to the Fund as determined by a majority of the
Trustees who are not interested persons (as defined in the Investment Company
Act) of the Fund, the Adviser or the Affiliated Broker. Because the Adviser,
which is affiliated with the Affiliated Broker, has, as an investment adviser to
the Fund, the obligation to provide investment management services, which
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.
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 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 Subadviser 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 an annual fee 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 an annual fee 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. The Fund pays Signature Services an
annual fee of 0.05% of average daily net assets attributable to Class I shares
plus certain out-of pocket expenses.
50
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, 160 Federal
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.
51
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). (e.g., short sales, currency
contracts, financial futures and options; securities and index options).
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., repurchase agreements, securities lending, foreign debt
securities, non-investment-grade debt securities, asset-backed securities,
mortgage-backed securities, participation interests, financial futures and
options; securities and index options, structured securities).
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., currency
trading, foreign debt securities, currency contracts, financial futures and
options; securities and index options).
Extension risk The risk that an unexpected rise in interest rates will extend
the life of a mortgage-backed security beyond the expected prepayment time,
typically reducing the security's value.(e.g., mortgage-backed securities,
structured securities).
Information risk The risk that key information about a security or market is
inaccurate or unavailable.(e.g., non-investment-grade debt securities).
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.,
foreign debt securities, non-investment-grade debt securities, asset-backed
securities, mortgage-backed securities, participation interests, financial
future and options; securities and index options, structured securities).
Leverage risk Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value. (e.g.,
when-issued securities and forward
A-1
commitments, currency contracts, financial futures and options; securities and
index options, structured securities).
o Hedged When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that
the fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains.
o Speculative To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
Liquidity risk The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead, or forego an investment
opportunity, any of which could have a negative effect on fund management or
performance. (e.g., short sales, non-investment-grade debt securities,
restricted and illiquid securities, mortgage-backed securities, participation
interests, currency contracts, financial futures and options; securities and
index options, structured securities).
Management risk The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
Market risk The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than it was worth at an earlier time. Market risk may affect a
single issuer, industry, sector of the economy or the market as a whole. Common
to all stocks and bonds and the mutual funds that invest in them. (e.g., short
sales, short-term trading, when-issued securities and forward commitments,
foreign debt securities, non-investment-grade debt securities, restricted and
illiquid securities, financial futures and options; securities and index
options, structured securities).
Natural event risk The risk of losses attributable to natural disasters, crop
failures and similar events.
Opportunity risk The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments. (e.g., short sales, when-issued securities and forward commitments,
currency contracts, financial futures and options; securities and index
options).
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 debt securities).
Prepayment risk The risk that unanticipated prepayments may occur during periods
of falling interest rates, reducing the value of mortgage-backed securities.
(e.g., mortgage-backed securities, structured securities).
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 debt
securities, restricted and illiquid securities, participation interests,
structured securities)
A-2
APPENDIX B
DESCRIPTION OF BOND RATINGS
Standard & Poor's Bond Ratings
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.
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.
To provide more detailed indications of credit quality, the ratings AA to
BBB may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
A provisional rating, indicated by "p" following a rating, is sometimes
used by Standard & Poor's. It assumes the successful completion of the project
being financed by the issuance of the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion.
Moody's Bond Ratings
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. Generally speaking, the safety
of obligations of this class is so absolute that with the occasional exception
of oversupply in a few specific instances, characteristically, their market
value is affected solely by money market fluctuations.
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 fluctuation 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.
The market value of Aa bonds is virtually immune to all but money market
influences, with the occasional exception of oversupply in a few specific
instances.
B-1
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 sometime 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.
Rating symbols may include numerical modifiers 1, 2 or 3. The numerical
modifier 1 indicates that the security ranks at the high end, 2 in the
mid-range, and 3 nearer the low end, of the generic category. These modifiers of
rating symbols Aa, A and Baa are to give investors a more precise indication of
relative debt quality in each of the historically defined categories.
Conditional ratings, indicated by "Con," are sometimes given when the
security for the bond depends upon the completion of some act or the fulfillment
of some condition. Such bonds, are given a conditional rating that denotes their
probable credit status upon completion of that act or fulfillment of that
condition.
B-2
FINANCIAL STATEMENTS
The financial statements listed below are included in the Fund's 2002 Annual
Report to Shareholder's for the year ended October 31, 2002 (filed
electronically on December , 2002, accession number 0000928816-02- and
are included in and incorporated by reference into Part B of the Registration
Statement for John Hancock International Fund (file no. 811-4630 and 33-4559).
John Hancock Investment Trust III
John Hancock International Fund
Statement of Assets and Liabilities as of October 31, 2002.
Statement of Operations for year ended October 31, 2002.
Statement of Changes in Net Assets for the two years ended October 31, 2002.
Financial Highlights.
Notes to Financial Statements.
Schedule of Investments as of October 31, 2002.
Report of Independent Auditors.
F-1
JOHN HANCOCK
- --------------------------------------------------------------------------------
Prospectus 2.14.03 European Equity Fund
[LOGO](R) As with all mutual funds, the Securities and Exchange
- ------------------ Commission has not approved or disapproved this fund
JOHN HANCOCK FUNDS or determined whether the information in this
prospectus is adequate and accurate. Anyone who
indicates otherwise is committing a federal crime.
Contents
- --------------------------------------------------------------------------------
A summary of the fund's European Equity Fund 4
goals, strategies, risks,
performance and expenses.
Policies and instructions for Your account
opening, maintaining and
closing an 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 12
Additional investor services 13
Further information on the Fund details
fund.
Business structure 14
Financial highlights 15
For more information back cover
3
European Equity Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term growth of capital. To pursue this goal, the
fund normally invests at least 80% of its assets in equity securities (including
common and preferred stocks and their equivalents) of European companies. These
companies derive more than half of their revenues from European operations, are
organized under European law or are traded principally on European stock
exchanges. While the fund invests most heavily in developed economies, it is
permitted to invest in securities of European emerging market companies.
In managing the portfolio, the managers focus on a "bottom-up" analysis on the
financial conditions and competitiveness of individual companies throughout
Europe. In analyzing specific companies for possible investment, the managers
ordinarily look for several of the following characteristics that will enable
the companies to compete successfully in their respective markets:
o above-average per share earnings growth
o high return on invested capital
o a healthy balance sheet
o sound financial and accounting policies and overall financial strength
o strong competitive advantages
o effective research, product development and marketing
The managers consider whether to sell a particular security when any of those
factors materially changes. The managers allocate the fund's assets among
securities of European countries that are expected to provide the best
opportunities for meeting the fund's investment objective.
The fund may use certain derivatives (investments whose value is based on
indexes, securities or currencies).
In abnormal circumstances, the fund may temporarily invest more than 20% of its
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
================================================================================
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The average annual figures reflect sales charges; the
year-by-year and index figures do not, and would be lower if they did. All
figures assume dividend reinvestment. Past performance before and after taxes
does not indicate future results.
Class A, total returns
Best quarter: Q4 '99, 25.43%
Worst quarter: Q1 '01, -20.00%
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)
MSCI Europe Index, an unmanaged index of European stocks.
[THE FOLLOWING DATA WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
- --------------------------------------------------------------------------------
Class A calendar year total returns (without sales charges)
- --------------------------------------------------------------------------------
1999 2000 2001 2002
17.51% -16.41% -27.24%
- --------------------------------------------------------------------------------
Average annual total returns (including sales charge) for periods ending
12-31-02
- --------------------------------------------------------------------------------
1 year Life of Life of Life of
Class A Class B Class C
Class A before tax (began 3-2-98) -30.87% -6.80% -- --
Class A after tax on distributions -30.87% -6.80% -- --
Class A after tax on distributions,
with sale -18.80% -5.32% -- --
Class B before tax (began 6-1-98) -31.42% -- -9.95% --
Class C before tax (began 3-1-99) -29.25% -- -- -10.53%
- --------------------------------------------------------------------------------
MSCI Europe Index -21.23% -2.58% -5.18% -5.36%
4
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements. Because the fund focuses on a single region of the world, its
performance may be more volatile than that of a fund that invests globally.
European issues denominated in euros are subject to the risk that the euro may
decline in value against the U.S. dollar. Also, applying a single monetary
policy to countries with different economic trends could hurt issuers in some
countries, and the failure of a monetary union could disrupt European economies.
Foreign investments are more risky than domestic investments. Investments in
foreign 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.
These risks are more significant in emerging markets.
The fund's management strategy has a significant influence on fund performance.
European stocks as a group could fall out of favor with the market, causing the
fund to underperform investments that focus on other types of stocks. 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 In a down market, emerging market securities, other higher-risk securities
and derivatives could become harder to value or to sell at a fair price.
o Certain derivatives could produce disproportionate losses.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
Investments in the fund are not bank deposits and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency. You
could lose money by investing in this fund.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses (1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) 5.00% 5.00% 2.00%
Maximum front-end sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
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 0.90% 0.90% 0.90%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 1.45% 1.45% 1.45%
Total fund operating expenses 2.65% 3.35% 3.35%
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 (3) Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A $755 $1,282 $1,835 $3,334
Class B with redemption $838 $1,330 $1,945 $3,482
Class B without redemption $338 $1,030 $1,745 $3,482
Class C with redemption $533 $1,120 $1,828 $3,703
Class C without redemption $434 $1,120 $1,828 $3,703
(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."
(3) The Adviser has agreed to limit expenses on Classes A, B and C shares to
1.90%, 2.60% and 2.60%, respectively until 2/28/03. This limitation has
not been reflected in these expenses.
================================================================================
SUBADVISER
Nicholas-Applegate Capital Management
U.S.-based team responsible for day-to-day
investment management since December 2000
Founded in 1984
Supervised by the adviser
FUND CODES
Class A Ticker JHEAX
CUSIP 410233886
Newspaper EuropeA
SEC number 811-4932
JH fund number 92
Class B Ticker JHEBX
CUSIP 410233878
Newspaper EuropeB
SEC number 811-4932
JH fund number 192
Class C Ticker JHECX
CUSIP 410233860
Newspaper --
SEC number 811-4932
JH fund number 592
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 A front-end sales charge, as described at right.
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.
For actual past expenses of each share class, see the "Your Expenses"
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.
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.
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.
Your broker/dealer or agent may charge you a fee to effect transactions in fund
shares.
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
Class A and Class C 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
- --------------------------------------------------------------------------------
Class C sales charges
- --------------------------------------------------------------------------------
As a % of As a % of your
Your investment offering price investment
Up to $1,000,000 1.00% 1.01%
$1,000,000 and over none
Investments of $1 million or more Class A and Class C shares are available with
no front-end sales charge. However, there is a contingent deferred sales charge
(CDSC) on any Class A shares sold within one year of purchase, as follows:
- --------------------------------------------------------------------------------
CDSC 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 Shares are offered at their net asset value per share, without any
initial sales charge. Class B and Class C A CDSC may be charged if 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
- --------------------------------------------------------------------------------
Years after purchase CDSC on shares being sold
1st year 5.00%
2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
After 6th year none
- --------------------------------------------------------------------------------
Class C deferred charges
- --------------------------------------------------------------------------------
Years after purchase CDSC on shares being sold
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.
CDSC calculations are based on the number of shares involved, not on the value
of your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that carry
no CDSC. If there are not enough of these to meet your request, we will sell
those shares that have the lowest CDSC.
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
Reducing your Class A sales charges There are several ways you can combine
multiple purchases of Class A shares of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
o Accumulation Privilege -- lets you add the value of any Class A shares you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge. 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.
o Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section of your application, or contact
your financial representative or Signature Services, or consult the SAI (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: contact your financial representative or Signature Services to find
out how to qualify, or consult the SAI (see the back cover of the prospectus).
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: if you think you may be eligible for a CDSC waiver, contact your
financial representative or Signature Services, or consult the SAI (see the back
cover of this prospectus).
YOUR ACCOUNT 7
Reinstatement privilege If you sell shares of a John Hancock fund, you may
reinvest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge, as long as Signature Services is
notified before you reinvest. If you paid a CDSC when you sold your shares, you
will be credited with the amount of the CDSC. All accounts involved must have
the same registration.
To utilize: contact your financial representative or Signature Services.
Waivers for certain investors Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
o selling brokers and their employees and sales representatives
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
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)
Class C shares may be offered without front-end sales charges to various
individuals and institutions.
To utilize: if you think you may be eligible for a sales charge waiver, contact
Signature Services or consult the SAI (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: $250
o group investments: $250
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
o fee-based clients of selling brokers who have placed at least $2
billion in John Hancock funds: $250
3 Complete the appropriate parts of the account application, carefully
following the instructions. You must submit additional documentation when
opening trust, corporate or power of attorney accounts. You must notify
your financial representative or Signature Services if this information
changes. For more details, please contact your financial representative or
call Signature Services at 1-800-225-5291.
4 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
[Clip Art] o Make out a check for the o Make out a check for the
investment amount, payable to investment amount payable to
"John Hancock Signature "John Hancock Signature
Services, Inc." Services, Inc."
o Deliver the check and your o Fill out the detachable
completed application to your investment slip from an
financial representative, or account statement. If no slip
mail them to Signature is available, include a note
Services (address below). specifying the fund name,
your share class, your
account number and the
name(s) in which the account
is registered.
o Deliver the check and your
investment slip or note to
your financial
representative, or mail them
to Signature Services
(address below).
By exchange
[Clip Art] o Call your financial o Log on to www.jhfunds.com to
representative or Signature process exchanges between
Services to request an funds.
exchange.
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
[Clip Art] o Deliver your completed o Instruct your bank to wire
application to your financial the amount of your investment
representative, or mail it to to:
Signature Services. First Signature Bank & Trust
Account # 900000260
o Obtain your account number by Routing # 211475000
calling your financial
representative or Signature Specify the fund name, your
Services. share class, your account
number and the name(s) in which
o Instruct your bank to wire the account is registered. Your
the amount of your investment bank may charge a fee to wire
to: 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
[Clip Art] See "By exchange" and "By o Verify that your bank or
wire." 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
[Clip Art] See "By exchange" and "By o Verify that your bank or
wire." 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 Signature
Services between 8 A.M. and 4
P.M. Eastern Time on most
business days.
- ----------------------------------------------
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.
- ----------------------------------------------
To open or add to an account using the Monthly Automatic Accumulation Program,
see "Additional investor services."
YOUR ACCOUNT 9
- --------------------------------------------------------------------------------
Selling shares
- --------------------------------------------------------------------------------
Designed for To sell some or all of your shares
By letter
[Clip Art] o Accounts of any type. o Write a letter of instruction
or complete a stock power
o Sales of any amount. indicating the fund name,
your share class, your
account number, the name(s)
in which the account is
registered and the dollar
value or number of shares you
wish to sell.
o Include all signatures and
any additional documents that
may be required (see next
page).
o Mail the materials to
Signature Services.
o A check will be mailed to the
name(s) and address in which
the account is registered, or
otherwise according to your
letter of instruction.
By Internet
[Clip Art] o Most accounts. o Log on to www.jhfunds.com to
initiate redemptions from
o Sales of up to $100,000. your funds.
By phone
[Clip Art] o Most accounts. o Call EASI-Line for automated
service 24 hours a day using
o Sales of up to $100,000. your touch-tone phone at
1-800-338-8080.
o Call your financial
representative or Signature
Services between 8 A.M. and 4
P.M. Eastern Time on most
business days.
By wire or electronic funds transfer (EFT)
[Clip Art] o Requests by letter to sell o To verify that the Internet
any amount. or telephone redemption
privilege is in place on an
o Requests by Internet or phone account, or to request the
to sell up to $100,000. form to add it to an existing
account, call Signature
Services.
o Amounts of $1,000 or more
will be wired on the next
business day. A $4 fee will
be deducted from your
account.
o Amounts of less than $1,000
may be sent by EFT or by
check. Funds from EFT
transactions are generally
available by the second
business day. Your bank may
charge a fee for this
service.
By exchange
[Clip Art] o Accounts of any type. o Obtain a current prospectus
for the fund into which you
o Sales of any amount. are exchanging by Internet or
by 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
- --------------------------------------------------------------------------------
[Clip Art]
Owners of individual, joint or o Letter of instruction.
UGMA/UTMA accounts (custodial
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 o Letter of instruction.
proprietorship, general partner or
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 o Letter of instruction signed by
rights of survivorship whose 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, o Call 1-800-225-5291 for
guardians and other sellers or 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 each class of the
fund is determined each business day at the close of regular trading on the New
York Stock Exchange (typically 4 P.M. Eastern Time). The fund uses market prices
in valuing portfolio securities, but may use fair-value estimates if reliable
market prices are unavailable. The fund may also 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. 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.
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. However, if the new fund's CDSC rate is higher, then the rate will
increase. A CDSC rate that has increased will drop again with a future exchange
into a fund with a lower rate.
To protect the interests of other investors in the fund, the fund may cancel the
exchange privileges of any parties who, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. The fund may also refuse any exchange
order. The fund may change or cancel its exchange policies at any time, upon 60
days' notice to its shareholders.
Account Information John Hancock Funds is required by law to obtain information
for verifying an account holder's identity. 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 NAV minus any applicable sales charges and take 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.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
Account statements In general, you will receive account statements as follows:
o after every transaction (except a dividend reinvestment) that affects your
account balance
o after any changes of name or address of the registered owner(s)
o in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
Dividends The fund generally distributes most or all of its net earnings 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. If the
check is not deliverable or the combined dividend and capital gains amount is
$10 or less, your
12 YOUR ACCOUNT
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, Signature Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
Monthly Automatic Accumulation Program (MAAP) MAAP lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
o Complete the appropriate parts of your account application.
o If you are using MAAP to open an account, make out a check ($25 minimum)
for your first investment amount payable to "John Hancock Signature
Services, Inc." Deliver your check and application to your financial
representative or Signature Services.
Systematic withdrawal plan This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account
(buying shares during a period when you are also selling shares of the
same fund is not advantageous to you, because of sales charges).
o Specify the payee(s). The payee may be yourself or any other party, and
there is no limit to the number of payees you may have, as long as they
are all on the same payment schedule.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial
representative or Signature Services.
Retirement plans John Hancock Funds offers a range of retirement plans,
including traditional, Roth and 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 $250 or, for some group plans, no
minimum investment at all. To find out more, call Signature Services at
1-800-225-5291.
YOUR ACCOUNT 13
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 of the fund have the power to change the fund's investment goal
without shareholder approval.
The trustees of the fund have the power to change the focus of the fund's 80%
investment policy without shareholder approval. The fund will provide written
notice to shareholders at least 60 days prior to a change in its 80% investment
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 as of ___________, 2002 managed approximately $26
billion in assets.
Management fee The fund pays the investment adviser a management fee at an
annual rate of 0.90% of the fund's average daily net assets.
------------
Shareholders
------------
Distribution and
shareholder services
-------------------------------------------------
Financial services firms and
their representatives
Advise current and prospective share-
holders on their fund investments, often
in the context of an overall financial plan.
-------------------------------------------------
-------------------------------------------------
Principal distributor
John Hancock Funds, LLC
Markets the fund and distributes shares
through selling brokers, financial planners
and other financial representatives.
-------------------------------------------------
-------------------------------------------------
Transfer agent
John Hancock Signature Services, Inc.
Handles shareholder services, including record-
keeping and statements, distribution of dividends
and processing of buy and sell requests.
-------------------------------------------------
-------------------------------------------------
Subadviser
Nicholas-Applegate
Capital Management
600 West Broadway
San Diego, California 92101
Provides portfolio management
to the fund.
-------------------------------------------------
-------------------------------------------------
Investment adviser
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Manages the fund's business and
investment activities.
-------------------------------------------------
-------------------------------------------------
Custodian
The Bank of New York
One Wall Street
New York, New York 10286
Holds the fund's assets, settles all
portfolio trades and collects most of
the valuation data required for
calculating the fund's NAV.
-------------------------------------------------
Asset
management
-------------------------------------------------
Trustees
Oversee the fund's activities.
-------------------------------------------------
14 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.
European Equity Fund
Figures audited by PricewaterhouseCoopers LLP.
CLASS A SHARES PERIOD ENDED: 10-31-98(1) 10-31-99 10-31-00 10-31-01 10-31-02
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.00 $10.07 $11.16 $10.98 $7.80
Net investment income (loss)(2) 0.01 (0.04) (0.06) --(3) (0.01)
Net realized and unrealized gain (loss) on investments 0.06 1.13 (0.12) (3.18) (1.35)
Total from investment operations 0.07 1.09 (0.18) (3.18) (1.36)
Net asset value, end of period $10.07 $11.16 $10.98 $7.80 $6.44
Total return(4,5) (%) 0.70(6) 10.82 (1.61) (28.96) (17.44)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $12 $14 $13 $8 $6
Ratio of expenses to average net assets (%) 1.90(7) 1.90 1.90 1.90 1.90
Ratio of adjusted expenses to average net assets(8) (%) 3.31(7) 2.23 2.30 3.02 2.65
Ratio of net investment income (loss) to average net assets (%) 0.16(7) (0.38) (0.52) 0.03 (0.08)
Portfolio turnover (%) 31 64 97 260 198
CLASS B SHARES PERIOD ENDED: 10-31-98(1) 10-31-99 10-31-00 10-31-01 10-31-02
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.07 $10.04 $11.06 $10.80 $7.62
Net investment loss(2) (0.04) (0.12) (0.15) (0.06) (0.06)
Net realized and unrealized gain (loss) on investments (0.99) 1.14 (0.11) (3.12) (1.32)
Total from investment operations (1.03) 1.02 (0.26) (3.18) (1.38)
Net asset value, end of period $10.04 $11.06 $10.80 $7.62 $6.24
Total return(5,6) (%) (9.30)(6) 10.16 (2.35) (29.44) (18.11)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $16 $15 $15 $8 $6
Ratio of expenses to average net assets (%) 2.60(7) 2.60 2.60 2.60 2.60
Ratio of adjusted expenses to average net assets(8) (%) 4.01(7) 2.93 3.00 3.72 3.35
Ratio of net investment loss to average net assets (%) (1.12)(7) (1.08) (1.23) (0.67) (0.78)
Portfolio turnover (%) 31 64 97 260 198
FUND DETAILS 15
European Equity Fund continued
CLASS C SHARES PERIOD ENDED: 10-31-99(1) 10-31-00 10-31-01 10-31-02
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.64 $11.06 $10.80 $7.62
Net investment loss(2) (0.07) (0.13) (0.06) (0.06)
Net realized and unrealized gain (loss) on investments 0.49 (0.13) (3.12) (1.32)
Total from investment operations 0.42 (0.26) (3.18) (1.38)
Net asset value, end of period $11.06 $10.80 $7.62 $6.24
Total return(4,5) (%) 3.95(6) (2.35) (29.44) (18.11)
- -----------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) --(9) --(9) --(9) --(9)
Ratio of expenses to average net assets (%) 2.60(7) 2.60 2.60 2.60
Ratio of adjusted expenses to average net assets(8) (%) 2.93(7) 3.00 3.72 3.35
Ratio of net investment loss to average net assets (%) (1.17)(7) (1.16) (0.61) (0.78)
Portfolio turnover (%) 64 97 260 198
(1) Class A, Class B and Class C shares began operations on 3-2-98, 6-1-98 and
3-1-99, respectively.
(2) Based on the average of the shares outstanding.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Total returns would have been lower had certain expenses not been reduced
during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods
shown.
(9) Less than $500,000.
================================================================================
The following returns are not audited and are not part of the audited financial
highlights presented above:
Without the expense reductions, returns for the period or year ended October 31,
1998, 1999, 2000, 2001 and 2002 for Class A would have been (0.24%), 10.49%,
(2.01%), (30.08%) and __________, for Class B (9.89%), 9.83%, (2.75%), (30.56%)
and ________, and for Class C, the returns for the period or year ended October
31, 1999, 2000, 2001 and 2002 would have been 3.73%, (2.75%), (30.56%) and
________, respectively.
16 FUND DETAILS
For more information
Two documents are available that offer further information on John Hancock
European Equity 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.
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:
In person: at the SEC's Public Reference Room in
Washington, DC. For access to the Reference Room
call 1-202-942-8090
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
By electronic request: publicinfo@sec.gov
(duplicating fee required)
On the Internet: www.sec.gov
(C)2003 JOHN HANCOCK FUNDS, LLC 920PN 2/03
[LOGO](R) -------------
PRSRT STD
John Hancock Funds, LLC U.S. POSTAGE
MEMBER NASD P A I D
101 Huntington Avenue BOSTON, MA
Boston, MA 02199-7603 PERMIT NO. 11
-------------
www.jhfunds.com
JOHN HANCOCK
- --------------------------------------------------------------------------------
Prospectus 2.14.03 Global Fund
[LOGO](R) As with all mutual funds, the Securities and Exchange
- ------------------ Commission has not approved or disapproved this fund
JOHN HANCOCK FUNDS or determined whether the information in this
prospectus is adequate and accurate. Anyone who
indicates otherwise is committing a federal crime.
Contents
- --------------------------------------------------------------------------------
A summary of the fund's Global Fund 4
goals, strategies, risks,
performance and expenses.
Policies and instructions for Your account
opening, maintaining and
closing an 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 12
Additional investor services 13
Further information on the Fund details
fund.
Business structure 14
Financial highlights 15
For more information back cover
3
Global Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term growth of capital. To pursue this goal, the
fund normally invests at least 80% of its assets in common stocks of foreign and
U.S. companies of any size. The fund does not maintain a fixed allocation of
assets, either with respect to securities type or geography.
In managing the portfolio, the managers focus on a "bottom-up" analysis on the
financial conditions and competitiveness of individual companies throughout the
world. In analyzing specific companies for possible investment, the managers
ordinarily look for several of the following characteristics that will enable
the companies to compete successfully in their respective markets:
o above-average per share earnings growth
o high return on invested capital
o a healthy balance sheet
o sound financial and accounting policies and overall financial strength
o strong competitive advantages
o effective research, product development and marketing.
The managers consider whether to sell a particular security when any of those
factors materially changes. The managers allocate the fund's assets among
securities of countries that are expected to provide the best opportunities for
meeting the fund's investment objective.
The fund may invest in emerging market countries. The fund may also use certain
derivatives (investments whose value is based on indexes, securities or
currencies).
In abnormal conditions, the fund may temporarily invest more than 20% of assets
in investment-grade short-term securities. In these and other cases, the fund
might not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The average annual figures reflect sales charges; the
year-by-year and index figures do not, and would be lower if they did. All
figures assume dividend reinvestment. Past performance before and after taxes
does not indicate future results.
Class A, total returns
Best quarter: Q4 '98, 20.73%
Worst quarter: Q3 '01, -24.70%
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)
MSCI All Country World Free Index, an unmanaged index of freely traded stocks of
foreign and U.S. companies.
[THE FOLLOWING DATA WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
- --------------------------------------------------------------------------------
Class A calendar year total returns (without sales charges)
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
34.59% -4.87% 10.60% 12.68% 7.30% 21.52% 21.77% -23.43% -33.12%
- --------------------------------------------------------------------------------
Average annual total returns (including sales charge) for periods ending
12-31-02
- --------------------------------------------------------------------------------
1 year 5 year 10 year Life of
Class C
Class A before tax -36.47% -5.04% -- --
Class A after tax on distributions -38.57% -5.51% 1.74% --
Class A after tax on distributions,
with sale -38.57% -6.21% 0.22% --
Class B after tax -23.49% -4.02% 1.21% --
Class C before tax (began 3-1-99) -36.63% -- -- -15.92%
- --------------------------------------------------------------------------------
MSCI All Country World Free Index -17.26% 3.53% 6.10% -3.97%
4
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
Foreign investments are more risky than domestic investments. Investments in
foreign 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.
These risks are more significant in emerging markets.
The fund's management strategy has a significant influence on fund performance.
If the fund invests in countries or regions that experience economic downturns,
performance could suffer. In addition, if certain investments or industries do
not perform as expected, or 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 In a down market, emerging market securities, other higher-risk securities
and derivatives could become harder to value or to sell at a fair price.
o Certain derivatives could produce disproportionate losses.
o Stocks of small and medium size companies can be more volatile than those
of larger companies.
Investments in the fund are not bank deposits and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency. You
could lose money by investing in this fund.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) 5.00% 5.00% 2.00%
Maximum front-end sales charge (load)
on purchases as a % of purchase price 5.00% none 1.00%
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 0.90% 0.90% 0.90%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 1.15% 1.15% 1.15%
Total fund operating expenses 2.35% 3.05% 3.05%
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 $726 $1,197 $1,693 $3,052
Class B with redemption $808 $1,242 $1,801 $3,202
Class B without redemption $308 $942 $1,601 $3,202
Class C with redemption $504 $1,033 $1,685 $3,431
Class C without redemption $405 $1,033 $1,685 $3,431
(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
Nicholas-Applegate Capital Management
U.S.-based team responsible for day-to-day
investment management since December 2000
Founded in 1984
Supervised by the adviser
FUND CODES
Class A Ticker JHGAX
CUSIP 409906104
Newspaper GlobA
SEC number 811-4630
JH fund number 3
Class B Ticker FGLOX
CUSIP 409906203
Newspaper GlobB
SEC number 811-4630
JH fund number 103
Class C Ticker JHGCX
CUSIP 409906815
Newspaper --
SEC number 811-4630
JH fund number 503
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 0.30%.
- --------------------------------------------------------------------------------
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 A front-end sales charge, as described at right.
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.
For actual past expenses of each share class, see the "Your Expenses"
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.
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.
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.
Your broker/dealer or agent may charge you a fee to effect transactions in fund
shares.
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
Class A and Class C 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
- --------------------------------------------------------------------------------
Class C sales charges
- --------------------------------------------------------------------------------
As a % of As a % of your
Your investment offering price investment
Up to $1,000,000 1.00% 1.01%
$1,000,000 and over none
Investments of $1 million or more Class A and Class C shares are available with
no front-end sales charge. However, there is a contingent deferred sales charge
(CDSC) on any Class A shares sold within one year of purchase, as follows:
- --------------------------------------------------------------------------------
CDSC 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 Shares are offered at their net asset value per share, without any
initial sales charge. Class B and Class C A CDSC may be charged if 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
- --------------------------------------------------------------------------------
Years after purchase CDSC on shares being sold
1st year 5.00%
2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
After 6th year none
- --------------------------------------------------------------------------------
Class C deferred charges
- --------------------------------------------------------------------------------
Years after purchase CDSC on shares being sold
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.
CDSC calculations are based on the number of shares involved, not on the value
of your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that carry
no CDSC. If there are not enough of these to meet your request, we will sell
those shares that have the lowest CDSC.
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
Reducing your Class A sales charges There are several ways you can combine
multiple purchases of Class A shares of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
o Accumulation Privilege -- lets you add the value of any Class A shares you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge. 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.
o Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section of your application, or contact
your financial representative or Signature Services, or consult the SAI (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: contact your financial representative or Signature Services to find
out how to qualify, or consult the SAI (see the back cover of the prospectus).
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: if you think you may be eligible for a CDSC waiver, contact your
financial representative or Signature Services, or consult the SAI (see the back
cover of this prospectus).
YOUR ACCOUNT 7
Reinstatement privilege If you sell shares of a John Hancock fund, you may
reinvest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge, as long as Signature Services is
notified before you reinvest. If you paid a CDSC when you sold your shares, you
will be credited with the amount of the CDSC. All accounts involved must have
the same registration.
To utilize: contact your financial representative or Signature Services.
Waivers for certain investors Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
o selling brokers and their employees and sales representatives
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
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)
Class C shares may be offered without front-end sales charges to various
individuals and institutions.
To utilize: if you think you may be eligible for a sales charge waiver, contact
Signature Services or consult the SAI (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: $250
o group investments: $250
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
o fee-based clients of selling brokers who have placed at least $2
billion in John Hancock funds: $250
3 Complete the appropriate parts of the account application, carefully
following the instructions. You must submit additional documentation when
opening trust, corporate or power of attorney accounts. You must notify
your financial representative or Signature Services if this information
changes. For more details, please contact your financial representative or
call Signature Services at 1-800-225-5291.
4 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
[Clip Art] o Make out a check for the o Make out a check for the
investment amount, payable to investment amount payable to
"John Hancock Signature "John Hancock Signature
Services, Inc." Services, Inc."
o Deliver the check and your o Fill out the detachable
completed application to your investment slip from an
financial representative, or account statement. If no slip
mail them to Signature is available, include a note
Services (address below). specifying the fund name,
your share class, your
account number and the
name(s) in which the account
is registered.
o Deliver the check and your
investment slip or note to
your financial
representative, or mail them
to Signature Services
(address below).
By exchange
[Clip Art] o Call your financial o Log on to www.jhfunds.com to
representative or Signature process exchanges between
Services to request an funds.
exchange.
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
[Clip Art] o Deliver your completed o Instruct your bank to wire
application to your financial the amount of your investment
representative, or mail it to to:
Signature Services. First Signature Bank & Trust
Account # 900000260
o Obtain your account number by Routing # 211475000
calling your financial
representative or Signature Specify the fund name, your
Services. share class, your account
number and the name(s) in which
o Instruct your bank to wire the account is registered. Your
the amount of your investment bank may charge a fee to wire
to: 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
[Clip Art] See "By exchange" and "By o Verify that your bank or
wire." 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
[Clip Art] See "By exchange" and "By o Verify that your bank or
wire." 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 Signature
Services between 8 A.M. and 4
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
- --------------------------------------------------------------------------------
Designed for To sell some or all of your shares
By letter
[Clip Art] o Accounts of any type. o Write a letter of instruction
or complete a stock power
o Sales of any amount. indicating the fund name,
your share class, your
account number, the name(s)
in which the account is
registered and the dollar
value or number of shares you
wish to sell.
o Include all signatures and
any additional documents that
may be required (see next
page).
o Mail the materials to
Signature Services.
o A check will be mailed to the
name(s) and address in which
the account is registered, or
otherwise according to your
letter of instruction.
By Internet
[Clip Art] o Most accounts. o Log on to www.jhfunds.com to
initiate redemptions from
o Sales of up to $100,000. your funds.
By phone
[Clip Art] o Most accounts. o Call EASI-Line for automated
service 24 hours a day using
o Sales of up to $100,000. your touch-tone phone at
1-800-338-8080.
o Call your financial
representative or Signature
Services between 8 A.M. and 4
P.M. Eastern Time on most
business days.
By wire or electronic funds transfer (EFT)
[Clip Art] o Requests by letter to sell o To verify that the Internet
any amount. or telephone redemption
privilege is in place on an
o Requests by Internet or phone account, or to request the
to sell up to $100,000. form to add it to an existing
account, call Signature
Services.
o Amounts of $1,000 or more
will be wired on the next
business day. A $4 fee will
be deducted from your
account.
o Amounts of less than $1,000
may be sent by EFT or by
check. Funds from EFT
transactions are generally
available by the second
business day. Your bank may
charge a fee for this
service.
By exchange
[Clip Art] o Accounts of any type. o Obtain a current prospectus
for the fund into which you
o Sales of any amount. are exchanging by Internet or
by 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
- --------------------------------------------------------------------------------
[Clip Art]
Owners of individual, joint or o Letter of instruction.
UGMA/UTMA accounts (custodial
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 o Letter of instruction.
proprietorship, general partner or
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 o Letter of instruction signed by
rights of survivorship whose 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, o Call 1-800-225-5291 for
guardians and other sellers or 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 each class of the
fund is determined each business day at the close of regular trading on the New
York Stock Exchange (typically 4 P.M. Eastern Time). The fund uses market prices
in valuing portfolio securities, but may use fair-value estimates if reliable
market prices are unavailable. The fund may also 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. 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 a fund's NAV
on days when you cannot buy or sell shares.
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. However, if the new fund's CDSC rate is higher, then the rate will
increase. A CDSC rate that has increased will drop again with a future exchange
into a fund with a lower rate.
To protect the interests of other investors in the fund, the fund may cancel the
exchange privileges of any parties who, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. The fund may also refuse any exchange
order. The fund may change or cancel its exchange policies at any time, upon 60
days' notice to its shareholders.
Account Information John Hancock Funds is required by law to obtain information
for verifying an account holder's identity. 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 NAV minus any applicable sales charges and take 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.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
Account statements In general, you will receive account statements as follows:
o after every transaction (except a dividend reinvestment) that affects your
account balance
o after any changes of name or address of the registered owner(s)
o in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
Dividends The fund generally distributes most or all of its net earnings 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. 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
12 YOUR ACCOUNT
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, Signature Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
Monthly Automatic Accumulation Program (MAAP) MAAP lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
o Complete the appropriate parts of your account application.
o If you are using MAAP to open an account, make out a check ($25 minimum)
for your first investment amount payable to "John Hancock Signature
Services, Inc." Deliver your check and application to your financial
representative or Signature Services.
Systematic withdrawal plan This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account
(buying shares during a period when you are also selling shares of the
same fund is not advantageous to you, because of sales charges).
o Specify the payee(s). The payee may be yourself or any other party, and
there is no limit to the number of payees you may have, as long as they
are all on the same payment schedule.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial
representative or Signature Services.
Retirement plans John Hancock Funds offers a range of retirement plans,
including traditional, Roth and 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 $250 or, for some group plans, no
minimum investment at all. To find out more, call Signature Services at
1-800-225-5291.
YOUR ACCOUNT 13
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 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 as of ___________, 2002 managed approximately $26
billion in assets.
Management fee For the fiscal year ended October 31, 2002, the fund paid the
investment adviser a management fee at an annual rate of 0.90% of the fund's
average daily net assets.
------------
Shareholders
------------
Distribution and
shareholder services
-------------------------------------------------
Financial services firms and
their representatives
Advise current and prospective share-
holders on their fund investments, often
in the context of an overall financial plan.
-------------------------------------------------
-------------------------------------------------
Principal distributor
John Hancock Funds, LLC
Markets the fund and distributes shares
through selling brokers, financial planners
and other financial representatives.
-------------------------------------------------
-------------------------------------------------
Transfer agent
John Hancock Signature Services, Inc.
Handles shareholder services, including record-
keeping and statements, distribution of dividends
and processing of buy and sell requests.
-------------------------------------------------
-------------------------------------------------
Subadviser
Nicholas-Applegate
Capital Management
600 West Broadway
San Diego, California 92101
Provides portfolio management
to the fund.
-------------------------------------------------
-------------------------------------------------
Investment adviser
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Manages the fund's business and
investment activities.
-------------------------------------------------
-------------------------------------------------
Custodian
The Bank of New York
One Wall Street
New York, New York 10286
Holds the fund's assets, settles all
portfolio trades and collects most of
the valuation data required for
calculating the fund's NAV.
-------------------------------------------------
Asset
management
-------------------------------------------------
Trustees
Oversee the fund's activities.
-------------------------------------------------
14 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.
Global Fund
Figures audited by PricewaterhouseCoopers LLP.
CLASS A SHARES PERIOD ENDED: 10-31-98 10-31-99 10-31-00 10-31-01 10-31-02
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.94 $13.46 $15.24 $13.64 $7.71
Net investment loss(1) (0.05) (0.03) (0.08) (0.11) (0.10)
Net realized and unrealized gain (loss) on investments 1.53 2.67 (0.91) (5.82) (1.01)
Total from investment operations 1.48 2.64 (0.99) (5.93) (1.11)
Less distributions
From net realized gain (0.96) (0.86) (0.61) -- --
Net asset value, end of period $13.46 $15.24 $13.64 $7.71 $6.60
Total return(2) (%) 11.88 20.90 (6.90) (43.48) (14.40)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $121 $128 $105 $51 $39
Ratio of expenses to average net assets (%) 1.82 1.78 1.87 2.14 2.35
Ratio of net investment loss to average net assets (%) (0.33) (0.23) (0.52) (1.01) (1.31)
Portfolio turnover (%) 160 176 182 297 264
CLASS B SHARES PERIOD ENDED: 10-31-98 10-31-99 10-31-00 10-31-01 10-31-02
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.39 $12.76 $14.30 $12.67 $6.93
Net investment loss(1) (0.13) (0.11) (0.18) (0.17) (0.14)
Net realized and unrealized gain (loss) on investments 1.46 2.51 (0.84) (5.57) (0.89)
Total from investment operations 1.33 2.40 (1.02) (5.74) (1.03)
Less distributions
From net realized gain (0.96) (0.86) (0.61) -- --
Net asset value, end of period $12.76 $14.30 $12.67 $6.93 $5.90
Total return(2) (%) 11.15 20.12 (7.60) (45.30) (14.86)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $55 $54 $41 $17 $11
Ratio of expenses to average net assets (%) 2.46 2.37 2.57 2.84 3.05
Ratio of net investment loss to average net assets (%) (0.97) (0.82) (1.25) (1.72) (2.01)
Portfolio turnover (%) 160 176 182 297 264
CLASS C SHARES PERIOD ENDED: 10-31-99(3) 10-31-00 10-31-01 10-31-02
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.88 $14.30 $12.67 $6.93
Net investment loss(1) (0.10) (0.15) (0.17) (0.14)
Net realized and unrealized gain (loss) on investments 1.52 (0.87) (5.57) (0.89)
Total from investment operations 1.42 (1.02) (5.74) (1.03)
Less distributions
From net realized gain -- (0.61) -- --
Net asset value, end of period $14.30 $12.67 $6.93 $5.90
Total return(2) (%) 11.02(4) (7.60) (45.30) (14.86)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) --(5) $1 $1 $1
Ratio of expenses to average net assets (%) 2.48(6) 2.57 2.84 3.05
Ratio of net investment loss to average net assets (%) (1.01)(6) (1.06) (1.72) (2.01)
Portfolio turnover (%) 176 182 297 264
(1) Based on the average of the shares outstanding.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Class C shares began operations on 3-1-99.
(4) Not annualized.
(5) Less than $500,000.
(6) Annualized.
FUND DETAILS 15
For more information
Two documents are available that offer further information on John Hancock
Global 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.
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:
In person: at the SEC's Public Reference Room in
Washington, DC. For access to the Reference Room
call 1-202-942-8090
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
By electronic request: publicinfo@sec.gov
(duplicating fee required)
On the Internet: www.sec.gov
(C)2003 JOHN HANCOCK FUNDS, LLC 030PN 2/03
[LOGO](R) -------------
PRSRT STD
John Hancock Funds, LLC U.S. POSTAGE
MEMBER NASD P A I D
101 Huntington Avenue BOSTON, MA
Boston, MA 02199-7603 PERMIT NO. 11
-------------
www.jhfunds.com
JOHN HANCOCK EUROPEAN EQUITY FUND
Class A, Class B and Class C Shares
Statement of Additional Information
February 14, 2003
This Statement of Additional Information provides information about John Hancock
European Equity Fund (the "Fund") in addition to the information that is
contained in the combined International Funds' current Prospectus (the
"Prospectus"). The Fund is a diversified series of John Hancock World Fund (the
"Trust").
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the 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 .................................................. 12
Those Responsible for Management ......................................... 16
Investment Advisory and Other Services ................................... 22
Distribution Contracts ................................................... 26
Sales Compensation ....................................................... 28
Net Asset Value .......................................................... 30
Initial Sales Charge on Class A and Class C Shares ....................... 30
Deferred Sales Charge on Class B and Class C Shares ..................... 33
Special Redemptions ...................................................... 37
Additional Services and Programs ......................................... 37
Purchases and Redemptions through Third Parties .......................... 39
Description of the Fund's Shares ......................................... 39
Tax Status ............................................................... 40
Calculation of Performance ............................................... 45
Brokerage Allocation ..................................................... 47
Transfer Agent Services .................................................. 51
Custody of Portfolio ..................................................... 51
Independent Auditors ..................................................... 51
Appendix A - Description of Investment Risk .............................. A-1
Appendix B - Description of Bond and Commercial Paper Ratings ............ B-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 on August, 1986 under the laws of
The Commonwealth of Massachusetts.
John Hancock Advisers, LLC (prior to February 1, 2002, John Hancock Advisers,
Inc.) (the "Adviser") is the Fund's investment adviser. The Adviser is an
indirect, wholly-owned subsidiary of John Hancock Life Insurance Company
(formerly John Hancock Mutual Life Insurance Company)(the "Life Company"), a
Massachusetts life insurance company chartered in 1862, with national
headquarters at John Hancock Place, Boston, Massachusetts. The Life Company is
wholly owned by John Hancock Financial Services, Inc., a Delaware corporation
organized in February, 2000.
The Fund's Sub-Adviser is Nicholas-Applegate Capital Management
("Nicholas-Applegate"), (the "Sub-Adviser"). Nicholas-Applegate is responsible
for providing investment advice to the Fund, subject to the review of the
Trustees and overall supervision of the Adviser.
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 risk. The investment objective is
non-fundamental. There is no assurance that the Fund will achieve its investment
objective.
The Fund's investment objective is long-term growth capital. The Fund will seek
to accomplish this objective through investment in a diversified portfolio of
European equity securities. These issuers ("European Issuers") will consist of:
(1) companies the equity securities of which are traded principally on
stock exchanges in Europe;
(2) companies deriving at least 50% of their total revenue from goods
produced, sales made or services performed in Europe; or
(3) companies that are organized under the laws of European countries,
The principal European countries in which the Fund will invest are the
established markets of Germany, France, England, Sweden, Denmark, Spain,
Switzerland, Italy, Netherlands, Belgium, Norway, Portugal, Ireland and Finland.
Under normal circumstances, the Fund will invest at least 80% of its Assets in
the equity securities of European Issuers. For this purpose, equity securities
consist of common stock, warrants and securities convertible into common stock.
The balance of the Fund's assets will be invested in (1) equity securities of
European Issuers which trade principally on developing or "emerging" market
stock exchanges and (2) investment grade debt securities (i.e., rated BBB, Baa
or higher by Standard & Poor's Ratings Group ("S&P") or Moody's Investors
Services, Inc. ("Moody's"), or, if unrated by either such service, determined to
be of comparable quality by the Adviser or the Sub-Adviser) of U.S. and European
companies and governments and U.S. and European bank certificates of deposit.
Debt securities rated BBB or Baa and unrated securities of equivalent quality
are considered medium-grade obligations with speculative characteristics, and
adverse economic conditions or changing circumstances may weaken the issuer's
capacity to pay interest and repay principal.
2
With respect to the Fund's investment policy of investing at least 80% of its
Assets in equity securities of European 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.
Under normal circumstances, up to 20% of the Fund's its Assets may be held in
cash or investment grade short-term securities and repurchase agreements
(denominated in U.S. dollars) to meet anticipated redemptions of the Fund's
shares. In abnormal circumstances, all or any part of the Fund's assets may be
temporarily invested in money market instruments, including but not limited to
governmental obligations, certificates of deposit, bankers' acceptances,
commercial paper and investment grade short-term corporate debt securities, cash
and repurchase agreements. Any of the foregoing, including cash, may be
denominated in U.S. or foreign currencies and may be obligations of foreign
issuers.
The Fund has not established any limitations on the allocation of investments
among the European countries. The portion of the Fund's assets to be allocated
to each of the European countries will be determined by the Adviser and the
Subadviser. In making this allocation several factors will be considered,
including the relative economic growth and potential of the various economies
and securities markets, expected levels of inflation, governmental policies
influencing business conditions, regulatory and tax consideration, the domestic
and international strength of the leading industrial sectors and currency
stability relative to the U.S.
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.
Investment in Foreign Securities. The Fund may invest directly in the securities
of foreign issuers as well as in the form of sponsored and unsponsored American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs") or other
securities convertible into securities of foreign issuers. ADRs are receipts
typically issued by a U.S. bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. EDRs are receipts issued
in Europe by banks or depositories which evidence a similar ownership
arrangement. Generally, ADRs, in registered form, are designed for use in U.S.
securities markets and EDRs, in bearer form, are designed for use in European
securities markets. Issuers of unsponsored ADRs are not required to disclose
material information in the United States. Foreign issuers may be assigned to
reasonable industry classifications that differ from the industry
classifications ordinarily assigned to U.S. issuers.
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.
3
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.
These risks may be intensified in the case of investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominantly based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rates. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of substantial holdings difficult or
impossible at times. The Fund may be required to establish special custodial or
other arrangements before making certain investments in those countries.
Securities of issuers located in these countries may have limited marketability
and may be subject to more abrupt or erratic price movements.
The U.S. Government has from time to time in the past imposed restrictions,
through taxation and otherwise, on foreign investments by U.S. investors such as
the Fund. If such restrictions should
4
be reinstituted, it might become necessary for the Fund to invest all or
substantially all of its assets in U.S. securities. In such event, the Fund
would review its investment objective and investment policies to determine
whether changes are appropriate.
The Fund's ability and decisions to purchase or sell portfolio securities may be
affected by laws or regulations relating to the convertibility and repatriation
of assets. Because the shares of the Fund are redeemable on a daily basis in
U.S. dollars, the Fund intends to manage its portfolio so as to give reasonable
assurance that it will be able to obtain U.S. dollars. Under present conditions,
it is not believed that these considerations will have any significant effect on
its portfolio strategy.
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
enhance return, to hedge against fluctuations in currency exchange rates
affecting a particular transaction or portfolio position, or as a substitute for
the purchase or sale of a currency or assets denominated in that currency.
Forward contracts are agreements to purchase or sell a specified currency at a
specified future date and price set at the time of the contract. Transaction
hedging is the purchase or sale of forward foreign currency contracts with
respect to specific receivables or payables of the Fund accruing in connection
with the purchase and sale of its portfolio securities quoted or denominated in
the same or related foreign currencies. Portfolio hedging is the use of forward
foreign currency contracts to offset portfolio security positions denominated or
quoted in the same or related foreign currencies. The Fund may elect to hedge
less than all of its foreign portfolio positions as deemed appropriate by the
Adviser and Sub-Adviser.
If the Fund purchases a forward contract or sells a forward contract for
non-hedging purposes, 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.
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 and Sub-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 these 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
5
increasing the level of illiquidity in the Fund if qualified institutional
buyers become for a time uninterested in purchasing these restricted securities.
Equity-Linked Securities The Fund may purchase equity-linked securities; also
known as participation notes, equity swaps, and zero strike calls and warrants.
Equity-linked securities are primarily used by a Fund as an alternative means to
access the securities market of a country. The Fund deposits an amount of cash
with its custodian (or broker, if legally permitted) in an amount equal to the
selling price of the underlying security in exchange for an equity linked
security. Upon sale, the Fund receives cash from the broker or custodian based
on the change in the value of the underlying security. Aside from market risk
there is of the underlying security, there is the risk of default by the other
party to the transaction. In the event of insolvency of the other party, the
Fund might be unable to obtain its expected benefit. In addition, while a Fund
will seek to enter into such transactions only with parties which are capable of
entering into closing transactions with the Fund, there can be no assurance that
the Fund will be able to close out such a transaction with the other party or
obtain an offsetting position with any other party, at any time prior to the end
of the term of the underlying agreement. This may impair the Fund's ability to
enter into other transactions at a time when doing so might be advantageous. The
Fund's investments in equity-linked securities may be subject to its 15% of net
assets limitation on investments in illiquid securities.
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 or a Sub-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 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 highly liquid, marketable securities 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 purchase
additional securities while all borrowings exceed 5% of its total assets. The
Fund will enter into reverse repurchase agreements only with federally insured
banks or savings and loan associations which are approved in advance as being
creditworthy by the Trustees. Under the procedures established by the Trustees,
the Adviser will monitor the creditworthiness of the banks involved.
6
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,
or on any securities index based on securities in which it may invest or 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 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.
7
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 which it does not own. The Fund would ordinarily realize a gain
if, during the option period, the value of the underlying securities or currency
decreased below the exercise price sufficiently to cover the premium and
transaction costs; otherwise the Fund would realize either no gain or a loss on
the purchase of the put option. Gains and losses on the purchase of put options
may be offset by countervailing changes in the value of the Fund's portfolio
securities.
The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
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 although outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
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
8
fluctuations and, for hedging transactions, the degree of correlation between
the options and securities or currency markets.
Futures Contracts and Options on Futures Contracts. To seek to increase total
return or hedge against changes in interest rates or securities prices or
currency exchange rates, the Fund may purchase and sell various kinds of futures
contracts, and purchase and write call and put options on these futures
contracts. The Fund may also enter into closing purchase and sale transactions
with respect to any of these contracts and options. The futures contracts may be
based on various securities (such as U.S. Government securities), securities
indices, foreign currencies and any other financial instruments and indices. All
futures contracts entered into by the Fund are traded on U.S. or foreign
exchanges or boards of trade that are licensed, regulated or approved by the
Commodity Futures Trading Commission ("CFTC").
Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments or
currencies for an agreed price during a designated month (or to deliver the
final cash settlement price, in the case of a contract relating to an index or
otherwise not calling for physical delivery at the end of trading in the
contract).
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or currency will usually be
liquidated in this manner, the Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically advantageous
to do so. A clearing corporation associated with the exchange on which futures
contracts are traded guarantees that, if still open, the sale or purchase will
be performed on the settlement date.
Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire or the
exchange rate of currencies in which portfolio securities are quoted or
denominated. When interest rates are rising or securities prices are falling,
the Fund can seek to offset a decline in the value of its current portfolio
securities through the sale of futures contracts. When interest rates are
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 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
9
attempt to estimate the extent of this volatility difference based on historical
patterns and compensate for any differential by having the Fund enter into a
greater or lesser number of futures contracts or by attempting to achieve only a
partial hedge against price changes affecting the Fund's portfolio securities.
When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of the Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices that are currently available. The Fund
may also purchase futures contracts as a substitute for transactions in
securities or foreign currency, to alter the investment characteristics of or
currency exposure associated with portfolio securities or to gain or increase
its exposure to a particular securities market or currency.
Options on Futures Contracts. The Fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
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
10
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 futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), for maintaining its qualifications as a
regulated investment company for federal income tax purposes.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities or currencies require the Fund to
establish with the custodian a segregated account consisting of cash or liquid
securities in an amount equal to the underlying value of such contracts and
options.
While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates, securities prices or currency
exchanges rates may result in a poorer overall performance for the Fund than if
it had not entered into any futures contracts or options transactions.
Perfect correlation between the Fund's futures positions and portfolio positions
will be impossible to achieve. 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.
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 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
11
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 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.
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.
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.
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 at least 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.
12
The Fund observes the following fundamental restrictions.
The Fund may not:
1. Issue senior securities, except as permitted by paragraphs 2, 5 and 6
below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the deferral of
trustees' fees, the purchase or sale of options, futures contracts,
forward commitments and repurchase agreements entered into in accordance
with the Fund's investment policies or within the meaning of paragraph 6
below, are not deemed to be senior securities.
