-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q79ZYPNdCGkLc8cdbwNzXuYrDfqM61DdJ5mp7VFyluN4hRjA3shdC6njAI99prmk el7jik+RTz/TwA8lTU3YgA== 0001010521-03-000248.txt : 20030731 0001010521-03-000248.hdr.sgml : 20030731 20030731140224 ACCESSION NUMBER: 0001010521-03-000248 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20030731 EFFECTIVENESS DATE: 20030731 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANCOCK JOHN SOVEREIGN BOND FUND CENTRAL INDEX KEY: 0000045288 IRS NUMBER: 042528977 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 002-48925 FILM NUMBER: 03814101 BUSINESS ADDRESS: STREET 1: 101 HUNTINGTON AVE STREET 2: JOHN HANCOCK FUNDS CITY: BOSTON STATE: MA ZIP: 02199-7603 BUSINESS PHONE: 6173751702 MAIL ADDRESS: STREET 1: JOHN HANCOCK FUNDS STREET 2: 101 HUNTINGTON AVENUE CITY: BOSTON STATE: MA ZIP: 02199-7603 FORMER COMPANY: FORMER CONFORMED NAME: HANCOCK JOHN BONDS DATE OF NAME CHANGE: 19930921 FORMER COMPANY: FORMER CONFORMED NAME: HANCOCK JOHN BOND TRUST DATE OF NAME CHANGE: 19910704 FORMER COMPANY: FORMER CONFORMED NAME: HANCOCK JOHN BOND FUND INC DATE OF NAME CHANGE: 19841225 497 1 pro.txt JOHN HANCOCK SOVEREIGN BOND FUND Sign up for electronic delivery at www.jhancock.com/funds/edelivery JOHN HANCOCK - -------------------------------------------------------------------------------- Prospectus 10.1.02 Income funds as revised 7.31.03 Bond Fund Government Income Fund High Income Fund High Yield Bond Fund Investment Grade Bond Fund formerly Intermediate Government Fund Strategic Income Fund [LOGO](R) - ------------------ JOHN HANCOCK FUNDS As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these funds or determined whether the information in this prospectus is adequate and accurate. Anyone who indicates otherwise is committing a federal crime. Contents - -------------------------------------------------------------------------------- A fund-by-fund summary of Bond Fund 4 goals, strategies, risks, performance and expenses. Government Income Fund 6 High Income Fund 8 High Yield Bond Fund 10 Investment Grade Bond Fund 12 Strategic Income Fund 14 Policies and instructions for Your account opening, maintaining and closing an account in any Choosing a share class 16 income fund. How sales charges are calculated 16 Sales charge reductions and waivers 17 Opening an account 18 Buying shares 19 Selling shares 20 Transaction policies 22 Dividends and account policies 22 Additional investor services 23 Further information on the Fund details income funds. Business structure 24 Management biographies 25 Financial highlights 26 For more information back cover Overview - -------------------------------------------------------------------------------- JOHN HANCOCK INCOME FUNDS These funds seek current income without sacrificing total return. Some of the funds also invest for stability of principal. 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 a regular stream of income o want to diversify their portfolios o are seeking a mutual fund for the income portion of an asset allocation portfolio o are retired or nearing retirement Income funds may NOT be appropriate if you: o are investing for maximum return over a long time horizon o require absolute stability of your principal 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 income 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 March 31, 2003, managed approximately $26 billion in assets. FUND INFORMATION KEY Concise fund-by-fund descriptions begin on the next page. Each description provides the following information: [Clip Art] Goal and strategy The fund's particular investment goals and the strategies it intends to use in pursuing those goals. [Clip Art] 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. 3 Bond Fund GOAL AND STRATEGY [Clip Art] The fund seeks to generate a high level of current income consistent with prudent investment risk. In pursuing this goal, the fund normally invests at least 80% of its assets in a diversified portfolio of bonds and other debt securities. These include corporate bonds and debentures as well as U.S. government and agency securities. Most of these securities are investment grade, although the fund may invest up to 25% of assets in high yield bonds rated as low as CC/Ca and their unrated equivalents. There is no limit on the fund's average maturity. In managing the fund's portfolio, the managers concentrate on sector allocation, industry allocation and securities selection: deciding which types of bonds and industries to emphasize at a given time, and then which individual bonds to buy. When making sector and industry allocations, the managers try to anticipate shifts in the business cycle, using top-down analysis to determine which sectors and industries may benefit over the next 12 months. In choosing individual securities, the managers use bottom-up research to find securities that appear comparatively undervalued. The managers look at bonds of all quality levels and maturities from many different issuers, potentially including U.S. dollar-denominated securities of foreign governments and corporations. The fund intends to keep its exposure to interest rate movements generally in line with those of its peers. The fund may invest in mortgage-related securities and certain other derivatives (investments whose value is based on indexes, securities or currencies). Under normal circumstances, the fund may not invest more than 10% of assets in cash or cash equivalents. In abnormal circumstances, the fund may temporarily invest extensively in investment-grade short-term securities. In these and other cases, the fund might not achieve its goal. ================================================================================ 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 broad-based market indexes 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 2002 return as of 6-30-02: 1.33% Best quarter: Q2 `95, 6.57% Worst quarter: Q1 `94, -2.71% After-tax returns After-tax returns are shown for Class A shares only and would be different for the other classes. They are calculated using the historical highest individual federal marginal income-tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. Indexes(1) (reflect no fees or taxes) Index 1: Lehman Brothers Government/Credit Bond Index, an unmanaged index of U.S. government, U.S. corporate and Yankee bonds. Index 2: Lehman Brothers Credit Bond Index, an unmanaged index of U.S. corporate bonds and Yankee bonds.
- ---------------------------------------------------------------------------------- Class A calendar year total returns (without sales charges) - ---------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 8.19% 11.69% -2.75% 19.46% 4.05% 9.66% 7.50% -1.36% 10.39% 7.12%
- -------------------------------------------------------------------------------------------------------------------------------- Average annual total returns (including sales charge) for periods ending 12-31-01 - -------------------------------------------------------------------------------------------------------------------------------- 1 year 5 year 10 year Life of Life of Class B Class C Class A before tax 2.30% 5.60% 6.73% -- -- Class A after tax on distributions -0.07% 2.91% 3.76% -- -- Class A after tax on distributions, with sale 1.37% 3.10% 3.88% -- -- Class B before tax (began 11-23-93) 1.37% 5.53% -- 5.84% -- Class C before tax (began 10-1-98) 4.30% -- -- -- 3.71% - ------------------------------------------------------------------------------------------------------------------------------- Index 1 8.50% 7.37% 7.27% 6.76%(2) 5.27% Index 2 10.40% 7.22% 7.68% 7.01%(2) 5.30%
(1) In the future, the adviser will compare the fund's performance only to the Lehman Brothers Government/Credit Bond Index since it more closely represents the fund's investment strategy. (2) As of December 1, 1993. 4 MAIN RISKS [Clip Art] The major factors in this fund`s performance are interest rates and credit risk. When interest rates rise, bond prices generally fall. Generally, an increase in the fund's average maturity will make it more sensitive to interest rate risk. The fund could lose money if any bonds it owns are downgraded in credit rating or go into default. In general, high yield bonds (also known as "junk bonds") have higher credit risks. If certain sectors or investments do not perform as the fund expects, it could underperform its peers or lose money. To the extent that the fund makes investments with additional risks, those risks could increase volatility or reduce performance: o Junk bonds and foreign securities may make the fund more sensitive to market or economic shifts in the U.S. and abroad. o If interest rate movements cause the fund's mortgage-related and callable securities to be paid off substantially earlier or later than expected, the fund's share price or yield could be hurt. o In a down market, higher-risk securities and derivatives could become harder to value or to sell at a fair price. o Certain derivatives could produce disproportionate losses. Any U.S. government guarantees on portfolio securities do not apply to these securities' market value or current yield, or to fund shares. 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) 4.50% 5.00% 2.00% Maximum sales charge (load) on purchases as a % of purchase price 4.50% 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 0.50% 0.50% 0.50% Distribution and service (12b-1) fees 0.30% 1.00% 1.00% Other expenses 0.31% 0.31% 0.31% Total fund operating expenses 1.11% 1.81% 1.81%
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 $558 $787 $1,034 $1,741 Class B with redemption $684 $869 $1,180 $1,943 Class B without redemption $184 $569 $980 $1,943 Class C with redemption $381 $664 $1,070 $2,205 Class C without redemption $282 $664 $1,070 $2,205 (1) A $4.00 fee will be charged for wire redemptions. (2) Except for investments of $1 million or more; see "How sales charges are calculated." ================================================================================ PORTFOLIO MANAGERS Barry H. Evans, CFA Joined fund team in 2002 Howard C. Greene, CFA Joined fund team in 2002 Benjamin A. Matthews Joined fund team in 1995 See page 25 for the management biographies. FUND CODES Class A Ticker JHNBX CUSIP 410223101 Newspaper BondA SEC number 811-2402 JH fund number 21 Class B Ticker JHBBX CUSIP 410223309 Newspaper BondB SEC number 811-2402 JH fund number 121 Class C Ticker JHCBX CUSIP 410223200 Newspaper -- SEC number 811-2402 JH fund number 521 5 Government Income Fund GOAL AND STRATEGY [Clip Art] The fund seeks a high level of current income consistent with preservation of capital. Maintaining a stable share price is a secondary goal. In pursuing these goals, the fund normally invests at least 80% of its assets in U.S. government and agency securities. There is no limit on the fund's average maturity. The fund may invest in higher-risk securities, including U.S. dollar-denominated foreign government securities and asset-backed securities. It may also invest up to 10% of assets in foreign governmental high-yield securities (junk bonds) rated as low as B and their unrated equivalents. In managing the fund's portfolio, the managers consider interest rate trends to determine which types of bonds to emphasize at a given time. The fund typically favors mortgage-related securities when it anticipates that interest rates will be relatively stable, and favors U.S. Treasuries at other times. Because high-yield bonds often respond to market movements differently from U.S. government bonds, the fund may use them to manage volatility. The fund may invest in mortgage-related securities and certain other derivatives (investments whose value is based on indexes, securities or currencies). In abnormal circumstances, the fund may temporarily invest extensively in high-quality 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 B, total returns 2002 return as of 6-30-02: 3.50% Best quarter: Q2 '95, 6.40% Worst quarter: Q1 '94, -3.52% After-tax returns After-tax returns are shown for Class B 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) Lehman Brothers Government Bond Index, an unmanaged index of U.S. Treasury and government agency bonds.
