As filed with the Securities and Exchange Commission on November 20, 1995.
File Nos. 33-
811-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [ ]
(Check appropriate box or boxes.)
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John Hancock Declaration Trust
(Exact Name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(617) 375-1760
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THOMAS H. DROHAN
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effectiveness of the registration under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended, the
Registrant hereby elects to register an indefinite number of shares of the
Registrant and each series thereof.
<PAGE>
JOHN HANCOCK DECLARATION TRUST
CROSS
REFERENCE SHEET
Pursuant to Rule 495(a) under the Securities Act of 1933
Item Number Statement of
Form N-1A Part A Prospectus Caption Additional
Information Caption
1 Front Cover Page *
2 An Overview of the Funds *
3 Not applicable *
4 An Overview of the Funds; *
Investment Policies and
Strategies; Organization
and Management of the
Funds; Performance;
Investments, Techniques and
Risk Factors
5 Organization and Management *
of the Funds; The Funds'
Expenses;
6 Organization and Management *
of Fund; Dividends and
Taxes; Redeeming Shares;
7 Purchase and Redemption of Shares; *
Investments in Shares of the Funds;
Share Price; Redeeming Shares
8 Redeeming Shares *
9 Not Applicable *
<PAGE>
Item Number Statement of
Form N-1A Part A Prospectus Caption Additional
Information Caption
10 * Front Cover Page
11 * Table of Contents
12 * Organization of the
Trust
13 * Eligible Investors--
Investment Objective
and Policies;
Certain Investment
Practices;
Investment
Restrictions
14 * Those Responsible
for Management
15 * Those Responsible
for Management
16 * Investment Advisory
and Other Services;
Shareholder Servicing
Agent; Custody of
Portfolio; Independent
Auditors
17 * Brokerage Allocation
18 * Description of the
Trust's Shares
19 * Net Asset Value;
Special Redemptions
20 * Tax Status
21 * Not Applicable
22 * Calculation of
Performance
23 * Not Applicable
<PAGE>
Subject to Completion: Dated November 20, 1995
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY.
JOHN HANCOCK FUNDS
101 Huntington Avenue
Boston, Massachusetts 02199
PROSPECTUS
February __, 1996
The John Hancock Declaration Trust consists of ten mutual funds, each of which
is described in this Prospectus (each, a "Fund" and collectively, the "Funds"):
John Hancock V.A. International Fund
John Hancock V.A. Emerging Equities Fund
John Hancock V.A. Discovery Fund
John Hancock V.A. Diversified Core Equity Fund
John Hancock V.A. Sovereign Investors Fund
John Hancock V.A. 500 Index Fund
John Hancock V.A. Sovereign Bond Fund
John Hancock V.A. Strategic Income Fund
John Hancock V.A. Global Income Fund
John Hancock V.A. Money Market Fund
TABLE OF CONTENTS
An Overview of the Funds.................................... 1
Investment Policies and Strategies.......................... 2
Purchase and Redemption of Shares........................... 9
(continued on next page)
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
An investment in John Hancock V.A. Money Market Fund is neither insured nor
guaranteed by the U.S. Government. There is no assurance that the Money Market
Fund will be able to maintain a stable net asset value of $1.00 per share.
JOHN HANCOCK V.A. STRATEGIC INCOME FUND MAY INVEST UP TO 100% OF ITS TOTAL
ASSETS IN LOWER RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS," THAT ENTAIL GREATER
RISKS, INCLUDING DEFAULT RISKS, THAN THOSE FOUND IN HIGHER RATED SECURITIES.
INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. SEE "RISK
FACTORS, INVESTMENTS AND TECHNIQUES," AND THE APPENDIX.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
(continued)
Investments in Shares of the Funds..................... 9
Share Price............................................ 10
Redeeming Shares....................................... 10
Organization and Management of the Funds.................... 10
The Funds' Expenses......................................... 14
Dividends and Taxes......................................... 15
Performance................................................. 16
Risk Factors, Investments and Techniques.................... 16
Appendix ................................................... A-1
This Prospectus sets forth information about the Funds, which are each
(other than Global Income Fund) a diversified series of John Hancock Declaration
Trust (the "Trust"), that you should know before investing. Please read and
retain it for future reference. The Funds are designed primarily to provide
investment vehicles for variable annuity and variable life insurance contracts
("Variable Contracts") of various insurance companies. This Prospectus should be
read in conjunction with the separate account prospectus of the specific
insurance product which accompanies this Prospectus.
Additional information about the Trust and the Funds has been filed with
the Securities and Exchange Commission (the "SEC"). You can obtain a copy of the
Funds' Statement of Additional Information, dated February __, 1996, subject to
completion dated November 20, 1995, which is incorporated by reference into this
Prospectus, free of charge by writing or telephoning: John Hancock Investor
Services Corporation, P.O. Box 9298, Boston, Massachusetts 02205-9116,
1-800-824-0335. Shares of a Fund may not be available in your state due to
various insurance or other regulations. Please check with your insurance company
for Funds that are available in your state. Inclusion of a Fund in this
Prospectus which is not available in your state is not to be considered a
solicitation.
<PAGE>
AN OVERVIEW OF THE FUNDS
John Hancock V.A. International Fund ("International Fund") seeks
long-term growth of capital. The Fund invests primarily in equity securities of
foreign companies and governments.
John Hancock V.A. Emerging Equities Fund ("Emerging Equities Fund")
seeks long-term growth of capital. The potential for growth of capital is the
sole basis for selection of portfolio securities. Current income is not a factor
in this selection.
John Hancock V.A. Discovery Fund ("Discovery Fund") seeks long-term
growth of capital. The Fund invests primarily in common stocks of companies of
all levels of capitalization which are believed by the Fund's managers to offer
superior prospects for growth. Current income is not a factor of consequence in
the selection of stocks for the Fund.
John Hancock V.A. Diversified Core Equity Fund ("Diversified Core Equity
Fund") seeks above-average total return, consisting of capital appreciation and
income. The Fund will diversify its investments to create a portfolio focused on
stocks of companies that management believes are undervalued and have improving
fundamentals over both the intermediate and long term.
John Hancock V.A. Sovereign Investors Fund ("Sovereign Investors Fund")
seeks long-term growth of capital and income without assuming undue market
risks. At times, however, because of market conditions, the Fund may find it
advantageous to invest primarily for current income. The Fund invests primarily
in common stocks of seasoned companies in sound financial condition with a long
record of paying increasing dividends.
John Hancock V.A. 500 Index Fund ("500 Index Fund") seeks to replicate
the aggregate price and yield performance of the Standard & Poor's 500 Stock
Price Index (the "S&P 500 Index"), although there can be no assurance that the
Fund will do so. The 500 Index Fund invests in all 500 stocks in the S&P 500
Index in approximately the same proportions as they are represented in the
Index.
John Hancock V.A. Sovereign Bond Fund ("Sovereign Bond Fund") seeks a
high level of current income consistent with prudent investment risk. The Fund
invests primarily in a diversified portfolio of investment grade fixed income
securities of U.S. and foreign issuers, although the Fund may invest up to 25%
of its total assets in lower-rated high yield, high risk, fixed income
securities.
John Hancock V.A. Strategic Income Fund ("Strategic Income Fund") seeks
a high level of current income. The Fund invests primarily in foreign government
and corporate fixed income securities, U.S. Government securities and
lower-rated high yield, high risk, fixed income securities of U.S. issuers.
John Hancock V.A. Global Income Fund ("Global Income Fund") seeks
competitive total investment return, consisting of current income and capital
appreciation. The Fund invests primarily in a global portfolio of high grade,
fixed income securities.
John Hancock V.A. Money Market Fund ("Money Market Fund") seeks maximum
current income consistent with capital preservation and liquidity. The Fund
invests only in high-quality money market instruments.
The investment adviser of each Fund is John Hancock Advisers, Inc. (the
"Adviser"), a wholly owned indirect subsidiary of John Hancock Mutual Life
Insurance Company (the "Life Company"). The sub-adviser to the International
Fund is John Hancock Advisers International Limited ("JHAI"), a wholly
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owned subsidiary of the Adviser. The sub-adviser of the Diversified Core Equity
Fund is Independence Investment Associates, Inc. ("IIA"), a wholly owned
indirect subsidiary of the Life Company. The sub-adviser of the Sovereign
Investors Fund is Sovereign Asset Management Corporation ("SAMCorp" and,
together with IIA and JHAI, the "Sub-advisers"), also a wholly owned indirect
subsidiary of the Life Company.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500,"
and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by the Adviser. See "Organization and Management of the Funds"
for a description of the terms of the Adviser's license.
Risk Factors. Each Fund is a newly organized series of the Trust and,
therefore, has no operating history. There can be no assurance that the Funds
will achieve their investment objectives. An investment in one or more of the
Funds (except for Money Market Fund) is intended for long-term investors who can
accept the risks associated with investing primarily in equity and fixed income
securities. The Funds' investments will be subject to market fluctuation and
other risks inherent in all securities. The yield, return and price volatility
of each Fund depend on the type and quality of its investments as well as market
and other factors. In addition, a Fund's potential investments and management
techniques may entail specific risks. For additional information about the risks
associated with an investment in one or more of the Funds, see "Risk Factors,
Investments and Techniques."
INVESTMENT POLICIES AND STRATEGIES
The Equity Funds
The Equity Funds offer a range of investment alternatives focusing on
common stocks.
The International Fund, Emerging Equities Fund, Discovery Fund,
Diversified Core Equity Fund, Sovereign Investors Fund, and 500 Index Fund
(collectively, the "Equity Funds") will invest at least 65% of their assets,
and, in the case of the 500 Index Fund, 95% of its assets, in common stocks.
However, under normal market conditions, the Equity Funds will be substantially
fully invested in common stocks. Each Equity Fund, other than the 500 Index
Fund, is managed according to traditional methods of "active" management, which
involves the buying and selling of securities based upon economic, financial and
market analysis and investment judgment. Diversified Core Equity Fund is managed
using model driven quantitative techniques. The 500 Index Fund uses a "passive"
or "indexing" investment approach and attempts to duplicate the investment
performance of the S&P 500 Index by purchasing stocks for the Fund in proportion
to their weighting in the S&P 500 Index. This indexing technique is known as
"complete replication" and is achieved through the use of stock optimization
modeling.
In addition to common stocks, each Equity Fund (other than the 500 Index
Fund) may invest in preferred stock and securities convertible into common and
preferred stock. However, if deemed advisable by the Adviser or relevant
Sub-adviser, the Equity Funds may invest in any other types of securities
including warrants, bonds, notes and other fixed income securities or
obligations of domestic governments and their political subdivisions or domestic
corporations. The Emerging Equities Fund, Discovery Fund and International Fund
may also invest in obligations of foreign governments and their political
subdivisions or foreign corporations. Each Equity Fund will diversify its
investments among a number of industry groups without concentrating more than
25% of its assets in any particular industry.
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The International Fund invests primarily in equity securities of foreign
companies and governments.
Under normal circumstances, at least 65% of the International Fund's
total assets will be invested in equity securities of issuers located in various
countries around the world. Generally, the Fund's portfolio will contain
securities of issuers from at least three countries other than the United
States. Although the Fund may invest in both equity and fixed income securities,
the Adviser and JHAI expect that equity securities, such as common stock,
preferred stock and securities convertible into common and preferred stock, will
ordinarily offer the greatest potential for long-term growth of capital and will
constitute substantially all of the Fund's assets. However, if deemed advisable
by the Adviser and JHAI, the Fund may invest in any other types of securities
that the Adviser and JHAI believe offer long-term capital appreciation due to
favorable credit quality, interest rates or currency exchange rates. These
securities include warrants, bonds, notes and other debt securities (including
Euro-dollar securities) or obligations of domestic or foreign governments and
their political subdivisions, or domestic or foreign corporations. The Fund will
maintain a flexible investment policy and will invest in a diversified portfolio
of securities of companies and governments located throughout the world.
In choosing specific investments for the Fund, the Adviser and JHAI
generally look for companies whose earnings show a strong growth trend or
companies whose current market value per share is undervalued. The Fund will not
restrict its investments to any particular size company and, consequently, the
portfolio may include the securities of small and relatively less well-known
companies. The securities of small and, in some cases, medium sized companies
may be subject to more volatile market movements than the securities of larger,
more established companies or the stock market averages in general. See "Smaller
Capitalization Companies."
The Emerging Equities Fund invests primarily in small-sized companies
that tend to be at a stage of development associated with higher than
average growth.
The Emerging Equities Fund invests in common stocks and other equity
securities of domestic and foreign issuers (including convertible securities) of
small-sized companies (with a total market capitalization of $750 million or
less). The Adviser selects investments that it believes offer growth potential
higher than average for all companies. The Adviser expects that common stocks of
rapidly growing smaller capitalization companies in an emerging growth stage of
development generally offer the most attractive growth prospects. However, the
Fund may also invest in equity securities of larger, more established companies
that the Adviser believes offer superior growth potential. The Fund may invest
without limitation in securities of foreign issuers.
The Discovery Fund invests primarily in common stocks of companies of
all levels of capitalization which are believed by the Adviser to offer
superior prospects for growth.
The Discovery Fund invests primarily in common stocks of companies whose
securities are traded on domestic stock exchanges or in the over-the-counter
market. Small to medium sized companies in which the Fund may invest include
companies with a market capitalization of between $50 million to $1.5 billion.
Large capitalization companies in which the Fund may invest include those with a
market capitalization in excess of $1.5 billion.
In selecting portfolio investments for the Fund, the Adviser will focus
on companies with broad market opportunities and consistent or accelerating
earnings growth. These companies may be in a relatively early stage of
development, but have usually established a record of profitability and a strong
financial position. They may possess a new technology, a unique or proprietary
product, or a profitable
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market niche -- all of which help drive strong unit volume growth, profitability
and ultimately earnings per share growth. Other desirable attributes of
portfolio investments may include participation by a company in an industrial
sector with a favorable secular growth outlook (e.g., medical/healthcare,
communications, technology, etc.), a capable management team with a significant
equity stake in its company, and financial cash flows sufficient to sustain
estimated growth rates. The Fund may invest up to 25% of its total assets in
foreign securities.
The Diversified Core Equity Fund invests primarily in common stocks of
companies that the Adviser and IIA believe are undervalued and have
improving fundamentals over both the intermediate and long term.
The Diversified Core Equity Fund selects securities of companies which
are undervalued and have improving fundamentals over both the intermediate and
long term. The Fund will diversify its investments to create a portfolio with a
risk profile and characteristics similar to those of the S&P 500 Index.
Consequently, the Fund will invest in a number of industry groups without
concentrating in any particular industry. In determining what constitutes
"value," the Adviser and the Fund's Sub-adviser, IIA, seek stocks with the
following attributes: high growth relative to price/earnings ratio; rising
dividend stream; and high asset value. To determine whether a company's stock
exhibits improving fundamentals, the Adviser and IIA look for accelerating
earnings growth, positive earnings surprises when compared to the market's
expectations and favorable cyclical timing. The Fund may invest only in U.S.
Dollar denominated securities.
Sovereign Investors Fund generally invests in seasoned companies in
sound financial condition with a long record of paying dividends.
Under normal circumstances, Sovereign Investors Fund invests at least
65% of its total assets in dividend paying securities. The Adviser expects that
common stocks will ordinarily offer the greatest dividend paying potential and
will constitute a majority of the Fund's assets. The Fund may also invest a
smaller portion of its assets in corporate and U.S. Government fixed income
securities. For defensive purposes, however, the Fund may temporarily hold a
larger percentage of high grade liquid preferred stock or fixed income
securities. The Adviser and the Fund's Sub-adviser, SAMCorp, will select
securities for the Fund's portfolio mainly for their investment character based
upon generally accepted elements of intrinsic value, including industry
position, management, financial strength, earning power, marketability and
prospects for future growth. The distribution of the Fund's assets among various
types of investments is based on general market conditions, the level of
interest rates, business and economic conditions and the availability of
investments in the equity or fixed income markets. The amount of the Fund's
assets that may be invested in either equity or fixed income securities is not
restricted and is based upon judgment of the Adviser or SAMCorp of what might
best achieve the Fund's investment objective.
While there is considerable flexibility in the investment grade and type
of security in which the Fund may invest, the Fund invests only in companies
that have (together with their predecessors) been in continuous business for at
least five years and have total assets of at least $10 million. The Fund
currently uses a strategy of investing only in those common stocks which have a
record of having increased their dividend payout in each of the preceding ten or
more years. This "dividend performers" strategy can be changed at any time.
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Using "passive" or "indexing" investment techniques, the 500 Index Fund
attempts to duplicate the investment results of the S&P 500 Index.
The 500 Index Fund attempts to duplicate the investment results of the
S&P 500 Index by investing in all 500 stocks in the Index in approximately the
same proportions as they are represented in the Index. This indexing technique
is know as "complete replication." The Fund is designed for long-term investors
seeking a low-cost, "passive" approach for investing in a diversified portfolio
of common stocks. Unlike other equity funds which seek to "beat" stock market
averages, the Fund seeks to "match" the S&P 500 Index and thus expects to
provide a predictable return relative to the benchmark. There can be no
assurance, however, that the Fund's performance will match the S&P 500 Index.
Under normal circumstances, the Fund will invest at least 95% of its
total assets in the common stocks of the S&P 500 Index. The Fund may invest in
certain short-term fixed income securities such as cash equivalents, although
cash or cash equivalents are normally expected to represent less than 1% of the
Fund's assets. The Fund may also invest up to 20% of its assets in stock futures
contracts and options in order to invest uncommitted cash balances, to maintain
liquidity to meet shareholder redemptions, or to minimize trading costs. The
Fund will not invest in cash equivalents, futures contracts or options as part
of a temporary defensive strategy. The Fund intends to remain fully invested, to
the extent practicable, in a pool of securities which will duplicate the
investment characteristics of the S&P 500 Index. See "The S&P 500 Index".
Each Equity Fund (other than the 500 Index Fund) may invest a portion of
its total assets in corporate and governmental fixed income securities.
Although under normal market conditions, each Equity Fund intends to be
substantially fully invested in common stocks, each Equity Fund (other than the
500 Index Fund) may invest in fixed income securities for purposes of managing
its cash position and for temporary defensive purposes. Fixed income investments
of these Funds may include bonds, notes, preferred stock and convertible fixed
income securities issued by U.S. corporations or the U.S. Government and its
political subdivisions. The International Fund may also invest in fixed income
securities issued by foreign corporations or foreign governments and their
political subdivisions. The value of fixed income securities varies inversely
with interest rates. Convertible issues, while influenced by the level of
interest rates, are also subject to the changing value of the underlying common
stocks into which they are convertible.
The fixed income securities of the Diversified Core Equity Fund will be
rated A or better by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Ratings Group ("S&P") or, if unrated, determined to be of comparable
quality by the Adviser or IIA. The fixed income securities of the International
Fund, the Emerging Equities Fund and the Discovery Fund will be rated
"investment grade" (i.e., rated BBB or better by S&P or Baa or better by
Moody's) or, if unrated, determined to be of investment grade quality by the
Adviser or relevant Sub-adviser. The International Fund may also invest in
commercial paper and corporate debt obligations not rated investment grade if
they are (a) subject to demand features or puts or (b) are guaranteed as to
principal and interest by a domestic or foreign bank having total assets in
excess of $1 billion, by a corporation whose commercial paper may be purchased
by the Fund or by a foreign government having an existing debt security rated
investment grade. The fixed income securities of the Sovereign Investors Fund
may be rated as low as C by S&P or Moody's. No more than 5% of Sovereign
Investors Fund's assets will be invested in fixed income securities rated lower
than BBB by S&P or Baa by Moody's or, if unrated, determined to be of equivalent
quality by the Adviser.
Fixed income securities rated BBB or Baa normally exhibit adequate
protection parameters. However, fixed income securities rated BBB or Baa or
lower have speculative characteristics, and adverse
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changes in economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than with higher grade
bonds. Fixed income securities rated lower than BBB or Baa are high risk
securities commonly known as "junk bonds." See "Lower Rated Securities" and the
Appendix to this Prospectus for a description of the risks and characteristics
of various ratings categories. Each Equity Fund (other than the Sovereign
Investors Fund) may retain fixed income securities whose ratings are downgraded
below the minimum ratings noted above until the Adviser or relevant Sub-adviser
determines that disposing of such securities is in the best interests of the
affected Fund. If any security in Sovereign Investors Fund's portfolio falls
below the Fund's minimum credit quality standards, as a result of a rating
downgrade or the Adviser's or Sub-adviser's determination, the Fund will dispose
of the security as promptly as possible while attempting to minimize any loss.
The Fixed Income Funds
The Fixed Income Funds offer a range of investment alternatives focusing
primarily on corporate and governmental fixed income securities.
Under normal circumstances, the Sovereign Bond Fund, Strategic Income
Fund and Global Income Fund (collectively, the "Fixed Income Funds") each
invests at least 65% of its total assets in fixed income securities. Each Fixed
Income Fund will invest in a broad range of fixed income securities, including
bonds, notes, preferred stock and convertible debt securities issued by U.S.
corporations or the U.S. Government and its political subdivisions. The Funds
may invest in mortgage-backed securities and the Sovereign Bond and Strategic
Income Fund may invest in asset-backed securities. The Fixed Income Funds may
also invest in fixed income securities issued by foreign corporations or
governments and their political subdivisions. The fixed income securities in
which the Funds may invest are subject to varying credit quality criteria. The
Fixed Income Funds are not obligated to dispose of securities whose issuers
subsequently are in default or which are downgraded below the minimum ratings
noted below.
The value of fixed income securities generally varies inversely with
interest rates. The longer the maturity of the fixed income security, the more
volatile will be changes in its value resulting from changes in interest rates.
The value of fixed income securities with conversion features, however, will
also be affected by changes in the value of the common stocks into which such
fixed income securities are convertible.
The Sovereign Bond Fund invests primarily in a diversified portfolio of
freely marketable investment grade fixed income securities of U.S. and
foreign issuers.
Under normal market conditions, the Sovereign Bond Fund invests at least
65% of the value of its total assets in bonds and/or debentures. In addition, at
least 75% of the value of the Fund's total investments in fixed income
securities (other than commercial paper) normally consists of securities which
have, at the time of purchase, a rating within the four highest grades as
determined by S&P (AAA, AA, A, or BBB) or Moody's (Aaa, Aa, A or Baa) or their
respective equivalent ratings and fixed income securities of banks, the U.S.
Government and its agencies or instrumentalities and other issuers which,
although not rated as a matter of policy by either S&P or Moody's, are
considered by the Adviser to have investment quality comparable to securities
receiving ratings within the four highest grades. Fixed income securities rated
BBB or Baa and unrated debt securities of comparable credit quality are subject
to certain risks. See "Investment Grade Securities."
The Fund may also invest up to 25% of the value of its total assets in
fixed income securities rated below BBB by S&P or below Baa by Moody's or their
respective equivalent ratings or in securities which are unrated. The Fund may
invest in securities rated as low as CC or Ca and unrated securities of
comparable credit quality as determined by the Adviser. These ratings indicate
obligations that are
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speculative to a high degree and often in default. Securities rated lower than
Baa or BBB are high risk securities generally referred to as "junk bonds." See
"Lower Rated Securities" and the Appendix to this Prospectus for a description
of the risks and characteristics of the various ratings categories.
The Fund may acquire individual securities of any maturity and is not
subject to any limits as to the average maturity of its overall portfolio.
The Fund may invest in securities of United States and foreign issuers.
It is anticipated that under normal conditions, the Fund will not invest more
than 25% of its total assets in foreign securities (excluding U.S.
dollar-denominated Canadian securities). Securities of foreign issuers involve
special risks. See "Securities of Foreign Issuers."
The Strategic Income Fund seeks a high level of current income by
investing primarily in fixed income securities of U.S. and foreign
issuers.
The Strategic Income Fund invests in all types of fixed income
securities including foreign government and foreign corporate securities, U.S.
Government securities and lower-rated high yield, high risk, fixed income
securities of U.S. issuers. Under normal circumstances, the Fund's assets will
be invested in each of the foregoing three sectors. However, from time to time
the Fund may also invest up to 100% of its total assets in any one sector. The
Fund may invest up to 10% of its net assets in common stocks and similar equity
securities of U.S. and foreign companies. No more than 25% of the Fund's total
assets, at the time of purchase, will be invested in government securities of
any one foreign country. The fixed income securities in which the Fund may
invest include bonds, debentures, notes (including variable and floating rate
instruments), preferred and preference stock, zero coupon bonds, payment-in-kind
securities, increasing rate note securities, participation interests, multiple
class pass through securities, collateralized mortgage obligations, stripped
debt securities, other mortgage-backed securities, asset-backed securities and
other derivative debt securities. Variable and floating rate instruments,
mortgage-backed securities and asset-backed securities are derivative
instruments that derive their value from an underlying security. Derivative
securities are subject to additional risks. See "Derivative Instruments."
The higher yields and the high income sought by the Fund are generally
obtainable from investments in the lower rating categories. The Fund may invest
up to 100% of its total assets in fixed income securities rated below Baa by
Moody's, or below BBB by S&P, or in securities which are unrated. The Fund may
invest in securities rated as low as Ca or CC, which may indicate that the
obligations are speculative to a high degree and in default. Fixed income
securities rated below Baa or BBB are commonly called "junk bonds." See "Lower
Rated Securities" and the Appendix to this Prospectus for a description of the
risks and characteristics of the various ratings categories.
Global Income Fund invests primarily in a global portfolio of high
grade, fixed income securities.
Normally, the Global Income Fund will invest in fixed income securities
denominated in at least three currencies or multi-currency units, including the
U.S. Dollar. Under normal circumstances, the Fund will invest primarily (at
least 65% of total assets) in U.S. Government, municipal and foreign
governmental securities; obligations of supranational organizations (e.g., the
World Bank, the International Bank for Reconstruction and Development, the
European Investment Bank, the Asian Development Bank and the European Coal and
Steel Community); and foreign corporations or financial institutions. The Fund
has registered as a "non-diversified" fund so that it will be able to invest
more than 5% of its assets in
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obligations of a single foreign government or other issuer. The Fund will not
invest more than 25% of its total assets in securities issued by any one foreign
government. See "Securities of Foreign Issuers."
The Fund may invest in fixed income securities denominated in any
currency or a multi-national currency unit. The European Currency Unit ("ECU")
is a composite currency consisting of specified amounts of each of the
currencies of the member countries of the European Economic Community. The Fund
may also invest in fixed income securities denominated in the currency of one
country although issued by a governmental entity, corporation or financial
institution of another country. For example, the Fund may invest in a Japanese
yen-denominated fixed income security issued by a U.S. corporation. This type of
investment involves credit risks associated with the issuer and currency risks
associated with the currency in which the obligation is denominated. The Fund
maintains a flexible investment policy and its portfolio assets may be shifted
among fixed income securities denominated in various foreign currencies that the
Adviser expects to provide relatively high yields or potential capital
appreciation in U.S. Dollars.
The Fund will invest primarily in fixed income securities which are
rated A or better by S&P or Moody's or securities that the Adviser has
determined to be of similar credit quality. The Fund may, however, invest up to
30% of its total assets in fixed income securities rated, at the time of
investment, as low as CC by S&P or Ca by Moody's or their respective equivalent
ratings and unrated securities of comparable credit quality. Securities rated
below Baa or BBB are commonly called "junk bonds." See "Lower Rated Securities"
and the Appendix to this Prospectus for a description of the risks and
characteristics of the various ratings categories.
The average maturity of the Fund's portfolio securities may vary based
upon the Adviser's assessment of economic market conditions.
The Money Market Fund
The Money Market Fund invests only in high-quality money market
instruments.
The Money Market Fund seeks to achieve its objective by investing in
money market instruments including, but not limited to, U.S. Government,
municipal and foreign governmental securities; obligations of supranational
organizations (e.g., the World Bank and the International Monetary Fund);
obligations of U.S. and foreign banks and other lending institutions; corporate
obligations; repurchase agreements and reverse repurchase agreements. All of the
Fund's investments will be denominated in U.S. Dollars.
At the time the Money Market Fund acquires its investments, they will be
rated (or issued by an issuer that is rated with respect to a comparable class
of short-term debt obligations) in one of the two highest rating categories for
short-term debt obligations assigned by at least two nationally recognized
rating organizations (or one rating organization if the obligation was rated by
only one such organization). These high quality securities are divided into
"first tier" and "second tier" securities. First tier securities have received
the highest rating from at least two rating organizations (or one, if only one
has rated the security). Second tier securities have received ratings within the
two highest categories from at least two rating agencies (or one, if only one
has rated the security), but do not qualify as first tier securities. The Fund
may also purchase obligations that are not rated, but are determined by the
Adviser, based on procedures adopted by the Fund's Board of Trustees, to be of
comparable quality to rated first or second tier securities. The Fund may not
purchase any second tier security if, as a result of its purchase (a) more than
5% of its total assets would be invested in second tier securities or (b) more
than 1% of its total assets or $1 million (whichever is greater) would be
invested in the second tier securities of a single issuer.
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The Fund seeks to maintain a constant $1.00 share price although there
can be no assurance it will do so. All of the Fund's investments will mature in
397 days or less. The Fund will maintain an average dollar-weighted portfolio
maturity of 90 days or less.
Each Fund may employ certain investment strategies and techniques to
help achieve its investment objective.
Each Fund (other than the Sovereign Investors Fund, 500 Index Fund and
Money Market Fund) may invest in the securities of foreign issuers including
American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs").
Each Fund may purchase securities on a forward commitment or when-issued basis
and invest up to 15% (10% for the Money Market Fund) of its net assets in
illiquid securities. In addition, each Fund may lend portfolio securities and
may make temporary investments in short-term securities, including repurchase
agreements and other money market instruments, in order to receive a return on
excess cash. The Money Market Fund may enter into reverse repurchase agreements.
See "Risk Factors, Investments and Techniques" for more information on the
Funds' investments.
When, in the opinion of the Adviser or relevant Sub-adviser
extraordinary market or economic conditions warrant, each Fund (other than the
500 Index Fund) may, for temporary defensive purposes, hold cash, cash
equivalents or fixed income securities without limitation or, in the case of the
Discovery Fund, hold up to 80% of the Fund's total assets in cash, cash
equivalents or fixed income securities.
Each Fund has adopted investment restrictions which are enumerated in
detail in the Statement of Additional Information. Some of these restrictions
may help to reduce investment risk. Those restrictions designated as fundamental
may not be changed without shareholder approval. Each Fund's investment
objective, investment policies and nonfundamental restrictions, however, may be
changed by a vote of the Trustees without shareholder approval. If there is a
change in a Fund's investment objective, investors should consider whether the
Fund remains an appropriate investment in light of their current financial
position and needs.
Brokers are chosen for Fund transactions on the basis of best price and
execution.
The primary consideration in choosing brokerage firms to carry out a
Fund's transactions is execution at the most favorable prices, taking into
account the broker's professional ability and quality of service. Pursuant to
procedures determined by the Trustees, the Adviser may place securities
transactions with brokers affiliated with the Adviser or a Sub-adviser. These
brokers include Tucker, Anthony Incorporated, John Hancock Distributors, Inc.
and Sutro and Company, Inc., which are indirectly owned by the Life Company,
which in turn indirectly owns the Adviser and the Sub-advisers. Fixed income
securities are generally purchased and sold in transactions directly with
dealers acting as principal and involve a "spread" rather than a commission.
PURCHASE AND REDEMPTION OF SHARES
Investments in Shares of the Funds
Each Fund sells its shares at net asset value ("NAV") directly to
separate accounts established and maintained by insurance companies for the
purpose of funding Variable Contracts. Variable Contract separate accounts may
or may not make investments in all the Funds described in this Prospectus.
Investments in a Fund are credited to an insurance company's separate account
immediately upon acceptance of the investment by the Fund. The offering of
shares of any Fund may be suspended for a
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period of time and each Fund reserves the right to reject any specific purchase
order. Purchase orders may be refused if, in the Adviser's opinion, they are of
a size that would disrupt the management of a Fund.
Share Price
Shares of each Fund are offered at the NAV per share of that Fund.
The NAV per share is the value of one share and is calculated by
dividing a Fund's net assets by the number of outstanding shares of that Fund.
Securities in a Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services, or at fair
value as determined in good faith according to procedures approved by the
Trustees. Short-term fixed income investments maturing within 60 days are valued
at amortized cost which the Board of Trustees has determined approximates market
value. Foreign securities are valued on the basis of quotations from the primary
market in which they are traded, and are translated from the local currency into
U.S. dollars using current exchange rates. If quotations are not readily
available, or the value has been materially affected by events occurring after
the closing of a foreign market, assets are valued by a method that the Trustees
believe accurately reflects fair value. The NAV is calculated once daily as of
the close of regular trading on the New York Stock Exchange (generally at 4:00
p.m., New York time) on each day the Exchange is open.
Redeeming Shares
Shares of a Fund may be redeemed on any business day. Redemptions are
effected at the per share NAV next determined after receipt and acceptance of
the redemption request by a Fund. Redemption proceeds will normally be forwarded
by bank wire to the redeeming insurance company on the next business day after
receipt of the redemption instructions by a Fund. Under unusual circumstances, a
Fund may suspend redemptions or postpone payment for up to seven (7) business
days or longer, as permitted by Federal securities laws.
ORGANIZATION AND MANAGEMENT OF THE FUNDS
The Trustees elect officers and retain the Adviser and the Sub-advisers,
who are responsible for the day-to-day operations of the Funds, subject
to the Trustees' policies and supervision.
Each Fund is organized as a separate portfolio of the Trust, which is an
open-end, management investment company organized as a Massachusetts business
trust in 1995. The Trust has an unlimited number of authorized shares, and
currently has ten distinct funds.
Each Fund currently has one class of shares with equal rights as to
voting, redemption, dividends and liquidation within that Fund. The Trustees
have the authority, without further shareholder approval, to establish
additional funds within the Trust and to classify and reclassify the shares of
the Funds, or any new fund of the Trust, into one or more classes. The Trust is
not required to hold annual shareholder meetings, although special meetings may
be called for such purposes as electing or removing Trustees, changing
fundamental restrictions or approving a management contract. An insurance
company issuing a Variable Contract that participates in the Trust will vote
shares of the Funds held by the insurance company's separate accounts as
required by law. In accordance with current law and interpretations thereof,
participating insurance companies are required to request voting instructions
from policy owners
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<PAGE>
and must vote shares of the Funds in proportion to the voting instructions
received. For a further discussion of voting rights, please refer to your
insurance company's separate account prospectus.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for acts or
obligations of the Funds. However, the Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations or affairs of
the Trust. The Declaration of Trust also provides for indemnification out of a
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. Liability is, therefore,
limited to circumstances in which a Fund itself would be unable to meet its
obligations, and the possibility of this occurrence is remote. Liabilities
attributable to one Fund are not charged against the assets of any other Fund.
John Hancock Advisers, Inc. advises investment companies having a total
asset value of more than $14 billion.
The Adviser was organized in 1968 and is a wholly owned indirect
subsidiary of the Life Company, a financial services company. It provides the
Funds, 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 of the Funds. Certain officers of the
Trust are also officers of the Adviser, the Sub-advisers and John Hancock Funds.
Pursuant to an order granted by the SEC, the Trust has adopted a deferred
compensation plan for its independent Trustees which allows Trustees' fees to be
invested by the Funds in other John Hancock funds.
John Hancock Advisers International Limited ("JHAI") serves as the
sub-adviser to the International Fund pursuant to a subadvisory agreement among
the Fund, the Adviser and JHAI. JHAI was formed in 1987 and is a wholly owned
subsidiary of the Adviser. JHAI provides international investment research and
advisory services to investment companies and institutional clients with assets
totaling approximately $ .
Independence Investment Associates, Inc. ("IIA") serves as the
sub-adviser to the Diversified Core Equity Fund pursuant to a separate
subadvisory agreement among the Fund, the Adviser and IIA. IIA was organized in
1982 and is a wholly owned indirect subsidiary of the Life Company. IIA provides
investment advice and advisory services to investment companies and
institutional accounts totalling approximately $19 billion.
Sovereign Asset Management Corporation ("SAMCorp") serves as the
sub-adviser to the Sovereign Investors Fund pursuant to a subadvisory agreement
among the Fund, the Adviser and SAMCorp. SAMCorp was organized in 1992 and is a
wholly owned indirect subsidiary of the Life Company. SAMCorp provides
investment advice and advisory services to investment companies and private and
institutional accounts totalling approximately $ .
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500,"
and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by the Adviser. The 500 Index Fund is not sponsored, endorsed,
sold or promoted by Standard & Poor's. Standard & Poor's makes no representation
or warranty, express or implied, to the purchasers of the Fund or any member of
the public regarding the advisability of investing in securities generally or in
the 500 Index Fund particularly or the ability of the S&P 500 Index to track
general stock market performance. Standard & Poor's only relationship to the
Adviser is the licensing of certain trademarks and trade names of Standard &
Poor's and of the S&P 500 Index, which is determined, composed and calculated by
Standard & Poor's without regard to the Adviser or the 500 Index Fund. Standard
& Poor's has no obligation to take the needs of the Adviser or the purchasers of
the 500 Index Fund into consideration in determining, composing or calculating
the
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<PAGE>
S&P 500 Index. Standard & Poor's is not responsible for and has not participated
in the determination of the prices and amount of the 500 Index Fund or the
timing of the issuance or sale of the 500 Index Fund or in the determination or
calculation of the equation by which the 500 Index Fund is to be converted into
cash. Standard & Poor's has no obligation or liability in connection with the
administration, marketing or trading of the 500 Index Fund.
STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND STANDARD &
POOR'S SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. STANDARD & POOR'S MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY THE ADVISER, THE TRUST, OR ANY OTHER PERSON OR ENTITY FROM THE
USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. STANDARD & POOR'S MAKES
NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL STANDARD & POOR'S HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The person or persons primarily responsible for the day-to-day
management of each Fund (other than Money Market Fund) are listed below:
International Fund
The International Fund is managed by John Hancock's international
equities team. All investment decisions are made by the portfolio management
team, and no single person is primarily responsible for making recommendations
to the team.
Emerging Equities Fund
The Emerging Equities Fund is managed by an investment team of Michael
P. DiCarlo, Edgar M. Larsen, and Benjamin A. Hock, Jr. Mr. DiCarlo is a
Executive Vice President and oversees the Adviser's equity management team. He
is also the portfolio manager of the John Hancock Special Equities Fund and John
Hancock Special Opportunities Fund. Mr. Larsen is a Senior Vice President of the
Adviser and portfolio manager of the John Hancock Emerging Growth Fund. Mr. Hock
is a Vice President of the Adviser and was associated with Transamerica Fund
Management Company prior to its purchase by the Adviser in December 1994. Prior
to August 1993, Mr. Hock was employed by Securities Management Research as a
Senior Vice President and at Interfirst Investment Management as a Senior Vice
President.
Discovery Fund
The Discovery Fund is managed by Bernice S. Behar. Ms. Behar is a Vice
President of the Adviser and portfolio manager of the Fund. Ms. Behar has been
with the Adviser since 1991 and is also the portfolio manager of John Hancock
Discovery Fund and John Hancock Growth Fund.
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<PAGE>
Diversified Core Equity Fund
The Diversified Core Equity Fund is managed by Independence Investment
Associates, Inc. All investment decisions are made by the portfolio management
team, and no single individual is primarily responsible for making
recommendations to the team.
Sovereign Investors Fund
John F. Snyder, III is primarily responsible for management of the
Sovereign Investors Fund. He is assisted by a team of portfolio managers and
analysts in the day-to-day management of the Fund. Mr. Snyder is Executive Vice
President of SAMCorp. He has been associated with the Adviser since 1991. Mr.
Snyder is primarily responsible for John Hancock Sovereign Investors Fund.
500 Index Fund
The 500 Index Fund is not actively managed, but is instead administered
by the Adviser's Risk Management Group using computerized, quantitative
techniques. The Risk Management Group is head by Anne McDonley, Vice President
of the Adviser since 1992. The Risk Management Group is responsible for
providing quantitative analysis to other mutual funds managed by the Adviser.
Sovereign Bond Fund
James Ho is an Executive Vice President of the Adviser and the portfolio
manager of the Sovereign Bond Fund and John Hancock Sovereign Bond Fund. Mr. Ho
is assisted in the day-to-day management of the Fund's investment portfolio by a
co-manager and a team of credit analysts. Mr. Ho also directs all taxable fixed
income investments for the Adviser and has been associated with the Adviser
since 1985.
Strategic Income Fund
Frederick L. Cavanaugh, Jr. is Senior Vice President of the Adviser and
portfolio manger of the Strategic Income Fund. Mr. Cavanaugh's areas of
expertise include the high yield bond market and international economies. Mr.
Cavanaugh is also the portfolio manager of John Hancock Strategic Income Fund.
Global Income Fund
Global Income Fund is managed by the Adviser's global fixed income team,
and no single individual is primarily responsible for making recommendations to
the team.
In order to avoid any conflict with portfolio trades for the Funds, the
Adviser, the Sub-advisers and the Funds have adopted extensive restrictions on
personal securities trading by personnel of the Adviser, the Sub-advisers and
their affiliates. In the case of the Adviser, some of these restrictions are:
pre-clearance for all personal trades and a ban on the purchase of initial
public offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. The Sub-advisers have adopted similar
restrictions which may differ where appropriate as long as they have similar
intent. These restrictions are a continuation of the basic principle that the
interests of the Funds and their shareholders come before those of management.
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<PAGE>
THE FUNDS' EXPENSES
Each Fund pays a monthly fee to the Adviser for managing the Fund's
investment and business affairs, which is equal on an annual basis to a
percentage of the Fund's average daily net assets. The Adviser pays any
subadvisory fees out of its own assets and no Fund is responsible for paying a
fee to its respective Sub-adviser. These fees are as follows:
Rate
International Fund 0.90%
Emerging Equities Fund 0.75%
Discovery Fund 0.75%
Diversified Core Equity Fund 0.70%
Sovereign Investors Fund 0.60%
500 Index Fund 0.35%
Sovereign Bond Fund 0.50%
Strategic Income Fund 0.60%
Global Income Fund 0.75%
Money Market Fund 0.50%
While higher than the investment advisory fees paid by other investment
companies in general, the advisory fees paid by the International Fund, Emerging
Equities Fund, Discovery Fund and Global Income Fund are comparable to those
paid by other investment companies with similar investment objectives and
policies.
The Adviser pays a portion of its advisory fee from the International
Fund to JHAI at the following rate: 70% of the advisory fee payable on the
Fund's average daily net assets.
The Adviser pays a portion of its advisory fee from the Diversified Core
Equity Fund to IIA at the following rate: 55% of the advisory fee payable on the
Fund's average daily net assets.
The Adviser pays a portion of its fee from the Sovereign Investors Fund
to SAMCorp at the following rate: 40% of the advisory fee payable on the Fund's
average daily net assets.
Each Fund pays certain additional expenses.
Each Fund pays fees to the Independent Trustees of the Trust, the
expenses of the continuing registration and qualification of its shares for
sale, the charges of custodians and transfer agents, and auditing and legal
expenses. The Adviser may, from time to time, agree that all or a portion of its
fee will not be imposed for specific periods or make other arrangements to limit
the Funds' expenses to not more
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than a specified percentage of average net assets. The Adviser retains the right
to reimpose the fee and recover any other payments to the extent annual expenses
fall below the limit at the end of the fiscal year.
DIVIDENDS AND TAXES
Dividends from net investment income are declared and paid as follows:
Fund Declared Paid
International Fund.......................... Annually Annually
Emerging Equities Fund...................... Annually Annually
Discovery Fund.............................. Annually Annually
Diversified Core Equity Fund................ Quarterly Quarterly
Sovereign Investors Fund.................... Quarterly Quarterly
500 Index Fund.............................. Quarterly Quarterly
Sovereign Bond Fund......................... Daily Monthly
Strategic Income Fund....................... Daily Monthly
Global Income Fund.......................... Daily Monthly
Money Market Fund........................... Daily Monthly
Capital gains distributions are generally declared annually. Dividends
are automatically reinvested in additional shares of the Funds.
Taxation. For a discussion of the tax status of your Variable Contract,
including the tax consequences of withdrawals or other payments, refer to the
prospectus of your insurance company's separate account. It is suggested you
keep all statements you receive to assist in your personal record keeping.
Each Fund is treated as a separate entity for tax purposes and intends
to elect to be treated and qualify each year as a separate regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). To qualify as a regulated investment company, a Fund must satisfy
certain requirements in Subchapter M of the Code relating to the sources of its
income, the diversification of its assets, and the distribution of its income to
shareholders. As a regulated investment company, each Fund will not be subject
to Federal income taxes on any net investment income and net realized capital
gains that are distributed to its shareholders in accordance with the timing
requirements of the Code. Each Fund expects to distribute to the life insurance
company separate accounts owning its shares all or substantially all of its net
investment income and net realized capital gains, if any, for each taxable year.
In addition to the above, each Fund also follows certain portfolio
diversification requirements imposed under the Code on separate accounts of
insurance companies that are used to fund Variable Contracts. More specific
information on these diversification requirements is contained in the Trust's
Statement of Additional Information.
If a Fund fails to qualify as a regulated investment company and satisfy
the additional diversification requirements referred to above, the holders of
Variable Contracts based on a separate account that invested in that Fund might
become subject to taxation of the income of such contracts for the
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year of such failure and for subsequent periods, unless the failure is permitted
to be corrected by the Internal Revenue Service.
PERFORMANCE
Each Fund may advertise its total return.
Total return is based on the overall change in value of a hypothetical
investment in a Fund. A Fund's total return shows the overall dollar or
percentage change in value, assuming the reinvestment of all dividends.
Cumulative total return shows a Fund's performance over a period of time.
Average annual total return shows the cumulative return divided over the number
of years included in the period. Because average annual total return tends to
smooth out variations in a Fund's performance, you should recognize that it is
not the same as actual year-to-year results.
Total return calculations are at net asset value because no sales
charges are incurred by those eligible to buy the Funds.
Each Fund may also advertise yield.
Yield reflects a Fund's rate of income on portfolio investments as a
percentage of its share price. Yield is computed by annualizing the result of
dividing the net investment income per share over a 30-day period by the net
asset value per share on the last day of that period.
Money Market Fund's yield refers to the income generated by an
investment in the Fund over a specified seven-day period, expressed as an annual
percentage rate. Money Market Fund's effective yield is calculated similarly,
but assumes that the income earned from investments is reinvested in shares of
the Fund. Money Market Fund's effective yield will tend to be slightly higher
than its yield because of the compounding effect of this reinvestment.
Yield is calculated according to accounting methods that are
standardized for all stock and bond funds. Because yield accounting methods
differ from the methods used for other accounting purposes, a Fund's yield may
not equal the income paid on shares or the income reported in the Fund's
financial statements.
The value of a Fund's shares when redeemed may be more or less than
their original cost. Total return and yield are historical calculations and are
not indications of future performance.
RISK FACTORS, INVESTMENTS AND TECHNIQUES
Common Stocks. Common stocks are shares of a corporation or other entity
that entitle the holder to a pro rata share of the profits of the corporation,
if any, without preference over any other shareholder or class of shareholders,
including holders of such entity's preferred stock and other senior equity.
Ownership of common stock usually carries with it the right to vote and,
frequently, an exclusive right to do so. Each Fund will diversify its
investments in common stocks of companies in a number of industry groups. Common
stocks have the potential to outperform fixed income securities over the long
term. Common stocks provide the most potential for growth, yet are the more
volatile of the two asset classes.
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The S&P 500 Index. The S&P 500 Index is comprised of 500 industrial,
utility, transportation and financial companies in the United States markets.
Most of these companies are listed on the New York Stock Exchange (the
"Exchange"). Companies included in the S&P 500 Index represent about 75% of the
Exchange's market capitalization and 30% of the Exchange's issuers. The S&P 500
Index is a capitalization weighted index calculated on a total return basis with
dividends reinvested. The inclusion of a stock in the S&P 500 Index in no way
implies that Standard & Poor's believes the stock to be an attractive
investment.
Because of the market-value weighting, the 50 largest companies in the
S&P 500 Index currently account for approximately 46% of the Index. Typically,
companies included in the S&P 500 Index are the largest and most dominant firms
in their respective industries. As of October 31, 1995, the five largest
companies in the Index were: General Electric (2.5%), American Telephone and
Telegraph (2.3%), Exxon Corporation (2.2%), Coca Cola (2.1%), and Merck & Co.
(1.7%). The largest industry categories were: international oil companies
(6.5%), telephone companies (5.0%), major regional banks (4.1%), pharmaceutical
companies (4.0%) and health care companies (3.9%).
Fixed Income Securities. Fixed income securities of corporate and
governmental issuers in which a Fund may invest are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligations
(credit risk) and may also be subject to price volatility due to such factors as
interest rate sensitivity, market perception of the creditworthiness of the
issuer and general market liquidity (market risk). Particular debt securities
will be selected based upon credit risk analysis of potential issuers, the
characteristics of the security and interest rate sensitivity of the various
debt issues available with respect to a particular issuer and analysis of the
anticipated volatility and liquidity of the particular fixed income instruments.
The longer the Fund's average portfolio maturity, the more the value of the
portfolio and the net asset value of the Fund's shares will fluctuate in
response to changes in interest rates. An increase in rates will generally
decrease the value of the Fund's portfolio securities and its shares, while a
decline in interest rates will generally increase their value.
Preferred Stocks. Preferred stock generally has a preference as to
dividends and upon liquidation over an issuer's common stock but ranks junior to
debt securities in an issuer's capital structure. Preferred stock generally pays
dividends in cash (or additional shares of preferred stock) at a defined rate
but, unlike interest payments on debt securities, preferred stock dividends are
payable only if declared by the issuer's board of directors. Dividends on
preferred stock may be cumulative, meaning that, in the event the issuer fails
to make one or more dividend payments on the preferred stock, no dividends may
be paid on the issuer's common stock until all unpaid preferred stock dividends
have been paid. Preferred stock also may be subject to optional or mandatory
redemption provisions.
Investment Grade Securities. Each Fund other than the Diversified Core
Equity Fund, 500 Index Fund and Money Market Fund may invest in securities that
are rated in the lowest category of "investment grade" (BBB by S&P or Baa by
Moody's) or unrated securities determined by the Adviser or relevant Sub-
adviser to be of comparable quality. Securities in the lowest category of
investment grade are considered medium grade obligations and normally exhibit
adequate protection parameters. However, these securities also have speculative
characteristics. Adverse changes in economic conditions or other circumstances
are more likely to lead to weakened capacity to make principal and interest
payments than in the case of higher grade obligations.
Lower Rated Securities. The Sovereign Investors Fund, Sovereign Bond
Fund, Strategic Income Fund and Global Income Fund may invest in securities
rated below investment grade, commonly referred to as junk bonds. Debt
obligations rated in the lower ratings categories, or which are unrated, involve
greater volatility of price and risk of loss of principal and income. In
addition, lower ratings reflect a greater
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possibility of an adverse change in financial condition affecting the ability of
the issuer to make payments of interest and principal. The market price and
liquidity of high yield, high risk, fixed income securities generally respond to
short-term economic, corporate and market developments to a greater extent than
do the price and liquidity of higher rated securities, because these
developments are perceived to have a more direct relationship to the ability of
an issuer of lower rated securities to meet its ongoing debt obligations.
Reduced volume and liquidity in the high yield bond market or the
reduced availability of market quotations will make it more difficult to dispose
of the bonds and to value accurately the assets of the Sovereign Investors Fund,
Sovereign Bond Fund, Strategic Income Fund and Global Income Fund. The reduced
availability of reliable objective data may increase these Funds' reliance on
management's judgment in valuing the high yield, high risk bonds. To the extent
that these Funds invest in high yield, high risk securities, achieving the
Funds' objectives will depend more on the Adviser's or relevant Sub-adviser's
judgment and analysis than would otherwise be the case. In addition, these
Funds' investments in high yield, high risk securities may be susceptible to
adverse publicity and investor perceptions, whether or not justified by
fundamental factors. In the past, economic downturns and increases in interest
rates have caused a higher incidence of default by the issuers of these
securities and may do so in the future, particularly with respect to highly
leveraged issuers. The market prices of zero coupon and payment-in-kind bonds
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.
Increasing rate note securities are typically refinanced by the issuers within a
short period of time. A Fund accrues income on these securities for tax and
accounting purposes, and this income is required to be distributed to
shareholders. Because no cash is received at the time and income accrues on
these securities, the Fund may be forced to liquidate other investments to make
distributions.
Warrants. Warrants entitle the holder to buy equity securities at a
specific price for a specific period of time. Warrants tend to be more volatile
than their underlying securities. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to the expiration date.
Convertible Securities. Each Fund (other than the 500 Index Fund and the
Money Market Fund) may invest in convertible securities, which may include
corporate notes or preferred stock but are ordinarily long-term debt obligations
of the issuer convertible at a stated exchange rate into common stock of the
same or another issuer. As with all debt securities, the market value of
convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. The market value of
convertible securities can also be heavily dependent upon the changing value of
the equity securities into which such securities are convertible depending on
whether the market price of the underlying security exceeds the conversion
price. Convertible securities generally rank senior to common stocks in an
issuer's capital structure and consequently entail less risk than the issuer's
common stock. However, the extent of such risk reduction depends upon the degree
to which the convertible security sells above its value as a fixed income
security. In evaluating a convertible security, the Adviser or relevant
Sub-adviser will give primary emphasis to the attractiveness of the underlying
common stock.