2. Borrow money, except for the following extraordinary or emergency
purposes: (i) from banks for temporary or short-term purposes or for the
clearance of transactions in amounts not to exceed 33 1/3% of the value of
the Fund's total assets (including the amount borrowed) taken at market
value; (ii) in connection with the redemption of Fund shares or to finance
failed settlements of portfolio trades without immediately liquidating
portfolio securities or other assets; (iii) in order to fulfill
commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets; and (iv) 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. 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 purpose of the 1933 Act.
4. Purchase or sell real estate except that the Fund may (i) acquire or
lease office space for its own use, (ii) invest in securities of issuers
that invest in real estate or interests therein, (iii) invest in
securities that are secured by real estate or interests therein, (iv)
purchase and sell mortgage-related securities and (v) hold and sell real
estate acquired by the Fund as a result of the ownership of securities.
5. Invest in commodities, except the Fund may purchase and sell options on
securities, securities indices and currency, futures contracts on
securities, securities indices and currency and options on such futures,
forward foreign currency exchange contracts, forward commitments,
securities index put or call warrants and repurchase agreements entered
into in accordance with the Fund's investment policies.
6. Make loans, except that the Fund (1) may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% of the Fund's
total assets taken at market value, (2) enter into repurchase agreements,
and (3) purchase all or a portion of an issue of debt securities, bank
loan participation interests, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the purchase
is made upon the original issuance of the securities.
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.
13
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 total assets, purchase securities of an issuer
(other than the U.S. Government, its agencies, instrumentalities or
authorities), if:
(i) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities of
such issuer; or
(ii) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund.
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:
1. Purchase securities on margin or make short sales, or unless, by virtue
of its ownership of other securities, the Fund has the right to obtain
securities equivalent in kind and amount to the securities sold and, if
the right is conditional, the sale is made upon the same conditions,
except (i) in connection with arbitrage transactions, (ii) for hedging the
Fund's exposure to an actual or anticipated market decline in the value of
its securities, (iii) to profit from an anticipated decline in the value
of a security, and (iv) obtaining such short-term credits as may be
necessary for the clearance of purchases and sales of securities.
2. Purchase a security if, as a result, (i) more than 10% of the Fund's
total assets would be invested in the securities of other investment
companies, (ii) the Fund would hold more than 3% of the total outstanding
voting securities of any one investment company, or (iii) more than 5% of
the Fund's total assets would be invested in the securities of any one
investment company. These limitations do not apply to (a) the investment
of cash collateral, received by the Fund in connection with lending the
Fund's portfolio securities, in the securities of open-end investment
companies or (b) the purchase of shares of any investment company in
connection with a merger, consolidation, reorganization or purchase of
substantially all of the assets of another investment company. Subject to
the above percentage limitations the Fund may, in connection with the John
Hancock Group of Funds Deferred Compensation Plan for Independent
Trustees/Directors, purchase securities of other investment companies
within the John Hancock Group of Funds.
3. Invest more than 15% of its net assets in illiquid securities.
4. Invest for the purpose of exercising control over or management of any
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 value of the Fund's assets will not be considered a violation of the
restriction.
Nothing in the foregoing investment restrictions shall be deemed to prohibit the
Fund from purchasing the securities of any issuer pursuant to the exercise of
subscription rights distributed to the Fund by the issuer, except that no such
purchase may be made if as a result, the Fund will no longer be a diversified
investment company as defined in the Investment Company Act or will fail to meet
the diversification requirements for a regulated investment company under the
Internal Revenue Code of 1986, as amended.
14
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.
15
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 Overseen by
And Age Fund since(2) Directorships During Past 5 Years Trustee
- ---------------------------------------------------------------------------------------------------------------------
Independent Trustees
- ---------------------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz Trustee 1998 Professor of Law, Emeritus, Boston 31
Born: 1931 University School of Law (as of 1996);
Director, Brookline Bancorp.
- ---------------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. Trustee 1998 President and Chief Executive Officer, 31
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 1998 Vice President, Senior Banker and Senior 31
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).
- ---------------------------------------------------------------------------------------------------------------------
Richard A. Farrell Trustee 1998 President, Farrell, Healer & Co., Inc. 31
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.
- ---------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and interested 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) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
16
- ---------------------------------------------------------------------------------------------------------------------
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 F. Glavin Trustee 1998 President Emeritus, Babson College (as of 31
Born: 1932 1998); Vice Chairman, Xerox Corporation
(until 1989); Director, Reebok, Inc. (until
2002) and Inco Ltd. (until 2002).
- ---------------------------------------------------------------------------------------------------------------------
John A. Moore Trustee 1998 President and Chief Executive Officer, 39
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 1998 Executive Director, Council for International 39
Born: 1943 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).
- ---------------------------------------------------------------------------------------------------------------------
John W. Pratt Trustee 1998 Professor of Business Administration 31
Born: 1931 Emeritus, Harvard University Graduate School
of Business Administration (as of 1998).
- ---------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and interested 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) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
17
- ---------------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------
Interested Trustees
- ---------------------------------------------------------------------------------------------------------------------
John M. DeCiccio (3) Trustee 2001 Executive Vice President and Chief Investment 61
Born: 1948 Officer, John Hancock Financial Services,
Inc.; Director, Executive Vice President and
Chief Investment Officer, John Hancock Life
Insurance Company; Chairman of the Committee
of Finance of John Hancock Life Insurance
Company; Director, John Hancock Subsidiaries,
LLC, Hancock Natural Resource Group,
Independence Investment LLC, Independence
Fixed Income LLC, John Hancock Advisers, LLC
(the "Adviser") and The Berkeley Financial
Group, LLC ("The Berkeley Group"), John
Hancock Funds, LLC ("John Hancock Funds"),
Massachusetts Business Development
Corporation; Director, John Hancock Insurance
Agency, Inc. ("Insurance Agency, Inc.")
(until 1999) and John Hancock Signature
Services, Inc. ("Signature Services") (until
1997).
- ---------------------------------------------------------------------------------------------------------------------
Maureen R. Ford (3) Trustee, 2000 Executive Vice President, John Hancock 61
Born: 1955 Chairman, Financial Services, Inc., John Hancock Life
President Insurance Company; Chairman, Director,
and Chief President and Chief Executive Officer, the
Executive Advisers and The Berkeley Group; Chairman,
Officer Director, President and Chief Executive
Officer, John Hancock Funds; Chairman,
Director and Chief Executive Officer,
Sovereign Asset Management Corporation
("SAMCorp."); Director, John Hancock
Subsidiaries, LLC; Independence Investment
LLC, Independence Fixed Income LLC and
Signature Services; Senior Vice President,
MassMutual Insurance Co. (until 1999).
- ---------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and interested 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) Interested 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 Overseen by
And Age Fund since(2) Directorships During Past 5 Years Trustee
- ---------------------------------------------------------------------------------------------------------------------
Principal Officers who
are not Trustees
- ---------------------------------------------------------------------------------------------------------------------
William L. Braman Executive 2000 Executive Vice President and Chief Investment N/A
Born: 1953 Vice Officer, the Adviser and each of the John
President Hancock funds; Director, SAMCorp., Executive
and Chief Vice President and Chief Investment Officer,
Investment Baring Asset Management, London U.K. (until
Officer 2000).
- ---------------------------------------------------------------------------------------------------------------------
Richard A. Brown Senior Vice 2000 Senior Vice President, Chief Financial N/A
Born: 1949 President Officer and Treasurer, the Adviser, John
and 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).
- ---------------------------------------------------------------------------------------------------------------------
Thomas H. Connors Vice 1998 Vice President and Compliance Officer, the N/A
Born: 1959 President Adviser and each of the John Hancock funds;
and Vice President, John Hancock Funds.
Compliance
Officer
- ---------------------------------------------------------------------------------------------------------------------
William H. King Vice 1998 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).
- ---------------------------------------------------------------------------------------------------------------------
Susan S. Newton Senior Vice 1998 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 interested 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) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
19
The Fund's Board of Trustees currently has five standing Committees: the Audit
Committee, the Administration Committee, the Contracts/Operations Committee, the
Investment Performance Committee and the Coordinating Committee. Each Committee
is comprised of Independent Trustees. The Audit Committee members are Messrs.
Moore and Farrell. 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, 2002.
The Administration Committee's members are all of the Independent Trustees of
the Fund. 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. The Administration Committee will consider
nominees recommended by shareholders to serve as Independent Trustees, provided
that shareholders submit recommendations in compliance with all of the pertinent
provisions of Rule 14a-8 under the Securities Exchange Act of 1934. The
Administration Committee also works with all Trustees on the selection and
election of officers of the Fund. The Administration Committee held four
meetings during the fiscal year ended October 31, 2002.
The Contracts/Operations Committee members are Messrs. Chapman, Cosgrove and
Pratt. 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, 2002.
The Investment Performance Committee consists of Messrs. Aronowitz, Glavin and
Ms. Peterson. 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, 2001.
The Coordinating Committee members are the chairpersons of the other four
standing committees. The Coordinating Committee assures consistency of action
among committees, reviews Trustee compensation, evaluates Trustee performance
and considers committee membership rotations as well as relevant corporate
governance issues.
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, 2002.
20
- -----------------------------------------------------------------------------------------------------------
Aggregate Dollar Range of holdings
Dollar Range of Fund Shares in John Hancock funds overseen by
Name of Trustee Owned by Trustee Trustee
- -----------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz $1-$10,000 $50,001-$100,000
- -----------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. None Over $100,000
- -----------------------------------------------------------------------------------------------------------
William J. Cosgrove None Over $100,000
- -----------------------------------------------------------------------------------------------------------
Richard A. Farrell $10,001-$50,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
William F. Glavin None $10,001-$50,000
- -----------------------------------------------------------------------------------------------------------
Dr. John A. Moore None Over $100,000
- -----------------------------------------------------------------------------------------------------------
Patti McGill Peterson $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
John W. Pratt None Over $100,000
- -----------------------------------------------------------------------------------------------------------
Interested Trustees
- -----------------------------------------------------------------------------------------------------------
John M.DeCiccio None Over $100,000
- -----------------------------------------------------------------------------------------------------------
Maureen R. Ford $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
(1) Under the John Hancock Deferred Compensation Plan for Independent
Trustees, 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, 2002, 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 none
and over $100,000 for Mr. Chapman, $1-$10,000 and over $100,000 for Mr.
Cosgrove, $1-$10,000 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. Mr. DeCiccio and Ms. Ford, each a
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.
Aggregate Compensation Total Compensation From the Fund and John
Independent Trustees from the Fund (1) Hancock Fund Complex to Trustees (2)
- -------------------- ----------------- ------------------------------------
Dennis J. Aronowitz $ $
Richard P. Chapman*
William J. Cosgrove*
Richard A. Farrell
Gail D. Fosler+
William F. Glavin*
Dr. John A. Moore*
Patti McGill Peterson
John Pratt
Total $ $
(1) Compensation is for the fiscal year ending October 31, 2002.
(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 2002. As of this date, there were sixty-one funds
in the John Hancock Fund
21
Complex, with Mr. Moore and Ms. Peterson serving on thirty-nine funds and each
of the other Independent Trustees serving on thirty-one funds.
*As of December 31, 2002, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $71,309 Mr. Cosgrove was $207,842 , Mr. Glavin was $280,472 and for
Dr. Moore was $238,982 under the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees (the "Plan").
+As of December 31, 2002, Ms. Fosler resigned as 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
and/or directors and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
As of January , 2003 the officers and Trustees of the Trust as a group
beneficially owned less than 1% of the Fund's outstanding shares. As of that
date, the following shareholders beneficially owned 5% or more of outstanding
shares of the Fund:
Percentage of Outstanding
Name and Address of Shareholder Class of Shares Shares of Class of Fund
- ------------------------------- --------------- -----------------------
John Hancock Advisers, Inc. A %
101 Huntington Avenue
Boston, MA. 02199-7603
John Hancock Advisers, Inc. A %
Credit Agricole Indosuez
101 Huntington Avenue
Boston, MA 02199-7603
Prudential Securities Inc FBO C %
Kadlec Engieering Sep DTD
2651 Westriedge Road
Los Angeles,CA
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and as of December 31, 2002 had approximately $__ billion
in assets under management in its capacity as investment adviser to the Fund and
the other funds in the John Hancock group of funds as well as retail and
institutional privately managed accounts. The Adviser is an affiliate of the
Life Company, one of the most recognized and respected financial institutions in
the nation. With total assets under management of approximately $100 billion,
the Life Company is one of the ten largest life insurance companies in the
United States, and carries a high rating from Standard & Poor's and A.M. Best.
Founded in 1862, the Life Company has been serving clients for over 130 years.
The Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser, which was approved by the Fund's shareholders.
Pursuant to the Advisory Agreement, the Adviser will: (a) furnish continuously
an investment program for the Fund and determine, subject to the overall
supervision and review of the Trustees, which investments should be purchased,
held, sold or exchanged, and (b) provide supervision over all aspects of the
Fund's operations except those which are delegated to a custodian, transfer
agent or other agent.
22
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
membership; insurance premiums; and any extraordinary expenses.
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 $500,000,000 0.90%
Amount over $500,000,000 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 has agreed to limit Fund (excluding 12b-1 fees) to 1.60% of
the Fund's average daily net assets. The Adviser retains the right to re-impose
a fee and recover any other payments to the extent that, at the end of any
fiscal year, the Fund's annual expenses fall below this limit.
As of December 14, 2000, the Adviser has entered into a sub-investment
management contract (the "sub-advisory agreement") with Nicholas-Applegate under
which, subject to the review of the Trustees and the overall supervision of the
Adviser, Nicholas-Applegate is responsible for providing the Fund with
investment advice. Nicholas-Applegate will also provide the Fund on a continuous
basis with economic, financial and political information, research and
assistance concerning international markets. Until May 11, 2001, as compensation
for its services under the Sub-Advisory Agreement, the Adviser paid
Nicholas-Applegate quarterly, in arrears, a fee at the annual rate of 0.35% of
the average daily net assets of the Fund. Effective May 11, 2001, the Adviser
will pay quarterly, in arrears, a fee at the annual rate of: (i) 0.60% of the
first $100,000,000 of the average daily net asset value of the Fund; and (ii)
0.50% of the average daily net asset value of the Fund in excess of
$100,000,000. Nicholas-Applegate is a limited liability company organized under
the laws of the State of Delaware, with offices at 600 West Broadway, 30th
Floor, San Diego, California 92101. Nicholas-Applegate was organized in August
1984 to manage discretionary accounts investing primarily in publicly traded
equity securities and securities convertible into or exercisable for publicly
traded equity securities, with the goal of capital appreciation.
Nicholas-Applegate is a wholly owned subsidiary of Allianz of America, Inc.
("AZOA"). Allianz AG, the parent of AZOA, is a German Aktiengesellschaft, a
German publicly traded company, which, together with its subsidiaries, comprises
the world's largest insurance group (the "Allianz Group"). Allianz Group
currently has assets under management of approximately $690 billion. Allianz
AG's address is: Koeniginstrasse 28, D-80802, Munich, Germany.
23
Until December 14, 2000, the Sub-Adviser to the Fund was Indocam International
Investment Services, "IIIS". IIIS is a French corporation and a subsidiary of
Indocam, the asset management affiliate of Credit Agricole, a French bank group
with a presence in financial centers around the world. IIIS is located at 90
Boulevard Pasteaur, Paris, France 75015. Indocam is an asset management firm
maintaining established relationships with institutional, corporate and
individual investors. Credit Agricole is one of the largest bank groups in the
world. As compensation for its services under the Sub-Advisory Agreement, the
Adviser was paying IIIS quarterly, in arrears, a fee at the annual rate of 0.35%
of the average daily net assets of the Fund.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser, the Sub-Adviser or any of their
respective affiliates provides 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 the Sub-Adviser for the Fund or for other funds or clients for which
the Adviser or the Sub-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, the Sub-Adviser or its affiliate may increase the demand for
securities being purchased or the supply of securities being sold, there may be
an adverse effect on price.
The Advisory Agreement fee paid by the Fund is higher than the fee paid by most
mutual funds but is comparable to the fee paid by similar funds which invest
primarily in international securities. For the fiscal years ended October 31,
2000, 2001 and 2002, the Fund paid the Advisers fees in the amount of $301,771,
$198,853 and $ , respectively, prior to the expense reduction by the
Advisers. After the expense reduction the Fund paid no advisory fee for the
fiscal year ended 2000, 2001 and 2002.
Pursuant to their respective Advisory Agreements, the Adviser and Sub-Adviser
are not liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to which the Agreements
relate, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser or Sub-Adviser in the performance of their
duties or from reckless disregard by them of their obligations and duties under
the applicable 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 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
24
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.
The primary factors underlying the Board's decision to renew the Fund's Advisory
Agreement and Sub-Advisory Agreement were as follows:
o The Board determined that the performance results of the Fund and the
Adviser and Sub-Adviser's responsive actions were reasonable, as compared
with relevant performance standards, including the performance results of
comparable European region funds derived from data provided by Lipper Inc.
and appropriate market indexes.
o 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 and Sub-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 Board considered whether the Fund should obtain alternative
portfolio management services and concluded that, under all the
circumstances and based on its informed business judgement, the most
appropriate course of action in the best interest of the Fund's
shareholders was to renew the agreements with the Adviser and Sub-Adviser.
The continuation of the Advisory Agreement, the Sub-Advisory Agreement and the
Distribution Agreement was approved by all of the Trustees in June of 1999. On
December 12, 2000, the Trustees approved the termination of IIIS as Sub-Adviser
and appointed Nicholas-Applegate as Sub-Adviser effective December 14, 2000. On
April 25, 2001, the shareholders of the Fund approved the appointment of
Nicholas-Applegate as Sub-Adviser. The Advisory Agreement, the
Nicholas-Applegate 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 of these 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, 2000, 2001 and 2002,
the Fund paid the Adviser $6,357, $4,300 and $xxxxxx, respectively, for services
under this Agreement.
25
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 (the "Selling Brokers") that have entered into selling agency
agreements with John Hancock Funds. These Selling Brokers 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 which 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 Brokers receive compensation from
a sales charge imposed, in the case of Class A and C shares, at the time of
sale. In the case of Class B or Class C shares, the broker receives compensation
immediately but John Hancock Funds is compensated on a deferred basis.
Total underwriting commissions for sales of the Fund's Class A shares for the
fiscal years ended October 31, 2000, 2001 and 2002 were $31,625, $14,118 and
$ , respectively. Of such amounts $5,067, $998 and $xxxx were retained by
John Hancock Funds for the fiscal years ended 2000, 2001 and 2002, respectively.
The remainder of the underwriting commissions were reallowed to Selling Brokers.
Total underwriting commissions for sales of the Fund's Class C shares for the
fiscal year ended October 31, 2001 were $4,813 and $3,289, respectively. The
remainder of the underwriting commissions were reallowed to Selling Brokers.
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 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 Brokers and others (including affiliates of John Hancock Funds) engaged
in the sale of Fund shares; (ii) marketing, promotional and overhead expenses
incurred in connection with the 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
Brokers for providing personal and account maintenance services to shareholders.
In the event that John Hancock Funds is not fully reimbursed for payments or
expenses they incur under the Class A Plan, these expenses will not be carried
beyond twelve months from the date they were incurred. Unreimbursed expenses
under the Class B 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 Class B and/or Class C Plans at any
time. For the fiscal year ended October 31, 2002, an aggregate of $ of
distribution expenses or % 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, 2002, an aggregate of $ of distribution
expenses or % of the average net assets of the Class C 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.
26
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 their
continuance is approved at least annually by a majority of both the Trustees and
Independent Trustees. The Plans provide that they may be terminated without
penalty, (a) by vote of a majority of the Independent Trustees, (b) by a vote of
a majority of the Fund's outstanding shares of the applicable class upon 60
days' written notice to John Hancock Funds, and (c) automatically in the event
of assignment. The Plans further provide that they may not be amended to
increase the maximum amount of the fees for the services described therein
without the approval of a majority of the outstanding shares of the class of the
Fund which has voting rights with respect to that Plan. Each plan provides, that
no material amendment to the Plans will be effective unless it is approved by a
majority 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 that, in their judgment, there is a reasonable
likelihood that the Plans will benefit the holders of the applicable class of
shares of the Fund.
Amounts paid to John Hancock Funds by any class of shares of the Fund will not
be used to pay the expenses incurred with respect to any other class of shares
of the Fund; provided, however, that expenses attributable to the Fund as a
whole will be allocated, to the extent permitted by law, according to a formula
based upon gross sales dollars and/or average daily net assets of each such
class, as may be approved from time to time by vote of a majority of Trustees.
From time to time, the Fund may participate in joint distribution activities
with other Funds and the costs of those activities will be borne by each Fund in
proportion to the relative net asset value of the participating Fund.
During the fiscal year ended October 31, 2002, the Fund paid John Hancock Funds
the following amounts of expenses in connection with their services of the Fund:
Expense Items
-------------
Printing and Interest
Mailing of Expenses Carrying
Prospectus Compensation of John or other
to new to Selling Hancock Finance
Shares Advertising Shareholders Brokers Funds Charges
- ------ ----------- ------------ ------- ----- -------
Class A $ $ $ $ $
Class B $ $ $ $ $
Class C $ $ $ $ $
27
SALES COMPENSATION
As part of their business strategies, the Fund, along with John Hancock Funds,
pay compensation to financial services firms that sell the fund's shares. These
firms typically pass along a portion of this compensation to your financial
representative.
The two primary sources of 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 reallowed to financial services firms are shown on the next
page.
Whenever you make an investment in the Fund, the financial services firm
receives a reallowance, as described below. The firm also receives the first
year's service fee at this time. Beginning with the second year after an
investment is made, the financial services firm receives an annual service fee
of 0.25% of its total eligible fund net assets. This fee is paid quarterly in
arrears by the Fund.
In addition, from time to time, John Hancock Funds, at its expense, 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 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 financial
services firms-sponsored events or activities. From time to time, John Hancock
Funds may provide expense reimbursements for special training of a financial
services firm's registered representatives and other employees in group
meetings. Other compensation, such as asset retention fees, finder's fees and
reimbursement for wire transfer fees may be offered to the extent not prohibited
by law or any self-regulatory agency, such as the NASD.
28
Sales charge Broker receives Broker receives
paid by investors maximum 12b-1 service fee Total broker
(% of offering reallowance (% of net compensation (1)
Class A investments price) (% of offering price) investment) (3) (% of offering price)
- ------------------- ------ -------------------- --------------- ---------------------
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 of $1 million
or more (4)
- -----------
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50% (2)
Next $1 or more above that -- 0.00% 0.25% 0.25% (2)
Broker receives Broker receives
maximum 12b-1 service fee Total broker
reallowance (% of net compensation (1)
Class B investments (% of offering price) investment) (3) (% of offering price)
- ------------------- --------------------- --------------- ---------------------
All amounts -- 3.75% 0.25% 4.00%
Broker receives Broker receives
maximum 12b-1service fee Total broker
reallowance (% of net compensation (1)
Class C investments (% of offering price) investment) (3) (% of offering price)
- ------------------- --------------------- --------------- ---------------------
Over $1,000,000 or amounts
purchased at NAV -- 0.75% 0.25% 1.00%
All other amounts 1.00% 1.75% 0.25% 2.00%
(1) Broker percentages and 12b-1 service fee percentages are calculated from
different amounts, and therefore may not equal total broker compensation
percentages if combined using simple addition
(2) For Group Investment Programs sales, the maximum total broker compensation
for investments of $1 million or more is 1.00% of the offering price (one
year CDSC of 1.00% applies for each sale).
(3) After first year broker receives 12b-1 service fees quarterly in arrears.
(4) John Hancock Funds may reduce aggregate investments by the amount of
recent redemptions.
CDSC revenues collected by John Hancock Funds may be used to pay broker
commissions when there is no initial sales charge.
29
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
other securities traded over-the-counter are generally valued at the last
available bid price.
Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00 p.m., London time (12:00 noon,
New York time) on the date of any determination of the Fund's NAV. If quotations
are not readily available, or the value has been materially affected by events
occurring after the closing of a foreign market, assets are valued by a method
that the Trustees believe accurately reflects fair value.
The NAV for each fund and class is determined each business day at the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m. Eastern
Time) by dividing a class's net assets by the number of its shares outstanding.
On any day an international market is closed and the New York Stock Exchange is
open, any foreign securities will be valued at the prior day's close with the
current day's exchange rate. Trading of foreign securities may take place on
Saturdays and U.S. business holidays on which the Fund's NAV is not calculated.
Consequently, the Fund's portfolio securities may trade and the NAV of the
Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.
INITIAL SALES CHARGE ON CLASS A AND CLASS C SHARES
Shares of the Fund are offered at a price equal to their net asset value plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase (the "initial sales charge alternative") or on a contingent
deferred basis (the "deferred sales charge alternative"). The Fund no longer
issues share certificates, all 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 shares of Class A and Class C
shares of the Fund are described in the Prospectus. Methods of obtaining a
reduced sales charge 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 greater of the current value (at offering price) of the Class
A shares of the Fund, owned
30
by the investor, or, if John Hancock Signature Services, Inc. ("Signature
Services") is notified by the investor's dealer or the investor at the time of
the purchase, the cost of the Class A shares owned.
Without Sales Charge. 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 Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family
(spouse, children, grandchildren, mother, father, sister, brother,
mother-in-law, father-in-law, daughter-in-law, son-in-law, niece, nephew,
grandparents, subadviser and same sex domestic partner) 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 Retirement plans participating in Merrill Lynch servicing programs, if the
Plan has more than $3 million in assets or 500 eligible employees at the
date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement. See you Merrill Lynch financial consultant for further
information.
o Retirement plans investing through the PruArray Program sponsored by
Prudential Securities.
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 Participant directed retirement plans with at least 100 eligible employees
at the inception of the Fund account. Each of these investors may purchase
Class A shares with no initial sales charge. However, if the shares are
redeemed within 12 months after the end of the calendar year in which the
purchase was made, a CDSC will be imposed at the following rate:
Amount Invested CDSC Rate
- --------------- ---------
$1 to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
31
Class C shares may be offered without a front-end sales charge to:
o Investments of redemption proceeds from a non-John Hancock mutual fund.
o Group Retirement plan products for which John Hancock Signature Services
performs recordkeeping and administrative services. (These plans include
403(b), Simple IRA, SEP and SARSEP plans.)
o Group Retirement plan products sold through third party administrators
under the John Hancock SELECT retirement plan program. (These plans
include 401(k), Money Purchase and Profit Sharing plans.)
o An investor who buys through a Merrill Lynch omnibus account. However, a
CDSC may apply if the shares are sold within 12 months of purchase.
Class A and Class C 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.
Combination Privilege. 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). A company's (not an individual's) 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 Broker's
representative.
Accumulation Privilege. Investors (including investors combining purchases) who
are already Class A shareholders may also obtain the benefit of the reduced
sales charge by taking into account not only the amount being invested but also
the investor's purchase price or current value of the Class A shares of all John
Hancock funds which carry a sales charge already held by such person. 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. Retirement plan investors may include the value of Class
B shares if Class B shares held are greater than $1 million. Retirement plans
must notify Signature Services to utilize. ). A company's (not an individual's)
qualified and non-qualified retirement plan investments can be combined to take
advantage of this privilege.
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 sales charges are also applicable to investments
made pursuant to a Letter of Intention (the "LOI"), which should be read
carefully prior to its execution by an investor. The Fund offers two options
regarding the specified period for making investments
32
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 individuals non-qualified and
qualified retirement plans investments cannot be combined to satisfy LOI of 48
months. Such an investment (including accumulations and combinations but not
including 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
(within 13 or 48 months) the sales charge applicable will not be higher than
that which would have applied (including accumulations and combinations) had the
LOI been for the amount actually invested.
The LOI authorizes Signature Services to hold in escrow sufficient Class A
shares (approximately 5% of the aggregate) to make up any difference in sales
charges on the amount intended to be invested and the amount actually invested,
until such investment is completed within the specified period, at which time
the escrowed Class A shares will be released. If the total investment specified
in the LOI is not completed, the Class A shares held in escrow may be redeemed
and the proceeds used as required to pay the sales charge as may be due. By
signing the LOI, the investor authorizes Signature Services to act as his or her
attorney-in-fact to redeem any escrowed Class A shares and adjust the sales
charge, if necessary. A LOI does not constitute a binding commitment by an
investor to purchase or by the 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 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 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 price 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.
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
33
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 share (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 Funds in connection with the sale of the
Class B and Class C shares, such as the payment of compensation to select
Selling Brokers for selling Class B and Class C shares. The combination of the
CDSC and the distribution and service fees facilitates the ability of the Funds
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 of 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.
34
* 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 that this waiver does not apply to
periodic withdrawal plan redemptions of Class A shares that are subject to
a CDSC).
* Redemptions by Retirement plans participating in Merrill Lynch servicing
programs, if the Plan has less than $3 million in assets or 500 eligible
employees at the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement. See your Merrill Lynch financial
consultant for further information.
* Redemptions of Class A shares by retirement plans that invested through
the PruArray Program sponsored by Prudential Securities.
* Redemptions of Class A shares made after one year from the inception date
of a retirement plan at John Hancock.
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 distributions to participants or beneficiaries
from employer sponsored retirement plans under sections 401(a) (such as
Money Purchase Pension Plans and Profit-Sharing/401(k) Plans), 457 and 408
(SEPs and SIMPLE IRAs) of the Internal Revenue Code.
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares prior
to May 15, 1995.
Please see matrix for some examples.
35
- ---------------------------------------------------------------------------------------------------------------
Type of 401 (a) Plan 403 (b) 457 IRA, IRA Rollover Non-retirement
Distribution (401 (k), MPP,
PSP) 457 & 408
(SEPs & Simple
IRAs)
- ---------------------------------------------------------------------------------------------------------------
Death or Disability Waived Waived Waived Waived Waived
- ---------------------------------------------------------------------------------------------------------------
Over 70 1/2 Waived Waived Waived Waived for required 12% of account
minimum value annually
distributions* in periodic
or 12% of account payments
value annually in
periodic payments.
- ---------------------------------------------------------------------------------------------------------------
Between 59 1/2 and Waived Waived Waived Waived for Life 12% of account
70 1/2 Expectancy or 12% of value annually
account value in periodic
annually in periodic payments
payments.
- ---------------------------------------------------------------------------------------------------------------
Under 59 1/2 Waived for Waived for Waived for Waived for annuity 12% of account
(Class B and Class annuity payments annuity annuity payments (72t) or value annually
C only) (72t) or 12% of payments payments 12% of account value in periodic
account value (72t) or 12% (72t) or 12% annually in periodic payments
annually in of account of account payments.
periodic value value
payments. annually in annually in
periodic periodic
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.
36
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 shareholder 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 with shares that are not subject to a CDSC are based on
their respective net asset values. No sales charge or transaction charge is
imposed. Shares of the Fund which are subject to a CDSC may be exchanged into
shares of any of the other John Hancock funds that are subject to a CDSC without
incurring the CDSC; however, the shares acquired in an exchange will be subject
to the CDSC schedule of the shares acquired if and when such shares are redeemed
(except that shares exchanged into John Hancock 500 Index Fund will retain the
exchanged fund's CDSC schedule). For purposes of computing the CDSC payable upon
redemption of shares acquired in an exchange, the holding period of the original
shares is added to the holding period of the shares acquired in an exchange.
If a 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.
If a shareholder exchanges Class B shares purchased prior to January 1, 1994 for
Class B shares of any other John Hancock fund, the acquired shares will continue
to be subject to the CDSC schedule that was in effect when the exchanged shares
were purchased.
The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of 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.
37
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 the CDSC charged upon
the prior redemption and the new shares will continue to be subject to the CDSC.
The holding period of the shares acquired through reinvestment will, for
purposes of computing the CDSC payable upon a subsequent redemption, include the
holding period of the redeemed shares.
To protect the interests of other investors in the Fund, the Fund may cancel the
reinvestment privilege of any parties that, in the opinion of the Fund, are
using market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. Also, the Fund may refuse any reinvestment
request.
The Fund may change or cancel its reinvestment policies at any time.
A redemption or exchange of 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 shares are available at net asset value for plans with $3 million in
plan assets or 500 eligible employees at the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement. If the plan does not meet either
of these limits, Class A shares are not available.
For participating retirement plans investing in Class B shares, shares will
convert to Class A shares after eight years, or sooner if the plan attains
assets of $5 million (by means of a CDSC-free redemption/purchase at net asset
value).
38
PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES
Shares of the Fund may be purchased or redeemed through certain broker-dealers
or Service Agents ("Brokers"). Brokers may charge for their services or place
limitations on the extent to which you may use the services of the Fund. The
Fund will be deemed to have received a purchase or redemption order when an
authorized broker, or if applicable, a broker's authorized designee, receives
the order. If a broker is an agent or designee of the Fund, orders are processed
at the NAV next calculated after the broker receives the order. The broker 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 brokers that maintain 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. The Adviser, the Fund, and/or John
Hancock Funds, LLC (the Fund's principal distributor), share in the expense of
these fees.
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 six 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 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
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
39
record holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, the Fund's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
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 by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Furthermore, no fund included in this Fund's prospectus shall
be liable for the liabilities of any other John Hancock fund. Liability is
therefore limited to circumstances in which the 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. Brokers of record on
Non-U.S. investors' accounts with foreign mailing addresses are required to
certify that all sales activities have occurred, and in the future will occur,
only in the U.S. A foreign corporation may purchase shares of the Fund only if
it has a U.S. mailing address.
TAX STATUS
The Fund, is treated as a separate entity for accounting and tax purposes, has
qualified and elected to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") and
intends to continue to so qualify for each taxable year. As such and by
complying with the applicable provisions of the Code regarding the sources of
its income, the timing of its distributions, and the diversification of its
assets, the Fund will not be subject to Federal income tax on its taxable income
(including net realized capital gains) which is distributed to shareholders in
accordance with the timing requirements of the Code.
The Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.
40
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss, and investment company taxable income is all taxable
income and capital gains, other than net capital gain, after reduction by
deductible expenses.) Some distributions may be paid in January but may be
taxable to shareholders as if they had been received on December 31 of the
previous year. The tax treatment described above will apply without regard to
whether distributions are received in cash or reinvested in additional shares of
the Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
foreign currency forward contracts, foreign currencies, or payables or
receivables denominated in a foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders. 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 for each taxable year. If the net
foreign exchange loss for a year treated as ordinary loss under Section 988 were
to exceed the Fund's investment company taxable income computed without regard
to such loss, the resulting overall ordinary loss for such year would not be
deductible by the Fund or its shareholders in future years.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes.
Investors may be entitled to claim U.S. foreign tax credits or deductions with
respect to foreign income taxes or certain other foreign taxes ("qualified
foreign taxes"), paid by the Fund subject to certain provisions and limitations
contained in the Code, if the Fund so elects, more than 50% of the value of the
Fund's total assets at the close of any taxable year consists of stock or
securities of foreign corporations, the Fund may file an election with the
Internal Revenue Service pursuant to which shareholders of the Fund will be
required to (i) include in ordinary gross income (in addition to taxable
dividends and distributions actually received) their pro rata shares of
qualified foreign taxes paid by the Fund even though not actually received by
them, and (ii) treat such respective pro rata portions as foreign taxes paid by
them.
If the Fund makes this election, shareholders may then deduct such pro rata
portions of qualified foreign taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S., Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of qualified foreign taxes paid by the Fund,
although such shareholders will be required to include their share of such taxes
in gross income. Shareholders who claim a foreign tax credit for such foreign
taxes may be required to treat a portion of dividends received from the
41
Fund as a separate category of income for purposes of computing the limitations
on the foreign tax credit. Tax-exempt shareholders will ordinarily not benefit
from this election. Each year (if any) that the Fund files the election
described above, its shareholders will be notified of the amount of (i) each
shareholder's pro rata share of qualified foreign taxes paid by the Fund and
(ii) the portion of Fund dividends which represents income from each foreign
country. If the Fund does not satisfy the 50% requirement described above or
otherwise does not make the election, the Fund will deduct the foreign taxes it
pays in determining the amount it has available for distribution to
shareholders, and shareholders will not include these foreign taxes in their
income, nor will they be entitled to any tax deductions or credits with respect
to such taxes.
If the Fund invests in stock of certain non-U.S. corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, certain rent, and royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from these
passive foreign investment companies or gain from the sale of stock in such
companies, even if all income or gain actually received by the Fund is timely
distributed to its shareholders. The Fund would not be able to pass through to
its shareholders any credit or deduction for such a tax. An elections 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 investments in passive
foreign investment companies or make an available election to minimize its tax
liability or maximize its return from these investments.
Certain of these transactions may cause the Fund to recognize gains or losses
from marking to market even though its positions have not been sold or
terminated and may affect the character as long-term or short-term (or, in the
case of certain forward contracts, as ordinary income or loss) of some capital
gains and losses realized by the Fund. Additionally, certain of the Fund's
losses on transactions involving forward contracts, and any offsetting or
successor positions in its portfolio may be deferred rather than being taken
into account currently in calculating the Fund's taxable income or gain. Certain
of such transactions may also cause the Fund to dispose of investments sooner
than would otherwise have occurred. These transactions may therefore affect the
amount, timing and character of the Fund's distributions to shareholders. The
Fund will take into account the special tax rules applicable to forward
contracts, including consideration of available elections, in order to seek to
minimize any potential adverse tax consequences.
The amount of net realized capital gains, if any, in any given year will vary
depending upon the current investment strategy of the Adviser and Sub-Adviser
and whether the Adviser and the Sub-Adviser believe it to be in the best
interest of the Fund to dispose of portfolio securities that will generate
capital gains. At the time of an investor's purchase of Fund shares, a portion
of the purchase price is often attributable to realized or unrealized
appreciation in the Fund's portfolio or undistributed taxable income of the
Fund. Consequently, subsequent distributions on those shares from such
appreciation or income may be taxable to such investor even if the net asset
value of the investor's shares is, as a result of the distributions, reduced
below the investor's cost for such shares, and the distributions in reality
represent a return of a portion of the purchase price.
Upon a redemption or other disposition of shares of the Fund (including by
exercise of the exchange privilege) in a transaction that is treated as a sale
for tax purposes, a shareholder will ordinarily realize a taxable gain or loss
depending upon the amount of the proceeds and the investor's basis in his
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands. A sales charge paid in purchasing
shares of the Fund cannot be taken into account for purposes of determining gain
or loss on the redemption or exchange of such shares within 90 days after their
purchase to the extent shares of the Fund or
42
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 this 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
capital gain over net short-term capital loss in any year. The Fund will not in
any event distribute net capital gain realized in any year to the extent that a
capital loss is carried forward from prior years against such gain. To the
extent such excess was retained and not exhausted by the carryforward of prior
years' capital losses, it would be subject to Federal income tax in the hands of
the Fund. Upon proper designation of this amount by the Fund, each shareholder
would be treated for Federal income tax purposes as if the Fund had distributed
to him on the last day of its taxable year his pro rata share of such excess,
and he had paid his pro rata share of the taxes paid by the Fund and reinvested
the remainder in the Fund. Accordingly, each shareholder would (a) include his
pro rata share of such excess as long term capital gain in his return for his
taxable year in which the last day of the Fund's taxable year falls, (b) be
entitled either to a tax credit on his return for, or to a refund of, his pro
rata share of the taxes paid by the Fund, and (c) be entitled to increase the
adjusted tax basis for his shares in the Fund by the difference between his pro
rata share of such excess and his pro rata share of such taxes.
For Federal income tax purposes, the Fund is permitted to carry forward a net
realized capital loss in any year to offset net capital gains, if any, during
the eight years following the year of the loss. To the extent subsequent net
capital gains are offset by such losses, they would not result in Federal income
tax liability to the Fund and, as noted above, would not be distributed as such
to shareholders. The Fund has $ of capital loss carryforwards available
to the extent provided by regulations to offset net capital gains. The Fund's
carryforwards expire as follows: $ on October 31, 20xx, $ on
October 31, 20xx and $ on October 31, 20xx.
For purposes of the dividends-received deduction available to corporations,
dividends received by the Fund 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 Fund shares, may be denied a portion of the
dividends received deduction. The entire qualifying dividend, including the
otherwise-deductible amount, will be included in determining 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 tax basis in its shares may be
reduced, for Federal income tax purposes, by reason of "extraordinary dividends"
received with respect to the shares, and to the extent such basis would be
reduced below zero, that current recognition of income would be required.
43
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 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 and
forward contracts may also require the Fund to recognize income or gain without
a concurrent receipt of cash. However, the Fund must distribute to shareholders
for each taxable year substantially all of its net income and net capital gains,
including such income or gain, to qualify as a regulated investment company and
avoid liability for any federal income or excise tax. Therefore, the Fund may
have to dispose of its portfolio securities under disadvantageous circumstances
to generate cash, or 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 intangibles 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 the Fund may in its sole discretion provide relevant
information to shareholders.
The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax in the case of non-exempt shareholders
who fail to furnish the Fund with their correct taxpayer identification number
or if the IRS or a broker notifies the Fund that the number furnished by the
shareholder is incorrect or that the shareholder is subject to backup
withholding as a result of failure to report interest or dividend income. The
Fund may refuse to accept an application that does not contain any required
taxpayer identification number or certification that the number provided is
correct. If the backup withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in shares, will
be reduced by the amounts required to be withheld. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability. Investors
should consult their tax advisers about the applicability of the backup
withholding provisions.
The foregoing discussion relates solely to U.S. Federal income tax laws
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain 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.
44
Non-U.S. investors not engaged in a U.S. trade or business with which their Fund
investment is effectively connected will be subject to U.S. Federal income tax
treatment that is different from that described above. These investors may be
subject to 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 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.
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, 2002, the average annual total returns for the Fund's Class A
shares for 1 year and since the commencement of operations on March 2, 1998 were
% and %, respectively.
As of October 31, 2002, the average annual total returns for the Fund's Class B
shares for 1 year and since the commencement of operations on June 1, 1998 were
% and %, respectively.
As of October 31, 2002, the average annual total returns for the Fund's Class C
shares for 1 year and since the commencement of operations on March 1, 1999 were
% and %, respectively.
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:
P(1+T)^n = 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).
45
The Fund discloses average annual total returns after taxes for Class B shares
for the one, five and 10 year periods ended December 31, 2002 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:
P(1+T)^n = 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:
P(1+T)^n = 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, respectively. 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
46
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.
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:
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 and total return 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, BARRON'S, etc.
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
The Sub-Adviser is required to effect all transactions in portfolio securities
through the Adviser's trading desk. Decisions concerning the purchase and sale
of portfolio securities and the allocation of brokerage commissions are made by
the Sub-Adviser under the supervision of and under the guidelines established by
the Adviser, which consists of officers and directors of the Adviser and
officers and Trustees who are interested persons of the Fund. Orders for
purchases and sales of securities are placed in a manner which, in the opinion
of the officers of the Adviser, will offer the best price and market for the
execution of each such transaction. Purchases from underwriters of portfolio
securities may include a commission or commissions paid by the issuer and
transactions with dealers serving as market maker reflect a "spread." Debt
securities are generally traded on a net basis through dealers acting for their
own account as principals and not as brokers; no brokerage commissions are
payable on these transactions.
In the U.S. Government securities market, securities are generally traded on a
"net" basis with dealers acting as principal for their own account without a
stated commission, although the price of the security usually includes a profit
to the dealer. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or premiums are paid. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less
47
government supervision and regulation of foreign stock exchanges and
broker-dealers than in the U.S.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed.
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 the
Sub-Adviser of the Fund, and their value and expected contribution to the
performance of the Fund.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker-dealer which provides brokerage and research services to the
Fund an amount of disclosed commission in excess of the commission which another
broker-dealer would have charged for effecting that transaction. This practice
is subject to a good faith determination by the Trustees that such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time. During the fiscal year ended October 31,
2002, the Fund paid $ in commissions to compensate brokers for research
services.
Research services received from broker-dealers 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 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
custody services, as well as the providing of equipment used to communicate
research information, the providing of specialized consultations with the
Adviser's or Sub-Adviser's personnel with respect to computerized systems and
data furnished to the Adviser 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. 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. In some cases, the
research services are available only from the broker-dealer providing them. In
other cases, the research services may be obtainable from alternative sources in
return for cash payments.
The Adviser and Sub-Adviser believe that the research services are beneficial in
supplementing the Adviser's or Sub-Adviser's research and analysis and that they
improve the quality of the
48
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 or Sub-Adviser receive such services. However, to the extent that the
Adviser or Sub-Adviser would have purchased research services had they not been
provided by broker-dealers, 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.
While the Adviser, in consultation with the Sub-Adviser, will be primarily
responsible for the allocation of the Fund's brokerage business, the policies
and practices of the Adviser and 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 ended October 31, 2000, 2001 and 2002, the Fund paid negotiated
brokerage commissions in the amount of $127,569, $89,891 and $ , respectively.
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, including sales of the Fund. 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.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder Signator Investors, Inc., a broker-dealer (until January 1, 1999,
John Hancock Distributors, Inc.) ("Signator" or "Affiliated Broker") with the
Adviser.
Allianz AG, the parent of Nicholas Applegate Capital Management ("NACM"), has
several affiliates engaged in the brokerage business: Bayerische Hypo-und
Vereinsbank AG, HPV, HVB Capital Markets; Credit Lyonnais SA; Dresdner, Dresdner
Kleinwort Benson, Dresdner Kleinwort Wasserstein; Deutsche Bank AG, Deutsche
Bank Alex Brown, Deutsche Morgan Grenfell; Grantchester Securities Inc; IKB
Deutsche Industriebank AG; Munchener Ruckversicherungs-Gesellschaft AG, Munich
Re; National Discount Brokers Group, Inc., NDB Capital Markets; UniCredito
Italiano S.p.A., UniCredit Banco Mobiliare S.p.A.; US Allianz Securities, Inc.;
Williams Capital Group. (all "Affiliated Brokers"). Pursuant to procedures
determined by the Trustees and consistent with the above policy of obtaining
best net results, the Fund may execute portfolio transactions with or through
Affiliated Brokers. For the fiscal year ended October 31, 2000 and 2001, the
Fund paid $0 and $6,767 respectively to Affiliated Brokers of NACM. During the
fiscal year ended October 31, 2001, this amounted to approximately 7.11% of the
aggregate brokerage commissions paid by the Fund for transactions involving
approximately 6.36% of the aggregate dollar amount of transactions for which the
Fund paid brokerage commissions.
Credit Agricole, the parent of Indocam International Investment Services
(IIIS"), the Fund's subadviser until December 14, 2000, has several affiliates
engaged in the brokerage business in Europe and Asia: Credit Agricole Indosuez
Cheuvreux; CPR Action (ex-Schelcher Prince Cheuvreux de Virieu International
Ltd, London; Cheuvreux de Virieu, Nordic AB, Stockholm,
49
Cheuvreux de Virieu, Espana, Madrid, Credit Agricole Indosuez Cheuvreux
Deutschland GMBH, Frankfourt/ Main; Caboto Sim in Italy; Carr Securities; Carr
Futures SNC. (Paris) and Carr Futures PTE, Singapore (all "Affiliated Brokers").
Pursuant to procedures determined by the Trustees and consistent with the above
policy of obtaining best net results, the Fund may execute portfolio
transactions with or through Affiliated Brokers. For the fiscal year ended
October 31, 1999 and 2000, the Fund paid $2,578 and $167, respectively, in
brokerage commissions to Affiliated Brokers of IIIS. During the fiscal year
ended October 31, 2001, this amounted to approximately 1.18% of the aggregate
brokerage commissions paid by the Fund for transactions involving approximately
0.61% of the aggregate dollar amount of transactions for which the Fund paid
brokerage commissions.
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 and the Sub-Adviser, have, as investment advisers 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.
Other investment advisory clients advised by the Adviser or the 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 the
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 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 s
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
50
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 an annual fee 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 an annual fee 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
are aggregated and allocated to each class on the basis of their relative net
asset values.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and 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, portfolio, Foreign Custody Manager and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are PricewaterhouseCoopers LLP, 160 Federal
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.
51
APPENDIX A- Description of Investment Risk
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). (e.g., short sales, currency
contracts, financial futures and options; securities and index options).
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., repurchase agreements, securities lending, foreign debt
securities, non-investment-grade debt securities, asset-backed securities,
mortgage-backed securities, participation interests, financial futures and
options; securities and index options, structured securities).
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., currency
trading, foreign debt securities, currency contracts, financial futures and
options; securities and index options).
Extension risk The risk that an unexpected rise in interest rates will extend
the life of a mortgage-backed security beyond the expected prepayment time,
typically reducing the security's value.(e.g., mortgage-backed securities,
structured securities).
Information risk The risk that key information about a security or market is
inaccurate or unavailable.(e.g., non-investment-grade debt securities).
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.,
foreign debt securities, non-investment-grade debt securities, asset-backed
securities, mortgage-backed securities, participation interests, financial
future and options; securities and index options, structured securities).
Leverage risk Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value. (e.g.,
when-issued securities and forward
A-1
commitments, currency contracts, financial futures and options; securities and
index options, structured securities).
o Hedged When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that
the fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains.
o Speculative To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
Liquidity risk The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead, or forego an investment
opportunity, any of which could have a negative effect on fund management or
performance. (e.g., short sales, non-investment-grade debt securities,
restricted and illiquid securities, mortgage-backed securities, participation
interests, currency contracts, financial futures and options; securities and
index options, structured securities).
Management risk The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
Market risk The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than it was worth at an earlier time. Market risk may affect a
single issuer, industry, sector of the economy or the market as a whole. Common
to all stocks and bonds and the mutual funds that invest in them. (e.g., short
sales, short-term trading, when-issued securities and forward commitments,
foreign debt securities, non-investment-grade debt securities, restricted and
illiquid securities, financial futures and options; securities and index
options, structured securities).
Natural event risk The risk of losses attributable to natural disasters, crop
failures and similar events.
Opportunity risk The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments. (e.g., short sales, when-issued securities and forward commitments,
currency contracts, financial futures and options; securities and index
options).
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 debt securities).
Prepayment risk The risk that unanticipated prepayments may occur during periods
of falling interest rates, reducing the value of mortgage-backed securities.
(e.g., mortgage-backed securities, structured securities).
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 debt
securities, restricted and illiquid securities, participation interests,
structured securities)
A-2
APPENDIX B-DESCRIPTION OF BOND RATINGS
Moody's Bond Ratings
"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.
"Bonds which are rated 'Aa' are judged to be of high quality by all standards.
Together with the 'Aaa' group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in 'Aaa' securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in 'Aaa'
securities."
"Bonds which are rated 'A' possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future."
"Bonds which are rated 'Baa' are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well."
"Bonds which are rated 'Ba' are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position,
characterizes bonds in this class."
"Bonds which are rated 'B' generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue. Should
no rating be assigned, the reason may be one of the following: (i) an
application for rating was not received or accepted; (ii) the issue or issuer
belongs to a group of securities that are not rated as a matter of policy; (iii)
there is a lack of essential data pertaining to the issue or issuer; or (iv) the
issue was privately placed, in which case the rating is not published in Moody's
publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Standard & Poor's Bond Ratings
"AAA. Debt rated 'AAA' has the highest rating by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong."
B-1
"AA. Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree."
"A. Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."
"BBB. Debt rated 'BBB' is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
"Debt rated "BB" or "B" is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and pay principal in
accordance with the terms of the obligation. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major risk exposures to adverse conditions."
Unrated. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper Ratings
Moody's ratings for commercial paper are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's two highest commercial paper rating categories
are as follows:
"P-1 -- "Prime-1" indicates the highest quality repayment capacity of the rated
issues.
"P-2 -- "Prime-2" indicates that the issuer has a strong capacity for repayment
of short-term promissory obligations. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained."
Standard & Poor's Commercial Paper Ratings
Standard & Poor's commercial paper ratings are current assessments of the
likelihood of timely payment of debts having an original maturity of no more
than 365 days. Standard & Poor's two highest commercial paper rating categories
are as follows:
"A-1 -- This designation indicates that the degree of safety regarding timely
payment is very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus (+) sign designation."
"A-2 -- Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1."
B-2
FINANCIAL STATEMENTS
The financial statements listed below are included in the Fund's 2002 Annual
Report to Shareholders for the year ended October 31, 2002; (filed
electronically on December xx, 2002, accession number 0000928816-02-500xxx) and
are included in and incorporated by reference into Part B of the Registration
Statement for John Hancock European Equity Fund (file nos. 811-4932 and
33-10722).
John Hancock World Fund
John Hancock European Equity Fund
Statement of Assets and Liabilities as of October 31, 2002
Statement of Operations for year ended October 31, 2002
Statement of Changes in Net Assets for the year ended October 31, 2002
Financial Highlights.
Notes to Financial Statements.
Schedule of Investments as of October 31, 2002
Report of Independent Auditors.
F-1
JOHN HANCOCK GLOBAL FUND
Class A, Class B and Class C Shares
Statement of Additional Information
February 14, 2003
This Statement of Additional Information provides information about John Hancock
Global Fund (the "Fund") in addition to the information that is contained in the
combined International Funds' current Prospectus and in the Fund's current
Prospectus for Class I shares, (the "Prospectuses"). 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, Massachusetts 02217-1000
1-800-225-5291
TABLE OF CONTENTS
Page
Organization of the Fund ................................................. 2
Investment Objective and Policies ........................................ 2
Investment Restrictions .................................................. 13
Those Responsible for Management ......................................... 16
Investment Advisory and Other Services ................................... 22
Distribution Contracts ................................................... 26
Sales Compensation ....................................................... 28
Net Asset Value .......................................................... 30
Initial Sales Charge on Class A and Class C Shares ....................... 30
Deferred Sales Charge on Class B and Class C Shares ...................... 33
Special Redemptions ...................................................... 37
Additional Services and Programs ......................................... 37
Purchases and Redemptions through Third Parties .......................... 39
Description of the Fund's Shares ......................................... 39
Tax Status ............................................................... 40
Calculation of Performance ............................................... 45
Brokerage Allocation ..................................................... 47
Transfer Agent Services .................................................. 50
Custody of Portfolio ..................................................... 51
Independent Auditors ..................................................... 51
Appendix A- Description of Investment Risk ............................... A-1
Appendix B-Description of Bond Ratings ................................... B-1
Financial Statements ..................................................... F-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.
John Hancock Advisers, LLC (prior to February 1, 2002, John Hancock Advisers,
Inc.) (the "Adviser") is the Fund's investment adviser. The Adviser is an
indirect, wholly-owned subsidiary of John Hancock Life Insurance Company
(formerly John Hancock Mutual Life Insurance Company) (the "Life Company"), a
Massachusetts life insurance company chartered in 1862, with national
headquarters at John Hancock Place, Boston, Massachusetts. The Life Company is
wholly owned by John Hancock Financial Services, Inc., a Delaware corporation
organized in February, 2000.