- --------------------------------------------------------------------------------- Class B calendar year total returns (without sales charges) - --------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 5.28% 7.64% -5.27% 17.74% 1.29% 8.67% 7.96% -3.15% 11.35% 5.88%
- ------------------------------------------------------------------------------------------------------------------------------- Average annual total returns (including sales charge) for periods ending 12-31-01 - -------------------------------------------------------------------------------------------------------------------------------- 1 year 5 year 10 year Life of Life of Class A Class C Class A before tax (began 9-30-94) 1.85% 5.81% -- 6.74% -- Class B before tax 0.88% 5.70% 5.54% -- -- Class B after tax on distributions -1.19% 3.36% 3.00% -- -- Class B after tax on distributions, with sale 0.51% 3.38% 3.14% -- -- Class C before tax (began 4-1-99) 3.84% -- -- -- 5.16% - -------------------------------------------------------------------------------------------------------------------------------- Index 7.23% 7.40% 7.14% 7.97% 7.08%
6 MAIN RISKS [Clip Art] The major factor in this fund performance is interest rates.'s When interest rates rise, bond prices generally fall. Generally, an increase in the fund's average maturity will make it more sensitive to interest rate risk. A fall in worldwide demand for U.S. government securities could also lower the prices of these securities. The fund could lose money if any bonds it owns are downgraded in credit rating or go into default. In general, lower-rated bonds have higher credit risks. If certain sectors or investments do not perform as the fund expects, it could underperform its peers or lose money. To the extent that the fund makes investments with additional risks, those risks could increase volatility or reduce performance: o If interest rate movements cause the fund's mortgage-related and callable securities to be paid off substantially earlier or later than expected, the fund's share price or yield could be hurt. o Junk bonds and foreign securities could make the fund more sensitive to market or economic shifts in the U.S. and abroad. o In a down market, higher-risk securities and derivatives could become harder to value or to sell at a fair price. o Certain derivatives could produce disproportionate losses. Any governmental guarantees on portfolio securities do not apply to these securities' market value or current yield, or to fund shares. ================================================================================ 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) 4.50% 5.00% 2.00% Maximum sales charge (load) on purchases as a % of purchase price 4.50% 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 0.63% 0.63% 0.63% Distribution and service (12b-1) fees 0.25% 1.00% 1.00% Other expenses 0.29% 0.29% 0.29% Total fund operating expenses 1.17% 1.92% 1.92% Management fee reduction (at least until 9/30/03) 0.13% 0.13% 0.13% Net annual operating expenses 1.04% 1.79% 1.79%
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 $551 $766 $998 $1,664 Class B with redemption $682 $863 $1,170 $1,908 Class B without redemption $182 $563 $970 $1,908 Class C with redemption $379 $658 $1,060 $2,184 Class C without redemption $280 $658 $1,060 $2,184 (1) A $4.00 fee will be charged for wire redemptions. (2) Except for investments of $1 million or more; see "How sales charges are calculated." ================================================================================ PORTFOLIO MANAGERS Barry H. Evans, CFA Joined fund team in 1995 Dawn M. Baillie Joined fund team in 1998 Jeffrey N. Given, CFA Joined fund team in 1998 See page 25 for the management biographies. FUND CODES Class A Ticker JHGIX CUSIP 41014P854 Newspaper GvIncA SEC number 811-3006 JH fund number 56 Class B Ticker TSGIX CUSIP 41014P847 Newspaper GvIncB SEC number 811-3006 JH fund number 156 Class C Ticker TCGIX CUSIP 41014P797 Newspaper -- SEC number 811-3006 JH fund number 556 7 High Income Fund GOAL AND STRATEGY [Clip Art] The fund seeks income. In pursuing this high current goal, the fund normally invests at least 80% of its assets in U.S. and foreign bonds and other debt securities rated BBB/Baa or lower and their unrated equivalents. The fund may invest up to 30% of assets in high yield bonds rated CC/Ca and their unrated equivalents. There is no limit on the fund's average maturity. In managing the fund's portfolio, the managers concentrate on industry allocation and debt security selection. In choosing individual debt securities, the managers use bottom-up research to find securities that appear comparatively undervalued. The managers look at the financial condition of the issuers as well as the collateralization and other features of the securities themselves. The managers look at bonds of many different issuers, including foreign government and corporate debt securities from developed and emerging markets. The fund may invest up to 15% of assets in non-U.S. dollar-denominated securities. The fund may also use certain higher-risk investments, including derivatives (investments whose value is based on indexes, securities or currencies) and restricted and illiquid securities. In abnormal circumstances, the fund may temporarily invest extensively in investment-grade short-term securities. In these and other cases, the fund might not achieve its goal. The fund may trade securities actively, which could increase its transaction costs (thus lowering performance) and increase your taxable distributions. ================================================================================ PAST PERFORMANCE [Clip Art] This section normally shows how the fund's total return has varied from year to year, along with a broad-based market index for reference. Because the fund has existed for less than a full calendar year, there is no past performance to report. 8 MAIN RISKS [Clip Art] The major factors in this fund's performance are interest rate and credit risk. When interest rates rise, bond prices generally fall. Generally, an increase in the fund's average maturity will make it more sensitive to interest rate risk. Credit risk depends largely on the perceived financial health of bond issuers. In general, high yield bonds (also known as "junk bonds") have higher credit risks. Junk bond prices can fall on bad news about the economy, an industry or a company. Share price, yield and total return may fluctuate more than with less aggressive bond funds. The fund could lose money if any bonds it owns are downgraded in credit rating or go into default. If certain industries or investments do not perform as the fund expects, it 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 Foreign investments carry additional risks, including potentially unfavorable currency exchange rates, inadequate or inaccurate financial information and social or political instability. These risks are greater in emerging markets. o If interest rate movements cause the fund's callable securities to be paid off substantially earlier or later than expected, the fund's share price or yield could be hurt. o In a down market, higher-risk securities and derivatives could become harder to value or to sell at a fair price. o Certain derivatives could produce disproportionate losses. ================================================================================ YOUR EXPENSES [Clip Art] Transaction expenses are charged directly to your account. Operating expenses paid from the fund's assets, and therefore are paid by shareholders indirectly. are
- ------------------------------------------------------------------------------------------- Shareholder transaction expenses(1) Class A Class B Class C - ------------------------------------------------------------------------------------------- Maximum sales charge (load) 4.50% 5.00% 2.00% Maximum sales charge (load) on purchases as a % of purchase price 4.50% 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 0.65% 0.65% 0.65% Distribution and service (12b-1) fees 0.30% 1.00% 1.00% Other expenses 1.82% 1.82% 1.82% Total fund operating expenses 2.77% 3.47% 3.47% Expense reimbursement (at least until 9-30-03) 1.53% 1.53% 1.53% Net annual operating expenses 1.24% 1.94% 1.94%
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 $571 $1,132 $1,719 $3,303 Class B with redemption $697 $1,223 $1,872 $3,487 Class B without redemption $197 $923 $1,672 $3,487 Class C with redemption $394 $1,014 $1,755 $3,709 Class C without redemption $295 $1,014 $1,755 $3,709 (1) A $4.00 fee will be charged for wire redemptions. (2) Except for investments of $1 million or more; see "How sales charges are calculated." ================================================================================ PORTFOLIO MANAGERS Frederick L. Cavanaugh, Jr. Joined fund team in 2001 Daniel S. Janis, III Joined fund team in 2001 See page 25 for the management biographies. FUND CODES Class A Ticker JAHIX CUSIP 410227870 Newspaper -- SEC number 811-4651 JH fund number 72 Class B Ticker JBHIX CUSIP 410227862 Newspaper -- SEC number 811-4651 JH fund number 172 Class C Ticker JCHIX CUSIP 410227854 Newspaper -- SEC number 811-4651 JH fund number 572 9 High Yield Bond Fund GOAL AND STRATEGY [Clip Art] The fund seeks high current income. Capital appreciation is a secondary goal. In pursuing these goals, the fund normally invests at least 80% of its assets in U.S. and foreign high yield bonds and other debt securities rated BB/Ba or lower and their unrated equivalents. The fund may invest up to 30% of assets in high yield securities rated CC/Ca and their unrated equivalents. There is no limit on the fund's average maturity. In managing the fund's portfolio, the manager concentrates on industry allocation and securities selection: deciding which types of industries to emphasize at a given time, and then which individual bonds to buy. The manager uses top-down analysis to determine which industries may benefit from current and future changes in the economy. In choosing individual securities, the manager uses bottom-up research to find securities that appear comparatively undervalued. The manager looks at the financial condition of the issuers as well as the collateralization and other features of the securities themselves. The fund typically invests in a broad range of industries. The fund may use certain higher-risk investments, including derivatives (investments whose value is based on indexes, securities or currencies) and restricted or illiquid securities. In addition, the fund may invest up to 20% of its assets in U.S. and foreign stocks of companies of any size. In abnormal circumstances, the fund may temporarily invest extensively in investment-grade short-term securities. In these and other cases, the fund might not achieve its goal. The fund may trade securities actively, which could increase its transaction costs (thus lowering performance) and increase your taxable distributions. ================================================================================ PAST PERFORMANCE [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 broad- based market indexes 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 B, total returns 2002 return as of 6-30-02: 1.68% Best quarter: Q1 '93, 8.90% Worst quarter: Q3 '98, -18.05% After-tax returns After-tax returns are shown for Class B 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. Indexes(1) (reflect no fees or taxes) Index 1: Merrill Lynch High Yield Master II Index, an unmanaged index consisting of U.S.-dollar-denominated public corporate issues with par amounts greater than $100 million that are rated below investment grade. Index 2: Lehman Brothers High Yield Bond Index, an unmanaged index of high yield bonds.
- --------------------------------------------------------------------------------------- Class B calendar year total returns (without sales charges) - --------------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 13.15% 21.39% -6.06% 14.62% 15.12% 16.88% -11.88% 10.08% -8.09% 0.05%
- ----------------------------------------------------------------------------------------------------------------------------- Average annual total returns (including sales charge) for periods ending 12-31-01 - ----------------------------------------------------------------------------------------------------------------------------- 1 year 5 year 10 year Life of Life of Class A Class C Class A before tax (began 6-30-93) -3.68% 0.66% -- 4.06% -- Class B before tax -4.43% 0.60% 5.91% -- -- Class B after tax on distributions -8.65% -3.59% 1.81% -- -- Class B after tax on distributions, with sale -2.70% -1.40% 2.85% -- -- Class C before tax (began 5-1-98) -1.82% -- -- -- -5.38% - ----------------------------------------------------------------------------------------------------------------------------- Index 1 4.48% 3.45% 7.98% 6.18% 0.32% Index 2 5.28% 3.11% 7.58% 5.85% -0.10%
