<PAGE> 1
As Filed with the Securities and Exchange Commission on February __, 1995
Registration No. 2-90305
Registration No. 811-3999
=============================================================================
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. 32 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1040 [X]
AMENDMENT NO. 32
(Check appropriate box or boxes)
------------------
FREEDOM INVESTMENT TRUST
(Exact name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(address of Principal Executive Officers)
Registrant's Telephone Number, including Area Code (617) 375-1700
------------------
THOMAS H. DROHAN
Senior Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Name and Address of Agent for Service)
------------------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on March 1, 1995 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
------------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has registered an indefinite number of shares under the Securities Act of
1933. The Registrant filed the notice required by Rule 24f-2 for its most
recent fiscal year on or about December 20, 1993.
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<PAGE> 2
<TABLE>
CROSS REFERENCE SHEET
Pursuant to Rule 495(a) under the Securities Act of 1933
<CAPTION>
Item Number Statement of Additional
Form N-1A Part A Prospectus Caption Information Caption
---------------- ------------------ -------------------
<S> <C> <C>
1 Front Cover Page *
2 Expense Information; *
The Fund's Expenses;
Shares Price;
Additional Services and
Programs
3 The Fund's Financial *
History Performance
4 Investment Objectives and *
Policies; Organization and
Management of the Fund
5 Organization and Management *
of the Fund; The Fund's
Expenses
6 Organization and Management of *
Fund; Distribution and Taxes;
How to Redeem Shares;
Additional Services and Programs
7 Who Can Buy Shares; *
How to Buy Shares;
Shares Price; Additional
Services and Programs
8 How to Redeem Shares *
9 Not Applicable *
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Item Number Statement of Additional
Form N-1A Part A Prospectus Caption Information Caption
---------------- ------------------ -------------------
<S> <C> <C>
10 * Front Cover Page
11 * Table of Contents
12 * Organization of the Fund
13 * Investment Objective and
Policies; Investment
Restrictions
14 * Those Responsible for
Management
15 * Those Responsible for
Management
16 * Investment Advisory and
Other Services;
Distribution Contract;
Transfer Agent Services;
Custody of Portfolio;
Independent Auditors
17 * Brokerage Allocation
18 * Description of the Fund's
Shares
19 * Net Asset Value; Additional
Services and Programs
20 * Tax Status
21 * Distribution Contract
22 * Calculation of Performance
23 * Financial Statements
</TABLE>
<PAGE> 4
JOHN HANCOCK
REGIONAL BANK FUND
JOHN HANCOCK
GOLD & GOVERNMENT FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 1, 1995
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Expense Information................................................................... 2
The Funds' Financial Highlights....................................................... 4
Investment Objectives and Policies.................................................... 6
Regional Bank Fund............................................................... 6
Gold & Government Fund........................................................... 7
Certain Investment Strategies......................................................... 10
Organization and Management of the Funds.............................................. 11
Alternative Purchase Arrangements..................................................... 13
The Funds' Expenses................................................................... 14
Dividends and Taxes................................................................... 15
Performance........................................................................... 16
How to Buy Shares..................................................................... 18
Share Price........................................................................... 19
How to Redeem Shares.................................................................. 25
Additional Services and Programs...................................................... 27
</TABLE>
This Prospectus sets forth information about the John Hancock Regional Bank
Fund ("Regional Bank Fund" or the "Fund"), and John Hancock Gold & Government
Fund ("Gold & Government Fund" or the "Fund") each a diversified series of
Freedom Investment Trust (the "Trust"), that you should know before investing.
Please read and retain it for future reference.
Additional information about 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 March 1, 1995, and incorporated by reference
into this Prospectus, free of charge by writing or telephoning: John Hancock
Investor Services Corporation, P.O. Box 9116, Boston, Massachusetts 02205-9116,
1-800-225-5291 (1-800-554-6713 TDD).
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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 5
<TABLE>
EXPENSE INFORMATION
The purpose of the following information is to help you understand the various
fees and expenses that you will bear, directly or indirectly, when you purchase
shares of either fund. The operating expenses included in the table and the
hypothetical example below are based on fees and expenses for the Funds' fiscal
year ended October 31, 1994 adjusted to reflect certain current expenses. Actual
fees and expenses in the future may be greater or less than those shown.
<CAPTION>
CLASS A CLASS B
SHARES SHARES
---------- --------
<S> <C> <C>
GOLD & GOVERNMENT FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of offering price).............................. 5.00% None
Maximum sales charge imposed on reinvested dividends....................................................... None None
Maximum deferred sales charge.............................................................................. None* 5.00%
Redemption fee(a).......................................................................................... None None
Exchange fee............................................................................................... None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fee............................................................................................. 0.80% 0.80%
12b-1 fee**................................................................................................ 0.30% 1.00%
Other expenses............................................................................................. 0.49% 0.48%
Total Fund operating expenses.............................................................................. 1.59% 2.28%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
---------- --------
<S> <C> <C>
REGIONAL BANK FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of offering price).............................. 5.00% None
Maximum sales charge imposed on reinvested dividends....................................................... None None
Maximum deferred sales charge.............................................................................. None* 5.00%
Redemption fee(a).......................................................................................... None None
Exchange fee............................................................................................... None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fee............................................................................................. 0.80% 0.80%
12b-1 fee**................................................................................................ 0.30% 1.00%
Other expenses............................................................................................. 0.38% 0.35%
Total Fund operating expenses.............................................................................. 1.48% 2.15%
<FN>
- ---------------
* No sales charge is payable at the time of purchase on investments of $1 million or more, but for such investments a
contingent deferred sales charge may be imposed, as described under the caption "Share Price," in the event of certain
redemption transactions within one year of purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to 0.25% of average daily net assets, and the
remaining portion will be used to cover distribution expenses.
(a) Redemption by wire fee (currently $4.00) not included.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a
hypothetical $1,000 investment assuming a 5% annual return:
GOLD & GOVERNMENT FUND
Class A shares.............................................................. $65 $ 98 $132 $229
Class B shares
--Assuming complete redemption at end of period............................. $73 $101 $142 $244
--Assuming no redemption.................................................... $23 $ 71 $122 $244
REGIONAL BANK FUND
Class A shares.............................................................. $64 $ 94 $127 $218
Class B shares
--Assuming complete redemption at end of period............................. $71 $ 97 $135 $231
--Assuming no redemption.................................................... $21 $ 67 $115 $231
</TABLE>
(The example should not be considered as a representation of past or future
expenses. Actual expenses may be greater or less than shown.)
Each Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the maximum
front-end sales charge permitted under the National Association of Securities
Dealers Rules of Fair Practice.
The management and 12b-1 fees referenced above are more fully explained in
this Prospectus under the caption "The Funds' Expenses" and in the Statement of
Additional Information under the captions "Investment Advisory and Other
Services" and "Distribution Contract."
