-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FCOj3I6Y9kzLZN2IFslfLDkudjhYgFKvqjw1Gzkw+0hcGcOWeVLXmLxYibi48N78 rD/Olmpoe+V+r1Tq+NumuQ== 0000950135-95-000701.txt : 19950615 0000950135-95-000701.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950135-95-000701 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950315 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANCOCK JOHN SERIES INC CENTRAL INDEX KEY: 0000819300 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-16048 FILM NUMBER: 95520905 BUSINESS ADDRESS: STREET 1: 101 HUNTINGTON AVENUE CITY: BOSTON STATE: MA ZIP: 02199 MAIL ADDRESS: STREET 1: 101 HUNTINGTON AVENUE STREET 2: 10TH FLOOR CITY: BOSTON STATE: MA ZIP: 02199 FORMER COMPANY: FORMER CONFORMED NAME: TRANSAMERICA SERIES INC DATE OF NAME CHANGE: 19940729 FORMER COMPANY: FORMER CONFORMED NAME: TRANSAMERICA SPECIAL SERIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CRITERION SPECIAL SERIES INC DATE OF NAME CHANGE: 19890718 497 1 JOHN HANCOCK SERIES FUND 1 John Hancock Global Resources Fund, March 1, 1995 John Hancock High Yield Bond Fund, March 1, 1995 John Hancock High Yield Tax-Free Fund, March 1, 1995 John Hancock Government Income Fund, March 1, 1995 John Hancock Emerging Growth Fund, March 1, 1995 John Hancock Growth and Income Fund, January 1, 1995 John Hancock Government Securities Trust, September 30, 1994 John Hancock Investment Quality Bond Fund, September 30, 1994 John Hancock U.S. Government Trust, September 30, 1994 John Hancock Intermediate Government Trust, September 30, 1994 John Hancock Adjustable U.S. Government Trust, September 30, 1994 John Hancock Capital Growth, April 29, 1994 John Hancock California Tax Free Income Fund, April 29, 1994 John Hancock Tax Free Bond Fund, April 15, 1994 Supplement to Class A and Class B Prospectus The "Waiver of Initial Sales Charge" section under PURCHASE OF SHARES is supplemented as follows: Effective March 15, 1995, participant directed defined contribution plans with at least 100 eligible employees at the inception of the Fund account may purchase Class A shares of the Fund without an initial sales charge but if the shares are redeemed within 12 months after the end of the calendar year in which the purchase was made, a contingent deferred sales charge will be imposed at the rate for Class A shares described in the prospectus. March 15, 1995 2 JOHN HANCOCK GOVERNMENT INCOME FUND A Portfolio of John Hancock Series, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 - -------------------------------------------------------------------------------- John Hancock Government Income Fund (the "Fund"), a portfolio of John Hancock Series, Inc. (the "Corporation"), seeks to earn a high level of current income consistent with the preservation of capital from securities primarily issued or guaranteed by the U.S. government, its agencies or instrumentalities. The Fund may seek to hedge against changes in interest rates by engaging in transactions involving options, futures and options on futures relating to U.S. government securities. The Corporation is a registered investment company which is comprised of multiple separate series (investment portfolios) offering investors a wide range of mutual fund investment choices. This Prospectus relates only to shares of the Fund. ALTERNATIVE PURCHASE PLAN. The Fund offers two classes of shares with alternative purchase and distribution fee arrangements. These differences permit you to choose the method of purchasing shares that is most beneficial given the amount of the purchase, the length of time you expect to hold the shares and other circumstances. Shares of the Fund may be purchased at the next determined net asset value per share, plus a sales charge which, at your election, may be imposed either (i) at the time of purchase in the case of the Class A Shares (the initial sales charge alternative) or (ii) on a contingent deferred basis in the case of the Class B Shares (the deferred sales charge alternative.) See "Purchase of Shares -- Alternative Purchase Plan" in this Prospectus for further details about the Alternative Purchase Plan. --------------------- This prospectus briefly sets forth the basic information that you should know before investing. YOU SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. A Statement of Additional Information dated March 1, 1995, containing further information about the Fund, has been filed with the Securities and Exchange Commission and is incorporated into this Prospectus by reference. A copy of the Statement of Additional Information may be obtained without charge by contacting John Hancock Funds, Inc. ("John Hancock Funds"), whose address and telephone number are shown on the back cover of this Prospectus. - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR FINANCIAL INSTITUTION, NOR ARE SHARES OF THE FUND FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. --------------------- PROSPECTUS DATED MARCH 1, 1995 3 SUMMARY - -------------------------------------------------------------------------------- THE FUND AND THE CORPORATION. John Hancock Government Income Fund (the "Fund") is a series of John Hancock Series, Inc. (the "Corporation") which is organized as Maryland corporation and is an open-end diversified management investment company that issues its shares in series each of which is designated as a "fund." INVESTMENT OBJECTIVE. The Fund seeks to earn a high level of current income consistent with preservation of capital from securities primarily issued or guaranteed by the U.S. Government, its agencies or its instrumentalities. INVESTMENT ADVISER. John Hancock Advisers, Inc. (the "Investment Adviser") serves as investment adviser and receives a monthly fee from the Fund at varying annual percentage rates of average daily net assets, depending on the Fund's asset size, ranging from a low of .60% to a high of .65%. The Investment Adviser presently manages a broad range of mutual funds and multiple investment portfolios representing total assets of approximately $13 billion under management (see "The Fund and its Management.") DISTRIBUTION ARRANGEMENTS. The Fund offers two classes of shares, "Class A Shares" and "Class B Shares," through the Fund's distributor, John Hancock Funds, Inc. ("John Hancock Funds"). Class A Shares are subject to an initial sales charge of up to 4.75% at the time of purchase and bear the expense of an ongoing Rule 12b-1 distribution service fee at an annual rate of up to .25% of the average daily net assets of the Fund allocable to the Class A Shares. Class B Shares do not incur a sales charge when they are purchased but (i) are generally subject to a sales charge if they are redeemed within six years of purchase (a "contingent deferred sales charge" or "CDSC") and (ii) are subject to an aggregate distribution and service fee of up to 1% of the Fund's average daily net assets allocable to the Class B Shares annually. The contingent deferred sales charges for Class B Shares decline from 5% during the first year of investment to zero after the sixth year (5%, 4%, 3%, 3%, 2%, 1%), (see "Alternative Purchase Plan" on page 14). Shares of either class may be purchased through selected financial services firms having dealer agreements with John Hancock Funds. The minimum initial and subsequent investment amounts for either class of shares are $1,000 and $50 ($250 and $25 for a tax sheltered retirement plan), respectively (see "Purchase of Shares.") REDEMPTION OF SHARES. Shares of the Fund in any amount may be redeemed at any time at the net asset value per share next determined after the redemption request is received in proper form by The Shareholder Services Group (the "Transfer Agent.") In certain cases, however, redemption proceeds from the Class B Shares will be reduced by the amount of any applicable contingent deferred sales charge (see "Redemption and Repurchase of Shares.") SPECIAL RISK CONSIDERATIONS. Generally, a rise in interest rates will result in a decrease in the net asset value per share of the Fund, while a decline in interest rates will result in an increase in the Fund's net asset value per share. The U.S. government guarantee as to payment of principal and interest of government backed securities held by the Fund does not extend to the value or yield of the Fund's shares. In addition, during periods of declining interest rates, prepayment of mortgages underlying certain obligations held by the Fund may cause a reduction in the Fund's rate of return. The investment policies and techniques of the Fund such as foreign government securities (page 9), zero coupon bonds (page 7), options and futures transactions (page 9) and reverse repurchase agreements (page 8), may involve a greater degree of risk than those inherent in more conservative investment approaches, such as money market funds. The above is qualified in its entirety by the detailed information appearing elsewhere in this Prospectus and in the Statement of Additional Information. 2 4 FUND EXPENSES - ----------------------------------------------------------------------------------------------------- The following table illustrates the various expenses and fees a shareholder of the Fund would bear directly or indirectly. The expenses and fees set forth in the table are for the fiscal year ended October 31, 1994, except as otherwise noted.
CLASS A SHARES CLASS B SHARES (INITIAL SALES (DEFERRED SALES CHARGE CHARGE ALTERNATIVE) ALTERNATIVE) -------------- --------------- SHAREHOLDER TRANSACTION EXPENSES(1) Maximum Sales Charge Imposed on Purchases...................... 4.75% None Sales Charge Imposed on Reinvested Dividends................... None None Deferred Sales Charge (as a percentage of original purchase price)............................................... None 5.00% Redemption Fee................................................. None None Exchange Fee................................................... None None
CLASS A CLASS B ------- ------- ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets) Management Fees(2)............................................. 0.64% 0.64% 12b-1 Fees(3).................................................. 0.25% 1.00% Other Expenses................................................. 0.29% 0.29% ---- ---- Total Fund Operating Expenses.................................. 1.18% 1.93% ==== ====
EXAMPLE A(4): You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and redemption at the end of each time period.
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Class A....................................... $59 $83 $109 $184 Class B....................................... $70 $91 $124 $206*
EXAMPLE B(4): You would pay the following expenses on the same investment in Example A assuming no redemption:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Class A....................................... $59 $83 $109 $184 Class B....................................... $20 $61 $104 $206* - --------------- (1) Class A Shares have a reduced initial sales charge for purchases in excess of $100,000. Purchases of $1 million or more are not subject to a sales charge; however, a contingent deferred sales charge of 1% will be applied to redemptions within 12 months of such purchase. The deferred sales charge on Class B Shares declines from 5% during the first year to 0% after the sixth year in the following manner: 5%, 4%, 3%, 3%, 2% and 1%. See "Information About Shares of the Fund -- Redemption and Repurchase of Shares." (2) See "The Fund and Its Management." (3) See "The Fund and Its Management -- Distribution Plans." (4) Expenses in Examples above have been restated to reflect current fees and should not be considered a representation of past or future expenses. Actual expenses may be greater or less than those shown above. Use of assumed (5%) return is mandated by the Securities and Exchange Commission. THE FUND'S PAYMENT OF A DISTRIBUTION FEE MAY RESULT IN A LONG-TERM SHAREHOLDER PAYING MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM FRONT-END SALES CHARGE PERMITTED UNDER THE NATIONAL ASSOCIATION OF SECURITIES DEALERS' RULES OF FAIR PRACTICE. * Assumes tax-free automatic exchange of Class B Shares for Class A Shares after the eight year period following the initial purchase of Class B Shares. If the exchange is declined, such Class B expenses would be $225.
3 5 FINANCIAL HIGHLIGHTS - ----------------------------------------------------------------------------------------------------------------------------- Financial highlights for John Hancock Government Income Fund (formerly Transamerica Government Income Fund) for the period September 30, 1994 through October 31, 1994, in the case of Class A Shares, and for each of the six years, in the case of Class B Shares, in the period ended October 31, 1994 and the period February 23, 1988 through October 31, 1988 have been audited by Ernst & Young LLP, independent auditors, whose unqualified report thereon as well as other financial statements of the Fund are included in the Statement of Additional Information. The Fund's annual report contains a discussion of the Fund's performance and is made available upon request without charge.
CLASS A SHARES CLASS B SHARES ----------------- -------------------------------------------------------------- PERIOD FROM YEAR ENDED OCTOBER 31, SEPT. 30, 1994 TO --------------------------------------------------------------- OCT. 31, 1994(1) 1994 1993 1992 1991 ----------------- ------- ------- ------- ------- Per share income and capital changes for a share outstanding during each period: Net asset value, beginning of period..... $ 8.85 $ 10.05 $ 9.83 $ 9.79 $ 9.37 INCOME FROM INVESTMENT OPERATIONS Net investment income.................... 0.06 0.65 0.70 0.80 0.89 Net realized and unrealized gain (loss) on securities........................... (0.10) (1.28) 0.24 0.03 0.40 -------- -------- -------- -------- -------- Total from Investment Operations...... (0.04) (0.63) 0.94 0.83 1.29 LESS DISTRIBUTIONS Dividends from net investment income..... (0.06) (0.65) (0.72) (0.79) (0.87) Distributions from realized gains........ -- (0.02) -- -- -- -------- -------- -------- -------- -------- Total Distributions................... (0.06) (0.67) (0.72) (0.79) (0.87) -------- -------- -------- -------- -------- Net asset value, end of period........... $ 8.75 $ 8.75 $ 10.05 $ 9.83 $ 9.79 ======== ======== ======== ======== ======== TOTAL RETURN(3)....................... (0.45)% (6.42)% 9.86% 8.81% 14.38% ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA Ratio of operating expenses to average net assets.............................. 1.12% 1.93% 2.00% 2.00% 2.00% Ratio of interest expense to average net assets.............................. -- 0.01% 0.01% 0.15% -- -------- -------- -------- -------- -------- Ratio of total expenses to average net assets.............................. 0.12% 1.94% 2.01% 2.15% 2.00% Ratio of expense reimbursement to average net assets.............................. -- -- -- -- -- -------- -------- -------- -------- -------- Ratio of net expenses to average net assets.............................. 0.12% 1.94% 2.01% 2.15% 2.00% ======== ======== ======== ======== ======== Ratio of net investment income to average net assets.............................. 0.71% 6.98% 7.06% 8.03% 9.09% Portfolio turnover....................... 92% %92 138% 112% 162% Net Assets, end of period (in thousands).......................... $ 223 $241,061 $293,413 $225,540 $129,014 Debt outstanding at end of period (in thousands)(4)....................... $ 0 $ 0 $ 0 $ 0 -- Average daily amount of debt outstanding during the period (in thousands)(4)..... $ 349 $ 349 $ 503 $ 6,484 -- Average monthly number of shares outstanding during the period (in thousands).......................... 28,696 28,696 26,378 18,572 -- Average daily amount of debt outstanding per share during the period(4).......... $ 0.01 $ 0.01 $ 0.02 $ 0.35 -- PERIOD ENDED OCT. 31, 1990 1989 1988(2) ------ ------ ------- Per share income and capital changes for a share outstanding during each period: Net asset value, beginning of period..... $ 9.98 $ 10.01 $ 10.58 INCOME FROM INVESTMENT OPERATIONS Net investment income.................... 0.88 0.98 0.69 Net realized and unrealized gain (loss) on securities........................... (0.54) (0.01) (0.45) ------- ------- ------- Total from Investment Operations...... 0.34 0.97 0.24 LESS DISTRIBUTIONS Dividends from net investment income..... (0.95) (1.00) (0.64) Distributions from realized gains........ -- -- (0.17) ------- ------- ------- Total Distributions................... (0.95) (1.00) (0.81) ------- ------- ------- Net asset value, end of period........... $ 9.37 $ 9.98 $ 10.01 ======= ======= ======= TOTAL RETURN(3)....................... 3.71% 10.22% 2.40% ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA Ratio of operating expenses to average net assets.............................. 2.04% 2.82% 2.76% Ratio of interest expense to average net assets.............................. -- -- -- ------- ------- ------- Ratio of total expenses to average net assets.............................. 2.04% 2.82% 2.76% Ratio of expense reimbursement to average net assets.............................. (0.04)% (0.82)% (1.38)% ------- ------- ------- Ratio of net expenses to average net assets.............................. 2.00% 2.00% 1.38% ======= ======= ======= Ratio of net investment income to average net assets.............................. 9.22% 9.64% 6.34% Portfolio turnover....................... 83% 151% 174% Net Assets, end of period (in thousands).......................... $64,707 $26,568 $ 6,966 Debt outstanding at end of period (in thousands)(4)....................... -- -- -- Average daily amount of debt outstanding during the period (in thousands)(4)..... -- -- -- Average monthly number of shares outstanding during the period (in thousands).......................... -- -- -- Average daily amount of debt outstanding per share during the period(4).......... -- -- -- - --------------- (1) Financial highlights, including total return, have not been annualized. Portfolio turnover and information regarding debt outstanding are for the year ended October 31, 1994 and are not class specific. (2) Financial highlights, including total return, are for the period from February 23, 1988 (date of the Fund's initial offering of shares to the public) to October 31, 1988 and have not been annualized. Per share information has been calculated using the average number of shares outstanding. (3) Total return does not include the effect of the initial sales charge for Class A Shares nor the contingent deferred sales charge for Class B Shares. (4) Debt outstanding consists of reverse repurchase agreements entered into during the year.
4 6 INVESTMENT OBJECTIVE AND POLICIES - ------------------------------------------------------ The Fund's investment objective is to earn a high level of current income consistent with preservation of capital by investing primarily in securities that are issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities ("U.S. Government Securities.") The Fund may seek to enhance its current return and may seek to hedge against changes in interest rates by engaging in transactions involving options, futures and options on futures. The Fund expects that under normal market conditions it will invest at least 80% of its total assets in U.S. Government Securities (and related repurchase agreements and forward commitments) which include: (1) Obligations issued by the U.S. Treasury differing only in their interest rates, maturities and times of issuance (a) U.S. Treasury bills-maturity of one year or less; (b) U.S. Treasury notes-maturities of one to ten years; and (c) U.S. Treasury bonds-generally maturities greater than ten years; and (2) Obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities which are supported by: (a) the full faith and credit of the U.S. government (e.g., direct pass-through certificates of the Government National Mortgage Association "GNMA"); (b) the right of the issuer to borrow from the U.S. government (e.g., securities of the Federal Home Loan banks); and (c) the credit of the instrumentality (e.g., bonds issued by Federal National Mortgage Association.) Investments in GNMA certificates (and other mortgage related securities) which are pools of home mortgages, are subject to prepayment of principal as mortgages in the pool are prepaid. The Fund may also invest in stripped securities including (1) "zero coupon" U.S. government securities which have been stripped of their unmatured interest coupons and receipts or in certificates representing undivided interests in such stripped U.S. government securities and coupons and (2) stripped government agency mortgage backed securities (i.e., interest only/principal only strips). Investments will be made in an attempt to minimize excessive fluctuations in net asset value per share, so at times the highest yielding government securities then available may not be selected for investment, if in the Investment Adviser's view future interest rate movements could result in depreciation of value. The Fund may take full advantage of the entire range of maturities of U.S. government securities and may adjust the dollar-weighted average maturity of its portfolios from time to time based in large part on the Investment Adviser's expectation as the future changes in interest rates. There is no assurance the Fund will achieve its objective. As to the balance of the Fund's assets, where consistent with the investment objective, the Fund may: 1. invest in U.S. dollar denominated and foreign currency denominated securities issued or guaranteed by foreign governments which are considered stable by the Investment Adviser, or any of the political subdivisions, instrumentalities, authorities or agencies of these governments provided these securities are rated within the three highest categories of a nationally recognized credit agency; 2. invest in taxable municipal obligations issued by state and local governments or their agencies provided these securities are rated within the three highest categories of a nationally recognized credit agency; 5 7 3. invest in other "asset backed securities" which are not included as "government asset backed" securities and are rated in one of the two highest rating categories by a nationally recognized credit rating organization (e.g., Standard & Poor's Ratings Group or Moody's Investors Services, Inc.) or if not so rated, of equivalent investment quality in the opinion of the Investment Adviser; 4. write covered put and call options on portfolio securities (option writing for the purpose of increasing income is not presently being used; implementation requires advance written notice to shareholders) and engage in hedging transactions, including options, interest rate futures contract and options thereon, subject to certain limitation described below (see "Investment Practices, Techniques and Restrictions"); 5. enter into repurchase agreements and reverse repurchase agreements and invest in, when issued securities and restricted securities, subject to certain limitations described below (see "Investment Practices, Techniques and Restrictions"); and 6. invest in (for liquidity purposes) high quality, short-term debt securities with remaining maturities of one year or less ("money market instruments") such as certificates of deposit, bankers acceptances, corporate debt securities, commercial paper and related repurchase agreements. Asset backed securities, like GNMA certificates, are securities which represent a participation in or are secured by and payable from, a stream of payments generated by particular assets, most often a pool of assets similar to one another. Types of other asset backed securities include automobile receivable securities, credit card receivable securities and mortgage backed securities such as collateralized mortgage obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"). Investors may refer to Appendix A and Statement of Additional Information for discussion of both government and non-government asset backed securities. The Fund may also lend its portfolio securities (see "Investment Practices, Techniques and Restrictions.") The foregoing policies represent a greater degree of risk than those of investment companies which have more conservative investment policies (see "Special Considerations" below.) The extent to which the Fund will be able to achieve its investment objective depends upon the Investment Adviser's ability to evaluate and develop the information it receives into a successful investment program. The Fund's investment objective and policies are non-fundamental, which means they may be changed by the Board of Directors without requiring the vote of shareholders; such investment objective may not, however, be changed without prior (30 days') written notice first having been given to shareholders. Such a change in the investment objective may result in the Fund's investment objective being different from that which the shareholders considered appropriate, in light of their then current financial position and needs, at the time of their investment in the Fund. Investors may also refer to the Statement of Additional Information which contains the following information: 1. Appendix AA explains short-term obligations and government securities. 2. Appendix BB explains municipal securities. 3. Appendix CC explains various options, futures and forward contracts. 4. Appendix DD explains ratings of various fixed income securities by Moody's and S&P, including preferred stocks and short term investments. During periods of unusual market conditions when the Investment Adviser believes that investing for temporary defensive purposes is appropriate, part or all of the assets of the Fund may be invested in cash or cash equivalents consisting of -- 1. obligations of banks (including certificates of deposit, bankers' acceptances and repurchase 6 8 agreements) with assets of $100,000,000 or more; 2. commercial paper rated within two highest rating categories of a nationally recognized rating organization; 3. investment grade short-term notes; and 4. related repurchase agreements. Portfolio securities may be sold without regard to the length of time they have been held whenever such a sale will, in the opinion of the Investment Adviser, strengthen the Fund's position in furthering its investment objectives. Disposing of debt securities in these circumstances should not increase direct transaction costs since debt securities are normally traded on a principal basis without brokerage commissions. However, such a transaction involves a mark-up or mark-down of the price. In addition, positions in options and futures for hedging purposes may be established with great frequency. For these reasons, portfolio turnover is likely to be higher than that of other mutual funds. A higher portfolio turnover rate involves greater expense to the Fund and may also result in the realization of short-term capital gains at ordinary income rates. Portfolio turnover rates of the Fund for recent years are shown in the section "Financial Highlights." The Fund will engage in portfolio trading if it believes a transaction, net of costs (including custodian charges,) will help in attaining its investment objective. SPECIAL RISKS CONSIDERATIONS. THE U.S. GOVERNMENT GUARANTEES AS TO PAYMENT OF PRINCIPAL AND INTEREST OF THE FUND'S U.S. GOVERNMENT SECURITIES, DOES NOT EXTEND TO THE VALUE OR YIELD OF SUCH SECURITIES OR OF THE FUND'S SHARES OF COMMON STOCK. To the extent the Fund invests in government asset backed (e.g., GNMA) and non-government asset backed securities, it may experience a high rate of repayment when interest rates decline and may therefore face the necessity of reinvesting at a time when rates of return are relatively low which could result in a reduction in principal if some securities were acquired at a premium. (See Statement of Additional Information "Investment Objectives, Policies and Restrictions" for further discussion.) The value of the securities held by the Fund, and therefore the net asset value per share, will fluctuate with interest rate changes. Generally, a rise in interest rates will result in a decrease in the Fund's net asset value, while a decline will result in an increase in the Fund's net asset value. Therefore at the time of redemption, your shares may be worth more or less than the value at the time of purchase. The use of options contracts (see "Investment Practices, Techniques and Restrictions -- Transactions in Options and Futures" below) may result in the loss of principal under certain market conditions. The Fund will seek to reduce risks associated with changes in interest rates. However, these hedging techniques will result in transaction costs to the Fund and there can be no assurance the interest rate risks will be eliminated. Zero coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically, therefore their value is subject to greater fluctuation in response to changes in market interest rates than bonds which pay interest currently (see Appendix A.) Foreign government obligations which are appropriate for investment by the Fund may be subject to risks generally applicable to foreign securities (see "Investment Practices, Techniques and Restrictions -- Foreign Securities"). 7 9 INVESTMENT PRACTICES, TECHNIQUES AND RESTRICTIONS - ------------------------------------------------------ The Fund's investments are subject to the following practices, techniques and restrictions and may involve certain risks. The Statement of Additional Information contains more detailed information about these practices, including limitations designed to reduce these risks. REPURCHASE AGREEMENTS AND RESTRICTED SECURITIES. When participating in repurchase agreements, the Fund buys securities from a seller (usually a bank or brokerage firm) with the agreement that the seller will repurchase the securities at a predetermined price or yield at a later date. Transactions involving repurchase agreements must be fully collateralized at all times, however the Fund may be subject to various delays and risks of loss if the seller is unable to meet its obligation to repurchase. The Fund may also invest in securities which are restricted as to resale. The registration of such "restricted securities" under the Securities Act of 1933 (the "Securities Act") may be required prior to sale with attendant time delays, and the Fund may have to bear all or a part of the expense of such registration. No more than 10% of the Fund's total assets may be invested in restricted securities (including other securities not readily marketable) and in repurchase agreements that mature in more than seven days (collectively, "illiquid securities.") Although the Fund may purchase restricted securities which can be offered and sold to "qualified institutional buyers" under Rule 144A of the Securities Act, its present investment restriction limits such investment to the foregoing 10% limitation. LENDING OF PORTFOLIO SECURITIES. The Fund may lend its portfolio securities amounting to not more than 33% of the value of its portfolio securities to approved borrowers (principally broker/dealers) provided these loans are callable at any time and are continuously secured by collateral (cash or government securities) equal to no less than the market value, determined daily, on the securities loaned. The Fund may reinvest any cash collateral in short term, highly liquid debt securities. During the period of the loan, the Fund earns income on both the loaned securities and the collateral. Although these transactions must be fully collateralized at all times, they involve some credit risk to the Fund if the borrower should default on its obligation and the Fund is delayed or prevented from recovering the collateral. REVERSE REPURCHASE AGREEMENTS. A reverse repurchase agreement involves the sale of a security by the Fund and its agreement to repurchase the instrument at a specified time and price. The Fund will maintain a segregated account consisting of highly liquid, marketable debt securities to cover its obligations under reverse repurchase agreements with selected firms approved in advance by the Board of Directors. The Fund will use the proceeds to purchase other investments. Reverse repurchase agreements are considered to be borrowings by the Fund and as an investment practice may be considered speculative. The Fund may borrow money for temporary administrative or emergency purposes. To avoid the potential leveraging effects of the Fund's borrowings, additional investments will not be made while borrowings are in excess of 5% of the Fund's total assets. The Fund will limit its investments in reverse repurchase agreements and other borrowings to no more than 33 1/3% of its total assets. WHEN ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. In order to help ensure the availability of suitable securities for its portfolio, the Fund may purchase securities on a "when-issued" or "delayed delivery" basis or may purchase or sell securities on a forward commitment basis with delivery and payment ("settlement") for the securities taking place in the future. The Fund does not pay for the securities or start earning interest on 8 10 them until settlement. Prior to the settlement date, the value of the securities will fluctuate and assets consisting of cash and/or liquid, high grade debt securities will be maintained in a segregated account in an amount sufficient to meet the purchase price. FOREIGN SECURITIES AND CURRENCY TRANSACTIONS. The Fund's investments in foreign securities can involve risks not present in domestic securities such as: currency exchange rate fluctuations; exchange control policies; expropriation or confiscatory taxation; difficulty in obtaining and enforcing judgments against a foreign issuer; political, economic or social instability; and less securities regulation. Foreign securities can be less liquid or more volatile than U.S. securities, and foreign accounting and disclosure standards may differ from U.S. standards. The values of foreign investments can rise or fall because of changes in currency exchange rates. The Fund may buy or sell foreign currencies and foreign currency forward contacts for hedging purposes in connection with its foreign investments. A forward currency contract is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. The Fund might purchase a particular currency or enter into a forward currency contract to preserve the U.S. dollar price of securities it intends to or has contracted to purchase. Alternatively, it might sell a particular currency on either a spot or forward basis to hedge against an anticipated decline in the dollar value of securities it intends to or has contracted to sell. Although this strategy could minimize the risk of loss due to a decline in the hedged currency, it could also limit any potential gain from an increase in the value of the currency. The Fund is authorized to, but presently does not intend to, enter into transactions involving options on foreign currencies for hedging purposes only. (See "Investment in Securities of Non-U.S. Issuers" in the Statement of Additional Information). TRANSACTIONS IN OPTIONS AND FUTURES OPTIONS ON SECURITIES. The Fund may write (sell) covered call and cash secured put options and purchase call and put options on debt securities. The Fund may write options on its portfolio securities for the purpose of increasing its return on these securities or to protect the value of its portfolio. If the price of the underlying security moves adversely to the Fund's position, the option may be exercised and the Fund will be required to purchase or sell the underlying security at a disadvantageous price, which may only be partially offset by the amount of the premium if at all. The Fund may also write straddles, which are combinations of put and call options on the same security. These transactions can generate additional premium income but also present an increased risk. The Fund may also purchase put or call options in anticipation of changes in interest rates, which may adversely affect the value of its portfolio securities or the prices of securities the Fund wants to purchase at a later date. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise or liquidation of the option. Unless the price of the underlying security changes sufficiently, the option may expire without value to the Fund. The Fund does not currently engage in the writing of options for the purpose of enhancing its return and has undertaken not to commence such investment activity without having first given 60 days' written notice to shareholders in advance thereof. FUTURES CONTRACTS. The Fund may enter into interest rate futures contracts for hedging purposes ("Futures Contracts"). Interest rate futures contracts are purchased or sold to attempt to hedge against the effects of interest or exchange rate changes on the Fund's current or intended investments in fixed income securities. The adverse effects of an anticipated decrease in the value of portfolio securities may be offset, in whole or in part, by gains on the sale of Futures Contracts. This 9 11 applies when the decrease occurs as a result of a general increase in interest rates. Conversely, the increased cost of portfolio securities to be acquired may be offset, in whole or in part, by gains on Futures Contracts purchased by the Fund. This applies when the increase is caused by a general decline in interest rates. The Fund will incur transaction costs when it purchases and sells Futures Contracts. It will also be required to maintain margin deposits (see "Risks of Transactions in Options and Futures"). OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write options on interest rate futures contracts ("Options on Futures Contracts.") Such investment strategies will be used as a hedge and not for speculation. Put and call Options on Futures Contracts may be traded by the Fund in order to protect against declines in the values of portfolio securities or against increases in the cost of securities to be acquired. Purchases of options on Futures Contracts may present less risk in hedging the Fund's portfolio than the purchase and sale of the underlying Futures Contracts since the potential loss is limited to the amount of the premium plus related transaction costs. The writing of these options, however, does not present less risk than the trading of Futures Contracts. It will constitute only a partial hedge, up to the amount of the premium received and if an option is exercised, the Fund may suffer a loss on the transaction. RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES. Although the Fund will enter into transactions in Futures Contracts, Options on Futures Contracts and certain options solely for hedging purposes, their use does involve certain risks. For example, a lack of correlation between the value of an instrument underlying an option or Futures Contract and the assets being hedged or unexpected adverse price movements, could render the Fund's hedging strategy unsuccessful, thus resulting in losses. The Fund also may enter into transactions in options on securities for other than hedging purposes. This involves greater risk. In addition, there can be no assurance that a liquid secondary market will exist for a contract purchased or sold. Therefore, the Fund may be required to maintain a position until exercise or expiration, which could result in losses. Over-the-counter transactions in options on securities also involve risks arising from the lack of an organized exchange trading environment. The Fund will limit its investment in over-the-counter options, together with other illiquid securities, to 10% of the Fund's total assets. Transactions in Futures Contracts, Options on Futures Contracts and options are subject to other risks as well. The Fund will not engage in transactions in futures contracts and options on futures for speculation, but only for hedging or other permissible risk management purposes. All of the Fund's futures contracts and options thereon will be traded on a U.S. commodity exchange or board of trade. The Fund will not engage in a futures or options transaction if, immediately thereafter, the sum of initial margin deposits on existing positions and premiums paid for options on futures would exceed 5% of the Fund's total assets. The potential loss from writing options on futures transactions is potentially unlimited and may exceed the amount of the premium received. The Fund will not purchase a call or put option if as a result the premium paid for the option together with premiums paid for all other options, interest rate futures contracts and options thereon then held by the Fund, exceed 10% of the Fund's total net assets. When the Fund purchases a futures contract or a call option on a futures contract, an amount of cash or U.S. Government securities equal to the market value of the futures contract will be deposited in a segregated account with the Fund's custodian to collateralize the position. The Fund's risks in entering into transactions in options, futures and forward contracts are set forth in greater detail in the Statement of Additional Information. 10 12 INVESTMENT RESTRICTIONS. The Fund has adopted certain fundamental investment restrictions which are described in detail in the Statement of Additional Information and may not be changed without shareholder approval. Among these restrictions, the Fund may not borrow money in an amount in excess of 33 1/3 of its total assets. If a percentage restriction, except a restriction regarding borrowing on investments or utilization of assets is followed at the time an investment is made or assets are utilized, a later change in percentage resulting from changes in the value of the Fund's portfolio securities will not be considered a violation of policy. THE FUND AND ITS MANAGEMENT - ------------------------------------------------------ GENERAL. The Fund is a series of John Hancock Series, Inc., (the "Corporation"), an open-end diversified management investment company organized as a Maryland corporation (see "Additional Information -- Organization"). The Corporation's Board of Directors supervises the management and affairs of the Fund. The officers of the Corporation are responsible for the Fund's daily business operations under the overall direction of the Directors. Information about each of the Directors and officers is set forth in the Statement of Additional Information. INVESTMENT ADVISER. John Hancock Advisers, Inc. is the Investment Adviser of the Fund and is compensated for its advisory services at varying annual rates of the Fund's average daily net assets: .65% on assets up to $200 million, .625% on assets of $200 million up to $500 million and .60% on assets of $500 million and over. The Investment Adviser manages the Fund's assets, provides administrative services and supervises the Fund's daily business affairs. Investment decisions are made by a committee with no one person being solely responsible for making recommendations to the committee. The Investment Adviser was organized in 1968 and is an indirect wholly owned subsidiary of John Hancock Mutual Life Insurance Company, a financial services company. The Investment Adviser provides the Fund and other investment companies in the John Hancock group of funds, with investment research and portfolio management services. John Hancock Funds distributes shares for all of the John Hancock mutual funds through selected broker/ dealers ("Selling Brokers"). Certain Fund officers are also officers of the Investment Adviser and John Hancock Funds. For the fiscal year ended October 31, 1994, the Fund paid an advisory fee of .64% of the Fund's average daily net assets to the Fund's former investment adviser. In addition, during the fiscal year ended October 31, 1994 the Fund reimbursed Transamerica Fund Management Company (the Fund's investment adviser until December 1994) ("TFMC"), pursuant to a separate Administrative Services Agreement, for actual expenses incurred in providing certain administrative services such as accounting and bookkeeping services, communications in response to shareholders inquiries and certain printing services for reports of the Fund. For the fiscal year ended October 31, 1994, administrative services fees paid to TFMC by the Fund amounted to 0.05% of its average daily net assets. The Administrative Services Agreement was terminated effective January 16, 1994. DISTRIBUTION PLANS. The Class A and Class B shareholders have adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under these Plans, the Fund will pay distribution and service fees at an aggregate annual rate of 0.25% of the Class A Share's average daily net assets and an aggregate annual rate of 1.00% of the Class B Shares average daily net assets. In each case, up to 0.25% is for service expenses and the remaining amount is for 11 13 distribution expenses. The distribution fees will be used to reimburse John Hancock Funds for its distribution expenses, including but not limited to: (i) initial and ongoing sales compensation to Selling Brokers and others (including affiliates of John Hancock Funds) engaged in the sale of Fund shares, (ii) marketing, promotional and overhead expenses incurred in connection with the distribution of shares of the Fund, (iii) unreimbursed distribution expenses under the Fund's prior distribution plans, (iv) distribution expenses incurred by other investment companies which sell all or substantially all of its assets to merge or otherwise engage in a reorganization transaction with the Fund and (v) with respect to Class B Shares only, interest expenses on unreimbursed distribution expenses. The service fees will be used to compensate Selling Brokers for providing personal and account maintenance services to shareholders. In the event John Hancock Funds is not fully reimbursed for payments made or expenses it incurs under the Class A Plan, these expenses will not be carried beyond twelve months from the date they were incurred. These unreimbursed expenses under the Class B Plan will be carried forward together with interest on the balance of these unreimbursed expenses. Applicable distribution fees, in an amount not exceeding the annual limitation, are accrued each day as an expense of the Class B Shares and reduce the net assets of the fund attributable to the Class B Shares. However, in accordance with generally accepted accounting principles, the Fund does not treat the amount of Distribution Fees exceeding the annual limitation as a liability of the Fund and does not reduce the current net assets of the Fund attributable to the Class B Shares by such amount, although it may become payable in the future, because the standards for accrual of a liability under these accounting principles have not been satisfied due to contingencies as to payment of such amount. Under the Class B Plan, unreimbursed distribution expenses as of October 31, 1994 amounted to $10,485,386 (4.35% of the Fund's Class B net assets at that date). In order to limit the higher ongoing costs associated with an investment in Class B Shares, the Fund implements arrangements under which Class B Shares are automatically exchanged, on a tax-free basis, for Class A Shares at the end of the eight-year period following the initial purchase of Class B Shares. (See "Shareholder Services -- Class B Shares Automatic Exchange".) For the period September 30, 1994 through October 31, 1994, payments made by the Fund under the former Class A Plan amounted to 0.02% of the average daily net assets attributable to Class A Shares. For the fiscal year ended October 31, 1994, total payments made by the Fund under the former Class B Plan amounted to 1.00% of its Class B average daily net assets. In addition, for the fiscal year ended October 31, 1994, the former Distributor received contingent deferred sales charges from redemptions of shares of the Fund in an amount equal (on an annual basis) to 0.29% of the Fund's Class B average daily net assets. EXPENSES OF THE FUND. The Fund's expenses, which are accrued daily, are deducted from total income before dividends are paid. These expenses, include, but are not limited to: fees paid to the Investment Adviser; directors' fees; taxes; distribution, brokerage and legal fees; custodian and auditing fees; administrative services fees; transfer agency fees and other expenses. For the period September 30, 1994 through October 31, 1994, total Class A expenses expressed as a percentage of the Fund's Class A average daily net assets amounted to 0.12%. For the fiscal year ended October 31, 1994, total Class B operations expenses (which includes interest expense) expressed as a percentage of the Fund's Class B average daily net assets amounted to 1.94%. PORTFOLIO TRANSACTIONS. The primary consideration in choosing brokerage firms to carry out the Fund's transactions is execution at the most favorable prices, taking into account the broker's professional ability and quality of service. Consideration may 12 14 also be given to the broker's sale of shares of the Fund. Pursuant to procedures determined by the Board of Directors, the Investment Adviser may place securities transactions with brokers affiliated with the Investment Adviser. These brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc. and Sutro & Company, Inc. which are indirectly owned by John Hancock Mutual Life Insurance Company, which in turn indirectly owns the Investment Adviser. (For a further discussion, see the Statement of Additional Information -- "Portfolio Transactions"). INFORMATION ABOUT SHARES OF THE FUND - ------------------------------------------------------ NET ASSET VALUE The net asset value of the Fund is computed once daily on each day that the New York Stock Exchange is open for business as of the close of trading (presently 4:00 p.m. New York time). The Fund will also compute its net asset value on other days if a purchase or redemption request is received on that day and there is a sufficient degree of trading in securities held by the Fund. Net asset value per share is calculated by dividing the market or fair value of all of the Fund's portfolio securities plus the value of its other assets (including dividends and interest received or accrued), less all liabilities (including accrued expenses but excluding capital) by the number of shares of the Fund outstanding. The Board of Directors has established procedures for the valuation of the Fund's securities, based in general on market or estimated value (see "Net Asset Value" in the Statement of Additional Information). Although the legal rights of Class A and Class B Shares will be identical, the different expenses borne by each class will result in different net asset values and dividends. The net asset value of Class B Shares will generally be lower than the net asset value of Class A Shares as a result of the larger distribution fee accrual with respect to Class B Shares. (However, Class B shareholders will generally receive more shares at the time of purchase.) It is expected, however, that the net asset value per share of the two classes will tend to converge immediately after the recording of dividends which will differ by approximately the amount of the distribution expense accrual differential between the classes. PURCHASE OF SHARES GENERAL. Shares of the Fund will be offered at a price equal to their net asset value (next determined following receipt of an order by The Shareholder Services Group (the Fund's Transfer Agent) or the investor's dealer) plus a sales charge which, at the option of the purchaser, may be imposed either at the time of purchase (the "initial sales charge alternative") as described below or on a contingent deferred basis (the "deferred sales charge alternative"), as described under "Redemption and Repurchase of Shares." Shares of the Fund are offered continuously for sale by John Hancock Funds and are available for purchase through eligible financial service firms such as securities broker/dealer firms and banks which have entered into sales agreements with John Hancock Funds. Dealers are responsible for transmitting orders promptly (orders transmitted to and received by the Transfer Agent prior to 4:00 p.m. New York time will receive that day's purchase price.) John Hancock Funds, at its expense, may provide additional promotional incentives or payments to dealers that sell shares of the Fund. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares of the Fund or other John Hancock mutual funds. You may purchase shares by mailing a check, made payable to the Fund (noting the existing account number), and if opening a new account a completed 13 15 application form, to the Transfer Agent either at the post office address shown on the back page of this Prospectus; or, if delivered by express mail, the street address: One American Express Plaza, Providence, Rhode Island 02903. The initial purchase must be at least $1,000 with subsequent investments of no less than $50. These minimum amounts are reduced for tax-advantaged retirement plans and accounts of participants in certain labor unions and other membership organizations to $250, initial and $25, subsequent. The minimum investment amounts are waived for tax-deferred retirement programs involving the submission of additional investments by means of group remittal statements subject to a $25 minimum amount. Programs providing for regular periodic investments, including a payroll deduction plan or investment by bank draft have also reduced minimum investment amounts. (See "Shareholder Services -- Automatic Investment Plan and Payroll Deduction Plans.") Certificates for shares will not be issued unless you so request in writing. The Fund's Board of Directors reserves the right to change or waive the minimum investment requirements and to reject any order for Purchase of Shares (including wire purchases) when in its judgement such rejection is in the Fund's best interest. FEDWIRE PURCHASES. You may make payment for initial and subsequent investments by federal funds wire. You should first notify Account Services (1-800-343-6840) of the new account request (if applicable) and the intended wire purchase. To assure proper credit, banks wiring federal funds should be instructed to include: (1) name of the Fund, (2) name of the shareholder (as registered exactly in the account), or if opening an account, the name and address in which the account is being registered and the taxpayer identification number of the investor (a completed application must be mailed to the Transfer Agent after completing the wire arrangement); and (3) shareholder account number. Federal funds may be wired to *: Boston Safe Deposit and Trust Company ("BSDT") ABA Routing Number: 011001234 Account Number: 159565 * Except during such times or holidays when BSDT is not open for business. ALTERNATIVE PURCHASE PLANS You can purchase shares of the Fund at a price equal to their net asset value per share, plus a sales charge. At your election, this charge may be imposed either at the time of the purchase (see "Initial Sales Charge Alternative -- Class A Shares") or on a contingent deferred basis (see "Deferred Sales Charge Alternative -- Class B Shares"). If you do not specify on your account application which class of shares you are purchasing, it will be assumed that you are investing in Class A Shares. CLASS A SHARES. If you elect to purchase Class A Shares, you will incur an initial sales charge unless the amount you purchase is $1 million or more. If you purchase $1 million or more of Class A Shares you will not be subject to an initial sales charge, but you will incur a sales charge if you redeem your shares within one year of purchase. Class A Shares are subject to ongoing distribution and service fees at a combined annual rate of up to .25% of the Fund's average daily net assets attributable to the Class A Shares. Certain purchases of Class A Shares qualify for reduced initial sales charges. See "Reduced Initial Sales Charge." CLASS B SHARES. You will not incur a sales charge when you purchase Class B Shares, but the shares are subject to a sales charge if you redeem them within six years of purchase (the "contingent deferred sales charge" or the "CDSC"). Class B 14 16 Shares are subject to ongoing distribution and service fees at a combined annual rate of up to 1.00% of the Fund's average daily net assets attributable to the Class B Shares. Investing in Class B Shares permits all of your dollars to work from the time you make your investment, but the higher ongoing distribution fee will cause these shares to have a higher expense ratio than that of Class A Shares. To the extent that any dividends are paid by the Fund, these higher expenses will also result in lower dividends than those paid on Class A Shares. FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE. The alternative purchase arrangement allows you to choose the most beneficial way to buy shares given the amount of your purchase, the length of time that you expect to hold your shares and other circumstances. You should consider whether, during the anticipated life of your Fund Investment, the accumulated fees on Class B Shares would be less than the initial sales charge and accumulated fees on Class A Shares purchased at the same time and to what extent this differential would be offset by the Class A Shares' lower expenses. To help you make this determination, the table under the caption "Fund Expenses" gives examples of the charges applicable to each class of shares. Class A Shares will normally be more beneficial if you qualify for a reduced sales charge. See "Reduced Initial Sales Charge." Class A Shares are subject to lower distribution and service fees and, accordingly, pay correspondingly higher dividends per share, to the extent any dividends are paid. However, because Initial Sales Charges are deducted at the time of purchase, you would not have all of your funds invested initially and, therefore, would initially own fewer shares. If you do not qualify for reduced initial sales charges and expect to maintain your investment for an extended period of time you might consider purchasing Class A Shares because the accumulated distribution and service charges on Class B Shares may exceed the initial sales charge and accumulated distribution and service charges on Class A Shares during the life of your investment. Alternatively, you might determine that it would be more advantageous to purchase Class B Shares in order to have all of your funds invested initially, although remaining subject to higher distribution fees and, for a six-year period, a CDSC. In the case of Class A Shares, distribution expenses that John Hancock Funds incurs in connection with the sale of the shares will be paid from the proceeds of the initial sales charge and the ongoing distribution and service fees. In the case of Class B Shares expenses will be paid from the proceeds of the ongoing distribution and service fees, as well as the CDSC incurred upon redemption within six years of purchase. The purpose and function of the Class B Shares' CDSC and ongoing CDSC distribution and service fees are the same as those of the Class A Shares' initial sales charge and ongoing distribution and service fees. Sales personnel distributing the Fund's shares may receive different compensation for selling each class of shares. Dividends, if any, on Class A and Class B Shares will be calculated in the same manner, at the same time and on the same day and will be in the same amount. However, each class will bear only its own distribution and service fees, and shareholder meeting expenses and incremental transfer agency costs. See "Dividends, Distributions and Taxes." 15 17 INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The public offering price of Class A Shares of the Fund is the current net asset value per share (next computed after receipt of an order by the Fund's Transfer Agent), plus a sales charge (a percentage of the offering price as set forth in the table below).
COMBINED REALLOWANCE REALLOWANCE SALES SALES AND SERVICE TO SELLING CHARGE AS A CHARGE AS A FEE AS A BROKER AS AMOUNT INVESTED PERCENTAGE PERCENTAGE OF PERCENTAGE A PERCENTAGE (INCLUDING AT OFFERING THE AMOUNT OF OFFERING OF OFFERING SALES CHARGE) PRICE INVESTED PRICE(+) PRICE(*) - ------------------------------- ----------- ------------- --------------- ------------ Less than $100,000............. 4.75% 4.99% 4.25% 4.01% $100,000 to $249,999........... 3.75% 3.90% 3.25% 3.01% $250,000 to $499,999........... 2.75% 2.83% 2.35% 2.11% $500,000 to $999,999........... 2.00% 2.04% 1.75% 1.51% $1,000,000 and over............ 0.00%(**) 0.00%(**) (***) 0.00%(***) - --------------- (*) Upon notice to broker-dealers with whom it has sales agreements ("Selling Brokers"), John Hancock Funds may reallow an amount up to the full applicable sales charge. A Selling Broker to whom substantially the entire sales charge is reallowed or who receives these incentives may be deemed to be an underwriter under the Securities Act of 1933. (**) No sales charge is payable at the time of purchase in Class A Shares of $1 million or more, but a contingent deferred sales charge may be imposed in the event of certain redemption transactions within one year of purchase. See "Purchases of $1 Million or More." (***) John Hancock Funds may pay a commission and first year's service fee (as described in (+) below) to Selling Brokers who initiate and are responsible for purchases of $1 million or more in aggregate. See "Purchases of $1 Million or More" below. (+) At the time of sale, John Hancock Funds pays to Selling Brokers the first year's service fee in advance, in an amount equal to 0.25% of the next assets invested in the Fund and thereafter pays the service fee periodically in arrears in an amount up to 0.25% of the Fund's average annual net assets. Selling Brokers receive the fee as compensation for providing personal and account maintenance services to shareholders.