The Fund's Subadviser is Nicholas-Applegate Capital Management
("Nicholas-Applegate"), (the "Subadviser"). Nicholas-Applegate is responsible
for providing investment advice to the Fund, subject to the review of the
Trustees and overall supervision of the Adviser.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies 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 long-term growth of capital. The Fund seeks
to achieve its investment objective by investing primarily in common stocks of
companies of any size domiciled in foreign countries and in the United States.
Any income received on the Fund's investments will be incidental to the Fund's
objective of long-term growth of capital. Normally, the Fund will invest in the
securities markets of at least three countries, including the United States.
Under normal circumstances, at least 80% of the Fund's total assets will consist
of common stocks and securities convertible into common stock. However, if
deemed advisable by the Adviser, the Fund may invest in any other type of
security including preferred stocks, warrants, bonds, notes and other debt
securities (including Eurodollar securities) or obligations of domestic or
foreign governments and their political subdivisions. The Fund will only invest
in investment grade debt securities, which are securities rated within the four
highest rating categories of Standard & Poor's Rating Group ("S&P") (AAA, AA, A,
BBB) or Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, Baa).
Investments in the lowest investment grade rating category may have speculative
characteristics and therefore may involve higher risks. Investment grade debt
securities are subject to market fluctuations and changes in interest rates;
however, the risk of loss of income and principal is generally expected to be
less than with lower quality debt securities. In the event a debt security is
downgraded below investment grade, the Adviser will consider this event in its
determination of whether the Fund should continue to hold the security.
The global allocation of assets is not fixed, and will vary from time to time
based on the judgment of the Adviser and Subadviser. The Fund will maintain a
flexible investment policy and will invest in a diversified portfolio of
securities of companies and governments located throughout the world. In making
the allocation of assets among various countries and geographic regions, the
Adviser and the Subadviser ordinarily consider such factors as prospects for
relative economic growth between foreign countries; expected levels of inflation
and interest rates; government policies influencing business conditions; and
other pertinent financial, tax, social, political,
2
currency and national factors all in relation to the prevailing prices of the
securities in each country or region.
When the Adviser believes that adverse conditions are present, for temporary
defensive purposes, the Fund may hold or invest all or part of its assets in
cash and in domestic and foreign money market instruments, including but not
limited to, governmental obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate debt securities and
repurchase agreements.
Any income received on the Fund's investments will be incidental to the Fund's
objective of long-term growth of capital.
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.
Time Deposits. The Fund's time deposits are non-negotiable deposits maintained
for a stated period of time at a stated interest rate. If the Fund purchases
time deposits maturing in seven days or more, it will treat those longer-term
time deposits as illiquid.
Investments in Foreign Securities. The Fund may invest directly in the
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.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. 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 by banks or
depositories which evidence a similar ownership arrangement. Generally, ADRs, in
registered form, are designed for use in U.S. securities markets and EDRs, in
bearer form, are designed for use in European securities markets. Issuers of the
shares underlying unsponsored ADRs are not contractually obligated to disclose
material information in the United States. Foreign issuers may be assigned to
reasonable industry classifications that differ from the industry
classifications ordinarily assigned to U.S. issuers.
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
enhance return, to hedge against fluctuations in currency exchange rates
affecting a particular transaction or portfolio position, or as a substitute for
the purchase or sale of a currency or assets denominated in that currency.
Forward contracts are agreements to purchase or sell a specified currency at a
specified future date and price set at the time of the contract. Transaction
hedging is the purchase or sale of forward foreign currency contracts with
respect to specific receivables or payables of the Fund accruing in connection
with the purchase and sale of its portfolio securities quoted or denominated in
the same or related foreign currencies. Portfolio hedging is the use of forward
foreign currency contracts to offset portfolio security positions denominated or
quoted in the
3
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
Subadviser.
If the Fund purchases a forward contract or sells a forward contract for
non-hedging purposes, 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 risks than those in domestic securities. There is generally
less publicly available information about foreign companies and other issuers
comparable to reports and ratings that are published about issuers in the United
States. There may be difficulty in enforcing legal rights outside the United
States. Foreign issuers are also generally not subject to uniform accounting and
auditing and financial reporting standards, practices and requirements
comparable to those applicable to United States issuers.
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 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 such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
4
The dividends and interest payable on certain of the Fund's foreign portfolio
securities (and, in some cases, capital gains) may be subject to foreign
withholding or other foreign taxes, thus reducing the net amount of income
available for distribution to the Fund's shareholders. See "TAX STATUS".
Investors should understand that the expense ratio of the Fund will be higher
than that of investment companies investing in domestic securities since the
expenses of the Fund, such as the cost of maintaining the custody of foreign
securities and the rate of advisory fees paid by the Fund, are higher.
These risks may be intensified in the case of investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominantly based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens,
inflation rates. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of substantial holdings difficult or
impossible at times. The Fund may be required to establish special custodial or
other arrangements before making certain investments in those countries.
Securities of issuers located in these countries may have limited marketability
and may be subject to more abrupt or erratic price movements
Equity-Linked Securities The Fund may purchase equity-linked securities; also
known as participation notes, equity swaps, and zero strike calls and warrants.
Equity-linked securities are primarily used by a Fund as an alternative means to
access the securities market of a country. The Fund deposits an amount of cash
with its custodian (or broker, if legally permitted) in an amount equal to the
selling price of the underlying security in exchange for an equity linked
security. Upon sale, the Fund receives cash from the broker or custodian based
on the change in the value of the underlying security. Aside from market risk
there is of the underlying security, there is the risk of default by the other
party to the transaction. In the event of insolvency of the other party, the
Fund might be unable to obtain its expected benefit. In addition, while a Fund
will seek to enter into such transactions only with parties which are capable of
entering into closing transactions with the Fund, there can be no assurance that
the Fund will be able to close out such a transaction with the other party or
obtain an offsetting position with any other party, at any time prior to the end
of the term of the underlying agreement. This may impair the Fund's ability to
enter into other transactions at a time when doing so might be advantageous. The
Fund's investments in equity-linked securities may be subject to its 15% of net
assets limitation on investments in illiquid securities.
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 or Advisers, as appropriate, will continuously monitor the
creditworthiness of the parties with whom a Fund enters into repurchase
agreements.
5
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. The Fund may also enter into reverse purchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. Reverse repurchase agreements
involve the risk that the market value of securities purchased by the Fund with
proceeds of the transaction may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. 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. In addition, the Fund will not borrow
money or enter into reverse repurchase agreements except for the following
extraordinary or emergency purposes: (i) from banks for temporary or short-term
purposes or for the clearance of transactions in amounts not to exceed 33 1/3%
of the value of the Fund's total assets (including the amount borrowed) taken at
market value; (ii) in connection with redemption of Fund shares or to finance
failed settlement of portfolio trades without immediately liquidating portfolio
securities or other assets; and (iii) in order to fulfill commitments or plans
to purchase additional securities pending the anticipated sale of other
portfolio securities or assets. For purposes of this investment restriction, the
deferral of Trustees' fees and transactions in short sales, futures contracts,
options on futures contracts, securities or indices and forward commitment
transactions shall not constitute borrowing. The Fund will enter into reverse
repurchase agreements only with federally insured banks which are approved in
advance as being creditworthy by the Board of Trustees. Under procedures
established by the Trustees, the Adviser will monitor the creditworthiness of
the banks involved.
Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. The Fund will not invest more than 15% of its net
assets in illiquid investments. If the Trustees determine, based upon a
continuing review of the trading markets for specific Section 4(2) paper or Rule
144A securities that they are liquid, they will not be subject to the 15% limit
on illiquid investments. The Trustees have adopted guidelines and delegated to
the Adviser or Advisers, as appropriate, the daily function of determining and
monitoring the liquidity of restricted securities. The Trustees, however, will
retain sufficient oversight and be ultimately responsible for the
determinations. The Trustees will carefully monitor 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
6
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 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
7
the option period, the value of the underlying securities or currency decreased
below the exercise price sufficiently to cover the premium and transaction
costs; otherwise the Fund would realize either no gain or a loss on the purchase
of the put option. Gains and losses on the purchase of put options may be offset
by countervailing changes in the value of the Fund's portfolio securities.
The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
currencies or dispose of assets held in a segregated account until the options
expire or are exercised. Similarly, if the Fund is unable to effect a closing
sale transaction with respect to options it has purchased, it would have to
exercise the options in order to realize any profit and will incur transaction
costs upon the purchase or sale of underlying securities or currencies.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). 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
8
securities (such as U.S. Government securities), securities indices, foreign
currencies and any other financial instruments and indices. All futures
contracts entered into by the Fund are traded on U.S. or foreign exchanges or
boards of trade that are licensed, regulated or approved by the Commodity
Futures Trading Commission ("CFTC").
Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments or
currencies for an agreed price during a designated month (or to deliver the
final cash settlement price, in the case of a contract relating to an index or
otherwise not calling for physical delivery at the end of trading in the
contract).
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or currency will usually be
liquidated in this manner, the Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically advantageous
to do so. A clearing corporation associated with the exchange on which futures
contracts are traded guarantees that, if still open, the sale or purchase will
be performed on the settlement date.
Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire or the
exchange rate of currencies in which portfolio securities are quoted or
denominated. When interest rates are rising or securities prices are falling,
the Fund can seek to offset a decline in the value of its current portfolio
securities through the sale of futures contracts. When interest rates are
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.
9
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices that are currently available. The Fund
may also purchase futures contracts as a substitute for transactions in
securities or foreign currency, to alter the investment characteristics of or
currency exposure associated with portfolio securities or to gain or increase
its exposure to a particular securities market or currency.
Options on Futures Contracts. The Fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
put and call options on futures contracts will give the Fund the right (but not
the obligation) for a specified price to sell or to purchase, respectively, the
underlying futures contract at any time during the option period. As the
purchaser of an option on a futures contract, the Fund obtains the benefit of
the futures position if prices move in a favorable direction but limits its risk
of loss in the event of an unfavorable price movement to the loss of the premium
and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium (upon exercise
of the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that the Fund intends to purchase. However,
the Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by the Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
Other Considerations. The Fund will engage in futures and related options
transactions either for bona fide hedging purposes or to seek to increase total
return as permitted by the CFTC. To the extent that the Fund is using futures
and related options for hedging purposes, futures contracts will be sold to
protect against a decline in the price of securities (or the currency in which
they are quoted or denominated) that the Fund owns or futures contracts will be
purchased to protect the Fund against an increase in the price of securities (or
the currency in which they are quoted or denominated) it intends to purchase.
The Fund will determine that the price fluctuations in the futures contracts and
options on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or securities or instruments which
it expects to purchase. As evidence of its hedging intent, the Fund expects that
on 75% or more of the occasions on which it takes a long futures or option
position (involving the purchase of futures contracts), the Fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
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
10
futures contracts and related options only to the extent such transactions are
consistent with the requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), for maintaining its qualification as a regulated
investment company for federal income tax purposes.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities or currencies, require the Fund to
establish a segregated account consisting of cash or liquid securities in an
amount equal to the underlying value of such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates, securities prices or currency
exchange rates may result in a poorer overall performance for the Fund than if
it had not entered into any futures contracts or options transactions.
Perfect correlation between the Fund's futures positions and portfolio positions
will be impossible to achieve. 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 and
rights increases the potential profit or loss to be realized from the investment
of a given amount of the Fund's assets as compared with investing the same
amount in the underlying stock.
Forward Commitment and When-Issued Securities. The 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
11
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.
Structured or Hybrid Notes. The Fund may invest in "structured" or "hybrid"
notes, bonds or debentures. The distinguishing feature of a structured or hybrid
note, bond or debenture is that the amount of interest and/or principal payable
on the security is based on the performance of a benchmark asset or market other
than fixed income securities or interest rates. Examples of these benchmark
include stock prices, currency exchange rates and physical commodity prices.
Investing in a structured note allows the Fund to gain exposure to the benchmark
market while fixing the maximum loss that the Fund may experience in the event
that market does not perform as expected. Depending on the terms of the
security, the Fund may forego all or part of the interest and principal that
would be payable on a comparable conventional note, bond or debenture; the
Fund's loss cannot exceed this foregone interest and/or principal. An investment
in structured or hybrid notes involves risks similar to those associated with a
direct investment in the benchmark asset.
Asset-Backed Securities. The Fund may invest a portion of its assets in
asset-backed securities. Asset-backed securities are often subject to more rapid
repayment than their stated maturity date would indicate as a result of the
pass-through of prepayments of principal on the underlying loans. During periods
of declining interest rates, prepayment of loans underlying asset-backed
securities can be expected to accelerate. Accordingly, the Fund's ability to
maintain positions in these securities will be affected by reductions in the
principal amount of such securities resulting from prepayments, and its ability
to reinvest the returns of principal at comparable yields is subject to
generally prevailing interest rates at that time.
Credit card receivables are generally unsecured and the debtors on such
receivables are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set-off
certain amounts owed on the credit cards, thereby reducing the balance due.
Automobile receivables generally are secured, but by automobiles rather than
residential real property. Most issuers of automobile receivables permit the
loan services to retain possession of the underlying obligations. If the service
were to sell these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
asset-backed securities. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of the automobile receivables may not have a proper
security interest in the underlying automobiles. Therefore,
12
there is the possibility that, in some cases, recoveries on repossessed
collateral may not be available to support payments on these securities.
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 realized 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) 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 other 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 all types of derivative
instruments are not considered to be borrowing.
(2) 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.
(3) Issue senior securities, except to the extent permitted by the 1940
Act. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts 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
considered an issuance of senior securities.
(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.
13
(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 (1) lend portfolio securities in
accordance with the fund's investment policies up to 33 1/3% of the fund's
total assets taken at market value; (2) enter into repurchase agreements;
and (3) purchase all or a portion of an issue of 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 equal or exceed 25% of its total assets
taken at market value at the time of such purchase. This limitation does
not apply to investments in obligations of the U.S. government or any of
its agencies or instrumentalities.
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:
(1) Invest more than 15% of its net assets in illiquid securities.
(2) Purchase securities of any issuer for the purpose of exercising
control or management, except in connection with a merger, consolidation,
acquisition or reorganization.
(3) Purchase a security if, as a result, (i) more than 10% of the Fund's
total assets would be invested in the securities of other investment
companies; (ii) the Fund would hold more than 3% of the total outstanding
voting securities of any one investment company; or (iii) more than 5% of
the Fund's total assets would be invested in the securities of any one
investment company. These limitations do not apply to (a) the investment
of cash collateral, received by the Fund in connection with lending the
Fund's portfolio securities, in the securities of open-end investment
companies or (b) the purchase of shares of any investment company in
connection with a merger, consolidation, reorganization or purchase of
substantially all of the assets of another investment company. Subject to
the above percentage limitations, the Fund may, in connection with the
John Hancock Group of Funds Deferred Compensation Plan for Independent
Trustees/Directors, purchase securities of other investment companies
within the John Hancock Group of Funds.
(4) Purchase securities on margin or sell short, except that the Fund may
obtain such short term credits as may be necessary for the clearance of
securities transactions.
(5) 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) securities of other investment companies.
14
Except with respect to borrowing money, if a percentage restriction is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from a change in values of portfolio securities or amounts of net
assets will not be considered a violation of any of the foregoing restrictions.
The 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 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.
15
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/ 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
- ---------------------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz Trustee 1996 Professor of Law, Emeritus, Boston 31
Born: 1931 University School of Law (as of 1996);
Director, Brookline Bancorp.
- ---------------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. Trustee 1996 President and Chief Executive Officer, 31
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 1996 Vice President, Senior Banker and Senior 31
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).
- ---------------------------------------------------------------------------------------------------------------------
Richard A. Farrell Trustee 1996 President, Farrell, Healer & Co., Inc., 31
Born: 1932 (venture capital management firm)(since
1980) and General Partner of the Venture
Capital Fund of NE; 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 interested 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) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
16
- -------------------------------------------------------------------------------------------------------------------------------
Number of John
Position(s) Trustee/ Principal Occupation(s) and other Hancock Funds
Name, Address (1) Held with Officer Directorships Overseen by
And Age Fund since(2) During Past 5 Years Trustee
- -------------------------------------------------------------------------------------------------------------------------------
William F. Glavin Trustee 1992 President Emeritus, Babson College (as of 1998); 31
Born: 1932 Vice Chairman, Xerox Corporation (until 1989);
Director, Reebok, Inc. (until 2002) and Inco
Ltd. (until 2002).
- -------------------------------------------------------------------------------------------------------------------------------
John A. Moore Trustee 1991 President and Chief Executive Officer, Institute 39
Born: 1939 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 1993 Executive Director, Council for International 39
Born: 1943 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).
- -------------------------------------------------------------------------------------------------------------------------------
John W. Pratt Trustee 1986 Professor of Business Administration Emeritus, 31
Born: 1931 Harvard University Graduate School of Business
Administration (as of 1998).
- -------------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and interested 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) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
17
- -------------------------------------------------------------------------------------------------------------------------------
Position(s) Trustee/ Principal Occupation(s) and other Number of John
Name, Address (1) Held with Officer Directorships Hancock Funds
And Age Fund since(2) During Past 5 Years Overseen by Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Interested Trustees
- -------------------------------------------------------------------------------------------------------------------------------
John M. DeCiccio (3) Trustee 2001 Executive Vice President and Chief Investment 61
Born: 1948 Officer, John Hancock Financial Services,
Inc.; Director, Executive Vice President and
Chief Investment Officer, John Hancock Life
Insurance Company; Chairman of the Committee
of Finance of John Hancock Life Insurance
Company; Director, John Hancock Subsidiaries,
LLC, Hancock Natural Resource Group,
Independence Investment LLC, Independence
Fixed Income LLC, John Hancock Advisers, LLC
(the "Adviser") and The Berkeley Financial
Group, LLC ("The Berkeley Group"), John
Hancock Funds, LLC ("John Hancock Funds"),
Massachusetts Business Development
Corporation; Director, John Hancock Insurance
Agency, Inc. ("Insurance Agency, Inc.") (until
1999) and John Hancock Signature Services,
Inc. ("Signature Services") (until 1997).
- -------------------------------------------------------------------------------------------------------------------------------
Maureen R. Ford (3) Trustee, 2000 Executive Vice President, John Hancock 61
Born: 1955 Chairman, Financial Services, Inc., John Hancock Life
President Insurance Company; Chairman, Director,
and Chief President and Chief Executive Officer, the
Executive Advisers and The Berkeley Group; Chairman,
Officer President, Director and Chief Executive
Officer, John Hancock Funds; Chairman,
Director and Chief Executive Officer,
Sovereign Asset Management Corporation
("SAMCorp."); Director, John Hancock
Subsidiaries, LLC, Independence Investment
LLC, Independence Fixed Income LLC and
Signature Services; Senior Vice President,
MassMutual Insurance Co. (until 1999).
- -------------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and interested 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) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
18
- -------------------------------------------------------------------------------------------------------------------------------
Position(s) Trustee/ Principal Occupation(s) and other Number of John
Name, Address (1) Held with Officer Directorships Hancock Funds
And Age Fund since(2) During Past 5 Years Overseen by Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Principal Officers who are
not Trustees
- -------------------------------------------------------------------------------------------------------------------------------
William L. Braman Executive 2000 Executive Vice President and Chief Investment N/A
Born: 1953 Vice Officer, the Adviser and each of the John
President Hancock funds; Director, SAMCorp., Executive
and Chief Vice President and Chief Investment Officer,
Investment Barring Asset Management, London U.K. (until
Officer 2000).
- -------------------------------------------------------------------------------------------------------------------------------
Richard A. Brown Senior Vice 2000 Senior Vice President, Chief Financial Officer N/A
Born: 1949 President and Treasurer, the Adviser, John Hancock
and Chief Funds, and The Berkeley Group; Second Vice
Financial President and Senior Associate Controller,
Officer Corporate Tax Department, John Hancock
Financial Services, Inc. (until 2001).
- -------------------------------------------------------------------------------------------------------------------------------
Thomas H. Connors Vice 1992 Vice President and Compliance Officer, the N/A
Born: 1959 President Adviser and each of the John Hancock funds;
and Vice President, John Hancock Funds.
Compliance
Officer
- -------------------------------------------------------------------------------------------------------------------------------
William H. King Vice 1992 Vice President and Assistant Treasurer, the N/A
Born: 1952 President Adviser; Vice President and Treasurer of each
and of the John Hancock funds; Assistant Treasurer
Treasurer of each of the John Hancock funds (until 2001).
- -------------------------------------------------------------------------------------------------------------------------------
Susan S. Newton Senior Vice 1992 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 Signature Services (until 2000), Director,
Officer Senior Vice President and Secretary, NM
Capital.
- -------------------------------------------------------------------------------------------------------------------------------
(1) Business address for independent and interested 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) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.
19
The Fund's Board of Trustees currently has five standing Committees: the Audit
Committee, the Administration Committee, the Contracts/Operations Committee, the
Investment Performance Committee and the Coordinating Committee. Each Committee
is comprised of Independent Trustees. The Audit Committee members are Messrs.
Moore, Glavin and Farrell. 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, 2002.
The Administration Committee's members are all of the Independent Trustees of
the Fund. 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. The Administration Committee will consider
nominees recommended by shareholders to serve as Independent Trustees, provided
that shareholders submit recommendations in compliance with all of the pertinent
provisions of Rule 14a-8 under the Securities Exchange Act of 1934. The
Administration Committee also works with all Trustees on the selection and
election of officers of the Fund. The Administration Committee held four
meetings during the fiscal year ended October 31, 2002.
The Contracts/Operations Committee members are Messrs. Chapman, Cosgrove and
Pratt. 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, 2002.
The Investment Performance Committee consists of Messrs. Aronowitz and Ms.
Peterson. 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, 2002.
The Coordinating Committee members are the chairpersons of the other four
standing committees. The Coordinating Committee assures consistency of action
among committees, reviews Trustee compensation, evaluates Trustee performance
and considers committee membership rotations as well as relevant corporate
governance issues.
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, 2002.
20
- -----------------------------------------------------------------------------------------------------------
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 $1-$10,000 $50,001-$100,000
- -----------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr. $10,001-$50,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
William J. Cosgrove $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
Richard A. Farrell $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
William F. Glavin None $10,001-$50,000
- -----------------------------------------------------------------------------------------------------------
Dr. John A. Moore $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
Patti McGill Peterson $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
John W. Pratt $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
Interested Trustees
- -----------------------------------------------------------------------------------------------------------
John M. DeCiccio None Over $100,000
- -----------------------------------------------------------------------------------------------------------
Maureen R. Ford $1-$10,000 Over $100,000
- -----------------------------------------------------------------------------------------------------------
(1) Under the John Hancock Deferred Compensation Plan for Independent
Trustees, 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, 2002, 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 none
and over $100,000 for Mr. Chapman, $1-$10,000 and over $100,000 for Mr.
Cosgrove, $1-$10,000 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. Mr. DeCiccio and Ms. Ford, each a
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.
Aggregate
Compensation from Total Compensation From the Fund and
Independent Trustees the Fund (1) John Hancock Fund Complex to Trustees (2)
- -------------------- ------------ -----------------------------------------
Dennis J. Aronowitz
Richard P. Chapman*
William J. Cosgrove*
Richard A. Farrell
Gail D. Fosler +
William F. Glavin*
Dr. John A. Moore*
Patti McGill Peterson
John Pratt
Total
(1) Compensation is for the current fiscal year ending October 31, 2002.
(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 2002. As of this date, there were sixty-one funds
in the John Hancock
21
Fund Complex, with Mr. Moore and Ms. Peterson serving on thirty-nine funds and
each other Independent Trustees servicing on thirty one funds.
*As of December 31, 2002, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $71,309, Mr. Cosgrove was $207,842, Mr. Glavin was $280,472 and for
Dr. Moore was $238,982 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 January 14, 2003, 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 outstanding
shares of the Fund.
Percentage of total outstanding
Name and Address of Shareholder Class of Shares shares of the Class of the Fund
- ------------------------------- --------------- -------------------------------
MLPF&S For The Sole Benefit of Its Customers B %
Attn: Fund Administration 9739B
4800 Deer Lake Drive East 2nd Fl
Jacksonville FL 32246-6484
MLP&S For The Sole Benefit of Its Customers C %
Attn: Fund Administration 974UO
4800 Deerlake Drive East 2nd Fl
Jacksonville, FL 32246-6484
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and as of has approximately $26 billion in
assets under management in its capacity as investment adviser to the Fund and
the other funds in the John Hancock group of funds as well as institutional
accounts. The Adviser is an affiliate of the Life Company, one of the most
recognized and respected financial institutions in the nation. With total assets
under management of more than $100 billion, the Life Company is one of the ten
largest life insurance companies in the United States, and carries a high rating
from Standard & Poor's and A.M. Best. Founded in 1862, the Life Company has been
serving clients for over 130 years.
The Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser, which was approved by the Fund's shareholders.
Pursuant to the Advisory Agreement, the Adviser will: (a) furnish continuously
an investment program for the Fund and determine, subject to the overall
supervision and review of the Trustees, which investments should be purchased,
held, sold or exchanged, and (b) provide supervision over all aspects of the
Fund's operations except those which are delegated to a custodian, transfer
agent or other agent.
22
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 plans 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.
As compensation for its services under the Advisory Agreement, the Fund pays the
Adviser monthly a fee based on a stated percentage of the average of the daily
net assets of the Fund as follows:
Net Asset Value Annual Rate
--------------- -----------
First $100,000,000 0.90%
Next $200,000,000 0.80%
Next $200,000,000 0.75%
Amounts over $500,000,000 0.625%
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, 2000, 2001 and 2002, the Adviser's
management fee was $1,532,808, $938,820 and $ , respectively
As of December 14, 2000, the Adviser has entered into a sub-investment
management contract (the "sub-advisory agreement") with Nicholas-Applegate under
which, subject to the review of the Trustees and the overall supervision of the
Adviser, Nicholas-Applegate is responsible for providing the Fund with
investment advice. Nicholas-Applegate will also provide the Fund on a continuous
basis with economic, financial and political information, research and
assistance concerning international markets. Until May 11, 2001, as compensation
for its services under the Sub-Advisory Agreement, the Adviser will pay
Nicholas-Applegate quarterly, in arrears, a fee at the annual rate of 50% of the
investment advisory fee received by the Adviser. Nicholas-Applegate is a limited
liability company organized under the laws of the State of Delaware with offices
at 600 West Broadway, 30th Floor, San Diego, California 92101. Effective May 11,
2001, the Adviser will pay the Subadviser quarterly, in arrears, a fee at the
annual rate of: (i) 0.50% of the first $500,000,000 of the average daily net
asset value of the Fund; and (ii) 0.45% of the average daily net asset value of
the Fund in excess of $500,000,000. Nicholas-Applegate was organized in August
1984 to manage discretionary accounts investing primarily in publicly traded
equity securities and securities convertible into or exercisable for publicly
traded equity securities, with the goal of capital appreciation.
Nicholas-Applegate is a wholly owned subsidiary of Allianz of America, Inc.
("AZOA"). Allianz AG, the parent of AZOA, is a German Aktiengesellschaft, a
German publicly traded company, which, together with its subsidiaries, comprises
the world's largest insurance group (the "Allianz Group"). Allianz Group
currently has assets under
23
management of approximately $690 billion. Allianz AG's address is:
Koeniginstrasse 28, D-80802, Munich, Germany.
Until December 14, 2000, the Subadviser to the Fund was Indocam International
Investment Services ("IIIS"). IIIS is a French corporation and a subsidiary of
Indocam, the asset management affiliate of Credit Agricole, a French bank group
with a presence in financial centers around the world. IIIS is located at 90
Boulevard Pasteaur, Paris, France 75015. Indocam is an asset management firm
maintaining established relationships with institutional, corporate and
individual investors. Credit Agricole is one of the largest bank groups in the
world. As compensation for its services under the Sub-Advisory Agreement, the
Adviser was paying IIIS quarterly, in arrears, a fee at the annual rate of 50%
of the investment advisory fee received by the Adviser. Until March 1, 2000, the
Fund had another subadviser, John Hancock Advisers International, Limited
("JHAI") located at 6th Floor, Duke's Court, 32-36 Duke Street, St. James's,
London, England SW1Y6DF. JHAI was a wholly-owned subsidiary of the Adviser
formed in 1987 to provide international investment research and advisory
services to U.S. institutional clients. As compensation for its services under
the Sub-Advisory Agreement, JHAI received from the Adviser a portion of its
monthly fee equal to 0.70% on an annual basis of the average daily net asset
value of the Fund for each calendar month up to $200 million of average daily
net assets; and 0.6375% on an annual basis of the average daily net asset value
over $200 million. JHAI agreed to waive all but 0.05% of its fee as of January
1, 2000 and its Sub-Advisory contract was terminated effective March 1, 2000.
The Fund is not responsible for paying any Subadviser's fee.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser, a Subadviser or any of their respective
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 a
Subadviser for the Fund or for other funds or clients for which the Adviser or a
Subadviser renders investment advice arise for consideration at or about the
same time, transactions in such securities will be made, insofar as feasible,
for the respective funds or clients in a manner deemed equitable to all of them.
To the extent that transactions on behalf of more than one client of the
Adviser, a Subadviser or its affiliates may increase the demand for securities
being purchased or the supply of securities being sold, there may be an adverse
effect on price.
Pursuant to the Advisory Agreement and the Sub-Advisory Agreement, neither the
Adviser nor Subadviser is liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which the
Agreements relate, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Adviser or Subadviser in the performance
of their duties or from reckless disregard by them of their obligations and
duties under the applicable Agreements.
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 Subadviser and determining whether to approve
and renew the Fund's
24
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
Subadviser. 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 Subadviser; (2) the investment performance of the
Fund; (3) the fair market value of the services provided by the Adviser and
Subadviser; (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.
The primary factors underlying the Board's decision to renew the Fund's Advisory
Agreement and Sub-Advisory Agreement were as follows:
o The Board determined that the performance results of the Fund and the
Adviser and Subadviser's responsive actions were reasonable, as compared
with relevant performance standards, including the performance results of
comparable global funds derived from data provided by Lipper Inc. and
appropriate market indexes.
o 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 and Subadviser'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 Board considered whether the Fund should obtain alternative
portfolio management services and concluded that, under all the
circumstances and based on its informed business judgement, the most
appropriate course of action in the best interest of the Fund's
shareholders was to renew the agreements with the Adviser and Subadviser.
The continuation of the Advisory Agreement, the Sub-Advisory Agreement and the
Distribution Agreement was approved by all of the Trustees in June of 1999. On
December 12, 2000, the Trustees approved the termination of IIIS as Subadviser
and appointed Nicholas-Applegate as Subadviser effective December 14, 2000. On
April 25, 2001, the shareholders of the Fund approved the appointment of
Nicholas-Applegate as Subadviser . The Advisory Agreement, the
Nicholas-Applegate 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 of these 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
25
Adviser provides the Fund with certain tax, accounting and legal services. For
the fiscal year ended October 31, 2000, 2001 and 2002, the Fund paid the Adviser
$34,007, $20,946 and $ respectively, for services under this Agreement.
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 (the "Selling Brokers") which have entered into selling agency
agreements with John Hancock Funds. These Selling Brokers 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 Brokers receive compensation from
a sales charge imposed, in the case of Class A and Class C shares, at the time
of sale. In the case of Class B or Class C shares, the broker receives
compensation immediately but John Hancock Funds is compensated on a deferred
basis.
Total underwriting commissions for sales of the Fund's Class A shares for the
fiscal years ended October 31, 2000, 2001 and 2002 were $161,392, $125,204, and
$ respectively. Of such amounts $23,146, $9,638 and $ ,
respectively, were retained by John Hancock Funds in 2000, 2001 and 2002. Total
underwriting commissions for sales of the Fund's Class C shares for the period
from May 1, 2000 to October 31, 2000 and for the fiscal year ended October 31,
2001 and 2002 were $3,313, $4,263 and $ , respectively. The remainder of
the underwriting commissions were reallowed to Selling Brokers.
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 shares and 1.00% for Class B
and Class C shares, respectively, of the Fund's average daily net assets
attributable to shares of that class. However, the service fee will not exceed
0.25% of the Fund's average daily net assets attributable to each class of
shares. The distribution fees will be used to reimburse John Hancock Funds for
its distribution expenses, including but not limited to: (i) initial and ongoing
sales compensation to Selling Brokers and others (including affiliates of John
Hancock Funds) engaged in the sale of Fund shares; (ii) marketing, promotional
and overhead expenses incurred in connection with the 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 Brokers and others for providing personal and account
maintenance services to shareholders. In the event that John Hancock Funds is
not fully reimbursed for payments or expenses they incur under the Class A Plan,
these expenses will not be carried beyond twelve months from the date they were
incurred. Unreimbursed expenses under the Class B 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 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, 2002,
an aggregate of $ of distribution expenses or % of the average net
assets of the Fund's Class B shares was not reimbursed or recovered by the John
Hancock Funds through the receipt of deferred sales charges or Rule12b-1 fees in
prior periods. For the fiscal year ended October 31, 2002, an aggregate of
$ of distribution expenses or % of the average net
26
assets of the Fund's Class C shares was not reimbursed or recovered by the John
Hancock Funds through the receipt of deferred sales charges or Rule 12b-1 fees.
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, the 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 their
continuance is approved at least annually by a majority of both the Trustees and
Independent Trustees. The Plans provide that they may be terminated without
penalty, (a) by vote of a majority of the Independent Trustees, (b) by a vote of
a majority of the Fund's outstanding shares of the applicable class upon 60
days' written notice to the 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 that, in their judgment, there is a reasonable
likelihood that the Plans will benefit the holders of the applicable class of
shares of the Fund.
Amounts paid to John Hancock Funds by any class of shares of the Fund will not
be used to pay the expenses incurred with respect to any other class of shares
of the Fund; provided, however, that expenses attributable to the Fund as a
whole will be allocated, to the extent permitted by law, according to a formula
based upon gross sales dollars and/or average daily net assets of each such
class, as may be approved from time to time by vote of a majority of Trustees.
From time to time, the Fund may participate in joint distribution activities
with other Funds and the costs of those activities will be borne by each Fund in
proportion to the relative net asset value of the participating Fund.
During the fiscal year ended October 31, 2002, the Fund paid John Hancock Funds
the following amounts of expenses in connection with their services.
Expense Items
-------------
Printing and Interest
Mailing of Expenses of Carrying or
Prospectus to New Compensation to John Hancock Other Finance
Advertising Shareholders Selling Brokers Funds Charges
----------- ------------ --------------- ----- -------
Class A
Class B
Class C
27
SALES COMPENSATION
As part of their business strategies, each of the John Hancock funds, along with
John Hancock Funds, pay compensation to financial services firms that sell the
funds' shares. These firms typically pass along a portion of this compensation
to your financial representative.
The two primary sources of 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 reallowed to financial services firms are shown on the next
page.
Whenever you make an investment in the Fund, the financial services firm
receives a reallowance, as described below. The firm also receives the first
year's service fee at this time. Beginning with the second year after an
investment is made, the financial services firm receives an annual service fee
of 0.25% of its total eligible fund net assets. This fee is paid quarterly in
the arrears by the Fund.
In addition, from time to time, John Hancock Funds, at its expense, 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 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 financial
services firms-sponsored events or activities. From time to time, John Hancock
Funds may provide expense reimbursements for special training of a financial
services firm's registered representatives and other employees in group
meetings. Other compensation, such as asset retention fees, finder's fees and
reimbursement for wire transfer fees may be offered to the extent not prohibited
by law or any self-regulatory agency, such as the NASD.
28
Broker receives
Sales charge paid Broker receives 12b-1 service
by investors % of maximum Reallowance fee(% of net Total compensation (1)
Class A investments offering price) (% of offering price) investment) (3) (% of offering price)
- ------------------- --------------- --------------------- --------------- ---------------------
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 (4)
- -----------
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50% (2)
Next $1 or more above that -- 0.00% 0.25% 0.25% (2)
Broker receives
Broker receives 12b-1 service fee Total Broker
maximum reallowance (% of net compensation (1)
Class B investments (% of offering price) investment) (3) (% of offering price)
- ------------------- --------------------- --------------- ---------------------
All amounts 3.75% 0.25% 4.00%
First year
Maximum service fee Maximum total
reallowance (% of net compensation (1)
Class C investments (% of offering price) investment) (3) (% of offering price)
- ------------------- --------------------- --------------- ---------------------
Over $1,000,000 or amounts
purchased at NAV -- 0.75% 0.25% 1.00%
All other amounts 1.00% 1.75 0.25% 2.00%
(1) Broker percentages and 12b-1 service fee percentages are calculated from
different amounts, and therefore may not equal total broker compensation
percentages if combined using simple addition
(2) For Group Investment Programs sales, the maximum total broker compensation
for investments of $1 million or more is 1.00% of the offering price (one
year CDSC of 1.00% applies for each sale).
(3) After first year broker receives 12b-1 service fees are paid quarterly in
arrears.
(4) John Hancock Funds may reduce aggregate with investments by the amount of
recent redemptions.
CDSC revenues collected by John Hancock Funds may be used to pay broker
commissions when there is no initial sales charge.
29
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned categories for which no sales are reported and
other securities traded over-the-counter are generally valued at the mean
between the current closing bid and asked prices.
Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00 p.m., London time ( 12:00
noon, New York time) on the date of any determination of the Fund's NAV. If
quotations are not readily available or the value has been materially affected
by events occurring after the closing of a foreign market, assets are valued by
a method that the Trustees believe accurately reflects their value.
The NAV for each fund and class is determined each business day at the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m. Eastern
Time) by dividing a class's net assets by the number of its shares outstanding.
On any day an international market is closed and the New York Stock Exchange is
open, any foreign securities will be valued at the prior day's close with the
current day's exchange rate. Trading of foreign securities may take place on
Saturdays and U.S. business holidays on which the Fund's NAV is not calculated.
Consequently, the Fund's portfolio securities may trade and the NAV of the
Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.
INITIAL SALES CHARGE ON CLASS A AND CLASS C SHARES
Shares of the Fund are offered at a price equal to their net asset value plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase (the "initial sales charge alternative") or on a contingent
deferred basis (the "deferred sales charge alternative"). 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 and Class C 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
30
with the greater of the current value (at offering price) of the Class A shares
of the Fund, owned by the investor, or if John Hancock Signature Services, Inc.
("Signature Services") is notified by the investor's dealer or the investor at
the time of the purchase, the cost of the Class A shares owned.
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 Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family
(spouse, children, grandchildren, mother, father, sister, brother,
mother-in-law, father-in-law, daughter-in-law, son-in-law, niece, nephew,
grandparents and same sex domestic partner) 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 a Fund's shares in fee-based
investment products or services made available to their clients.
o A former participant in an employee benefit plan with John Hancock
funds, when he or she withdraws from his or her plan and transfers any or
all of his or her plan distributions directly to a Fund.
o A member of a class action lawsuit against insurance companies who is
investing settlement proceeds.
o Retirement plans participating in Merrill Lynch servicing programs, if
the Plan has more than $3 million in assets or 500 eligible employees at
the date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement. See your Merrill Lynch financial consultant for further
information.
o Retirement plans investing through the PruArray Program sponsored by
Prudential Securities.
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 Participant directed retirement plans with at least 100 eligible
employees at the inception of the Fund account. Each of these investors
may purchase Class A shares with no initial sales charge. However, if the
shares are redeemed within 12 months after the end of the calendar year in
which the purchase was made, a CDSC will be imposed at the following rate:
Amount Invested CDSC Rate
--------------- ---------
$1 to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts to $10 million and over 0.25%
31
Class C shares may be offered without a front-end sales charge to:
o Investments of redemption proceeds from a non-John Hancock mutual fund.
o Group Retirement plan products for which John Hancock Signature Services
performs recordkeeping and administrative services. (These plans include
403(b), Simple IRA, SEP and SARSEP plans.)
o Group Retirement plan products sold through third party administrators
under the John Hancock SELECT retirement plan program. (These plans
include 401(k), Money Purchase and Profit Sharing plans.)
o An investor who buys through Merrill Lynch omnibus account. However, a
CDSC may apply if the shares are sold within 12 months of purchase.
Class A and Class C 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.
Combination Privilege. 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). A company's (not an individual's) 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 Broker's
representative.
Accumulation Privilege. Investors (including investors combining purchases) who
are already Class A shareholders may also obtain the benefit of the reduced
sales charge by taking into account not only the amount being invested but also
the investor's purchase price or current value of the Class A shares of all John
Hancock funds which carry a sales charge already held by such person. 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. Retirement plan investors may include the value of Class
B shares if Class B shares held are greater than $1 million. Retirement plans
must notify Signature Services to utilize. A company's (not an individual's)
qualified and non-qualified retirement plan investments can be combined to take
advantage of this privilege.
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 sales charges are also applicable to investments
made pursuant to a Letter of Intention (the "LOI"), which should be read
carefully prior to its execution by an investor. The Funds offer two options
regarding the specified period for making investments
32
under the LOI. All investors have the option of making their investments over a
specified period of thirteen (13) months. Investors who are using a Fund as a
funding medium for a 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 cannot be combined to satisfy an LOI of 48
months. Such an investment (including accumulations and combinations but not
including 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 the sales charge as may be due. By
signing the LOI, the investor authorizes Signature Services to act as his or her
attorney-in-fact to redeem any escrowed Class A shares and adjust the sales
charge, if necessary. A LOI does not constitute a binding commitment by an
investor to purchase, or by the 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 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
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 price 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.
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 purchase 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
33
or 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 share (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 Brokers 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 of Class A shares that are subject
to CDSC, unless indicated otherwise, in the circumstances defined below:
For all account types:
* Redemptions made pursuant to the Funds' right to liquidate your account if
you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability. (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
34
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.)
* Redemptions by Retirement plans participating in Merrill Lynch servicing
programs, if the Plan has less than $3 million in assets or 500 eligible
employees at the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement. See your Merrill Lynch financial
consultant for further information.
* Redemptions of Class A or Class C shares by retirement plans that invested
through the PruArray Program sponsored by Prudential Securities.
* Redemptions of Class A shares made after one year from the inception date
of a retirement plan at John Hancock.
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 distributions 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), 457
and 408 (SEPs and SIMPLE IRAs) of the Internal Revenue Code.
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares prior
to May 15, 1995.
Please see matrix for some examples.
35
- ---------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------
* 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.
36
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 shareholder 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 with shares that are not subject to a CDSC are based on
their respective net asset values. No sales charge or transaction charge is
imposed. Shares of the Fund which are subject to a CDSC may be exchanged into
shares of any of the other John Hancock funds that are subject to a CDSC without
incurring the CDSC; however, the shares acquired in an exchange will be subject
to the CDSC schedule of the shares acquired if and when such shares are redeemed
(except that shares exchanged into John Hancock 500 Index Fund will retain the
exchanged fund's CDSC schedule). For purposes of computing the CDSC payable upon
redemption of shares acquired in an exchange, the holding period of the original
shares is added to the holding period of the shares acquired in an exchange.
If a 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.
If a shareholder exchanges Class B shares purchased prior to January 1, 1994 for
Class B shares of any other John Hancock fund, the acquired shares will continue
to be subject to the CDSC schedule that was in effect when the exchanged shares
were purchased.
The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of 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
37
shareholder on 30 days' prior written notice to such shareholder, or to
discontinue the availability of such plan in the future. The shareholder may
terminate the plan at any time by giving proper notice to Signature Services.
Monthly Automatic Accumulation Program ("MAAP"). This program is explained in
the Prospectus. The program, as it relates to automatic investment checks, is
subject to the following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the MAAP may be revoked by Signature
Services without prior notice if any investment is not honored by the
shareholder's bank. The bank shall be under no obligation to notify the
shareholder as to the non-payment of any checks.
The program may be discontinued by the shareholder either by calling Signature
Services or upon written notice to Signature Services which is received at least
five (5) business days prior to the 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.
To protect the interests of other investors in the Fund, the Fund may cancel the
reinvestment privilege of any parties that, in the opinion of the Fund, are
using market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. Also, the Fund may refuse any reinvestment
request.
The Fund may change or cancel its reinvestment policies at any time.
A redemption on exchange of Fund shares is a taxable transaction for Federal
income tax purposes even if the reinvestment privilege is exercised, and any
gain or loss realized by a shareholder on the redemption or other disposition of
Fund shares will be treated for tax purposes as described under the caption "TAX
STATUS."
Retirement plans participating in Merrill Lynch's servicing programs:
Class A shares are available at net asset value for plans with $3 million in
plan assets or 500 eligible employees at the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement. If the plan does not meet either
of these limits, Class A shares are not available.
For participating retirement plans investing in Class B shares, shares will
convert to Class A shares after eight years, or sooner if the plan attains
assets of $5 million (by means of a CDSC-free redemption/purchase at net asset
value).
38
PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES
Shares of the Fund may be purchased or redeemed through certain broker-dealers
or Service Agents ("Brokers"). Brokers may charge for their services or place
limitations on the extent to which you may use the services of the Fund. The
Fund will be deemed to have received a purchase or redemption order when an
authorized broker, or if applicable, a broker's authorized designee, receives
the order. If a broker is an agent or designee of the Fund, orders are processed
at the NAV next calculated after the broker receives the order. The broker 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 brokers that maintain 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. The Adviser, the Fund, and/or John
Hancock Funds, Inc. (the Fund's principal distributor), share in the expense of
these fees.
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 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 shares and (iii) each class of shares will bear any class
expenses properly allocable to that class of shares, subject to the conditions
the Internal Revenue Service imposes with respect to 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 a request for a special meeting of shareholders.
However, at any time that less than a majority of the
39
Trustees holding office were elected by the shareholders, the Trustees will call
a special meeting of shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the trust. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of each
Fund. The Declaration of Trust also provides for indemnification out of the
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Furthermore, no fund included in the Fund's prospectus shall
be liable for the liabilities of any other John Hancock fund. Liability is
therefore limited to circumstances in which a Fund itself would be unable to
meet its obligations, and the possibility of this occurrence is remote.
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 to
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. Brokers of record on
Non-U.S. investors' accounts with foreign mailing addresses are required to
certify that all sales activities have occurred, and in the future will occur,
only in the U.S. A foreign corporation may purchase shares of the Fund only if
it has a U.S. mailing address.
TAX STATUS
The Fund is treated as a separate entity for accounting and tax purposes, has
qualified and elected to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") and
intends to continue to qualify for each taxable year. As such and by complying
with the applicable provisions of the Code regarding the sources of its income,
the timing of its distributions, and the diversification of its assets, the Fund
will not be subject to Federal income tax on taxable income (including net
realized capital gains) which is distributed to shareholders in accordance with
the timing requirements of the Code.
The Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they
40
are paid from the Fund's "net capital gain," they will be taxable as long-term
capital gain. (Net capital gain is the excess (if any) of net long-term capital
gain over net short-term capital loss, and investment company taxable income is
all taxable income and capital gains, other than net capital gain, after
reduction by deductible expenses.) Some distributions may be paid in January but
may be taxable to shareholders as if they had been received on December 31 of
the previous year. The tax treatment described above will apply without regard
to whether distributions are received in cash or reinvested in additional shares
of the Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
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 assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from these
passive foreign investment companies or gain from the sale of stock in such
companies, even if all income or gain actually received by the Fund is timely
distributed to its shareholders. The Fund would not be able to pass through to
its shareholders any 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 to minimize its tax liability or maximize its
return from 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 futures and options, foreign currency forward
contracts, foreign currencies, or payables or receivables denominated in a
foreign currency are subject to Section 988 of the Code, which generally causes
such gains and losses to be treated as ordinary income and losses and may affect
the amount, timing and character of distributions to shareholders. 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 for each
taxable year. If the net foreign exchange loss for a year treated as ordinary
loss under Section 988 were to exceed the Fund's investment company taxable
income computed without regard to such loss the resulting overall ordinary loss
for such year would not be deductible by the Fund or its shareholders in future
years.
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. Investors may be entitled to claim U.S. foreign tax credits or deductions
with respect to foreign income taxes or certain other foreign taxes ("qualified
foreign taxes"), paid by the Fund, subject to certain provisions and limitations
contained in the Code, if the Fund so elects. If more than 50% of the value of
the Fund's total assets at the close of any taxable year consists of stock or
securities of foreign corporations, the Fund may file an election with the
Internal Revenue Service pursuant to which shareholders of the Fund will be
required to (i) include in ordinary gross income (in addition to taxable
dividends and distributions actually received) their pro rata shares of
qualified foreign taxes paid by the Fund
41
even though not actually received by them, and (ii) treat such respective pro
rata portions as foreign taxes paid by them.
If the Fund makes this election, shareholders may then deduct such pro rata
portions of qualified foreign taxes in computing their taxable incomes, or
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of qualified foreign taxes paid by the Fund,
although such shareholders will be required to include their share of such taxes
in gross income. Shareholders who claim a foreign tax credit for such foreign
taxes may be required to treat a portion of dividends received from the Fund as
a separate category of income for purposes of computing the limitations on the
foreign tax credit. Tax-exempt shareholders will ordinarily not benefit from
this election. Each year (if any) that the Fund files the election described
above, its shareholders will be notified of the amount of (i) each shareholder's
pro rata share of qualified foreign taxes paid by the Fund and (ii) the portion
of Fund dividends which represents income from each foreign country. The Fund
that cannot or does not make this election may deduct such taxes in determining
the amount it has available for distribution to shareholders, and shareholders
would not, in this event, include these foreign taxes in their income, nor would
they be entitled to any tax deductions or credits with respect to such taxes.
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 or enter into option, futures or forward 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) in a transaction that is treated as a sale
for tax purposes, a shareholder will ordinarily realize a taxable gain or loss
depending upon the amount of the proceeds and the investor's basis in his
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands. A sales charge paid in purchasing
shares of the Fund cannot be taken into account for purposes of determining gain
or loss on the redemption or exchange of such shares within 90 days after their
purchase to the extent shares of the Fund or another John Hancock Fund are
subsequently acquired without payment of a sales charge pursuant to the
reinvestment or exchange privilege. This disregarded charge will result in an
increase in the shareholder's tax basis in the shares subsequently acquired.
Also, any loss realized on a redemption or exchange may be disallowed to the
extent the shares disposed of are replaced with other shares of the same Fund
within a period of 61 days beginning 30 days before and ending 30 days after the
shares are disposed of, such as pursuant to the automatic dividend
reinvestments. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss.
Any loss realized upon the redemption of shares with a tax holding period of six
months or less will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain with respect to such
shares. 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.
42
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 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 extend that a capital loss is carried forward
from prior years against such gain. To the extent such excess was retained and
not exhausted by the carryforward of prior years' capital losses, it would be
subject to Federal income tax in the hands of the Fund. Upon proper designation
of this amount by the Fund, each shareholder would be treated for Federal income
tax purposes as if such Fund had distributed to him on the last day of its
taxable year his pro rata share of such excess, and he had paid his pro rata
share of the taxes paid by the Fund and reinvested the remainder in the Fund.
Accordingly, each shareholder would (a) include his pro rata share of such
excess as long-term capital gain in his return for his taxable year in which the
last day of the Fund's taxable year falls, (b) be entitled either to a tax
credit on his return for, or a refund of, his pro rata share of the taxes paid
by the Fund, and (c) be entitled to increase the adjusted tax basis for his
shares in the Fund by the difference between his pro rata share of such excess
and his pro rata share of such taxes.
For Federal income tax purposes, the Fund is permitted to carry forward a net
realized capital loss in any year to offset its own net capital gains, if any,
during the eight years following the year of the loss. To the extent subsequent
net capital gains are offset by such losses, they would not result in Federal
income tax liability to the applicable Fund, and as noted above, would not be
distributed as such to shareholders. The Fund has a $39,619,964 capital loss
carryforward available, to the extent provided by regulations, to offset future
net realized capital gains. The Fund's carryforward expires on October 31, 2009.
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 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 portfolio securities
under disadvantageous circumstances to generate cash, or may have to leverage by
borrowing the cash, to satisfy these distribution requirements.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) 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
43
IRS or a broker notifies the Fund that the number furnished by the shareholder
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. The Fund may refuse to
accept an application that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in shares, will be reduced by the amounts
required to be withheld. Any amounts withheld may be credited against a
shareholder's U.S. federal income tax liability. Investors should consult their
tax advisers about the applicability of the backup withholding provisions.
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 any share of stock held by the Fund, for U.S. Federal income tax
purposes, for at least 46 days (91 days in the case of certain preferred stock)
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 alternative minimum
tax liability, if any. Additionally, any corporate shareholder should consult
its tax adviser regarding the possibility that its tax basis in its shares may
be reduced, for Federal income tax purposes, by reason of "extraordinary
dividends" received with respect to the shares and to the extent such basis
would be reduced below zero, that current recognition of income would be
required.
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.
Certain options, futures and forward foreign currency contracts undertaken by
the Fund may cause the Fund to recognize gains or losses from marking to market
even though its positions have not been sold or terminated and affect the
character as long-term or short-term (or, in the case of 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 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 these 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 or forward contracts in order to minimize any potential adverse
tax consequences.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain 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 Fund shares may also be
subject to state and local taxes. Shareholders should consult their own tax
advisers as to the Federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Funds in their particular
circumstances.
44
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 nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from a Fund and, unless an effective IRS Form W-8, 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 a Fund.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
The Fund anticipates that, provided 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, 2002, the average annual total returns before taxes of the
Class A shares of the Fund for the one, five year periods and since the
commencement of operations on January 3, 1992 were %, % and %,
respectively.
As of October 31, 2002, the average annual returns before taxes for the Fund's
Class B shares for the one, five and ten year periods were %, % and %.
As of October 31, 2002, the average annual returns before taxes for the Fund's
Class C shares for the one year period and since the commencement of operations
on March 1, 1999 were % and %.
The average annual total return before taxes is computed by finding the average
annual compounded rates 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:
P(1+T)^n = 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 ended December 31, 2002 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 inception, that would equate the initial
amount invested to the ending redeemable value according to the following
formula:
45
P(1+T)^n = 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:
P(1+T)^n = 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 that 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 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.
From time to time, in reports and promotional literature, the Fund's total
return and/or yield will be compared to indices of mutual funds such as Lipper
Analytical Services, Inc.'s "Lipper-Mutual Performance Analysis," a monthly
publication which tracks net assets, total return, and yield on mutual funds in
the United States. Ibottson and Associates, CDA Weisenberger and F.C. Towers are
also used for comparison purposes, as well as Russell and Wilshire indices.