Securities of Foreign Issuers. Each Fund except for the Diversified Core
Equity Fund, 500 Index Fund, Sovereign Investors Fund and Money Market Fund may
invest in U.S. Dollar and foreign denominated securities of foreign issuers. The
Diversified Core Equity Fund and Money Market Fund may only invest in U.S.
Dollar denominated securities. In making the allocation of assets for the Funds
among various countries and geographic regions, the Adviser and relevant
Sub-adviser ordinarily consider such factors as the investment attractiveness of
the issuer; the strengths and weaknesses of the currencies in which the
securities are denominated; expected levels of inflation and interest rates;
government policies
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influencing business conditions; the financial condition of the issuer and other
pertinent financial, tax, social, political, currency and national factors.
Investments in foreign securities may involve a greater degree of risk
than those in domestic securities due to exchange controls, less publicly
available information, more volatile or less liquid securities markets, and the
possibility of expropriation, confiscatory taxation or political, economic or
social instability. There may be difficulty in enforcing legal rights outside
the United States. Some foreign companies are not generally subject to the same
uniform accounting, auditing and financial reporting requirements as domestic
companies; also foreign regulation may differ considerably from domestic
regulation of stock exchanges, brokers and securities. Security trading
practices abroad may offer less protection to investors such as the Funds.
Additionally, because foreign securities may be denominated in currencies other
than the U.S. dollar, changes in foreign currency exchange rates will affect the
Funds' net asset value, the value of dividends and interest earned, gains and
losses realized on the sale of securities, and net investment income and gains,
if any, that the Funds distribute. Securities transactions undertaken in some
foreign markets may not be settled promptly. Therefore, the Funds' investments
on foreign exchanges may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement. The expense ratios of Funds with
significant investments in foreign securities can be expected to be higher than
those of mutual funds investing solely in domestic securities since the expenses
of these Funds, such as the cost of maintaining custody of foreign securities
and advisory fees, are usually higher.
The risks of foreign investing may be intensified in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions of foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominantly based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rates. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of substantial holdings difficult or
impossible at times. The International Fund, Strategic Income Fund and Global
Income Fund may be required to establish special custodial or other arrangements
before making certain investments in those countries. Securities of issuers
located in these countries may have limited marketability and may be subject to
more abrupt or erratic price movements.
Certain realized gains or losses on the sale of foreign currency
denominated debt obligations held by a Fund, to the extent attributable to
fluctuations in foreign currency exchange rates, as well as certain other gains
or losses attributable to exchange rate fluctuations, e.g., from transactions in
foreign currencies or currency forward contracts, may be treated as ordinary
income or loss. Such income or loss may increase or decrease (or possibly
eliminate) the Fund's income available for distribution.
Depositary Receipts. Each Fund (other than the Sovereign Investors Fund,
500 Index Fund and Money Market Fund) may invest in securities of foreign
issuers in the form of American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") or other securities convertible into securities of
corporations in which the Fund is permitted to invest. ADRs (sponsored and
unsponsored) are receipts typically issued by an American bank or trust company
which evidence ownership of underlying securities
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issued by a foreign corporation and are designed for trading in United States
securities markets. Issuers of the shares underlying unsponsored ADRs are not
contractually obligated to disclose material information in the United States
and, therefore, there may not be a correlation between such information and the
market value of the unsponsored ADR.
Foreign Currency Transactions. Each of the Funds, except the Diversified
Core Equity Fund, 500 Index Fund, Sovereign Investors Fund and Money Market
Fund, and particularly International Fund, Emerging Equities Fund, and Global
Income Fund, may purchase securities denominated in foreign currencies. The
value of investments in these securities and the value of dividends and interest
earned may be significantly affected by changes in currency exchange rates. Some
foreign currency values may be volatile, and there is the possibility of
governmental controls on currency exchange or governmental intervention in
currency markets, which could adversely affect a Fund. As a result, these Funds
may enter into forward foreign currency exchange contracts to protect against
changes in foreign currency exchange rates. These Funds will not speculate in
foreign currencies or in forward foreign currency exchange contracts, but will
enter into these transactions only in connection with their hedging strategies.
A forward foreign currency exchange contract involves an obligation to purchase
or sell a specific currency at a future date at a price set at the time of the
contract. Although certain strategies could minimize the risk of loss due to a
decline in the value of the hedged foreign currency, they could also limit any
potential gain which might result from an increase in the value of the currency.
Government Securities. Each Fund may invest in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. The 500
Index Fund, however, may only invest temporarily in short-term U.S. Government
securities for liquidity purposes. Certain U.S. Government securities, including
U.S. Treasury bills, notes and bonds and Government National Mortgage
Association certificates ("Ginnie Maes"), are supported by the full faith and
credit of the United States. Certain other U.S. Government securities, issued or
guaranteed by federal agencies or government sponsored enterprises, are not
supported by the full faith and credit of the United States, but may be
supported by the right of the issuer to borrow from the U.S. Treasury. These
securities include obligations of the Federal Home Loan Mortgage Corporation
("Freddie Macs") and Federal National Mortgage Association ("Fannie Maes"), and
obligations supported by the credit of the instrumentality, such as Student Loan
Marketing Association bonds ("Sallie Maes").
Each Fund, and, in particular, the Sovereign Bond Fund, Strategic Income
Fund and Sovereign Investors Fund, may invest in mortgage-backed securities. A
mortgage-backed security may be an obligation of the issuer backed by a mortgage
or pool of mortgages or a direct interest in an underlying pool of mortgages.
Some mortgage-backed securities, such as collateralized mortgage obligations
(CMOs), make payments of both principal and interest at a variety of intervals;
others make semiannual interest payments at a predetermined rate and repay
principal at maturity (like a typical bond). Mortgage-backed securities are
based on different types of mortgages including those on commercial real estate
or residential properties. Mortgage-backed securities often have stated
maturities of up to thirty years when they are issued, depending upon the length
of the mortgages underlying the securities. In practice, however, unscheduled or
early payments of principal and interest on the underlying mortgages may make
the securities' effective maturity shorter than this, and the prevailing
interest rates may be higher or lower than the current yield of a Fund's
portfolio at the time the Fund receives the payments for reinvestment.
Mortgage-backed securities may have less potential for capital appreciation than
comparable fixed income securities, due to the likelihood of increased
prepayments of mortgages as interest rates decline. If a Fund buys
mortgage-backed securities at a premium, mortgage foreclosures and prepayments
of principal by mortgagors (which may be made at any time without penalty) may
result in some loss of the Fund's principal investment to the extent of the
premium paid.
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The value of mortgage-backed securities may also change due to shifts in
the market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities markets as a whole. Non-governmental
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
governmental issues.
"Stripped" mortgage-backed securities are created when a U.S. Government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security ("PO") receives the
principal payments made by the underlying mortgage-backed security, while the
holder of the "interest-only" security ("IO") receives interest payments from
the same underlying security. The prices of stripped mortgage-backed securities
may be particularly affected by changes in interest rates. As interest rates
fall, prepayment rates tend to increase, which tends to reduce prices of IOs and
increase prices of POs. Rising interest rates can have the opposite effect.
Although the market for such securities is increasingly liquid, the Adviser or
relevant Sub-adviser may, in accordance with guidelines adopted by the Board of
Trustees, determine that certain stripped mortgage-backed securities issued by
the U.S. Government, its agencies or instrumentalities are not readily
marketable. If so, these securities, together with privately-issued stripped
mortgage-backed securities, will be considered illiquid for purposes of the
Funds' limitation on investments in illiquid securities.
Other types of mortgage-backed securities will likely be developed in
the future, and a Fund may invest in them if the Adviser or relevant Sub-adviser
determines they are consistent with the Fund's investment objectives and
policies.
Short Term Trading and Portfolio Turnover. Short-term trading means the
purchase and subsequent sale of a security after it has been held for a
relatively brief period of time. The International Fund, Emerging Equities Fund,
Sovereign Bond Fund, Strategic Income Fund and Global Income Fund engage in
short-term trading in response to stock market conditions, changes in interest
rates or other economic trends and developments, or to take advantage of yield
disparities between various fixed income securities in order to realize capital
gains or improve income. Short term trading may have the effect of increasing
portfolio turnover rate.
The remaining Funds do not intend to invest for the purpose of seeking
short-term profits. These Funds' particular portfolio securities may be changed,
however, without regard to the holding period of these securities (subject to
certain tax restrictions), when the Adviser or relevant Sub-adviser deems that
this action will help achieve the Fund's objective given a change in an issuer's
operations or changes in general market conditions.
The estimated portfolio turnover rate of each Equity Fund is expected to
be less than 100%. The estimated portfolio turnover rates of the remaining Funds
are as follows: Sovereign Bond Fund: 100%; Strategic Income Fund: 200%; and
Global Income Fund: 300%. A high rate of portfolio turnover (100% or greater)
involves corresponding higher transaction expenses and may make it more
difficult for a Fund to qualify as a regulated investment company for federal
income tax purposes.
Options and Futures Transactions. Each Fund (other than the Money Market
Fund) may buy and sell options contracts, financial futures contracts and
options on futures contracts. Options and futures contracts are bought and sold
to manage a Fund's exposure to changing interest rates, security prices, and
currency exchange rates. Some options and futures strategies, including selling
futures, buying puts, and writing calls, tend to hedge a Fund's investment
against price fluctuations. Other strategies, including buying futures, writing
puts, and buying calls, tend to increase market exposure. Options and futures
may be combined with each other or with forward contracts in order to adjust the
risk and return characteristics
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of the overall strategy. Subject to their individual investment policies, the
Funds may invest in options and futures based on securities, indices, or
currencies, including options and futures traded on foreign exchanges and
options not traded on any exchange.
Options and futures can be volatile investments and involve certain
risks. If the Adviser applies a hedge at an inappropriate time or judges market
conditions incorrectly, options and futures strategies may lower a Fund's
return. A Fund can also experience losses if the prices of its options and
futures positions are poorly correlated with its other investments, or if it
cannot close out its positions because of an illiquid secondary market. Options
and futures do not pay interest, but may produce income, gains or losses.
A Fund will not engage in a transaction in futures or options on futures
for non-hedging purposes if, immediately thereafter, the sum of initial margin
deposits and premiums required to establish speculative positions in futures
contracts and options on futures would exceed 5% of the Fund's net assets. The
loss incurred by a Fund investing in futures contracts and in writing options on
futures is potentially unlimited and may exceed the amount of any premium
received. The Funds' transactions in options and futures contracts may be
limited by the requirements of the Code for qualification as a regulated
investment company. The Emerging Equities Fund will not engage in futures and
options transactions for speculative purposes.
No Fund, except the Global Income Fund, will hedge more than 25% of its
total assets by selling futures, buying puts, and writing calls under normal
conditions. In addition, no Fund will buy futures or write puts whose underlying
value exceeds 25% of its total assets, and no Fund will buy calls with a value
exceeding 5% of its total assets.
Swap Agreements. As one way of managing its exposure to different types
of investments, Global Income Fund may enter into interest rate swaps and other
types of swap agreements such as caps, collars and floors. The Fund may also
enter into currency swaps. In a typical interest rate swap, one party agrees to
make regular payments equal to a floating interest rate times a "notional
principal amount," in return for payments equal to a fixed rate times the same
amount, for a specified period of time. If a swap agreement provides for
payments in different currencies, the parties might agree to exchange the
notional principal amount as well. Swaps may also depend on other prices or
rates, such as the value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate exceeds
an agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift the Global Income Fund's investment
exposure from one type of investment to another. For example, if the Fund agrees
to exchange payments in dollars for payments in a foreign currency, the swap
agreement would tend to decrease the Fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and floors
have an effect similar to buying or writing options. Depending on how they are
used, swap agreements may increase or decrease the overall volatility of the
Fund's investments and its share price and yield.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks assumed.
As a result, swaps can be highly volatile and may have a considerable impact on
the Global Bond Fund's performance. Swap agreements are subject to the risk
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of a counterparty's failure to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. The Fund may also suffer losses if
it is unable to terminate outstanding swap agreements or reduce its exposure
through offsetting transactions. The Global Income Fund will maintain in a
segregated account with its custodian, cash or liquid, high grade debt
securities equal to the net amount, if any, of the excess of the Fund's
obligations over its entitlements with respect to swap, cap, collar or floor
transactions.
Derivative Investments. Consistent with its investment objective, each
Fund may purchase or enter into derivative investments to enhance return, to
hedge against fluctuations in interest rates, securities prices or currency
exchange rates, to change the duration of the Fund's fixed income portfolio or
as a substitute for the purchase or sale of securities or currency. A Fund's
investments in derivative securities may include certain mortgage-backed and
indexed securities. A Fund's transactions in derivative contracts may include
the purchase or sale of futures contracts on securities, indices or currency;
options on futures contracts; options on securities, indices or options on
futures contracts; options on securities, indices or currency; forward contracts
to purchase or sell securities or currency; currency, mortgage and interest rate
swaps; and interest rate caps, floors and collars. All of the Funds'
transactions in derivative instruments involve a risk of loss of principal due
to unanticipated adverse changes in interest rates, securities prices or
currency exchange rates. The loss on derivative contracts (other than purchased
options, caps, floors and collars) may exceed a Fund's initial investment in
these contracts. In addition, a Fund may lose the entire premium paid for
purchased options, caps, floors and collars that expire before they can be
profitably exercised by the Fund.
Structured Securities. The Sovereign Bond Fund, Strategic Income Fund
and Global Income Fund may invest in structured notes, bonds or debentures, the
value of the principal of and/or interest on which is to be determined by
reference to changes in the value of specific currencies, interest rates,
commodities, indices and other financial indicators (the "Reference") or the
relative change in two or more References. The interest rate or the principal
amount payable upon maturity or redemption may be increased or decreased
depending upon changes in the applicable reference. The terms of the structured
securities may provide that in certain circumstances no principal is due at
maturity and, therefore, may result in the loss of the Fund's investment.
Structured securities may be positively or negatively indexed, so that
appreciation of the Reference may produce an increase or decrease in the yield
or value of the security at maturity. In addition, the change in the yield or
the value of the security at maturity may be a multiple of the change in the
value of the Reference. Consequently, structured securities entail a greater
degree of market risk than other types of debt securities. Structured securities
may also be more volatile, less liquid and more difficult to price accurately
than less complex fixed income investments.
Participation Interests. The Strategic Income Fund may invest in
participation interests. Participation interests, which may take the form of
interests in, or assignments of certain loans, are acquired from banks who have
made these loans or are members of a lending syndicate. The Strategic Income
Fund's investments in participation interests are subject to its 15% limitation
on investments in illiquid securities. The Strategic Income Fund may purchase
only those participation interests that mature in 60 days or less, or, if
maturing in more than 60 days, that have a floating rate that is automatically
adjusted at least once every 60 days.
Smaller Capitalization Companies. Each Equity Fund may invest in smaller
capitalization companies. These companies may have limited product lines, market
and financial resources, or they may be dependent on smaller or less experienced
management groups. In addition, trading volume for these securities may be
limited. Historically, the market price for these securities has been more
volatile than for securities of companies with greater capitalization. However,
securities of companies with smaller capitalization may offer greater potential
for capital appreciation since they may be overlooked and thus undervalued by
investors.
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Non-Diversified Status. The Global Income Fund has elected to be a
"non-diversified" fund in order to permit it to invest more than 5% of its total
assets in the obligations of any one issuer. Since a relatively high percentage
of this Fund's assets may be invested in the obligations of a limited number of
issuers, the value of this Fund's shares may be more susceptible to any single
economic, political or regulatory event, and to the credit and market risks
associated with a single issuer, than would the shares of a diversified fund.
However, this Fund must satisfy certain tax diversification requirements in
order to qualify as a regulated investment company under the Code.
Short Sales. Each Fund (other than the 500 Index Fund and Money Market
Fund) may engage in short sales "against the box," as well as short sales for
hedging purposes. The International Fund and Emerging Equities Fund may engage
in short sales to profit from an anticipated decline in a security's value. When
a Fund engages in a short sale other than "against the box," it will place cash
or U.S. Government securities in a segregated account and mark them to market
daily in accordance with applicable regulatory requirements. Except for short
sales against the box, a Fund is limited in the amount of the Fund's net assets
that may be committed to short sales and the securities in which short sales are
made must be listed on a national securities exchange. A short sale is "against
the box" to the extent that the Fund contemporaneously owns or has the right to
obtain, at no added cost, securities identical to those sold short. Short sales
other than "against the box" may involve an unlimited exposure to loss. See the
Statement of Additional Information.
Restricted and Illiquid Securities. Each Fund may invest up to 15% (10%
for Money Market Fund) of its net assets in illiquid investments, which include
repurchase agreements maturing in more than seven days, certain over-the-counter
options, privately-issued stripped mortgage-backed securities, all interest rate
swaps, caps, collars and floors, certain restricted securities and securities
not readily marketable. Each Fund may also invest without limitation in
restricted securities eligible for resale to certain institutional investors
pursuant to Rule 144A under the Securities Act of 1933 and, to the extent
consistent with its investment policies, foreign securities acquired in
accordance with Regulation S under the Securities Act of 1933.
Lending of Securities and Repurchase Agreements. For the purpose of
realizing additional income, each Fund may lend to broker-dealers portfolio
securities amounting to not more than 33 1/3% of its respective total assets
taken at current value. Each Fund may also enter into repurchase agreements. In
a repurchase agreement, the Fund buys a security subject to the right and
obligation to sell it back to the issuer at the same price plus accrued
interest. These transactions must be fully collateralized at all times. However,
they may involve some credit risk to a Fund if the other party should default on
its obligation and that Fund is delayed in or prevented from recovering the
collateral. Securities loaned by a Fund will remain subject to fluctuations in
market value.
Reverse Repurchase Agreements. The Money Market Fund may enter into
reverse repurchase agreements which involve the sale of a security by the Fund
to a bank or securities firm and its agreement to repurchase the instrument at a
specified time and price plus an agreed amount of interest. 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 to be speculative. The Fund will enter into a reverse repurchase
agreement only when the Adviser determines that the interest income to be earned
from the investment of the proceeds is greater than the interest expense of the
transaction. The Fund will enter into reverse repurchase agreements only with
selected registered broker/dealers or with federally insured banks or savings
and loan associations which are approved in advance as being creditworthy by the
Board of Trustees. Under procedures established by the Board of Trustees, the
Adviser will monitor the creditworthiness of the firms involved.
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The use of reverse repurchase agreements involves leverage. Leverage
allows any investment gains made with the additional monies received (in excess
of the costs of the reverse repurchase agreement) to increase the net asset
value of the Fund's shares faster than would otherwise be the case. On the other
hand, if the additional monies received by the Fund are invested in ways that do
not fully recover the costs of such transactions, the net asset value of the
Fund would fall faster than would otherwise be the case.
When-Issued Securities. Each Fund may purchase securities on a forward
or "when issued" basis. When a Fund engages in when-issued transactions, it
relies on the seller or the buyer, as the case may be, to consummate the
transaction. Failure to consummate the transaction may result in the Fund's
losing the opportunity to obtain an advantageous price and yield.
See the Statement of Additional Information for further discussion of
the uses and risks of the investments described above.
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APPENDIX
As described in the Prospectus, the fixed income securities offering the
high current income sought by certain of the Funds are ordinarily in the lower
rating categories (that is, rated Baa or lower by Moody's or BBB or lower by S&P
or are unrated).
Moody's describes its lower ratings for corporate bonds as follows:
Bonds that are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other market
shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
S&P describes its lower ratings for corporate bonds as follows:
Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Debt rated BB, B, CCC, or CC is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
A-1
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JOHN HANCOCK DECLARATION TRUST
Investment Adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Sub-Investment Advisers
John Hancock Advisers International Limited
(International Fund)
34 Dover Street
London, England WIX3RA
Independence Investment Associates, Inc.
(Diversified Core Equity Fund)
53 State Street
Boston, Massachusetts 02109
Sovereign Asset Management Corp.
(Sovereign Investors Fund)
1235 Westlakes Drive
Berwyn, Pennsylvania 19312
Principal Distributor
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Custodians
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02205
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Shareholder Servicing Agent
Investor Services Corporation
P.O. Box
Boston, Massachusetts 02205
Independent Accountants
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
HOW TO OBTAIN INFORMATION ABOUT THE FUNDS
For Service Information
101 Huntington Avenue
Boston, Massachusetts 02199-
Telephone 1-800-
<PAGE>
SUBJECT TO COMPLETION DATED NOVEMBER 20, 1995
JOHN HANCOCK DECLARATION TRUST
101 Huntington Avenue
Boston, Massachusetts 02199-7603
John Hancock V.A. International Fund
John Hancock V.A. Emerging Equities Fund
John Hancock V.A. Discovery Fund
John Hancock V.A. Diversified Core Equity Fund
John Hancock V.A. Sovereign Investors Fund
John Hancock V.A. 500 Index Fund
John Hancock V.A. Sovereign Bond Fund
John Hancock V.A. Strategic Income Fund
John Hancock V.A. Global Income Fund
John Hancock V.A. Money Market Fund
(each, a "Fund" and collectively, the "Funds")
STATEMENT OF ADDITIONAL INFORMATION
February __, 1996
This Statement of Additional Information ("SAI") provides information
about John Hancock Declaration Trust (the "Trust") and the Funds, in addition to
the information that is contained in the Funds' Prospectus dated February ,
1996, subject to completion dated November 20, 1995 (the "Prospectus").
This SAI is not a prospectus. It should be read in conjunction with the
Funds' Prospectus, a copy of which can be obtained free of charge by writing or
telephoning:
John Hancock Investor Services Trust
P.O. Box
Boston, Massachusetts 02205-
1-800- -
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY.
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TABLE OF CONTENTS
Page
Organization of the Trust................................ 3
Eligible Investors; Investment Objectives and Policies... 3
Certain Investment Practices............................. 3
Investment Restrictions.................................. 16
Those Responsible for Management......................... 21
Investment Advisory and Other Services................... 23
Distribution Contract.................................... 25
Net Asset Value.......................................... 25
Special Redemptions...................................... 26
Tax Status............................................... 26
Description of the Trust's Shares........................ 29
Calculation of Performance............................... 30
Brokerage Allocation..................................... 32
Shareholder Servicing Agent.............................. 34
Custody of Portfolio..................................... 34
Independent Auditors..................................... 34
Financial Statements..................................... F-1
Appendix................................................. A-1
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ORGANIZATION OF THE TRUST
John Hancock Declaration Trust (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust under a
Declaration of Trust dated November 15, 1995. The Trust currently has ten series
of shares designated as: John Hancock V.A. International Fund ("International
Fund"), John Hancock V.A. Emerging Equities Fund ("Emerging Equities Fund"),
John Hancock V.A. Diversified Core Equity Fund ("Diversified Core Equity Fund"),
John Hancock V.A. Discovery Fund ("Discovery Fund"), John Hancock V.A. Sovereign
Investors Fund ("Sovereign Investors Fund"), John Hancock V.A. 500 Index Fund
("500 Index Fund"), John Hancock V.A. Sovereign Bond Fund ("Sovereign Bond
Fund"), John Hancock V.A. Strategic Income Fund ("Strategic Income Fund"), John
Hancock V.A. Global Income Fund ("Global Income Fund") and John Hancock V.A.
Money Market Fund ("Money Market Fund").
The investment adviser of each Fund is John Hancock Advisers, Inc. (the
"Adviser"), a wholly owned indirect subsidiary of John Hancock Mutual Life
Insurance Company (the "Life Company"). The investment sub-adviser to the
International Fund is John Hancock Advisers International Limited ("JHAI"). The
investment sub-adviser of Diversified Core Equity Fund is Independence
Investment Associates, Inc. ("IIA"). The investment sub-adviser for Sovereign
Investors Fund is Sovereign Asset Management Corp. ("SAMCorp"). Together, JHAI,
IIA and SAMCorp are sometimes referred to herein collectively as the
"Sub-advisers" or, individually, as the "Sub-adviser." The Sub-advisers are
wholly owned indirect subsidiaries of the Life Company.
ELIGIBLE INVESTORS; INVESTMENT OBJECTIVES AND POLICIES
The Funds are designed to serve as investment vehicles for variable
annuity and variable life insurance contracts (the "Variable Contracts") offered
by the separate accounts of various insurance companies. Participating insurance
companies are the owners of shares of beneficial interest in each Fund of the
Trust. In accordance with any limitations set forth in their Variable Contracts,
contract holders may direct through their participating insurance companies the
allocation of amounts available for investment among the Funds. Instructions for
any such allocation, or for the purchase or redemption of shares of a Fund, must
be made by the investor's participating insurance company's separate account as
the owner of the Fund's shares. The rights of participating insurance companies
as owners of shares of a Fund are different from the rights of contract holders
under their Variable Contracts. The term "shareholder" in this Statement of
Additional Information refers only to participating insurance companies, and not
to contract holders.
Each Fund has its own distinct investment objective and policies. In
striving to meet its objective, each Fund will face the challenges of changing
business, economic and market conditions. For a further description of the
Funds' investment objectives, policies and restrictions see "Overview of the
Funds" in the Prospectus and "Investment Restrictions" in this SAI.
CERTAIN INVESTMENT PRACTICES
Custodial Receipts. The Funds may each acquire custodial receipts in
respect of U.S. Government securities. Such custodial receipts evidence
ownership of future interest payments, principal payments or both on certain
notes or bonds. These custodial receipts are known by various names, including
Treasury Receipts, Treasury Investors Growth Receipts ("TIGRs"), and
Certificates of Accrual on Treasury Securities ("CATS"). For certain securities
law purposes, custodial receipts are not considered U.S. Government securities.
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Bank and Corporate Obligations. Each of the Funds may invest in
commercial paper. Commercial paper represents short-term unsecured promissory
notes issued in bearer form by banks or bank holding companies, corporations and
finance companies. The commercial paper purchased by the Funds consists of
direct U.S. Dollar denominated obligations of domestic or foreign issuers. Bank
obligations in which a Fund may invest include certificates of deposit, bankers'
acceptances and fixed time deposits. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific merchandise, which
are "accepted" by a bank, meaning, in effect, that the bank unconditionally
agrees to pay the face value of the instrument on maturity. Fixed time deposits
are bank obligations payable at a stated maturity date and bearing interest at a
fixed rate. Fixed time deposits may be withdrawn on demand by the investor, but
may be subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Bank notes and bankers' acceptances rank junior to domestic deposit
liabilities of the bank and pari passu with other senior, unsecured obligations
of the bank. Bank notes are not insured by the Federal Deposit Insurance
Corporation or any other insurer. Deposit notes are insured by the Federal
Deposit Insurance Corporation only to the extent of $100,000 per depositor per
bank.
Mortgage-Backed Securities. Each Fund, and in particular Strategic
Income Fund and Sovereign Investors Fund, may invest in mortgage pass-through
certificates and multiple-class pass-through securities, such as real estate
mortgage investment conduits ("REMIC") pass-through certificates, collateralized
mortgage obligations ("CMOs") and stripped mortgage-backed securities ("SMBS"),
and other types of "Mortgage-Backed Securities" that may be available in the
future.
Guaranteed Mortgage Pass-Through Securities. Guaranteed mortgage
pass-through securities represent participation interests in pools of
residential mortgage loans and are issued by U.S. Governmental or private
lenders and guaranteed by the U.S. Government or one of its agencies or
instrumentalities, including but not limited to the Government National Mortgage
Association ("Ginnie Mae"), the Federal National Mortgage Association ("Fannie
Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). Ginnie Mae
certificates are guaranteed by the full faith and credit of the U.S. Government
for timely payment of principal and interest on the certificates. Fannie Mae
certificates are guaranteed by Fannie Mae, a federally chartered and privately
owned corporation, for full and timely payment of principal and interest on the
certificates. Freddie Mac certificates are guaranteed by Freddie Mac, a
corporate instrumentality of the U.S. Government, for timely payment of interest
and the ultimate collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage
Obligations. CMOs and REMIC pass-through or participation certificates may be
issued by, among others, U.S. Government agencies and instrumentalities as well
as private issuers. CMOs and REMIC certificates are issued in multiple classes
and the principal of and interest on the mortgage assets may be allocated among
the several classes of CMOs or REMIC certificates in various ways. Each class of
CMOs or REMIC certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Generally, interest is paid or accrues on all
classes of CMOs or REMIC certificates on a monthly basis.
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Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie
Mac certificates but also may be collateralized by other mortgage assets such as
whole loans or private mortgage pass-through securities. Debt service on CMOs is
provided from payments of principal and interest on collateral of mortgaged
assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code of 1986, as amended (the "Code"), invests in certain
mortgages primarily secured by interests in real property and other permitted
investments and issues "regular" and "residual" interests. The Funds do not
intend to acquire REMIC residual interests.
Stripped Mortgage-Backed Securities. SMBS are derivative multiple-class
mortgage-backed securities. SMBS are usually structured with two classes that
receive different proportions of interest and principal distributions on a pool
of mortgage assets. A typical SMBS will have one class receiving some of the
interest and most of the principal, while the other class will receive most of
the interest and the remaining principal. In the most extreme case, one class
will receive all of the interest (the "interest only" class) while the other
class will receive all of the principal (the "principal only" class). The yields
and market risk of interest only and principal only SMBS, respectively, may be
more volatile than those of other fixed income securities. The staff of the
Securities and Exchange Commission ("SEC") considers privately issued SMBS to be
illiquid.
Structured or Hybrid Notes. The Sovereign Bond Fund, Strategic Income
Fund and Global Income Fund may invest in "structured" or "hybrid" notes. The
distinguishing feature of a structured or hybrid note is that the amount of
interest and/or principal payable on the note is based on the performance of a
benchmark asset or market other than fixed income securities or interest rates.
Examples of these benchmarks include stock prices, currency exchange rates and
physical commodity prices. Investing in a structured note allows a Fund to gain
exposure to the benchmark market while fixing the maximum loss that the Fund may
experience in the event that market does not perform as expected. Depending on
the terms of the note, a Fund may forego all or part of the interest and
principal that would be payable on a comparable conventional note; a Fund's loss
cannot exceed this foregone interest and/or principal. An investment in
structured or hybrid notes involves risks similar to those associated with a
direct investment in the benchmark asset.
Risk Factors Associated with Mortgage-Backed Securities. Investing in
Mortgage-Backed Securities involves certain risks, including the failure of a
counterparty to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. In addition, investing in the
lowest tranche of CMOs and REMIC certificates involves risks similar to those
associated with investing in equity securities. Further, the yield
characteristics of Mortgage-Backed Securities differ from those of traditional
fixed income securities. The major differences typically include more frequent
interest and principal payments (usually monthly), the adjustability of interest
rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and
a variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, a Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental, agency or other guarantee. When a Fund reinvests amounts
representing payments and unscheduled prepayments of principal, it may receive a
rate of interest that is lower than the rate on existing adjustable rate
mortgage pass-through securities. Thus, Mortgage-Backed Securities, and
adjustable rate mortgage pass-through
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securities in particular, may be less effective than other types of U.S.
Government securities as a means of "locking in" interest rates.
Conversely, in a rising interest rate environment, a declining
prepayment rate will extend the average life of many Mortgage-Backed Securities.
This possibility is often referred to as extension risk. Extending the average
life of a Mortgage-Backed Security increases the risk of depreciation due to
future increases in market interest rates.
Risks Associated With Specific Types of Derivative Debt Securities.
Different types of derivative debt securities are subject to different
combinations of prepayment, extension and/or interest rate risk. Conventional
mortgage pass-through securities and sequential pay CMOs are subject to all of
these risks, but are typically not leveraged. Thus, the magnitude of exposure
may be less than for more leveraged Mortgage-Backed Securities.
The risk of early prepayments is the primary risk associated with
interest only debt securities ("IOs"), super floaters, other leveraged floating
rate instruments and Mortgage-Backed Securities purchased at a premium to their
par value. In some instances, early prepayments may result in a complete loss of
investment in certain of these securities.
The primary risks associated with certain other derivative debt
securities are the potential extension of average life and/or depreciation due
to rising interest rates. These securities include floating rate securities
based on the Cost of Funds Index ("COFI floaters"), other "lagging rate"
floating rate securities, floating rate securities that are subject to a maximum
interest rate ("capped floaters"), Mortgage-Backed Securities purchased at a
discount, leveraged inverse floating rate securities ("inverse floaters"),
principal only debt securities ("POs"), certain residual or support tranches of
CMOs and index amortizing notes. Index amortizing notes are not Mortgage-Backed
Securities, but are subject to extension risk resulting from the issuer's
failure to exercise its option to call or redeem the notes before their stated
maturity date. Leveraged inverse IOs combine several elements of the
Mortgage-Backed Securities described above and thus present an especially
intense combination of prepayment, extension and interest rate risks.
Planned amortization class ("PAC") and target amortization class ("TAC")
CMO bonds involve less exposure to prepayment, extension and interest rate risks
than other Mortgage-Backed Securities, provided that prepayment rates remain
within expected prepayment ranges or "collars." To the extent that prepayment
rates remain within these prepayment ranges, the residual or support tranches of
PAC and TAC CMOs assume the extra prepayment, extension and interest rate risks
associated with the underlying mortgage assets.
Other types of floating rate derivative debt securities present more
complex types of interest rate risks. For example, range floaters are subject to
the risk that the coupon will be reduced to below market rates if a designated
interest rate floats outside of a specified interest rate band or collar. Dual
index or yield curve floaters are subject to depreciation in the event of an
unfavorable change in the spread between two designated interest rates. X-reset
floaters have a coupon that remains fixed for more than one accrual period.
Thus, the type of risk involved in these securities depends on the terms of each
individual X-reset floater.
Foreign Securities and Emerging Countries. Each Fund except for
Diversified Core Equity Fund, 500 Index Fund, Sovereign Investors Fund and Money
Market Fund may invest in U.S. Dollar and foreign denominated securities of
foreign issuers. Diversified Core Equity Fund and Money Market Fund may only
invest in U.S. dollar denominated securities of domestic and foreign issuers.
International Fund, Emerging Equities Fund, Strategic Income Fund and Global
Income Fund may also invest in debt and equity securities of corporate and
governmental issuers of countries with emerging economies or securities markets.
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Investing in obligations of non-U.S. issuers and foreign banks,
particularly securities of issuers located in emerging countries, may entail
greater risks than investing in similar securities of U.S. issuers. These risks
include (i) social, political and economic instability; (ii) the small current
size of the markets for many such securities and the currently low or
nonexistent volume of trading, which may result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict a
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) foreign taxation; and
(v) the absence of developed structures governing private or foreign investment
or allowing for judicial redress for injury to private property. Investing in
securities of non-U.S. companies may entail additional risks due to the
potential political and economic instability of certain countries and the risks
of expropriation, nationalization, confiscation or the imposition of
restrictions on foreign investment and on repatriation of capital invested. In
the event of such expropriation, nationalization or other confiscation by any
country, a Fund could lose its entire investment in any such country.
In addition, even though opportunities for investment may exist in
foreign countries, and in particular emerging markets, any change in the
leadership or policies of the governments of those countries or in the
leadership or policies of any other government which exercises a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and thereby
eliminate any investment opportunities which may currently exist. Investors
should note that upon the accession to power of authoritarian regimes, the
governments of a number of Latin American countries previously expropriated
large quantities of real and personal property similar to the property which may
be represented by the securities purchased by the Funds. The claims of property
owners against those governments were never finally settled. There can be no
assurance that any property represented by foreign securities purchased by a
Fund will not also be expropriated, nationalized, or otherwise confiscated. If
such confiscation were to occur, a Fund could lose a substantial portion of its
investments in such countries. A Fund's investments would similarly be adversely
affected by exchange control regulations in any of those countries. Certain
countries in which the Funds may invest may have vocal minorities that advocate
radical religious or revolutionary philosophies or support ethnic independence.
Any disturbance on the part of such individuals could carry the potential for
widespread destruction or confiscation of property owned by individuals and
entities foreign to such country and could cause the loss of a Fund's investment
in those countries.
Certain countries prohibit or impose substantial restrictions on
investments in their capital markets, particularly their equity markets, by
foreign entities such as the Funds. As illustrations, certain countries require
governmental approval prior to investments by foreign persons, or limit the
amount of investment by foreign persons in a particular company, or limit the
investment by foreign persons to only a specific class of securities of a
company that may have less advantageous terms than securities of the company
available for purchase by nationals. Moreover, the national policies of certain
countries may restrict investment opportunities in issuers or industries deemed
sensitive to national interests. In addition, some countries require
governmental approval for the repatriation of investment income, capital or the
proceeds of securities sales by foreign investors. A Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation, as well as by the application to it of other restrictions on
investments.
Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most foreign securities held by the Funds will
not be registered with the
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SEC and such issuers thereof will not be subject to the SEC's reporting
requirements. Thus, there will be less available information concerning foreign
issuers of securities held by the Funds than is available concerning U.S.
issuers. In instances where the financial statements of an issuer are not deemed
to reflect accurately the financial situation of the issuer, the Adviser or
relevant Sub-adviser will take appropriate steps to evaluate the proposed
investment, which may include on-site inspection of the issuer, interviews with
its management and consultations with accountants, bankers and other
specialists. There is substantially less publicly available information about
foreign companies than there are reports and ratings published about U.S.
companies and the U.S. Government. In addition, where public information is
available, it may be less reliable than such information regarding U.S. issuers.
Because the Funds (other than Diversified Core Equity Fund, 500 Index
Fund, Sovereign Investors Fund and Money Market Fund) may invest, and
International Fund, Emerging Equities Fund and Global Income Fund will (under
normal circumstances) invest, a substantial portion of their total assets in
securities which are denominated or quoted in foreign currencies, the strength
or weakness of the U.S. dollar against such currencies may account for part of
the Funds' investment performance. A decline in the value of any particular
currency against the U.S. dollar will cause a decline in the U.S. dollar value
of a Fund's holdings of securities denominated in such currency and, therefore,
will cause an overall decline in the Fund's net asset value and any net
investment income and capital gains to be distributed in U.S. dollars to
shareholders of the Fund.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the pace of business activity in certain other countries and
the U.S., and other economic and financial conditions affecting the world
economy.
Although the Funds value their respective assets daily in terms of U.S.
dollars, the Funds do not intend to convert their holdings of foreign currencies
into U.S. dollars on a daily basis. However, the Funds may do so from time to
time, and investors should be aware of the costs of currency conversion.
Although currency dealers do not charge a fee for conversion, they do realize a
profit based on the difference ("spread") between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to sell that currency to the dealer.
Securities of foreign issuers, and in particular many emerging country
issuers, may be less liquid and their prices more volatile than securities of
comparable U.S. issuers. In addition, foreign securities exchanges and brokers
are generally subject to less governmental supervision and regulation than in
the U.S., and foreign securities exchange transactions are usually subject to
fixed commissions, which are generally higher than negotiated commissions on
U.S. transactions. In addition, foreign securities exchange transactions may be
subject to difficulties associated with the settlement of such transactions.
Delays in settlement could result in temporary periods when assets of a Fund are
uninvested and no return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to a Fund due
to subsequent declines in value of the portfolio security or, if the Fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser.
The Funds' investment income or, in some cases, capital gains from stock
or securities of foreign issuers may be subject to foreign withholding or other
foreign taxes, thereby reducing the Funds' net investment income and/or net
realized capital gains. See "Tax Status."
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Forward Foreign Currency Contracts. Each Fund (other than Diversified
Core Equity, 500 Index Fund, Sovereign Investors Fund and Money Market Fund) may
engage in forward foreign currency transactions. Generally, the foreign currency
exchange transactions of the Funds may be conducted on a spot (i.e., cash) basis
at the spot rate for purchasing or selling currency prevailing in the foreign
exchange market. A Fund may also deal in forward foreign currency exchange
contracts involving currencies of the different countries in which it may invest
as a hedge against possible variations in the foreign exchange rate between
these currencies. This is accomplished through contractual agreements to
purchase or sell a specified currency at a specified future date and price set
at the time of the contract. The Funds' dealings in forward foreign currency
exchange contracts will be limited to hedging either specified transactions or
portfolio positions. Transaction hedging is the purchase or sale of forward
foreign currency contracts with respect to specific receivables or payables of a
Fund accruing in connection with the purchase and sale of its portfolio
securities denominated in foreign currencies. Portfolio hedging is the use of
forward foreign currency contracts to offset portfolio security positions
denominated or quoted in such foreign currencies. A Fund will not attempt to
hedge all of its foreign portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by the Adviser or
relevant Sub-adviser. The Board of Trustees has adopted a policy of monitoring
the Funds' foreign currency contract transactions to assure that the Funds
qualify as regulated investment companies under the Code. The Funds will not
engage in speculative forward foreign currency exchange transactions.
If a Fund purchases a forward contract, its custodian bank will
segregate cash or high grade liquid debt securities in a separate account of the
Fund in an amount equal to the value of the Fund's total assets committed to the
consummation of such forward contract. Those assets will be valued at market
daily. If the value of the securities in the separate account declines,
additional cash or securities will be placed in the account so that the value of
the account will be equal to the amount of the Fund's commitment with respect to
such contracts.
Hedging against a decline in the value of currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it may
not be possible for a Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level it anticipates.
The cost to a Fund of engaging in foreign currency exchange transactions
varies with such factors as the currency involved, the length of the contract
period and the market conditions then prevailing. Since transactions in foreign
currency are usually conducted on a principal basis, no fees or commissions are
involved.
Repurchase Agreements. Each Fund may enter into repurchase agreements. A
repurchase agreement is a contract under which the Fund would acquire a security
for a relatively short period (generally not more than seven days) subject to
the obligation of the seller to repurchase and the Fund to resell such security
at a fixed time and price (representing the Fund's cost plus interest). A Fund
will enter into repurchase agreements only with member banks of the Federal
Reserve System and with securities dealers. The Adviser or relevant Sub-adviser
will continuously monitor the creditworthiness of the parties with whom a Fund
enters into repurchase agreements. Each Fund has established a procedure
providing that the securities serving as collateral for each repurchase
agreement must be delivered to the Fund's custodian either physically or in
book-entry form and that the collateral must be marked to market daily to ensure
that each repurchase agreement is fully collateralized at all times. In the
event of bankruptcy or other default by a seller of a repurchase agreement, a
Fund could experience delays in liquidating the underlying securities and could
experience losses, including the possible decline in the value
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of the underlying securities during the period which the Fund seeks to enforce
its rights thereto, possible subnormal levels of income and lack of access to
income during this period, and the expense of enforcing its rights. A Fund will
not invest in a repurchase agreement maturing in more than seven days, if such
investment, together with other illiquid securities held by the Fund would
exceed 15% (10% for Money Market Fund) of the Fund's net assets.
Reverse Repurchase Agreements. The Money Market Fund may also enter into
reverse repurchase agreements which involve the sale of U.S. Government
securities held in its portfolio to a bank or securities firm with an agreement
that the Fund will buy back the securities at a fixed future date at a fixed
price plus an agreed amount of "interest" which may be reflected in the
repurchase price. Reverse repurchase agreements are considered to be borrowings
by the Fund. The Fund will use proceeds obtained from the sale of securities
pursuant to reverse repurchase agreements to purchase other investments. The use
of borrowed funds to make investments is a practice known as "leverage," which
is considered speculative. Use of reverse repurchase agreements is an investment
technique that is intended to increase income. Thus, the Fund will enter into a
reverse repurchase agreement only when the Adviser determines that the interest
income to be earned from the investment of the proceeds is greater than the
interest expense of the transaction. However, there is a risk that interest
expense will nevertheless exceed the income earned. Reverse repurchase
agreements involve the risk that the market value of securities purchased by the
Fund with proceeds of the transaction may decline below the repurchase price of
the securities sold by the Fund which it is obligated to repurchase. The Fund
will also continue to be subject to the risk of a decline in the market value of
the securities sold under the agreements because it will reacquire those
securities upon effecting their repurchase. To minimize various risks associated
with reverse repurchase agreements, the Fund will establish and maintain with
the Fund's custodian a separate account consisting of highly liquid, marketable
securities in an amount at least equal to the repurchase prices of the
securities (plus any accrued interest thereon) under such agreements. In
addition, the Fund will not enter into reverse repurchase agreements and other
borrowings exceeding in the aggregate 33 1/3% of the market value of its total
assets. The Fund will enter into reverse repurchase agreements only with
selected registered broker/ dealers or with federally insured banks or savings
and loan associations which are approved in advance as being creditworthy by the
Board of Trustees. Under procedures established by the Board of Trustees, the
Adviser will monitor the creditworthiness of the firms involved.
Forward Commitment and When-Issued Securities. Each Fund may purchase
securities on a when-issued or forward commitment basis. "When-issued" refers to
securities whose terms are available and for which a market exists, but which
have not been issued. A Fund will engage in when-issued transactions with
respect to securities purchased for its portfolio in order to obtain what is
considered to be an advantageous price and yield at the time of the transaction.
For when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, a Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When a Fund engages in forward commitment and when-issued transactions,
it relies on the seller to consummate the transaction. The failure of the issuer
or seller to consummate the transaction may result in the Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date a Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid, high grade debt securities equal in value to the Fund's
commitment. These assets will be valued daily at market, and additional cash or
securities will be segregated in a separate account to the extent
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that the total value of the assets in the account declines below the amount of
the when-issued commitments. Alternatively, a Fund may enter into offsetting
contracts for the forward sale of other securities that it owns.
Short Sales. International Fund and Emerging Equities Fund may engage in
short sales in order to profit from an anticipated decline in the value of a
security. Each Fund (except for 500 Index Fund and Money Market Fund) may also
engage in short sales to attempt to limit its exposure to a possible market
decline in the value of its portfolio securities through short sales of
securities which the Adviser believes possess volatility characteristics similar
to those being hedged. To effect such a transaction, a Fund must borrow the
security sold short to make delivery to the buyer. A Fund then is obligated to
replace the security borrowed by purchasing it at the market price at the time
of replacement. Until the security is replaced, a Fund is required to pay to the
lender any accrued interest and may be required to pay a premium.
A Fund will realize a gain if the security declines in price between the
date of the short sale and the date on which the Fund replaces the borrowed
security. On the other hand, a Fund will incur a loss as a result of the short
sale if the price of the security increases between those dates. The amount of
any gain will be decreased, and the amount of any loss increased, by the amount
of any premium or interest or dividends a Fund may be required to pay in
connection with a short sale. The successful use of short selling as a hedging
device may be adversely affected by imperfect correlation between movements in
the price of the security sold short and the securities being hedged.
Under applicable guidelines of the staff of the SEC, if a Fund engages
in short sales, it must put in a segregated account (not with the broker) an
amount of cash or U.S. Government securities equal to the difference between (a)
the market value of the securities sold short at the time they were sold short
and (b) any cash or U.S. Government securities required to be deposited as
collateral with the broker in connection with the short sale (not including the
proceeds from the short sale). In addition, until a Fund replaces the borrowed
security, it must daily maintain the segregated account at such a level that the
amount deposited in it plus the amount deposited with the broker as collateral
will equal the current market value of the securities sold short. Except for
short sales against the box, the amount of the Fund's net assets that may be
committed to short sales is limited and the securities in which short sales are
made must be listed on a national securities exchange.
Short selling may produce higher than normal portfolio turnover which
may result in increased transaction costs to a Fund and may result in gains from
the sale of securities deemed to have been held for less than three months,
which gains must be less than 30% of the Fund's gross income in order for the
Fund to qualify as a regulated investment company under the Code.
Lower Rated High Yield/High Risk Debt Obligations. Strategic Income
Fund, Sovereign Investors Fund, Sovereign Bond Fund and Global Income Fund may
invest in high yield/high risk, fixed income securities rated below investment
grade (e.g., rated Baa or lower by Moody's or BBB or lower by S&P.
Ratings are based largely on the historical financial condition of the
issuer. Consequently, the rating assigned to any particular security is not
necessarily a reflection of the issuer's current financial condition, which may
be better or worse than the rating would indicate.
See the Appendix to the Prospectus and this SAI which describes the
characteristics of corporate bonds in the various rating categories. These Funds
may invest in comparable quality unrated securities which, in the opinion of the
Adviser or relevant Sub-adviser, offer comparable yields and risks to those
securities which are rated.
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Debt obligations rated in the lower ratings categories, or which are
unrated, involve greater volatility of price and risk of loss of principal and
income. In addition, lower ratings reflect a greater possibility of an adverse
change in financial condition affecting the ability of the issuer to make
payments of interest and principal. The high yield/high risk fixed income market
is relatively new and its growth occurred during a period of economic expansion.
The market has not yet been fully tested by an economic recession.
The market price and liquidity of lower rated fixed income securities
generally respond to short term corporate and market developments to a greater
extent than do the price and liquidity of higher rated securities because such
developments are perceived to have a more direct relationship to the ability of
an issuer of such lower rated securities to meet its ongoing debt obligations.
Reduced volume and liquidity in the high yield/high risk bond market or
the reduced availability of market quotations will make it more difficult to
dispose of the bonds and to value accurately a Fund's assets. The reduced
availability of reliable, objective data may increase a Fund's reliance on
management's judgment in valuing high yield/high risk bonds. In addition, a
Fund's investments in high yield/high risk securities may be susceptible to
adverse publicity and investor perceptions, whether or not justified by
fundamental factors.
Financial Futures Contracts. To the extent set forth in the Prospectus,
the Funds may buy and sell futures contracts (and related options) on stocks,
stock indices, debt securities, currencies, interest rate indices, and other
instruments. Each Fund may hedge its portfolio by selling or purchasing
financial futures contracts as an offset against the effects of changes in
interest rates or in security or foreign currency values. Although other
techniques could be used to reduce exposure to market fluctuations, a Fund may
be able to hedge its exposure more effectively and perhaps at a lower cost by
using financial futures contracts. The Funds (other than the 500 Index Fund and
the Emerging Equities Fund) may enter into financial futures contracts for
hedging and other non-speculative purposes to the extent permitted by
regulations of the Commodity Futures Trading Commission ("CFTC"). Emerging
Equities Fund will not engage in futures transactions for speculative purposes.
Financial futures contracts have been designed by boards of trade which
have been designated "contract markets" by the CFTC. Futures contracts are
traded on these markets in a manner that is similar to the way a stock is traded
on a stock exchange. The boards of trade, through their clearing corporations,
guarantee that the contracts will be performed. Currently, financial futures
contracts are based on interest rate instruments such as long-term U.S. Treasury
bonds, U.S. Treasury notes, Government National Mortgage Association ("GNMA")
modified pass-through mortgage-backed securities, three-month U.S. Treasury
bills, 90-day commercial paper, bank certificates of deposit and Eurodollar
certificates of deposit. It is expected that if other financial futures
contracts are developed and traded the Funds may engage in transactions in such
contracts.
Although some financial futures contracts by their terms call for actual
delivery or acceptance of financial instruments, in most cases the contracts are
closed out prior to delivery by offsetting purchases or sales of matching
financial futures contracts (same exchange, underlying security and delivery
month). Other financial futures contracts, such as futures contracts on
securities indices, by their terms call for cash settlements. If the offsetting
purchase price is less than a Fund's original sale price, the Fund realizes a
gain, or if it is more, the Fund realizes a loss. Conversely, if the offsetting
sale price is more than a Fund's original purchase price, the Fund realizes a
gain, or if it is less, the Fund realizes a loss. The transaction costs must
also be included in these calculations. Each Fund will pay a commission in
connection with each purchase or sale of financial futures contracts, including
a closing transaction. For a discussion of the Federal
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income tax considerations of trading in financial futures contracts, see the
information under the caption "Tax Status" below.
At the time a Fund enters into a financial futures contract, it is
required to deposit with its custodian a specified amount of cash or U.S.
Government securities, known as "initial margin," ranging upward from 1.1% of
the value of the financial futures contract being traded. The margin required
for a financial futures contract is set by the board of trade or exchange on
which the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance bond or good
faith deposit on the financial futures contract which is returned to the Fund
upon termination of the contract, assuming all contractual obligations have been
satisfied. The Funds expect to earn interest income on their initial margin
deposits. Each day, the futures contract is valued at the official settlement
price of the board of trade or exchange on which it is traded. Subsequent
payments, known as "variation margin," to and from the broker are made on a
daily basis as the market price of the financial futures contract fluctuates.
This process is known as "mark to market." Variation margin does not represent a
borrowing or lending by the Funds but is instead a settlement between the Funds
and the broker of the amount one would owe the other if the financial futures
contract expired. In computing net asset value, the Funds will mark to market
their respective open financial futures positions.
Successful hedging depends on a strong correlation between the market
for the underlying securities and the futures contract market for those
securities. There are several factors that will probably prevent this
correlation from being a perfect one, and even a correct forecast of general
interest rate trends may not result in a successful hedging transaction. There
are significant differences between the securities and futures markets which
could create an imperfect correlation between the markets and which could affect
the success of a given hedge. The degree of imperfection of correlation depends
on circumstances such as variations in speculative market demand for financial
futures and debt securities, including technical influences in futures trading
and differences between the financial instruments being hedged and the
instruments underlying the standard financial futures contracts available for
trading in such respects as interest rate levels, maturities and
creditworthiness of issuers. The degree of imperfection may be increased where
the underlying debt securities are lower-rated and, thus, subject to greater
fluctuation in price than higher-rated securities.