Until March 31, 1995, John Hancock Funds is continuing a sales incentive program in which non-cash concessions in the form of an all-expense-paid trip to a North American resort location will be awarded to participating broker/dealers and financial institutions achieving certain specified sales levels in shares of certain funds formerly managed by TFMC upon which (1) an initial sales charge has been paid or (2) a charge may be applicable upon redemption and who had sales agreements with the Fund's former distributor. Participation in the incentive program is entirely optional on the part of the broker/dealers and financial institutions. Copies of the incentive program which contain more complete information about the terms and conditions of the program, including qualifying levels and specific awards and eligible funds, may be obtained by investment representatives by contacting John Hancock Funds. John Hancock Funds will make these incentive payments out of its own resources. Other than distribution fees, the Funds do not bear distribution expenses. John Hancock Funds will pay certain affiliated Selling Brokers at an annual rate of up to 0.05% of the daily net assets of accounts attributable to these brokers. 16 18 Purchases of $1 Million or More. On purchases by a single purchaser aggregating $1 million or more, John Hancock Funds will pay securities dealers an amount on a cumulative basis equal to 1% of the first $3 million, plus .5 of 1% of the next $2 million, plus .25 of 1% on amounts over $5 million. With respect to shares purchased at the $1 million plus breakpoint, a contingent deferred sales charge ("CDSC") will be imposed on the proceeds of the redemption of certain shares so purchased if they are redeemed within 12 months of the end of the calendar month of their purchase, in an amount equal to 1% of the lesser of (a) the net asset value of the shares at the time of purchase or (b) the net asset value of the shares at the time of redemption ("CDSC Shares"). The CDSC would be deducted from the redemption proceeds otherwise payable to the shareholder and would be retained by the John Hancock Funds. In addition, no CDSC will be imposed when a shareholder redeems (a) CDSC shares acquired through reinvestment of income dividends or capital gains distributions; and (b) shares acquired by exchange from any mutual fund sold with an initial sales charge and distributed by the John Hancock Funds. The CDSC does not apply to purchases at net asset value described under "Waiver of Initial Sales Charge" and will be waived in the case of redemptions of shares in connection with (i) distributions to participants or beneficiaries of certain qualified retirement plans, and returns of excess contributions made to these plans, and (ii) involuntary redemption of shares if the aggregate net asset value of shares held in the account is less than the required minimum. In determining whether a CDSC is payable on any redemption, the Fund will first redeem shares not subject to any charge. Although any CDSC shares being exchanged are not subject to any charge, they will be subject to the applicable CDSC when the acquired shares are eventually redeemed. For purposes of calculating the CDSC on these redemptions, the original purchase date of the initial fund investment will be used in lieu of the date the redeemed shares were acquired by exchange. Reduced Initial Sales Charges. If you choose the initial sales charge alternative, you are entitled to pay reduced sales charges shown in the above table through several available purchase plans: Concurrent Purchases, Rights of Accumulation, Statement of Intention and Group Purchases. You and your immediate family may combine Concurrent Purchases of Class A Shares of the Fund and Class A Shares (and shares subject to front-end sales charges) of certain other mutual funds which are managed by the Investment Adviser ("other John Hancock funds" as defined under "Shareholders Services -- Exchange Privilege"), for purposes of qualifying for, and determining, a reduced sales charge provided that the purchases are made through a single dealer and any purchase amounts satisfy the minimum investment amount of the respective Fund. Further information about these purchase plans is set forth under "Purchase of Shares" in the Statement of Additional Information (see also Statement of Intention and Rights of Accumulation in the Account Application and its Terms and Conditions in the back of the Prospectus). Waiver of Initial Sales Charges. Class A Shares of the Fund may be purchased without paying an initial sales charge by the following: - - A Director or Officer of the Corporation; a director or officer of the Investment Adviser and its affiliates or Selling Brokers; employees or sales representatives of any of the foregoing; retired officers, employees or directors of any of the foregoing; a member of the immediate family of any of the foregoing; or any Fund, pension, profit sharing or other benefit plan for the individuals described above. - - Any state, county, city or any instrumentality, department, authority or agency of these entities (an "eligible governmental authority") which is prohibited by applicable investment laws from paying a sales charge or commission when it purchases shares of any registered investment management company. 17 19 - - A broker, dealer or registered investment adviser that has entered into an agreement with John Hancock Funds providing specifically for the use of Fund shares in fee-based investment products made available to their clients. - - A former participant in an employee benefit plan with John Hancock Mutual Funds, when he/she withdraws from his/her plan distributions directly to the Funds. - - Class A Shares of the Funds may also be purchased without an initial sales charge in connection with certain liquidation, merger and acquisition transactions involving other investment companies or personal holding companies. - - Existing full service clients of John Hancock Mutual Life Insurance Company group annuity contract holders as of September 1, 1994, may purchase Class A Shares with no initial sales charge, but if the shares are redeemed within 12 months after the end of the calendar year in which the purchase was made, a contingent deferred sales charge will be imposed at the rate for Class A Shares described above in the section "Purchases of $1 Million or More." See the Statement of Additional Information, "Purchase of Shares -- Purchase at Net Asset Value" for a more complete description of investors eligible to purchase shares at net asset value. REDEMPTION AND REPURCHASE OF SHARES GENERAL. You may redeem shares of the Fund in any amount at any time at the net asset value per share next determined after the redemption request is received in proper form by the Transfer Agent. See "Net Asset Value." In certain cases, however, redemption proceeds from the Class B Shares will be reduced by the amount of any applicable contingent deferred sales charge (see "Class B Shares -- Contingent Deferred Sales Charge" below.) If you hold both Class A and Class B Shares of the Fund, any request for redemption must specify whether Class A or Class B Shares are to be redeemed. Failure to specify which class, or insufficient shares of the class specified, will result in the redemption request being delayed until the Transfer Agent receives further written instructions from you. Payment proceeds will be mailed within seven (7) days following receipt of all required documents. However, in the case of redemptions of shares which were recently purchased by check, the payment of the redemption proceeds may be delayed for a period of up to 15 days or more, only until the check used to purchase the shares has been cleared for payment by your bank. The Fund will not forward proceeds by FedWire Redemption (described below), and the redemption will not be effective, for a period of 15 days after receipt of the purchase check. This delay in payment of redemption proceeds can be avoided if shares are purchased by means of a certified check or federal funds wire. Under unusual circumstances, the Fund may suspend redemptions or postpone payment for up to seven days or more, as permitted by securities laws. REDEMPTION BY WRITTEN REQUEST. To redeem shares, send a written request or "letter of instruction" specifying the name of the Fund, the dollar amount or number of shares to be redeemed, and shareholder's name and account number to: The Shareholder Services Group, P.O. Box 9656, Providence, Rhode Island 02940-9656. A request for redemption will be processed after receipt by the Transfer Agent of all required documents in proper order including any issued stock certificates and the letter of instruction signed by each account owner exactly as the account is registered. If a redemption of $50,000 or more is to be made (or if the shareholder's address or bank account to which proceeds are to be mailed has changed in the prior 30 days) signatures must be guaranteed subject to the provisions under Rule 17Ad-15 of the Securities Exchange Act of 1934 ("SEA Rule") without 18 20 restriction, condition or qualification by an authorized signatory of a commercial bank, trust company, savings bank, savings and loan association, or a member firm of a domestic stock exchange or the National Association of Securities Dealers, or any other "eligible guarantor institution" as defined in the SEA Rule. If shares are held in the name of a corporation, trust, estate, custodianship, guardianship, partnership, pension and profit sharing plan (or other types of retirement plans), additional documentation may be necessary. TELEPHONE REDEMPTION. Shares of the Fund for which no share certificates have been issued may be redeemed in amounts of $50,000 or less by telephone request, provided that selection has been made in the Account Application or a telephone authorization form is on file with the Transfer Agent. Proceeds from telephone redemptions will be mailed to your address of record. The Fund and/or the Transfer Agent reserve the right to refuse telephone redemption requests at any time. Telephone authorization forms are available from the Fund upon request. See "Telephone Privileges" for further information concerning authenticity of instructions received by telephone. Information concerning redemption can be obtained by contacting Account Services at 1-800-343-6840. FEDWIRE REDEMPTION. You may redeem shares for which no certificates have been issued and have redemption proceeds of at least $50,000 wired by federal funds transfer. Requests for FedWire redemption may be made by wire communication, telephone or letter, provided that you have selected this option in the Account Application. Proceeds of shares redeemed at the net asset value next determined after receipt of request are transmitted the following business day by wire to your bank account designated in the Account Application form (bank must be a member of the Federal Reserve System). Delivery of the proceeds of a wire redemption request of $250,000 or more may be delayed by the Fund for up to seven days if the Investment Adviser deems it appropriate under the then current market conditions. The Fund cannot be responsible for the efficiency of the federal wire system or your dealer or bank. Redemption of shares purchased by check are subject to certain limitations and restrictions described below. The Fund may modify this Privilege at any time or charge a service fee upon notice to shareholders; no such fee currently is contemplated. REPURCHASE. John Hancock Funds is authorized to repurchase any shares presented by telephone or telegraph to John Hancock Funds by certain securities dealers selected by John Hancock Funds in its sole discretion. The offer to repurchase may be suspended by John Hancock Funds at any time. Repurchase orders received by dealers prior to the closing of the NYSE (4:00 p.m. New York time) on any business day will be priced at the net asset value per share that is based on that day's close, provided that they are time-stamped by the dealer no later than 4:00 p.m. New York time on such day. Dealers may charge for their services in connection with repurchases, but neither the Fund nor John Hancock Funds makes any charge. INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem your account at any time the total net asset value of the account falls below $500 ($100 for a tax sheltered retirement plan) as a result of a redemption. You will be notified in writing that the value of your account is less than $500 as a result of a redemption and will be allowed 60 days to make additional investments before the redemption is processed. No contingent deferred sales charge will be imposed on an involuntary redemption of shares. REDEMPTION IN KIND. Although it is the Fund's present policy to make payment of redemption proceeds in cash, if the Fund's Board of Directors determines that a material adverse effect would otherwise be experienced by remaining investors, redemption proceeds may be paid in whole or in part by a distribution in kind of securities from the portfolio of the Fund subject to the limitation that 19 21 pursuant to an election under Rule 18f-1 under the Investment Company Act of 1940, the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund during any 90-day period for any one account. In such circumstances, you might be required to bear transaction costs to dispose of the securities distributed in kind. REINSTATEMENT PRIVILEGE. If you have redeemed shares of the Fund, or have had shares repurchased by the Fund, you may, within 60 days after the date the shares were redeemed or repurchased, reinvest (reinstate) all or a portion of the proceeds of the redemption or repurchase in shares of the Fund or in shares of "other John Hancock funds" (as defined under "Shareholder Services -- Exchange Privilege") at the next determined net asset value of the shares being acquired, so long as the Transfer Agent is in receipt of a written request for reinstatement and appropriate payment. Shares being acquired pursuant to the reinstatement privilege must be of the identical class as those which were redeemed within the prior 60 days. The CDSC will not be applicable to Class B Shares acquired in a reinstatement, although it will be assessed in connection with the initial redemption or repurchase. This privilege may be exercised only once as to any particular shares of the Fund or other John Hancock funds. Exercise of the Reinstatement Privilege does not alter the federal income tax treatment of any capital gains realized on the redemption of shares of the Fund. If a loss is realized on the redemption and reinvestment is made in shares of the Fund within 30 days, it would not be recognized as a loss for income tax purposes. You are advised to consult your tax advisers as to all possible tax consequences related to the exercise of the reinstatement privilege. The reinstatement privilege may be terminated or modified at any time. CLASS B SHARES -- CONTINGENT DEFERRED SALES CHARGE. Class B Shares redeemed within six years of purchase will be subject to a CDSC at the rates set forth below. This charge will be assessed on an amount equal to the lesser of the current market value or the original purchase cost of the shares being redeemed. Accordingly, the CDSC will not be assessed on increases in account value above the initial purchase price, including shares derived from dividend reinvestment. In determining whether a CDSC applies to a redemption, the calculation will be determined in a manner that results in the lowest possible rate being charged. It will be assumed that the redemption comes first from shares which have been held beyond the six-year CDSC redemption period or those that were acquired through dividend reinvestment, and next from the shares that have been held the longest during the six-year period. Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses all or part of them to defray its expenses related to providing the Fund with distribution services in connection with the sale of Class B Shares, such as compensating Selling Brokers for selling these shares. The combination of the CDSC and the distribution and service fees makes it possible for the Fund to sell Class B Shares without deducting a sales charge at the time of the purchase. The amount of the CDSC, if any, will vary depending on the number of years from the time the Class B Shares were purchased until the time they were redeemed. Solely for purposes of determining the holding period, any payments you make during the month will be aggregated and deemed to have been made on the last day of the month. 20 22
YEAR IN WHICH CLASS B SHARES CONTINGENT DEFERRED SALES REDEEMED CHARGE AS A PERCENTAGE OF FOLLOWING PURCHASE DOLLAR AMOUNT SUBJECT TO CDSC ---------------- ---------------------------- First........................................ 5.0% Second....................................... 4.0% Third........................................ 3.0% Fourth....................................... 3.0% Fifth........................................ 2.0% Sixth........................................ 1.0% Seventh and thereafter....................... None
A commission equal to 3.75% of the amount invested and a first year's service fee equal to 0.25% of the amount invested are paid to Selling Brokers. The initial service fee is paid in advance at the time of sale for the provision of personal and account maintenance services to shareholders during the twelve months following the sale, and thereafter the service fee is paid in arrears. If a partial redemption (or exchange) that you make results in a remaining account balance of less than the amount of the CDSC owed at the time of the redemption (or exchange) on the shares remaining in the account, the Fund reserves the right to require you to redeem (or exchange) all of the shares in the account. The Fund does not believe that this constitutes an involuntary redemption. Waiver of CDSC. The contingent deferred sales charge will be waived (a) in the event of the death or total disability (as evidenced by a determination by the Federal Social Security Administration) of the shareholder (including a registered joint owner) and (b) for certain distributions from deferred compensation retirement plans. No contingent deferred sales charge will be imposed where shares are redeemed in connection with a merger or reorganization of the Fund into another investment company which imposes a contingent deferred sales charge and the investor receives shares of the investment company in the transaction. In these cases any applicable contingent deferred sales charge will be imposed when an investor redeems shares acquired in such a transaction. In addition, the Fund will waive the CDSC on redemptions made (1) by shareholders (including retirement plan account holders) having accounts as Systematic Withdrawal Plans with payments of an annual amount less than or equal to 12% of the value of the account (at the time of authorization) and available on a monthly, quarterly, semi-annual or yearly basis; and (2) as distributions from employer sponsored retirement plans in connection with the participant's separation of service at age 55 or over from his or her employer. The above waiver of CDSC are subject to change upon 60 days written notice to shareholders. To be eligible for the waiver, the account holder or the dealer must notify John Hancock Funds of eligibility at the time of redemption request. (See the Statement of Additional Information, "Redemption and Repurchase of Shares" for a more complete description of the Fund's shareholders on whose shares a contingent deferred sales charge will not be imposed.) SHAREHOLDER SERVICES - ------------------------------------------------------ The Fund offers you the following services and privileges: (1) Reinvestment of Dividends and Distributions at net asset value; (2) Retirement Plans; (3) Automatic Investment Plan; (4) Systematic Withdrawal Plan; (5) Exchange Privilege; and (6) Class B Automatic Exchange; (7) Payroll Deduction Plans; (8) Systematic Exchange Program and (9) Cross-Reinvestment Service. AUTOMATIC INVESTMENT PLAN (AIP) permits you to purchase additional shares on a monthly basis with funds transferred from your bank account subject to an initial and subsequent investment minimum amount of $25. For further information, see the AIP section in the accompanying Account Application. EXCHANGE PRIVILEGE permits you to exchange your Class A or Class B Shares of the Fund for shares of "other John Hancock funds" (i.e., funds which formerly had investment advisory contracts with 21 23 TFMC) on the basis of the relative net asset value per share subject to the minimum investment requirements of these funds. Class A Shares may be exchanged for other John Hancock funds' Class A Shares. These other Class A Shares may also be exchanged for Class A Shares of the Fund, provided that any sales charge differential (not previously paid) is paid by shareholder. Class B Shares may be exchanged without imposition of the Fund's CDSC for Class B Shares or shares of other funds that are subject to a CDSC ("CDSC Funds".) Exchanges between CDSC Funds having different CDSC schedules will retain their respective original CDSC schedule. Any applicable contingent deferred sales charge payable upon the redemption of Class B Shares exchanged will be calculated from the date of the initial purchase. Class B Shares may not be exchanged into money market funds other than John Hancock Money Market Fund B. See Account Application or the "Exchange Privilege" in the Statement of Additional Information. Exchanges may be accomplished by telephone request (see below) or by a written request from the account owner(s). Forms for both written and telephone exchanges are available from the Fund upon request. Share certificates, if issued, must be returned to the Fund prior to any exchange of such shares. There is currently no exchange fee for an exchange; however, dealers or other firms may charge for their services in expediting exchange transactions. In addition, the Fund reserves the right to impose an exchange fee. Exchanges are, in effect, a redemption and purchase of shares in the respective funds. As such, the limitations and restrictions applicable generally to purchases and redemptions apply, and any exchange constitutes a sale upon which a gain or loss will be realized for federal income tax purposes. THIS EXCHANGE PRIVILEGE IS NOT AVAILABLE IN ANY JURISDICTION WHERE SHARES OF THE OTHER JOHN HANCOCK FUND BEING ACQUIRED ARE NOT QUALIFIED FOR SALE. EACH JOHN HANCOCK MUTUAL FUND RESERVES THE RIGHT TO REJECT ANY ORDER TO ACQUIRE ITS SHARES THROUGH EXCHANGE, OR OTHERWISE TO MODIFY, RESTRICT OR TERMINATE THE EXCHANGE PRIVILEGE, AT ANY TIME AFTER 60 DAYS' NOTICE TO SHAREHOLDERS. Because other John Hancock funds have investment objectives and policies which may differ from those of the Fund, you should carefully review the prospectus of the other John Hancock fund before effecting an exchange. Shares of the Fund for which no share certificates have been issued may be exchanged by telephone request, provided you have selected this option in the Account Application or have a telephone authorization form on file. See "Telephone Privileges" for important information about transactions by telephone. Telephone requests may be made by contacting Investor Services at 1-800-343-6840. CLASS B AUTOMATIC EXCHANGE is a tax-free exchange of Class B Shares for Class A Shares of the same fund that occurs at the end of the calendar quarter eight years after the original purchase date of the Class B Shares, the "Automatic Exchange Date." At the Automatic Exchange Date the Class B Shares will be exchanged for an equal dollar value of Class A Shares (which may or may not be the same number of shares). The Class A Shares have lower expenses than Class B Shares but are otherwise substantially identical. Class A Shares, therefore, will have a slightly higher total return than Class B Shares and may have a slightly higher dividend as a result. If you have made more than one purchase, you may hold both Class B Shares and Class A Shares at the same time. The Class B Automatic Exchange is available to all Class B shareholders and requires no action whatsoever on your part. If you want to decline taking advantage of this privilege, however, the Fund must be notified in writing three months prior to the Automatic Exchange Date. PAYROLL DEDUCTION PLANS are available for employer sponsored plans, where regular, periodic purchases are made into the employees' accounts through the submission of the John Hancock Group Investment List. The minimum initial and subsequent purchase 22 24 amounts are $250 for the Plan and $25 per fund-account in the Plan. For further information on how to establish a John Hancock Group Investment List, call Account Services at 1-800-343-6840. SYSTEMATIC EXCHANGE PROGRAM allows you to exchange a specified dollar amount from an existing account in any John Hancock Fund (including the Fund), into any other John Hancock Fund (including the Fund) subject to the requirements and limitations of the Exchange Privilege as noted above. At the time this option is selected, you must have a minimum balance of $5,000 in the account from which the exchange is to be made and must designate a monthly exchange amount of no less than $25 for a specific Fund. The minimum initial investment amount (established by the Fund being exchanged into) will be waived for shareholders utilizing this Program. Note that automated dollar cost averaging methods do not assure a profit nor protect against loss in declining markets. You should consult your broker or financial adviser to determine whether this Program is suitable for your investment needs. In particular, consideration should be given to the type of John Hancock fund from which your exchanges will be made (i.e., its investment objective, policies and risks, including the potential for fluctuation in its net asset value). The Fund currently imposes no service fee for participation in the Program but reserves the right to do so. You may change the exchange amounts or the selection of Funds or terminate your participation in the Program at any time by directing the Transfer Agent in writing. For further information regarding this Program, see the Statement of Additional Information (which may be obtained by contacting Account Services at 1-800-343-6840). CROSS-REINVESTMENT SERVICE. Shares of a particular class of the Fund may be purchased and/or redeemed without imposition of any applicable sales charge through the automatic reinvestment of dividend and capital gain distributions from the same class of any other John Hancock fund. These proceeds from other John Hancock funds will be invested at the next determined net asset value following receipt of the proceeds (i.e., reinvestment date which is normally the payable date of such other John Hancock fund) by the Fund's Transfer Agent. In addition, you may select in the Account Application to have you Fund distributions automatically invested without imposition of a sales charge in shares of the same class of another John Hancock fund. RETIREMENT PLANS. The Fund offers a variety of tax sheltered retirement plans. Shares of the Fund are available for purchase by qualified plans which have been approved by the Internal Revenue Service and include Individual Retirement Accounts (including SEP/IRAs), Profit Sharing and Money Purchase Plans, 403(b) Plans and 401(k) Plans. Plan support services are available. For details, please contact the John Hancock Funds Retirement Plans Department by calling 1-800-472-3863. Further information regarding the above services and privileges is set forth in the Statement of Additional Information. TELEPHONE PRIVILEGES - ------------------------------------------------------ Neither the Fund, Transfer Agent or the Investment Adviser will be responsible for the authenticity of telephone instructions. You should be aware that transactions authorized by telephone instructions reasonably believed to be authentic by the Fund can subject you to the risk of loss if such telephone instructions are subsequently found to be unauthentic. Privileges associated with telephone exchange, telephone redemption, and FedWire redemption may be selected in the Fund's Account Application. The privileges associated with FedWire redemption will not be established unless specifically instructed. The privileges associated with telephone exchange 23 25 and/or telephone redemption will automatically be accorded to your account unless you specifically decline this privilege in the Account Application. If establishing a new account through a confirmed trade, your securities dealer should provide a completed new account application or submit specific written instructions requesting specific account privileges at the time of trade settlement. The Fund will employ reasonable procedures to confirm that the instructions as to either exchange, redemption or FedWire redemptions communicated by telephone are genuine, and that absent such procedures, the Fund or its agents may be liable for any losses due to unauthorized or fraudulent instructions. These procedures include: 1. Recording all calls for telephone transactions (each transaction is thereby indexed by the time of the call placed); 2. Requesting the caller's name and phone number as verification of the origin of the telephone call; 3. Requesting the name of the Fund and your account number, the name(s) in which the account is registered and the tax identification number listed on the account; and 4. Mailing written confirmation (statements) of each transaction on the following business day to the registration address and the broker/dealer of record. DIVIDENDS, DISTRIBUTIONS AND TAX STATUS - ------------------------------------------------------ DIVIDENDS AND CAPITAL GAINS. The Fund declares dividends daily and pays dividends monthly which are substantially equal to all of its net investment income (i.e., non-capital gain income from its investments less expenses). In addition, the Fund may distribute any net short-term or long-term capital gains realized from the sale of its portfolio securities and transactions involving options and futures during the fiscal year. Short-term capital gains, if any, will normally be distributed monthly and net realized capital gains, if any, will be distributed at least annually. The excess of net long-term capital gains over net short-term capital losses including losses carried forward from prior years represents net realized capital gains. In addition, the Fund may make "supplemental dividends or distributions" to comply with applicable income and excise tax laws. When a dividend or capital gains distribution is paid, the net asset value per share is reduced by the amount of the payment. All dividends and any capital gains distribution are reinvested automatically in additional shares on the reinvestment date, unless you indicate in writing to the Transfer Agent or select in the Account Application to receive proceeds in cash or have them reinvested in shares of the same class of another John Hancock fund (without imposition of a sales charge) at the next determined net asset value following receipt of the proceeds (i.e., the reinvestment date.) See "Cross -- Reinvestment Service." TAXES. Because the Fund intends to distribute its net investment income and net realized capital gains to its shareholders, and to adhere to other applicable requirements, it is not expected that the Fund will be required to pay any federal income taxes on amounts paid by it as dividends and distributions. However, you normally will have to pay federal income taxes and any applicable state income taxes on the dividends and capital gains distributions you receive (either as cash or reinvested shares) from the Fund (unless you are exempt from taxation or entitled to tax deferral.) After the end of each calendar year, you will receive a statement indicating the amount and federal tax status of all distributions received during that year. This includes information on the portion taxable as ordinary income and the portion taxable as long-term capital gains. 24 26 Distributions from the Fund's net investment income and any net short-term capital gains are taxable to you as ordinary income. Distributions derived from net long-term capital gains, which are designated by the Fund as capital gains dividends are taxable to you as long-term capital gains, regardless of the length of time you have held the shares. The Fund is required to withhold 31% of taxable dividends, distributions and redemptions paid to you if you have not complied with IRS taxpayer identification requirements. To avoid this "backup" withholding requirement, you may furnish the Transfer Agent with your taxpayer identification number and required certifications by completing the Account Application or IRS form W9. (See "Backup Withholding" in the back of the Prospectus). You should consult your own tax adviser concerning tax consequences of an investment in the Fund. Additional Information - ------------------------------------------------------ PERFORMANCE INFORMATION. From time to time the Fund may advertise its yield and total return which are computed separately for Class A and Class B Shares and in accordance with applicable regulatory requirements. Yield is computed by annualizing the result of dividing the net investment income per share over a 30-day period by the maximum offering price per share on the last day of the period. The Fund may also advertise in supplemental sales literature a distribution rate which is computed in the same manner as yield except that actual income dividends declared per share during the applicable period are substituted for net investment income per share. Yield and distribution rate quotations of Class B Shares do not reflect any contingent deferred sales charge and, if included, would be reflected in a lower rate quotation. The distribution rate is computed separately for Class A and Class B Shares. The cumulative total return shows the dollar or percentage change in value over a specified period of time (i.e., 1, 5 or 10 years or since the Fund's inception), assuming reinvestment of all dividends and distributions on the reinvestment dates and payment of maximum sales charges applicable to purchases and redemptions. Average annual total return shows the Fund's cumulative return divided over the number of years included in the given period ("standardized performance"). Total returns may, in conjunction with standardized performance, be calculated for other specified periods and/or excluding the effect of sales charges (which if included, would reduce the performance quoted). Both the yield and total return are based on historical earnings and are not indicative of future performance. The Fund will include performance data for both Class A and Class B Shares in any achievement or information including performance data of the Fund. The Statement of Additional Information contains more detailed information about the calculation of performance. The Fund also may advertise its performance relative to certain performance rankings, ratings and indexes compiled by independent organizations (such as Lipper Analytical Services, Value Line and Morningstar, Inc.). In addition, the Fund may use comparative performance information from certain industry research materials or published in various periodicals. The Statement of Additional Information sets forth under "Performance Information" a list of periodicals, indexes, etc. which the Fund may use in its advertisements. ORGANIZATION. The Fund operates as one series of the Corporation. The Corporation was organized as a Maryland Corporation on June 22, 1987. In December, 1994, in connection with the acquisition of the Corporation's previous investment adviser, Transamerica Fund Management Company, the Corporation's name was changed from Transamerica Series, Inc. to John Hancock Series Inc. and the Fund's name was changed from Transamerica Government Income Fund to John Hancock Govern- 25 27 ment Income Fund. All shares of common stock of the Corporation, $0.01 par value per share, have equal voting rights and have no preemptive or conversion rights. Both Class A and Class B shares represent an interest in the same assets of the Fund and are identical in all respects except that each class bears different distribution expenses and has exclusive voting rights with respect to its distribution plan. Shares of the Fund issued are fully paid, nonassessable, fully transferable and redeemable at the option of the holder. The Fund is not required to hold annual shareholder meetings except when required by federal or state law. Under certain circumstances, shareholders of the Fund have the right, and available procedures, to call a meeting of shareholders for any proper purpose. At the written request of the holders of at least 10% of the outstanding shares of the Corporation, the Corporation will call a meeting for the purpose of voting on the removal of one or more Directors. The Fund will assist shareholders with any communications regarding such meetings including shareholder proposals. SHAREHOLDER INQUIRIES. All inquiries regarding the Fund including questions concerning share ownership, dividends, transfer of ownership or share redemption, should be directed to the Fund at the telephone number or address on the cover page of this Prospectus. CUSTODIAN. Investors Bank & Trust Company, 34 Federal Street, Boston, Massachusetts 02110, is the Custodian for the Fund. TRANSFER AGENT. Transfer and dividend disbursing agent functions are performed by The Shareholder Services Group ("TSSG"), One American Express Plaza, Providence, Rhode Island 02903. INDEPENDENT AUDITORS. Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116, has been selected as the independent auditors of the Fund. 26 28 APPENDIX A DESCRIPTION OF DERIVATIVE SECURITIES AND ASSET-BACKED SECURITIES Set forth below is a description of the derivative securities and asset-backed securities in which the Fund may invest. The Fund may invest in other similar types of derivative securities and asset-backed securities, including those which may be developed in the future, without shareholder approval. CMOS, REMICS AND MULTI-CLASS PASS THROUGH SECURITIES The Fund may also invest in real estate mortgage investment conduits (REMICs), collateralized mortgage obligations (CMOs) and multi-class pass-through securities. CMOs are obligations issued by special purpose trusts secured by mortgages. REMICs own mortgages and elect REMIC status under the Internal Revenue Code and are similar to CMOs in that they issue multiple classes of securities. Multi-class pass-through securities are similar to CMOs in that they are generally divided into several classes; however, they represent equity interests in the pool of mortgage loans typically held in a trust (unless indicated otherwise all references to CMOs include REMICs and multiclass pass through securities). Government CMOs are issued by a U.S. Government agency or instrumentality and private CMOs are issued by private, nongovernment corporations such as commercial banks, mortgage bankers or other financial institutions. CMOs are issued in a number of classes or "tranches" with different maturities. The classes or tranches are retired in sequence as the underlying mortgages are repaid. Prepayment may shorten the stated maturity of the obligation and can result in a loss of premium, if any has been paid. Certain of these securities may have variable or floating interest rates and others may be stripped (securities which provide only the principal or interest feature of the underlying security). As part of the process of creating more predictable cash flows on most of the tranches in a series of CMOs, one or more tranches generally must be created that absorb most of the volatility in the cash flows on the underlying mortgage assets. The yields on these more volatile tranches are generally higher than prevailing market yields on government asset backed securities with similar average lives. Because of the uncertainty of the cash flows on these tranches, and the sensitivity thereof to changes in prepayment rates on the underlying mortgage assets, the market prices of and yield on these tranches tend to be highly volatile. CMOs, REMICs and multiclass pass through securities issued by private entities are not considered U.S. Government securities for purposes of the investment policies of the Fund and may be purchased only if they are rated at the time of purchase in the two highest grades by either Moody's or S & P. Privately issued securities which have underlying assets consisting of conventional mortgage loans or whole loans are not guaranteed by an entity having the credit status of a U.S. Government agency. Such securities are generally structured with one or more types of credit enhancement such as guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties so that in the event of a default on an underlying mortgage no loss would be borne until all credit enhancement protecting such security is exhausted. ZERO COUPON BONDS AND OTHER STRIPPED SECURITIES The Fund may also invest in the interest only or principal only components of debt securities in which the Fund is permitted to invest. Zero coupon Treasury securities are (i) U.S. Treasury bills, and both notes and bonds which have been stripped of their unmatured interest coupons and receipts or (ii) certificates representing interest in such stripped obligations. A zero coupon security pays no interest in cash to its holder during its life although interest is accrued for federal income tax purposes. Its value to an investor consists of 27 29 the difference between its face value at the time of maturity and the price for which it was acquired, which is generally an amount significantly less than its face value (sometimes referred to as a "deep discount" price). Investing in "zero coupon" Treasury securities may help to preserve capital during periods of declining interest rates. For example, if interest rates decline, GNMA Certificates owned by the Fund which were purchased at greater than par are more likely to be prepaid, which would cause a loss of principal. In anticipation of this, the Fund might purchase zero coupon Treasury securities, the value of which would be expected to increase when interest rates decline. Zero coupon Treasury securities do not entitle the holder to any periodic payments of interest prior to maturity. Accordingly, such securities usually trade at a deep discount from their face or par value and will be subject to greater fluctuations of market value in response to changing interest rates than debt obligations of comparable maturities which make periodic distributions of interest. On the other hand, because there are not periodic interest payments to be reinvested prior to maturity, zero coupon securities eliminate the reinvestment risk and lock in a rate of return to maturity. Current federal tax law requires that a holder (such as the Fund) of a zero coupon security accrue a portion of the discount at which the security was purchased as income each year even though the Fund received no interest payment in cash on the security during the year. Stripped mortgage-related and mortgage-backed securities (hereinafter referred to as "Stripped Mortgage Securities") are derivative multiclass mortgage securities. Stripped Mortgage Securities may be issued by agencies or instrumentalities of the U.S. Government, or by private originators of, or investors in, mortgage loans, including mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Stripped Mortgage Securities are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of Stripped Mortgage Securities will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the securities' yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the fund may fail to fully recoup its initial investment in an IO, even if the IO is rated AAA or Aaa. Furthermore, if the underlying mortgage assets experience slower than anticipated prepayments of principal, the yield of a PO will be affected more severely than would be the case with a traditional mortgage-backed security. IOs and POs have exhibited large price changes in response to changes in interest rates and are considered to be volatile in nature. In addition, if any stripped mortgage security issued by the U.S. Government or its agencies and instrumentalities is determined to be illiquid under guidelines established by the Board of Directors, the Fund will limit its investment in such instruments together with all non-government issued stripped mortgage securities and other illiquid instruments to not more than 10% of its total assets. ASSET-BACKED SECURITIES The Fund may invest in securities that represent individual interests in pools of consumer loans and trade receivables similar in structure to mortgage-backed securities. The assets are securitized either in a pass-through structure (similar to a mortgage pass-through structure) or in a pay-through structure (similar to the CMO structure). Although the collateral supporting asset-backed securities generally is of a shorter maturity 28 30 than mortgage loans and historically has been less likely to experience substantial prepayments, no assurance can be given as to the actual maturity of an asset-backed security because prepayments of principal may be made at any time. Payments of principal and interest typically supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guarantee by another entity or having a priority to certain of the borrower's other securities. The degree of credit enhancement varies, and generally applies to only a fraction of the asset-backed security's par value until exhausted. If the credit enhancement of an asset-backed security held by the Fund has been exhausted, and if any required payments of principal and interest are not made with respect to the underlying loans, the Fund may experience losses or delays in receiving payment. Asset-backed securities entail certain risks not presented by mortgage-backed securities. Asset-backed securities do not have the benefit of the same type of security interest in the related collateral. Credit card receivables are generally unsecured and a number of state and federal consumer credit laws give debtors the right to set off certain amounts owed on the credit cards, thereby reducing the outstanding balance. In the case of automobile receivables, there is a risk that the holders may not have either a proper or first security interest in all of the obligations backing such receivables due to the large number of vehicles involved in typical issuance, and technical requirements under state laws. Therefore, recoveries on repossessed collateral may not always be available to support payments on the securities. For a further discussion of the risks of investing in asset-backed securities, see the Statement of Additional Information. The Fund will invest in asset-backed securities only if they are rated at the time of purchase in the two highest grades by a nationally-recognized rating agency. 29 31 TABLE OF CONTENTS
PAGE --- Summary................................. 2 Fund Expenses......................... 3 Financial Highlights.................... 4 Investment Objectives and Policies...... 5 Investment Practices, Techniques, and Restrictions.......................... 8 The Fund and Its Management............. 11 Information About Shares of the Fund.... 13 Net Asset Value....................... 13 Purchase of Shares.................... 13 Redemption and Repurchase of Shares... 18 Shareholder Services.................... 21 Telephone Privileges.................... 23 Dividends, Distributions and Tax Status................................ 24 Additional Information.................. 25 Appendix A.............................. 27
INVESTMENT ADVISER ----------------------- John Hancock Advisers, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 DISTRIBUTOR -------------- John Hancock Funds, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 SHAREHOLDER INQUIRY ------------------------ 1-800-343-6840 P.O. Box 9656 Providence, Rhode Island 02940-9656 No dealer, salesman or other person has been authorized to give any information or to make any representation other than those contained in this Prospectus or in official sales literature distributed by the Funds' Distributor in connection with the offer of the Fund's shares, and if given or made, such other information or representations must not be relied upon as having been authorized by the Fund or John Hancock Funds. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. T430P 3/95 - ------------------------------------------------------- JOHN HANCOCK GOVERNMENT INCOME FUND A Portfolio of John Hancock Series, Inc. PROSPECTUS March 1, 1995 32 JOHN HANCOCK GLOBAL RESOURCES FUND A Portfolio of John Hancock Series, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 - -------------------------------------------------------------------------------- John Hancock Global Resources Fund (the "Fund"), a portfolio of John Hancock Series, Inc. (the "Corporation"), seeks to achieve growth of capital and to protect the purchasing power of its shareholders' capital by investing in equity securities of domestic and foreign companies that have substantial natural resource assets or that engage in natural resource or energy-related activities. The Corporation is a registered investment company which is comprised of multiple separate series (investment portfolios) offering investors a wide range of mutual fund investment choices. This Prospectus relates only to shares of the Fund. THE FUND IS INTENDED FOR INVESTORS WHO ARE WILLING TO ACCEPT THE RISKS OF INVESTING IN SECURITIES OF NATURAL RESOURCE COMPANIES AND FOREIGN ISSUERS AND THOSE WHO UNDERSTAND SUCH RISKS ARE GREATER THAN THOSE OF INVESTMENT COMPANIES WHICH INVEST SOLELY IN DOMESTIC SECURITIES OR DO NOT CONCENTRATE IN NATURAL RESOURCE INDUSTRIES. ALTERNATIVE PURCHASE PLAN. The Fund offers two classes of shares with alternative purchase and distribution fee arrangements. These differences permit you to choose the method of purchasing shares that is most beneficial given the amount of the purchase, the length of time you expect to hold the shares and other circumstances. Shares of the Fund may be purchased at the next determined net asset value per share, plus a sales charge which, at your election, may be imposed either (i) at the time of purchase in the case of the Class A Shares (the initial sales charge alternative) or (ii) on a contingent deferred basis in the case of the Class B Shares (the deferred sales charge alternative.) See "Purchase of Shares -- Alternative Purchase Plan" in this Prospectus for further details about the Alternative Purchase Plan. --------------------- This prospectus briefly sets forth the basic information that you should know before investing. YOU SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. A Statement of Additional Information dated March 1, 1995, containing further information about the Fund, has been filed with the Securities and Exchange Commission and is incorporated into this Prospectus by reference. A copy of the Statement of Additional Information may be obtained without charge by contacting John Hancock Funds, Inc. whose address and telephone number are shown on the back cover of this Prospectus. - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR FINANCIAL INSTITUTION, NOR ARE SHARES OF THE FUND FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. --------------------- PROSPECTUS DATED MARCH 1, 1995 33 SUMMARY - -------------------------------------------------------------------------------- THE FUND AND THE CORPORATION. John Hancock Global Resources Fund (the "Fund") (formerly Transamerica Global Resources Fund) is a portfolio of John Hancock Series, Inc. (the "Corporation") which is organized as a Maryland corporation and is an open-end diversified management investment company that issues its shares in series each of which is designated as a "fund." INVESTMENT OBJECTIVE. The Fund seeks to achieve growth of capital and to protect the purchasing power of its shareholders' capital by investing in equity securities of domestic and foreign companies that have substantial natural resource assets or that engage in natural resource or energy-related activities. See "Investment Objective and Policies." INVESTMENT ADVISER. John Hancock Advisers, Inc. (the "Investment Adviser") serves as investment adviser and receives a monthly fee from the Fund at an annual rate of .75% of the Fund's average daily net assets. The Investment Adviser presently manages a broad range of mutual funds and multiple investment portfolios representing total assets of approximately $13 billion under management. (See "The Fund and Its Management.") DISTRIBUTION ARRANGEMENTS. The Fund offers two classes of shares, "Class A Shares" and "Class B Shares," through the Fund's distributor, John Hancock Funds, Inc. ("John Hancock Funds"). Class A Shares are subject to an initial sales charge of up to 5.75% at the time of purchase and bear the expense of an ongoing Rule 12b-1 distribution service fee at an annual rate of up to .25% of the average daily net assets of the Fund allocable to the Class A Shares. Class B Shares do not incur a sales charge when they are purchased but (i) are generally subject to a sales charge if they are redeemed within six years of purchase (a "contingent deferred sales charge" or "CDSC") and (ii) are subject to aggregate distribution and service fees of up to 1% of the Fund's average daily net assets allocable to the Class B Shares annually. The contingent deferred sales charges for Class B Shares decline from 5% during the first year of investment to zero after the sixth year (5%, 4%, 3%, 3%, 2%, 1%), (see "Alternative Purchase Plan" on page 17). Shares of either class may be purchased through selected financial services firms having dealer agreements with John Hancock Funds. The minimum initial and subsequent investment amounts for either class of shares are $1,000 and $50 ($250 and $25 for a tax sheltered retirement plan), respectively (see "Purchase of Shares.") REDEMPTION OF SHARES. Shares of the Fund in any amount may be redeemed at any time at the net asset value per share next determined after the redemption request is received in proper form by The Shareholder Services Group (the "Transfer Agent.") In certain cases, however, redemption proceeds from the Class B Shares will be reduced by the amount of any applicable contingent deferred sales charge (see "Redemption and Repurchase of Shares.") SPECIAL RISK CONSIDERATIONS. The Fund's investments in equity securities of natural resource companies involve certain risks not assumed by certain other investment companies that do not emphasize investments in particular industries or markets. In particular, the value of equity securities of natural resource companies (including those companies that are primarily involved in providing goods and services to natural resource companies) will fluctuate pursuant to market conditions generally, as well as the market for the particular natural resource in which the issuer is involved (see "Risk Factors.") Investing in foreign securities represents a greater degree of risk than investing in domestic securities. In particular, the dollar value of portfolio securities of non-U.S. issuers fluctuates with changes in market and economic conditions abroad and with changes in relative currency values. (See "Foreign Securities.") The Fund's other investment policies and techniques, such as options and futures transactions, involve specific risks (see "Investment Practices, Techniques and Restrictions.") The Fund is not intended as a complete investment program. The above is qualified in its entirety by the detailed information appearing elsewhere in this Prospectus and in the Statement of Additional Information. 2 34 FUND EXPENSES
- ----------------------------------------------------------------------------------------------------------------- The following table illustrates the various expenses and fees a shareholder of the Fund would bear directly or indirectly. The expenses and fees set forth in the table are for the fiscal year ended October 31, 1994, except as otherwise noted. CLASS B SHARES CLASS A SHARES (DEFERRED (INITIAL SALES SALES CHARGE CHARGE ALTERNATIVE) ALTERNATIVE) -------------- -------------- SHAREHOLDER TRANSACTION EXPENSES(1) Maximum Sales Charge Imposed on Purchases............................ 5.75% None Sales Charge Imposed on Reinvested Dividends......................... None None Deferred Sales Charge (as a percentage of original purchase price)... None 5.00% Redemption Fee....................................................... None None Exchange Fee......................................................... None None
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B (as a percentage of average net assets) ------- ------- Management Fees(2)................................................... 0.75% 0.75% 12b-1 Fees(3)........................................................ 0.25% 1.00% Other Expenses....................................................... 0.79% 0.79% ----- ----- Total Fund Operating Expenses........................................ 1.79% 2.54% ===== =====
EXAMPLE A(4): You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and redemption at the end of each time period. 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------ ------ ------- Class A................................................................... $ 75 $111 $149 $256 Class B................................................................... $ 76 $109 $155 $269*
EXAMPLE B(4): You would pay the following expenses on the same investment assuming no redemption: 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------ ------ ------- Class A................................................................... $ 75 $111 $149 $256 Class B................................................................... $ 26 $ 79 $135 $269* - --------------- (1) Class A Shares have a reduced initial sales charge for purchases in excess of $50,000. Purchases of $1 million or more are not subject to a sales charge; however, a contingent deferred sales charge of 1% will be applied to redemptions within 12 months of such purchase (as described under "Initial Sales Charge Alternative -- Class A Shares".) The deferred sales charge on Class B Shares declines from 5% during the first year to 0% after the sixth year in the following manner: 5%, 4%, 3%, 3%, 2% and 1%. See "Information About Shares of the Fund -- Redemption and Repurchase of Shares". (2) See "The Fund and Its Management." (3) See "The Fund and Its Management -- Distribution Plans." (4) Expenses in Examples above have been restated to reflect current fees and should not be considered a representation of past or future expenses. Use of assumed (5%) return is mandated by the Securities and Exchange Commission. Actual expenses may be greater or less than those shown above. THE FUND'S PAYMENT OF A DISTRIBUTION FEE MAY RESULT IN A LONG-TERM SHAREHOLDER PAYING MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM FRONT-END SALES CHARGE PERMITTED UNDER THE NATIONAL ASSOCIATION OF SECURITIES DEALERS' RULES OF FAIR PRACTICE. * Assumes tax-free automatic exchange of Class B Shares for Class A Shares after the eight year period following the initial purchase of Class B Shares. If the exchange is declined, such Class B expenses would be $288.
3 35 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------- Financial highlights for John Hancock Global Resources Fund (formerly, Transamerica Global Resources Fund), in the case of Class A Shares, for the period June 15, 1994 through October 31, 1994 and, in the case of Class B Shares, for each of the seven years in the period ended October 31, 1994 and the period October 26, 1987 through October 31, 1987 have been audited by Ernst & Young LLP, independent auditors, whose unqualified report thereon as well as other financial statements of the Fund are included in the Statement of Additional Information. The Fund's annual report contains a discussion of the Fund's performance and is made available upon request without charge. CLASS A SHARES CLASS B SHARES -------------- --------------------------------------------------------------------------------- PERIOD FROM PERIOD JUNE 15, 1994 YEAR ENDED OCTOBER 31, ENDED TO OCT. 31, --------------------------------------------------------------------- OCT. 31, 1994(1) 1994 1993 1992 1991 1990 1989 1988 1987(2) -------------- ------- ------- ------ ------- ------ ------ ------ -------- Per share income and capital changes for a share outstanding during each period(3): Net asset value, beginning of period...................... $14.89 $ 15.69 $ 12.41 $12.20 $ 11.57 $11.99 $10.29 $ 8.91 $ 8.71 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)...................... (0.08) (0.23) (0.24) (0.24) (0.17) (0.10) 0.06 0.16 (0.0020) Net realized and unrealized gain on investments......... 0.81 0.12 3.52 0.58 1.24 0.16 1.82 1.22 0.2020 ------ ------- ------- ------ ------- ------ ------ ------ -------- Total from Investment Operations.............. 0.73 (0.11) 3.28 0.34 1.07 0.06 1.88 1.38 0.2000 LESS DISTRIBUTIONS Dividends from net investment income...................... -- -- -- -- -- (0.01) (0.06) -- -- Distributions from realized gains....................... -- -- -- (0.13) (0.44) (0.47) (0.12) -- -- ------ ------- ------- ------ ------- ------ ------ ------ -------- Total Distributions....... -- -- -- (0.13) (0.44) (0.48) (0.18) -- -- ------ ------- ------- ------ ------- ------ ------ ------ -------- Net asset value, end of period...................... $15.62 $ 15.58 $ 15.69 $12.41 $ 12.20 $11.57 $11.99 $10.29 $ 8.91 ====== ======= ======= ====== ======= ====== ====== ====== ======== TOTAL RETURN(4)............... 4.90% (0.70)% 26.43% 2.93% 9.81% 0.09% 18.60% 15.49% 2.30% ====== ======= ======= ====== ======= ====== ====== ====== ======== RATIOS AND SUPPLEMENTAL DATA Ratio of expenses to average net assets.................. 0.73% 2.54% 2.92% 3.75% 3.64% 3.55% 4.85% 9.03% 0.40% Ratio of expense reimbursement to average net assets....... -- -- -- -- -- (0.05)% (1.40)% (5.94)% (0.37)% ------ ------- ------- ------ ------- ------ ------ ------ -------- Ratio of net expenses to average net assets.......... 0.73% 2.54% 2.92% 3.75% 3.64% 3.50% 3.45% 3.09% 0.03% ====== ======= ======= ====== ======= ====== ====== ====== ======== Ratio of net investment income (loss) to average net assets...................... (0.42)% (1.52)% (1.65)% (2.01)% (1.47)% (0.82)% 0.55% 1.61% (0.02)% Portfolio turnover............ 96% 96% 83% 59% 93% 59% 63% 191% 0% Net Assets, end of period (in thousands).................. $5,372 $36,937 $19,498 $7,428 $10,766 $7,746 $3,655 $1,746 $ 113 - --------------- (1) Financial highlights, including total return, have not been annualized. Portfolio turnover is for the year ended October 31, 1994. (2) Financial highlights, including total return, are for the period from October 26, 1987 (date of the Fund's initial offering of shares to the public) to October 31, 1987 and have not been annualized. (3) Per share information has been calculated using the average number of shares outstanding. (4) Total return does not include the effect of the initial sales charge for Class A Shares nor the contingent deferred sales charge for Class B Shares.