3
<PAGE> 7
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS
The following table of Financial Highlights has been examined by Price
Waterhouse LLP, the Funds' independent accountants, whose unqualified reports
are included in the Funds' 1994 Annual Reports and are included in the Funds'
Statement of Additional Information. Further information about the performance
of the Funds is contained in each Fund's Annual Report to shareholders which may
be obtained free of charge by writing or telephoning John Hancock Investor
Services Corporation ("Investor Services"), at the address or telephone number
listed on the front page of this Prospectus.
Selected data for each class of shares outstanding throughout each period
indicated is as follows:
REGIONAL BANK FUND
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988
-------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A**
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period................ $ 21.62 $ 17.47 $ 13.47
-------- -------- -------
Net investment income............................... 0.39*** 0.26*** 0.21
Net realized and unrealized gain (loss) on
investments........................................ 0.91 5.84 3.98
-------- -------- -------
Total from investment operations............... 1.30 6.10 4.19
-------- -------- -------
Less distributions:
Dividends from net investment income............... (0.34) (0.26) (0.19)
Distributions from net realized gain on investments
sold............................................. (1.06) (1.69) --
-------- -------- -------
Total distributions............................ (1.40) (1.95) (0.19)
-------- -------- -------
Net asset value, end of period...................... $ 21.52 $ 21.62 $ 17.47
========= ========= ========
Total investment return at net asset value.......... 6.44% 37.45% 31.26%(a)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (000's omitted)............. $216,978 $ 94,158 $31,306
Ratio of expenses to average net assets............. 1.34% 1.35% 1.41%*
Ratio of net investment income to average net
assets............................................. 1.78% 1.29% 1.64%*
Portfolio turnover rate............................. 13% 35% 53%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period................ $ 21.56 $ 17.44 $ 13.76 $ 8.13 $ 13.00 $ 11.89 $ 10.02
-------- -------- ------- ------- ------- ------- -------
Net investment income............................... 0.23*** 0.15*** 0.18 0.29 0.30 0.20 0.16
Net realized and unrealized gain (loss) on
investment......................................... 0.91 5.83 4.56 5.68 (4.19) 2.02 3.12
-------- -------- ------- ------- ------- ------- -------
Total from investment operations............... 1.14 5.98 4.74 5.97 (3.89) 2.22 3.28
-------- -------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income............... (0.21) (0.17) (0.28) (0.34) (0.19) (0.16) (0.15)
Distributions from net realized gain on
investments sold................................. (1.06) (1.69) (0.78) -- (0.76) (0.95) (1.26)
Distributions from capital paid-in................. -- -- -- -- (0.03) -- --
-------- -------- ------- ------- ------- ------- -------
Total distributions............................ (1.27) (1.86) (1.06) (0.34) (0.98) (1.11) (1.41)
-------- -------- ------- ------- ------- ------- -------
Net asset value, end of period...................... $ (21.43) $ 21.56 $ 17.44 $ 13.76 $ 8.13 $ 13.00 $ 11.89
-------- -------- ------- ------- ------- ------- -------
Total investment return at net asset value.......... 5.69% 36.71% 37.20% 75.35% (32.29%) 20.46% 36.89%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)........... $522,207 $171,808 $56,016 $52,098 $38,992 $81,167 $50,965
Ratio of expenses to average net assets............. 2.06% 1.88% 1.96% 2.04% 1.99% 1.99% 2.17%
Ratio of net investment income to average net
assets............................................. 1.07% 0.76% 1.21% 2.65% 2.51% 1.67% 1.50%
Portfolio turnover rate............................. 13% 35% 53% 75% 56% 85% 87%
<CAPTION>
1987(B) 1987 1986(C)
------- ------- -------
CLASS A**
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period................
Net investment income...............................
Net realized and unrealized gain (loss) on
investments........................................
Total from investment operations...............
Less distributions:
Dividends from net investment income...............
Distributions from net realized gain on investments
sold.............................................
Total distributions............................
Net asset value, end of period......................
Total investment return at net asset value..........
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (000's omitted).............
Ratio of expenses to average net assets.............
Ratio of net investment income to average net
assets.............................................
Portfolio turnover rate.............................
CLASS B
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period................ $ 12.68 $ 12.51 $ 9.40
------- ------- -------
Net investment income............................... 0.05 0.20 0.17
Net realized and unrealized gain (loss) on
investment......................................... (2.17) 1.74 3.02
------- ------- -------
Total from investment operations............... (2.12) 1.94 3.19
------- ------- -------
Less distributions:
Dividends from net investment income............... (0.04) (0.26) (0.08)
Distributions from net realized gain on
investments sold................................. (0.50) (1.51) --
Distributions from capital paid-in................. -- -- --
------- ------- -------
Total distributions............................ (0.54) (1.77) (0.08)
------- ------- -------
Net asset value, end of period...................... $ 10.02 $ 12.68 $ 12.51
------- ------- -------
Total investment return at net asset value.......... (17.36%)(a) 17.44% 34.08%(a)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)........... $38,721 $54,626 $48,602
Ratio of expenses to average net assets............. 2.47%* 1.48% 1.33%*
Ratio of net investment income to average net
assets............................................. 0.73%* 1.62% 3.13%*
Portfolio turnover rate............................. 58%* 89% 86%*
<FN>
- ---------------
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
*** Net investment income per share has been calculated on average monthly shares outstanding.
(a) Not annualized.
(b) From April 1, 1987.