A decision as to whether, when and how to hedge involves the exercise of
skill and judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of unexpected market or interest rate trends. The Funds will bear
the risk that the price of the securities being hedged will not move in complete
correlation with the price of the futures contracts used as a hedging
instrument. Although the Adviser and relevant Sub-adviser believe that the use
of financial futures contracts will benefit the Funds, an incorrect market
prediction could result in a loss on both the hedged securities in the
respective Fund's portfolio and the hedging vehicle so that the Fund's return
might have been better had hedging not been attempted. However, in the absence
of the ability to hedge, the Adviser or relevant Sub-adviser might have taken
portfolio actions in anticipation of the same market movements with similar
investment results but, presumably, at greater transaction costs. The low margin
deposits required for futures transactions permit an extremely high degree of
leverage. A relatively small movement in a futures contract may result in losses
or gains in excess of the amount invested.
Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount the price of a futures contract may vary either
up or down from the previous day's settlement price, at the end of the current
trading session. Once the daily limit has been reached in a futures contract
subject to the limit, no more trades may be made on that day at a price beyond
that limit. The daily limit governs only price movements during a particular
trading day and, therefore, does not limit
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potential losses because the limit may work to prevent the liquidation of
unfavorable positions. For example, futures prices have occasionally moved to
the daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of positions and subjecting some holders
of futures contracts to substantial losses.
Finally, although the Funds engage in financial futures transactions
only on boards of trade or exchanges where there appears to be an adequate
secondary market, there is no assurance that a liquid market will exist for a
particular futures contract at any given time. The liquidity of the market
depends on participants closing out contracts rather than making or taking
delivery. In the event participants decide to make or take delivery, liquidity
in the market could be reduced. In addition, the Funds could be prevented from
executing a buy or sell order at a specified price or closing out a position due
to limits on open positions or daily price fluctuation limits imposed by the
exchanges or boards of trade. If a Fund cannot close out a position, it must
continue to meet margin requirements until the position is closed.
Options on Financial Futures Contracts. To the extent set forth in the
Prospectus, the Funds may buy and sell options on financial futures contracts on
stocks, stock indices, debt securities, currencies, interest rate indices, and
other instruments. An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the period of the
option. Upon exercise, the writer of the option delivers the futures contract to
the holder at the exercise price. The Funds would be required to deposit with
their custodian initial and variation margin with respect to put and call
options on futures contracts written by them. Options on futures contracts
involve risks similar to the risks of transactions in financial futures
contracts. Also, an option purchased by a Fund may expire worthless, in which
case a Fund would lose the premium it paid for the option.
Other Considerations. The Funds (other than the 500 Index Fund) will
engage in futures and options transactions for bona fide hedging or other
non-speculative purposes to the extent permitted by CFTC regulations. A Fund
will determine that the price fluctuations in the futures contracts and options
on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or which it expects to purchase.
Except as stated below, the Funds' futures transactions will be entered into for
traditional hedging purposes -- i.e., futures contracts will be sold to protect
against a decline in the price of securities that the Funds own, or futures
contracts will be purchased to protect the Funds against an increase in the
price of securities, or the currency in which they are denominated, the Fund
intends to purchase. As evidence of this hedging intent, the Funds expect that
on 75% or more of the occasions on which they take a long futures or option
position (involving the purchase of futures contracts), the Funds will have
purchased, or will be in the process of purchasing equivalent amounts of related
securities or assets denominated in the related currency in the cash market at
the time when the futures contract or option position is closed out. However, in
particular cases, when it is economically advantageous for a Fund to do so, a
long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
As an alternative to literal compliance with the bona fide hedging
definition, a CFTC regulation permits the Funds to elect to comply with a
different test, under which the aggregate initial margin and premiums required
to establish nonhedging positions in futures contracts and options on futures
will not exceed 5% of the net asset value of the respective Fund's portfolio,
after taking into account unrealized profits and losses on any such positions
and excluding the amount by which such options were in-the-money at the time of
purchase. The Funds will engage in transactions in futures contracts only to the
extent such transactions are consistent with the requirements of the Code for
maintaining their qualifications as regulated investment companies for Federal
income tax purposes.
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When the Funds purchase financial futures contracts, or write put
options or purchase call options thereon, cash or liquid, high grade debt
securities will be deposited in a segregated account with the Funds' custodian
in an amount that, together with the amount of initial and variation margin held
in the account of the broker, equals the market value of the futures contracts.
Options Transactions. To the extent set forth in the Prospectus, the
Funds may write listed and over-the-counter covered call options and covered put
options on securities in order to earn additional income from the premiums
received. In addition, the Funds may purchase listed and over-the-counter call
and put options. The extent to which covered options will be used by the Funds
will depend upon market conditions and the availability of alternative
strategies.
A Fund will write listed and over-the-counter call options only if they
are "covered," which means that the Fund owns or has the immediate right to
acquire the securities underlying the options without additional cash
consideration upon conversion or exchange of other securities held in its
portfolio. A call option written by a Fund may also be "covered" if the Fund
holds on a share-for-share basis a covering call on the same securities where
(i) the exercise price of the covering call held is equal to or less than the
exercise price of the call written or the exercise price of the covering call is
greater than the exercise price of the call written, in the latter case only if
the difference is maintained by the Fund in cash or high grade liquid debt
obligations in a segregated account with the Fund's custodian, and (ii) the
covering call expires at the same time as the call written. If a covered call
option is not exercised, a Fund would keep both the option premium and the
underlying security. If the covered call option written by a Fund is exercised
and the exercise price, less the transaction costs, exceeds the cost of the
underlying security, the Fund would realize a gain in addition to the amount of
the option premium it received. If the exercise price, less transaction costs,
is less than the cost of the underlying security, a Fund's loss would be reduced
by the amount of the option premium.
As the writer of a covered put option, each Fund will write a put option
only with respect to securities it intends to acquire for its portfolio and will
maintain in a segregated account with its custodian bank cash or high grade
liquid debt securities with a value equal to the price at which the underlying
security may be sold to the Fund in the event the put option is exercised by the
purchaser. The Funds may also write a "covered" put option by purchasing on a
share-for-share basis a put on the same security as the put written by the Fund
if the exercise price of the covering put held is equal to or greater than the
exercise price of the put written and the covering put expires at the same time
as or later than the put written.
When writing listed and over-the-counter covered put options on
securities, the Funds would earn income from the premiums received. If a covered
put option is not exercised, the Funds would keep the option premium and the
assets maintained to cover the option. If the option is exercised and the
exercise price, including transaction costs, exceeds the market price of the
underlying security, a Fund would realize a loss, but the amount of the loss
would be reduced by the amount of the option premium.
If the writer of an exchange-traded option wishes to terminate its
obligation prior to its exercise, it may effect a "closing purchase
transaction." This is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that a Fund's position
will be offset by the Options Clearing Corporation. The Funds may not effect a
closing purchase transaction after they have been notified of the exercise of an
option. There is no guarantee that a closing purchase transaction can be
effected. Although the Funds will generally write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange or board of trade will exist for any
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particular option or at any particular time, and for some options no secondary
market on an exchange may exist.
In the case of a written call option, effecting a closing transaction
will permit a Fund to write another call option on the underlying security with
either a different exercise price, expiration date or both. In the case of a
written put option, it will permit a Fund to write another put option to the
extent that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction will permit the
cash or proceeds from the concurrent sale of any securities subject to the
option to be used for other investments. If a Fund desires to sell a particular
security from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale of the
security.
A Fund will realize a gain from a closing transaction if the cost of the
closing transaction is less than the premium received from writing the option.
The Funds will realize a loss from a closing transaction if the cost of the
closing transaction is more than the premium received for writing the option.
However, because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by appreciation in the value of the underlying security owned by the
Fund.
Over-the-Counter Options. Funds that may engage in options transactions
may engage in options transactions on exchanges and in the over-the-counter
markets. In general, exchange-traded options are third-party contracts (i.e.,
performance of the parties' obligations is guaranteed by an exchange or clearing
corporation) with standardized strike prices and expiration dates.
Over-the-counter ("OTC") transactions are two-party contracts with price and
terms negotiated by the buyer and seller. A Fund will acquire only those OTC
options for which management believes the Fund can receive on each business day
at least two separate bids or offers (one of which will be from an entity other
than a party to the option) or those OTC options valued by an independent
pricing service. The Funds will write and purchase OTC options only with member
banks of the Federal Reserve System and primary dealers in U.S. Government
securities or their affiliates which have capital of at least $50 million or
whose obligations are guaranteed by an entity having capital of at least $50
million. The SEC has taken the position that OTC options are subject to each
Fund's 15% restriction on illiquid investments. The SEC, however, allows a Fund
to exclude from the 15% limitation on illiquid securities a portion of the value
of the OTC options written by the Fund, provided that certain conditions are
met. First, the other party to the OTC options has to be a primary U.S.
Government securities dealer designated as such by the Federal Reserve Bank.
Second, the Fund must have an absolute contractual right to repurchase the OTC
options at a formula price. If the above conditions are met, a Fund may treat as
illiquid only that portion of the OTC option's value (and the value of its
underlying securities) which is equal to the formula price for repurchasing the
OTC option, less the OTC option's intrinsic value.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
Each Fund has adopted the following fundamental investment restrictions
which may not be changed without the approval of a majority of the applicable
Fund's outstanding voting securities. Under the Investment Company Act of 1940,
as amended (the "1940 Act"), and as used in the Prospectus and this SAI, a
"majority of the outstanding voting securities" means the approval of the lesser
of (1) the holders of 67% or more of the shares of a Fund represented at a
meeting if the holders of more than 50% of the outstanding shares of the Fund
are present in person or by proxy or (2) the holders of more than 50% of the
outstanding shares of the Fund.
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Each Fund (other than Money Market Fund) may not:
1. Issue senior securities, except as permitted by paragraphs 3, 6 and
7 below. For purposes of this restriction, the issuance of shares
of beneficial interest in multiple classes or series, the deferral
of the Trustees' fees and the purchase or sale of options, futures
contracts, forward commitments, swaps and repurchase agreements
entered into in accordance with the Fund's investment policies
within the meaning of paragraph 6 below, are not deemed to be
senior securities.
2. Purchase securities on margin or make short sales, unless, by
virtue of its ownership of other securities, the Fund has the right
to obtain securities equivalent in kind and amount to the
securities sold and, if the right is conditional, the sale is made
upon the same conditions, except (i) in connection with arbitrage
transactions, (ii) for hedging the Fund's exposure to an actual or
anticipated market decline in the value of its securities, (iii) to
profit from an anticipated decline in the value of a security, and
(iv) for obtaining such short-term credits as may be necessary for
the clearance of purchases and sales of securities.
3. Borrow money, except for the following extraordinary or emergency
purposes: (i) from banks for temporary or short-term purposes or
for the clearance of transactions; (ii) in connection with the
redemption of Fund shares or to finance failed settlements of
portfolio trades without immediately liquidating portfolio
securities or other assets; and (iii) in order to fulfill
commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets, but only
if after each such borrowing there is asset coverage of at least
300% as defined in the 1940 Act. For purposes of this investment
restriction, the deferral of trustees' fees and short sales,
transactions in futures contracts and options on futures contracts,
securities or indices and forward commitment transactions shall not
constitute borrowing. This restriction does not apply to
transactions in reverse repurchase agreements in amounts not to
exceed 33 1/3% of the value of the Fund's total assets (including
the amount borrowed) taken at market value.
4. Act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Fund may be
deemed to be an underwriter for purposes of the Securities Act of
1933 (the "1933 Act").
5. Purchase or sell real estate except that the Fund may (i) acquire
or lease office space for its own use, (ii) invest in securities of
issuers that invest in real estate or interests therein, (iii)
invest in securities that are secured by real estate or interests
therein, (iv) purchase and sell mortgage-related securities and (v)
hold and sell real estate acquired by the Fund as a result of the
ownership of securities.
6. Invest in commodities, except the Fund may purchase and sell
options on securities, securities indices and currency, futures
contracts on securities, securities indices and currency and
options on such futures, forward foreign currency exchange
contracts, forward commitments, securities index put or call
warrants, interest rate and currency swaps, interest rate caps,
floors and collars and repurchase agreements entered into in
accordance with the Fund's investment policies.
7. Make loans, except that the Fund (1) may lend portfolio securities
in accordance with the Fund's investment policies up to 33 1/3% of
the Fund's total assets taken at market value, (2) enter into
repurchase agreements, and (3) purchase all or a portion of an
issue of debt securities, bank loan participation interests, bank
certificates of deposit, bankers'
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acceptances, debentures or other securities, whether or not the
purchase is made upon the original issuance of the securities.
8. Purchase the securities of issuers conducting their principal
activity in the same industry if, immediately after such purchase,
the value of its investments in such industry would equal or exceed
25% of its total assets taken at market value at the time of such
investment. This limitation does not apply to investments in
obligations of the U.S. Government or any of its agencies,
instrumentalities or authorities.
9. For each Fund, other than Global Income Fund, with respect to 75%
of total assets, purchase securities of an issuer (other than the
U.S. Government, its agencies, instrumentalities or authorities),
if:
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities
of such issuer; or
(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the
Fund.
Money Market Fund may not:
1. Issue senior securities. For purposes of this restriction, the
issuance of shares of beneficial interest in multiple classes or
series, the deferral of the Trustees' fees and transactions in
repurchase agreements or reverse repurchase agreements are not
deemed to be senior securities.
2. Purchase securities on margin or make short sales of securities
except for obtaining such short-term credits as may be necessary
for the clearance of purchases and sales of securities.
3. Borrow money, except from banks to meet redemptions in amounts not
exceeding 33 1/3% (taken at the lower of cost or current value) of
its total assets (including the amount borrowed). The Fund does not
intend to borrow money during the coming year, and will do so only
as a temporary measure for extraordinary purposes or to facilitate
redemptions. The Fund will not purchase securities while any
borrowings are outstanding. This restriction does not apply to the
purchase of reverse repurchase agreements in amounts not to exceed
33 1/3% of the value of the Fund's total assets (including the
amount borrowed) taken at market value.
4. Act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Fund may be
deemed to be an underwriter for purposes of the Securities Act of
1933 (the "1933 Act").
5. Write, purchase or otherwise invest in any put, call, straddle or
spread option or buy or sell real estate, commodities or commodity
futures contracts.
6. Make loans, except that the Fund (1) may lend portfolio securities
in accordance with the Fund's investment policies up to 33 1/3% of
the Fund's total assets taken at market value, (2) enter into
repurchase agreements, and (3) purchase all or a portion of an
issue of debt securities, bank loan participation interests, bank
certificates of deposit, bankers' acceptances, debentures or other
securities, whether or not the purchase is made upon the original
issuance of the securities.
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<PAGE>
7. Purchase the securities of issuers conducting their principal
activity in the same industry if, immediately after such purchase,
the value of its investments in such industry would equal or exceed
25% of its total assets taken at market value at the time of such
investment. This limitation does not apply to investments in
obligations of the U.S. Government or any of its agencies,
instrumentalities or authorities.
8. With respect to 75% of total assets, purchase securities of an
issuer (other than the U.S. Government, its agencies,
instrumentalities or authorities), if:
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities
of such issuer; or
(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the
Fund.
Non-Fundamental Investment Restrictions
The following restrictions are designated as non-fundamental and may be
changed by the Board of Trustees without the approval of shareholders.
Each Fund (other than Money Market Fund) may not:
1. Pledge, mortgage or hypothecate its assets, except to secure
permitted borrowings and then only if such pledging, mortgaging or
hypothecating does not exceed 33 1/3% of the Fund's total assets
taken at market value. Collateral arrangements with respect to
margin, option and other risk management, when-issued and forward
commitment transactions are not deemed to be pledges or other
encumbrances for purposes of this restriction.
2. Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or purchase
of marketable portfolio securities with other accounts under the
management of the Adviser or any Sub-adviser to save commissions or
to average prices among them is not deemed to result in a joint
securities trading account.
3. Purchase or retain securities of an issuer if one or more of the
Trustees or officers of the Trust or directors or officers of the
Adviser, any Sub-adviser or any investment management subsidiary of
the Adviser individually owns beneficially more than of 1% and
together own beneficially more than 5% of the securities of such
issuer.
4. Purchase a security if, as a result, (i) more than 10% of the
Fund's assets would be invested in securities of other investment
companies, (ii) such purchase would result in more than 3% of the
total outstanding voting securities of any one such investment
company being held by the Fund or (iii) more than 5% of the Fund's
assets would be invested in any one such investment company. Each
Fund may, in connection with the John Hancock Group of Funds
Deferred Compensation Plan for Independent Trustees, purchase
securities of other investment companies within the John Hancock
Group of Funds provided that, as a result, (i) no more than 10% of
the Fund's assets would be invested in securities of all other
investment companies, (ii) such purchase would not result in more
than 3% of the total outstanding voting securities of any one such
investment company being held by
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the Fund and (iii) no more than 5% of the Fund's assets would be
invested in any one such investment company.
5. Invest in securities which are illiquid if, as a result, more than
15% of its net assets would consist of such securities, including
repurchase agreements maturing in more than seven days, securities
that are not readily marketable, restricted securities not eligible
for resale pursuant to Rule 144A under the 1933 Act, purchased OTC
options, certain assets used to cover written OTC options, and
privately issued stripped mortgage-backed securities.
6. Purchase securities while outstanding borrowings (other than
reverse repurchase agreements) exceed 5% of the Fund's total
assets.
7. Purchase warrants of any issuer, if, as a result of such purchase,
more than 2% of the value of the Fund's total assets would be
invested in warrants which are not listed on an exchange or more
than 5% of the value of the total assets of the Fund would be
invested in warrants generally, whether or not so listed. For these
purposes, warrants are to be valued at the lesser of cost or
market, but warrants acquired by the Fund in units with or attached
to debt securities shall be deemed to be without value.
8. Write covered call or put options with respect to more than 25% of
the value of its total assets, invest more than 25% of its total
assets in protective put options or invest more than 5% of its
total assets in puts, calls, spreads or straddles, or any
combination thereof, other than protective put options. The
aggregate value of premiums paid on all options, other than
protective put options, held by the Fund at any time will not
exceed 20% of the Fund's total assets.
9. Invest for the purpose of exercising control over or management of
any company.
The Money Market Fund will not:
1. Pledge, mortgage or hypothecate its portfolio securities if at the
time of such action the value of the securities so pledged,
mortgaged or hypothecated would exceed 10% of the Fund's total
assets taken at market value.
2. Purchase or retain the securities of any issuer if any officer or
Trustee of the Trust or the Fund or its investment adviser is an
officer or director of such issuer and beneficially owns more than
1/2 of 1% of the securities of such issuer and all of the officers
and the Trustees of the Trust and the Fund's investment adviser
together own more than 5% of the securities of such issuer.
3. Purchase the securities of other investment companies or investment
trusts.
4. Invest in securities which are illiquid if, as a result, more than
10% of its net assets would consist of such securities, including
repurchase agreements maturing in more than seven days, securities
that are not readily marketable, restricted securities not eligible
for resale pursuant to Rule 144A under the 1933 Act, purchased OTC
options, certain assets used to cover written OTC options, and
privately issued stripped mortgage-backed securities.
5. Invest in warrants.
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6. Invest for the purpose of exercising control over or management of
any company.
If a percentage restriction on investment or utilization of assets as
set forth above is adhered to at the time an investment is made, a later change
in percentage resulting from changes in the values of a Fund's assets will not
be considered a violation of the restriction.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Trust is managed by the Trustees of the Trust who
elect officers who are responsible for the day-to-day operations of the Trust
and the Funds and who execute policies formulated by the Trustees. Several of
the officers and Trustees of the Trust are also officers and directors of the
Adviser, one or more of the Sub-advisers and/or the Fund's principal
distributor, John Hancock Funds, Inc. ("John Hancock Funds").
Set forth below is the principal occupation or employment of the
Trustees and principal officers of the Trust during the past five years:
Position Held With Principal Occupation(s)
Name and Address the Trust During Past Five Years
Edward J. Boudreau, Jr.* Trustee, Chairman Chairman and Chief Executive
101 Huntington Avenue and Chief Executive Officer, the Adviser and The
Boston, MA 02199 Officer(1)(2) Berkeley Financial Group
("The Berkeley Group");
Chairman, NM Capital
Management, Inc. ("NM
Capital"); John Hancock
Advisers International Limited
("Advisers International");
John Hancock Funds, Inc.;
John Hancock Investor
Services Corporation
("Investor Services"); and
SAMCorp; (hereinafter the
Adviser, The Berkeley Group,
NM Capital, Advisers
International, John Hancock
Funds, Inc., Investor Services
and SAMCorp are collectively
referred to as the "Affiliated
Companies"); Chairman, First
Signature Bank & Trust;
Director, John Hancock
Freedom Securities
Corporation, John Hancock
Capital Corporation, New
England/Canada Business
Council; Member, Investment
Company Institute Board of
Governors; Director, Asia
Strategic Growth Fund, Inc.;
Trustee, Museum of Science;
President, the Adviser (until
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July 1992); Trustee or Director
of other investment companies
managed by the Adviser; and
Chairman, John Hancock
Distributors, Inc. (until April,
1994).
Richard S. Scipione* Trustee(1) General Counsel, the Life
John Hancock Place Insurance Company; Director,
P. O. Box 111 the Adviser, the Affiliated
Boston, Massachusetts Companies, John Hancock
Distributors, Inc., JM
Networking Insurance Agency,
Inc., John Hancock
Subsidiaries, Inc., SAMCorp,
NM Capital and John Hancock
Property and Casualty
Insurance and its affiliates
(until November, 1993);
Trustee: The Berkeley Group;
Director, John Hancock Home
Mortgages Corp. and John
Hancock Financial Access,
Inc. (until July 1990).
* An "interested person" of the Trust, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Committee on Administration.
All of the officers listed are officers or employees of the Adviser, a
Sub-adviser or affiliated companies. Some of the Trustees and officers may also
be officers, Directors and/or Trustees of one or more of the other funds for
which the Adviser serves as investment adviser.
As of the date of this SAI, there were [_________] shares of the Trust
outstanding and the officers and Trustees as a group beneficially owned less
than 1% of the outstanding shares of the Trust and of each of the Funds. On such
date, the Adviser was the only record holder and beneficial owner of 5% or more
of the shares of each Fund.
At such date, no other person(s) owned of record or was known by the
Trust to beneficially own as much as 5% of the outstanding shares of the Trust
or of any of the Funds.
Compensation of the Board of Trustees. The following tables provide
information regarding the compensation paid by the Fund and the other investment
companies in the John Hancock Fund Complex to the Independent Trustees for their
services. Mr. Boudreau, a non-Independent Trustee, and each of the officers of
the Funds are interested persons of the Adviser, are compensated by the Adviser
and received no compensation from the Funds for their services.
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<PAGE>
Pension or Total Compensation
Retirement from all Funds in
Aggregate Benefits Accrued John Hancock
Compensation as Part of the Fund Complex to
Trustees from the Funds Funds' Expenses Trustees*
$0 $0 $
$0 $0 $
$0 $0 $
$0 $0 $
$0 $0 $
$0 $0 $
$0 $0 $
$0 $0 $
Total $0 $0 $
* The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of the calendar year ended December 31, 1995.
INVESTMENT ADVISORY AND OTHER SERVICES
Each of the Trustees and principal officers affiliated with the Trust
who is also an affiliated person of the Adviser or any Sub-adviser is named
above, together with the capacity in which such person is affiliated with the
Trust, the Adviser or any Sub-adviser.
The Trust, on behalf of each Fund, has entered into investment
management contracts with the Adviser. Under each investment management
contract, the Adviser provides the Funds with (i) a continuous investment
program, consistent with each Fund's stated investment objective and policies,
(ii) supervision of all aspects of each Fund's operations except those that are
delegated to a custodian, transfer agent or other agent and (iii) such
executive, administrative and clerical personnel, officers and equipment as are
necessary for the conduct of their business. The Adviser is responsible for the
day-to-day management of each Fund's portfolio assets.
With respect to the International Fund, the Adviser has entered into a
sub-investment management contract with JHAI. With respect to Diversified Core
Equity Fund, the Adviser has entered into a sub-investment management contract
with IIA. With respect to Sovereign Investors Fund, the Adviser has entered into
a sub-investment management contract with SAMCorp. Under each respective
sub-investment management contract, the corresponding Sub-adviser, subject to
the review of the Trustees and the overall supervision of the Adviser, is
responsible for managing the investment operations of the corresponding Fund and
the composition of the Fund's portfolio and furnishing the Fund with advice and
recommendations with respect to investments, investment policies and the
purchase and sale of securities
See "Organization and Management of the Funds" and "The Funds' Expenses"
in the Prospectus for a description of certain information concerning each
Fund's investment management contract and the sub-investment management
contracts of Diversified Core Equity Fund and Sovereign Investors Fund.
Securities held by a Fund may also be held by other funds or investment
advisory clients for which the Adviser or any of its affiliates provides
investment advice. Because of different investment objectives or other factors,
a particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
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securities by the Adviser or Sub-adviser for a Fund or for other funds or
clients for which the Adviser or Sub-adviser renders investment advice arise for
consideration at or about the same time, transactions in such securities will be
made, insofar as feasible, for the respective funds or clients in a manner
deemed equitable to all of them. To the extent that transactions on behalf of
more than one client of the Adviser or its affiliates may increase the demand
for securities being purchased or the supply of securities being sold, there may
be an adverse effect on price.
No person other than the Adviser, any Sub-adviser and their directors
and employees regularly furnish advice to the Funds with respect to the
desirability of a Fund investing in, purchasing or selling securities. The
Adviser may from time to time receive statistical or other similar factual
information, and information regarding general economic factors and trends, from
the Life Company and its affiliates.
Under the terms of the investment management contracts with the Trust,
on behalf of each Fund, the Adviser provides each Fund office space, equipment
and supplies and other facilities required for the business of the Fund. The
Adviser pays the compensation of all officers and employees of the Trust and of
Trustees of the Trust affiliated with the Adviser, the office expenses of the
Funds, including those of the Trust's Treasurer and Secretary, and other
expenses incurred by the Adviser in connection with the performance of its
duties.
All expenses which are not specifically paid by the Adviser and which
are incurred in the operation of the Funds, including the fees of the Trustees
of the Trust who are not "interested persons," as such term is defined in the
1940 Act (the "Independent Trustees"), and the continuous public offering of the
shares of each Fund, are borne by the Funds.
As provided by the investment management contract, each Fund pays the
Adviser an investment management fee, which is accrued daily and paid monthly in
arrears and is equal on an annual basis to a stated percentage of the respective
Fund's average daily net asset value. The Adviser, not any Fund, pays the
subadvisory fees as described in the Prospectus. See "Organization and
Management of the Funds" in the Prospectus.
Pursuant to each investment management contract, and, where applicable,
sub-investment management contract, neither the Adviser nor any Sub-adviser is
liable for any error of judgment or mistake of law or for any loss suffered by
the Funds in connection with the matters to which its respective contract
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser or any Sub-adviser in the performance of
its duties or from its reckless disregard of the obligations and duties under
the applicable contract.
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts
02199-7603, was organized in 1968 and has more than [$ ] billion in total assets
under management in its capacity as investment adviser to the Funds and the
other mutual funds and publicly traded investment companies in the John Hancock
group of funds having a combined total of over [ ] shareholders. The Adviser is
a wholly owned subsidiary of The Berkeley Financial Group, which is in turn a
wholly owned subsidiary of John Hancock Subsidiaries, Inc., which is in turn a
wholly owned subsidiary of John Hancock Mutual Life Insurance Company (the "Life
Company"), one of the most recognized and respected financial institutions in
the nation. With total assets under management of over [$ ] billion, the Life
Company is one of the ten largest life insurance companies in the United States,
and carries Standard & Poor's and A.M. Best's highest ratings. Founded in 1862,
the Life Company has been serving clients for over 130 years.
JHAI, located at 34 Dover Street, London, England, W1X3RA, is a wholly
owned subsidiary of the Adviser, formed in 1987 to provide investment research
and advisory services to U.S. institutional clients. IIA, located at 53 State
Street, Boston, Massachusetts 02109, and
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<PAGE>
organized in 1982, is a wholly owned subsidiary of John Hancock Subsidiaries,
Inc. SAMCorp, located at 1235 Westlakes Drive, Berwyn, Pennsylvania 19312, is a
wholly owned subsidiary of The Berkeley Financial Group.
Each investment management contract and sub-investment management
contract initially expires on June 30, 1997, and will continue in effect from
year to year thereafter if approved annually by a vote of a majority of the
Trustees of the Trust who are not interested persons of one of the parties to
the contract, cast in person at a meeting called for the purpose of voting on
such approval, or by either the Trustees or the holders of a majority of the
applicable Fund's outstanding voting securities. Each contract automatically
terminates upon assignment. Each contract may be terminated without penalty on
60 days' notice at the option of either party to the respective contract or by
vote of the holders of a majority of the outstanding voting securities of the
applicable Fund. Each sub-investment management contract terminates
automatically upon the termination of the corresponding investment management
contract.
Under the investment management contract, each Fund may use the name
"John Hancock" or any name derived from or similar to it only for as long as the
investment management contract or any extension, renewal or amendment thereof
remains in effect. If a Fund's investment management contract is no longer in
effect, the Fund (to the extent that it lawfully can) will cease to use such
name or any other name indicating that it is advised by or otherwise connected
with the Adviser. In addition, the Adviser or the Life Company may grant the
non-exclusive right to use the name "John Hancock" or any similar name to any
other corporation or entity, including but not limited to any investment company
of which the Life Company or any subsidiary or affiliate thereof or any
successor to the business of any subsidiary or affiliate thereof shall be the
investment adviser.
DISTRIBUTION CONTRACT
Distribution Agreement. John Hancock Funds, a wholly owned subsidiary of
the Adviser, has the exclusive right, pursuant to the Distribution Agreement
dated February __, 1995 (the "Distribution Agreement"), to purchase shares from
the Funds at net asset value for resale to the separate accounts of insurance
companies at the public offering price.
The Distribution Agreement was initially adopted by the affirmative vote
of the Trust's Board of Trustees, including the vote of a majority of Trustees
who are not parties to the agreement or interested persons of any such party,
cast in person at a meeting called for such purpose. The Distribution Agreement
will continue in effect with respect to each Fund until June 30, 1997 and from
year to year if approved by either the vote of the Fund's shareholders or the
Board of Trustees, including the vote of a majority of the Trustees who are not
parties to the agreement or interested persons of any such party, cast in person
at a meeting called for such purpose. The Distribution Agreement may be
terminated at any time as to one or more of the Funds, without penalty, by
either party upon sixty (60) days' written notice or by a vote of a majority of
the outstanding voting securities of the affected Fund and terminates
automatically in the case of an assignment by John Hancock Funds.
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the shares of
the Funds, the following procedures are utilized wherever applicable.
Debt securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to
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<PAGE>
determine valuations for normal institutional size trading units of debt
securities without exclusive reliance upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National
Market issues are generally valued at last sale price on the day of valuation.
Exchange or NASDAQ traded securities for which no sales are reported and other
securities traded over-the-counter are generally valued at the last available
bid price.
Short-term debt instruments which have a remaining maturity of 60 days
or less are generally valued at amortized cost which approximates market value.
If market quotations are not readily available or if in the opinion of
the Adviser any quotation or price is not representative of true market value,
the fair value of any security may be determined in good faith in accordance
with procedures approved by the Trustees.
Any assets or liabilities expressed in terms of foreign currencies are
translated into U.S. dollars by the Funds' custodian based on London currency
exchange quotations as of 5:00 p.m., London time (12:00 noon, New York time) on
the date of any determination of a Fund's NAV.
The Funds will not price their securities on the following national
holidays: New Year's Day; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; and Christmas Day. On any day an
international market is closed and the New York Stock Exchange is open, any
foreign securities will be valued at the prior day's closing price with the
current day's exchange rate. Trading of foreign securities may take place on
Saturdays and U.S. business holidays on which a Fund's NAV is not calculated.
Consequently, a Fund's portfolio securities may trade and the NAV of the Fund's
redeemable shares may be significantly affected on days when a shareholder has
no access to the Fund.
SPECIAL REDEMPTIONS
Although the Funds would not normally do so, each Fund has the right to
pay the redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, a brokerage charge would be incurred. Any
such security would be valued for the purpose of making such payment at the same
value as used in determining the Fund's net asset value. Each Fund has elected
to be governed by Rule 18f-1 under the 1940 Act, pursuant to which 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.
TAX STATUS
Each Fund is treated as a separate entity for accounting and tax
purposes. Each Fund intends to elect to be treated, and to qualify for each
taxable year, as a separate "regulated investment company" under Subchapter M of
the Code. As such and by complying with the applicable provisions of the Code
regarding the sources of its income, the timing of its distributions, and the
diversification of its assets, each Fund will not be subject to Federal income
tax on taxable income (including net realized capital gains) which is
distributed to shareholders at least annually in accordance with the timing
requirements of the Code.
Qualification of a Fund for treatment as a regulated investment company
under the Code requires, among other things, that (a) at least 90% of a Fund's
annual gross income, without being offset for losses from the sale or other
disposition of stock or securities or other transactions, be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale
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<PAGE>
or other disposition of stock or securities or foreign currencies, or other
income (including but not limited to gains from options, futures, or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; (b) the Fund derive less than 30% of its annual gross
income from gains (without deduction for losses) from the sale or other
disposition of any of the following held (for tax purposes) for less than three
months: (i) stock or securities; (ii) options, futures or forward contracts (not
on foreign currencies) or (iii) foreign currencies (or options, futures or
forward contracts on foreign currencies) not directly related to the Fund's
principal business of investing in stock or securities and related options or
futures; (c) the Fund distribute at least annually to its shareholders as
dividends at least 90% of the sum of its taxable and tax-exempt net investment
income, the excess of net short-term capital gain over net long-term capital
loss earned in each year and any other net income (except for the excess, if
any, of net long-term capital gain over net short-term capital loss, which need
not be distributed in order for the Fund to qualify as a regulated investment
company but is taxed to the Fund if it is not distributed); and (d) the Fund
diversify its assets so that, at the close of each quarter of its taxable year,
(i) at least 50% of the fair market value of its total (gross) assets is
comprised of cash, cash items, U.S. Government securities, securities of other
regulated investment companies and other securities limited in respect of any
one issuer to no more than 5% of the fair market value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer and (ii) no
more than 25% of the fair market value of its total assets is invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies) or of two or more issuers
controlled by the Fund and engaged in the same, similar, or related trades or
businesses.
Each Fund also must, and intends to, comply with the diversification
requirements imposed by Section 817(h) of the Code and the regulations
thereunder. These requirements, which are in addition to the diversification
requirements imposed on a Fund by the 1940 Act and Subchapter M of the Code,
place certain limitations on assets of each insurance company separate account
used to fund variable contracts and, because Section 817(h) and those
regulations treat the assets of the Fund as assets of the related separate
account, the assets of a Fund, that may be invested in securities of any one,
two, three and four issuers. Specifically, the regulations provide that, except
as permitted by the "safe harbor" described below, as of the end of each
calendar quarter or within 30 days thereafter no more than 55% of the total
assets of a Fund may be represented by any one investment, no more than 70% by
any two investments, no more than 80% by any three investments and no more than
90% by any four investments. For this purpose, all securities of the same issuer
are considered a single investment, and each U.S. Government agency and
instrumentality is considered a separate issuer. Section 817(h) provides, as a
safe harbor, that a separate account will be treated as being adequately
diversified if the diversification requirements under Subchapter M are satisfied
and no more than 55% of the value of the account's total assets is attributable
to cash and cash items (including receivables), U.S. Government securities and
securities of other regulated investment companies. Failure by a Fund to both
qualify as a regulated investment company and satisfy the Section 817(h)
requirements would generally result in treatment of the variable contract
holders other than as described in the applicable variable contract prospectus,
including possible current inclusion in ordinary income of income accrued under
the contracts for the current and all prior taxable years. Under certain
circumstances described in the applicable Treasury regulations, inadvertent
failure to satisfy the applicable diversification requirements may be corrected,
but such a correction would require a payment to the U.S. based on the tax
contractholders would have incurred if they were treated as receiving the income
on the contract for the period during which the diversification requirements
were not satisfied. Any such failure may also result in adverse tax consequences
for the insurance company issuing the contracts. Failure by a Fund to qualify as
a regulated investment company would also subject the Fund to federal and state
income taxation of all of its taxable income and gain, whether or not
distributed to shareholders.
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If a Fund acquires stock in certain non-U.S. corporations that receive
at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), that Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its shareholders.
The Fund would not be able to pass through to its shareholders any credit or
deduction for such a tax. Certain elections may, if available, ameliorate these
adverse tax consequences, but any such election would require the applicable
Fund to recognize taxable income or gain without the concurrent receipt of cash.
Any Fund that is permitted to acquire stock in foreign corporations may limit
and/or manage its holdings in passive foreign investment companies to minimize
its tax liability or maximize its return from these investments.
Foreign exchange gains and losses realized by a Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
certain foreign currency futures and options, foreign currency forward
contracts, foreign currencies, or payables or receivables denominated in a
foreign currency are subject to Section 988 of the Code, which generally causes
such gains and losses to be treated as ordinary income and losses and may affect
the amount, timing and character of distributions to shareholders. Any such
transactions that are not directly related to a Fund's investment in stock or
securities, possibly including speculative currency positions or currency
derivatives not used for hedging purposes, may increase the amount of gain it is
deemed to recognize from the sale of certain investments held for less than
three months, which gain is limited under the Code to less than 30% of its
annual gross income, and could under future Treasury regulations produce income
not among the types of "qualifying income" from which the Fund must derive at
least 90% of its annual gross income. Income from investments in commodities,
such as gold and certain related derivative instruments, is also not treated as
qualifying income under this test. If the net foreign exchange loss for a year
treated as ordinary loss under Section 988 were to exceed a Fund's investment
company taxable income computed without regard to such loss but after
considering the post-October loss regulations (i.e., all of the Fund's net
income other than any excess of net long-term capital gain over net short-term
capital loss) the resulting overall ordinary loss for such year would not be
deductible by the Fund or its shareholders in future years.
A Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes.
For Federal income tax purposes, each Fund is generally permitted to
carry forward a net capital loss in any year to offset its own net capital
gains, if any, during the eight years following the year of the loss. To the
extent subsequent net capital gains are offset by such losses, they would not
result in Federal income tax liability to the applicable Fund and would not be
distributed as such to shareholders.
Each Fund that invests in certain PIKs, zero coupon securities or
certain increasing rate securities (and, in general, any other securities with
original issue discount or with market discount if the Fund elects to include
market discount in income currently) must accrue income on such investments
prior to the receipt of the corresponding cash payments. However, each Fund must
distribute, at least annually, all or substantially all of its net income,
including such accrued income, to shareholders to qualify as a regulated
investment company under the Code and avoid Federal income tax. Therefore, a
Fund may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash, or may have to leverage itself by borrowing the
cash, to satisfy distribution requirements.
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Investments in debt obligations that are at risk of or are in default
present special tax issues for any Fund that may hold such obligations, such as
Global Income Fund, Strategic Income Fund or Sovereign Investors Fund. Tax rules
are not entirely clear about issues such as when the Funds may cease to accrue
interest, original issue discount, or market discount, when and to what extent
deductions may be taken for bad debts or worthless securities, how payments
received on obligations in default should be allocated between principal and
income, and whether exchanges of debt obligations in a workout context are
taxable. These and other issues will be addressed by any Fund that may hold such
obligations in order to reduce the risk of distributing insufficient income to
preserve its status as a regulated investment company and seek to avoid becoming
subject to Federal income tax.
Limitations imposed by the Code on regulated investment companies like
the Funds may restrict a Fund's ability to enter into futures, options and
currency forward transactions.
Certain options, futures and forward foreign currency transactions
undertaken by a Fund may cause such Fund to recognize gains or losses from
marking to market even though its positions have not been sold or terminated and
affect the character as long-term or short-term (or, in the case of certain
currency forwards, options and futures, as ordinary income or loss) and timing
of some capital gains and losses realized by the Fund. Also, certain of a Fund's
losses on its transactions involving options, futures and forward foreign
currency contracts and/or offsetting portfolio positions may be deferred rather
than being taken into account currently in calculating the Fund's taxable income
or gains. These transactions may therefore affect the amount, timing and
character of a Fund's distributions to shareholders. Certain of the applicable
tax rules may be modified if the Fund is eligible and chooses to make one or
more of certain tax elections that may be available. The Funds will take into
account the special tax rules (including consideration of available elections)
applicable to options, futures or forward contracts in order to minimize any
potential adverse tax consequences.
The tax rules applicable to currency swaps and interest rate swaps,
caps, floors and collars may be unclear in some respects, and the Funds may be
required to limit participation in such transactions in order to qualify as
regulated investment companies.
The foregoing discussion relates solely to U.S. Federal income tax law
as applicable to the Funds and certain aspects of their distributions. The
discussion does not address special tax rules applicable to insurance companies.
Shareholders should consult their own tax advisers as to the Federal, state or
local tax consequences of ownership of shares of, and receipt of distributions
from, a Fund in their particular circumstances.
Provided that each Fund qualifies as a regulated investment company
under the Code, it will not be required to pay any Massachusetts income,
corporate excise or franchise taxes.
DESCRIPTION OF THE TRUST'S SHARES
The Trustees of the Trust are responsible for the management and
supervision of the Funds. The Declaration of Trust, dated November 15, 1995,
permits the Trustees to issue an unlimited number of full and fractional shares
of beneficial interest of the Funds, without par value. Under the Declaration of
Trust, the Trustees have the authority to create and classify shares of
beneficial interest in separate series, without further action by shareholders.
As of the date of this SAI, the Trustees have only authorized shares of the
Funds. Additional series may be added in the future. The Declaration of Trust
also authorizes the Trustees to classify and reclassify the
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shares of the Funds, or any other series of the Trust, into one or more classes.
As of the date of this SAI, the Trustees have not authorized the issuance of
additional classes of shares of the Funds.
Each share of a Fund represents an equal proportionate interest in the
assets belonging to that Fund. When issued, shares are fully paid and
nonassessable except as provided in the Prospectus under the caption
"Organization and Management of the Funds." In the event of liquidation of a
Fund, shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to such shareholders. Shares of the Trust are freely
transferable and have no preemptive, subscription or conversion rights.
In accordance with the provisions of the Declaration of Trust, the
Trustees have initially determined that shares entitle their holders to one vote
per share on any matter on which such shares are entitled to vote. The Trustees
may determine in the future, without the vote or consent of shareholders, that
each dollar of net asset value (number of shares owned times net asset value per
share) will be entitled to one vote on any matter on which such shares are
entitled to vote.
The rights, if any, of Variable Contract holders to vote the shares of a
Fund are governed by the relevant Variable Contract. For information on these
voting rights see the prospectus describing the Variable Contract.
Unless otherwise required by the 1940 Act or the Declaration of Trust,
the Trust has no intention of holding annual meetings of shareholders. Trust
shareholders may remove a Trustee by the affirmative vote of at least two-thirds
of the Trust's outstanding shares and the Trustees shall promptly call a meeting
for such purpose when requested to do so in writing by the record holders of not
less than 10% of the outstanding shares of the Trust. Shareholders may, under
certain circumstances, communicate with other shareholders in connection with
requesting a special meeting of shareholders. However, at any time that less
than a majority of the Trustees holding office were elected by the shareholders,
the Trustees will call a special meeting of shareholders for the purpose of
electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for acts or
obligations of the trust. However, the Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations or affairs of
the Trust. The Declaration of Trust also provides for indemnification out of the
Trust's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Liability is therefore limited to circumstances in which a
Fund itself would be unable to meet its obligations, and the possibility of this
occurrence is remote.
CALCULATION OF PERFORMANCE
Yield (except for Money Market Fund). The yield of each Fund (except for
Money Market Fund) is computed by dividing net investment income per share
determined for a 30-day period by the net asset value per share on the last day
of the period, according to the following standard formula:
-30-
<PAGE>
a-b 6
Yield = 2 [ ( --- + 1) -1]
cd
Where:
a = dividends and interest earned during the period.
b = net expenses accrued during the period.
c = the average daily number of fund shares outstanding during
the period that would be entitled to receive dividends.
d = the net asset value per share on the last day of the
period).
Money Market Fund Yield. For the purposes of calculating yield for the
Money Market Fund, daily income per share consists of interest and discount
earned on the Fund's investments less provision for amortization of premiums,
divided by the number of shares outstanding, but does not include realized or
unrealized appreciation or depreciation.
If the Fund reports its annualized yield, it will also furnish
information as to the average portfolio maturities of the Fund. It will also
report any material effect of realized gains or losses or unrealized
appreciation on dividends which have been excluded from the computation of
yield.
Yield calculations are based on the value of a hypothetical preexisting
account with exactly one share at the beginning of the seven day period. Yield
is computed by determining the net change in the value of the account during the
base period and dividing the net change by the value of the account at the
beginning of the base period to obtain the base period return. Base period is
multiplied by 365/7 and the resulting figure is carried to the nearest 100th of
a percent. Net change in account value during the base period includes dividends
declared on the original share, dividends declared on any shares purchased with
dividends of that share and any account or sales charges that would affect an
account of average size, but excludes any capital changes.
Effective yield is computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical preexisting account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula:
365
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)---] -1
7
Total Return. Each Fund's total return is computed by finding the
average annual compounded rate of return over the 1-year, 5-year, and 10-year
periods that would equate the initial amount invested to the ending redeemable
value according to the following formula:
n
P(1+T) = ERV
P = a hypothetical initial payment of $1,000.
T = average annual total return.
-31-
<PAGE>
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the 1-year and
life-of-fund periods.
This calculation assumes that all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period. The
"distribution rate" is determined by annualizing the result of dividing the
declared dividends of a Fund during the period stated by the net asset value at
the end of the period.
In addition to average annual total returns, a Fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Cumulative total returns may be quoted as a
percentage or as a dollar amount, and may be calculated for a single investment,
a series of investments, and/or a series of redemptions, over any time period.
From time to time, in reports and promotional literature, a Fund's yield
and total return will be compared to indices of mutual funds and bank deposit
vehicles such as Lipper Analytical Services, Inc.'s "Lipper--Fixed Income Fund
Performance Analysis," a monthly publication which tracks net assets, total
return, and yield on approximately 1,700 fixed income mutual funds in the United
States. Ibottson and Associates, CDA Weisenberger and F.C. Towers are also used
for comparison purposes, as well as the Russell and Wilshire Indices.
Performance rankings and ratings reported periodically in national
financial publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK, THE WALL
STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S, etc. will
also be utilized. A Fund's promotional and sales literature may make reference
to the Fund's "beta." Beta reflects the market-related risk of the Fund by
showing how responsive the Fund is to the market.
The performance of a Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of a
Fund for any period in the future. The performance of a Fund is a function of
many factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease a
Fund's performance.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and
the allocation of brokerage commissions are made by the Adviser, any Sub-adviser
and the officers of the Trust pursuant to recommendations made by its investment
committee, which consists of officers and directors of the Adviser and
affiliates and officers and Trustees who are interested persons of the Funds.
Orders for purchases and sales of securities are placed in a manner which, in
the opinion of the Adviser or Sub-Adviser, will offer the best price and market
for the execution of each such transaction. Purchases from underwriters of
portfolio securities may include a commission or commissions paid by the issuer
and transactions with dealers serving as market makers reflect a "spread."
Investments in debt securities are generally traded on a net basis through
dealers acting for their own account as principals and not as brokers; no
brokerage commissions are payable on such transactions.
-32-
<PAGE>
Each Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing primary
policy, the Rules of Fair Practice of the NASD and other policies that the
Trustees may determine, the Adviser or Sub-Adviser may consider sales of shares
of the Funds as a factor in the selection of broker-dealers to execute a Fund's
portfolio transactions.
Purchases of securities for Global Income Fund and Strategic Income Fund
are normally principal transactions made directly from the issuer or from an
underwriter or market maker for which no brokerage commissions are usually paid.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases and sales from dealers serving as
market makers will usually include a mark up or mark down. Purchases and sales
of exchange-traded options and futures will be effected through brokers who
charge a commission for their services.
To the extent consistent with the foregoing, each Fund will be governed
in the selection of brokers and dealers, and the negotiation of brokerage
commission rates and dealer spreads, by the reliability and quality of the
services, including primarily the availability and value of research information
and to a lesser extent statistical assistance furnished to the Adviser of the
Fund, and their value and expected contribution to the performance of the Fund.
It is not possible to place a dollar value on information and services to be
received from brokers and dealers, since it is only supplementary to the
research efforts of the Adviser. The receipt of research information is not
expected to reduce significantly the expenses of the Adviser. The research
information and statistical assistance furnished by brokers and dealers may
benefit the Life Company or other advisory clients of the Adviser, and
conversely, brokerage commissions and spreads paid by other advisory clients of
the Adviser may result in research information and statistical assistance
beneficial to the Funds. The Funds will make no commitments to allocate
portfolio transactions upon any prescribed basis. While the Trust's officers
will be primarily responsible for the allocation of each Fund's brokerage
business, their policies and practices in this regard must be consistent with
the foregoing and will at all times be subject to review by the Trustees.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, a
Fund may pay to a broker which provides brokerage and research services to the
Fund an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Trustees that the price is
reasonable in light of the services provided and to policies that the Trustees
may adopt from time to time.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Freedom Securities Trust and its subsidiaries, three
of which, Tucker Anthony Incorporated ("Tucker Anthony") John Hancock
Distributors, Inc. ("John Hancock Distributors") and Sutro & Company, Inc.
("Sutro"), are broker-dealers ("Affiliated Brokers"). Pursuant to procedures
determined by the Trustees and consistent with the above policy of obtaining
best net results, the Fund may execute portfolio transactions with or through
Tucker Anthony, Sutro or John Hancock Distributors.
Any of the Affiliated Brokers may act as broker for a Fund on exchange
transactions, subject, however, to the general policy of the Fund set forth
above and the procedures adopted by the Trustees pursuant to the 1940 Act.
Commissions paid to an Affiliated Broker must be at least as favorable as those
which the Trustees believe to be contemporaneously charged by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold. A transaction would not be placed with an Affiliated Broker
if the Fund would have to
-33-
<PAGE>
pay a commission rate less favorable than the Affiliated Broker's
contemporaneous charges for comparable transactions for its other most favored,
but unaffiliated, customers, except for accounts for which the Affiliated Broker
acts as a clearing broker for another brokerage firm, and any customers of the
Affiliated Broker not comparable to a Fund as determined by a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Funds, the Adviser or the Affiliated Brokers. Because the Adviser, which is
affiliated with the Affiliated Brokers, has, as an investment adviser to the
Fund, the obligation to provide investment management services, which includes
elements of research and related investment skills, such research and related
skills will not be used by the Affiliated Brokers as a basis for negotiating
commissions at a rate higher than that determined in accordance with the above
criteria. The Funds will not effect principal transactions with Affiliated
Brokers. The Funds may, however, purchase securities from other members of
underwriting syndicates of which Tucker Anthony and Sutro are members, but only
in accordance with the policy set forth above and procedures adopted and
reviewed periodically by the Trustees.
Brokerage or other transactions costs of a Fund are generally
commensurate with the rate of portfolio activity. The estimated portfolio
turnover rate of International Fund, Emerging Equities Fund, Diversified Core
Equity Fund, Discovery Fund, Sovereign Investors Fund and 500 Index Fund is
expected to be less than 100%. The estimated portfolio turnover rates for the
other Funds are as follows: Sovereign Bond Fund: 100%; Strategic Income Fund:
200%; and Global Income Fund: 300%. A high rate of portfolio turnover (100% or
greater) involves corresponding higher transaction expenses and may make it more
difficult for a Fund to qualify as a regulated investment company.
SHAREHOLDER SERVICING AGENT
John Hancock Investor Services Corporation ("Investor Services"), P.O.
Box 9116, Boston, MA 02205-9116, a wholly owned indirect subsidiary of the Life
Company, is the shareholder servicing agent for the Funds. The Funds pay
Investor Services a transfer agent fee equal to $____ per account.
CUSTODY OF PORTFOLIO
Portfolio securities of the International Fund, Global Income Fund,
Money Market Fund and 500 Index Fund are held pursuant to a custodian agreement
between the Trust and State Street Bank, 225 Franklin Street, Boston,
Massachusetts 02205. Portfolio securities of the other Funds are held pursuant
to a custodian agreement between the Trust and Investors Bank & Trust Company,
24 Federal Street, Boston, MA 02205. Under the custodian agreements, the
custodians perform custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Funds are Ernst & Young LLP, 200
Clarendon Street, Boston, Massachusetts 02116. The independent auditors audit
and render an opinion on the Funds' annual financial statements and review the
Funds' annual income tax returns.
-34-
<PAGE>
FINANCIAL STATEMENTS
To be filed by amendment.
F-1
<PAGE>
APPENDIX
CORPORATE BOND RATINGS
Set forth below are the high quality bond ratings of Moody's Investors
Services, Inc. and Standard & Poor Rating Group. See the Appendix to the
Prospectus for a description of the lower quality bond ratings.