4 36 INVESTMENT OBJECTIVES AND POLICIES - -------------------------------------------------------------------------------- The Fund's investment objectives are to protect the purchasing power of shareholders' capital and to achieve growth of capital. The first of these objectives means that the Fund seeks to protect generally shareholders' invested capital against erosion of the value of the U.S. dollar through inflation. Current income will not be a primary consideration in selecting securities. However, it will be an important factor in making selections among securities believed otherwise comparable by the Investment Adviser. The Fund pursues its objectives by investing at all times (except during periods when it is investing defensively) at least 65% of its total assets in: 1. equity securities of domestic and foreign companies (a) with substantial natural resource assets, natural resource-related or energy-related activities and (b) that provide equipment or services primarily devoted to the natural resource or energy related activities of companies described in (a); and 2. asset-based securities (hereinafter defined). Resource assets consist of precious metals (e.g., gold, silver and platinum), ferrous and nonferrous metals (e.g., iron, aluminum and copper), strategic metals (e.g., uranium and titanium), hydrocarbons (e.g., coal, oil and natural gas), timberland, developed and undeveloped real property and agricultural commodities. The Investment Adviser will identify companies that, in its opinion, have substantial holdings of resource assets so that when compared to the company's capitalization, revenues or operating profits, such assets are of enough magnitude that changes in the assets' economic value will affect the market value of the company. The Fund will consider a company to be a Natural Resource Company if, at the time the Fund acquires its securities, at least 50% of the company's noncurrent assets, capitalization, gross revenues or operating profits in the most recent or current fiscal year are: 1. involved in or result from (directly or indirectly through subsidiaries) exploring, mining, refining, processing, transporting, fabricating, dealing in or owning resource assets; or 2. involved in or result from energy-related activities directly or indirectly through subsidiaries. The Fund presently does not intend to invest directly in natural resource assets or contracts related to natural resource assets, other than gold bullion (directly or through warehouse receipts for gold) and gold coins. Although the Fund is authorized to invest a majority of its assets in (1) gold and (2) gold related securities or securities of gold related companies, it does not presently anticipate such investments to exceed 25% of its total assets (including its 10% limitation in gold bullion or gold coins.) (See "Risk Factors"). Energy-related activities consist of those which relate to the development and use of energy sources, such as: 1. the generation of power from hydroelectric, geothermal, tidal, or other naturally-occurring sources, or from natural resource manufacturing by-products or refuse; 2. the development of synthetic fuels; 3. transportation of energy producing sources such as coal, oil, electricity or nuclear fuels; 4. the development and application of techniques and devices for conservation or efficient use of energy; and, 5. the control of pollution related to energy industries and waste disposal. Generally, a company will be considered to provide equipment or services to such Natural Resource Companies if a significant part (at least 50%) of the 5 37 company's business or its profit relates to the resource-related or energy-related activities. Examples of this kind of company are: 1. manufacturers of mining or earth moving equipment; 2. providers of seismology testing services; and 3. providers of supplies and maintenance services to offshore drilling sites. The Investment Adviser believes an investment in the Fund may provide a good hedge against inflation. Although it is not required to do so, the Fund will consider selling securities of companies held in its portfolio that no longer meet the 50% test described above. The Fund may invest in "asset based securities" which are debt securities, preferred stocks or convertible securities when the principal amount, redemption terms or conversion terms of these investments are related to the market price of some natural resource asset such as gold bullion. The Fund will purchase only asset-based securities that are rated investment grade (i.e., "AAA," "AA," "A" or "BBB" by Standard & Poors Ratings Group ("S&P"); or "Aaa," "Aa," "A" or "Baa" by Moody's Investor Services ("Moody's"); or commercial paper rated "A-1" by S&P or "Prime-1" by Moody's ), or, if not rated by S&P and Moody's or unrated, securities from issuers that the Investment Adviser has determined to be of similar creditworthiness. Subsequent to its purchase by the Fund, a security may be assigned a lower rating or cease to be rated. Such an event would not require the elimination of the issue from the portfolio, but the Investment Adviser will consider such an event in determining whether the Fund should continue to hold the security in its portfolio. Securities rated BBB or Baa, although considered to be investment grade, may have speculative characteristics in that changes in economic conditions or other circumstances are more likely to lead to a weakened capacity of the issuer to make principal and interest payments than is the case for higher grade securities. The Fund will seek securities that are attractively priced relative to the intrinsic values of the relevant natural resource or that are of companies which are positioned to benefit under existing or anticipated economic conditions. Accordingly, the Fund may shift its emphasis from one natural resource industry to another depending upon prevailing trends or developments, provided that the Fund will not invest 25% or more of its total assets in the securities of companies in any one natural resource industry. There are also no geographic limitations on natural resource companies in which the Fund may invest. However, it is a non-fundamental policy whereby the Fund will be invested in securities of issuers, with respect to foreign investments, in at least three countries. In light of the geographic concentration of many natural resources, the Fund anticipates that many of the companies in which it invests will be located in Canada, Australia, New Zealand, Malaysia, the United Kingdom and the United States. Investments may also be made in companies located in Japan, Western Europe, Latin America, Southeast Asia and other countries as the Fund's investment adviser may from time to time determine. In connection with the Fund's investments in foreign securities, the Fund's Investment Adviser will consider factors such as the expected levels of inflation and interest rates, government policies influencing business conditions, the range of investment opportunity and other pertinent financial, tax, social, political and national factors -- all in relation to the prevailing prices of the securities of foreign issuers. The Fund is permitted, but presently does not intend, to invest up to 100% of its assets in securities of non-U.S. companies and may engage in various hedging instruments related to foreign securities. Concentration of investments by the Fund in foreign securities may involve special considerations and additional investment risks. (See "Risk Factors".) 6 38 During periods when the Investment Adviser views the potential for total returns from corporate or government debt obligations to be greater than the potential for total returns from equities, these securities, up to a normal limit of 35% of the Fund's total assets, will be included in the portfolio. The Fund will purchase only corporate debt securities of domestic or foreign issuers which are rated investment grade (i.e., "AAA," "AA" "A" or "BBB" by S&P; or "Aaa," "Aa," "A" or "Baa" by Moody's; or commercial paper rated "A-1 " by S&P or "Prime-1 " by Moody's,) or unrated securities from issuers that the Investment Adviser has determined to be of similar creditworthiness. This limit may be exceeded as the result of temporary defensive investments. The foregoing credit quality limitations do not apply to deposits at the bank or banks in which cash is maintained by the Fund (see "Custodian.") As noted above, securities that are rated "BBB" or "Baa" are considered to have speculative characteristics. As to the balance of the Fund's assets, the Fund may: 1. invest (for liquidity purposes) in short term debt securities with remaining maturities of one year or less ("money market instruments") such as U.S. government securities, certificates of deposit, bankers acceptances, commercial paper, corporate debt securities and related repurchase agreements; 2. enter into repurchase agreements and reverse repurchase agreements, lend its portfolio securities and make short sales "against the box"; 3. invest in options on securities and stock indexes; 4. invest in when-issued securities and restricted securities; and 5. employ certain hedging techniques such as options on stock indexes, stock index futures contracts and options thereon, foreign currency futures contracts and forward foreign currency exchange contracts and options on foreign currencies. These policies and techniques may involve certain risks and are further described under "Investment Practices, Techniques and Restrictions." During periods of unusual market conditions when the Investment Adviser believes that investing for temporary defensive purposes is appropriate, part or all of the assets of the Fund may be invested in cash or cash equivalents consisting of: 1. obligations of banks (including certificates of deposit, bankers' acceptances and repurchase agreements) with assets of $100,000,000 or more; 2. commercial paper rated within the two highest rating categories of a nationally recognized rating organization; 3. investment grade short-term notes; 4. obligations issued or guaranteed by the U.S. government or any of its agencies or instrumentalities; and 5. related repurchase agreements. The extent to which the Fund will be able to achieve its investment objective depends upon the Investment Adviser's ability to evaluate and develop the information it receives into a successful investment program. There can, of course, be no assurance that the Fund will achieve its investment objectives. The investment objectives and policies of the Fund are non-fundamental, which means they may be changed by the Board of Directors without requiring the vote of shareholders; such investment objective may not, however changed without prior (30 days') written notice first having been given to shareholders. Such a change in the investment objective may result in the Fund's investment objective being different from that which the shareholders considered appropriate, in light of their then current financial position and needs, at the time of their investment in the Fund. The Fund may dispose of investments regardless of the holding period if an issuer's revised credit rating or perceived changes in a company's growth pros- 7 39 pects or asset value make selling them advisable. A higher portfolio turnover rate involves greater expenses to the Fund and may also result in the realization of short-term capital gains at ordinary income rates. Portfolio turnover rates of the Fund for recent years are shown in the section "Financial Highlights." The Fund will engage in portfolio trading if it believes a transaction, net of costs (including custodian charges) will help in attaining its investment objective. The Statement of Additional Information also contains the following information: 1. Appendix AA explains short-term obligations and government securities. 2. Appendix CC explains various options, futures and forward contracts. 3. Appendix DD explains ratings of various fixed income securities by Moody's and S&P, including preferred stocks and short term investments. RISK FACTORS General. Because the values of the portfolio securities of the Fund, and therefore the net asset value per share, will fluctuate with general economic and market conditions, the net asset value per share at the time an investor's shares are redeemed may be more or less than the value at the time of purchase. Foreign Securities. The Fund's investments in foreign securities involve risks not present in domestic securities such as: currency exchange rate fluctuations; exchange control policies; expropriation or confiscatory taxation; difficulty in obtaining and enforcing judgments against a foreign issuer; political, economic or social instability; and less securities regulation. Foreign securities can be less liquid or more volatile than U.S. securities, and foreign accounting and disclosure standards may differ from U.S. standards. The values of foreign investments can rise or fall because of changes in currency exchange rates. (See "Foreign Securities and Currency Transactions" below.) Natural Resources Considerations. The value of equity securities of natural resource companies will fluctuate due to various factors including changes in the market for the particular natural resource in which the issuer is involved. Events occurring in nature, inflationary pressures and international polities can affect the overall supply and demand of a natural resource and thereby the value of companies involved in such natural resources. Additionally, the prices of gold stocks and the price of gold are subject to substantial fluctuations, and may be affected by unpredictable international monetary and political circumstances such as currency revaluations, national and world economic conditions, social conditions within a country (particularly South Africa, which is the world's largest producer of gold), trade imbalances or trade and currency restrictions between countries. These price fluctuations may adversely affect the value of an investment in the Fund. The only major gold-producing countries are the U.S., Russia, Canada, Australia and South Africa. (See Statement of Additional Information "Special Considerations Related to Investment in Gold" for further discussion.) Because of its emphasis on securities of companies with substantial resource assets or resource asset-related or energy-related businesses, the Fund should be considered as a focused investment to achieve diversification and not as a balanced or complete investment program. Other Considerations. The use of options contracts in an effort to enhance current yield (see "Investment Techniques Transactions in Options, Futures and Forward Contracts" below) may result in the loss of principal under certain market conditions. In addition, certain hedging techniques employed the Fund will result in transaction costs to the Fund and there can be no assurance that the risks will be eliminated. In addition, the value of the Fund's investments in debt securities generally increases when interest rates decline and decrease when inter- 8 40 est rates rise. The rating limitations applicable to the Fund's fixed income investments apply at the time of acquisition of a security; any subsequent change in the rating or quality of a security will not require the Fund to sell the security. Securities rated BBB by S&P or Baa by Moody's have speculative characteristics with respect to the issuer's capacity to pay interest and repay principal. This capacity may decline during sustained periods of deteriorating economic conditions or rising interest rates. Medium grade securities are generally considered to be subject to greater market risk than higher quality securities in times of deteriorating economic conditions and may be less likely to appreciate in value during periods of declining interest rates. In addition, medium grade securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than is the case for higher quality securities. The Investment Adviser does not rely solely on the ratings assigned by recognized rating agencies. (See "Statement of Additional Information" for further discussion.) GIVEN THE FOREGOING RISKS AND THOSE DESCRIBED ELSEWHERE IN THIS PROSPECTUS, AN INVESTMENT IN THE FUND MAY NOT BE APPROPRIATE FOR ALL INVESTORS, PARTICULARLY THOSE WHO SEEK ASSURED INCOME. INVESTMENT PRACTICES, TECHNIQUES AND RESTRICTIONS - -------------------------------------------------------------------------------- The Fund's investments are subject to the following practices, techniques and restrictions and may involve certain risks. The Statement of Additional Information contains more detailed information about these practices, including limitations designed to reduce these risks. FOREIGN SECURITIES AND CURRENCY TRANSACTIONS. As briefly described above, investment in foreign securities involve certain risks not associated with the investment in securities of U.S. issuers. These risks include political or economic instability in the country of the issuer, the difficulty of predicting international trade patterns, the possibility of imposition of exchange controls and the risk of currency fluctuations. Such securities may be subject to greater fluctuations in price than securities issued by U.S. corporations or issued or guaranteed by the U.S. Government, its instrumentalities or agencies. In addition, there may be less publicly available information about a foreign company than about a domestic company. Foreign companies generally are not subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to domestic companies. There is generally less government regulation of securities exchanges, brokers and listed companies abroad than in the United States. In addition, the values of foreign securities may be affected by application of foreign laws (including withholding taxes), changes in governmental administration or economic or monetary policy in the U.S. or diplomatic relations with foreign countries. Finally, in the event of a default of any such foreign debt obligations, it may be more difficult for the Fund to obtain or to enforce a judgment against the issuers of such securities. In many instances, foreign debt securities may provide higher yields than securities of domestic issuers which have similar maturities and quality. Under certain market conditions these investments may be less liquid than the securities of U.S. corporations and are certainly less liquid than securities issued or guaranteed by the U.S. Government, its instrumentalities or agencies. If the security is denominated in a foreign currency, it will be affected by changes in currency exchange rates and in exchange control regulations, and costs will be incurred in connection with conversions between currencies. A change in the value of any such currency against the U.S. dollar will result in a corresponding change in the U.S. dollar value of the Fund's securities denominated in that currency. 9 41 Such changes will also affect the Fund's income and distributions to shareholders. In addition, although the Fund will receive income in such currencies, the Fund will be required to compute and distribute its income in U.S. dollars. Therefore, the Fund may buy or sell foreign currencies and foreign currency forward contacts for hedging purposes in connection with its foreign investments. A forward currency contract is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. The Fund might purchase a particular currency or enter into a forward currency contract to preserve the U.S. dollar price of securities it intends to or has contracted to purchase. Alternatively, it might sell a particular currency on either a spot or forward basis to hedge against an anticipated decline in the dollar value of securities it intends to or has contracted to sell. Although this strategy could minimize the risk of loss due to a decline in the hedged currency, it could also limit any potential gain from an increase in the value of the currency. The Fund is authorized to, but presently does not intend to, enter into transactions involving options on foreign currencies for hedging purposes only. (See Statement of Additional Information for further details). REPURCHASE AGREEMENTS AND RESTRICTED SECURITIES. When participating in repurchase agreements, the Fund buys securities from a seller (usually a bank or brokerage firm) with the agreement that the seller will repurchase the securities at a predetermined price or yield at a later date. Transactions involving repurchase agreements must be fully collateralized at all times, however the Fund may be subject to various delays and risks of loss if the seller is unable to meet its obligation to repurchase. The Fund may also invest in securities which are restricted as to resale. The registration of such "restricted securities" under the Securities Act of 1933 (the "Securities Act") may be required prior to sale with attendant time delays, and the Fund may have to bear all or a part of the expense of such registration. No more than 10% of the Fund's total net assets may be invested in restricted securities (including other securities not readily marketable) and in repurchase agreements that mature in more than seven days (collectively, "illiquid securities.") The Fund may purchase, without regard to this limitation, restricted securities which can be offered and sold to "qualified institutional buyers" under Rule 144A of the Securities Act so long as such securities meet liquidity guidelines established by the Fund's Board of Directors. Since it is not possible to predict with assurance exactly how this market for restricted securities sold and offered under Rule 144A will develop, the Board of Directors will monitor the Fund's investments in these securities, focusing on such factors, among others, as valuation, liquidity and availability of information. LENDING OF PORTFOLIO SECURITIES. The Fund may lend its portfolio securities amounting to not more than 33% of the value of its portfolio securities to approved borrowers (principally broker/dealers) provided these loans are callable at any time and are continuously secured by collateral (cash or government securities) equal to no less than the market value, determined daily, on the securities loaned. The Fund may reinvest any cash collateral in short term highly liquid debt securities. During the period of the loan, the Fund earns income on both the loaned securities and the collateral. Although these transactions must be fully collateralized at all times, they involve some credit risk to the Fund if the borrower should default on its obligation and the Fund is delayed or prevented from recovering the collateral. REVERSE REPURCHASE AGREEMENTS. A reverse repurchase agreement involves the sale of a security by the Fund and its agreement to repurchase the instrument at a specified time and price. The Fund will maintain a segregated account consisting of highly liquid, marketable debt securities to cover its obligations under reverse repurchase agreements 10 42 with selected firms approved in advance by the Board of Directors. The Fund will use the proceeds to purchase other investments. Reverse repurchase agreements are considered to be borrowings by the Fund and as an investment practice may be considered speculative. The Fund may borrow money for temporary administrative or emergency purposes. To avoid the potential leveraging effects of the Fund's borrowings, additional investments will not be made while borrowings are in excess of 5% of the Fund's total assets. The Fund will limit its investments in reverse repurchase agreements and other borrowings to no more than 33% of its total assets. SHORT SALES AGAINST-THE-BOX. The Fund may make short sales against-the-box for the purpose of deferring realization of gain or loss for Federal income tax purposes. A short sale "against-the-box" is a short sale in which the Fund owns an equal amount of the securities sold short or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short. The Fund may engage in such short sales only to the extent that not more than 10% of the Fund's total assets (determined at the time of the short sale) is held as collateral for such sales. TRANSACTIONS IN OPTIONS AND FUTURES OPTIONS ON SECURITIES. The Fund may write (sell) covered call and cash secured put options and purchase call and put options on equity securities. The Fund will write options on its portfolio securities for the purpose of increasing its return on such securities or to protect the value of its portfolio. If the price of the underlying security moves adversely to the Fund's position, the option may be exercised and the Fund will be required to purchase or sell the underlying security at a disadvantageous price, which may only be partially offset by the amount of the premium if at all. The Fund may also write straddles, which are combinations of put and call options on the same security. These transactions can generate additional premium income but also present an increased risk. The Fund may also purchase put or call options in anticipation of market changes, which may adversely affect the prices of securities the Fund wants to purchase at a later date. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise or liquidation of the option. Unless the price of the underlying security changes sufficiently, the option may expire without value to the Fund. OPTIONS ON STOCK INDEXES. The Fund may write (sell) covered call and put options and purchase call and put options on stock indexes. The Fund may write options on securities indexes in order to increase its gross income, and attempt to protect its portfolio against declines in the value of securities it owns, or increases in the value of securities to be acquired. When the Fund writes an option on a securities index and the value of the index moves adversely to the Fund's position, the option will not be exercised. The Fund will either close out the option at a profit or allow it to expire unexercised. The Fund will thereby retain the amount of the premium, less related transaction costs, which will increase its gross income and offset part of the reduced value of the portfolio securities or the increased cost of securities to be acquired. Such transactions, however, will constitute only partial hedges against adverse price fluctuations. This is because any of these fluctuations will be offset only to the extent of the premium received by the Fund for the writing of the option. In addition, if the value of an underlying index moves adversely to the Fund's option position, the option may be exercised and the Fund will experience a loss that may only be partially offset, if at all, by the amount of the premium received. The Fund may also purchase put or call options on securities indexes in order to hedge its investments against a decline in value or to attempt to reduce the risk of missing a market or industry segment advance. The Fund's possible loss in either case will 11 43 be limited to the premium paid for the option, plus related transaction costs. FUTURES CONTRACTS. The Fund may enter into stock index future contracts ("Futures Contracts"). Purchases or sales of stock index Futures Contracts are used to attempt to protect the Fund's current or intended stock index investments from broad fluctuations in securities prices. The adverse effects of an anticipated decrease in the value of portfolio securities may be offset, in whole or in part, by gains on the sale of Futures Contracts. This applies when the decrease occurs as a result of a general stock market decline. Conversely, the increased cost of portfolio securities to be acquired may be offset, in whole or in part, by gains on Futures Contracts purchased by the Fund. This applies when the increase is caused by a general rise in the stock market. The Fund will incur transaction costs when it purchases and sells Futures Contracts. It will also be required to maintain margin deposits (see "Risks of Transactions in Options and Futures"). OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write options on stock index futures contracts ("Options on Futures Contracts.") Such investment strategies will be used as a hedge and not for speculation. Put and call options on Futures Contracts may be traded by the Fund in order to protect against declines in the values of portfolio securities or against increases in the cost of securities to be acquired. Purchases of options on Futures Contracts may present less risk in hedging the Fund's portfolios than the purchase and sale of the underlying Futures Contracts since the potential loss is limited to the amount of the premium plus related transaction costs. The writing of these options, however, does not present less risk than the trading of Futures Contracts. It will constitute only a partial hedge, up to the amount of the premium received and if an option is exercised, the Fund may suffer a loss on the transaction. RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES. Although the Fund will enter into transactions in Futures Contracts, Options on Futures Contracts and certain options solely for hedging purposes, their use does involve certain risks. For example, a lack of correlation between the value of an instrument underlying an option or Futures Contract and the assets being hedged or unexpected adverse price movements, could render the Fund's hedging strategy unsuccessful, thus resulting in losses. The Fund also may enter into transactions in options on securities and options on stock indexes for other than hedging purposes. This involves greater risk. In addition, there can be no assurance that a liquid secondary market will exist for a contract purchased or sold. Therefore, the Fund may be required to maintain a position until exercise or expiration, which could result in losses. Over-the-counter transactions in options on securities also involve risks arising from the lack of an organized exchange trading environment. The Fund will limit its investments in over-the-counter options, together with other illiquid securities, to 10% of the Fund's total assets. Transactions in Futures Contracts, Options on Futures Contracts and options are subject to other risks as well. The Fund will not engage in transactions in futures contracts and options on futures for speculation, but only for hedging or other permissible risk management purposes. All of the Fund's futures contracts and options thereon will be traded on a U.S. commodity exchange or board of trade. The Fund will not engage in a futures or option transaction if, immediately thereafter, the sum of initial margin deposits on existing positions and premiums paid for options on futures would exceed 5% of the Fund's total assets. The potential loss from writing options on futures transactions is potentially unlimited and may exceed the amount of the premium received. The Fund will not purchase a call or put option if as a result the premium paid for the option together with premiums paid for all other stock options, options on stock indexes, stock index futures and 12 44 options thereon then held by the Fund, exceed 10% of the Fund's total net assets. When the Fund purchases a futures contract or a call option on a futures contact, an amount of cash or U.S. Government securities equal to the market value of the futures contract will be deposited in a segregated account with the Fund's custodian to collateralize the position. The Fund's risks in entering into transactions in options, futures and forward contracts are set forth in greater detail in the Statement of Additional Information. INVESTMENT RESTRICTIONS. The Fund has adopted certain fundamental investment restrictions which are described in detail in the Statement of Additional Information and may not be changed without shareholder approval. Among the restrictions are provided that the Fund may not: (1) borrow money in an amount in excess of 33 1/3% of its total assets; and (2) invest more than 25% of its total assets in any one industry. If a percentage restriction, except restriction regarding borrowing, on investments or utilization of assets is followed at the time an investment is made or assets are utilized, a later change in percentage resulting from changes in the value of the Fund's portfolio securities will not be considered a violation of policy. THE FUND AND ITS MANAGEMENT - -------------------------------------------------------------------------------- GENERAL. The Fund is a series of John Hancock Series, Inc. (the "Corporation"), an open-end diversified management investment company organized as a Maryland corporation (see "Additional Information -- Organization"). The Corporation's Board of Directors supervises the management and affairs of the Fund. The officers of the Corporation are responsible for the Fund's daily business operations under the overall direction of the Directors. Information about each of the Directors and officers is set forth in the Statement of Additional Information. Investment decisions are made by the portfolio manager, Burton J. Willingham, Senior Vice President of John Hancock Advisers, Inc. Mr. Willingham has served in an equity portfolio management position with the Investment Adviser and PREDECESSOR INVESTMENT ADVISERS since 1976. INVESTMENT ADVISER. John Hancock Advisers, Inc. is the Investment Adviser of the Fund and is compensated for its advisory services at an annual rate of .75% of the Fund's average daily net assets. The Investment Adviser manages the Fund's assets, provides administrative services and supervises the Fund's daily business affairs. The advisory fee paid by the Fund is higher than that of most other investment companies. However, the Board of Directors has determined that such fee is reasonable in light of the highly specialized investment decisions and investment techniques employed by the Fund. The Investment Adviser was organized in 1968 and is an indirect wholly owned subsidiary of John Hancock Mutual Life Insurance Company, a financial services company. The Investment Adviser provides the Fund and other investment companies in the John Hancock group of funds, with investment research and portfolio management services. John Hancock Funds distributes shares for all of the John Hancock mutual funds through selected broker/ dealers ("Selling Brokers"). Certain Fund officers are also officers of the Investment Adviser and John Hancock Funds. For the fiscal year ended October 31, 1994, the Fund paid an advisory fee of .75% of the Fund's average net assets to the Fund's former investment adviser. In addition, during the fiscal year ended October 31, 1994, the Fund reimbursed Transamerica Fund 13 45 Management Company (the Fund's investment adviser until December 1994) ("TFMC"), pursuant to a separate Administrative Services Agreement, for actual expenses incurred in providing certain administrative services such as accounting and bookkeeping services, communications in response to shareholders inquiries and certain printing services for reports of the Fund. For the fiscal year ended October 31, 1994 administrative services fees paid by the Fund to TFMC amounted to 0.17% of its average daily net assets. The Administrative Services Agreement was terminated effective January 16, 1995. DISTRIBUTION PLANS. The Class A and Class B shareholders have adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under these Plans, the Fund will pay distribution and service fees at an aggregate annual rate of 0.25% of the Class A Share's average daily net assets and an aggregate annual rate of 1.00% of the Class B Shares average daily net assets. In each case, up to 0.25% is for service expenses and the remaining amount is for distribution expenses. The distribution fees will be used to reimburse John Hancock Funds for its distribution expenses including but not limited to: (i) initial and ongoing sales compensation to Selling Brokers and others (including affiliates of John Hancock Funds) engaged in the sale of Fund shares, (ii) marketing, promotional and overhead expenses incurred in connection with the distribution of shares of the Fund, (iii) unreimbursed distribution expenses under the Fund's prior distribution plans, (iv) distribution expenses incurred by other investment companies which sell all or substantially all of its assets to merge or otherwise engage in a reorganization transaction with the Fund and (v) with respect to Class B Shares only, interest expenses on unreimbursed distribution expenses. The service fees will be used to compensate Selling Brokers for providing personal and account maintenance services to shareholders. In the event John Hancock Funds is not fully reimbursed for payments made or expenses it incurs under the Class A Plan, these expenses will not be carried beyond twelve months from the date they were incurred. These unreimbursed expenses under the Class B Plan will be carried forward together with interest on the balance of these unreimbursed expenses. Applicable distribution fees, in an amount not exceeding the annual limitation, are accrued each day as an expense of the Class B Shares and reduce the net assets of the fund attributable to the Class B Shares. However, in accordance with generally accepted accounting principles, the Fund does not treat the amount of Distribution Fees exceeding the annual limitation as a liability of the Fund and does not reduce the current net assets of the Fund attributable to the Class B Shares by such amount, although it may become payable in the future, because the standards for accrual of a liability under these accounting principles have not been satisfied due to contingencies as to payment of such amount. Under the Class B Plan, unreimbursed distribution expenses as of October 31, 1994 amounted to $965,044 (2.61% of the Fund's Class B net assets at that date). In order to limit the higher ongoing costs associated with an investment in Class B Shares, the Fund implements arrangements under which Class B Shares are automatically exchanged, on a tax-free basis, for Class A Shares at the end of the eight year period following the initial purchase of Class B Shares. (See "Shareholder Services -- Class B Shares Automatic Exchange".) For the fiscal year ended October 31, 1994, payments made by the Fund under the former Class A Plan amounted to 0.10% of the average daily net assets attributable to Class A Shares. For the fiscal year ended October 31, 1994, total payments made by the Fund under the former Class B Plan amounted to 1.00% of its Class B average daily net assets. In addition, for the fiscal year ended October 31, 1994, the former Distributor received contingent deferred sales charges from redemptions of shares of the Fund in an amount equal (on an 14 46 annual basis) to 0.24% of the Fund's Class B average daily net assets. EXPENSES OF THE FUND. The Fund's expenses, which are accrued daily, are deducted from total income before dividends are paid. These expenses, include, but are not limited to: fees paid to the Investment Adviser; directors' fees; taxes; distribution, brokerage and legal fees; custodian and auditing fees; administrative services fees; transfer agency fees and other expenses. For the fiscal year ended October 31, 1994, Class B total expenses were 2.54% of Class B average net assets and for the period June 15, 1994 through October 31, 1994, total expenses for Class A Shares were 0.73% of Class A average net assets. PORTFOLIO TRANSACTIONS. The primary consideration in choosing brokerage firms to carry out the Fund's transactions is execution at the most favorable prices, taking into account the broker's professional ability and quality of service. Consideration may also be given to the broker's sale of shares of the Fund. Pursuant to procedures determined by the Board of Directors, the Investment Adviser may place securities transactions with brokers affiliated with the Investment Adviser. These brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc. and Sutro & Company, Inc. which are indirectly owned by John Hancock Mutual Life Insurance Company, which in turn indirectly owns the Investment Adviser. (For a further discussion, see the Statement of Additional Information -- "Portfolio Transactions"). INFORMATION ABOUT SHARES OF THE FUND - -------------------------------------------------------------------------------- NET ASSET VALUE The net asset value of the Fund is computed once daily on each day that the New York Stock Exchange is open for business as of the close of trading (presently 4:00 p.m. New York time). The Fund will also compute its net asset value on other days if a purchase or redemption request is received on that day and there is a sufficient degree of trading in securities held by the Fund. Net asset value per share is calculated by dividing the market or fair value of all of the Fund's portfolio securities plus the value of its other assets (including dividends and interest received or accrued), less all liabilities (including accrued expenses but excluding capital) by the number of shares of the Fund outstanding. The Board of Directors has established procedures for the valuation of the Fund's securities, based in general on market or estimated value (see "Net Asset Value" in the Statement of Additional Information). Although the legal rights of Class A and Class B Shares will be identical, the different expenses borne by each class will result in different net asset values and dividends. The net asset value of Class B Shares will generally be lower than the net asset value of Class A Shares as a result of the larger distribution fee accrual with respect to Class B Shares. (However, Class B shareholders will generally receive more shares at the time of purchase.) It is expected, however, that the net asset value per share of the two classes will tend to converge immediately after the recording of dividends which will differ by approximately the amount of the distribution expense accrual differential between the classes. PURCHASE OF SHARES GENERAL. Shares of the Fund will be offered at a price equal to their net asset value (next determined following receipt of an order by The Shareholder Services Group (the Fund's Transfer Agent) or the investor's dealer) plus a sales charge which, at the option of the purchaser, may be imposed either at the time of purchase (the "initial sales charge alternative") as described below or on a contingent deferred basis (the "deferred sales charge alternative"), as described under "Redemption and Repur- 15 47 chase of Shares". Shares of the Fund are offered continuously for sale by John Hancock Funds and are available for purchase through eligible financial service firms such as securities broker/dealer firms and banks which have entered into selected dealer agreements with John Hancock Funds. Dealers are responsible for transmitting orders promptly (orders received and transmitted to the Transfer Agent prior to 4:00 p.m. New York time will receive that day's purchase price.) John Hancock Funds, at its expense, may provide additional promotional incentives or payments to dealers that sell shares of the Fund. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares of the Fund or other John Hancock mutual funds. You may purchase shares by mailing a check, made payable to the Fund (noting shareholder account number), and if opening a new account a completed application form, to the Transfer Agent either at the post office address shown on the back page of this Prospectus; or, if delivered by express mail, the street address: the Transfer Agent, One American Express Plaza, Providence, Rhode Island 02903. The initial purchase must be at least $1,000 with subsequent investments of no less than $50. These minimum amounts are reduced for tax-advantaged retirement plans and accounts of participants in certain labor unions and other membership organizations to $250, initial and $25, subsequent. The minimum investment amounts are waived for tax-deferred retirement programs involving the submission of additional investments by means of group remittal statements subject to a $25 minimum amount. Programs providing for regular periodic investments, including a payroll deduction plan, systematic exchanges or investment by bank draft, have also reduced minimum investment amounts (see "Shareholder Services -- Automatic Investment Plan, Systematic Exchange Program and Payroll Deduction Plans.") Certificates for shares will not be issued unless requested by the shareholder in writing and then only for full shares. The Board of Directors reserves the right to change or waive the minimum investment requirements and to reject any order for purchase of shares (including FedWire purchases) when in its judgement such rejection is in the Fund's best interest. FEDWIRE PURCHASES. You may make payment for initial and subsequent investments by federal funds wire. You should first notify Account Services (1-800-343-6840) of the new account request (if applicable) and the intended wire purchase. To assure proper credit, banks wiring federal funds should be instructed to include: (1) name of the Fund, (2) name of the shareholder (as registered exactly in the account), or if opening an account, the name and address in which the account is being registered and the taxpayer identification number of the investor (a completed application must be mailed to the Transfer Agent after completing the wire arrangement); and (3) shareholder account number. Federal funds may be wired to:* Boston Safe Deposit and Trust Company ("BSDT") ABA Routing Number: 011001234 Account Number: 159565 * Except during such times or holidays when BSDT is not open for business. ALTERNATIVE PURCHASE PLAN You can purchase shares of the Fund at a price equal to their net asset value per share, plus a sales charge. At your election, this charge may be imposed either at the time of the purchase (see "Initial Sales Charge Alternative -- Class A Shares") or on a contingent deferred basis (see "Deferred Sales Charge Alternative -- Class B Shares"). If 16 48 you do not specify on your account application which class of shares you are purchasing, it will be assumed that you are investing in Class A Shares. CLASS A SHARES. If you elect to purchase Class A Shares, you will incur an initial sales charge unless the amount you purchase is $1 million or more. If you purchase $1 million or more of Class A Shares you will not be subject to an initial sales charge, but you will incur a sales charge if you redeem your shares within one year of purchase. Class A Shares are subject to ongoing distribution and service fees at a combined annual rate of up to .25% of the Fund's average daily net assets attributable to the Class A Shares. Certain purchases of Class A Shares qualify for reduced initial sales charges. See "Reduced Initial Sales Charge." CLASS B SHARES. You will not incur a sales charge when you purchase Class B Shares, but the shares are subject to a sales charge if you redeem them within six years of purchase (the "contingent deferred sales charge" or the "CDSC"). Class B Shares are subject to ongoing distribution and service fees at a combined annual rate of up to 1.00% of the Fund's average daily net assets attributable to the Class B Shares. Investing in Class B Shares permits all of your dollars to work from the time you make your investment, but the higher ongoing distribution fee will cause these shares to have a higher expense ratio than that of Class A Shares. To the extent that any dividends are paid by the Fund, these higher expenses will also result in lower dividends than those paid on Class A Shares. FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE. The alternative purchase arrangement allows you to choose the most beneficial way to buy shares given the amount of your purchase, the length of time that you expect to hold your shares and other circumstances. You should consider whether, during the anticipated life of your Fund investment, the accumulated fees on Class B Shares would be less than the initial sales charge and accumulated fees on Class A Shares purchased at the same time and to what extent this differential would be offset by the Class A Shares' lower expenses. To help you make this determination, the table under the caption "Fund Expenses" gives examples of the charges applicable to each class of shares. Class A Shares will normally be more beneficial if you qualify for a reduced sales charge. See "Reduced Initial Sales Charge." Class A Shares are subject to lower distribution and service fees and, accordingly, pay correspondingly higher dividends per share, to the extent any dividends are paid. However, because Initial Sales Charges are deducted at the time of purchase, you would not have all of your funds invested initially and, therefore, would initially own fewer shares. If you do not qualify for reduced initial sales charges and expect to maintain your investment for an extended period of time you might consider purchasing Class A Shares because the accumulated distribution and service charges on Class B Shares may exceed the initial sales charge and accumulated distribution and service charges on Class A Shares during the life of your investment. Alternatively, you might determine that it would be more advantageous to purchase Class B Shares in order to have all of your funds invested initially, although remaining subject to higher distribution fees and, for a six-year period, a CDSC. In the case of Class A Shares, distribution expenses that John Hancock Funds incurs in connection with the sale of the shares will be paid from the proceeds of the initial sales charge and the ongoing distribution and service fees. In the case of Class B Shares expenses will be paid from the proceeds of the ongoing distribution and service fees, as well as the CDSC incurred upon redemption within six years of purchase. The purpose and function of the Class B Shares' CDSC and ongoing distribution and service fees are the same as those of the Class A Shares' initial sales charge and ongoing distribution and service fees. Sales personnel distributing the Fund's 17 49 shares may receive different compensation for selling each class of shares. Dividends, if any, on Class A and Class B Shares will be calculated in the same manner, at the same time and on the same day and will be in the same amount. However, each class will bear only its own distribution and service fees, and shareholder meeting expenses and incremental transfer agency costs. See "Dividends, Distributions and Taxes." INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The public offering price of Class A Shares of the Fund is the current net asset value per share (next computed after receipt of an order by the Fund's Transfer Agent), plus a sales charge (a percentage of the offering price as set forth in the table below).
COMBINED REALLOWANCE REALLOWANCE SALES SALES AND SERVICE TO SELLING CHARGE AS A CHARGE AS A FEE AS A BROKER AS AMOUNT INVESTED PERCENTAGE PERCENTAGE OF PERCENTAGE A PERCENTAGE (INCLUDING AT OFFERING THE AMOUNT OF OFFERING OF OFFERING SALES CHARGE) PRICE INVESTED PRICE(+) PRICE(*) - ------------------------------- ----------- ------------- --------------- ------------ Less than $50,000.............. 5.75% 6.10% 5.25% 5.01% $50,000 to $99,999............. 4.75% 4.99% 4.25% 4.01% $100,000 to $249,999........... 3.75% 3.90% 3.25% 3.01% $250,000 to $499,999........... 2.75% 2.83% 2.35% 2.11% $500,000 to $999,999........... 2.00% 2.04% 1.75% 1.51% $1,000,000 and over............ 0.00%(**) 0.00%(**) (***) 0.00%(***) - --------------- (*) Upon notice to broker-dealers with whom it has sales agreements ("Selling Brokers"), John Hancock Funds may reallow an amount up to the full applicable sales charge. A Selling Broker to whom substantially the entire sales charge is reallowed or who receives these incentives may be deemed to be an underwriter under the Securities Act of 1933. (**) No sales charge is payable at the time of purchase in Class A Shares of $1 million or more, but a contingent deferred sales charge may be imposed in the event of certain redemption transactions within one year of purchase. See "Purchases of $1 Million or More." (***) John Hancock Funds may pay a commission and first year's service fee (as described in (+) below) to Selling Brokers who initiate and are responsible for purchases of $1 million or more in aggregate. See "Purchases of $1 Million or More" below. (+) At the time of sale, John Hancock Funds pays to Selling Brokers the first year's service fee in advance, in an amount equal to 0.25% of the next assets invested in the Fund and thereafter pays the service fee periodically in arrears in an amount up to 0.25% of the Fund's average annual net assets. Selling Brokers receive the fee as compensation for providing personal and account maintenance services to shareholders.
Until March 31, 1995, John Hancock Funds is continuing a sales incentive program in which non-cash concessions in the form of an all-expense-paid trip to a North American resort location will be awarded to participating broker/dealers and financial institutions achieving certain specified sales levels in shares of certain funds formerly managed by TFMC upon which (1) an initial sales charge has been paid or (2) a charge may be applicable upon redemption and who had sales agreements with the Fund's former distributor. Participation in the incentive program is entirely optional on the part of the broker/dealers and financial institutions. Copies of the incentive program which contain more complete information about the terms and conditions of the program, including qualifying 18 50 levels and specific awards and eligible funds, may be obtained by investment representatives by contacting John Hancock Funds. John Hancock Funds will make these incentive payments out of its own resources. Other than distribution fees, the Funds do not bear distribution expenses. John Hancock Funds will pay certain affiliated Selling Brokers at an annual rate of up to 0.05% of the daily net assets of accounts attributable to these brokers. Purchases of $1 Million or More. On purchases by a single purchaser aggregating $1 million or more, John Hancock Funds will pay securities dealers an amount on a cumulative basis equal to 1% of the first $3 million, plus .5 of 1% of the next $2 million, plus .25 of 1% on amounts over $5 million. With respect to shares purchased at the $1 million plus breakpoint, a contingent deferred sales charge ("CDSC") will be imposed on the proceeds of the redemption of certain shares so purchased if they are redeemed within 12 months of the end of the calendar month of their purchase, in an amount equal to 1% of the lesser of (a) the net asset value of the shares at the time of purchase or (b) the net asset value of the shares at the time of redemption ("CDSC Shares"). The CDSC would be deducted from the redemption proceeds otherwise payable to the shareholder and would be retained by John Hancock Funds. In addition, no CDSC will be imposed when a shareholder redeems (a) CDSC shares acquired through reinvestment of income dividends or capital gains distributions; and (b) shares acquired by exchange from any mutual fund sold with an initial sales charge and distributed by John Hancock Funds. The CDSC does not apply to purchases at net asset value described under "Waiver of Initial Sales Charge" and will be waived in the case of redemptions of shares in connection with (i) certain distributions to participants or beneficiaries of certain qualified retirement plans, and returns of excess contributions made to these plans, and (ii) involuntary redemption of shares if the aggregate net asset value of shares held in the account is less than the required minimum. In determining whether a CDSC is payable on any redemption, the Fund will first redeem shares not subject to any charge. Although any CDSC shares being exchanged are not subject to any charge, they will be subject to the applicable CDSC when the acquired shares are eventually redeemed. For purposes of calculating the CDSC on these redemptions, the original purchase date of the initial fund investment will be used in lieu of the date the redeemed shares were acquired by exchange. Reduced Initial Sales Charges. If you choose the initial sales charge alternative, you are entitled to pay reduced sales charges shown in the above table through several available purchase plans: Concurrent Purchases, Rights of Accumulation, Statement of Intention and Group Purchases. You and your immediate family may combine Concurrent Purchases of Class A Shares of the Fund and Class A Shares (and shares subject to front-end sales charges) of certain other mutual funds which are managed by the Investment Adviser ("other John Hancock funds" as defined under "Shareholder Services -- Exchange Privilege"), for purposes of qualifying for, and determining, a reduced sales charge provided that the purchases are made through a single dealer and any purchase amounts satisfy the minimum investment amount of the respective Fund. Further information about these purchase plans is set forth under "Purchase of Shares" in the Statement of Additional Information (see also Statement of Intention and Rights of Accumulation in the Account Application and its Terms and Conditions in the back of the Prospectus). Waiver of Initial Sales Charges. Class A Shares of the Fund may be purchased without paying an initial sales charge by the following: - - A Director or Officer of the Corporation; a director or officer of the Investment Adviser and its affiliates or Selling Brokers; employees or sales representatives of any of the foregoing; retired officers, employees or directors of any of the 19 51 foregoing; a member of the immediate family of any of the foregoing; or any Fund, pension, profit sharing or other benefit plan for the individuals described above. - - Any state, county, city or any instrumentality, department, authority or agency of these entities (an "eligible governmental authority") which is prohibited by applicable investment laws from paying a sales charge or commission when it purchases shares of any registered investment management company. - - A broker, dealer or registered investment adviser that has entered into an agreement with John Hancock Funds providing specifically for the use of Fund shares in fee-based investment products made available to their clients. - - A former participant in an employee benefit plan with John Hancock Mutual Funds, when he/she withdraws from his/her plan distributions directly to the Funds. - - Class A Shares of the Funds may also be purchased without an initial sales charge in connection with certain liquidation, merger and acquisition transactions involving other investment companies or personal holding companies. - - Existing full service clients of John Hancock Mutual Life Insurance Company group annuity contract holders as of September 1, 1994, may purchase Class A Shares with no initial sales charge, but if the shares are redeemed within 12 months after the end of the calendar year in which the purchase was made, a contingent deferred sales charge will be imposed at the rate for Class A Shares described above in the section "Purchases of $1 Million or More." REDEMPTION AND REPURCHASE OF SHARES GENERAL. You may redeem shares of the Fund in any amount at any time at the net asset value per share next determined after the redemption request is received in proper form by the Transfer Agent. See "Net Asset Value." In certain cases, however, redemption proceeds from the Class B Shares will be reduced by the amount of any applicable contingent deferred sales charge (see "Class B Shares -- Contingent Deferred Sale Charge.") If you hold both Class A and Class B Shares of the Fund, any request for redemption must specify whether Class A or Class B Shares are to be redeemed. Failure to specify which class, or insufficient shares of the class specified, will result in the redemption request being delayed until the Transfer Agent receives further written instructions from you. Payment proceeds will be mailed within seven (7) days following receipt of all required documents. However, in the case of redemptions of shares which were recently purchased by check, the payment of the redemption proceeds may be delayed for a period of up to 15 days or more only until the check used to purchase the shares has been cleared for payment by your bank. The Fund will not forward proceeds by FedWire Redemption (described below), and the redemption will not be effective, for a period of 15 days after receipt of the purchase check. This delay in payment of redemption proceeds can be avoided if shares are purchased by means of a certified check or federal funds wire. Under unusual circumstances, the Fund may suspend redemptions or postpone payment for up to seven days or more, as permitted by securities laws. REDEMPTION BY WRITTEN REQUEST. To redeem shares, send a written request or "letter of instruction" specifying the name of the Fund, the class of shares, the dollar amount or number of shares to be redeemed, and shareholder's name and account number to: The Shareholder Services Group, P.O. Box 9656, Providence, Rhode Island 02940-9656. A request for redemption will be processed after receipt by the Transfer Agent of all required documents in proper order including any issued stock certificates and the letter of instruction signed by each account owner exactly as the account is registered. If a redemption of $50,000 or more is to be 20 52 made (or if the shareholder's address or bank account to which proceeds are to be mailed has changed in the prior 30 days) signatures must be guaranteed subject to the provisions under Rule 17Ad-15 of the Securities Exchange Act of 1934 ("SEA Rule") without restriction, condition or qualification by an authorized signatory of a commercial bank, trust company, savings and loan association, savings bank or a member firm of the National Association of Securities Dealers or a domestic stock exchange, or any other "eligible guarantor institution" as defined in the SEA Rule. If shares are held in the name of a corporation, trust, estate, custodianship, guardianship, partnership or pension and profit sharing plan, additional documentation may be necessary. TELEPHONE REDEMPTION. Shares of the Fund for which no share certificates have been issued may be redeemed in amounts of $50,000 or less by telephone request, provided that selection has been made in the Account Application or a telephone authorization form is on file with the Transfer Agent. Proceeds from telephone redemptions will be mailed to your address of record. The Fund and/or the Transfer Agent reserve the right to refuse telephone redemption requests at any time. See "Telephone Privileges" for further information concerning authenticity of instructions received by telephone. Telephone authorization forms are available from the Fund upon request. Information concerning redemption can be obtained by contacting the Fund at 1-800-343-6840. FEDWIRE REDEMPTION. You may redeem shares for which no certificates have been issued and have redemption proceeds of at least $50,000 wired by federal funds transfer. Requests for FedWire Redemption may be made by wire communication, telephone or letter, provided that you have selected this option in the Account Application. Proceeds of shares redeemed at the net asset value next determined after receipt of request are transmitted the following business day by wire to your bank account designated in the Account Application form (bank must be a member of the Federal Reserve System). Delivery of the proceeds of a wire redemption request of $250,000 or more may be delayed by the Fund for up to seven days if the Investment Adviser deems it appropriate under the then current market conditions. The Fund cannot be responsible for the efficiency of the federal wire system or your dealer or bank. Redemption of shares purchased by check are subject to certain limitations and restrictions described above. The Fund may modify this Privilege at any time or charge a service fee upon notice to shareholders; no such fee currently is contemplated. REPURCHASE. John Hancock Funds is authorized to repurchase any shares presented by telephone or telegraph to John Hancock Funds by certain securities dealers selected by John Hancock Funds in its sole discretion. The offer to repurchase may be suspended by John Hancock Funds at any time. Repurchase orders received by dealers prior to the closing of the NYSE (4:00 p.m. New York time) on any business day will be priced at the net asset value per share that is based on that day's close, provided that they are time-stamped by the dealer no later than 4:00 p.m. New York time on such day. Dealers may charge for their services in connection with repurchases, but neither the Fund nor John Hancock Funds makes any charge. INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem your account at any time the total net asset value of the account falls below $500 as a result of a redemption. You will be notified in writing that the value of your account is less than $500 ($100 for a tax sheltered retirement plan) as a result of a redemption and will be allowed 60 days to make additional investments before the redemption is processed. No contingent deferred sales charge will be imposed on an involuntary redemption of Class B Shares. REDEMPTION IN KIND. Although it is the Fund's present policy to make payment of redemption proceeds in cash, if the Fund's Board of Directors 21 53 determines that a material adverse effect would otherwise be experienced by remaining investors, redemption proceeds may be paid in whole or in part by a distribution in kind of securities from the portfolio of the Fund subject to the limitation that pursuant to an election under Rule 18f-1 under the Investment Company Act of 1940, the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund during any 90-day period for such one account. In such circumstances, you might be required to bear transaction costs to dispose of the securities distributed in kind. REINSTATEMENT PRIVILEGE. If you have redeemed shares of the Fund, or have had shares repurchased by the Fund, you may, within 60 days after the date shares were redeemed or repurchased, reinvest (reinstate) all or a portion of the proceeds of the redemption or repurchase in shares of the Fund or shares of other John Hancock funds (as defined under "Shareholder Services -- Exchange Privilege") at the next determined net asset value of the shares so long as the Transfer Agent is in receipt of a written request for reinstatement and appropriate payment. Shares being acquired, pursuant to the reinstatement privilege, must be of the identical class as those which were redeemed within the prior 60 days. The CDSC will not be applicable to Class B Shares acquired in a reinstatement, although it will be assessed in connection with the initial redemption or repurchase. This privilege may be exercised only once as to any particular shares of the Fund or other John Hancock fund. Exercise of the Reinstatement Privilege does not alter the federal income tax treatment of any capital gains realized on the redemption of shares of the Fund. If a loss is realized on the redemption and reinvestment is made in shares of the Fund within 30 days, it would not be recognized as a loss for income tax purposes. You are advised to consult your tax adviser as to all possible tax consequences related to the exercise of the reinstatement privilege. The reinstatement privilege may be terminated or modified at any time. CLASS B SHARES -- CONTINGENT DEFERRED SALES CHARGE. Class B Shares redeemed within six years of purchase will be subject to a CDSC at the rates set forth below. This charge will be assessed on an amount equal to the lesser of the current market value or the original purchase cost of the shares being redeemed. Accordingly, the CDSC will not be assessed on increases in account value above the initial purchase price, including shares derived from dividend reinvestment. In determining whether a CDSC applies to a redemption, the calculation will be determined in a manner that results in the lowest possible rate being charged. It will be assumed that the redemption comes first from shares which have been held beyond the six-year CDSC redemption period or those that were acquired through dividend reinvestment, and next from the shares that have been held the longest during the six-year period. Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses all or part of them to defray its expenses related to providing the Fund with distribution services in connection with the sale of Class B Shares, such as compensating Selling Brokers for selling these shares. The combination of the CDSC and the distribution and service fees makes it possible for the Fund to sell Class B Shares without deducting a sales charge at the time of the purchase. The amount of the CDSC, if any, will vary depending on the number of years from the time the Class B Shares were purchased until the time they were redeemed. Solely for purposes of determining the holding period, any payments you make during 22 54 the month will be aggregated and deemed to have been made on the last day of the month.