(1) In the future, the adviser will compare the fund's performance only to the Merrill Lynch High Yield Master II Index since it more closely represents the fund's investment strategy. 10 MAIN RISKS [Clip Art] The major factors in the fund performance are interest rates's and credit risk. When interest rates rise, bond prices generally fall. Generally, an increase in the fund's average maturity will make it more sensitive to interest rate risk. Credit risk depends largely on the perceived financial health of bond issuers. In general, high yield bonds (also known as "junk bonds") have higher credit risks. Junk bond prices can fall on bad news about the economy, an industry or a company. Share price, yield and total return may fluctuate more than with less aggressive bond funds. The fund could lose money if any bonds it owns are downgraded in credit rating or go into default. If certain industries or investments do not perform as the fund expects, it could underperform its peers or lose money. To the extent that the fund makes investments with additional risks, those risks could increase volatility or reduce performance: o Foreign investments carry additional risks, including potentially unfavorable currency exchange rates, inadequate or inaccurate financial information and social or political instability. o If interest rate movements cause the fund's callable securities to be paid off substantially earlier or later than expected, the fund's share price or yield could be hurt. o Stock investments may go down in value due to stock market movements or negative company or industry events. o Stocks of small- and medium-capitalization companies can be more volatile than those of larger companies. o In a down market, higher-risk securities and derivatives could become harder to value or to sell at a fair price. o Certain derivatives could produce disproportionate losses. ================================================================================ 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) 4.50% 5.00% 2.00% Maximum front-end sales charge (load) on purchases as a % of purchase price 4.50% 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 0.52% 0.52% 0.52% Distribution and service (12b-1) fees 0.25% 1.00% 1.00% Other expenses 0.25% 0.25% 0.25% Total fund operating expenses 1.02% 1.77% 1.77%
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 $549 $760 $988 $1,642 Class B with redemption $680 $857 $1,159 $1,886 Class B without redemption $180 $557 $959 $1,886 Class C with redemption $377 $652 $1,050 $2,163 Class C without redemption $278 $652 $1,050 $2,163 (1) A $4.00 fee will be charged for wire redemptions. (2) Except for investments of $1 million or more; see "How sales charges are calculated." ================================================================================ PORTFOLIO MANAGER Arthur N. Calavritinos, CFA Joined fund team in 1995 See page 25 for the management biographies. FUND CODES Class A Ticker JHHBX CUSIP 41014P839 Newspaper HiYldA SEC number 811-3006 JH fund number 57 Class B Ticker TSHYX CUSIP 41014P821 Newspaper HiYldB SEC number 811-3006 JH fund number 157 Class C Ticker JHYCX CUSIP 41014P813 Newspaper HiYldC SEC number 811-3006 JH fund number 557 11 Investment Grade Bond Fund GOAL AND STRATEGY [Clip Art] The fund seeks a high level of current income consistent with preservation of capital and maintenance of liquidity. In pursuing this goal, the fund normally invests at least 80% of its assets in investment-grade bonds (securities rated from AAA to BBB). These include corporate bonds and debentures as well as U.S. government and agency securities. Although the fund may invest in bonds of any maturity, it maintains a dollar-weighted average maturity of between three and ten years. In managing the fund's portfolio, the managers concentrate on sector allocation, industry allocation and securities selection: deciding which types of bonds and industries to emphasize at a given time, and then which individual bonds to buy. When making sector and industry allocations, the managers try to anticipate shifts in the business cycle, using top-down analysis to determine which sectors and industries may benefit over the next 12 months. In choosing individual securities, the managers use bottom-up research to find securities that appear comparatively undervalued. The managers look at bonds of many different issuers, potentially including U.S. dollar-denominated securities of foreign governments and corporations. The fund may invest in mortgage-related securities and certain other derivatives (investments whose value is based on indexes or other securities). In abnormal circumstances, the fund may temporarily invest extensively in investment-grade short-term securities. In these and other cases, the fund might not achieve its goal. The fund may trade securities actively, which could increase its transaction costs (thus lowering performance) and increase your taxable distributions. ================================================================================ PAST PERFORMANCE [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 broad- based market indexes 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 2002 return as of 6-30-02: 2.79% Best quarter: Q3 '01, 5.07% Worst quarter: Q1 '96, -1.35% 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. Indexes(1) (reflect no fees or taxes) Index 1: Lehman Brothers Government Bond Index, an unmanaged index of U.S. Treasury and government agency bonds. Index 2: Lipper Intermediate U.S. Government Index, an unmanaged index of intermediate-term government bonds. Index 3: Lehman Brothers Aggregate Bond Index, an unmanaged index of dollar- denominated and nonconvertible investment-grade debt issues. - -------------------------------------------------------------------------------- Class A calendar year total returns (without sales charges) - -------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 6.56% 3.95% 1.07% 10.27% 3.32% 8.79% 8.58% -1.06% 11.02% 7.23%
- ---------------------------------------------------------------------------------------------------------- Average annual total returns (including sales charge) for periods ending 12-31-01 - ---------------------------------------------------------------------------------------------------------- 1 year 5 year 10 year Life of Class C Class A before tax 2.45% 5.85% 5.42% -- Class A after tax on distributions 0.18% 3.30% 3.02% -- Class A after tax on distributions, with sale 1.45% 3.37% 3.12% -- Class B before tax 1.46% 5.72% 5.17% -- Class C before tax (began 4-1-99) 4.35% -- -- 5.39% - ---------------------------------------------------------------------------------------------------------- Index 1 7.23% 7.40% 7.14% 7.08% Index 2 7.57% 6.72% 6.21% 6.57% Index 3 8.44% 7.43% 7.23% 7.12%
(1) In the future, the adviser will compare the fund's performance only to the Lehman Brothers Aggregate Bond Index since it more closely represents the fund's investment strategy. 12 MAIN RISKS [Clip Art] The major factors in this fund's performance are interest rates and credit risk. When interest rates rise, bond prices generally fall. Generally, an increase in the fund's average maturity will make it more sensitive to interest rate risk. The fund could lose money if any bonds it owns are downgraded in credit rating or go into default. If certain sectors or investments do not perform as the fund expects, it could underperform its peers or lose money. To the extent that the fund makes investments with additional risks, those risks could increase volatility or reduce performance: o If interest rate movements cause the fund's mortgage-related and callable securities to be paid off substantially earlier or later than expected, the fund's share price or yield could be hurt. o In a down market, 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 Foreign securities may make the fund more sensitive to market or economic shifts in the U.S. and abroad. Any U.S. government guarantees on portfolio securities do not apply to these securities' market value or current yield, or to fund shares. ================================================================================ 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) 4.50% 5.00% 2.00% Maximum front-end sales charge (load) on purchases as a % of purchase price 4.50% 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 0.40% 0.40% 0.40% Distribution and service (12b-1) fees 0.25% 1.00% 1.00% Other expenses 0.37% 0.37% 0.37% Total fund operating expenses 1.02% 1.77% 1.77%
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 $549 $760 $988 $1,642 Class B with redemption $680 $857 $1,159 $1,886 Class B without redemption $180 $557 $959 $1,886 Class C with redemption $377 $652 $1,050 $2,163 Class C without redemption $278 $652 $1,050 $2,163 (1) A $4.00 fee will be charged for wire redemptions. (2) Except for investments of $1 million or more; see "How sales charges are calculated." ================================================================================ PORTFOLIO MANAGERS Barry H. Evans, CFA Joined fund team in 1995 Dawn M. Baillie Joined fund team in 1998 Jeffrey N. Given, CFA Joined fund team in 1998 See page 25 for the management biographies. FUND CODES Class A Ticker TAUSX CUSIP 41014P102 Newspaper IntGvA SEC number 811-3006 JH fund number 55 Class B Ticker TSUSX CUSIP 41014P201 Newspaper IntGvB SEC number 811-3006 JH fund number 155 Class C Ticker TCUSX CUSIP 41014P789 Newspaper -- SEC number 811-3006 JH fund number 555 13 Strategic Income Fund GOAL AND STRATEGY [Clip Art] The fund seeks a high level of current income. In pursuing this goal, the fund invests primarily in the following types of securities: o foreign government and corporate debt securities from developed and emerging markets o U.S. government and agency securities o U.S. high yield bonds The fund may also invest in preferred stock and other types of debt securities. Although the fund invests in securities rated as low as CC/Ca and their unrated equivalents, it generally intends to keep its average credit quality in the investment-grade range (AAA to BBB). There is no limit on the fund's average maturity. In managing the portfolio, the managers allocate assets among the three major sectors based on analysis of economic factors such as projected international interest rate movements, industry cycles and political trends. However, the managers may invest up to 100% of assets in any one sector. Within each sector, the managers look for securities that are appropriate for the overall portfolio in terms of yield, credit quality, structure and industry distribution. In selecting securities, relative yields and risk/reward ratios are the primary considerations. The fund may use certain higher-risk investments, including derivatives (investments whose value is based on indexes, securities or currencies) and restricted or illiquid securities. In addition, the fund may invest up to 10% of net assets in U.S. or foreign stocks. In abnormal circumstances, the fund may temporarily invest extensively in investment-grade short-term securities. In these and other cases, the fund might not achieve its goal. The fund may trade securities actively, which could increase its transaction costs (thus lowering performance) and increase your taxable distributions. ================================================================================ PAST PERFORMANCE [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 broad- based market indexes 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 2002 return as of 6-30-02: 2.00% Best quarter: Q3 '97, 5.76% Worst quarter: Q1 '94, -2.50% 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. Indexes(1) (reflect no fees or taxes) Index 1: Merrill Lynch High Yield Master II Index, an unmanaged index consisting of U.S. dollar-denominated public corporate issues with par amounts greater than $100 million that are rated below investment-grade. Index 2: Merrill Lynch AAA U.S. Treasury/Agency Master Index, an unmanaged index of fixed-rate U.S. Treasury and agency securities. Index 3: Salomon Smith Barney World Government Bond Index, an unmanaged index consisting of approximately 650 securities issued by 18 governments in various countries. Index 4: Lehman Brothers Government/Credit Bond Index, an unmanaged index of U.S. government, U.S. corporate and Yankee bonds.