Moody's Investors Services, Inc. ("Moody's)
Aaa, Aa, A and Baa - Tax-exempt bonds rated Aaa are judged to be of the
"best quality." The rating of Aa is assigned to bonds that are of "high quality
by all standards," but long-term risks appear somewhat larger than Aaa rated
bonds. The Aaa and Aa rated bonds are generally known as "high grade bonds." The
foregoing ratings for tax-exempt bonds are rated conditionally. Bonds for which
the security depends upon the completion of some act or upon the fulfillment of
some condition are rated conditionally. These are bonds secured by (a) earnings
of projects under construction, (b) earnings of projects unseasoned in operation
experience, (c) rentals that begin when facilities are completed, or (d)
payments to which some other limiting condition attaches. Such conditional
ratings denote the probable credit stature upon completion of construction or
elimination of the basis of the condition. Bonds rated A are considered as upper
medium grade obligations. Principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future. Bonds rated Baa are considered a medium grade obligations; i.e.,
they are neither highly protected or 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.
Standard & Poor's Ratings Group ("S&P")
AAA, AA, A and BBB - Bonds rated AAA bear the highest rating assigned to
debt obligations, which indicates an extremely strong capacity to pay principal
and interest. Bonds rated AA are considered "high grade," are only slightly less
marked than those of AAA ratings and have the second strongest capacity for
payment of debt service. Bonds rated A have a strong capacity to pay principal
and interest, although they are somewhat susceptible to the adverse effects of
changes in circumstances and economic conditions. The foregoing ratings are
sometimes followed by a "p" indicating that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the bonds being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. Although a provisional rating addresses credit quality subsequent to
completion of the project, it makes no comment on the likelihood of, or the risk
of default upon failure of, such completion. Bonds rated BBB are regarded as
having an adequate capacity to repay principal and pay interest. Whereas they
normally exhibit protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to repay principal
and pay interest for bonds in this category than for bonds in the A category.
A-1
<PAGE>
PART C.
JOHN HANCOCK DECLARATION TRUST
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in the Registration Statement:
John Hancock Declaration Trust
Statement of Assets and Liabilities.*
Report of Independent Public Accountants.*
______________________
*To be filed by amendment.
(b) Exhibits:
The exhibits to this Registration Statement are listed in the
Exhibit Index hereto and are incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant
Immediately prior to effectiveness of this Registration Statement it
is expected that John Hancock Mutual Life Insurance Company, or an
affiliate, will own 100 % of the outstanding shares of beneficial
interest of the Registrant.
Item 26. Number of Holders of Securities
Just prior to the effective date of this Registration Statement, it is
expected there will be one record holder of the Registrant's shares of
beneficial interest.
Item 27. Indemnification
(a) Under Registrant's Declaration of Trust. Article IV, Section 4.3
of the Registrant's Declaration of Trust contains provisions
indemnifying each trustee and each officer of Registrant from
liability to the full extent permitted by law, subject to the
provisions of the Investment Company Act of 1940, as amended.
(b) Under the Underwriting Agreement. Under Section 11 of the
Distribution Agreement, the principal underwriter has agreed to
indemnify the Registrant and its Trustees,
<PAGE>
officers and controlling persons against claims arising out of
certain acts and statements of the underwriter.
(c) Under The By-Laws of the John Hancock Mutual Life Insurance
Company ("the Company"), John Hancock Funds, Inc. ("JH Funds,
Inc.") and John Hancock Advisers, Inc. (the "Adviser"). Section
9a of the By-Laws of the Company provides, in effect, that the
Company will, subject to limitations of law, indemnify each
present and former director, officer and employee of the Company
who serves as a director or officer of the Registrant at the
direction or request of the Company against litigation expenses
and liabilities incurred while acting as such, except that such
indemnification does not cover any expense or liability incurred
or imposed in connection with any matter as to which such person
shall be finally adjudicated not to have acted in good faith in
the reasonable belief that his action was in the best interests
of the Company. In addition, no such person will be indemnified
by the Company in respect of any liability or expense incurred in
connection with any matter settled without final adjudication
unless such settlement shall have been approved as in the best
interests of the Company either by vote of the Board of Directors
at a meeting composed of directors who have no interest in the
outcome of such vote or by vote of the policyholders. The Company
may pay expenses incurred in defending an action or claim in
advance of its final disposition, but only upon receipt of an
undertaking by the person indemnified to repay such payment if he
should be determined to be entitled to indemnification.
Article IX of the respective By-Laws of JH Funds, Inc. and the Adviser
provides as follows:
Section 9.01. Indemnity: Any person made or threatened to be made a party
to any action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was at any time
since the inception of the Corporation a director, officer, employee or
agent of the Corporation, or is or was at any time since the inception of
the Corporation serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by the Corporation
against expenses (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and the
liability was not incurred by reason of gross negligence or reckless
disregard of the duties involved in the conduct of his office, and expenses
in connection therewith may be advanced by the Corporation, all to the full
extent authorized by law.
Section 9.02. Not Exclusive; Survival of Rights: The indemnification
provided by Section 9.01 shall not be deemed exclusive of any other right
to which those indemnified may be entitled, and shall continue as to a
person who has ceased to be
<PAGE>
a director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
(d) Under the Investment Management Contracts of Registrant on behalf
of each Fund. Each of the Registrant's Investment Management
Contracts (the "Contracts") provides that the Adviser shall not
be liable for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with matters to which the
Contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under the contract.
Any person, even though also employed by the Adviser, who may be
or become an employee of and paid by the Trust a Fund shall be
deemed, when acting within the scope of his employment by the
Fund, to be acting in such employment solely for the Fund and not
as the Adviser's employee or agent.
(e) Under the Sub-Investment Management Contracts. Each of the
Sub-Investment Management Contracts (the "Sub-Investment
Contracts") provides that the Sub-Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered
by the Trust, the Fund or the Adviser in connection with matters
to which the Sub-Investment Contract relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence
on the Sub-Adviser's part in the performance of its duties or
from reckless disregard by it of its obligations and duties under
the contract. Any person, even though also employed by the
Sub-Adviser, who may be or become an employee of and paid by the
Trust or the Fund shall be deemed, when acting within the scope
of his employment by the Trust or the Fund, to be acting in such
employment solely for the Trust or the Fund and not as the
Sub-Adviser's employee or agent.
(f) Insofar as indemnification for liabilities under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to
Trustees, officers and controlling persons of Registrant pursuant
to the foregoing provisions, Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against policy as expressed in the 1933 Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant in the successful defense of any action, suit
or proceeding) is asserted by such Trustee, officer or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of
such issue.
Item 28. Business and other Connections of Investment Adviser
For all of the information required by this item reference is made to the
Forms ADV, as amended, filed under the Investment Advisers Act of 1940 of
the Registrant's Adviser, John Hancock Advisers, Inc. (File No. 801-8124),
and the Registrant's Sub-Advisers;
<PAGE>
Independence Investment Associates, Inc. (File No. 801-18048), John Hancock
Advisers International, Ltd. (File No. 801-294981), and Sovereign Asset
Management Corporation (File No. 801-420231) incorporated herein by
reference.
Item 29. Principal Underwriters
(a) The Registrant's sole principal underwriter is JH Funds, Inc.,
which also acts as principal underwriter for the following
investment companies: John Hancock Institutional Series Trust,
John Hancock Capital Series, John Hancock Sovereign Bond Fund,
John Hancock Sovereign Investors Fund, Inc., John Hancock Special
Equities Fund, John Hancock Strategic Series, John Hancock
Tax-Exempt Income Fund, John Hancock Tax-Exempt Series Fund, John
Hancock Technology Series, Inc., John Hancock Limited Term
Government Fund, John Hancock World Fund, Freedom Investment
Trust, Freedom Investment Trust II, Freedom Investment Trust III,
John Hancock Bond Fund, John Hancock California Tax-Free Income
Fund, John Hancock Cash Reserve, Inc., John Hancock Current
Interest, John Hancock Investment Trust, John Hancock Series,
Inc. and John Hancock Tax-Free Bond Fund.
(b) The following table lists, for each director and officer of JH
Funds, Inc., the information indicated.
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ -------------- -------------
Edward J. Boudreau, Jr. Chairman of Chairman and
101 Huntington Avenue the Board Chief Executive
Boston, Massachusetts Officer
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ -------------- -------------
Robert H. Watts Director None
101 Huntington Avenue
Boston, Massachusetts
C. Troy Shaver, Jr. President, Chief None
101 Huntington Avenue Executive Officer
Boston, Massachusetts and Director
Stephen W. Blair Executive Vice None
101 Huntington Avenue President
Boston, Massachusetts
James V. Bowhers Executive Vice None
101 Huntington Avenue President
Boston, Massachusetts
James W. McLaughlin Senior Vice President None
101 Huntington Avenue and Chief Financial
Boston, Massachusetts Officer
Thomas H. Drohan Senior Vice Senior Vice
101 Huntington Avenue President President and
Boston, Massachusetts Secretary
David A. King Director and Senior None
101 Huntington Avenue Vice President
Boston, Massachusetts
James B. Little Senior Vice Senior Vice
101 Huntington Avenue President President and
Boston, Massachusetts Chief
Financial Officer
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ -------------- -------------
John A. Morin Vice President Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President Vice President,
101 Huntington Avenue and Secretary Assistant Secretary
Boston, Massachusetts and Compliance
Officer
William S. Nichols Senior Vice None
101 Huntington Avenue President
Boston, Massachusetts
Michael T. Carpenter Senior Vice None
1000 Louisiana Street President
Houston, Texas
Christopher M. Meyer Treasurer None
101 Huntington Avenue
Boston, Massachusetts
Robert G. Freedman Director Vice Chairman
101 Huntington Avenue and Chief Investment
Boston, Massachusetts Officer
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ -------------- -------------
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director Trustee
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John Goldsmith Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard O. Hansen Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
(c) None.
Item 30. Location of Accounts and Records
Registrant maintains the records required to be maintained by it under
Rules 31a-1(a), 31a-1(b) and 31a-2(a) under the Investment Company Act
of 1940 at its principal executive offices at 101 Huntington Avenue,
Boston, Massachusetts 02199-7603. Certain records, including records
relating to Registrant's shareholders and the physical possession
<PAGE>
of its securities, may be maintained pursuant to Rule 31a-3 at the
main office of Registrant's Transfer Agent or Custodian.
Item 31. Management Services
The Registrant is not a party to any management-related service
contract, except as described in this Registration Statement.
Item 32. Undertakings
The Registrant undertakes:
(a) to file a post-effective amendment, using financial statements
which need not be certified, within four to six months from the
later of the effective date of this Registration Statement or
commencement of operations; and
(b) to furnish each person to whom a prospectus is delivered with a
copy of the Registrant's latest annual report to shareholders
upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts on the
20th day of November 1995.
JOHN HANCOCK DECLARATION TRUST
By:
/s/ Anne C. Hodsdon
Anne C. Hodsdon
President
Pursuant to the requirements of the Securities Act of 1933, the
Registration has been signed below by the following persons in the capacities
and on the dates indicated.
Signature Title Date
Chairman November 20, 1995
/s/ Edward J. Boudreau, Jr. (Principal Executive
Edward J. Boudreau, Jr. Officer)
Senior Vice President
and Chief Financial
/s/ James B. Little Officer (Principal November 20, 1995
James B. Little Financial and Accounting
Officer)
/s/ Richard S. Scipione Trustee November 20, 1995
Richard S. Scipione
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
1 Declaration of Trust**
2 By-Laws.**
5 Form of Investment Management Contract between Registrant, on
behalf of each series, and John Hancock Advisers, Inc. and
schedule of omitted substantially similar documents.**
5.1 Form of Sub-Investment Management Contract among John Hancock
V.A. Sovereign Investors Fund, John Hancock Advisers, Inc. and
Sovereign Asset Management Corporation.**
5.2 Form of Sub-Investment Management Contract among John Hancock
V.A. Diversified Core Equity Fund, John Hancock Advisers, Inc.
and Independence Investment Associates, Inc.**
5.3 Form of Sub-Investment Management Contract among John Hancock
V.A. International Fund, John Hancock Advisers, Inc. and
Advisers International LTD.**
6 Form of Distribution Agreement between the Registrant and John
Hancock Funds, Inc.**
8 Master Custodian Agreement with Amendment between John Hancock
Mutual Funds and State Street Bank and Trust Company.**
8.1 Master Custodian Agreement between John Hancock Mutual Funds
and Investors Bank and Trust Company.**
9 Form of Transfer Agency and Service Agreement between
Registrant and John Hancock Investor Services Corporation.**
10 Opinion and consent of counsel.**
13 Form of Subscription Agreement*
_________________________
* To be filed by amendment.
** Filed electronically herewith.
DECLARATION OF TRUST
OF
JOHN HANCOCK DECLARATION TRUST
101 Huntington Avenue
Boston, Massachusetts
02199-7603
Dated November 15, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - NAME AND DEFINITIONS 1
Section 1.1. Name 1
Section 1.2. Definitions 1
ARTICLE II - TRUSTEES 4
Section 2.1. General Powers 4
Section 2.2. Investments 4
Section 2.3. Legal Title 6
Section 2.4. Issuance and Repurchase of Shares 6
Section 2.5. Delegation; Committees 7
Section 2.6. Collection and Payment 7
Section 2.7. Expenses 7
Section 2.8. Manner of Acting; By-laws 7
Section 2.9. Miscellaneous Powers 7
Section 2.10. Principal Transactions 8
Section 2.11. Litigation 8
Section 2.12. Number of Trustees 8
Section 2.13. Election and Term 9
Section 2.14. Resignation and Removal 9
Section 2.15. Vacancies 9
Section 2.16. Delegation of Power to Other Trustees 10
ARTICLE III - CONTRACTS 10
Section 3.1. Distribution Contract 10
Section 3.2. Advisory or Management Contract 10
Section 3.3. Administration Agreement 11
Section 3.4. Service Agreement 11
Section 3.5. Transfer Agent 11
Section 3.6. Custodian 11
Section 3.7. Affiliations of Trustees or Officers, Ect 11
Section 3.8. Compliance with 1940 Act 12
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Page
ARTICLE IV - LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS 12
Section 4.1. No Personal Liability of
Shareholders, Trustees, Etc 12
Section 4.2. Non-Liability of Trustees, Etc 13
Section 4.3. Mandatory Indemnification 13
Section 4.4. No Bond Required of Trustees 15
Section 4.5. No Duty of Investigation; Notice
in Trust Instruments, Etc 15
Section 4.6. Reliance on Experts, Etc 15
ARTICLE V - SHARES OF BENEFICIAL INTEREST 16
Section 5.1. Beneficial Interest 16
Section 5.2. Rights of Shareholders 16
Section 5.3. Trust Only 16
Section 5.4. Issuance of Shares 17
Section 5.5. Register of Shares 17
Section 5.6. Transfer of Shares 17
Section 5.7. Notices 18
Section 5.8. Treasury Shares 18
Section 5.9. Voting Powers 18
Section 5.10. Meetings of Shareholders 19
Section 5.11. Series or Class Designation 19
Section 5.12. Assent to Declaration of Trust 22
ARTICLE VI - REDEMPTION AND REPURCHASE OF SHARES 22
Section 6.1. Redemption of Shares 22
Section 6.2. Price 22
Section 6.3. Payment 23
Section 6.4. Effect of Suspension of Determination
of Net Asset Value 23
Section 6.5. Repurchase by Agreement 23
Section 6.6. Redemption of Shareholder's Interest 23
Section 6.7. Redemption of Shares in Order to
Qualify as Regulated Investment
Company; Disclosure of Holding 23
<PAGE>
Page
Section 6.8. Reductions in Number of
Outstanding Shares Pursuant to
Net Asset Value Formula 24
Section 6.9. Suspension of Right of Redemption 24
ARTICLE VII - DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS 25
Section 7.1. Net Asset Value 25
Section 7.2. Distributions to Shareholders 25
Section 7.3. Determination of Net Income;
Constant Net Asset Value;
Reduction of Outstanding Shares 26
Section 7.4. Power to Modify Foregoing Procedures 27
ARTICLE VIII - DURATION; TERMINATION OF TRUST OR A
SERIES OR CLASS; AMENDMENT;
MERGERS, ETC 27
Section 8.1. Duration 27
Section 8.2. Termination of the Trust or a
Series or a Class 27
Section 8.3. Amendment Procedure 28
Section 8.4. Merger, Consolidation and Sale of Assets 29
Section 8.5. Incorporation 30
ARTICLE IX - REPORTS TO SHAREHOLDERS 30
ARTICLE X - MISCELLANEOUS 30
Section 10.1. Execution and Filing 30
Section 10.2. Governing Law 31
Section 10.3. Counterparts 31
Section 10.4. Reliance by Third Parties 31
Section 10.5. Provisions in Conflict with Law or
Regulations 31
<PAGE>
DECLARATION OF TRUST
OF
JOHN HANCOCK DECLATRATION TRUST
101 Huntington Avenue
Boston, Massachusetts 02199
Dated November 15, 1995
DECLARATION OF TRUST made this 15th day of November, 1995 by Edward J.
Boudreau, Jr. and Richard S. Scipione (together with all other persons from time
to time duly elected, qualified and serving as Trustees in accordance with the
provisions of Article II hereof, the "Trustees");
WHEREAS, the Trustees desire to establish a trust for the investment and
reinvestment of funds contributed thereto;
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
WHEREAS, the Trustees declare that all money and property contributed to
the trust established hereunder shall be held and managed in trust for the
benefit of the holders, from time to time, of the shares of beneficial interest
issued hereunder and subject to the provisions hereof;
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements contained herein, the undersigned, being all of the Trustees of the
trust, hereby declare as follows:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is "John Hancock
Declaration Trust" (the "Trust").
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "Administrator" means the party, other than the Trust, to the
contract described in Section 3.3 hereof.
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(b) "By-laws" means the By-laws referred to in Section 2.8 hereof, as
amended from time to time.
(c) "Class" means any division of shares within a Series in accordance
with the provisions of Article V.
(d) The terms "Commission" and "Interested Person" have the meanings
given them in the 1940 Act. Except as such term may be otherwise defined by the
Trustees in conjunction with the establishment of any Series, the term "vote of
a majority of the Outstanding Shares entitled to vote" shall have the same
meaning as is assigned to the term "vote of a majority of the outstanding voting
securities" in the 1940 Act.
(e) "Custodian" means any Person other than the Trust who has custody of
any Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(f) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein," and "hereunder" shall be deemed to refer to this Declaration rather
than exclusively to the article or section in which such words appear.
(g) "Distributor" means the party, other than the Trust, to the contract
described in Section 3.1 hereof.
(h) "Fund" or "Funds," individually or collectively, means the separate
Series of the Trust, together with the assets and liabilities assigned thereto.
(I) "Fundamental Restrictions" means the investment restrictions set
forth in the Prospectus and Statement of Additional Information for any Series
and designated as fundamental restrictions therein with respect to such Series.
(j) "His" shall include the feminine and neuter, as well as the
masculine, genders.
(k) "Investment Adviser" means the party, other than the Trust, to the
contract described in Section 3.2 hereof.
(l) T he "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
(m) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
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(n) "Prospectus" means the Prospectuses and Statements of Additional
Information included in the Registration Statement of the Trust under the
Securities Act of 1933, as amended, as such Prospectuses and Statements of
Additional Information may be amended or supplemented and filed with the
Commission from time to time.
(o) "Series" individually or collectively means the separately managed
component(s) of the Trust (or, if the Trust shall have only one such component,
then that one) as may be established and designated from time to time by the
Trustees pursuant to Section 5.11 hereof.
(p) "Shareholder" means a record owner of Outstanding Shares.
(q) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time,
including the Shares of any and all Series or of any Class within any Series (as
the context may require) which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares. "Outstanding" Shares means those
Shares shown from time to time on the books of the Trust or its Transfer Agent
as then issued and outstanding, but shall not include Shares which have been
redeemed or repurchased by the Trust and which are at the time held in the
treasury of the Trust.
(r) "Transfer Agent" means any Person other than the Trust who maintains
the Shareholder records of the Trust, such as the list of Shareholders, the
number of Shares credited to each account, and the like.
(s) "Trust" means John Hancock Declaration Trust.
(t) "Trustees" means the persons who have signed this Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who now serve or may from time to time be duly elected,
qualified and serving as Trustees in accordance with the provisions of Article
II hereof, and reference herein to a Trustee or the Trustees shall refer to such
person or persons in this capacity or their capacities as trustees hereunder.
(u) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including any and all assets of or allocated to any
Series or Class, as the context may require.
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ARTICLE II
TRUSTEES
Section 2.1. General Powers. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without The Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid powers. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 2.2. Investments. The Trustees shall have the power:
(a) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest in, cash; securities,
including common, preferred and preference stocks; warrants; subscription
rights; profit-sharing interests or participations and all other contracts for
or evidence of equity interests; bonds, debentures, bills, time notes and all
other evidences of indebtedness; negotiable or non-negotiable instruments;
government securities, including securities of any state, municipality or other
political subdivision thereof, or any governmental or quasi-governmental agency
or instrumentality; and money market instruments including bank certificates of
deposit, finance paper, commercial paper, bankers' acceptances and all kinds of
repurchase agreements, of any corporation, company, trust, association, firm or
other business organization however established, and of any country, state,
municipality or other political subdivision, or any governmental or
quasi-governmental agency or instrumentality; any other security, instrument or
contract the acquisition or execution of which is not prohibited by any
Fundamental Restriction; and the Trustees shall be deemed to have the foregoing
powers with respect to any additional securities in which the Trust may invest
should the Fundamental Restrictions be amended.
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(c) To acquire (by purchase, subscription or otherwise), to hold, to
trade in and deal in, to acquire any rights or options to purchase or sell, to
sell or otherwise dispose of, to lend and to pledge any such securities, to
enter into repurchase agreements, reverse repurchase agreements, firm commitment
agreements, forward foreign currency exchange contracts, interest rate, mortgage
or currency swaps, and interest rate caps and floors, to purchase and sell
options on securities, indices, currency or other financial assets, futures
contracts and options on futures contracts of all descriptions and to engage in
all types of hedging, risk management or income enhancement transactions.
(d) To exercise all rights, powers and privileges of ownership or
interest in all securities and repurchase agreements included in the Trust
Property, including the right to vote thereon and otherwise act with respect
thereto and to do all acts for the preservation, protection, improvement and
enhancement in value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash or foreign currency, and any interest therein.
(f) To borrow money and in this connection issue notes or other evidence
of indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; and to endorse, guarantee, or
undertake the performance of any obligation or engagement of any other Person
and to lend Trust Property.
(g) To aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included in the
Trust Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest; and to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) To enter into a plan of distribution and any related agreements
whereby the Trust may finance directly or indirectly any activity which is
primarily intended to result in the distribution and/or servicing of Shares.
(i) To adopt on behalf of the Trust or any Series thereof an alternative
purchase plan providing for the issuance of multiple Classes of Shares (as
authorized herein at Section 5.11).
(j) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
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appurtenant to or arising out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
Notwithstanding any other provision herein, the Trustees shall have full
power in their discretion as contemplated in Section 8.5, without any
requirement of approval by Shareholders, to invest part or all of the Trust
Property (or part or all of the assets of any Series), or to dispose of part or
all of the Trust Property (or part or all of the assets of any Series) and
invest the proceeds of such disposition, in securities issued by one or more
other investment companies registered under the 1940 Act. Any such other
investment company may (but need not) be a trust (formed under the laws of the
State of New York or of any other state) which is classified as a partnership
for federal income tax purposes.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
Section 2.3. Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust or any Series of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine, provided that the interest of the Trust therein is
deemed appropriately protected. The right, title and interest of the Trustees in
the Trust Property and the Property of each Series of the Trust shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office, resignation, removal or death of a Trustee he
shall automatically cease to have any right, title or interest in any of the
Trust Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
Section 2.4. Issuance and Repurchase of Shares. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VI and VII and Section 5.11 hereof, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the Trust or of the particular
Series with respect to which such Shares are issued, whether capital or surplus
or otherwise, to the full extent now or hereafter permitted by the laws of The
Commonwealth of Massachusetts governing business corporations.
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Section 2.5. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or any
Series of the Trust or the names of the Trustees or otherwise as the Trustees
may deem expedient, to the same extent as such delegation is permitted by the
1940 Act.
Section 2.6. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 2.7. Expenses. The Trustees shall have the power to incur and
pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to pay
reasonable compensation from the funds of the Trust to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and Trustees.
Section 2.8. Manner of Acting; By-laws. Except as otherwise provided
herein or in the By-laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees, including any
meeting held by means of a conference telephone circuit or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, or by written consents of a majority of Trustees
then in office. The Trustees may adopt By-laws not inconsistent with this
Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such By-laws to the extent such power is not reserved to the
Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
Section 2.9. Miscellaneous Powers. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust or any Series thereof; (b) enter
into joint ventures, partnerships and any other combinations or associations;
(c) remove Trustees, fill vacancies in, add to or subtract from their number,
elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more
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committees which may exercise some or all of the power and authority of the
Trustees as the Trustees may determine; (d) purchase, and pay for out of Trust
Property or the property of the appropriate Series of the Trust, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, administrators, distributors, selected dealers or
independent contractors of the Trust against all claims arising by reason of
holding any such position or by reason of any action taken or omitted by any
such Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (e) establish pension, profit-sharing, share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust; (f) to the extent permitted by law, indemnify any
person with whom the Trust or any Series thereof has dealings, including the
Investment Adviser, Administrator, Distributor, Transfer Agent and selected
dealers, to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine and change the
fiscal year and taxable year of the Trust or any Series thereof and the method
by which its or their accounts shall be kept; and (i) adopt a seal for the
Trust, but the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust.
Section 2.10. Principal Transactions. Except for transactions not
permitted by the 1940 Act or rules and regulations adopted, or orders issued, by
the Commission thereunder, the Trustees may, on behalf of the Trust, buy any
securities from or sell any securities to, or lend any assets of the Trust or
any Series thereof to any Trustee or officer of the Trust or any firm of which
any such Trustee or officer is a member acting as principal, or have any such
dealings with the Investment Adviser, Distributor or Transfer Agent or with any
Interested Person of such Person; and the Trust or a Series thereof may employ
any such Person, or firm or company in which such Person is an Interested
Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
Section 2.11. Litigation. The Trustees shall have the power to engage in
and to prosecute, defend, compromise, abandon, or adjust by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series thereof
to pay or to satisfy any debts, claims or expenses incurred in connection
therewith, including those of litigation, and such power shall include without
limitation the power of the Trustees or any appropriate committee thereof, in
the exercise of their or its good faith business judgment, to dismiss any
action, suit, proceeding, dispute, claim, or demand, derivative or otherwise,
brought by any person, including a Shareholder in its own name or the name of
the Trust, whether or not the Trust or any of the Trustees may be named
individually therein or the subject matter arises by reason of business for or
on behalf of the Trust.
Section 2.12. Number of Trustees. The initial Trustees shall be the
persons initially signing this Declaration. The number of Trustees (other than
the initial Trustees) shall be such number as shall be fixed from time to time
by vote of a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be less than one (1).
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Section 2.13. Election and Term. Except for the Trustees named herein or
appointed to fill vacancies pursuant to Section 2.15 hereof, the Trustees may
succeed themselves and shall be elected by the Shareholders owning of record a
plurality of the Shares voting at a meeting of Shareholders on a date fixed by
the Trustees. Except in the event of resignations or removals pursuant to
Section 2.14 hereof, each Trustee shall hold office until such time as less than
a majority of the Trustees holding office have been elected by Shareholders. In
such event the Trustees then in office shall call a Shareholders' meeting for
the election of Trustees. Except for the foregoing circumstances, the Trustees
shall continue to hold office and may appoint successor Trustees.
Section 2.14. Resignation and Removal. Any Trustee may resign his trust
(without the need for any prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than one) with cause, by
the action of two-thirds of the remaining Trustees or by action of two-thirds of
the outstanding Shares of the Trust (for purposes of determining the
circumstances and procedures under which any such removal by the Shareholders
may take place, the provisions of Section 16(c) of the 1940 Act (or any
successor provisions) shall be applicable to the same extent as if the Trust
were subject to the provisions of that Section). Upon the resignation or removal
of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the incapacity or death of
any Trustee, his legal representative shall execute and deliver on his behalf
such documents as the remaining Trustees shall require as provided in the
preceding sentence.
Section 2.15. Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of his death, retirement, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees shall fill
such vacancy by the appointment of such other person as they in their discretion
shall see fit, made by vote of a majority of the Trustees then in office. Any
such appointment shall not become effective, however, until the person named in
the vote approving the appointment shall have accepted in writing such
appointment and agreed in writing to be bound by the terms of the Declaration.
An appointment of a Trustee may be made in anticipation of a vacancy to occur at
a later date by reason of retirement, resignation or increase in the number of
Trustees, provided that such appointment shall not become effective prior to
such retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.15, the
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Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by the Declaration. The vote by a majority of the Trustees in office,
fixing the number of Trustees shall be conclusive evidence of the existence of
such vacancy.
Section 2.16. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
fewer than two (2) Trustees personally exercise the powers granted to the
Trustees under this Declaration except as herein otherwise expressly provided.
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may in their discretion
from time to time enter into an exclusive or non-exclusive distribution contract
or contracts providing for the sale of the Shares to net the Trust or the
applicable Series of the Trust not less than the amount provided for in Section
7.1 of Article VII hereof, whereby the Trustees may either agree to sell the
Shares to the other party to the contract or appoint such other party as their
sales agent for the Shares, and in either case on such terms and conditions, if
any, as may be prescribed in the By-laws, and such further terms and conditions
as the Trustees may in their discretion determine not inconsistent with the
provisions of this Article III or of the By-laws; and such contract may also
provide for the repurchase of the Shares by such other party as agent of the
Trustees.
Section 3.2. Advisory or Management Contract. The Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts or, if the Trustees establish multiple Series, separate
investment advisory or management contracts with respect to one or more Series
whereby the other party or parties to any such contracts shall undertake to
furnish the Trust or such Series management, investment advisory,
administration, accounting, legal, statistical and research facilities and
services, promotional or marketing activities, and such other facilities and
services, if any, as the Trustees shall from time to time consider desirable and
all upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of the Declaration, the Trustees may
authorize the Investment Advisers, or any of them, under any such contracts
(subject to such general or specific instructions as the Trustees may from time
to time adopt) to effect purchases, sales, loans or exchanges of portfolio
securities and other investments of the Trust on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of such Investment Advisers, or
any of them (and all without further action by the Trustees). Any such
purchases, sales, loans and exchanges shall be deemed to have been authorized by
all of the Trustees. The Trustees may, in their sole discretion, call a
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meeting of Shareholders in order to submit to a vote of Shareholders at such
meeting the approval or continuance of any such investment advisory or
management contract. If the Shareholders of any one or more of the Series of the
Trust should fail to approve any such investment advisory or management
contract, the Investment Adviser may nonetheless serve as Investment Adviser
with respect to any Series whose Shareholders approve such contract.
Section 3.3. Administration Agreement. The Trustees may in their
discretion from time to time enter into an administration agreement or, if the
Trustees establish multiple Series or Classes separate administration agreements
with respect to each Series or Class, whereby the other party to such agreement
shall undertake to manage the business affairs of the Trust or of a Series or
Class thereof and furnish the Trust or a Series or a Class thereof with office
facilities, and shall be responsible for the ordinary clerical, bookkeeping and
recordkeeping services at such office facilities, and other facilities and
services, if any, and all upon such terms and conditions as the Trustees may in
their discretion determine.
Section 3.4. Service Agreement. The Trustees may in their discretion
from time to time enter into Service Agreements with respect to one or more
Series or Classes thereof whereby the other parties to such Service Agreements
will provide administration and/or support services pursuant to administration
plans and service plans, and all upon such terms and conditions as the Trustees
in their discretion may determine.
Section 3.5. Transfer Agent. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such terms
and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or more
Persons.
Section 3.6. Custodian. The Trustees may appoint or otherwise engage one
or more banks or trust companies, each having an aggregate capital, surplus and
undivided profits (as shown in its last published report) of at least two
million dollars ($2,000,000) to serve as Custodian with authority as its agent,
but subject to such restrictions, limitations and other requirements, if any, as
may be contained in the By-laws of the Trust. The Trustees may also authorize
the Custodian to employ one or more sub-custodians, including such foreign banks
and securities depositories as meet the requirements of applicable provisions of
the 1940 Act, and upon such terms and conditions as may be agreed upon between
the Custodian and such sub-custodian, to hold securities and other assets of
the Trust and to perform the acts and services of the Custodian, subject to
applicable provisions of law and resolutions adopted by the Trustees.
Section 3.7. Affiliations of Trustees or Officers, Etc. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust or
any Series thereof is a shareholder, director, officer, partner,
trustee, employee, manager, adviser or
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distributor of or for any partnership, corporation, trust, association
or other organization or of or for any parent or affiliate of any
organization, with which a contract of the character described in
Sections 3.1, 3.2, 3.3 or 3.4 above or for services as Custodian,
Transfer Agent or disbursing agent or for related services may have been
or may hereafter be made, or that any such organization, or any parent
or affiliate thereof, is a Shareholder of or has an interest in the
Trust, or that
(ii) any partnership, corporation, trust, association or other
organization with which a contract of the character described in
Sections 3.1, 3.2, 3.3 or 3.4 above or for services as Custodian,
Transfer Agent or disbursing agent or for related services may have been
or may hereafter be made also has any one or more of such contracts with
one or more other partnerships, corporations, trusts, associations or
other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
Section 3.8. Compliance with 1940 Act. Any contract entered into
pursuant to Sections 3.1 or 3.2 shall be consistent with and subject to the
requirements of Section 15 of the 1940 Act (including any amendment thereof or
other applicable Act of Congress hereafter enacted), as modified by any
applicable order or orders of the Commission, with respect to its continuance in
effect, its termination and the method of authorization and approval of such
contract or renewal thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust or any Series thereof. No Trustee, officer, employee or agent of the Trust
or any Series thereof shall be subject to any personal liability whatsoever to
any Person, other than to the Trust or its Shareholders, in connection with
Trust Property or the affairs of the Trust, except to the extent arising from
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties with respect to such Person; and all such Persons shall look solely to
the Trust Property, or to the Property of one or more specific Series of the
Trust if the claim arises from the conduct of such Trustee, officer, employee or
agent with respect to only such Series, for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any Shareholder,
Trustee, officer, employee, or agent, as such, of the Trust or any
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Series thereof, is made a party to any suit or proceeding to enforce any such
liability of the Trust or any Series thereof, he shall not, on account thereof,
be held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities, to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder or former Shareholder (or his
or her heirs, executors, administrators or other legal representatives or in the
case of a corporation or other entity, its corporate or other general successor)
out of the Trust Property for all legal and other expenses reasonably incurred
by him in connection with any such claim or liability. The indemnification and
reimbursement required by the preceding sentence shall be made only out of
assets of the one or more Series whose Shares were held by said Shareholder at
the time the act or event occurred which gave rise to the claim against or
liability of said Shareholder. The rights accruing to a Shareholder under this
Section 4.1 shall not impair any other right to which such Shareholder may be
lawfully entitled, nor shall anything herein contained restrict the right of the
Trust or any Series thereof to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer,
employee or agent of the Trust or any Series thereof shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee, or
agent thereof for any action or failure to act (including without limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his own bad faith, willful misfeasance, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the exceptions
and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee, officer, employee
or agent of the Trust (including any individual who serves at its
request as director, officer, partner, trustee or the like of another
organization in which it has any interest as a shareholder, creditor or
otherwise) shall be indemnified by the Trust, or by one or more Series
thereof if the claim arises from his or her conduct with respect to only
such Series, to the fullest extent permitted by law against all
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred by
him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal, or
other, including appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and
other liabilities.
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(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust, a Series thereof or the
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust or a Series
thereof;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(ii)
resulting in a payment by a Trustee or officer, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(A) by the court or other body approving the settlement or
other disposition;
(B) based upon a review of readily available facts (as opposed
to a full trial-type inquiry) by (x) vote of a majority of the
Non-interested Trustees acting on the matter (provided that a
majority of the Non-interested Trustees then in office act on the
matter) or (y) written opinion of independent legal counsel; or
(C) by a vote of a majority of the Shares outstanding and
entitled to vote (excluding Shares owned of record or beneficially
by such individual).
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Trustee or officer may now or hereafter be entitled,
shall continue as to a person who has ceased to be such Trustee or officer and
shall inure to the benefit of the heirs, executors, administrators and assigns
of such a person. Nothing contained herein shall affect any rights to
indemnification to which personnel of the Trust or any Series thereof other than
Trustees and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced by the Trust or a Series thereof prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that either:
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(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust or Series
thereof shall be insured against losses arising out of any such
advances; or
(ii) a majority of the Non-interested Trustees acting on the matter
(provided that a majority of the Non-interested Trustees act on the
matter) or an independent legal counsel in a written opinion shall
determine, based upon a review of readily available facts (as opposed to
a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Non-interested Trustee" is one who (i)
is not an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order of
the Commission), and (ii) is not involved in the claim, action, suit or
proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust Instruments, Etc.
No purchaser, lender, transfer agent or other Person dealing with the Trustees
or any officer, employee or agent of the Trust or a Series thereof shall be
bound to make any inquiry concerning the validity of any transaction purporting
to be made by the Trustees or by said officer, employee or agent or be liable
for the application of money or property paid, loaned, or delivered to or on the
order of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking, and every other act or thing whatsoever executed
in connection with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity as Trustees
under this Declaration or in their capacity as officers, employees or agents of
the Trust or a Series thereof. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or a Series thereof or
undertaking made or issued by the Trustees may recite that the same is executed
or made by them not individually, but as Trustees under the Declaration, and
that the obligations of the Trust or a Series thereof under any such instrument
are not binding upon any of the Trustees or Shareholders individually, but bind
only the Trust Property or the Trust Property of the applicable Series, and may
contain any further recital which they may deem appropriate, but the omission of
such recital shall not operate to bind the Trustees individually. The Trustees
shall at all times maintain insurance for the protection of the Trust Property
or the Trust Property of the applicable Series, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee, officer or employee
of the Trust or a Series thereof shall, in the performance of his duties, be
fully and completely justified and
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protected with regard to any act or any failure to act resulting from reliance
in good faith upon the books of account or other records of the Trust or a
Series thereof, upon an opinion of counsel, or upon reports made to the Trust or
a Series thereof by any of its officers or employees or by the Investment
Adviser, the Administrator, the Distributor, Transfer Agent, selected dealers,
accountants, appraisers or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest
without par value. The number of such Shares of beneficial interest authorized
hereunder is unlimited. The Trustees shall have the exclusive authority without
the requirement of Shareholder approval to establish and designate one or more
Series of shares and one or more Classes thereof as the Trustees deem necessary
or desirable. Each Share of any Series shall represent an equal proportionate
Share in the assets of that Series with each other Share in that Series. Subject
to the provisions of Section 5.11 hereof, the Trustees may also authorize the
creation of additional Series of Shares (the proceeds of which may be invested
in separate, independently managed portfolios) and additional Classes of Shares
within any Series. All Shares issued hereunder including, without limitation,
Shares issued in connection with a dividend in Shares or a split in Shares,
shall be fully paid and nonassessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust Property
of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to share or assume any losses of the Trust or suffer an assessment of any
kind by virtue of their ownership of Shares. The Shares shall be personal
property giving only the rights specifically set forth in this Declaration. The
Shares shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights, except as the Trustees may determine with respect
to any Series or Class of Shares.
Section 5.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
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Section 5.4. Issuance of Shares. The Trustees in their discretion may,
from time to time without a vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, including
cash or property, at such time or times and on such terms as the Trustees may
deem best, except that only Shares previously contracted to be sold may be
issued during any period when the right of redemption is suspended pursuant to
Section 6.9 hereof, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and Shares held in the treasury. The
Trustees may from time to time divide or combine the Shares of the Trust or, if
the Shares be divided into Series or Classes, of any Series or any Class thereof
of the Trust, into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust or in the Trust Property
allocated or belonging to such Series or Class. Contributions to the Trust or
Series thereof may be accepted for, and Shares shall be redeemed as, whole
Shares and/or 1/1,000ths of a Share or integral multiples thereof.
Section 5.5. Register of Shares. A register shall be kept at the
principal office of the Trust or an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as provided
herein or in the By-laws, until he has given his address to the Transfer Agent
or such other officer or agent of the Trustees as shall keep the said register
for entry thereon. It is not contemplated that certificates will be issued for
the Shares; however, the Trustees, in their discretion, may authorize the
issuance of share certificates and promulgate appropriate rules and regulations
as to their use.
Section 5.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to
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the Trustees or the Transfer Agent, but until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer Agent or registrar
nor any officer or agent of the Trust shall be affected by any notice of such
death, bankruptcy or incompetence, or other operation of law.
Section 5.7. Notices. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
Section 5.8. Treasury Shares. Shares held in the treasury shall, until
resold pursuant to Section 5.4, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.13; (ii) with
respect to any investment advisory contract entered into pursuant to Section
3.2; (iii) with respect to termination of the Trust or a Series or Class thereof
as provided in Section 8.2; (iv) with respect to any amendment of this
Declaration to the limited extent and as provided in Section 8.3; (v) with
respect to a merger, consolidation or sale of assets as provided in Section 8.4;
(vi) with respect to incorporation of the Trust to the extent and as provided in
Section 8.5; (vii) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or a Series thereof or the Shareholders of either; (viii)
with respect to any plan adopted pursuant to Rule 12b-1 (or any successor rule)
under the 1940 Act, and related matters; and (ix) with respect to such
additional matters relating to the Trust as may be required by this Declaration,
the By-laws or any registration of the Trust as an investment company under the
1940 Act with the Commission (or any successor agency) or as the Trustees may
consider necessary or desirable. As determined by the Trustees without the vote
or consent of shareholders, on any matter submitted to a vote of Shareholders
either (i) each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote or (ii) each dollar of net asset value (number of
Shares owned times net asset value per share of such Series or Class, as
applicable) shall be entitled to one vote on any matter on which such Shares are
entitled to vote and each fractional dollar amount shall be entitled to a
proportionate fractional vote. The Trustees may, in conjunction with the
establishment of any further Series or any Classes of Shares, establish
conditions under which the several Series or Classes of Shares shall have
separate voting rights or no voting rights. There shall be no cumulative voting
in the election of Trustees. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration or the By-laws to be taken by Shareholders. The By-laws may include
further provisions for Shareholders' votes and meetings and related matters.
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Section 5.10. Meetings of Shareholders. No annual or regular meetings of
Shareholders are required. Special meetings of the Shareholders, including
meetings involving only the holders of Shares of one or more but less than all
Series or Classes thereof, may be called at any time by the Chairman of the
Board, President, or any Vice-President of the Trust, and shall be called by the
President or the Secretary at the request, in writing or by resolution, of a
majority of the Trustees, or at the written request of the holder or holders of
ten percent (10%) or more of the total number of Outstanding Shares of the Trust
entitled to vote at such meeting. Meetings of the Shareholders of any Series
shall be called by the President or the Secretary at the written request of the
holder or holders of ten percent (10%) or more of the total number of
Outstanding Shares of such Series of the Trust entitled to vote at such meeting.
Any such request shall state the purpose of the proposed meeting.
Section 5.11. Series or Class Designation. (a) Without limiting the
authority of the Trustees set forth in Section 5.1 to establish and designate
any further Series or Classes, the Trustees hereby establish the following ten
Series, each of which consists of a single Class of Shares: John Hancock V.A.
International Fund, John Hancock V.A. Emerging Equities Fund, John Hancock V.A.
Discovery Fund, John Hancock V.A. Diversified Core Equity Fund, John Hancock
V.A. Sovereign Investors Fund, John Hancock V.A. 500 Index Fund, John Hancock
V.A. Sovereign Bond Fund, John Hancock V.A. Strategic Income Fund, John Hancock
V.A. Global Income Fund, John Hancock V.A. Money Market Fund (the "Existing
Series").
(b) The Shares of the Existing Series and Class thereof herein
established and designated and any Shares of any further Series and Classes
thereof that may from time to time be established and designated by the Trustees
shall be established and designated, and the variations in the relative rights
and preferences as between the different Series shall be fixed and determined,
by the Trustees (unless the Trustees otherwise determine with respect to further
Series or Classes at the time of establishing and designating the same);
provided, that all Shares shall be identical except that there may be variations
so fixed and determined between different Series or Classes thereof as to
investment objective, policies and restrictions, purchase price, payment
obligations, distribution expenses, right of redemption, special and relative
rights as to dividends and on liquidation, conversion rights, exchange rights,
and conditions under which the several Series or Classes shall have separate
voting rights, all of which are subject to the limitations set forth below. All
references to Shares in this Declaration shall be deemed to be Shares of any or
all Series or Classes as the context may require.
(c) As to any Existing Series and Classes herein established and
designated and any further division of Shares of the Trust into additional
Series or Classes, the following provisions shall be applicable:
(i) The number of authorized Shares and the number of Shares of each
Series or Class thereof that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued
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Shares or any Shares previously issued and reacquired of any Series or Class
into one or more Series or one or more Classes that may be established and
designated from time to time. The Trustees may hold as treasury shares (of the
same or some other Series or Class), reissue for such consideration and on such
terms as they may determine, or cancel any Shares of any Series or Class
reacquired by the Trust at their discretion from time to time.
(ii) All consideration received by the Trust for the issue or sale of
Shares of a particular Series or Class, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors of such Series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series, the Trustees shall allocate them among any
one or more of the Series established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Series for all purposes. No holder of Shares of any
Series shall have any claim on or right to any assets allocated or belonging to
any other Series.
(iii) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series or the appropriate
Class or Classes thereof and all expenses, costs, charges and reserves
attributable to that Series or Class or Classes thereof, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees to and among any one or more of the Series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Series and Classes for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items are capital; and each
such determination and allocation shall be conclusive and binding upon the
Shareholders. The assets of a particular Series of the Trust shall under no
circumstances be charged with liabilities attributable to any other Series or
Class thereof of the Trust. All persons extending credit to, or contracting with
or having any claim against a particular Series or Class of the Trust shall look
only to the assets of that particular Series for payment of such credit,
contract or claim.
(iv) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 7.2 of this Declaration. With respect to any Series
or Class, dividends and distributions on Shares of a particular Series or Class
may be paid with such frequency as the Trustees may determine, which may be
daily or otherwise, pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may determine, to the
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holders of Shares of that Series or Class, from such of the income and capital
gains, accrued or realized, from the assets belonging to that Series, as the
Trustees may determine, after providing for actual and accrued liabilities
belonging to that Series or Class. All dividends and distributions on Shares of
a particular Series or Class shall be distributed pro rata to the Shareholders
of that Series or Class in proportion to the number of Shares of that Series or
Class held by such Shareholders at the time of record established for the
payment of such dividends or distribution.
(v) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a Series or
Class thereof shall be entitled to receive his pro rata share of distributions
of income and capital gains made with respect to such Series or Class net of
expenses. Upon redemption of his Shares or indemnification for liabilities
incurred by reason of his being or having been a Shareholder of a Series or
Class, such Shareholder shall be paid solely out of the funds and property of
such Series of the Trust. Upon liquidation or termination of a Series or Class
thereof of the Trust, Shareholders of such Series or Class thereof shall be
entitled to receive a pro rata share of the net assets of such Series. A
Shareholder of a particular Series of the Trust shall not be entitled to
participate in a derivative or class action on behalf of any other Series or the
Shareholders of any other Series of the Trust.
(vi) On each matter submitted to a vote of Shareholders, all Shares of
all Series and Classes shall vote as a single class; provided, however, that (1)
as to any matter with respect to which a separate vote of any Series or Class is
required by the 1940 Act or is required by attributes applicable to any Series
or Class or is required by any Rule 12b-1 plan, such requirements as to a
separate vote by that Series or Class shall apply, (2) to the extent that a
matter referred to in clause (1) above, affects more than one Class or Series
and the interests of each such Class or Series in the matter are identical,
then, subject to clause (3) below, the Shares of all such affected Classes or
Series shall vote as a single Class; (3) as to any matter which does not affect
the interests of a particular Series or Class, only the holders of Shares of the
one or more affected Series or Classes shall be entitled to vote; and (4) the
provisions of the following sentence shall apply. On any matter that pertains to
any particular Class of a particular Series or to any Class expenses with
respect to any Series which matter may be submitted to a vote of Shareholders,
only Shares of the affected Class or that Series, as the case may be, shall be
entitled to vote except that: (i) to the extent said matter affects Shares of
another Class or Series, such other Shares shall also be entitled to vote, and
in such cases Shares of the affected Class, as the case may be, of such Series
shall be voted in the aggregate together with such other Shares; and (ii) to the
extent that said matter does not affect Shares of a particular Class of such
Series, said Shares shall not be entitled to vote (except where otherwise
required by law or permitted by the Trustees acting in their sole discretion)
even though the matter is submitted to a vote of the Shareholders of any other
Class or Series.
(vii) Except as otherwise provided in this Article V, the Trustees shall
have the power to determine the designations, preferences, privileges, payment
obligations, limitations and rights, including voting and dividend rights, of
each Class and Series of Shares. Subject to compliance
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with the requirements of the 1940 Act, the Trustees shall have the authority to
provide that the holders of Shares of any Series or Class shall have the right
to convert or exchange said Shares into Shares of one or more Series or Classes
of Shares in accordance with such requirements, conditions and procedures as may
be established by the Trustees.
(viii) The establishment and designation of any Series or Classes of
Shares shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences of such Series or Classes, or as otherwise
provided in such instrument. At any time that there are no Shares outstanding of
any particular Series or Class previously established and designated, the
Trustees may by an instrument executed by a majority of their number abolish
that Series or Class and the establishment and designation thereof. Each
instrument referred to in this section shall have the status of an amendment to
this Declaration.
Section 5.12. Assent to Declaration of Trust. Every Shareholder, by
virtue of having become a Shareholder, shall be held to have expressly assented
and agreed to the terms hereof and to have become a party hereto.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. (a) All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed or repurchased Shares may be resold by the Trust. The
Trust may require any Shareholder to pay a sales charge to the Trust, the
underwriter, or any other person designated by the Trustees upon redemption or
repurchase of Shares in such amount and upon such conditions as shall be
determined from time to time by the Trustees.
(b) The Trust shall redeem the Shares of the Trust or any Series or
Class thereof at the price determined as hereinafter set forth, upon the
appropriately verified written application of the record holder thereof (or upon
such other form of request as the Trustees may determine) at such office or
agency as may be designated from time to time for that purpose by the Trustees.
The Trustees may from time to time specify additional conditions, not
inconsistent with the 1940 Act, regarding the redemption of Shares in the
Trust's then effective Prospectus.
Section 6.2. Price. Shares shall be redeemed at a price based on their
net asset value determined as set forth in Section 7.1 hereof as of such time as
the Trustees shall have theretofore prescribed by resolution. In the absence of
such resolution, the redemption price of Shares deposited shall be based on the
net asset value of such Shares next determined as set forth in Section 7.1
hereof after receipt of such application. The amount of any contingent deferred
sales
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charge or redemption fee payable upon redemption of Shares may be deducted from
the proceeds of such redemption.
Section 6.3. Payment. Payment of the redemption price of Shares of the
Trust or any Series or Class thereof shall be made in cash or in property to the
Shareholder at such time and in the manner, not inconsistent with the 1940 Act
or other applicable laws, as may be specified from time to time in the Trust's
then effective Prospectus(es), subject to the provisions of Section 6.4 hereof.
Notwithstanding the foregoing, the Trustees may withhold from such redemption
proceeds any amount arising (i) from a liability of the redeeming Shareholder to
the Trust or (ii) in connection with any Federal or state tax withholding
requirements.
Section 6.4. Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or of
any Series or Class thereof, the rights of Shareholders (including those who
shall have applied for redemption pursuant to Section 6.1 hereof but who shall
not yet have received payment) to have Shares redeemed and paid for by the Trust
or a Series or Class thereof shall be suspended until the termination of such
suspension is declared. Any record holder who shall have his redemption right so
suspended may, during the period of such suspension, by appropriate written
notice of revocation at the office or agency where application was made, revoke
any application for redemption not honored and withdraw any Share certificates
on deposit. The redemption price of Shares for which redemption applications
have not been revoked shall be based on the net asset value of such Shares next
determined as set forth in Section 7.1 after the termination of such suspension,
and payment shall be made within seven (7) days after the date upon which the
application was made plus the period after such application during which the
determination of net asset value was suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
Section 6.6. Redemption of Shareholder's Interest. The Trustees, in
their sole discretion, may cause the Trust to redeem all of the Shares of one or
more Series or Class thereof held by any Shareholder if the value of such Shares
held by such Shareholder is less than the minimum amount established from time
to time by the Trustees.
Section 6.7. Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. (a) If the Trustees shall, at any
time and in good faith, be of the opinion that direct or indirect ownership of
Shares or other securities of the Trust has or may become concentrated in any
Person to an extent which would disqualify the Trust or any Series of
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the Trust as a regulated investment company under the Internal Revenue Code of
1986, then the Trustees shall have the power by lot or other means deemed
equitable by them (i) to call for redemption by any such Person a number, or
principal amount, of Shares or other securities of the Trust or any Series of
the Trust sufficient to maintain or bring the direct or indirect ownership of
Shares or other securities of the Trust or any Series of the Trust into
conformity with the requirements for such qualification and (ii) to refuse to
transfer or issue Shares or other securities of the Trust or any Series of the
Trust to any Person whose acquisition of the Shares or other securities of the
Trust or any Series of the Trust in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in Section 6.1.