(c) From commencement of operations, October 4, 1985.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
GOLD & GOVERNMENT FUND
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------------
1994 1993 1992(A) 1991 1990 1989 1988 1987(C)
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Per share operating performance
Net asset value, beginning of
period.............................. $ 16.91 $ 15.19 $ 15.31
------- ------- -------
Net investment income................. 0.63 0.76** 0.72
Net realized and unrealized gain
(loss) on investments, financial
futures contracts and written
options............................. (2.28) 1.76 (0.21)
------- ------- -------
Total from investment operations.. (1.65) 2.52 0.51
------- ------- -------
Less distributions:
Dividends from net investment income.. (0.67) (0.80) (0.63)
------- ------- -------
Distributions in excess of net
realized gains on investments sold,
written options and financial
futures contracts................... (0.24)
-------
Total distributions................... (0.91) (0.80) (0.63)
=======
Net asset value, end of period........ $ 14.35 $ 16.91 $ 15.19
======= ======= =======
Total investment return at net asset
value.......................... (10.10%) 17.10% 3.44%(b)
Ratios and supplemental data
Net assets, end of period (000's
omitted)....................... $16,469 $20,385 $17,593
Ratio of expenses to average net
assets......................... 1.53% 1.59% 1.68%*
Ratio of net investment income to
average net assets.................. 4.02% 4.84% 5.49%*
Portfolio turnover rate............... 147% 118% 209%
CLASS B
Per share operating performance
Net asset value, beginning of
period.............................. $ 16.89 $ 15.17 $ 15.13 $ 14.51 $ 15.45 $ 14.96 $ 14.98 $ 16.56
------- ------- ------- ------- ------- ------- ------- -------
Net investment income................. 0.53 0.69** 0.83 0.87+ 0.91+ 1.00 0.86 0.39
Net realized and unrealized gain
(loss) on investments, financial
futures contracts and written
options............................. (2.28) 1.76 0.11 0.76 (0.81) 0.65 0.26 (1.02)
------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations.. (1.75) 2.45 0.94 1.63 0.10 1.65 1.12 (0.63)
------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.. (0.57) (0.73) (0.90) (1.01) (1.04) (0.92) (0.74) (0.40)
Distributions in excess of net
realized gain on investments
sold, written options and
financial futures contracts..... (0.24) -- -- -- -- (0.24) (0.40) (0.55)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions............. (0.81) (0.73) (0.90) (1.01) (1.04) (1.16) (1.14) (0.95)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period........ $ 14.33 $ 16.89 $ 15.17 $ 15.13 $ 14.51 $ 15.45 $ 14.96 $ 14.98
======= ======= ======= ======= ======= ======= ======= =======
Total investment return at net asset
value.......................... (10.70%) 16.56% 6.42% 11.78%+ 0.55%+ 11.73% 7.82% (6.00%*)
Ratio and supplemental data
Net assets, end of period (000's
omitted)....................... $38,992 $51,872 $36,103 $56,928 $65,498 $63,569 $77,925 $80,459
Ratio of expenses to average net
assets......................... 2.18% 2.11% 1.63% 1.82%+ 1.90%+ 1.59% 1.92% 2.13%*
Ratio of net investment income to
average net assets.................. 3.41% 4.29% 5.56% 5.96%+ 6.03%+ 6.70% 5.69% 4.22%*
Portfolio turnover rate............... 147% 118% 209% 134% 171% 124% 108% 161%
<CAPTION>
PERIOD ENDED
GOLD & GOVERNMENT FUND ------------------------------
MARCH 31, MARCH 31, MARCH 31,
1987 1986 1985(D)
-------- -------- --------
<S> <C> <C> <C>
CLASS A
Per share operating performance
Net asset value, beginning of
period..............................
Net investment income.................
Net realized and unrealized gain
(loss) on investments, financial
futures contracts and written
options.............................
Total from investment operations..
Less distributions:
Dividends from net investment income..
Distributions in excess of net
realized gains on investments sold,
written options and financial
futures contracts...................
Total distributions...................
Net asset value, end of period........
Total investment return at net asset
value...............................
Ratios and supplemental data
Net assets, end of period (000's
omitted)............................
Ratio of expenses to average net
assets..............................
Ratio of net investment income to
average net assets..................
Portfolio turnover rate...............
CLASS B
Per share operating performance
Net asset value, beginning of
period.............................. $ 16.20 $ 14.71 $ 14.25
------- ------- -------
Net investment income................. 1.01 1.12 0.64
Net realized and unrealized gain
(loss) on investments, financial
futures contracts and written
options............................. 1.07 1.61 0.14
------- ------- -------
Total from investment operations.. 2.08 2.73 0.78
------- ------- -------
Less distributions:
Dividends from net investment income.. (1.06) (1.20) (0.32)
Distributions in excess of net
realized gain on investments
sold, written options and
financial futures contracts..... (0.66) (0.04) --
------- ------- -------
Total distributions............. (1.72) (1.24) (0.32)
------- ------- -------
Net asset value, end of period........ $ 16.56 $ 16.20 $ 14.71
======= ======= =======
Total investment return at net asset
values......................... 13.93% 19.69% 10.70%*
Ratio and supplemental data
Net assets, end of period
(000's omitted)................ $70,833 $39,469 $26,401
Ratio of expenses to average net
assets......................... 1.68% 1.45% 1.49%*
Ratio of net investment income to
average net assets.................. 6.06% 7.46% 8.57%*
Portfolio turnover rate............... 159% 336% 279%*
<FN>
- ---------------
* On an annualized basis.
** Net investment income per share has been calculated on average shares outstanding during the year.
(a) Class A shares commenced operations on January 3, 1992.
(b) Total return is not on an annualized basis.
(c) From April 1, 1987.
(d) From commencement of operations, September 26, 1984.
+ Reflects expense limitations in effect during the years indicated. As a result of such limitations expenses of Class B
shares for the years ended, October 31, 1991 and 1990, reflect reductions of $0.01 and less than $0.01, per share,
respectively. Absent such reductions, for the years ended October 31, 1991 and 1990, the ratio of expenses to average net
assets would have been 1.91% and 1.93%, respectively, and the ratio of net investment income to average net assets would
have been 5.87% and 6.00%, respectively.
</TABLE>
5
<PAGE> 9
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has a fundamental investment objective with policies and restrictions
to guide its portfolio management. There are market fluctuations and risks in
any investment and therefore there is no assurance that either Fund will achieve
its investment objectives.
REGIONAL BANK FUND
The Fund's investment objective is to achieve capital appreciation from a
portfolio of equity securities of regional banks and lending institutions.
Moderate income is a secondary objective. Under ordinary circumstances, the Fund
will invest at least 65% of its total assets in equity securities, including
common stock and securities convertible into common stock (such as convertible
bonds, convertible preferred stock, and warrants), of regional commercial banks,
industrial banks, consumer banks and bank holding companies that receive a
substantial portion of their income from banks.
- -------------------------------------------------------------------------------
THE FUND INVESTS IN EQUITY
SECURITIES OF REGIONAL BANKS
AND LENDING INSTITUTIONS.
- -------------------------------------------------------------------------------
A regional bank is one that provides full service banking (i.e., savings
accounts, checking accounts, commercial lending and real estate lending), whose
assets are primarily of domestic origin, and which typically has a principal
office outside of New York City and Chicago. Regional Bank Fund may invest in
banks that are not members of the Federal Reserve System or whose deposits are
not insured by the Federal Deposit Insurance Corporation (including any state or
federally chartered savings and loan association). Although the Adviser will
primarily seek opportunities for capital appreciation, many of the regional
banks in which the Fund may invest pay regular dividends. Accordingly, the Fund
also expects to receive moderate income.
Regional Bank Fund may invest some or all of its assets that are not invested in
equity securities of regional banks in the equity securities of financial
services companies, companies with significant lending operations or "money
center" banks. A "money center" bank is one with a strong international banking
business and a significant percentage of international assets, which is
typically located in New York or Chicago.