- ---------------------------------------------------------------------------------- Class A calendar year total returns (without sales charges) - ---------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 7.68% 13.93% -3.02% 18.73% 11.62% 12.67% 5.41% 3.35% 1.14% 4.90%
- ----------------------------------------------------------------------------------------------------------------------------- Average annual total returns (including sales charge) for periods ending 12-31-01 - ----------------------------------------------------------------------------------------------------------------------------- 1 year 5 year 10 year Life of Life of Class B Class C Class A before tax 0.14% 4.44% 6.96% -- -- Class A after tax on distributions -2.98% 1.11% 3.44% -- -- Class A after tax on distributions, with sale 0.05% 1.88% 3.80% -- -- Class B before tax (began 10-4-93) -0.66% 4.40% -- 6.17% -- Class C before tax (began 5-1-98) 2.14% -- -- -- 1.92% - ----------------------------------------------------------------------------------------------------------------------------- Index 1 4.48% 3.45% 7.98% 6.08%(2) 0.32% Index 2 7.18% 7.40% 7.15% 6.45% 6.92% Index 3 -0.99% 2.16% 5.32% 4.20% 2.23% Index 4 8.50% 7.37% 7.27% 6.52% 6.81%
(1) In the future, the adviser will compare the fund's performance to the Merrill Lynch High Yield Master II Index, Merrill Lynch AAA U.S. Treasury/Agency Master Index and Salomon Smith Barney World Government Bond Index, since they more closely represent the fund's investment strategy. (2) As of September 30, 1993. 14 MAIN RISKS [Clip Art] The fund's risk profile allocation depends on its sector. In general, investors should expect fluctuations in share price, yield and total return that are above average for bond funds. When interest rates rise, bond prices generally fall. Generally, an increase in the fund's average maturity will make it more sensitive to interest rate risk. A fall in worldwide demand for U.S. government securities could also lower the prices of these securities. The fund could lose money if any bonds it owns are downgraded in credit rating or go into default. In general, high yield bonds (also known as "junk bonds") have higher credit risks, and their prices can fall on bad news about the economy, an industry or a company. If certain allocation strategies or certain industries or investments do not perform as the fund expects, the fund could underperform its peers or lose money. To the extent that the fund makes investments with additional risks, those risks could increase volatility or reduce performance: o Foreign investments carry additional risks, including potentially unfavorable currency exchange rates, inadequate or inaccurate financial information and social or political instability. These risks are greater in emerging markets. o If interest rate movements cause the fund's callable securities to be paid off substantially earlier or later than expected, the fund's share price or yield could be hurt. o Stock investments may go down in value due to stock market movements or negative company or industry events. o In a down market, higher-risk securities and derivatives could become harder to value or to sell at a fair price. o Certain derivatives could produce disproportionate losses. ================================================================================ 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) 4.50% 5.00% 2.00% Maximum front-end sales charge (load) on purchases as a % of purchase price 4.50% 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 0.37% 0.37% 0.37% Distribution and service (12b-1) fees 0.30% 1.00% 1.00% Other expenses 0.26% 0.26% 0.26% Total fund operating expenses 0.93% 1.63% 1.63%
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 $541 $733 $942 $1,542 Class B with redemption $666 $814 $1,087 $1,746 Class B without redemption $166 $514 $887 $1,746 Class C with redemption $363 $609 $978 $2,013 Class C without redemption $264 $609 $978 $2,013 (1) A $4.00 fee will be charged for wire redemptions. (2) Except for investments of $1 million or more; see "How sales charges are calculated." ================================================================================ PORTFOLIO MANAGERS Frederick L. Cavanaugh, Jr. Joined fund team in 1986 Daniel S. Janis, III Joined fund team in 1999 See page 25 for the management biographies. FUND CODES Class A Ticker JHFIX CUSIP 410227102 Newspaper StrIncA SEC number 811-4651 JH fund number 91 Class B Ticker STIBX CUSIP 410227300 Newspaper StrIncB SEC number 811-4651 JH fund number 191 Class C Ticker JSTCX CUSIP 410227888 Newspaper StrIncC SEC number 811-4651 JH fund number 591 15 Your account - -------------------------------------------------------------------------------- CHOOSING A SHARE CLASS Each share class has its own cost structure, including a Rule 12b-1 plan that allows it to pay fees for the sale, distribution and service of its shares. Your financial representative can help you decide which share class is best for you. - -------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------- o A front-end sales charge, as described at right. o Distribution and service (12b-1) fees of 0.25% (0.30% for Bond, High Income and Strategic Income). - -------------------------------------------------------------------------------- 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 fund-by-fund information earlier in this prospectus. Because 12b-1 fees are paid on an ongoing basis, they may cost share-holders 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 $99,999 4.50% 4.71% $100,000 - $249,999 3.75% 3.90% $250,000 - $499,999 2.75% 2.83% $500,000 - $999,999 2.00% 2.04% $1,000,000 and over See below - -------------------------------------------------------------------------------- Class 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. 16 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 Years after fund shares purchase being sold 1st year 5.00% 2nd year 4.00% 3rd year 3.00% 4th year 3.00% 5th year 2.00% 6th year 1.00% After 6th year none - -------------------------------------------------------------------------------- Class C deferred charges - -------------------------------------------------------------------------------- Years after purchase CDSC 1st year 1.00% After 1st year none For purposes of these CDSCs, all purchases made during a calendar month are counted as having been made on the first day of that month. 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, no 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 17 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 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 a trust, corporate or power of attorney account. 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. 18 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 the application to your financial amount of your investment to: w representative, or mail it First Signature Bank & Trust to Signature Services. Account # 900000260 o Obtain your account number by Routing # 211475000 calling your financial Specify the fund name, your share representative or Signature class, your account number and Services. the name(s) in which the account o Instruct your bank to wire the is registered. Your bank may amount of your investment to: charge a fee to wire funds. First Signature Bank & Trust Account # 900000260 Routing # 211475000 Specify the fund name, your choice of share class, the new account number and the name(s) in which the account is registered. Your bank may charge a fee to wire funds. By Internet [Clip Art] See "By exchange" and "By wire." o Verify that your bank or credit union is a member of the Automated Clearing House (ACH) system. o Complete the "Bank Information" section on your account application. o Log on to www.jhfunds.com to initiate purchases using your authorized bank account. By phone [Clip Art] See "By exchange" and "By wire." o Verify that your bank or credit union is a member of the Automated Clearing House (ACH) system. o Complete the "Bank Information" section on your account application. o Call EASI-Line for automated service 24 hours a day using your touch-tone phone at 1-800-338-8080. o Call your financial representative or 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 19 - -------------------------------------------------------------------------------- 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 o Sales of any amount. or complete a stock power indicating the fund name, your share class, your account number, the name(s) in which the account is registered and the dollar value or number of shares you wish to sell. o Include all signatures and any additional documents that may be required (see next page). o Mail the materials to Signature Services. o A check will be mailed to the name(s) and address in which the account is registered, or otherwise according to your letter of instruction. By Internet [Clip Art] o Most accounts. o Log on to www.jhfunds.com to o Sales of up to $100,000. initiate redemptions from your funds. By phone [Clip Art] o Most accounts. o Call EASI-Line for automated o Sales of up to $100,000. 