YEAR IN WHICH CONTINGENT DEFERRED SALES CLASS B SHARES CHARGE AS A PERCENTAGE REDEEMED FOLLOWING OF DOLLAR AMOUNT PURCHASE SUBJECT TO CDSC - ----------------------- ------------------------- First ............................ 5.0% Second ........................... 4.0% Third ............................ 3.0% Fourth ........................... 3.0% Fifth ............................ 2.0% Sixth ............................ 1.0% Seventh and thereafter .......... None
A commission equal to 3.75% of the amount invested and a first year's service fee equal to 0.25% of the amount invested are paid to Selling Brokers. The initial service fee is paid in advance at the time of sale for the provision of personal and account maintenance services to shareholders during the twelve months following the sale, and thereafter the service fee is paid in arrears. If a partial redemption (or exchange) that you make results in a remaining account balance of less than the amount of the CDSC owed at the time of the redemption (or exchange) on the shares remaining in the account, the Fund reserves the right to require you to redeem (or exchange) all of the shares in the account. The Fund does not believe that this constitutes an involuntary redemption. The CDSC will be paid to John Hancock Funds or to the Fund. (See "Distribution Plans.") Waiver of CDSC. The contingent deferred sales charge will be waived (a) in the event of the death or total disability (as evidenced by a determination by the Federal Social Security Administration) of the shareholder (including a registered joint owner) and (b) for certain distributions of Class B Shares held in certain deferred compensation retirement plans. No contingent deferred sales charge will be imposed where shares are redeemed in connection with a merger or reorganization of the Fund into another investment company which imposes a contingent deferred sales charge and the investor receives shares of the investment company in the transaction. In these cases any applicable CDSC will be imposed when you redeem shares acquired in such a transaction. In addition, the Fund will waive the CDSC on redemptions made (1) by shareholders (including retirement plan account holders) having accounts as Systematic Withdrawal Plans (SWP) with payments of an annual amount less than or equal to 12% of the value of the account determined at the time of authorization (subject to subsequent year end adjustments) and available on a monthly, quarterly, semi-annual or yearly basis; and (2) as distributions from employer sponsored retirement plans in connection with the participant's separation of service at age 55 or over from his or her employer. The foregoing waiver of CDSC is subject to change upon 60 days written notice to shareholders. To be eligible for the waiver, the account holder or the dealer must notify John Hancock Funds of eligibility at the time of redemption request. (See the Statement of Additional Information, "Redemption and Repurchase of Shares" for a more complete description of the Fund's shareholders on whose shares a CDSC will not be imposed.) SHAREHOLDER SERVICES - -------------------------------------------------------------------------------- The Fund offers you the following services and privileges: (1) Reinvestment of Dividends and Distributions at net asset value; (2) Retirement Plans; (3) Automatic Investment Plan; (4) Systematic Withdrawal Plan; (5) Exchange Privilege; (6) Class B Shares Automatic Exchange; (7) Payroll Deduction Plans; (8) Systematic Exchange Program and (9) Cross -Reinvestment Service. AUTOMATIC INVESTMENT PLAN (AIP) permits you to purchase additional shares on a monthly basis with funds transferred from your bank account subject to an initial and subsequent minimum investment of 23 55 $25. For further information, see the AIP Section in the accompanying Account Application. EXCHANGE PRIVILEGE permits you to exchange your Class A or Class B Shares of the Fund for shares of "other John Hancock funds" (i.e., funds which formerly had investment advisory contracts with TFMC) on the basis of the relative net asset value per share subject to the minimum investment requirements of such funds. Class A Shares may be exchanged for other John Hancock funds' Class A Shares. These other Class A Shares may also be exchanged for Class A Shares of the Fund, provided that any sales charge differential (not previously paid) is paid by the shareholder. Class B Shares may be exchanged without imposition of the Fund's CDSC for Class B Shares or shares of other Funds that are subject to a CDSC ("CDSC Funds.") Exchanges between CDSC Funds having different CDSC schedules will retain their respective original CDSC schedules. Any applicable contingent deferred sales charge payable upon the redemption of Class B Shares exchanged will be calculated from the date of the initial purchase. Class B Shares may not be exchanged into money market funds other than John Hancock Money Market Fund B. See Account Application or the "Exchange Privilege" in the Statement of Additional Information. Exchanges may be accomplished by telephone request (see below) or by a written request from the account owner(s). Forms for both written and telephone exchanges are available from the Fund upon request. Share certificates, if issued, must be returned to the Fund prior to any exchange of such shares. There is currently no exchange fee for an exchange; however, dealers or other firms may charge for their services in expediting exchange transactions. In addition, the Fund reserves the right to impose an exchange fee. Exchanges are, in effect, a redemption and purchase of shares in the respective funds and are treated as such for tax purposes. As such, the limitations and restrictions applicable generally to purchases and redemptions apply, and any exchange constitutes a sale upon which a gain or loss will be realized for federal income tax purposes. THIS EXCHANGE PRIVILEGE IS NOT AVAILABLE IN ANY JURISDICTION WHERE SHARES OF THE OTHER JOHN HANCOCK FUND BEING ACQUIRED ARE NOT QUALIFIED FOR SALE. EACH JOHN HANCOCK MUTUAL FUND RESERVES THE RIGHT TO REJECT ANY ORDER TO ACQUIRE ITS SHARES THROUGH EXCHANGE, OR OTHERWISE TO MODIFY, RESTRICT OR TERMINATE THE EXCHANGE PRIVILEGE, AT ANY TIME AFTER 60 DAYS' NOTICE TO SHAREHOLDERS. Because other John Hancock funds have investment objectives and policies which may differ from those of the Fund, you should carefully review the prospectus of the other John Hancock fund before effecting an exchange. Shares of the Fund for which no share certificates have been issued may be exchanged by telephone request, provided you have selected this option in the Account Application or have a telephone authorization form on file. See "Telephone Privileges" for important information about transactions by telephone. Telephone requests may be made by contacting the Fund at 1-800-343-6840. CLASS B AUTOMATIC EXCHANGE is a tax-free exchange of Class B Shares for Class A Shares of the same fund that occurs at the end of the calendar quarter eight years after the original purchase date of the Class B Shares, the "Automatic Exchange Date." At the Automatic Exchange Date the Class B Shares will be exchanged for an equal dollar value of Class A Shares (which may or may not be the same number of shares). The Class A Shares have lower expenses than Class B Shares but are otherwise substantially identical. Class A Shares, therefore, will have a slightly higher total return than Class B Shares and may have a slightly higher dividend as a result. If you have made more than one purchase, you may hold both Class B Shares and Class A Shares at the same time. The Class B Automatic Exchange is available to all Class B Shareholders and requires no action whatsoever on your part. If you want to decline taking advantage of this privilege, however, the Fund must be notified in 24 56 writing three months prior to the Automatic Exchange Date. PAYROLL DEDUCTION PLANS are available for employer sponsored plans, where regular, periodic purchases are made into the employees' accounts through the submission of the John Hancock Group Investment List. The minimum initial and subsequent purchase amounts are $250 for the Plan and $25 per fund-account in the Plan. For further information on how to establish a John Hancock Group Investment List, call Account Services at 1-800-343-6840. SYSTEMATIC EXCHANGE PROGRAM allows you to exchange a specified dollar amount from an existing account in any John Hancock Fund (including the Fund), into any other John Hancock Fund (including the Fund) subject to the requirements and limitations of the Exchange Privilege as noted above. At the time this option is selected, you must have a minimum balance of $5,000 in the account from which the exchange is to be made and must designate a monthly exchange amount of no less than $25.00 for a specific Fund. The minimum initial investment amount (established by the Fund being exchanged into) will be waived for shareholders utilizing this Program. Note that automated dollar cost averaging methods do not assure a profit nor protect against loss in declining markets. You should consult your broker or financial adviser to determine whether this Program is suitable for your investment needs. In particular, consideration should be given to the type of John Hancock Fund from which your exchanges will be made (i.e., its investment objective, policies and risks, including the potential for fluctuation in its net asset value). The Fund currently imposes no service fee for participation in the Program but reserves the right to do so. You may change the exchange amounts or the selection of Funds or terminate your participation in the Program at any time by directing the Transfer Agent in writing. For further information regarding this Program, see the Statement of Additional Information (which may be obtained by contacting Account Services at 1-800-343-6840). CROSS-REINVESTMENT SERVICE. Shares of a particular class of the Fund may be purchased and/or redeemed without imposition of any applicable sales charge through the automatic reinvestment of dividend and capital gain distributions from the same class of any other John Hancock fund. These proceeds from other John Hancock funds will be invested at the next determined net asset value following receipt of the proceeds (i.e., reinvestment date which is normally the payable date of such other John Hancock fund) by the Fund's Transfer Agent. In addition, you may select in the Account Application to have your Fund distributions automatically invested without imposition of a sales charge in shares of the same class of another John Hancock fund. RETIREMENT PLANS. The Fund offers a variety of tax sheltered retirement plans. Shares of the Fund are available for purchase by qualified plans which have been approved by the Internal Revenue Service and include Individual Retirement Accounts (including SEP/IRAs), Profit-Sharing and Money Purchase Plans, 403(b) Plans and 401(k) Plans. Plan support services are available. For details, please contact John Hancock Funds Retirement Plans Department by calling 1-800-472-3863. Further information regarding the above services and privileges is set forth in the Statement of Additional Information. TELEPHONE PRIVILEGES - -------------------------------------------------------------------------------- Neither the Fund, Transfer Agent or the Investment Adviser will be responsible for the authenticity of telephone instructions. You should be aware that transactions authorized by telephone instructions reasonably believed to be authentic by the Fund can subject you to the risk of loss if such telephone instructions are subsequently found to be unauthentic. 25 57 Privileges associated with telephone exchange, telephone redemption, and FedWire redemption may be selected in the Fund's Account Application. The privileges associated with FedWire redemption will not be established unless specifically instructed. The privileges associated with telephone exchange and/or telephone redemption will automatically be accorded to your account unless you specifically decline this privilege in the Account Application. If establishing a new account through a confirmed trade, your securities dealer should provide a completed new account application or submit specific written instructions requesting specific account privileges at the time of trade settlement. The Fund will employ reasonable procedures to confirm that the instructions as to either exchange, redemption or FedWire redemptions communicated by telephone are genuine, and that absent such procedures, the Fund or its agents may be liable for any losses due to unauthorized or fraudulent instructions. These procedures include: 1. Recording all calls for telephone transactions (each transaction is thereby indexed by the time of the call placed); 2. Requesting the caller's name and phone number as verification of the origin of the telephone call; 3. Requesting the name of the Fund and your account number, the name(s) in which the account is registered and the tax identification number listed on the account; and 4. Mailing written confirmation (statements) of each transaction on the following business day to the registration address and the broker/dealer of record. DIVIDENDS, DISTRIBUTIONS AND TAX STATUS - -------------------------------------------------------------------------------- DIVIDENDS AND CAPITAL GAINS. The Fund distributes substantially all of its net investment income (i.e., non capital gain income from its investment less expenses), if any, to shareholders in the form of annual dividends. The excess of net long-term capital gains over net short-term capital losses, including losses carried forward from prior years, represents net realized capital gains. The Fund distributes net realized capital gains, if any, to shareholders at least annually. When a dividend or capital gains distribution is paid, the net asset value per share is reduced by the amount of the payment. The per share dividends and distributions on Class B Share will be lower than the per share dividends and distributions on Class A Shares as a result of the higher distribution services and incremental transfer agency fees applicable to the Class B Shares. All dividends and any capital gains distribution are reinvested automatically in additional shares on the reinvestment date, unless you indicate in writing to the Transfer Agent or select in the Account Application to receive proceeds in cash or have them reinvested in shares of the same class of another John Hancock fund (without imposition of a sales charge) at the next determined net asset value following receipt of the proceeds (i.e., the reinvestment date.) See "Cross-Reinvestment Service." TAXES. Because the Fund intends to distribute its net investment income and net realized capital gains shareholders, and to adhere to other applicable requirements, it is not expected that the Fund will be required to pay any federal income taxes on amounts it pays as dividends and distributions. However, you will normally have to pay federal income taxes and any applicable state income taxes on the dividends and capital gains distributions you receive (either as cash or reinvested shares) from the Fund (unless you are exempt from taxation or entitled to tax deferral.) After the end of each calendar year, you will receive a statement indicating the amount and federal tax status of all distributions received during such year. This includes information on the portion taxable as ordinary income and the portion taxable as long-term capital 26 58 gains. It should be noted that the distributions of any net realized short-term capital gains are taxable as ordinary income. The Fund is required to withhold 31% of taxable dividends, distributions and redemptions paid to you if you have not complied with IRS taxpayer identification requirements. To avoid this "back-up" withholding requirement, you may furnish the Transfer Agent with your taxpayer identification number and required certifications by completing the Account Application or IRS form W-9. (See "Backup Withholding" in the back of the Prospectus). You should consult your own tax adviser concerning tax consequences of an investment in the Fund. ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION. From time to time the Fund may advertise its total return which is computed separately for Class A and Class B Shares and in accordance with applicable regulatory requirements. The cumulative total return shows the dollar or percentage change in value over a specified period of time (i.e., 1, 5 or 10 years or since the Fund's inception), assuming reinvestment of all dividends and distributions on the reinvestment dates and payment of the maximum sales charges applicable to purchases and redemptions. Average annual total return shows the Fund's cumulative return dividend over the number of years included in the given period ("standardized performance"). Total returns may, in conjunction with standardized performance, be calculated for other specified periods and/or excluding the effect of sales charges (which if included, would reduce the performance quoted). Both the yield and total return are based on historical earnings and are not indicative of future performance. The Fund will include performance data for both Class A and Class B Shares in any advertisement or information including performance data of the Fund. The Statement of Additional Information contains more detailed information about the calculation of performance. The Fund also may advertise its performance relative to certain performance rankings, ratings and indexes compiled by independent organizations (such as Lipper Analytical Services and Value Line). In addition, the Fund may use comparative performance information from certain industry research materials or published in various periodicals. The Fund may, from time to time, use ratings of Morningstar, Inc. in the Fund's advertisements. Past performance and/or ratings are no guarantee of future results. In addition, investors are advised to consult their investment representative when considering an investment in the Fund based upon a given rating. The Statement of Additional Information sets forth under "Performance Information" a list of periodicals, indexes, etc. which the Fund may use in its advertisements. ORGANIZATION. The Fund operates as one series of the Corporation. The Corporation was organized as a Maryland Corporation on June 22, 1987. In December, 1994, in connection with the acquisition of the Corporation's previous investment adviser, Transamerica Fund Management Company, the Corporation's name was changed from Transamerica Series, Inc. to John Hancock Series Inc. and the Fund's name was changed from Transamerica Global Resources Fund to John Hancock Global Resources Fund. All shares of stock of the Corporation, $0.01 par value per share, have equal voting rights and have no preemptive or conversion rights. Both Class A and Class B shares represent an interest in the same assets of the Fund and are identical in all respects except that each class bears different distribution expenses, exclusive voting rights with respect to its distribution plan and has different exchange privileges. Shares issued are fully paid, non-assessable, fully transferable and redeemable at the option of the holder. The Fund is not required to hold annual shareholder meetings except 27 59 when required by federal or state law. Under certain circumstances, shareholders of the Fund have the right, and available procedures, to call a meeting of shareholders for any purpose. At the written request of the holders of at least 10% of the outstanding shares of the Corporation, the Corporation will call a meeting for the purpose of voting on the removal of one or more Directors. The Fund will assist shareholders with any communications including shareholder proposals. SHAREHOLDER INQUIRIES. All inquiries regarding the Fund including questions concerning share ownership, dividends, transfer of ownership or share redemption, should be directed to the Fund at the telephone number or address on the cover page of this Prospectus. CUSTODIAN. Investors Bank & Trust Company, 34 Federal Street, Boston, Massachusetts 02110, is the Custodian for the Fund. TRANSFER AGENT. Transfer and dividend disbursing agent functions are performed by The Shareholder Services Group, One American Express Plaza, Providence, Rhode Island 02903. INDEPENDENT AUDITORS. Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116, has been selected as the independent auditors of the Fund. 28 60 TABLE OF CONTENTS
PAGE ---- Summary.................................... 2 Fund Expenses............................ 3 Financial Highlights....................... 4 Investment Objectives and Policies......... 5 Investment Practices, Techniques and Restrictions............................. 9 The Fund and Its Management................ 13 Information About Shares of the Fund....... 15 Net Asset Value.......................... 15 Purchase of Shares....................... 16 Redemption and Repurchase of Shares...... 20 Shareholder Services....................... 23 Telephone Privileges....................... 26 Dividends, Distributions and Tax Status.... 26 Additional Information................. 27
INVESTMENT ADVISER - ---------------------- John Hancock Advisers, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 DISTRIBUTOR - -------------- John Hancock Funds, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 SHAREHOLDER INQUIRY - ----------------------- 1-800-343-6840 P.O. Box 9656 Providence, Rhode Island 02940-9656 No dealer, salesman or other person has been authorized to give any information or to make any representation other than those contained in this Prospectus or in official sales literature distributed by the Fund's Distributor in connection with the offer of the Fund's shares, and if given or made, such other information or representations must not be relied upon as having been authorized by the Funds or John Hancock Funds. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. JOHN HANCOCK GLOBAL RESOURCES FUND A Portfolio of John Hancock Series, Inc. PROSPECTUS March 1, 1995 61 JOHN HANCOCK HIGH YIELD TAX-FREE FUND A Portfolio of John Hancock Series, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 - -------------------------------------------------------------------------------- John Hancock High Yield Tax-Free Fund (the "Fund"), a portfolio of John Hancock Series, Inc. (the "Corporation"), seeks to obtain a high level of current income that is exempt from federal taxes consistent with the preservation of capital through investing primarily in municipal bonds rated "A" "Baa" or "Ba" by Moody's Investors Services, Inc. or "A", "BBB" or "BB" by Standard and Poor's Ratings Group. The Corporation is a registered investment company which is comprised of multiple separate series (investment portfolios) offering investors a wide range of mutual fund investment choices. This Prospectus relates only to shares of the Fund. THE FUND INVESTS PRIMARILY (AND IS PERMITTED TO INVEST UP TO 100% OF ITS ASSETS) IN LOWER RATED (I.E., BELOW INVESTMENT GRADE) OR UNRATED (AND DETERMINED TO BE NON-INVESTMENT GRADE) MUNICIPAL OBLIGATIONS COMMONLY KNOWN AS "JUNK BONDS" WHICH ENTAIL PRICE VOLATILITY, DEFAULT AND OTHER RISKS GREATER THAN THOSE ASSOCIATED WITH HIGHER RATED/HIGHER QUALITY SECURITIES. INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. SEE "INVESTMENT OBJECTIVE AND POLICIES." ALTERNATIVE PURCHASE PLAN. The Fund offers two classes of shares with alternative purchase and distribution fee arrangements. These differences permit you to choose the method of purchasing shares that is most beneficial given the amount of the purchase, the length of time you expect to hold the shares and other circumstances. Shares of the Fund may be purchased at the next determined net asset value per share, plus a sales charge which, at your election, may be imposed either (i) at the time of purchase in the case of the Class A Shares (the initial sales charge alternative) or (ii) on a contingent deferred basis in the case of the Class B Shares (the deferred sales charge alternative.) See "Purchase of Shares -- Alternative Purchase Plan" in this Prospectus for further details about the Alternative Purchase Plan. This prospectus briefly sets forth the basic information that you should know before investing. YOU SHOULD RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. A Statement of Additional Information dated March 1, 1995, containing further information about the Fund, has been filed with the Securities and Exchange Commission and is incorporated into this Prospectus by reference. A copy of the Statement of Additional Information may be obtained without charge by contacting John Hancock Funds, Inc. whose address and telephone number are shown on the back cover of this Prospectus. - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR FINANCIAL INSTITUTION, NOR ARE SHARES OF THE FUND FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. --------------------- PROSPECTUS DATED MARCH 1, 1995 62 SUMMARY - -------------------------------------------------------------------------------- THE FUND AND THE CORPORATION. John Hancock High Yield Tax-Free Fund (the "Fund") is a portfolio of John Hancock Series, Inc. (the "Corporation") which is organized as a Maryland corporation and is an open-end diversified management investment company that issues its shares in series each of which is designated as a "fund." INVESTMENT OBJECTIVES. The Fund seeks to obtain a high level of current income that is exempt from federal taxes consistent with the preservation of capital through investing primarily in municipal bonds rated "A," "Baa" or "Ba" by Moody's Investors Services, Inc. ("Moodys"), or "A," "BBB" or "BB" by Standard & Poor's Ratings Group ("S&P"). See "Investment Objectives and Policies." INVESTMENT ADVISER. John Hancock Advisers, Inc. (the "Investment Adviser") is responsible for the investments and operations of the Fund and receives a monthly fee from the Fund at varying annual percentage rates of average daily net assets, depending on the Fund's asset size, ranging from a low of .50% to a high of .625%. The Investment Adviser presently manages a broad range of mutual funds and multiple investment portfolios representing total assets of approximately $13 billion under management. (See "The Fund and Its Management.") DISTRIBUTION ARRANGEMENTS. The Fund offers two classes of shares, "Class A Shares" and "Class B Shares", through the Fund's distributor, John Hancock Funds, Inc. ("John Hancock Funds"). Class A Shares are subject to an initial sales charge of up to 4.75% at the time of purchase and bear the expense of an ongoing Rule 12b-1 distribution service fee at an annual rate of up to .25% of the average daily net assets of the Fund allocable to the Class A Shares. Class B Shares do not incur a sales charge when they are purchased but (i) are generally subject to a sales charge if they are redeemed within six years of purchase (a "contingent deferred sales charge" or "CDSC") and (ii) are subject to aggregate distribution and service fees of up to 1% of the Fund's average daily net assets allocable to the Class B Shares annually. The contingent deferred sales charges for Class B Shares decline from 5% during the first year of investment to zero after the sixth year (5%, 4%, 3%, 3%, 2%, 1%), (see "Alternative Purchase Plan" on page 18). Shares of either class may be purchased through selected financial services firms having dealer agreements with John Hancock Funds. The minimum initial and subsequent investment amounts for either class of shares are $1,000 and $50 ($250 and $25 for a tax sheltered retirement plan), respectively (See "Purchase of Shares.") REDEMPTION OF SHARES. Shares of the Fund in any amount may be redeemed at any time at the net asset value per share next determined after the redemption request is received in proper form by The Shareholder Services Group (the "Transfer Agent.") In certain cases, however, redemption proceeds from the Class B Shares will be reduced by the amount of any applicable contingent deferred sales charge (see "Redemption and Repurchase of Shares.") SPECIAL RISK CONSIDERATIONS. The Fund may invest significantly in municipal bonds rated lower than "Baa" by Moody's or "BBB" by S&P, commonly called "junk bonds", which involve certain risks and are considered to be speculative. Investors should refer to a further discussion of these risks on page 9. These investments together with other policies and techniques of the Fund, such as reverse repurchase agreements and options and futures transactions, involve a greater degree of risk than is assumed by other investment companies which do not invest similarly. (See "Investment Objective and Policies -- Risk Factors" and "Investment Practices, Techniques and Restrictions.") An investment in the Fund should not constitute a complete investment program. ADDITIONAL INFORMATION. The above summary is qualified in its entirety by the detailed information appearing elsewhere in this Prospectus and in the Statement of Additional Information. In addition, for a comparison of tax-exempt yields to taxable yields, see "Additional Information -- Performance Information" and "Appendix A -- Tax Exempt vs. Taxable Yields." 2 63 FUND EXPENSES - -------------------------------------------------------------------------------- The following table illustrates the various expenses and fees a shareholder of the Fund would bear directly or indirectly. The expenses and fees set forth in the table are for the fiscal year ended October 31, 1994, except as otherwise noted.
CLASS A SHARES CLASS B SHARES (INITIAL SALES (DEFERRED SALES CHARGE CHARGE ALTERNATIVE) ALTERNATIVE) ------------- ------------- SHAREHOLDER TRANSACTION EXPENSES(1) Maximum Sales Charge Imposed on Purchases.................... 4.75% None Sales Charge Imposed on Reinvested Dividends................. None None Deferred Sales Charge (as a percentage of original purchase price)............................................. None 5.00% Redemption Fee............................................... None None Exchange Fee................................................. None None
ANNUAL FUND OPERATING EXPENSES(2) CLASS A CLASS B ------- ------- (as a percentage of average net assets) Management Fees.............................................. 0.59% 0.59% 12b-1 Fees(3)................................................ 0.25% 1.00% Other Expenses............................................... 0.28% 0.28% ----- ----- Total Fund Operating Expenses................................ 1.12% 1.87% ===== =====
EXAMPLE A(4): You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ----- ------ ------ ------- Class A................................................. $ 58 $81 $ 106 $177 Class B................................................. $ 69 $89 $ 121 $199*
EXAMPLE B(4): You would pay the following expenses on the same investment in Example A assuming no redemption:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ----- ------ ------ ------- Class A................................................. $ 58 $81 $ 106 $177 Class B................................................. $ 19 $59 $ 101 $199* - --------------- (1) Class A Shares have reduced initial sales charges for purchases in excess of $100,000. Purchases of $1 million or more are not subject to a sales charge; however, a contingent deferred sales charge of 1% will be applied to redemptions within twelve (12) months of such purchase. The deferred sales charge on Class B Shares declines from 5% during the first year to 0% after the sixth year in the following manner: 5%, 4%, 3%, 3%, 2%, 1% and 0%. See "Information About Shares of the Funds -- Redemption and Repurchase of Shares". (2) As to Expenses for Class A Shares, Management Fees and 12b-1 Fees are based on maximum allowed fees (if collected) and Other Expenses for Class A Shares are based on estimated expenses to be incurred in the current fiscal year. (See "The Fund and Its Management.") (3) 12b-1 fees are based on maximum allowed fees (if collected). Actual fees for the fiscal year ended October 31, 1994 were 0.21% and 0.98% for the Class A and Class B Shares, respectively. See "The Fund and Its Management -- Distribution Plans." (4) Expenses in Examples above have been restated to reflect current fees and should not be considered a representation of past or future expenses. Actual expenses may be greater or less than those shown above. Use of assumed (5%) return is mandated by Securities and Exchange Commission. THE FUND'S PAYMENT OF A DISTRIBUTION FEE MAY RESULT IN A LONG-TERM SHAREHOLDER PAYING MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM FRONT-END SALES CHARGE PERMITTED UNDER THE NATIONAL ASSOCIATION OF SECURITIES DEALERS' RULES OF FAIR PRACTICE. * Assumes tax-free automatic exchange of Class B Shares for Class A Shares after the eight year period following the initial purchase of Class B Shares. If the exchange is declined, such Class B expenses would be $219.
3 64 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Financial highlights for John Hancock High Yield Tax-Free Fund (formerly Transamerica High Yield Tax-Free Fund), in the case of Class B Shares, for each of the seven years in the period ended October 31, 1994, and the periods May 1, 1987 through October 31, 1987 and August 25, 1986 through April 30, 1987, have been audited by Ernst & Young LLP, independent auditors, whose unqualified report thereon as well as other financial statements of the Fund are included in the Statement of Additional Information. The Fund's annual report contains a discussion of the Fund's performance and is made available upon request without charge.
PERIODS ENDED YEAR ENDED OCTOBER 31, ------------------ -------------------------------------------------------------------- OCTOBER 31, APRIL 30, 1994 1993 1992 1991 1990 1989 1988 1987(1) 1987(2) ------- ------- ------ ------ ------ ------ ------ --------- ------- Per share income and capital changes for a Class B Share outstanding during each period: Net asset value, beginning of period........................... $ 9.98 $ 9.39 $ 9.31 $ 9.07 $ 9.29 $ 9.25 $ 8.62 $ 9.49 $ 10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income............. 0.48 0.53 0.55 0.54 0.55 0.55 0.62 0.37 0.53 Net realized and unrealized gain (loss) on investments............ (0.90) 0.72 0.17 0.34 (0.14) 0.13 0.70 (0.87) (0.51) -------- -------- ------- ------- ------- ------- ------- ------- -------- Total from Investment Operations................... (0.42) 1.25 0.72 0.88 0.41 0.68 1.32 (0.50) 0.02 LESS DISTRIBUTIONS Dividends from net investment income........................... (0.48) (0.56) (0.55) (0.54) (0.55) (0.51) (0.66) (0.37) (0.53) Dividends in excess of net investment income................ (0.07) -- -- -- -- -- -- -- -- Distributions from realized gains............................ (0.19) (0.10) (0.09) -- -- -- (0.03) -- -- Returns of capital................ -- -- -- (0.10) (0.08) (0.13) -- -- -- -------- -------- ------- ------- ------- ------- ------- ------- -------- Total Distributions............ (0.74) (0.66) (0.64) (0.64) (0.63) (0.64) (0.69) (0.37) (0.53) -------- -------- ------- ------- ------- ------- ------- ------- -------- Net asset value, end of period.... $ 8.82 $ 9.98 $ 9.39 $ 9.31 $ 9.07 $ 9.29 $ 9.25 $ 8.62 $ 9.49 ======== ======== ======= ======= ======= ======= ======= ======= ======== TOTAL RETURN(3)................... (4.44)% 13.69% 7.89% 10.07% 4.60% 7.54% 15.88% (5.13)% 0.12% ======== ======== ======= ======= ======= ======= ======= ======= ======== RATIOS AND SUPPLEMENTAL DATA Ratio of expenses to average net assets........................... 1.85% 2.06% 2.17% 2.36% 2.20% 2.32% 2.05% 0.82% 1.07% Ratio of expense reimbursement to average net assets............... -- -- -- -- -- -- -- (0.21)% (0.51)% -------- -------- ------- ------- ------- ------- ------- ------- -------- Ratio of net expenses to average net assets....................... 1.85% 2.06% 2.17% 2.36% 2.20% 2.32% 2.05% 0.61% 0.56% ======== ======== ======= ======= ======= ======= ======= ======= ======== Ratio of net investment income to average net assets............... 5.36% 5.23% 5.78% 5.61% 5.96% 5.79% 6.66% 4.05% 4.96% Portfolio turnover................ 62 100% 40% 83% 41% 29% 82% 42% 153% Net Assets, end of period (in thousands)................... $151,069 $113,442 $65,933 $51,467 $35,820 $29,841 $24,278 $15,026 $ 15,753 - --------------- (1) Financial highlights, including total return, are for the period from May 1, 1987 (date of Fund's initial offering of shares to the public as a Portfolio of the Corporation) to October 31, 1987 and have not been annualized. (2) Financial highlights, including total return, are for the period from August 25, 1986 (date of Fund's initial offering of shares to the public) to April 30, 1987 and have not been annualized. (3) Total return does not include the effect of the initial sales charge for Class A Shares nor the contingent deferred sales charge for Class B Shares. (4) Financial highlights, including total return, have not been annualized. Per share information has been calculated using the average number of shares outstanding. Portfolio turnover is for the year ended October 31, 1994.
4 65 FINANCIAL HIGHLIGHTS - ---------------------------------------------------------------------------- Financial highlights for John Hancock High Yield Tax-Free Fund (formerly Transamerica High Yield Tax-Free Fund), in the case of Class A Shares, for October 31, 1993 through October 31, 1994, has been audited by Ernst & Young LLP, independent auditors, whose unqualified report thereon as well as other financial statements of the Fund are included in the Statement of Additional Information.
PERIOD FROM DECEMBER 31, 1993 TO OCT. 31, 1994(4) ------------------ Per share income and capital changes for a Class A Share outstanding during the period: Net asset value, beginning of period.......................... $ 9.85 INCOME FROM INVESTMENT OPERATIONS Net investment income........... 0.48 Net realized and unrealized loss on investments................ (0.94) -------- Total from Investment Operations.............. (0.46) LESS DISTRIBUTIONS Dividends from net investment income........................ (0.48) Dividends in excess of net investment income............. (0.09) -------- Total Distributions....... (0.57) -------- Net asset value, end of period.... $ 8.82 ======== TOTAL RETURN(3)................... (4.82)% ======== RATIOS AND SUPPLEMENTAL DATA Ratio of expenses to average net assets...................... 0.96% Ratio of net investment income to average net assets.............. 5.08% Portfolio turnover................ 62% Net Assets, end of period (in thousands)...................... $ 15,401
See page 4 for footnotes 3 and 4. INVESTMENT OBJECTIVES AND POLICIES - -------------------------------------------------------------------------------- The Fund's primary investment objective is to obtain a high level of current income that is largely exempt from federal income taxes and is consistent with the preservation of capital. The Fund pursues this objective by normally investing substantially all of its assets in medium and lower quality obligations, including bonds, notes and commercial paper, issued or on behalf of states, territories and possessions of the United States, The District of Columbia and their political subdivisions, agencies or instrumentalities, the interest on which is exempt from federal income tax ("tax-exempt securities"). The Fund seeks as its secondary objective preservation of capital by purchasing and selling interest rate futures contracts ("financial futures") and tax-exempt bond index futures contracts ("index futures"), and by purchasing and writing put and call options on debt securities, financial futures, tax-exempt bond indices and index futures to hedge against changes in the general level of interest rates. There is no assurance that the Fund will achieve its investment objectives. As a fundamental policy, the Fund invests, in normal circumstances, at least 80% of its total assets in municipal bonds rated, at the time of purchase, "A," "Baa" or "Ba" by Moody's Investor Services ("Moody's"); or "A," "BBB" or "BB" by Standard and Poor's Ratings Group ("S&P"); or if unrated, that are of comparable quality as determined by the Investment Adviser ("Municipal Bonds.") Municipal Bonds rated lower than "Ba" or "BB" may be bought by the Fund. However, the Fund will limit its investments in such securities to not more than 5% of its total assets at the time of purchase. The Fund may invest in Municipal Bonds with ratings as low as "CC" by S&P or "Ca" by Moody's, but will invest in securities rated lower than "Ba" or "BB" only where, in the opinion of the Investment 5 66 Adviser, the rating does not accurately reflect the true quality of the credit of the issuer and the quality of such securities is comparable to that of securities rated at least "Ba" or "BB". A general description of Moody's and S&P's ratings is set forth in Appendix B. Municipal Bonds rated lower than Baa or BBB by Moody's or S&P respectively and unrated Municipal Bonds of comparable quality (collectively referred to as "high yield/high risk securities") generally have larger price fluctuations and involve increased risks to the principal and interest than do higher rated securities. Many of these securities are considered to be speculative investments. In general, these risks include: (1) substantial market price volatility (2) changes in credit status, including weaker overall credit condition of issuers and risks of default and (3) industry, market and economic risks, including limited liquidity and secondary market support. The risks of high yield securities, as discussed in greater detail below (see "Risk Factors"), should be carefully considered by investors. During the fiscal year ended October 31, 1994, the percentages of the Fund's assets invested in securities rated in particular rating categories by Moody's (or, if not rated by Moody's, by S&P) were, on a weighted average basis, as follows*:
PERCENTAGE OF TOTAL MOODY'S (OR S&P) RATINGS INVESTMENTS ------------------------ ---------- Aaa................................. 9.28% Aa.................................. 1.69% A................................... 2.94% Baa................................. 9.92% (BBB+, BBB, BBB-)................. 2.40% Ba.................................. 11.09% (BB+, BB, BB-).................... 1.63% Below Ba............................ 1.60% Not Rated**......................... 59.45% --------- Total............................... 100.00% - --------------- * Based on average of month end portfolio holdings during fiscal year. Asset composition does not represent actual holdings on 10/31/94 nor does it imply that the overall quality of portfolio holdings is fixed (see discussion on ratings). ** Of the amount not rated by either Moody's or S&P, the following percentages of the Fund's assets represent quality standards attributed by the Investment Adviser to such non-rated securities at the time of purchase: 1.04%, AAA; 1.82%, A; 21.50%, Baa; 34.03%, Ba; and 1.06%, below Ba.
In addition to the hedging strategies employed by the Fund in pursuit of its secondary objective of preservation of capital, the Investment Adviser can purchase bonds rated BBB and BB or Baa and Ba, where based upon price, yield and its assessment of quality, investment in such bonds is determined to be consistent with the Fund's secondary objective of preservation of capital. To the extent that the Fund purchases, retains or disposes of such bonds for this purpose, the Fund may not earn as high a yield as might otherwise be obtainable from lower quality securities. The Fund will not invest more than 10% of its total assets (computed at current value) in Municipal Bonds or other tax-exempt securities that are not considered readily marketable. OTHER INVESTMENTS. While the Fund normally will invest primarily in medium and lower quality Municipal Bonds as indicated above, it may invest in a higher quality tax exempt securities particularly, when the difference in returns between rating classifications is very narrow. To the extent that the Fund does not invest in the obligations described above, it will attempt to invest its assets in tax-exempt securities that are rated at least as high as follows: (1) Municipal Commercial Paper rated "MIG-3" by Moody's, or "A-3" by S&P; (2) Municipal Notes rated "MIG-3" by Moody's, or "SP-2" by S&P; and 6 67 (3) Municipal Variable Rate Demand Obligations rated "VMIG-3" by Moody's, or "SP2/A-3" and "A/A-3" by S&P. For temporary purposes (such as pending new investments) or liquidity purposes (such as to meet redemption obligations), the Fund may invest up to 20% of its total assets in taxable short-term debt securities with remaining maturities of one year or less ("money market instruments"), including obligations guaranteed or issued by the U.S. government, its agencies or instrumentalities ("U.S. government securities"), high quality corporate debt securities, high quality commercial paper, certificates of deposit, bankers acceptances and related repurchase agreements. In addition, the Fund may: (1) enter in repurchase agreements and reverse repurchase agreements; (2) invest in restricted securities; (3) lend its portfolio securities; and (4) purchase securities on a "when issued" or on a "forward delivery" basis. These investments and practices, as well as the Fund's options strategies and hedging techniques, are subject to certain limitations and risks which are further described under "Investment Practices, Techniques and Restrictions." For defensive purposes the Fund may temporarily invest more than 20% of the value of its total assets in taxable money market instruments described above to enhance liquidity or preserve capital when, in the Adviser's opinion, it is advisable to do so because of prevailing market conditions so long as at the end of any fiscal quarter, such investments do not exceed 50% of the Fund's total assets. The Fund will not be pursuing its objective of tax exempt income to the extent it invests in taxable securities. The extent to which the Fund will be able to achieve its investment objective depends upon the Investment Adviser's ability to evaluate and develop the information it receives into a successful investment program. The investment objective and primary investment policies are fundamental which means they may not be changed without shareholder approval. The Fund may dispose of investments regardless of the holding period if an issuer's revised credit rating or perceived changes in an issuer's financial prospects or asset value make selling them advisable. Such an investment decision could result in a high portfolio turnover rate during a given period. Disposing of debt securities in these circumstances should not increase direct transaction costs since debt securities are normally traded on a principal basis without brokerage commissions. However, such a transaction involves a mark-up or markdown of the price. Portfolio turnover rates of the Fund are shown in the section "Financial Highlights." The Fund will engage in portfolio trading if it believes a transaction, net of costs (including custodian charges) will help in attaining its investment objective. The Statement of Additional Information also contains the following information: (1) Appendix AA explains short-term obligations and government securities. (2) Appendix BB explains municipal securities. (3) Appendix CC explains various options, futures and forward contracts. (4) Appendix DD explains ratings of various fixed income securities by Moody's and S&P, including short term investments. DESCRIPTION OF TAX EXEMPT SECURITIES. "Tax exempt securities" are debt obligations generally issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies or instrumentalities the interest on which, in the opinion of the bond issuer's counsel (not the Fund's counsel), is exempt from federal income tax. These securities consist of municipal bonds, municipal 7 68 notes and municipal commercial paper (see "Appendix BB" in the Statement of Additional Information) as well as variable or floating rate obligations and participation interests. Variable Or Floating Rate Obligations. Certain of the obligations in which the Fund may invest may be variable or floating rate obligations on which the interest rate is adjusted at predesignated periodic intervals (variable rate) or when there is a change in the market rate of interest on which the interest rate payable on the obligation is based (floating rate). Variable or floating rate obligations may include a demand feature which entitles the purchaser to demand prepayment of the principal amount prior to stated maturity. Also, the issuer may have a corresponding right to prepay the principal amount prior to maturity. The Fund may also invest in more recently developed floating rate instruments which are created by dividing a municipal security's interest rate into two or more different components. Typically, one component, ("floating rate component" or "FRC"), pays an interest rate that is reset periodically through an auction process or by reference to an interest rate index. A second component ("inverse floating rate component" or "IFRC"), pays an interest rate that varies inversely with changes to market rates of interest, in that the interest paid to the IFRC holders is generally determined by subtracting a variable or floating rate from a predetermined amount (i.e., the difference between the total interest paid by the municipal security and that paid by the FRC). The Fund may purchase FRC's without limitation. IFRC's may be purchased (up to 10% of the Fund's total assets) in an attempt to protect against a reduction in the income earned on the Fund's other investments due to a decline in interest rates. The extent of increases and decreases in the value of an IFRC generally will be greater than comparable changes in the value of an equal principal amount of a fixed-rate municipal security having similar credit quality, redemption provisions and maturity. To the extent that such instruments are not, in view of the Investment Adviser and subject to guidelines adopted by the Board of Directors, readily marketable, they will be considered as such for purposes of the Fund's 10% investment restriction on investments in non-readily marketable securities. Participation Interests. The Fund may purchase from financial institutions tax exempt participation interests in tax exempt securities. A participation interest gives the Fund an undivided interest in the tax exempt security in the proportion that the Fund's participation interest bears to the total amount of the tax exempt security. For certain participation interests, the Fund will have the right to demand payment, on a specified number of days' notice, for all or any part of the Fund's participation interest in the tax exempt security, plus accrued interest. The Fund may also invest in Certificates of Participation (COPs) which provide participation interests in lease revenues. Each Certificate represents a proportionate interest in or right to the lease-purchase payment made under municipal lease obligations or installment sales contracts. Typically, municipal lease obligations are issued by a state or municipal financing authority to provide funds for the construction of facilities (e.g., schools, dormitories, office building or prisons) or the acquisition of equipment. The facilities are typically used by the state or municipality pursuant to a lease with a financing authority. Certain municipal lease obligations may trade infrequently. Accordingly, COPs, both rated and unrated, will be purchased and monitored pursuant to analysis by the Adviser and review procedures by the Board which consider various factors in determining the liquidity risk, including: frequency of trading; availability of quotations; the numbers of dealers and their willingness to make markets; the nature of trading activity; the assurance that liquidity will be maintained. In addition, unrated COPs may be considered illiquid unless further determined under the Board's guidelines to be comparable to the Fund's credit quality standards as to: whether the lease can be cancelled; what assurance lease assets can be sold; the 8 69 creditworthiness of the issuing municipality; the likelihood that the municipality will discontinue appropriating funding for the leased property because the property is no longer deemed essential to the operations of the municipality; and the legal recourse in the event of non-appropriation. Participation interests and COPs considered illiquid will be subject to the Funds' 10% limitation on illiquid securities. See "Appendix BB" in the Statement of Additional Information. Callable Bonds. The Fund may purchase and hold callable municipal bonds which contain a provision in the indenture permitting the issuer to redeem the bonds prior to their maturity dates at a specified price which typically reflects a premium over the bonds' original issue price. These bonds generally have call-protection (a period of time during which the bonds may not be called) which usually lasts for 7 to 10 years, after which time such bonds may be called away. An issuer may generally be expected to call its bonds, or a portion of them during periods of relatively declining interest rates, when borrowings may be replaced at lower rates than those obtained in prior years. If the proceeds of a bond called under such circumstances are reinvested, the result may be a lower overall yield due to lower current interest rates. If the purchase price of such bonds included a premium related to the appreciated value of the bonds, some or all of that premium may not be recovered by bondholders, such as the Fund, depending on the price at which such bonds were redeemed. RISK FACTORS GENERAL. The value of the securities held by the Fund, and therefore the Fund's net asset value per share, will fluctuate due to various factors, principally interest rate changes and the ability of the issuers to pay interest and principal on those obligations. Generally a rise in interest rates will result in a decrease in the Fund's net asset value, while a decline in interest rates will result in an increase in the Fund's net asset value. Therefore, at the time of redemption, your shares may be worth more or less than the value at the time of purchase. Because the investment policies and nature of the investments of the Fund involve securities whose values tend to fluctuate more widely than other types of investments, the value of the Fund's shares may be subject to greater fluctuation than other investment companies. HIGH YIELD/HIGH RISK SECURITIES. You should carefully consider your ability to assume the risks of owning shares of a mutual fund which can invest in securities in certain of the lower rating categories. Lower quality ("high yield/high risk") securities, whether rated or unrated, can be subject to greater market fluctuations and risks of loss of income and principal than lower yielding, higher quality fixed income securities. Securities rated BBB by S&P or Baa by Moody's, although considered to be of investment grade quality, have speculative characteristics greater than those of higher quality rated securities, while securities rated lower than BBB or Baa (commonly called "junk bonds") are, to varying degrees, considered predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. This capacity may decline during sustained periods of deteriorating economic conditions or rising interest rates. Ratings given to a security are an assessment of the ability of an issuer to repay interest and principal when due and do not reflect other risks which may affect the security (see "Special Considerations" below). For example, lower quality securities are generally considered to be subject to greater market risk than higher quality securities in times of deteriorating economic conditions and may be less likely to appreciate in value during periods of declining interest rates. In addition, lower quality securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than is the case for higher quality securities. Because of the limitations inherent in the ratings given to securities and that the creditworthiness of issuers of lower rated securities is more problematical than that of issuers 9 70 of higher rated securities, the Fund's investment performance will be dependent primarily on the ability of the Investment Adviser to perform its own evaluation of credit risks. As a result of the possible limited liquidity of high yield/high risk securities, their prices may decline rapidly in the event a significant number of holders of such securities decide to sell. The high yield/high risk securities market has grown primarily during a period of long economic expansion and it is uncertain how it would perform during an economic downturn or sustained period of rising interest rates. In addition, adverse publicity and investor perceptions about lower quality securities, whether or not based on fundamental analysis, may tend to decrease the market value and liquidity of such lower quality securities. If the issuer of a security owned by the Fund defaults, the Fund may incur additional expenses to seek recovery. To the extent there is no established secondary market, there can be thin trading of high yield/high risk securities which would adversely affect the prices of such securities and may present difficulty in the Fund's ability to accurately value its portfolio holdings of high yield/high risk securities at certain times or to dispose of such holdings. There is also the risk that legislation may be enacted limiting the use, or tax and other advantages, of high yield/high risk securities which could have an adverse impact on the high yield/high risk securities market and prices for such securities. For example, past legislation required federally insured savings and loans associations to divest their holdings of high yield/high risk securities. Further information about credit and interest rate risks is described in the Statement of Additional Information. SPECIAL CONSIDERATIONS. The rating limitations applicable to the Fund's fixed income investments apply at the time of acquisition of a security; any subsequent change in the rating or quality of a security will not require the Fund to sell the security. The ratings given to securities by rating agencies represent their respective opinions of the qualities of the securities they undertake to rate and are a generally accepted barometer of risk. Nonetheless, such ratings are general and not absolute standards of quality; their limitations include: (1) ratings are based largely on historical financial data and may not accurately reflect the current financial outlook of the issuer; (2) frequent occurrence of a lag between the time a rating is assigned and the time publication of it is updated; and (3) large differences may be present among the current financial conditions of issuers within each rating category. For these reasons, the Investment Adviser does not rely solely on the ratings assigned by recognized rating agencies in its evaluation and monitoring of the Fund's investments to assure that such Fund's overall portfolio is constituted in a manner consistent with the Fund's investment objectives and policies. Additionally, credit quality limitations applicable to securities do not apply to deposits at the bank or banks in which cash is maintained by the Fund (see "Custodian"). Many issuers of fixed income securities choose not to have their obligations rated. Although unrated securities eligible for purchase by the Fund must be determined to be comparable in quality to securities having specified ratings, the market for unrated securities may not be as broad as for rated securities since many investors rely on rating agencies for credit appraisal. In evaluating the creditworthiness of an issue, whether rated or unrated, the Investment Adviser or Sub-Adviser will take various factors into consideration, which may include, as applicable, the issuer's financial resources, its sensitivity to economic conditions and trends, the operating history of and the community support for the facility financed by the issue, the ability of the issuer's management and regulatory matters. The use of options contracts in an effort to enhance current yield (see "Investment Techniques and Restrictions-Transactions in Options, Futures and Forward Contracts" below) may result in the loss of principal under certain market conditions. The Fund will seek to reduce risks associated with changes in 10 71 interest rates. However these hedging techniques will result in transaction costs and there can be no assurance the interest rate risk will be eliminated. INVESTMENT PRACTICES, TECHNIQUES AND RESTRICTIONS - -------------------------------------------------------------------------------- The Fund's investments are subject to the following practices, techniques and restrictions and may involve certain risks. The Statement of Additional Information contains more detailed information about these practices, including limitations designed to reduce these risks. REPURCHASE AGREEMENTS AND RESTRICTED SECURITIES. When participating in repurchase agreements, the Fund buys securities from a seller (usually a bank or brokerage firm) with the agreement that the seller will repurchase the securities at a predetermined price or yield at a later date. Transactions involving repurchase agreements must be fully collateralized at all times, however the Fund may be subject to various delays and risks of loss if the seller is unable to meet its obligation to repurchase. The Fund may also invest in securities which are restricted as to resale. The registration of such "restricted securities" under the Securities Act of 1933 (the "Securities Act") may be required prior to sale with attendant time delays, and the Fund may have to bear all or a part of the expense of such registration. No more than 10% of the Fund's total net assets may be invested in restricted securities (including other securities not readily marketable) and in repurchase agreements that mature in more than seven days (collectively, "illiquid securities.") Although the Fund may purchase restricted securities which can be offered and sold to "qualified institutional buyers" under Rule 144A of the Securities Act, its present investment restriction limits such investment to the foregoing 10% limitation. LENDING OF PORTFOLIO SECURITIES. The Fund may lend its portfolio securities amounting to not more than 33% of the value of its portfolio securities to approved borrowers (principally broker/dealers) provided these loans are callable at any time and are continuously secured by collateral (cash or government securities) equal to no less than the market value, determined daily, on the securities loaned. The Fund may reinvest any cash collateral in short term highly liquid debt securities. During the period of the loan, the Fund earns income on both the loaned securities and the collateral. Additional income earned by portfolio lending is not tax exempt. Although these transactions must be fully collateralized at all times, they involve some credit risk to the Fund if the borrower should default on its obligation and the Fund is delayed or prevented from recovering the collateral. REVERSE REPURCHASE AGREEMENTS. A reverse repurchase agreement involves the sale of a security by the Fund and its agreement to repurchase the instrument at a specified time and price. The Fund will maintain a segregated account consisting of highly liquid, marketable debt securities to cover its obligations under reverse repurchase agreements with selected firms approved in advance by the Board of Directors. The Fund will use the proceeds to purchase other investments. Reverse repurchase agreements are considered to be borrowings by the Fund and as an investment practice may be considered speculative. The Fund may borrow money for temporary administrative or emergency purposes. To avoid the potential leveraging effects of the Fund's borrowings, additional investments will not be made while borrowings are in excess of 5% of the Fund's total assets. The Fund will limit its investments in reverse repurchase agreements (including any borrowings) to no more than 33 1/3% of its total assets. WHEN ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. In order to help ensure the availability of suitable securities for its portfolio, the Fund may purchase securities on a "when-issued" or "delayed delivery" basis or may purchase 11 72 or sell securities on a forward commitment basis with delivery and payment ("settlement") for the securities taking place in the futures. The Fund does not pay for the securities or start earning interest on them until settlement. Prior to the settlement date, the value of the securities will fluctuate and assets consisting of cash and/or liquid, high grade debt securities will be maintained in a segregated account in an amount sufficient to meet the purchase. TRANSACTIONS IN OPTIONS AND FUTURES OPTIONS ON SECURITIES. The Fund may write (sell) covered call and cash secured put options and purchase call and put options on debt securities. The Fund will write options on its portfolio securities for the purpose of protecting the value of its portfolio. If the price of the underlying security moves adversely to the Fund's position, the option may be exercised and the Fund will be required to purchase or sell the underlying security at a disadvantageous price, which may only be partially offset by the amount of the premium if at all. The Fund may also write straddles, which are combinations of put and call options on the same security. These transactions can generate additional premium income but also present an increased risk. The Fund may also purchase put or call options in anticipation of changes in interest rates, which may adversely affect the value of its portfolio securities or the prices of securities the Fund wants to purchase at a later date. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise or liquidation of the option. Unless the price of the underlying security changes sufficiently, the option may expire without value to the Fund. OPTIONS ON MUNICIPAL BOND INDEXES. The Fund may write (sell) covered call and put options and purchase call and put options on municipal bond indexes (securities index). The Fund may write options on securities indexes in an attempt to protect its portfolio against declines in the value of securities it owns, or increases in the value of securities to be acquired. When the Fund writes an option on a securities index and the value of the index moves adversely to the Fund's position, the option will not be exercised. The Fund will either close out the option at a profit or allow it to expire unexercised. The Fund will thereby retain the amount of the premium, less related transaction costs, which will increase its gross income and offset part of the reduced value of the portfolio securities or the increased cost of securities to be acquired. Such transactions, however, will constitute only partial hedges against adverse price fluctuations. This is because any of these fluctuations will be offset only to the extent of the premium received by the Fund for the writing of the option. In addition, if the value of an underlying index moves adversely to the Fund's option position, the option may be exercised and the Fund will experience a loss that may only be partially offset, if at all, by the amount of the premium received. The Fund may also purchase put or call options on securities indexes in order to hedge its investments against a decline in value or to attempt to reduce the risk of missing a market or industry segment advance. The Fund's possible loss in either case will be limited to the premium paid for the option, plus related transaction costs. FUTURES CONTRACTS. The Fund may enter into interest rate futures contracts and municipal bond index futures contracts for hedging purposes ("Futures Contracts"). Purchases or sales of municipal bond index futures contract are used to attempt to protect the Fund's current or intended municipal bond index investments from broad fluctuations in securities prices. Interest rate futures contracts are purchased or sold to attempt to hedge against the effects of interest or exchange rate changes on the Fund's current or intended investments in fixed income securities. The adverse effects of an anticipated decrease in the value of portfolio securities may be offset, in whole or in part, by gains on the 12 73 sale of Futures Contracts. This applies when the decrease occurs as a result of a general municipal bond market decline or a general increase in interest rates. Conversely, the increased cost of portfolio securities to be acquired may be offset, in whole or in part, by gains on Futures Contracts purchased by the Fund. This applies when the increase is caused by a general rise in the municipal bond market or a general decline in interest rates. The Fund will incur transaction costs when it purchases and sells Futures Contracts. It will also be required to maintain margin deposits (see "Risks of Transactions in Options and Futures"). OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write options on interest rate futures contracts and municipal bond index futures contracts ("Options on Futures Contracts.") Such investment strategies will be used as a hedge and not for speculation. Put and call options on Futures Contracts may be traded by the Fund in order to protect against declines in the values of portfolio securities or against increases in the cost of securities to be acquired. Purchases of options on Futures Contracts may present less risk in hedging the Fund's portfolio than the purchase and sale of the underlying Futures Contracts since the potential loss is limited to the amount of the premium plus related transaction costs. The writing of these options, however, does not present less risk than the trading of Futures Contracts. It will constitute only a partial hedge, up to the amount of the premium received and if an option is exercised, the Fund may suffer a loss on the transaction. RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES. Although the Fund will enter into transactions in Futures Contracts, Options on Futures Contracts and certain options solely for hedging purposes, their use does involve certain risks. For example, a lack of correlation between the value of an instrument underlying an option or Futures Contract and the assets being hedged or unexpected adverse price movements, could render the Fund's hedging strategy unsuccessful, thus resulting in losses. The Fund also may enter into transactions in options on debt securities for other than hedging purposes. This involves greater risk. In addition, there can be no assurance that a liquid secondary market will exist for a contract purchased or sold. Therefore, the Fund may be required to maintain a position until exercise or expiration, which could result in losses. Transactions in Futures Contracts, Options on Futures Contracts and options are subject to other risks as well. The Fund will not engage in transactions in futures contracts and options on futures for speculation, but only for hedging or other permissible risk management purposes. All of the Fund's futures contracts and options thereon will be traded on a U.S. commodity exchange or board of trade. The Fund will not engage in a futures or option transaction if, immediately thereafter, the sum of initial margin deposits on existing positions and premiums paid for options on futures would exceed 5% of the Fund's total assets. The potential loss from writing options on futures transactions is potentially unlimited and may exceed the amount of the premium received. The Fund will not purchase a call or put option if as a result the premium paid for the option together with premiums paid for all other options, options on municipal indexes, interest rate futures, municipal bond index futures and options thereon then held by the Fund, exceed 10% of the Fund's total net assets. When the Fund purchases a futures contract or a call option on a futures contact, an amount of cash or U.S. Government securities equal to the market value of the futures contract will be deposited in a segregated account with the Fund's custodian to collateralize the position. The Fund's risks in entering into transactions in options and futures contracts are set forth in greater detail in the Statement of Additional Information. 13 74 INVESTMENT RESTRICTIONS. The Fund has adopted certain fundamental investment restrictions which are described in detail in the Statement of Additional Information and may not be changed without shareholder approval. Among the restrictions are provided that the Fund may not: (1) borrow money in an amount in excess of 15% of its total assets; and (2) invest more than 25% of its total assets in any one industry. If a percentage restriction, except a restriction regarding borrowing, on investments or utilization of assets is followed at the time an investment is made or assets are utilized, a later change in percentage resulting from changes in the value of the Fund's portfolio securities will not be considered a violation of policy. THE FUND AND ITS MANAGEMENT - ------------------------------------------------------------------------------- GENERAL. The Fund is a series of John Hancock Series, Inc., (the "Corporation"), an open-end diversified management investment company organized as a Maryland corporation (see "Additional Information-Organization"). The Corporation's Board of Directors supervises the management and affairs of the Fund. The officers of the Corporation are responsible for the Fund's daily business operations under the overall direction of the Directors. Information about each of the Directors and officers is set forth in the Statement of Additional Information. INVESTMENT ADVISER. John Hancock Advisers, Inc. is the Investment Adviser of the Fund and is compensated for its advisory services at varying annual rates of the Fund's average daily net assets: .625% on assets up to $75 million, .5625% on assets of $75 million up to $150 million and .50% on assets of $150 million and over. The Investment Adviser manages the Fund's assets, provides administrative services and supervises the Fund's daily business affairs. Investment decisions are made by a committee with no one person being solely responsible for making recommendations to the committee. The Investment Adviser was organized in 1968 and is an indirect wholly owned subsidiary of John Hancock Mutual Life Insurance Company, a financial services company. The Investment Adviser provides the Fund and other investment companies in the John Hancock group of funds, with investment research and portfolio management services. John Hancock Funds, Inc. ("John Hancock Funds") distributes shares for all of the John Hancock mutual funds through selected broker/dealers ("Selling Brokers"). Certain Fund officers are also officers of the Investment Adviser and John Hancock Funds. For the fiscal year ended October 31, 1994, the Fund paid an advisory fee of .59% of the Fund's average net assets to the Fund's former investment adviser. In addition, during the fiscal year ended October 31, 1994, the Fund reimbursed Transamerica Fund Management Company (the Fund's investment adviser until December 1994) ("TFMC"), pursuant to a separate Administrative Services Agreement, for actual expenses incurred in providing certain administrative services such as accounting and bookkeeping services, communications in response to shareholders inquiries and certain printing services for reports of the Fund. For the fiscal year ended October 31, 1994, administrative services fees paid by the Fund to TFMC amounted to 0.06% of its average daily net assets. The Administrative Services Agreement was terminated effective January 16, 1995. SUB-ADVISER. On October 18, 1994, the Board of Directors of the Corporation approved, on behalf of the Fund, a new sub-advisory agreement (the "Sub-Advisory Agreement") between the Fund's Investment Adviser and Transamerica Investment Services, Inc. ("TIS"), the Los Angeles-based 14 75 investment management subsidiary of Transamerica Corporation ("Transamerica"). The Sub-Advisory Agreement was approved by a majority of the Fund's shareholders at a meeting held on December 16, 1994. The Sub-Advisory Agreement will be terminated on or about April 17, 1995. Pursuant to the Sub-Advisory Agreement between TIS and the Investment Adviser, TIS is responsible for providing investment advice with respect to the assets of the Fund and managing the investment operations of the Fund. Investment decisions are made by a committee with no one person being solely responsible for making recommendations to the committee. The Sub-Advisory Agreement provides for reimbursement to TIS by the Investment Adviser of any costs and expenses incurred in the performance of its duties as described in, and subject to the terms of, the Sub-Advisory Agreement. No portion of the amount paid to TIS is borne by the Fund. TIS is responsible for managing over $25 billion in assets for Transamerica's insurance companies and included among such assets as well as those managed on behalf of registered investment companies, over $1 billion represents municipal securities. TIS has more than 20 years of municipal bond credit analysis and management experience. DISTRIBUTION PLANS. The Class A and Class B shareholders have adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under these Plans, the Fund will pay distribution and service fees at an aggregate annual rate of 0.25% of the Class A Share's average daily net assets and an aggregate annual rate of 1.00% of the Class B Shares average daily net assets. In each case, up to 0.25% is for service expenses and the remaining amount is for distribution expenses. The distribution fees will be used to reimburse John Hancock Funds for its distribution expenses including but not limited to: (i) initial and ongoing sales compensation to Selling Brokers and others (including affiliates of John Hancock Funds) engaged in the sale of Fund shares, (ii) marketing, promotional and overhead expenses incurred in connection with the distribution of shares of the Fund, (iii) unreimbursed distribution expenses under the Fund's prior distribution plans, (iv) distribution expenses incurred by other investment companies which sell all or substantially all of its assets to merge or otherwise engage in a reorganization transaction with the Fund and (v) with respect to Class B Shares only, interest expenses on unreimbursed distribution expenses. The service fees will be used to compensate Selling Brokers for providing personal and account maintenance services to shareholders. In the event John Hancock Funds is not fully reimbursed for payments made or expenses it incurs under the Class A Plan, these expenses will not be carried beyond twelve months from the date they were incurred. These unreimbursed expenses under the Class B Plan will be carried forward together with interest on the balance of these unreimbursed expenses. Applicable distribution fees, in an amount not exceeding the annual limitation, are accrued each day as an expense of the Class B Shares and reduce the net assets of the fund attributable to the Class B Shares. However, in accordance with generally accepted accounting principles, the Fund does not treat the amount of Distribution Fees exceeding the annual limitation as a liability of the Fund and does not reduce the current net assets of the Fund attributable to the Class B Shares by such amount, although it may become payable in the future, because the standards for accrual of a liability under these accounting principles have not been satisfied due to contingencies as to payment of such amount. Under the Class B Plan, unreimbursed distribution expenses as of October 31, 1994 amounted to $6,227,263 (4.12% of the Fund's Class B net assets at that date). In order to limit the higher ongoing costs associated with an investment in Class B Shares, the Fund implements arrangements under which Class B Shares are automatically exchanged, on a tax-free basis, for Class A Shares at the end of the eight year period following the initial purchase of Class B 15 76 Shares. (See "Shareholder Services -- Class B Shares Automatic Exchange".) For the fiscal year ended October 31, 1994, payments made by the Fund under the former Class A Plan amounted to 0.21% of the average daily net assets attributable to Class A Shares. For the fiscal year ended October 31, 1994, total payments made by the Fund under the former Class B Plan amounted to 0.98% of its Class B average daily net assets. In addition, for the fiscal year ended October 31, 1994, the former Distributor received contingent deferred sales charges from redemptions of shares of the Fund in an amount equal (on an annual basis) to 0.18% of the Fund's Class B average daily net assets. EXPENSES OF THE FUND. The Fund's expenses, which are accrued daily, are deducted from total income before dividends are paid. These expenses, include, but are not limited to: fees paid to the Investment Adviser; directors' fees; taxes; distribution, brokerage and legal fees; custodian and auditing fees; administrative services fees; transfer agency fees and other expenses. For the ten-month period ended October 31, 1994 in the case of Class A Shares and the fiscal year ended October 31, 1994 in the case of Class B Shares, total expenses of the Fund amounted, respectively, to 0.96% of Class A Shares and 1.85% of Class B Shares average daily net assets. PORTFOLIO TRANSACTIONS. The primary consideration in choosing brokerage firms to carry out the Fund's transactions is execution at the most favorable prices, taking into account the broker's professional ability and quality of service. Consideration may also be given to the broker's sale of shares of the Fund. Pursuant to procedures determined by the Board of Directors, the Investment Adviser may place securities transactions with brokers affiliated with the Investment Adviser. These brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc. and Sutro & Company, Inc. which are indirectly owned by John Hancock Mutual Life Insurance Company, which in turn indirectly owns the Investment Adviser. (For a further discussion, see the Statement of Additional Information -- "Portfolio Transactions"). INFORMATION ABOUT SHARES OF THE FUND - ------------------------------------------------------------------------------- NET ASSET VALUE The net asset value of the Fund is computed once daily on each day that the New York Stock Exchange is open for business as of the close of trading (presently 4:00 p.m. New York time). The Fund will also compute its net asset value on other days if a purchase or redemption request is received on that day and there is a sufficient degree of trading in securities held by the Fund. Net asset value per share is calculated by dividing the market or fair value of all of the Fund's portfolio securities plus the value of its other assets (including dividends and interest received or accrued), less all liabilities (including accrued expenses but excluding capital) by the number of shares of the Fund outstanding. The Board of Directors has established procedures for the valuation of the Fund's securities, based in general on market or estimated value (see "Net Asset Value" in the Statement of Additional Information). Although the legal rights of Class A and Class B Shares will be identical, the different expenses borne by each class will result in different net asset values and dividends. The net asset value of Class B Shares will generally be lower than the net asset value of Class A Shares as a result of the larger distribution fee accrual with respect to Class B Shares. (However, Class B shareholders will generally receive more shares at the time of purchase.) It is expected, however, that the net asset value per share of the two classes will tend to converge immediately after the recording of dividends which will differ by approximately the amount of the 16 77 distribution expense accrual differential between the classes. PURCHASE OF SHARES GENERAL. Shares of the Fund will be offered at a price equal to their net asset value (next determined following receipt of an order by The Shareholder Services Group (the "Transfer Agent") or the investor's dealer) plus a sales charge which, at the option of the purchaser, may be imposed either at the time of purchase (the "initial sales charge alternative") as described below or on a contingent deferred basis (the "deferred sales charge alternative"), as described under "Redemption and Repurchase of Shares". Shares of the Fund are offered continuously for sale by John Hancock Funds and are available for purchase through eligible financial service firms such as securities broker/dealer firms and banks which have entered into sales agreements with John Hancock Funds. Dealers are responsible for transmitting orders promptly (orders transmitted to and received by the Transfer Agent prior to 4:00 p.m. New York time will receive that day's purchase price.) John Hancock Funds, at its expense, may provide additional promotional incentives or payments to dealers that sell shares of the Fund. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares of the Fund or other John Hancock mutual funds. You may purchase shares by mailing a check, made payable to the Fund (noting the existing account number), and if opening a new account a completed application form, to the Transfer Agent either at the post office address shown on the back page of this Prospectus; or if delivered by express mail, the street address: One American Express Plaza, Providence, Rhode Island 02903. The initial purchase must be at least $1,000 with subsequent investments of no less than $50. These minimum amounts are reduced for accounts of participants in certain labor unions and other membership organizations to $250, initial and $25, subsequent. Programs providing regular periodic investments, including a payroll deduction plan, systematic exchanges or investment by bank draft, have reduced investment minimums. (See "Shareholder Services -- Automatic Investment Plan, Systematic Exchange Program and Payroll Deduction Plans".) Certificates for shares will not be issued unless you so request in writing. The Fund's Board of Directors reserves the right to change or waive the minimum investment requirements and to reject any order for purchase of shares (including wire purchases) when in its judgement such rejection is in the Fund's best interest. FEDWIRE PURCHASES. You may make payment for initial and subsequent investments by federal funds wire. You should first notify Account Services (1-800-343-6840) of the new account request (if applicable) and the intended wire purchase. To assure proper credit, banks wiring federal funds should be instructed to include: (1) name of the Fund, (2) name of the shareholder (as registered exactly in the account), or if opening an account, the name and address in which the account is being registered and the taxpayer identification number of the investor (a completed application must be mailed to the Transfer Agent after completing the wire arrangement); and (3) shareholder account number. Federal funds may be wired to:* Boston Safe Deposit and Trust Company ("BSDT") ABA Routing Number: 011001234 Account Number: 159565 * Except during such times or holidays when BSDT is not open for business. 17 78 ALTERNATIVE PURCHASE PLAN You can purchase shares of the Fund at a price equal to their net asset value per share, plus a sales charge. At your election, this charge may be imposed either at the time of the purchase (see "Initial Sales Charge Alternative -- Class A Shares") or on a contingent deferred basis (see "Deferred Sales Charge Alternative -- Class B Shares"). If you do not specify on your account application which class of shares you are purchasing, it will be assumed that you are investing in Class A Shares. CLASS A SHARES. If you elect to purchase Class A Shares, you will incur an initial sales charge unless the amount you purchase is $1 million or more. If you purchase $1 million or more of Class A Shares you will not be subject to an initial sales charge, but you will incur a sales charge if you redeem your shares within one year of purchase. Class A Shares are subject to ongoing distribution and service fees at a combined annual rate of up to .25% of the Fund's average daily net assets attributable to the Class A Shares. Certain purchases of Class A Shares qualify for reduced initial sales charges. See "Reduced Initial Sales Charge." CLASS B SHARES. You will not incur a sales charge when you purchase Class B Shares, but the shares are subject to a sales charge if you redeem them within six years of purchase (the "contingent deferred sales charge" or the "CDSC"). Class B Shares are subject to ongoing distribution and service fees at a combined annual rate of up to 1.00% of the Fund's average daily net assets attributable to the Class B Shares. Investing in Class B Shares permits all of your dollars to work from the time you make your investment, but the higher ongoing distribution fee will cause these shares to have a higher expense ratio than that of Class A Shares. To the extent that any dividends are paid by the Fund, these higher expenses will also result in lower dividends than those paid on Class A Shares. FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE. The alternative purchase arrangement allows you to choose the most beneficial way to buy shares given the amount of your purchase, the length of time that you expect to hold your shares and other circumstances. You should consider whether, during the anticipated life of your Fund Investment, the accumulated fees on Class B Shares would be less than the initial sales charge and accumulated fees on Class A Shares purchased at the same time and to what extent this differential would be offset by the Class A Shares' lower expenses. To help you make this determination, the table under the caption "Fund Expenses" gives examples of the charges applicable to each class of shares. Class A Shares will normally be more beneficial if you qualify for a reduced sales charge. See "Reduced Initial Sales Charge." Class A Shares are subject to lower distribution and service fees and, accordingly, pay correspondingly higher dividends per share, to the extent any dividends are paid. However, because Initial Sales Charges are deducted at the time of purchase, you would not have all of your funds invested initially and, therefore, would initially own fewer shares. If you do not qualify for reduced initial sales charges and expect to maintain your investment for an extended period of time you might consider purchasing Class A Shares because the accumulated distribution and service charges on Class B Shares may exceed the initial sales charge and accumulated distribution and service charges on Class A Shares during the life of your investment. Alternatively, you might determine that it would be more advantageous to purchase Class B Shares in order to have all of your funds invested initially, although remaining subject to higher distribution fees and, for a six-year period, a CDSC. In the case of Class A Shares, distribution expenses that John Hancock Funds incurs in connection with the slae of the shares will be paid from the proceeds of the initial sales charge and the ongoing distribution and service fees. In the case of Class B Shares expenses will be paid from the proceeds of the 18 79 ongoing distribution and service fees, as well as the CDSC incurred upon redemption within six years of purchase. The purpose and function of the Class B Shares' CDSC and ongoing distribution and service fees are the same as those of the Class A Shares' initial sales charge and ongoing distribution and service fees. Sales personnel distributing the Fund's shares may receive different compensation for selling each class of shares. Dividends, if any, on Class A and Class B Shares will be calculated in the same manner, at the same time and on the same day and will be in the same amount. However, each class will bear only its own distribution and service fees, and shareholder meeting expenses and incremental transfer agency costs. See "Dividends, Distributions and Taxes." INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The offering price you pay for Class A Shares of the Fund equals the NAV plus a sales charge as follows:
COMBINED REALLOWANCE REALLOWANCE SALES SALES AND SERVICE TO SELLING CHARGE AS A CHARGE AS A FEE AS A BROKER AS AMOUNT INVESTED PERCENTAGE PERCENTAGE OF PERCENTAGE A PERCENTAGE (INCLUDING AT OFFERING THE AMOUNT OF OFFERING OF OFFERING SALES CHARGE) PRICE INVESTED PRICE(+) PRICE(*) -------------- ---------- ----------- ------------- ---------- Less than $100,000........... 4.75% 4.99% 4.25% 4.01% $100,000 to $249,999......... 3.75% 3.90% 3.25% 3.01% $250,000 to $499,999......... 2.75% 2.83% 2.35% 2.11% $500,000 to $999,999......... 2.00% 2.04% 1.75% 1.51% $1,000,000 and over.......... 0.00%(**) 0.00%(**) (***) 0.00%(***) - --------------- (*) Upon notice to broker-dealers with whom it has sales agreements ("Selling Brokers"), John Hancock Funds may reallow an amount up to the full applicable sales charge. A Selling Broker to whom substantially the entire sales charge is reallowed or who receives these incentives may be deemed to be an underwriter under the Securities Act of 1933. (**) No sales charge is payable at the time of purchase in Class A Shares of $1 million or more, but a contingent deferred sales charge may be imposed in the event of certain redemption transactions within one year of purchase. See "Purchases of $1 Million or More." (***) John Hancock Funds may pay a commission and first year's service fee (as described in (+) below) to Selling Brokers who initiate and are responsible for purchases of $1 million or more in aggregate. See "Purchases of $1 Million or More" below. (+) At the time of sale, John Hancock Funds pays to Selling Brokers the first year's service fee in advance, in an amount equal to 0.25% of the next assets invested in the Fund and thereafter pays the service fee periodically in arrears in an amount up to 0.25% of the Fund's average annual net assets. Selling Brokers receive the fee as compensation for providing personal and account maintenance services to shareholders.