To avoid the need to sell equity securities in the portfolio to provide funds
for redemption, and to provide flexibility to Regional Bank Fund to take
advantage of investment opportunities, the Fund may invest up to 15% of its net
assets in short-term (less than one year) investment grade (i.e., rated at the
time of purchase AAA, AA, A or BBB by Standard & Poor's Rating Group or Aaa, Aa,
A or Baa by Moody's Investors Service, Inc.) debt securities of corporations
(such as commercial paper, notes, bonds or debentures), certificates of deposit,
deposit accounts, obligations of the U.S. Government, its agencies and
instrumentalities, or repurchase agreements which are fully-collateralized by
U.S. Government obligations, including repurchase agreements that mature in more
than seven days. When the Adviser believes that financial conditions warrant, it
may invest up to 80% of the Fund's assets in these securities rated in the three
highest categories, for temporary defensive purposes. Medium grade obligations
(i.e., those rated BBB or Baa) lack outstanding investment characteristics and
in fact have
6
<PAGE> 10
speculative characteristics as well and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments. In the event a debt security is subsequently downgraded
below medium grade, the Adviser will consider this event in its determination of
whether the Fund should continue to hold the security. See Appendix A to the
Statement of Additional Information for a description of the various ratings of
investment grade debt securities.
The Fund may write (sell) covered call options and may purchase put and call
options. These investment techniques are discussed in more detail below under
"Certain Investment Strategies" and in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS. Since the Fund's investments will be
concentrated in the banking industry, it will be subject to risks in addition to
those that apply to the general equity market. Events may occur which
significantly affect the entire banking industry. Thus, the Fund's share value
may at times increase or decrease at a faster rate than the share value of a
mutual fund with investments in many industries. In addition, despite some
measure of deregulation, banks and other lending institutions are still subject
to extensive governmental regulation which limits their activities. The
availability and cost of funds to these entities is crucial to their
profitability. Consequently, volatile interest rates and general economic
conditions can adversely affect their financial performance and condition. The
market value of the debt securities in the Fund's portfolio will also tend to
vary in an inverse relationship with changes in interest rates. For example, as
interest rates rise, the market value of debt securities tends to decline.
Regional Bank Fund is not a complete investment program. Because the Fund's
investments are concentrated in the banking industry, an investment in the Fund
may be subject to greater market fluctuations than a fund that does not
concentrate in a particular industry. Thus, it is recommended that an investment
in this Fund be considered only one portion of your overall investment
portfolio.
GOLD & GOVERNMENT FUND
The Fund's investment objective is to achieve capital appreciation and
preservation of the purchasing power of your capital. Moderate income is a
secondary objective.
The Fund will at all times invest at least 65% of its total assets in some
combination of gold and gold mining securities and U.S. Government securities.
John Hancock Advisers, Inc. (the "Adviser") will seek to anticipate oncoming
inflationary and disinflationary economic cycles, and will attempt to achieve
Gold & Government Fund's investment objective of capital appreciation and
preservation of purchasing power, as follows:
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT
OBJECTIVE IS TO ACHIEVE
CAPITAL APPRECIATION AND
PRESERVATION OF THE
PURCHASING POWER OF
YOUR CAPITAL.
- -------------------------------------------------------------------------------
- During periods of actual or anticipated inflation, concentrate its
investments principally in gold or other precious metal mining shares as
described below.
- During periods of actual or anticipated disinflation, move from investments
in gold or other precious metals mining shares to a concentration of
investments in U.S. Government and government agency fixed-income
securities.
7
<PAGE> 11
The Adviser believes that this investment strategy enhances Gold & Government
Fund's potential to achieve its investment objective of capital appreciation
over that which could be achieved by remaining fully invested in gold (and other
precious metals) mining shares. The Adviser does so by seeking to avoid the
decline in the price of gold and other precious metal mining shares that
typically occurs during periods of disinflation, while at the same time,
obtaining the benefit of the increase in value of debt instruments that
typically occurs when interest rates decline during periods of disinflation. The
Adviser's determination as to whether the economy is in an inflationary or
disinflationary environment will be made based upon its evaluation of numerous
economic and monetary factors.
When, by reason of a rising rate of change in the CPI, rising interest rates,
and/or a decline in the value of the U.S. dollar, an inflationary cycle is
expected by the Adviser, Gold & Government Fund will invest at least 25% and up
to 80% of the value of its total assets in the equity securities (common stock,
preferred stock and securities convertible into common and preferred stock) of
companies engaged in the exploration for, mining and processing of, or dealing
in gold and other precious metals such as silver. The Fund may purchase
securities of mining companies located throughout the free world, including in
particular the United States, Canada, South Africa and Australia. The Fund may
purchase sponsored or unsponsored American depositary receipts ("ADRs") rather
than the actual security of a foreign company. An ADR is a certificate issued by
a United States bank representing the right to receive securities of a foreign
issuer deposited in that bank or a correspondent bank. Although the Fund
anticipates purchasing most of its gold mining securities on United States
markets, it may from time to time purchase them on foreign markets. In addition,
the Fund may invest up to 10% of the value of its total assets directly in gold,
particularly gold bullion and gold coins.
- -------------------------------------------------------------------------------
HOW THE FUND INVESTS
DURING AN INFLATIONARY CYCLE.
- -------------------------------------------------------------------------------
When, by reason of a declining rate of change in the CPI, declining interest
rates, and/or an increase in the value of the U.S. dollar, a disinflationary
cycle is anticipated, the Fund may invest up to 90% of its assets in debt
instruments of the U.S. Government and its agencies having varied maturities
("U.S. Government securities"). These U.S. Government securities will be
obligations issued or guaranteed as to both principal and interest by the U.S.
Government or backed by the full faith and credit of the United States. In
addition to direct obligations of the U.S. Treasury such as Treasury bonds and
bills, U.S. Government securities include securities issued or guaranteed by
different agencies such as: Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, Fannie Mae and Freddie
Mae mortgage-backed securities, General Services Administration and Federal
Maritime Administration. The Fund may also invest in securities issued by the
U.S. Government in the form of separately traded principal and interest
components of securities guaranteed by the U.S. Treasury. Because these
obligations do not pay current income, their value may experience more
volatility when interest rates change than that of other U.S. Government
securities that have similar yields and maturities. As of the date of this
Prospectus, the Adviser believes that the economy is in an extended period of
slow growth and that inflation will likely remain stable. Therefore, under these
circumstances, the Fund would invest principally in U.S. Government securities.
- -------------------------------------------------------------------------------
HOW THE FUND
INVESTS DURING A
DISINFLATIONARY CYCLE.
- -------------------------------------------------------------------------------
8
<PAGE> 12
The Fund may invest up to 10% of its net assets in repurchase agreements, which
are fully collateralized by U.S. Government securities, including repurchase
agreements that mature in more than seven days.
The Fund may write covered call options and may purchase put and call options on
gold bullion, U.S. Government securities and equity securities. The Fund may
also invest in futures contracts in gold bullion, financial futures contracts
with respect to U.S. Treasury obligations and related options on such futures
contracts. These investment techniques are discussed in more detail below under
"Certain Investment Strategies" and in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS. The Fund's investment success will
depend to a high degree on the Adviser's ability to anticipate the onset and
termination of inflationary and disinflationary cycles. A failure to anticipate
a disinflationary cycle could result in the Fund's assets being
disproportionately invested in securities of gold or other mining companies.