(b) The holders of Shares or other securities of the Trust or any Series
of the Trust shall upon demand disclose to the Trustees in writing such
information with respect to direct and indirect ownership of Shares or other
securities of the Trust or any Series of the Trust as the Trustees deem
necessary to comply with the provisions of the Internal Revenue Code of 1986, as
amended, or to comply with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may also reduce the number of outstanding Shares
of the Trust or of any Series of the Trust pursuant to the provisions of Section
7.3.
Section 6.9. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust or a Series
thereof of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Trust or a Series thereof fairly to determine the
value of its net assets, or (iv) during any other period when the Commission may
for the protection of Shareholders of the Trust by order permit suspension of
the right of redemption or postponement of the date of payment or redemption;
provided that applicable rules and regulations of the Commission shall govern as
to whether the conditions prescribed in clauses (ii), (iii), or (iv) exist. Such
suspension shall take effect at such time as the Trust shall specify but not
later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.
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ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The net asset value of each outstanding
Share of the Trust or of each Series or Class thereof shall be determined on
such days and at such time or times as the Trustees may determine. The value of
the assets of the Trust or any Series thereof may be determined (i) by a pricing
service which utilizes electronic pricing techniques based on general
institutional trading, (ii) by appraisal of the securities owned by the Trust or
any Series of the Trust, (iii) in certain cases, at amortized cost, or (iv) by
such other method as shall be deemed to reflect the fair value thereof,
determined in good faith by or under the direction of the Trustees. From the
total value of said assets, there shall be deducted all indebtedness, interest,
taxes, payable or accrued, including estimated taxes on unrealized book profits,
expenses and management charges accrued to the appraisal date, net income
determined and declared as a distribution and all other items in the nature of
liabilities which shall be deemed appropriate, as incurred by or allocated to
the Trust or any Series or Class of the Trust. The resulting amount which shall
represent the total net assets of the Trust or Series or Class thereof shall be
divided by the number of Shares of the Trust or Series or Class thereof
outstanding at the time and the quotient so obtained shall be deemed to be the
net asset value of the Shares of the Trust or Series or Class thereof. The net
asset value of the Shares shall be determined at least once on each business
day, as of the close of regular trading on the New York Stock Exchange or as of
such other time or times as the Trustees shall determine. The power and duty to
make the daily calculations may be delegated by the Trustees to the Investment
Adviser, the Administrator, the Custodian, the Transfer Agent or such other
Person as the Trustees by resolution may determine. The Trustees may suspend the
daily determination of net asset value to the extent permitted by the 1940 Act.
It shall not be a violation of any provision of this Declaration if Shares are
sold, redeemed or repurchased by the Trust at a price other than one based on
net asset value if the net asset value is affected by one or more errors
inadvertently made in the pricing of portfolio securities or in accruing income,
expenses or liabilities.
Section 7.2. Distributions to Shareholders. (a) The Trustees shall from
time to time distribute ratably among the Shareholders of the Trust or of a
Series or Class thereof such proportion of the net profits, surplus (including
paid-in surplus), capital, or assets of the Trust or such Series held by the
Trustees as they may deem proper. Such distributions may be made in cash or
property (including without limitation any type of obligations of the Trust or
Series or Class or any assets thereof), and the Trustees may distribute ratably
among the Shareholders of the Trust or Series or Class thereof additional Shares
of the Trust or Series or Class thereof issuable hereunder in such manner, at
such times, and on such terms as the Trustees may deem proper. Such
distributions may be among the Shareholders of the Trust or Series or Class
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thereof at the time of declaring a distribution or among the Shareholders of the
Trust or Series or Class thereof at such other date or time or dates or times as
the Trustees shall determine. The Trustees may in their discretion determine
that, solely for the purposes of such distributions, Outstanding Shares shall
exclude Shares for which orders have been placed subsequent to a specified time
on the date the distribution is declared or on the next preceding day if the
distribution is declared as of a day on which Boston banks are not open for
business, all as described in the then effective prospectus under the Securities
Act of 1933. The Trustees may always retain from the net profits such amount as
they may deem necessary to pay the debts or expenses of the Trust or a Series or
Class thereof or to meet obligations of the Trust or a Series or Class thereof,
or as they may deem desirable to use in the conduct of its affairs or to retain
for future requirements or extensions of the business. The Trustees may adopt
and offer to Shareholders such dividend reinvestment plans, cash dividend payout
plans or related plans as the Trustees shall deem appropriate. The Trustees may
in their discretion determine that an account administration fee or other
similar charge may be deducted directly from the income and other distributions
paid on Shares to a Shareholder's account in each Series or Class.
(b) Inasmuch as the computation of net income and gains for Federal
income tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or a Series or Class thereof to avoid or reduce liability for
taxes.
Section 7.3. Determination of Net Income; Constant Net Asset Value;
Reduction of Outstanding Shares. Subject to Section 5.11 hereof, the net income
of the Series and Classes thereof of the Trust shall be determined in such
manner as the Trustees shall provide by resolution. Expenses of the Trust or of
a Series or Class thereof, including the advisory or management fee, shall be
accrued each day. Each Class shall bear only expenses relating to its Shares and
an allocable share of Series expenses in accordance with such policies as may be
established by the Trustees from time to time and as are not inconsistent with
the provisions of this Declaration or of any applicable document filed by the
Trust with the Commission or of the Internal Revenue Code of 1986, as amended.
Such net income may be determined by or under the direction of the Trustees as
of the close of trading on the New York Stock Exchange on each day on which such
market is open or as of such other time or times as the Trustees shall
determine, and, except as provided herein, all the net income of any Series or
Class, as so determined, may be declared as a dividend on the Outstanding Shares
of such Series or Class. If, for any reason, the net income of any Series or
Class determined at any time is a negative amount, or for any other reason, the
Trustees shall have the power with respect to such Series or Class (i) to offset
each Shareholder's pro rata share of such negative amount from the accrued
dividend account of such Shareholder, or (ii) to reduce the number of
Outstanding Shares of such Series or Class by reducing the number of Shares in
the account of such Shareholder by that number of full and fractional Shares
which represents the amount of such excess negative net income, or (iii) to
cause to be recorded on the books of the Trust an asset account in the amount of
such negative net income, which account may be reduced by the amount, provided
that the same shall thereupon
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become the property of the Trust with respect to such Series or Class and shall
not be paid to any Shareholder, of dividends declared thereafter upon the
Outstanding Shares of such Series or Class on the day such negative net income
is experienced, until such asset account is reduced to zero. The Trustees shall
have full discretion to determine whether any cash or property received shall be
treated as income or as principal and whether any item of expense shall be
charged to the income or the principal account, and their determination made in
good faith shall be conclusive upon the Shareholders. In the case of stock
dividends received, the Trustees shall have full discretion to determine, in the
light of the particular circumstances, how much if any of the value thereof
shall be treated as income, the balance, if any, to be treated as principal.
Section 7.4. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VII, but subject to Section 5.11
hereof, the Trustees may prescribe, in their absolute discretion, such other
bases and times for determining the per Share net asset value of the Shares of
the Trust or a Series or Class thereof or net income of the Trust or a Series or
Class thereof, or the declaration and payment of dividends and distributions as
they may deem necessary or desirable. Without limiting the generality of the
foregoing, the Trustees may establish several Series or Classes of Shares in
accordance with Section 5.11, and declare dividends thereon in accordance with
Section 5.11(d)(iv).
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A SERIES OR CLASS;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article VIII.
Section 8.2. Termination of the Trust or a Series or a Class. The Trust
or any Series or Class thereof may be terminated by (i) the affirmative vote of
the holders of not less than two-thirds of the Outstanding Shares entitled to
vote and present in person or by proxy at any meeting of Shareholders of the
Trust or the appropriate Series or Class thereof, (ii) by an instrument or
instruments in writing without a meeting, consented to by the holders of
two-thirds of the Outstanding Shares of the Trust or a Series or Class thereof;
provided, however, that, if such termination as described in clauses (i) and
(ii) is recommended by the Trustees, the vote or written consent of the holders
of a majority of the Outstanding Shares of the Trust or a Series or Class
thereof entitled to vote shall be sufficient authorization, or (iii) notice to
Shareholders by means of an instrument in writing signed by a majority of the
Trustees, stating that a majority of the Trustees has determined that the
continuation of the Trust or a Series or a Class thereof is not in the best
interest of such Series or a Class, the Trust or their respective shareholders
as a result of such factors or events adversely affecting the ability of such
Series or a Class or the Trust to conduct its business and operations in an
economically viable manner. Such factors and events
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may include (but are not limited to) the inability of a Series or Class or the
Trust to maintain its assets at an appropriate size, changes in laws or
regulations governing the Series or Class or the Trust or affecting assets of
the type in which such Series or Class or the Trust invests or economic
developments or trends having a significant adverse impact on the business or
operations of such Series or Class or the Trust. Upon the termination of the
Trust or the Series or Class,
(i) The Trust, Series or Class shall carry on no business except
for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust, Series or Class and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust, Series or
Class shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust, Series or Class, collect its
assets, sell, convey, assign, exchange, transfer or otherwise dispose of
all or any part of the remaining Trust Property or Trust Property
allocated or belonging to such Series or Class to one or more persons at
public or private sale for consideration which may consist in whole or
in part of cash, securities or other property of any kind, discharge or
pay its liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
Property or Trust Property allocated or belonging to such Series or
Class that requires Shareholder approval in accordance with Section 8.4
hereof shall receive the approval so required.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property or the remaining
property of the terminated Series or Class, in cash or in kind or partly
each, among the Shareholders of the Trust or the Series or Class
according to their respective rights.
(b) After termination of the Trust, Series or Class and distribution to
the Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust and file with the Office of the
Secretary of The Commonwealth of Massachusetts an instrument in writing setting
forth the fact of such termination, and the Trustees shall thereupon be
discharged from all further liabilities and duties with respect to the Trust or
the terminated Series or Class, and the rights and interests of all Shareholders
of the Trust or the terminated Series or Class shall thereupon cease.
Section 8.3. Amendment Procedure. (a) This Declaration may be amended by
a vote of the holders of a majority of the Shares outstanding and entitled to
vote or by any instrument in writing, without a meeting, signed by a majority of
the Trustees and consented to by the holders of a majority of the Shares
outstanding and entitled to vote.
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(b) This Declaration may be amended by a vote of a majority of Trustees,
without approval or consent of the Shareholders, except that no amendment can be
made by the Trustees to impair any voting or other rights of shareholders
prescribed by federal or state law. Without limiting the foregoing, the Trustees
may amend this Declaration without the approval or consent of Shareholders (i)
to change the name of the Trust or any Series, (ii) to add to their duties or
obligations or surrender any rights or powers granted to them herein; (iii) to
cure any ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein or to make any other provisions
with respect to matters or questions arising under this Declaration which will
not be inconsistent with the provisions of this Declaration; and (iv) to
eliminate or modify any provision of this Declaration which (a) incorporates,
memorializes or sets forth an existing requirement imposed by or under any
Federal or state statute or any rule, regulation or interpretation thereof or
thereunder or (b) any rule, regulation, interpretation or guideline of any
federal or state agency, now or hereafter in effect, including without
limitation, requirements set forth in the 1940 Act and the rules and regulations
thereunder (and interpretations thereof), to the extent any change in applicable
law liberalizes, eliminates or modifies any such requirements, but the Trustees
shall not be liable for failure to do so.
(c) The Trustees may also amend this Declaration without the approval or
consent of Shareholders if they deem it necessary to conform this Declaration to
the requirements of applicable Federal or state laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code of 1986, as amended, or if requested or required to do so by any
Federal agency or by a state Blue Sky commissioner or similar official, but the
Trustees shall not be liable for failing so to do.
(d) Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(e) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Trustees or by the
Shareholders as aforesaid or a copy of the Declaration, as amended, and executed
by a majority of the Trustees, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
Section 8.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series may merge or consolidate into any other corporation, association, trust
or other organization or may sell, lease or exchange all or substantially all of
the Trust Property or Trust Property allocated or belonging to such Series,
including its good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Shareholders called for
the purpose by the affirmative vote of the holders of two-thirds of the Shares
of the Trust or such Series outstanding and entitled to vote and present in
person or by proxy at a meeting of Shareholders, or by an instrument or
instruments in writing without a meeting, consented to by the holders of
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two-thirds of the Shares of the Trust or such Series; provided, however, that,
if such merger, consolidation, sale, lease or exchange is recommended by the
Trustees, the vote or written consent of the holders of a majority of the
Outstanding Shares of the Trust or such Series entitled to vote shall be
sufficient authorization; and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to Massachusetts law.
Section 8.5. Incorporation. The Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other organization
to take over all or any portion of the Trust Property or the Trust Property
allocated or belonging to such Series or to carry on any business in which the
Trust shall directly or indirectly have any interest, and to sell, convey and
transfer all or any portion of the Trust Property or the Trust Property
allocated or belonging to such Series to any such corporation, trust,
association or organization in exchange for the shares or securities thereof or
otherwise, and to lend money to, subscribe for the shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust or such Series holds or is about to acquire
shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring all or a portion of the Trust Property to such organization or
entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders of
each Series a written financial report of the transactions of the Trust and
Series thereof, including financial statements which shall at least annually be
certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
Section 10.1. Execution and Filing. This Declaration and any amendment
hereto shall be filed in the office of the Secretary of The Commonwealth of
Massachusetts and in such other places as may be required under the laws of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Each amendment so filed shall be
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accompanied by a certificate signed and acknowledged by a Trustee stating that
such action was duly taken in a manner provided herein, and unless such
amendment or such certificate sets forth some later time for the effectiveness
of such amendment, such amendment shall be effective upon its execution. A
restated Declaration, integrating into a single instrument all of the provisions
of the Declaration which are then in effect and operative, may be executed from
time to time by a majority of the Trustees and filed with the Secretary of The
Commonwealth of Massachusetts. A restated Declaration shall, upon execution, be
conclusive evidence of all amendments contained therein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
Section 10.2. Governing Law. This Declaration is executed by the
Trustees and delivered in The Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
Section 10.3. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 10.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying (a) the number or identity of Trustees or Shareholders,
(b) the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Shareholders, (d) the fact
that the number of Trustees or Shareholders present at any meeting or executing
any written instrument satisfies the requirements of this Declaration, (e) the
form of any By-laws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
Section 10.5. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986 or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
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IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 15th day of November, 1995.
/s/ Edward J. Boudreau, Jr.
Edward J. Boudreau, Jr.,
as Trustee and not individually,
34 Swan Road
Winchester, Massachusetts 01890
/s/ Richard S. Scipione
Richard S. Scipione,
as Trustee and not individually,
4 Sentinel Road
Hingham, Massachusetts 02043
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THE COMMONWEALTH OF MASSACHUSETTS
SUFFOLK COUNTY, MASSACHUSETTS
November 15, 1995
Then personally appeared the above-named person, Edward J. Boudreau,
Jr., who acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ Ann Marie Kalapinski
Ann Marie Kalapinski
Notary Public
My commission expires:
10/20/00
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THE COMMONWEALTH OF MASSACHUSETTS
SUFFOLK COUNTY, MASSACHUSETTS
November 15, 1995
Then personally appeared the above-named person, Richard S. Scipione,
who acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ Ann Marie Kalapinski
Ann Marie Kalapinski
Notary Public
My commission expires:
10/20/00
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BY-LAWS
OF
JOHN HANCOCK DECLARATION TRUST
Dated November 15, 1995
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ARTICLE I
DEFINITIONS
All capitalized terms have the respective meanings given them in the
Declaration of Trust of John Hancock Declaration Trust dated November 15, 1995,
as amended or restated from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the
principal office of the Trust shall be in Boston, Massachusetts.
Section 2. Other Offices. The Trust may have offices in such other
places without as well as within The Commonwealth of Massachusetts as the
Trustees may from time to time determine.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders of the Trust or a
Series or Class thereof shall be held as provided in the Declaration of Trust at
such place within or without The Commonwealth of Massachusetts as the Trustees
shall designate. The holders of a majority the Outstanding Shares of the Trust
or a Series or Class thereof present in person or by proxy and entitled to vote
shall constitute a quorum at any meeting of the Shareholders of the Trust or a
Series or Class thereof.
Section 2. Notice of Meetings. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail or telegraphic means to each Shareholder at his
address as recorded on the register of the Trust mailed at least seven (7) days
before the meeting, provided, however, that notice of a meeting need not be
given to a Shareholder to whom such notice need not be given under the proxy
rules of the Commission under the 1940 Act and the Securities Exchange Act of
1934, as amended. Only the business stated in the notice of the meeting shall be
considered at such meeting. Any adjourned meeting may be held as adjourned
without further notice. No notice need be given to any Shareholder who shall
have failed to inform the Trust of his current address or if a written waiver of
notice, executed before or after the meeting by the Shareholder or his attorney
thereunto authorized, is filed with the records of the meeting.
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Section 3. Record Date for Meetings and Other Purposes. For the purpose
of determining the Shareholders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer books for such
period, not exceeding sixty (60) days, as the Trustees may determine; or without
closing the transfer books the Trustees may fix a date not more than ninety (90)
days prior to the date of any meeting of Shareholders or distribution or other
action as a record date for the determination of the persons to be treated as
Shareholders of record for such purposes, except for dividend payments which
shall be governed by the Declaration of Trust.
Section 4. Proxies. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken. A
proxy shall be deemed signed if the shareholder's name is placed on the proxy
(whether by manual signature, typewriting or telegraphic transmission) by the
shareholder or the shareholder's attorney-in-fact. Proxies may be solicited in
the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. Each whole share shall be
entitled to one vote as to any matter on which it is entitled by the Declaration
of Trust to vote and fractional shares shall be entitled to a proportionate
fractional vote. When any Share is held jointly by several persons, any one of
them may vote at any meeting in person or by proxy in respect of such Share, but
if more than one of them shall be present at such meeting in person or by proxy,
and such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy,
including a photographic or similar reproduction thereof and a telegram,
cablegram, wireless or similar transmission thereof, purporting to be executed
by or on behalf of a Shareholder shall be deemed valid unless challenged at or
prior to its exercise, and the burden of proving invalidity shall rest on the
challenger. If the holder of any such Share is a minor or a person of unsound
mind, and subject to guardianship or the legal control of any other person as
regards the charge or management of such Share, he may vote by his guardian or
such other person appointed or having such control, and such vote may be given
in person or by proxy. The placing of a Shareholder's name on a proxy pursuant
to telephonic or electronically transmitted instructions obtained pursuant to
procedures reasonably designed to verify that such instructions have been
authorized by such Shareholder shall constitute execution of such proxy by or on
behalf of such Shareholder.
Section 5. Abstentions and Broker Non-Votes. Outstanding Shares
represented in person or by proxy (including Shares which abstain or do not vote
with respect to one or more of any proposals presented for Shareholder approval)
will be counted for purposes of determining whether a quorum is present at a
meeting. Abstentions will be treated as Shares that are present and entitled to
vote for purposes of determining the number of Shares that are present and
entitled to vote with respect to any particular proposal, but will not be
counted as a vote in favor of such proposal. If a broker or nominee holding
Shares in "street name" indicates on the proxy that it
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does not have discretionary authority to vote as to a particular proposal, those
Shares will not be considered as present and entitled to vote with respect to
such proposal.
Section 6. Inspection of Records. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted shareholders of
a Massachusetts business corporation.
Section 7. Action without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Outstanding Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law) consent to the action in writing and the written consents are
filed with the records of the meetings of Shareholders. Such consents shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the President,
the Chairman or by any one of the Trustees, at the time being in office. Notice
of the time and place of each meeting other than regular or stated meetings
shall be given by the Secretary or an Assistant Secretary or by the officer or
Trustee calling the meeting and shall be mailed to each Trustee at least two
days before the meeting, or shall be given by telephone, cable or wireless to
each Trustee at his business address, or personally delivered to him at least
one day before the meeting. Such notice may, however, be waived by any Trustee.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him before or after the meeting, is filed with the records
of the meeting, or to any Trustee who attends the meeting without protesting
prior thereto or at its commencement the lack of notice to him. A notice or
waiver of notice need not specify the purpose of any meeting. The Trustees may
meet by means of a telephone conference circuit or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time and participation by such means shall be deemed to
have been held at a place designated by the Trustees at the meeting.
Participation in a telephone conference meeting shall constitute presence in
person at such meeting. Any action required or permitted to be taken at any
meeting of the Trustees may be taken by the Trustees without a meeting if a
majority of the Trustees consent to the action in writing and the written
consents are filed with the records of the Trustees' meetings. Such consents
shall be treated as a vote for all purposes.
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Section 2. Quorum and Manner of Acting. A majority of the Trustees shall
be present in person at any regular or special meeting of the Trustees in order
to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration of Trust or these By-laws)
the act of a majority of the Trustees present at any such meeting, at which a
quorum is present, shall be the act of the Trustees. In the absence of a quorum,
a majority of the Trustees present may adjourn the meeting from time to time
until a quorum shall be present. Notice of an adjourned meeting need not be
given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than two (2) members to hold office at the
pleasure of the Trustees, which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust or a Series thereof, and such
other powers of the Trustees as the Trustees may, from time to time, delegate to
them except those powers which by law, the Declaration of Trust or these By-laws
they are prohibited from delegating. The Trustees may also elect from their own
number other Committees from time to time; the number composing such Committees,
the powers conferred upon the same (subject to the same limitations as with
respect to the Executive Committee) and the term of membership on such
Committees to be determined by the Trustees. The Trustees may designate a
chairman of any such Committee. In the absence of such designation the Committee
may elect its own Chairman.
Section 2. Meetings, Quorum and Manner of Acting. The Trustees may (1)
provide for stated meetings of any Committee, (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the office of the Trust.
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ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
Chairman, a President, a Treasurer and a Secretary, who shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as the
business of the Trust may require, including one or more Vice Presidents, one or
more Assistant Secretaries, and one or more Assistant Treasurers. The Trustees
may delegate to any officer or committee the power to appoint any subordinate
officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration of Trust or these By-laws, the President, the
Treasurer, the Secretary and any other officer shall each hold office at the
pleasure of the Board of Trustees or until his successor shall have been duly
elected and qualified. The Secretary and the Treasurer may be the same person. A
Vice President and the Treasurer or a Vice President and the Secretary may be
the same person, but the offices of Vice President, Secretary and Treasurer
shall not be held by the same person. The President shall hold no other office.
Except as above provided, any two offices may be held by the same person. Any
officer may be but none need be a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer with or without cause, by a vote of a
majority of the Trustees then in office. Any officer or agent appointed by an
officer or committee may be removed with or without cause by such appointing
officer or committee.
Section 4. Powers and Duties of the Chairman. The Chairman shall preside
at the meetings of the Shareholders and of the Trustees. He may call meetings of
the Trustees and of any committee thereof whenever he deems it necessary. He
shall be the Chief Executive Officer of the Trust and shall have, with the
President, general supervision over the business and policies of the Trust,
subject to the limitations imposed upon the President, as provided in Section 5
of this Article VI.
Section 5. Powers and Duties of the Vice Chairman. The Trustees may, but
need not, appoint one or more Vice Chairman of the Trust. A Vice Chairman shall
be an executive officer of the Trust and shall have the powers and duties of a
Vice President of the Trust as provided in Section 6 of this Article VI. The
Vice Chairman shall perform such duties as may be assigned to him or her from
time to time by the Trustees or the Chairman.
Section 6. Powers and Duties of the President. The President shall
preside at all meetings of the Shareholders in the absence of the Chairman.
Subject to the control of the Trustees and to the control of any Committees of
the Trustees, within their respective spheres, as provided by the Trustees, he
shall at all times exercise a general supervision and direction over the affairs
of the Trust. He shall have the power to employ attorneys and counsel for the
Trust or any Series or
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Class thereof and to employ such subordinate officers, agents, clerks and
employees as he may find necessary to transact the business of the Trust or any
Series or Class thereof. He shall also have the power to grant, issue, execute
or sign such powers of attorney, proxies or other documents as may be deemed
advisable or necessary in furtherance of the interests of the Trust or any
Series thereof. The President shall have such other powers and duties, as from
time to time may be conferred upon or assigned to him by the Trustees.
Section 7. Powers and Duties of Vice Presidents. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees, shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees and the President.
Section 8. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. He shall deliver
all funds of the Trust or any Series or Class thereof which may come into his
hands to such Custodian as the Trustees may employ. He shall render a statement
of condition of the finances of the Trust or any Series or Class thereof to the
Trustees as often as they shall require the same and he shall in general perform
all the duties incident to the office of a Treasurer and such other duties as
from time to time may be assigned to him by the Trustees. The Treasurer shall
give a bond for the faithful discharge of his duties, if required so to do by
the Trustees, in such sum and with such surety or sureties as the Trustees shall
require.
Section 9. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Trustees and of the Shareholders in proper
books provided for that purpose; he shall have custody of the seal of the Trust;
he shall have charge of the Share transfer books, lists and records unless the
same are in the charge of a transfer agent. He shall attend to the giving and
serving of all notices by the Trust in accordance with the provisions of these
By-laws and as required by law; and subject to these By-laws, he shall in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Trustees.
Section 10. Powers and Duties of Assistant Officers. In the absence or
disability of the Treasurer, any officer designated by the Trustees shall
perform all the duties, and may exercise any of the powers, of the Treasurer.
Each officer shall perform such other duties as from time to time may be
assigned to him by the Trustees. Each officer performing the duties and
exercising the powers of the Treasurer, if any, and any Assistant Treasurer,
shall give a bond for the faithful discharge of his duties, if required so to do
by the Trustees, in such sum and with such surety or sureties as the Trustees
shall require.
Section 11. Powers and Duties of Assistant Secretaries. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all the duties, and may
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exercise any of the powers, of the Secretary. Each Assistant Secretary shall
perform such other duties as from time to time may be assigned to him by the
Trustees.
Section 12. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Declaration of
Trust, the compensation of the officers and Trustees and members of an advisory
board shall be fixed from time to time by the Trustees or, in the case of
officers, by any Committee or officer upon whom such power may be conferred by
the Trustees. No officer shall be prevented from receiving such compensation as
such officer by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of each Series of the Trust shall begin on the first day
of January in each year and shall end on the last day of December in each year,
provided, however, that the Trustees may from time to time change the fiscal
year of each Series. The taxable year of each Series of the Trust shall be as
determined by the Trustees from time to time.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe but the
absence of a seal shall not impair the validity or execution of any document.
ARTICLE IX
SUFFICIENCY AND WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration of Trust or these By-laws, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. A notice shall be deemed to
have been sent by mail, telegraph, cable or wireless for the purposes of these
By-laws when it has been delivered to a representative of any company holding
itself out as capable of sending notice by such means with instructions that it
be so sent.
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ARTICLE X
AMENDMENTS
These By-laws, or any of them, may be altered, amended or repealed, or
new By-laws may be adopted by a vote of a majority of the Trustees, provided,
however, that no By-law may be amended, adopted or repealed by the Trustees if
such amendment, adoption or repeal requires, pursuant to federal or state law,
the Declaration of Trust or these By-laws, a vote of the Shareholders.
END OF BY-LAWS
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SCHEDULE OF OMITTED INVESTMENT MANAGEMENT CONTRACTS
Due to the substantial similarity of Investment Management Contracts
between John Hancock Advisers, Inc. and the John Hancock Declaration Trust (the
"Trust") on behalf of each of its funds, the following form of Investment
Management Contract and this schedule of omitted documents, listing all material
differences between the Investment Management Contracts, is filed in accordance
with the requirements of Rule 8b-31 under the Investment Company Act of 1940.
1. Name of Series: John Hancock V.A. Emerging Equities Fund
Advisory Fee Schedule: 0.75% of average daily net assets.
2. Name of Series: John Hancock V.A. Discovery Fund
Advisory Fee Schedule: 0.75% of average daily net assets.
3. Name of Series: John Hancock V.A. International Fund
Advisory Fee Schedule: 0.90% of average daily net assets.
4. Name of Series: John Hancock V.A. 500 Index Fund
Advisory Fee Schedule: 0.35% of average daily net assets.
5. Name of Series: John Hancock V.A. Diversified Core Equity Fund
Advisory Fee Schedule: 0.70% of average daily net assets.
6. Name of Series: John Hancock V.A. Sovereign Investors Fund
Advisory Fee Schedule: 0.60% of average daily net assets.
7. Name of Series: John Hancock V.A. Sovereign Bond Fund
Advisory Fee Schedule: 0.50% of average daily net assets.
8. Name of Series: John Hancock V.A. Strategic Income Fund
Advisory Fee Schedule: 0.60% of average daily net assets.
9. Name of Series: John Hancock V.A. Global Income Fund
Advisory Fee Schedule: 0.75% of average daily net assets.
10. Name of Series: John Hancock V.A. Money Market Fund
Advisory Fee Schedule: 0.50% of average daily net assets.
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JOHN HANCOCK V.A. _______ FUND
(a series of John Hancock Declaration Trust)
Form of
Investment Management Contract
Dated: ______ __, 199__
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JOHN HANCOCK V.A. _____ FUND
(a series of John Hancock Declaration Trust)
101 Huntington Avenue
Boston, Massachusetts
_________, 199__
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Form of
Investment Management Contract
Ladies and Gentlemen:
John Hancock Declaration Trust (the "Trust") of which John Hancock V.A.
______ Fund (the "Fund") is a series, has been organized as a business trust
under the laws of the Commonwealth of Massachusetts to engage in the business of
an investment company. The Trust's shares of beneficial interest are currently
divided into ten series (including the Fund), each series representing the
entire undivided interest in a separate portfolio of assets. Series may be
established or terminated from time to time by action of the Board of Trustees
of the Trust. This Agreement relates solely to the Fund.
The Board of Trustees of the Trust (the "Trustees") has selected John
Hancock Advisers, Inc. (the "Adviser") to provide overall investment advice and
management for the Fund, and to provide certain other services, as more fully
set forth below, and the Adviser is willing to provide such advice, management
and services under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund, agree as
follows:
1. Delivery of Documents. The Trust has furnished the Adviser with copies,
properly certified or otherwise authenticated, of each of the following:
(a) Declaration of Trust of the Trust, dated November 15, 1995, (the
"Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as the investment
adviser for the Fund and approving the form of this Agreement and
the resolution of the Fund's sole shareholder approving this
Agreement.
(d) Commitments, limitations and undertakings made by the Fund to state
securities or "blue sky" authorities for the purpose of qualifying
shares of the Fund for sale in such states; and
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(e) The Trust's Code of Ethics.
The Trust will furnish the Adviser from time to time with copies, properly
certified or otherwise authenticated, of all amendments of or supplements to the
foregoing, if any.
2. Investment and Management Services. The Adviser will use its best efforts to
provide to the Fund continuing and suitable investment programs with respect to
investments, consistent with the investment objectives, policies and
restrictions of the Fund. In the performance of the Adviser's duties hereunder,
subject always (x) to the provisions contained in the documents delivered to the
Adviser pursuant to Section 1, as each of the same may from time to time be
amended or supplemented, and (y) to the limitations set forth in the Fund's
then-current Prospectus and Statement of Additional Information included in the
registration statement of the Trust as in effect from time to time under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended (the "1940 Act"), the Adviser will, at its own expense:
(a) furnish the Fund with advice and recommendations, consistent with
the investment objectives, policies and restrictions of the Fund,
with respect to the purchase, holding and disposition of portfolio
securities including the purchase and sale of options, alone or in
consultation with any sub-adviser or sub-advisers appointed
pursuant to this Agreement and subject to the provisions of any
sub-investment management contract respecting the responsibilities
of such sub-adviser or sub-advisers;
(b) advise the Fund in connection with policy decisions to be made by
the Trustees or any committee thereof with respect to the Fund's
investments and, as requested, furnish the Fund with research,
economic and statistical data in connection with the Fund's
investments and investment policies;
(c) provide administration of the day-to-day investment operations of
the Fund;
(d) submit such reports relating to the valuation of the Fund's
securities as the Trustees may reasonably request;
(e) assist the Fund in any negotiations relating to the Fund's
investments with issuers, investment banking firms, securities
brokers or dealers and other institutions or investors;
(f) consistent with provisions of Section 8 of this Agreement, place
orders for the purchase, sale or exchange of portfolio securities
with brokers or dealers selected by the Adviser, provided that in
connection with the placing of such orders and the selection of
such brokers or dealers the Adviser shall seek to obtain execution
and pricing within the policy guidelines determined by the Trustees
and set forth in the Prospectus and Statement of Additional
Information of the Fund as in effect from time to time;
(g) provide office space and equipment and supplies, the use of
accounting equipment when required, and necessary executive,
clerical and secretarial personnel for the administration of the
affairs of the Fund;
(h) from time to time or at any time requested by the Trustees, make
reports to the Fund of the Adviser's performance of the foregoing
services and furnish advice and recommendations with respect to
other aspects of the business and affairs of the Fund;
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(i) maintain all books and records with respect to the Fund's
securities transactions required by the 1940 Act, including
sub-paragraphs (b)(5), (6), (9) and (10) and paragraph (f) of Rule
31a-1 thereunder (other than those records being maintained by the
Fund's custodian or transfer agent) and preserve such records for
the periods prescribed therefor by Rule 31a-2 of the 1940 Act (the
Adviser agrees that such records are the property of the Fund and
will be surrendered to the Fund promptly upon request therefor);
(j) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as the
Adviser may deem necessary or useful in the discharge of the
Adviser's duties hereunder;
(k) oversee and use the Adviser's best efforts to assure the
performance of the activities and services of the custodian,
transfer agent or other similar agents retained by the Fund; and
(l) give instructions to the Fund's custodian as to deliveries of
securities to and from such custodian and transfer of payment of
cash for the account of the Fund.
3. Sub-advisers. The Adviser may engage one or more investment advisers which
are either registered as such or specifically exempt from registration under the
1940 Act to act as sub-advisers to provide, with respect to the Fund, certain
services set forth in Section 2 of this Agreement, all as shall be set forth in
a written sub-advisory contract to which the Trust and the Adviser shall be
parties. The sub-advisory contract shall be subject to approval by the vote of a
majority of the Trustees of the Trust who are not interested persons of the
Adviser, the sub-adviser or of the Trust, cast in person at a meeting called
for the purpose of voting on such approval and by the vote of a majority of the
outstanding voting securities of the Fund and otherwise consistent with the
terms of the 1940 Act. Any fee, compensation or expense to be paid to any
sub-adviser shall be paid by the Adviser, and no obligation to the sub-adviser
shall be incurred on the Fund's or Trust's behalf, except as agreed upon by the
Trustees of the Trust and otherwise consistent with the terms of the 1940 Act.
4. Expenses paid by the Adviser. The Adviser will pay:
(a) the compensation and expenses of all officers and employees of the
Fund;
(b) the expenses of office, rent, telephone and other utilities, office
furniture, equipment, supplies and other expenses of the Fund;
(c) any other expenses incurred by the Adviser in connection with the
performance of its duties hereunder; and
(d) premiums for such insurance as may be agreed upon between the
Adviser and the Trustees.
5. Expenses of the Fund Not Paid by the Adviser. The Adviser will not be
required to pay any expenses which this Agreement does not expressly make
payable by it. In particular, and without limiting the generality of the
foregoing but subject to the provisions of Section 4, the Adviser will not be
required to pay under this Agreement:
(a) the expenses of organizing the Trust and the Fund (including
without limitation legal, accounting and auditing fees and expenses
incurred in connection with the matters
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referred to in this clause (a)), of initially registering the
shares of the Trust under the Securities Act of 1933, as amended,
and of qualifying the shares for sale under state securities laws
for the initial offering and sale of shares;
(b) the compensation and expenses of Trustees who are not interested
persons (as used in this Agreement such term shall have the meaning
specified in the 1940 Act) of the Adviser, and of independent
advisers, independent contractors, consultants, managers and other
unaffiliated agents employed by the Fund other than through the
Adviser;
(c) legal (including an allocable portion of the cost of its employees
rendering legal services to the Fund), accounting and auditing fees
and expenses of the Fund;
(d) the fees and disbursements of custodians and depositories of the
Fund's assets, transfer agents, disbursing agents, plan agents and
registrars;
(e) taxes and governmental fees assessed against the Fund's assets and
payable by the Fund;
(f) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the Fund;
(g) brokers' commissions and underwriting fees; and
(h) the expense of periodic calculations of the net asset value of the
shares of the Fund.
6. Compensation of the Adviser. For all services to be rendered, facilities
furnished and expenses paid or assumed by the Adviser as herein provided, the
Adviser shall be entitled to a fee, paid monthly in arrears, equal to ___% of
the average daily net assets of the Fund for the preceding month.
The "average daily net assets" of the Fund shall be determined on the basis set
forth in the Fund's Prospectus or otherwise consistent with the 1940 Act and the
regulations promulgated thereunder. The Adviser will receive a pro-rata portion
of such monthly fee for any periods in which the Adviser serves as investment
adviser to the Fund for less than a full month. On any day that the net asset
value calculation is suspended as specified in the Fund's Prospectus, the net
asset value for purposes of calculating the advisory fee shall be calculated as
of the date last determined.
In the event that normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of any limitation imposed by the
law of a state where the Fund is registered to sell shares of beneficial
interest, the fee payable to the Adviser will be reduced to the extent required
by law, and the Adviser will make any arrangements that the Adviser is required
by law to make.
In addition, the Adviser may agree not to impose all or a portion of its fee (in
advance of the time its fee would otherwise accrue) and/or undertake to make any
other payments or arrangements necessary to limit the fund's expenses to any
level the Adviser may specify. Any fee reduction or undertaking shall constitute
a binding modification of this agreement while it is in effect but may be
discontinued or modified prospectively by the adviser at any time.
7. Other Activities of the Adviser and Its Affiliates. Nothing herein contained
shall prevent the Adviser or any affiliate or associate of the Adviser from
engaging in any other business or
4
<PAGE>
from acting as investment adviser or investment manager for any other person or
entity, whether or not having investment policies or portfolios similar to the
Fund's; and it is specifically understood that officers, directors and employees
of the Adviser and those of its parent company, John Hancock Mutual Life
Insurance Company, or other affiliates may continue to engage in providing
portfolio management services and advice to other investment companies, whether
or not registered, to other investment advisory clients of the Adviser or of its
affiliates and to said affiliates themselves.
8. Avoidance of Inconsistent Position. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Adviser nor any of
its investment management subsidiaries, nor any of the Adviser's or such
investment management subsidiaries' directors, officers or employees will act as
principal or agent or receive any commission except as may be permitted by the
1940 Act and rules and regulations promulgated thereunder. If any occasions
shall arise in which the Adviser advises persons concerning the shares of the
Fund, the Adviser will act solely on its own behalf and not in any way on behalf
of the Fund.
Nothing herein contained shall limit or restrict the Adviser or any of its
officers, affiliates or employees from buying, selling or trading in any
securities for its or their own account or accounts. The Fund acknowledges that
the Adviser and its officers, affiliates, and employees, and its other clients
may at any time have, acquire, increase, decrease or dispose of positions in
investments which are at the same time being acquired or disposed of hereunder.
The Adviser shall have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers, affiliates or
employees may acquire for its or their own accounts or for the account of
another client, if, in the sole discretion of the Adviser, it is not feasible or
desirable to acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from purchasing or
recommending the purchase of a particular security for one or more funds or
clients while other funds or clients may be selling the same security.
9. No Partnership or Joint Venture. Neither the Trust, the Fund, nor the Adviser
are partners of or joint venturers with each other and nothing herein shall be
construed so as to make them such partners or joint venturers or impose any
liability as such on any of them.
10. Name of the Trust and Fund. The Trust and the Fund may use the name "John
Hancock" or any name or names derived from or similar to the names "John Hancock
Advisers, Inc." or "John Hancock Mutual Life Insurance Company" only for so long
as this Agreement (or similar agreement with John Hancock Mutual Life Insurance
Company or any of its affiliates or subsidiaries) remains in effect. At such
time as this Agreement or such other agreement shall no longer be in effect, the
Fund will (to the extent that it lawfully can) cease to use such a name or any
other name indicating that the Fund is advised by or otherwise connected with
the Adviser. The Fund acknowledges that it has adopted the name "John Hancock
V.A. _______ Fund" through permission of John Hancock Mutual Life Insurance
Company, a Massachusetts insurance company, and agrees that John Hancock Mutual
Life Insurance Company reserves to itself and any successor to its business the
right to grant the non-exclusive right to use the name "John Hancock" or any
similar name or names to any other corporation or entity, including but not
limited to any investment company of which John Hancock Mutual Life Insurance
Company or any subsidiary or affiliate thereof shall be the investment adviser.
5
<PAGE>
11. Limitation of Liability of the Adviser. The Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement. Any person, even though also
employed by the Adviser, who may be or become an employee of and paid by the
Fund shall be deemed, when acting within the scope of his employment by the
Fund, to be acting in such employment solely for the Fund and not as the
Adviser's employee or agent.
12. Duration and Termination of this Agreement. This Agreement shall remain in
force until the second anniversary of the date upon which this Agreement was
executed by the parties hereto, and from year to year thereafter, but only so
long as such continuance is specifically approved at least annually by (a) a
majority of the Trustees who are not interested persons of the Adviser or (other
than as Board Members) of the Fund, cast in person at a meeting called for the
purpose of voting on such approval, and (b) either (i) the Trustees or (ii) a
majority of the outstanding voting securities of the Fund. This Agreement may,
on 60 days' written notice, be terminated at any time without the payment of any
penalty by the vote of a majority of the outstanding voting securities of the
Fund, by the Trustees or by the Adviser. Termination of this Agreement shall not
be deemed to terminate or otherwise invalidate any provisions of any contract
between the Adviser and any other series of the Trust. This Agreement shall
automatically terminate in the event of its assignment. In interpreting the
provisions of this Section 12, the definitions contained in Section 2(a) of the
1940 Act (particularly the definitions of "assignment," "interested person" and
"voting security"), shall be applied.
13. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, and no amendment, transfer, assignment, sale,
hypothecation or pledge of this Agreement shall be effective until approved by
(a) the Trustees, including a majority of the Trustees who are not interested
persons of the Adviser or (other than as Board Members) of the Fund, cast in
person at a meeting called for the purpose of voting on such approval, and (b) a
majority of the outstanding voting securities of the Fund, as defined in the
1940 Act.
14. Governing Law. This Agreement shall be governed and construed in accordance
with the laws of the Commonwealth of Massachusetts.
15. Severability. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be deemed invalid or unenforceable in whole or in part.
16. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. The name John Hancock V.A. ____ Fund is a series
6
<PAGE>
designation of the Trustees under the Trust's Declaration of Trust, dated
Nov. 15, 1995, as amended from time to time. The Declaration of Trust has been
filed with the Secretary of State of the Commonwealth of Massachusetts. The
obligations of the Fund are not personally binding upon, nor shall resort be had
to the private property of, any of the Trustees, shareholders, officers,
employees or agents of the Fund, but only the Fund's property shall be bound.
The Fund shall not be liable for the obligations of any other series of the
Trust and no other series shall be liable for the Fund's obligations hereunder.
Yours very truly,
JOHN HANCOCK DECLARATION TRUST
--on behalf of John Hancock V.A. _______ Fund
By:
Its:
The foregoing contract is hereby agreed
to as of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By:
President
7
u:\vafunds\vamgtk2
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199
____ __, 199_
JOHN HANCOCK DECLARATION TRUST
- -- John Hancock V.A. Sovereign Investors Fund
101 Huntington Avenue
Boston, Massachusetts 02199
SOVEREIGN ASSET MANAGEMENT CORP.
101 Huntington Avenue
Boston, Massachusetts 02199
Sub-Investment Management Contract
Dear Sirs:
John Hancock Declaration Trust (the "Trust"), of which John Hancock V.A.
Sovereign Investors Fund (the "Fund") is a series, has been organized as a
business trust under the laws of The Commonwealth of Massachusetts to engage in
the business of an investment company. The Trust's shares of beneficial interest
are currently divided into ten series (including the Fund), each series
representing the entire undivided interest in a separate portfolio of assets.
This contract relates solely to the Fund.
The Board of Trustees of the Trust (the "Trustees") has selected John
Hancock Advisers, Inc. (the "Adviser") to provide overall investment advice and
management for the Fund and to provide certain other services, under the terms
and conditions provided in the investment management contract, dated as of the
date hereof, between the Trust, on behalf of the Fund, and the Adviser (the
"Investment Management Contract").
The Adviser and the Trustees have selected Sovereign Asset Management
Corp. (the "Sub-Adviser") to provide the Adviser and the Fund with the advice
and services set forth below, and the Sub-Adviser is willing to provide such
advice and services, subject to the review of the Trustees and overall
supervision of the Adviser, under the terms and conditions hereinafter set
forth. The Sub-Adviser hereby represents and warrants that it is registered as
an investment adviser under the Investment Advisers Act of 1940, as amended (the
"1940 Act"). Accordingly, the Trust, on behalf of the Fund, and the Adviser
agree with the Sub-Adviser as follows:
1. Delivery of Documents. The Trust has furnished the Sub-Adviser with
copies, properly certified or otherwise authenticated, of each of the following:
<PAGE>
(a) Declaration of Trust of the Trust, dated November 15, 1995 (the
"Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Sub-Adviser as the
investment sub-adviser to the Fund and approving the form of this
Sub-Investment Management Contract (the "Contract") and the
resolution approving the Contract, adopted by the initial sole
shareholder of the Fund;
(d) Resolutions of the Trustees selecting the Adviser as investment
adviser to the Fund and approving the form of the Investment
Management Contract and resolutions adopted by the initial
shareholder of the Fund approving the form of the Investment
Management Contract;
(e) The Adviser's Investment Management Contract;
(f) Commitments, limitations and undertakings made by the Trust to
state "blue sky" authorities for the purpose of qualifying shares
of the Fund for sale in such states;
(g) The Fund's prospectus and statement of additional information; and
(h) The Trust's Code of Ethics.
The Adviser will furnish the Sub-Adviser from time to time with copies,
properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any.
2. Investment Services. The Sub-Adviser will use its best efforts to provide to
the Fund continuing and suitable investment advice with respect to investments,
in conformity with the investment policies, objectives and restrictions of the
Fund as set forth in the Fund's Prospectus and Statement of Additional
Information. The Sub-Adviser will perform its duties in compliance with the
Investment Compant Act, the Internal Revenue Code and all other applicable
federal and state law. In the performance of the Sub-Adviser's duties hereunder,
subject always to the provisions contained in the documents delivered to the
Sub-Adviser pursuant to Section 1 above, as each of the same may from time to
time be amended or supplemented, the Sub-Adviser will have investment discretion
with respect to the Fund and will, at its own expense:
(a) furnish the Adviser and the Fund with advice and recommendations,
consistent with the investment policies, objectives and
restrictions of the Fund as set forth in the Fund's prospectus and
statement of additional information, with respect to the purchase,
holding and disposition of portfolio securities and other permitted
investments;
(b) furnish the Adviser and the Fund with advice as to the manner in
which voting rights, subscription rights, rights to consent to
corporate action and any other rights pertaining to the Fund's
assets shall be exercised, the Fund having the responsibility to
2
<PAGE>
exercise such voting and other rights; and, as requested, furnish
the Fund with research, economic and statistical data in connection
with the Fund's investments and investment policies;
(c) submit such reports relating to the valuation of the Fund's
securities as the Adviser may reasonably request;
(d) subject to prior consultation with the Adviser, engage in
negotiations relating to the Fund's investments with issuers,
investment banking firms, securities brokers or dealers and other
institutions or investors;
(e) consistent with the provisions of Section 7 of this Contract, place
orders for the purchase, sale or exchange of portfolio securities
for the Fund's account with brokers or dealers selected by the
Adviser or the Sub-Adviser, provided that in connection with the
placing of such orders and the selection of such brokers or dealers
the Sub-Adviser shall seek to obtain execution and pricing within
the policy guidelines determined by the Trustees and set forth in
the prospectus and statement of additional information of the Fund
as in effect and furnished to the Sub-Adviser from time to time;
(f) from time to time or at any time requested by the Adviser or the
Trustees, make reports to the Adviser or the Trust, as requested,
of the Sub-Adviser's performance of the foregoing services;
(g) subject to the supervision of the Adviser, maintain and preserve
the records required by the 1940 Act to be maintained by the
Sub-Adviser (the Sub-Adviser agrees that such records are the
property of the Trust and copies will be surrendered to the Trust
promptly upon request therefor);
(h) give instructions to the custodian (including any subcustodian) of
the Fund as to deliveries of securities to and from such custodian
and payments of cash for the account of the Fund, and advise the
Adviser on the same day such instructions are given;
(i) cooperate generally with the Fund and the Adviser to provide
information necessary for the preparation of registration
statements and periodic reports to be filed with the Securities and
Exchange Commission, including Form N-1A, semi-annual reports on
Form N-SAR, shareholder reports, periodic statements, shareholder
communications and proxy materials furnished to holders of shares
of the Fund, filings with state "blue sky" authorities and with
United States agencies responsible for tax matters, and other
reports and filings of like nature; and
3. Expenses Paid by the Sub-Adviser. The Sub-Adviser will pay the cost of
maintaining the staff and personnel necessary for it to perform its obligations
under this Contract, the expenses of office rent, telephone, telecommunications
and other facilities it is obligated to provide in order to perform the services
specified in Section 2, and any other expenses incurred by it in connection with
the performance of its duties hereunder.
3
<PAGE>
4. Expenses of the Fund Not Paid by the Sub-Adviser. The Sub-Adviser will not be
required to pay any expenses which this Contract does not expressly state shall
be payable by the Sub-Adviser. In particular, and without limiting the
generality of the foregoing but subject to the provisions of Section 3, the
Sub-Adviser will not be required to pay under this contract:
(a) the compensation and expenses of Trustees and of independent
advisers, independent contractors, consultants, managers and other
agents employed by the Trust or the Fund other than through the
Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the Trust or
the Fund;
(c) the fees and disbursements of custodians and depositories of the
Trust or the Fund's assets, transfer agents, disbursing agents,
plan agents and registrars;
(d) taxes and governmental fees assessed against the Trust or the
Fund's assets and payable by the Trust or the Fund;
(e) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the Trust
or the Fund except that the Sub-Adviser shall bear the costs of
providing the information referred to in Section 2(i) to the
Adviser;
(f) brokers' commissions and underwriting fees; and;
(g) the expense of periodic calculations of the net asset value of the
shares of the Fund.
5. Compensation of the Sub-Adviser. For all services to be rendered, facilities
furnished and expenses paid or assumed by the Sub-Adviser as herein provided for
the Fund, the Adviser will pay the Sub-Adviser quarterly, for each of the
preceding 3 months, in arrears a fee at the annual rate of 40% of the investment
advisory fee payable to the Adviser. The "average daily net assets" of the Fund
shall be determined on the basis set forth in the Fund's prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated thereunder. The
Sub-Adviser will receive a pro rata portion of such monthly fee for any periods
in which the Sub-Adviser advises the Fund less than a full month. The
Sub-Adviser understands and agrees that neither the Trust nor the Fund has any
liability for the Sub-Adviser's fee hereunder. Calculations of the Sub-Adviser's
fee will be based on average net asset values as provided by the Adviser.
In addition, the Sub-Adviser may agree not to impose all or a portion of
its fee (in advance of the time its fee would otherwise accrue) and/or undertake
to make any other payments or arrangements necessary to limit the fund's
expenses to any level the Sub-Adviser may specify. Any fee reduction or
undertaking shall constitute a binding modification of this agreement while it
is in effect but may be discontinued or modified prospectively by the Sub-
Adviser at any time.
6. Other Activities of the Sub-Adviser and Its Affiliates. Nothing herein
contained shall prevent the Sub-Adviser or any of its affiliates or associates
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or a portfolio similar to the Fund. It is specifically
4
<PAGE>
understood that officers, directors and employees of the Sub-Adviser and those
of its affiliates may engage in providing portfolio management services and
advice to other investment advisory clients of the Sub-Adviser or of its
affiliates.
7. Avoidance of Inconsistent Position. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Sub-Adviser nor
any of its directors, officers or employees will act as principal or agent or
receive any commission , except as permitted by the 1940 Act and the rules and
regulations promulgated thereunder. The Sub-Adviser shall not knowingly
recommend that the Fund purchase, sell or retain securities of any issuer in
which the Sub-Adviser has a financial interest without obtaining prior approval
of the Adviser prior to the execution of any such transaction.
Nothing herein contained shall limit or restrict the Sub-Adviser or any
of its officers, affiliates or employees from buying, selling or trading in any
securities for its or their own account or accounts. The Trust and Fund
acknowledge the Sub-Adviser and its officers, affiliates and employees, and its
other clients may at any time have, acquire, increase, decrease or dispose of
positions in investments which are at the same time being acquired or disposed
of by the Fund. The Sub-Adviser shall have no obligation to acquire with respect
to the Fund, a position in any investment which the Sub-Adviser, its officers,
affiliates or employees may acquire for its or their own accounts or for the
account of another client if, in the sole discretion of the Sub-Adviser, it is
not feasible or desirable to acquire a position in such investment on behalf of
the Fund. Nothing herein contained shall prevent the Sub-Adviser from purchasing
or recommending the purchase of a particular security for one or more funds or
clients while other funds or clients may be selling the same security.