Until March 31, 1995, John Hancock Funds is continuing a sales incentive program in which non-cash concessions in the form of an all-expense-paid trip to a North American resort location will be awarded to participating broker/dealers and financial institutions achieving certain specified sales levels in shares of certain funds formerly managed by TFMC upon which (1) an initial sales charge has been paid or (2) a charge may be applicable upon redemption and who had sales agreements 19 80 with the Fund's former distributor. Participation in the incentive program is entirely optional on the part of the broker/dealers and financial institutions. Copies of the incentive program which contain more complete information about the terms and conditions of the program, including qualifying levels and specific awards and eligible funds, may be obtained by investment representatives by contacting John Hancock Funds. John Hancock Funds will make these incentive payments out of its own resources. Other than distribution fees, the Funds do not bear distribution expenses. John Hancock Funds will pay certain affiliated Selling Brokers at an annual rate of up to 0.05% of the daily net assets of accounts attributable to these brokers. Purchases of $1 Million or More. On purchases by a single purchaser aggregating $1 million or more, John Hancock Funds will pay securities dealers an amount on a cumulative basis equal to 1% of the first $3 million, plus .5 of 1% of the next $2 million, plus .25 of 1% on amounts over $5 million. With respect to shares purchased at the $1 million plus breakpoint, a contingent deferred sales charge ("CDSC") will be imposed on the proceeds of the redemption of certain shares so purchased if they are redeemed within 12 months of the end of the calendar month of their purchase, in an amount equal to 1% of the lesser of (a) the net asset value of the shares at the time of purchase or (b) the net asset value of the shares at the time of redemption ("CDSC Shares"). The CDSC would be deducted from the redemption proceeds otherwise payable to the shareholder and would be retained by John Hancock Funds. In addition, no CDSC will be imposed when a shareholder redeems (a) CDSC shares acquired through reinvestment of income dividends or capital gains distributions; and (b) shares acquired by exchange from any mutual fund sold with an initial sales charge and distributed by John Hancock Funds. The CDSC does not apply to purchases at net asset value described under "Waiver of Initial Sales Charge" and will be waived in the case of redemptions of shares in connection with (i) distributions to participants or beneficiaries of certain qualified retirement plans, and returns of excess contributions made to these plans, and (ii) involuntary redemption of shares if the aggregate net asset value of shares held in the account is less than the required minimum. In determining whether a CDSC is payable on any redemption, the Fund will first redeem shares not subject to any charge. Although any CDSC shares being exchanged are not subject to any charge, they will be subject to the applicable CDSC when the acquired shares are eventually redeemed. For purposes of calculating the CDSC on these redemptions, the original purchase date of the initial fund investment will be used in lieu of the date the redeemed shares were acquired by exchange. Reduced Initial Sales Charges. If you choose the initial sales charge alternative, you are entitled to pay reduced sales charges shown in the above table through several available purchase plans: Concurrent Purchases, Rights of Accumulation, Statement of Intention and Group Purchases. You and your immediate family may combine Concurrent Purchases of Class A Shares of the Fund and Class A Shares (and shares subject to front-end sales charges) of certain other mutual funds which are managed by the Investment Adviser ("other John Hancock funds" as defined under "Shareholder Services -- Exchange Privilege"), for purposes of qualifying for, and determining, a reduced sales charge provided that the purchases are made through a single dealer and any purchase amounts satisfy the minimum investment amount of the respective Fund. Further information about these purchase plans is set forth under "Purchase of Shares" in the Statement of Additional Information (see also Statement of Intention and Rights of Accumulation in the Account Application and its Terms and Conditions in the back of the Prospectus). 20 81 Waiver of Initial Sales Charges. Class A Shares of the Fund may be purchased without paying an initial sales charge by the following: - - A Director or Officer of the Corporation; a director or officer of the Investment Adviser and its affiliates or Selling Brokers; employees or sales representatives of any of the foregoing; retired officers, employees or directors of any of the foregoing; a member of the immediate family of any of the foregoing; or any Fund, pension, profit sharing or other benefit plan for the individuals described above. - - Any state, county, city or any instrumentality, department, authority or agency of these entities (an "eligible governmental authority") which is prohibited by applicable investment laws from paying a sales charge or commission when it purchases shares of any registered investment management company. - - A broker, dealer or registered investment adviser that has entered into an agreement with John Hancock Funds providing specifically for the use of Fund shares in fee-based investment products made available to their clients. - - A former participant in an employee benefit plan with John Hancock Mutual Funds, when he/she withdraws from his/her plan distributions directly to the Funds. - - Class A Shares of the Funds may also be purchased without an initial sales charge in connection with certain liquidation, merger and acquisition transactions involving other investment companies or personal holding companies. - - Existing full service clients of John Hancock Mutual Life Insurance Company group annuity contract holders as of September 1, 1994, may purchase Class A Shares with no initial sales charge, but if the shares are redeemed within 12 months after the end of the calendar year in which the purchase was made, a contingent deferred sales charge will be imposed at the rate for Class A Shares described above in the section "Purchases of $1 Million or More." REDEMPTION AND REPURCHASE OF SHARES GENERAL. You may redeem shares of the Fund in any amount at any time at the net asset value per share next determined after the redemption request is received in proper form by the Transfer Agent. See "Net Asset Value." In certain cases, however, redemption proceeds from the Class B Shares will be reduced by the amount of any applicable contingent deferred sales charge (see "Class B Shares Contingent Deferred Sale Charge" below.) If you hold both Class A and Class B Shares of the Fund, any request for redemption must specify whether Class A or Class B Shares are to be redeemed. Failure to specify which class, or insufficient shares of the class specified, will result in the redemption request being delayed until the Transfer Agent receives further written instructions from you. Payment proceeds will be mailed within seven (7) days following receipt of all required documents. However, in the case of redemptions of shares which were recently purchased by check, the payment of the redemption proceeds may be delayed for a period of up to 15 days or more, only until the check used to purchase the shares has been cleared for payment by your bank. The Fund will not forward proceeds by FedWire Redemption (described below), and the redemption will not be effective, for a period of 15 days after receipt of the purchase check. This delay in payment of redemption proceeds can be avoided if shares are purchased by means of a certified check or federal funds wire. Under unusual circumstances, the Fund may suspend redemptions or postpone payment for up to seven days or more, as permitted by securities laws. REDEMPTION BY WRITTEN REQUEST. To redeem shares, send a written request or "letter of instruction" specifying the name of the Fund, the dollar 21 82 amount or number of shares to be redeemed, and shareholder's name and account number to: The Shareholder Services Group, P.O. Box 9656, Providence, Rhode Island 02940-9656. A request for redemption will be processed after receipt by the Transfer Agent of all required documents in proper order including any issued stock certificates and the letter of instruction signed by each account owner exactly as the account is registered. If a redemption of $50,000 or more is to be made (or if the shareholder's address or bank account to which proceeds are to be mailed has changed in the prior 30 days) signatures must be guaranteed, subject to the provisions under Rule 17Ad-15 of the Securities Exchange Act of 1934 ("SEA Rule") without restriction, condition or qualification by an authorized signatory of a commercial bank, trust company, savings and loan association, savings bank or a member firm of the National Association of Securities Dealers, Inc. or a domestic stock exchange, or any other "eligible guarantor institution" as defined in the SEA Rule. If shares are held in the name of a corporation, trust, estate, custodianship, guardianship, partnership or pension, and profit sharing plan, additional documentation may be necessary. TELEPHONE REDEMPTION. Shares of the Fund for which no share certificates have been issued may be redeemed in amounts of $50,000 or less by telephone request, provided that selection has been made in the Account Application or a telephone authorization form is on file with the Transfer Agent. Proceeds from telephone redemptions will be mailed to your address of record. The Fund and/or the Transfer Agent reserve the right to refuse telephone redemption requests at any time. Telephone authorization forms are available from the Fund upon request. See "Telephone Privileges" for further information concerning authenticity of instructions received by telephone. Information concerning redemption can be obtained by contacting the Fund at 1-800-343-6840. FEDWIRE REDEMPTION. You may redeem shares for which no certificates have been issued and have redemption proceeds of at least $50,000 wired by federal funds transfer. Requests for FedWire redemption may be made by wire communication, telephone or letter, provided that you have have selected this option in the Account Application. Proceeds of shares redeemed at the net asset value next determined after receipt of request are transmitted the following business day by wire to your bank account designated in the Account Application form (bank must be a member of the Federal Reserve System). Delivery of the proceeds of a wire redemption request of $250,000 or more may be delayed by the Fund for up to seven days if the Investment Adviser deems it appropriate under the then current market conditions. The Fund cannot be responsible for the efficiency of the federal wire system or your dealer or bank. Redemption of shares purchased by check are subject to certain limitations and restrictions described below. The Fund may modify this Privilege at any time or charge a service fee upon notice to shareholders; no such fee currently is contemplated. REPURCHASE. John Hancock Funds is authorized to repurchase any shares presented by telephone or telegraph to John Hancock Funds by certain securities dealers selected by John Hancock Funds in its sole discretion. The offer to repurchase may be suspended by John Hancock Funds at any time. Repurchase orders received by dealers prior to the closing of the NYSE (4:00 p.m. New York time) on any business day will be priced at the net asset value per share that is based on that day's close, provided that they are time stamped by the dealer no later than 4:00 p.m. New York time on such day. Dealers may charge for their services in connection with repurchases, but neither the Fund nor John Hancock Funds makes any charge. INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem your account at any time the total net asset value of the account falls below $500 ($100 for a tax sheltered retirement plan) as a result of a redemption. You will be notified in writing that the value of your account is less than 22 83 $500 as a result of a redemption and will be allowed 60 days to make additional investments before the redemption is processed. No contingent deferred sales charge will be imposed on an involuntary redemption of shares. REDEMPTION IN KIND. Although it is the Fund's present policy to make payment of redemption proceeds in cash, if the Fund's Board of Directors determines that a material adverse effect would otherwise be experienced by remaining investors, redemption proceeds may be paid in whole or in part by a distribution in kind of securities from the portfolio of the Fund subject to the limitation that pursuant to an election under Rule 18f-1 under the Investment Company Act of 1940, the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund during any 90-day period for any one account. In such circumstances, you might be required to bear transaction costs to dispose of the securities distributed in kind. REINSTATEMENT PRIVILEGE. If you have redeemed shares of the Fund, or have had shares repurchased by the Fund, you may, within 60 days after the date the shares were redeemed or repurchased, reinvest (reinstate) all or a portion of the proceeds of the redemption or repurchase in shares of the Fund or in shares of "other John Hancock funds" (as defined under "Shareholder Services -- Exchange Privilege") at the next determined net asset value of the shares being acquired, so long as the Transfer Agent is in receipt of a written request for reinstatement and appropriate payment. Shares being acquired pursuant to the reinstatement privilege must be of the identical class as those which were redeemed within the prior 60 days. The CDSC will not be applicable to Class B Shares acquired in a reinstatement, although it will be assessed in connection with the initial redemption or repurchase. This privilege may be exercised only once as to any particular shares of the Fund or other John Hancock fund. Exercise of the Reinstatement Privilege does not alter the federal income tax treatment of any capital gains realized on the redemption of shares of the Fund. If a loss is realized on the redemption and reinvestment is made in shares of the Fund within 30 days, it would not be recognized as a loss for income tax purposes. You are advised to consult your tax adviser as to all possible tax consequences related to the exercise of the reinstatement privilege. The reinstatement privilege may be terminated or modified at any time. CLASS B SHARES -- CONTINGENT DEFERRED SALES CHARGE. Class B Shares redeemed within six years of purchase will be subject to a CDSC at the rates set forth below. This charge will be assessed on an amount equal to the lesser of the current market value or the original purchase cost of the shares being redeemed. Accordingly, the CDSC will not be assessed on increases in account value above the initial purchase price, including shares derived from dividend reinvestment. In determining whether a CDSC applies to a redemption, the calculation will be determined in a manner that results in the lowest possible rate being charged. It will be assumed that the redemption comes first from shares which have been held beyond the six-year CDSC redemption period or those that were acquired through dividend reinvestment, and next from the shares that have been held the longest during the six-year period. Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses all or part of them to defray its expenses related to providing the Fund with distribution services in connection with the sale of Class B Shares, such as compensating Selling Brokers for selling these shares. The combination of the CDSC and the distribution and service fees makes it possible for the Fund to sell Class B Shares without deducting a sales charge at the time of the purchase. The amount of the CDSC, if any, will vary depending on the number of years from the time the Class B Shares were purchased until the time they were redeemed. Solely for purposes of determining 23 84 the holding period, any payments you make during the month will be aggregated and deemed to have been made on the last day of the month.
YEAR IN WHICH CLASS B SHARES CONTINGENT DEFERRED SALES REDEEMED CHARGE AS A PERCENTAGE OF FOLLOWING PURCHASE DOLLAR AMOUNT SUBJECT TO CDSC ---------------- ---------------------------- First....................................... 5.0% Second...................................... 4.0% Third....................................... 3.0% Fourth...................................... 3.0% Fifth....................................... 2.0% Sixth....................................... 1.0% Seventh and following....................... None
A commission equal to 3.75% of the amount invested and a first year's service fee equal to 0.25% of the amount invested are paid to Selling Brokers. The initial service fee is paid in advance at the time of sale for the provision of personal and account maintenance services to shareholders during the twelve months following the sale, and thereafter the service fee is paid in arrears. If a partial redemption (or exchange) that you make results in a remaining account balance of less than the amount of the CDSC owed at the time of the redemption (or exchange) on the shares remaining in the account, the Fund reserves the right to require you to redeem (or exchange) all of the shares in the account. The Fund does not believe that this constitutes an involuntary redemption. Waiver of CDSC. The contingent deferred sales charge will be waived in the event of the death or total disability (as evidenced by a determination by the Federal Social Security Administration) of the shareholder (including a registered joint owner). In addition, no contingent deferred sales charge will be imposed where shares are redeemed in connection with a merger or reorganization of the Fund into another investment company which imposes a contingent deferred sales charge and the investor receives shares of the investment company in the transaction. In these cases any applicable contingent deferred sales charge will be imposed when an investor redeems shares acquired in such a transaction. In addition, the CDSC is waived on redemptions made (1) by shareholders (including retirement plan account holders) having accounts as Systematic Withdrawal Plans (SWP) with payments of an annual amount less than or equal to 12% of the value of the account determined at the time of SWP authorization (subject to subsequent calendar year end adjustments) and available on a monthly, quarterly, semi-annual or yearly basis; and (2) as distributions from employer sponsored retirement plans in connection with the participant's separation of service at age 55 or over from his or her employer. To be eligible for the waiver, the account holder or the dealer must notify John Hancock Funds of eligibility at the time of redemption request. The above waiver of CDSC are subject to change upon 60 days written notice to shareholders. (See the Statement of Additional Information, "Redemption and Repurchase of Shares" for a more complete description of the Fund's shareholders on whose shares a contingent deferred sales charge will not be imposed.) SHAREHOLDER SERVICES - -------------------------------------------------------------------------------- The Fund offers you the following services and privileges: (1) Reinvestment of Dividends and Distributions at net asset value; (2) Automatic Investment Plan; (3) Systematic Withdrawal Plan; (4) Exchange Privilege; (5) Class B Shares Automatic Exchange; (6) Payroll Deduction Plans; (7) System Exchange Program and (8) Cross -- Reinvestment Service. AUTOMATIC INVESTMENT PLAN (AIP) permits you to purchase additional shares on a monthly basis with funds transferred from your bank account subject to an initial and subsequent minimum investment amount of $25. For further details, see the AIP section in the accompanying Account Application. 24 85 EXCHANGE PRIVILEGE permits you to exchange your Class A and Class B shares of the Fund for shares of "other John Hancock funds" (i.e., funds which formerly had investment advisory contracts with TFMC) on the basis of the relative net asset value per share subject to the minimum investment requirements of such funds. Class A Shares may be exchanged for other John Hancock funds' Class A Shares. These other Class A Shares may also be exchanged for Class A Shares of the Fund, provided that any sales charge differential (not previously paid) is paid by the shareholder. Class B Shares may be exchanged without imposition of the Fund's CDSC for Class B Shares or shares of other Funds that are subject to a CDSC ("CDSC Funds.") Exchanges between CDSC Funds having different schedules will retain their original respective CDSC schedules. Any applicable contingent deferred sales charge payable upon the redemption of Class B Shares exchanged will be calculated from the date of the initial purchase. Class B Shares may not be exchanged into money market funds other than John Hancock Money Market Fund B. See Account Application or the "Exchange Privilege" in the Statement of Additional Information. Exchanges may be accomplished by telephone request (see below) or by a written request from the account owner(s). Forms for both written and telephone exchanges are available from the Fund upon request. Share certificates, if issued, must be returned to the Fund prior to any exchange of such shares. There is currently no exchange fee for an exchange; however, dealers or other firms may charge for their services in expediting exchange transactions. In addition, the Fund reserves the right to impose an exchange fee. Exchanges are, in effect, a redemption and purchase of shares in the respective funds. As such, the limitations and restrictions applicable generally to purchases and redemptions apply, and any exchange constitutes a sale upon which a gain or loss will be realized for federal income tax purposes. THIS EXCHANGE PRIVILEGE IS NOT AVAILABLE IN ANY JURISDICTION WHERE SHARES OF THE OTHER JOHN HANCOCK FUND BEING ACQUIRED ARE NOT QUALIFIED FOR SALE. EACH JOHN HANCOCK MUTUAL FUND RESERVES THE RIGHT TO REJECT ANY ORDER TO ACQUIRE ITS SHARES THROUGH EXCHANGE, OR OTHERWISE TO MODIFY, RESTRICT OR TERMINATE THE EXCHANGE PRIVILEGE, AT ANY TIME AFTER 60 DAYS' NOTICE TO SHAREHOLDERS. Because other John Hancock funds have investment objectives and policies which may differ from those of the Fund, you should carefully review the prospectus of the other John Hancock fund before effecting an exchange. Shares of the Fund for which no share certificates have been issued may be exchanged by telephone request, provided you have selected this option in the Account Application or have a telephone authorization form on file. See "Telephone Privileges" for important information about transactions by telephone. Telephone requests may be made by contacting the Fund at 1-800-343-6840. CLASS B AUTOMATIC EXCHANGE is a tax-free exchange of Class B Shares for Class A Shares of the same fund that occurs at the end of the calendar quarter eight years after the original purchase date of the Class B Shares, the "Automatic Exchange Date." At the Automatic Exchange Date, the Class B Shares will be exchanged for an equal dollar value of Class A Shares (which may or may not be the same number of shares). The Class A Shares have lower expenses than Class B Shares but are otherwise substantially identical. Class A Shares, therefore, will have a slightly higher total return than Class B Shares and may have a slightly higher dividend as a result. If you have made more than one purchase, you may hold both Class B Shares and Class A Shares at the same time. The Class B Automatic Exchange is available to all Class B shareholders and requires no action whatsoever on your part. If you want to decline taking advantage of this privilege, however, the Fund must be notified in writing three months prior to the Automatic Exchange Date. 25 86 PAYROLL DEDUCTION PLANS are available for employer sponsored plans, where regular, periodic purchases are made into the employees' accounts through the submission of the John Hancock Group Investment List. The minimum initial and subsequent purchase amounts are $250 for the Plan and $25 per fund-account in the Plan. For further information on how to establish a John Hancock Group Investment List, call Account Services at 1-800-343-6840. SYSTEMATIC EXCHANGE PROGRAM allows you to exchange a specified dollar amount from an existing account in any John Hancock Fund (including the Fund), into any other John Hancock Fund (including the Fund) subject to the requirements and limitations of the Exchange Privilege as noted above. At the time this option is selected, you must have a minimum balance of $5,000 in the account from which the exchange is to be made and must designate a monthly exchange amount of no less than $25 for a specific Fund. The minimum initial investment amount (established by the Fund being exchanged into) will be waived for shareholders utilizing this Program. Note that automated dollar cost averaging methods do not assure a profit nor protect against loss in declining markets. You should consult your broker or financial adviser to determine whether this Program is suitable for your investment needs. In particular, consideration should be given to the type of John Hancock Fund from which your exchanges will be made (i.e., its investment objective, policies and risks, including the potential for fluctuation in its net asset value). The Fund currently imposes no service fee for participation in the Program but reserves the right to do so. You may change the exchange amounts or the selection of Funds or terminate your participation in the Program at any time by directing the Transfer Agent in writing. For further information regarding this Program, see the Statement of Additional Information (which may be obtained by contacting Account Services at 1-800-343-6840). CROSS-REINVESTMENT SERVICE. Shares of a particular class of the Fund may be purchased and/or redeemed without imposition of any applicable sales charge through the automatic reinvestment of dividend and capital gain distributions from the same class of any other John Hancock fund. These proceeds from other John Hancock funds will be invested at the next determined net asset value following receipt of the proceeds (i.e., reinvestment date which is normally the payable date of such other John Hancock fund) by the Fund's Transfer Agent. In addition, you may select in the Account Application to have your Fund distributions automatically invested without imposition of a sales charge in shares of the same class of another John Hancock fund. Further information regarding the above services and privileges is set forth in the Statement of Additional Information. TELEPHONE PRIVILEGES - -------------------------------------------------------------------------------- Neither the Fund, Transfer Agent or the Investment Adviser will be responsible for the authenticity of telephone instructions. You should be aware that transactions authorized by telephone instructions reasonably believed to be authentic by the Fund can subject you to the risk of loss if the telephone instructions are subsequently found to be unauthentic. Privileges associated with telephone exchange, telephone redemption, and FedWire redemption may be selected in the Fund's Account Application. The privileges associated with FedWire redemption will not be established unless specifically instructed. The privileges associated with telephone exchange and/or telephone redemption will automatically be accorded to your account unless you specifically decline this privilege in the Account Application. If establishing a new account through a confirmed trade, the shareholder's securities dealer should pro- 26 87 vide a completed new account application or submit specific written instructions requesting specific account privileges at the time of trade settlement. The Fund will employ reasonable procedures to confirm that the instructions as to either exchange, redemption or FedWire redemptions communicated by telephone are genuine, and that absent such procedures, the Fund or its agents may be liable for any losses due to unauthorized or fraudulent instructions. These procedures include: 1. Recording all calls for telephone transactions (each transaction is thereby indexed by the time of the call placed); 2. Requesting the caller's name and phone number as verification of the origin of the telephone call; 3. Requesting the name of the Fund and your account number, the name(s) in which the account is registered and the tax identification number listed on the account; and 4. Mailing written confirmation (statements) of each transaction on the following business day to the registration address and the broker/dealer of record. DIVIDENDS, DISTRIBUTIONS AND TAX STATUS - -------------------------------------------------------------------------------- DIVIDENDS AND CAPITAL GAINS. The Fund declares dividends daily and pays dividends monthly which are substantially equal to all of its net investment income (i.e., non-capital gain income from its investments less expenses). In addition, the Fund may distribute any net short-term or long-term capital gains realized from the sale of its portfolio securities and transactions involving options and futures during the fiscal year. Short-term capital gains, if any, will normally be distributed monthly and net realized capital gains, if any, will be distributed at least annually. The excess of net long-term capital gains over net short-term capital losses including losses carried forward from prior years represents net realized capital gains. In addition, the Fund may make "supplemental dividends or distributions" to comply with applicable income and excise tax laws. When a dividend or capital gains distribution is paid, the net asset value per share is reduced by the amount of the payment. All dividends and any capital gains distribution are reinvested automatically in additional shares on the reinvestment date, unless you indicate in writing to the Transfer Agent or select in the Account Application to receive proceeds in cash or have them reinvested in shares of the same class of another John Hancock fund (without imposition of a sales charge) at the next determined net asset value following receipt of the proceeds (i.e., the reinvestment date.) See "Cross -- Reinvestment Service." TAXES. Because the Fund intends to distribute its net investment income and net realized capital gains to its shareholders, and to adhere to other applicable requirements, it is not expected that the Fund will be required to pay any federal income taxes on amounts paid by it as dividends and distributions. In order for the Fund to be entitled to pay tax-exempt interest income dividends you, at the close of each quarter of its taxable year, at least 50% of the value of its total assets must consist of obligations whose interest is exempt from federal income tax. The exempt interest portion of dividends payable monthly to you is based upon the ratio of the Fund's net tax-exempt income to taxable income for the entire year. Thus, the tax exempt portion of any particular dividend is based upon the tax-exempt portion of all distributions for the year rather than upon the tax-exempt portion of that particular dividend. Distribution of net tax-exempt interest income may be treated by you for federal income tax purposes as interest excludable from their gross income. Any distributions of long-term capital gains are taxable 27 88 as such to you. Any distribution of short-term capital gains are taxable as ordinary income; however, it is expected that such amounts, if any, would not be substantial in relation to the tax-exempt interest generated by the Fund. Interest on indebtedness incurred or continued by you to purchase or carry shares of the Fund is not deductible. You will normally be subject to federal income tax on dividends and distributions, if any, paid from taxable securities. The Fund is required to withhold 31% of taxable dividends, distributions and redemptions paid to you if you have not complied with IRS taxpayer identification requirements. To avoid this "backup" withholding requirement, you may furnish the Transfer Agent with your taxpayer identification number and required certifications by completing the Account Application or IRS form W-9. (See "Backup Withholding" in the back of the Prospectus). The foregoing relates to federal income taxation as in effect as of the date of this Prospectus. Distributions from investment income and capital gains, may be subject to other state and local tax laws. You should consult your own tax adviser concerning tax consequences of an investment in the Fund including state and local tax consequences. You, generally, will not incur any federal income tax on the amount of the Fund's distributions that are attributable to net tax-exempt interest income. However, interest on certain "private activity bonds" issued after August 7, 1986 is an item of tax preference for purposes of the alternative minimum tax. The Fund anticipates that a portion of its investments may be made in these "private activity bonds." As a result, a portion of the exempt interest dividends paid by the Fund would be an item of tax preference to shareholders subject to the alternative minimum tax. The Fund anticipates that under normal circumstances, no more than 20% of its investments will be made in such private activity bonds. It should also be noted that certain corporations that are subject to the alternative minimum tax may also have to include exempt-interest dividends in calculating their alternative minimum taxable income. This applies to situations where the "adjusted current earnings" of the corporation exceeds its alternative minimum taxable income. ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION. From time to time the Fund may advertise its yield and total return which are computed separately for Class A and Class B Shares and in accordance with applicable regulatory requirements. Yield is computed by annualizing the result of dividing the net investment income per share over a 30-day period by the maximum offering price per share on the last day of the period. The Fund may also advertise in supplemental sales literature a distribution rate which is computed in the same manner as yield except that actual income dividends declared per share during the applicable period are substituted for net investment income per share. The distribution rate may differ from the yield calculation noted above in that the components of the distribution rate: (1) may include short-term gains (which may be non-recurring) and equalization or other non-income related distributions which may include nontaxable returns of capital dividends and (2) reflect amortization policies for debt discount and dividend income recognition which may vary from those used in the yield calculation. The distribution rate is computed separately for Class A and Class B Shares. Yield and distribution rate quotations of Class B Shares do not reflect any contingent deferred sales charge and, if included, would be reflected in a lower rate quotation. The Fund may also quote a tax equivalent yield or distribution rate which is the yield or distribution rate a fully taxable investment would have to return to an investor subject to the highest marginal federal tax rate to provide a comparable return. 28 89 The cumulative total return shows the dollar or percentage change in value over a specified period of time (i.e., 1, 5 or 10 years or since the Fund's inception), assuming reinvestment of all dividends and distributions on the reinvestment dates and payment of maximum sales charges applicable to purchases and redemptions. Average annual total return shows the Fund's cumulative return divided over the number of years included in the given period ("standardized performance"). Total returns may, in conjunction with standardized performance, be calculated for other specified periods and/or excluding the effect of sales charges (which if included, would reduce the performance quoted). Both the yield and total return are based on historical earnings and are not indicative of future performance. The Fund will include performance data for both Class A and Class B Shares in any advertisement or information including performance data of the Fund. The Statement of Additional Information contains more detailed information about the calculation of performance. The Fund also may advertise its performance relative to certain performance rankings, ratings and indexes compiled by independent organizations (such as Lipper Analytical Services, Value Line and Morningstar, Inc.). In addition, the Fund may use comparative performance information from certain industry research materials or published in various periodicals. The Statement of Additional Information sets forth under "Performance Information" a list of periodicals, indexes, etc. which the Fund may use in its advertisements. ORGANIZATION. The Fund operates as one of six series of the Corporation. The Corporation was organized as a Maryland Corporation on June 22, 1987. In December, 1994, in connection with the acquisition of the Corporation's previous investment adviser, Transamerica Fund Management Company, the Corporation's name was changed from Transamerica Series, Inc. to John Hancock Series Inc. and the Fund's name was changed from Transamerica High Yield Tax-Free Fund to John Hancock High Yield Tax-Free Fund. All shares of common stock of the Corporation, $0.01 par value per share, have equal voting rights and have no preemptive or conversion rights. Both Class A and Class B shares represent an interest in the same assets of the Fund and are identical in all respects except that each class bears different distribution expenses, exclusive voting rights with respect to its distribution plan. Shares of the Fund issued are fully paid, non-assessable, fully transferable and redeemable at the option of the holder. The Fund is not required to hold annual shareholder meetings except when required by federal or state law. Under certain circumstances, shareholders of the Fund have the right, and available procedures, to call a meeting of shareholders for any proper purpose. At the written request of the holders of at least 10% of the outstanding shares of the Corporation, the Corporation will call a meeting for the purpose of voting on the removal of one or more Directors. The Fund will assist you with any communications regarding such meetings including shareholder proposals. SHAREHOLDER INQUIRIES. All inquiries regarding the Fund including questions concerning share ownership, dividends, transfer of ownership or share redemption, should be directed to the Fund at the telephone number or address on the cover page of this Prospectus. CUSTODIAN. Investors Bank & Trust Company, 34 Federal Street, Boston, Massachusetts 02110, is the Custodian for the Fund. TRANSFER AGENT. Transfer and dividend disbursing agent functions are performed by The Shareholder Services Group ("TSSG"), One American Express Plaza, Providence, Rhode Island 02903. INDEPENDENT AUDITORS. Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116, has been selected as the independent auditors of the Fund. 29 90 APPENDIX A TAX-EXEMPT VS. TAXABLE YIELDS The table below shows the effect of the tax status of Municipal Obligations on the yield received by their holders under the regular federal income tax laws that apply to 1994. It gives the approximate yield a taxable security must earn at various income brackets to produce after-tax yields. TAX-FREE YIELDS 1994 TAX TABLE
TAXABLE INCOME - -------------------------------------- SINGLE RETURN JOINT RETURN MARGINAL TAX-EXEMPT YIELD - ----------------- ----------------- INCOME ------------------------------------------------------------------------- (TAXABLE INCOME) TAX RATE 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00% 8.50% - -------------------------------------- --------- ------ ------ ------ ------ ------ ------ ------ ------ $ 0-22,750 $ 0-38,000 15.00% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82% 9.41% 10.00% $ 22,751-55,100 $ 38,001-91,850 28.00% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42% 11.11% 11.81% $ 55,101-115,000 $ 91,851-140,000 31.00% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87% 11.59% 12.32% $115,001-250,000 $140,001-250,000 36.00% 7.81% 8.59% 9.38% 10.16% 10.94% 11.72% 12.50% 13.28% $250,001-and up $250,001-and up 39.60% 8.28% 9.11% 9.93% 10.76% 11.59% 12.42% 13.25% 14.07%
This table is for illustrative purposes only and is not intended to imply or guarantee any particular yield from the John Hancock High Yield Tax-Free Fund. While it is expected that a substantial portion of the interest income distributed to the Fund's shareholders will be exempt from federal income taxes, portions of such distributions from time to time may be subject to federal income taxes. APPENDIX B DESCRIPTION OF BOND RATINGS The ratings of Moody's Investors Service, Inc. and Standard & Poor's Ratings Group represent their opinions as to the quality of various debt instruments they undertake to rate. It should be emphasized that ratings are not absolute standards of quality. Consequently, debt instruments with the same maturity, coupon and rating may have different yields while debt instruments of the same maturity and coupon with different ratings may have the same yield. See "Appendix DD" in the Statement of Additional Information for other ratings. MOODY'S INVESTORS SERVICE, INC. AAA: Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. AA: Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuations of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. 30 91 A: Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment at some time in the future. Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba: Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds which are rated B generally lack the characteristics of desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. STANDARD & POOR'S RATINGS GROUP AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. A: Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB, B: Debt rated BB, and B is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and CC the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. 31 92 TABLE OF CONTENTS
PAGE --- Summary................................. 2 Fund Expenses......................... 3 Financial Highlights.................... 4 Investment Objective and Policies....... 5 Investment Practices, Techniques and Restrictions.......................... 11 The Fund and Its Management............. 14 Information About Shares of the Fund.... 16 Net Asset Value....................... 16 Purchase of Shares.................... 17 Redemption and Repurchase of Shares... 21 Shareholder Services.................... 24 Telephone Privileges.................... 26 Dividends, Distributions and Tax Status................................ 27 Additional Information.................. 28 Appendix A.............................. 30 Appendix B.............................. 30
INVESTMENT MANAGER ------------------------ John Hancock Advisers, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 DISTRIBUTOR -------------- John Hancock Funds, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 SHAREHOLDER INQUIRY ------------------------ 1-800-343-6840 P.O. Box 9656 Providence, Rhode Island 02940-9656 No dealer, salesman or other person has been authorized to give any information or to make any representation other than those contained in this Prospectus or in official sales literature distributed by the Fund's Distributor in connection with the offer of the Fund's shares, and if given or made, such other information or representations must not be relied upon as having been authorized by the Fund or its Distributor. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. T470P 3/95 JOHN HANCOCK HIGH YIELD TAX-FREE FUND A Portfolio of John Hancock Series, Inc. PROSPECTUS March 1, 1995 93 JOHN HANCOCK HIGH YIELD BOND FUND A Portfolio of John Hancock Series, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 - -------------------------------------------------------------------------------- John Hancock High Yield Bond Fund (the "Fund"), a portfolio of John Hancock Series, Inc. (the "Corporation"), seeks to maximize current income without assuming undue risk by investing in lower rated, high yielding, fixed income securities; its secondary objective is capital appreciation. The Corporation is a registered investment company which is comprised of multiple separate series (investment portfolios) offering investors a wide range of mutual fund investment choices. This Prospectus relates only to shares of the Fund. THE FUND INVESTS PRIMARILY (AND IS PERMITTED TO INVEST UP TO 100% OF ITS ASSETS) IN NON-INVESTMENT GRADE DEBT SECURITIES ISSUED BY DOMESTIC ISSUERS (COMMONLY KNOWN AS "JUNK BONDS") AND FOREIGN ISSUERS, WHICH SECURITIES (I) ENTAIL PRICE VOLATILITY, DEFAULT AND OTHER RISKS GREATER THAN THOSE ASSOCIATED WITH HIGHER RATED SECURITIES AND (II) MAY PRESENT PROBLEMS OF LIQUIDITY AND VALUATION. INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. SEE "INVESTMENT OBJECTIVE AND POLICIES" PAGE 9 AND "INVESTMENT PRACTICES, TECHNIQUES AND RESTRICTIONS". ALTERNATIVE PURCHASE PLAN. The Fund offers two classes of shares with alternative purchase and distribution fee arrangements. These differences permit you to choose the method of purchasing shares that is most beneficial given the amount of the purchase, the length of time you expect to hold the shares and other circumstances. Shares of the Fund may be purchased at the next determined net asset value per share, plus a sales charge which, at your election, may be imposed either (i) at the time of purchase in the case of the Class A Shares (the initial sales charge alternative) or (ii) on a contingent deferred basis in the case of the Class B Shares (the deferred sales charge alternative.) See "Purchase of Shares -- Alternative Purchase Plan" in this Prospectus for further details about the Alternative Purchase Plan. --------------------- This prospectus briefly sets forth the basic information that you should know before investing. YOU SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. A Statement of Additional Information dated March 1, 1995, containing further information about the Fund, has been filed with the Securities and Exchange Commission and is incorporated into this Prospectus by reference. A copy of the Statement of Additional Information may be obtained without charge by contacting John Hancock Funds, Inc. ("John Hancock Funds"), whose address and telephone number are shown on the back cover of this Prospectus. - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR FINANCIAL INSTITUTION, NOR ARE SHARES OF THE FUND FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. --------------------- PROSPECTUS DATED MARCH 1, 1995 94 SUMMARY - -------------------------------------------------------------------------------- THE FUND AND THE CORPORATION. John Hancock High Yield Bond Fund (the "Fund") is a portfolio of John Hancock Series, Inc. (the "Corporation") which is organized as Maryland corporation and is an open-end diversified management investment company that issues its shares in series each of which is designated as a "fund." INVESTMENT OBJECTIVES. The Fund seeks to maximize current income without assuming undue risk by investing primarily in lower-rated, high yielding, fixed income securities; secondary objective is capital appreciation but only when it is consistent with the primary objective. INVESTMENT ADVISER. John Hancock Advisers, Inc. (the "Investment Adviser") serves as investment adviser and receives a monthly fee from the Fund at varying annual percentage rates of average daily net assets, depending on the Fund's asset size, ranging from a low of .50% to a high of .625%. The Investment Adviser presently manages a broad range of mutual funds and multiple investment portfolios representing total assets of approximately $13 billion under management. (See "The Fund and its Management.") DISTRIBUTION ARRANGEMENTS. The Fund offers two classes of shares, "Class A Shares" and "Class B Shares", through the Fund's distributor, John Hancock Funds, Inc. ("John Hancock Funds"). Class A Shares are subject to an initial sales charge of up to 4.75% at the time of purchase and bear the expense of an ongoing Rule 12b-1 distribution service fee at an annual rate of up to .25% of the average daily net assets of the Fund allocable to the Class A Shares. Class B Shares do not incur a sales charge when they are purchased but (i) are generally subject to a sales charge if they are redeemed within six years of purchase (a "contingent deferred sales charge" or "CDSC") and (ii) are subject to aggregate distribution and service fees of up to 1% of the Fund's average daily net assets allocable to the Class B Shares annually. The contingent deferred sales charges for Class B Shares decline from 5% during the first year of investment to zero after the sixth year (5%, 4%, 3%, 3%, 2%, 1%), (see "Alternative Purchase Plan" on page 17). Shares of either class may be purchased through selected financial services firms having dealer agreements with John Hancock Funds. The minimum initial and subsequent investment amounts for either class of shares are $1,000 and $50 ($250 and $25 for a tax sheltered retirement plan), respectively (see "Purchase of Shares.") REDEMPTION OF SHARES. Shares of the Fund in any amount may be redeemed at any time at the net asset value per share next determined after the redemption request is received in proper form by The Shareholder Services Group (the "Transfer Agent.") In certain cases, however, redemption proceeds from the Class B Shares will be reduced by the amount of any applicable contingent deferred sales charge (see "Redemption and Repurchase of Shares.") SPECIAL RISK CONSIDERATIONS. The Fund may invest significantly in domestic and foreign corporate bonds rated lower than medium grade quality, commonly called "junk bonds", which involve certain risks and are considered to be speculative. Investors should refer to a further discussion of these risks on page 9. These investments together with other policies of the Fund such as investing in foreign debt securities, investment concentration in certain industries, options and futures contracts and reverse repurchase agreements, involve a greater degree of risk than is assumed by other investment companies which do not invest similarly. An investment in the Fund should not constitute a complete investment program. The above is qualified in its entirety by the detailed information appearing elsewhere in this Prospectus and in the Statement of Additional Information. 2 95 FUND EXPENSES - -------------------------------------------------------------------------------- The following table illustrates the various expenses and fees a shareholder of the Fund would bear directly or indirectly. The expenses and fees set forth in the table are for the fiscal year ended October 31, 1994, except as otherwise noted.
CLASS A CLASS B SHARES SHARES ----------------- ----------------- (INITIAL SALES (DEFERRED SALES CHARGE ALTERNATIVE) CHARGE ALTERNATIVE) SHAREHOLDER TRANSACTION EXPENSES(1) Maximum Sales Charge Imposed on Purchases........ 4.75% None Sales Charge Imposed on Reinvested Dividends..... None None Deferred Sales Charge (as a percentage of original purchase price)....................... None 5.00% Redemption Fee................................... None None Exchange Fee..................................... None None ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B --------- --------- (as a percentage of average net assets) Management Fees(2)............................... 0.58% 0.58% 12b-1 Fees(3).................................... 0.25% 1.00% Other Expenses................................... 0.33% 0.33% --------- --------- Total Fund Operating Expenses.................... 1.16% 1.91% ========= =========
EXAMPLE A(4): You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and redemption at the end of each time period.