Conversely, a failure to predict an inflationary cycle could result in the
Fund's assets being disproportionately invested in U.S. Government securities.
The securities of companies engaged in the exploration for, mining and
processing of gold and precious metals have been volatile historically. Mining
and other related securities tend to fluctuate as much as or more than gold
during periods of market instability because operating results will usually be
positively or negatively leveraged by considerable movements in the price of
gold. These securities are further affected by changes in the currency of the
country of domicile. Since the Fund may from time to time, as set forth above,
invest up to 80% of its total assets in gold and precious metals mining stocks,
the Fund may be subject to greater risks and market fluctuations than other
mutual funds with portfolios having a broader range of investment alternatives.
The Fund's holdings of gold bullion, if any, will not generate any current
income, and appreciation in the market price of gold is the sole manner in which
the Fund will be able to realize gains on such investment.
Investments in foreign securities may involve certain risks. See "Certain
Investment Strategies."
If Gold & Government Fund writes (sells) a substantial number of call options
and the market prices of the underlying securities appreciate, or if the Fund
writes a substantial number of put options and the market prices of the
underlying securities depreciate, there may be a very substantial turnover of
the portfolio. A high rate of portfolio turnover involves correspondingly
greater brokerage expense which will be borne by the Fund and may, under certain
circumstances, make it more difficult for the Fund to qualify as a regulated
investment company under the Internal Revenue Code. See the Statement of
Additional Information for a further discussion of these special considerations.
9
<PAGE> 13
CERTAIN INVESTMENT STRATEGIES
OPTIONS TRANSACTIONS. Gold & Government Fund may purchase call and put options
and write (sell) covered call options on gold bullion, U.S. Government
securities and equity securities in which it may invest. The Fund may not invest
more than 5% of its assets in purchased put and call options. The Fund may write
(sell) covered call options on all or part of its portfolio assets, without
limit. Regional Bank Fund may invest up to 5% of its assets may be invested in
purchased put and call options and may write (sell) covered call options on up
to 30% of its portfolio securities.
The Funds may deal in options listed for trading on a national securities
exchange or traded over-the-counter. The Funds will engage in over-the-counter
options only with member banks of the Federal Reserve System and primary dealers
in U.S. Government securities. The staff of the Securities and Exchange
Commission considers over-the-counter options to be illiquid except under
prescribed conditions, which are discussed in the Statement of Additional
Information.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. Gold & Government Fund may buy and
sell gold bullion and financial futures contracts and options on futures to
hedge against the effects of fluctuations in securities prices, interest rates,
currency exchange rates and other market conditions and for speculative
purposes. The potential loss incurred by the Fund in writing options on futures
is unlimited and may exceed the amount of the premium received. All of the
Fund's futures contracts and options on futures will be traded on a U.S.
commodity exchange or board of trade. The Gold & Government Fund will not engage
in a futures or options transaction for speculative purposes, if immediately
thereafter, the sum of initial margin deposits on existing positions and
premiums required to establish speculative positions in futures contracts and
options on futures would exceed 5% of the Fund's net assets. The Fund intends to
comply with the CFTC regulations with respect to its speculative transactions.
These regulations are discussed further in the Statement of Additional
Information.
REPURCHASE AGREEMENTS. In a repurchase agreement, a Fund buys a security
subject to the right and obligation to sell it back at a higher price. These
transactions must be fully collateralized at all times, but they involve some
credit risk to the Fund if the other party defaults on its obligations and the
Fund is delayed in or prevented from liquidating the collateral.
RESTRICTED SECURITIES. Each Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to Rule
144A under the Securities Act of 1933 (the "Securities Act"). The Trustees will
carefully monitor the Funds' investments in these securities, focusing on
certain factors, including valuation, liquidity and availability of information.
Purchases are subject to a nonfundamental investment restriction limiting all
the Funds' illiquid securities to not more than 10% of the Funds' net assets.
FOREIGN ISSUERS. Gold & Government Fund may purchase securities of foreign
issuers. Investments in foreign securities may involve a greater degree of risk
than investments in domestic securities due to exchange controls, less publicly
10
<PAGE> 14
available information, more volatile or less liquid securities markets, and the
possibility of expropriation, confiscatory taxation or political, economic or
social instability. Some foreign companies are not generally subject to the same
uniform accounting, auditing and financial reporting requirements as domestic
companies, and foreign regulation of stock exchanges, brokers and securities may
differ considerably from domestic regulation thereof. Additionally, because
foreign securities may be denominated in currencies other than the U.S. dollar,
changes in foreign currency exchange rates will affect the Fund's net asset
value, the value of dividends and interest earned, gains and losses realized on
the sale of securities, and net investment income and gains, if any, to be
distributed to shareholders by the Fund. Securities transactions effected in
some foreign markets may not be settled promptly. Therefore, the Fund's
investments in these markets may be less liquid and subject to the risk of
fluctuating currency exchange rates pending settlement.
Each Fund has adopted certain investment restrictions which are enumerated in
detail in the Statement of Additional Information, where they are classified as
fundamental or non-fundamental. The Funds' investment objectives and those
investment restrictions designated as fundamental may not be changed without
shareholder approval. The Funds' non-fundamental investment policies and
restrictions, however, may be changed by a vote of the Trustees without
shareholder approval. The Funds' portfolio turnover rates for recent periods are
shown in the section "The Funds' Financial Highlights."
- -------------------------------------------------------------------------------
EACH FUND FOLLOWS CERTAIN
POLICIES, SOME OF WHICH MAY
HELP TO REDUCE INVESTMENT
RISK.
- -------------------------------------------------------------------------------
When choosing brokerage firms to carry out the Funds' transactions, the Advisers
gives primary consideration is execution at the most favorable prices, taking
into account the broker's professional ability and quality of service.
Consideration may also be given to the broker's sales of shares of the Funds.
Pursuant to procedures determined by the Trustees, the Adviser may place
securities transactions with brokers affiliated with the Adviser. These brokers
include Tucker Anthony Incorporated, John Hancock Distributors, Inc. and Sutro &
Company Inc., which are indirectly owned by John Hancock Mutual Life Insurance
Company, which in turn indirectly owns the Adviser.
- -------------------------------------------------------------------------------
BROKERS ARE CHOSEN BASED ON
BEST PRICE AND EXECUTION.
- -------------------------------------------------------------------------------
ORGANIZATION AND MANAGEMENT OF THE FUNDS
Each Fund is a diversified series of Freedom Investment Trust (the "Trust") an
open-end management investment company organized as a Massachusetts business
trust in 1984. The Trust reserves the right to create and issue a number of
series of shares, or funds or classes thereof, which are separately managed and
have different investment objectives. The Trust is not required and does not
intend to hold annual shareholder meetings, although special meetings may be
held for such purposes as electing or removing Trustees, changing fundamental
policies or approving a management contract. The Trust, under certain
circumstances, will assist in shareholder communications with other
shareholders.