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. By wire or electronic funds transfer (EFT) [Clip Art] o Requests by letter to sell any o To verify that the Internet or amount. telephone redemption privilege o Requests by Internet or phone is in place on an account, or to sell up to $100,000. to request the 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 o Sales of any amount. for the fund into which you 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. By check [Clip Art] o Government Income, High o Request checkwriting on your Income, Investment Grade Bond account application. and Strategic Income only. o Verify that the shares to be o Any account with checkwriting sold were purchased more than privileges. 10 days earlier or were o Sales of over $100. purchased by wire. o Write a check for any amount over $100. 20 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 o On the letter, the signatures of accounts for minors). 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 o Corporate business/organization association accounts. 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 o Letter of instruction. accounts. o On the letter, the signature(s) of the trustee(s). o Copy of the trust document certified within the past 12 months or a 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. To sell shares through a systematic withdrawal plan, 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 21 - -------------------------------------------------------------------------------- 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. The funds may trade foreign bonds or other portfolio securities 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. Certificated shares The funds no longer issue share certificates. Shares are electronically recorded. Any existing certificated shares can only be sold by returning the certifi-cated 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 declare dividends daily and pay them monthly. Capital gains, if any, are distributed annually, typically after the end of a fund's fiscal year. Most of these funds' dividends are income dividends. Your dividends begin accruing the day after the fund receives payment and continue through the day your shares are actually sold. Dividend reinvestments Most investors have their dividends reinvested in additional shares of the same fund and class. If you choose this option, or if you do not indicate any choice, your dividends will be reinvested on the dividend record date. Alternatively, you can choose to have a check for your dividends and capital gains in the amount of more than $10 mailed to you. However, if the check is not deliverable or the combined dividend and capital gains amount is $10 or less, your proceeds will be reinvested. If five or more of your dividend or capital gains checks remain uncashed after 180 days, all subsequent dividends and capital gains will be reinvested. 22 YOUR ACCOUNT Taxability of dividends Dividends you receive from a fund, whether reinvested or taken as cash, are generally considered taxable. Dividends from a fund's short-term capital gains are taxable as ordinary income. Dividends from a fund's long-term capital gains are taxable at a lower rate. Whether gains are short-term or long-term depends on the fund's holding period. Some dividends paid in January may be taxable as if they had been paid the previous December. The Form 1099 that is mailed to you every January details your dividends and their federal tax category, although you should verify your tax liability with your tax professional. Taxability of transactions Any time you sell 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 Education IRAs, 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 23 Fund details - -------------------------------------------------------------------------------- BUSINESS STRUCTURE The diagram below shows the basic business structure used by the John Hancock income 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 Government Income, High Income, High Yield Bond and Investment Grade Bond funds have the power to change these funds' respective investment goals without shareholder approval. The trustees of Bond, Government Income, High Income, High Yield Bond and Investment Grade Bond Funds have the power to change the focus of each fund's 80% investment policy without shareholder approval. A fund will provide shareholders with written notice 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 income funds last fiscal year are as follows: - -------------------------------------------------------------------------------- Fund % of net assets - -------------------------------------------------------------------------------- Bond 0.50% Government Income 0.50% High Income 0.00% High Yield Bond 0.52% Investment Grade Bond 0.40% Strategic Income 0.37% ------------------------------------ Shareholders ------------------------------------ ------------------------------------ Distribution and Financial services firms and their shareholder services representatives Advise current and prospective shareholders 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. ------------------------------------ ------------------------------------ Investment adviser Asset management 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, NY 10286 Holds the funds' assets, settles all portfolio trades and collects most of the valuation data required for calculating the funds' NAV. ------------------------------------ ------------------------------------ Trustees Oversee the funds' activities. ------------------------------------ 24 FUND DETAILS - -------------------------------------------------------------------------------- MANAGEMENT BIOGRAPHIES Below is an alphabetical list of the portfolio managers for the John Hancock income funds. It is a brief summary of their business careers over the past five years. Dawn M. Baillie - ----------------------------------------- Second vice president Joined John Hancock Advisers in 1985 Began business career in 1985 Arthur N. Calavritinos, CFA - ----------------------------------------- Vice president Joined John Hancock Advisers in 1988 Began business career in 1986 Frederick L. Cavanaugh, Jr. - ----------------------------------------- Senior vice president Joined John Hancock Advisers in 1986 Began business career in 1975 Barry H. Evans, CFA - ----------------------------------------- Senior vice president Joined John Hancock Advisers in 1986 Began business career in 1986 Jeffrey N. Given, CFA - ----------------------------------------- Joined John Hancock Advisers in 1993 Began business career in 1993 Howard C. Greene, CFA - ----------------------------------------- Senior vice president Joined John Hancock Advisers in 2002 Vice president at Sun Life Financial Services Company of Canada (1987-2002) Began business career in 1979 Daniel S. Janis, III - ----------------------------------------- Vice president Joined John Hancock Advisers in 1999 Senior risk manager at BankBoston (1997-1998) Manager of forward desk at Morgan Stanley (1991-1997) Began business career in 1984 Benjamin A. Matthews - ----------------------------------------- Vice president Joined John Hancock Advisers in 1995 Began business career in 1970 FUND DETAILS 25 - -------------------------------------------------------------------------------- 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. Bond Fund Figures audited by Ernst & Young LLP.