Performance rankings and ratings reported periodically in, and excerpts from,
national financial publications such as MONEY Magazine, FORBES, BUSINESS WEEK,
THE WALL STREET JOURNAL, MORNINGSTAR, STANGER'S and BARRON'S, etc. may also be
utilized. The
46
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 any Fund is a function of many
factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales, and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performances.
BROKERAGE ALLOCATION
The Subadviser is required to effect all transactions in portfolio securities
through the Adviser's trading desk. Decisions concerning the purchase and sale
of portfolio securities and the allocation of brokerage commissions are made by
the Subadviser under the supervision of and under the guidelines established by
the Adviser, which consists of officers and directors of the Adviser and
officers and Trustees who are interested persons of the Fund. Orders for
purchases and sales of securities are placed in a manner which, in the opinion
of the officers of the Adviser, will offer the best price and market for the
execution of each such transaction. Purchases from underwriters of portfolio
securities may include a commission or commissions paid by the issuer and
transactions with dealers serving as market maker reflect a "spread." Debt
securities are generally traded on a net basis through dealers acting for their
own account as principals and not as brokers; no brokerage commissions are
payable on these transactions.
In the U.S. Government securities market, securities are generally traded on a
"net" basis with dealers acting as principal for their own account without a
stated commission, although the price of the security usually includes a profit
to the dealer. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or premiums are paid. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less government supervision and
regulation of foreign stock exchanges and broker-dealers than in the U.S.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed.
The Sub-Advisory Agreement between both Adviser and the Subadviser authorize the
Subadviser (subject to the control of the Trustees of the Fund) to provide the
Fund with a continuing and suitable investment program with respect to
investments by the Fund in countries other than the United States and Canada.
To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and to a
lesser extent statistical assistance furnished to the Adviser of the Fund, and
their value and expected contribution to the performance of the Fund.
47
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 the price is
reasonable in light of the services provided and to policies that the Trustees
may adopt from time to time. For the fiscal year ended October 31, 2002, the
Fund did not paid commissions to compensate brokers for research services.
Research services received from broker-dealers supplement the Adviser's or
Subadviser'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 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
custody services, as well as the providing of equipment used to communicate
research information, the providing of specialized consultations with the
Adviser's personnel with respect to computerized systems and data furnished to
the Adviser or Subadviser 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 Subadviser since the
broker-dealers used by the Adviser or Subadviser 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 or Subadviser 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 or
Subadviser'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. In some cases, the research services are available only
from the broker-dealer providing them. In other cases, the research services may
be obtainable from alternative sources in return for cash payments.
The Adviser believe that the research services are beneficial in supplementing
the Adviser's or Subadviser's research and analysis and that they improve the
quality of the Adviser's or Subadviser'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 Subadviser The advisory fee paid by the Fund is not reduced because
the Adviser or Subadviser receives such services. However, to the extent that
the Adviser or Subadviser would have purchased research services had they not
been provided by broker-dealers, the expenses to the Adviser or Subadviser 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 Subadviser, and conversely,
brokerage commissions and spreads paid by other advisory clients of the Adviser
or Subadviser 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.
While the Adviser, in connection with the Subadviser, will be primarily
responsible for the allocation of the Fund's brokerage business, the policies
and practices of the Adviser and Subadviser in this regard must be consistent
with the foregoing and at all times be subject to
48
review by the Trustees. For the fiscal years ended October 31, 2000, 2001 and
2002, the Fund did not paid negotiated commission.
The Adviser or Subadviser 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 Subadviser in particular, including sales of the Fund. 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 Subadviser will not use a specific formula in connection with any of
these considerations to determine the target levels.
The Adviser's indirect parent, the Life Company is the indirect sole shareholder
of Signator Investors, Inc., a broker-dealer (until January 1, 1999, John
Hancock Distributors, Inc.) ("Signator" or "Affiliated Broker"). Pursuant to
procedures determined by the Trustees and consistent with the above policy of
obtaining best net results, the Fund may execute portfolio transactions with or
through Affiliated Brokers. For the fiscal years ended October 31, 2000, 2001
and 2002, the Fund paid no brokerage commissions to any Affiliated Broker.
Allianz AG, the parent of Nicholas Applegate Capital Management ("NACM"), has
several affiliates engaged in the brokerage business: Bayerische Hypo-und
Vereinsbank AG, HPV, HVB Capital Markets; Credit Lyonnais SA; Dresdner, Dresdner
Kleinwort Benson, Dresdner Kleinwort Wasserstein; Deutsche Bank AG, Deutsche
Bank Alex Brown, Deutsche Morgan Grenfell; Grantchester Securities Inc; IKB
Deutsche Industriebank AG; Munchener Ruckversicherungs-Gesellschaft AG, Munich
Re; National Discount Brokers Group, Inc., NDB Capital Markets; UniCredito
Italiano S.p.A., UniCredit Banco Mobiliare S.p.A.; US Allianz Securities, Inc.;
Williams Capital Group. (all "Affiliated Brokers"). Pursuant to procedures
determined by the Trustees and consistent with the above policy of obtaining
best net results, the Fund may execute portfolio transactions with or through
Affiliated Brokers. For the period from December 14, 2000 through October 31,
2001, the Fund paid $17,370 to Affiliated Brokers of NACM. During the fiscal
year ended October 31, 2001, this amounted to approximately 2.27% of the
aggregate brokerage commissions paid by the Fund for the transactions involving
approximately 2.29% of the aggregate dollar amount of transactions for which the
Fund paid brokerage commissions.
Credit Agricole, the parent of Indocam International Investment Services
("IIIS), the Fund's subadviser until December 13, 2000, has several affiliates
engaged in the brokerage business in Europe and Asia: Credit Agricole Indosuez
Cheuvreux; CPR Action (ex-Schelcher Prince Cheuvreux de Virieu International
Ltd, London; Cheuvreux de Virieu, Nordic AB, Stockholm, Cheuvreux de Virieu,
Espana, Madrid, Credit Agricole Indosuez Cheuvreux Deutschland GMBH, Frankfourt/
Main; Caboto Sim in Italy; Carr Securities; Carr Futures SNC. (Paris) and Carr
Futures PTE, Singapore (all "Affiliated Brokers"). Pursuant to procedures
determined by the Trustees and consistent with the above policy of obtaining
best net results, the Fund may execute portfolio transactions with or through
Affiliated Brokers. For the fiscal years ended October 31, 1999, 2000 and the
period from November 1, 2000 to December 13, 2000, the Fund paid $0, $1,559 and
$4,697, respectively, in brokerage commissions to Affiliated Brokers of IIIS.
During the fiscal year ended October 31, 2001, this amounted to approximately
0.61% of the aggregate brokerage commissions paid by the Fund for transactions
involving approximately 0.36% of the aggregate dollar amount of transactions for
when the Fund paid brokerage commissions.
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
49
pursuant to the Investment Company Act. Commissions paid to an Affiliated Broker
must be at least as favorable as those which the Trustees believe to be
contemporaneously charged by other brokers in connection with comparable
transactions involving similar securities being purchased or sold. A transaction
would not be placed with an Affiliated Broker if the Fund would have to pay a
commission rate less favorable than the Affiliated Broker's contemporaneous
charges for comparable transactions for its other most favored, but
unaffiliated, customers except for accounts for which the Affiliated Broker acts
as clearing broker for another brokerage firm, and any customers of the
Affiliated Broker not comparable to the Fund as determined by a majority of the
Trustees who are not interested persons (as defined in the Investment Company
Act) of the Fund, the Adviser or the Affiliated Broker. Because the Adviser,
which is affiliated with the Affiliated Broker, has, as an investment adviser to
the Fund, the obligation to provide investment management services, which
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.
Over-the-counter purchases and sales are transacted directly with principal
market makers except in those cases in which better prices and executions may be
obtained elsewhere. The Affiliated Broker will not receive any brokerage
commissions for orders they execute for a Fund in the over-the-counter market.
The Fund will in no event effect principal transactions with the Affiliated
Broker in the over-the-counter securities in which the Affiliated Broker makes a
market.
Other investment advisory clients advised by the Adviser or Subadviser 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 Subadviser may
average the transactions as to price and allocate the amount of available
investments in a manner which the Adviser or Subadviser 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 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 Subadviser 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 an annual fee of $16.00 for each Class A shareholder account and $18.50
for each Class B shareholder account and $17.50 for each Class
50
C shareholder account. The Fund also pays Signature Services an annual fee 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 are aggregated and allocated to each class on the basis of
their relative net asset values.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Trust 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, 160 Federal
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.
51
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). (e.g., short sales, currency
contracts, financial futures and options; securities and index options).
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., repurchase agreements, securities lending, foreign debt
securities, non-investment-grade debt securities, asset-backed securities,
mortgage-backed securities, participation interests, financial futures and
options; securities and index options, structured securities).
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., currency
trading, foreign debt securities, currency contracts, financial futures and
options; securities and index options).
Extension risk The risk that an unexpected rise in interest rates will extend
the life of a mortgage-backed security beyond the expected prepayment time,
typically reducing the security's value.(e.g., mortgage-backed securities,
structured securities).
Information risk The risk that key information about a security or market is
inaccurate or unavailable.(e.g., non-investment-grade debt securities).
A-1
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.,
foreign debt securities, non-investment-grade debt securities, asset-backed
securities, mortgage-backed securities, participation interests, financial
future and options; securities and index options, structured securities).
Leverage risk Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value. (e.g.,
when-issued securities and forward commitments, currency contracts, financial
futures and options; securities and index options, structured securities).
o Hedged When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that
the fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains.
o Speculative To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
Liquidity risk The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead, or forego an investment
opportunity, any of which could have a negative effect on fund management or
performance. (e.g., short sales, non-investment-grade debt securities,
restricted and illiquid securities, mortgage-backed securities, participation
interests, currency contracts, financial futures and options; securities and
index options, structured securities).
Management risk The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
Market risk The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than it was worth at an earlier time. Market risk may affect a
single issuer, industry, sector of the economy or the market as a whole. Common
to all stocks and bonds and the mutual funds that invest in them. (e.g., short
sales, short-term trading, when-issued securities and forward commitments,
foreign debt securities, non-investment-grade debt securities, restricted and
illiquid securities, financial futures and options; securities and index
options, structured securities).
Natural event risk The risk of losses attributable to natural disasters, crop
failures and similar events.
Opportunity risk The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments. (e.g., short sales, when-issued securities and forward commitments,
currency contracts, financial futures and options; securities and index
options).
A-2
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 debt securities).
Prepayment risk The risk that unanticipated prepayments may occur during periods
of falling interest rates, reducing the value of mortgage-backed securities.
(e.g., mortgage-backed securities, structured securities).
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 debt
securities, restricted and illiquid securities, participation interests,
structured securities)
A-3
APPENDIX B - DESCRIPTION OF BOND RATINGS*
Moody's Bond Ratings
Bonds. "Bonds which are rated 'Aaa' are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge.' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most likely to impair
the fundamentally strong position of such issues.
"Bonds which are rated 'Aa' are judged to be of high quality by all standards.
Together with the 'Aaa' group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in 'Aaa' securities or fluctuation of
protective elements may be of grater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in 'Aaa'
securities . "Bonds which are rated 'A' possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
"Bonds which are rated 'Baa' are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Bonds which are rated 'Ba' are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position,
characterizes bonds in this class.
"Bonds which are rated 'B' generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
"Bonds which are rated `Caa' are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
"Bonds which are rated `Ca' represented obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue. Should
no rating be assigned, the reason may be one of the following: (i) an
application for rating was not received or accepted; (ii) the issue or issuer
belongs to a group of securities that are not rated as a matter of policy; (iii)
there is a lack of essential data pertaining to the issue or issuer; or (iv) the
issue was privately placed, in which case the rating is not published in Moody's
publications.
- ------------
*As described by the rating companies themselves.
B-1
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Standard & Poor's Bond Ratings
"AAA. Debt rated 'AAA' has the highest rating by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
"AA. Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
"A. Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
"BBB. Debt rated 'BBB' is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
Debt rated "BB," or "B," is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and pay principal in
accordance with the terms of the obligation. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major risk exposures to adverse conditions.
"CCC: Debt rated 'CCC' has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The 'CCC' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'B' or 'B-' rating.
"CC: The rating 'CC' is typically applied to debt subordinated to senior debt
that is assigned an actual or implied 'CCC' rating.
Unrated. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
B-2
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper Ratings
Moody's ratings for commercial paper are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's two highest commercial paper rating categories
are as follows:
"P-1 -- "Prime-1" indicates the highest quality repayment capacity of the rated
issues.
"P-2 -- "Prime-2" indicates that the issuer has a strong capacity for repayment
of short-term promissory obligations. Earnings trends and coverage ratios, while
sound, will be more subjective to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained."
Standard & Poor's Commercial Paper Ratings
Standard & Poor's commercial paper ratings are current assessments of the
likelihood of timely payment of debts having an original maturity of no more
than 365 days. Standard & Poor's two highest commercial paper rating categories
are as follows:
"A-1 -- This designation indicates that the degree of safety regarding timely
payment is very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus (+) sign designation.
"A-2 -- Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1."
B-3
FINANCIAL STATEMENTS
The financial statements listed below are included in the Fund's 2002 Annual
Report to Shareholder's for the year ended October 31, 2002 (filed
electronically on December , 2002, accession number 0000928816-02- and
are included in and incorporated by reference into Part B of the Registration
Statement for John Hancock Global Fund (file no. 811-4630 and 33-4559).
John Hancock Investment Trust III
John Hancock Global Fund
Statement of Assets and Liabilities as of October 31, 2002.
Statement of Operations for year ended October 31, 2002.
Statement of Changes in Net Assets for the two years ended October 31, 2002.
Financial Highlights.
Notes to Financial Statements.
Schedule of Investments as of October 31, 2002.
Report of Independent Auditors.
F-1
John Hancock
Global
Fund
ANNUAL
REPORT
10.31.02
Sign up for electronic delivery at
www.jhancock.com/funds/edelivery
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Maureen R. Ford, Chairman and Chief Executive Officer,
flush left next to first paragraph.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
A look at performance
page 6
Growth of $10,000
page 7
Fund's investments
page 8
Financial statements
page 13
Trustees & officers
page 28
For your information
page 33
Dear Fellow Shareholders,
The year 2002 has been an extremely difficult one for the stock market. A
steady stream of accounting scandals and corporate misdeeds has shaken
investors' faith in corporate America. Plus, questions about the strength
of the economic rebound and prospects for corporate earnings have hung over
the financial markets, along with increased fears about Middle East
tensions and terrorism.
With all these concerns, the major stock market indexes have fallen
significantly for much of the year. Despite a strong rally in October, the
broad Standard & Poor's 500 Index is down 22% year to date through October,
the Dow Jones Industrial Average is off 15% and the technology-laden Nasdaq
Composite Index has fallen 32%. Investors in equity mutual funds have been
unable to escape the market's descent, as 99% of all U.S. diversified
equity funds have produced negative results through October, according to
Lipper, Inc., and the average equity fund has lost 23%. Bonds, on the other
hand, outperformed stocks and gained some ground, as often happens when
investors seek safer havens.
At such trying times as these, the impulse to flee is understandable,
especially after the negative stock market returns in 2000 and 2001. But we
urge you to stay the course and keep a well-diversified portfolio and a
longer-term investment perspective. Working with your investment
professional on your long-term plan is especially critical in turbulent
times. Financial markets have always moved in cycles, and even though the
current down cycle is painful, it comes after five straight years of
20%-plus returns between 1995 and 1999.
As discouraging as conditions may seem in the short-term, history shows us
that the bad times do pass. We believe that remains the case today. The
economy is sound and the vast majority of U.S. corporations are honest
institutions striving to do their best for their shareholders. And the
efforts of both the private sector and the U.S. government should address
the current issues of corporate governance, so that corporate credibility
and therefore investor confidence are restored.
Sincerely,
/S/ MAUREEN R. FORD
Maureen R. Ford,
Chairman and Chief Executive Officer
YOUR FUND
AT A GLANCE
The Fund seeks
long-term growth
of capital by
investing primar-
ily in the stocks of
companies located
throughout the
world, including
the United States.
Over the last twelve months
* Global economic growth remained sluggish.
* Concerns over Middle East violence and terrorism dampened investor
enthusiasm for stocks.
* Stock markets worldwide staged a solid rebound late in the period.
[Bar chart with heading "John Hancock Global Fund." Under the heading is
a note that reads "Fund performance for the year ended October 31,
2002." The chart is scaled in increments of 10% with -25% at the bottom
and 0% at the top. The first bar represents the -14.40% total return for
Class A. The second bar represents the -14.86% total return for Class B.
The third bar represents the -14.86% total return for Class C. A note
below the chart reads "Total returns for the Fund are at net asset value
with all distributions reinvested."]
Top 10 holdings
2.2% Pfizer
2.0% Microsoft
2.0% Dell Computer
1.9% General Electric
1.8% Nokia
1.6% Wells Fargo
1.5% Johnson & Johnson
1.5% Bank of Ireland
1.4% Citigroup
1.4% 3M
As a percentage of net assets on October 31, 2002.
BY CATHERINE SOMHEGYI NICHOLAS FOR THE NICHOLAS-APPLEGATE CAPITAL
MANAGEMENT PORTFOLIO MANAGEMENT TEAM
John Hancock
Global Fund
MANAGERS'
REPORT
Following two consecutive years of decline in the global stock market,
investors could not be faulted for hoping that better days lay ahead. Alas,
these hopes were dashed as equity markets around the world continued to
retreat during the 12-month period ended October 31, 2002.
The reporting period began with a powerful rally as investors rebuilt their
shattered confidence and sentiment improved following the September 11,
2001 terrorist attacks on U.S. soil. In the wake of the attacks, the
world's central bankers joined together to reduce interest rates and inject
liquidity into the markets. The stimulus began to have its desired effect
late in 2001 as encouraging economic reports indicated that a recovery was
indeed underway.
As 2002 opened, the markets suffered another setback, triggered by the fall
from grace of Enron and the widespread accounting irregularities it
suggested. As mid-year approached, escalating violence in the Middle East,
worries over both the quality and quantity of corporate earnings, and
rising energy prices pressured equity prices in most developed economies.
One notable exception was in Japan, where stocks surged on a combination of
technical reforms and hints that its beleaguered economy might be
bottoming.
"... equity markets
around the world
continued to retreat..."
During the third quarter, stock prices around the world plummeted in the
wake of a deteriorating global economy, earnings disappointments and the
threat of U.S. military action against Iraq. U.S. equities sagged as signs
of strain in the consumer pointed to a slower fourth quarter. A worsening
job market and higher oil prices appeared to be overwhelming the positive
effects of record mortgage refinancing activity. Meanwhile, European
exchanges continued to be plagued by overcapacity in the telecommunications
sector, which accounts for a meaningful portion of the region's equity
market. In Japan, investors remained discouraged by the government's lack
of progress on critical tax and banking-system reforms.
Late in the period, the major international developed stock markets, with
the exception of Japan, staged a solid rebound. On a macroeconomic level,
worries of a possible double-dip recession in global growth were offset by
a number of positive data.
FUND PERFORMANCE EXPLAINED
For the 12 months ended October 31, 2002, the Fund's Class A, Class B and
Class C shares posted total returns of -14.40%, -14.86% and -14.86%,
respectively, at net asset value. During the same period, the average
global fund returned -13.92%, according to Lipper, Inc.1, while the
benchmark MSCI All Country World Free Index returned -13.57%. Keep in mind
that your net asset value return will be different from the Fund's
performance if you were not invested in the Fund for the entire period and
did not reinvest all distributions. Please see pages six and seven for
historical performance information.
"... we added to holdings
in the consumer non-
durables sector..."
The Fund's modest relative underperformance during the reporting period was
due largely to challenging investment conditions that negatively affected
the strategy's returns in 2001 and persisted throughout much of 2002. Late
in the period, however, it appeared that investors were once again
rewarding companies that are meeting or exceeding earnings estimates -- a
vital component of our approach centered on positive, sustainable change
and timeliness of investment.
[Table at top left-hand side of page entitled "Top five industry
groups." The first listing is Medical 14%, the second is Retail 10%, the
third Computers 9%, the fourth Oil & gas 7%, and the fifth Banks--foreign 6%.]
By sector, Fund performance was hampered by overweight holdings in
technology stocks, which have continued to be pressured throughout 2002 by
persistently high inventory levels, overcapacity and weak corporate
investment in information technology. Poor stock selection in the
producers/manufacturing sector also hurt both relative and absolute
returns.
On the positive side, commercial/industrial services, retail trade and
consumer services holdings in the portfolio held up better than their
counterparts in the benchmark. Specialty chains and oilfield services
companies managed to post strong gains during the reporting period.
[Bar chart at middle of page with heading "Top five countries As a
percentage of net assets on 10-31-02." The chart is divided into five
sections: United States 54%, United Kingdom 9%, Japan 7%, France 3% and
Switzerland 3%.]
By country, holdings in the United Kingdom, Switzerland, and France proved
disappointing, while South Korean and Irish stocks both surged strongly.
For the reporting period, most countries suffered declines.
The list of best-performing stocks included Nissan Motor Co. of Japan,
Samsung Electronics of South Korea and U.S.-based Forest Labs. Decliners
included Corus Group and British Airways of the U.K., and Cisco Systems of
the United States.
[Table at top of page entitled "SCORECARD." The header for the left
column is "INVESTMENT" and the header for the right column is "RECENT
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is
Nextel followed by an up arrow with the phrase "Strong cash flow and
greater-than-expected earnings." The second listing is Cisco Systems
followed by a down arrow with the phrase "Spending on enterprise
information technology remained weak." The third listing is Forest Labs
followed by an up arrow with the phrase "Robust sales of flagship
depression drug Celexa."]
PORTFOLIO SHIFTS
During the period, we added to holdings in the consumer non-durables sector
as consumers continue to buy staple goods, while trimming exposure to
technology stocks, where visibility remains limited. As for countries, we
shifted assets away from France and increased holdings in the United
States.
OUTLOOK
Looking ahead, the global equity market is sending mixed signals. On the
downside, economic data have been disappointing in the United States,
Eurozone and Japan, and the Iraq situation continues to hang over the
markets. On a positive note, bond yields are close to historical lows and
after three years of bond outperformance, U.S. equities are more attractive
on a relative risk/reward basis.
"...after three years of bond
outperformance, U.S. equi-
ties are more attractive on a
relative risk/reward basis."
The U.S. market received further economic stimulus on November 6 when the
Federal Reserve cut interest rate targets by one-half of a percentage
point. Additionally, the Bush administration's bid for reelection in 2004
should refocus its attention on the U.S. economy. Any advance in global
equities likely will be led by the United States, so measures to get the
U.S. economy moving forward are welcome. Also, we believe that the European
Central Bank (ECB) must lower interest rates to stimulate growth.
This commentary reflects the views of the portfolio management team through
the end of the Fund's period discussed in this report. Of course, the
team's views are subject to change as market and other conditions warrant.
International investing involves special risks such as political, economic
and currency risks and differences in accounting standards and financial
reporting.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
A LOOK AT
PERFORMANCE
For the period ended
October 31, 2002
The index used for
comparison is the
Morgan Stanley
Capital International
(MSCI) All Country
World Free Index, an
unmanaged index
composed of freely
traded stocks of
foreign and U.S.
companies.
It is not possible to
invest in an index.
Class A Class B Class C Index
Inception date 1-3-92 9-2-86 3-1-99 --
Average annual returns with maximum sales charge (POP)
One year -18.72% -19.12% -16.56% -13.57%
Five years -10.36% -10.79% -- -1.47%
Ten years 0.20% -0.18% -- 6.57%
Since inception -- -- -18.46% --
Cumulative total returns with maximum sales charge (POP)
One year -18.72% -19.12% -16.56% -13.57%
Five years -42.11% -43.50% -- -7.12%
Ten years 1.99% -1.76% -- 89.00%
Since inception -- -- -52.70% --
Performance figures assume all distributions are reinvested. Returns with
maximum sales charge reflect a sales charge on Class A shares of 5% and
Class C shares of 1%, and the applicable contingent deferred sales charge
(CDSC) on Class B and Class C shares. The Class B shares' CDSC declines
annually between years 1-6 according to the following schedule: 5, 4, 3,
3, 2, 1%. No sales charge will be assessed after the sixth year. Class C
shares held for less than one year are subject to a 1% CDSC. The return and
principal value of an investment in the Fund will fluctuate, so that
shares, when redeemed, may be worth more or less than the original cost.
Index figures do not reflect sales charges and would be lower if they did.
The returns reflect past results and should not be considered indicative of
future performance. The performance table above and the chart on the next
page do not reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares.
GROWTH OF
$10,000
This chart shows what happened to a hypothetical $10,000 investment in
Class A shares for the period indicated. For comparison, we've shown the
same investment in the MSCI All Country World Free Index.
Line chart with the heading "GROWTH OF $10,000." Within the chart are
three lines. The first line represents the Index and is equal to $18,900
as of October 31, 2002. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Global Fund,
before sales charge, and is equal to $10,741 as of October 31, 2002. The
third line represents the value of the same hypothetical investment made
in the John Hancock Global Fund, after sales charge, and is equal to
$10,199 as of October 31, 2002.
Class B 1 Class C 1
Period beginning 10-31-92 3-1-99
Without sales charge $9,824 $4,777
With maximum sales charge -- $4,730
Index $18,900 $7,442
Assuming all distributions were reinvested for the period indicated, the
chart above shows the value of a $10,000 investment in the Fund's Class B
and Class C shares, respectively, as of October 31, 2002. Performance of
the classes will vary based on the difference in sales charges paid by
shareholders investing in the different classes and the fee structure of
those classes.
1 No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
October 31, 2002
This schedule is divided into four main categories: common stocks,
preferred stocks, warrants and short-term investments. Common stocks,
preferred stocks and warrants are further broken down by country.
Short-term investments, which represent the Fund's cash position, are
listed last.
SHARES ISSUER VALUE
COMMON STOCKS 93.49% $47,119,325
(Cost $46,795,541)
Australia 1.21% $608,053
89,000 Woolworths Ltd. (Retail) 608,053
Bermuda 1.56% 788,180
11,800 Platinum Underwriters Holdings, Ltd.* (Insurance) 296,180
12,000 RenaissanceRe Holdings Ltd. (Insurance) 492,000
Canada 2.53% 1,275,240
17,600 Precision Drilling Corp.* (Oil & Gas) 601,040
53,850 WestJet Airlines Ltd.* (Transport) 674,200
Denmark 0.46% 229,829
4,900 Carlsberg AS (Beverages) 229,829
Finland 1.83% 920,509
54,200 Nokia Oyj (Telecommunications) 920,509
France 3.29% 1,658,466
46,700 Axa SA (Insurance) 696,939
31,900 JC Decaux SA* (Advertising) 342,756
3,300 L'Oreal SA (Cosmetics & Personal Care) 245,752
6,100 Sanofi-Synthelabo SA (Medical) 373,019
Ireland 2.50% 1,257,796
66,100 Bank of Ireland (Banks -- Foreign) 733,135
14,100 Ryanair Holdings Plc* American Depositary Receipts
(ADR) (Transport) 524,661
Israel 0.63% 317,463
4,100 Teva Pharmaceutical Industries Ltd. (ADR) (Medical) 317,463
Italy 1.01% 508,626
16,900 ENI SpA (Oil & Gas) 234,639
21,993 Riunione Adriatica di Sicurta SpA (Insurance) 273,987
Japan 6.50% 3,278,037
37,000 Dai Nippon Printing Co., Ltd. (Printing -- Commercial) 378,124
27,000 Kao Corp. (Cosmetics & Personal Care) 617,093
79 Mitsubishi Tokyo Financial Group, Inc. (Banks -- Foreign) 515,231
6,800 Murata Manufacturing Co., Ltd. (Electronics) 321,378
44,500 Nissan Motor Co., Ltd. (Automobile / Trucks) 341,805
48,000 Shiseido Co., Ltd. (Cosmetics & Personal Care) 533,638
13,200 Sony Corp. (ADR) (Leisure) 570,768
Luxembourg 0.91% 460,256
42,600 Arcelor SA* (Steel) 460,256
Netherlands 1.92% 965,498
47,400 ASML Holding NV (NY Reg Shares)* (Electronics) 407,640
8,700 Unilever NV (Food) 557,858
Norway 0.99% 501,312
20,200 Frontline Ltd. (Transport) 121,690
51,800 Tomra Systems ASA (Pollution Control) 379,622
Singapore 1.76% 888,392
51,800 Flextronics International Ltd.* (Electronics) 433,048
60,000 United Overseas Bank Ltd. (Banks -- Foreign) 455,344
South Korea 0.99% 499,795
950 Samsung Electronics Co., Ltd. (Electronics) 268,978
1,250 SK Telecom Co., Ltd. (Telecommunications) 230,817
Switzerland 2.85% 1,434,298
9,700 Alcon, Inc.* (Medical) 397,894
2,300 Nestle SA (Food) 493,124
11,400 UBS AG (Banks -- Foreign) 543,280
United Kingdom 9.02% 4,548,177
70,900 BP Plc (Oil & Gas) 454,772
23,900 British American Tobacco Plc (Tobacco) 244,534
151,600 Centrica Plc (Utilities) 431,652
182,500 Corus Group Plc* (Steel) 121,343
30,300 Exel Plc (Transport) 311,438
45,600 HSBC Holdings Plc (Banks -- Foreign) 496,961
29,900 Imperial Tobacco Group Plc (Tobacco) 467,772
35,000 Next Plc (Retail) 487,328
21,505 Royal Bank of Scotland Group Plc (Banks -- Foreign) 506,000
39,400 Shell Transport & Trading Co. Plc (Oil & Gas) 253,184
35,700 Shire Pharmaceuticals Group Plc* (Medical) 287,633
30,500 Vodafone Group Plc (ADR) (Telecommunications) 485,560
United States 53.53% 26,979,398
5,700 3M Co. (Diversified Operations) 723,558
4,900 Allergan, Inc. (Medical) 266,805
13,900 Allstate Corp. (The) (Insurance) 552,942
3,300 Anheuser-Busch Cos., Inc. (Beverages) 174,108
10,900 Anthem, Inc.* (Medical) 686,700
78,400 AT&T Wireless Services, Inc.* (Telecommunications) 538,608
7,300 AutoZone, Inc.* (Retail) 626,121
9,600 Ball Corp. (Containers) 464,928
11,800 BJ Services Co.* (Oil & Gas) 357,894
17,500 Blockbuster, Inc. (Class A) (Leisure) 419,475
13,600 Borland Software Corp.* (Computers) 182,648
29,200 Cisco Systems, Inc.* (Computers) 326,456
19,700 Citigroup, Inc. (Finance) 727,915
35,500 Dell Computer Corp.* (Computers) 1,015,655
16,900 Dial Corp. (The) (Cosmetics & Personal Care) 359,294
5,800 Electronic Arts, Inc.* (Computers) 377,696
17,800 ENSCO International, Inc. (Oil & Gas) 481,312
5,100 Forest Laboratories, Inc.* (Medical) 499,749
37,700 General Electric Co. (Electronics) 951,925
11,000 Gilead Sciences, Inc.* (Medical) 382,140
27,100 Gymboree Corp. (The)* (Retail) 497,556
10,600 Harley-Davidson, Inc. (Leisure) 554,380
24,800 Health Management Associates, Inc. (Class A)* (Medical) 474,176
15,500 Hunt (J.B.) Transport Services, Inc.* (Transport) 429,195
28,400 IMC Global, Inc. (Fertilizers) 312,400
10,100 Intel Corp. (Electronics) 174,730
6,900 International Business Machines Corp. (Computers) 544,686
11,100 Intuit, Inc.* (Computers) 576,312
13,200 Johnson & Johnson (Medical) 775,500
6,300 Kohl's Corp.* (Retail) 368,235
9,200 Lockheed Martin Corp. (Aerospace) 532,680
15,800 Lowe's Cos., Inc. (Retail) 659,334
14,400 Medtronic, Inc. (Medical) 645,120
21,200 MGM Mirage, Inc.* (Leisure) 659,320
7,100 Michaels Stores, Inc.* (Retail) 319,216
19,100 Microsoft Corp.* (Computers) 1,021,277
9,900 Moody's Corp. (Business Services -- Misc.) 466,290
34,500 Nextel Communications, Inc. (Class A)* (Telecommunications) 389,160
15,900 Noble Corp.* (Oil & Gas) 513,888
10,400 North Fork Bancorp., Inc. (Banks -- United States) 399,984
10,300 Patterson-UTI Energy, Inc.* (Oil & Gas) 297,876
35,400 Pfizer, Inc. (Medical) 1,124,658
5,200 Procter & Gamble Co. (The) (Soap & Cleaning Preparations) 459,940
7,100 Scripps (E.W.) Co. (The) (Class A) (Media) 548,049
6,900 Smith International, Inc.* (Oil & Gas) 215,694
28,600 TJX Cos., Inc. (The) (Retail) 586,872
26,200 Tyco International Ltd. (Diversified Operations) 378,852
13,500 Viacom, Inc. (Class B)* (Media) 602,235
11,200 Wal-Mart Stores, Inc. (Retail) 599,760
15,800 Wells Fargo & Co. (Banks -- United States) 797,426
14,500 Williams-Sonoma, Inc.* (Retail) 345,100
14,400 Zimmer Holdings, Inc.* (Medical) 593,568
PREFERRED STOCKS 1.06% $531,637
(Cost $544,481)
South Korea 1.06%
3,950 Samsung Electronics Co., Ltd. (Electronics) 531,637
WARRANTS 0.58% $290,397
(Cost $337,071)
India 0.58%
59,647 Satyam Computer Services Ltd.* (Computers) 290,397
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 5.18% $2,613,000
(Cost $2,613,000)
Joint Repurchase Agreement 5.18%
Investment in a joint repurchase agreement
transaction with Barclays Capital, Inc. --
Dated 10-31-02, due 11-01-02
(Secured by U.S. Treasury Inflation
Indexed Note, 3.00% due 07-15-12) 1.90% $2,613 2,613,000
TOTAL INVESTMENTS 100.31% $50,554,359
OTHER ASSETS AND LIABILITIES, NET (0.31%) ($158,364)
TOTAL NET ASSETS 100.00% $50,395,995
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to
financial statements.
PORTFOLIO
CONCENTRATION
October 31, 2002
(unaudited)
The concentration
of the Fund's
investments can
be aggregated by
various industry
groups. This
table shows the
percentages of
the Fund's
investments
assigned to
the various
investment
categories.
VALUE AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
Advertising 0.68%
Aerospace 1.06
Automobile / Trucks 0.68
Banks -- Foreign 6.45
Banks -- United States 2.38
Beverages 0.80
Business Services -- Misc. 0.93
Computers 8.60
Containers 0.92
Cosmetics & Personal Care 3.48
Diversified Operations 2.19
Electronics 6.13
Fertilizers 0.62
Finance 1.44
Food 2.09
Insurance 4.59
Leisure 4.37
Media 2.28
Medical 13.54
Oil & Gas 6.77
Pollution Control 0.75
Printing -- Commercial 0.75
Retail 10.11
Soap & Cleaning Preparations 0.91
Steel 1.15
Telecommunications 5.09
Tobacco 1.41
Transport 4.09
Utilities 0.87
Short-term investments 5.18
Total investments 100.31%
See notes to
financial statements.
ASSETS AND
LIABILITIES
October 31, 2002
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the net
asset value and
the maximum
offering price
per share.
ASSETS
Investments at value (cost $50,290,093) $50,554,359
Cash 872
Receivable for investments sold 2,292,176
Receivable for shares sold 795,122
Dividends and interest receivable 81,186
Other assets 10,562
Total assets 53,734,277
LIABILITIES
Payable for investments purchased 1,274,029
Payable for shares repurchased 1,853,253
Payable to affiliates 100,209
Other payables and accrued expenses 110,791
Total liabilities 3,338,282
NET ASSETS
Capital paid-in 101,102,961
Accumulated net realized loss on investments
and foreign currency transactions (50,964,568)
Net unrealized appreciation of investments
and translation of assets and liabilities in
foreign currencies 263,628
Accumulated net investment loss (6,026)
Net assets $50,395,995
NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($39,090,539 [DIV] 5,919,275 shares) $6.60
Class B ($10,624,860 [DIV] 1,802,131 shares) $5.90
Class C ($680,596 [DIV] 115,405 shares) $5.90
MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($6.60 [DIV] 95%) $6.95
Class C ($5.90 [DIV] 99%) $5.96
1 On single retail sales of less than $50,000. On sales of
$50,000 or more and on group sales the offering price
is reduced.
See notes to
financial statements.
OPERATIONS
For the year ended
October 31, 2002
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in
operating the
Fund. It also shows
net gains (losses)
for the period
stated.
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $44,950) $642,526
Interest (including securities lending income of $2,011) 25,837
Total investment income 668,363
EXPENSES
Investment management fee 578,787
Class A distribution and service fee 145,228
Class B distribution and service fee 150,712
Class C distribution and service fee 8,291
Transfer agent fee 524,384
Custodian fee 106,322
Registration and filing fee 44,119
Auditing fee 36,900
Accounting and legal services fee 13,585
Trustees' fee 4,333
Interest expense 3,274
Legal fee 1,988
Miscellaneous 1,754
Total expenses 1,619,677
Net investment loss (951,314)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on
Investments (10,179,806)
Foreign currency transactions 18,431
Change in net unrealized appreciation (depreciation) of
Investments 2,858,148
Translation of assets and liabilities in foreign currencies (88,581)
Net realized and unrealized loss (7,391,808)
Decrease in net assets from operations ($8,343,122)
See notes to
financial statements.
CHANGES IN
NET ASSETS
This Statement
of Changes in
Net Assets
shows how the
value of the
Fund's net assets
has changed
since the end of
the previous
period. The dif-
ference reflects
earnings less
expenses, any
investment gains
and losses, distri-
butions paid to
shareholders, if
any, and any
increase or
decrease in
money share-
holders invested
in the Fund.
YEAR YEAR
ENDED ENDED
10-31-01 10-31-02
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss ($1,267,414) ($951,314)
Net realized loss (39,616,088) (10,161,375)
Change in net unrealized
appreciation (depreciation) (18,859,248) 2,769,567
Decrease in net assets
resulting from operations (59,742,750) (8,343,122)
From Fund share transactions (18,013,598) (10,750,858)
NET ASSETS
Beginning of period 147,246,323 69,489,975
End of period 1 $69,489,975 $50,395,995
1 Includes accumulated net investment loss of $95,497 and $6,026, respectively.
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS A SHARES
The Financial Highlights show how the Fund's net asset value for a share
has changed since the end of the previous period.
PERIOD ENDED 10-31-98 10-31-99 10-31-00 10-31-01 10-31-02
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $12.94 $13.46 $15.24 $13.64 $7.71
Net investment loss 1 (0.05) (0.03) (0.08) (0.11) (0.10)
Net realized and unrealized
gain (loss) on investments 1.53 2.67 (0.91) (5.82) (1.01)
Total from investment
operations 1.48 2.64 (0.99) (5.93) (1.11)
Less distributions
From net realized gain (0.96) (0.86) (0.61) -- --
Net asset value,
end of period $13.46 $15.24 $13.64 $7.71 $6.60
Total return 2 (%) 11.88 20.90 (6.90) (43.48) (14.40)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $121 $128 $105 $51 $39
Ratio of expenses to
average net assets (%) 1.82 1.78 1.87 2.14 2.35
Ratio of net investment loss
to average net assets (%) (0.33) (0.23) (0.52) (1.01) (1.31)
Portfolio turnover (%) 160 176 182 297 264
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS B SHARES
PERIOD ENDED 10-31-98 10-31-99 10-31-00 10-31-01 10-31-02
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $12.39 $12.76 $14.30 $12.67 $6.93
Net investment loss 1 (0.13) (0.11) (0.18) (0.17) (0.14)
Net realized and unrealized
gain (loss) on investments 1.46 2.51 (0.84) (5.57) (0.89)
Total from investment
operations 1.33 2.40 (1.02) (5.74) (1.03)
Less distributions
From net realized gain (0.96) (0.86) (0.61) -- --
Net asset value,
end of period $12.76 $14.30 $12.67 $6.93 $5.90
Total return 2 (%) 11.15 20.12 (7.60) (45.30) (14.86)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $55 $54 $41 $17 $11
Ratio of expenses to
average net assets (%) 2.46 2.37 2.57 2.84 3.05
Ratio of net investment loss
to average net assets (%) (0.97) (0.82) (1.25) (1.72) (2.01)
Portfolio turnover (%) 160 176 182 297 264
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS C SHARES
PERIOD ENDED 10-31-99 3 10-31-00 10-31-01 10-31-02
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $12.88 $14.30 $12.67 $6.93
Net investment loss 1 (0.10) (0.15) (0.17) (0.14)
Net realized and unrealized
gain (loss) on investments 1.52 (0.87) (5.57) (0.89)
Total from investment
operations 1.42 (1.02) (5.74) (1.03)
Less distributions
From net realized gain -- (0.61) -- --
Net asset value,
end of period $14.30 $12.67 $6.93 $5.90
Total return 2 (%) 11.02 4 (7.60) (45.30) (14.86)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) -- 5 $1 $1 $1
Ratio of expenses to average
net assets (%) 2.48 6 2.57 2.84 3.05
Ratio of net investment loss
to average net assets (%) (1.01) 6 (1.06) (1.72) (2.01)
Portfolio turnover (%) 176 182 297 264
1 Based on the average of the shares outstanding.
2 Assumes dividend reinvestment and does not reflect the effect of
sales charges.
3 Class C shares began operations on 3-1-99.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
See notes to
financial statements.
NOTES TO
STATEMENTS
NOTE A
Accounting policies
John Hancock Global Fund (the "Fund") is a diversified series of John
Hancock Investment Trust III, an open-end investment management company
registered under the Investment Company Act of 1940. The investment
objective of the Fund is to achieve long-term growth of capital.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B and Class C shares. The shares of
each class represent an interest in the same portfolio of investments of
the Fund and have equal rights as to voting, redemptions, dividends and
liquidation, except that certain expenses, subject to the approval of the
Trustees, may be applied differently to each class of shares in accordance
with current regulations of the Securities and Exchange Commission and the
Internal Revenue Service. Shareholders of a class that bears distribution
and service expenses under terms of a distribution plan have exclusive
voting rights to that distribution plan.
Significant accounting policies of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or, if
quotations are not readily available, or the value has been materially
affected by events occurring after the closing of a foreign market, at fair
value as determined in good faith in accordance with procedures approved by
the Trustees. Short-term debt investments maturing within 60 days are
valued at amortized cost, which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign currency translation"
below.
Joint repurchase agreement
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with other registered investment companies
having a management contract with John Hancock Advisers, LLC (the
"Adviser"), a wholly owned subsidiary of The Berkeley Financial Group, LLC,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
Foreign currency translation
All assets or liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars based on London currency
exchange quotations as of 5:00 P.M., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain (loss) on
investments are translated at the rates prevailing at the dates of the
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities, other than investments
in securities, resulting from changes in the exchange rates.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis. Capital gains realized on some
foreign securities are subject to foreign taxes, which are accrued as
applicable.
Class allocations
Income, common expenses and realized and unrealized gains (losses) are
determined at the fund level and allocated daily to each class of shares
based on the appropriate net assets of the respective classes. Distribution
and service fees, if any, are calculated daily at the class level based on
the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
Expenses
The majority of the expenses are directly identifiable to an individual
fund. Expenses that are not readily identifiable to a specific fund will be
allocated in such a manner as deemed equitable, taking into consideration,
among other things, the nature and type of expense and the relative sizes
of the funds.
Bank borrowings
The Fund is permitted to have bank borrowings for temporary or emergency
purposes, including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. The Fund has entered into a
syndicated line of credit agreement with various banks. This agreement
enables the Fund to participate with other funds managed by the Adviser in
an unsecured line of credit with banks, which permit borrowings of up to
$475 million, collectively. Interest is charged to each fund, based on its
borrowing. In addition, a commitment fee is charged to each fund based on
the average daily unused portion of the line of credit and is allocated
among the participating funds. The Fund had no borrowing activity under the
line of credit during the year ended October 31, 2002.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the Fund
negotiated lender fees. These fees are included in interest income. The
loans are collateralized at all times with cash or securities with a market
value at least equal to the market value of the securities on loan. As with
other extensions of credit, the Fund may bear the risk of delay of the
loaned securities in recovery or even loss of rights in the collateral,
should the borrower of the securities fail financially. There were no
securities loaned on October 31, 2002.
Forward foreign currency exchange contracts
The Fund may enter into forward foreign currency exchange contracts as a
hedge against the effect of fluctuations in currency exchange rates. A
forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date at a set price. The
aggregate principal amounts of the contracts are marked to market daily at
the applicable foreign currency exchange rates. Any resulting unrealized
gains and losses are included in the determination of the Fund's daily net
assets. The Fund records realized gains and losses at the time the forward
foreign currency exchange contract is closed out. Risks may arise upon
entering these contracts from the potential inability of counterparties to
meet the terms of the contract and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. These contracts
involve market or credit risk in excess of the unrealized gain or loss
reflected in the Fund's statement of assets and liabilities.
The Fund may also purchase and sell forward contracts to facilitate the
settlement of foreign currency denominated portfolio transactions, under
which it intends to take delivery of the foreign currency. Such contracts
normally involve no market risk if they are offset by the currency amount
of the underlying transaction. The Fund had no open forward foreign
currency exchange contracts on October 31, 2002.
Federal income taxes
The Fund qualifies as a "regulated investment company" by complying with
the applicable provisions of the Internal Revenue Code and will not be
subject to federal income tax on taxable income that is distributed to
shareholders. Therefore, no federal income tax provision is required. For
federal income tax purposes, the Fund has $50,475,789 of a capital loss
carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. To the extent that such carryforward is
used by the Fund, no capital gain distributions will be made. The loss
carry forward expires as follows: October 31, 2009 -- $39,619,964 and
October 31, 2010 -- $10,855,825.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend
date or, in the case of some foreign securities, on the date thereafter
when the Fund identifies the dividend. Interest income on investment
securities is recorded on the accrual basis. Foreign income may be subject
to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment income
and net realized gains on the ex-dividend date. Distributions paid by the
Fund with respect to each class of shares are calculated in the same
manner, at the same time and are in the same amount, except for the effect
of expenses that may be applied differently to each class.
As of October 31, 2002, there were no distributable earnings on a tax
basis. Such distributions and distributable earnings on a tax basis are
determined in conformity with income tax regulations, which may differ from
accounting principles generally accepted in the United States of America.
Distributions in excess of tax basis earnings and profits, if any, are
reported in the Fund's financial statements as a return of capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of America,
incorporates estimates made by management in determining the reported
amount of assets, liabilities, revenues and expenses of the Fund. Actual
results could differ from these estimates.
NOTE B
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under the
investment management contract, the Fund pays a monthly management fee to
the Adviser equivalent, on an annual basis, to the sum of: (a) 0.90% of the
first $100,000,000 of the Fund's average daily net asset value, (b) 0.80%
of the next $200,000,000, (c) 0.75% of the next $200,000,000 and (d) 0.625%
of the Fund's average daily net asset value in excess of $500,000,000. The
Adviser has a subadvisory agreement with Nicholas - Applegate Capital
Management LP. The Fund is not responsible for the payment of the
subadvisory fees.
The Fund has Distribution Plans with John Hancock Funds, LLC ("JH Funds"),
a wholly owned subsidiary of the Adviser. The Fund has adopted Distribution
Plans with respect to Class A, Class B and Class C pursuant to Rule 12b-1
under the Investment Company Act of 1940 to reimburse JH Funds for the
services it provides as distributor of shares of the Fund. Accordingly, the
Fund makes monthly payments to JH Funds at an annual rate not to exceed
0.30% of Class A average daily net assets and 1.00% of Class B and Class C
average daily net assets. A maximum of 0.25% of such payments may be
service fees as defined by the Conduct Rules of the National Association of
Securities Dealers. Under the Conduct Rules, curtailment of a portion of
the Fund's 12b-1 payments could occur under certain circumstances.
Class A and Class C shares are assessed up-front sales charges. During the
year ended October 31, 2002, JH Funds received net up-front sales charges
of $43,698 with regard to sales of Class A shares. Of this amount, $4,994
was retained and used for printing prospectuses, advertising, sales
literature and other purposes, $21,556 was paid as sales commissions to
unrelated broker-dealers and $17,148 was paid as sales commissions to sales
personnel of Signator Investors, Inc. ("Signator Investors"), a related
broker-dealer. The Adviser's indirect parent, John Hancock Life Insurance
Company ("JHLICo"), is the indirect sole shareholder of Signator Investors.
During the year ended October 31, 2002, JH Funds received net up-front
sales charges of $4,275 with regard to sales of Class C shares. Of this
amount, $4,168 was paid as sales commissions to unrelated broker-dealers
and $107 was paid as sales commissions to sales personnel of Signator
Investors.
Class B shares that are redeemed within six years of purchase are subject
to a contingent deferred sales charge ("CDSC") at declining rates,
beginning at 5.00% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed.
Class C shares that are redeemed within one year of purchase are subject to
a CDSC at a rate of 1.00% of the lesser of the current market value at the
time of redemption or the original purchase cost of the shares being
redeemed. Proceeds from the CDSCs are paid to JH Funds and are used in
whole or in part to defray its expenses for providing distribution related
services to the Fund in connection with the sale of Class B and Class C
shares. During the year ended October 31, 2002, CDSCs received by JH Funds
amounted to $36,731 for Class B shares and $1,265 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc., an indirect subsidiary of JHLICo. The Fund pays a monthly
transfer agent fee based on the number of shareholder accounts, plus
certain out-of-pocket expenses. Effective January 1, 2003, the Fund will
pay a monthly transfer agent fee at an annual rate of 0.05% of the average
daily net asset value, plus a fee based on the number of shareholder
accounts and reimbursement for certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the year
was at an annual rate of 0.02% of the average net assets of the Fund.
Ms. Maureen R. Ford and Mr. John M. DeCiccio are directors and/or officers
of the Adviser and/or its affiliates, as well as Trustees of the Fund. The
compensation of unaffiliated Trustees is borne by the Fund. The
unaffiliated Trustees may elect to defer for tax purposes their receipt of
this compensation under the John Hancock Group of Funds Deferred Compen
sation Plan. The Fund makes investments into other John Hancock funds, as
applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability are
recorded on the Fund's books as an other asset. The deferred compensation
liability and the related other asset are always equal and are marked to
market on a periodic basis to reflect any income earned by the investment
as well as any unrealized gains or losses. The Deferred Compensation Plan
investments had no impact on the operations of the Fund.
NOTE C
Fund share transactions
This listing illustrates the number of Fund shares sold and repurchased
during the last two periods, along with the corresponding dollar value. The
Fund has an unlimited number of shares authorized with no par value.
YEAR ENDED 10-31-01 YEAR ENDED 10-31-02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Sold 5,676,327 $64,226,203 1,786,452 $13,544,533
Repurchased (6,714,603) (75,224,956) (2,543,191) (19,528,993)
Net decrease (1,038,276) ($10,998,753) (756,739) ($5,984,460)
CLASS B SHARES
Sold 332,513 $3,269,531 311,157 $2,161,259
Repurchased (1,062,282) (10,421,533) (1,010,948) (7,061,861)
Net decrease (729,769) ($7,152,002) (699,791) ($4,900,602)
CLASS C SHARES
Sold 2,604,419 $27,476,042 78,832 $540,982
Repurchased (2,590,045) (27,338,885) (64,039) (406,778)
Net increase 14,374 $137,157 14,793 $134,204
NET DECREASE (1,753,671) ($18,013,598) (1,441,737) ($10,750,858)
NOTE D
Investment transactions
Purchases and proceeds from sales of securities, other than short-term
securities and obligations of the U.S. government, during the year ended
October 31, 2002 aggregated $164,685,426 and $178,094,166, respectively.
The cost of investments owned on October 31, 2002 including short-term
investments, for federal income tax purposes was $50,778,872. Gross
unrealized appreciation and depreciation of investments aggregated
$2,763,464 and $2,987,977, respectively, resulting in net unrealized
depreciation of $224,513. The difference between book basis and tax basis
net unrealized depreciation of investments is attributable primarily to the
tax deferral of losses on wash sales, the realization for tax purposes of
unrealized gains on certain forward foreign currency contracts.
NOTE E
Reclassification of accounts
During the year ended October 31, 2002, the Fund reclassified amounts to
reflect an increase in accumulated net realized loss on investments of
$18,267, a decrease in accumulated net investment loss of $1,040,785 and a
decrease in capital paid-in of $1,022,518. This represents the amount
necessary to report these balances on a tax basis, excluding certain
temporary differences, as of October 31, 2002. Additional adjustments may
be needed in subsequent reporting periods. These reclassifications, which
have no impact on the net asset value of the Fund, are primarily
attributable to the treatment of net operating losses and realized
gain/loss on foreign currency transactions, in the computation of
distributable income and capital gains under federal tax rules versus
accounting principles generally accepted in the United States of America.
The calculation of net investment income (loss) per share in the financial
highlights excludes these adjustments.
NOTE F
Proposed Reorganization
On November 19, 2002, the Trustees approved the reorganization of John
Hancock European Equity Fund and John Hancock Global Fund into John Hancock
International Fund, subject to the approval by shareholders.
AUDITORS'
REPORT
Report of
Pricewaterhouse-
Coopers LLP,
Independent
Auditors
To the Board of Trustees and Shareholders
of John Hancock Global Fund,
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of the
John Hancock Global Fund (a series of John Hancock Investment Trust III)
(the "Fund") at October 31, 2002, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in
the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities owned at October 31,
2002 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 13, 2002
TAX
INFORMATION
Unaudited
For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund, if any, paid during its
taxable year ended October 31, 2002.
With respect to the ordinary dividends paid by the Fund for the fiscal year
ended October 31, 2002, none of the dividends qualify for the
dividends-received deduction.
If the Fund paid dividends during the fiscal year, shareholders will be
mailed a 2002 U.S. Treasury Department Form 1099-DIV in January 2003. This
will reflect the total of all distributions which are taxable for the
calendar year 2002.
TRUSTEES
& OFFICERS
This chart provides information about the Trustees and Officers who oversee
your John Hancock fund. Officers elected by the Trustees manage the
day-to-day operations of the Fund and execute policies formulated by the
Trustees.
INDEPENDENT TRUSTEES
NUMBER OF
NAME, AGE TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
Dennis S. Aronowitz, Born: 1931 1996 31
Professor of Law, Emeritus, Boston University School of Law
(as of 1996); Director, Brookline Bancorp.