- -------------------------------------------------------------------------------
THE TRUSTEES ELECT OFFICERS
AND RETAIN THE INVESTMENT
ADVISER WHO IS RESPONSIBLE
FOR THE DAY-TO-DAY
OPERATIONS OF THE FUNDS,
SUBJECT TO THE TRUSTEES'
POLICIES AND SUPERVISION.
- -------------------------------------------------------------------------------
11
<PAGE> 15
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
the John Hancock Mutual Life Insurance Company, a financial services company
(the "Life 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 for all of the John Hancock funds directly and through selected
broker-dealers ("Selling Brokers"). Freedom Distributors Corporation, a co-
distributor of the Funds, is, along with John Hancock Funds, (together with John
Hancock Funds, the "Distributors") an indirect subsidiary of the Life Company.
Certain Fund officers are also officers of the Adviser and John Hancock Funds.
Pursuant to an order granted by the Securities and Exchange Commission, the Fund
has adopted a deferred compensation plan for its independent Trustees which
allows Trustees' fees to be invested by the Fund in other John Hancock funds.
- -------------------------------------------------------------------------------
JOHN HANCOCK ADVISERS,
INC. ADVISES INVESTMENT
COMPANIES HAVING A
TOTAL ASSET VALUE OF
MORE THAN $13 BILLION.
- -------------------------------------------------------------------------------
Ann M. McDonley is Vice President and portfolio manager of Gold & Government
Fund as well as John Hancock Limited Term Government Fund. She joined the
Adviser in 1992 as a fixed income derivatives specialist. Prior to 1992, she was
Vice President and Treasurer of First Signature Bank & Trust Company, an
indirect subsidiary of the Life Company.
James K. Schmidt is Senior Vice President and portfolio manager of Regional Bank
Fund as well as The Southeastern Thrift and Bank Fund, Inc., a closed-end fund.
He has been portfolio manager of Regional Bank Fund since its inception. He
joined John Hancock in 1985.
In order to avoid any conflict with portfolio trades for the Funds, the Adviser
and each Fund have adopted extensive restrictions on personal securities trading
by personnel of the Adviser and its affiliates. 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. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.
12
<PAGE> 16
ALTERNATIVE PURCHASE ARRANGEMENTS
You can purchase shares of the Fund at a price equal to their net asset value
per share plus a sales charge. At your election, this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge Alternative,"
Class A shares) or on a contingent deferred basis (see "Contingent Deferred
Sales Charge Alternative," Class B shares). If you do not specify on your
account application which class of shares you are purchasing, it will be assumed
that you are investing in Class A shares.
- -------------------------------------------------------------------------------
AN ALTERNATIVE PURCHASE PLAN ALLOWS YOU TO
CHOOSE THE METHOD OF PAYMENT THAT IS BEST
FOR YOU.
- -------------------------------------------------------------------------------
CLASS A SHARES. If you elect to purchase Class A shares, you will incur an
initial sales charge unless the amount of your purchase is $1 million or more.
If you purchase $1 million or more of Class A shares, you will not be subject to
an initial sales charge, but you will incur a sales charge if you redeem your
shares within one year of purchase. Class A shares are subject to ongoing
distribution and service fees at a combined annual rate of up to 0.30% of a
Fund's average daily net assets attributable to the Class A shares. Certain
purchases of Class A shares qualify for a reduced initial sales charge. See
"Share Price -- Qualifying for a Reduced Sales Charge."
- -------------------------------------------------------------------------------
INVESTMENTS IN CLASS A
SHARES ARE SUBJECT TO AN
INITIAL SALES CHARGE.
- -------------------------------------------------------------------------------
CLASS B SHARES. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them within
six years of purchase (the "contingent deferred sales charge" or the "CDSC").
Class B shares are subject to ongoing distribution and service fees at a
combined annual rate of up to 1.00% of a Fund's average daily net assets
attributable to the Class B shares. Investing in Class B shares permits all your
dollars to work from the time you make your investment, but the higher ongoing
distribution fee will cause these shares to have a higher expense ratio than
that of Class A shares. To the extent that any dividends are paid by the Funds,
these higher expenses will also result in lower dividends than those paid on
Class A shares.
- -------------------------------------------------------------------------------
INVESTMENTS IN CLASS B
SHARES ARE SUBJECT TO A
CONTINGENT DEFERRED SALES
CHARGE.
- -------------------------------------------------------------------------------
Class B shares are not available to full service defined contribution plans
administered by Investor Services or John Hancock Mutual Life Insurance Company
that had more than 100 eligible employees at the inception of the Fund account.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider whether,
during the anticipated life of your Fund investment, the CDSC and accumulated
fees on Class B shares would be less than the initial sales charge and
accumulated fees on Class A shares purchased at the same time; and to what
extent this differential would be offset by the Class A shares' lower expenses.
To help you make this determination, the table under the caption "Expense
Information" on the inside cover page of this Prospectus shows examples of the
charges applicable to each class of shares. Class A shares will normally be more
beneficial if you qualify for reduced sales charges. See "Share
Price -- Qualifying for a Reduced Sales Charge."
- -------------------------------------------------------------------------------
YOU SHOULD CONSIDER WHICH
CLASS OF SHARES WILL BE MORE
BENEFICIAL FOR YOU.
- -------------------------------------------------------------------------------
13
<PAGE> 17
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent any
dividends are paid. However, because initial sales charges are deducted at the
time of purchase, you would not have all of your funds invested initially and,
therefore, would initially own fewer shares. If you do not qualify for reduced
initial sales charges and expect to maintain your investment for an extended
period of time, you might consider purchasing Class A shares because the
accumulated distribution and service charges on Class B shares may exceed the
initial sales charge and accumulated distribution and service charges on Class A
shares during the life of your investment.
Alternatively, you might determine that it would be more advantageous to
purchase Class B shares in order to have all of your funds invested initially.
However, you would be subject to higher distribution charges and, for a six-year
period, a CDSC.
In the case of Class A shares, the distribution expenses that John Hancock Funds
incurs in connection with the sale of the shares will be paid from the proceeds
of the initial sales charge and the ongoing distribution and service fees. In
the case of Class B shares, the expenses will be paid from the proceeds of the
ongoing distribution and service fees, as well as the CDSC incurred upon
redemption within six years of purchase. The purpose and function of the CDSC
and ongoing distribution and service fees are the same as those of the Class A
shares' initial sales charge and ongoing distribution and service fees. Sales
personnel distributing the Funds' shares may receive different compensation for
each class of shares.
Dividends, if any, on Class A and Class B shares will be calculated in the same
manner, at the same time and on the same day and will be in the same amount
except for differences resulting from the fact that each class will bear only
its own distribution and service fees, shareholder meeting expenses and any
incremental transfer agency costs. See "Dividends and Taxes."