CLASS A SHARES PERIOD ENDED: 5-31-98 5-31-99 5-31-00 5-31-01 5-31-02(1) - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $14.78 $15.25 $14.76 $13.93 $14.69 Net investment income(2) 1.05 0.97 0.96 0.92 0.82 Net realized and unrealized gain (loss) on investments 0.47 (0.49) (0.83) 0.76 0.06 Total from investment operations 1.52 0.48 0.13 1.68 0.88 Less distributions From net investment income (1.05) (0.97) (0.96) (0.92) (0.86) Net asset value, end of period $15.25 $14.76 $13.93 $14.69 $14.71 Total return(3) (%) 10.54 3.11 0.97 12.38 6.10 - --------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $1,328 $1,279 $1,098 $1,140 $1,144 Ratio of expenses to average net assets (%) 1.08 1.07 1.11 1.12 1.11 Ratio of net investment income to average net assets (%) 6.90 6.35 6.69 6.38 5.51 Portfolio turnover (%) 198 228 162 235 189
CLASS B SHARES PERIOD ENDED: 5-31-98 5-31-99 5-31-00 5-31-01 5-31-02(1) - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $14.78 $15.25 $14.76 $13.93 $14.69 Net investment income(2) 0.95 0.86 0.86 0.83 0.72 Net realized and unrealized gain (loss) on investments 0.47 (0.49) (0.83) 0.76 0.06 Total from investment operations 1.42 0.37 0.03 1.59 0.78 Less distributions From net investment income (0.95) (0.86) (0.86) (0.83) (0.76) Net asset value, end of period $15.25 $14.76 $13.93 $14.69 $14.71 Total return(3) (%) 9.78 2.39 0.27 11.64 5.37 - --------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $166 $239 $197 $218 $236 Ratio of expenses to average net assets (%) 1.78 1.77 1.81 1.78 1.81 Ratio of net investment income to average net assets (%) 6.18 5.65 6.00 5.71 4.81 Portfolio turnover (%) 198 228 162 235 189
CLASS C SHARES PERIOD ENDED: 5-31-99(4) 5-31-00 5-31-01 5-31-02(1) - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $15.61 $14.76 $13.93 $14.69 Net investment income(2) 0.55 0.85 0.82 0.72 Net realized and unrealized gain (loss) on investments (0.85) (0.83) 0.76 0.06 Total from investment operations (0.30) 0.02 1.58 0.78 Less distributions From net investment income (0.55) (0.85) (0.82) (0.76) Net asset value, end of period $14.76 $13.93 $14.69 $14.71 Total return(3) (%) 1.95(5) 0.28 11.60 5.36 - --------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $21 $24 $26 $44 Ratio of expenses to average net assets (%) 1.77(6) 1.80 1.82 1.81 Ratio of net investment income to average net assets (%) 5.65(6) 6.01 5.66 4.81 Portfolio turnover (%) 228 162 235 189
(1) As required, effective June 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, relating to the amortization of premiums and accretion of discounts on debt securities. The effect of this change on per share amounts for the year ended May 31, 2002, was to decrease net investment income per share by $0.04, increase net realized and unrealized gains per share by $0.04 and, had the Fund not made these changes to amortization and accretion, the annualized ratio of net investment income to average net assets would have been 5.81%, 5.11% and 5.09% for Class A, Class B and Class C shares, respectively. Per share ratios and supplemental data for periods prior to June 1, 2001, have not been restated to reflect this change in presentation. (2) Based on the average of the shares outstanding at the end of each month. (3) Assumes dividend reinvestment and does not reflect the effect of sales charges. (4) Class C shares began operations on 10-1-98. (5) Not annualized. (6) Annualized. 26 FUND DETAILS Government Income Fund Figures audited by Ernst & Young LLP.
CLASS A SHARES PERIOD ENDED: 5-31-98 5-31-99 5-31-00 5-31-01 5-31-02(1) - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $8.93 $9.25 $9.02 $8.58 $9.06 Net investment income(2) 0.62 0.57 0.55 0.55 0.47 Net realized and unrealized gain (loss) on investments 0.32 (0.23) (0.44) 0.48 0.19 Total from investment operations 0.94 0.34 0.11 1.03 0.66 Less distributions From net investment income (0.62) (0.57) (0.55) (0.55) (0.51) Net asset value, end of period $9.25 $9.02 $8.58 $9.06 $9.21 Total return(3) (%) 10.82 3.64(4) 1.38(4) 12.26(4) 7.37(4) - --------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $340 $585 $505 $521 $532 Ratio of expenses to average net assets (%) 1.10 1.05 1.05 1.02 1.04 Ratio of adjusted expenses to average net assets(5) (%) -- 1.10 1.18 1.15 1.17 Ratio of net investment income to average net assets (%) 6.79 6.08 6.31 6.13 5.04 Portfolio turnover (%) 106 161(6) 106 68 110
CLASS B SHARES PERIOD ENDED: 5-31-98 5-31-99 5-31-00 5-31-01 5-31-02(1) - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $8.93 $9.25 $9.02 $8.58 $9.06 Net investment income(2) 0.55 0.50 0.49 0.48 0.40 Net realized and unrealized gain (loss) on investments 0.32 (0.23) (0.44) 0.48 0.19 Total from investment operations 0.87 0.27 0.05 0.96 0.59 Less distributions From net investment income (0.55) (0.50) (0.49) (0.48) (0.44) Net asset value, end of period $9.25 $9.02 $8.58 $9.06 $9.21 Total return(3) (%) 10.01 2.92(4) 0.64(4) 11.44(4) 6.57(4) - --------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $118 $197 $113 $93 $86 Ratio of expenses to average net assets (%) 1.85 1.74 1.78 1.75 1.79 Ratio of adjusted expenses to average net assets(5) (%) -- 1.79 1.91 1.88 1.92 Ratio of net investment income to average net assets(6)(%) 6.05 5.39 5.58 5.41 4.29 Portfolio turnover (%) 106 161(6) 106 68 110
CLASS C SHARES PERIOD ENDED: 5-31-99(7) 5-31-00 5-31-01 5-31-02(1) - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $9.15 $9.02 $8.58 $9.06 Net investment income(2) 0.07 0.49 0.48 0.40 Net realized and unrealized gain (loss) on investments (0.13) (0.44) 0.48 0.19 Total from investment operations (0.06) 0.05 0.96 0.59 Less distributions From net investment income (0.07) (0.49) (0.48) (0.44) Net asset value, end of period $9.02 $8.58 $9.06 $9.21 Total return(3,4) (%) (0.65)(8) 0.61 11.42 6.57 RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (in millions) --(9) --(9) $2 $7 Ratio of expenses to average net assets (%) 1.80(10) 1.80 1.77 1.79 Ratio of adjusted expenses to average net assets(5) (%) 1.85(10) 1.93 1.90 1.92 Ratio of net investment income to average net assets (%) 5.33(10) 5.56 5.30 4.29 Portfolio turnover (%) 161(6) 106 68 110
(1) As required, effective June 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, relating to the amortization of premiums and accretion of discounts on debt securities. The effect of this change on per share amounts for the year ended May 31, 2002, was to decrease net investment income per share by $0.04, increase net realized and unrealized gains per share by $0.04 and, had the Fund not made these changes to amortization and accretion, the ratio of net investment income to average net assets would have been 5.49%, 4.74% and 4.74% for Class A, Class B and Class C shares, respectively. Per share ratios and supplemental data for periods prior to June 1, 2001, have not been restated to reflect this change in presentation. (2) Based on the average of the shares outstanding at the end of each month. (3) Assumes dividend reinvestment and does not reflect the effect of sales charges. (4) 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) Excludes merger activity. (7) Class C shares began operations on 4-1-99. (8) Not annualized. (9) Less than $500,000. (10) 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 year or period ended May 31, 1999, and years ended May 31, 2000, 2001 and 2002 would have been 3.59%, 1.25%, 12.13% and 7.24% for Class A, 2.87%, 0.51%, 11.31% and 6.44% for Class B and (0.66%), 0.48%, 11.29% and 6.44% for Class C, respectively. FUND DETAILS 27 High Income Fund Figures audited by PricewaterhouseCoopers LLP.