8. No Partnership or Joint Venture. The Trust, the Fund, the Adviser and the
Sub-Adviser are not partners of or joint venturers with each other and nothing
herein shall be construed so as to make them such partners or joint venturers or
impose any liability as such on any of them.
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust, the Fund or the Adviser in connection with the matters to which this
Contract relates, except a loss resulting from willful misfeasance, bad faith or
gross negligence on the Sub-Adviser's part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this Contract.
Any person, even though also employed by the Sub-Adviser, who may be or become
an employee of and paid by the Trust or the Fund shall be deemed, when acting
within the scope of his employment by the Trust or the Fund, to be acting in
such employment solely for the Trust or the Fund and not as the Sub-Adviser's
employee or agent.
10. Duration and Termination of this Contract. This Contract shall remain in
force until the second anniversary of the date upon which this Contract was
executed by the parties hereto, and from year to year thereafter, but only so
long as such continuance is specifically approved at least annually by (a) a
majority of the Trustees who are not interested persons of the Adviser, of the
Sub-Adviser or (other than as Board members) of the Trust or the Fund, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
either (i) the Trustees or (ii) a majority of the outstanding voting securities
of the Fund. This Contract may, on 60 days' written notice, be terminated at any
time without the payment of any penalty by the Trust on
5
<PAGE>
behalf of the Fund by vote of a majority of the outstanding voting securities of
the Fund or by the Board of Trustees or by the Adviser or by the Sub-Adviser.
Termination of this Contract with respect to the Fund shall not be deemed to
terminate or otherwise invalidate any provisions of any contract between you and
any other series of the Trust. This Contract shall automatically terminate in
the event of its assignment or upon the termination of the Adviser's Investment
Management Contract. In interpreting the provisions of this Section 10, the
definitions contained in Section 2(a) of the 1940 Act (including the definitions
of "assignment," "interested person" and "voting security") shall be applied.
11. Amendment of This Contract. No provision of this Contract may be changed,
discharged, terminated or waived orally, but only by an instrument in writing
signed by the party against which enforcement of the change discharge,
termination or waiver is sought, and no amendment, transfer, assignment, sale,
hypothecation or pledge of this Contract shall be effective until approved by
(a) the Trustees, including a majority of the Trustees who are not interested
persons of the Adviser, the Sub-Adviser or (other than as Board members) the
Trust or the Fund, cast in person at a meeting called for the purpose of voting
on such approval, and (b) a majority of the outstanding voting securities of the
Fund, as defined in the 1940 Act.
12. Miscellaneous.
(a) The captions in this Contract are included for convenience of
reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect. This
Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The
name John Hancock Declaration Trust is the designation of the
Trustees under the Declaration of Trust, dated November 15, 1995 as
amended from time to time. The Declaration of Trust has been filed
with the Secretary of State of The Commonwealth of Massachusetts.
The obligations of the Trust and the Fund are not personally
binding upon, nor shall resort be had to the private property of,
any of the Trustees, shareholders, officers, employees or agents of
the Trust or the Fund, but only the Fund's property shall be bound.
The Trust or the Fund shall not be liable for the obligations of
any other series of the Trust.
(b) Any information supplied by the Sub-Adviser, which is not otherwise
in the public domain, in connection with the performance of its
duties hereunder is to be regarded as confidential and for use only
by the Fund and/or its agents, and only in connection with the Fund
and its investments.
13. Governing Law. This Contract shall be construed in accordance with the laws
of The Commonwealth of Massachusetts and the applicable provisions of the 1940
Act.
14. Severability. The provisions of this contract are independent of and
separable from each other and no provision shall be affected or rendered invalid
or unenforceable by virtue of the fact that for any reason any other or others
of them may be deemed invalid or unenforceable in whole or in part.
6
<PAGE>
Yours very truly,
JOHN HANCOCK ADVISERS, INC.
By:
Its: President
The foregoing Contract is hereby agreed to as of the date thereof.
JOHN HANCOCK DECLARATION TRUST
on behalf of John Hancock V.A. Sovereign Investors Fund
By:
Its: President
SOVEREIGN ASSET MANAGEMENT CORP.
By:
Its: President
7
u:\vafunds\subsamo2.doc
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199
_____ __, 199__
JOHN HANCOCK DECLARATION TRUST
on behalf of John Hancock V.A. Diversified Core Equity Fund
101 Huntington Avenue
Boston, Massachusetts 02199
INDEPENDENCE INVESTMENT ASSOCIATES, INC.
53 State Street
Boston, MA 02109
Sub-Investment Management Contract
Dear Sirs:
John Hancock Declaration Trust (the "Trust"), of which John Hancock V.A.
Diversified Core Equity Fund (the "Fund") is a series, has been organized as a
business trust under the laws of The Commonwealth of Massachusetts to engage in
the business of an investment company. The Trust's shares of beneficial interest
are currently divided into 10 series (including the Fund), each series
representing the entire undivided interest in a separate portfolio of assets.
This contract relates solely to the Fund.
The Board of Trustees of the Trust (the "Trustees") has selected John
Hancock Advisers, Inc. (the "Adviser") to provide overall investment advice and
management for the Fund and to provide certain other services under the terms
and conditions provided in the investment management contract, dated as of the
date hereof, between the Trust, on behalf of the Fund, and the Adviser (the
"Investment Management Contract").
The Adviser and the Trustees have selected Independence Investment
Associates, Inc. (the "Sub-Adviser") to provide the Adviser and the Fund with
the advice and services set forth below, and the Sub-Adviser is willing to
provide such advice and services, subject to the review of the Trustees and
overall supervision of the Adviser, under the terms and conditions hereinafter
set forth. The Sub-Adviser hereby represents and warrants that it is registered
as an investment adviser under the Investment Advisers Act of 1940, as amended
(the "1940 Act"). Accordingly, the Trust, on behalf of the Fund, and the Adviser
agree with the Sub-Adviser as follows:
<PAGE>
1. Delivery of Documents. The Trust has furnished the Sub-Adviser with copies,
properly certified or otherwise authenticated, of each of the following:
(a) Declaration of Trust of the Trust, dated November 15, 1995 (the
"Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Sub-Adviser as the
investment sub-adviser to the Fund and approving the form of this
Sub-Investment Management Contract (the "Contract") and the
resolution approving the Contract, adopted by the initial sole
shareholder of the Fund;
(d) Resolutions of the Trustees selecting the Adviser as investment
adviser to the Fund and approving the form of the Investment
Management Contract and resolutions adopted by the initial
shareholder of the Fund approving the form of the Investment
Management Contract;
(e) The Adviser's Investment Management Contract;
(f) Commitments, limitations and undertakings made by the Trust to
state "blue sky" authorities for the purpose of qualifying shares
of the Fund for sale in such states;
(g) The Fund's prospectus and statement of additional information; and
The Adviser will furnish the Sub-Adviser from time to time with copies,
properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any.
The Sub-Adviser has furnished the Adviser with a copy of the
Sub-Adviser's Code of Ethics, and will furnish the Adviser from time to time
with copies of any amendments to the code. The restrictions of the Sub-Adviser
may differ from those of the Trust where appropriate as long as they maintain
the same intent consistent with the sub adviser's own procedures for
recommending and purchasing securities.
2. Investment Services. The Sub-Adviser will use its best efforts to provide to
the Fund continuing and suitable investment advice with respect to investments,
in conformity with the investment policies, objectives and restrictions of the
Fund as set forth in the Fund's Prospectus and Statement of Additional
Information. In the performance of the Sub-Adviser's duties hereunder, subject
always to the provisions contained in the documents delivered to the Sub-
Adviser pursuant to Section 1 above, as each of the same may from time to time
be amended or supplemented, the Sub-Adviser will have investment discretion with
respect to the Fund and will, at its own expense:
(a) furnish the Adviser and the Fund with advice and recommendations,
consistent with the investment policies, objectives and
restrictions of the Fund as set forth in the Fund's
2
<PAGE>
prospectus and statement of additional information, with respect to
the purchase, holding and disposition of portfolio securities and
other permitted investments;
(b) furnish the Adviser and the Fund with advice as to the manner in
which voting rights, subscription rights, rights to consent to
corporate action and any other rights pertaining to the Fund's
assets shall be exercised, the Fund having the responsibility to
exercise such voting and other rights; and, as requested, furnish
the Fund with research, economic and statistical data in connection
with the Fund's investments and investment policies;
(c) submit such reports relating to the valuation of the Fund's
securities as the Adviser may reasonably request;
(d) subject to prior consultation with the Adviser, engage in
negotiations relating to the Fund's investments with issuers,
investment banking firms, securities brokers or dealers and other
institutions or investors;
(e) consistent with the provisions of Section 7 of this Contract, place
orders for the purchase, sale or exchange of portfolio securities
for the Fund's account with brokers or dealers selected by the
Adviser or the Sub-Adviser, provided that in connection with the
placing of such orders and the selection of such brokers or dealers
the Sub-Adviser shall seek to obtain execution and pricing within
the policy guidelines determined by the Trustees and set forth in
the prospectus and statement of additional information of the Fund
as in effect and furnished to the Sub-Adviser from time to time;
(f) from time to time or at any time requested by the Adviser or the
Trustees, make reports to the Adviser or the Trust, as requested,
of the Sub-Adviser's performance of the foregoing services;
(g) subject to the supervision of the Adviser, maintain and preserve
the records required by the 1940 Act to be maintained by the
Sub-Adviser (the Sub-Adviser agrees that such records are the
property of the Trust and copies will be surrendered to the Trust
promptly upon request therefor);
(h) give instructions to the custodian (including any subcustodian) of
the Fund as to deliveries of securities to and from such custodian
and payments of cash for the account of the Fund, and advise the
Adviser on the same day such instructions are given;
(i) cooperate generally with the Fund and the Adviser to provide
information necessary for the preparation of registration
statements and periodic reports to be filed with the Securities and
Exchange Commission, including Form N-1A, semi-annual reports on
Form N-SAR, shareholder reports, periodic statements, shareholder
communications and proxy materials furnished to holders of shares
of the Fund, filings with state "blue sky" authorities and with
United States agencies responsible for tax matters, and other
reports and filings of like nature; and
3
<PAGE>
(j) in the performance of its duties hereunder, the sub-adviser is and
shall be an independent contractor and unless otherwise expressly
provided or authorized shall have no authority to act for or
represent the Fund or Trust in any way or otherwise be deemed to be
an agent of the Fund, The Trust or the Adviser.
3. Expenses Paid by the Sub-Adviser. The Sub-Adviser will pay the cost of
maintaining the staff and personnel necessary for it to perform its obligations
under this Contract, the expenses of office rent, telephone, telecommunications
and other facilities it is obligated to provide in order to perform the services
specified in Section 2, and any other expenses incurred by it in connection with
the performance of its duties hereunder.
4. Expenses of the Fund Not Paid by the Sub-Adviser. The Sub-Adviser will not be
required to pay any expenses which this Contract does not expressly state shall
be payable by the Sub-Adviser. In particular, and without limiting the
generality of the foregoing but subject to the provisions of Section 3, the
Sub-Adviser will not be required to pay under this contract:
(a) the compensation and expenses of Trustees and of independent
advisers, independent contractors, consultants, managers and other
agents employed by the Trust or the Fund other than through the
Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the Trust or
the Fund;
(c) the fees and disbursements of custodians and depositories of the
Trust or the Fund's assets, transfer agents, disbursing agents,
plan agents and registrars;
(d) taxes and governmental fees assessed against the Trust or the
Fund's assets and payable by the Trust or the Fund;
(e) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the Trust
or the Fund except that the Sub-Adviser shall bear the costs of
providing the information referred to in Section 2(i) to the
Adviser;
(f) brokers' commissions and underwriting fees; and;
(g) the expense of periodic calculations of the net asset value of the
shares of the Fund.
5. Compensation of the Sub-Adviser. For all services to be rendered, facilities
furnished and expenses paid or assumed by the Sub-Adviser as herein provided for
the Fund, the Adviser will pay the Sub-Adviser quarterly, based on the "average
daily net asset" value of the Fund for each of the preceding 3 months, in
arrears a fee at the annual rate of 55% of the investment advisory fee payable
to the Adviser. The "average daily net assets" of the Fund shall be determined
on the basis set forth in the Fund's prospectus or otherwise consistent with the
1940 Act and the regulations promulgated thereunder. The Sub-Adviser will
receive a pro rata portion of such quarterly fee for any periods in which the
Sub-Adviser advises the Fund less than a full quarter. The Sub-Adviser
understands and agrees that neither the Trust nor the Fund has any liability for
the Sub-Adviser's fee hereunder. Calculations of the Sub-Adviser's fee will be
based on average net asset values as provided by the Adviser.
4
<PAGE>
In addition, the Sub-Adviser may agree not to impose all or a portion of
its fee (in advance of the time its fee would otherwise accrue) and/or undertake
to make any other payments or arrangements necessary to limit the fund's
expenses to any level the Sub-Adviser may specify. Any fee reduction or
undertaking shall constitute a binding modification of this agreement while it
is in effect but may be discontinued or modified prospectively by the Sub-
Adviser at any time.
6. Other Activities of the Sub-Adviser and Its Affiliates. Nothing herein
contained shall prevent the Sub-Adviser or any of its affiliates or associates
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or a portfolio similar to the Fund. It is specifically
understood that officers, directors and employees of the Sub-Adviser and those
of its affiliates may engage in providing portfolio management services and
advice to other investment advisory clients of the Sub-Adviser or of its
affiliates.
7. Avoidance of Inconsistent Position. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Sub-Adviser nor
any of its directors, officers or employees will act as principal or agent or
receive any commission , except as permitted by the 1940 Act and the rules and
regulations promulgated thereunder,. The Sub-Adviser shall not knowingly
recommend that the Fund purchase, sell or retain securities of any issuer in
which the Sub-Adviser has a financial interest without obtaining prior approval
of the Adviser prior to the execution of any such transaction.
Nothing herein contained shall limit or restrict the Sub-Adviser or any
of its officers, affiliates or employees from buying, selling or trading in any
securities for its or their own account or accounts. The Trust and Fund
acknowledge the Sub-Adviser and its officers, affiliates and employees, and its
other clients may at any time have, acquire, increase, decrease or dispose of
positions in investments which are at the same time being acquired or disposed
of by the Fund. The Sub-Adviser shall have no obligation to acquire with respect
to the Fund, a position in any investment which the Sub-Adviser, its officers,
affiliates or employees may acquire for its or their own accounts or for the
account of another client if, in the sole discretion of the Sub-Adviser, it is
not feasible or desirable to acquire a position in such investment on behalf of
the Fund. Nothing herein contained shall prevent the Sub-Adviser from purchasing
or recommending the purchase of a particular security for one or more funds or
clients while other funds or clients may be selling the same security.
8. No Partnership or Joint Venture. The Trust, the Fund, the Adviser and the
Sub-Adviser are not partners of or joint venturers with each other and nothing
herein shall be construed so as to make them such partners or joint venturers or
impose any liability as such on any of them.
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust, the Fund or the Adviser in connection with the matters to which this
Contract relates, except a loss resulting from willful misfeasance, bad faith or
gross negligence on the Sub-Adviser's part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this Contract.
Any person, even though also employed by the Sub-Adviser, who may be or become
5
<PAGE>
an employee of and paid by the Trust or the Fund shall be deemed, when acting
within the scope of his employment by the Trust or the Fund, to be acting in
such employment solely for the Trust or the Fund and not as the Sub-Adviser's
employee or agent.
10. Duration and Termination of this Contract. This Contract shall remain in
force until the second anniversary of the date upon which this Contract was
executed by the parties hereto, and from year to year thereafter, but only so
long as such continuance is specifically approved at least annually by (a) a
majority of the Trustees who are not interested persons of the Adviser, of the
Sub-Adviser or (other than as Board members) of the Trust or the Fund, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
either (i) the Trustees or (ii) a majority of the outstanding voting securities
of the Fund. This Contract may, on 60 days' written notice, be terminated at any
time without the payment of any penalty by the Trust on behalf of the Fund by
vote of a majority of the outstanding voting securities of the Fund or by the
Board of Trustees or by the Adviser or by the Sub-Adviser. Termination of this
Contract with respect to the Fund shall not be deemed to terminate or otherwise
invalidate any provisions of any contract between you and any other series of
the Trust. This Contract shall automatically terminate in the event of its
assignment or upon the termination of the Adviser's Investment Management
Contract. In interpreting the provisions of this Section 10, the definitions
contained in Section 2(a) of the 1940 Act (including the definitions of
"assignment," "interested person" and "voting security") shall be applied.
11. Amendment of This Contract. No provision of this Contract may be changed,
discharged, terminated or waived orally, but only by an instrument in writing
signed by the party against which enforcement of the change discharge,
termination or waiver is sought, and no amendment, transfer, assignment, sale,
hypothecation or pledge of this Contract shall be effective until approved by
(a) the Trustees, including a majority of the Trustees who are not interested
persons of the Adviser, the Sub-Adviser or (other than as Board members) the
Trust or the Fund, cast in person at a meeting called for the purpose of voting
on such approval, and (b) a majority of the outstanding voting securities of the
Fund, as defined in the 1940 Act.
12. Miscellaneous.
(a) The captions in this Contract are included for convenience of
reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect. This
Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The
name John Hancock Declaration Trust is the designation of the
Trustees under the Declaration of Trust, dated November 15, 1995 as
amended from time to time. The Declaration of Trust has been filed
with the Secretary of State of The Commonwealth of Massachusetts.
The obligations of the Trust and the Fund are not personally
binding upon, nor shall resort be had to the private property of,
any of the Trustees, shareholders, officers, employees or agents of
the Trust or the Fund, but only the Fund's property shall be bound.
The Trust or the Fund shall not be liable for the obligations of
any other series of the Trust.
(b) Any information supplied by the Sub-Adviser, which is not otherwise
in the public domain, in connection with the performance of its
duties hereunder is to be regarded as
6
<PAGE>
confidential and for use only by the Fund and/or its agents, and
only in connection with the Fund and its investments.
(c) The Trust and the Fund may use the name "Independence" or "NIXDEX"
or any name similar to "Independence Investment Associates, Inc."
or "NIXDEX" only for so long as this Agreement remains in effect.
At such time as this Agreement shall no longer be in effect, the
Fund will (to the extent that it lawfully can) cease to use such
names or any other names indicating that the Fund is advised by or
otherwise connected with the Sub-Adviser. The Fund agrees that the
Sub-Adviser reserves to itself and any successor to its business
the right to grant the non-exclusive right to use the name
"Independence" or "NIXDEX" or any similar name to any other
corporation or entity, including but not limited to any investment
company of which it or any of its subsidiaries or affiliates shall
be the investment adviser.
13. Governing Law. This Contract shall be construed in accordance with the laws
of The Commonwealth of Massachusetts and the applicable provisions of the 1940
Act.
14. Severability. The provisions of this contract are independent of and
separable from each other and no provision shall be affected or rendered invalid
or unenforceable by virtue of the fact that for any reason any other or others
of them may be deemed invalid or unenforceable in whole or in part.
7
<PAGE>
Yours very truly,
JOHN HANCOCK ADVISERS, INC.
By:
Its: President
The foregoing Contract is hereby agreed to as of the date thereof.
JOHN HANCOCK DECLARATION TRUST
on behalf of John Hancock V.A. Diversified Core Equity Fund
By:
Its: President
INDEPENDENCE INVESTMENT ASSOCIATES, INC.
By:
Its: President
8
u:\vafunds\subiia3.doc
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199
____ __, 199_
JOHN HANCOCK DECLARATION TRUST
- -- John Hancock V.A. International Fund
101 Huntington Avenue
Boston, Massachusetts 02199
JOHN HANCOCK ADVISERS INTERNATIONAL LTD.
34 Dover Street
London, UK W1X 3RA
Sub-Investment Management Contract
Dear Sirs:
John Hancock Declaration Trust (the "Trust"), of which John Hancock V.A.
International Fund (the "Fund") is a series, has been organized as a business
trust under the laws of The Commonwealth of Massachusetts to engage in the
business of an investment company. The Trust's shares of beneficial interest are
currently divided into ten series (including the Fund), each series representing
the entire undivided interest in a separate portfolio of assets. This contract
relates solely to the Fund.
The Board of Trustees of the Trust (the "Trustees") has selected John
Hancock Advisers, Inc. (the "Adviser") to provide overall investment advice and
management for the Fund and to provide certain other services, under the terms
and conditions provided in the investment management contract, dated as of the
date hereof, between the Trust, on behalf of the Fund, and the Adviser (the
"Investment Management Contract").
The Adviser and the Trustees have selected John Hancock Advisers
International Ltd. (the "Sub-Adviser") to provide the Adviser and the Fund with
the advice and services set forth below, and the Sub-Adviser is willing to
provide such advice and services, subject to the review of the Trustees and
overall supervision of the Adviser, under the terms and conditions hereinafter
set forth. The Sub-Adviser hereby represents and warrants that it is registered
as an investment adviser under the Investment Advisers Act of 1940, as amended
(the "1940 Act"). Accordingly, the Trust, on behalf of the Fund, and the Adviser
agree with the Sub-Adviser as follows:
1. Delivery of Documents. The Trust has furnished the Sub-Adviser with copies,
properly certified or otherwise authenticated, of each of the following:
<PAGE>
(a) Declaration of Trust of the Trust, dated November 15, 1995 (the
"Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Sub-Adviser as the
investment sub-adviser to the Fund and approving the form of this
Sub-Investment Management Contract (the "Contract") and the
resolution approving the Contract, adopted by the initial sole
shareholder of the Fund;
(d) Resolutions of the Trustees selecting the Adviser as investment
adviser to the Fund and approving the form of the Investment
Management Contract and resolutions adopted by the initial
shareholder of the Fund approving the form of the Investment
Management Contract;
(e) The Adviser's Investment Management Contract;
(f) Commitments, limitations and undertakings made by the Trust to
state "blue sky" authorities for the purpose of qualifying shares
of the Fund for sale in such states;
(g) The Fund's prospectus and statement of additional information; and
(h) The Trust's Code of Ethics.
The Adviser will furnish the Sub-Adviser from time to time with copies,
properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any.
2. Investment Services. The Sub-Adviser will use its best efforts to provide to
the Fund continuing and suitable investment advice with respect to investments,
in conformity with the investment policies, objectives and restrictions of the
Fund as set forth in the Fund's Prospectus and Statement of Additional
Information. The Sub-Adviser will perform its duties in compliance with the
Investment Compant Act, the Internal Revenue Code and all other applicable
federal and state law. In the performance of the Sub-Adviser's duties hereunder,
subject always to the provisions contained in the documents delivered to the
Sub-Adviser pursuant to Section 1 above, as each of the same may from time to
time be amended or supplemented, the Sub-Adviser will have investment discretion
with respect to the Fund and will, at its own expense:
(a) furnish the Adviser and the Fund with advice and recommendations,
consistent with the investment policies, objectives and
restrictions of the Fund as set forth in the Fund's prospectus and
statement of additional information, with respect to the purchase,
holding and disposition of portfolio securities and other permitted
investments;
(b) furnish the Adviser and the Fund with advice as to the manner in
which voting rights, subscription rights, rights to consent to
corporate action and any other rights pertaining to the Fund's
assets shall be exercised, the Fund having the responsibility to
exercise such voting and other rights; and, as requested, furnish
the Fund with research,
2
<PAGE>
economic and statistical data in connection with the Fund's
investments and investment policies;
(c) submit such reports relating to the valuation of the Fund's
securities as the Adviser may reasonably request;
(d) subject to prior consultation with the Adviser, engage in
negotiations relating to the Fund's investments with issuers,
investment banking firms, securities brokers or dealers and other
institutions or investors;
(e) consistent with the provisions of Section 7 of this Contract, place
orders for the purchase, sale or exchange of portfolio securities
for the Fund's account with brokers or dealers selected by the
Adviser or the Sub-Adviser, provided that in connection with the
placing of such orders and the selection of such brokers or dealers
the Sub-Adviser shall seek to obtain execution and pricing within
the policy guidelines determined by the Trustees and set forth in
the prospectus and statement of additional information of the Fund
as in effect and furnished to the Sub-Adviser from time to time;
(f) from time to time or at any time requested by the Adviser or the
Trustees, make reports to the Adviser or the Trust, as requested,
of the Sub-Adviser's performance of the foregoing services;
(g) subject to the supervision of the Adviser, maintain and preserve
the records required by the 1940 Act to be maintained by the
Sub-Adviser (the Sub-Adviser agrees that such records are the
property of the Trust and copies will be surrendered to the Trust
promptly upon request therefor);
(h) give instructions to the custodian (including any subcustodian) of
the Fund as to deliveries of securities to and from such custodian
and payments of cash for the account of the Fund, and advise the
Adviser on the same day such instructions are given;
(i) cooperate generally with the Fund and the Adviser to provide
information necessary for the preparation of registration
statements and periodic reports to be filed with the Securities and
Exchange Commission, including Form N-1A, semi-annual reports on
Form N-SAR, shareholder reports, periodic statements, shareholder
communications and proxy materials furnished to holders of shares
of the Fund, filings with state "blue sky" authorities and with
United States agencies responsible for tax matters, and other
reports and filings of like nature; and
3. Expenses Paid by the Sub-Adviser. The Sub-Adviser will pay the cost of
maintaining the staff and personnel necessary for it to perform its obligations
under this Contract, the expenses of office rent, telephone, telecommunications
and other facilities it is obligated to provide in order to perform the services
specified in Section 2, and any other expenses incurred by it in connection with
the performance of its duties hereunder.
4. Expenses of the Fund Not Paid by the Sub-Adviser. The Sub-Adviser will not be
required to pay any expenses which this Contract does not expressly state shall
be payable by the
3
<PAGE>
Sub-Adviser. In particular, and without limiting the generality of the foregoing
but subject to the provisions of Section 3, the Sub-Adviser will not be required
to pay under this contract:
(a) the compensation and expenses of Trustees and of independent
advisers, independent contractors, consultants, managers and other
agents employed by the Trust or the Fund other than through the
Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the Trust or
the Fund;
(c) the fees and disbursements of custodians and depositories of the
Trust or the Fund's assets, transfer agents, disbursing agents,
plan agents and registrars;
(d) taxes and governmental fees assessed against the Trust or the
Fund's assets and payable by the Trust or the Fund;
(e) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the Trust
or the Fund except that the Sub-Adviser shall bear the costs of
providing the information referred to in Section 2(i) to the
Adviser;
(f) brokers' commissions and underwriting fees; and;
(g) the expense of periodic calculations of the net asset value of the
shares of the Fund.
5. Compensation of the Sub-Adviser. For all services to be rendered, facilities
furnished and expenses paid or assumed by the Sub-Adviser as herein provided for
the Fund, the Adviser will pay the Sub-Adviser quarterly, for each of the
preceding 3 months, in arrears a fee at the annual rate of 70% of the investment
advisory fee payable to the Adviser. The "average daily net assets" of the Fund
shall be determined on the basis set forth in the Fund's prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated thereunder. The
Sub-Adviser will receive a pro rata portion of such monthly fee for any periods
in which the Sub-Adviser advises the Fund less than a full month. The
Sub-Adviser understands and agrees that neither the Trust nor the Fund has any
liability for the Sub-Adviser's fee hereunder. Calculations of the Sub-Adviser's
fee will be based on average net asset values as provided by the Adviser.
In addition, the Sub-Adviser may agree not to impose all or a portion of
its fee (in advance of the time its fee would otherwise accrue) and/or undertake
to make any other payments or arrangements necessary to limit the fund's
expenses to any level the Sub-Adviser may specify. Any fee reduction or
undertaking shall constitute a binding modification of this agreement while it
is in effect but may be discontinued or modified prospectively by the Sub-
Adviser at any time.
6. Other Activities of the Sub-Adviser and Its Affiliates. Nothing herein
contained shall prevent the Sub-Adviser or any of its affiliates or associates
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or a portfolio similar to the Fund. It is specifically
understood that officers, directors and employees of the Sub-Adviser and those
of its affiliates
4
<PAGE>
may engage in providing portfolio management services and advice to other
investment advisory clients of the Sub-Adviser or of its affiliates.
7. Avoidance of Inconsistent Position. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Sub-Adviser nor
any of its directors, officers or employees will act as principal or agent or
receive any commission , except as permitted by the 1940 Act and the rules and
regulations promulgated thereunder. The Sub-Adviser shall not knowingly
recommend that the Fund purchase, sell or retain securities of any issuer in
which the Sub-Adviser has a financial interest without obtaining prior approval
of the Adviser prior to the execution of any such transaction.
Nothing herein contained shall limit or restrict the Sub-Adviser or any
of its officers, affiliates or employees from buying, selling or trading in any
securities for its or their own account or accounts. The Trust and Fund
acknowledge the Sub-Adviser and its officers, affiliates and employees, and its
other clients may at any time have, acquire, increase, decrease or dispose of
positions in investments which are at the same time being acquired or disposed
of by the Fund. The Sub-Adviser shall have no obligation to acquire with respect
to the Fund, a position in any investment which the Sub-Adviser, its officers,
affiliates or employees may acquire for its or their own accounts or for the
account of another client if, in the sole discretion of the Sub-Adviser, it is
not feasible or desirable to acquire a position in such investment on behalf of
the Fund. Nothing herein contained shall prevent the Sub-Adviser from purchasing
or recommending the purchase of a particular security for one or more funds or
clients while other funds or clients may be selling the same security.
8. No Partnership or Joint Venture. The Trust, the Fund, the Adviser and the
Sub-Adviser are not partners of or joint venturers with each other and nothing
herein shall be construed so as to make them such partners or joint venturers or
impose any liability as such on any of them.
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust, the Fund or the Adviser in connection with the matters to which this
Contract relates, except a loss resulting from willful misfeasance, bad faith or
gross negligence on the Sub-Adviser's part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this Contract.
Any person, even though also employed by the Sub-Adviser, who may be or become
an employee of and paid by the Trust or the Fund shall be deemed, when acting
within the scope of his employment by the Trust or the Fund, to be acting in
such employment solely for the Trust or the Fund and not as the Sub-Adviser's
employee or agent.
10. Duration and Termination of this Contract. This Contract shall remain in
force until the second anniversary of the date upon which this Contract was
executed by the parties hereto, and from year to year thereafter, but only so
long as such continuance is specifically approved at least annually by (a) a
majority of the Trustees who are not interested persons of the Adviser, of the
Sub-Adviser or (other than as Board members) of the Trust or the Fund, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
either (i) the Trustees or (ii) a majority of the outstanding voting securities
of the Fund. This Contract may, on 60 days' written notice, be terminated at any
time without the payment of any penalty by the Trust on behalf of the Fund by
vote of a majority of the outstanding voting securities of the Fund or by
5
<PAGE>
the Board of Trustees or by the Adviser or by the Sub-Adviser. Termination of
this Contract with respect to the Fund shall not be deemed to terminate or
otherwise invalidate any provisions of any contract between you and any other
series of the Trust. This Contract shall automatically terminate in the event of
its assignment or upon the termination of the Adviser's Investment Management
Contract. In interpreting the provisions of this Section 10, the definitions
contained in Section 2(a) of the 1940 Act (including the definitions of
"assignment," "interested person" and "voting security") shall be applied.
11. Amendment of This Contract. No provision of this Contract may be changed,
discharged, terminated or waived orally, but only by an instrument in writing
signed by the party against which enforcement of the change discharge,
termination or waiver is sought, and no amendment, transfer, assignment, sale,
hypothecation or pledge of this Contract shall be effective until approved by
(a) the Trustees, including a majority of the Trustees who are not interested
persons of the Adviser, the Sub-Adviser or (other than as Board members) the
Trust or the Fund, cast in person at a meeting called for the purpose of voting
on such approval, and (b) a majority of the outstanding voting securities of the
Fund, as defined in the 1940 Act.
12. Miscellaneous.
(a) The captions in this Contract are included for convenience of
reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect. This
Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The
name John Hancock Declaration Trust is the designation of the
Trustees under the Declaration of Trust, dated November 15, 1995 as
amended from time to time. The Declaration of Trust has been filed
with the Secretary of State of The Commonwealth of Massachusetts.
The obligations of the Trust and the Fund are not personally
binding upon, nor shall resort be had to the private property of,
any of the Trustees, shareholders, officers, employees or agents of
the Trust or the Fund, but only the Fund's property shall be bound.
The Trust or the Fund shall not be liable for the obligations of
any other series of the Trust.
(b) Any information supplied by the Sub-Adviser, which is not otherwise
in the public domain, in connection with the performance of its
duties hereunder is to be regarded as confidential and for use only
by the Fund and/or its agents, and only in connection with the Fund
and its investments.
13. Governing Law. This Contract shall be construed in accordance with the laws
of The Commonwealth of Massachusetts and the applicable provisions of the 1940
Act.
14. Severability. The provisions of this contract are independent of and
separable from each other and no provision shall be affected or rendered invalid
or unenforceable by virtue of the fact that for any reason any other or others
of them may be deemed invalid or unenforceable in whole or in part.
6
<PAGE>
Yours very truly,
JOHN HANCOCK ADVISERS, INC.
By:
Its: President
The foregoing Contract is hereby agreed to as of the date thereof.
JOHN HANCOCK DECLARATION TRUST
on behalf of John Hancock V.A. International Fund
By:
Its: President
JOHN HANCOCK ADVISERS INTERNATIONAL LTD.
By:
Its: Director
7
u:\vafunds\subjhai2.doc
JOHN HANCOCK DECLARATION TRUST
101 Huntington Avenue
Boston, Massachusetts 02199
______ ___ , 199_
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Form of
Distribution Agreement
Dear Sir:
John Hancock Declaration Trust (the "Trust") has been organized as a business
trust under the laws of the Commonwealth of Massachusetts to engage in the
business of an investment company. The Trust's Board of Trustees has selected
you to act as principal underwriter (as such term is defined in Section 2(a)(29)
of the Investment Company Act of 1940, as amended) of the shares of beneficial
interest ("shares") of each series of the Trust, to offer the shares for sale to
John Hancock Variable Annuity Account J (a separate account of John Hancock
Variable Life Insurance Company), to other insurance company separate accounts
and certain other qualified investors (collectively, the "Eligible Purchasers")
at net asset value in accordance with the prospectus and statement of additional
information then in effect.
The Trust intends to offer shares in ten series designated as: John Hancock V.A.
Emerging Equities Fund, John Hancock V.A. Discovery Fund, John Hancock V.A.
International Fund, John Hancock V.A. 500 Index Fund, John Hancock V.A.
Diversified Core Equity Fund, John Hancock V.A. Sovereign Investors Fund, John
Hancock V.A. Sovereign Bond Fund, John Hancock V.A. Strategic Income Fund, John
Hancock V.A. Global Income Fund and John Hancock V.A. Money Market Fund,
together with all other series subsequently established by the Trust and made
subject to this Agreement (each, a "Fund" and collectively, the "Funds"). You
are willing, as agent for the Trust, to sell the shares to Eligible Purchasers,
in the manner and on the conditions hereinafter set forth. Accordingly, the
Trust hereby agrees with you as follows:
1. Delivery of Documents. The Trust will furnish you promptly with copies,
properly certified or otherwise authenticated, of any registration statements
filed by it with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, (the "1933 Act") or the Investment Company Act of 1940, as
amended, (the "1940 Act") together with any financial statements and exhibits
included therein, and all amendments or supplements thereto hereafter filed.
2. Registration and Sale of Additional Shares. The Trust will use its best
efforts to register from time to time under the 1933 Act, if necessary, such
shares not already so registered as you may reasonably be expected to sell as
agent on behalf of the Trust. If necessary, you will cooperate with the Trust in
taking such action as may be required from time to time to effect and
<PAGE>
maintain the registration of the Trust's shares under the 1933 Act, to qualify
shares of the Trust for sale in the Commonwealth of Massachusetts and in any
other states mutually agreeable to you and the Trust, and to maintain such
qualification if and so long as such shares are duly registered under the 1933
Act.
3. Solicitation of Orders. You will use your best efforts (but only in states in
which you may lawfully do so) to obtain from Eligible Purchasers unconditional
orders for shares authorized for issuance by the Trust and registered under the
1933 Act provided that you may in your discretion refuse to accept orders for
such shares from any particular applicant.
4. Sale of Shares. Subject to the provisions of this Agreement, you are
authorized to sell as agent on behalf of the Trust, authorized and issued shares
registered under the 1933 Act. Such sales may be made by you on behalf of the
Trust by accepting unconditional orders to purchase such shares placed with
Eligible Purchasers. The sales price to Eligible Purchasers of such shares shall
be the net asset value as provided in Section 5 hereof.
Any right granted to you to accept orders for shares or make sales on behalf of
the Funds will not apply to shares issued in connection with the merger or
consolidation of any other investment company with any Fund or its acquisition,
by purchase or otherwise, of all or substantially all the assets of any
investment company or substantially all the outstanding shares of any such
company, and such right shall not apply to shares that may be offered or
otherwise issued by a Fund to shareholders by virtue of their being shareholders
of the Fund.
5. Share Price. All shares sold by you as agent for the Funds will be sold at
their net asset value, which will be determined in the manner provided in the
Funds' prospectuses or statement of additional information, as now in effect or
as they may be amended.
6. No Sales Discount. The respective Fund shall receive the applicable net asset
value on all sales of shares by you as agent of the Trust.
7. Transmission of Orders. No orders for the sale, redemption or repurchase of
the Funds' shares (nor payment for shares, in the case of a purchase) shall be
transmitted to you. Sales, redemptions and repurchases shall be effected
directly by the Funds' transfer agent according to the terms of the Trust's
transfer agency agreement. Also, payment for shares shall be transmitted by the
transfer agent directly to the Funds' custodian according to the terms of the
Trust's transfer agency agreement.
8. Suspension of Sales. If and whenever a suspension of the right of redemption
or a postponement of the date of payment or redemption has been declared
pursuant to the Trust's Declaration of Trust and has become effective, then,
until such suspension or postponement is terminated, no further orders for
shares shall be accepted by you except such unconditional orders placed with you
before you have knowledge of the suspension. Each Fund reserves the right to
suspend the sale of its shares and your authority to accept orders for shares on
behalf of the Fund if, in the judgment of a majority of the Trust's Board of
Trustees, it is in the best interests of the Fund to do so, such suspension to
continue for such period as may be determined by such majority; and in that
event, no shares will be sold by the Fund or by you on behalf of the Fund
2
<PAGE>
while such suspension remains in effect except for shares necessary to cover
unconditional orders accepted by you before you had knowledge of the suspension.
9. Expenses. The Trust will pay (or will enter into arrangements providing that
persons other than you will pay) all fees and expenses in connection with the
preparation and filing of any registration statement, prospectus and Statement
of Additional Information or any amendments thereto under the 1933 Act covering
the issue and sale of shares and in connection with the qualification of shares
for sale in the various states in which the Funds shall determine advisable to
qualify such shares for sale. The Trust, or applicable Fund, will also pay the
issue taxes or (in the case of shares redeemed) any initial transfer taxes
thereon.
10. Conformity with Law. You agree that in selling the shares you will duly
conform in all respects with the laws of the United States and, if necessary,
any state in which such shares may be offered for sale by you pursuant to this
Agreement.
11. Indemnification. You agree to indemnify and hold harmless the Trust and each
of its Board members and officers and each person, if any, who controls the
Trust or any Fund within the meaning of Section 15 of the Securities Act of
1933, as amended, against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses) to which the Trust, Fund or such
Board members, officers or controlling person may become subject under such Act,
under any other statute, at common law or otherwise, arising out of the
acquisition of any shares by any person which (a) may be based upon any wrongful
act by you or any of your employees or representatives or (b) may be based upon
any untrue statement or alleged untrue statement of a material fact contained in
a registration statement, prospectus or statement of additional information
covering shares of the Trust or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances in which they were made if such statement or omission
was made in reliance upon information furnished or confirmed in writing to the
Trust by you, or (c) may be incurred or arise by reason of your acting as the
Trust's agent instead of purchasing and reselling shares as principal in
distributing shares to Eligible Purchasers, provided that in no case is your
indemnity in favor of a Board member or officer of the Trust or any other person
deemed to protect such Board member or officer of the Trust or other person
against any liability to which any such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of his duties or by reason of his reckless disregard of obligations and duties
under this Agreement.
You are not authorized to give any information or to make any
representations on behalf of the Trust or in connection with the sale of shares
other than the information and representations contained in a registration
statement, prospectus, or statement of additional information covering shares,
as such registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time. No person other
than you is authorized to act as principal underwriter for the Trust.
12. Duration and Termination of this Agreement. This Agreement shall remain in
effect until the second anniversary of the date upon which this Agreement was
executed by the parties hereto, and from year to year thereafter, but only so
long as such continuance is specifically approved at least annually by (a) a
majority of the Board of Trustees who are not interested persons of you
3
<PAGE>
(other than as Board members) or of the Trust, cast in person at a meeting
called for the purpose of voting on such approval, and (b) either (i) the Board
of Trustees of the Trust, or (ii) a majority of the outstanding voting
securities of the Trust. This Agreement may, on 60 days' written notice, be
terminated at any time, without the payment of any penalty, by the Board of
Trustees of the Trust, by a vote of a majority of the outstanding voting
securities of the Trust, or by you. This Agreement will automatically terminate
in the event of its assignment by you. In interpreting the provisions of this
Section 13, the definitions contained in Section 2(a) of the Investment Company
Act of 1940 (particularly the definitions of "interested person", "assignment"
and "voting security") shall be applied.
13. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought. If the Trust should at any time deem it necessary or
advisable in the best interests of the Trust that any amendment of this
agreement be made in order to comply with the recommendations or requirements of
the Securities and Exchange Commission or other governmental authority or to
obtain any advantage under state or federal tax laws and should notify you of
the form of such amendment, and the reasons therefor, and if you should decline
to assent to such amendment, the Trust may terminate this agreement forthwith.
If you should at any time request that a change be made in the Trust's
Declaration of Trust or By-Laws, or in its methods of doing business, in order
to comply with any requirements of federal law or regulations of the Securities
and Exchange Commission or of a national securities association of which you are
or may be a member, relating to the sale of shares, and the Trust should not
make such necessary change within a reasonable time, you may terminate this
Agreement forthwith.
14. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Very truly yours,
JOHN HANCOCK DECLARATION TRUST
By:
Its:
The foregoing Agreement is hereby
accepted as of the date hereof.
JOHN HANCOCK FUNDS, INC.
By:
C. Troy Shaver, Jr., President
4
u:\vafunds\distrib3.doc
MASTER CUSTODIAN AGREEMENT
between
JOHN HANCOCK MUTUAL FUNDS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
1. Definitions..................................................1-3
2. Employment of Custodian and Property to be held by it........3-4
3. Duties of the Custodian with Respect to
Property of the Fund.........................................4
A. Safekeeping and Holding of Property......................4
B. Delivery of Securities...................................4-7
C. Registration of Securities...............................7
D. Bank Accounts............................................7
E. Payments for Shares of the Fund..........................8
F. Investment and Availability of Federal Funds.............8
G. Collections..............................................8-9
H. Payment of Fund Moneys...................................9-10
I. Liability for Payment in Advance of
Receipt of Securities Purchased..........................10
J. Payments for Repurchases of Redemptions
of Shares of the Fund....................................11
K. Appointment of Agents by the Custodian...................11
L. Deposit of Fund Portfolio Securities in
Securities Systems.......................................12-13
M. Deposit of Fund Commercial Paper in an Approved
Book-Entry System for Commercial Paper...................14-16
N. Segregated Account.......................................16
O. Ownership Certificates for Tax Purposes..................16
P. Proxies .................................................17
Q. Communications Relating to Fund Portfolio
Securities.........................................17
R. Exercise of Rights; Tender Offers.......................17-18
S. Depository Receipts......................................18
T. Interest Bearing Call or Time Deposits...................18
U. Options, Futures Contracts and Foreign
Currency Transactions....................................18-20
V. Actions Permitted Without Express Authority..............20
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value...............................20-21
5. Records and Miscellaneous Duties.............................21
6. Opinion of Fund's Independent Public Accountants.............22
7. Compensation and Expenses of Bank............................22
8. Responsibility of Bank.......................................22-23
9. Persons Having Access to Assets of the Fund..................23
10. Effective Period, Termination and Amendment;
Successor Custodian..........................................24
11. Interpretive and Additional Provisions.......................25
12. Certification as to Authorized Officers......................25
13. Notices......................................................25
14. Massachusetts Law to Apply...................................25
15. Adoption of the Agreement by the Fund........................26
<PAGE>
MASTER CUSTODIAN AGREEMENT
This Agreement is made as of June 15, 1994 between each investment company
advised by John Hancock Advisers, Inc. which has adopted this Agreement in the
manner provided herein and State Street Bank and Trust Company (hereinafter
called "Bank", "Custodian" and "Agent"), a trust company established under the
laws of Massachusetts with a principal place of business in Boston,
Massachusetts.
Whereas, each such investment company is registered under the Investment
Company Act of 1940 and has appointed the Bank to act as Custodian of its
property and to perform certain duties as its Agent, as more fully hereinafter
set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company and the
Bank agree as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Fund" shall mean the investment company which has adopted this
Agreement and is listed on Appendix A hereto. If the Fund is a Massachusetts
business trust or Maryland corporation, it may in the future establish and
designate other separate and distinct series of shares, each of which may be
called a "portfolio"; in such case, the term "Fund" shall also refer to each
such separate series or portfolio.
(b) "Board" shall mean the board of directors/trustees/managing general
partners/director general partners of the Fund, as the case may be.
(c) "The Depository Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(d) "Authorized Officer", shall mean any of the following officers of the
Trust: The Chairman of the Board of Trustees, the President, a Vice President,
the Secretary, the Treasurer or Assistant Secretary or Assistant Treasurer, or
any other officer of the Trust duly authorized to sign by appropriate resolution
of the Board of Trustees of the Trust.
(e) "Participants Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(f) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934 which acts as a securities depository but
only if the Custodian has received a certified copy of a vote of the Board
approving such clearing agency as a securities depository for the Fund.
(g) "Federal Book-Entry System" shall mean the book-entry system referred
to in Rule 17f-4(b) under the Investment Company Act of 1940 for United States
and federal agency securities (i.e., as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the book-entry
regulations of federal agencies substantially in the form of Subpart O).
(h) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in rule 17f-4 under the
Investment Company Act of 1940 for foreign securities but only if the Custodian
has received a certified copy of a vote of the Board approving such depository
or clearing agency as a foreign securities depository for the Fund.
(i) "Approved Book-Entry System for Commercial Paper" shall mean a system
maintained by the Custodian or by a subcustodian employed pursuant to Section 2
hereof for the holding of commercial paper in book-entry form but only if the
Custodian has received a certified copy of a vote of the Board approving the
participation by the Fund in such system.
(j) The Custodian shall be deemed to have received "proper instructions" in
respect of any of the matters referred to in this Agreement upon receipt of
written or facsimile instructions signed by such one or more person or persons
as the Board shall have from time to time authorized to give the particular
class of instructions in question. Electronic instructions for the purchase and
sale of securities which are transmitted by John Hancock Advisers, Inc. to the
Custodian through the John Hancock equity trading system and the John Hancock
fixed income trading system shall be deemed to be proper instructions; the Fund
shall cause all such instructions to be confirmed in writing. Different persons
may be authorized to give instructions for different purposes. A certified copy
of a vote of the Board may be received and accepted by the Custodian as
conclusive evidence of the authority of any such person to act and may be
considered as in full force and effect until receipt of written notice to the
contrary. Such instructions may be general or specific in terms and, where
appropriate, may be standing instructions. Unless the vote delegating authority
to any person or persons to give a particular class of instructions specifically
requires that the approval of any person, persons or committee shall first have
been obtained before the Custodian may act on instructions of that class, the
Custodian shall be under no obligation to question the right of the person or
persons giving such instructions in so doing. Oral instructions will be
considered proper instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. The Fund authorizes the Custodian to tape record any and all
telephonic or other oral instructions given to the Custodian. Upon receipt of a
certificate signed by two officers of the Fund as to the authorization by the
President and the Treasurer of the Fund accompanied by a detailed description of
the communication procedures approved by the President and the Treasurer of the
Fund, "proper instructions" may also include communications effected directly
between electromechanical or electronic devices provided that the President and
Treasurer of the Fund and the Custodian are satisfied that such procedures
afford adequate safeguards for the Fund's assets. In performing its duties
generally, and more particularly in connection with the purchase, sale and
exchange of securities made by or for the Fund, the Custodian may take
cognizance of the provisions of the governing documents and registration
statement of the Fund as the same may from time to time be in effect (and votes,
resolutions or proceedings of the shareholders or the Board), but, nevertheless,
except as otherwise expressly provided herein, the Custodian may assume unless
and until notified in writing to the contrary that so-called proper instructions
received by it are not in conflict with or in any way contrary to any provisions
of such governing documents and registration statement, or votes, resolutions or
proceedings of the shareholders or the Board.
2. Employment of Custodian and Property to be Held by It
The Fund hereby appoints and employs the Bank as its Custodian and Agent in
accordance with and subject to the provisions hereof, and the Bank hereby
accepts such appointment and employment. The Fund agrees to deliver to the
Custodian all securities, participation interests, cash and other assets owned
by it, and all payments of income, payments of principal and capital
distributions and adjustments received by it with respect to all securities and
participation interests owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held by the Fund and not delivered by
the Fund to the Custodian. The Fund will also deliver to the Bank from time to
time copies of its currently effective charter (or declaration of trust or
partnership agreement, as the case may be), By-Laws, prospectus, statement of
additional information and distribution agreement with its principal
underwriter, together with such resolutions, votes and other proceedings of the
Fund as may be necessary for or convenient to the Bank in the performance of its
duties hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Board. Any such subcustodian so employed by
the Custodian shall be deemed to be the agent of the Custodian, and the
Custodian shall remain primarily responsible for the securities, participation
interests, moneys and other property of the Fund held by such subcustodian. Any
foreign subcustodian shall be a bank or trust company which is an eligible
foreign custodian within the meaning of Rule 17f-5 under the Investment Company
Act of 1940, and the foreign custody arrangements shall be approved by the Board
and shall be in accordance with and subject to the provisions of said Rule. For
the purposes of this Agreement, any property of the Fund held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the Custodian
under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Fund
A. Safekeeping and Holding of Property The Custodian shall keep
safely all property of the Fund and on behalf of the Fund
shall from time to time receive delivery of Fund property for
safekeeping. The Custodian shall hold, earmark and segregate
on its books and records for the account of the Fund all
property of the Fund, including all securities, participation
interests and other assets of the Fund (1) physically held by
the Custodian, (2) held by any subcustodian referred to in
Section 2 hereof or by any agent referred to in Paragraph K
hereof, (3) held by or maintained in The Depository Trust
Company or in Participants Trust Company or in an Approved
Clearing Agency or in the Federal Book-Entry System or in an
Approved Foreign Securities Depository, each of which from
time to time is referred to herein as a "Securities System",
and (4) held by the Custodian or by any subcustodian referred
to in Section 2 hereof and maintained in any Approved
Book-Entry System for Commercial Paper.
B. Delivery of Securities The Custodian shall release and deliver
securities or participation interests owned by the Fund held (or deemed
to be held) by the Custodian or maintained in a Securities System
account or in an Approved Book-Entry System for Commercial Paper
account only upon receipt of proper instructions, which may be
continuing instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities or participation interests for the
account of the Fund, but only against receipt of payment
therefor; if delivery is made in Boston or New York City, payment
therefor shall be made in accordance with generally accepted
clearing house procedures or by use of Federal Reserve Wire
System procedures; if delivery is made elsewhere payment therefor
shall be in accordance with the then current "street delivery"
custom or in accordance with such procedures agreed to in writing
from time to time by the parties hereto; if the sale is effected
through a Securities System, delivery and payment therefor shall
be made in accordance with the provisions of Paragraph L hereof;
if the sale of commercial paper is to be effected through an
Approved Book-Entry System for Commercial Paper, delivery and
payment therefor shall be made in accordance with the provisions
of Paragraph M hereof; if the securities are to be sold outside
the United States, delivery may be made in accordance with
procedures agreed to in writing from time to time by the parties
hereto; for the purposes of this subparagraph, the term "sale"
shall include the disposition of a portfolio security (i) upon
the exercise of an option written by the Fund and (ii) upon the
failure by the Fund to make a successful bid with respect to a
portfolio security, the continued holding of which is contingent
upon the making of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the Fund;
3) To the depository agent in connection with tender or
other similar offers for portfolio securities of the
Fund;
4) To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or
otherwise become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the Custodian
or any subcustodian employed pursuant to Section 2 hereof;
5) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee of the Custodian or
into the name or nominee name of any agent appointed pursuant to
Paragraph K hereof or into the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities or
participation interests are to be delivered to the Custodian or
any subcustodian employed pursuant to Section 2 hereof;
6) To the broker selling the same for examination in accordance with
the "street delivery" custom; provided that the Custodian shall
adopt such procedures as the Fund from time to time shall approve
to ensure their prompt return to the Custodian by the broker in
the event the broker elects not to accept them;
7) For exchange or conversion pursuant to any plan of merger,
consolidation, re capitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion of such securities, or pursuant to
any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian
or any subcustodian employed pursuant to Section 2 hereof;
8) In the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such
warrants, rights or similar securities, or the surrender of
interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
9) For delivery in connection with any loans of securities made by
the Fund (such loans to be made pursuant to the terms of the
Fund's current registration statement), but only against receipt
of adequate collateral as agreed upon from time to time by the
Custodian and the Fund, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities.