Richard P. Chapman, Jr., Born: 1935 1996 31
President and Chief Executive Officer, Brookline Bancorp Inc. (lending)
(since 1972); Trustee, Northeastern University (education); Chairman
and Director, Lumber Insurance Co. (insurance) (until 2000); Chairman
and Director, Northeast Retirement Services, Inc. (retirement administration)
(since 1998).
William J. Cosgrove, Born: 1933 1996 31
Vice President, Senior Banker and Senior Credit Officer, Citibank, N.A.
(retired 1991); Executive Vice President, Citadel Group Representatives,
Inc.; Director, Hudson City Bancorp; Trustee, Scholarship Fund for
Inner City Children (since 1986).
Richard A. Farrell 2, Born: 1932 1986 31
President, Farrell, Healer & Co., Inc. (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.
Gail D. Fosler 2, Born: 1947 1994 31
Senior Vice President and Chief Economist, The Conference Board
(non-profit economic and business research) (since 1989); Director, Unisys
Corp. (since 1993); Director, H.B. Fuller Company (since 1992) and
DBS Holdings (Singapore) (banking and financial services) (since 1999);
Director, National Bureau of Economic Research (academic) (since 1989);
Director, Baxter International (medical health care) (since 2001).
William F. Glavin, Born: 1932 1992 31
President Emeritus, Babson College (as of 1998); Vice Chairman, Xerox
Corporation (until 1989); Director, Reebok, Inc. (until 2002) and Inco Ltd.
(until 2002).
Patti McGill Peterson, Born: 1943 1993 39
Executive Director, Council for 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).
John A. Moore 2, Born: 1939 1991 39
President and Chief Executive Officer, 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).
John W. Pratt, Born: 1931 1986 31
Professor of Business Administration Emeritus, Harvard University
Graduate School of Business Administration (as of 1998).
INTERESTED TRUSTEES 3
NAME, AGE NUMBER OF
POSITION(S) HELD WITH FUND TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
John M. DeCiccio, Born: 1948 2001 61
Trustee
Executive Vice President and Chief Investment Officer, John Hancock
Financial Services, Inc.; Director, Executive Vice President and Chief
Investment Officer, John Hancock Life Insurance Company; Chairman of
the Committee of Finance of John Hancock Life Insurance Company;
Director, John Hancock Subsidiaries, LLC, Hancock Natural Resource
Group, Independence Investment LLC, Independence Fixed Income LLC,
John Hancock Advisers, LLC (the "Adviser") and The Berkeley Financial
Group, LLC ("The Berkeley Group"), John Hancock Funds, LLC ("John
Hancock Funds"), Massachusetts Business Development Corporation;
Director, John Hancock Insurance Agency, Inc. ("Insurance Agency, Inc.")
(until 1999) and John Hancock Signature Services, Inc. ("Signature
Services") (until 1997).
Maureen R. Ford, Born: 1955 2000 61
Trustee, Chairman, President and Chief Executive Officer
Executive Vice President, John Hancock Financial Services, Inc., John
Hancock Life Insurance Company; Chairman, Director, President and
Chief Executive Officer, the Adviser and The Berkeley Group; Chairman,
Director and Chief Executive Officer, John Hancock Funds; Chairman,
Director and Chief Executive Officer, Sovereign Asset Management
Corporation ("SAMCorp."); Director, Independence Investment LLC,
Independence Fixed Income LLC and Signature Services; Senior Vice
President, MassMutual Insurance Co. (until 1999).
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME, AGE
POSITION(S) HELD WITH FUND OFFICER
PRINCIPAL OCCUPATION(S) AND OF FUND
DIRECTORSHIPS DURING PAST 5 YEARS SINCE
William L. Braman, Born: 1953 2000
Executive Vice President and Chief Investment Officer
Executive Vice President and Chief Investment Officer, the Adviser and each of the John
Hancock funds; Director, SAMCorp., Executive Vice President and Chief Investment
Officer, Baring Asset Management, London UK (until 2000).
Richard A. Brown, Born: 1949 2000
Senior Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, the Adviser, John Hancock
Funds, and The Berkeley Group; Second Vice President and Senior Associate Controller,
Corporate Tax Department, John Hancock Financial Services, Inc. (until 2001).
Thomas H. Connors, Born: 1959 1992
Vice President and Compliance Officer
Vice President and Compliance Officer, the Adviser and each of the John Hancock funds;
Vice President, John Hancock Funds.
William H. King, Born: 1952 1992
Vice President and Treasurer
Vice President and Assistant 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, Born: 1950 1992
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Vice President,
Signature Services (until 2000); Director, Senior Vice President and Secretary, NM Capital.
The business address for all Trustees and Officers is 101 Huntington
Avenue, Boston Massachusetts, 02199.
The Statement of Additional Information of the Fund includes additional
information about members of the Board of Trustees of the Fund and is
available, without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee serves until resignation, retirement age or until his or her
successor is elected.
2 Member of Audit Committee.
3 Interested Trustees hold positions with the Fund's investment adviser,
underwriter and certain other affiliates.
OUR FAMILY
OF FUNDS
- -------------------------------------------------------
Equity Balanced Fund
Classic Value Fund
Core Equity Fund
Focused Equity Fund
Growth Trends Fund
Large Cap Equity Fund
Large Cap Growth Fund
Large Cap Spectrum Fund
Mid Cap Growth Fund
Multi Cap Growth Fund
Small Cap Equity Fund
Small Cap Growth Fund
Sovereign Investors Fund
U.S. Global Leaders Growth Fund
- -------------------------------------------------------
Sector Biotechnology Fund
Financial Industries Fund
Health Sciences Fund
Real Estate Fund
Regional Bank Fund
Technology Fund
- -------------------------------------------------------
Income Bond Fund
Government Income Fund
High Income Fund
High Yield Bond Fund
Investment Grade Bond Fund
Strategic Income Fund
- -------------------------------------------------------
International European Equity Fund
Global Fund
International Fund
Pacific Basin Equities Fund
- -------------------------------------------------------
Tax-Free Income California Tax-Free Income Fund
High Yield Municipal Bond Fund
Massachusetts Tax-Free Income Fund
New York Tax-Free Income Fund
Tax-Free Bond Fund
- -------------------------------------------------------
Money Market Money Market Fund
U.S. Government Cash Reserve
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FOR YOUR
INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUBADVISER
Nicholas-Applegate Capital Management LP
600 West Broadway
San Diego, California 92101
PRINCIPAL DISTRIBUTOR
John Hancock Funds, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By express mail John Hancock Signature Services, Inc.
Attn: Mutual Fund Image Operations
529 Main Street
Charlestown, MA 02129
Customer service representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhancock.com/funds/edelivery
This report is for the information of
the shareholders of the John Hancock
Global Fund.
0300A 10/02
12/02
John Hancock
European
Equity Fund
ANNUAL
REPORT
10.31.02
Sign up for electronic delivery at
www.jhancock.com/funds/edelivery
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Maureen R. Ford, Chairman and Chief Executive Officer, flush
left next to first paragraph.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
A look at performance
page 6
Growth of $10,000
page 7
Fund's investments
page 8
Financial statements
page 13
Trustees & officers
page 27
For your information
page 33
Dear Fellow Shareholders,
The year 2002 has been an extremely difficult one for the stock market. A
steady stream of accounting scandals and corporate misdeeds has shaken
investors' faith in corporate America. Plus, questions about the strength
of the economic rebound and prospects for corporate earnings have hung over
the financial markets, along with increased fears about Middle East
tensions and terrorism.
With all these concerns, the major stock market indexes have fallen
significantly for much of the year. Despite a strong rally in October, the
broad Standard & Poor's 500 Index is down 22% year to date through October,
the Dow Jones Industrial Average is off 15% and the technology-laden Nasdaq
Composite Index has fallen 32%. Investors in equity mutual funds have been
unable to escape the market's descent, as 99% of all U.S. diversified
equity funds have produced negative results through October, according to
Lipper, Inc., and the average equity fund has lost 23%. Bonds, on the other
hand, outperformed stocks and gained some ground, as often happens when
investors seek safer havens.
At such trying times as these, the impulse to flee is understandable,
especially after the negative stock market returns in 2000 and 2001. But we
urge you to stay the course and keep a well-diversified portfolio and a
longer-term investment perspective. Working with your investment
professional on your long-term plan is especially critical in turbulent
times. Financial markets have always moved in cycles, and even though the
current down cycle is painful, it comes after five straight years of
20%-plus returns between 1995 and 1999.
As discouraging as conditions may seem in the short-term, history shows us
that the bad times do pass. We believe that remains the case today. The
economy is sound and the vast majority of U.S. corporations are honest
institutions striving to do their best for their shareholders. And the
efforts of both the private sector and the U.S. government should address
the current issues of corporate governance, so that corporate credibility
and therefore investor confidence are restored.
Sincerely,
/S/ MAUREEN R. FORD
Maureen R. Ford,
Chairman and Chief Executive Officer
YOUR FUND
AT A GLANCE
The Fund seeks
long-term growth
of capital by invest-
ing primarily in
stocks of compa-
nies located in
Europe.
Over the last twelve months
* Global economic growth remained sluggish.
* Concerns over Middle East violence and terrorism dampened investor
enthusiasm for stocks.
* Eurozone stock markets staged a solid rebound late in the period.
[Bar chart with heading "John Hancock European Equity Fund." Under the
heading is a note that reads "Fund performance for the year ended
October 31, 2002." The chart is scaled in increments of 5% with -20% at
the bottom and 0% at the top. The first bar represents the -17.44% total
return for Class A. The second bar represents the -18.11% total return
for Class B. The third bar represents the -18.11% total return for Class
C. A note below the chart reads "Total returns for the Fund are at net
asset value with all distributions reinvested."]
Top 10 holdings
2.3% TotalFinaElf
1.7% Nokia
1.7% Unilever
1.7% Perlos
1.6% Axa
1.6% ENI
1.5% Teva Pharmaceutical Industries
1.5% GlaxoSmithKline
1.4% Man Group
1.4% Autostrade
As a percentage of net assets on October 31, 2002.
BY LORETTA MORRIS, FOR THE NICHOLAS-APPLEGATE
CAPITAL MANAGEMENT PORTFOLIO MANAGEMENT TEAM
John Hancock
European Equity Fund
MANAGERS'
REPORT
Following two consecutive years of decline in the global stock market,
investors could not be faulted for hoping that better days lay ahead. Alas,
these hopes were dashed as equity markets around the world continued to
retreat during the 12-month period ended October 31, 2002.
"...equity markets
around the world
continued to retreat..."
The reporting period began with a powerful rally as investors rebuilt their
shattered confidence and sentiment improved following the September 11,
2001 terrorist attacks on U.S. soil. In the wake of the attacks,
coordinated action by the world's central bankers led to unprecedented
stimulus in the form of interest-rate reductions and injections of
liquidity into the markets. The stimulus began to have its desired effect
late in 2001 as encouraging economic reports indicated that a recovery was
indeed underway. Increasing evidence of a pickup in economic growth, as
well as the support of low interest rates, buoyed international markets
during the first quarter of 2002.
However, by the second quarter, weakness in key sectors became apparent.
The Continent's giant telecommunications companies, which have labored
under high debt levels and their huge financial commitments to
next-generation technology, saw share prices cut nearly in half.
European stocks continued to decline in the third quarter. Exacerbating an
already difficult market, businesses in need of scarce capital were forced
to sell their equity stakes in other companies, regardless of those
companies' operating fundamentals. In addition, European law requires that
insurance companies sell certain underperforming stocks from their
investment portfolios, which put additional pressure on both the lagging
stocks and the insurance sector. Finally, overcapacity in
telecommunications continued to plague European exchanges, since this
sector makes up a significant portion of the region's market
capitalization.
On the economic front, nearly all indicators for continental Europe pointed
to a slowdown in activity. For example, Italian consumer confidence
weakened, French industrial production fell and retail sales decreased in
Germany. In September, the narrow victory of the incumbent German coalition
government of Chancellor Helmut Schroeder was another disappointment.
Investors had hoped for more conservative leadership and a larger governing
majority to help push through much-needed structural reforms.
"An underweight position
in consumer non-durables
...also hampered relative
performance."
Late in the period, the European stock markets staged a solid rebound. On a
macroeconomic level, worries of a possible double-dip recession in global
growth were offset by a number of positive data, including moderating oil
prices, a rise in the Baltic freight index, and a rise in the price of
dynamic random access memory (DRAM) chips.
FUND PERFORMANCE EXPLAINED
For the 12 months ended October 31, 2002, the Fund's Class A, Class B and
Class C shares posted a total return of -17.44%, -18.11% and -18.11%,
respectively, at net asset value. During the same period, the average
European Equity fund returned -13.28%, according to Lipper, Inc.1, while
the benchmark MSCI Europe Index returned -13.59%. Keep in mind that your
net asset value return will be different from the Fund's performance if you
were not invested in the Fund for the entire period and did not reinvest
all distributions. Please see pages six and seven for historical
performance information.
[Table at top left-hand side of page entitled "Top five industry
groups." The first listing is Banks--foreign 11%, the second is Medical
9%, the third Oil & gas 8%, the fourth Utilities 7%, and the fifth
Finance 6%.]
Throughout 2001 and much of 2002, companies meeting or exceeding earnings
estimates were not rewarded by investors. This phenomenon penalized our
philosophy and process centered on positive, sustainable change and
timeliness of investment.
The Fund's relative underperformance was driven largely by disappointing
stock selection and overweight holdings in the consumer services sector. An
underweight position in consumer non-durables, which was among the few
sectors to post positive returns during the period, also hampered relative
performance. On the positive side, favorable stock selection in the
insurance services and financial services sectors supported relative
performance. In particular, money-center banks held up well.
[Bar chart at middle of page with heading "Top countries As a percentage
of net assets on 10-31-02." The chart is divided into five sections:
United Kingdom 29%, Italy 11%, France 10%, Spain 6% and Netherlands 5%.]
By country, holdings in the United Kingdom and Switzerland were
disappointing. Meanwhile, stock selection in Spain and Ireland supported
both relative and absolute performance. In particular, Iberia Lineas, a
Spanish airline, and the Bank of Ireland were among the portfolio's top
performers during the period. Decliners included Corus Group, a steel
manufacturer, and food and beverage giant Nestle.
SECTOR AND COUNTRY SHIFTS
During the period, based on our bottom-up analysis of individual stocks'
appreciation potential, we increased exposure to the financial services
sector and reduced holdings in commercial/ industrial services stocks. On a
country basis, we shifted some assets from France to Italy.
[Table at top of page entitled "SCORECARD." The header for the left
column is "INVESTMENT" and the header for the right column is "RECENT
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is Corus
Group followed by a down arrow with the phrase "Suffered losses amid
sliding steel prices and reduced output." The second listing is Bank of
Ireland followed by an up arrow with the phrase "Gaining market share
amid strong Irish economy." The third listing is Iberia Lineas followed
by an up arrow with the phrase "Spanish low-cost airline continually
exceeding earnings expectations."]
OUTLOOK
Looking ahead, the European equity markets are sending mixed signals. On
the downside, economic data have been disappointing in the Eurozone, and
the Iraq situation continues to hang over the markets.
"...the European equity
markets are sending
mixed signals."
Observers are particularly worried about Germany, which accounts for 35% of
the total European Union economy. In October, German business confidence
fell to a nine-month low, manufacturing orders declined, and leading German
research institutes cut their growth forecasts for 2003 by more than half.
Germany's DAX Index remains quite volatile. The persistent burden of
excessive debt could continue to constrain the telecommunications industry,
although we began to see signs of positive change late in the period.
The current environment favors stock pickers such as Nicholas-Applegate.
International companies whose earnings are in line with or better than
expectations but not reflected in the stock's price should be rewarded by
investors. These are precisely the types of stocks in which we seek to
invest.
This commentary reflects the views of the portfolio management team through
the end of the Fund's period discussed in this report. Of course, the
team's views are subject to change as market and other conditions warrant.
International investing involves special risks such as political, economic
and currency risks and differences in accounting standards and financial
reporting.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
A LOOK AT
PERFORMANCE
For the period ended
October 31, 2002
The index used for
comparison is the
Morgan Stanley
Capital International
(MSCI) Europe Index,
an unmanaged index
used to measure the
performance of securi-
ties listed on European
stock exchanges.
It is not possible to
invest in an index.
Class A Class B Class C Index
Inception date 3-2-98 6-1-98 3-1-99 --
Average annual returns with maximum sales charge (POP)
One year -21.56% -22.20% -19.77% -13.59%
Since inception -10.00% -12.57% -13.78% --
Cumulative total returns with maximum sales charge (POP)
One year -21.56% -22.20% -19.77% -13.59%
Since inception -38.84% -44.76% -41.95% --
Performance figures assume all distributions are reinvested. Returns with
maximum sales charge reflect a sales charge on Class A shares of 5% and
Class C shares of 1%, and the applicable contingent deferred sales charge
(CDSC) on Class B and Class C shares. The Class B shares' CDSC declines
annually between years 1-6 according to the following schedule: 5, 4, 3, 3,
2, 1%. No sales charge will be assessed after the sixth year. Class C
shares held for less than one year are subject to a 1% CDSC. The return and
principal value of an investment in the Fund will fluctuate, so that
shares, when redeemed, may be worth more or less than the original cost.
Index figures do not reflect sales charges and would be lower if they did.
The returns reflect past results and should not be considered indicative of
future performance. The performance table above and the chart on the next
page do not reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares.
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future. See the
prospectus for details.
GROWTH OF
$10,000
This chart shows what happened to a hypothetical $10,000 investment in
Class A shares for the period indicated. For comparison, we've shown the
same investment in the MSCI Europe Index.
Line chart with the heading "GROWTH OF $10,000." Within the chart are
three lines. The first line represents the Index and is equal to $7,973
as of October 31, 2002. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock European Equity
Fund, before sales charge, and is equal to $6,440 as of October 31,
2002. The third line represents the value of the same hypothetical
investment made in the John Hancock European Equity Fund, after sales
charge, and is equal to $6,116 as of October 31, 2002.
Class B Class C 1
Period beginning 6-1-98 3-1-99
Without sales charge $5,637 $5,865
With maximum sales charge $5,524 $5,806
Index $7,152 $7,174
Assuming all distributions were reinvested for the period indicated, the
chart above shows the value of a $10,000 investment in the Fund's Class B
and Class C shares, respectively, as of October 31, 2002. Performance of
the classes will vary based on the difference in sales charges paid by
shareholders investing in the different classes and the fee structure of
those classes.
1 No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
October 31, 2002
This schedule is divided into four main categories: common stocks,
preferred stocks, units and short-term investments. The common and
preferred stocks and units are further broken down by country. Short-term
investments, which represent the Fund's cash position, are listed last.
SHARES ISSUER VALUE
COMMON STOCKS 93.08% $10,656,377
(Cost $11,108,582)
Belgium 1.38% $157,873
8,000 Dexia SA (Banks -- Foreign) 76,768
3,600 Interbrew SA (Beverages) 81,105
Denmark 2.07% 236,545
800 Carlsberg AS (Beverages) 37,523
2,000 Danisco AS (Food) 65,026
2,400 Jyske Bank AS* (Banks -- Foreign) 56,285
3,600 TDC AS (Telecommunications) 77,711
Finland 4.07% 465,817
12,000 Nokia Oyj American Depositary Receipts (ADR)
(Telecommunications) 199,440
29,800 Perlos Oyj (Electronics) 190,640
11,100 Sampo Oyj (A Shares) (Finance) 75,737
France 9.47% 1,084,783
12,300 Axa SA (Insurance) 183,562
5,000 JC Decaux SA* (Advertising) 53,724
1,200 L'Oreal SA (Cosmetics & Personal Care) 89,364
500 Pernod-Ricard SA (Beverages) 50,654
1,800 Sanofi-Synthelabo SA (Medical) 110,071
1,900 TotalFinaElf SA (Oil & Gas) 261,725
2,200 Unibail SA (Real Estate Operations) 126,253
1,500 Vinci SA (Engineering / R&D Services) 83,779
5,300 Vivendi Environnement SA (Utilities) 125,651
Germany 3.99% 457,303
10 AMB Generali Holding AG (Insurance) 609
2,200 Bayerische Motoren Werke AG (Automobile / Trucks) 78,431
2,500 Deutsche Boerse AG (Finance) 89,622
1,786 E.ON AG (Utilities) 80,828
2,200 Fraport AG (Transport) 44,662
1,500 SAP AG (Computers) 115,122
2,500 Schwarz Pharma AG (Medical) 48,029
Greece 0.79% 90,125
6,400 Coca-Cola Hellenic Bottling Co. SA (Beverages) 90,125
Ireland 3.87% 442,671
10,500 Bank of Ireland (Banks -- Foreign) 116,459
7,200 CRH Plc (Building) 91,408
3,300 ICON Plc* (ADR) (Business Services -- Misc.) 79,632
13,300 Irish Life & Permanent Plc (Finance) 155,172
Israel 1.49% 170,346
2,200 Teva Pharmaceutical Industries Ltd. (ADR) (Medical) 170,346
Italy 11.45% 1,311,101
19,200 Autostrade SpA (Transport) 158,764
13,200 ENI SpA (Oil & Gas) 183,268
188,000 Finmeccanica SpA (Aerospace) 103,327
120,000 Impregilo SpA* (Building) 46,346
14,500 Italcementi SpA (Building) 127,367
9,700 Italgas SpA (Utilities) 94,522
9,700 Mediaset SpA (Media) 67,721
45,300 Parmalat Finanziaria SpA (Food) 126,506
10,459 Riunione Adriatica di Sicurta SpA (Insurance) 130,297
11,800 Saipem SpA (Oil & Gas) 63,803
40,500 Snam Rete Gas SpA (Utilities) 121,123
23,400 UniCredito Italiano SpA (Banks -- Foreign) 88,057
Luxembourg 0.65% 74,548
6,900 Arcelor SA* (Steel) 74,548
Netherlands 5.35% 612,069
3,800 Euronext NV (Finance) 75,639
2,400 Heineken NV (Beverages) 96,423
1,600 IHC Caland NV (Oil & Gas) 70,984
2,800 Royal Dutch Petroleum Co. (Oil & Gas) 121,117
3,100 Unilever NV (Food) 198,777
2,200 Van der Moolen Holding NV (Finance) 49,129
Norway 3.61% 413,016
15,600 Frontline Ltd. (Transport) 93,978
3,400 Gjensidige NOR ASA* (Finance) 105,613
3,200 ProSafe ASA * (Oil & Gas) 40,449
8,600 Tandberg ASA* (Telecommunications) 93,094
10,900 Tomra Systems ASA (Pollution Control) 79,882
Spain 6.33% 724,832
1,400 Acciona SA (Building) 54,070
3,500 Actividades de Construccion y Servicios SA (Building) 97,049
11,383 Banco Bilbao Vizcaya Argentaria SA (Banks -- Foreign) 108,442
3,000 Banco Popular Espanol SA (Banks -- Foreign) 128,461
15,000 Corporacion Mapfre SA (Insurance) 101,456
7,000 Endesa SA (Utilities) 72,301
27,300 Iberia Lineas Aereas de Espana SA (Transport) 47,311
12,200 Telefonica SA* (Telecommunications) 115,742
Sweden 4.40% 504,300
3,300 Autoliv, Inc. Swedish Depositary Receipts (Automobile/Trucks) 63,570
7,400 Capio AB* (Medical) 44,421
9,900 Elekta AB (B Shares)* (Medical) 92,923
4,200 Hennes & Mauritz AB (B Shares) (Retail) 81,594
15,700 Skandinaviska Enskilda Banken AB (A Shares) (Banks -- Foreign) 136,225
2,800 Svenska Cellulosa AB (B Shares) (Paper & Paper Products) 85,567
Switzerland 5.06% 579,250
1,000 Actelion Ltd.* (Medical) 38,274
2,100 Alcon, Inc.* (Medical) 86,142
1,900 Converium Holding AG* (Insurance) 76,710
500 Nestle SA (Food) 107,201
900 Nobel Biocare Holding AG* (Medical) 50,054
2,141 Novartis AG (Medical) 81,654
150 SGS Societe Generale de Surveillance Holding SA
(Business Services -- Misc.) 43,998
1,600 Syngenta AG (Chemicals) 95,217
United Kingdom 28.81% 3,298,338
13,800 Allied Domecq Plc (Beverages) 82,472
22,324 Barclays Plc (Banks -- Foreign) 154,368
22,200 BG Group Plc (Oil & Gas) 88,651
15,112 BHP Billiton Plc (Metal) 73,763
11,000 British American Tobacco Plc (Tobacco) 112,547
10,500 British Sky Broadcasting Group Plc* (Media) 99,136
19,700 Capita Group Plc (Business Services -- Misc.) 69,036
8,400 Capital Radio Plc (Media) 68,335
30,095 Centrica Plc (Utilities) 85,690
4,900 Cobham Plc (Aerospace) 74,052
169,300 orus Group Plc* (Steel) 112,567
9,400 Diageo Plc (Beverages) 105,956
9,400 Exel Plc (Transport) 96,618
32,600 Game Group Plc (Computers) 56,994
14,300 George Wimpey Plc (Building) 61,522
8,900 GlaxoSmithKline Plc (Medical) 169,869
9,900 HBOS Plc (Banks -- Foreign) 109,578
13,000 HSBC Holdings Plc (Banks -- Foreign) 144,806
4,300 Imperial Tobacco Group Plc (Tobacco) 67,272
15,000 Kelda Group Plc (Utilities) 88,705
11,000 Man Group Plc (Finance) 163,830
32,700 MFI Furniture Group Plc (Furniture) 67,017
28,100 Morrison (Wm.) Supermarkets Plc (Retail) 92,428
20,800 National Grid Transco Plc (Utilities) 148,060
28,300 Peninsular and Oriental Steam Navigation Co. (Transport) 84,231
30,000 Rentokil Initial Plc (Diversified Operations) 101,729
15,400 Rexam Plc (Containers) 98,358
6,092 Royal Bank of Scotland Group Plc (Banks -- Foreign) 143,341
93,000 SkyePharma Plc* (Medical) 69,837
17,500 Smith & Nephew Plc (Medical) 104,036
7,700 Smiths Group Plc (Manufacturing) 88,360
67,700 Tullow Oil Plc* (Oil & Gas) 96,381
73,900 Vodafone Group Plc (Telecommunications) 118,793
United States 0.29% 33,460
1,400 GlobalSantaFe Corp. (Oil & Gas) 33,460
PREFERRED STOCKS 0.45% $50,941
(Cost $47,926)
Germany 0.45%
800 Henkel KGaA (Chemicals) 50,941
UNITS 0.80% $91,854
(Cost $125,456)
France 0.80%
127,061 Eurotunnel SA* (Transport) 91,854
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 8.10% $927,000
(Cost $927,000)
Joint Repurchase Agreement 8.10%
Investment in a joint repurchase agreement
transaction with Barclays Capital, Inc. --
Dated 10-31-02, due 11-01-02 (Secured by
U.S. Treasury Inflation Indexed Note, 3.00%
due 07-15-12) 1.90% $927 927,000
TOTAL INVESTMENTS 102.43% $11,726,172
OTHER ASSETS AND LIABILITIES, NET (2.43%) ($277,672)
TOTAL NET ASSETS 100.00% $11,448,500
* Non-income producing security.
The percentage shown for each investment category is the total value
of that category as a percentage of the net assets of the Fund.
See notes to
financial statements.
PORTFOLIO
CONCENTRATION
October 31, 2002
This table shows
the percentages
of the Fund's
investments
aggregated
by various
industries.
VALUE AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
Advertising 0.47%
Aerospace 1.55
Automobile/Trucks 1.24
Banks -- Foreign 11.03
Beverages 4.75
Building 4.17
Business Services -- Misc. 1.68
Chemicals 1.28
Computers 1.50
Containers 0.86
Cosmetics & Personal Care 0.78
Diversified Operations 0.89
Electronics 1.67
Engineering/R&D Services 0.73
Finance 6.24
Food 4.35
Furniture 0.59
Insurance 4.30
Manufacturing 0.77
Media 2.06
Medical 9.31
Metal 0.64
Oil & Gas 8.38
Paper & Paper Products 0.75
Pollution Control 0.70
Real Estate Operations 1.10
Retail 1.52
Steel 1.64
Telecommunications 5.28
Tobacco 1.57
Transport 5.39
Utilities 7.14
Short-term investments 8.10
Total investments 102.43%
See notes to
financial statements.
ASSETS AND
LIABILITIES
October 31, 2002
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes.
You'll also find
the net asset
value and
the maximum
offering price
per share.
ASSETS
Investments at value (cost $12,208,964) $11,726,172
Cash 845
Receivable for investments sold 8,587
Dividends and interest receivable 37,032
Other assets 617
Total assets 11,773,253
LIABILITIES
Payable for investments purchased 233,646
Payable to affiliates 23,376
Other payables and accrued expenses 67,731
Total liabilities 324,753
NET ASSETS
Capital paid-in 20,697,603
Accumulated net realized loss on investments and foreign
currency transactions (8,766,909)
Net unrealized depreciation of investments and translation
of assets and liabilities in foreign currencies (482,010)
Accumulated net investment loss (184)
Net assets $11,448,500
NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($5,621,320 [DIV] 873,321 shares) $6.44
Class B ($5,579,028 [DIV] 893,734 shares) $6.24
Class C ($248,152 [DIV] 39,749 shares) $6.24
MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($6.44 [DIV] 95%) $6.78
Class C ($6.24 [DIV] 99%) $6.30
1 On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
See notes to
financial statements.
OPERATIONS
For the year ended
October 31, 2002
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in
operating the
Fund. It also
shows net gains
(losses) for the
period stated.
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $29,561) $253,441
Interest (including securities lending income of $1,150) 12,676
Total investment income 266,117
EXPENSES
Investment management fee 131,871
Class A distribution and service fee 20,968
Class B distribution and service fee 73,556
Class C distribution and service fee 3,073
Custodian fee 113,665
Transfer agent fee 36,229
Registration and filing fee 28,080
Auditing fee 20,500
Printing 7,500
Accounting and legal services fee 2,853
Miscellaneous 2,099
Trustees' fee 962
Legal fee 206
Interest expense 105
Total expenses 441,667
Less expense reductions (109,528)
Net expenses 332,139
Net investment loss (66,022)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on
Investments (2,966,174)
Foreign currency transactions (59,993)
Change in unrealized appreciation (depreciation) of
Investments 482,251
Translation of assets and liabilities in foreign currencies 513
Net realized and unrealized loss (2,543,403)
Decrease in net assets from operations ($2,609,425)
See notes to
financial statements.
CHANGES IN
NET ASSETS
This Statement
of Changes in
Net Assets
shows how the
value of the
Fund's net assets
has changed
since the end of
the previous
period. The dif-
ference reflects
earnings less
expenses, any
investment gains
and losses, distri-
butions paid to
shareholders, if
any, and any
increase or
decrease in
money share-
holders invested
in the Fund.
YEAR YEAR
ENDED ENDED
10-31-01 10-31-02
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss ($77,164) ($66,022)
Net realized loss (3,629,140) (3,026,167)
Change in net unrealized
appreciation (depreciation) (3,858,033) 482,764
Decrease in net assets resulting
from operations (7,564,337) (2,609,425)
From Fund share transactions (4,110,019) (2,487,052)
NET ASSETS
Beginning of period 28,219,333 16,544,977
End of period 1 $16,544,977 $11,448,500
1 Includes accumulated net investment loss of $196 and $184, respectively.
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
The Financial Highlights show how the Fund's net asset value for a share
has changed since the end of the previous period.
CLASS A SHARES
PERIOD ENDED 10-31-98 1 10-31-99 10-31-00 10-31-01 10-31-02
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $10.00 $10.07 $11.16 $10.98 $7.80
Net investment income (loss) 2 0.01 (0.04) (0.06) -- 3 (0.01)
Net realized and unrealized
gain (loss) on investments 0.06 1.13 (0.12) (3.18) (1.35)
Total from investment operations 0.07 1.09 (0.18) (3.18) (1.36)
Net asset value, end of period $10.07 $11.16 $10.98 $7.80 $6.44
Total return 4,5 (%) 0.70 6 10.82 (1.61) (28.96) (17.44)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $12 $14 $13 $8 $6
Ratio of expenses
to average net assets (%) 1.90 7 1.90 1.90 1.90 1.90
Ratio of adjusted expenses
to average net assets 8 (%) 3.31 7 2.23 2.30 3.02 2.65
Ratio of net investment income (loss)
to average net assets (%) 0.16 7 (0.38) (0.52) 0.03 (0.08)
Portfolio turnover (%) 31 64 97 260 198
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS B SHARES
PERIOD ENDED 10-31-98 1 10-31-99 10-31-00 10-31-01 10-31-02
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $11.07 $10.04 $11.06 $10.80 $7.62
Net investment loss 2 (0.04) (0.12) (0.15) (0.06) (0.06)
Net realized and unrealized
gain (loss) on investments (0.99) 1.14 (0.11) (3.12) (1.32)
Total from investment operations (1.03) 1.02 (0.26) (3.18) (1.38)
Net asset value, end of period $10.04 $11.06 $10.80 $7.62 $6.24
Total return 4,5 (%) (9.30)6 10.16 (2.35) (29.44) (18.11)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $16 $15 $15 $8 $6
Ratio of expenses
to average net assets (%) 2.60 7 2.60 2.60 2.60 2.60
Ratio of adjusted expenses
to average net assets 8 (%) 4.01 7 2.93 3.00 3.72 3.35
Ratio of net investment loss
to average net assets (%) (1.12)7 (1.08) (1.23) (0.67) (0.78)
Portfolio turnover (%) 31 64 97 260 198
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS C SHARES
PERIOD ENDED 10-31-99 1 10-31-00 10-31-01 10-31-02
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $10.64 $11.06 $10.80 $7.62
Net investment loss 2 (0.07) (0.13) (0.06) (0.06)
Net realized and unrealized
gain (loss) on investments 0.49 (0.13) (3.12) (1.32)
Total from investment operations 0.42 (0.26) (3.18) (1.38)
Net asset value, end of period $11.06 $10.80 $7.62 $6.24
Total return 4,5 (%) 3.95 6 (2.35) (29.44) (18.11)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) -- 9 -- 9 -- 9 -- 9
Ratio of expenses
to average net assets (%) 2.60 7 2.60 2.60 2.60
Ratio of adjusted expenses
to average net assets 8 (%) 2.93 7 3.00 3.72 3.35
Ratio of net investment loss
to average net assets (%) (1.17) 7 (1.16) (0.61) (0.78)
Portfolio turnover (%) 64 97 260 198
1 Class A, Class B and Class C shares began operations on 3-2-98, 6-1-98
and 3-1-99, respectively.
2 Based on the average of the shares outstanding.
3 Less than $0.01 per share.
4 Assumes dividend reinvestment and does not reflect the effect of sales
charges.
5 Total returns would have been lower had certain expenses not been
reduced during the periods shown.
6 Not annualized.
7 Annualized.
8 Does not take into consideration expense reductions during the periods
shown.
9 Less than $500,000.
See notes to
financial statements.
NOTES TO
STATEMENTS
NOTE A
Accounting policies
John Hancock European Equity Fund (the "Fund") is a diversified series of
John Hancock World Fund, an open-end investment management company
registered under the Investment Company Act of 1940. The investment
objective of the Fund is to achieve long-term capital growth.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B and Class C shares. The shares of
each class represent an interest in the same portfolio of investments of
the Fund and have equal rights as to voting, redemptions, dividends and
liquidation, except that certain expenses, subject to the approval of the
Trustees, may be applied differently to each class of shares in accordance
with current regulations of the Securities and Exchange Commission and the
Internal Revenue Service. Shareholders of a class that bears distribution
and service expenses under terms of a distribution plan have exclusive
voting rights to that distribution plan.
Significant accounting policies of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services, or, if
quotations are not readily available, or the value has been materially
affected by events occurring after the closing of a foreign market, at
fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60
days are valued at amortized cost, which approximates market value. All
portfolio transactions initially expressed in terms of foreign
currencies have been translated into U.S. dollars as described in
"Foreign currency translation" below.
Joint repurchase agreement
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with other registered investment companies
having a management contract with John Hancock Advisers, LLC (the
"Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
LLC, may participate in a joint repurchase agreement transaction.
Aggregate cash balances are invested in one or more large repurchase
agreements, whose underlying securities are obligations of the U.S.
government and/or its agencies. The Fund's custodian bank receives
delivery of the underlying securities for the joint account on the
Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
Foreign currency translation
All assets or liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars based on London currency
exchange quotations as of 5:00 P.M., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain (loss) on
investments are translated at the rates prevailing at the dates of the
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the trade
and settlement dates on securities transactions and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains
and losses arise from changes in the value of assets and liabilities,
other than investments in securities, resulting from changes in the
exchange rates.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis. Capital gains realized on some
foreign securities are subject to foreign taxes, which are accrued as
applicable.
Class allocations
Income, common expenses and realized and unrealized gains (losses) are
determined at the fund level and allocated daily to each class of shares
based on the appropriate net assets of the respective classes.
Distribution and service fees, if any, are calculated daily at the class
level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.
Expenses
The majority of the expenses are directly identifiable to an individual
fund. Expenses that are not readily identifiable to a specific fund will
be allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and
the relative sizes of the funds.
Bank borrowings
The Fund is permitted to have bank borrowings for temporary or emergency
purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. The Fund has
entered into a syndicated line of credit agreement with various banks.
This agreement enables the Fund to participate with other funds managed
by the Adviser in an unsecured line of credit with banks, which permit
borrowings of up to $475 million, collectively. Interest is charged to
each fund, based on its borrowing. In addition, a commitment fee is
charged to each fund based on the average daily unused portion of the
line of credit and is allocated among the participating funds. There was
no outstanding borrowing under the line of credit during the year ended
October 31, 2002.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the
Fund negotiated lender fees. These fees are included in interest income.
The loans are collateralized at all times with cash or securities with a
market value at least equal to the market value of the securities on
loan. As with other extensions of credit, the Fund may bear the risk of
delay of the loaned securities in recovery or even loss of rights in the
collateral, should the borrower of the securities fail financially.
There were no securities loaned on October 31, 2002.
Forward foreign currency exchange contracts
The Fund may enter into forward foreign currency exchange contracts as a
hedge against the effect of fluctuations in currency exchange rates. A
forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date at a set price.
The aggregate principal amounts of the contracts are marked to market
daily at the applicable foreign currency exchange rates. Any resulting
unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at
the time the forward foreign currency exchange contract is closed out.
Risks may arise upon entering these contracts from the potential
inability of counterparties to meet the terms of the contract and from
unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. These contracts involve market or credit risk in excess
of the unrealized gain or loss reflected in the Fund's statement of
assets and liabilities.
The Fund may also purchase and sell forward contracts to facilitate the
settlement of foreign currency denominated portfolio transactions, under
which it intends to take delivery of the foreign currency. Such
contracts normally involve no market risk if they are offset by the
currency amount of the underlying transaction.
The Fund had no open forward foreign currency exchange contracts on
October 31, 2002.
Federal income taxes
The Fund qualifies as a "regulated investment company" by complying with
the applicable provisions of the Internal Revenue Code and will not be
subject to federal income tax on taxable income that is distributed to
shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, the Fund has $8,741,298 of a capital
loss carryforward available, to the extent provided by regulations, to
offset future net realized capital gains. To the extent that such
carryforward is used by the Fund, no capital gain distributions will be
made. The loss carryforward expires as follows: October 31, 2006 --
$821,474, October 31, 2007 -- $1,234,369, October 31, 2009 -- $3,678,367
and October 31, 2010 -- 3,007,088.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend
date or, in the case of some foreign securities, on the date thereafter
when the Fund identifies the dividend. Interest income on investment
securities is recorded on the accrual basis. Foreign income may be
subject to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment
income and net realized gains on the ex-dividend date. Distributions
paid by the Fund with respect to each class of shares are calculated in
the same manner, at the same time and are in the same amount, except for
the effect of expenses that may be applied differently to each class.
As of October 31, 2002, there were no distributable earnings on a tax
basis.
Such distributions and distributable earnings, on a tax basis, are
determined in conformity with income tax regulations, which may differ
from accounting principles generally accepted in the United States of
America. Distributions in excess of tax basis earnings and profits, if
any, are reported in the Fund's financial statements as a return of
capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of
America, incorporates estimates made by management in determining the
reported amount of assets, liabilities, revenues and expenses of the
Fund. Actual results could differ from these estimates.
NOTE B
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.90% of the first $500,000,000 of the Fund's average daily net asset
value, and (b) 0.70% of the Fund's average daily net asset value in
excess of $500,000,000. The Adviser has a subadvisory agreement with
Nicholas-Applegate Capital Management LP. The Fund is not responsible
for payment of the subadvisory fees.
The Adviser has agreed to limit the Fund's expenses for Class A, Class B
and Class C shares to 1.90%, 2.60% and 2.60%, respectively, of the Fund's
average daily net assets, at least until February 28, 2003. Accordingly,
the expense reduction amounted to $109,528 for the year ended October 31,
2002. The Adviser reserves the right to terminate this limitation in the
future.
The Fund has Distribution Plans with John Hancock Funds, LLC ("JH
Funds"), a wholly owned subsidiary of the Adviser. The Fund has adopted
Distribution Plans with respect to Class A, Class B and Class C pursuant
to Rule 12b-1 under the Investment Company Act of 1940 to reimburse JH
Funds for the services it provides as distributor of shares of the Fund.
Accordingly, the Fund makes monthly payments to JH Funds at an annual
rate not to exceed 0.30% of Class A average daily net assets and 1.00%
of Class B and Class C average daily net assets. A maximum of 0.25% of
such payments may be service fees as defined by the Conduct Rules of the
National Association of Securities Dealers. Under the Conduct Rules,
curtailment of a portion of the Fund's 12b-1 payments could occur under
certain circumstances.
Class A and Class C shares are assessed up-front sales charges. During the
year ended October 31, 2002, JH Funds received net up-front sales charges
of $8,035 with regard to sales of Class A shares. Of this amount, $939 was
retained and used for printing prospectuses, advertising, sales literature
and other purposes, $5,262 was paid as sales commissions to unrelated
broker-dealers and $1,834 was paid as sales commissions to sales personnel
of Signator Investors, Inc. ("Signator Investors"), a related
broker-dealer. The Adviser's indirect parent, John Hancock Life Insurance
Company ("JHLICo"), is the indirect sole shareholder of Signator Investors.
During the year ended October 31, 2002, JH Funds received net up-front
sales charges of $853 with regard to sales of Class C shares. Of this
amount, $852 was paid as sales commissions to unrelated broker-dealers and
$1 was paid as sales commissions to sales personnel of Signator Investors.
Class B shares that are redeemed within six years of purchase are subject
to a contingent deferred sales charge ("CDSC") at declining rates,
beginning at 5.00% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed.
Class C shares that are redeemed within one year of purchase are subject to
a CDSC at a rate of 1.00% of the lesser of the current market value at the
time of redemption or the original purchase cost of the shares being
redeemed. Proceeds from the CDSCs are paid to JH Funds and are used in
whole or in part to defray its expenses for providing distribution related
services to the Fund in connection with the sale of Class B and Class C
shares. During the year ended October 31, 2002, CDSCs received by JH Funds
amounted to $33,035 for Class B shares and $154 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc., an indirect subsidiary of JHLICo. The Fund pays a monthly
transfer agent fee based on the number of shareholder accounts, plus
certain out-of-pocket expenses. Effective January 1, 2003, the Fund will
pay a monthly transfer agent fee at an annual rate of 0.05% of the average
daily net asset value, plus a fee based on the number of shareholder
accounts and reimbursement for certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the year
was at an annual rate of 0.02% of the average net assets of the Fund.
The Adviser and other subsidiaries of JHLICo owned 150,000 shares of
beneficial interest of the Fund on October 31, 2002.
Ms. Maureen R. Ford and Mr. John M. DeCiccio are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
NOTE C
Fund share transactions
This listing illustrates the number of shares sold and repurchased during
the last two periods, along with the corresponding dollar value. The Fund
has an unlimited number of shares authorized with no par value.
YEAR ENDED 10-31-01 YEAR ENDED 10-31-02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Sold 792,626 $7,381,907 243,515 $1,801,403
Repurchased (982,882) (9,192,300) (359,333) (2,672,712)
Net decrease (190,256) ($1,810,393) (115,818) ($871,309)
CLASS B SHARES
Sold 238,918 $2,437,624 146,815 $1,075,119
Repurchased (492,476) (4,717,190) (368,071) (2,672,695)
Net decrease (253,558) ($2,279,566) (221,256) ($1,597,576)
CLASS C SHARES
Sold 67,015 $679,196 113,551 $805,510
Repurchased (69,607) (699,256) (117,426) (823,677)
Net decrease (2,592) ($20,060) (3,875) ($18,167)
NET DECREASE (446,406) ($4,110,019) (340,949) ($2,487,052)
NOTE D
Investment transactions
Purchases and proceeds from sales of securities, other than short-term
securities and obligations of the U.S. government, during the year ended
October 31, 2002, aggregated $27,757,888 and $29,779,513, respectively.
The cost of investments owned on October 31, 2002, including short-term
investments, for federal income tax purposes was $12,234,000. Gross
unrealized appreciation and depreciation of investments aggregated
$446,831 and $954,659, respectively, resulting in net unrealized
depreciation of $507,828. The difference between book basis and tax
basis net unrealized depreciation of investments is attributable
primarily to the tax deferral of losses on wash sales.
NOTE E
Reclassification of accounts
During the year ended October 31, 2002, the Fund reclassified amounts to
reflect a decrease in accumulated net realized loss on investments of
$60,029, a decrease in accumulated net investment loss of $66,034 and a
decrease in capital paid-in of $126,063. This represents the amount
necessary to report these balances on a tax basis, excluding certain
temporary differences, as of October 31, 2002. Additional adjustments may
be needed in subsequent reporting periods. These reclassifications,
which have no impact on the net asset value of the Fund, are primarily
attributable to the treatment of net operating loss and foreign currency
gains and losses in the computation of distributable income and capital
gains under federal tax rules versus accounting principles generally
accepted in the United States of America. The calculation of net investment
loss per share in the financial highlights excludes these adjustments.
NOTE F
Proposed Reorganization
On November 19, 2002, the Trustees approved the reorganization of John
Hancock European Equity Fund and John Hancock Global Fund into John Hancock
International Fund, subject to approval by shareholders.
AUDITORS'
REPORT
Report of
Pricewaterhouse-
Coopers, LLP,
Independent
Auditors
To the Board of Trustees and Shareholders of
John Hancock European Equity Fund,
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of the
John Hancock European Equity Fund (a series of John Hancock World Fund)
(the "Fund") at October 31, 2002, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in
the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities owned at October 31,
2002 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 13, 2002
TAX
INFORMATION
Unaudited
For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund, if any, paid during its
taxable year ended October 31, 2002.
If the Fund paid dividends during the fiscal year, shareholders will be
mailed a 2002 U.S. Treasury Department Form 1099-DIV in January 2003. This
will reflect the total of all distributions that are taxable for calendar
year 2002.
TRUSTEES
& OFFICERS
This chart provides information about the Trustees and Officers who oversee
your John Hancock fund. Officers elected by the Trustees manage the
day-to-day operations of the Fund and execute policies formulated by the
Trustees.
INDEPENDENT TRUSTEES
NUMBER OF
NAME, AGE TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
Dennis S. Aronowitz, Born: 1931 1998 31
Professor of Law, Emeritus, Boston University School of Law
(as of 1996); Director, Brookline Bancorp.
Richard P. Chapman, Jr., Born: 1935 1998 31
President and Chief Executive Officer, Brookline Bancorp Inc. (lending)
(since 1972); Trustee, Northeastern University (education); Chairman
and Director, Lumber Insurance Co. (insurance) (until 2000); Chairman
and Director, Northeast Retirement Services, Inc. (retirement administration)
(since 1998).
William J. Cosgrove, Born: 1933 1998 31
Vice President, Senior Banker and Senior Credit Officer, Citibank, N.A.
(retired 1991); Executive Vice President, Citadel Group Representatives,
Inc.; Director, Hudson City Bancorp; Trustee, Scholarship Fund for
Inner City Children (since 1986).
Richard A. Farrell 2, Born: 1932 1998 31
President, Farrell, Healer & Co., Inc. (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.
Gail D. Fosler 2, Born: 1947 1998 31
Senior Vice President and Chief Economist, The Conference Board
(non-profit economic and business research) (since 1989); Director, Unisys
Corp. (since 1993); Director, H.B. Fuller Company (since 1992) and
DBS Holdings (Singapore) (banking and financial services) (since 1999);
Director, National Bureau of Economic Research (academic) (since 1989);
Director, Baxter International (medical health care) (since 2001).
William F. Glavin, Born: 1932 1998 31
President Emeritus, Babson College (as of 1998); Vice Chairman, Xerox
Corporation (until 1989); Director, Reebok, Inc. (until 2002) and Inco Ltd.
(until 2002).
Patti McGill Peterson, Born: 1943 1998 39
Executive Director, Council for 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).
John A. Moore 2, Born: 1939 1998 39
President and Chief Executive Officer, 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).
John W. Pratt, Born: 1931 1998 31
Professor of Business Administration Emeritus, Harvard University
Graduate School of Business Administration (as of 1998).
INTERESTED TRUSTEES 3
NAME, AGE NUMBER OF
POSITION(S) HELD WITH FUND TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
John M. DeCiccio, Born: 1948 2001 61
Trustee
Executive Vice President and Chief Investment Officer, John Hancock
Financial Services, Inc.; Director, Executive Vice President and Chief
Investment Officer, John Hancock Life Insurance Company; Chairman of
the Committee of Finance of John Hancock Life Insurance Company;
Director, John Hancock Subsidiaries, LLC, Hancock Natural Resource
Group, Independence Investment LLC, Independence Fixed Income LLC,
John Hancock Advisers, LLC (the "Adviser") and The Berkeley Financial
Group, LLC ("The Berkeley Group"), John Hancock Funds, LLC ("John
Hancock Funds"), Massachusetts Business Development Corporation;
Director, John Hancock Insurance Agency, Inc. ("Insurance Agency, Inc.")
(until 1999) and John Hancock Signature Services, Inc. ("Signature
Services") (until 1997).
Maureen R. Ford, Born: 1955 2000 61
Trustee, Chairman, President and Chief Executive Officer
Executive Vice President, John Hancock Financial Services, Inc., John
Hancock Life Insurance Company; Chairman, Director, President and
Chief Executive Officer, the Adviser and The Berkeley Group; Chairman,
Director and Chief Executive Officer, John Hancock Funds; Chairman,
Director and Chief Executive Officer, Sovereign Asset Management
Corporation ("SAMCorp."); Director, Independence Investment LLC,
Independence Fixed Income LLC and Signature Services; Senior Vice
President, MassMutual Insurance Co. (until 1999).
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME, AGE
POSITION(S) HELD WITH FUND OFFICER
PRINCIPAL OCCUPATION(S) AND OF FUND
DIRECTORSHIPS DURING PAST 5 YEARS SINCE
William L. Braman, Born: 1953 2000
Executive Vice President and Chief Investment Officer
Executive Vice President and Chief Investment Officer, the Adviser and each of the John
Hancock funds; Director, SAMCorp., Executive Vice President and Chief Investment
Officer, Baring Asset Management, London UK (until 2000).
Richard A. Brown, Born: 1949 2000
Senior Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, the Adviser, John Hancock
Funds, and The Berkeley Group; Second Vice President and Senior Associate Controller,
Corporate Tax Department, John Hancock Financial Services, Inc. (until 2001).
Thomas H. Connors, Born: 1959 1998
Vice President and Compliance Officer
Vice President and Compliance Officer, the Adviser and each of the John Hancock funds;
Vice President, John Hancock Funds.
William H. King, Born: 1952 1998
Vice President and Treasurer
Vice President and Assistant 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, Born: 1950 1998
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Vice President,
Signature Services (until 2000); Director, Senior Vice President and Secretary, NM Capital.
The business address for all Trustees and Officers is 101 Huntington
Avenue, Boston Massachusetts, 02199.
The Statement of Additional Information of the Fund includes additional
information about members of the Board of Trustees of the Fund and is
available, without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee serves until resignation, retirement age or until his or her
successor is elected.
2 Member of Audit Committee.
3 Interested Trustees hold positions with the Fund's investment adviser,
underwriter and certain other affiliates.
OUR FAMILY
OF FUNDS
- -------------------------------------------------------
Equity Balanced Fund
Classic Value Fund
Core Equity Fund
Focused Equity Fund
Growth Trends Fund
Large Cap Equity Fund
Large Cap Growth Fund
Large Cap Spectrum Fund
Mid Cap Growth Fund
Multi Cap Growth Fund
Small Cap Equity Fund
Small Cap Growth Fund
Sovereign Investors Fund
U.S. Global Leaders Growth Fund
- -------------------------------------------------------
Sector Biotechnology Fund
Financial Industries Fund
Health Sciences Fund
Real Estate Fund
Regional Bank Fund
Technology Fund
- -------------------------------------------------------
Income Bond Fund
Government Income Fund
High Income Fund
High Yield Bond Fund
Investment Grade Bond Fund
Strategic Income Fund
- -------------------------------------------------------
International European Equity Fund
Global Fund
International Fund
Pacific Basin Equities Fund
- -------------------------------------------------------
Tax-Free Income California Tax-Free Income Fund
High Yield Municipal Bond Fund
Massachusetts Tax-Free Income Fund
New York Tax-Free Income Fund
Tax-Free Bond Fund
- -------------------------------------------------------
Money Market Money Market Fund
U.S. Government Cash Reserve
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FOR YOUR
INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUBADVISER
Nicholas-Applegate Capital Management LP
600 West Broadway
San Diego, California 92101
PRINCIPAL DISTRIBUTOR
John Hancock Funds, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By express mail John Hancock Signature Services, Inc.
Attn: Mutual Fund Image Operations
529 Main Street
Charlestown, MA 02129
Customer service representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhancock.com/funds/edelivery
This report is for the information of
the shareholders of the John Hancock
European Equity Fund.
9200A 10/02
12/02
JOHN HANCOCK INTERNATIONAL FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS - (UNAUDITED)
OCTOBER 31, 2002
Pro forma information is intended to provide shareholders of John Hancock
International Fund and John Hancock Global Fund with information about the
impact of the proposed merger by indicating how the merger might have affected
information had the merger been consummated as of November 1, 2001.