CLASS A SHARES PERIOD ENDED: 5-31-01(1) 5-31-02 - --------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $10.00 $9.94 Net investment income(2) 0.15 0.81 Net realized and unrealized income loss on investments (0.07) (0.27) Total from investment operations 0.08 0.54 Less distributions From net investment income (0.14) (0.86) Net asset value, end of period $9.94 $9.62 Total return(3,4) (%) 0.89(5) 5.63 - --------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $10 $12 Ratio of expenses to average net assets (%) 1.25(6) 1.24 Ratio of adjusted expenses to average net assets(7) (%) 2.42(6) 2.77 Ratio of net investment income to average net assets (%) 5.93(6) 8.24 Portfolio turnover (%) 13 113
CLASS B SHARES PERIOD ENDED: 5-31-01(1) 5-31-02 - --------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $10.00 $9.94 Net investment income(2) 0.13 0.75 Net realized and unrealized loss on investments (0.06) (0.27) Total from investment operations 0.07 0.48 Less distributions From net investment income (0.13) (0.80) Net asset value, end of period $9.94 $9.62 Total return(3,4) (%) 0.71(5) 4.99 - --------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------- Net assets, end of period (in millions) --(8) $3 Ratio of expenses to average net assets (%) 1.95(6) 1.90 Ratio of adjusted expenses to average net assets(7) (%) 3.12(6) 3.43 Ratio of net investment income to average net assets (%) 5.22(6) 7.58 Portfolio turnover (%) 13 113
CLASS C SHARES PERIOD ENDED: 5-31-01(1) 5-31-02 - --------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $10.00 $9.94 Net investment income(2) 0.13 0.75 Net realized and unrealized loss on investments (0.06) (0.27) Total from investment operations 0.07 0.48 Less distributions From net investment income (0.13) (0.80) Net asset value, end of period $9.94 $9.62 Total return(3,4) (%) 0.71(5) 4.99 - --------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------- Net assets, end of period (in millions) ($) --(8) $2 Ratio of expenses to average net assets (%) 1.95(6) 1.90 Ratio of adjusted expenses to average net assets(7) (%) 3.12(6) 3.43 Ratio of net investment income to average net assets (%) 5.22(6) 7.58 Portfolio turnover (%) 13 113
(1) Class A, Class B and Class C shares began operations on 3-1-01. (2) Based on the average of the shares outstanding at the end of each month. (3) Assumes dividend reinvestment and does not reflect the effect of sales charges. (4) Total returns would have been lower had certain expenses not been reduced during the periods shown. (5) Not annualized. (6) Annualized. (7) Does not take into consideration expense reductions during the periods shown. (8) 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 ended May 31, 2001, and the year ended May 31, 2002, would have been 0.60% and 4.10% for Class A, 0.42% and 3.461% for Class B and 0.42% and 3.461% for Class C, respectively. 28 FUND DETAILS High Yield Bond Fund Figures audited by Ernst & Young LLP.
CLASS A SHARES PERIOD ENDED: 5-31-98 5-31-99 5-31-00 5-31-01 5-31-02(1) - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $7.87 $8.26 $6.57 $5.87 $5.11 Net investment income(2) 0.78 0.75 0.72 0.65 0.47 Net realized and unrealized gain (loss) on investments 0.51 (1.59) (0.70) (0.76) (0.32) Total from investment operations 1.29 (0.84) 0.02 (0.11) 0.15 Less distributions From net investment income (0.78) (0.75) (0.72) (0.65) (0.54) From net realized gain (0.12) (0.10) -- -- -- (0.90) (0.85) (0.72) (0.65) (0.54) Net asset value, end of period $8.26 $6.57 $5.87 $5.11 $4.72 Total return(3) (%) 17.03 (9.85) 0.15 (1.82) 3.59 - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $273 $285 $238 $228 $254 Ratio of expenses to average net assets (%) 0.97 0.98 0.99 0.99 1.02 Ratio of net investment income to average net assets (%) 9.33 10.94 11.36 10.87 9.85 Portfolio turnover (%) 100 56 49 57 69
CLASS B SHARES PERIOD ENDED: 5-31-98 5-31-99 5-31-00 5-31-01 5-31-02(1) - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $7.87 $8.26 $6.57 $5.87 $5.11 Net investment income(2) 0.71 0.70 0.67 0.61 0.43 Net realized and unrealized gain (loss) on investments 0.51 (1.59) (0.70) (0.76) (0.32) Total from investment operations 1.22 (0.89) (0.03) (0.15) 0.11 Less distributions From net investment income (0.71) (0.70) (0.67) (0.61) (0.50) From net realized gain (0.12) (0.10) -- -- -- (0.83) (0.80) (0.67) (0.61) (0.50) Net asset value, end of period $8.26 $6.57 $5.87 $5.11 $4.72 Total return(3) (%) 16.16 (10.54) (0.61) (2.51) 2.81 - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $798 $835 $691 $571 $515 Ratio of expenses to average net assets (%) 1.72 1.73 1.74 1.68 1.77 Ratio of net investment income to average net assets (%) 8.62 10.20 10.61 10.87 9.10 Portfolio turnover (%) 100 56 49 57 69
CLASS C SHARES PERIOD ENDED: 5-31-98(4) 5-31-99 5-31-00 5-31-01 5-31-02(1) - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $8.45 $8.26 $6.57 $5.87 $5.11 Net investment income(2) 0.06 0.70 0.67 0.61 0.43 Net realized and unrealized loss on investments (0.19) (1.59) (0.70) (0.76) (0.32) Total from investment operations (0.13) (0.89) (0.03) (0.15) 0.11 Less distributions From net investment income (0.06) (0.70) (0.67) (0.61) (0.50) From net realized gain -- (0.10) -- -- -- (0.06) (0.80) (0.67) (0.61) (0.50) Net asset value, end of period $8.26 $6.57 $5.87 $5.11 $4.72 Total return(3) (%) (1.59)(5) (10.54) (0.61) (2.57) 2.81 - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $3 $29 $27 $40 $61 Ratio of expenses to average net assets (%) 1.72(6) 1.73 1.74 1.74 1.77 Ratio of net investment income to average net assets (%) 6.70(6) 10.20 10.61 10.87 9.10 Portfolio turnover (%) 100 56 49 57 69
(1) As required, effective June 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, relating to the amortization of premiums and accretion of discounts on debt securities. The effect of this change on per share amounts for the year ended May 31, 2002, was to decrease net investment income per share by $0.01, decrease net realized and unrealized losses per share by $0.01 and, had the Fund not made these changes to amortization and accretion, the ratio of net investment income to average net assets would have been 10.16%, 9.41% and 9.41% for Class A, Class B and Class C shares, respectively. Per share ratios and supplemental data for periods prior to June 1, 2001, have not been restated to reflect this change in presentation. (2) Based on the average of the shares outstanding at the end of each month. (3) Assumes dividend reinvestment and does not reflect the effect of sales charges. (4) Class C shares began operations on 5-1-98. (5) Not annualized. (6) Annualized. FUND DETAILS 29 Investment Grade Bond Fund Figures audited by Ernst & Young LLP.