1 YEAR 3 YEARS 5 YEARS 10 YEARS --------- -------- -------- --------- Class A.......................................... $59 $83 $108 $182 Class B.......................................... $69 $90 $123 $204*
EXAMPLE B(4): You would pay the following expenses on the same investment in Example A assuming no redemption:
1 YEAR 3 YEARS 5 YEARS 10 YEARS --------- -------- -------- --------- Class A.......................................... $59 $83 $108 $182 Class B.......................................... $19 $60 $103 $204* - --------------- (1) Class A Shares have a reduced initial sales charge for purchases in excess of $100,000. Purchases of $1 million or more are not subject to a sales charge; however, a contingent deferred sales charge of 1% will be applied to redemptions within 12 months of such purchase. The deferred sales charge on Class B Shares declines from 5% during the first year to 0% after the sixth year in the following manner: 5%, 4%, 3%, 3%, 2% and 1%. See "Information About Shares of the Fund -- Redemption and Repurchase of Shares." (2) See "The Fund and Its Management." (3) See "The Fund and Its Management -- Distribution Plans." (4) Expenses in Examples above have been restated to reflect current fees and should not be considered a representation of past or future expenses. Actual expenses may be greater or less than those shown above. Use of assumed (5%) return is mandated by the Securities and Exchange Commission. THE FUND'S PAYMENT OF A DISTRIBUTION FEE MAY RESULT IN A LONG-TERM SHAREHOLDER PAYING MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM FRONT-END SALES CHARGE PERMITTED UNDER THE NATIONAL ASSOCIATION OF SECURITIES DEALERS' RULES OF FAIR PRACTICE. * Assumes tax-free automatic exchange of Class B Shares for Class A Shares after the eight year period following the initial purchase of Class B Shares. If the exchange is declined, such Class B expenses would be $223.
3 96 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Financial highlights for John Hancock High Yield Bond Fund (formerly, Transamerica High Yield Bond Fund) for each of the seven years in the period ended October 31, 1994 and the period from October 26, 1987 through October 31, 1987, in the case of Class B Shares, have been audited by Ernst & Young LLP, independent auditors, whose unqualified report thereon as well as other financial statements of the Fund are included in the Statement of Additional Information. The Fund's annual report contains a discussion of the Fund's performance and is made available upon request without charge.
CLASS B SHARES --------------------------------------------------------------------------------------- PERIOD YEAR ENDED OCTOBER 31, ENDED --------------------------------------------------------------------------- OCT. 31, 1994(2) 1993 1992 1991 1990 1989 1988(2) 1987(1) ------- ------- ------- ------- ------- ------- ------- ------- Per share income and capital changes for a share outstanding during each period: Net asset value, beginning of period.......................... $ 8.23 $ 7.43 $ 7.44 $ 6.45 $ 8.14 $ 9.70 $ 9.94 $ 9.95 INCOME FROM INVESTMENT OPERATIONS Net investment income............. 0.74 0.80 0.87 0.98 1.09 1.16 1.07 0.0091 Net realized and unrealized gain (loss) on investments........... (0.83) 0.75 (0.04) 1.06 (1.68) (1.55) (0.14) (0.0191) ------- ------- ------- ------- ------- ------- ------- ------- Total from Investment Operations.................... (0.09) 1.55 0.83 2.04 (0.59) (0.39) 0.93 (0.0100) LESS DISTRIBUTIONS Dividends from net investment income.......................... (0.76) (0.75) (0.84) (0.98) (1.09) (1.14) (1.17) -- Distributions from realized gains........................... (0.05) -- -- -- -- -- -- -- Returns of capital................ -- -- -- (0.07) (0.01) (0.03) -- -- ------ ------- ------- ------- ------- ------- ------- ------- Total Distributions............. (0.81) (0.75) (0.84) (1.05) (1.10) (1.17) (1.17) -- ------ ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period.... $ 7.33 $ 8.23 $ 7.43 $ 7.44 $ 6.45 $ 8.14 $ 9.70 $ 9.94 ====== ======= ======= ======= ======= ======= ======= ======= TOTAL RETURN(3)................... (1.33)% 21.76% 11.56% 34.21% (8.04)% (4.51)% 9.77% (0.10)% ====== ======= ======= ======= ======= ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA Ratio of expenses to average net assets.......................... 1.91% 2.08% 2.25% 2.24% 2.25% 2.51% 2.76% 0.34% Ratio of expense reimbursement to average net assets.............. -- -- -- -- (0.03)% (0.31)% (0.76)% (0.31)% ------ ------- ------- ------- ------- ------- ------- ------- Ratio of net expenses to average net assets...................... 1.91% 2.08% 2.25% 2.24% 2.22% 2.20% 2.00% 0.03% ====== ======= ======= ======= ======= ======= ======= ======= Ratio of net investment income to average net assets.............. 9.39% 10.07% 11.09% 13.73% 14.59% 12.23% 10.97% 0.09% Portfolio turnover................ 153% 204% 206% 93% 96% 100% 60% 0% Net Assets, end of period (in thousands)...................... $160,739 $154,214 $ 98,560 $ 72,023 $ 37,097 $ 33,964 $ 20,852 $ 110 - --------------- (1) Financial highlights, including total return, are for the period October 26, 1987 (date of the Fund's initial offering of shares to the public) to October 31, 1987 and have not been annualized. (2) Per share information has been calculated using the average number of shares outstanding. (3) Total return does not include the effect of the contingent deferred sales charge for Class B Shares.
4 97 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Financial highlights for John Hancock High Yield Bond Fund (formerly, Transamerica High Yield Bond Fund) for the year ended October 31, 1994 and for the period from June 30, 1993 through October 31, 1993 in the case of Class A Shares, have been audited by Ernst & Young LLP, independent auditors, whose unqualified report thereon as well as other financial statements of the Fund are included in the Statement of Additional Information. The Fund's annual report contains a discussion of the Fund's performance and is made available upon request without charge.
CLASS A SHARES ------------------------------- PERIOD FROM YEAR ENDED JUNE 30, 1993 OCTOBER 31, TO OCTOBER 31, 1994(2) 1993(1) ----------- -------------- Per share income and capital changes for a share outstanding during each period: Net asset value, beginning of period............................. $ 8.23 $ 8.10 INCOME FROM INVESTMENT OPERATIONS Net investment income............................................ 0.80 0.33 Net realized and unrealized gain (loss) on investments........... (0.83) 0.09 -------- -------- Total from Investment Operations............................... (0.03) 0.42 LESS DISTRIBUTIONS Dividends from net investment income............................. (0.82) (0.29) Distributions from realized gains................................ (0.05) -- -------- -------- Total Distributions............................................ (0.87) (0.29) -------- -------- Net asset value, end of period................................... $ 7.33 $ 8.23 ======== ======== TOTAL RETURN(3).................................................. (0.59)% 4.96% ======== ======== RATIOS AND SUPPLEMENTAL DATA Ratio of expenses to average net assets.......................... 1.16% 0.31% Ratio of net investment income to average net assets............. 10.14% 4.38% Portfolio turnover............................................... 153% 204% Net Assets, end of period (in thousands)......................... $ 11,696 $ 2,344 - --------------- (1) Financial highlights, including total return, have not been annualized. Portfolio turnover is for the year ended October 31, 1993. (2) Per share information has been calculated using the average number of shares outstanding. (3) Total return does not include the effect of the initial sales charge for Class A Shares.
5 98 INVESTMENT OBJECTIVES AND POLICIES - ------------------------------------------------------------------------------- The Fund's primary investment objective is to maximize current income without assuming undue risk by investing in a diversified portfolio consisting primarily of lower-rated, high yielding, fixed income securities, such as: (1) domestic and foreign corporate bonds; (2) debentures and notes; (3) convertible securities; (4) preferred stocks; and (5) domestic and foreign government obligations. As a secondary objective, the Fund seeks capital appreciation, but only when it is consistent with the primary objective of maximizing current income. There is no assurance the Fund will achieve its objectives. The higher yields sought by the Fund are generally obtainable from securities rated in the lower categories by recognized rating services, i.e. rated lower than "Baa" by Moody's Investors Services ("Moody's") or "BBB" by Standard and Poors Ratings Group ("S&P"), or unrated securities of comparable quality (collectively referred to as "high yield securities"). While providing higher yields, these lower quality securities generally involve greater volatility of price and greater risk of principal and income than securities in the higher rating categories and, accordingly, may be considered speculative. In general, these risks include: (1) substantial market price volatility (2) changes in credit status, including weaker overall credit condition of issuers and risks of default and (3) industry, market and economic risks, including limited liquidity and secondary market support. THE RISKS OF HIGH YIELD/HIGH RISK SECURITIES, AS DISCUSSED IN GREATER DETAIL BELOW (SEE "RISK FACTORS -- HIGH YIELD/HIGH RISK SECURITIES"), SHOULD BE CAREFULLY CONSIDERED BY INVESTORS. Under normal market conditions, at least 65% of the Fund's total assets may be invested in bonds or debentures rated "Baa" or lower by Moody's, or "BBB" or lower by S&P; however, no more than 10% of its assets can be invested in securities that are rated as low as "CC" by S&P or "Ca" by Moody's. A general description of Moody's and S&P's ratings is set forth in Appendix A. Non-rated securities will also be considered for investment by the Fund when the Investment Adviser believes that the issuer's financial condition, or the protection afforded by the terms of the securities themselves, limits the risk to the Fund to a degree comparable to that of rated securities consistent with the Fund's objectives and policies. During the fiscal year ended October 31, 1994, the percentages of the Fund's assets invested in securities rated in particular rating categories by Moody's (or, if not by Moody's, by S&P) were, on a weighted average basis, as follows*:
PERCENTAGE OF TOTAL MOODY'S (OR S&P) RATINGS INVESTMENTS ----------------------- ---------- Baa and above........................ 0.0% Ba................................... 9.58% (BB+, BB, BB-)..................... 0.25% B.................................... 52.96% (B+, B, B-)........................ 5.00% Caa.................................. 19.56% (CCC+, CCC, CCC ).................. 1.50% Ca................................... 0.11% below Ca............................. 0.0% Not Rated**.......................... 11.04%** ------- Total................................ 100.00% ======= - --------------- * Based on average of month end portfolio holdings during fiscal year ended 10/31/94. Asset composition does not represent actual holdings on 10/31/94 nor does it imply that the overall quality of portfolio holdings is fixed (see discussion on ratings). ** Of this amount, the following percentages of the Fund's assets represent quality standards attributed by the Investment Adviser to such non-rated securities at the time of purchase: 8.56%, B; and 2.48%, Caa.
6 99 The Fund may at times invest in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon bonds do not pay current interest, their value is subject to greater fluctuation in response to changes in market interest rates than bonds which pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently. Even though these bonds do not pay current interest in cash, the Fund is nonetheless required to accrue interest income on these investments and to distribute these amounts at least annually to shareholders. Thus, the Fund could be required at times to liquidate other investments in order to satisfy its dividend requirements. At times when the Fund invests in zero-coupon and payment-in-kind bonds, it will not be pursuing its primary objective of maximizing current income. The Fund may invest without limitation in debt obligations of foreign issuers, including those issued by supranational entities (such as the "World Bank"). The Fund may also purchase securities issued in any country, developed or undeveloped. Investments in securities of issuers in non-industrialized countries generally involve more risk and may be considered speculative. (See "Risk Factors" and "Investment Practices, Techniques and Restrictions -- Foreign Securities.") The Fund may also enter into forward foreign currency exchange contracts for the purchase or sale of foreign currency for hedging purposes (see "Statement of Additional Information"). The risks involving foreign investments should be carefully considered by investors. (The Fund intends to maintain investment emphasis in debt securities of domestic issuers.) Included among domestic debt obligations eligible for purchase by the Fund are adjustable and/or variable (floating) rate securities, mortgage related securities (including stripped securities, collateralized mortgage obligations and multi-class pass-through securities), asset-backed securities and callable bonds. (See "Risk Factors -- Other Risk Considerations" and "Appendix B"). Callable bonds have a provision permitting the issuer, at its option, to "call" or redeem the bonds. If an issuer were to redeem bonds held by the Fund during a time of declining interest rates, the Fund might not be able to reinvest the proceeds in bonds providing the same coupon return as the bonds redeemed. To the extent that the Fund does not invest in the securities described above, the Fund may: 1. invest (for liquidity purposes), in high quality, short-term debt securities with remaining maturities of one year or less ("money market instruments") including government obligations, certificates of deposit, bankers acceptances, short-term corporate debt securities, commercial paper and related repurchase agreements; 2. invest up to 10% of its assets in municipal obligations, including municipal bonds issued at a discount, in circumstances where the Investment Adviser determines that investing in such obligations would facilitate the Fund's ability to accomplish its investment objectives; 3. enter into repurchase agreements and reverse repurchase agreements subject to certain limitations (see "Investment Practices, Techniques and Restrictions"); 4. subject to certain limitations described under "Investment Practices, Techniques and Restrictions", write (sell) covered call and cash secured options and purchase call and put options on fixed income securities and securities indexes in an effort to increase current income and for hedging purposes; 5. subject to certain limitations described under "Investment Practices, Techniques and Restric- 7 100 tions", purchase and sell interest rate futures contracts on fixed income securities and securities index futures contracts and may write and purchase options thereon for hedging purposes; and 6. subject to certain limitations described under "Investment Practices, Techniques and Restrictions", invest in restricted securities, purchase securities issued on a "when issued" or "forward delivery" basis and lend its portfolio securities. As a matter of fundamental policy, the Fund will not invest more than 25% of its total assets (taken at market value) in the securities of issuers engaged in any one industry, except that the Fund may invest up to 40% of the value of its total assets in the securities of issuers engaged in the electric utility and telephone industries. The Investment Adviser follows a policy under which it will not cause the Fund to invest more than 25% of its total assets in the securities of issuers engaged in the electric utility industry or the telephone industry unless yields available for four consecutive weeks in the four highest rating categories on new issue bonds in this industry (issue size of $50 million or more) have averaged greater than the yields of new issue long-term industrial bonds similarly rated (issue size of $50 million or more) and, in the opinion of the Adviser, the relative return available from the electric utility or telephone industry and the relative risk, marketability, quality and availability of securities of this industry justifies such an investment. Obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities are not subject to the foregoing 25% limitation. In addition, for purposes of this limitation, determinations of what constitutes an industry are made in accordance with specific industry codes set forth in the Standard Industrial Classification Manual and without considering groups of industries (e.g., all utilities) to be an industry. The extent to which the Fund will be able to achieve its investment objectives depends upon the Investment Adviser's ability to evaluate and develop the information it receives into a successful investment program. The Fund's investment objectives and investment policies (except for its policy on concentration) are non-fundamental, which means they may be changed by the Board of Directors without requiring the vote of shareholders; these investment objectives may not, however be changed without prior (30 days') written notice first having been given to shareholders. Such a change in the investment objective may result in the Fund's investment objective being different from the objective which the shareholders considered appropriate, in light of their then current financial position and needs, at the time of their investment in the Fund. During periods of unusual market conditions when the Investment Adviser believes that investing for temporary defensive purposes is appropriate, part or all of the assets of the Fund may be invested in cash or cash equivalents consisting of: (1) obligations of banks (including certificates of deposit, bankers' acceptances and repurchase agreements) with assets of $100,000,000 or more; (2) commercial paper rated within two highest rating categories of a nationally recognized rating organization; (3) investment grade short-term notes; (4) obligations issued or guaranteed by the U.S. government or any of its agencies or instrumentalities; and (5) related repurchase agreements. Portfolio securities may be sold without regard to the length of time they have been held whenever such a sale will, in the opinion of the Investment Adviser, strengthen the Fund's position in furthering its investment objectives. Disposing of debt securities in these circumstances should not increase direct transaction costs since debt securities are normally traded on a principal basis without 8 101 brokerage commissions. However, such a transaction involves a mark-up or mark-down of the price. In addition, positions in options and futures for hedging purposes may be established with great frequency. For these reasons, portfolio turnover is likely to be higher than that of other mutual funds. A higher portfolio turnover rate involves greater expenses to the Fund and may also result in the realization of short-term capital gains taxable at ordinary income rates. Portfolio turnover rates of the Fund for recent years are shown in the section "Financial Highlights." The Fund will engage in portfolio trading if it believes a transaction, net of costs (including custodian charges,) will help in attaining its investment objective. The Statement of Additional Information also contains the following information: (1) Appendix AA explains short-term obligations and government securities. (2) Appendix CC explains various options, futures and forward contracts. (3) Appendix DD explains ratings of various fixed income securities by Moody's and S&P, including preferred stocks and short term investments. RISK FACTORS GENERAL. The value of the securities held by the Fund, and therefore, net asset value per share, will fluctuate due to various factors principally interest rate changes and the ability of the issuers to pay interest and principal of these obligations. Generally, a rise in interest rates will result in a decrease in the Fund's net asset value, while a decline in interest rates will result in an increase in the Fund's net asset value. Therefore, at the time of redemption, your shares may be worth more or less than the value at the time of purchase. Because the investment objective and nature of the investments of the Fund involve securities whose values tend to fluctuate more widely than other types of investments, the value of the Fund's shares may be subject to greater fluctuation than other investment companies. HIGH YIELD/HIGH RISK SECURITIES. YOU SHOULD CAREFULLY CONSIDER YOUR ABILITY TO ASSUME THE RISKS OF OWNING SHARES OF A MUTUAL FUND WHICH CAN INVEST IN SECURITIES IN CERTAIN OF THE LOWER RATING CATEGORIES. Lower quality "high yield, high risk" securities, whether rated or unrated, can be subject to greater market fluctuations and risks of loss of income and principal than lower yielding, higher quality fixed income securities. Securities rated BBB by S&P or Baa by Moody's, although considered to be of investment grade quality, have speculative characteristics greater than those of higher quality rated securities, while securities rated lower than BBB or Baa (commonly called "junk bonds") are, to varying degrees, considered predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. This capacity may decline during sustained periods of deteriorating economic conditions or rising interest rates. Ratings given to a security are an assessment of the ability of an issuer to repay interest and principal when due and do not reflect other risks which may affect the security (see "Special Considerations" below). For example, lower quality securities are generally considered to be subject to greater market risk than higher quality securities in times of deteriorating economic conditions and may be less likely to appreciate in value during periods of declining interest rates. In addition, lower quality securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than is the case for higher quality securities. Because of the limitations inherent in the ratings given to securities and that the creditworthiness of issuers of lower rated securities is more problematical than that of issuers of higher rated securities, the Fund's investment performance will be dependent primarily on the ability of the Investment Adviser to perform its own evaluation of credit risks. 9 102 As a result of the possible limited liquidity of high yield securities, their prices may decline rapidly in the event a significant number of holders of these securities decide to sell. The high yield/high risk securities market has grown primarily during a period of long economic expansion and it is uncertain how it would perform during an economic downturn or sustained period of rising interest rates. In addition, adverse publicity and investor perceptions about lower quality securities, whether or not based on fundamental analysis, may tend to decrease the market value and liquidity of these lower quality securities. If the issuer of a security owned by the Fund defaults, the Fund may incur additional expenses to seek recovery. The market prices of certain securities held by the Fund, such as zero-coupon bonds or payment-in-kind securities are affected to a greater extent by interest rate changes and thereby tend to be more volatile than securities which pay interest periodically and in cash. To the extent there is no established secondary market, there can be thin trading of high yield/high risk securities which would adversely affect the prices of such securities and may present difficulty in the Fund's ability to accurately value its portfolio holdings of high yield securities at certain times or to dispose of such holdings. There is also the risk that legislation may be enacted limiting the use or tax and other advantages of high yield/high risk securities which could have an adverse impact on the high yield/high risk securities market and prices for such securities. For example, past legislation required federally insured savings and loans associations to divest their holdings of high yield/high risk securities. Further information about credit and interest rate risks is described in the Statement of Additional Information. SPECIAL CONSIDERATIONS. The rating limitations applicable to the Fund's fixed income investments apply at the time of acquisition of a security; any subsequent change in the rating or quality of a security will not require the Fund to sell the security. The ratings given to securities by rating agencies represent their respective opinions of the qualities of the securities they undertake to rate and are a generally accepted barometer of risk. Nonetheless, such ratings are general and not absolute standards of quality; their limitations include: (1) ratings are based largely on historical financial data and may not accurately reflect the current financial outlook of the issuer; (2) frequent occurrence of a lag between the time a rating is assigned and the time publication of it is updated; and (3) large differences may be present among the current financial conditions of issuers within each rating category. For these reasons, the Investment Adviser does not rely solely on the ratings assigned by recognized rating agencies in its evaluation and monitoring of the Fund's investments to assure that the Fund's overall portfolio is constituted in a manner consistent with the Fund's investment objective and policies. Additionally, credit quality limitations applicable to securities do not apply to deposits at the bank or banks in which cash is maintained by the Fund (see "Custodian.") Many issuers of fixed income securities choose not to have their obligations rated. Although unrated securities eligible for purchase by the Fund must be determined to be comparable in quality to securities having specified ratings, the market for unrated securities may not be as broad as for rated securities since many investors rely on rating agencies for credit appraisal. See "Credit and Interest Rate Risks" in the Statement of Additional Information for discussion of the Investment Adviser's evaluation of rated and non-rated securities. OTHER RISK CONSIDERATIONS. In many instances, foreign debt securities may provide higher yields than securities of domestic issuers which have similar maturities and quality. Under certain market conditions, these foreign investment may be less liquid than the securities of U.S. companies and certainly less liquid than securities issued or guaranteed by the U.S. government (see "Investment Practices, Techniques and Restrictions -- Foreign Securities and Currency Transactions" for other 10 103 foreign investment considerations. The use of options contracts in an effort to enhance current yield (see "Investment Practices, Techniques and Restrictions -- Transactions in Options, Futures and Forward Contracts" below) may result in the loss of principal under certain market conditions. The Fund will seek to reduce risks associated with changes in interest rates. However, these hedging techniques will result in transaction costs to the Fund and there can be no assurance that the interest rate risks will be eliminated. In addition, the market volatility of stripped securities, collateralized mortgage obligations and multi-class pass-through securities may be greater than the market volatility of other securities which are not of the derivative type in which the Fund may invest. To the extent these derivative securities are considered illiquid, their investment will be limited by the 10% investment restriction in respect of illiquid securities. (See "Appendix B".) INVESTMENT PRACTICES, TECHNIQUES AND RESTRICTIONS - -------------------------------------------------------------------------------- The Fund's investments are subject to the following practices, techniques and restrictions and may involve certain risks. The Statement of Additional Information contains more detailed information about these practices, including limitations designed to reduce these risks. REPURCHASE AGREEMENTS AND RESTRICTED SECURITIES. When participating in repurchase agreements, the Fund buys securities from a seller (usually a bank or brokerage firm) with the agreement that the seller will repurchase the securities at a predetermined price or yield at a later date. Transactions involving repurchase agreements must be fully collateralized at all times, however the Fund may be subject to various delays and risks of loss if the seller is unable to meet its obligation to repurchase. The Fund may also invest in securities which are restricted as to resale. The registration of such "restricted securities" under the Securities Act of 1933 (the "Securities Act") may be required prior to sale with attendant time delays, and the Fund may have to bear all or a part of the expense of such registration. No more than 10% of the Fund's total assets may be invested in restricted securities (including other securities not readily marketable) and in repurchase agreements that mature in more than seven days (collectively, "illiquid securities.") Although the Fund may purchase restricted securities which can be offered and sold to "qualified institutional buyers" under Rule 144A of the Securities Act, its present investment restriction limits such investment to the foregoing 10% limitation. LENDING OF PORTFOLIO SECURITIES. The Fund may lend its portfolio securities amounting to not more than 33% of the value of its portfolio securities to approved borrowers (principally broker/dealers) provided these loans are callable at any time and are continuously secured by collateral (cash or government securities) equal to no less than the market value, determined daily, on the securities loaned. The Fund may reinvest any cash collateral in short term highly liquid debt securities. During the period of the loan, the Fund earns income on both the loaned securities and the collateral. Although these transactions must be fully collateralized at all times, they involve some credit risk to the Fund if the borrower should default on its obligation and the Fund is delayed or prevented from recovering the collateral. REVERSE REPURCHASE AGREEMENTS. A reverse repurchase agreement involves the sale of a security by the Fund and its agreement to repurchase the instrument at a specified time and price. The Fund will maintain a segregated account consisting of highly liquid, marketable debt securities to cover its obligations under reverse repurchase agreements with selected firms approved in advance by the Board of Directors. The Fund will use the proceeds 11 104 to purchase other investments. Reverse repurchase agreements are considered to be borrowings by the Fund and as an investment practice may be considered speculative. The Fund may borrow money for temporary administrative or emergency purposes. To avoid the potential leveraging effects of the Fund's borrowings, additional investments will not be made while borrowings are in excess of 5% of the Fund's total assets. The Fund will limit its investments in reverse repurchase agreements and other borrowings to no more than 33 1/3% of its total assets. WHEN ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. In order to help ensure the availability of suitable securities for its portfolio, the Fund may purchase securities on a "when-issued" or "delayed delivery" basis or may purchase or sell securities on a forward commitment basis with delivery and payment ("settlement") for the securities taking place in the future. The Fund does not pay for the securities or start earning interest on them until settlement. Prior to the settlement date, the value of the securities will fluctuate and assets consisting of cash and/or liquid, high grade debt securities will be maintained in a segregated account in an amount sufficient to meet the purchase price. FOREIGN SECURITIES AND CURRENCY TRANSACTIONS. The Fund's investments in foreign securities can involve risks not present in domestic securities such as: currency exchange rate fluctuations; exchange control policies; expropriation or confiscatory taxation; difficulty in obtaining and enforcing judgments against a foreign issuer; political, economic or social instability; and less securities regulation. Foreign securities can be less liquid or more volatile than U.S. securities, and foreign accounting and disclosure standards may differ from U.S. standards. The values of foreign investments can rise or fall because of changes in currency exchange rates. The Fund may buy or sell foreign currencies and foreign currency forward contacts for hedging purposes in connection with its foreign investments. A forward currency contract is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. The Fund might purchase a particular currency or enter into a forward currency contract to preserve the U.S. dollar price of securities it intends to or has contracted to purchase. Alternatively, it might sell a particular currency on either a spot or forward basis to hedge against an anticipated decline in the dollar value of securities it intends to or has contracted to sell. Although this strategy could minimize the risk of loss due to a decline in the hedged currency, it could also limit any potential gain from an increase in the value of the currency. The Fund is authorized to, but presently does not intend to, enter into transactions involving options on foreign currencies for hedging purposes only. (See "Investment in Non-U.S. Issuers" in the Statement of Additional Information). TRANSACTIONS IN OPTIONS AND FUTURES OPTIONS ON SECURITIES. The Fund may write (sell) covered call and cash secured put options and purchase call and put options on debt securities. The Fund will write options on its portfolio securities for the purpose of increasing its return on the securities or to protect the value of its portfolio. If the price of the underlying security moves adversely to the Fund's position, the option may be exercised and the Fund will be required to purchase or sell the underlying security at a disadvantageous price, which may only be partially offset by the amount of the premium if at all. The Fund may also write straddles, which are combinations of put and call options on the same security. These transactions can generate additional premium income but also present an increased risk. The Fund may also purchase put or call options in anticipation of changes in interest rates, which may adversely affect the value of its portfolio securities or the prices of securities the Fund wants to purchase at a later date. The 12 105 premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise or liquidation of the option. Unless the price of the underlying security changes sufficiently, the option may expire without value to the Fund. FUTURES CONTRACTS. The Fund may enter into interest rate futures contracts for hedging purposes ("Futures Contracts"). Interest rate futures contracts are purchased or sold to attempt to hedge against the effects of interest or exchange rate changes on the Fund's current or intended investments in fixed income securities. The adverse effects of an anticipated decrease in the value of portfolio securities may be offset, in whole or in part, by gains on the sale of Futures Contracts. This applies when the decrease occurs as a result of a general increase in interest rates. Conversely, the increased cost of portfolio securities to be acquired may be offset, in whole or in part, by gains on Futures Contracts purchased by the Fund. This applies when the increase is caused by a general decline in interest rates. The Fund will incur transaction costs when it purchases and sells Futures Contracts. It will also be required to maintain margin deposits (see "Risks of Transactions in Options and Futures"). OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write options on interest rate futures contracts ("Options on Futures Contracts.") Such investment strategies will be used as a hedge and not for speculation. Put and call Options on Futures Contracts may be traded by the Fund in order to protect against declines in the values of portfolio securities or against increases in the cost of securities to be acquired. Purchases of options on Futures Contracts may present less risk in hedging the Fund's portfolio than the purchase and sale of the underlying Futures Contracts since the potential loss is limited to the amount of the premium plus related transaction costs. The writing of these options, however, does not present less risk than the trading of Futures Contracts. It will constitute only a partial hedge, up to the amount of the premium received and if an option is exercised, the Fund may suffer a loss on the transaction. RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES. Although the Fund will enter into transactions in Futures Contracts, Options on Futures Contracts and certain options solely for hedging purposes, their use does involve certain risks. For example, a lack of correlation between the value of an instrument underlying an option or Futures Contract and the assets being hedged or unexpected adverse price movements, could render the Fund's hedging strategy unsuccessful, thus resulting in losses. The Fund also may enter into transactions in options on securities for other than hedging purposes. This involves greater risk. In addition, there can be no assurance that a liquid secondary market will exist for a contract purchased or sold. Therefore, the Fund may be required to maintain a position until exercise or expiration, which could result in losses. Over-the-counter transactions in options on securities also involve risks arising from the lack of an organized exchange trading environment. The Fund will limit its investment in over-the-counter options, together with other illiquid securities to 10% of the Fund's total assets. Transactions in Futures Contracts, Options on Futures Contracts and options are subject to other risks as well. The Fund will not engage in transactions in futures contracts and options on futures for speculation, but only for hedging or other permissible risk management purposes. All of the Fund's futures contracts and options thereon will be traded on a U.S. commodity exchange or board of trade. The Fund will not engage in a futures or option transaction if, immediately thereafter, the sum of initial margin deposits on existing positions and premiums paid for options on futures would exceed 5% of the Fund's total assets. The potential loss from writing options on futures transactions is potentially unlimited and may exceed the amount of the premium received. 13 106 The Fund will not purchase a call or put option if as a result the premium paid for the option together with premiums paid for all other options, interest rate futures contracts and options thereon then held by the Fund, exceed 10% of the Fund's total net assets. When the Fund purchases a futures contract or a call option on a futures contract, an amount of cash or U.S. Government securities equal to the market value of the futures contract will be deposited in a segregated account with the Fund's custodian to collateralize the position. The Fund's risks in entering into transactions in options, futures and forward contracts are set forth in greater detail in the Statement of Additional Information. INVESTMENT RESTRICTIONS. The Fund has adopted certain fundamental investment restrictions which are described in detail in the Statement of Additional Information and may not be changed without shareholder approval. Among these restrictions, the Fund may not borrow money in an amount in excess of 33 1/3 of its total assets. If a percentage restriction, except a restriction regarding borrowing on investments or utilization of assets is followed at the time an investment is made or assets are utilized, a later change in percentage resulting from changes in the value of the Fund's portfolio securities will not be considered a violation of policy. THE FUND AND ITS MANAGEMENT - -------------------------------------------------------------------------------- GENERAL. The Fund is a series of John Hancock Series, Inc., (the "Corporation"), an open-end diversified management investment company organized as a Maryland corporation (see "Additional Information -- Organization"). The Corporation's Board of Directors supervises the management and affairs of the Fund. The officers of the Corporation are responsible for the Fund's daily business operations under the overall direction of the Directors. Information about each of the Directors and officers is set forth in the Statement of Additional Information. INVESTMENT ADVISER. John Hancock Advisers, Inc. is the Investment Adviser of the Fund and is compensated for its advisory services at varying annual rates of the Fund's average daily net assets: .625% on assets up to $75 million, .5625% on assets of $75 million up to $150 million and .50% on assets of $150 million and over. The Investment Adviser manages the Fund's assets, provides administrative services and supervises the Fund's daily business affairs. Investment decisions are made by a committee with no one person being solely responsible for making recommendations to the committee. The Investment Adviser was organized in 1968 and is an indirect wholly owned subsidiary of John Hancock Mutual Life Insurance Company, a financial services company. The Investment Adviser provides the Fund and other investment companies in the John Hancock group of funds, with investment research and portfolio management services. John Hancock Funds distributes shares for all of the John Hancock mutual funds through selected broker/dealers ("Selling Brokers"). Certain Fund officers are also officers of the Investment Adviser and John Hancock Funds. For the fiscal year ended October 31, 1994, the Fund paid an advisory fee of .58% of the Fund's average daily net assets to the Fund's former investment adviser. In addition, during the fiscal year ended October 31, 1994, the Fund reimbursed Transamerica Fund Management Company (the Fund's investment adviser until December, 1994) ("TFMC"), pursuant to a separate Administrative Services Agreement, for actual expenses incurred in providing certain administrative services such as accounting and bookkeeping services, communications in response to shareholders inquiries and certain printing ser- 14 107 vices for reports of the Fund. For the fiscal year ended October 31, 1994, administrative services fees paid to TFMC by the Fund amounted to 0.06% of its average daily net assets. The Administrative Services Agreement was terminated effective January 16, 1994. DISTRIBUTION PLANS. The Class A and Class B shareholders have adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under these Plans, the Fund will pay distribution and service fees at an aggregate annual rate of 0.25% of the Class A Share's average daily net assets and an aggregate annual rate of 1.00% of the Class B Shares average daily net assets. In each case, up to 0.25% is for service expenses and the remaining amount is for distribution expenses. The distribution fees will be used to reimburse John Hancock Funds for its distribution expenses including but not limited to: (i) initial and ongoing sales compensation to Selling Brokers and others (including affiliates of John Hancock Funds) engaged in the sale of Fund shares, (ii) marketing, promotional and overhead expenses incurred in connection with the distribution of shares of the Fund, (iii) unreimbursed distribution expenses under the Fund's prior distribution plans, (iv) distribution expenses incurred by other investment companies which sell all or substantially all of its assets to merge or otherwise engage in a re-organization transaction with the Fund and (v) with respect to Class B Shares only, interest expenses on unreimbursed distribution expenses. The service fees will be used to compensate Selling Brokers for providing personal and account maintenance services to shareholders. In the event John Hancock Funds is not fully reimbursed for payments made or expenses it incurs under the Class A Plan, these expenses will not be carried beyond twelve months from the date they were incurred. These unreimbursed expenses under the Class B Plan will be carried forward together with interest on the balance of these unreimbursed expenses. Applicable distribution fees, in an amount not exceeding the annual limitation, are accrued each day as an expense of the Class B Shares and reduce the net assets of the fund attributable to the Class B Shares. However, in accordance with generally accepted accounting principles, the Fund does not treat the amount of Distribution Fees exceeding the annual limitation as a liability of the Fund and does not reduce the current net assets of the Fund attributable to the Class B Shares by such amount, although it may become payable in the future, because the standards for accrual of a liability under these accounting principles have not been satisfied due to contingencies as to payment of such amount. Under the former Class B Plan, unreimbursed distribution expenses as of October 31, 1994 amounted to $6,398,026 (3.98% of the Fund's Class B net assets at that date). In order to limit the higher ongoing costs associated with an investment in Class B Shares, the Fund implements arrangements under which Class B Shares are automatically exchanged, on a tax-free basis, for Class A Shares at the end of the eight year period following the initial purchase of Class B Shares. (See "Shareholder Services -- Class B Shares Automatic Exchange".) For the fiscal year ended October 31, 1994, payments made by the Fund under the former Class A Plan amounted to 0.25% of the average daily net assets attributable to Class A Shares. For the fiscal year ended October 31, 1994, total payments made by the Fund under the former Class B Plan amounted to 1.00% of its Class B average daily net assets. In addition, for the fiscal year ended October 31, 1994, the former Distributor received contingent deferred sales charges from redemptions of shares of the Fund in an amount equal (on an annual basis) to 0.24% of the Fund's Class B average daily net assets. EXPENSES OF THE FUND. The Fund's expenses, which are accrued daily, are deducted from total income before dividends are paid. These expenses include, but are not limited to: fees paid to the 15 108 Investment Adviser; directors' fees; taxes; distribution, brokerage and legal fees; custodian and auditing fees; administrative services fees; transfer agency fees and other expenses. For the fiscal year ended October 31, 1994, total expenses expressed as a percentage of the Fund's Class A and Class B average daily net assets amounted to 1.16% and 1.91%, respectively. PORTFOLIO TRANSACTIONS. The primary consideration in choosing brokerage firms to carry out the Fund's transactions is execution at the most favorable prices, taking into account the broker's professional ability and quality of service. Consideration may also be given to the broker's sale of shares of the Fund. Pursuant to procedures determined by the Board of Directors, the Investment Adviser may place securities transactions with brokers affiliated with the Investment Adviser. These brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc. and Sutro & Company, Inc. which are indirectly owned by John Hancock Mutual Life Insurance Company, which in turn indirectly owns the Investment Adviser. (For a further discussion, see the Statement of Additional Information -- "Portfolio Transactions"). INFORMATION ABOUT SHARES OF THE FUND - -------------------------------------------------------------------------------- NET ASSET VALUE The net asset value of the Fund is computed once daily on each day that the New York Stock Exchange is open for business as of the close of trading (presently 4:00 p.m. New York time). The Fund will also compute its net asset value on other days if a purchase or redemption request is received on that day and there is a sufficient degree of trading in securities held by the Fund. Net asset value per share is calculated by dividing the market or fair value of all of the Fund's portfolio securities plus the value of its other assets (including dividends and interest received or accrued), less all liabilities (including accrued expenses but excluding capital) by the number of shares of the Fund outstanding. The Board of Directors has established procedures for the valuation of the Fund's securities, based in general on market or estimated value (see "Net Asset Value" in the Statement of Additional Information). Although the legal rights of Class A and Class B Shares will be identical, the different expenses borne by each class will result in different net asset values and dividends. The net asset value of Class B Shares will generally be lower than the net asset value of Class A Shares as a result of the larger distribution fee accrual with respect to Class B Shares. (However, Class B shareholders will generally receive more shares at the time of purchase.) It is expected, however, that the net asset value per share of the two classes will tend to converge immediately after the recording of dividends which will differ by approximately the amount of the distribution expense accrual differential between the classes. PURCHASE OF SHARES GENERAL. Shares of the Fund will be offered at a price equal to their net asset value (next determined following receipt of an order by The Shareholder Services Group (the Fund's Transfer Agent) or the investor's dealer) plus a sales charge which, at the option of the purchaser, may be imposed either at the time of purchase (the "initial sales charge alternative") as described below or on a contingent deferred basis (the "deferred sales charge alternative"), as described under "Redemption and Repurchase of Shares". Shares of the Fund are offered continuously for sale by John Hancock Funds and are available for purchase through eligible financial service firms such as securities broker/dealer firms and banks which have entered into sales agreements with John Hancock Funds. Dealers are responsible for transmitting orders promptly (orders transmitted to and received by the 16 109 Transfer Agent prior to 4:00 p.m. New York time will receive that day's purchase price.) John Hancock Funds, at its expense, may provide additional promotional incentives or payments to dealers that sell shares of the Fund. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares of the Fund or other John Hancock mutual funds. You may purchase shares by mailing a check, made payable to the Fund (noting the existing account number), and if opening a new account a completed application form, to the Transfer Agent either at the post office address shown on the back page of this Prospectus; or, if delivered by express mail, the street address: One American Express Plaza, Providence, Rhode Island 02903. The initial purchase must be at least $1,000 with subsequent investments of no less than $50. These minimum amounts are reduced for tax-advantaged retirement plans and accounts of participants in certain labor unions and other membership organizations to $250, initial and $25, subsequent. The minimum investment amounts are waived for tax-deferred retirement programs involving the submission of additional investments by means of group remittal statements subject to a $25 minimum amount. Programs providing regular periodic investments, including a payroll deduction plan, systematic exchanges or investment by bank draft, also have reduced investment minimums. (See "Shareholder Services -- Automatic Investment Plan, Systematic Exchange Program and Payroll Deduction Plans".) Certificates for shares will not be issued unless you so request in writing. The Fund's Board of Directors reserves the right to change or waive the minimum investment requirements and to reject any order for Purchase of Shares (including wire purchases) when in its judgement such rejection is in the Fund's best interest. FEDWIRE PURCHASES. You may make payment for initial and subsequent investments by federal funds wire. You should first notify Account Services (1-800-343-6840) of the new account request (if applicable) and the intended wire purchase. To assure proper credit, banks wiring federal funds should be instructed to include: (1) name of the Fund, (2) name of the shareholder (as registered exactly in the account), or if opening an account, the name and address in which the account is being registered and the taxpayer identification number of the investor (a completed application must be mailed to the Transfer Agent after completing the wire arrangement); and (3) shareholder account number. Federal funds may be wired to*: Boston Safe Deposit and Trust Company ("BSDT") ABA Routing Number: 011001234 Account Number: 159565 * Except during such times or holidays when BSDT is not open for business. ALTERNATIVE PURCHASE PLAN You can purchase shares of the Fund at a price equal to their net asset value per share, plus a sales charge. At your election, this charge may be imposed either at the time of the purchase (see "Initial Sales Charge Alternative -- Class A Shares") or on a contingent deferred basis (see "Deferred Sales Charge Alternative -- Class B Shares"). If you do not specify on your account application which class of shares you are purchasing, it will be assumed that you are investing in Class A Shares. CLASS A SHARES. If you elect to purchase Class A Shares, you will incur an initial sales charge unless the amount you purchase is $1 million or more. If you purchase $1 million or more of Class A Shares you will not be subject to an initial sales charge, but 17 110 you will incur a sales charge if you redeem your shares within one year of purchase. Class A Shares are subject to ongoing distribution and service fees at a combined annual rate of up to .25% of the Fund's average daily net assets attributable to the Class A Shares. Certain purchases of Class A Shares qualify for reduced initial sales charges. See "Reduced Initial Sales Charge." CLASS B SHARES. You will not incur a sales charge when you purchase Class B Shares, but the shares are subject to a sales charge if you redeem them within six years of purchase (the "contingent deferred sales charge" or the "CDSC"). Class B Shares are subject to ongoing distribution and service fees at a combined annual rate of up to 1.00% of the Fund's average daily net assets attributable to the Class B Shares. Investing in Class B Shares permits all of your dollars to work from the time you make your investment, but the higher ongoing distribution fee will cause these shares to have a higher expense ratio than that of Class A Shares. To the extent that any dividends are paid by the Fund, these higher expenses will also result in lower dividends than those paid on Class A Shares. FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE. The alternative purchase arrangement allows you to choose the most beneficial way to buy shares given the amount of your purchase, the length of time that you expect to hold your shares and other circumstances. You should consider whether, during the anticipated life of your Fund investment, the accumulated fees on Class B Shares would be less than the initial sales charge and accumulated fees on Class A Shares purchased at the same time and to what extent this differential would be offset by the Class A Shares' lower expenses. To help you make this determination, the table under the caption "Fund Expenses" gives examples of the charges applicable to each class of shares. Class A Shares will normally be more beneficial if you qualify for a reduced sales charge. See "Reduced Initial Sales Charge." Class A Shares are subject to lower distribution and service fees and, accordingly, pay correspondingly higher dividends per share, to the extent any dividends are paid. However, because Initial Sales Charges are deducted at the time of purchase, you would not have all of your funds invested initially and, therefore, would initially own fewer shares. If you do not qualify for reduced initial sales charges and expect to maintain your investment for an extended period of time you might consider purchasing Class A Shares because the accumulated distribution and service charges on Class B Shares may exceed the initial sales charge and accumulated distribution and service charges on Class A Shares during the life of your investment. Alternatively, you might determine that it would be more advantageous to purchase Class B Shares in order to have all of your funds invested initially, although remaining subject to higher distribution fees and, for a six-year period, a CDSC. In the case of Class A Shares, distribution expenses that John Hancock Funds incurs in connection with the sale of the shares will be paid from the proceeds of the initial sales charge and the ongoing distribution and service fees. In the case of Class B Shares expenses will be paid from the proceeds of the ongoing distribution and service fees, as well as the CDSC incurred upon redemption within six years of purchase. The purpose and function of the Class B Shares' CDSC and ongoing distribution and service fees are the same as those of the Class A Shares' initial sales charge and ongoing distribution and service fees. Sales personnel distributing the Fund's shares may receive different compensation for selling each class of shares. Dividends, if any, on Class A and Class B Shares will be calculated in the same manner, at the same time and on the same day and will be in the same amount. However, each class will bear only its own distribution and service fees, and shareholder meeting expenses and incremental transfer agency costs. See "Dividends, Distributions and Taxes." 18 111 INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The public offering price of Class A Shares of the Fund is the current net asset value per share (next computed after receipt of an order by the Fund's Transfer Agent), plus a sales charge (a percentage of the offering price as set forth in the table below).
COMBINED REALLOWANCE REALLOWANCE TO SELLING SALES CHARGE SALES CHARGE AND SERVICE FEE BROKER AS A PERCENTAGE AS A PERCENTAGE AS A PERCENTAGE AS A PERCENTAGE AMOUNT INVESTED AT OFFERING OF THE AMOUNT OF OFFERING OF OFFERING (INCLUDING SALES CHARGE) PRICE INVESTED PRICE(+) PRICE(*) - --------------------------- --------------- --------------- --------------- --------------- Less than $100,000............. 4.75% 4.99% 4.25% 4.01% $100,000 to $249,999........... 3.75% 3.90% 3.25% 3.01% $250,000 to $499,999........... 2.75% 2.83% 2.35% 2.11% $500,000 to $999,999........... 2.00% 2.04% 1.75% 1.51% $1,000,000 and over............ 0.00%(**) 0.00%(**) (***) 0.00%(***) - --------------- (*) Upon notice to broker-dealers with whom it has sales agreements ("Selling Brokers"), John Hancock Funds may reallow an amount up to the full applicable sales charge. A Selling Broker to whom substantially the entire sales charge is reallowed or who receives these incentives may be deemed to be an underwriter under the Securities Act of 1933. (**) No sales charge is payable at the time of purchase in Class A Shares of $1 million or more, but a contingent deferred sales charge may be imposed in the event of certain redemption transactions within one year of purchase. See "Purchases of $1 Million or More." (***) John Hancock Funds may pay a commission and first year's service fee (as described in (+) below) to Selling Brokers who initiate and are responsible for purchases of $1 million or more in aggregate. See "Purchases of $1 Million or More" below. (+) At the time of sale, John Hancock Funds pays to Selling Brokers the first year's service fee in advance, in an amount equal to 0.25% of the next assets invested in the Fund and thereafter pays the service fee periodically in arrears in an amount up to 0.25% of the Fund's average annual net assets. Selling Brokers receive the fee as compensation for providing personal and account maintenance services to shareholders.
Until March 31, 1995, John Hancock Funds is continuing a sales incentive program in which non-cash concessions in the form of an all-expense-paid trip to a North American resort location will be awarded to participating broker/dealers and financial institutions achieving certain specified sales levels in shares of certain funds formerly managed by TFMC upon which (1) an initial sales charge has been paid or (2) a charge may be applicable upon redemption and who had sales agreements with the Fund's former distributor. Participation in the incentive program is entirely optional on the part of the broker/dealers and financial institutions. Copies of the incentive program which contain more complete information about the terms and conditions of the program, including qualifying levels and specific awards and eligible funds, may be obtained by investment representatives by contacting John Hancock Funds. John Hancock Funds will make these incentive payments out of its own resources. Other than distribution fees, the Funds do not bear distribution expenses. John Hancock Funds will pay certain affiliated Selling Brokers at an annual rate of up to 0.05% of the daily net assets of accounts attributable to these brokers. Purchases of $1 Million or More. On purchases by a single purchaser aggregating $1 million or more, John Hancock Funds will pay securities dealers an 19 112 amount on a cumulative basis equal to 1% of the first $3 million, plus .5 of 1% of the next $2 million, plus .25 of 1% on amounts over $5 million. With respect to shares purchased at the $1 million plus breakpoint, a contingent deferred sales charge ("CDSC") will be imposed on the proceeds of the redemption of certain shares so purchased if they are redeemed within 12 months of the end of the calendar month of their purchase, in an amount equal to 1% of the lesser of (a) the net asset value of the shares at the time of purchase or (b) the net asset value of the shares at the time of redemption ("CDSC Shares"). The CDSC would be deducted from the redemption proceeds otherwise payable to the shareholder and would be retained by John Hancock Funds. In addition, no CDSC will be imposed when a shareholder redeems (a) CDSC shares acquired through reinvestment of income dividends or capital gains distributions; and (b) shares acquired by exchange from any mutual fund sold with an initial sales charge and distributed by John Hancock Funds. The CDSC does not apply to purchases at net asset value described under "Waiver of Initial Sales Charge" and will be waived in the case of redemptions of shares in connection with (i) distributions to participants or beneficiaries of certain qualified retirement plans, and returns of excess contributions made to these plans, and (ii) involuntary redemption of shares if the aggregate net asset value of shares held in the account is less than the required minimum. In determining whether a CDSC is payable on any redemption, the Fund will first redeem shares not subject to any charge. Although any CDSC shares being exchanged are not subject to any charge, they will be subject to the applicable CDSC when the acquired shares are eventually redeemed. For purposes of calculating the CDSC on these redemptions, the original purchase date of the initial fund investment will be used in lieu of the date the redeemed shares were acquired by exchange. Reduced Initial Sales Charges. If you choose the initial sales charge alternative, you are entitled to pay reduced sales charges shown in the above table through several available purchase plans: Concurrent Purchases, Rights of Accumulation, Statement of Intention and Group Purchases. You and your immediate family may combine Concurrent Purchases of Class A Shares of the Fund and Class A Shares (and shares subject to front-end sales charges) of certain other mutual funds which are managed by the Investment Adviser ("other John Hancock funds" as defined under "Shareholder Services -- Exchange Privilege"), for purposes of qualifying for, and determining, a reduced sales charge provided that the purchases are made through a single dealer and any purchase amounts satisfy the minimum investment amount of the respective Fund. Further information about these purchase plans is set forth under "Purchase of Shares" in the Statement of Additional Information (see also Statement of Intention and Rights of Accumulation in the Account Application and its Terms and Conditions in the back of the Prospectus). Waiver of Initial Sales Charges. Class A Shares of the Funds may be purchased without paying an initial sales charge by the following: - - A Director or Officer of the Corporation; a director or officer of the Investment Adviser and its affiliates or Selling Brokers; employees or sales representatives of any of the foregoing; retired officers, employees or directors of any of the foregoing; a member of the immediate family of any of the foregoing; or any Fund, pension, profit sharing or other benefit plan for the individuals described above. - - Any state, county, city or any instrumentality, department, authority or agency of these entities (an "eligible governmental authority") which is prohibited by applicable investment laws from paying a sales charge or commission when it purchases shares of any registered investment management company. 20 113 - - A broker, dealer or registered investment adviser that has entered into an agreement with John Hancock Funds providing specifically for the use of Fund shares in fee-based investment products made available to their clients. - - A former participant in an employee benefit plan with John Hancock Mutual Funds, when he/she withdraws from his/her plan distributions directly to the Funds. - - Class A Shares of the Funds may also be purchased without an initial sales charge in connection with certain liquidation, merger and acquisition transactions involving other investment companies or personal holding companies. - - Existing full service clients of John Hancock Mutual Life Insurance Company group annuity contract holders as of September 1, 1994, may purchase Class A Shares with no initial sales charge, but if the shares are redeemed within 12 months after the end of the calendar year in which the purchase was made, a contingent deferred sales charge will be imposed at the rate for Class A Shares described above in the section "Purchases of $1 Million or More." REDEMPTION AND REPURCHASE OF SHARES GENERAL. You may redeem shares of the Fund in any amount at any time at the net asset value per share next determined after the redemption request is received in proper form by the Transfer Agent. See "Net Asset Value." In certain cases, however, redemption proceeds from the Class B Shares will be reduced by the amount of any applicable contingent deferred sales charge (see "Class B Shares -- Contingent Deferred Sales Charge" below.) If you hold both Class A and Class B Shares of the Fund, any request for redemption must specify whether Class A or Class B Shares are to be redeemed. Failure to specify which class, or insufficient shares of the class specified, will result in the redemption request being delayed until the Transfer Agent receives further written instructions from you. Payment proceeds will be mailed within seven (7) days following receipt of all required documents. However, in the case of redemptions of shares which were recently purchased by check, the payment of the redemption proceeds may be delayed for a period of up to 15 days or more, only until the check used to purchase the shares has been cleared for payment by your bank. The Fund will not forward proceeds by FedWire Redemption (described below), and the redemption will not be effective, for a period of 15 days after receipt of the purchase check. This delay in payment of redemption proceeds can be avoided if shares are purchased by means of a certified check or federal funds wire. Under unusual circumstances, the Fund may suspend redemptions or postpone payment for up to seven days or more, as permitted by securities laws. REDEMPTION BY WRITTEN REQUEST. To redeem shares, send a written request or "letter of instruction" specifying the name of the Fund, the dollar amount or number of shares to be redeemed, and shareholder's name and account number to: The Shareholder Services Group, P.O. Box 9656, Providence, Rhode Island 02940-9656. A request for redemption will be processed after receipt by the Transfer Agent of all required documents in proper order including any issued stock certificates and the letter of instruction signed by each account owner exactly as the account is registered. If a redemption of $50,000 or more is to be made (or if the shareholder's address or bank account to which proceeds are to be mailed has changed in the prior 30 days) signatures must be guaranteed subject to the provisions under Rule 17Ad-15 of the Securities Exchange Act of 1934 ("SEA Rule") without restriction, condition or qualification by an authorized signatory of a commercial bank, trust company, savings bank, savings and loan association, or a member firm of a domestic stock exchange or the National Association of Securities Dealers, or any 21 114 other "eligible guarantor institution" as defined in the SEA Rule. If shares are held in the name of a corporation, trust, estate, custodianship, guardianship, partnership, pension and profit sharing plan (or other types of retirement plans), additional documentation may be necessary. TELEPHONE REDEMPTION. Shares of the Fund for which no share certificates have been issued may be redeemed in amounts of $50,000 or less by telephone request, provided that selection has been made in the Account Application or a telephone authorization form is on file with the Transfer Agent. Proceeds from telephone redemptions will be mailed to your address of record. The Fund and/or the Transfer Agent reserve the right to refuse telephone redemption requests at any time. Telephone authorization forms are available from the Fund upon request. See "Telephone Privileges" for further information concerning authenticity of instructions received by telephone. Information concerning redemption can be obtained by contacting Account Services at 1-800-343-6840. FEDWIRE REDEMPTION. You may redeem shares for which no certificates have been issued and have redemption proceeds of at least $50,000 wired by federal funds transfer. Requests for FedWire redemption may be made by wire communication, telephone or letter, provided that you have selected this option in the Account Application. Proceeds of shares redeemed at the net asset value next determined after receipt of request are transmitted the following business day by wire to your bank account designated in the Account Application form (bank must be a member of the Federal Reserve System). Delivery of the proceeds of a wire redemption request of $250,000 or more may be delayed by the Fund for up to seven days if the Investment Adviser deems it appropriate under the then current market conditions. The Fund cannot be responsible for the efficiency of the federal wire system or your dealer or bank. Redemption of shares purchased by check are subject to certain limitations and restrictions described below. The Fund may modify this Privilege at any time or charge a service fee upon notice to shareholders; no such fee currently is contemplated. REPURCHASE. John Hancock Funds is authorized to repurchase any shares presented by telephone or telegraph to John Hancock Funds by certain securities dealers selected by John Hancock Funds in its sole discretion. The offer to repurchase may be suspended by John Hancock Funds at any time. Repurchase orders received by dealers prior to the closing of the NYSE (4:00 p.m. New York time) on any business day will be priced at the net asset value per share that is based on that day's close, provided that they are time-stamped by the dealer no later than 4:00 p.m. New York time on such day. Dealers may charge for their services in connection with repurchases, but neither the Fund nor John Hancock Funds makes any charge. INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem your account at any time the total net asset value of the account falls below $500 ($100 for a tax sheltered retirement plan) as a result of a redemption. You will be notified in writing that the value of your account is less than $500 as a result of a redemption and will be allowed 60 days to make additional investments before the redemption is processed. No contingent deferred sales charge will be imposed on an involuntary redemption of shares. REDEMPTION IN KIND. Although it is the Fund's present policy to make payment of redemption proceeds in cash, if the Fund's Board of Directors determines that a material adverse effect would otherwise be experienced by remaining investors, redemption proceeds may be paid in whole or in part by a distribution in kind of securities from the portfolio of the Fund subject to the limitation that pursuant to an election under Rule 18f-1 under the Investment Company Act of 1940, the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund during any 90-day period for any one account. 22 115 In such circumstances, you might be required to bear transaction costs to dispose of the securities distributed in kind. REINSTATEMENT PRIVILEGE. If you have redeemed shares of the Fund, or have had shares repurchased by the Fund, you may, within 60 days after the date the shares were redeemed or repurchased, reinvest (reinstate) all or a portion of the proceeds of the redemption or repurchase in shares of the Fund or in shares of "other John Hancock funds" (as defined under "Shareholder Services -- Exchange Privilege") at the next determined net asset value of the shares being acquired, so long as the Transfer Agent is in receipt of a written request for reinstatement and appropriate payment. Shares being acquired pursuant to the reinstatement privilege must be of the identical class as those which were redeemed within the prior 60 days. The CDSC will not be applicable to Class B Shares acquired in a reinstatement, although it will be assessed in connection with the initial redemption or repurchase. This privilege may be exercised only once as to any particular shares of the fund or other John Hancock Fund. Exercise of the reinstatement privilege does not alter the federal income tax treatment of any capital gains realized on the redemption of shares of the Fund. If a loss is realized on the redemption and reinvestment is made in shares of the Fund within 30 days, it would not be recognized as a loss for income tax purposes. You are advised to consult your tax adviser as to all possible tax consequences related to the exercise of the reinstatement privilege. The reinstatement privilege may be terminated or modified at any time. CLASS B SHARES -- CONTINGENT DEFERRED SALES CHARGE. Class B Shares redeemed within six years of purchase will be subject to a CDSC at the rates set forth below. This charge will be assessed on an amount equal to the lesser of the current market value or the original purchase cost of the shares being redeemed. Accordingly, the CDSC will not be assessed on increases in account value above the initial purchase price, including shares derived from dividend reinvestment. In determining whether a CDSC applies to a redemption, the calculation will be determined in a manner that results in the lowest possible rate being charged. It will be assumed that the redemption comes first from shares which have been held beyond the six-year CDSC redemption period or those that were acquired through dividend reinvestment, and next from the shares that have been held the longest during the six-year period. Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses all or part of them to defray its expenses related to providing the Fund with distribution services in connection with the sale of Class B Shares, such as compensating Selling Brokers for selling these shares. The combination of the CDSC and the distribution and service fees makes it possible for the Fund to sell Class B Shares without deducting a sales charge at the time of the purchase. The amount of the CDSC, if any, will vary depending on the number of years from the time the Class B Shares were purchased until the time they were redeemed. Solely for purposes of determining the holding period, any payments you make during the month will be aggregated and deemed to have been made on the last day of the month.