THE FUNDS' EXPENSES
For managing its investment and business affairs, each Fund pays a monthly fee
to the Adviser based upon the average daily net asset value of such Fund at the
annual rate of 0.80% of each respective Fund's first $500 million of average
daily net assets and 0.75% of average daily net assets in excess of $500
million. For the 1994 fiscal year the fee was 0.79% of Gold and Government
Fund's average daily net assets and 0.79% of Regional Bank's average net assets.
The Class A and Class B shareholders of each Fund have adopted distribution
plans (each a "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940. Under these Plans, each Fund pays distribution and service fees at an
aggregate annual rate of up to 0.30% of the Class A shares' average daily net
assets of the respective Fund and an aggregate annual rate of up to 1.00% of the
Class B shares' average daily net assets of the respective Fund. In each case,
up to 0.25% is for service expenses and the remaining amount is for distribution
expenses. Distribution fees are used to reimburse the Distributors for their
distribution expenses, including but not limited to: (i) initial and ongoing
sales compensation to Selling Brokers and others (including affiliates of the
Distributors) engaged in the sale of shares of the Funds; (ii) marketing,
promotional and overhead expenses incurred in connection with the distribution
of shares of the Funds; and (iii) with respect to Class B shares only, interest
expenses on unreimbursed distribution expenses. Service fees are paid to the
Distributors to compensate Selling Brokers for providing personal and account
maintenance services to shareholders.
- -------------------------------------------------------------------------------
THE FUND PAYS
DISTRIBUTION AND SERVICE
FEES FOR MARKETING AND
SALES RELATED SHAREHOLDER
SERVICING.
- -------------------------------------------------------------------------------
14
<PAGE> 18
In the event the Distributors are not fully reimbursed for payments made or
expenses incurred by them under the Class A Plan, these expenses will not be
carried beyond one year from the date they were incurred. These unreimbursed
expenses under the Class B Plan will be carried forward together with interest
on the balance of these unreimbursed expenses. For the fiscal year ended October
31, 1994, for Gold & Government Fund and Regional Bank Fund, respectively, an
aggregate of $169,364 and $22,030,887 of distribution expenses or 0.3% and 7.0%
of the average net assets of the Class B shares was not reimbursed or recovered
by the Distributors through the receipt of deferred sales charges or 12b-1 fees
in prior periods.
For the fiscal year ended October 31, 1994, Gold & Government Fund's total
expenses for Class A shares and Class B shares, respectively, were 1.53% and
2.18% of average net assets, and Regional Bank Fund's total expenses to Class A
shares and Class B shares respectively, were 1.34% and 2.06% of average net
assets.
DIVIDENDS AND TAXES
DIVIDENDS. The Funds generally declare and distribute dividends representing
all or substantially all net investment income quarterly. Each Fund may
distribute net short-term capital gains, if any, quarterly, and will distribute
net long-term capital gains, if any, annually after the close of its fiscal year
(October 31).
Dividends are reinvested in additional shares of your class unless you elect the
option to receive them in cash. If you elect the cash option and the U.S. Postal
Service cannot deliver your checks, your election will be converted to the
reinvestment option. Because of the higher expenses associated with Class B
shares, any dividends on these shares will be lower than those on the Class A
shares. See "Share Price."
TAXATION. Dividends from the Funds' net investment income, certain net foreign
exchange gains and net short-term capital gains are taxable to you as ordinary
income and dividends from the Funds' net long-term capital gains are taxable as
long-term capital gain. These dividends are taxable whether received in cash or
reinvested in additional shares. Corporate shareholders may be entitled to take
a corporate dividends received deduction for dividends paid by the Funds
attributable to the dividends they receive from U.S. domestic corporations,
subject to certain restrictions in the Internal Revenue Code of 1986, as amended
(the "Code"). Certain dividends may be paid in January of a given year but may
be taxable as if
15
<PAGE> 19
you received them the previous December. The Funds will send you a statement by
January 31 showing the tax status of the dividends you received for the prior
year.
Each Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. As a regulated investment
company, neither Fund will be subject to Federal income taxes on any net
investment income or net realized capital gains distributed to its shareholders
within the time period prescribed by the Code.
When you redeem (sell) or exchange shares, you may realize a taxable gain or
loss.
Gold & Government Fund anticipates that it will be subject to foreign
withholding taxes or other foreign taxes on income (possibly including capital
gains) on certain foreign investments which will reduce the yield on those
investments. However, if more than 50% of the Fund's total assets at the close
of its taxable year consists of securities of foreign corporations and if the
Fund so elects, shareholders will include in their gross incomes their pro-rata
shares of qualified foreign taxes paid by the Fund and may be entitled subject
to certain conditions and limitations under the Code, to claim a Federal income
tax credit or deduction for their share of these taxes.
On the account application you must certify that your social security or other
taxpayer identification number you provide is correct and that you are not
subject to backup withholding of Federal income tax. If you do not provide this
information or are otherwise subject to this withholding, a Fund may be required
to withhold 31% of your dividends and the proceeds of redemptions or exchanges.
In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respect to your investment in and distributions from a Fund. Non-U.S.
shareholders and tax-exempt shareholders are subject to different tax treatment
not described above.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent a Fund's distributions are
derived from interest on (or, in the case of intangibles taxes, the value of its
assets is attributable to) certain U.S. Government obligations, provided in some
states that certain thresholds for holdings of such obligations and/or reporting
requirements are satisfied. You should consult your tax adviser for specific
advice.
PERFORMANCE
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 maximum offering
price per share on the last day of that period. Yield is also 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 your shares
or the income reported in the Fund's financial statements.
- -------------------------------------------------------------------------------
THE FUNDS MAY ADVERTISE
THEIR YIELD AND TOTAL RETURN.
- -------------------------------------------------------------------------------
16
<PAGE> 20
A Fund's total return shows the overall dollar or percentage change in value, of
a hypothetical investment in a Fund 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 of the respective class
of shares of a Fund divided by 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.
Both total return and yield calculations for Class A shares generally include
the effect of paying the maximum sales charge of 5.00% (except as shown in the
"The Funds' Financial Highlights"). Investments at lower sales charges would
result in higher performance figures. Yield and total return for the Class B
shares reflect deduction of the applicable contingent deferred sales charge
imposed on a redemption of shares held for the applicable period. All
calculations assume that all dividends are reinvested at net asset value on the
reinvestment dates during the periods. Yield and total return of Class A and
Class B shares will be calculated separately and, because each class is subject
to certain different expenses, the yield and total return may differ with
respect to that class for the same period. The relative performance of the Class
A and Class B shares will be affected by a variety of factors, including the
higher operating expenses attributable to the Class B shares, whether the Fund's
investment performance is better in the earlier or later portions of the period
measured and the level of net assets of the classes during the period. Each Fund
will include the total return and yield of both Class A and Class B shares in
any advertisement or promotional materials including Fund performance data. The
value of a Fund's shares, when redeemed, may be more or less than their original
cost. Both yield and total return are historical calculations and not an
indication of future performance. See "Factors to Consider in Choosing an
Alternative."