CLASS A SHARES PERIOD ENDED: 5-31-98 5-31-99 5-31-00 5-31-01 5-31-02(1) - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $9.46 $9.72 $9.55 $9.18 $9.64 Net investment income(2) 0.62 0.59 0.57 0.60 0.48 Net realized and unrealized gain (loss) on investments 0.26 (0.17) (0.37) 0.46 0.19 Total from investment operations 0.88 0.42 0.20 1.06 0.67 Less distributions From net investment income (0.62) (0.59) (0.57) (0.60) (0.53) Net asset value, end of period $9.72 $9.55 $9.18 $9.64 $9.78 Total return(3) (%) 9.56(4) 4.33 2.22 11.83 6.97 - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $163 $169 $138 $145 $159 Ratio of expenses to average net assets (%) 1.09 1.03 1.07 1.05 1.02 Ratio of adjusted expenses to average net assets(5) (%) 1.16 -- -- -- -- Ratio of net investment income to average net assets (%) 6.43 6.03 6.08 6.30 4.93 Portfolio turnover (%) 250(6) 267 300 328 573
CLASS B SHARES PERIOD ENDED: 5-31-98 5-31-99 5-31-00 5-31-01 5-31-02(1) - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $9.46 $9.72 $9.55 $9.18 $9.64 Net investment income(2) 0.55 0.52 0.50 0.53 0.41 Net realized and unrealized gain (loss) on investments 0.26 (0.17) (0.37) 0.46 0.19 Total from investment operations 0.81 0.35 0.13 0.99 0.60 Less distributions From net investment income (0.55) (0.52) (0.50) (0.53) (0.46) Net asset value, end of period $9.72 $9.55 $9.18 $9.64 $9.78 Total return(3) (%) 8.74(4) 3.57 1.46 11.03 6.18 - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $19 $44 $27 $28 $35 Ratio of expenses to average net assets (%) 1.84 1.77 1.81 1.77 1.77 Ratio of adjusted expenses to average net assets(5) (%) 1.91 -- -- -- -- Ratio of net investment income to average net assets (%) 5.66 5.30 5.34 5.59 4.18 Portfolio turnover (%) 250(6) 267 300 328 573
CLASS C SHARES PERIOD ENDED: 5-31-99(7) 5-31-00 5-31-01 5-31-02(1) - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $9.66 $9.55 $9.18 $9.64 Net investment income(2) 0.07 0.50 0.53 0.40 Net realized and unrealized gain (loss) on investments (0.11) (0.37) 0.46 0.19 Total from investment operations (0.04) 0.13 0.99 0.59 Less distributions From net investment income (0.07) (0.50) (0.53) (0.45) Net asset value, end of period $9.55 $9.18 $9.64 $9.78 Total return(3) (%) (0.38)(8) 1.44 11.00 6.17 - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) --(9) --(9) $2 $7 Ratio of expenses to average net assets (%) 1.77(10 1.82 1.80 1.77 Ratio of net investment income to average net assets (%) 5.30(10 5.33 5.42 4.18 Portfolio turnover (%) 267 300 328 573
(1) As required, effective June 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, relating to the amortization of premiums and accretion of discounts on debt securities. The effect of this change on per share amounts for the year ended May 31, 2002, was to decrease net investment income per share by $0.05, increase net realized and unrealized gains per share by $0.05 and, had the Fund not made these changes to amortization and accretion, the annualized ratio of net investment income to average net assets would have been 5.42%, 4.67% and 4.67% for Class A, Class B and Class C shares, respectively. Per share ratios and supplemental data for periods prior to June 1, 2001, have not been restated to reflect this change in presentation. (2) Based on the average of the shares outstanding at the end of each month. (3) Assumes dividend reinvestment and does not reflect the effect of sales charges. (4) Total return would have been lower had certain expenses not been reduced during the period shown. (5) Does not take into consideration expense reductions during the periods shown. (6) Excludes merger activity. (7) Class C shares began operations on 4-1-99. (8) Not annualized. (9) Less than $500,000. (10) 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 year ended May 31, 1998, would have been 9.49% for Class A and 8.67%, 1.81% and 8.67% for Class B, respectively. 30 FUND DETAILS Strategic Income Fund Figures audited by PricewaterhouseCoopers LLP.
CLASS A SHARES PERIOD ENDED: 5-31-98 5-31-99 5-31-00 5-31-01 5-31-02(1) - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $7.54 $7.84 $7.46 $6.97 $6.61 Net investment income(2) 0.64 0.59 0.59 0.57 0.46 Net realized and unrealized gain (loss) on investments 0.34 (0.38) (0.49) (0.36) (0.07) Total from investment operations 0.98 0.21 0.10 0.21 0.39 Less distributions From net investment income (0.64) (0.59) (0.59) (0.56) (0.46) From net realized gain on investments sold (0.04) -- -- -- -- From capital paid-in -- -- -- (0.01) (0.05) (0.68) (0.59) (0.59) (0.57) (0.51) Net asset value, end of period $7.84 $7.46 $6.97 $6.61 $6.49 Total return(3) (%) 13.43 2.77 1.37 3.15 6.22 - -------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $489 $541 $511 $512 $508 Ratio of expenses to average net assets (%) 0.92 0.89 0.91 0.93 0.93 Ratio of net investment income to average net assets (%) 8.20 7.71 8.09 8.40 7.06 Portfolio turnover (%) 112 55(4) 36(4) 48 69
CLASS B SHARES PERIOD ENDED: 5-31-98 5-31-99 5-31-00 5-31-01 5-31-02(1) - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $7.54 $7.84 $7.46 $6.97 $6.61 Net investment income(2) 0.59 0.53 0.54 0.52 0.42 Net realized and unrealized gain (loss) on investments 0.34 (0.38) (0.49) (0.35) (0.08) Total from investment operations 0.93 0.15 0.05 0.17 0.34 Less distributions From net investment income (0.59) (0.53) (0.54) (0.52) (0.42) From net realized gain on investments sold (0.04) -- -- -- -- From capital paid-in -- -- -- (0.01) (0.04) (0.63) (0.53) (0.54) (0.53) (0.46) Net asset value, end of period $7.84 $7.46 $6.97 $6.61 $6.49 Total return(3) (%) 12.64 2.06 0.65 2.44 5.49 - -------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $473 $619 $564 $555 $556 Ratio of expenses to average net assets (%) 1.62 1.59 1.61 1.63 1.63 Ratio of net investment income to average net assets (%) 7.50 7.01 7.39 7.69 6.36 Portfolio turnover (%) 112 55(4) 36(4) 48 69
CLASS C SHARES PERIOD ENDED: 5-31-98(5) 5-31-99 5-31-00 5-31-01 5-31-02(1) - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $7.87 $7.84 $7.46 $6.97 $6.61 Net investment income(2) 0.05 0.53 0.53 0.52 0.42 Net realized and unrealized gain (loss) on investments (0.03) (0.38) (0.49) (0.35) (0.08) Total from investment operations 0.02 0.15 0.04 0.17 0.34 Less distributions From net investment income (0.05) (0.53) (0.53) (0.52) (0.42) From capital paid-in -- -- -- (0.01) (0.04) (0.05) (0.53) (0.53) (0.53) (0.46) Net asset value, end of period $7.84 $7.46 $6.97 $6.61 $6.49 Total return(3) (%) 0.23 2.04 0.65 2.43 5.49 - -------------------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $1 $22 $36 $69 $121 Ratio of expenses to average net assets (%) 1.62(7) 1.59 1.61 1.63 1.64 Ratio of net investment income to average net assets (%) 7.34(7) 7.01 7.39 7.65 6.35 Portfolio turnover (%) 112 55(4) 36(4) 48 69
(1) As required, effective June 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, relating to the amortization of premiums and accretion of discounts on debt securities. The effect of this change on per share amounts for the year ended May 31, 2002, was to decrease net investment income per share by $0.03, decrease net realized and unrealized losses per share by $0.03 and, had the Fund not made these changes to amortization and accretion, the annualized ratio of net investment income to average net assets would have been 7.59%, 6.89% and 6.88% for Class A, Class B and Class C shares, respectively. Per share ratios and supplemental data for periods prior to June 1, 2001, have not been restated to reflect this change in presentation. (2) Based on the average of the shares outstanding at the end of each month. (3) Assumes dividend reinvestment and does not reflect the effect of sales charges. (4) Excludes merger activity. (5) Class C shares began operations on 5-1-98. (6) Not annualized. (7) Annualized. For more information Two documents are available that offer further information on John Hancock income 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 INCPN 7/03 ------------- [LOGO](R) PRSRT STD U.S. POSTAGE John Hancock Funds, LLC P A I D MEMBER NASD BOSTON, MA 101Huntington Avenue PERMIT NO. 11 Boston, MA 02199-7603 ------------- www.jhfunds.com -----END PRIVACY-ENHANCED MESSAGE-----