10) For delivery as security in connection with any borrowings by the
Fund requiring a pledge or hypothecation of assets by the Fund
(if then permitted under circumstances described in the current
registration statement of the Fund), provided, that the
securities shall be released only upon payment to the Custodian
of the monies borrowed, except that in cases where additional
collateral is required to secure a borrowing already made,
further securities may be released for that purpose; upon receipt
of proper instructions, the Custodian may pay any such loan upon
redelivery to it of the securities pledged or hypothecated
therefor and upon surrender of the note or notes evidencing the
loan;
11) When required for delivery in connection with any redemption or
repurchase of Shares of the Fund in accordance with the
provisions of Paragraph J hereof;
12) For delivery in accordance with the provisions of any agreement
between the Custodian (or a subcustodian employed pursuant to
Section 2 hereof) and a broker-dealer registered under the
Securities Exchange Act of 1934 and, if necessary, the Fund,
relating to compliance with the rules of The Options Clearing
Corporation or of any registered national securities exchange, or
of any similar organization or organizations, regarding deposit
or escrow or other arrangements in connection with options
transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian (or a subcustodian employed
pursuant to Section 2 hereof), and a futures commission merchant,
relating to compliance with the rules of the Commodity Futures
Trading Commission and/or of any contract market or commodities
exchange or similar organization, regarding futures margin
account deposits or payments in connection with futures
transactions by the Fund;
14) For any other proper corporate purpose, but only upon receipt of,
in addition to proper instructions, a certified copy of a vote of
the Board specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made,
declaring such purpose to be proper corporate purpose, and naming
the person or persons to whom delivery of such securities shall
be made.
C. Registration of Securities Securities held by the Custodian
(other than bearer securities) for the account of the Fund
shall be registered in the name of the Fund or in the name of
any nominee of the Fund or of any nominee of the Custodian, or
in the name or nominee name of any agent appointed pursuant to
Paragraph K hereof, or in the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof, or in the
name or nominee name of The Depository Trust Company or
Participants Trust Company or Approved Clearing Agency or
Federal Book-Entry System or Approved Book-Entry System for
Commercial Paper; provided, that securities are held in an
account of the Custodian or of such agent or of such
subcustodian containing only assets of the Fund or only assets
held by the Custodian or such agent or such subcustodian as a
custodian or subcustodian or in a fiduciary capacity for
customers. All certificates for securities accepted by the
Custodian or any such agent or subcustodian on behalf of the
Fund shall be in "street" or other good delivery form or shall
be returned to the selling broker or dealer who shall be
advised of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a
separate bank account or accounts in the name of the Fund,
subject only to draft or order by the Custodian acting in
pursuant to the terms of this Agreement, and shall hold in
such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the Fund
other than cash maintained by the Fund in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian
for the Fund may be deposited by it to its credit as Custodian
in the banking department of the Custodian or in such other
banks or trust companies as the Custodian may in its
discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940
and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be
approved in writing by an Authorized Officer. Such funds
shall be deposited by the Custodian in its capacity as
Custodian and shall be subject to withdrawal only by the
Custodian in that capacity.
E. Payment for Shares of the Fund The Custodian shall make
appropriate arrangements with the Transfer Agent and the
principal underwriter of the Fund to enable the Custodian to
make certain it promptly receives the cash or other
consideration due to the Fund for such new or treasury Shares
as may be issued or sold from time to time by the Fund, in
accordance with the governing documents and offering
prospectus and statement of additional information of the
Fund. The Custodian will provide prompt notification to the
Fund of any receipt by it of payments for Shares of the Fund.
F. Investment and Availability of Federal Funds Upon agreement
between the Fund and the Custodian, the Custodian shall, upon
the receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, invest in
such securities and instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and
the Fund.
G. Collections The Custodian shall promptly collect all income
and other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall
promptly collect all income and other payments with respect to
bearer securities if, on the date of payment by the issuer,
such securities are held by the Custodian or agent thereof and
shall credit such income, as collected, to the Fund's
custodian account.
The Custodian shall do all things necessary and proper in connection with such
prompt collections and, without limiting the generality of the foregoing, the
Custodian shall
1) Present for payment all coupons and other income items
requiring presentations;
2) Present for payment all securities which may mature or
be called, redeemed, retired or otherwise become payable;
3) Endorse and deposit for collection, in the name of the
Fund, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a Securities System
or in an Approved Book-Entry System for Commercial Paper at the
time funds become available to the Custodian; in the case of
securities maintained in The Depository Trust Company funds shall
be deemed available to the Fund not later than the opening of
business on the first business day after receipt of such funds by
the Custodian.
The Custodian shall notify the Fund as soon as reasonably practicable whenever
income due on any security is not promptly collected. In any case in which the
Custodian does not receive any due and unpaid income after it has made demand
for the same, it shall immediately so notify the Fund in writing, enclosing
copies of any demand letter, any written response thereto, and memoranda of all
oral responses thereto and to telephonic demands, and await instructions from
the Fund; the Custodian shall in no case have any liability for any nonpayment
of such income provided the Custodian meets the standard of care set forth in
Section 8 hereof. The Custodian shall not be obligated to take legal action for
collection unless and until reasonably indemnified to its satisfaction.
The Custodian shall also receive and collect all stock dividends, rights and
other items of like nature, and deal with the same pursuant to proper
instructions relative thereto.
H. Payment of Fund Moneys Upon receipt of proper instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out moneys of the Fund in the following cases only:
1) Upon the purchase of securities, participation interests,
options, futures contracts, forward contracts and options on
futures contracts purchased for the account of the Fund but only
(a) against the receipt of:
(i) such securities registered as provided in
Paragraph C hereof or in proper form for transfer
or
(ii) detailed instructions signed by an officer of the
Fund regarding the participation interests to be
purchased or
(iii) written confirmation of the purchase by the Fund
of the options, futures contracts, forward
contracts or options on futures contracts
by the Custodian (or by a subcustodian employed pursuant to
Section 2 hereof or by a clearing corporation of a national
securities exchange of which the Custodian is a member or by any
bank, banking institution or trust company doing business in the
United States or abroad which is qualified under the Investment
Company Act of 1940 to act as a custodian and which has been
designated by the Custodian as its agent for this purpose or by
the agent specifically designated in such instructions as
representing the purchasers of a new issue of privately placed
securities); (b) in the case of a purchase effected through a
Securities System, upon receipt of the securities by the
Securities System in accordance with the conditions set forth in
Paragraph L hereof; (c) in the case of a purchase of commercial
paper effected through an Approved Book-Entry System for
Commercial Paper, upon receipt of the paper by the Custodian or
subcustodian in accordance with the conditions set forth in
Paragraph M hereof; (d) in the case of repurchase agreements
entered into between the Fund and another bank or a
broker-dealer, against receipt by the Custodian of the securities
underlying the repurchase agreement either in certificate form or
through an entry crediting the Custodian's segregated,
non-proprietary account at the Federal Reserve Bank of Boston
with such securities along with written evidence of the agreement
by the bank or broker-dealer to repurchase such securities from
the Fund; or (e) with respect to securities purchased outside of
the United States, in accordance with written procedures agreed
to from time to time in writing by the parties hereto;
2) When required in connection with the conversion,
exchange or surrender of securities owned by the Fund as
set forth in Paragraph B hereof;
3) When required for the redemption or repurchase of Shares
of the Fund in accordance with the provisions of
Paragraph J hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund: advisory fees, distribution plan payments,
interest, taxes, management compensation and expenses,
accounting, transfer agent and legal fees, and other operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends or other distributions
to holders of Shares declared or authorized by the
Board; and
6) For any other proper corporate purpose, but only upon receipt of,
in addition to proper instructions, a certified copy of a vote of
the Board, specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person
or persons to whom such payment is to be made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for purchase of
securities for the account of the Fund is made by the
Custodian in advance of receipt of the securities purchased in
the absence of specific written instructions signed by two
officers of the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the
same extent as if the securities had been received by the
Custodian; except that in the case of a repurchase agreement
entered into by the Fund with a bank which is a member of the
Federal Reserve System, the Custodian may transfer funds to
the account of such bank prior to the receipt of (i) the
securities in certificate form subject to such repurchase
agreement or (ii) written evidence that the securities subject
to such repurchase agreement have been transferred by
book-entry into a segregated non-proprietary account of the
Custodian maintained with the Federal Reserve Bank of Boston
or (iii) the safekeeping receipt, provided that such
securities have in fact been so transferred by book-entry and
the written repurchase agreement is received by the Custodian
in due course; and except that if the securities are to be
purchased outside the United States, payment may be made in
accordance with procedures agreed to from time to time by the
parties hereto.
J. Payments for Repurchases or Redemptions of Shares of the Fund
From such funds as may be available for the purpose, but
subject to any applicable votes of the Board and the current
redemption and repurchase procedures of the Fund, the
Custodian shall, upon receipt of written instructions from the
Fund or from the Fund's transfer agent or from the principal
underwriter, make funds and/or portfolio securities available
for payment to holders of Shares who have caused their Shares
to be redeemed or repurchased by the Fund or for the Fund's
account by its transfer agent or principal underwriter.
The Custodian may maintain a special checking account upon which
special checks may be drawn by shareholders of the Fund holding Shares
for which certificates have not been issued. Such checking account and
such special checks shall be subject to such rules and regulations as
the Custodian and the Fund may from time to time adopt. The Custodian
or the Fund may suspend or terminate use of such checking account or
such special checks (either generally or for one or more shareholders)
at any time. The Custodian and the Fund shall notify the other
immediately of any such suspension or termination.
K. Appointment of Agents by the Custodian The Custodian may at
any time or times in its discretion appoint (and may at any
time remove) any other bank or trust company (provided such
bank or trust company is itself qualified under the Investment
Company Act of 1940 to act as a custodian or is itself an
eligible foreign custodian within the meaning of Rule 17f-5
under said Act) as the agent of the Custodian to carry out
such of the duties and functions of the Custodian described in
this Section 3 as the Custodian may from time to time direct;
provided, however, that the appointment of any such agent
shall not relieve the Custodian of any of its responsibilities
or liabilities hereunder, and as between the Fund and the
Custodian the Custodian shall be fully responsible for the
acts and omissions of any such agent. For the purposes of
this Agreement, any property of the Fund held by any such
agent shall be deemed to be held by the Custodian hereunder.
L. Deposit of Fund Portfolio Securities in Securities Systems
The Custodian may deposit and/or maintain securities owned by
the Fund
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and regulations, and at
all times subject to the following
provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep securities
of the Fund in a Securities System provided that such
securities are maintained in a non-proprietary account
("Account") of the Custodian or such subcustodian in the
Securities System which shall not include any assets of the
Custodian or such subcustodian or any other person other than
assets held by the Custodian or such subcustodian as a
fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to securities of the Fund
which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund, and the Custodian
shall be fully and completely responsible for maintaining a record
keeping system capable of accurately and currently stating the Fund's
holdings maintained in each such Securities System.
(c) The Custodian shall pay for securities purchased in book-entry
form for the account of the Fund only upon (i) receipt of
notice or advice from the Securities System that such
securities have been transferred to the Account, and (ii) the
making of any entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold for the account of
the Fund only upon (i) receipt of notice or advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all notices or
advises from the Securities System of transfers of securities
for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be promptly
provided to the Fund at its request. The Custodian shall
promptly send to the Fund confirmation of each transfer to or
from the account of the Fund in the form of a written advice
or notice of each such transaction, and shall furnish to the
Fund copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Fund on the next business day.
(d) The Custodian shall promptly send to the Fund any report or
other communication received or obtained by the Custodian
relating to the Securities System's accounting system, system
of internal accounting controls or procedures for safeguarding
securities deposited in the Securities System; the Custodian
shall promptly send to the Fund any report or other
communication relating to the Custodian's internal accounting
controls and procedures for safeguarding securities deposited
in any Securities System; and the Custodian shall ensure that
any agent appointed pursuant to Paragraph K hereof or any
subcustodian employed pursuant to Section 2 hereof shall
promptly send to the Fund and to the Custodian any report or
other communication relating to such agent's or
subcustodian's internal accounting controls and procedures for
safeguarding securities deposited in any Securities System.
The Custodian's books and records relating to the Fund's
participation in each Securities System will at all times
during regular business hours be open to the inspection of the
Fund's Authorized Officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the
absence of receipt of a certificate of an Authorized Officer
that the Board has approved the use of a particular Securities
System; the Custodian shall also obtain appropriate assurance
from an Authorized Officer that the Board has annually
reviewed and approved the continued use by the Fund of each
Securities System, so long as such review and approval is
required by Rule 17f-4 under the Investment Company Act of
1940, and the Fund shall promptly notify the Custodian if the
use of a Securities System is to be discontinued; at the
request of the Fund, the Custodian will terminate the use of
any such Securities System as promptly as practicable.
(f) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Securities System
by reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or subcustodians or of any of
its or their employees or from any failure of the Custodian or
any such agent or subcustodian to enforce effectively such
rights as it may have against the Securities System or any
other person; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the Fund has
not been made whole for any such loss or damage.
M. Deposit of Fund Commercial Paper in an Approved Book-Entry System
for Commercial Paper Upon receipt of proper instructions with
respect to each issue of direct issue commercial paper purchased
by the Fund, the Custodian may deposit and/or maintain direct
issue commercial paper owned by the Fund in any Approved
Book-Entry System for Commercial Paper, in each case only in
accordance with applicable Securities and Exchange Commission
rules, regulations, and no-action correspondence, and at all
times subject to the following provisions:
(a) The Custodian may (either directly or through one or
more subcustodians employed pursuant to Section 2) keep
commercial paper of the Fund in an Approved Book-Entry
System for Commercial Paper, provided that such paper is
issued in book entry form by the Custodian or
subcustodian on behalf of an issuer with which the
Custodian or subcustodian has entered into a book-entry
agreement and provided further that such paper is
maintained in a non-proprietary account ("Account") of
the Custodian or such subcustodian in an Approved
Book-Entry System for Commercial Paper which shall not
include any assets of the Custodian or such subcustodian
or any other person other than assets held by the
Custodian or such subcustodian as a fiduciary,
custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to commercial
paper of the Fund which is maintained in an Approved
Book-Entry System for Commercial Paper shall identify by
book-entry each specific issue of commercial paper
purchased by the Fund which is included in the System
and shall at all times during regular business hours be
open for inspection by authorized officers, employees or
agents of the Fund. The Custodian shall be fully and
completely responsible for maintaining a record keeping
system capable of accurately and currently stating the
Fund's holdings of commercial paper maintained in each
such System.
(c) The Custodian shall pay for commercial paper purchased
in book-entry form for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice from the
issuer that such paper has been issued, sold and
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
purchase, payment and transfer for the account of the
Fund. The Custodian shall transfer such commercial
paper which is sold or cancel such commercial paper
which is redeemed for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice that
payment for such paper has been transferred to the
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such transfer or redemption
and payment for the account of the Fund. Copies of all
notices, advises and confirmations of transfers of
commercial paper for the account of the Fund shall
identify the Fund, be maintained for the Fund by the
Custodian and be promptly provided to the Fund at its
request. The Custodian shall promptly send to the Fund
confirmation of each transfer to or from the account of
the Fund in the form of a written advice or notice of
each such transaction, and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transactions in the System for the account of the Fund
on the next business day.
(d) The Custodian shall promptly send to the Fund any report
or other communication received or obtained by the
Custodian relating to each System's accounting system,
system of internal accounting controls or procedures for
safeguarding commercial paper deposited in the System;
the Custodian shall promptly send to the Fund any report
or other communication relating to the Custodian's
internal accounting controls and procedures for
safeguarding commercial paper deposited in any Approved
Book-Entry System for Commercial Paper; and the
Custodian shall ensure that any agent appointed pursuant
to Paragraph K hereof or any subcustodian employed
pursuant to Section 2 hereof shall promptly send to the
Fund and to the Custodian any report or other
communication relating to such agent's or subcustodian's
internal accounting controls and procedures for
safeguarding securities deposited in any Approved
Book-Entry System for Commercial Paper.
(e) The Custodian shall not act under this Paragraph M in
the absence of receipt of a certificate of an officer of
the Fund that the Board has approved the use of a
particular Approved Book-Entry System for Commercial
Paper; the Custodian shall also obtain appropriate
assurance from an Authorized Officer that the Board has
annually reviewed and approved the continued use by the
Fund of each Approved Book-Entry System for Commercial
Paper, so long as such review and approval is required
by Rule 17f-4 under the Investment Company Act of 1940,
and the Fund shall promptly notify the Custodian if the
use of an Approved Book-Entry System for Commercial
Paper is to be discontinued; at the request of the Fund,
the Custodian will terminate the use of any such System
as promptly as practicable.
(f) The Custodian (or subcustodian, if the Approved Book-Entry System
for Commercial Paper is maintained by the subcustodian) shall
issue physical commercial paper or promissory notes whenever
requested to do so by the Fund or in the event of an electronic
system failure which impedes issuance, transfer or custody of
direct issue commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Fund for any loss or damage to the Fund resulting from
use of any Approved Book-Entry System for Commercial
Paper by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or
subcustodians or of any of its or their employees or
from any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it
may have against this System, the issuer of the
commercial paper or any other person; at the election of
the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim
against this System, the issuer of the commercial paper
or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any
such loss or damage.
N. Segregated Account The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant
to Paragraph L hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Custodian and any
registered broker-dealer (or any futures commission merchant),
relating to compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange
(or of the Commodity Futures Trading Commission or of any
contract market or commodities exchange), or of any similar
organization or organizations, regarding escrow or deposit or
other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or U.S. Government
securities in connection with options purchased, sold or
written by the Fund or futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of
compliance by the Fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
purposes, but only, in the case of clause (iv), upon receipt
of, in addition to proper instructions, a certificate signed
by two officers of the Fund, setting forth the purpose such
segregated account and declaring such purpose to be a proper
purpose.
O. Ownership Certificates for Tax Purposes The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund held by it and in
connection with transfers of securities.
P. Proxies The Custodian shall, with respect to the securities
held by it hereunder, cause to be promptly delivered to the
Fund all forms of proxies and all notices of meetings and any
other notices or announcements or other written information
affecting or relating to the securities, and upon receipt of
proper instructions shall execute and deliver or cause its
nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor
its nominee shall vote upon any of the securities or execute
any proxy to vote thereon or give any consent or take any
other action with respect thereto (except as otherwise herein
provided) unless ordered to do so by proper instructions.
Q. Communications Relating to Fund Portfolio Securities The
Custodian shall deliver promptly to the Fund all written
information (including, without limitation, pendency of call
and maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers and other persons
relating to the securities and participation interests being
held for the Fund. With respect to tender or exchange offers,
the Custodian shall deliver promptly to the Fund all written
information received by the Custodian from issuers and other
persons relating to the securities and participation interests
whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender
offers, similar offers to purchase or exercise rights
(including, without limitation, pendency of calls and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options and the maturity of futures
contracts) affecting or relating to securities and
participation interests held by the Custodian under this
Agreement, the Custodian shall have responsibility for
promptly notifying the Fund of all such offers in accordance
with the standard of reasonable care set forth in Section 8
hereof. For all such offers for which the Custodian is
responsible as provided in this Paragraph R, the Fund shall
have responsibility for providing the Custodian with all
necessary instructions in timely fashion. Upon receipt of
proper instructions, the Custodian shall timely deliver to the
issuer or trustee thereof, or to the agent of either,
warrants, puts, calls, rights or similar securities for the
purpose of being exercised or sold upon proper receipt
therefor and upon receipt of assurances satisfactory to the
Custodian that the new securities and cash, if any, acquired
by such action are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof. Upon
receipt of proper instructions, the Custodian shall timely
deposit securities upon invitations for tenders of securities
upon proper receipt therefor and upon receipt of assurances
satisfactory to the Custodian that the consideration to be
paid or delivered or the tendered securities are to be
returned to the Custodian or subcustodian employed pursuant to
Section 2 hereof. Notwithstanding any provision of this
Agreement to the contrary, the Custodian shall take all
necessary action, unless otherwise directed to the contrary by
proper instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or
similar rights of security ownership, and shall thereafter
promptly notify the Fund in writing of such action.
S. Depository Receipts The Custodian shall, upon receipt of
proper instructions, surrender or cause to be surrendered
foreign securities to the depository used by an issuer of
American Depository Receipts, European Depository Receipts or
International Depository Receipts (hereinafter collectively
referred to as "ADRs") for such securities, against a written
receipt therefor adequately describing such securities and
written evidence satisfactory to the Custodian that the
depository has acknowledged receipt of instructions to issue
with respect to such securities ADRs in the name of a nominee
of the Custodian or in the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof, for
delivery to the Custodian or such subcustodian at such place
as the Custodian or such subcustodian may from time to time
designate. The Custodian shall, upon receipt of proper
instructions, surrender ADRs to the issuer thereof against a
written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian
that the issuer of the ADRs has acknowledged receipt of
instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian or to a subcustodian
employed pursuant to Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian shall,
upon receipt of proper instructions, place interest bearing
fixed term and call deposits with the banking department of
such banking institution (other than the Custodian) and in
such amounts as the Fund may designate. Deposits may be
denominated in U.S. Dollars or other currencies. The
Custodian shall include in its records with respect to the
assets of the Fund appropriate notation as to the amount and
currency of each such deposit, the accepting banking
institution and other appropriate details and shall retain
such forms of advice or receipt evidencing the deposit, if
any, as may be forwarded to the Custodian by the banking
institution. Such deposits shall be deemed portfolio
securities of the applicable Fund for the purposes of this
Agreement, and the Custodian shall be responsible for the
collection of income from such accounts and the transmission
of cash to and from such accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
1. Options. The Custodians shall, upon receipt of proper
instructions and in accordance with the provisions of
any agreement between the Custodian, any registered
broker-dealer and, if necessary, the Fund, relating to
compliance with the rules of the Options Clearing
Corporation or of any registered national securities
exchange or similar organization or organizations,
receive and retain confirmations or other documents, if
any, evidencing the purchase or writing of an option on
a security, securities index, currency or other
financial instrument or index by the Fund; deposit and
maintain in a segregated account for each Fund
separately, either physically or by book-entry in a
Securities System, securities subject to a covered call
option written by the Fund; and release and/or transfer
such securities or other assets only in accordance with
a notice or other communication evidencing the
expiration, termination or exercise of such covered
option furnished by the Options Clearing Corporation,
the securities or options exchange on which such covered
option is traded or such other organization as may be
responsible for handling such options transactions.
2. Futures Contracts The Custodian shall, upon receipt of
proper instructions, receive and retain confirmations
and other documents, if any, evidencing the purchase or
sale of a futures contract or an option on a futures
contract by the Fund; deposit and maintain in a
segregated account, for the benefit of any futures
commission merchant, assets designated by the Fund as
initial, maintenance or variation "margin" deposits
(including mark-to-market payments) intended to secure
the Fund's performance of its obligations under any
futures contracts purchased or sold or any options on
futures contracts written by Fund, in accordance with
the provisions of any agreement or agreements among the
Fund, the Custodian and such futures commission
merchant, designed to comply with the rules of the
Commodity Futures Trading Commission and/or of any
contract market or commodities exchange or similar
organization regarding such margin deposits or payments;
and release and/or transfer assets in such margin
accounts only in accordance with any such agreements or
rules.
3. Foreign Exchange Transactions The Custodian shall,
pursuant to proper instructions, enter into or cause a
subcustodian to enter into foreign exchange contracts,
currency swaps or options to purchase and sell foreign
currencies for spot and future delivery on behalf and
for the account of the Fund. Such transactions may be
undertaken by the Custodian or subcustodian with such
banking or financial institutions or other currency
brokers, as set forth in proper instructions. Foreign
exchange contracts, swaps and options shall be deemed to
be portfolio securities of the Fund; and accordingly,
the responsibility of the Custodian therefor shall be
the same as and no greater than the Custodian's
responsibility in respect of other portfolio securities
of the Fund. The Custodian shall be responsible for the
transmittal to and receipt of cash from the currency
broker or banking or financial institution with which
the contract or option is made, the maintenance of
proper records with respect to the transaction and the
maintenance of any segregated account required in
connection with the transaction. The Custodian shall
have no duty with respect to the selection of the
currency brokers or banking or financial institutions
with which the Fund deals or for their failure to comply
with the terms of any contract or option. Without
limiting the foregoing, it is agreed that upon receipt
of proper instructions and insofar as funds are made
available to the Custodian for the purpose, the
Custodian may (if determined necessary by the Custodian
to consummate a particular transaction on behalf and for
the account of the Fund) make free outgoing payments of
cash in the form of U.S. dollars or foreign currency
before receiving confirmation of a foreign exchange
contract or swap or confirmation that the countervalue
currency completing the foreign exchange contract or
swap has been delivered or received. The Custodian
shall not be responsible for any costs and interest
charges which may be incurred by the Fund or the
Custodian as a result of the failure or delay of third
parties to deliver foreign exchange; provided that the
Custodian shall nevertheless be held to the standard of
care set forth in, and shall be liable to the Fund in
accordance with, the provisions of Section 8.
V. Actions Permitted Without Express Authority The Custodian may in
its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Agreement, provided, that all such payments shall be
accounted for by the Custodian to the Treasurer of the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Fund
except as otherwise directed by the Fund.
4. Duties of Bank with Respect to Books of Account and Calculations
of Net Asset Value
The Bank shall as Agent (or as Custodian, as the case may be) keep such books of
account and render as at the close of business on each day a detailed statement
of the amounts received or paid out and of securities received or delivered for
the account of the Fund during said day and such other statements, including a
daily trial balance and inventory of the Fund's portfolio securities; and shall
furnish such other financial information and data as from time to time requested
by the Treasurer or any Authorized Officer of the Fund; and shall compute and
determine, as of the close of regular trading on the New York Stock Exchange, or
at such other time or times as the Board may determine, the net asset value of a
share in the Fund, such computation and determination to be made in accordance
with the governing documents of the Fund and the votes and instructions of the
Board at the time in force and applicable, and promptly notify the Fund and its
investment adviser and such other persons as the Fund may request of the result
of such computation and determination. In computing the net asset value the
Custodian may rely upon security quotations received by telephone or otherwise
from sources or pricing services designated by the Fund by proper instructions,
and may further rely upon information furnished to it by any authorized officer
of the Fund relative (a) to liabilities of the Fund not appearing on its books
of account, (b) to the existence, status and proper treatment of any reserve or
reserves, (c) to any procedures established by the Board regarding the valuation
of portfolio securities, and (d) to the value to be assigned to any bond, note,
debenture, Treasury bill, repurchase agreement, subscription right, security,
participation interest or other asset or property for which market quotations
are not readily available.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All books of account and
records maintained by the Bank in connection with the performance of its duties
under this Agreement shall be the property of the Fund, shall at all times
during the regular business hours of the Bank be open for inspection by
authorized officers, employees or agents of the Fund, and in the event of
termination of this Agreement shall be delivered to the Fund or to such other
person or persons as shall be designated by the Fund. Disposition of any account
or record after any required period of preservation shall be only in accordance
with specific instructions received from the Fund. The Bank shall assist
generally in the preparation of reports to shareholders, audits of accounts, and
other ministerial matters of like nature; and, upon request, shall furnish the
Fund's auditors with an attested inventory of securities held with appropriate
information as to securities in transit or in the process of purchase or sale
and with such other information as said auditors may from time to time request.
The Custodian shall also maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory thereof, and
shall conduct periodic verifications (including sampling counts at the
Custodian) of certificates representing bonds and other securities for which it
is responsible under this Agreement in such manner as the Custodian shall
determine from time to time to be advisable in order to verify the accuracy of
such inventory. The Bank shall not disclose or use any books or records it has
prepared or maintained by reason of this Agreement in any manner except as
expressly authorized herein or directed by the Fund, and the Bank shall keep
confidential any information obtained by reason of this Agreement.
6. Opinion of Fund's Independent Public Accountants
The Custodian shall take all reasonable action, as the Fund may from time to
time request, to enable the Fund to obtain from year to year favorable opinions
from the Fund's independent public accountants with respect to its activities
hereunder in connection with the preparation of the Fund's registration
statement and Form N-SAR or other periodic reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
7. Compensation and Expenses of Bank
The Bank shall be entitled to reasonable compensation for its services as
Custodian and Agent, as agreed upon from time to time between the Fund and the
Bank. The Bank shall be entitled to receive from the Fund on demand
reimbursement for its cash disbursements, expenses and charges, including
counsel fees, in connection with its duties as Custodian and Agent hereunder,
but excluding salaries and usual overhead expenses.
8. Responsibility of Bank
So long as and to the extent that it is in the exercise of reasonable care, the
Bank as Custodian and Agent shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
The Bank as Custodian and Agent shall be held to the exercise of reasonable care
in carrying out the provisions of this Agreement but shall be liable only for
its own negligent or bad faith acts or failures to act. Notwithstanding the
foregoing, nothing contained in this paragraph is intended to nor shall it be
construed to modify the standards of care and responsibility set forth in
Section 2 hereof with respect to subcustodians and in subparagraph f of
Paragraph L of Section 3 hereof with respect to Securities Systems and in
subparagraph g of Paragraph M of Section 3 hereof with respect to an Approved
Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect to subcustodians
generally in Section 2 hereof, provided that, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign securities
depository or a branch of a U.S. bank, the Custodian shall not be liable for any
loss, damage, cost, expense, liability or claim resulting from, or caused by,
the direction of or authorization by the Fund to maintain custody of any
securities or cash of the Fund in a foreign county including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
acts of war, civil war or terrorism, insurrection, revolution, military or
usurped powers, nuclear fission, fusion or radiation, earthquake, storm or other
disturbance of nature or acts of God.
If the Fund requires the Bank in any capacity to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Bank, result in the Bank or its nominee assigned to the Fund
being liable for the payment of money or incurring liability of some other form,
the Fund, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to
advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund assets to
the extent necessary to obtain reimbursement.
9. Persons Having Access to Assets of the Fund
(i) No trustee, director, general partner, officer, employee
or agent of the Fund shall have physical access to the
assets of the Fund held by the Custodian or be
authorized or permitted to withdraw any investments of
the Fund, nor shall the Custodian deliver any assets of
the Fund to any such person. No officer or director,
employee or agent of the Custodian who holds any similar
position with the Fund or the investment adviser of the
Fund shall have access to the assets of the Fund.
(ii) Access to assets of the Fund held hereunder shall only
be available to duly Authorized Officers, employees,
representatives or agents of the Custodian or other
persons or entities for whose actions the Custodian
shall be responsible to the extent permitted hereunder,
or to the Fund's independent public accountants in
connection with their auditing duties performed on
behalf of the Fund.
(iii) Nothing in this Section 9 shall prohibit any Authorized Officer,
employee or agent of the Fund or of the investment adviser of the
Fund from giving instructions to the Custodian or executing a
certificate so long as it does not result in delivery of or
access to assets of the Fund prohibited by paragraph (i) of this
Section 9.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than sixty (60) days
after the date of such delivery or mailing; provided, that the Fund may at any
time by action of its Board, (i) substitute another bank or trust company for
the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the Federal Deposit Insurance
Corporation or by the Banking Commissioner of The Commonwealth of Massachusetts
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction. Upon termination of the
Agreement, the Fund shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
Unless the holders of a majority of the outstanding shares of the Fund vote to
have the securities, funds and other properties held hereunder delivered and
paid over to some other bank or trust company, specified in the vote, having not
less than $2,000,000 of aggregate capital, surplus and undivided profits, as
shown by its last published report, and meeting such other qualifications for
custodians set forth in the Investment Company Act of 1940, the Board shall,
forthwith, upon giving or receiving notice of termination of this Agreement,
appoint as successor custodian, a bank or trust company having such
qualifications. The Bank, as Custodian, Agent or otherwise, shall, upon
termination of the Agreement, deliver to such successor custodian, all
securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no such vote has been adopted by
the shareholders and that no written order designating a successor custodian
shall have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Fund to the Fund but shall have
the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all funds, securities and properties of the Fund held by or
deposited with the Bank, and all books of account and records kept by the Bank
pursuant to this Agreement, and all documents held by the Bank relative thereto.
Thereafter such bank or trust company shall be the successor of the Custodian
under this Agreement.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and the Fund
may from time to time agree on such provisions interpretive of or in addition to
the provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
governing instruments of the Fund. No interpretive or additional provisions made
as provided in the preceding sentence shall be deemed to be an amendment of this
Agreement.
12. Certification as to Authorized Officers
The Secretary of the Fund shall at all times maintain on file with the Bank his
certification to the Bank, in such form as may be acceptable to the Bank, of the
names and signatures of the Authorized Officers of each fund, it being
understood that upon the occurrence of any change in the information set forth
in the most recent certification on file (including without limitation any
person named in the most recent certification who has ceased to hold the office
designated therein), the Secretary of the Fund shall sign a new or amended
certification setting forth the change and the new, additional or omitted names
or signatures. The Bank shall be entitled to rely and act upon instructions from
any officers named in the most recent certification.
13. Notices
Notices and other writings delivered or mailed postage prepaid to the Fund
addressed to Thomas H. Drohan, John Hancock Advisers, Inc., 101 Huntington
Avenue, Boston, Massachusetts 02199, or to such other address as the Fund may
have designated to the Bank, in writing, or to State Street Bank and Trust
Company, shall be deemed to have been properly delivered or given hereunder to
the respective addressees.
14. Massachusetts Law to Apply; Limitations on Liability
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with the laws of The Commonwealth of Massachusetts.
If the Fund is a Massachusetts business trust, the Custodian expressly
acknowledges the provision in the Fund's declaration of trust limiting the
personal liability of the trustees and shareholders of the Fund; and the
Custodian agrees that it shall have recourse only to the assets of the Fund for
the payment of claims or obligations as between the Custodian and the Fund
arising out of this Agreement, and the Custodian shall not seek satisfaction of
any such claim or obligation from the trustees or shareholders of the Fund. Each
Fund, and each series or portfolio of a Fund, shall be liable only for its own
obligations to the Custodian under this Agreement and shall not be jointly or
severally liable for the obligations of any other Fund, series or portfolio
hereunder.
15. Adoption of the Agreement by the Fund
The Fund represents that its Board has approved this Agreement and has duly
authorized the Fund to adopt this Agreement. This Agreement shall be deemed to
supersede and terminate, as of the date first written above, all prior
agreements between the Fund and the Bank relating to the custody of the Fund's
assets.
* * * * *
<PAGE>
In Witness Whereof, the parties hereto have caused this agreement to be executed
in duplicate as of the date first written above by their respective officers
thereunto duly authorized.
John Hancock Mutual Funds listed on Appendix A
by: /s/ James B. Little
James B. Little
Senior Vice President and Chief Financial Officer
Attest:
/s/ Avery P. Maher
State Street Bank and Trust Company
by: /s/Ronald E. Logue
Attest:
/s/ Sharon Baker Morin
<PAGE>
State Street Bank and Trust Company
Form of
Appendix A
State Street Bank and Trust Company
[EFFECTIVE OCTOBER 2, 1995]
Freedom Investment Trust II
John Hancock Global Fund
John Hancock Global Income Fund
John Hancock Short-Term Strategic Income Fund
John Hancock International Fund
John Hancock Cash Management Fund
John Hancock Cash Reserve, Inc.
John Hancock Current Interest
John Hancock U.S. Government Cash Reserve
John Hancock Institutional Series Trust
John Hancock Global Bond Fund
John Hancock International Equity Fund
John Hancock Patriot Global Dividend Fund
John Hancock Patriot Preferred Dividend Fund
John Hancock Patriot Premium Dividend Fund I
John Hancock Patriot Premium Dividend Fund II
John Hancock Patriot Select Dividend Trust
John Hancock Bank and Thrift Opportunity Fund
John Hancock Series, Inc.
John Hancock Money Market Fund
John Hancock World Fund
John Hancock Pacific Basin Equities Fund
John Hancock Global Rx Fund
John Hancock Global Retail Fund
The Southeastern Thrift and Bank Fund, Inc.
John Hancock Declaration Trust
John Hancock V.A. International Fund
John Hancock V.A. 500 Index Fund
John Hancock V.A. Global Income Fund
John Hancock V.A. Money Market Fund
<PAGE>
AMENDMENT TO MASTER CUSTODIAN AGREEMENT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and each investment company advised by John Hancock Advisers, Inc.
which has adopted the Master Custodian Agreement (each a "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated June 15, 1994 (the "Master Custodian Agreement") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the terms and
conditions under which the Custodian maintains the Fund's securities and other
non-cash property in the custody of certain foreign sub-custodians in conformity
with the requirements of Rule 17f-5 under the Investment Company Act of 1940, as
amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Master Custodian Agreement
by the addition of the following terms and provisions;
1. Notwithstanding any provisions to the contrary set forth in the
Master Custodian Agreement, the Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash property
of the Fund which are maintained in such account shall identify by book-entry
those securities and other non-cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-cash property so held by
the foreign sub-custodian be held separately from any assets of the foreign
sub-custodian, Custodian or of others.
2. Except as specifically superseded or modified herein, the terms and
provisions of the Master Custodian Agreement shall continue to apply with full
force and effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in duplicate by its duly authorized representative this 15th day of
September, 1995.
JOHN HANCOCK FUNDS LISTED ON APPENDIX A
By: /s/ James B. Little
Title: Senior Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
Title: Executive Vice President
s:\edgar\custdnss.doc
MASTER CUSTODIAN AGREEMENT
between
JOHN HANCOCK MUTUAL FUNDS
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1-3
2. Employment of Custodian and Property to be held by it . . . . 3-4
3. Duties of the Custodian with Respect to
Property of the Fund . . . . . . . . . . . . . . . . . . . 4
A. Safekeeping and Holding of Property . . . . . . . . . . 4
B. Delivery of Securities . . . . . . . . . . . . . . . . . 5-8
C. Registration of Securities . . . . . . . . . . . . . . . 8
D. Bank Accounts . . . . . . . . . . . . . . . . . . . . . 8-9
E. Payments for Shares of the Fund . . . . . . . . . . . . 9
F. Investment and Availability of Federal Funds . . . . . . 9
G. Collections . . . . . . . . . . . . . . . . . . . . . . 9-10
H. Payment of Fund Moneys . . . . . . . . . . . . . . . . . 10-12
I. Liability for Payment in Advance of Receipt
of Securities Purchased . . . . . . . . . . . . . . . 12-13
J. Payments for Repurchases of Redemptions of
Shares of the Fund . . . . . . . . . . . . . . . . . 13
K. Appointment of Agents by the Custodian . . . . . . . . . 13
L. Deposit of Fund Portfolio Securities in
Securities Systems . . . . . . . . . . . . . . . . . 13-16
M. Deposit of Fund Commercial Paper in an Approved
Book-Entry System for Commercial Paper . . . . . . . 16-18
N. Segregated Account . . . . . . . . . . . . . . . . . . . 18-19
O. Ownership Certificates for Tax Purposes . . . . . . . . 19
P. Proxies . . . . . . . . . . . . . . . . . . . . . . . . 19
Q. Communications Relating to Fund Portfolio Securities . . 19-20
<PAGE>
R. Exercise of Rights; Tender Offers . . . . . . . . . . . 20
S. Depository Receipts . . . . . . . . . . . . . . . . . . 20-21
T. Interest Bearing Call or Time Deposits . . . . . . . . . 21
U. Options, Futures Contracts and
Foreign Currency Transactions . . . . . . . . . . . . 21-23
V. Actions Permitted Without Express Authority . . . . . . 23-24
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value . . . . . . . . . . . . . . 24
5. Records and Miscellaneous Duties . . . . . . . . . . . . . . 24-25
6. Opinion of Fund`s Independent Public Accountants . . . . . . 25
7. Compensation and Expenses of Bank . . . . . . . . . . . . . . 25-26
8. Responsibility of Bank . . . . . . . . . . . . . . . . . . . 26-27
9. Persons Having Access to Assets of the Fund . . . . . . . . . 27
10. Effective Period, Termination and Amendment;
Successor Custodian . . . . . . . . . . . . . . . . . . . 27-28
11. Interpretive and Additional Provisions . . . . . . . . . . . 28-29
12. Certification as to Authorized Officers . . . . . . . . . . . 29
13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . 29
15. Adoption of the Agreement by the Fund . . . . . . . . . . . . 30
<PAGE>
MASTER CUSTODIAN AGREEMENT
This Agreement is made as of December 15, 1992 between each investment
company advised by John Hancock Advisers, Inc. which has adopted this Agreement
in the manner provided herein and Investors Bank & Trust Company (hereinafter
called "Bank", "Custodian" and "Agent"), a trust company established under the
laws of Massachusetts with a principal place of business in Boston,
Massachusetts.
Whereas, each such investment company is registered under the Investment
Company Act of 1940 and has appointed the Bank to act as Custodian of its
property and to perform certain duties as its Agent, as more fully hereinafter
set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company and the
Bank agree as follows:
1. Definitions
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Fund" shall mean the investment company which has adopted this
Agreement and is listed on Appendix A hereto. If the Fund is a Massachusetts
business trust or Maryland corporation, it may in the future establish and
designate other separate and distinct series of shares, each of which may be
called a "portfolio"; in such case, the term "Fund" shall also refer to each
such separate series or portfolio.
(b) "Board" shall mean the board of directors/trustees/managing general
partners/director general partners of the Fund, as the case may be.
(c) "The Depository Trust Company", a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(d) "Authorized Officer", shall mean any of the following officers of
the Trust: The Chairman of the Board of Trustees, the President, a Vice
President, the Secretary, the Treasurer or Assistant Secretary or Assistant
Treasurer, or any other officer of the Trust duly authorized to sign by
appropriate resolution of the Board of Trustees of the Trust.
(e) "Participants Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
<PAGE>
(f) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934 which acts as a securities depository
but only if the Custodian has received a certified copy of a vote of the Board
approving such clearing agency as a securities depository for the Fund.
(g) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for
United States and federal agency securities (i.e., as provided in Subpart O of
Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the
book-entry regulations of federal agencies substantially in the form of Subpart
O).
(h) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in rule 17f-4 under the
Investment Company Act of 1940 for foreign securities but only if the Custodian
has received a certified copy of a vote of the Board approving such depository
or clearing agency as a foreign securities depository for the Fund.
(i) "Approved Book-Entry System for Commercial Paper" shall mean a
system maintained by the Custodian or by a subcustodian employed pursuant to
Section 2 hereof for the holding of commercial paper in book-entry form but
only if the Custodian has received a certified copy of a vote of the Board
approving the participation by the Fund in such system.
(j) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this Agreement
upon receipt of written or facsimile instructions signed by such one or more
person or persons as the Board shall have from time to time authorized to give
the particular class of instructions in question. Electronic instructions for
the purchase and sale of securities which are transmitted by John Hancock
Advisers, Inc. to the Custodian through the John Hancock equity trading system
and the John Hancock fixed income trading system shall be deemed to be proper
instructions; the Fund shall cause all such instructions to be confirmed in
writing. Different persons may be authorized to give instructions for
different purposes. A certified copy of a vote of the Board may be received
and accepted by the Custodian as conclusive evidence of the authority of any
such person to act and may be considered as in full force and effect until
receipt of written notice to the contrary. Such instructions may be general or
specific in terms and, where appropriate, may be standing instructions. Unless
the vote delegating authority to any person or persons to give a particular
class of instructions specifically requires that the approval of any person,
persons or committee shall first have been obtained before the Custodian may
act on instructions of that class, the Custodian shall be under no obligation
to question the right of the person or persons giving such instructions in so
doing. Oral instructions will be considered proper instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund
shall cause all oral
<PAGE>
instructions to be confirmed in writing. The Fund authorizes the Custodian to
tape record any and all telephonic or other oral instructions given to the
Custodian. Upon receipt of a certificate signed by two officers of the Fund as
to the authorization by the President and the Treasurer of the Fund accompanied
by a detailed description of the communication procedures approved by the
President and the Treasurer of the Fund, "proper instructions" may also include
communications effected directly between electromechanical or electronic
devices provided that the President and Treasurer of the Fund and the Custodian
are satisfied that such procedures afford adequate safeguards for the Fund's
assets. In performing its duties generally, and more particularly in
connection with the purchase, sale and exchange of securities made by or for
the Fund, the Custodian may take cognizance of the provisions of the governing
documents and registration statement of the Fund as the same may from time to
time be in effect (and votes, resolutions or proceedings of the shareholders or
the Board), but, nevertheless, except as otherwise expressly provided herein,
the Custodian may assume unless and until notified in writing to the
contrary that so-called proper instructions received by it are not in conflict
with or in any way contrary to any provisions of such governing documents and
registration statement, or votes, resolutions or proceedings of the
shareholders or the Board.
2. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby appoints and employs the Bank as its Custodian and Agent
in accordance with and subject to the provisions hereof, and the Bank hereby
accepts such appointment and employment. The Fund agrees to deliver to the
Custodian all securities, participation interests, cash and other assets owned
by it, and all payments of income, payments of principal and capital
distributions and adjustments received by it with respect to all securities and
participation interests owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held by the Fund and not delivered by
the Fund to the Custodian. The Fund will also deliver to the Bank from time to
time copies of its currently effective charter (or declaration of trust or
partnership agreement, as the case may be), by-laws, prospectus, statement of
additional information and distribution agreement with its principal
underwriter, together with such resolutions, votes and other proceedings of the
Fund as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Board. Any such subcustodian so employed by
the Custodian shall be deemed to be the agent of the Custodian, and the
Custodian shall remain primarily responsible for the securities, participation
interests, moneys and other property of the Fund held by such subcustodian.
Any foreign subcustodian shall be a bank or trust company which is an eligible
foreign custodian within the meaning of Rule 17f-5 under the Investment Company
Act of 1940, and the foreign custody arrangements shall be approved by the
Board and shall be in accordance with and subject to the provisions of said
Rule. For
<PAGE>
the purposes of this Agreement, any property of the Fund held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the Custodian
under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Fund
------------------------------------------------------------
A. SAFEKEEPING AND HOLDING OF PROPERTY The Custodian shall keep
safely all property of the Fund and on behalf of the Fund shall
from time to time receive delivery of Fund property for
safekeeping. The Custodian shall hold, earmark and segregate on
its books and records for the account of the Fund all property of
the Fund, including all securities, participation interests and
other assets of the Fund (1) physically held by the Custodian, (2)
held by any subcustodian referred to in Section 2 hereof or by any
agent referred to in Paragraph K hereof, (3) held by or maintained
in The Depository Trust Company or in Participants Trust Company
or in an Approved Clearing Agency or in the Federal Book-Entry
System or in an Approved Foreign Securities Depository, each of
which from time to time is referred to herein as a "Securities
System", and (4) held by the Custodian or by any subcustodian
referred to in Section 2 hereof and maintained in any Approved
Book-Entry System for Commercial Paper.
B. DELIVERY OF SECURITIES The Custodian shall release and deliver
securities or participation interests owned by the Fund held (or
deemed to be held) by the Custodian or maintained in a Securities
System account or in an Approved Book-Entry System for Commercial
Paper account only upon receipt of proper instructions, which may
be continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities or participation interests
for the account of the Fund, BUT ONLY against receipt of
payment therefor; if delivery is made in Boston or New
York City, payment therefor shall be made in accordance
with generally accepted clearing house procedures or by
use of Federal Reserve Wire System procedures; if delivery
is made elsewhere payment therefor shall be in accordance
with the then current "street delivery" custom or in
accordance with such procedures agreed to in writing from
time to time by the parties hereto; if the sale is
effected through a Securities System, delivery and payment
therefor shall be made in accordance with the provisions
of Paragraph L hereof; if the sale of commercial paper is
to be effected through an Approved Book-Entry System for
Commercial Paper, delivery and payment therefor shall be
made in accordance with the provisions of Paragraph M
hereof; if the securities are to be sold outside the
United States, delivery may be made in accordance with
procedures agreed to in writing from time to time by the
parties hereto; for the purposes of this subparagraph, the
term "sale" shall include the disposition of a portfolio
<PAGE>
security (i) upon the exercise of an option written by the
Fund and (ii) upon the failure by the Fund to make a
successful bid with respect to a portfolio security, the
continued holding of which is contingent upon the making
of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the Fund;
3) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
4) To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or
otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
5) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Paragraph K hereof or into the name
or nominee name of any subcustodian employed pursuant to
Section 2 hereof; or for exchange for a different number
of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided
that, in any such case, the new securities or
participation interests are to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom; provided
that the Custodian shall adopt such procedures as the Fund
from time to time shall approve to ensure their prompt
return to the Custodian by the broker in the event the
broker elects not to accept them;
7) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion of
such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
<PAGE>
8) In the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such
warrants, rights or similar securities, or the surrender
of interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
9) For delivery in connection with any loans of securities
made by the Fund (such loans to be made pursuant to the
terms of the Fund's current registration statement), but
only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund, which may
be in the form of cash or obligations issued by the United
States government, its agencies or instrumentalities.
10) For delivery as security in connection with any borrowings
by the Fund requiring a pledge or hypothecation of assets
by the Fund (if then permitted under circumstances
described in the current registration statement of the
Fund), provided, that the securities shall be released
only upon payment to the Custodian of the monies borrowed,
except that in cases where additional collateral is
required to secure a borrowing already made, further
securities may be released for that purpose; upon receipt
of proper instructions, the Custodian may pay any such
loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or
notes evidencing the loan;
11) When required for delivery in connection with any
redemption or repurchase of Shares of the Fund in
accordance with the provisions of Paragraph J hereof;
12) For delivery in accordance with the provisions of any
agreement between the Custodian (or a subcustodian
employed pursuant to Section 2 hereof) and a broker-dealer
registered under the Securities Exchange Act of 1934 and,
if necessary, the Fund, relating to compliance with the
rules of The Options Clearing Corporation or of any
registered national securities exchange, or of any similar
organization or organizations, regarding deposit or escrow
or other arrangements in connection with options
transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian (or a subcustodian
employed pursuant to Section 2 hereof),
and a futures commission merchant, relating to compliance
with the rules of the Commodity Futures Trading Commission
and/or of any
<PAGE>
contract market or commodities exchange or similar
organization, regarding futures margin account deposits or
payments in connection with futures transactions by
the Fund;
14) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board specifying the
securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose
to be proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
C. REGISTRATION OF SECURITIES Securities held by the Custodian
(other than bearer securities) for the account of the Fund shall
be registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian, or in the
name or nominee name of any agent appointed pursuant to Paragraph
K hereof, or in the name or nominee name of any subcustodian
employed pursuant to Section 2 hereof, or in the name or nominee
name of The Depository Trust Company or Participants Trust Company
or Approved Clearing Agency or Federal Book-Entry System or
Approved Book-Entry System for Commercial Paper; provided, that
securities are held in an account of the Custodian or of such
agent or of such subcustodian containing only assets of the Fund
or only assets held by the Custodian or such agent or such
subcustodian as a custodian or subcustodian or in a fiduciary
capacity for customers. All certificates for securities accepted
by the Custodian or any such agent or subcustodian on behalf of
the Fund shall be in "street" or other good delivery form or shall
be returned to the selling broker or dealer who shall be advised
of the reason thereof.
D. BANK ACCOUNTS The Custodian shall open and maintain a separate
bank account or accounts in the name of the Fund, subject only to
draft or order by the Custodian acting in pursuant to the terms of
this Agreement, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or
for the account of the Fund other than cash maintained by the Fund
in a bank account established and used in accordance with Rule
17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for the Fund may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as the Custodian may in its
discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each
such bank or trust company and the funds to be deposited with each
such bank or trust company shall be approved in writing by two
officers of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be subject to
withdrawal only by the Custodian in that capacity.
<PAGE>
E. PAYMENT FOR SHARES OF THE FUND The Custodian shall make
appropriate arrangements with the Transfer Agent and the principal
underwriter of the Fund to enable the Custodian to make certain it
promptly receives the cash or other consideration due to the Fund
for such new or treasury Shares as may be issued or sold from time
to time by the Fund, in accordance with the governing documents
and offering prospectus and statement of additional information of
the Fund. The Custodian will provide prompt notification to the
Fund of any receipt by it of payments for Shares of the Fund.
F. INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS Upon agreement
between the Fund and the Custodian, the Custodian shall, upon the
receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, invest in
such securities and instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and the
Fund.
G. COLLECTIONS The Custodian shall promptly collect all income and
other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall promptly
collect all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or agent thereof and shall
credit such income, as collected, to the Fund's custodian account.
The Custodian shall do all things necessary and proper in connection with such
prompt collections and, without limiting the generality of the foregoing, the
Custodian shall
1) Present for payment all coupons and other income items
requiring presentations;
2) Present for payment all securities which may mature or be
called, redeemed, retired or otherwise become payable;
3) Endorse and deposit for collection, in the name of the
Fund, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a Securities
System or in an Approved Book-Entry System for Commercial
Paper at the time funds become available to the Custodian;
in the case of securities maintained in The Depository
Trust Company funds shall be deemed available to the Fund
not later than the opening of business on the first
business day after receipt of such funds by the Custodian.