YEAR IN WHICH CLASS B SHARES CONTINGENT DEFERRED SALES REDEEMED CHARGE AS A PERCENTAGE OF FOLLOWING PURCHASE DOLLAR AMOUNT SUBJECT TO CDSC ---------------- ----------------------------- First................................ 5.0% Second............................... 4.0% Third................................ 3.0% Fourth............................... 3.0% Fifth................................ 2.0% Sixth................................ 1.0% Seventh and thereafter............... None
A commission equal to 3.75% of the amount invested and a first year's service fee equal to 0.25% of the amount invested are paid to Selling Brokers. The initial service fee is paid in advance at the time 23 116 of sale for the provision of personal and account maintenance services to shareholders during the twelve months following the sale, and thereafter the service fee is paid in arrears. If a partial redemption (or exchange) that you make results in a remaining account balance of less than the amount of the CDSC owed at the time of the redemption (or exchange) on the shares remaining in the account, the Fund reserves the right to require you to redeem (or exchange) all of the shares in the account. The Fund does not believe that this constitutes an involuntary redemption. Waiver of CDSC. The contingent deferred sales charge will be waived (a) in the event of the death or total disability (as evidenced by a determination by the Federal Social Security Administration) of the shareholder (including a registered joint owner) and (b) for certain distributions from deferred compensation retirement plans. No contingent deferred sales charge will be imposed where shares are redeemed in connection with a merger or reorganization of the Fund into another investment company which imposes a contingent deferred sales charge and the investor receives shares of the investment company in the transaction. In these cases any applicable contingent deferred sales charge will be imposed when an investor redeems shares acquired in such a transaction. In addition, CDSC is waived on redemptions made (1) by shareholders (including retirement plan account holders) having accounts as Systematic Withdrawal Plans (SWP) with payments of an annual amount less than or equal to 12% of the value of the account determined at the time of SWP authorization (subject to subsequent calendar year end adjustments) and available on a monthly, quarterly, semi-annual or yearly basis; and (2) as distributions from employer sponsored retirement plans in connection with the participant's separation of service at age 55 or over from his or her employer. The foregoing waiver of CDSC are subject to change upon 60 days written notice to shareholders. To be eligible for the waiver, the account holder or the dealer must notify John Hancock Funds of eligibility at the time of redemption request. (See the Statement of Additional Information, "Redemption and Repurchase of Shares" for a more complete description of the Fund's shareholders on whose shares a contingent deferred sales charge will not be imposed.) SHAREHOLDER SERVICES - -------------------------------------------------------------------------------- The Fund offers you the following services and privileges: (1) Reinvestment of Dividends and Distributions at net asset value; (2) Retirement Plans; (3) Automatic Investment Plan; (4) Systematic Withdrawal Plan; (5) Exchange Privilege; (6) Class B Shares Automatic Exchange; (7) Payroll Deduction Plans; (8) Systematic Exchange Program and (9) Cross-Reinvestment Service. AUTOMATIC INVESTMENT PLAN (AIP) permits you to purchase additional shares on a monthly basis with funds transferred from your bank account subject to an initial and subsequent minimum investment amount of $25. For further details, see the AIP section in the accompanying Account Application. EXCHANGE PRIVILEGE permits you to exchange your Class A and Class B shares of the Fund for shares of "other John Hancock funds" (i.e., funds which formerly had investment advisory contracts with TFMC) on the basis of the relative net asset value per share subject to the minimum investment requirements of such funds. Class A Shares may be exchanged for other John Hancock funds' Class A Shares. These other Class A Shares may also be exchanged for Class A Shares of the Fund, provided that any sales charge differential (not previously paid) is paid by shareholder. Class B Shares may be exchanged without imposition of the Fund's CDSC for Class B Shares or shares of other Funds that are subject to a CDSC ("CDSC Funds"). Exchanges between CDSC Funds having different CDSC schedules will retain their respective original CDSC schedules. Any applicable contingent deferred sales charge payable upon the redemption of Class B 24 117 Shares exchanged will be calculated from the date of the initial purchase. Class B Shares may not be exchanged into money market funds other than John Hancock Money Market Fund B. See Account Application or the "Exchange Privilege" in the Statement of Additional Information. Exchanges may be accomplished by telephone request (see below) or by a written request from the account owner(s). Forms for both written and telephone exchanges are available from the Fund upon request. Share certificates, if issued, must be returned to the Fund prior to any exchange of such shares. There is currently no exchange fee for an exchange; however, dealers or other firms may charge for their services in expediting exchange transactions. In addition, the Fund reserves the right to impose an exchange fee. Exchanges are, in effect, a redemption and purchase of shares in the respective funds. As such, the limitations and restrictions applicable generally to purchases and redemptions apply, and any exchange constitutes a sale upon which a gain or loss will be realized for federal income tax purposes. THIS EXCHANGE PRIVILEGE IS NOT AVAILABLE IN ANY JURISDICTION WHERE SHARES OF THE OTHER JOHN HANCOCK FUND BEING ACQUIRED ARE NOT QUALIFIED FOR SALE. EACH JOHN HANCOCK MUTUAL FUND RESERVES THE RIGHT TO REJECT ANY ORDER TO ACQUIRE ITS SHARES THROUGH EXCHANGE, OR OTHERWISE TO MODIFY, RESTRICT OR TERMINATE THE EXCHANGE PRIVILEGE, AT ANY TIME AFTER 60 DAYS' NOTICE TO SHAREHOLDERS. Because other John Hancock funds have investment objectives and policies which may differ from those of the Fund, you should carefully review the prospectus of the other John Hancock fund before effecting an exchange. Shares of the Fund for which no share certificates have been issued may be exchanged by telephone request, provided you have selected this option in the Account Application or have a telephone authorization form on file. See "Telephone Privileges" for important information about transactions by telephone. Telephone requests may be made by contacting Investor Services at 1-800-343-6840. CLASS B AUTOMATIC EXCHANGE is a tax-free exchange of Class B Shares for Class A Shares of the same fund that occurs at the end of the calendar quarter eight years after the original purchase date of the Class B Shares, the "Automatic Exchange Date." At the Automatic Exchange Date, the Class B Shares will be exchanged for an equal dollar value of Class A Shares (which may or may not be the same number of shares). The Class A Shares have lower expenses than Class B Shares but are otherwise substantially identical. Class A Shares, therefore, will have a slightly higher total return than Class B Shares and may have a slightly higher dividend as a result. If you have made more than one purchase, you may hold both Class B Shares and Class A Shares at the same time. The Class B Automatic Exchange is available to all Class B shareholders and requires no action whatsoever on your part. If you want to decline taking advantage of this privilege, however, the Fund must be notified in writing three months prior to the Automatic Exchange Date. PAYROLL DEDUCTION PLANS are available for employer sponsored plans, where regular, periodic purchases are made into the employees' accounts through the submission of the John Hancock Group Investment List. The minimum initial and subsequent purchase amounts are $250 for the Plan and $25 per fund-account in the Plan. For further information on how to establish a John Hancock Group Investment List, call Account Services at 1-800-343-6840. SYSTEMATIC EXCHANGE PROGRAM allows you to exchange a specified dollar amount from an existing account in any John Hancock Fund (including the Fund) into any other John Hancock Fund (including the Fund), subject to the requirements and limitations of the Exchange Privilege as noted above. At the time this option is selected, you must have a minimum balance of $5,000 in the account from which the exchange is to be made and must 25 118 designate a monthly exchange amount of no less than $25 for a specific Fund. The minimum initial investment amount (established by the Fund being exchanged into) will be waived for shareholders utilizing this Program. Note that automated dollar cost averaging methods do not assure a profit nor protect against loss in declining markets. You should consult your broker or financial adviser to determine whether this Program is suitable for your investment needs. In particular, consideration should be given to the type of John Hancock Fund from which your exchanges will be made (i.e., its investment objective, policies and risks, including the potential for fluctuation in its net asset value). The Fund currently imposes no service fee for participation in the Program but reserves the right to do so. You may change the exchange amounts or the selection of Funds or terminate your participation in the Program at any time by directing the Transfer Agent in writing. For further information regarding this Program, see the Statement of Additional Information (which may be obtained by contacting Account Services at 1-800-343-6840). CROSS-REINVESTMENT SERVICE. Shares of a particular class of the Fund may be purchased and/or redeemed without imposition of any applicable sales charge through the automatic reinvestment of dividend and capital gain distributions from the same class of any other John Hancock fund. These proceeds from other John Hancock funds will be invested at the next determined net asset value following receipt of such proceeds (i.e., reinvestment date which is normally the payable date of such other John Hancock fund) by the Fund's Transfer Agent. In addition, you may select in the Account Application to have your Fund distributions automatically invested without imposition of a sales charge in shares of the same class of another John Hancock fund. RETIREMENT PLANS. The Fund offers a variety of tax sheltered retirement plans. Shares of the Fund are available for purchase by qualified plans which have been approved by the Internal Revenue Service and include Individual Retirement Accounts (including SEP/IRAs), Profit Sharing and Money Purchase Plans, 403(b) Plans and 401(k) Plans. Plan support services are available. For details, please contact the Transamerica Funds Retirement Plans Department by calling 1-800-472-3863. Further information regarding the above services and privileges is set forth in the Statement of Additional Information. TELEPHONE PRIVILEGES - -------------------------------------------------------------------------------- Neither the Fund, Transfer Agent or the Investment Adviser will be responsible for the authenticity of telephone instructions. You should be aware that transactions authorized by telephone instructions reasonably believed to be authentic by the Fund can subject you to the risk of loss if the telephone instructions are subsequently found to be unauthentic. Privileges associated with telephone exchange, telephone redemption, and FedWire redemption may be selected in the Fund's Account Application. The privileges associated with FedWire redemption will not be established unless specifically instructed. The privileges associated with telephone exchange and/or telephone redemption will automatically be accorded to your account unless you specifically decline this privilege in the Account Application. If establishing a new account through a confirmed trade, your securities dealer should provide a completed new account application or submit specific written instructions requesting specific account privileges at the time of trade settlement. The Fund will employ reasonable procedures to confirm that the instructions as to either exchange, redemption or FedWire redemptions communicated by telephone are genuine, and that absent such procedures, the Fund or its agents may be liable for any losses due 26 119 to unauthorized or fraudulent instructions. These procedures include: 1. Recording all calls for telephone transactions (each transaction is thereby indexed by the time of the call placed); 2. Requesting the caller's name and phone number as verification of the origin of the telephone call; 3. Requesting the name of the Fund and your account number, the name(s) in which the account is registered and the tax identification number listed on the account; and 4. Mailing written confirmation (statements) of each transaction on the following business day to the registration address and the broker/dealer of record. DIVIDENDS, DISTRIBUTIONS AND TAX STATUS - -------------------------------------------------------------------------------- DIVIDENDS AND CAPITAL GAINS. The Fund declares dividends daily and pays dividends monthly which are substantially equal to all of its net investment income (i.e., non-capital gain income from its investments less expenses). In addition, the Fund may distribute any net short-term or long-term capital gains realized from the sale of its portfolio securities and transactions involving options and futures during the fiscal year. Short-term capital gains, if any, will normally be distributed monthly and net realized capital gains, if any, will be distributed at least annually. The excess of net long-term capital gains over net short-term capital losses including losses carried forward from prior years represents net realized capital gains. In addition, the Fund may make "supplemental dividends or distributions" to comply with applicable income and excise tax laws. When a dividend or capital gains distribution is paid, the net asset value per share is reduced by the amount of the payment. All dividends and any capital gains distribution are reinvested automatically in additional shares on the reinvestment date, unless you indicate in writing to the Transfer Agent or select in the Account Application to receive proceeds in cash or have them reinvested in shares of the same class of another John Hancock fund (without imposition of a sales charge) at the next determined net asset value following receipt of the proceeds (i.e., the reinvestment date.) See "Cross-Reinvestment Service." TAXES. Because the Fund intends to distribute its net investment income and net realized capital gains to its shareholders, and to adhere to other applicable requirements, it is not expected that the Fund will be required to pay any federal income taxes on amounts paid by it as dividends and distributions. However, you normally will have to pay federal income taxes and any applicable state income taxes on the dividends and capital gains distributions you receive (either as cash or reinvested shares) from the Fund (unless you are exempt from taxation or entitled to tax deferral.) After the end of each calendar year, you will receive a statement indicating the amount and federal tax status of all distributions received during that year. This includes information on the portion taxable as ordinary income and the portion taxable as long-term capital gains. Distributions from the Fund's net investment income and any net short-term capital gains are taxable to you as ordinary income. Distributions derived from net long-term capital gains, which are designated by the Fund as capital gains dividends are taxable to you as long-term capital gains, regardless of the length of time you have held the shares. The Fund is required to withhold 31% of taxable dividends, distributions and redemptions paid to you if you have not complied with IRS taxpayer identification requirements. To avoid this "backup" withholding requirement, you may furnish the Transfer Agent with your taxpayer identification number and required certifications by completing the Account Application or IRS form W9. (See "Backup Withholding" in the back of the Prospectus). You should consult your own 27 120 tax advisers concerning tax consequences of an investment in the Fund. ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION. From time to time the Fund may advertise its yield and total return which are computed separately for Class A and Class B Shares and in accordance with applicable regulatory requirements. Yield is computed by annualizing the result of dividing the net investment income per share over a 30-day period by the maximum offering price per share on the last day of the period. The Fund may also advertise in supplemental sales literature a distribution rate which is computed in the same manner as yield except that actual income dividends declared per share during the applicable period are substituted for net investment income per share. Yield and distribution rate quotations of Class B Shares do not reflect any contingent deferred sales charge and, if included, would be reflected in a lower rate quotation. The distribution rate is computed separately for Class A and Class B Shares. The cumulative total return shows the dollar or percentage change in value over a specified period of time (i.e., 1, 5 or 10 years or since the Fund's inception), assuming reinvestment of all dividends and distributions on the reinvestment dates and payment of maximum sales charges applicable to purchases and redemptions. Average annual total return shows the Fund's cumulative return divided over the number of years included in the given period ("standardized performance"). Total returns may, in conjunction with standardized performance, be calculated for other specified periods and/or excluding the effect of sales charges (which if included, would reduce the performance quoted). Both the yield and total return are based on historical earnings and are not indicative of future performance. The Fund will include performance data for both Class A and Class B Shares in any advertisement or information including performance data of the Fund. The Statement of Additional Information contains more detailed information about the calculation of performance. The Fund also may advertise its performance relative to certain performance rankings, ratings and indexes compiled by independent organizations (such as Lipper Analytical Services, Value Line and Morningstar, Inc.). In addition, the Fund may use comparative performance information from certain industry research materials or published in various periodicals. The Statement of Additional Information sets forth under "Performance Information" a list of periodicals, indexes, etc. which the Fund may use in its advertisements. ORGANIZATION. The Fund operates as one of six series of the Corporation. The Corporation was organized as a Maryland Corporation on June 22, 1987. In December, 1994, in connection with the acquisition of the Corporation's previous investment adviser, Transamerica Fund Management Company, the Corporation's name was changed from Transamerica Series, Inc. to John Hancock Series Inc. and the Fund's name was changed from Transamerica High Yield Bond Fund to John Hancock High Yield Bond Fund. All shares of common stock of the Corporation, $0.01 par value per share, have equal voting rights and have no preemptive or conversion rights. Both Class A and Class B shares represent an interest in the same assets of the Fund and are identical in all respects except that each class bears different distribution expenses and has exclusive voting rights with respect to its distribution plan. Shares of the Fund issued are fully paid, nonassessable, fully transferable and redeemable at the option of the holder. The Fund is not required to hold annual shareholder meetings except when required by federal or state law. Under certain circumstances, shareholders of the Fund have the right, and available procedures, to call a meeting of shareholders for any proper purpose. At the written request of the holders of at least 10% of the outstanding shares of the Corpora- 28 121 tion, the Corporation will call a meeting for the purpose of voting on the removal of one or more Directors. The Fund will assist shareholders with any communications regarding such meetings including shareholder proposals. SHAREHOLDER INQUIRIES. All inquiries regarding the Fund including questions concerning share ownership, dividends, transfer of ownership or share redemption, should be directed to the Fund at the telephone number or address on the cover page of this Prospectus. CUSTODIAN. Investors Bank & Trust Company, 34 Federal Street, Boston, Massachusetts 02110, is the Custodian for the Fund. TRANSFER AGENT. Transfer and dividend disbursing agent functions are performed by The Shareholder Services Group ("TSSG"), One American Express Plaza, Providence, Rhode Island 02903. INDEPENDENT AUDITORS. Ernst & Young LLP, 200 Clarendon Street, Boston Massachusetts 02116, has been selected as the independent auditors of the Fund. 29 122 - -------------------------------------------------------------------------------- APPENDIX A DESCRIPTION OF BOND RATINGS The ratings of Moody's Investors Service, Inc. and Standard & Poor's Ratings Group represent their opinions as to the quality of various debt instruments they undertake to rate. It should be emphasized that ratings are not absolute standards of quality. Consequently, debt instruments with the same maturity, coupon and rating may have different yields while debt instruments of the same maturity and coupon with different ratings may have the same yield. For ratings of other fixed income securities, including short-term securities, see Appendix D in the Statement of Additional Information. MOODY'S INVESTORS SERVICE, INC. Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa: Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuations of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A: Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment at some time in the future. Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba: Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds which are rated B generally lack the characteristics of desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca: Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C: Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. 30 123 STANDARD & POOR'S RATINGS GROUP AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. A: Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB, B, CCC, CC: Debt rated BB, B, CCC and CC is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and CC the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C: The rating C is reserved for income bonds on which no interest is being paid. D: Bonds rated D are in default, and payment of principal and/or interest is in arrears. APPENDIX B DESCRIPTION OF DERIVATIVE SECURITIES AND ASSET-BACKED SECURITIES Set forth below is a description of the derivative securities and asset-backed securities in which the Fund may invest. The Fund may invest in other similar types of derivative securities and asset-backed securities, including those which may be developed in the future, without shareholder approval. CMOS, REMICS AND MULTI-CLASS PASS THROUGH SECURITIES The Fund may also invest in real estate mortgage investment conduits (REMICs), collateralized mortgage obligations (CMOs) and multi-class pass-through securities. CMOs are obligations issued by special purpose trusts secured by mortgages. REMICs own mortgages and elect REMIC status under the Internal Revenue Code and are similar to CMOs in that they issue multiple classes of securities. Multi-class pass-through securities are similar to CMOs in that they are generally divided into several classes; however, they represent equity interests in the pool of mortgage loans typically held in a trust (unless indicated otherwise all references to CMOs include REMICs and multiclass pass through securities). Government CMOs are issued by a U.S. Government agency or instrumentality and private CMOs are issued by private, nongovernment corporations such as commercial banks, mortgage bankers or other financial institutions. CMOs are issued in a number of classes or "tranches" with different maturities. The classes or tranches are retired in sequence as the underlying mortgages are repaid. Prepayment may shorten the stated maturity of the obligation and can result in a loss of premium, if any has been paid. Certain of these securities may have variable or floating interest 31 124 rates and others may be stripped (securities which provide only the principal or interest feature of the underlying security). As part of the process of creating more predictable cash flows on most of the tranches in a series of CMOs, one or more tranches generally must be created that absorb most of the volatility in the cash flows on the underlying mortgage assets. The yields on these more volatile tranches are generally higher than prevailing market yields on government asset backed securities with similar average lives. Because of the uncertainty of the cash flows on these tranches, and the sensitivity thereof to changes in prepayment rates on the underlying mortgage assets, the market prices of and yield on these tranches tend to be highly volatile. CMOs, REMICs and multiclass pass through securities issued by private entities are not considered U.S. Government securities for purposes of the investment policies of the Fund and may be purchased only if they are rated at the time of purchase in the two highest grades by either Moody's or S & P. Privately issued securities which have underlying assets consisting of conventional mortgage loans or whole loans are not guaranteed by an entity having the credit status of a U.S. Government agency. Such securities are generally structured with one or more types of credit enhancement such as guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties so that in the event of a default on an underlying mortgage no loss would be borne until all credit enhancement protecting such security is exhausted. ZERO COUPON BONDS AND OTHER STRIPPED SECURITIES The Fund may also invest in the interest only or principal only components of debt securities in which the Fund is permitted to invest. Zero coupon Treasury securities are (i) U.S. Treasury bills, and both notes and bonds which have been stripped of their unmatured interest coupons and receipts or (ii) certificates representing interest in such stripped obligations. A zero coupon security pays no interest in cash to its holder during its life although interest is accrued for federal income tax purposes. Its value to an investor consists of the difference between its face value at the time of maturity and the price for which it was acquired, which is generally an amount significantly less than its face value (sometimes referred to as a "deep discount" price). Investing in "zero coupon" Treasury securities may help to preserve capital during periods of declining interest rates. For example, if interest rates decline, GNMA Certificates owned by the Fund which were purchased at greater than par are more likely to be prepaid, which would cause a loss of principal. In anticipation of this, the Fund might purchase zero coupon Treasury securities, the value of which would be expected to increase when interest rates decline. Zero coupon Treasury securities do not entitle the holder to any periodic payments of interest prior to maturity. Accordingly, such securities usually trade at a deep discount from their face or par value and will be subject to greater fluctuations of market value in response to changing interest rates than debt obligations of comparable maturities which make periodic distributions of interest. On the other hand, because there are not periodic interest payments to be reinvested prior to maturity, zero coupon securities eliminate the reinvestment risk and lock in a rate of return to maturity. Current federal tax law requires that a holder (such as the Fund) of a zero coupon security accrue a portion of the discount at which the security was purchased as income each year even though the Fund received no interest payment in cash on the security during the year. Stripped mortgage-related and mortgage-backed securities (hereinafter referred to as "Stripped Mortgage Securities") are derivative multiclass mortgage securities. Stripped Mortgage Securities may be issued by agencies or instrumentalities of the U.S. Government, or by private originators of, or investors in, mortgage loans, including mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Stripped Mortgage Securities are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of Stripped 32 125 Mortgage Securities will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the securities' yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the fund may fail to fully recoup its initial investment in an IO, even if the IO is rated AAA or Aaa. Furthermore, if the underlying mortgage assets experience slower than anticipated prepayments of principal, the yield of a PO will be affected more severely than would be the case with a traditional mortgage-backed security. IOs and POs have exhibited large price changes in response to changes in interest rates and are considered to be volatile in nature. In addition, if any stripped mortgage security issued by the U.S. Government or its agencies and instrumentalities is determined to be illiquid under guidelines established by the Board of Directors, the Fund will limit its investment in such instruments together with all non-government issued stripped mortgage securities and other illiquid instruments to not more than 10% of its total assets. ASSET-BACKED SECURITIES The Fund may invest in securities that represent individual interests in pools of consumer loans and trade receivables similar in structure to mortgage-backed securities. The assets are securitized either in a pass-through structure (similar to a mortgage pass-through structure) or in a pay-through structure (similar to the CMO structure). Although the collateral supporting asset-backed securities generally is of a shorter maturity than mortgage loans and historically has been less likely to experience substantial prepayments, no assurance can be given as to the actual maturity of an asset-backed security because prepayments of principal may be made at any time. Payments of principal and interest typically supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guarantee by another entity or having a priority to certain of the borrower's other securities. The degree of credit enhancement varies, and generally applies to only a fraction of the asset-backed security's par value until exhausted. If the credit enhancement of an asset-backed security held by the Fund has been exhausted, and if any required payments of principal and interest are not made with respect to the underlying loans, the Fund may experience losses or delays in receiving payment. Asset-backed securities entail certain risks not presented by mortgage-backed securities. Asset-backed securities do not have the benefit of the same type of security interest in the related collateral. Credit card receivables are generally unsecured and a number of state and federal consumer credit laws give debtors the right to set off certain amounts owed on the credit cards, thereby reducing the outstanding balance. In the case of automobile receivables, there is a risk that the holders may not have either a proper or first security interest in all of the obligations backing such receivables due to the large number of vehicles involved in typical issuance, and technical requirements under state laws. Therefore, recoveries on repossessed collateral may not always be available to support payments on the securities. For a further discussion of the risks of investing in asset-backed securities, see the Statement of Additional Information. The Fund will invest in asset-backed securities only if they are rated at the time of purchase in the two highest grades by a nationally-recognized rating agency. 33 126 TABLE OF CONTENTS
PAGE ---- Summary................................ 2 Fund Expenses........................ 3 Financial Highlights................... 4 Investment Objectives and Policies..... 6 Investment Practices, Techniques, and Restrictions......................... 11 The Fund and Its Management............ 14 Information About Shares of the Fund... 16 Net Asset Value...................... 16 Purchase of Shares................... 16 Redemption and Repurchase of Shares............................ 21 Shareholder Services................... 24 Telephone Privileges................... 26 Dividends, Distributions and Tax Status............................... 27 Additional Information................. 28 Appendix A............................. 30 Appendix B............................. 31
INVESTMENT MANAGER - ------------------------ John Hancock Advisers, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 DISTRIBUTOR - -------------- John Hancock Funds, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 SHAREHOLDER INQUIRY - ------------------------ 1-800-343-6840 P.O. Box 9656 Providence, Rhode Island 02940-9656 No dealer, salesman or other person has been authorized to give any information or to make any representation other than those contained in this Prospectus or in official sales literature distributed by the Funds' Distributor in connection with the offer of the Fund's shares, and if given or made, such other information or representations must not be relied upon as having been authorized by the Fund or the Distributor. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. T450P 3/95 JOHN HANCOCK HIGH YIELD BOND FUND A Portfolio of John Hancock Series, Inc. PROSPECTUS March 1, 1995 127 JOHN HANCOCK EMERGING GROWTH FUND A Portfolio of John Hancock Series, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-7603 - -------------------------------------------------------------------------------- John Hancock Emerging Growth Fund (the "Fund"), a portfolio of John Hancock Series, Inc. (the "Corporation"), seeks to achieve long-term growth of capital through investing primarily in the common stocks of rapidly growing small and medium sized companies at a relatively early point in their corporate life cycles ("emerging growth stocks".) The Corporation is a registered investment company that is comprised of multiple separate series (investment portfolios) offering investors a wide range of mutual fund investment choices. This Prospectus relates only to shares of the Fund. THE FUND IS INTENDED FOR LONG-TERM INVESTORS WILLING TO ASSUME THE RISKS OF INVESTMENTS IN EMERGING GROWTH STOCKS. ALTERNATIVE PURCHASE PLAN. The Fund offers two classes of shares with alternative purchase and distribution fee arrangements. These differences permit you to choose the method of purchasing shares that is most beneficial given the amount of the purchase, the length of time you expect to hold the shares and other circumstances. Shares of the Fund may be purchased at the next determined net asset value per share, plus a sales charge which, at your election, may be imposed either (i) at the time of purchase in the case of the Class A Shares (the initial sales charge alternative) or (ii) on a contingent deferred basis in the case of the Class B Shares (the deferred sales charge alternative.) See "Purchase of Shares -- Alternative Purchase Plan" in this Prospectus for further details about the Alternative Purchase Plan. --------------------- This prospectus briefly sets forth the basic information that you should know before investing. YOU SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. A Statement of Additional Information dated March 1, 1995, containing further information about the Fund, has been filed with the Securities and Exchange Commission and is incorporated into this Prospectus by reference. A copy of the Statement of Additional Information may be obtained without charge by contacting John Hancock Funds, Inc. whose address and telephone number are shown on the back cover of this Prospectus. - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR FINANCIAL INSTITUTION, NOR ARE SHARES OF THE FUND FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. --------------------- PROSPECTUS DATED MARCH 1, 1995 128 SUMMARY - -------------------------------------------------------------------------------- THE FUND AND THE CORPORATION. John Hancock Emerging Growth Fund (the "Fund") is a portfolio of John Hancock Series, Inc. (the "Corporation") which is organized as a Maryland corporation and is an open-end diversified management investment company that issues its shares in series each of which is designated as a "fund." INVESTMENT OBJECTIVE. The Fund seeks to achieve long-term growth of capital through investing primarily in the common stocks of rapidly growing small- and medium-sized companies at a relatively early point in their corporate life cycles. See "Investment Objectives and Policies." INVESTMENT ADVISER. John Hancock Advisers, Inc. (the "Investment Adviser") serves as investment adviser and receives a monthly fee from the Fund at an annual rate of .75% of the Fund's average daily net assets. The Investment Adviser presently manages a broad range of mutual funds and multiple investment portfolios representing total assets of approximately $13 billion under management. (See "The Fund and Its Management.") DISTRIBUTION ARRANGEMENTS. The Fund offers two classes of shares, "Class A Shares" and "Class B Shares", through the Fund's distributor, John Hancock Funds, Inc. ("John Hancock Funds"). Class A Shares are subject to an initial sales charge of up to 5.75% at the time of purchase and bear the expense of an ongoing Rule 12b-1 distribution service fee at an annual rate of up to .25% of the average daily net assets of the Fund allocable to the Class A Shares. Class B Shares do not incur a sales charge when they are purchased but (i) are generally subject to a sales charge if they are redeemed within six years of purchase (a "contingent deferred sales charge" or "CDSC") and (ii) are subject to aggregate distribution and service fees of up to 1% of the Fund's average daily net assets allocable to the Class B Shares annually. The contingent deferred sales charges for Class B Shares decline from 5% during the first year of investment to zero after the sixth year (5%, 4%, 3%, 3%, 2%, 1%), (see "Alternative Purchase Plan" on page 15). Shares of either class may be purchased through selected financial services firms having dealer agreements with John Hancock Funds. The minimum initial and subsequent investment amounts for either class of shares are $1,000 and $50 ($250 and $25 for a tax sheltered retirement plan), respectively (see "Purchase of Shares.") REDEMPTION OF SHARES. Shares of the Fund in any amount may be redeemed at any time at the net asset value per share next determined after the redemption request is received in proper form by The Shareholder Services Group (the "Transfer Agent.") In certain cases, however, redemption proceeds from the Class B Shares will be reduced by the amount of any applicable contingent deferred sales charge (see "Redemption and Repurchase of Shares.") SPECIAL RISK CONSIDERATIONS. Because of the type of issuer and the price volatility of the equity securities in which the Fund invests for long-term growth of capital, investors should consider carefully the risks involved in such investments (see "Investment Objective and Policies.") In addition, the Fund's investment practices and other policies such as options and futures transactions, lending portfolio securities and investing in foreign securities, entail specific risks (see "Investment Practices, Techniques and Restrictions.") The Fund is not intended as a complete investment program. The above is qualified in its entirety by the detailed information appearing elsewhere in this Prospectus and in the Statement of Additional Information. 2 129 FUND EXPENSES
- ----------------------------------------------------------------------------------------------------------- The following table illustrates the various expenses and fees a shareholder of the Fund would bear directly or indirectly. The expenses and fees set forth in the table are for the fiscal year ended October 31, 1994, except as otherwise noted. CLASS A SHARES CLASS B SHARES (INITIAL SALES (DEFERRED CHARGE SALES CHARGE ALTERNATIVE) ALTERNATIVE) ------------- ------------- SHAREHOLDER TRANSACTION EXPENSES(1) Maximum Sales Charge Imposed on Purchases............................ 5.75% None Sales Charge Imposed on Reinvested Dividends......................... None None Deferred Sales Charge (as a percentage of original purchase price)... None 5.00% Redemption Fee....................................................... None None Exchange Fee......................................................... None None ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B (as a percentage of average net assets) ------- ------- Management Fees(2)................................................... 0.75% 0.75% 12b-1 Fees(3)........................................................ 0.25% 1.00% Other Expenses....................................................... 0.44% 0.44% ----- ----- Total Fund Operating Expenses........................................ 1.44% 2.19% ===== =====
EXAMPLE A(4): You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and redemption at the end of each time period. 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------ ------ ------ Class A.............................................................. $ 71 $100 $132 $220 Class B.............................................................. $ 72 $ 99 $137 $233* EXAMPLE B(4): You would pay the following expenses on the same investment assuming no redemption: 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------ ------ ------ Class A.............................................................. $ 71 $100 $132 $220 Class B.............................................................. $ 22 $ 69 $117 $233* - --------------- (1) Class A Shares have a reduced initial sales charge for purchases in excess of $50,000. Purchases of $1 million or more are not subject to a sales charge; however, a contingent deferred sales charge of 1% will be applied to redemptions within 12 months of such purchase (as described under "Initial Sales Charge Alternative -- Class A Shares".) The deferred sales charge on Class B Shares declines from 5% during the first year to 0% after the sixth year in the following manner: 5%, 4%, 3%, 3%, 2% and 1%. See "Information About Shares of the Fund -- Redemption and Repurchase of Shares". (2) See "The Fund and Its Management." (3) See "The Fund and Its Management -- Distribution Plans." (4) Expenses in Examples above have been restated to reflect current fees and should not be considered a representation of past or future expenses. Use of assumed (5%) return is mandated by the Securities and Exchange Commission. Actual expenses may be greater or less than those shown above. THE FUND'S PAYMENT OF A DISTRIBUTION FEE MAY RESULT IN A LONG-TERM SHAREHOLDER PAYING MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM FRONT-END SALES CHARGE PERMITTED UNDER THE NATIONAL ASSOCIATION OF SECURITIES DEALERS' RULES OF FAIR PRACTICE. * Assumes tax-free automatic exchange of Class B Shares for Class A Shares after the eight year period following the initial purchase of Class B Shares. If the exchange is declined, such Class B expenses would be $252.
3 130 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Financial highlights for John Hancock Emerging Growth Fund (formerly Transamerica Emerging Growth Fund) for each of the three years in the period ended October 31, 1994 and the period from August 22, 1991 through October 31, 1991 in the case of Class A Shares, have been audited by Ernst & Young LLP, independent auditors whose unqualified report thereon as well as other financial statements of the Fund are included in the Statement of Additional Information. The Fund's annual report contains a discussion of the Fund's performance and is made available upon request without charge.
CLASS A SHARES --------------------------------------------------------- YEAR ENDED FROM OCTOBER 31, AUGUST 22, 1991 ---------------------------------- TO OCTOBER 31, 1994 1993 1992 1991(2) -------- -------- -------- --------------- Per share income and capital changes for a share outstanding during each period:(1) Net asset value, beginning of period............... $ 25.89 $ 20.60 $ 19.26 $ 18.12 INCOME FROM INVESTMENT OPERATIONS Net investment loss................................ (0.18) (0.16) (0.20) (0.03) Net realized and unrealized gain on investments.... 1.11 5.45 1.60 1.17 ------- ------- ------- ------- Total from Investment Operations.............. 0.93 5.29 1.40 1.14 LESS DISTRIBUTIONS Distributions from realized gains.................. -- -- (0.06) -- ------- ------- ------- ------- Total Distributions........................... -- -- (0.06) -- ------- ------- ------- ------- Net asset value, end of period..................... $ 26.82 $ 25.89 $ 20.60 $ 19.26 ======= ======= ======= ======= TOTAL RETURN(3).................................... 3.59% 25.68% 7.32% 6.29% ======= ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA Ratio of expenses to average net assets............ 1.44% 1.40% 1.67% 0.33% Ratio of net investment loss to average net assets........................................... (0.71)% (0.70)% (1.03)% (0.15)% Portfolio turnover................................. 25% 29% 48% 66% Net Assets, end of period (in thousands)........... $131,053 $81,263 $46,137 $38,859 - --------------- (1) Per share information has been calculated using the average number of shares outstanding. (2) Financial highlights, including total return, have not been annualized. Portfolio turnover is for the year ended October 31, 1991. (3) Total return does not include the effect of the initial sales charge for Class A Shares.
4 131 FINANCIAL HIGHLIGHTS (continued) - -------------------------------------------------------------------------------- Financial highlights for John Hancock Emerging Growth Fund (formerly Transamerica Emerging Growth Fund) for each of the seven years in the period ended October 31, 1994 and the period from October 26, 1987 through October 31, 1987 in the case of Class B Shares have been audited by Ernst & Young LLP, independent auditors whose unqualified report thereon as well as other financial statements of the Fund are included in the Statement of Additional Information. The Fund's annual report contains a discussion of the Fund's performance and is made available upon request without charge.
CLASS B SHARES -------------------------------------------------------------------------------------- PERIOD YEAR ENDED OCTOBER 31, ENDED ------------------------------------------------------------------------- OCT. 31, 1994 1993 1992 1991 1990 1989 1988 1987(2) ------ ------ ------ ------ ------ ------ ------ ------- Per share income and capital changes for a share outstanding during each period(1): Net asset value, beginning of period..... $ 25.33 $ 20.34 $ 19.22 $ 11.06 $ 12.76 $10.54 $ 7.89 $ 7.89 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)............. (0.36) (0.36) (0.38) (0.30) (0.22) (0.08) 0.09 (0.0021) Net realized and unrealized gain (loss) on investments......................... 1.07 5.35 1.56 8.46 (1.26) 2.83 2.56 0.0021 -------- -------- ------- ------- ------- ------ ------ ------ Total from Investment Operations..... 0.71 4.99 1.18 8.16 (1.48) 2.75 2.65 0.0000 LESS DISTRIBUTIONS Dividends from net investment income... -- -- -- -- -- (0.04) -- -- Distributions from realized gains...... -- -- (0.06) -- (0.22) (0.49) -- -- -------- -------- ------- ------- ------- ------ ------ ------ Total Distributions.................. -- -- (0.06) -- (0.22) (0.53) -- -- -------- -------- ------- ------- ------- ------ ------ ------ Net asset value, end of period........... $ 26.04 $ 25.33 $ 20.34 $ 19.22 $ 11.06 $12.76 $10.54 $ 7.89 ======== ======== ======= ======= ======= ====== ====== ======= TOTAL RETURN(3).......................... 2.80% 24.53% 6.19% 73.78% (11.82)% 27.40% 33.59% 0.00% ======== ======== ======= ======= ======= ====== ====== ======= RATIOS AND SUPPLEMENTAL DATA Ratio of expenses to average net assets.. 2.19% 2.28% 2.64% 2.85% 3.11% 3.51% 5.64% 0.44% Ratio of expense reimbursement to average net assets..................... -- -- -- -- -- (0.03)% (2.59)% (0.41)% -------- -------- ------- ------- ------- ------ ------ ------ Ratio of net expenses to average net assets................................. 2.19% 2.28% 2.64% 2.85% 3.11% 3.48% 3.05% 0.03% ======== ======== ======= ======= ======= ====== ====== ======= Ratio of net investment income (loss) to average net assets.................. (1.46)% (1.58)% (1.99)% (1.83)% (1.64)% (0.67)% 0.81% (0.03)% Portfolio turnover....................... 25% 29% 48% 66% 82% 90% 252% 0% Net Assets, end of period (in thousands)......................... $283,435 $219,484 $86,923 $52,743 $11,668 $7,877 $3,232 $ 79 - --------------- (1) Per share information has been calculated using the average number of shares outstanding. (2) Financial highlights, including total return, are for the period from October 26, 1987 (date of the Fund's initial offering of shares to the public) to October 31, 1987 and have not been annualized. (3) Total return does not include the effect of the contingent deferred sales charge for Class B Shares.