The unaudited pro forma combined statements of assets and liabilities and
results of operations as of October 31, 2002, have been prepared to reflect the
merger of the John Hancock International Fund and the John Hancock Global Fund
after giving effect to pro forma adjustments described in the notes listed
below.
(a) Acquisition by John Hancock International Fund of all the assets of John
Hancock Global Fund and issuance of John Hancock International 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 Global Fund.
(b) The investment advisory fee was adjusted to reflect the application of a
reduced fee structure which will be in effect for John Hancock
International Fund and will match the current fee structure of John
Hancock Global Fund:
0.90% of the first $100,000,000 of the Fund's net assets;
0.80% for the net assets between $100,000,000 and $300,000,000;
0.75% for the net assets between $300,000,000 and $500,000,000;
0.625% for the net assets in excess of $500,000,000
(c) The 12b-1 fee reflects the application of the fee structure which will be
in effect for the John Hancock International Fund: 0.30% of Class A
average daily net assets and 1.00% of Class B and Class C average daily
net assets.
(d) 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.
(e) The actual expenses incurred by the John Hancock International Fund and
John Hancock Global Fund for various expenses included on a pro forma
basis were reduced to reflect the estimated savings arising from the
merger.
(f) The Adviser has limited International Fund's total operating expenses at
least until March 1, 2004, to 2.35% of average daily net assets for Class
A shares and 3.05% of average daily net assets for Class B and Class C
shares.
JOHN HANCOCK INTERNATIONAL FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS - (UNAUDITED)
OCTOBER 31, 2002
Pro forma information is intended to provide shareholders of John Hancock
International Fund and John Hancock European Equity Fund with information about
the impact of the proposed merger by indicating how the merger might have
affected information had the merger been consummated as of November 1, 2001.
The unaudited pro forma combined statements of assets and liabilities and
results of operations as of October 31, 2002, have been prepared to reflect the
merger of the John Hancock International Fund and the John Hancock European
Equity Fund after giving effect to pro forma adjustments described in the notes
listed below.
(a) Acquisition by John Hancock International Fund of all the assets of John
Hancock European Equity Fund and issuance of John Hancock International
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 European Equity Fund.
(b) The investment advisory fee was adjusted to reflect the application of a
reduced fee structure which will be in effect for John Hancock
International Fund and will match the current fee structure of John
Hancock European Equity Fund:
0.90% of the first $100,000,000 of the Fund's net assets;
0.80% for the net assets between $100,000,000 and $300,000,000;
0.75% for the net assets between $300,000,000 and $500,000,000;
0.625% for the net assets in excess of $500,000,000
(c) The 12b-1 fee reflects the application of the fee structure which will be
in effect for the John Hancock International Fund: 0.30% of Class A
average daily net assets and 1.00% of Class B and Class C average daily
net assets.
(d) 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.
(e) The actual expenses incurred by the John Hancock International Fund and
John Hancock European Equity Fund for various expenses included on a pro
forma basis were reduced to reflect the estimated savings arising from the
merger.
(f) The Adviser has limited International Fund's total operating expenses at
least until March 1, 2004, to 2.35% of average daily net assets for Class
A shares and 3.05% of average daily net assets for Class B and Class C
shares.
JOHN HANCOCK INTERNATIONAL FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS - (UNAUDITED)
OCTOBER 31, 2002
Pro forma information is intended to provide shareholders of John Hancock
International Fund and John Hancock European Fund, Equity and John Hancock
Global Fund with information about the impact of the proposed merger by
indicating how the merger might have affected information had the merger been
consummated as of November 1, 2001.
The unaudited pro forma combined statements of assets and liabilities and
results of operations as of October 31, 2002, have been prepared to reflect the
merger of the John Hancock International Fund, John Hancock European Equity Fund
and John Hancock Global Fund after giving effect to pro forma adjustments
described in the notes listed below.
(a) Acquisition by John Hancock International Fund of all the assets of John
Hancock European Equity Fund and John Hancock Global Fund and issuance of
John Hancock International 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 European Equity and John Hancock Global Fund.
(b) The investment advisory fee was adjusted to reflect the application of a
reduced fee structure which will be in effect for John Hancock
International Fund and will match the current fee structure of John
Hancock European Equity and John Hancock Global Fund:
0.90% of the first $100,000,000 of the Fund's net assets;
0.80% for the net assets between $100,000,000 and $300,000,000;
0.75% for the net assets between $300,000,000 and $500,000,000;
0.625% for the net assets in excess of $500,000,000
(c) The 12b-1 fee reflects the application of the fee structure which will be
in effect for the John Hancock International Fund: 0.30% of Class A
average daily net assets and 1.00% of Class B and Class C average daily
net assets.
(d) 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.
(e) The actual expenses incurred by the John Hancock International Fund and
John Hancock European Equity Fund and John Hancock Global Fund for various
expenses included on a pro forma basis were reduced to reflect the
estimated savings arising from the merger.
(f) The Adviser has limited International Fund's total operating expenses at
least until March 1, 2004, to 2.35% of average daily net assets for Class
A shares and 3.05% of average daily net assets for Class B and Class C
shares.
John Hancock International Fund
Pro-forma Statement of Assets and Liabilities
October 31, 2002
(Unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL GLOBAL PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
------------- ------------ ------------ ------------
Assets:
Investments at value
(cost - $12,622,183, $50,290,093 and $62,912,276, respectively) $ 12,064,987 $ 50,554,359 $ -- $ 62,619,346
Cash 490 872 -- 1,362
Receivable for investments sold 272,210 2,292,176 -- 2,564,386
Receivable for shares sold 3,312 795,122 -- 798,434
Dividends and interest receivable 32,259 81,186 -- 113,445
Receivable from affiliates 26,936 -- -- 26,936
Other assets 2,243 10,562 -- 12,805
------------ ------------ ------------ ------------
Total Assets 12,402,437 53,734,277 -- 66,136,714
----------------------------------------------------- ------------ ------------ ------------
Liabilities:
Payable for investments purchased 201,661 1,274,029 -- 1,475,690
Payable for shares repurchased 4,206 1,853,253 -- 1,857,459
Payable for forward currency exchange contracts --
Payable to affiliates -- 100,209 -- 100,209
Accounts payable and accrued expenses 132,213 110,791 -- 243,004
------------ ------------ ------------ ------------
Total Liabilities 338,080 3,338,282 -- 3,676,362
----------------------------------------------------- ------------ ------------ ------------
Net Assets:
Capital paid-in 26,588,761 101,102,961 -- 127,691,722
Accumulated net realized gain (loss) on investments -- -- --
and foreign currency transactions (13,966,036) (50,964,568) (64,930,604)
Net unrealized appreciation (depreciation) of investments and -- -- --
translation of assets and liabilities in foreign currencies (557,744) 263,628 (294,116)
Accumulated net investment loss (624) (6,026) -- (6,650)
------------ ------------ ------------ ------------
$ 12,064,357 $ 50,395,995 $ -- $ 62,460,352
================================================================================ ============ ============ ============
Net Assets
International Fund
Class A $ 5,571,851 -- $ 39,090,539 $ 44,662,390
Class B $ 4,706,547 -- $ 10,624,860 $ 15,331,407
Class C $ 783,277 -- $ 680,596 $ 1,463,873
Class I $ 1,002,682 -- -- $ 1,002,682
Global Fund
Class A -- $ 39,090,539 $(39,090,539) --
Class B -- $ 10,624,860 $(10,624,860) --
Class C -- $ 680,596 $ (680,596) --
================================================================================ ============ ============ ============
Shares outstanding
International Fund
Class A 1,092,159 -- 7,665,145(a) 8,757,304
Class B 978,559 -- 2,208,795(a) 3,187,354
Class C 162,819 -- 141,522(a) 304,341
Class I 195,952 -- -- 195,952
Global Fund
Class A -- 5,919,275 (5,919,275)(a) --
Class B -- 1,802,131 (1,802,131)(a) --
Class C -- 115,405 (115,405)(a) --
================================================================================ ============ ============ ============
Net Asset Value Per Share
Class A $ 5.10 $ 6.60 --(a) $ 5.10
Class B $ 4.81 $ 5.90 --(a) $ 4.81
Class C $ 4.81 $ 5.90 --(a) $ 4.81
Class I $ 5.12 -- -- $ 5.12
================================================================================ ============ ============ ============
See Notes to Pro Forma Statements
John Hancock International Fund
Pro-forma Statement of Operations
October 31, 2002
(Unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL GLOBAL PRO-FORMA
FUND FUND ADJUSTMENTS COMBINED
------------- ------------ ------------ ------------
Investment Income:
Dividends (net of foreign withholding tax of $27,493,
and $44,950 and $72,443, respectively) $ 235,166 $ 642,526 $ -- $ 877,692
Interest (including income on securities loaned of $468
$2,011 and $2,479, respectively) 9,520 25,837 35,357
------------ ------------ ------------ ------------
244,686 668,363 913,049
------------ ------------ ------------ ------------
Expenses:
Investment management fee 143,908 578,787 (14,391)(b) 708,304
Class A distribution and service fee 21,175 145,228 --(c) 166,403
Class B distribution and service fee 58,879 150,712 --(c) 209,591
Class C distribution and service fee 9,672 8,291 --(c) 17,963
Class A, Class B and Class C transfer agent fee 164,099 524,384 --(d) 688,483
Transfer agent fee Class I 5,458 -- -- 5,458
Custodian fee 162,080 106,322 (74,425)(e) 193,977
Registration and filing fee 57,086 44,119 (28,543)(e) 72,662
Auditing fee 36,633 36,900 (31,533)(e) 42,000
Printing 17,017 -- --(e) 17,017
Accounting and legal services fee 3,047 13,585 -- 16,632
Miscellaneous 2,710 1,754 -- 4,464
Trustees' fee 912 4,333 -- 5,245
Legal fee 522 1,988 -- 2,510
Interest expense 464 3,274 -- 3,738
------------ ------------ ------------ ------------
Total Expenses 683,662 1,619,677 (148,892) 2,154,447
---------------------------------------------------------------------- ------------ ------------ ------------
Less Expense Reductions (294,862) -- 145,331(f) (149,531)
---------------------------------------------------------------------- ------------ ------------ ------------
Net Expenses 388,800 1,619,677 (3,561) 2,004,916
---------------------------------------------------------------------- ------------ ------------ ------------
Net Investment loss (144,114) (951,314) 3,561 (1,091,867)
---------------------------------------------------------------------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (2,537,653) (10,179,806) -- (12,717,459)
Foreign currency transactions (8,371) 18,431 -- 10,060
Change in net unrealized appreciation (depreciation) of:
Investments 92,047 2,858,148 -- 2,950,195
Translation of assets and liabilities in foreign currencies (35,291) (88,581) -- (123,872)
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) (2,489,268) (7,391,808) (9,881,076)
------------ ------------ ------------ ------------
Increase (Decrease) in net assets resulting from operations $ (2,633,382) $ (8,343,122) $ 3,561 $(10,972,943)
================================================================================== ============ ============ ============
See Notes to Pro-Forma Statements
Statement of Changes in Net Assets EUROPEAN EQUITY FUND INTERNATIONAL FUND
---------------------------------- ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
October 31, 2001 October 31, 2002 October 31, 2001 October 31, 2002
---------------- ---------------- ---------------- ----------------
INCRESE (DECREASE) IN NET ASSETS
From operations:
Net investment loss $0 $0 $0 $0
Net realized gain (loss) 0 0 0 0
Change in net unrealized appreciation (depreciation) 0 0 0 0
---------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets resulting from operations 0 0 0 0
---------------- ---------------- ---------------- ----------------
Distributions to shareholders:
From net investment income 0 0 0 0
From net realized gain -- 0 -- 0
---------------- ---------------- ---------------- ----------------
0 0 0 0
---------------- ---------------- ---------------- ----------------
From fund share transactions
---------------- ---------------- ---------------- ----------------
NET ASSETS
Beginning of period 0 0 0 0
End of period (1) $0 $0 $0 $0
================ ================ ================ ================
Statement of Changes in Net Assets GLOBAL FUND
----------------------------------
YEAR ENDED YEAR ENDED
October 31, 2001 October 31, 2002
---------------- ----------------
INCRESE (DECREASE) IN NET ASSETS
From operations:
Net investment loss $0 $0
Net realized gain (loss) 0 0
Change in net unrealized appreciation (depreciation) 0 0
---------------- ----------------
Increase (decrease) in net assets resulting from operations 0 0
---------------- ----------------
Distributions to shareholders:
From net investment income 0 0
From net realized gain -- 0
---------------- ----------------
0 0
---------------- ----------------
From fund share transactions
---------------- ----------------
NET ASSETS
Beginning of period 0 0
End of period (1) $0 $0
================ ================
(1) Includes accumulated net investment loss of $xxx, $xxx, $xxx, $xxx, $xxx
and $xxx, respectively.
John Hancock International Fund
Pro-forma Statement of Assets and Liabilities
October 31, 2002
(Unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL EUROPEAN PRO FORMA
FUND EQUITY FUND ADJUSTMENTS COMBINED
------------- ------------ ------------ ------------
Assets:
Investments at value
(cost - $12,622,183, $12,208,965 and $24831,148, respectively) $ 12,064,987 $ 11,726,172 $ -- $ 23,791,159
Cash 490 845 -- 1,335
Receivable for investments sold 272,210 8,587 -- 280,797
Receivable for shares sold 3,312 -- -- 3,312
Dividends and interest receivable 32,259 37,032 -- 69,291
Receivable from affiliates 26,936 -- -- 26,936
Other assets 2,243 617 -- 2,860
------------ ------------ ------------ ------------
Total Assets 12,402,437 11,773,253 -- 24,175,690
------------------------------------------------------ ------------ ------------ ------------
Liabilities:
Payable for investments purchased 201,661 233,646 -- 435,307
Payable for shares repurchased 4,206 -- -- 4,206
Payable for forward currency exchange contracts --
Payable to affiliates -- 23,376 -- 23,376
Accounts payable and accrued expenses 132,213 67,731 -- 199,944
------------ ------------ ------------ ------------
Total Liabilities 338,080 324,753 -- 662,833
------------------------------------------------------ ------------ ------------ ------------
Net Assets:
Capital paid-in 26,588,761 20,697,603 -- 47,286,364
Accumulated net realized gain (loss) on investments 0.00
and foreign currency transactions (13,966,036) (8,766,909) (22,732,945)
Net unrealized appreciation (depreciation) of investments and
translation of assets and liabilities in foreign currencies (557,744) (482,010) (1,039,754)
Accumulated net investment loss (624) (184) -- (808)
------------ ------------ ------------ ------------
$ 12,064,357 $ 11,448,500 $ -- $ 23,512,857
================================================================================ ============ ============ ============
Net Assets $ --
International Fund
Class A $ 5,571,851 -- $ 5,621,320 $ 11,193,171
Class B $ 4,706,547 -- $ 5,579,028 $ 10,285,575
Class C $ 783,277 -- $ 248,152 $ 1,031,429
Class I $ 1,002,682 -- -- $ 1,002,682
European Fund
Class A -- $ 5,621,320 $ (5,621,320) --
Class B -- $ 5,579,028 $ (5,579,028) --
Class C -- $ 248,152 $ (248,152) --
================================================================================ ============ ============ ============
Shares outstanding
International Fund
Class A 1,092,159 -- 1,102,580(a) 2,194,739
Class B 978,559 -- 1,159,814(a) 2,138,373
Class C 162,819 -- 51,615(a) 214,434
Class I 195,952 -- -- 195,952
European Fund
Class A -- 873,321 (873,321)(a) --
Class B -- 893,734 (893,734)(a) --
Class C -- 39,749 (39,749)(a) --
================================================================================ ============ ============ ============
Net Asset Value Per Share
Class A $ 5.10 $ 6.44 --(a) $ 5.10
Class B $ 4.81 $ 6.24 --(a) $ 4.81
Class C $ 4.81 $ 6.24 --(a) $ 4.81
Class I $ 5.12 -- -- $ 5.12
================================================================================ ============ ============ ============
See Notes to Pro Forma Statements
John Hancock International Fund
Pro-forma Statement of Operations
October 31, 2002
(Unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL EUROPEAN PRO-FORMA
FUND EQUITY FUND ADJUSTMENTS COMBINED
------------- ----------- ----------- -----------
Investment Income:
Dividends (net of foreign withholding tax of $27,493,
$29,561 and 457,054, respectively) $ 235,166 $ 253,441 $ -- $ 488,607
Interest (including income on securities loaned of $468,
$1,150 and $1,618, respectively) 9,520 12,676 -- 22,196
----------- ----------- ----------- -----------
244,686 266,117 510,803
----------- ----------- ----------- -----------
Expenses:
Investment management fee 143,908 131,871 (14,391)(b) 261,388
Class A distribution and service fee 21,175 20,968 --(c) 42,143
Class B distribution and service fee 58,879 73,556 --(c) 132,435
Class C distribution and service fee 9,672 3,073 --(c) 12,745
Class A, Class B and Class C transfer agent fee 164,099 36,229 --(d) 200,328
Transfer agent fee Class I 5,458 -- -- 5,458
Custodian fee 162,080 113,665 (79,565)(e) 196,180
Registration and filing fee 57,086 28,080 (14,040)(e) 71,126
Auditing fee 36,633 20,500 (15,133)(e) 42,000
Printing 17,017 7,500 (3,750)(e) 20,767
Accounting and legal services fee 3,047 2,853 -- 5,900
Miscellaneous 2,710 2,099 -- 4,809
Trustees' fee 912 962 -- 1,874
Legal fee 522 206 -- 728
Interest expense 464 105 -- 569
----------- ----------- ----------- -----------
Total Expenses 683,662 441,667 (126,879) 998,450
---------------------------------------------------------------------- ----------- ----------- -----------
Less Expense Reductions (294,862) (109,528) 192,375(f) (212,015)
---------------------------------------------------------------------- ----------- ----------- -----------
Net Expenses 388,800 332,139 65,496 786,435
---------------------------------------------------------------------- ----------- ----------- -----------
Net Investment loss (144,114) (66,022) (65,496) (275,632)
---------------------------------------------------------------------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (2,537,653) (2,966,174) -- (5,503,827)
Foreign currency transactions (8,371) (59,993) -- (68,364)
Change in net unrealized appreciation (depreciation) of:
Investments 92,047 482,251 -- 574,298
Translation of assets and liabilities in foreign currencies (35,291) 513 -- (34,778)
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) (2,489,268) (2,543,403) (5,032,671)
----------- ----------- ----------- -----------
Increase (Decrease) in net assets resulting from operations $(2,633,382) $(2,609,425) $ (65,496) $(5,308,303)
================================================================================== =========== =========== ===========
See Notes to Pro-Forma Statements
Statement of Changes in Net Assets EUROPEAN EQUITY FUND INTERNATIONAL FUND
---------------------------------- ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
October 31, 2001 October 31, 2002 October 31, 2001 October 31, 2002
---------------- ---------------- ---------------- ----------------
INCRESE (DECREASE) IN NET ASSETS
From operations:
Net investment loss $0 $0 $0 $0
Net realized gain (loss) 0 0 0 0
Change in net unrealized appreciation (depreciation) 0 0 0 0
---------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets resulting from operations 0 0 0 0
---------------- ---------------- ---------------- ----------------
Distributions to shareholders:
From net investment income 0 0 0 0
From net realized gain -- 0 -- 0
---------------- ---------------- ---------------- ----------------
0 0 0 0
---------------- ---------------- ---------------- ----------------
From fund share transactions
---------------- ---------------- ---------------- ----------------
NET ASSETS
Beginning of period 0 0 0 0
End of period (1) $0 $0 $0 $0
================ ================ ================ ================
Statement of Changes in Net Assets GLOBAL FUND
----------------------------------
YEAR ENDED YEAR ENDED
October 31, 2001 October 31, 2002
---------------- ----------------
INCRESE (DECREASE) IN NET ASSETS
From operations:
Net investment loss $0 $0
Net realized gain (loss) 0 0
Change in net unrealized appreciation (depreciation) 0 0
---------------- ----------------
Increase (decrease) in net assets resulting from operations 0 0
---------------- ----------------
Distributions to shareholders:
From net investment income 0 0
From net realized gain -- 0
---------------- ----------------
0 0
---------------- ----------------
From fund share transactions
---------------- ----------------
NET ASSETS
Beginning of period 0 0
End of period (1) $0 $0
================ ================
(1) Includes accumulated net investment loss of $xxx, $xxx, $xxx, $xxx, $xxx
and $xxx, respectively.
John Hancock International Fund
Pro-forma Statement of Assets and Liabilities
October 31, 2002
(Unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL EUROPEAN GLOBAL PRO-FORMA
FUND EQUITY FUND FUND ADJUSTMENTS COMBINED
------------- ------------ ------------ ------------ ------------
Assets:
Investments at value
(cost - $12,622,183, $12,208,965 $50,290,093,
and $75,121,241, respectively) $ 12,064,987 $ 11,726,172 $ 50,554,359 $ -- $ 74,345,518
Cash 490 845 872 -- 2,207
Receivable for investments sold 272,210 8,587 2,292,176 -- 2,572,973
Receivable for shares sold 3,312 -- 795,122 -- 798,434
Dividends and interest receivable 32,259 37,032 81,186 -- 150,477
Receivable from affiliates 26,936 -- -- -- 26,936
Other assets 2,243 617 10,562 -- 13,422
------------ ------------ ------------ ------------ ------------
Total Assets 12,402,437 11,773,253 53,734,277 77,909,967
------------------------------------ ------------ ------------ ------------ ------------
Liabilities:
Payable for investments purchased 201,661 233,646 1,274,029 -- 1,709,336
Payable for shares repurchased 4,206 -- 1,853,253 -- 1,857,459
Payable for forward currency exchange contracts --
Payable to affiliates -- 23,376 100,209 -- 123,585
Accounts payable and accrued expenses 132,213 67,731 110,791 -- 310,735
------------ ------------ ------------ ------------ ------------
Total Liabilities 338,080 324,753 3,338,282 4,001,115
------------------------------------ ------------ ------------ ------------ ------------
Net Assets:
Capital paid-in 26,588,761 20,697,603 101,102,961 -- 148,389,325
Accumulated net realized gain (loss) on
investments and foreign currency transactions (13,966,036) (8,766,909) (50,964,568) -- (73,697,513)
Net unrealized appreciation (depreciation) of
investments and translation of assets and
liabilities in foreign currencies (557,744) (482,010) 263,628 -- (776,126)
Accumulated net investment loss (624) (184) (6,026) -- (6,834)
------------ ------------ ------------ ------------ ------------
$ 12,064,357 $ 11,448,500 $ 50,395,995 $ 73,908,852
=============================================================== ============ ============ ============ ============
Net Assets
International Fund
Class A $ 5,571,851 -- -- $ 44,711,859(a) $ 50,283,710
Class B $ 4,706,547 -- -- 16,203,888(a) $ 20,910,435
Class C $ 783,277 -- -- 928,748(a) $ 1,712,025
Class I $ 1,002,682 -- -- $ 1,002,682
European Equity Fund
Class A -- $ 5,621,320 -- $ (5,621,320)(a) --
Class B -- $ 5,579,028 -- $ (5,579,028)(a) --
Class C -- $ 248,152 -- $ (248,152)(a) --
Global Fund
Class A -- -- $ 39,090,539 $(39,090,539)(a) --
Class B -- -- $ 10,624,860 $(10,624,860)(a) --
Class C -- -- $ 680,596 $ (680,596)(a) --
=============================================================== ============ ============ ============ ============
Shares outstanding
International Fund 1,092,159 -- -- 8,767,364(a) 9,859,523
Class A 978,559 -- -- 3,368,677(a) 4,347,236
Class B 162,819 -- -- 193,112(a) 355,931
Class C 195,952 -- -- 195,952
Class I
European Equity Fund
Class A -- 873,321 -- (873,321)(a) --
Class B -- 893,734 -- (893,734)(a) --
Class C -- 39,749 -- (39,749)(a) --
Global Fund
Class A -- -- 5,919,275 (5,919,275)(a) --
Class B -- -- 1,802,131 (1,802,131)(a) --
Class C -- -- 115,405 (115,405)(a) --
=============================================================== ============ ============ ============ ============
Net Asset Value Per Share
Class A $ 5.10 $ 6.44 $ 6.60 --(a) $ 5.10
Class B $ 4.81 $ 6.24 $ 5.90 --(a) $ 4.81
Class C $ 4.81 $ 6.24 $ 5.90 --(a) $ 4.81
Class I $ 5.12 $ -- -- -- $ 5.12
=============================================================== ============ ============ ============ ============
See Notes to Pro-Forma Statements
John Hancock International Fund
Pro-forma Statement of Operations
October 31, 2002
(Unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL EUROPEAN GLOBAL PRO-FORMA
FUND EQUITY FUND FUND ADJUSTMENTS COMBINED
------------- ------------ ------------ ------------ ------------
Investment Income:
Dividends (net of foreign withholding tax of
$27,493, 29,561, $44,950 and $102,004,
respectively) $ 235,166 $ 253,441 $ 642,526 $ -- $ 1,131,133
Interest (including income on securities loaned of
$468, $1,150, $2,011 and $3,629, respectively) 9,520.00 12,676 25,837 -- 48,033.00
------------ ------------ ------------ ------------ ------------
244,686 266,117 668,363 -- 1,179,166
------------ ------------ ------------ ------------ ------------
Expenses:
Investment management fee 143,908 131,871 578,787 (14,391)(b) 840,175
Class A distribution and service fee 21,175 20,968 145,228 --(c) 187,371
Class B distribution and service fee 58,879 73,556 150,712 --(c) 283,147
Class C distribution and service fee 9,672 3,073 8,291 --(c) 21,036
Class A, Class B and Class C transfer agent fee 164,099 36,229 524,384 --(d) 724,712
Transfer agent fee Class I 5,458 -- -- -- 5,458
Custodian fee 162,080 113,665 106,322 (153,990)(e) 228,077
Registration and filing fee 57,086 28,080 44,119 (42,583)(e) 86,702
Auditing fee 36,633 20,500 36,900 (52,033)(e) 42,000
Printing 17,017 7,500 -- (3,750)(e) 20,767
Accounting and legal services fee 3,047 2,853 13,585 -- 19,485
Miscellaneous 2,710 2,099 1,754 -- 6,563
Trustees' fee 912 962 4,333 -- 6,207
Legal fee 522 206 1,988 -- 2,716
Interest expense 464 105 3,274 -- 3,843
------------ ------------ ------------ ------------ ------------
Total Expenses 683,662 441,667 1,619,677 (266,747) 2,478,259
------------------------------------------------------ ------------ ------------ ------------ ------------
Less Expense Reductions (294,862) (109,528) -- 329,708(f) (74,682)
------------------------------------------------------ ------------ ------------ ------------ ------------
Net Expenses 388,800 332,139 1,619,677 62,961 2,403,577
------------------------------------------------------ ------------ ------------ ------------ ------------
Net Investment loss (144,114) (66,022) (951,314) (62,961) (1,224,411)
------------------------------------------------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (2,537,653) (2,966,174) (10,179,806) -- (15,683,633)
Foreign currency transactions (8,371) (59,993) 18,431 -- (49,933)
Change in net unrealized appreciation
(depreciation) of:
Investments 92,047 482,251 2,858,148 -- 3,432,446
Translation of assets and liabilities in
foreign currencies (35,291) 513 (88,581) -- (123,359)
------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) (2,489,268) (2,543,403) (7,391,808) -- (12,424,479)
------------ ------------ ------------ ------------ ------------
Increase (Decrease) in net assets resulting
from operations $ (2,633,382) $ (2,609,425) $ (8,343,122) $ (62,961) $(13,648,890)
================================================================= ============ ============ ============ ============
See Notes to Pro-Forma Statements
Statement of Changes in Net Assets EUROPEAN EQUITY FUND INTERNATIONAL FUND
---------------------------------- ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
October 31, 2001 October 31, 2002 October 31, 2001 October 31, 2002
---------------- ---------------- ---------------- ----------------
INCRESE (DECREASE) IN NET ASSETS
From operations:
Net investment loss $0 $0 $0 $0
Net realized gain (loss) 0 0 0 0
Change in net unrealized appreciation (depreciation) 0 0 0 0
---------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets resulting from operations 0 0 0 0
---------------- ---------------- ---------------- ----------------
Distributions to shareholders:
From net investment income 0 0 0 0
From net realized gain -- 0 -- 0
---------------- ---------------- ---------------- ----------------
0 0 0 0
---------------- ---------------- ---------------- ----------------
From fund share transactions
---------------- ---------------- ---------------- ----------------
NET ASSETS
Beginning of period 0 0 0 0
End of period (1) $0 $0 $0 $0
================ ================ ================ ================
Statement of Changes in Net Assets GLOBAL FUND
----------------------------------
YEAR ENDED YEAR ENDED
October 31, 2001 October 31, 2002
---------------- ----------------
INCRESE (DECREASE) IN NET ASSETS
From operations:
Net investment loss $0 $0
Net realized gain (loss) 0 0
Change in net unrealized appreciation (depreciation) 0 0
---------------- ----------------
Increase (decrease) in net assets resulting from operations 0 0
---------------- ----------------
Distributions to shareholders:
From net investment income 0 0
From net realized gain -- 0
---------------- ----------------
0 0
---------------- ----------------
From fund share transactions
---------------- ----------------
NET ASSETS
Beginning of period 0 0
End of period (1) $0 $0
================ ================
(1) Includes accumulated net investment loss of $xxx, $xxx, $xxx, $xxx, $xxx
and $xxx, respectively.
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund and European Equity Fund combined on October 31, 2002.
------------------------------
International Fund
- ---------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
Australia 1.19%
Commonwealth Bank of Australia (Banks - Foreign) 7,600 128,227
Woolworths Ltd. (Retail) 22,333 152,580
----------
280,807
----------
Belgium 1.30%
Dexia SA (Banks - Foreign) 6,300 60,455
Interbrew SA (Beverages) 3,900 87,864
----------
148,319
----------
Bermuda 0.15%
Nabors Industries Ltd.* (Oil & Gas) 1,000 34,970
----------
Brazil 0.60%
Aracruz Celulose SA American Depositary Receipts (ADR)
(Paper & Paper Products) 4,100 65,559
Tele Norte Leste Participacoes SA (ADR)
(Telecommunications) 11,000 76,120
----------
141,679
----------
Canada 2.49%
Barrick Gold Corp. (Metal) 7,900 119,053
Canadian National Railway Co. (Transport) 2,100 89,607
Loblaw Cos., Ltd. (Retail) 2,700 97,531
Petro-Canada (Oil & Gas) 1,500 41,460
Shoppers Drug Mart Corp.* (Retail) 3,600 57,237
Suncor Energy, Inc. (Oil & Gas) 3,800 54,979
Talisman Energy, Inc. (Oil & Gas) 3,400 124,848
----------
584,715
----------
Denmark 1.27%
Carlsberg AS (Beverages)
Danisco AS (Food)
Jyske Bank AS* (Banks - Foreign)
TDC AS (Telecommunications) 2,900 62,601
----------
Finland 2.94%
Nokia Oyj (ADR) (Telecommunications) 13,500 224,370
----------
Perlos Oyj (Electronics)
Sampo Oyj (A Shares) (Finance)
France 7.58%
Axa SA (Insurance) 13,200 196,993
JC Decaux SA* (Advertising)
L'Oreal SA (Cosmetics & Personal Care) 1,200 89,364
Pernod-Ricard SA (Beverages)
Sanofi-Synthelabo SA (Medical) 1,800 110,071
TotalFinaElf SA (Oil & Gas) 1,189 163,785
Unibail SA (Real Estate Operations)
Vinci SA (Engineering / R&D Services)
Vivendi Environnement SA (Utilities) 5,800 137,504
----------
697,717
----------
Germany 4.47%
AMB Generali Holding AG (Insurance)
Bayerische Motoren Werke AG (Automobile / Trucks) 2,600 92,692
Degussa AG (Chemicals) 2,900 86,156
----------------------------------------------------------------
European Equity Fund Combined
- ------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
Australia
Commonwealth Bank of Australia (Banks - Foreign) 7,600 128,227
Woolworths Ltd. (Retail) 22,333 152,580
----------
280,807
----------
Belgium
Dexia SA (Banks - Foreign) 8,000 76,768 14,300 137,223
Interbrew SA (Beverages) 3,600 81,105 7,500 168,969
---------- ----------
157,873 306,192
---------- ----------
Bermuda
Nabors Industries Ltd.* (Oil & Gas) 1,000 34,970
----------
Brazil
Aracruz Celulose SA American Depositary Receipts (ADR)
(Paper & Paper Products) 4,100 65,559
Tele Norte Leste Participacoes SA (ADR)
(Telecommunications) 11,000 76,120
----------
141,679
----------
Canada
Barrick Gold Corp. (Metal) 7,900 119,053
Canadian National Railway Co. (Transport) 2,100 89,607
Loblaw Cos., Ltd. (Retail) 2,700 97,531
Petro-Canada (Oil & Gas) 1,500 41,460
Shoppers Drug Mart Corp.* (Retail) 3,600 57,237
Suncor Energy, Inc. (Oil & Gas) 3,800 54,979
Talisman Energy, Inc. (Oil & Gas) 3,400 124,848
----------
584,715
----------
Denmark
Carlsberg AS (Beverages) 800 37,523 800 37,523
Danisco AS (Food) 2,000 65,026 2,000 65,026
Jyske Bank AS* (Banks - Foreign) 2,400 56,285 2,400 56,285
TDC AS (Telecommunications) 3,600 77,711 6,500 140,312
---------- ----------
236,545 299,146
---------- ----------
Finland
Nokia Oyj (ADR) (Telecommunications) 12,000 199,440 25,500 423,810
Perlos Oyj (Electronics) 29,800 190,640 29,800 190,640
Sampo Oyj (A Shares) (Finance) 11,100 75,737 11,100 75,737
---------- ----------
465,817 690,187
---------- ----------
France
Axa SA (Insurance) 12,300 183,562 25,500 380,555
JC Decaux SA* (Advertising) 5,000 53,724 5,000 53,724
L'Oreal SA (Cosmetics & Personal Care) 1,200 89,364 2,400 178,728
Pernod-Ricard SA (Beverages) 500 50,654 500 50,654
Sanofi-Synthelabo SA (Medical) 1,800 110,071 3,600 220,142
TotalFinaElf SA (Oil & Gas) 1,900 261,725 3,089 425,510
Unibail SA (Real Estate Operations) 2,200 126,253 2,200 126,253
Vinci SA (Engineering / R&D Services) 1,500 83,779 1,500 83,779
Vivendi Environnement SA (Utilities) 5,300 125,651 11,100 263,155
---------- ----------
1,084,783 1,782,500
---------- ----------
Germany
AMB Generali Holding AG (Insurance) 10 609 10 609
Bayerische Motoren Werke AG (Automobile / Trucks) 2,200 78,431 4,800 171,123
Degussa AG (Chemicals) 2,900 86,156
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund and European Equity Fund combined on October 31, 2002.
------------------------------
International Fund
- ---------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- ---------------------------------------------------------------------------------------------------------------------
Deutsche Telekom AG (Telecommunications) 5,900 67,717
E.ON AG (Utilities) 3,600 162,923
Fraport AG (Transport)
SAP AG (Computers) 2,400 184,195
Schwarz Pharma AG (Medical)
----------
593,683
----------
Greece 0.90%
Coca-Cola Hellenic Bottling Co. SA (Beverages) 4,800 67,594
Hellenic Telecommunications Organization SA
(Telecommunications) 4,800 53,999
----------
121,593
----------
Hong Kong 1.53%
China Mobile Ltd.* (Telecommunications) 31,000 76,115
CLP Holdings Ltd. (Utilities) 37,500 151,935
Sun Hung Kai Properties, Ltd. (Real Estate Operations) 21,000 130,856
----------
358,906
----------
India 0.66%
Hindustan Lever Ltd.* (Soap & Cleaning Preparations) 18,059 59,885
Infosys Technology Ltd.* (Computers) 1,200 94,029
----------
153,914
----------
Indonesia 0.07%
PT Telekomunikasi Indonesia (Telecommunications) 52,000 17,324
----------
Ireland 2.78%
Bank of Ireland (Banks - Foreign) 11,000 122,004
CRH Plc (Building) 7,100 89,646
ICON Plc* (ADR) (Business Services - Misc)
Irish Life & Permanent Plc (Finance)
----------
211,650
----------
Israel 1.42%
Teva Pharmaceutical Industries Ltd. (ADR) (Medical) 2,100 162,603
----------
Italy 8.99%
Autostrade SpA (Transport) 22,500 186,052
ENI SpA (Oil & Gas) 9,600 133,286
Finmeccanica SpA (Aerospace) 152,400 83,761
Impregilo SpA* (Building)
Italcementi SpA (Building)
Italgas SpA (Utilities)
Mediaset SpA (Media) 10,300 71,910
Parmalat Finanziaria SpA (Food)
Riunione Adriatica di Sicurta SpA (Insurance) 8,216 102,354
Saipem SpA (Oil & Gas)
Snam Rete Gas SpA (Utilities) 43,600 130,394
UniCredito Italiano SpA (Banks - Foreign) 25,200 94,831
----------
802,588
----------
Japan 7.69%
Asahi Glass Co., Ltd. (Building) 11,000 65,815
Bridgestone Corp (Rubber - Tires & Misc) 10,000 124,643
Dai Nippon Printing Co., Ltd. (Printing - Commercial) 13,000 132,854
Daiwa Securities Group, Inc. (Finance) 20,000 93,380
Fanuc Ltd. (Electronics) 200 7,918
Hoya Corp. (Electronics) 2,000 137,295
Ito-Yokado Co., Ltd. (Retail) 2,000 62,362
----------------------------------------------------------------
European Equity Fund Combined
- ------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- ------------------------------------------------------------------------------------------------------------------------
Deutsche Telekom AG (Telecommunications) 2,500 89,622 8,400 157,339
E.ON AG (Utilities) 1,786 80,828 5,386 243,751
Fraport AG (Transport) 2,200 44,662 2,200 44,662
SAP AG (Computers) 1,500 115,122 3,900 299,317
Schwarz Pharma AG (Medical) 2,500 48,029 2,500 48,029
---------- ----------
457,303 1,050,986
---------- ----------
Greece
Coca-Cola Hellenic Bottling Co. SA (Beverages) 6,400 90,125 11,200 157,719
----------
Hellenic Telecommunications Organization SA
(Telecommunications) 4,800 53,999
----------
211,718
----------
Hong Kong
China Mobile Ltd.* (Telecommunications) 31,000 76,115
CLP Holdings Ltd. (Utilities) 37,500 151,935
Sun Hung Kai Properties, Ltd. (Real Estate Operations) 21,000 130,856
----------
358,906
----------
India
Hindustan Lever Ltd.* (Soap & Cleaning Preparations) 18,059 59,885
Infosys Technology Ltd.* (Computers) 1,200 94,029
----------
153,914
----------
Indonesia
PT Telekomunikasi Indonesia (Telecommunications) 52,000 17,324
----------
Ireland
Bank of Ireland (Banks - Foreign) 10,500 116,459 21,500 238,463
CRH Plc (Building) 7,200 91,408 14,300 181,054
ICON Plc* (ADR) (Business Services - Misc) 3,300 79,632 3,300 79,632
Irish Life & Permanent Plc (Finance) 13,300 155,172 13,300 155,172
---------- ----------
442,671 654,321
---------- ----------
Israel
Teva Pharmaceutical Industries Ltd. (ADR) (Medical) 2,200 170,346 4,300 332,949
---------- ----------
Italy
Autostrade SpA (Transport) 19,200 158,764 41,700 344,816
ENI SpA (Oil & Gas) 13,200 183,268 22,800 316,554
Finmeccanica SpA (Aerospace) 188,000 103,327 340,400 187,088
Impregilo SpA* (Building) 120,000 46,346 120,000 46,346
Italcementi SpA (Building) 14,500 127,367 14,500 127,367
Italgas SpA (Utilities) 9,700 94,522 9,700 94,522
Mediaset SpA (Media) 9,700 67,721 20,000 139,631
Parmalat Finanziaria SpA (Food) 45,300 126,506 45,300 126,506
Riunione Adriatica di Sicurta SpA (Insurance) 10,459 130,297 18,675 232,651
Saipem SpA (Oil & Gas) 11,800 63,803 11,800 63,803
Snam Rete Gas SpA (Utilities) 40,500 121,123 84,100 251,517
UniCredito Italiano SpA (Banks - Foreign) 23,400 88,057 48,600 182,888
---------- ----------
1,311,101 2,113,689
---------- ----------
Japan
Asahi Glass Co., Ltd. (Building) 11,000 65,815
Bridgestone Corp (Rubber - Tires & Misc) 10,000 124,643
Dai Nippon Printing Co., Ltd. (Printing - Commercial) 13,000 132,854
Daiwa Securities Group, Inc. (Finance) 20,000 93,380
Fanuc Ltd. (Electronics) 200 7,918
Hoya Corp. (Electronics) 2,000 137,295
Ito-Yokado Co., Ltd. (Retail) 2,000 62,362
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund and European Equity Fund combined on October 31, 2002.
------------------------------
International Fund
- ---------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- ---------------------------------------------------------------------------------------------------------------------
Kao Corp. (Cosmetics & Personal Care) 6,000 137,132
Keyence Corp. (Electronics) 600 99,323
Millea Holdings, Inc.* (Insurance) 11 82,157
Murata Manufacturing Co., Ltd. (Electronics) 1,900 89,797
Nintendo Co., Ltd. (Leisure) 900 86,687
Rohm Co., Ltd. (Electronics) 100 12,595
Shin-Etsu Chemical Co., Ltd. (Chemicals) 2,200 67,880
Shiseido Co., Ltd. (Cosmetics & Personal Care) 10,000 111,175
Sony Corp. (Electronics) 3,200 137,654
Sumitomo Mitsu Banking Corp. (Banks - Foreign) 18,000 74,492
Takeda Chemical Industries, Ltd. (Medical) 3,600 149,571
Tokyo Gas Co., Ltd. (Utilities) 22,000 64,289
Yamato Transport Co., Ltd. (Transport) 5,000 71,219
----------
1,808,238
----------
Luxembourg 0.86%
Arcelor SA* (Steel) 11,900 128,569
----------
Mexico 0.29%
Wal-Mart de Mexico SA de CV (Series C) (Retail) 31,100 66,943
----------
Netherlands 4.54%
Euronext NV (Finance)
Heineken NV (Beverages) 2,700 108,476
IHC Caland NV (Oil & Gas)
Royal Dutch Petroleum Co. (Oil & Gas) 3,100 134,094
Unilever NV (Food) 3,300 211,601
Van der Moolen Holding NV (Finance)
----------
454,171
----------
Norway 1.76%
Frontline Ltd. (Transport)
Gjensidige NOR ASA* (Finance)
ProSafe ASA * (Oil & Gas)
Tandberg ASA* (Telecommunications)
Tomra Systems ASA (Pollution Control)
Singapore 0.96%
Singapore Press Holdings Ltd. (Media) 8,000 89,709
United Overseas Bank Ltd. (Banks - Foreign) 18,000 136,603
----------
226,312
----------
South Korea 1.19%
Hyundai Motor Co., Ltd. (Automobile / Trucks) 2,280 57,912
Kookmin Bank (Banks - Foreign) 1,500 49,979
Samsung Electronics, Ltd.* Global Depositary Receipts
(Electronics) (R) 700 99,100
SK Telecom Co., Ltd. (Telecommunications) 400 73,861
----------
280,852
----------
Spain 4.84%
Acciona SA (Building)
Actividades de Construccion y Servicios SA (Building)
Banco Bilbao Vizcaya Argentaria SA (Banks - Foreign) 13,954 132,935
Banco Popular Espanol SA (Banks - Foreign) 1,900 81,359
Corporacion Mapfre SA (Insurance)
Endesa SA (Utilities) 7,500 77,466
Iberia Lineas Aereas de Espana SA (Transport)
Telefonica SA* (Telecommunications) 12,900 122,383
----------
414,143
----------
----------------------------------------------------------------
European Equity Fund Combined
- ------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- ------------------------------------------------------------------------------------------------------------------------
Kao Corp. (Cosmetics & Personal Care) 6,000 137,132
Keyence Corp. (Electronics) 600 99,323
Millea Holdings, Inc.* (Insurance) 11 82,157
Murata Manufacturing Co., Ltd. (Electronics) 1,900 89,797
Nintendo Co., Ltd. (Leisure) 900 86,687
Rohm Co., Ltd. (Electronics) 100 12,595
Shin-Etsu Chemical Co., Ltd. (Chemicals) 2,200 67,880
Shiseido Co., Ltd. (Cosmetics & Personal Care) 10,000 111,175
Sony Corp. (Electronics) 3,200 137,654
Sumitomo Mitsu Banking Corp. (Banks - Foreign) 18,000 74,492
Takeda Chemical Industries, Ltd. (Medical) 3,600 149,571
Tokyo Gas Co., Ltd. (Utilities) 22,000 64,289
Yamato Transport Co., Ltd. (Transport) 5,000 71,219
----------
1,808,238
----------
Luxembourg
Arcelor SA* (Steel) 6,900 74,548 18,800 203,117
---------- ----------
Mexico
Wal-Mart de Mexico SA de CV (Series C) (Retail) 31,100 66,943
----------
Netherlands
Euronext NV (Finance) 3,800 75,639 3,800 75,639
Heineken NV (Beverages) 2,400 96,423 5,100 204,899
IHC Caland NV (Oil & Gas) 1,600 70,984 1,600 70,984
Royal Dutch Petroleum Co. (Oil & Gas) 2,800 121,117 5,900 255,211
Unilever NV (Food) 3,100 198,777 6,400 410,378
Van der Moolen Holding NV (Finance) 2,200 49,129 2,200 49,129
---------- ----------
612,069 1,066,240
---------- ----------
Norway
Frontline Ltd. (Transport) 15,600 93,978 15,600 93,978
Gjensidige NOR ASA* (Finance) 3,400 105,613 3,400 105,613
ProSafe ASA * (Oil & Gas) 3,200 40,449 3,200 40,449
Tandberg ASA* (Telecommunications) 8,600 93,094 8,600 93,094
Tomra Systems ASA (Pollution Control) 10,900 79,882 10,900 79,882
---------- ----------
413,016 413,016
---------- ----------
Singapore
Singapore Press Holdings Ltd. (Media) 8,000 89,709
United Overseas Bank Ltd. (Banks - Foreign) 18,000 136,603
----------
226,312
----------
South Korea
Hyundai Motor Co., Ltd. (Automobile / Trucks) 2,280 57,912
Kookmin Bank (Banks - Foreign) 1,500 49,979
Samsung Electronics, Ltd.* Global Depositary Receipts
(Electronics) (R) 700 99,100
SK Telecom Co., Ltd. (Telecommunications) 400 73,861
----------
280,852
----------
Spain
Acciona SA (Building) 1,400 54,070 1,400 54,070
Actividades de Construccion y Servicios SA (Building) 3,500 97,049 3,500 97,049
Banco Bilbao Vizcaya Argentaria SA (Banks - Foreign) 11,383 108,442 25,337 241,377
Banco Popular Espanol SA (Banks - Foreign) 3,000 128,461 4,900 209,820
Corporacion Mapfre SA (Insurance) 15,000 101,456 15,000 101,456
Endesa SA (Utilities) 7,000 72,301 14,500 149,767
Iberia Lineas Aereas de Espana SA (Transport) 27,300 47,311 27,300 47,311
Telefonica SA* (Telecommunications) 12,200 115,742 25,100 238,125
---------- ----------
724,832 1,138,975
---------- ----------
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund and European Equity Fund combined on October 31, 2002.
------------------------------
International Fund
- ---------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- ---------------------------------------------------------------------------------------------------------------------
Sweden 3.48%
Autoliv, Inc. Swedish Depositary Receipts
(Automobile / Trucks)
Capio AB* (Medical)
Elekta AB (B Shares)* (Medical)
Hennes & Mauritz AB (B Shares) (Retail) 4,400 85,480
Skandinaviska Enskilda Banken AB (A Shares)
(Banks - Foreign) 16,100 139,696
Svenska Cellulosa AB (B Shares)
(Paper & Paper Products) 2,900 88,623
----------
313,799
----------
Switzerland 4.65%
Actelion Ltd.* (Medical)
Alcon, Inc.* (Medical) 1,700 69,734
Converium Holding AG* (Insurance) 2,300 92,860
Nestle SA (Food) 800 171,522
Nobel Biocare Holding AG* (Medical)
Novartis AG (Medical) 2,232 85,125
SGS Societe Generale de Surveillance Holding SA
(Business Services - Misc)
Syngenta AG (Chemicals) 1,600 95,217
----------
514,458
----------
Taiwan
United Microelectronics Corp.* (ADR) (Electronics) 0.36% 20,280 84,162
----------
United Kingdom 23.81%
Allied Domecq Plc (Beverages) 17,900 106,974
Barclays Plc (Banks - Foreign) 23,660 163,606
BG Group Plc (Oil & Gas) 23,100 92,245
BHP Billiton Plc (Metal) 15,963 77,917
BOC Group Plc (Chemicals) 4,800 67,509
British American Tobacco Plc (Tobacco) 11,800 120,732
British Sky Broadcasting Group Plc* (Media) 11,100 104,801
Capita Group Plc (Business Services - Misc)
Capital Radio Plc (Media)
Centrica Plc (Utilities) 44,980 128,072
Cobham Plc (Aerospace)
Corus Group Plc* (Steel) 180,000 119,681
Diageo Plc (Beverages) 12,800 144,280
Exel Plc (Transport) 6,500 66,810
Game Group Plc (Computers)
George Wimpey Plc (Building)
GlaxoSmithKline Plc (Medical) 5,000 95,432
HBOS Plc (Banks - Foreign) 10,200 112,899
HSBC Holdings Plc (Banks - Foreign) 16,000 178,223
Imperial Tobacco Group Plc (Tobacco)
Kelda Group Plc (Utilities)
Man Group Plc (Finance) 7,800 116,170
MFI Furniture Group Plc (Furniture)
Morrison (Wm.) Supermarkets Plc (Retail)
National Grid Transco Plc (Utilities) 21,300 151,619
Peninsular and Oriental Steam Navigation Co.
(Transport)
Rentokil Initial Plc (Diversified Operations) 30,300 102,746
Rexam Plc (Containers)
Royal Bank of Scotland Group Plc (Banks - Foreign) 9,622 226,400
SkyePharma Plc* (Medical)
Smith & Nephew Plc (Medical)
Smiths Group Plc (Manufacturing)
Tullow Oil Plc* (Oil & Gas)
----------------------------------------------------------------
European Equity Fund Combined
- ------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- ------------------------------------------------------------------------------------------------------------------------
Sweden
Autoliv, Inc. Swedish Depositary Receipts
(Automobile / Trucks) 3,300 63,570 3,300 63,570
Capio AB* (Medical) 7,400 44,421 7,400 44,421
Elekta AB (B Shares)* (Medical) 9,900 92,923 9,900 92,923
Hennes & Mauritz AB (B Shares) (Retail) 4,200 81,594 8,600 167,074
Skandinaviska Enskilda Banken AB (A Shares)
(Banks - Foreign) 15,700 136,225 31,800 275,921
Svenska Cellulosa AB (B Shares)
(Paper & Paper Products) 2,800 85,567 5,700 174,190
---------- ----------
504,300 818,099
---------- ----------
Switzerland
Actelion Ltd.* (Medical) 1,000 38,274 1,000 38,274
Alcon, Inc.* (Medical) 2,100 86,142 3,800 155,876
Converium Holding AG* (Insurance) 1,900 76,710 4,200 169,570
Nestle SA (Food) 500 107,201 1,300 278,723
Nobel Biocare Holding AG* (Medical) 900 50,054 900 50,054
Novartis AG (Medical) 2,141 81,654 4,373 166,779
SGS Societe Generale de Surveillance Holding SA
(Business Services - Misc) 150 43,998 150 43,998
Syngenta AG (Chemicals) 1,600 95,217 3,200 190,434
---------- ----------
579,250 1,093,708
---------- ----------
Taiwan
United Microelectronics Corp.* (ADR) (Electronics) 20,280 84,162
----------
United Kingdom
Allied Domecq Plc (Beverages) 13,800 82,472 31,700 189,446
Barclays Plc (Banks - Foreign) 22,324 154,368 45,984 317,974
BG Group Plc (Oil & Gas) 22,200 88,651 45,300 180,896
BHP Billiton Plc (Metal) 15,112 73,763 31,075 151,680
BOC Group Plc (Chemicals) 4,800 67,509
British American Tobacco Plc (Tobacco) 11,000 112,547 22,800 233,279
British Sky Broadcasting Group Plc* (Media) 10,500 99,136 21,600 203,937
Capita Group Plc (Business Services - Misc) 19,700 69,036 19,700 69,036
Capital Radio Plc (Media) 8,400 68,335 8,400 68,335
Centrica Plc (Utilities) 30,095 85,690 75,075 213,762
Cobham Plc (Aerospace) 4,900 74,052 4,900 74,052
Corus Group Plc* (Steel) 169,300 112,567 349,300 232,248
Diageo Plc (Beverages) 9,400 105,956 22,200 250,236
Exel Plc (Transport) 9,400 96,618 15,900 163,428
Game Group Plc (Computers) 32,600 56,994 32,600 56,994
George Wimpey Plc (Building) 14,300 61,522 14,300 61,522
GlaxoSmithKline Plc (Medical) 8,900 169,869 13,900 265,301
HBOS Plc (Banks - Foreign) 9,900 109,578 20,100 222,477
HSBC Holdings Plc (Banks - Foreign) 13,000 144,806 29,000 323,029
Imperial Tobacco Group Plc (Tobacco) 4,300 67,272 4,300 67,272
Kelda Group Plc (Utilities) 15,000 88,705 15,000 88,705
Man Group Plc (Finance) 11,000 163,830 18,800 280,000
MFI Furniture Group Plc (Furniture) 32,700 67,017 32,700 67,017
Morrison (Wm.) Supermarkets Plc (Retail) 28,100 92,428 28,100 92,428
National Grid Transco Plc (Utilities) 20,800 148,060 42,100 299,679
Peninsular and Oriental Steam Navigation Co.
(Transport) 28,300 84,231 28,300 84,231
Rentokil Initial Plc (Diversified Operations) 30,000 101,729 60,300 204,475
Rexam Plc (Containers) 15,400 98,358 15,400 98,358
Royal Bank of Scotland Group Plc (Banks - Foreign) 6,092 143,341 15,714 369,741
SkyePharma Plc* (Medical) 93,000 69,837 93,000 69,837
Smith & Nephew Plc (Medical) 17,500 104,036 17,500 104,036
Smiths Group Plc (Manufacturing) 7,700 88,360 7,700 88,360
Tullow Oil Plc* (Oil & Gas) 67,700 96,381 67,700 96,381
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund and European Equity Fund combined on October 31, 2002.