<PAGE>
The Custodian shall notify the Fund as soon as reasonably practicable whenever
income due on any security is not promptly collected. In any case in which the
Custodian does not receive any due and unpaid income after it has made demand
for the same, it shall immediately so notify the Fund in writing, enclosing
copies of any demand letter, any written response thereto, and memoranda of all
oral responses thereto and to telephonic demands, and await instructions from
the Fund; the Custodian shall in no case have any liability for any nonpayment
of such income provided the Custodian meets the standard of care set forth in
Section 8 hereof. The Custodian shall not be obligated to take legal action
for collection unless and until reasonably indemnified to its satisfaction.
The Custodian shall also receive and collect all stock dividends, rights and
other items of like nature, and deal with the same pursuant to proper
instructions relative thereto.
H. PAYMENT OF FUND MONEYS Upon receipt of proper instructions, which
may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of the Fund in the
following cases only:
1) Upon the purchase of securities, participation interests,
options, futures contracts, forward contracts and options
on futures contracts purchased for the account of the Fund
but only (a) against the receipt of
(i) such securities registered as provided in
Paragraph C hereof or in proper form for
transfer or
(ii) detailed instructions signed by an officer of the
Fund regarding the participation interests to be
purchased or
(iii) written confirmation of the purchase by the Fund
of the options, futures contracts, forward
contracts or options on futures contracts
by the Custodian (or by a subcustodian employed pursuant
to Section 2 hereof or by a clearing corporation of a
national securities exchange of which the Custodian is a
member or by any bank, banking institution or trust
company doing business in the United States or abroad
which is qualified under the Investment Company Act of
1940 to act as a custodian and which has been designated
by the Custodian as its agent for this purpose or by the
agent specifically designated in such instructions as
representing the purchasers of a new issue of privately
placed securities); (b) in the case of a purchase effected
through a Securities System, upon receipt of the
securities by the Securities System in accordance with the
conditions set forth in Paragraph L hereof; (c) in the
case of a purchase of commercial paper effected through an
Approved Book-Entry System for Commercial Paper, upon
<PAGE>
receipt of the paper by the Custodian or subcustodian in
accordance with the conditions set forth in Paragraph M
hereof; (d) in the case of repurchase agreements entered
into between the Fund and another bank or a broker-
dealer, against receipt by the Custodian of the securities
underlying the repurchase agreement either in certificate
form or through an entry crediting the Custodian's
segregated, non-proprietary account at the Federal Reserve
Bank of Boston with such securities along with written
evidence of the agreement by the bank or broker-dealer to
repurchase such securities from the Fund; or (e) with
respect to securities purchased outside of the United
States, in accordance with written procedures agreed to
from time to time in writing by the parties hereto;
2) When required in connection with the conversion, exchange
or surrender of securities owned by the Fund as set forth
in Paragraph B hereof;
3) When required for the redemption or repurchase of Shares
of the Fund in accordance with the provisions of Paragraph
J hereof;
4) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: advisory fees,
distribution plan payments, interest, taxes, management
compensation and expenses, accounting, transfer agent and
legal fees, and other operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends or other distributions to
holders of Shares declared or authorized by the Board; and
6) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board, specifying the
amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
I. LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED In any and every case where payment for purchase of
securities for the account of the Fund is made by the Custodian in
advance of receipt of the securities purchased in the absence of
specific written instructions signed by two officers of the Fund
to so pay in advance, the Custodian shall be absolutely liable to
the Fund for such securities to the same extent as if the
securities had been received by the Custodian; EXCEPT that in the
case of a repurchase agreement
<PAGE>
entered into by the Fund with a bank which is a member of the
Federal Reserve System, the Custodian may transfer funds to the
account of such bank prior to the receipt of (i) the securities in
certificate form subject to such repurchase agreement or (ii)
written evidence that the securities subject to such repurchase
agreement have been transferred by book-entry into a segregated
non-proprietary account of the Custodian maintained with the
Federal Reserve Bank of Boston or (iii) the safekeeping receipt,
PROVIDED that such securities have in fact been so transferred by
book-entry and the written repurchase agreement is received by the
Custodian in due course; AND EXCEPT that if the securities are to
be
purchased outside the United States, payment may be made in
accordance with procedures agreed to from time to time by the
parties hereto.
J. PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
From such funds as may be available for the purpose, but subject
to any applicable votes of the Board and the current redemption
and repurchase procedures of the Fund, the Custodian shall, upon
receipt of written instructions from the Fund or from the Fund's
transfer agent or from the principal underwriter, make funds
and/or portfolio securities available for payment to holders of
Shares who have caused their Shares to be redeemed or repurchased
by the Fund or for the Fund's account by its transfer agent or
principal underwriter.
The Custodian may maintain a special checking account upon which
special checks may be drawn by shareholders of the Fund holding
Shares for which certificates have not been issued. Such checking
account and such special checks shall be subject to such rules and
regulations as the Custodian and the Fund may from time to time
adopt. The Custodian or the Fund may suspend or terminate use of
such checking account or such special checks (either generally or
for one or more shareholders) at any time. The Custodian and the
Fund shall notify the other immediately of any such suspension or
termination.
K. APPOINTMENT OF AGENTS BY THE CUSTODIAN The Custodian may at any
time or times in its discretion appoint (and may at any time
remove) any other bank or trust company (provided such bank or
trust company is itself qualified under the Investment Company Act
of 1940 to act as a custodian or is itself an eligible foreign
custodian within the meaning of Rule 17f-5 under said Act) as the
agent of the Custodian to carry out such of the duties and
functions of the Custodian described in this Section 3 as the
Custodian may from time to time direct; provided, however, that
the appointment of any such agent shall not relieve the Custodian
of any of its responsibilities or liabilities hereunder, and as
between the Fund and the Custodian the Custodian shall be fully
responsible for the acts and omissions of any such agent. For the
purposes of this Agreement, any property of the Fund held by any
such agent shall be deemed to be held by the Custodian hereunder.
<PAGE>
L. DEPOSIT OF FUND PORTFOLIO SECURITIES IN SECURITIES SYSTEMS The
Custodian may deposit and/or maintain securities owned by the Fund
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, and at all times subject to the following
provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep securities of
the Fund in a Securities System provided that such securities are
maintained in a non-proprietary account ("Account") of the
Custodian or such subcustodian in the Securities System which
shall not include any assets of the Custodian or such subcustodian
or any other person other than assets held by the Custodian or
such subcustodian as a fiduciary, custodian, or otherwise for its
customers.
(b) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund, and the
Custodian shall be fully and completely responsible for
maintaining a recordkeeping system capable of accurately and
currently stating the Fund's holdings maintained in each such
Securities System.
(c) The Custodian shall pay for securities purchased in book-entry
form for the account of the Fund only upon (i) receipt of notice
or advice from the Securities System that such securities have
been transferred to the Account, and (ii) the making of any entry
on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund only upon (i)
receipt of notice or advice from the Securities System that
payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Fund.
Copies of all notices or advises from the Securities System of
transfers of securities for the account of the Fund shall identify
the Fund, be maintained for the Fund by the Custodian and be
promptly provided to the Fund at its request.
<PAGE>
The Custodian shall promptly send to the Fund confirmation
of each transfer to or from the
account of the Fund in the form of a written advice or notice of
each such transaction, and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund on the next business
day.
(d) The Custodian shall promptly send to the Fund any report or other
communication received or obtained by the Custodian relating to
the Securities System's accounting system, system of internal
accounting controls or procedures for safeguarding securities
deposited in the Securities System; the Custodian shall promptly
send to the Fund any report or other communication relating to the
Custodian's internal accounting controls and procedures for
safeguarding securities deposited in any Securities System; and
the Custodian shall ensure that any agent appointed pursuant to
Paragraph K hereof or any subcustodian employed pursuant to
Section 2 hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to such
agent's or subcustodian's internal accounting controls and
procedures for safeguarding securities deposited in any Securities
System. The Custodian's books and records relating to the Fund's
participation in each Securities System will at all times during
regular business hours be open to the inspection of the Fund's
authorized officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the absence
of receipt of a certificate of an officer of the Fund that the
Board has approved the use of a particular Securities System; the
Custodian shall also obtain appropriate assurance from the
officers of the Fund that the Board has annually reviewed and
approved the continued use by the Fund of each Securities System,
so long as such review and approval is required by Rule 17f-4
under the Investment Company Act of 1940, and the Fund shall
promptly notify the Custodian if the use of a Securities System is
to be discontinued; at the request of the Fund, the Custodian will
terminate the use of any such Securities System as promptly as
practicable.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or subcustodians or of any of its or their employees
or from any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it may have
against the Securities System or any other person; at the election
of the Fund, it shall be entitled to be
<PAGE>
subrogated to the rights of the Custodian with respect to any claim
against the Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage
if and to the extent that the Fund has not been made whole for any
such loss or damage.
M. DEPOSIT OF FUND COMMERCIAL PAPER IN AN APPROVED BOOK-ENTRY SYSTEM FOR
COMMERCIAL PAPER Upon receipt of proper instructions with respect to
each issue of direct issue commercial paper purchased by the Fund, the
Custodian may deposit and/or maintain direct issue commercial paper
owned by the Fund in any Approved Book-Entry System for Commercial
Paper, in each case only in accordance with applicable Securities and
Exchange Commission rules, regulations, and no-action correspondence,
and at all times subject to the following provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep
commercial paper of the Fund in an Approved Book-Entry
System for Commercial Paper, provided that such paper is
issued in book entry form by the Custodian or subcustodian
on behalf of an issuer with which the Custodian or
subcustodian has entered into a book-entry agreement and
provided further that such paper is maintained in a
non-proprietary account ("Account") of the Custodian or
such subcustodian in an Approved Book-Entry System for
Commercial Paper which shall not include any assets of the
Custodian or such subcustodian or any other person other
than assets held by the Custodian or such subcustodian as
a fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to commercial
paper of the Fund which is maintained in an Approved
Book-Entry System for Commercial Paper shall identify by
book-entry each specific issue of commercial paper
purchased by the Fund which is included in the System and
shall at all times during regular business hours be open
for inspection by authorized officers, employees or agents
of the Fund. The Custodian shall be fully and completely
responsible for maintaining a recordkeeping system capable
of accurately and currently stating the Fund's holdings of
commercial paper maintained in each such System.
(c) The Custodian shall pay for commercial paper purchased in
book-entry form for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice
from the issuer that such paper has been issued, sold and
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
purchase, payment and transfer for the account of the
Fund. The Custodian shall transfer such commercial
<PAGE>
paper which is sold or cancel such commercial paper which
is redeemed for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice that
payment for such paper has been transferred to the Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such transfer or redemption and
payment for the account of the Fund. Copies of all notices,
advises and confirmations of transfers of commercial paper
for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be
promptly provided to the Fund at its request. The
Custodian shall promptly send to the Fund confirmation of
each transfer to or from the account of the Fund in the
form of a written advice or notice of each such
transaction, and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in
the System for the account of the Fund on the next business
day.
(d) The Custodian shall promptly send to the Fund any report
or other communication received or obtained by the
Custodian relating to each System's accounting system,
system of internal accounting controls or procedures for
safeguarding commercial paper deposited in the System; the
Custodian shall promptly send to the Fund any report or
other communication relating to the Custodian's internal
accounting controls and procedures for safeguarding
commercial paper deposited in any Approved Book-Entry
System for Commercial Paper; and the Custodian shall
ensure that any agent appointed pursuant to Paragraph K
hereof or any subcustodian employed pursuant to Section 2
hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to
such agent's or subcustodian's internal accounting
controls and procedures for safeguarding securities
deposited in any Approved Book-Entry System for Commercial
Paper.
(e) The Custodian shall not act under this Paragraph M in the
absence of receipt of a certificate of an officer of the
Fund that the Board has approved the use of a particular
Approved Book-Entry System for Commercial Paper; the
Custodian shall also obtain appropriate assurance from the
officers of the Fund that the Board
has annually reviewed and approved the continued use by
the Fund of each Approved Book-Entry System for Commercial
Paper, so long as such review and approval is required by
Rule 17f-4 under the Investment Company Act of 1940, and
the Fund shall promptly notify the Custodian if the use of
an Approved Book-Entry System for Commercial Paper is to
be discontinued; at the request of the Fund, the Custodian
will terminate the use of any such System as promptly as
practicable.
<PAGE>
(f) The Custodian (or subcustodian, if the Approved Book-Entry
System for Commercial Paper is maintained by the
subcustodian) shall issue physical commercial paper or
promissory notes whenever requested to do so by the Fund
or in the event of an electronic system failure which
impedes issuance, transfer or custody of direct issue
commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Fund
for any loss or damage to the Fund resulting from use of
any Approved Book-Entry System for Commercial Paper by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or subcustodians or of any
of its or their employees or from any failure of the
Custodian or any such agent or subcustodian to enforce
effectively such rights as it may have against the System,
the issuer of the commercial paper or any other person; at
the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to
any claim against the System, the issuer of the commercial
paper or any other person which the Custodian may have as
a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such
loss or damage.
N. SEGREGATED ACCOUNT The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Paragraph L hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and any registered
broker-dealer (or any futures commission merchant), relating to
compliance with the rules of the Options Clearing Corporation and
of any registered national securities exchange (or of the
Commodity Futures Trading Commission or of any contract market or
commodities exchange), or of any similar
organization or organizations, regarding escrow or deposit or
other arrangements in connection with transactions by the Fund,
(ii) for purposes of segregating cash or U.S. Government
securities in connection with options purchased, sold or written
by the Fund or futures contracts or options thereon purchased or
sold by the Fund, (iii) for the purposes of compliance by the Fund
with the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other
proper purposes, but only, in the case of clause (iv), upon
receipt of, in addition to proper instructions, a certificate
signed by two officers of the Fund, setting forth the purpose such
segregated account and declaring such purpose to be a proper
purpose.
<PAGE>
O. OWNERSHIP CERTIFICATES FOR TAX PURPOSES The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Fund
held by it and in connection with transfers of securities.
P. PROXIES The Custodian shall, with respect to the securities held
by it hereunder, cause to be promptly delivered to the Fund all
forms of proxies and all notices of meetings and any other notices
or announcements or other written information affecting or
relating to the securities, and upon receipt of proper
instructions shall execute and deliver or cause its nominee to
execute and deliver such proxies or other authorizations as may be
required. Neither the Custodian nor its nominee shall vote upon
any of the securities or execute any proxy to vote thereon or give
any consent or take any other action with respect thereto (except
as otherwise herein provided) unless ordered to do so by proper
instructions.
Q. COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES The
Custodian shall deliver promptly to the Fund all written
information (including, without limitation, pendency of call and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers and other persons relating
to the securities and participation interests being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall deliver promptly to the Fund all written information
received by the Custodian from issuers and other persons relating
to the securities and participation interests whose tender or
exchange is sought and from the party (or his agents) making the
tender or exchange offer.
R. EXERCISE OF RIGHTS; TENDER OFFERS In the case of tender offers,
similar offers to purchase or exercise rights (including, without
limitation, pendency of calls and maturities of securities and
participation interests and expirations of rights in connection
therewith and notices of exercise of call and put options and the
maturity of futures contracts) affecting or relating to securities
and participation interests held by the Custodian under this
Agreement, the Custodian shall have responsibility for promptly
notifying the Fund of all such offers in accordance with the
standard of reasonable care set forth in Section 8 hereof. For
all such offers for which the Custodian is responsible as provided
in this Paragraph R, the Fund shall have responsibility for
providing the Custodian with all necessary instructions in timely
fashion. Upon receipt of proper instructions, the Custodian shall
timely deliver to the issuer or trustee thereof, or to the agent
of either, warrants, puts, calls, rights or similar
<PAGE>
securities for the purpose of being exercised or sold upon proper
receipt therefor and upon receipt of assurances satisfactory to
the Custodian that the new securities and cash, if any,
acquired by such action are to be delivered to the Custodian or
any subcustodian employed pursuant to Section 2 hereof. Upon
receipt of proper instructions, the Custodian shall timely deposit
securities upon invitations for tenders of securities upon proper
receipt therefor and upon receipt of assurances satisfactory to
the Custodian that the consideration to be paid or delivered or
the tendered securities are to be returned to the Custodian or
subcustodian employed pursuant to Section 2 hereof.
Notwithstanding any provision of this Agreement to the contrary,
the Custodian shall take all necessary action, unless otherwise
directed to the contrary by proper instructions, to comply with
the terms of all mandatory or compulsory exchanges, calls,
tenders, redemptions, or similar rights of security ownership, and
shall thereafter promptly notify the Fund in writing of such
action.
S. DEPOSITORY RECEIPTS The Custodian shall, upon receipt of proper
instructions, surrender or cause to be surrendered foreign
securities to the depository used by an issuer of American
Depository Receipts, European Depository Receipts or International
Depository Receipts (hereinafter collectively referred to as
"ADRs") for such securities,
against a written receipt therefor adequately describing such
securities and written evidence satisfactory to the Custodian that
the depository has acknowledged receipt of instructions to issue
with respect to such securities ADRs in the name of a nominee of
the Custodian or in the name or nominee name of any subcustodian
employed pursuant to Section 2 hereof, for delivery to the
Custodian or such subcustodian at such place as the Custodian or
such subcustodian may from time to time designate. The Custodian
shall, upon receipt of proper instructions, surrender ADRs to the
issuer thereof against a written receipt therefor adequately
describing the ADRs surrendered and written evidence satisfactory
to the Custodian that the issuer of the ADRs has acknowledged
receipt of instructions to cause its depository to deliver the
securities underlying such ADRs to the Custodian or to a
subcustodian employed pursuant to Section 2 hereof.
T. INTEREST BEARING CALL OR TIME DEPOSITS The Custodian shall, upon
receipt of proper instructions, place interest bearing fixed term
and call deposits with the banking department of such banking
institution (other than the Custodian) and in such amounts as the
Fund may designate. Deposits may be denominated in U.S. Dollars
or other currencies. The Custodian shall include in its records
with respect to the assets of the Fund appropriate notation as to
the amount and currency of each such deposit, the accepting
banking institution and other appropriate details and shall retain
such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Custodian by the banking
<PAGE>
institution. Such deposits shall be deemed portfolio securities
of the applicable Fund for the purposes of this Agreement, and the
Custodian shall be responsible for the collection of income from
such accounts and the transmission of cash to and from such
accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
------------------------------------------------------------
1. OPTIONS. The Custodians shall, upon receipt of proper
instructions and in accordance with the provisions of any
agreement between the Custodian, any registered
broker-dealer and, if necessary, the Fund, relating to
compliance with the rules of the Options Clearing
Corporation or of any registered national securities
exchange or similar organization or organizations, receive
and retain confirmations or other documents, if any,
evidencing the purchase or writing of an option on a
security, securities index, currency or other financial
instrument or index by the Fund;
deposit and maintain in a segregated account for each Fund
separately, either physically or by book-entry in a
Securities System, securities subject to a covered call
option written by the Fund; and release and/or transfer
such securities or other assets only in accordance with a
notice or other communication evidencing the expiration,
termination or exercise of such covered option furnished
by the Options Clearing Corporation, the securities or
options exchange on which such covered option is traded or
such other organization as may be responsible for handling
such options transactions. The Custodian and the
broker-dealer shall be responsible for the sufficiency of
assets held in each Fund's segregated account in
compliance with applicable margin maintenance
requirements.
2. FUTURES CONTRACTS The Custodian shall, upon receipt of
proper instructions, receive and retain confirmations and
other documents, if any, evidencing the purchase or sale
of a futures contract or an option on a futures contract
by the Fund; deposit and maintain in a segregated account,
for the benefit of any futures commission merchant, assets
designated by the Fund as initial, maintenance or
variation "margin" deposits (including mark-to-market
payments) intended to secure the Fund's performance of its
obligations under any futures contracts purchased or sold
or any options on futures contracts written by Fund, in
accordance with the provisions of any agreement or
agreements among the Fund, the Custodian and such futures
commission merchant, designed to comply with the rules of
the Commodity Futures Trading Commission and/or of any
contract market or commodities exchange or similar
organization regarding such margin deposits or payments;
and release and/or transfer assets in such margin accounts
only in
<PAGE>
accordance with any such agreements or rules. The
Custodian and the futures commission merchant shall be
responsible for the sufficiency of assets held in the
segregated account in compliance with the applicable
margin maintenance and mark-to-market payment requirements.
3. FOREIGN EXCHANGE TRANSACTIONS The Custodian shall,
pursuant to proper instructions, enter into or cause a
subcustodian to enter into foreign exchange contracts,
currency swaps or options to purchase and sell foreign
currencies for spot and future delivery on behalf and for
the account of the Fund. Such transactions may be
undertaken by the Custodian or subcustodian with such
banking or financial institutions or other currency
brokers, as set forth in proper instructions. Foreign
exchange contracts, swaps and options shall be deemed to
be portfolio securities of the Fund; and accordingly, the
responsibility of the Custodian therefor shall be the same
as and no greater than the Custodian's responsibility in
respect of other portfolio securities of the Fund. The
Custodian shall be responsible for the transmittal to and
receipt of cash from the currency broker or banking or
financial institution with which the contract or option is
made, the maintenance of proper records with respect to
the transaction and the maintenance of any segregated
account required in connection with the transaction. The
Custodian shall have no duty with respect to the selection
of the currency brokers or banking or financial
institutions with which the Fund deals or for their
failure to comply with the terms of any contract or
option. Without limiting the foregoing, it is agreed that
upon receipt of proper instructions and insofar as funds
are made available to the Custodian for the purpose, the
Custodian may (if determined necessary by the Custodian to
consummate a particular transaction on behalf and for the
account of the Fund) make free outgoing payments of cash
in the form of U.S. dollars or foreign currency before
receiving confirmation of a foreign exchange contract or
swap or confirmation that the countervalue currency
completing the foreign exchange contract or swap has been
delivered or received. The Custodian shall not be
responsible for any costs and interest charges which may
be incurred by the Fund or the Custodian as a result of
the failure or delay of third parties to deliver foreign
exchange; provided that the Custodian shall nevertheless
be held to the standard of care set forth in, and shall be
liable to the Fund in accordance with, the provisions of
Section 8.
V. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY The Custodian may in its
discretion, without express authority from the Fund:
<PAGE>
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, PROVIDED, that all such
payments shall be accounted for by the Custodian to the
Treasurer of the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities
and property of the Fund except as otherwise directed by
the Fund.
4. Duties of Bank with Respect to Books of Account and Calculations of Net
Asset Value
-----------------------------------------------------------------------
The Bank shall as Agent (or as Custodian, as the case may be) keep such books
of account and render as at the close of business on each day a detailed
statement of the amounts received or paid out and of securities received or
delivered for the account of the Fund during said day and such other
statements, including a daily trial balance and inventory of the Fund's
portfolio securities; and shall furnish such other financial information and
data as from time to time requested by the Treasurer or any authorized officer
of the Fund; and shall compute and determine, as of the close of regular
trading on the New York Stock Exchange, or at such other time or times as the
Board may determine, the net asset value of a Share in the Fund, such
computation and determination to be made in accordance with the governing
documents of the Fund and the votes and instructions of the Board at the time
in force and applicable, and promptly notify the Fund and its investment
adviser and such other persons as the Fund may request of the result of such
computation and determination. In computing the net asset value the Custodian
may rely upon security quotations received by telephone or otherwise from
sources or pricing services designated by the Fund by proper instructions, and
may further rely upon information furnished to it by any authorized officer of
the Fund relative (a) to liabilities of the Fund not appearing on its books of
account, (b) to the existence, status and proper treatment of any reserve or
reserves, (c) to any procedures established by the Board regarding the
valuation of portfolio securities, and (d) to the value to be assigned to any
bond, note, debenture, Treasury bill, repurchase agreement, subscription right,
security, participation interest or other asset or property for which market
quotations are not readily available.
5. Records and Miscellaneous Duties
--------------------------------
The Bank shall create, maintain and preserve all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund
<PAGE>
under the Investment Company Act of 1940, with particular attention to Section
31 thereof and Rules 31a-1 and 31a-2 thereunder, applicable federal and state
tax laws and any other law or administrative rules or procedures which may be
applicable to the Fund. All books of account and records maintained by the Bank
in connection with the performance of its duties under this Agreement shall be
the property of the Fund, shall at all times during the regular business hours
of the Bank be open for inspection by authorized officers, employees or agents
of the Fund, and in the event of termination of this Agreement shall be
delivered to the Fund or to such other person or persons as shall be designated
by the Fund. Disposition of any account or record after any required period of
preservation shall be only in accordance with specific instructions received
from the Fund. The Bank shall assist generally in the preparation of
reports to shareholders, audits of accounts, and other ministerial matters of
like nature; and, upon request, shall furnish the Fund's auditors with an
attested inventory of securities held with appropriate information as to
securities in transit or in the process of purchase or sale and with such other
information as said auditors may from time to time request. The Custodian shall
also maintain records of all receipts, deliveries and locations of such
securities, together with a current inventory thereof, and shall conduct
periodic verifications (including sampling counts at the Custodian) of
certificates representing bonds and other securities for which it is responsible
under this Agreement in such manner as the Custodian shall determine from time
to time to be advisable in order to verify the accuracy of such inventory. The
Bank shall not disclose or use any books or records it has prepared or
maintained by reason of this Agreement in any manner except as expressly
authorized herein or directed by the Fund, and the Bank shall keep confidential
any information obtained by reason of this Agreement.
6. Opinion of Fund's Independent Public Accountants
------------------------------------------------
The Custodian shall take all reasonable action, as the Fund may from time to
time request, to enable the Fund to obtain from year to year favorable opinions
from the Fund's independent public accountants with respect to its activities
hereunder in connection with the preparation of the Fund's registration
statement and Form N-SAR or other periodic reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
7. Compensation and Expenses of Bank
---------------------------------
The Bank shall be entitled to reasonable compensation for its services as
Custodian and Agent, as agreed upon from time to time between the Fund and the
Bank. The Bank shall entitled to receive from the Fund on demand reimbursement
for its cash disbursements, expenses and charges, including counsel fees, in
connection with its duties as Custodian and Agent hereunder, but excluding
salaries and usual overhead expenses.
8. Responsibility of Bank
----------------------
<PAGE>
So long as and to the extent that it is in the exercise of reasonable care, the
Bank as Custodian and Agent shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall
be without liability for any action reasonably taken or omitted pursuant to
such advice.
The Bank as Custodian and Agent shall be held to the exercise of reasonable
care in carrying out the provisions of this Agreement but shall be liable only
for its own negligent or bad faith acts or failures to act. Notwithstanding
the foregoing, nothing contained in this paragraph is intended to nor shall it
be construed to modify the standards of care and responsibility set forth in
Section 2 hereof with respect to subcustodians and in subparagraph f of
Paragraph L of Section 3 hereof with respect to Securities Systems and in
subparagraph g of Paragraph M of Section 3 hereof with respect to an Approved
Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect to subcustodians
generally in Section 2 hereof, provided that, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim resulting from,
or caused by, the direction of or authorization by the Fund to maintain custody
of any securities or cash of the Fund in a foreign county including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, revolution,
military or usurped powers, nuclear fission, fusion or radiation, earthquake,
storm or other disturbance of nature or acts of God.
If the Fund requires the Bank in any capacity to take any action with respect
to securities, which action involves the payment of money or which action may,
in the opinion of the Bank, result in the Bank or its nominee assigned to the
Fund being liable for the payment of money or incurring liability of some other
form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
9. Persons Having Access to Assets of the Fund
-------------------------------------------
(i) No trustee, director, general partner, officer, employee
or agent of the Fund shall have physical access to the
assets of the Fund held by the Custodian or be authorized
or permitted to withdraw any investments of the Fund, nor
shall the Custodian deliver any assets of the Fund to any
such person. No officer or director, employee or agent of
the Custodian who holds any similar position with the Fund
or the
<PAGE>
investment adviser of the Fund shall have access to the
assets of the Fund.
(ii) Access to assets of the Fund held hereunder shall only be
available to duly authorized officers, employees,
representatives or agents of the Custodian or other
persons or entities for whose actions the Custodian shall
be responsible to the extent permitted hereunder, or to
the Fund's independent public accountants in connection
with their auditing duties performed on behalf of the
Fund.
(iii) Nothing in this Section 9 shall prohibit any officer,
employee or agent of the Fund or of the investment adviser
of the Fund from giving instructions to the Custodian or
executing a certificate so long as it does not result in
delivery of or access to assets of the Fund prohibited by
paragraph (i) of this Section 9.
10. Effective Period, Termination and Amendment; Successor Custodian
----------------------------------------------------------------
This Agreement shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid
to the other party, such termination to take effect not sooner than sixty (60)
days after the date of such delivery or mailing; provided, that the Fund may at
any time by action of its Board, (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the Federal Deposit Insurance
Corporation or by the Banking Commissioner of The Commonwealth of Massachusetts
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction. Upon termination of the
Agreement, the Fund shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
Unless the holders of a majority of the outstanding Shares of the Fund vote to
have the securities, funds and other properties held hereunder delivered and
paid over to some other bank or trust company, specified in the vote, having
not less than $2,000,000 of aggregate capital, surplus and undivided profits,
as shown by its last published report, and meeting such other qualifications
for custodians set forth in the Investment Company Act of 1940, the Board
shall, forthwith, upon giving or receiving notice of termination of this
Agreement, appoint as successor custodian, a bank or trust company having such
qualifications. The Bank, as Custodian, Agent or otherwise, shall, upon
termination of the Agreement, deliver to such successor custodian, all
securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no such vote has been
<PAGE>
adopted by the shareholders and that no written order designating a successor
custodian shall have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Fund to the Fund but shall have
the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all funds, securities and properties of the Fund held by or
deposited with the Bank, and all books of account and records kept by the Bank
pursuant to this Agreement, and all documents held by the Bank relative
thereto. Thereafter such bank or trust company shall be the successor of the
Custodian under this Agreement.
11. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Agreement, the Custodian and the Fund
may from time to time agree on such provisions interpretive of or in addition
to the provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
governing instruments of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment
of this Agreement.
12. Certification as to Authorized Officers
---------------------------------------
The Secretary of the Fund shall at all times maintain on file with the Bank his
certification to the Bank, in such form as may be acceptable to the Bank, of
the names and signatures of the authorized officers of each fund, it being
understood that upon the occurence of any change in the information set forth
in the most recent certification on file (including without limitation any
person named in the most recent certification who has ceased to hold the office
designated therein), the Secretary of the Fund shall sign a new or amended
certification setting forth the change and the new, additional or ommitted
names or signatures. The Bank shall be entitled to rely and act upon any
officers named in the most recent certification.
13. Notices
-------
Notices and other writings delivered or mailed postage prepaid to the Fund
addressed to Thomas H. Drohan, John Hancock Advisers, Inc., 101 Huntington
Avenue, Boston, Massachusetts 02199, or to such other address as the Fund may
have designated to the Bank, in writing, or to Investors Bank & Trust Company,
24 Federal Street, Boston, Massachusetts 02110, shall be deemed to have been
properly delivered or given hereunder to the respective addressees.
<PAGE>
14. Massachusetts Law to Apply; Limitations on Liability
----------------------------------------------------
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with the laws of The Commonwealth of Massachusetts.
If the Fund is a Massachusetts business trust, the Custodian expressly
acknowledges the provision in the Fund's declaration of trust limiting the
personal liability of the trustees and shareholders of the Fund; and the
Custodian agrees that it shall have recourse only to the assets of the Fund for
the payment of claims or obligations as between the Custodian and the Fund
arising out of this Agreement, and the Custodian shall not seek satisfaction of
any such claim or obligation from the trustees or shareholders of the Fund.
Each Fund, and each series or portfolio of a Fund, shall be liable only for its
own obligations to the Custodian under this Agreement and shall not be jointly
or severally liable for the obligations of any other Fund, series or portfolio
hereunder.
<PAGE>
15. Adoption of the Agreement by the Fund
-------------------------------------
The Fund represents that its Board has approved this Agreement and has duly
authorized the Fund to adopt this Agreement. This Agreement shall be deemed to
supersede and terminate, as of the date first written above, all prior
agreements between the Fund and the Bank relating to the custody of the Fund's
assets.
* * * *
<PAGE>
In Witness Whereof, the parties hereto have caused this agreement to be
executed in duplicate as of the date first written above by their respective
officers thereunto duly authorized.
John Hancock Mutual Funds
by: /s/ Robert G. Freedman
----------------------
Attest:
/s/Avery P. Maher
- -----------------
Investors Bank & Trust Company
by: /s/ Henry M. Joyce
------------------
Attest:
/s/ JM Keenan
- -------------
<PAGE>
Investors Bank & Trust Company
[EFFECTIVE OCTOBER 2, 1995]
John Hancock Limited Term Government Fund
John Hancock Capital Series
John Hancock Special Value Fund
John Hancock Growth Fund
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Sovereign Bond Fund
John Hancock Sovereign Investors Fund, Inc.
John Hancock Sovereign Investors Fund
John Hancock Sovereign Balanced Fund
John Hancock Special Equities Fund
John Hancock Strategic Series
John Hancock Independence Diversified Core Equity Fund
John Hancock Strategic Income Fund
John Hancock Utilities Fund
John Hancock Tax-Exempt Income Fund
John Hancock Tax-Exempt Series Fund
Massachusetts Portfolio
New York Portfolio
John Hancock Technology Series, Inc.
John Hancock Global Technology Fund
Freedom Investment Trust
John Hancock Gold & Government Fund
John Hancock Regional Bank Fund
John Hancock Sovereign U.S. Government Income Fund
John Hancock Managed Tax-Exempt Fund
John Hancock Sovereign Achievers Fund
Freedom Investment Trust II
John Hancock Special Opportunities Fund
Freedom Investment Trust III
John Hancock Discovery Fund
<PAGE>
Investors Bank & Trust Company
Form of
Appendix A
[EFFECTIVE SEPTEMBER 30, 1995]
John Hancock Series, Inc.
John Hancock Emerging Growth Fund
John Hancock Global Resources Fund
John Hancock Government Income Fund
John Hancock High Yield Bond Fund
John Hancock High Yield Tax-Free Fund
John Hancock Investment Trust
John Hancock Growth and Income Fund
John Hancock California Tax-Free Income Fund
John Hancock Tax-Free Bond Fund
John Hancock Bond Fund
John Hancock Intermediate Maturity Government Fund
John Hancock Institutional Series Trust
John Hancock Dividend Performers Fund
John Hancock Active Bond Fund
John Hancock Fundamental Value Fund
John Hancock Multi-Sector Growth Fund
John Hancock Independence Diversified Core Equity Fund II
John Hancock Independence Value Fund
John Hancock Independence Growth Fund
John Hancock Independence Medium Capitalization Fund
John Hancock Independence Balanced Fund
John Hancock Declaration Trust
John Hancock V.A. Emerging Equities Fund
John Hancock V.A. Discovery Fund
John Hancock V.A. Diversified Core Equity Fund
John Hancock V.A. Sovereign Investors Fund
John Hancock Sovereign Bond Fund
John Hancock Strategic Income Fund
<PAGE>
FORM OF
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the ____ day of __________, 199_ by and between
JOHN HANCOCK DECLARATION TRUST, a Massachusetts business trust, having its
principal office and place of business at 101 Huntington Avenue, Boston,
Massachusetts, 02199 (the "Trust"), and John Hancock Investor Services
Corporation, a Delaware corporation having its principal office and place of
business at 101 Huntington Avenue, Boston, Massachusetts 02199 ("JHISC").
WITNESSETH:
WHEREAS, the Trust desires to appoint JHISC as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and JHISC desires to accept such appointment;
WHEREAS, the Trust is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Trust intends to initially offer shares in ten series
designated as: John Hancock V.A. Emerging Equities Fund, John Hancock V.A.
Discovery Fund, John Hancock V.A. International Fund, John Hancock V.A. 500
Index Fund, John Hancock V.A. Diversified Core Equity Fund, John Hancock V.A.
Sovereign Investors Fund, John Hancock V.A. Sovereign Bond Fund, John Hancock
V.A. Strategic Income Fund, John Hancock V.A. Global Income Fund and John
Hancock V.A. Money Market Fund, together with all other series subsequently
established by the Trust and made subject to this Agreement (each, a "Fund"
and collectively, the "Funds");
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of JHISC
1.01 Subject to the terms and conditions set forth in this
Agreement, the Trust hereby employs and appoints JHISC to act, and JHISC
agrees to act, as transfer agent and dividend dispursing agent with
respect to the authorized and issued shares of beneficial interest
("Shares") of each series of the Trust subject to this Agreement and to
provide to the shareholders of the Trust ("Shareholders") such services
in connection therewith as may be set out in the prospectuses of the
Trust from time to time.
1.02 JHISC agrees that it will perform the following services:
(a) In accordance with procedures established from time to time
by agreement between the Trust and JHISC, JHISC shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation therefor to each Fund's Custodian
authorized pursuant to the Trust's Declaration of
Trust (the "Custodian");
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<PAGE>
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the
appropriate Shareholder account;
(iii) Receive for acceptance, redemption requests and
redemption directions and deliver the appropriate
documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in
the appropriate manner such monies as instructed by
the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Funds, processsing the
reinvestment of distributions on each Fund at the
net asset value per share for that Fund next
computed after the payment (in accordance with the
Fund's then-current prospectus);
(vii) Maintain records of account for and advise the Trust
and its Shareholders as to the foregoing; and
(viii) Record the issuance of Shares of each Fund and
maintain pursuant to Rule 17Ad-10(e) of the rules
and regulations of the Securities and Exchange
Commission a record of the total number of Shares of
each Fund which are authorized, based upon data
provided to it by each Fund, and issued and
outstanding. JHISC shall also provide each Fund on a
regular basis with the total number of Shares which
are authorized and issued and outstanding and shall
have no obligation, when recording the issuance of
Shares, to monitor the issuance of these Shares or
to take cognizance of any laws relating to the issue
or sale of these Shares, which functions shall be
the sole responsibility of each Fund.
(b) In calculating the number of shares to be issued on
purchase or reinvestment, or redeemed or repurchased, or
the amount of the purchase payment or redemption or
repurchase payments owed, JHISC shall use the net asset
value per share (as described in each fund's then-current
prospectus) computed by it or such other person as may be
designated by the Trust's board of trustees. It is
understood that, unless the Trust directs otherwise, the
issuance, redemption or repurchase of the Funds' shares
arising out of an automatic transaction under an insurance
contract (such as investment of net premiums, death of
insureds, deduction of fees and charges, transfers,
surrenders, loans, loan repayments, deductions of interest
on loans, lapses, reinstatements and similar automatic
transactions) shall be effected at the net asset value per
share computed as of the close of business on the day as of
which said automatic transaction is effected, even though
the "order" for purchase, sale or redemption of the Funds'
shares is not received until after said close of business.
All other issuances, redemptions or repurchases of the
Funds' shares shall be effected at net asset values per
share next computed after receipt of the orders therefore
and said orders shall become irrevocable at the time as of
which said value is next computed.
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<PAGE>
(c) In addition to and not in lieu of the services set forth in
the above paragraph (a), JHISC shall: (i) perform all of
the customary services of a transfer agent and dividend
disbursing agent including but not limited to: maintaining
all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, receiving and tabulating proxies,
mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing
appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions
of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information
and (ii) provide a system which will enable the Trust to
monitor the total number of each Fund's Shares sold in each
State.
(d) In addition, the Trust shall (i) identify to JHISC in
writing those transactions and assets to be treated as
exempt from the blue sky reporting for each State and (ii)
verify the establishment of transactions for each State on
the system prior to activation and thereafter monitor the
daily activity for each State. The responsibility of JHISC
for the Trust's blue sky State registration status is
solely limited to the initial establishment of transactions
subject to blue sky compliance by the Trust and the
reporting of these transactions to the Trust as provided
above.
(e) Additionally, JHISC shall:
(i) Utilize a system to identify all share transactions
which involve purchase and redemption orders that
are processed at a time other than the time of the
computation of net asset value per share next
computed after receipt of such orders, and shall
compute the net effect upon each Fund of the
transactions so identified on a daily and cumulative
basis.
(ii) If upon any day the cumulative net effect of such
transactions upon the Fund is negative and exceeds a
dollar amount equivalent to 1/2 of 1 cent per share,
JHISC shall promptly make a payment to the Fund in
cash or through the use of a credit in the manner
described in paragraph (iv) below, in such amount as
may be necessary to reduce the negative cumulative
net effect to less than 1/2 of 1 cent per share.
(iii) If on the last business day of any month the
cumulative net effect upon the Fund of such
transactions (adjusted by the amount of all prior
payments and credits by JHISC and the Fund) is
negative, the Fund shall be entitled to a reduction
in the fee next payable under the Agreement by an
equivalent amount, except as provided in paragraph
(iv) below. If on the last business day in any month
the cumulative net effect upon the Fund of such
transactions (adjusted by the amount of all prior
payments and credits by JHISC and the Fund) is
positive, JHISC shall be entitled to recover certain
past payments and reductions in fees, and to a
credit against all future payments and fee
reductions that may be required under the Agreement
as herein described in paragraph (iv) below.
(iv) At the end of each month, any positive cumulative
net effect upon the Fund of such transactions shall
be deemed to be a credit to JHISC which shall first
be applied to permit JHISC to recover any prior cash
payments and fee reductions made by it to the Fund
under paragraphs (ii) and (iii) above during the
calendar year, by increasing the amount of the
monthly fee under the Agreement next payable in an
amount equal to prior payments and fee reductions
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<PAGE>
made by JHISC during such calendar year, but not
exceeding the sum of that month's credit and credits
arising in prior months during such calendar year to
the extent such prior credits have not previously
been utilized as contemplated by this paragraph. Any
portion of a credit to JHISC not so used by it shall
remain as a credit to be used as payment against the
amount of any future negative cumulative net effects
that would otherwise require a cash payment or fee
reduction to be made to the Fund pursuant to
paragraphs (ii) or (iii) above (regardless of
whether or not the credit or any portion thereof
arose in the same calendar year as that in which the
negative cumulative net effects or any portion
thereof arose).
(v) JHISC shall supply to the Fund from time to time, as
mutually agreed upon, reports summarizing the
transactions identified pursuant to paragraph (i)
above, and the daily and cumulative net effects of
such transactions, and shall advise the Fund at the
end of each month of the net cumulative effect at
such time. JHISC shall promptly advise the Fund if
at any time the cumulative net effects exceeds a
dollar amount equivalent to 1/2 of 1 cent per share.
(vi) In the event that this Agreement is terminated for
whatever cause, or this provision 1.02 (d) is
terminated pursuant to paragraph (vii) below, the
Fund shall promptly pay to JHISC an amount in cash
equal to the amount by which the cumulative net
effect upon the Fund is positive or, if the
cumulative net effect upon the Fund is negative,
JHISC shall promptly pay to the Fund an amount in
cash equal to the amount of such cumulative net
effect.
(vii) This provision 1.02 (e) of the Agreement may be
terminated by JHISC at any time without cause,
effective as of the close of business on the date
written notice (which may be by telex) is received
by the Trust.
Procedures applicable to certain of these services may be
established from time to time by agreement between the Trust and
JHISC.
Article 2 Fees and Expenses
2.01 For performance by JHISC pursuant to this Agreement, the
Trust on behalf of each Fund agrees to pay JHISC an annual maintenance
fee for each Shareholder account as set out in the initial fee schedule
attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.02 below may be changed from time to time
subject to mutual written agreement between the Fund and JHISC.
2.02 In addition to the fee paid under Section 2.01 above, the
Trust on behalf of each Fund agrees to reimburse JHISC for out-of-pocket
expenses or advances incurred by JHISC for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by
JHISC at the request or with the consent of a Fund, will be reimbursed
by the Trust on behalf of such Fund.
2.03 The Trust on behalf of each Fund agrees to pay all fees and
reimbursable expenses promptly following the mailing of the respective
billing notice. Postage for mailing of proxies to all shareholder
accounts shall be advanced to JHISC by the Trust on behalf of the Funds
at least seven (7) days prior to the mailing date of such materials.
Article 3 Representations and Warranties of JHISC
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<PAGE>
JHISC represents and warrants to the Trust that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware, and is duly qualified
and in good standing as a foreign corporation under the Laws of The
Commonwealth of Massachusetts.
3.02 It has corporate power and authority to enter into and
perform its obligations under this Agreement.
3.03 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.04 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
Article 4 Representations and Warranties of the Trust
The Trust represents and warrants to JHISC that:
4.01 It is a business trust duly organized and existing and in
good standing under the laws of The Commonwealth of Massachusetts.
4.02 It has power and authority to enter into and perform this
Agreement.
4.03 All trust proceedings required by the Declaration of Trust
and By-Laws have been taken to authorize it to enter into and perform
this Agreement.
4.04 It is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act").
4.05 A registration statement under the Securities Act of 1933,
as amended, with respect to the shares of each series of the Trust
subject to this Agreement has become effective, and appropriate state
securities law filings have been made and will continue to be made.
Article 5 Indemnification
5.01 JHISC shall not be responsible for, and the Trust shall
indemnify and hold JHISC harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(a) All actions of JHISC or its agents or subcontractors
required to be taken pursuant to this Agreement, provided
that such actions are taken in good faith and without
negligence or willful misfeasance.
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<PAGE>
(b) The Trust's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Trust's bad
faith, gross negligence or willful misfeasance or which
arise out of the reckless disregard of any representation
or warranty of the Trust hereunder.
(c) The reliance on or use by JHISC or its agents or
subcontractors of information, records and documents which
(i) are received by JHISC or its agents or subcontractors
and furnished to it by or on behalf of the Trust, and (ii)
have been prepared and/or maintained by the Trust or any
other person or firm on behalf of the Trust.
(d) The reliance on, or the carrying out by JHISC or its agents
or subcontractors of, any instructions or requests of the
Trust.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that Fund
Shares be registered in that state or in violation of any
stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of
Shares in that state.
(f) It is understood and agreed that the assets of each Fund
may be used to satisfy the indemnity under this Article 5
only to the extent that the loss, damage, cost, charge,
counsel fee, payment, expense and liability arises out of
or is attributable to services hereunder with respect to
the Shares of such Fund.
5.02 JHISC shall indemnify and hold harmless the Trust on behalf
of each Fund from and against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising out of
or attributed to any action or failure or omission to act by JHISC as a
result of JHISC's lack of good faith, negligence or willful misfeasance.
5.03 At any time JHISC may apply to any officer of the Trust for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by JHISC
under this Agreement, and JHISC and its agents or subcontractors shall
not be liable and shall be indemnified by the Trust for any action taken
or omitted by it in reliance upon such instructions or upon the opinion
of such counsel. JHISC, its agents and subcontractors shall be protected
and indemnified in acting upon any paper or document furnished by or on
behalf of the Trust, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided JHISC or its agents or
subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Trust, and shall not be held to have
notice of any change of authority of any person, until receipt of
written notice thereof from the Trust. JHISC, its agents and
subcontractors shall also be protected and indemnified in recognizing
share certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officer of the Trust, and the
proper countersignature of any former transfer agent or registrar, or of
a co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond
its control, or other causes reasonably beyond its control, such party
shall not be liable for damages to the other for any damages resulting
from such failure to perform or otherwise from such causes.
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<PAGE>
5.05 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this
Agreement or for any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion,
and shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall
have the option to participate with the party seeking indemnification in
the defense of such claim. The party seeking indemnification shall in no
case confess any claim or make any compromise in any case in which the
other party may be required to indemnify it except with the other
party's prior written consent.
Article 6 Covenants of the Trust and JHISC
6.01 The Trust shall promptly furnish to JHISC the following:
(a) A certified copy of the resolution(s) of the Trustees of
the Trust authorizing the appointment of JHISC and the
execution and delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Trust
and all amendments thereto.
6.02 JHISC hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Trust for safekeeping of
share certificates and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such
certificates and devices.
6.03 JHISC shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To
the extent required by Section 31 of the 1940 Act and the rules and
regulations of the Securities and Exchange Commission thereunder, JHISC
agrees that all such records prepared or maintained by JHISC relating to
the services to be performed by JHISC hereunder are the property of the
Trust and will be preserved, maintained and made unavailable in
accordance with such Act and rules, and will be surrendered to the Trust
on and in accordance with its request.
6.04 JHISC and the Trust agree that all books, records,
information and data pertaining to the business of the other party which
are exchanged or received pursuant to the negotiation or the carrying
out of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be required by
law.
6.05 In case of any requests or demands for the inspection of
the Shareholder records of the Trust, JHISC will endeavor to notify the
Trust and to secure instructions from an authorized officer of the Trust
as to such inspection. JHISC reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
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<PAGE>
Article 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days' written notice to the other.
7.02 Should the Trust exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and
material will be borne by the Trust. Additionally, JHISC reserves the
right to charge for any other reasonable expenses associated with such
termination.
Article 8 Assignment
8.01 Except as provided in Section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by
either party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
8.03 JHISC may, without further consent on the part of the
Trust, subcontract for the performance hereof with (i) Boston Financial
Data Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(1) of the
Securities Exchange Act of 1934 ("Section 17A(c)(1)") or any other
entity registered as a transfer agent under Section 17A(c)(1) JHISC
deems appropriate in order to comply with the terms and conditions of
this Agreement; provided, however, that JHISC shall be as fully
responsible to the Trust for the acts and omissions of any subcontractor
as it is for its own acts and omissions.
Article 9 Amendment
9.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a
resolution of the Trustees of the Trust.
Article 10 Massachusetts Law to Apply
10.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the internal
substantive laws of The Commonwealth of Massachusetts.
Article 11 Merger of Agreement
11.01 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to
the subject hereof whether oral or written.
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<PAGE>
Article 12 Limitation on Liability
12.01 The name "John Hancock Declaration Trust" is the
designation of the Trustees under the Declaration of Trust dated
November 15, 1995. The obligations of such Trust are not personally
binding upon, nor shall resort be had to the property of, any of the
Trustees, shareholders, officers, employees or agents of such Trust, but
the Trust's property only shall be bound. Each Fund shall be liable only
for its own obligations under this Agreement and shall not be jointly or
severally liable to the obligations of any other Fund hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
JOHN HANCOCK DECLARATION TRUST
By:
Its:
JOHN HANCOCK INVESTOR SERVICES
CORPORATION
By:
Its:
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u:\vafunds\trans3.doc
November 20, 1995
Trustees of John Hancock Declaration Trust
101 Huntington Avenue
Boston, Massachusetts 02199
Ladies and Gentlemen:
John Hancock Declaration Trust (the "Trust") is a Massachusetts business
trust created under a written Declaration of Trust dated and executed November
15, 1995, and delivered in Boston, Massachusetts on November 16, 1995 (the
"Declaration of Trust"). The Trustees of the Trust have the powers set forth in
the Declaration of Trust, subject to the terms, provisions and conditions
therein provided.
Under Article V, Section 5.1 of the Declaration of Trust, it is provided
that the number of Shares of beneficial interest authorized to be issued under
the Declaration of Trust is unlimited. Also pursuant to Article V, Section 5.1,
the Trustees are empowered to authorize the division of shares of beneficial
interest into one or more series of shares and one or more classes thereto, each
represented by an unlimited number of transferable shares. Pursuant to Article
V, Section 5.11 of the Declaration of Trust, the Trustees established the
following ten series of the Trust, each of which consists of a single class of
shares: John Hancock V.A. International Fund, John Hancock V.A. Emerging
Equities Fund, John Hancock V.A. Discovery Fund, John Hancock V.A. Diversified
Core Equity Fund, John Hancock V.A. Sovereign Investors Fund, John Hancock V.A.
500 Index Fund, John Hancock V.A. Sovereign Bond Fund, John Hancock V.A.
Strategic Income Fund, John Hancock V.A. Global Income Fund and John Hancock
V.A. Money Market Fund (collectively, the "Funds").
The opinion set forth in paragraph 3 below is qualified in that
shareholders of a Massachusetts business trust may under certain circumstances
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for obligations of the
Trust and any series, including the Funds, and provides that notice of such
disclaimer may be given in every note, bond, contract, instrument, certificate
or undertaking made or issued by the Trustees or by any officer or officers of
the Trust. The Declaration of Trust provides for indemnification against all
loss and expense of any shareholder of a series of Trust shares held personally
liable solely by reason of being or having been a shareholder of a series,
including any Fund, such indemnification to be paid solely out or the assets of
such series. Thus, the shareholder's risk is limited to circumstances in which
the assets of the particular series of which he or she is or was a shareholder
would be insufficient to meet the obligations asserted against or with respect
to such assets.
<PAGE>
Trustees of John Hancock Declaration Trust
November 20, 1995
Page 2
Based on and subject to the foregoing, I am of the opinion that:
1. The Trust is duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts;
2. The beneficial interest of the Trust is divided into an
unlimited number of shares of beneficial interest, no par value per
share;
3. Shares of each Fund will be validly issued, fully paid and
non-assessable by the Trust when issued in accordance with the
provisions of the Declaration of Trust and subject to compliance with
the Securities Act of 1933, the Investment Company Act of 1940 and the
applicable state laws regulating the sale of securities.
I hereby consent to the filing of a copy of this opinion with the
Securities and Exchange Commission and other securities administrators of such
states in which registration may be required as part of the Trust's Registration
Statement on Form N-1A (or any amendment thereto).
Very truly yours,
/s/ Alfred P. Ouellette, Esq.
Alfred P. Ouellette, Esq.
Assistant Secretary
s:\corresp\ouellett\letters\95nov13.doc