5 132 INVESTMENT OBJECTIVE AND POLICIES - ------------------------------------------------------ The Fund seeks long-term growth of capital through investing primarily (at least 80% of its assets in normal circumstances) in the common stocks of rapidly growing small-sized companies (those with a market capitalization of $500 million or less) to medium-sized companies (those with a market capitalization of up to $1 billion.) Current income is not a factor of consequence in the selection of stocks for the Fund. In order to achieve its objective, the Fund invests in a diversified group of companies whose growth rates are expected to significantly exceed that of the average industrial company. It invests in these companies early in their corporate life cycle before they become widely recognized and well known, and while their reputations and track records are still emerging ("emerging growth companies".) Consequently, the Fund invests in the stocks of emerging growth companies whose capitalizations, sales and earnings are smaller than those of the Fortune 500 companies. Further, the Fund's investments in emerging growth stocks may include those of more established companies which offer the possibility of rapidly accelerating earnings because of revitalized management, new products, or structural changes in the economy. The nature of investing in emerging growth companies involves greater risk than is customarily associated with investments in more established companies (see "Risk Factors"). While the Fund will invest primarily in emerging growth companies, the balance of the Fund assets may be invested in the following: (1) other common stocks; (2) preferred stocks; (3) convertible securities (other than those rated investment grade and unrated securities, up to 10% of the Fund's total assets may be invested in convertible securities rated as low as "B" by Standard & Poor's Ratings Group ("S&P") or Moody's Investors Services ("Moody's") or, if unrated, determined by the Investment Adviser to be comparable in quality to those rated "B" -- see "Risk Factors"); (4) warrants; (5) hedging instruments (stock index options and stock index futures and options thereon); and (6) debt obligations of the United States government, its agencies and instrumentalities. The Fund also may write covered call and put options and purchase call and put options on securities. These transactions, including stock index futures transactions, involve certain risks and are described under "Investment Practices, Techniques and Restrictions". In order to provide liquidity for the purchase of new investments and to effect redemptions of its shares, the Fund will invest a portion of its assets in high quality, short-term debt securities with remaining maturities of one year or less ("money market instruments"), including U.S. government securities, certificates of deposit, bankers acceptances, commercial paper, corporate debt securities and related repurchase agreements. Most of the Fund's investments will be in equity securities of U.S. companies. However, since many of the emerging growth companies are located outside of the U.S., a significant portion of the Fund's investments may occasionally be in equity securities of non-U.S. companies. (See "Investment Practices, Techniques and Restrictions" for a discussion of foreign securities and their risks.) The extent to which the Fund will be able to achieve its investment objective depends upon the Investment Adviser's ability to evaluate and develop the information it receives into a successful investment program. 6 133 There is no assurance the Fund will achieve its objective. The Fund's investment objective and policies are non-fundamental which means they may be changed by the Board of Directors without requiring the vote of shareholders; such investment objective may not, however, be changed without prior (30 days') written notice first having been given to shareholders. Such a change in the investment objective may result in the Fund's investment objective being different from that which the shareholders considered appropriate, in light of their then current financial position and needs, at the time of their investment in the Fund. During periods of unusual market conditions when the Investment Adviser believes that investing for temporary defensive purposes is appropriate, part or all of the assets of the Fund may be invested in cash or cash equivalents consisting of: (1) obligations of banks (including certificates of deposit, bankers' acceptances and repurchase agreements) with assets of $100,000,000 or more; (2) commercial paper rated within the two highest rating categories of a nationally recognized rating organization; (3) investment grade short-term notes; (4) obligations issued or guaranteed by the U.S. government or any of its agencies or instrumentalities; and (5) related repurchase agreements. The Fund may dispose of investments regardless of the holding period if perceived changes in a company's growth prospects or asset value make selling them advisable. Such an investment decision could result in a high portfolio turnover rate during a given period. A higher portfolio turnover rate involves greater expenses to the Fund and may also result in the realization of short-term capital gains taxable at ordinary income rates. Portfolio turnover rates of the Fund for recent years are shown in the section "Financial Highlights." The Fund will engage in portfolio trading if it believes a transaction, net of costs (including custodian charges), will help in attaining its investment objective. RISK FACTORS. Because the value of the portfolio securities of the Fund and, therefore the net asset value per share, will fluctuate with changes in general economic and market conditions, the net asset value per share at the time an investor's shares are redeemed may be more or less than the value at the time of purchase. In particular, the value of securities of emerging growth companies tend to fluctuate more widely than other types of investments. Because emerging growth companies may be in the early stages of their development, they may be dependent on a relatively few products or services. They may also lack adequate capital reserves or may be dependent on one or two management individuals. Their stocks are often traded "over-the-counter" or on a regional exchange, and may not be traded in volumes typical of trading on a national exchange. Consequently, the investment risk is higher than that normally associated with larger, older, better-known companies. In order to help reduce this risk, the Fund allocates its investments among different industries. In addition, the Fund may invest a significant portion of its assets in foreign securities, which involve certain risks not assumed by other investment companies investing exclusively in domestic securities. (See "Foreign Securities" below.) Convertible securities rated less than investment grade, which are included in the category of securities commonly called "junk bonds", generally involve greater volatility of price and risk of loss of principal and income than securities in the higher rating categories and these securities are considered speculative by Moody's and S&P. The secondary market for "lower rated" convertible securities may be less liquid than for higher rated securities. The limited liquidity of the market may adversely affect the ability of the Board of Directors to arrive at a fair value for certain securities at certain times and could make it difficult for the Fund to sell the securities. 7 134 INVESTMENT PRACTICES, TECHNIQUES AND RESTRICTIONS - ------------------------------------------------------ The Fund's investments are subject to the following practices, techniques and restrictions and may involve certain risks. The Statement of Additional Information contains more detailed information about these practices, including limitations designed to reduce these risks. REPURCHASE AGREEMENTS AND RESTRICTED SECURITIES. When participating in repurchase agreements, the Fund buys securities from a seller (usually a bank or brokerage firm) with the agreement that the seller will repurchase the securities at a predetermined price or yield at a later date. Transactions involving repurchase agreements must be fully collateralized at all times, however the Fund may be subject to various delays and risks of loss if the seller is unable to meet its obligation to repurchase. The Fund may also invest in securities which are restricted as to resale. The registration of such "restricted securities" under the Securities Act of 1933 (the "Securities Act") may be required prior to sale with attendant time delays, and the Fund may have to bear all or a part of the expense of such registration. No more than 10% of the Fund's total net assets may be invested in restricted securities (including other securities not readily marketable) and in repurchase agreements that mature in more than seven days (collectively, "illiquid securities.") The Fund may purchase, without regard to this limitation, restricted securities which can be offered and sold to "qualified institutional buyers" under Rule 144A of the Securities Act so long as such securities meet liquidity guidelines established by the Fund's Board of Directors. Since it is not possible to predict with assurance exactly how this market for restricted securities sold and offered under Rule 144A will develop, the Board of Directors will monitor the Fund's investments in these securities, focusing on such factors, among others, as valuation, liquidity and availability of information. LENDING OF PORTFOLIO SECURITIES. The Fund may lend its portfolio securities amounting to not more than 33% of the value of its portfolio securities to approved borrowers (principally broker/dealers) provided these loans are callable at any time and are continuously secured by collateral (cash or government securities) equal to no less than the market value, determined daily, on the securities loaned. The Fund may reinvest any cash collateral in short term highly liquid debt securities. During the period of the loan, the Fund earns income on both the loaned securities and the collateral. Although these transactions must be fully collateralized at all times, they involve some credit risk to the Fund if the borrower should default on its obligation and the Fund is delayed or prevented from recovering the collateral. REVERSE REPURCHASE AGREEMENTS. A reverse repurchase agreement involves the sale of a security by the Fund and its agreement to repurchase the instrument at a specified time and price. The Fund will maintain a segregated account consisting of highly liquid, marketable debt securities to cover its obligations under reverse repurchase agreements with selected firms approved in advance by the Board of Directors. The Fund will use the proceeds to purchase other investments. Reverse repurchase agreements are considered to be borrowings by the Fund and as an investment practice may be considered speculative. The Fund may borrow money for temporary administrative or emergency purposes. To avoid the potential leveraging effects of the Fund's borrowings, additional investments will not be made while borrowings are in excess of 5% of the Fund's total assets. The Fund will limit its investments in reverse repurchase agreements and other borrowings to no more than 33% of its total assets. FOREIGN SECURITIES AND CURRENCY TRANSACTIONS. The Fund's investments in foreign securities can involve 8 135 risks not present in domestic securities such as: currency exchange rate fluctuations; exchange control policies; expropriation or confiscatory taxation; difficulty in obtaining and enforcing judgments against a foreign issuer; political, economic or social instability; and less securities regulation. Foreign securities can be less liquid or more volatile than U.S. securities, and foreign accounting and disclosure standards may differ from U.S. standards. The values of foreign investments can rise or fall because of changes in currency exchange rates. The Fund may buy or sell foreign currencies and foreign currency forward contacts for hedging purposes in connection with its foreign investments. A forward currency contract is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. The Fund might purchase a particular currency or enter into a forward currency contract to preserve the U.S. dollar price of securities it intends to or has contracted to purchase. Alternatively, it might sell a particular currency on either a spot or forward basis to hedge against an anticipated decline in the dollar value of securities it intends to or has contracted to sell. Although this strategy could minimize the risk of loss due to a decline in the hedged currency, it could also limit any potential gain from an increase in the value of the currency. The Fund is authorized to, but presently does not intend to, enter into transactions involving options on foreign currencies for hedging purposes only. (See "Investment in Securities of Non-U.S. Issuers" in the Statement of Additional Information. TRANSACTIONS IN OPTIONS AND FUTURES OPTIONS ON SECURITIES. The Fund may write (sell) covered call and cash secured put options and purchase call and put options on equity securities. The Fund will write options on its portfolio securities for the purpose of increasing its return on the securities or to protect the value of its portfolio. If the price of the underlying security moves adversely to the Fund's position, the option may be exercised and the Fund will be required to purchase or sell the underlying security at a disadvantageous price, which may only be partially offset by the amount of the premium if at all. The Fund may also write straddles, which are combinations of put and call options on the same security. These transactions can generate additional premium income but also present an increased risk. The Fund may also purchase put or call options in anticipation of market changes which may adversely affect the prices of securities the Fund wants to purchase at a later date. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise or liquidation of the option. Unless the price of the underlying security changes sufficiently, the option may expire without value to the Fund. OPTIONS ON STOCK INDEXES. The Fund may write (sell) covered call and put options and purchase call and put options on stock indexes. The Fund may write options on securities indexes in order to increase its gross income, and attempt to protect its portfolio against declines in the value of securities it owns, or increases in the value of securities to be acquired. When the Fund writes an option on a securities index and the value of the index moves adversely to the Fund's position, the option will not be exercised. The Fund will either close out the option at a profit or allow it to expire unexercised. The Fund will thereby retain the amount of the premium, less related transaction costs, which will increase its gross income and offset part of the reduced value of the portfolio securities or the increased cost of securities to be acquired. Such transactions, however, will constitute only partial hedges against adverse price fluctuations. This is because any of these fluctuations will be offset only to the extent of the premium received by the Fund for the writing of the option. In addition, if the value of an underlying 9 136 index moves adversely to the Fund's option position, the option may be exercised and the Fund will experience a loss that may only be partially offset, if at all, by the amount of the premium received. The Fund may also purchase put or call options on securities indexes in order to hedge its investments against a decline in value or to attempt to reduce the risk of missing a market or industry segment advance. The Fund's possible loss in either case will be limited to the premium paid for the option, plus related transaction costs. FUTURES CONTRACTS. The Fund may enter into stock index future contracts ("Futures Contracts"). Purchases or sales of stock index Futures Contracts are used to attempt to protect the Fund's current or intended stock index investments from broad fluctuations in securities prices. The adverse effects of an anticipated decrease in the value of portfolio securities may be offset, in whole or in part, by gains on the sale of Futures Contracts. This applies when the decrease occurs as a result of a general stock market decline. Conversely, the increased cost of portfolio securities to be acquired may be offset, in whole or in part, by gains on Futures Contracts purchased by the Fund. This applies when the increase is caused by a general rise in the stock market. The Fund will incur transaction costs when it purchases and sells Futures Contracts. It will also be required to maintain margin deposits (see "Risks of Transactions in Options and Futures"). OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write options on stock index futures contracts ("Options on Futures Contracts.") Such investment strategies will be used as a hedge and not for speculation. Put and call options on Futures Contracts may be traded by the Fund in order to protect against declines in the values of portfolio securities or against increases in the cost of securities to be acquired. Purchases of options on Futures Contracts may present less risk in hedging the Fund's portfolios than the purchase and sale of the underlying Futures Contracts since the potential loss is limited to the amount of the premium plus related transaction costs. The writing of these options, however, does not present less risk than the trading of Futures Contracts. It will constitute only a partial hedge, up to the amount of the premium received and if an option is exercised, the Fund may suffer a loss on the transaction. RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES. Although the Fund will enter into transactions in Futures Contracts, Options on Futures Contracts and certain options solely for hedging purposes, their use does involve certain risks. For example, a lack of correlation between the value of an instrument underlying an option or Futures Contract and the assets being hedged or unexpected adverse price movements, could render the Fund's hedging strategy unsuccessful, thus resulting in losses. The Fund also may enter into transactions in options on securities and options on stock indexes for other than hedging purposes. This involves greater risk. In addition, there can be no assurance that a liquid secondary market will exist for a contract purchased or sold. Therefore, the Fund may be required to maintain a position until exercise or expiration, which could result in losses. Over-the-counter transactions in options on securities also involve risks arising from the lack of an organized exchange trading environment. The Fund will limit its investment in over-the-counter options together with other illiquid securities to 10% of the Fund's total assets. Transactions in Futures Contracts, Options on Futures Contracts and options are subject to other risks as well. The Fund will not engage in transactions in futures contracts and options on futures for speculation, but only for hedging or other permissible risk management purposes. All of the Fund's futures contracts and options thereon will be traded on a U.S. commodity exchange or board of trade. The Fund will not engage in a futures or option transaction if, immediately thereafter, the sum of initial margin deposits on existing positions and premiums paid for 10 137 options on futures would exceed 5% of the Fund's total assets. The potential loss from writing options on futures contracts is unlimited and may exceed the amount of the premium received. The Fund will not purchase a call or put option if as a result the premium paid for the option together with premiums paid for all other stock options, options on stock indexes, stock index futures and options thereon then held by the Fund, exceed 10% of the Fund's total net assets. When the Fund purchases a futures contract or a call option on a futures contact, an amount of cash or U.S. Government securities equal to the market value of the futures contract will be deposited in a segregated account with the Fund's custodian to collateralize the position. The Fund's risks in entering into transactions in options, futures and forward contracts are set forth in greater detail in the Statement of Additional Information. INVESTMENT RESTRICTIONS. The Fund has adopted certain fundamental investment restrictions which are described in detail in the Statement of Additional Information and may not be changed without shareholder approval. Among the restrictions are provided that the Fund may not: (1) borrow money in an amount in excess of 33 1/3% of its total assets; and (2) invest more than 25% of its total assets in any one industry. If a percentage restriction, except restriction regarding borrowing, on investments or utilization of assets is followed at the time an investment is made or assets are utilized, a later change in percentage resulting from changes in the value of the Fund's portfolio securities will not be considered a violation of policy. THE FUND AND ITS MANAGEMENT - -------------------------------------------------------------------------------- GENERAL. The Fund is a series of John Hancock Series, Inc. (the "Corporation"), an open-end diversified management investment company organized as a Maryland corporation (see "Additional Information -- Organization"). The Corporation's Board of Directors supervises the management and affairs of the Fund. The officers of the Corporation are responsible for the Fund's daily business operations under the overall direction of the Directors. Information about each of the Directors and officers is set forth in the Statement of Additional Information. Investment decisions are made by the portfolio manager, Edgar M. Larsen, Senior Vice President of John Hancock Advisers, Inc. Mr. Larsen has served as Portfolio Manager since the Fund's inception in 1987. INVESTMENT ADVISER. John Hancock Advisers, Inc. is the Investment Adviser of the Fund and is compensated for its advisory services at an annual rate of .75% of the Fund's average daily net assets. The Investment Adviser manages the Fund's assets, provides administrative services and supervises the Fund's daily business affairs. The advisory fee paid by the Fund is higher than that of most other investment companies. However, the Board of Directors has determined that such fee is reasonable in light of the highly specialized investment decisions and investment techniques employed by the Fund. The Investment Adviser was organized in 1968 and is an indirect wholly owned subsidiary of John Hancock Mutual Life Insurance Company, a financial services company. The Investment Adviser provides the Fund and other investment companies in the John Hancock group of funds, with investment research and portfolio management services. The Distributor distributes shares for all of the John Hancock mutual funds through selected broker/dealers ("Selling Brokers"). Certain Fund 11 138 officers are also officers of the Investment Adviser and John Hancock Funds. For the fiscal year ended October 31, 1994, the Fund paid an advisory fee of 0.75% of the Fund's average net assets to the Fund's former investment advisor. In addition, during the fiscal year ended October 31, 1994 the Fund reimbursed Transamerica Fund Management Company (the Fund's Investment Adviser until December 1994) ("TFMC"), pursuant to a separate Administrative Services Agreement, for actual expenses incurred in providing certain administrative services such as accounting and bookkeeping services, communications in response to shareholders inquiries and certain printing services for reports of the Fund. For the fiscal year ended October 31, 1994 administrative services fees paid to TFMC by the Fund amounted to 0.06% of its average daily net assets. The Administrative Services Agreement was terminated effective January 16, 1995. DISTRIBUTION PLANS. The Class A and Class B shareholders have adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under these Plans, the Fund will pay distribution and service fees at an aggregate annual rate of 0.25% of the Class A Share's average daily net assets and an aggregate annual rate of 1.00% of the Class B Shares average daily net assets. In each case, up to 0.25% is for service expenses and the remaining amount is for distribution expenses. The distribution fees will be used to reimburse John Hancock Funds for its distribution expenses including but not limited to: (i) initial and ongoing sales compensation to Selling Brokers and others (including affiliates of John Hancock Funds) engaged in the sale of Fund shares, (ii) marketing, promotional and overhead expenses incurred in connection with the distribution of shares of the Fund, (iii) unreimbursed distribution expenses under the Fund's prior distribution plans, (iv) distribution expenses incurred by other investment companies which sell all or substantially all of its assets to merge or otherwise engage in a re-organization transaction with the Fund and (v) with respect to Class B Shares only, interest expenses on unreimbursed distribution expenses. The service fees will be used to compensate Selling Brokers for providing personal and account maintenance services to shareholders. In the event John Hancock Funds is not fully reimbursed for payments made or expenses it incurs under the Class A Plan, these expenses will not be carried beyond twelve months from the date they were incurred. These unreimbursed expenses under the Class B Plan will be carried forward together with interest on the balance of these unreimbursed expenses. Applicable distribution fees, in an amount not exceeding the annual limitation, are accrued each day as an expense of the Class B Shares and reduce the net assets of the fund attributable to the Class B Shares. However, in accordance with generally accepted accounting principles, the Fund does not treat the amount of Distribution Fees exceeding the annual limitation as a liability of the Fund and does not reduce the current net assets of the Fund attributable to the Class B Shares by such amount, although it may become payable in the future, because the standards for accrual of a liability under these accounting principles have not been satisfied due to contingencies as to payment of such amount. Under the former Class B Plan, unreimbursed distribution expenses as of October 31, 1994 amounted to $10,122,481, (3.57% of the Fund's Class B net assets at that date). In order to limit the higher ongoing costs associated with an investment in Class B Shares, the Fund implements arrangements under which Class B Shares are automatically exchanged, on a tax-free basis, for Class A Shares at the end of the eight year period following the initial purchase of Class B Shares. (See "Shareholder Services -- Class B Shares Automatic Exchange".) For the fiscal year ended October 31, 1994, payments made by the Fund under the former Class A 12 139 Plan amounted to 0.25% of the average daily net assets attributable to Class A Shares. For the fiscal year ended October 31, 1994, total payments made by the Fund under the former Class B Plan amounted to 1.00% of its Class B average daily net assets. In addition, for the fiscal year ended October 31, 1994, the former Distributor received contingent deferred sales charges from redemptions of shares of the Fund in an amount equal (on an annual basis) to 0.15% of the Fund's Class B average daily net assets. EXPENSES OF THE FUND. The Fund's expenses, which are accrued daily, are deducted from total income before dividends are paid. These expenses, include, but are not limited to: fees paid to the Investment Adviser; directors' fees; taxes; distribution, brokerage and legal fees; custodian and auditing fees; administrative services fees; transfer agency fees and other expenses. For the fiscal year ended October 31, 1994, total expenses were 1.44% of Class A average net assets and 2.19% of Class B average net assets. PORTFOLIO TRANSACTIONS. The primary consideration in choosing brokerage firms to carry out the Fund's transactions is execution at the most favorable prices, taking into account the broker's professional ability and quality of service. Consideration may also be given to the broker's sale of shares of the Fund. Pursuant to procedures determined by the Board of Directors, the Investment Adviser may place securities transactions with brokers affiliated with the Investment Adviser. These brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc. and Sutro & Company, Inc. which are indirectly owned by John Hancock Mutual Life Insurance Company, which in turn indirectly owns the Investment Adviser. (For a further discussion, see the Statement of Additional Information -- "Portfolio Transactions"). INFORMATION ABOUT SHARES OF THE FUND - ------------------------------------------------------------------------------- NET ASSET VALUE The net asset value of the Fund is computed once daily on each day that the New York Stock Exchange is open for business as of the close of trading (presently 4:00 p.m. New York time). The Fund will also compute its net asset value on other days if a purchase or redemption request is received on that day and there is a sufficient degree of trading in securities held by the Fund. Net asset value per share is calculated by dividing the market or fair value of all of the Fund's portfolio securities plus the value of its other assets (including dividends and interest received or accrued), less all liabilities (including accrued expenses but excluding capital) by the number of shares of the Fund outstanding. The Board of Directors has established procedures for the valuation of the Fund's securities, based in general on market or estimated value (see "Net Asset Value" in the Statement of Additional Information). Although the legal rights of Class A and Class B Shares will be identical, the different expenses borne by each class will result in different net asset values and dividends. The net asset value of Class B Shares will generally be lower than the net asset value of Class A Shares as a result of the larger distribution fee accrual with respect to Class B Shares. (However, Class B shareholders will generally receive more shares at the time of purchase.) It is expected, however, that the net asset value per share of the two classes will tend to converge immediately after the recording of dividends which will differ by approximately the amount of the distribution expense accrual differential between the classes. 13 140 PURCHASE OF SHARES GENERAL. Shares of the Fund will be offered at a price equal to their net asset value (next determined following receipt of an order by The Shareholder Services Group (the Fund's Transfer Agent) or the investor's dealer) plus a sales charge which, at the option of the purchaser, may be imposed either at the time of purchase (the "initial sales charge alternative") as described below or on a contingent deferred basis (the "deferred sales charge alternative"), as described under "Redemption and Repurchase of Shares". Shares of the Fund are offered continuously for sale by John Hancock Funds and are available for purchase through eligible financial service firms such as securities broker/dealer firms and banks which have entered into selected dealer agreements with John Hancock Funds. Dealers are responsible for transmitting orders promptly (orders received and transmitted to the Transfer Agent prior to 4:00 p.m. New York time will receive that day's purchase price.) John Hancock Funds, at its expense, may provide additional promotional incentives or payments to dealers that sell shares of the Fund. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares of the Fund or other John Hancock mutual funds. You may purchase shares by mailing a check, made payable to the Fund (noting your account number), and if opening a new account a completed application form, to the Transfer Agent either at the post office address shown on the back page of this Prospectus; or, if delivered by express mail, the street address: One American Express Plaza, Providence Rhode Island 02903. The initial purchase must be at least $1,000 with subsequent investments of no less than $50. These minimum amounts are reduced for tax-advantaged retirement plans and accounts of participants in certain labor unions and other membership organizations to $250, initial and $25, subsequent. The minimum investment amounts are waived for tax-deferred retirement programs involving the submission of additional investments by means of group remittal statements subject to a $25 minimum amount. Programs providing for regular periodic investments, including a payroll deduction plan, systematic exchanges or investment by bank draft, have reduced minimum investment amounts. (See "Shareholder Services -- Automatic Investment Plan, Systematic Exchange Program and Payroll Deduction Plans".) Certificates for shares will not be issued unless requested by the shareholder in writing and then only for full shares. The Board of Directors reserves the right to change or waive the minimum investment requirements and to reject any order for purchase of shares (including FedWire purchases) when in its judgement such rejection is in the Fund's best interest. FEDWIRE PURCHASES. You may make payment for initial and subsequent investments by federal funds wire. You should first notify Account Services (1-800-343-6840) of the new account request (if applicable) and the intended wire purchase. To assure proper credit, banks wiring federal funds should be instructed to include: (1) name of the Fund, (2) name of the shareholder (as registered exactly in the account), or if opening an account, the name and address in which the account is being registered and the taxpayer identification number of the investor (a completed application must be mailed to the Transfer Agent after completing the wire arrangement); and (3) shareholder account number. 14 141 Federal funds may be wired to:* Boston Safe Deposit and Trust Company ("BSDT") ABA Routing Number: 011001234 Account Number: 159565 * Except during such times or holidays when BSDT is not open for business. ALTERNATIVE PURCHASE PLAN You can purchase shares of the Fund at a price equal to their net asset value per share, plus a sales charge. At your election, this charge may be imposed either at the time of the purchase (see "Initial Sales Charge Alternative -- Class A Shares") or on a contingent deferred basis (see "Deferred Sales Charge Alternative -- Class B Shares"). If you do not specify on your account application which class of shares you are purchasing, it will be assumed that you are investing in Class A Shares. CLASS A SHARES. If you elect to purchase Class A Shares, you will incur an initial sales charge unless the amount you purchase is $1 million or more. If you purchase $1 million or more of Class A Shares you will not be subject to an initial sales charge, but you will incur a sales charge if you redeem your shares within one year of purchase. Class A Shares are subject to ongoing distribution and service fees at a combined annual rate of up to .25% of the Fund's average daily net assets attributable to the Class A Shares. Certain purchases of Class A Shares qualify for reduced initial sales charges. See "Reduced Initial Sales Charge." CLASS B SHARES. You will not incur a sales charge when you purchase Class B Shares, but the shares are subject to a sales charge if you redeem them within six years of purchase (the "contingent deferred sales charge" or the "CDSC"). Class B Shares are subject to ongoing distribution and service fees at a combined annual rate of up to 1.00% of the Fund's average daily net assets attributable to the Class B Shares. Investing in Class B Shares permits all of your dollars to work from the time you make your investment, but the higher ongoing distribution fee will cause these shares to have a higher expense ratio than that of Class A Shares. To the extent that any dividends are paid by the Fund, these higher expenses will also result in lower dividends than those paid on Class A Shares. FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE. The alternative purchase arrangement allows you to choose the most beneficial way to buy shares given the amount of your purchase, the length of time that you expect to hold your shares and other circumstances. You should consider whether, during the anticipated life of your Fund Investment, the accumulated fees on Class B Shares would be less than the initial sales charge and accumulated fees on Class A Shares purchased at the same time and to what extent this differential would be offset by the Class A Shares' lower expenses. To help you make this determination, the table under the caption "Fund Expenses" gives examples of the charges applicable to each class of shares. Class A Shares will normally be more beneficial if you qualify for a reduced sales charge. See "Reduced Initial Sales Charge." Class A Shares are subject to lower distribution and service fees and, accordingly, pay correspondingly higher dividends per share, to the extent any dividends are paid. However, because Initial Sales Charges are deducted at the time of purchase, you would not have all of your funds invested initially and, therefore, would initially own fewer shares. If you do not qualify for reduced initial sales charges and expect to maintain your investment for an extended period of time you might consider purchasing Class A Shares because the accumulated distribution and service charges on Class B Shares may exceed the initial sales charge and accumulated distribution and service charges on Class A Shares during the life of your investment. Alternatively, you might determine that it would be more advantageous to purchase Class B Shares in 15 142 order to have all of your funds invested initially, although remaining subject to higher distribution fees and, for a six-year period, a CDSC. In the case of Class A Shares, distribution expenses that John Hancock Funds incurs in connection with the sale of the shares will be paid from the proceeds of the initial sales charge and the ongoing distribution and service fees. In the case of Class B Shares expenses will be paid from the proceeds of the ongoing distribution and service fees, as well as the CDSC incurred upon redemption within six years of purchase. The purpose and function of the Class B Shares' CDSC and ongoing distribution and service fees are the same as those of the Class A Shares' initial sales charge and ongoing distribution and service fees. Sales personnel distributing the Fund's shares may receive different compensation for selling each class of shares. Dividends, if any, on Class A and Class B Shares will be calculated in the same manner, at the same time and on the same day and will be in the same amount. However, each class will bear only its own distribution and service fees, and shareholder meeting expenses and incremental transfer agency costs. See "Dividends, Distributions and Taxes." INITIAL SALES CHARGE ALTERNATIVE-CLASS A SHARES. The public offering price of Class A Shares of the Fund is the current net asset value per share (next computed after receipt of an order by the Fund's Transfer Agent), plus a sales charge (a percentage of the offering price as set forth in the table below).
COMBINED REALLOWANCE REALLOWANCE SALES SALES AND SERVICE TO SELLING CHARGE AS A CHARGE AS A FEE AS A BROKER AS AMOUNT INVESTED PERCENTAGE PERCENTAGE OF PERCENTAGE A PERCENTAGE (INCLUDING AT OFFERING THE AMOUNT OF OFFERING OF OFFERING SALES CHARGE) PRICE INVESTED PRICE(+) PRICE(*) ---------------------- ---------- ----------- ------------- ---------- Less than $50,000.............. 5.75% 6.10% 5.25% 5.01% $50,000 to $99,999............. 4.75% 4.99% 4.25% 4.01% $100,000 to $249,999........... 3.75% 3.90% 3.25% 3.01% $250,000 to $499,999........... 2.75% 2.83% 2.35% 2.11% $500,000 to $999,999........... 2.00% 2.04% 1.75% 1.51% $1,000,000 and over............ 0.00%(**) 0.00%(**) (***) 0.00%(***) - --------------- (*) Upon notice to broker-dealers with whom it has sales agreements ("Selling Brokers"), John Hancock Funds may reallow an amount up to the full applicable sales charge. A Selling Broker to whom substantially the entire sales charge is reallowed or who receives these incentives may be deemed to be an underwriter under the Securities Act of 1933. (**) No sales charge is payable at the time of purchase in Class A Shares of $1 million or more, but a contingent deferred sales charge may be imposed in the event of certain redemption transactions within one year of purchase. See "Purchases of $1 Million or More." (***) John Hancock Funds may pay a commission and first year's service fee (as described in (+) below) to Selling Brokers who initiate and are responsible for purchases of $1 million or more in aggregate. See "Purchases of $1 Million or More" below. (+) At the time of sale, John Hancock Funds pays to Selling Brokers the first year's service fee in advance, in an amount equal to 0.25% of the next assets invested in the Fund and thereafter pays the service fee periodically in arrears in an amount up to 0.25% of the Fund's average annual net assets. Selling Brokers receive the fee as compensation for providing personal and account maintenance services to shareholders.
16 143 Until March 31, 1995, John Hancock Funds is continuing a sales incentive program in which non-cash concessions in the form of an all-expense-paid trip to a North American resort location will be awarded to participating broker/dealers and financial institutions achieving certain specified sales levels in shares of certain funds formerly managed by TFMC upon which (1) an initial sales charge has been paid or (2) a charge may be applicable upon redemption and who had sales agreements with the Fund's former distributor. Participation in the incentive program is entirely optional on the part of the broker/dealers and financial institutions. Copies of the incentive program which contain more complete information about the terms and conditions of the program, including qualifying levels and specific awards and eligible funds, may be obtained by investment representatives by contacting John Hancock Funds. John Hancock Funds will make these incentive payments out of its own resources. Other than distribution fees, the Funds do not bear distribution expenses. John Hancock Funds will pay certain affiliated Selling Brokers at an annual rate of up to 0.05% of the daily net assets of accounts attributable to these brokers. Purchases of $1 Million or More. On purchases by a single purchaser aggregating $1 million or more, the Distributor will pay securities dealers an amount on a cumulative basis equal to 1% of the first $3 million, plus .5 of 1% of the next $2 million, plus .25 of 1% on amounts over $5 million. With respect to shares purchased at the $1 million plus breakpoint, a contingent deferred sales charge ("CDSC") will be imposed on the proceeds of the redemption of certain shares so purchased if they are redeemed within 12 months of the end of the calendar month of their purchase, in an amount equal to 1% of the lesser of (a) the net asset value of the shares at the time of purchase or (b) the net asset value of the shares at the time of redemption ("CDSC Shares"). The CDSC would be deducted from the redemption proceeds otherwise payable to the shareholder and would be retained by John Hancock Funds. In addition, no CDSC will be imposed when a shareholder redeems (a) CDSC shares acquired through reinvestment of income dividends or capital gains distributions; and (b) shares acquired by exchange from any mutual fund sold with an initial sales charge and distributed by John Hancock Funds. The CDSC does not apply to purchases at net asset value described under "Waiver of Initial Sales Charge" and will be waived in the case of redemptions of shares in connection with (i) certain distributions to participants or beneficiaries of certain qualified retirement plans, and returns of excess contributions made to these plans, and (ii) involuntary redemption of shares if the aggregate net asset value of shares held in the account is less than the required minimum. In determining whether a CDSC is payable on any redemption, the Fund will first redeem shares not subject to any charge. Although any CDSC shares being exchanged are not subject to any charge, they will be subject to the applicable CDSC when the acquired shares are eventually redeemed. For purposes of calculating the CDSC on these redemptions, the original purchase date of the initial fund investment will be used in lieu of the date the redeemed shares were acquired by exchange. Reduced Initial Sales Charges. If you choose the initial sales charge alternative, you are entitled to pay reduced sales charges shown in the above table through several available purchase plans: Concurrent Purchases, Rights of Accumulation, Statement of Intention and Group Purchases. You and your immediate family may combine Concurrent Purchases of Class A Shares of the Fund and Class A Shares (and shares subject to front-end sales charges) of certain other mutual funds which are managed by the Investment Adviser ("other John Hancock funds" as defined under "Shareholder Services -- Exchange Privilege"), for purposes of qualifying for, and determining, a reduced sales charge provided that the purchases are made 17 144 through a single dealer and any purchase amounts satisfy the minimum investment amount of the respective Fund. Further information about these purchase plans is set forth under "Purchase of Shares" in the Statement of Additional Information (see also Statement of Intention and Rights of Accumulation in the Account Application and its Terms and Conditions in the back of the Prospectus). Waiver of Initial Sales Charges. Class A Shares of the Fund may be purchased without paying an initial sales charge by the following: - - A Director or Officer of the Corporation; a director or officer of the Investment Adviser and its affiliates or Selling Brokers; employees or sales representatives of any of the foregoing; retired officers, employees or directors of any of the foregoing; a member of the immediate family of any of the foregoing; or any Fund, pension, profit sharing or other benefit plan for the individuals described above. - - Any state, county, city or any instrumentality, department, authority or agency of these entities (an "eligible governmental authority") which is prohibited by applicable investment laws from paying a sales charge or commission when it purchases shares of any registered investment management company. - - A broker, dealer or registered investment adviser that has entered into an agreement with the Distributor providing specifically for the use of Fund shares in fee-based investment products made available to their clients. - - A former participant in an employee benefit plan with John Hancock Mutual Funds, when he/she withdraws from his/her plan distributions directly to the Funds. - - Class A Shares of the Funs may also be purchased without an initial sales charge in connection with certain liquidation, merger and acquisition transactions involving other investment companies or personal holding companies. - - Existing full service clients of John Hancock Mutual Life Insurance Company group annuity contract holders as of September 1, 1994, may purchase Class A Shares with no initial sales charge, but if the shares are redeemed within 12 months after the end of the calendar year in which the purchase was made, a contingent deferred sales charge will be imposed at the rate for Class A Shares described above in the section "Purchases of $1 Million or More." REDEMPTION AND REPURCHASE OF SHARES GENERAL. You may redeem shares of the Fund in any amount at any time at the net asset value per share next determined after the redemption request is received in proper form by the Transfer Agent. See "Net Asset Value." In certain cases, however, redemption proceeds from the Class B Shares will be reduced by the amount of any applicable contingent deferred sales charge (see "Class B Shares -- Contingent Deferred Sale Charge.") If you hold both Class A and Class B Shares of the Fund, any request for redemption must specify whether Class A or Class B Shares are to be redeemed. Failure to specify which class, or insufficient shares of the class specified, will result in the redemption request being delayed until the Transfer Agent receives further written instructions from you. Payment proceeds will be mailed within seven (7) days following receipt of all required documents. However, in the case of redemptions of shares which were recently purchased by check, the payment of the redemption proceeds may be delayed for a period of up to 15 days or more, only until the check used to purchase the shares has been cleared for payment by your bank. The Fund will not forward proceeds by FedWire Redemption (described below), and the redemption will not be 18 145 effective, for a period of 15 days after receipt of the purchase check. This delay in payment of redemption proceeds can be avoided if shares are purchased by means of a certified check or federal funds wire. Under unusual circumstances, the Fund may suspend redemptions or postpone payment for up to seven days or more, as permitted by securities laws. REDEMPTION BY WRITTEN REQUEST. To redeem shares, send a written request or "letter of instruction" specifying the name of the Fund, the class of shares, the dollar amount or number of shares to be redeemed, and shareholder's name and account number to: The Shareholder Services Group, P.O. Box 9656, Providence, Rhode Island 02940-9656. A request for redemption will be processed after receipt by the Transfer Agent of all required documents in proper order including any issued stock certificates and the letter of instruction signed by each account owner exactly as the account is registered. If a redemption of $50,000 or more is to be made (or if the shareholder's address or bank account to which proceeds are to be mailed has changed in the prior 30 days) signatures must be guaranteed subject to the provisions under Rule 17Ad-15 of the Securities Exchange Act of 1934 ("SEA Rule") without restriction, condition or qualification by an authorized signatory of a commercial bank, trust company, savings and loan association, savings bank or a member firm of the National Association of Securities Dealers or a domestic stock exchange, or any other "eligible guarantor institution" as defined in the SEA Rule. If shares are held in the name of a corporation, trust, estate, custodianship, guardianship, partnership or pension and profit sharing plan, additional documentation may be necessary. TELEPHONE REDEMPTION. Shares of the Fund for which no share certificates have been issued may be redeemed in amounts of $50,000 or less by telephone request, provided that selection has been made in the Account Application or a telephone authorization form is on file with the Transfer Agent. Proceeds from telephone redemptions will be mailed to your address of record. The Fund and/or the Transfer Agent reserve the right to refuse telephone redemption requests at any time. See "Telephone Privileges" for further information concerning authenticity of instructions received by telephone. Telephone authorization forms are available from the Fund upon request. Information concerning redemption can be obtained by contacting the Fund at 1-800-343-6840. FEDWIRE REDEMPTION. You may redeem shares for which no certificates have been issued and have redemption proceeds of at least $50,000 wired by federal funds transfer. Requests for FedWire Redemption may be made by wire communication, telephone or letter, provided that you have selected this option in the Account Application. Proceeds of shares redeemed at the net asset value next determined after receipt of request are transmitted the following business day by wire to your bank account designated in the Account Application form (bank must be a member of the Federal Reserve System). Delivery of the proceeds of a wire redemption request of $250,000 or more may be delayed by the Fund for up to seven days if the Investment Adviser deems it appropriate under the then current market conditions. The Fund cannot be responsible for the efficiency of the federal wire system or your dealer or bank. Redemption of shares purchased by check are subject to certain limitations and restrictions described above. The Fund may modify this Privilege at any time or charge a service fee upon notice to shareholders; no such fee currently is contemplated. REPURCHASE. John Hancock Funds is authorized to repurchase any shares presented by telephone or telegraph to John Hancock Funds by certain securities dealers selected by John Hancock Funds in its sole discretion. The offer to repurchase may be suspended by John Hancock Funds at any time. Repurchase orders received by dealers prior to the closing of the NYSE (4:00 p.m. New York time) 19 146 on any business day will be priced at the net asset value per share that is based on that day's close, provided that they are time-stamped by the dealer no later than 4:00 p.m. New York time on such day. Dealers may charge for their services in connection with repurchases, but neither the Fund nor John Hancock Funds makes any charge. INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem your account at any time the total net asset value of the account falls below $500 as a result of a redemption. You will be notified in writing that the value of your account is less than $500 ($100 for a tax sheltered retirement plan) as a result of a redemption and will be allowed 60 days to make additional investments before the redemption is processed. No contingent deferred sales charge will be imposed on an involuntary redemption of Class B Shares. REDEMPTION IN KIND. Although it is the Fund's present policy to make payment of redemption proceeds in cash, if the Fund's Board of Directors determines that a material adverse effect would otherwise be experienced by remaining investors, redemption proceeds may be paid in whole or in part by a distribution in kind of securities from the portfolio of the Fund subject to the limitation that pursuant to an election under Rule 18f-1 under the Investment Company Act of 1940, the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund during any 90-day period for such one account. In such circumstances, you might be required to bear transaction costs to dispose of the securities distributed in kind. REINSTATEMENT PRIVILEGE. If you have redeemed shares of the Fund, or have had shares repurchased by the Fund, you may, within 60 days after the date the shares were redeemed or repurchased, reinvest (reinstate) all or a portion of the proceeds of such redemption or repurchase in shares of the Fund or in shares of "other John Hancock funds" (as defined under "Shareholder Services -- Exchange Privilege") at the next determined net asset value of the shares being acquired, so long as the Transfer Agent is in receipt of a written request for reinstatement and appropriate payment. Shares being acquired pursuant to the reinstatement privilege must be of the identical class as those which were redeemed within the prior 60 days. The CDSC will not be applicable to Class B Shares acquired in a reinstatement, although it will be assessed in connection with the initial redemption or repurchase. This privilege may be exercised only once as to any particular shares of the fund or other John Hancock Fund. Exercise of the reinstatement privilege does not alter the federal income tax treatment of any capital gains realized on the redemption of shares of the Fund. If a loss is realized on the redemption and reinvestment is made in shares of the Fund within 30 days, it would not be recognized as a loss for income tax purposes. You are advised to consult your tax adviser as to all possible tax consequences related to the exercise of the reinstatement privilege. The reinstatement privilege may be terminated or modified at any time. CLASS B SHARES -- CONTINGENT DEFERRED SALES CHARGE. Class B Shares redeemed within six years of purchase will be subject to a CDSC at the rates set forth below. This charge will be assessed on an amount equal to the lesser of the current market value or the original purchase cost of the shares being redeemed. Accordingly, the CDSC will not be assessed on increases in account value above the initial purchase price, including shares derived from dividend reinvestment. In determining whether a CDSC applies to a redemption, the calculation will be determined in a manner that results in the lowest possible rate being charged. It will be assumed that the redemption comes first from shares which have been held beyond the six-year CDSC redemption period or those that were acquired through dividend reinvestment, and next from the shares that have been held the longest during the six-year period. 20 147 Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses all or part of them to defray its expenses related to providing the Fund with distribution services in connection with the sale of Class B Shares, such as compensating Selling Brokers for selling these shares. The combination of the CDSC and the distribution and service fees makes it possible for the Fund to sell Class B Shares without deducting a sales charge at the time of the purchase. The amount of the CDSC, if any, will vary depending on the number of years from the time the Class B Shares were purchased until the time they were redeemed. Solely for purposes of determining the holding period, any payments you make during the month will be aggregated and deemed to have been made on the last day of the month.
YEAR IN WHICH CONTINGENT DEFERRED SALES CLASS B SHARES CHARGE AS A PERCENTAGE REDEEMED FOLLOWING OF DOLLAR AMOUNT PURCHASE SUBJECT TO CDSC ---------------- --------------- First.................... 5.0% Second................... 4.0% Third.................... 3.0% Fourth................... 3.0% Fifth.................... 2.0% Sixth.................... 1.0% Seventh and thereafter... None
A commission equal to 3.75% of the amount invested and a first year's service fee equal to 0.25% of the amount invested are paid to Selling Brokers. The initial service fee is paid in advance at the time of sale for the provision of personal and account maintenance services to shareholders during the twelve months following the sale, and thereafter the service fee is paid in arrears. If a partial redemption (or exchange) that you make results in a remaining account balance of less than the amount of the CDSC you owed at the time of the redemption (or exchange) on the shares remaining in the account, the Fund reserves the right to require you to redeem (or exchange) all of the shares in the account. The Fund does not believe that this constitutes an involuntary redemption. Waiver of CDSC. The contingent deferred sales charge will be waived (a) in the event of the death or total disability (as evidenced by a determination by the Federal Social Security Administration) of the shareholder (including a registered joint owner) and (b) for certain distributions of Class B Shares held in certain deferred compensation retirement plans. No contingent deferred sales charge will be imposed where shares are redeemed in connection with a merger or reorganization of the Fund into another investment company which imposes a contingent deferred sales charge and the investor receives shares of the investment company in the transaction. In these cases any applicable contingent deferred sales charge will be imposed when an investor redeems shares acquired in such a transaction. In addition, the CDSC is waived on redemptions made (1) by shareholders (including retirement plan account holders) having accounts as Systematic Withdrawal Plans (SWP) with payments of an annual amount less than or equal to 12% of the value of the account determined at the time of SWP authorization (subject to subsequent calendar year end adjustments) and available on a monthly, quarterly, semi-annual or yearly basis; and (2) as distributions from employer sponsored retirement plans in connection with the participant's separation of service at age 55 or over from his or her employer. The foregoing waiver of CDSC are subject to change upon 60 days written notice to shareholders. To be eligible for the waiver, the account holder or the dealer must notify the Distributor of eligibility at the time of redemption request. (See the Statement of Additional Information, "Redemption and Repurchase of Shares" for a more complete description of the Fund's shareholders on whose shares a contingent deferred sales charge will not be imposed.) 21 148 SHAREHOLDER SERVICES - -------------------------------------------------------------------------------- The Fund offers you the following services and privileges: (1) Reinvestment of Dividends and Distributions at net asset value; (2) Retirement Plans; (3) Automatic Investment Plan; (4) Systematic Withdrawal Plan; (5) Exchange Privilege; (6) Class B Shares Automatic Exchange; (7) Payroll Deduction Plans; (8) Systematic Exchange Program and (9) Cross-Reinvestment Service. AUTOMATIC INVESTMENT PLAN (AIP) permits you to purchase additional shares on a monthly basis with funds transferred from your bank account subject to an initial and subsequent minimum investment amount of $25. For further information, see the AIP section in the accompanying Account Application. EXCHANGE PRIVILEGE permits you to exchange your Class A or Class B Shares of the Fund for shares of "other John Hancock funds" (i.e., funds which formerly had investment advisory contracts with TFMC) on the basis of the relative net asset value per share subject to the minimum investment requirements of such funds. Class A Shares may be exchanged for other John Hancock funds' Class A Shares. These other Class A Shares may also be exchanged for Class A Shares of the Fund, provided that any sales charge differential (not previously paid) is paid by the shareholder. Class B Shares may be exchanged without imposition of the Fund's CDSC for Class B Shares or shares of other funds that are subject to a CDSC ("CDSC Funds".) Exchanges between CDSC Funds having different CDSC schedules will retain their respective CDSC schedules. Any applicable contingent deferred sales charge payable upon the redemption of Class B Shares exchanged will be calculated from the date of the initial purchase. Class B Shares may not be exchanged into money market funds other than John Hancock Money Market Fund B. See Account Application or the "Exchange Privilege" in the Statement of Additional Information. Exchanges may be accomplished by telephone request (see below) or by a written request from the account owner(s). Forms for both written and telephone exchanges are available from the Fund upon request. Share certificates, if issued, must be returned to the Fund prior to any exchange of such shares. There is currently no exchange fee for an exchange; however, dealers or other firms may charge for their services in expediting exchange transactions. In addition, the Fund reserves the right to impose an exchange fee. Exchanges are, in effect, a redemption and purchase of shares in the respective funds and are treated as such for tax purposes. As such, the limitations and restrictions applicable generally to purchases and redemptions apply, and any exchange constitutes a sale upon which a gain or loss will be realized for federal income tax purposes. THIS EXCHANGE PRIVILEGE IS NOT AVAILABLE IN ANY JURISDICTION WHERE SHARES OF THE OTHER JOHN HANCOCK FUND BEING ACQUIRED ARE NOT QUALIFIED FOR SALE. EACH JOHN HANCOCK MUTUAL FUND RESERVES THE RIGHT TO REJECT ANY ORDER TO ACQUIRE ITS SHARES THROUGH EXCHANGE, OR OTHERWISE TO MODIFY, RESTRICT OR TERMINATE THE EXCHANGE PRIVILEGE, AT ANY TIME AFTER 60 DAYS' NOTICE TO SHAREHOLDERS. Because other John Hancock funds have investment objectives and policies which may differ from those of the Fund, you should carefully review the prospectus of the other John Hancock fund before effecting an exchange. Shares of the Fund for which no share certificates have been issued may be exchanged by telephone request, provided you have selected this option in the Account Application or have a telephone authorization form on file. See "Telephone Privileges" for important information about transactions by telephone. Telephone requests may be made by contacting the Fund at 1-800-343-6840. CLASS B AUTOMATIC EXCHANGE is a tax-free exchange of Class B Shares for Class A Shares of the same fund that occurs at the end of the calendar quarter eight years after the original purchase date of the 22 149 Class B Shares, the "Automatic Exchange Date." At the Automatic Exchange Date, the Class B Shares will be exchanged for an equal dollar value of Class A Shares (which may or may not be the same number of shares). The Class A Shares have lower expenses than Class B Shares but are otherwise substantially identical. Class A Shares, therefore, will have a slightly higher total return than Class B Shares and may have a slightly higher dividend as a result. If you have made more than one purchase, you may hold both Class B Shares and Class A Shares at the same time. The Class B Automatic Exchange is available to all Class B shareholders and requires no action whatsoever on your part. If you want to decline taking advantage of this privilege, however, the Fund must be notified in writing three months prior to the Automatic Exchange Date. PAYROLL DEDUCTION PLANS are available for employer sponsored plans, where regular, periodic purchases are made into the employees' accounts through the submission of the John Hancock Group Investment List. The minimum initial and subsequent purchase amounts are $250 for the Plan and $25 per fund-account in the Plan. For further information on how to establish a John Hancock Group Investment List, call Account Services at 1-800-343-6840. SYSTEMATIC EXCHANGE PROGRAM allows you to exchange a specified dollar amount from an existing account in any John Hancock Fund (including the Fund), into any other John Hancock Fund (including the Fund) subject to the requirements and limitations of the Exchange Privilege as noted above. At the time this option is selected, you must have a minimum balance of $5,000 in the account from which the exchange is to be made and must designate a monthly exchange amount of no less than $25 for a specific Fund. The minimum initial investment amount (established by the Fund being exchanged into) will be waived for shareholders utilizing this Program. Note that automated dollar cost averaging methods do not assure a profit nor protect against loss in declining markets. You should consult your broker or financial adviser to determine whether this Program is suitable for your investment needs. In particular, consideration should be given to the type of John Hancock Fund from which your exchanges will be made (i.e., its investment objective, policies and risks, including the potential for fluctuation in its net asset value). The Fund currently imposes no service fee for participation in the Program but reserves the right to do so. You may change the exchange amounts or the selection of Funds or terminate your participation in the Program at any time by directing the Transfer Agent in writing. For further information regarding this Program, see the Statement of Additional Information (which may be obtained by contacting Account Services at 1-800-343-6840). CROSS-REINVESTMENT SERVICE. Shares of a particular class of the Fund may be purchased and/or redeemed without imposition of any applicable sales charge through the automatic reinvestment of dividend and capital gain distributions from the same class of any other John Hancock fund. These proceeds from other John Hancock funds will be invested at the next determined net asset value following receipt of the proceeds (i.e., reinvestment date which is normally the payable date of such other John Hancock fund) by the Fund's Transfer Agent. In addition, you may select in the Account Application to have your distributions automatically invested without imposition of a sales charge in shares of the same class of another John Hancock fund. RETIREMENT PLANS. The Fund offers a variety of tax sheltered retirement plans. Shares of the Fund are available for purchase by qualified plans which have been approved by the Internal Revenue Service and include Individual Retirement Accounts (including SEP/IRAs), Profit-Sharing and Money Purchase Plans, 403(b) Plans and 401(k) Plans. Plan support services are available. For details, please contact 23 150 John Hancock Funds Retirement Plans Department by calling 1-800-472-3863. Further information regarding the above services and privileges is set forth in the Statement of Additional Information. TELEPHONE PRIVILEGES - -------------------------------------------------------------------------------- Neither the Fund, Transfer Agent or the Investment Adviser will be responsible for the authenticity of telephone instructions. You should be aware that transactions authorized by telephone instructions reasonably believed to be authentic by the Fund can subject you to the risk of loss if the telephone instructions are subsequently found to be unauthentic. Privileges associated with telephone exchange, telephone redemption, and FedWire redemption may be selected in the Fund's Account Application. The privileges associated with FedWire redemption will not be established unless specifically instructed. The privileges associated with telephone exchange and/or telephone redemption will automatically be accorded to your account unless you specifically decline this privilege in the Account Application. If establishing a new account through a confirmed trade, your securities dealer should provide a completed new account application or submit specific written instructions requesting specific account privileges at the time of trade settlement. The Fund will employ reasonable procedures to confirm that the instructions as to either exchange, redemption or FedWire redemptions communicated by telephone are genuine, and that absent such procedures, the Fund or its agents may be liable for any losses due to unauthorized or fraudulent instructions. These procedures include: 1. Recording all calls for telephone transactions (each transaction is thereby indexed by the time of the call placed); 2. Requesting the caller's name and phone number as verification of the origin of the telephone call; 3. Requesting the name of the Fund and your account number, the name(s) in which the account is registered and the tax identification number listed on the account; and 4. Mailing written confirmation (statements) of each transaction on the following business day to the registration address and the broker/dealer of record. DIVIDENDS, DISTRIBUTIONS AND TAX STATUS - -------------------------------------------------------------------------------- DIVIDENDS AND CAPITAL GAINS. The Fund distributes substantially all of its net investment income (i.e., non capital gain income from its investment less expenses), if any, to shareholders in the form of annual dividends. The excess of net long-term capital gains over net short-term capital losses, including losses carried forward from prior years, represents net realized capital gains. The Fund distributes net realized capital gains, if any, to shareholders at least annually. When a dividend or capital gains distribution is paid, the net asset value per share is reduced by the amount of the payment. The per share dividends and distribution on Class B Share will be lower than the per share dividends and distributions on Class A Shares as a result of the higher distribution services and incremental transfer agency fees applicable to the Class B Shares. All dividends and any capital gains distribution are reinvested automatically in additional shares on the reinvestment date, unless you indicate in writing to the Transfer Agent or select in the Account Application to receive proceeds in cash or have them reinvested in shares of the same class of another John Hancock fund 24 151 (without imposition of a sales charge) at the next determined net asset value following receipt of the proceeds (i.e., the reinvestment date.) See "Cross- Reinvestment Services." TAXES. Because the Fund intends to distribute its net investment income and net realized capital gains to shareholders, and to adhere to other applicable requirements, it is not expected that the Fund will be required to pay any federal income taxes on amounts it pays as dividends and distributions. However, you normally will have to pay federal income taxes and any applicable state income taxes on the dividends and capital gains distributions you receive (either as cash or reinvested shares) from the Fund (unless you are exempt from taxation or entitled to tax deferral.) After the end of each calendar year, you will receive a statement indicating the amount and federal tax status of all distributions received during that year. This includes information on the portion taxable as ordinary income and the portion taxable as long-term capital gains. It should be noted that the distributions of any net realized short-term capital gains are taxable as ordinary income. The Fund is required to withhold 31% of taxable dividends, distributions and redemptions paid to shareholders who have not complied with IRS taxpayer identification requirements. To avoid this "back-up" withholding requirement, you may furnish the Transfer Agent with your taxpayer identification number and required certifications by completing the Account Application or IRS form W-9. (See "Backup Withholding" in the back of the Prospectus). You should consult your own tax adviser concerning tax consequences of an investment in the Fund. ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION. From time to time the Fund may advertise its total return which is computed separately for Class A and Class B Shares and in accordance with applicable regulatory requirements. The cumulative total return shows the dollar or percentage change in value over a specified period of time (i.e., 1, 5 or 10 years or since the Fund's inception), assuming reinvestment of all dividends and distributions on the reinvestment dates and payment of the maximum sales charges applicable to purchases and redemptions. Average annual total return shows the Fund's cumulative return dividend over the number of years included in the given period ("standardized performance"). Total returns may, in conjunction with standardized performance, be calculated for other specified periods and/or excluding the effect of sales charges (which if included, would reduce the performance quoted). Both the yield and total return are based on historical earnings and are not indicative of future performance. The Fund will include performance data for both Class A and Class B Shares in any advertisement or information including performance data of the Fund. The Statement of Additional Information contains more detailed information about the calculation of performance. The Fund also may advertise its performance relative to certain performance rankings and indexes compiled by independent organizations (such as Lipper Analytical Services and Value Line). In addition, the Fund may use comparative performance information from certain industry research materials or published in various periodicals. The Fund may, from time to time, use ratings of Morningstar, Inc. in the Fund's advertisements. Past performance and/or ratings are no guarantee of future results. In addition, investors are advised to consult their investment representative when considering an investment in the Fund based upon a given rating. The Statement of Additional Information sets forth under "Performance Information" a list of periodicals, indexes, etc. which the Fund may use in its advertisements. ORGANIZATION. The Fund operates as one series of the Corporation. The Corporation was organized as 25 152 a Maryland Corporation on June 22, 1987. In December, 1994, in connection with the acquisition of the Corporation's previous investment adviser, Transamerica Fund Management Company, the Corporation's name was changed from Transamerica Series, Inc. to John Hancock Series Inc. and the Fund's name was changed from Transamerica Emerging Growth Fund to John Hancock Emerging Growth Fund. All shares of stock of the Corporation, $0.01 par value per share, have equal voting rights and have no preemptive or conversion rights. Both Class A and Class B shares represent an interest in the same assets of the Fund and are identical in all respects except that each class bears different distribution expenses, exclusive voting rights with respect to its distribution plan and has different exchange privileges. Shares issued are fully paid, non-assessable, fully transferable and redeemable at the option of the holder. The Fund is not required to hold annual shareholder meetings except when required by federal or state law. Under certain circumstances, shareholders of the Fund have the right, and available procedures, to call a meeting of shareholders for any purpose. At the written request of the holders of at least 10% of the outstanding shares of the Corporation, the Corporation will call a meeting for the purpose of voting on the removal of one or more Directors. The Fund will assist shareholders with any communications including shareholder proposals. SHAREHOLDER INQUIRIES. All inquiries regarding the Fund including questions concerning share ownership, dividends, transfer of ownership or share redemption, should be directed to the Fund at the telephone number or address on the cover page of this Prospectus. CUSTODIAN. Investors Bank & Trust Company, 34 Federal Street, Boston, Massachusetts 02110, is the Custodian for the Fund. TRANSFER AGENT. Transfer and dividend disbursing agent functions are performed by The Shareholder Services Group, One American Express Plaza, Providence, Rhode Island 02903. INDEPENDENT AUDITORS. Ernst & Young LLP, 200 Clarendon Street, Boston Massachusetts 02116, has been selected as the independent auditors of the Fund. 26 153 TABLE OF CONTENTS
PAGE Summary................................ 2 Fund Expenses........................ 3 Financial Highlights................... 4 Investment Objective and Policies...... 6 Investment Practices, Techniques and Restrictions......................... 8 The Fund and Its Management............ 11 Information About Shares of the Fund... 13 Net Asset Value...................... 13 Purchase of Shares................... 14 Redemption and Repurchase of Shares............................ 18 Shareholder Services................... 22 Telephone Privileges................... 24 Dividends, Distributions and Tax Status............................... 24 Additional Information................. 25
INVESTMENT MANAGER - ------------------------ John Hancock Advisers, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-76903 DISTRIBUTOR - -------------- John Hancock Funds, Inc. 101 Huntington Avenue Boston, Massachusetts 02199-76903 SHAREHOLDER INQUIRY - ------------------------ 1-800-343-6840 P.O. Box 9656 Providence, Rhode Island 02940-9656 No dealer, salesman or other person has been authorized to give any information or to make any representation other than those contained in this Prospectus or in official sales literature distributed by the Fund's Distributor in connection with the offer of the Fund's shares, and if given or made, such other information or representations must not be relied upon as having been authorized by the Funds or John Hancock Funds. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. T490P 3/95 JOHN HANCOCK EMERGING GROWTH FUND A Portfolio of John Hancock Series, Inc. PROSPECTUS March 1, 1995 -----END PRIVACY-ENHANCED MESSAGE-----