------------------------------
International Fund
- ---------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- ---------------------------------------------------------------------------------------------------------------------
Vodafone Group Plc (Telecommunications) 76,900 123,615
----------
2,299,731
----------
United States 0.43%
GlobalSantaFe Corp. (Oil & Gas) 1,500 35,850
Noble Corp.* (Oil & Gas) 1,000 32,320
----------
68,170
----------
TOTAL COMMON STOCKS 93.20%
(Cost $22,922,765) 11,256,987
----------
PREFERRED STOCKS
Germany 0.21%
Henkel KGaA (Chemicals)
TOTAL PREFERRED STOCKS 0.21%
(Cost $47,926)
TOTAL COMMOM AND PREFERRED STOCKS 93.41%
(Cost $22,970,691) 11,256,987
----------
UNITS
France 0.39%
Eurotunnel SA* (Transport)
TOTAL UNITS 0.39%
(Cost $125,456)
TOTAL COMMOM AND PREFERRED STOCKS AND UNITS 93.80%
(Cost $23,096,147) 11,256,987
----------
ISSUER
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement 7.38%
Investment in a joint repurchase agreement
transaction with Barclays Capital,
Inc. - Dated 10-31-02, due 11-01-02
(Secured by U.S. Treasury Inflation Indexed
Note 3.00% due 07-15-12) 1.90% 11/1/2002 808 808,000
----------
TOTAL SHORT-TERM INVESTMENTS 7.38%
(Cost $1,735,000) 808,000
----------
TOTAL INVESTMENTS 101.18% 12,064,987
----------
OTHER ASSETS AND LIABILITIES, NET -1.18% -630
----------
TOTAL NET ASSETS 100.00% 12,064,357
----------
----------------------------------------------------------------
European Equity Fund Combined
- ------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- ------------------------------------------------------------------------------------------------------------------------
Vodafone Group Plc (Telecommunications) 73,900 118,793 150,800 242,408
---------- ----------
3,298,338 5,598,069
---------- ----------
United States
GlobalSantaFe Corp. (Oil & Gas) 1,400 33,460 2,900 69,310
----------
Noble Corp.* (Oil & Gas) 1,000 32,320
----------
101,630
----------
TOTAL COMMON STOCKS
(Cost $22,922,765) 10,656,377 21,913,364
---------- ----------
PREFERRED STOCKS
Germany
Henkel KGaA (Chemicals) 800 50,941 800 50,941
---------- ----------
TOTAL PREFERRED STOCKS
(Cost $47,926) 50,941 50,941
---------- ----------
TOTAL COMMOM AND PREFERRED STOCKS
(Cost $22,970,691) 10,707,318 21,964,305
---------- ----------
UNITS
France
Eurotunnel SA* (Transport) 127,061 91,854 127,061 91,854
---------- ----------
TOTAL UNITS
(Cost $125,456) 91,854 91,854
---------- ----------
TOTAL COMMOM AND PREFERRED STOCKS AND UNITS
(Cost $23,096,147) 10,799,172 22,056,159
---------- ----------
ISSUER
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement
Investment in a joint repurchase agreement
transaction with Barclays Capital,
Inc. - Dated 10-31-02, due 11-01-02
(Secured by U.S. Treasury Inflation Indexed
Note 3.00% due 07-15-12) 927 927,000 1,735 1,735,000
---------- ----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $1,735,000) 927,000 1,735,000
---------- ----------
TOTAL INVESTMENTS 11,726,172 23,791,159
---------- ----------
OTHER ASSETS AND LIABILITIES, NET -277,672 -278,302
---------- ----------
TOTAL NET ASSETS 11,448,500 23,512,857
---------- ----------
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund and Global Fund combined on October 31, 2002.
------------------------------
International Fund
- -----------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------
Australia 1.42%
Commonwealth Bank of Australia (Banks - Foreign) 7,600 128,227
Woolworths Ltd. (Retail) 22,333 152,580
----------
280,807
----------
Belgium 0.24%
Dexia SA (Banks - Foreign) 6,300 60,455
Interbrew SA (Beverages) 3,900 87,864
----------
148,319
----------
Bermuda 1.32%
Nabors Industries Ltd.* (Oil & Gas) 1,000 34,970
----------
Platinum Underwriters Holdings, Ltd.* (Insurance)
RenaissanceRe Holdings Ltd. (Insurance)
Brazil 0.23%
Aracruz Celulose SA American Depositary Receipts (ADR)
(Paper & Paper Products) 4,100 65,559
Tele Norte Leste Participacoes SA (ADR)
(Telecommunications) 11,000 76,120
----------
141,679
----------
Canada 2.98%
Barrick Gold Corp. (Metal) 7,900 119,053
Canadian National Railway Co. (Transport) 2,100 89,607
Loblaw Cos., Ltd. (Retail) 2,700 97,531
Petro-Canada (Oil & Gas) 1,500 41,460
Precision Drilling Corp.* (Oil & Gas)
Shoppers Drug Mart Corp.* (Retail) 3,600 57,237
Suncor Energy, Inc. (Oil & Gas) 3,800 54,979
Talisman Energy, Inc. (Oil & Gas) 3,400 124,848
WestJet Airlines Ltd.* (Transport)
----------
584,715
----------
Denmark 0.47%
Carlsberg AS (Beverages)
TDC AS (Telecommunications) 2,900 62,601
----------
Finland 1.83%
Nokia Oyj (Telecommunications)
Nokia Oyj (ADR) (Telecommunications) 13,500 224,370
----------
France 3.77%
Axa SA (Insurance) 13,200 196,993
JC Decaux SA* (Advertising)
L'Oreal SA (Cosmetics & Personal Care) 1,200 89,364
Sanofi-Synthelabo SA (Medical) 1,800 110,071
TotalFinaElf SA (Oil & Gas) 1,189 163,785
Vivendi Environnement SA (Utilities) 5,800 137,504
----------
697,717
----------
Germany 0.95%
Bayerische Motoren Werke AG (Automobile / Trucks) 2,600 92,692
Degussa AG (Chemicals) 2,900 86,156
Deutsche Telekom AG (Telecommunications) 5,900 67,717
E.ON AG (Utilities) 3,600 162,923
SAP AG (Computers) 2,400 184,195
----------
593,683
----------
Greece 0.20%
Coca-Cola Hellenic Bottling Co. SA (Beverages) 4,800 67,594
Hellenic Telecommunications Organization SA
(Telecommunications) 4,800 53,999
----------
121,593
----------
----------------------------------------------------------------
Global Fund Combined
- --------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- --------------------------------------------------------------------------------------------------------------------------
Australia
Commonwealth Bank of Australia (Banks - Foreign) 7,600 128,227
Woolworths Ltd. (Retail) 89,000 608,053 111,333 760,633
---------- ----------
888,860
----------
Belgium
Dexia SA (Banks - Foreign) 6,300 60,455
Interbrew SA (Beverages) 3,900 87,864
----------
148,319
----------
Bermuda
Nabors Industries Ltd.* (Oil & Gas) 1,000 34,970
Platinum Underwriters Holdings, Ltd.* (Insurance) 11,800 296,180 11,800 296,180
RenaissanceRe Holdings Ltd. (Insurance) 12,000 492,000 12,000 492,000
---------- ----------
788,180 823,150
---------- ----------
Brazil
Aracruz Celulose SA American Depositary Receipts (ADR)
(Paper & Paper Products) 4,100 65,559
Tele Norte Leste Participacoes SA (ADR)
(Telecommunications) 11,000 76,120
----------
141,679
----------
Canada
Barrick Gold Corp. (Metal) 7,900 119,053
Canadian National Railway Co. (Transport) 2,100 89,607
Loblaw Cos., Ltd. (Retail) 2,700 97,531
Petro-Canada (Oil & Gas) 1,500 41,460
Precision Drilling Corp.* (Oil & Gas) 17,600 601,040 17,600 601,040
Shoppers Drug Mart Corp.* (Retail) 3,600 57,237
Suncor Energy, Inc. (Oil & Gas) 3,800 54,979
Talisman Energy, Inc. (Oil & Gas) 3,400 124,848
WestJet Airlines Ltd.* (Transport) 53,850 674,200 53,850 674,200
---------- ----------
1,275,240 1,859,955
---------- ----------
Denmark
Carlsberg AS (Beverages) 4,900 229,829 4,900 229,829
----------
TDC AS (Telecommunications) 2,900 62,601
----------
292,430
----------
Finland
Nokia Oyj (Telecommunications) 54,200 920,509 54,200 920,509
----------
Nokia Oyj (ADR) (Telecommunications) 13,500 224,370
----------
1,144,879
----------
France
Axa SA (Insurance) 46,700 696,939 59,900 893,932
JC Decaux SA* (Advertising) 31,900 342,756 31,900 342,756
L'Oreal SA (Cosmetics & Personal Care) 3,300 245,752 4,500 335,116
Sanofi-Synthelabo SA (Medical) 6,100 373,019 7,900 483,090
TotalFinaElf SA (Oil & Gas) 1,189 163,785
Vivendi Environnement SA (Utilities) 5,800 137,504
---------- ----------
1,658,466 2,356,183
---------- ----------
Germany
Bayerische Motoren Werke AG (Automobile / Trucks) 2,600 92,692
Degussa AG (Chemicals) 2,900 86,156
Deutsche Telekom AG (Telecommunications) 5,900 67,717
E.ON AG (Utilities) 3,600 162,923
SAP AG (Computers) 2,400 184,195
----------
593,683
----------
Greece
Coca-Cola Hellenic Bottling Co. SA (Beverages) 4,800 67,594
Hellenic Telecommunications Organization SA
(Telecommunications) 4,800 53,999
----------
121,593
----------
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund and Global Fund combined on October 31, 2002.
------------------------------
International Fund
- -----------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------
Hong Kong 0.58%
China Mobile Ltd.* (Telecommunications) 31,000 76,115
CLP Holdings Ltd. (Utilities) 37,500 151,935
Sun Hung Kai Properties, Ltd. (Real Estate Operations) 21,000 130,856
----------
358,906
----------
India 0.71%
Hindustan Lever Ltd.* (Soap & Cleaning Preparations) 18,059 59,885
Infosys Technology Ltd.* (Computers) 1,200 94,029
Satyam Computer Services Ltd.* (Computers)
----------
153,914
----------
Indonesia 0.03%
PT Telekomunikasi Indonesia (Telecommunications) 52,000 17,324
----------
Ireland 2.35%
Bank of Ireland (Banks - Foreign) 11,000 122,004
CRH Plc (Building) 7,100 89,646
Ryanair Holdings Plc* American Depositary Receipts
(ADR) (Transport)
----------
211,650
----------
Israel 0.77%
Teva Pharmaceutical Industries Ltd. (ADR) (Medical) 2,100 162,603
----------
Italy 2.10%
Autostrade SpA (Transport) 22,500 186,052
ENI SpA (Oil & Gas) 9,600 133,286
Finmeccanica SpA (Aerospace) 152,400 83,761
Mediaset SpA (Media) 10,300 71,910
Riunione Adriatica di Sicurta SpA (Insurance) 8,216 102,354
Snam Rete Gas SpA (Utilities) 43,600 130,394
UniCredito Italiano SpA (Banks - Foreign) 25,200 94,831
----------
802,588
----------
Japan 8.14%
Asahi Glass Co., Ltd. (Building) 11,000 65,815
Bridgestone Corp (Rubber - Tires & Misc) 10,000 124,643
Dai Nippon Printing Co., Ltd. (Printing - Commercial) 13,000 132,854
Daiwa Securities Group, Inc. (Finance) 20,000 93,380
Fanuc Ltd. (Electronics) 200 7,918
Hoya Corp. (Electronics) 2,000 137,295
Ito-Yokado Co., Ltd. (Retail) 2,000 62,362
Kao Corp. (Cosmetics & Personal Care) 6,000 137,132
Keyence Corp. (Electronics) 600 99,323
Millea Holdings, Inc.* (Insurance) 11 82,157
Mitsubishi Tokyo Financial Group, Inc.
(Banks - Foreign)
Murata Manufacturing Co., Ltd. (Electronics) 1,900 89,797
Nintendo Co., Ltd. (Leisure) 900 86,687
Nissan Motor Co., Ltd. (Automobile / Trucks)
Rohm Co., Ltd. (Electronics) 100 12,595
Shin-Etsu Chemical Co., Ltd. (Chemicals) 2,200 67,880
Shiseido Co., Ltd. (Cosmetics & Personal Care) 10,000 111,175
Sony Corp. (Electronics) 3,200 137,654
Sumitomo Mitsu Banking Corp. (Banks - Foreign) 18,000 74,492
Takeda Chemical Industries, Ltd. (Medical) 3,600 149,571
Tokyo Gas Co., Ltd. (Utilities) 22,000 64,289
Yamato Transport Co., Ltd. (Transport) 5,000 71,219
----------
1,808,238
----------
Luxembourg 0.94%
Arcelor SA* (Steel) 11,900 128,569
----------
Mexico 0.11%
Wal-Mart de Mexico SA de CV (Series C) (Retail) 31,100 66,943
----------
----------------------------------------------------------------
Global Fund Combined
- --------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- --------------------------------------------------------------------------------------------------------------------------
Hong Kong
China Mobile Ltd.* (Telecommunications) 31,000 76,115
CLP Holdings Ltd. (Utilities) 37,500 151,935
Sun Hung Kai Properties, Ltd. (Real Estate Operations) 21,000 130,856
----------
358,906
----------
India
Hindustan Lever Ltd.* (Soap & Cleaning Preparations) 18,059 59,885
Infosys Technology Ltd.* (Computers) 1,200 94,029
Satyam Computer Services Ltd.* (Computers) 59,647 290,397 59,647 290,397
---------- ----------
444,311
----------
Indonesia
PT Telekomunikasi Indonesia (Telecommunications) 52,000 17,324
----------
Ireland
Bank of Ireland (Banks - Foreign) 66,100 733,135 77,100 855,139
CRH Plc (Building) 7,100 89,646
Ryanair Holdings Plc* American Depositary Receipts
(ADR) (Transport) 14,100 524,661 14,100 524,661
---------- ----------
1,257,796 1,469,446
---------- ----------
Israel
Teva Pharmaceutical Industries Ltd. (ADR) (Medical) 4,100 317,463 6,200 480,066
---------- ----------
Italy
Autostrade SpA (Transport) 22,500 186,052
ENI SpA (Oil & Gas) 16,900 234,639 26,500 367,925
Finmeccanica SpA (Aerospace) 152,400 83,761
Mediaset SpA (Media) 10,300 71,910
Riunione Adriatica di Sicurta SpA (Insurance) 21,993 273,987 30,209 376,341
Snam Rete Gas SpA (Utilities) 43,600 130,394
UniCredito Italiano SpA (Banks - Foreign) 25,200 94,831
---------- ----------
508,626 1,311,214
---------- ----------
Japan
Asahi Glass Co., Ltd. (Building) 11,000 65,815
Bridgestone Corp (Rubber - Tires & Misc) 10,000 124,643
Dai Nippon Printing Co., Ltd. (Printing - Commercial) 37,000 378,124 50,000 510,978
Daiwa Securities Group, Inc. (Finance) 20,000 93,380
Fanuc Ltd. (Electronics) 200 7,918
Hoya Corp. (Electronics) 2,000 137,295
Ito-Yokado Co., Ltd. (Retail) 2,000 62,362
Kao Corp. (Cosmetics & Personal Care) 27,000 617,093 33,000 754,225
Keyence Corp. (Electronics) 600 99,323
Millea Holdings, Inc.* (Insurance) 11 82,157
Mitsubishi Tokyo Financial Group, Inc.
(Banks - Foreign) 79 515,231 79 515,231
Murata Manufacturing Co., Ltd. (Electronics) 6,800 321,378 8,700 411,175
Nintendo Co., Ltd. (Leisure) 900 86,687
Nissan Motor Co., Ltd. (Automobile / Trucks) 44,500 341,805 44,500 341,805
Rohm Co., Ltd. (Electronics) 100 12,595
Shin-Etsu Chemical Co., Ltd. (Chemicals) 2,200 67,880
Shiseido Co., Ltd. (Cosmetics & Personal Care) 48,000 533,638 58,000 644,813
Sony Corp. (Electronics) 13,200 570,768 16,400 708,422
Sumitomo Mitsu Banking Corp. (Banks - Foreign) 18,000 74,492
Takeda Chemical Industries, Ltd. (Medical) 3,600 149,571
Tokyo Gas Co., Ltd. (Utilities) 22,000 64,289
Yamato Transport Co., Ltd. (Transport) 5,000 71,219
---------- ----------
3,278,037 5,086,275
---------- ----------
Luxembourg
Arcelor SA* (Steel) 42,600 460,256 54,500 588,825
---------- ----------
Mexico
Wal-Mart de Mexico SA de CV (Series C) (Retail) 31,100 66,943
----------
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund and Global Fund combined on October 31, 2002.
------------------------------
International Fund
- -----------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------
Netherlands 2.27%
ASML Holding NV (NY Reg Shares)* (Electronics)
Heineken NV (Beverages) 2,700 108,476
Royal Dutch Petroleum Co. (Oil & Gas) 3,100 134,094
Unilever NV (Food) 3,300 211,601
----------
454,171
----------
Norway 0.80%
Frontline Ltd. (Transport)
Tomra Systems ASA (Pollution Control)
Singapore 1.79%
Flextronics International Ltd.* (Electronics)
Singapore Press Holdings Ltd. (Media) 8,000 89,709
United Overseas Bank Ltd. (Banks - Foreign) 18,000 136,603
----------
226,312
----------
South Korea 1.25%
Hyundai Motor Co., Ltd. (Automobile / Trucks) 2,280 57,912
Kookmin Bank (Banks - Foreign) 1,500 49,979
Samsung Electronics, Ltd.* Global Depositary Receipts
(Electronics) (R) 700 99,100
SK Telecom Co., Ltd. (Telecommunications) 400 73,861
----------
280,852
----------
Spain 0.66%
Banco Bilbao Vizcaya Argentaria SA (Banks - Foreign) 13,954 132,935
Banco Popular Espanol SA (Banks - Foreign) 1,900 81,359
Endesa SA (Utilities) 7,500 77,466
Telefonica SA* (Telecommunications) 12,900 122,383
----------
414,143
----------
Sweden 0.50%
Hennes & Mauritz AB (B Shares) (Retail) 4,400 85,480
Skandinaviska Enskilda Banken AB (A Shares)
(Banks - Foreign) 16,100 139,696
Svenska Cellulosa AB (B Shares)
(Paper & Paper Products) 2,900 88,623
----------
313,799
----------
Switzerland 3.12%
Alcon, Inc.* (Medical) 1,700 69,734
Converium Holding AG* (Insurance) 2,300 92,860
Nestle SA (Food) 800 171,522
Novartis AG (Medical) 2,232 85,125
Syngenta AG (Chemicals) 1,600 95,217
UBS AG (Banks - Foreign)
----------
514,458
----------
Taiwan 0.14%
United Microelectronics Corp.* (ADR) (Electronics) 20,280 84,162
----------
United Kingdom 10.96%
Allied Domecq Plc (Beverages) 17,900 106,974
Barclays Plc (Banks - Foreign) 23,660 163,606
BG Group Plc (Oil & Gas) 23,100 92,245
BHP Billiton Plc (Metal) 15,963 77,917
BOC Group Plc (Chemicals) 4,800 67,509
BP Plc (Oil & Gas)
British American Tobacco Plc (Tobacco) 11,800 120,732
British Sky Broadcasting Group Plc* (Media) 11,100 104,801
Centrica Plc (Utilities) 44,980 128,072
Corus Group Plc* (Steel) 180,000 119,681
Diageo Plc (Beverages) 12,800 144,280
Exel Plc (Transport) 6,500 66,810
GlaxoSmithKline Plc (Medical) 5,000 95,432
HBOS Plc (Banks - Foreign) 10,200 112,899
HSBC Holdings Plc (Banks - Foreign) 16,000 178,223
Imperial Tobacco Group Plc (Tobacco)
----------------------------------------------------------------
Global Fund Combined
- --------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- --------------------------------------------------------------------------------------------------------------------------
Netherlands
ASML Holding NV (NY Reg Shares)* (Electronics) 47,400 407,640 47,400 407,640
Heineken NV (Beverages) 2,700 108,476
Royal Dutch Petroleum Co. (Oil & Gas) 3,100 134,094
Unilever NV (Food) 8,700 557,858 12,000 769,459
---------- ----------
965,498 1,419,669
---------- ----------
Norway
Frontline Ltd. (Transport) 20,200 121,690 20,200 121,690
Tomra Systems ASA (Pollution Control) 51,800 379,622 51,800 379,622
---------- ----------
501,312 501,312
---------- ----------
Singapore
Flextronics International Ltd.* (Electronics) 51,800 433,048 51,800 433,048
Singapore Press Holdings Ltd. (Media) 8,000 89,709
United Overseas Bank Ltd. (Banks - Foreign) 60,000 455,344 78,000 591,947
---------- ----------
888,392 1,114,704
---------- ----------
South Korea
Hyundai Motor Co., Ltd. (Automobile / Trucks) 2,280 57,912
Kookmin Bank (Banks - Foreign) 1,500 49,979
Samsung Electronics, Ltd.* Global Depositary Receipts
(Electronics) (R) 950 268,978 1,650 368,078
SK Telecom Co., Ltd. (Telecommunications) 1,250 230,817 1,650 304,678
---------- ----------
499,795 780,647
---------- ----------
Spain
Banco Bilbao Vizcaya Argentaria SA (Banks - Foreign) 13,954 132,935
Banco Popular Espanol SA (Banks - Foreign) 1,900 81,359
Endesa SA (Utilities) 7,500 77,466
Telefonica SA* (Telecommunications) 12,900 122,383
----------
414,143
----------
Sweden
Hennes & Mauritz AB (B Shares) (Retail) 4,400 85,480
Skandinaviska Enskilda Banken AB (A Shares)
(Banks - Foreign) 16,100 139,696
Svenska Cellulosa AB (B Shares)
(Paper & Paper Products) 2,900 88,623
----------
313,799
----------
Switzerland
Alcon, Inc.* (Medical) 9,700 397,894 11,400 467,628
Converium Holding AG* (Insurance) 2,300 92,860
Nestle SA (Food) 2,300 493,124 3,100 664,646
Novartis AG (Medical) 2,232 85,125
Syngenta AG (Chemicals) 1,600 95,217
UBS AG (Banks - Foreign) 11,400 543,280 11,400 543,280
---------- ----------
1,434,298 1,948,756
---------- ----------
Taiwan
United Microelectronics Corp.* (ADR) (Electronics) 20,280 84,162
----------
United Kingdom
Allied Domecq Plc (Beverages) 17,900 106,974
Barclays Plc (Banks - Foreign) 23,660 163,606
BG Group Plc (Oil & Gas) 23,100 92,245
BHP Billiton Plc (Metal) 15,963 77,917
BOC Group Plc (Chemicals) 4,800 67,509
BP Plc (Oil & Gas) 70,900 454,772 70,900 454,772
British American Tobacco Plc (Tobacco) 23,900 244,534 35,700 365,266
British Sky Broadcasting Group Plc* (Media) 11,100 104,801
Centrica Plc (Utilities) 151,600 431,652 196,580 559,724
Corus Group Plc* (Steel) 182,500 121,343 362,500 241,024
Diageo Plc (Beverages) 12,800 144,280
Exel Plc (Transport) 30,300 311,438 36,800 378,248
GlaxoSmithKline Plc (Medical) 5,000 95,432
HBOS Plc (Banks - Foreign) 10,200 112,899
HSBC Holdings Plc (Banks - Foreign) 45,600 496,961 61,600 675,184
Imperial Tobacco Group Plc (Tobacco) 29,900 467,772 29,900 467,772
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund and Global Fund combined on October 31, 2002.
------------------------------
International Fund
- -----------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------
Man Group Plc (Finance) 7,800 116,170
National Grid Transco Plc (Utilities) 21,300 151,619
Next Plc (Retail)
Rentokil Initial Plc (Diversified Operations) 30,300 102,746
Royal Bank of Scotland Group Plc (Banks - Foreign) 9,622 226,400
Shell Transport & Trading Co. Plc (Oil & Gas)
Shire Pharmaceuticals Group Plc* (Medical)
Vodafone Group Plc (Telecommunications) 76,900 123,615
----------
2,299,731
----------
United States 43.30%
3M Co. (Diversified Operations)
Allergan, Inc. (Medical)
Allstate Corp. (The) (Insurance)
Anheuser-Busch Cos., Inc. (Beverages)
Anthem, Inc.* (Medical)
AT&T Wireless Services, Inc.* (Telecommunications)
AutoZone, Inc.* (Retail)
Ball Corp. (Containers)
BJ Services Co.* (Oil & Gas)
Blockbuster, Inc. (Class A) (Leisure)
Borland Software Corp.* (Computers)
Cisco Systems, Inc.* (Computers)
Citigroup, Inc. (Finance)
Dell Computer Corp.* (Computers)
Dial Corp. (The) (Cosmetics & Personal Care)
Electronic Arts, Inc.* (Computers)
ENSCO International, Inc. (Oil & Gas)
Forest Laboratories, Inc.* (Medical)
General Electric Co. (Electronics)
Gilead Sciences, Inc.* (Medical)
GlobalSantaFe Corp. (Oil & Gas) 1,500 35,850
Gymboree Corp. (The)* (Retail)
Harley-Davidson, Inc. (Leisure)
Health Management Associates, Inc. (Class A)*
(Medical)
Hunt (J.B.) Transport Services, Inc.* (Transport)
IMC Global, Inc. (Fertilizers)
Intel Corp. (Electronics)
International Business Machines Corp. (Computers)
Intuit, Inc.* (Computers)
Johnson & Johnson (Medical)
Kohl's Corp.* (Retail)
Lockheed Martin Corp. (Aerospace)
Lowe's Cos., Inc. (Retail)
Medtronic, Inc. (Medical)
MGM Mirage, Inc.* (Leisure)
Michaels Stores, Inc.* (Retail)
Microsoft Corp.* (Computers)
Moody's Corp. (Business Services - Misc)
Nextel Communications, Inc. (Class A)*
(Telecommunications)
Noble Corp.* (Oil & Gas) 1,000 32,320
North Fork Bancorp., Inc. (Banks - United States)
Patterson-UTI Energy, Inc.* (Oil & Gas)
Pfizer, Inc. (Medical)
Procter & Gamble Co. (The)
(Soap & Cleaning Preparations)
Scripps (E.W.) Co. (The) (Class A) (Media)
Smith International, Inc.* (Oil & Gas)
TJX Cos., Inc. (The) (Retail)
Tyco International Ltd. (Diversified Operations)
Viacom, Inc. (Class B)* (Media)
Wal-Mart Stores, Inc. (Retail)
Wells Fargo & Co. (Banks - United States)
Williams-Sonoma, Inc.* (Retail)
Zimmer Holdings, Inc.* (Medical)
----------
68,170
----------
----------------------------------------------------------------
Global Fund Combined
- --------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- --------------------------------------------------------------------------------------------------------------------------
Man Group Plc (Finance) 7,800 116,170
National Grid Transco Plc (Utilities) 21,300 151,619
Next Plc (Retail) 35,000 487,328 35,000 487,328
Rentokil Initial Plc (Diversified Operations) 30,300 102,746
Royal Bank of Scotland Group Plc (Banks - Foreign) 21,505 506,000 31,127 732,400
Shell Transport & Trading Co. Plc (Oil & Gas) 39,400 253,184 39,400 253,184
Shire Pharmaceuticals Group Plc* (Medical) 35,700 287,633 35,700 287,633
Vodafone Group Plc (Telecommunications) 30,500 485,560 107,400 609,175
---------- ----------
4,548,177 6,847,908
---------- ----------
United States
3M Co. (Diversified Operations) 5,700 723,558 5,700 723,558
Allergan, Inc. (Medical) 4,900 266,805 4,900 266,805
Allstate Corp. (The) (Insurance) 13,900 552,942 13,900 552,942
Anheuser-Busch Cos., Inc. (Beverages) 3,300 174,108 3,300 174,108
Anthem, Inc.* (Medical) 10,900 686,700 10,900 686,700
AT&T Wireless Services, Inc.* (Telecommunications) 78,400 538,608 78,400 538,608
AutoZone, Inc.* (Retail) 7,300 626,121 7,300 626,121
Ball Corp. (Containers) 9,600 464,928 9,600 464,928
BJ Services Co.* (Oil & Gas) 11,800 357,894 11,800 357,894
Blockbuster, Inc. (Class A) (Leisure) 17,500 419,475 17,500 419,475
Borland Software Corp.* (Computers) 13,600 182,648 13,600 182,648
Cisco Systems, Inc.* (Computers) 29,200 326,456 29,200 326,456
Citigroup, Inc. (Finance) 19,700 727,915 19,700 727,915
Dell Computer Corp.* (Computers) 35,500 1,015,655 35,500 1,015,655
Dial Corp. (The) (Cosmetics & Personal Care) 16,900 359,294 16,900 359,294
Electronic Arts, Inc.* (Computers) 5,800 377,696 5,800 377,696
ENSCO International, Inc. (Oil & Gas) 17,800 481,312 17,800 481,312
Forest Laboratories, Inc.* (Medical) 5,100 499,749 5,100 499,749
General Electric Co. (Electronics) 37,700 951,925 37,700 951,925
Gilead Sciences, Inc.* (Medical) 11,000 382,140 11,000 382,140
GlobalSantaFe Corp. (Oil & Gas) 1,500 35,850
Gymboree Corp. (The)* (Retail) 27,100 497,556 27,100 497,556
Harley-Davidson, Inc. (Leisure) 10,600 554,380 10,600 554,380
Health Management Associates, Inc. (Class A)*
(Medical) 24,800 474,176 24,800 474,176
Hunt (J.B.) Transport Services, Inc.* (Transport) 15,500 429,195 15,500 429,195
IMC Global, Inc. (Fertilizers) 28,400 312,400 28,400 312,400
Intel Corp. (Electronics) 10,100 174,730 10,100 174,730
International Business Machines Corp. (Computers) 6,900 544,686 6,900 544,686
Intuit, Inc.* (Computers) 11,100 576,312 11,100 576,312
Johnson & Johnson (Medical) 13,200 775,500 13,200 775,500
Kohl's Corp.* (Retail) 6,300 368,235 6,300 368,235
Lockheed Martin Corp. (Aerospace) 9,200 532,680 9,200 532,680
Lowe's Cos., Inc. (Retail) 15,800 659,334 15,800 659,334
Medtronic, Inc. (Medical) 14,400 645,120 14,400 645,120
MGM Mirage, Inc.* (Leisure) 21,200 659,320 21,200 659,320
Michaels Stores, Inc.* (Retail) 7,100 319,216 7,100 319,216
Microsoft Corp.* (Computers) 19,100 1,021,277 19,100 1,021,277
Moody's Corp. (Business Services - Misc) 9,900 466,290 9,900 466,290
Nextel Communications, Inc. (Class A)*
(Telecommunications) 34,500 389,160 34,500 389,160
Noble Corp.* (Oil & Gas) 15,900 513,888 16,900 546,208
North Fork Bancorp., Inc. (Banks - United States) 10,400 399,984 10,400 399,984
Patterson-UTI Energy, Inc.* (Oil & Gas) 10,300 297,876 10,300 297,876
Pfizer, Inc. (Medical) 35,400 1,124,658 35,400 1,124,658
Procter & Gamble Co. (The)
(Soap & Cleaning Preparations) 5,200 459,940 5,200 459,940
Scripps (E.W.) Co. (The) (Class A) (Media) 7,100 548,049 7,100 548,049
Smith International, Inc.* (Oil & Gas) 6,900 215,694 6,900 215,694
TJX Cos., Inc. (The) (Retail) 28,600 586,872 28,600 586,872
Tyco International Ltd. (Diversified Operations) 26,200 378,852 26,200 378,852
Viacom, Inc. (Class B)* (Media) 13,500 602,235 13,500 602,235
Wal-Mart Stores, Inc. (Retail) 11,200 599,760 11,200 599,760
Wells Fargo & Co. (Banks - United States) 15,800 797,426 15,800 797,426
Williams-Sonoma, Inc.* (Retail) 14,500 345,100 14,500 345,100
Zimmer Holdings, Inc.* (Medical) 14,400 593,568 14,400 593,568
---------- ----------
26,979,398 27,047,568
---------- ----------
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund and Global Fund combined on October 31, 2002.
------------------------------
International Fund
- -----------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 93.93%
(Cost $58,946,795) 11,256,987
----------
PREFERRED STOCKS
South Korea 0.85%
Samsung Electronics Co., Ltd. (Electronics)
TOTAL PREFERRED STOCKS 0.85%
(Cost $544,481)
TOTAL COMMOM AND PREFERRED STOCKS 94.78%
(Cost $59,491,276) 11,256,987
----------
ISSUER
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement 5.48%
Investment in a joint repurchase agreement
transaction with Barclays Capital,
Inc. - Dated 10-31-02, due 11-01-02
(Secured by U.S. Treasury Inflation Indexed
Note 3.00% due 07-15-12) 1.90% 11/1/2002 808 808,000
----------
TOTAL SHORT-TERM INVESTMENTS 5.48%
(Cost $3,421,000) 808,000
----------
TOTAL INVESTMENTS 100.26% 12,064,987
----------
OTHER ASSETS AND LIABILITIES, NET -0.26% -630
----------
TOTAL NET ASSETS 100.00% 12,064,357
----------
----------------------------------------------------------------
Global Fund Combined
- --------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- --------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $58,946,795) 47,409,722 58,666,709
---------- ----------
PREFERRED STOCKS
South Korea
Samsung Electronics Co., Ltd. (Electronics) 3,950 531,637 3,950 531,637
---------- ----------
TOTAL PREFERRED STOCKS
(Cost $544,481) 531,637 531,637
---------- ----------
TOTAL COMMOM AND PREFERRED STOCKS
(Cost $59,491,276) 47,941,359 59,198,346
---------- ----------
ISSUER
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement
Investment in a joint repurchase agreement
transaction with Barclays Capital,
Inc. - Dated 10-31-02, due 11-01-02
(Secured by U.S. Treasury Inflation Indexed
Note 3.00% due 07-15-12) 2,613 2,613,000 3,421 3,421,000
---------- ----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,421,000) 2,613,000 3,421,000
---------- ----------
TOTAL INVESTMENTS 50,554,359 62,619,346
----------
----------
OTHER ASSETS AND LIABILITIES, NET -158,364 -158,994
---------- ----------
TOTAL NET ASSETS 50,395,995 62,460,352
---------- ----------
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund, Global Fund and European Equity Fund combined on October 31,
2002.
------------------------------
International Fund
- -----------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------
Australia 1.20%
Commonwealth Bank of Australia (Banks - Foreign) 7,600 128,227
Woolworths Ltd. (Retail) 22,333 152,580
----------
280,807
----------
Belgium 0.41%
Dexia SA (Banks - Foreign) 6,300 60,455
Interbrew SA (Beverages) 3,900 87,864
----------
148,319
----------
Bermuda 1.11%
Nabors Industries Ltd.* (Oil & Gas) 1,000 34,970
----------
Platinum Underwriters Holdings, Ltd.* (Insurance)
RenaissanceRe Holdings Ltd. (Insurance)
Brazil 0.19%
Aracruz Celulose SA American Depositary Receipts (ADR)
(Paper & Paper Products) 4,100 65,559
Tele Norte Leste Participacoes SA (ADR)
(Telecommunications) 11,000 76,120
----------
141,679
----------
Canada 2.52%
Barrick Gold Corp. (Metal) 7,900 119,053
Canadian National Railway Co. (Transport) 2,100 89,607
Loblaw Cos., Ltd. (Retail) 2,700 97,531
Petro-Canada (Oil & Gas) 1,500 41,460
Precision Drilling Corp.* (Oil & Gas)
Shoppers Drug Mart Corp.* (Retail) 3,600 57,237
Suncor Energy, Inc. (Oil & Gas) 3,800 54,979
Talisman Energy, Inc. (Oil & Gas) 3,400 124,848
WestJet Airlines Ltd.* (Transport)
----------
584,715
----------
Denmark 0.71%
Carlsberg AS (Beverages)
Danisco AS (Food)
Jyske Bank AS* (Banks - Foreign)
TDC AS (Telecommunications) 2,900 62,601
----------
Finland 2.18%
Nokia Oyj (Telecommunications)
Nokia Oyj (ADR) (Telecommunications) 13,500 224,370
----------
Perlos Oyj (Electronics)
Sampo Oyj (A Shares) (Finance)
France 4.66%
Axa SA (Insurance) 13,200 196,993
JC Decaux SA* (Advertising)
L'Oreal SA (Cosmetics & Personal Care) 1,200 89,364
Pernod-Ricard SA (Beverages)
Sanofi-Synthelabo SA (Medical) 1,800 110,071
TotalFinaElf SA (Oil & Gas) 1,189 163,785
Unibail SA (Real Estate Operations)
Vinci SA (Engineering / R&D Services)
Vivendi Environnement SA (Utilities) 5,800 137,504
----------
697,717
----------
Germany 1.42%
AMB Generali Holding AG (Insurance)
Bayerische Motoren Werke AG (Automobile / Trucks) 2,600 92,692
Degussa AG (Chemicals) 2,900 86,156
Deutsche Boerse AG (Finance)
Deutsche Telekom AG (Telecommunications) 5,900 67,717
E.ON AG (Utilities) 3,600 162,923
Fraport AG (Transport)
SAP AG (Computers) 2,400 184,195
Schwarz Pharma AG (Medical)
----------
593,683
----------
-------------------------------------------------------------------
Global Fund European Equity
- -----------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------------
Australia
Commonwealth Bank of Australia (Banks - Foreign)
Woolworths Ltd. (Retail) 89,000 608,053
----------
Belgium
Dexia SA (Banks - Foreign) 8,000 76,768
Interbrew SA (Beverages) 3,600 81,105
----------
157,873
----------
Bermuda
Nabors Industries Ltd.* (Oil & Gas)
Platinum Underwriters Holdings, Ltd.* (Insurance) 11,800 296,180
RenaissanceRe Holdings Ltd. (Insurance) 1,200 492,000
----------
788,180
----------
Brazil
Aracruz Celulose SA American Depositary Receipts (ADR)
(Paper & Paper Products)
Tele Norte Leste Participacoes SA (ADR)
(Telecommunications)
Canada
Barrick Gold Corp. (Metal)
Canadian National Railway Co. (Transport)
Loblaw Cos., Ltd. (Retail)
Petro-Canada (Oil & Gas)
Precision Drilling Corp.* (Oil & Gas) 17,600 601,040
Shoppers Drug Mart Corp.* (Retail)
Suncor Energy, Inc. (Oil & Gas)
Talisman Energy, Inc. (Oil & Gas)
WestJet Airlines Ltd.* (Transport) 53,850 674,200
----------
1,275,240
----------
Denmark
Carlsberg AS (Beverages) 4,900 229,829 800 37,523
----------
Danisco AS (Food) 2,000 65,026
Jyske Bank AS* (Banks - Foreign) 2,400 56,285
TDC AS (Telecommunications) 3,600 77,711
----------
236,545
----------
Finland
Nokia Oyj (Telecommunications) 54,200 920,509
----------
Nokia Oyj (ADR) (Telecommunications) 12,000 199,440
Perlos Oyj (Electronics) 29,800 190,640
Sampo Oyj (A Shares) (Finance) 11,100 75,737
----------
465,817
----------
France
Axa SA (Insurance) 46,700 696,939 12,300 183,562
JC Decaux SA* (Advertising) 31,900 342,756 5,000 53,724
L'Oreal SA (Cosmetics & Personal Care) 3,300 245,752 1,200 89,364
Pernod-Ricard SA (Beverages) 500 50,654
Sanofi-Synthelabo SA (Medical) 6,100 373,019 1,800 110,071
TotalFinaElf SA (Oil & Gas) 1,900 261,725
Unibail SA (Real Estate Operations) 2,200 126,253
Vinci SA (Engineering / R&D Services) 1,500 83,779
Vivendi Environnement SA (Utilities) 5,300 125,651
---------- ----------
1,658,466 1,084,783
---------- ----------
Germany
AMB Generali Holding AG (Insurance) 10 609
Bayerische Motoren Werke AG (Automobile / Trucks) 2,200 78,431
Degussa AG (Chemicals)
Deutsche Boerse AG (Finance) 2,500 89,622
Deutsche Telekom AG (Telecommunications)
E.ON AG (Utilities) 1,786 80,828
Fraport AG (Transport) 2,200 44,662
SAP AG (Computers) 1,500 115,122
Schwarz Pharma AG (Medical) 2,500 48,029
----------
457,303
----------
-------------------------------
Combined
- -----------------------------------------------------------------------------------------
Par Value
(000's Market
Issuer, Description Shares Omitted) Value
- -----------------------------------------------------------------------------------------
Australia
Commonwealth Bank of Australia (Banks - Foreign) 7,600 128,227
Woolworths Ltd. (Retail) 111,333 760,633
----------
888,860
----------
Belgium
Dexia SA (Banks - Foreign) 14,300 137,223
Interbrew SA (Beverages) 7,500 168,969
----------
306,192
----------
Bermuda
Nabors Industries Ltd.* (Oil & Gas) 1,000 34,970
Platinum Underwriters Holdings, Ltd.* (Insurance) 11,800 296,180
RenaissanceRe Holdings Ltd. (Insurance) 12,000 492,000
----------
823,150
----------
Brazil
Aracruz Celulose SA American Depositary Receipts (ADR)
(Paper & Paper Products) 4,100 65,559
Tele Norte Leste Participacoes SA (ADR)
(Telecommunications) 11,000 76,120
----------
141,679
----------
Canada
Barrick Gold Corp. (Metal) 7,900 119,053
Canadian National Railway Co. (Transport) 2,100 89,607
Loblaw Cos., Ltd. (Retail) 2,700 97,531
Petro-Canada (Oil & Gas) 1,500 41,460
Precision Drilling Corp.* (Oil & Gas) 17,600 601,040
Shoppers Drug Mart Corp.* (Retail) 3,600 57,237
Suncor Energy, Inc. (Oil & Gas) 3,800 54,979
Talisman Energy, Inc. (Oil & Gas) 3,400 124,848
WestJet Airlines Ltd.* (Transport) 53,850 674,200
----------
1,859,955
----------
Denmark
Carlsberg AS (Beverages) 5,700 267,352
Danisco AS (Food) 2,000 65,026
Jyske Bank AS* (Banks - Foreign) 2,400 56,285
TDC AS (Telecommunications) 6,500 140,312
----------
528,975
----------
Finland
Nokia Oyj (Telecommunications) 54,200 920,509
Nokia Oyj (ADR) (Telecommunications) 25,500 423,810
Perlos Oyj (Electronics) 29,800 190,640
Sampo Oyj (A Shares) (Finance) 11,100 75,737
----------
1,610,696
----------
France
Axa SA (Insurance) 72,200 1,077,494
JC Decaux SA* (Advertising) 36,900 396,480
L'Oreal SA (Cosmetics & Personal Care) 5,700 424,480
Pernod-Ricard SA (Beverages) 500 50,654
Sanofi-Synthelabo SA (Medical) 9,700 593,161
TotalFinaElf SA (Oil & Gas) 3,089 425,510
Unibail SA (Real Estate Operations) 2,200 126,253
Vinci SA (Engineering / R&D Services) 1,500 83,779
Vivendi Environnement SA (Utilities) 11,100 263,155
----------
3,440,966
----------
Germany
AMB Generali Holding AG (Insurance) 10 609
Bayerische Motoren Werke AG (Automobile / Trucks) 4,800 171,123
Degussa AG (Chemicals) 2,900 86,156
Deutsche Boerse AG (Finance) 2,500 89,622
Deutsche Telekom AG (Telecommunications) 5,900 67,717
E.ON AG (Utilities) 5,386 243,751
Fraport AG (Transport) 2,200 44,662
SAP AG (Computers) 3,900 299,317
Schwarz Pharma AG (Medical) 2,500 48,029
----------
1,050,986
----------
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund, Global Fund and European Equity Fund combined on October 31,
2002.
------------------------------
International Fund
- -----------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------
Greece 0.29%
Coca-Cola Hellenic Bottling Co. SA (Beverages) 4,800 67,594
Hellenic Telecommunications Organization SA
(Telecommunications) 4,800 53,999
----------
121,593
----------
Hong Kong 0.49%
China Mobile Ltd.* (Telecommunications) 31,000 76,115
CLP Holdings Ltd. (Utilities) 37,500 151,935
Sun Hung Kai Properties, Ltd. (Real Estate Operations) 21,000 130,856
----------
358,906
----------
India 0.60%
Hindustan Lever Ltd.* (Soap & Cleaning Preparations) 18,059 59,885
Infosys Technology Ltd.* (Computers) 1,200 94,029
Satyam Computer Services Ltd.* (Computers)
----------
153,914
----------
Indonesia 0.02%
PT Telekomunikasi Indonesia (Telecommunications) 52,000 17,324
----------
Ireland 2.59%
Bank of Ireland (Banks - Foreign) 11,000 122,004
CRH Plc (Building) 7,100 89,646
ICON Plc* (ADR) (Business Services - Misc)
Irish Life & Permanent Plc (Finance)
Ryanair Holdings Plc* American Depositary Receipts (ADR)
(Transport)
----------
211,650
----------
Israel 0.88%
Teva Pharmaceutical Industries Ltd. (ADR) (Medical) 2,100 162,603
----------
Italy 3.55%
Autostrade SpA (Transport) 22,500 186,052
ENI SpA (Oil & Gas) 9,600 133,286
Finmeccanica SpA (Aerospace) 152,400 83,761
Impregilo SpA* (Building)
Italcementi SpA (Building)
Italgas SpA (Utilities)
Mediaset SpA (Media) 10,300 71,910
Parmalat Finanziaria SpA (Food)
Riunione Adriatica di Sicurta SpA (Insurance) 8,216 102,354
Saipem SpA (Oil & Gas)
Snam Rete Gas SpA (Utilities) 43,600 130,394
UniCredito Italiano SpA (Banks - Foreign) 25,200 94,831
----------
802,588
----------
Japan 6.88%
Asahi Glass Co., Ltd. (Building) 11,000 65,815
Bridgestone Corp (Rubber - Tires & Misc) 10,000 124,643
Dai Nippon Printing Co., Ltd. (Printing - Commercial) 13,000 132,854
Daiwa Securities Group, Inc. (Finance) 20,000 93,380
Fanuc Ltd. (Electronics) 200 7,918
Hoya Corp. (Electronics) 2,000 137,295
Ito-Yokado Co., Ltd. (Retail) 2,000 62,362
Kao Corp. (Cosmetics & Personal Care) 6,000 137,132
Keyence Corp. (Electronics) 600 99,323
Millea Holdings, Inc.* (Insurance) 11 82,157
Mitsubishi Tokyo Financial Group, Inc. (Banks - Foreign)
Murata Manufacturing Co., Ltd. (Electronics) 1,900 89,797
Nintendo Co., Ltd. (Leisure) 900 86,687
Nissan Motor Co., Ltd. (Automobile / Trucks)
Rohm Co., Ltd. (Electronics) 100 12,595
Shin-Etsu Chemical Co., Ltd. (Chemicals) 2,200 67,880
Shiseido Co., Ltd. (Cosmetics & Personal Care) 10,000 111,175
Sony Corp. (Electronics) 3,200 137,654
Sumitomo Mitsu Banking Corp. (Banks - Foreign) 18,000 74,492
Takeda Chemical Industries, Ltd. (Medical) 3,600 149,571
Tokyo Gas Co., Ltd. (Utilities) 22,000 64,289
Yamato Transport Co., Ltd. (Transport) 5,000 71,219
----------
1,808,238
----------
Luxembourg 0.90%
Arcelor SA* (Steel) 11,900 128,569
----------
-------------------------------------------------------------------
Global Fund European Equity
- -----------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------------
Greece
Coca-Cola Hellenic Bottling Co. SA (Beverages) 6,400 90,125
----------
Hellenic Telecommunications Organization SA
(Telecommunications)
Hong Kong
China Mobile Ltd.* (Telecommunications)
CLP Holdings Ltd. (Utilities)
Sun Hung Kai Properties, Ltd. (Real Estate Operations)
India
Hindustan Lever Ltd.* (Soap & Cleaning Preparations)
Infosys Technology Ltd.* (Computers)
Satyam Computer Services Ltd.* (Computers) 59,647 290,397
----------
Indonesia
PT Telekomunikasi Indonesia (Telecommunications)
Ireland
Bank of Ireland (Banks - Foreign) 66,100 733,135 10,500 116,459
CRH Plc (Building) 7,200 91,408
ICON Plc* (ADR) (Business Services - Misc) 3,300 79,632
Irish Life & Permanent Plc (Finance) 13,300 155,172
Ryanair Holdings Plc* American Depositary Receipts (ADR)
(Transport) 14,100 524,661
---------- ----------
1,257,796 442,671
---------- ----------
Israel
Teva Pharmaceutical Industries Ltd. (ADR) (Medical) 4,100 317,463 2,200 170,346
---------- ----------
Italy
Autostrade SpA (Transport) 19,200 158,764
ENI SpA (Oil & Gas) 16,900 234,639 13,200 183,268
Finmeccanica SpA (Aerospace) 188,000 103,327
Impregilo SpA* (Building) 120,000 46,346
Italcementi SpA (Building) 14,500 127,367
Italgas SpA (Utilities) 9,700 94,522
Mediaset SpA (Media) 9,700 67,721
Parmalat Finanziaria SpA (Food) 45,300 126,506
Riunione Adriatica di Sicurta SpA (Insurance) 21,993 273,987 10,459 130,297
Saipem SpA (Oil & Gas) 11,800 63,803
Snam Rete Gas SpA (Utilities) 40,500 121,123
UniCredito Italiano SpA (Banks - Foreign) 23,400 88,057
---------- ----------
508,626 1,311,101
---------- ----------
Japan
Asahi Glass Co., Ltd. (Building)
Bridgestone Corp (Rubber - Tires & Misc)
Dai Nippon Printing Co., Ltd. (Printing - Commercial) 37,000 378,124
Daiwa Securities Group, Inc. (Finance)
Fanuc Ltd. (Electronics)
Hoya Corp. (Electronics)
Ito-Yokado Co., Ltd. (Retail)
Kao Corp. (Cosmetics & Personal Care) 27,000 617,093
Keyence Corp. (Electronics)
Millea Holdings, Inc.* (Insurance)
Mitsubishi Tokyo Financial Group, Inc. (Banks - Foreign) 79 515,231
Murata Manufacturing Co., Ltd. (Electronics) 6,800 321,378
Nintendo Co., Ltd. (Leisure)
Nissan Motor Co., Ltd. (Automobile / Trucks) 44,500 341,805
Rohm Co., Ltd. (Electronics)
Shin-Etsu Chemical Co., Ltd. (Chemicals)
Shiseido Co., Ltd. (Cosmetics & Personal Care) 48,000 533,638
Sony Corp. (Electronics) 13,200 570,768
Sumitomo Mitsu Banking Corp. (Banks - Foreign)
Takeda Chemical Industries, Ltd. (Medical)
Tokyo Gas Co., Ltd. (Utilities)
Yamato Transport Co., Ltd. (Transport)
----------
3,278,037
----------
Luxembourg
Arcelor SA* (Steel) 42,600 460,256 6,900 74,548
---------- ----------
-------------------------------
Combined
- -----------------------------------------------------------------------------------------
Par Value
(000's Market
Issuer, Description Shares Omitted) Value
- -----------------------------------------------------------------------------------------
Greece
Coca-Cola Hellenic Bottling Co. SA (Beverages) 11,200 157,719
Hellenic Telecommunications Organization SA
(Telecommunications) 4,800 53,999
----------
211,718
----------
Hong Kong
China Mobile Ltd.* (Telecommunications) 31,000 76,115
CLP Holdings Ltd. (Utilities) 37,500 151,935
Sun Hung Kai Properties, Ltd. (Real Estate Operations) 21,000 130,856
----------
358,906
----------
India
Hindustan Lever Ltd.* (Soap & Cleaning Preparations) 18,059 59,885
Infosys Technology Ltd.* (Computers) 1,200 94,029
Satyam Computer Services Ltd.* (Computers) 59,647 290,397
----------
444,311
----------
Indonesia
PT Telekomunikasi Indonesia (Telecommunications) 52,000 17,324
----------
Ireland
Bank of Ireland (Banks - Foreign) 87,600 971,598
CRH Plc (Building) 14,300 181,054
ICON Plc* (ADR) (Business Services - Misc) 3,300 79,632
Irish Life & Permanent Plc (Finance) 13,300 155,172
Ryanair Holdings Plc* American Depositary Receipts (ADR)
(Transport) 14,100 524,661
----------
1,912,117
----------
Israel
Teva Pharmaceutical Industries Ltd. (ADR) (Medical) 8,400 650,412
----------
Italy
Autostrade SpA (Transport) 41,700 344,816
ENI SpA (Oil & Gas) 39,700 551,193
Finmeccanica SpA (Aerospace) 340,400 187,088
Impregilo SpA* (Building) 120,000 46,346
Italcementi SpA (Building) 14,500 127,367
Italgas SpA (Utilities) 9,700 94,522
Mediaset SpA (Media) 20,000 139,631
Parmalat Finanziaria SpA (Food) 45,300 126,506
Riunione Adriatica di Sicurta SpA (Insurance) 40,668 506,638
Saipem SpA (Oil & Gas) 11,800 63,803
Snam Rete Gas SpA (Utilities) 84,100 251,517
UniCredito Italiano SpA (Banks - Foreign) 48,600 182,888
----------
2,622,315
----------
Japan
Asahi Glass Co., Ltd. (Building) 11,000 65,815
Bridgestone Corp (Rubber - Tires & Misc) 10,000 124,643
Dai Nippon Printing Co., Ltd. (Printing - Commercial) 50,000 510,978
Daiwa Securities Group, Inc. (Finance) 20,000 93,380
Fanuc Ltd. (Electronics) 200 7,918
Hoya Corp. (Electronics) 2,000 137,295
Ito-Yokado Co., Ltd. (Retail) 2,000 62,362
Kao Corp. (Cosmetics & Personal Care) 33,000 754,225
Keyence Corp. (Electronics) 600 99,323
Millea Holdings, Inc.* (Insurance) 11 82,157
Mitsubishi Tokyo Financial Group, Inc. (Banks - Foreign) 79 515,231
Murata Manufacturing Co., Ltd. (Electronics) 8,700 411,175
Nintendo Co., Ltd. (Leisure) 900 86,687
Nissan Motor Co., Ltd. (Automobile / Trucks) 44,500 341,805
Rohm Co., Ltd. (Electronics) 100 12,595
Shin-Etsu Chemical Co., Ltd. (Chemicals) 2,200 67,880
Shiseido Co., Ltd. (Cosmetics & Personal Care) 58,000 644,813
Sony Corp. (Electronics) 16,400 708,422
Sumitomo Mitsu Banking Corp. (Banks - Foreign) 18,000 74,492
Takeda Chemical Industries, Ltd. (Medical) 3,600 149,571
Tokyo Gas Co., Ltd. (Utilities) 22,000 64,289
Yamato Transport Co., Ltd. (Transport) 5,000 71,219
----------
5,086,275
----------
Luxembourg
Arcelor SA* (Steel) 61,400 663,373
----------
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund, Global Fund and European Equity Fund combined on October 31,
2002.
------------------------------
International Fund
- -----------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------
Mexico 0.09%
Wal-Mart de Mexico SA de CV (Series C) (Retail) 31,100 66,943
----------
Netherlands 2.75%
ASML Holding NV (NY Reg Shares)* (Electronics)
Euronext NV (Finance)
Heineken NV (Beverages) 2,700 108,476
IHC Caland NV (Oil & Gas)
Royal Dutch Petroleum Co. (Oil & Gas) 3,100 134,094
Unilever NV (Food) 3,300 211,601
Van der Moolen Holding NV (Finance)
----------
454,171
----------
Norway 1.24%
Frontline Ltd. (Transport)
Gjensidige NOR ASA* (Finance)
ProSafe ASA * (Oil & Gas)
Tandberg ASA* (Telecommunications)
Tomra Systems ASA (Pollution Control)
Singapore 1.51%
Flextronics International Ltd.* (Electronics)
Singapore Press Holdings Ltd. (Media) 8,000 89,709
United Overseas Bank Ltd. (Banks - Foreign) 18,000 136,603
----------
226,312
----------
South Korea 1.06%
Hyundai Motor Co., Ltd. (Automobile / Trucks) 2,280 57,912
Kookmin Bank (Banks - Foreign) 1,500 49,979
Samsung Electronics, Ltd.* Global Depositary Receipts
(Electronics) (R) 700 99,100
SK Telecom Co., Ltd. (Telecommunications) 400 73,861
----------
280,852
----------
Spain 1.54%
Acciona SA (Building)
Actividades de Construccion y Servicios SA (Building)
Banco Bilbao Vizcaya Argentaria SA (Banks - Foreign) 13,954 132,935
Banco Popular Espanol SA (Banks - Foreign) 1,900 81,359
Corporacion Mapfre SA (Insurance)
Endesa SA (Utilities) 7,500 77,466
Iberia Lineas Aereas de Espana SA (Transport)
Telefonica SA* (Telecommunications) 12,900 122,383
----------
414,143
----------
Sweden 1.11%
Autoliv, Inc. Swedish Depositary Receipts
(Automobile / Trucks)
Capio AB* (Medical)
Elekta AB (B Shares)* (Medical)
Hennes & Mauritz AB (B Shares) (Retail) 4,400 85,480
Skandinaviska Enskilda Banken AB (A Shares)
(Banks - Foreign) 16,100 139,696
Svenska Cellulosa AB (B Shares) (Paper & Paper Products) 2,900 88,623
----------
313,799
----------
Switzerland 3.42%
Actelion Ltd.* (Medical)
Alcon, Inc.* (Medical) 1,700 69,734
Converium Holding AG* (Insurance) 2,300 92,860
Nestle SA (Food) 800 171,522
Nobel Biocare Holding AG* (Medical)
Novartis AG (Medical) 2,232 85,125
SGS Societe Generale de Surveillance Holding SA
(Business Services - Misc)
Syngenta AG (Chemicals) 1,600 95,217
UBS AG (Banks - Foreign)
----------
514,458
----------
Taiwan 0.11%
United Microelectronics Corp.* (ADR) (Electronics) 20,280 84,162
----------
United Kingdom 13.73%
Allied Domecq Plc (Beverages) 17,900 106,974
Barclays Plc (Banks - Foreign) 23,660 163,606
BG Group Plc (Oil & Gas) 23,100 92,245
-------------------------------------------------------------------
Global Fund European Equity
- -----------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------------
Mexico
Wal-Mart de Mexico SA de CV (Series C) (Retail)
Netherlands
ASML Holding NV (NY Reg Shares)* (Electronics) 47,400 407,640
Euronext NV (Finance) 3,800 75,639
Heineken NV (Beverages) 2,400 96,423
IHC Caland NV (Oil & Gas) 1,600 70,984
Royal Dutch Petroleum Co. (Oil & Gas) 2,800 121,117
Unilever NV (Food) 8,700 557,858 3,100 198,777
Van der Moolen Holding NV (Finance) 2,200 49,129
---------- ----------
965,498 612,069
---------- ----------
Norway
Frontline Ltd. (Transport) 20,200 121,690 15,600 93,978
Gjensidige NOR ASA* (Finance) 3,400 105,613
ProSafe ASA * (Oil & Gas) 3,200 40,449
Tandberg ASA* (Telecommunications) 8,600 93,094
Tomra Systems ASA (Pollution Control) 51,800 379,622 10,900 79,882
---------- ----------
501,312 413,016
---------- ----------
Singapore
Flextronics International Ltd.* (Electronics) 51,800 433,048
Singapore Press Holdings Ltd. (Media)
United Overseas Bank Ltd. (Banks - Foreign) 60,000 455,344
----------
888,392
----------
South Korea
Hyundai Motor Co., Ltd. (Automobile / Trucks)
Kookmin Bank (Banks - Foreign)
Samsung Electronics, Ltd.* Global Depositary Receipts
(Electronics) (R) 950 268,978
SK Telecom Co., Ltd. (Telecommunications) 1,250 230,817
----------
499,795
----------
Spain
Acciona SA (Building) 1,400 54,070
Actividades de Construccion y Servicios SA (Building) 3,500 97,049
Banco Bilbao Vizcaya Argentaria SA (Banks - Foreign) 11,383 108,442
Banco Popular Espanol SA (Banks - Foreign) 3,000 128,461
Corporacion Mapfre SA (Insurance) 15,000 101,456
Endesa SA (Utilities) 7,000 72,301
Iberia Lineas Aereas de Espana SA (Transport) 27,300 47,311
Telefonica SA* (Telecommunications) 12,200 115,742
----------
724,832
----------
Sweden
Autoliv, Inc. Swedish Depositary Receipts
(Automobile / Trucks) 3,300 63,570
Capio AB* (Medical) 7,400 44,421
Elekta AB (B Shares)* (Medical) 9,900 92,923
Hennes & Mauritz AB (B Shares) (Retail) 4,200 81,594
Skandinaviska Enskilda Banken AB (A Shares)
(Banks - Foreign) 15,700 136,225
Svenska Cellulosa AB (B Shares) (Paper & Paper Products) 2,800 85,567
----------
504,300
----------
Switzerland
Actelion Ltd.* (Medical) 1,000 38,274
Alcon, Inc.* (Medical) 9,700 397,894 2,100 86,142
Converium Holding AG* (Insurance) 1,900 76,710
Nestle SA (Food) 2,300 493,124 500 107,201
Nobel Biocare Holding AG* (Medical) 900 50,054
Novartis AG (Medical) 2,141 81,654
SGS Societe Generale de Surveillance Holding SA
(Business Services - Misc) 150 43,998
Syngenta AG (Chemicals) 1,600 95,217
UBS AG (Banks - Foreign) 11,400 543,280
---------- ----------
1,434,298 579,250
---------- ----------
Taiwan
United Microelectronics Corp.* (ADR) (Electronics)
United Kingdom
Allied Domecq Plc (Beverages) 13,800 82,472
Barclays Plc (Banks - Foreign) 22,324 154,368
BG Group Plc (Oil & Gas) 22,200 88,651
-------------------------------
Combined
- -----------------------------------------------------------------------------------------
Par Value
(000's Market
Issuer, Description Shares Omitted) Value
- -----------------------------------------------------------------------------------------
Mexico
Wal-Mart de Mexico SA de CV (Series C) (Retail) 31,100 66,943
----------
Netherlands
ASML Holding NV (NY Reg Shares)* (Electronics) 47,400 407,640
Euronext NV (Finance) 3,800 75,639
Heineken NV (Beverages) 5,100 204,899
IHC Caland NV (Oil & Gas) 1,600 70,984
Royal Dutch Petroleum Co. (Oil & Gas) 5,900 255,211
Unilever NV (Food) 15,100 968,236
Van der Moolen Holding NV (Finance) 2,200 49,129
----------
2,031,738
----------
Norway
Frontline Ltd. (Transport) 35,800 215,668
Gjensidige NOR ASA* (Finance) 3,400 105,613
ProSafe ASA * (Oil & Gas) 3,200 40,449
Tandberg ASA* (Telecommunications) 8,600 93,094
Tomra Systems ASA (Pollution Control) 62,700 459,504
----------
914,328
----------
Singapore
Flextronics International Ltd.* (Electronics) 51,800 433,048
Singapore Press Holdings Ltd. (Media) 8,000 89,709
United Overseas Bank Ltd. (Banks - Foreign) 78,000 591,947
----------
1,114,704
----------
South Korea
Hyundai Motor Co., Ltd. (Automobile / Trucks) 2,280 57,912
Kookmin Bank (Banks - Foreign) 1,500 49,979
Samsung Electronics, Ltd.* Global Depositary Receipts
(Electronics) (R) 1,650 368,078
SK Telecom Co., Ltd. (Telecommunications) 1,650 304,678
----------
780,647
----------
Spain
Acciona SA (Building) 1,400 54,070
Actividades de Construccion y Servicios SA (Building) 3,500 97,049
Banco Bilbao Vizcaya Argentaria SA (Banks - Foreign) 25,337 241,377
Banco Popular Espanol SA (Banks - Foreign) 4,900 209,820
Corporacion Mapfre SA (Insurance) 15,000 101,456
Endesa SA (Utilities) 14,500 149,767
Iberia Lineas Aereas de Espana SA (Transport) 27,300 47,311
Telefonica SA* (Telecommunications) 25,100 238,125
----------
1,138,975
----------
Sweden
Autoliv, Inc. Swedish Depositary Receipts
(Automobile / Trucks) 3,300 63,570
Capio AB* (Medical) 7,400 44,421
Elekta AB (B Shares)* (Medical) 9,900 92,923
Hennes & Mauritz AB (B Shares) (Retail) 8,600 167,074
Skandinaviska Enskilda Banken AB (A Shares)
(Banks - Foreign) 31,800 275,921
Svenska Cellulosa AB (B Shares) (Paper & Paper Products) 5,700 174,190
----------
818,099
----------
Switzerland
Actelion Ltd.* (Medical) 1,000 38,274
Alcon, Inc.* (Medical) 13,500 553,770
Converium Holding AG* (Insurance) 4,200 169,570
Nestle SA (Food) 3,600 771,847
Nobel Biocare Holding AG* (Medical) 900 50,054
Novartis AG (Medical) 4,373 166,779
SGS Societe Generale de Surveillance Holding SA
(Business Services - Misc) 150 43,998
Syngenta AG (Chemicals) 3,200 190,434
UBS AG (Banks - Foreign) 11,400 543,280
----------
2,528,006
----------
Taiwan
United Microelectronics Corp.* (ADR) (Electronics) 20,280 84,162
----------
United Kingdom
Allied Domecq Plc (Beverages) 31,700 189,446
Barclays Plc (Banks - Foreign) 45,984 317,974
BG Group Plc (Oil & Gas) 45,300 180,896
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund, Global Fund and European Equity Fund combined on October 31,
2002.
------------------------------
International Fund
- -----------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------
BHP Billiton Plc (Metal) 15,963 77,917
BOC Group Plc (Chemicals) 4,800 67,509
BP Plc (Oil & Gas)
British American Tobacco Plc (Tobacco) 11,800 120,732
British Sky Broadcasting Group Plc* (Media) 11,100 104,801
Capita Group Plc (Business Services - Misc)
Capital Radio Plc (Media)
Centrica Plc (Utilities) 44,980 128,072
Cobham Plc (Aerospace)
Corus Group Plc* (Steel) 180,000 119,681
Diageo Plc (Beverages) 12,800 144,280
Exel Plc (Transport) 6,500 66,810
Game Group Plc (Computers)
George Wimpey Plc (Building)
GlaxoSmithKline Plc (Medical) 5,000 95,432
HBOS Plc (Banks - Foreign) 10,200 112,899
HSBC Holdings Plc (Banks - Foreign) 16,000 178,223
Imperial Tobacco Group Plc (Tobacco)
Kelda Group Plc (Utilities)
Man Group Plc (Finance) 7,800 116,170
MFI Furniture Group Plc (Furniture)
Morrison (Wm.) Supermarkets Plc (Retail)
National Grid Transco Plc (Utilities) 21,300 151,619
Next Plc (Retail)
Peninsular and Oriental Steam Navigation Co. (Transport)
Rentokil Initial Plc (Diversified Operations) 30,300 102,746
Rexam Plc (Containers)
Royal Bank of Scotland Group Plc (Banks - Foreign) 9,622 226,400
Shell Transport & Trading Co. Plc (Oil & Gas)
Shire Pharmaceuticals Group Plc* (Medical)
SkyePharma Plc* (Medical)
Smith & Nephew Plc (Medical)
Smiths Group Plc (Manufacturing)
Tullow Oil Plc* (Oil & Gas)
Vodafone Group Plc (Telecommunications) 76,900 123,615
----------
2,299,731
----------
United States 36.64%
3M Co. (Diversified Operations)
Allergan, Inc. (Medical)
Allstate Corp. (The) (Insurance)
Anheuser-Busch Cos., Inc. (Beverages)
Anthem, Inc.* (Medical)
AT&T Wireless Services, Inc.* (Telecommunications)
AutoZone, Inc.* (Retail)
Ball Corp. (Containers)
BJ Services Co.* (Oil & Gas)
Blockbuster, Inc. (Class A) (Leisure)
Borland Software Corp.* (Computers)
Cisco Systems, Inc.* (Computers)
Citigroup, Inc. (Finance)
Dell Computer Corp.* (Computers)
Dial Corp. (The) (Cosmetics & Personal Care)
Electronic Arts, Inc.* (Computers)
ENSCO International, Inc. (Oil & Gas)
Forest Laboratories, Inc.* (Medical)
General Electric Co. (Electronics)
Gilead Sciences, Inc.* (Medical)
GlobalSantaFe Corp. (Oil & Gas) 1,500 35,850
Gymboree Corp. (The)* (Retail)
Harley-Davidson, Inc. (Leisure)
Health Management Associates, Inc. (Class A)* (Medical)
Hunt (J.B.) Transport Services, Inc.* (Transport)
IMC Global, Inc. (Fertilizers)
Intel Corp. (Electronics)
International Business Machines Corp. (Computers)
Intuit, Inc.* (Computers)
Johnson & Johnson (Medical)
Kohl's Corp.* (Retail)
Lockheed Martin Corp. (Aerospace)
Lowe's Cos., Inc. (Retail)
Medtronic, Inc. (Medical)
MGM Mirage, Inc.* (Leisure)
-------------------------------------------------------------------
Global Fund European Equity
- -----------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------------
BHP Billiton Plc (Metal) 15,112 73,763
BOC Group Plc (Chemicals)
BP Plc (Oil & Gas) 70,900 454,772
British American Tobacco Plc (Tobacco) 23,900 244,534 11,000 112,547
British Sky Broadcasting Group Plc* (Media) 10,500 99,136
Capita Group Plc (Business Services - Misc) 19,700 69,036
Capital Radio Plc (Media) 8,400 68,335
Centrica Plc (Utilities) 151,600 431,652 30,095 85,690
Cobham Plc (Aerospace) 4,900 74,052
Corus Group Plc* (Steel) 182,500 121,343 169,300 112,567
Diageo Plc (Beverages) 9,400 105,956
Exel Plc (Transport) 30,300 311,438 9,400 96,618
Game Group Plc (Computers) 32,600 56,994
George Wimpey Plc (Building) 14,300 61,522
GlaxoSmithKline Plc (Medical) 8,900 169,869
HBOS Plc (Banks - Foreign) 9,900 109,578
HSBC Holdings Plc (Banks - Foreign) 45,600 496,961 13,000 144,806
Imperial Tobacco Group Plc (Tobacco) 29,900 467,772 4,300 67,272
Kelda Group Plc (Utilities) 15,000 88,705
Man Group Plc (Finance) 11,000 163,830
MFI Furniture Group Plc (Furniture) 32,700 67,017
Morrison (Wm.) Supermarkets Plc (Retail) 28,100 92,428
National Grid Transco Plc (Utilities) 20,800 148,060
Next Plc (Retail) 35,000 487,328
Peninsular and Oriental Steam Navigation Co. (Transport) 28,300 84,231
Rentokil Initial Plc (Diversified Operations) 30,000 101,729
Rexam Plc (Containers) 15,400 98,358
Royal Bank of Scotland Group Plc (Banks - Foreign) 21,505 506,000 6,092 143,341
Shell Transport & Trading Co. Plc (Oil & Gas) 39,400 253,184
Shire Pharmaceuticals Group Plc* (Medical) 35,700 287,633
SkyePharma Plc* (Medical) 93,000 69,837
Smith & Nephew Plc (Medical) 17,500 104,036
Smiths Group Plc (Manufacturing) 7,700 88,360
Tullow Oil Plc* (Oil & Gas) 67,700 96,381
Vodafone Group Plc (Telecommunications) 30,500 485,560 73,900 118,793
---------- ----------
4,548,177 3,298,338
---------- ----------
United States
3M Co. (Diversified Operations) 5,700 723,558
Allergan, Inc. (Medical) 4,900 266,805
Allstate Corp. (The) (Insurance) 13,900 552,942
Anheuser-Busch Cos., Inc. (Beverages) 3,300 174,108
Anthem, Inc.* (Medical) 10,900 686,700
AT&T Wireless Services, Inc.* (Telecommunications) 78,400 538,608
AutoZone, Inc.* (Retail) 7,300 626,121
Ball Corp. (Containers) 9,600 464,928
BJ Services Co.* (Oil & Gas) 11,800 357,894
Blockbuster, Inc. (Class A) (Leisure) 17,500 419,475
Borland Software Corp.* (Computers) 13,600 182,648
Cisco Systems, Inc.* (Computers) 29,200 326,456
Citigroup, Inc. (Finance) 19,700 727,915
Dell Computer Corp.* (Computers) 35,500 1,015,655
Dial Corp. (The) (Cosmetics & Personal Care) 16,900 359,294
Electronic Arts, Inc.* (Computers) 5,800 377,696
ENSCO International, Inc. (Oil & Gas) 17,800 481,312
Forest Laboratories, Inc.* (Medical) 5,100 499,749
General Electric Co. (Electronics) 37,700 951,925
Gilead Sciences, Inc.* (Medical) 11,000 382,140
GlobalSantaFe Corp. (Oil & Gas)
Gymboree Corp. (The)* (Retail) 27,100 497,556
Harley-Davidson, Inc. (Leisure) 10,600 554,380
Health Management Associates, Inc. (Class A)* (Medical) 24,800 474,176
Hunt (J.B.) Transport Services, Inc.* (Transport) 15,500 429,195
IMC Global, Inc. (Fertilizers) 28,400 312,400
Intel Corp. (Electronics) 10,100 174,730
International Business Machines Corp. (Computers) 6,900 544,686
Intuit, Inc.* (Computers) 11,100 576,312
Johnson & Johnson (Medical) 13,200 775,500
Kohl's Corp.* (Retail) 6,300 368,235
Lockheed Martin Corp. (Aerospace) 9,200 532,680
Lowe's Cos., Inc. (Retail) 15,800 659,334
Medtronic, Inc. (Medical) 14,400 645,120
MGM Mirage, Inc.* (Leisure) 21,200 659,320
-------------------------------
Combined
- -----------------------------------------------------------------------------------------
Par Value
(000's Market
Issuer, Description Shares Omitted) Value
- -----------------------------------------------------------------------------------------
BHP Billiton Plc (Metal) 31,075 151,680
BOC Group Plc (Chemicals) 4,800 67,509
BP Plc (Oil & Gas) 70,900 454,772
British American Tobacco Plc (Tobacco) 46,700 477,813
British Sky Broadcasting Group Plc* (Media) 21,600 203,937
Capita Group Plc (Business Services - Misc) 19,700 69,036
Capital Radio Plc (Media) 8,400 68,335
Centrica Plc (Utilities) 226,675 645,414
Cobham Plc (Aerospace) 4,900 74,052
Corus Group Plc* (Steel) 531,800 353,591
Diageo Plc (Beverages) 22,200 250,236
Exel Plc (Transport) 46,200 474,866
Game Group Plc (Computers) 32,600 56,994
George Wimpey Plc (Building) 14,300 61,522
GlaxoSmithKline Plc (Medical) 13,900 265,301
HBOS Plc (Banks - Foreign) 20,100 222,477
HSBC Holdings Plc (Banks - Foreign) 74,600 819,990
Imperial Tobacco Group Plc (Tobacco) 34,200 535,044
Kelda Group Plc (Utilities) 15,000 88,705
Man Group Plc (Finance) 18,800 280,000
MFI Furniture Group Plc (Furniture) 32,700 67,017
Morrison (Wm.) Supermarkets Plc (Retail) 28,100 92,428
National Grid Transco Plc (Utilities) 42,100 299,679
Next Plc (Retail) 35,000 487,328
Peninsular and Oriental Steam Navigation Co. (Transport) 28,300 84,231
Rentokil Initial Plc (Diversified Operations) 60,300 204,475
Rexam Plc (Containers) 15,400 98,358
Royal Bank of Scotland Group Plc (Banks - Foreign) 37,219 875,741
Shell Transport & Trading Co. Plc (Oil & Gas) 39,400 253,184
Shire Pharmaceuticals Group Plc* (Medical) 35,700 287,633
SkyePharma Plc* (Medical) 93,000 69,837
Smith & Nephew Plc (Medical) 17,500 104,036
Smiths Group Plc (Manufacturing) 7,700 88,360
Tullow Oil Plc* (Oil & Gas) 67,700 96,381
Vodafone Group Plc (Telecommunications) 181,300 727,968
----------
10,146,246
----------
United States
3M Co. (Diversified Operations) 5,700 723,558
Allergan, Inc. (Medical) 4,900 266,805
Allstate Corp. (The) (Insurance) 13,900 552,942
Anheuser-Busch Cos., Inc. (Beverages) 3,300 174,108
Anthem, Inc.* (Medical) 10,900 686,700
AT&T Wireless Services, Inc.* (Telecommunications) 78,400 538,608
AutoZone, Inc.* (Retail) 7,300 626,121
Ball Corp. (Containers) 9,600 464,928
BJ Services Co.* (Oil & Gas) 11,800 357,894
Blockbuster, Inc. (Class A) (Leisure) 17,500 419,475
Borland Software Corp.* (Computers) 13,600 182,648
Cisco Systems, Inc.* (Computers) 29,200 326,456
Citigroup, Inc. (Finance) 19,700 727,915
Dell Computer Corp.* (Computers) 35,500 1,015,655
Dial Corp. (The) (Cosmetics & Personal Care) 16,900 359,294
Electronic Arts, Inc.* (Computers) 5,800 377,696
ENSCO International, Inc. (Oil & Gas) 17,800 481,312
Forest Laboratories, Inc.* (Medical) 5,100 499,749
General Electric Co. (Electronics) 37,700 951,925
Gilead Sciences, Inc.* (Medical) 11,000 382,140
GlobalSantaFe Corp. (Oil & Gas) 1,500 35,850
Gymboree Corp. (The)* (Retail) 27,100 497,556
Harley-Davidson, Inc. (Leisure) 10,600 554,380
Health Management Associates, Inc. (Class A)* (Medical) 24,800 474,176
Hunt (J.B.) Transport Services, Inc.* (Transport) 15,500 429,195
IMC Global, Inc. (Fertilizers) 28,400 312,400
Intel Corp. (Electronics) 10,100 174,730
International Business Machines Corp. (Computers) 6,900 544,686
Intuit, Inc.* (Computers) 11,100 576,312
Johnson & Johnson (Medical) 13,200 775,500
Kohl's Corp.* (Retail) 6,300 368,235
Lockheed Martin Corp. (Aerospace) 9,200 532,680
Lowe's Cos., Inc. (Retail) 15,800 659,334
Medtronic, Inc. (Medical) 14,400 645,120
MGM Mirage, Inc.* (Leisure) 21,200 659,320
John Hancock International Fund
Schedule of Investments
October 31, 2002 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Fund, Global Fund and European Equity Fund combined on October 31,
2002.
------------------------------
International Fund
- -----------------------------------------------------------------------------------------------------------------------
Par Value
% of Net Interest Maturity (000's Market
Issuer, Description Assets Rate % Date Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------
Michaels Stores, Inc.* (Retail)
Microsoft Corp.* (Computers)
Moody's Corp. (Business Services - Misc)
Nextel Communications, Inc. (Class A)*
(Telecommunications)
Noble Corp.* (Oil & Gas) 1,000 32,320
North Fork Bancorp., Inc. (Banks - United States)
Patterson-UTI Energy, Inc.* (Oil & Gas)
Pfizer, Inc. (Medical)
Procter & Gamble Co. (The)
(Soap & Cleaning Preparations)
GlobalSantaFe Corp. (Oil & Gas)
Scripps (E.W.) Co. (The) (Class A) (Media)
Smith International, Inc.* (Oil & Gas)
TJX Cos., Inc. (The) (Retail)
Tyco International Ltd. (Diversified Operations)
Viacom, Inc. (Class B)* (Media)
Wal-Mart Stores, Inc. (Retail)
Wells Fargo & Co. (Banks - United States)
Williams-Sonoma, Inc.* (Retail)
Zimmer Holdings, Inc.* (Medical)
----------
68,170
----------
TOTAL COMMON STOCKS 93.80%
(Cost $70,055,377) 11,256,987
----------
PREFERRED STOCKS
Germany 0.07%
Henkel KGaA (Chemicals)
South Korea 0.72%
Samsung Electronics Co., Ltd. (Electronics)
TOTAL PREFERRED STOCKS 0.79%
(Cost $592,407)
TOTAL COMMOM AND PREFERRED STOCKS 94.59%
(Cost $70,647,784) 11,256,987
----------
UNITS
France 0.12%
Eurotunnel SA* (Transport)
TOTAL UNITS 0.12%
(Cost $125,456)
TOTAL COMMOM AND PREFERRED STOCKS AND UNITS 94.71%
(Cost $70,773,240) 11,256,987
----------
ISSUER
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement 5.88%
Investment in a joint repurchase agreement
transaction with Barclays Capital,
Inc. - Dated 10-31-02, due 11-01-02
(Secured by U.S. Treasury Inflation Indexed
Note 3.00% due 07-15-12) 1.90% 11/1/2002 808 808,000
----------
TOTAL SHORT-TERM INVESTMENTS 5.88%
(Cost $4,348,000) 808,000
----------
TOTAL INVESTMENTS 100.59% 12,064,987
----------
OTHER ASSETS AND LIABILITIES, NET -0.59% -630
----------
TOTAL NET ASSETS 100.00% 12,064,357
==========
-------------------------------------------------------------------
Global Fund European Equity
- -----------------------------------------------------------------------------------------------------------------------------
Par Value Par Value
(000's Market (000's Market
Issuer, Description Shares Omitted) Value Shares Omitted) Value
- -----------------------------------------------------------------------------------------------------------------------------
Michaels Stores, Inc.* (Retail) 7,100 319,216
Microsoft Corp.* (Computers) 19,100 1,021,277
Moody's Corp. (Business Services - Misc) 9,900 466,290
Nextel Communications, Inc. (Class A)*
(Telecommunications) 34,500 389,160
Noble Corp.* (Oil & Gas) 15,900 513,888
North Fork Bancorp., Inc. (Banks - United States) 10,400 399,984
Patterson-UTI Energy, Inc.* (Oil & Gas) 10,300 297,876
Pfizer, Inc. (Medical) 35,400 1,124,658
Procter & Gamble Co. (The)
(Soap & Cleaning Preparations) 5,200 459,940
GlobalSantaFe Corp. (Oil & Gas) 1,400 33,460
----------
Scripps (E.W.) Co. (The) (Class A) (Media) 7,100 548,049
Smith International, Inc.* (Oil & Gas) 6,900 215,694
TJX Cos., Inc. (The) (Retail) 28,600 586,872
Tyco International Ltd. (Diversified Operations) 26,200 378,852
Viacom, Inc. (Class B)* (Media) 13,500 602,235
Wal-Mart Stores, Inc. (Retail) 11,200 599,760
Wells Fargo & Co. (Banks - United States) 15,800 797,426
Williams-Sonoma, Inc.* (Retail) 14,500 345,100
Zimmer Holdings, Inc.* (Medical) 14,400 593,568
----------
26,979,398
----------
TOTAL COMMON STOCKS
(Cost $70,055,377) 47,409,722 10,656,377
---------- ----------
PREFERRED STOCKS
Germany
Henkel KGaA (Chemicals) 800 50,941
----------
South Korea
Samsung Electronics Co., Ltd. (Electronics) 3,950 531,637
----------
TOTAL PREFERRED STOCKS
(Cost $592,407) 531,637 50,941
---------- ----------
TOTAL COMMOM AND PREFERRED STOCKS
(Cost $70,647,784) 47,941,359 10,707,318
---------- ----------
UNITS
France
Eurotunnel SA* (Transport) 127,061 91,854
----------
TOTAL UNITS
(Cost $125,456) 91,854
----------
TOTAL COMMOM AND PREFERRED STOCKS AND UNITS
(Cost $70,773,240) 47,941,359 10,799,172
---------- ----------
ISSUER
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement
Investment in a joint repurchase agreement
transaction with Barclays Capital,
Inc. - Dated 10-31-02, due 11-01-02
(Secured by U.S. Treasury Inflation Indexed
Note 3.00% due 07-15-12) 2,613 2,613,000 927 927,000
---------- ----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $4,348,000) 2,613,000 927,000
---------- ----------
TOTAL INVESTMENTS 50,554,359 11,726,172
---------- ----------
OTHER ASSETS AND LIABILITIES, NET -158,364 -277,672
---------- ----------
TOTAL NET ASSETS 50,395,995 11,448,500
========== ==========
-------------------------------
Combined
- -----------------------------------------------------------------------------------------
Par Value
(000's Market
Issuer, Description Shares Omitted) Value
- -----------------------------------------------------------------------------------------
Michaels Stores, Inc.* (Retail) 7,100 319,216
Microsoft Corp.* (Computers) 19,100 1,021,277
Moody's Corp. (Business Services - Misc) 9,900 466,290
Nextel Communications, Inc. (Class A)*
(Telecommunications) 34,500 389,160
Noble Corp.* (Oil & Gas) 16,900 546,208
North Fork Bancorp., Inc. (Banks - United States) 10,400 399,984
Patterson-UTI Energy, Inc.* (Oil & Gas) 10,300 297,876
Pfizer, Inc. (Medical) 35,400 1,124,658
Procter & Gamble Co. (The)
(Soap & Cleaning Preparations) 5,200 459,940
GlobalSantaFe Corp. (Oil & Gas) 1,400 33,460
Scripps (E.W.) Co. (The) (Class A) (Media) 7,100 548,049
Smith International, Inc.* (Oil & Gas) 6,900 215,694
TJX Cos., Inc. (The) (Retail) 28,600 586,872
Tyco International Ltd. (Diversified Operations) 26,200 378,852
Viacom, Inc. (Class B)* (Media) 13,500 602,235
Wal-Mart Stores, Inc. (Retail) 11,200 599,760
Wells Fargo & Co. (Banks - United States) 15,800 797,426
Williams-Sonoma, Inc.* (Retail) 14,500 345,100
Zimmer Holdings, Inc.* (Medical) 14,400 593,568
----------
27,081,028
----------
TOTAL COMMON STOCKS
(Cost $70,055,377) 69,323,086
----------
PREFERRED STOCKS
Germany
Henkel KGaA (Chemicals) 800 50,941
----------
South Korea
Samsung Electronics Co., Ltd. (Electronics) 3,950 531,637
----------
TOTAL PREFERRED STOCKS
(Cost $592,407) 582,578
----------
TOTAL COMMOM AND PREFERRED STOCKS
(Cost $70,647,784) 69,905,664
----------
UNITS
France
Eurotunnel SA* (Transport) 127,061 91,854
----------
TOTAL UNITS
(Cost $125,456) 91,854
----------
TOTAL COMMOM AND PREFERRED STOCKS AND UNITS
(Cost $70,773,240) 69,997,518
----------
ISSUER
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement
Investment in a joint repurchase agreement
transaction with Barclays Capital,
Inc. - Dated 10-31-02, due 11-01-02
(Secured by U.S. Treasury Inflation Indexed
Note 3.00% due 07-15-12) 4,348 4,348,000
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $4,348,000) 4,348,000
----------
TOTAL INVESTMENTS 74,345,518
----------
OTHER ASSETS AND LIABILITIES, NET -436,666
----------
TOTAL NET ASSETS 73,908,852
==========
Footnotes for International Fund and European Equity Fund combined.
* Non-Income producing security.
(R) This security is exempt from registration under rule 144A of the
Securities Act of 1933. Such security may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $99,100 as of October 31, 2002
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
Portfolio Concentration
The Fund primarily invests in securities issued by companies of other countries.
The performance of the Fund is closely tied to the economic conditions within
the countries it invests. The concentration of investments by country for
individual securities held by the Fund is shown in the schedule of investments.
In addition, the concentration of investments can be aggregated by various
industry groups. The table below shows the percentages of the Fund's Investments
at October 31, 2002 assigned to the various investment categories.
VALUE
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
- --------------------- ----------------------
Advertising 0.23%
Aerospace 1.11%
Automobile / Trucks 1.24%
Banks - Foreign 12.61%
Beverages 4.51%
Building 2.69%
Business Services - Misc 0.82%
Chemicals 1.97%
Computers 1.92%
Containers 0.42%
Cosmetics & Personal Care 1.82%
Diversified Operations 0.87%
Electronics 3.65%
Engineering / R&D Services 0.36%
Finance 3.55%
Food 3.75%
Furniture 0.29%
Insurance 4.11%
Leisure 0.37%
Manufacturing 0.38%
Media 2.13%
Medical 7.39%
Metal 1.15%
Oil & Gas 7.69%
Paper & Paper Products 1.02%
Pollution Control 0.34%
Printing - Commercial 0.57%
Real Estate Operations 1.09%
Retail 2.96%
Rubber - Tires & Misc 0.53%
Soap & Cleaning Preparations 0.25%
Steel 1.85%
Telecommunications 6.77%
Tobacco 1.28%
Transport 4.39%
Utilities 7.75%
Short-term Investments 7.38%
----------------
Total Investments: 101.18%
----------------
Total Net Assets:
Footnotes for International Fund and Global Fund combined.
* Non-Income producing security.
(R) This security is exempt from registration under rule 144A of the
Securities Act of 1933. Such security may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $99,100 as of October 31, 2002
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
Portfolio Concentration
The Fund primarily invests in securities issued by companies of other countries.
The performance of the Fund is closely tied to the economic conditions within
the countries it invests. The concentration of investments by country for
individual securities held by the Fund is shown in the schedule of investments.
In addition, the concentration of investments can be aggregated by various
industry groups. The table below shows the percentages of the Fund's Investments
at October 31, 2002 assigned to the various investment categories.
VALUE
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
- --------------------- ---------------------
Advertising 0.55%
Aerospace 0.99%
Automobile / Trucks 0.79%
Banks - Foreign 7.93%
Banks - United States 1.92%
Beverages 1.47%
Building 0.25%
Business Services - Misc 0.75%
Chemicals 0.51%
Computers 7.39%
Containers 0.75%
Cosmetics & Personal Care 3.35%
Diversified Operations 1.93%
Electronics 6.02%
Fertilizers 0.50%
Finance 1.50%
Food 2.30%
Insurance 4.46%
Leisure 3.67%
Media 2.27%
Medical 12.00%
Metal 0.32%
Oil & Gas 6.82%
Paper & Paper Products 0.25%
Pollution Control 0.61%
Printing - Commercial 0.82%
Real Estate Operations 0.21%
Retail 9.00%
Rubber - Tires & Misc 0.20%
Soap & Cleaning Preparations 5.48%
Steel 0.83%
Telecommunications 1.33%
Tobacco 5.54%
Transport 1.33%
Utilities 3.96%
Short Term Investments 2.30%
-----------------
Total Investments: 100.26%
-----------------
Total Net Assets:
Footnotes for International Fund, Global Fund and European Equity Fund combined.
* Non-Income producing security.
(R) This security is exempt from registration under rule 144A of the
Securities Act of 1933. Such security may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $99,100 as of October 31, 2002
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
Portfolio Concentration
The Fund primarily invests in securities issued by companies of other countries.
The performance of the Fund is closely tied to the economic conditions within
the countries it invests. The concentration of investments by country for
individual securities held by the Fund is shown in the schedule of investments.
In addition, the concentration of investments can be aggregated by various
industry groups. The table below shows the percentages of the Fund's Investments
at October 31, 2002 assigned to the various investment categories.
VALUE
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
- --------------------- --------------------
Advertising 0.54%
Aerospace 1.07%
Automobile / Trucks 0.86%
Banks - Foreign 8.41%
Banks - United States 1.62%
Beverages 1.98%
Building 0.86%
Business Services - Misc 0.89%
Chemicals 0.63%
Computers 6.47%
Containers 0.76%
Cosmetics & Personal Care 2.95%
Diversified Operations 1.77%
Electronics 5.34%
Engineering / R&D Services 0.11%
Fertilizers 0.42%
Finance 2.24%
Food 2.61%
Furniture 0.09%
Insurance 4.44%
Leisure 3.10%
Manufacturing 0.12%
Media 2.24%
Medical 11.59%
Metal 0.37%
Oil & Gas 7.06%
Paper & Paper Products 0.32%
Pollution Control 0.62%
Printing - Commercial 0.69%
Real Estate Operations 0.35%
Retail 7.84%
Rubber - Tires & Misc 0.17%
Soap & Cleaning Preparations 0.70%
Steel 1.38%
Telecommunications 5.50%
Tobacco 1.37%
Transport 4.18%
Utilities 3.05%
Short-term Investments 5.88%
----------------
Total Investments: 100.59%
----------------
Total Net Assets:
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and The
Commonwealth of Massachusetts, on the 21st day of January, 2003.
JOHN HANCOCK INVESTMENT TRUST III
By: *
-----------------------------
Maureen R. Ford
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registration has been signed below by the following persons in the capacities
and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman, President and Chief Executive Officer
- ----------------------- (Principal Executive Officer)
Maureen R. Ford
* Senior Vice President and Chief
- ----------------------- Financial Officer
Richard A. Brown
/s/William H. King Senior Vice President, Treasurer January 21, 2003
- ----------------------- (Chief Accounting Officer)
William H. King
* Trustee
- -----------------------
Dennis S. Aronowitz
* Trustee
- -----------------------
John M. DeCiccio
* Trustee
- -----------------------
Richard P. Chapman, Jr.
* Trustee
- -----------------------
William J. Cosgrove
* Trustee
- -----------------------
Richard A. Farrell
* Trustee
- -----------------------
William F. Glavin
* Trustee
- -----------------------
Dr. John A. Moore
* Trustee
- -----------------------
Patti McGill Peterson
* Trustee
- -----------------------
John W. Pratt
*By: /s/Susan S. Newton January 21, 2003
-------------------
Susan S. Newton
Attorney-in-Fact under
Powers of Attorney dated
May 22, 2001, June 23, 2001
and September 12, 2001 filed herewith.
John Hancock Capital Series John Hancock Strategic Series
John Hancock Declaration Trust John Hancock Tax-Exempt Series Fund
John Hancock Income Securities Trust John Hancock World Fund
John Hancock Investors Trust John Hancock Investment Trust II
John Hancock Equity Trust John Hancock Investment Trust III
John Hancock Sovereign Bond Fund
POWER OF ATTORNEY
-----------------
The undersigned Trustee/Officer of each of the above listed Trusts,
each a Massachusetts business trust or Maryland corporation, does hereby
severally constitute and appoint Susan S. Newton, WILLIAM h. KING, and AVERY P.
MAHER, 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 12th day of September, 2001.
/s/Maureen R. Ford /s/Gail D. Fosler
- ---------------------------- -----------------
Maureen R. Ford, as Chairman Gail D. Fosler
and Chief Exective Officer
/s/John M. DeCiccio /s/William F. Glavin
- ---------------------------- --------------------
John M. DeCiccio, as Trustee William F. Glavin
/s/Dennis S. Aronowitz /s/John A. Moore
- ---------------------- ----------------
Dennis S. Aronowitz John A. Moore
/s/Richard P. Chapman, Jr. /s/Patti McGill Peterson
- -------------------------- ------------------------
Richard P. Chapman, Jr. Patti McGill Peterson
/s/William J. Cosgrove /s/John W. Pratt
- ---------------------- ----------------
William J. Cosgrove John W. Pratt
/s/Richard A. Farrell
- ---------------------
Richard A. Farrell
Panel A
- -------
John Hancock Capital Series John Hancock Strategic Series
John Hancock Declaration Trust John Hancock Tax-Exempt Series Fund
John Hancock Income Securities Trust John Hancock World Fund
John Hancock Investors Trust John Hancock Investment Trust II
John Hancock Equity Trust John Hancock Investment Trust III
John Hancock Sovereign Bond Fund
Panel B
- -------
John Hancock Bank and Thrift Opportunity Fund John Hancock Patriot Global Dividend Fund
John Hancock Bond Trust John Hancock Patriot Preferred Dividend Fund
John Hancock California Tax-Free Income Fund John Hancock Patriot Premium Dividend Fund I
John Hancock Current Interest John Hancock Patriot Premium Dividend Fund II
John Hancock Institutional Series Trust John Hancock Patriot Select Dividend Trust
John Hancock Investment Trust John Hancock Series Trust
John Hancock Cash Reserve, Inc. John Hancock Tax-Free Bond Trust
POWER OF ATTORNEY
-----------------
The undersigned Officer of each of the above listed Trusts, each a
Massachusetts business trust, or Maryland Corporation, does hereby severally
constitute and appoint SUSAN S. NEWTON, WILLIAM H. KING, AND AVERY P. MAHER, 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 23rd day of June, 2001.
/s/Richard A. Brown
-------------------
Richard A. Brown
Chief Financial Officer
Panel A
- -------
John Hancock Capital Series John Hancock Strategic Series
John Hancock Declaration Trust John Hancock Tax-Exempt Series Fund
John Hancock Income Securities Trust John Hancock World Fund
John Hancock Investors Trust John Hancock Investment Trust II
John Hancock Equity Trust John Hancock Investment Trust III
John Hancock Sovereign Bond Fund
Panel B
- -------
John Hancock Bank and Thrift Opportunity Fund John Hancock Patriot Global Dividend Fund
John Hancock Bond Trust John Hancock Patriot Preferred Dividend Fund
John Hancock California Tax-Free Income Fund John Hancock Patriot Premium Dividend Fund I
John Hancock Current Interest John Hancock Patriot Premium Dividend Fund II
John Hancock Institutional Series Trust John Hancock Patriot Select Dividend Trust
John Hancock Investment Trust John Hancock Series Trust
John Hancock Tax-Free Bond Trust
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 AND JAMES J. STOKOWSKI, 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 22nd day of May, 2001.
/s/John M. DeCiccio
------------------
John M. DeCiccio
Trustee
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
No change from the information set forth in Item 27 of the Registration
Statement of John Hancock Investment Trust III (the "Registrant") on Form N-1A
under the Securities Act of 1933 and the Investment company Act of 1940 (File
Nos. 33-4559 and 811-4630), which information is incorporated herein by
reference.
ITEM 16. EXHIBITS:
1 Registrant's Amended and Restated Filed herewith as Exhibit 1
Declaration of Trust
1.1 Abolition of John Hancock U.S. Global Filed herewith as Exhibit 2
Leaders Fund and Amendment of Section
5.11
2 Amended and Restated By-Laws of Filed herewith as Exhibit 3
Registrant
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 Contracts Filed as Exhibit 99.d to Registrant's
between Registrant and John Hancock Registration Statement on Form N-1A and
Advisers, LLC incorporated herein by reference to
post-effective amendment no. 28 (file
nos. 811-4630 and 33-4559 on
February 27, 1995,
accession no. 0000950146-95-000057)
("PEA 28 ")
6.1 Investment Management Contract Filed as Exhibit 99.d.1 to Registrant's
between John Hancock Growth Fund and Registration Statement on Form N-1A and
John Hancock Advisers, LLC incorporated herein by reference to
post-effective amendment no. 32 (file
nos. 811-4630 and 33-4559 on August 30,
1996, accession no. 0001010521-96-000151)
("PEA 32 ")
6.2 Investment Management Contract Filed as Exhibit 99.d.2 to PEA 32 and
between John Hancock International incorporated herein by reference
Fund and John Hancock Advisers, LLC
6.3 Investment Management Contract Filed as Exhibit 99.d.3 to PEA 32 and
between John Hancock Global Fund and incorporated herein by reference
John Hancock Advisers, LLC
6.4 Sub-Advisory Agreement among Filed as Exhibit 99.d.4 to Registrant's
International Fund, Indocam Registration Statement on Form N-1A and
International Investment Services and incorporated herein by reference to
John Hancock Adviser, LLC post-effective amendment no. 39 (file
nos. 811-4630 and 33-4559 on December 23,
1999, accession no. 0001010521-99-000389)
("PEA 39 ")
6.5 Sub-Advisory Agreement among Global Filed as Exhibit 99.d.5 to PEA 39 and
Fund, Indocam International incorporated herein by reference
Investment Services and John Hancock
Adviser, LLC
6.6 Interim Sub-Advisory Agreement among Filed as Exhibit 99.d.6 to PEA 42 and
John Hancock International Fund, incorporated herein by reference
Nicholas Applegate and John Hancock
Advisers, LLC
6.7 Interim Sub-Advisory Agreement among Filed as Exhibit 99.d.7 to PEA 42 and
John Hancock Global Fund, Nicholas incorporated herein by reference.
Applegate and John Hancock Adviser,
LLC
6.8 Second Interim sub-Advisory Agreement Filed as Exhibit 99.d.8 to PEA 42 and
among John Hancock International incorporated herein by reference
Fund, Nicholas Applegate and John
Hancock Advisers, LLC
6.9 Second Interim sub-Advisory Agreement Filed as Exhibit 99.d.9 to PEA 42 and
among John Hancock Global Fund, incorporated herein by reference.
Nicholas Applegate and John Hancock
Advisers, LLC
6.10 Sub-Advisory Agreement among John Filed as Exhibit 99.d.10 to Registrant's
Hancock Global Fund, Nicholas Registration Statement on Form N-1A and
Applegate and John Hancock Advisers, incorporated herein by reference to
LLC post-effective amendment no. 43 (file
nos. 811-4630 and 33-4559 on
June 25, 2001, accession no.
0001010521-01-500062)
("PEA 43 ")
6.11 Sub-Advisory Agreement among John Filed as Exhibit 99.d.11 to PEA 43 and
Hancock International Fund, Nicholas incorporated herein by reference
Applegate and John Hancock Advisers,
LLC
7 Distribution Agreement between Filed as Exhibit 99.e to Registrant's
Registrant and John Hancock Funds, Registration Statement on Form N-1A and
LLC incorporated herein by reference to
post-effective amendment no. 33 (file
nos. 811-4630 and 33-4559 on
February 27, 1997, accession no.
0001010521-97-000227)
("PEA 33 ")
7.1 Form of Soliciting Dealer Agreement Filed as Exhibit 99.e.1 to Registrant's
between John Hancock Funds, LLC and Registration Statement on Form N-1A and
Selected Dealers incorporated herein by reference to
post-effective amendment no. 37 (file
nos. 811-4630 and 33-4559 on
February 25, 1999, accession no.
0001010521-99-000143)
("PEA 37 ")
7.2 Form of Financial Institution Sales Filed as Exhibit 99.e.2 to PEA 28 and
and Service agreement between John incorporated herein by reference
Hancock Funds, LLC and John Hancock
funds
7.3 Amendment to Distribution Agreement Filed as Exhibit 99.e.3 to PEA 32 and
incorporated herein by reference
Amendment to Distribution Agreement Filed as Exhibit 99.e.4 to PEA 42 and
incorporated herein by reference
8 Not applicable
9 Master Custodian Agreement between Filed as Exhibit 99.g to Registrant's
John Hancock Mutual Funds (including Registration Statement on Form N-1A and
Registrant) and The Bank of New York incorporated herein by reference to
post-effective amendment no. 44 (file
nos. 811-4630 and 33-4559 on
December 27, 2001, accession no.
0001010521-01-500306)
("PEA 44 ")
10 Amended & Restate Master Transfer Filed as Exhibit 99.h. to Registrant's
Agent Service Agreement between John Registration Statement on Form N-1A and
Hancock Mutual Funds (including incorporated herein by reference to
Registrant) and John Hancock post-effective amendment no. 36 (file
Signature Services, Inc. nos. 811-4630 and 33-4559 on December 21,
1998, accession no. 0001010521-98-000397)
("PEA 36 ")
10.1 Amendment to the Amended & Restate Filed as Exhibit 99.h.1 to PEA 42 and
Master Transfer Agent Service incorporated herein by reference.
Agreement between John Hancock Mutual
Funds (including Registrant) and John
Hancock Services, Inc.
10.2 Accounting and Legal Services Filed as Exhibit 99.h.2 to PEA 28 and
Agreement incorporated herein by reference
11 Class A Distribution Plan between Filed as Exhibit 99.m to PEA 36 and
Growth Fund and John Hancock Funds, incorporated herein by reference
LLC
11.1 Class B Distribution Plan between Filed as Exhibit 99.m.1 to PEA 36 and
Growth Fund and John Hancock Funds, incorporated herein by reference
LLC
11.2 Class A Distribution Plan between Filed as Exhibit 99.m.2 to Registrant's
Global Fund, International Fund, Mid Registration Statement on Form N-1A and
Cap Growth Fund and John Hancock incorporated herein by reference to
Funds, LLC post-effective amendment no. 34 (file
nos. 811-4630 and 33-4559 on February 27,
1998, accession no. 0001010521-98-000202)
("PEA 34 ")
11.3 Class B Distribution Plans between Filed as Exhibit 99.m.3 to PEA 34 and
Global Fund, International Fund, Mid incorporated herein by reference
Cap Growth Fund and John Hancock
Funds, LLC
11.4 Class C Distribution Plan between Filed as Exhibit 99.m.4 to PEA 36 and
Growth Fund, International Fund, Mid incorporated herein by reference
Cap Growth Fund and John Hancock
Funds, LLC
11.5 Class C Distribution Plan between Filed as Exhibit 99.m.5 to PEA 39 and
Global Fund and John Hancock Funds, incorporated herein by reference
LLC
12 John Hancock Funds Class A, Class B Filed as Exhibit 99.o to PEA 36 and
and Class C Amended and restated incorporated herein by reference
Multiple Class Plan pursuant to Rule
18f-3
12.1 John Hancock Funds Class A, Class B, Filed as Exhibit 99.o.1 to Registrant's
Class C and Class I Amended and Registration Statement on Form N-1A and
restated Multiple Class Plan pursuant incorporated herein by reference to
to Rule 18f-3 post-effective amendment no. 45 (file
nos. 811-4630 and 33-4559 on February 27,
2002, accession no. 0001010521-02-000110)
("PEA 45 ")
13 Code of Ethics- John Hancock Funds, Filed herewith as Exhibit 13
LLC
13.1 Code of Ethics - Indocam Filed as Exhibit 99.p.1 to PEA 41 and
International Investment Services incorporated herein by reference
13.2 Code of Ethics -Nicholas-Applegate Filed as Exhibit 99.p.1 to PEA 42 and
incorporated herein by reference
14 Opinion as to legality of shares and Filed herewith as Exhibit 14
consent
15 Form of opinions as to tax matters and Filed herewith as Exhibit 15
consent
16 Not applicable
17 Consents of PricewaterhouseCoopers Filed herewith as Exhibit 17
LLP regarding the audited financial
statements of John Hancock
International Fund, John Hancock
Global Fund and John Hancock European
Equity Fund.
18 Not applicable
19 Powers of Attorney Filed as addendum to signature pages and
incorporated herein by reference
20 Prospectus of John Hancock Filed herewith as Exhibit B to Part B of
International Fund, dated February this Registration Statement.
14, 2003
20.1 Prospectus of John Hancock European Filed herewith as Exhibit B to Part B of
Equity Fund, dated February 14, 2003 this Registration Statement
20.2 Prospectus of John Hancock Global Filed herewith as Exhibit B to Part B of
Fund, dated February 14, 2003 this Registration Statement
21 Statement of Additional Information Filed herewith as Exhibit A and B to Part
of John Hancock European Equity Fund B of this Registration Statement
and John Hancock Global Fund, dated
February 14, 2003
21.1 Statement of Additional Information Filed herewith as Exhibit A and B to Part
of John Hancock International Fund B of this Registration Statement
dated February 14, 2003
EXHIBIT INDEX
The following exhibits are filed as part of this Registration Statement:
Exhibit No. Description
1 Amended and Restated Declaration of Trust of John Hancock Investment
Trust III, dated March 1, 2002.
1.1 Abolition of John Hancock U.S. Global Leaders Fund and Amendment of
Sections 5.11
2 Amendment to Amended and Restated By-Laws of Registrant
4 Form of Agreement and Plan of Reorganization between John Hancock
International Fund (the "Acquiring Fund") and John Hancock Global Fund
and John Hancock European Equity Fund(the "Acquired Funds") (filed as
EXHIBIT A to Part A of this Registration Statement).
13 Code of Ethics- John Hancock Funds, LLC.
14 Opinion as to legality of shares and consent.
15 Form of opinions as to tax matters and consent.
17 Consent of PricewaterhouseCoopers LLP regarding the audited financial
statements and highlights of the John Hancock International Fund, John
Hancock European Equity Fund and John Hancock Global Fund.
ITEM 17
(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 each proposed
reorganization within a responsible time after receipt of such opinion.