17
<PAGE> 21
<TABLE>
HOW TO BUY SHARES
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
OPENING AN ACCOUNT.
- --------------------------------------------------------------------------------------
The minimum initial investment in Class A or Class B shares is $1,000 ($250 for
group investments or $500 for retirement plans).
Complete the Account Application attached to the Prospectus. Indicate whether you
are purchasing Class A or Class B shares. If you do not specify which class of
shares you are purchasing, Fund Services will assume you are investing in Class A
shares.
- --------------------------------------------------------------------------------------
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation. ("Investor Services").
2. Deliver the completed application and check to your registered
representative, Selling Broker or mail it directly to Investor
Services.
- --------------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by contacting your registered
representative, Selling Broker, or by calling 1-800-225-5291.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: [NAME OF FUND]
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative, Selling Broker or mail it directly to Investor
Services.
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A
AND CLASS B SHARES.
- --------------------------------------------------------------------------------------
1. Complete the "Automatic Investing" and "Bank Information"
sections on the Account Privileges Application designating a bank
account from which your funds may be drawn.
MONTHLY
AUTOMATIC 2. The amount you elect to invest will be automatically withdrawn
ACCUMULATION from your bank or credit union account.
PROGRAM
(MAAP)
- --------------------------------------------------------------------------------------
BY TELEPHONE 1. Complete the "Invest-by-Phone" and "Bank Information" sections
on the Account Privileges Application designating a bank
account from which funds may be drawn. Note that in order to
invest by phone, your account must be in a bank or credit union
that is a member of the Automated Clearing House system (ACH).
2. After your authorization form has been processed, you may
purchase additional Class A or Class B shares by calling
Investor Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which
your account is registered, the Fund name, the class of shares
you own, your account number, and the amount you wish to
invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
- --------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 22
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
BY CHECK 1. Either complete the detachable stub included on your account
statement or include a note with your investment listing the
name of the Fund, the class, your account number and the
name(s) in which the account is registered.
- -----------------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A
AND CLASS B SHARES.
(CONTINUED)
- -----------------------------------------------------------------------------------------
2. Make your check payable to John Hancock Investor Services
Corporation.
3. Mail the account information and check to
John Hancock Investor Services Corporation
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling
Broker.
- -----------------------------------------------------------------------------------------
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: [NAME OF FUND]
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
- -----------------------------------------------------------------------------------------
Other Requirements. All purchases must be made in U.S. dollars. Checks written on
foreign banks will delay purchases until U.S. funds are received, and a collection
charge may be imposed. Shares of the Fund are priced at the offering price based
on the net asset value computed after John Hancock Funds receives notification of
the dollar equivalent from the Fund's custodian bank. Wire purchases normally take
two or more hours to complete and, to be accepted the same day, must be received
by 4:00 p.m., New York time. Your bank may charge a fee to wire funds. Telephone
transactions are recorded to verify information. Certificates are not issued
unless a request is made in writing to Investor Services.
- -----------------------------------------------------------------------------------------
</TABLE>
You will receive a statement of your account after any transaction that affects
your share balance or registration (statements related to reinvestment of
dividends and automatic investment/withdrawal plans will be sent to you
quarterly). A tax information statement will be mailed to you by January 31 of
each year.
- -------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT
STATEMENTS WHICH YOU
SHOULD KEEP TO HELP WITH
YOUR PERSONAL RECORDKEEPING.
- -------------------------------------------------------------------------------
SHARE PRICE
The net asset value ("NAV") is the value of one share. The NAV per share is
calculated by dividing the net assets of each class by the number of outstanding
shares of that class. The NAV of each class can differ in value. Securities in
the Funds' portfolios are valued on the basis of market quotations, valuations
provided by independent pricing services or, at fair value as determined in good
faith in accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost which
approximates market value. 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 have been materially affected
by events occurring after the closing of a foreign market, assets are valued by
a method that the Trustees believes 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 that the Exchange
is open.
- -------------------------------------------------------------------------------
THE OFFERING PRICE OF YOUR
SHARES IS THEIR NET ASSET
VALUE PLUS A SALES CHARGE,
IF APPLICABLE, WHICH WILL
VARY WITH THE PURCHASE
ALTERNATIVE YOU CHOOSE.
- -------------------------------------------------------------------------------
19
<PAGE> 23
Shares of the Funds are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock Funds.
If you buy shares of the Funds through a Selling Broker, the Selling Broker must
receive your investment before the close of regular trading on the New York
Stock Exchange and transmit it to John Hancock Funds before its close of
business to receive that day's offering price.
<TABLE>
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The offering price you pay
for Class A shares of each Fund equals the NAV plus a sales charge as follows.
<CAPTION>
SALES CHARGE SALES CHARGE REALLOWANCE TO
AS AS COMBINED SELLING BROKER
A PERCENTAGE A PERCENTAGE REALLOWANCE AS A PERCENTAGE
AMOUNT INVESTED OF OF AND SERVICE FEE AS OF
(INCLUDING SALES OFFERING THE AMOUNT A PERCENTAGE OF OFFERING
CHARGE) PRICE INVESTED OFFERING PRICE(+) PRICE(*)
- ------------------- ------------- ------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Less than $50,000 5.00% 5.26% 4.25% 4.01%
$50,000 to $99,999 4.50% 4.71% 3.75% 3.51%
$100,000 to
$249,999 3.50% 3.63% 2.85% 2.61%
$250,000 to
$499,999 2.50% 2.56% 2.10% 1.86%
$500,000 to
$999,999 2.00% 2.04% 1.60% 1.36%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(***)
<FN>
- ---------------
(*) Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales
charge. In addition to the reallowance allowed to all Selling Brokers,
John Hancock Funds will pay the following: round trip airfare to a resort
will be offered to each registered representative of a Selling Broker (if
the Selling Broker has agreed to participate) who sells certain amounts of
shares of John Hancock Funds. John Hancock Funds will make these incentive
payments out of its own resources. Other than distribution fees, the Fund
does not bear distribution expenses. A Selling Broker to whom
substantially the entire sales charge is reallowed or who receives these
incentives may be deemed to be an underwriter under the Securities Act of
1933.
(**) No sales charge is payable at the time of purchase of Class A shares of $1
million or more, but a contingent deferred sales charge may be imposed in
the event of certain redemption transactions made within one year of
purchase.
(***) John Hancock Funds may pay a commission and first year's service fee (as
described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of Class A shares of $1 million or more in the
aggregate as follows: 1% on sales to $4,999,999, 0.50% on the next $5
million and 0.25% on $10 million and over.
(+) At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance, in an amount equal to 0.25% of the net
assets invested in the Fund. Thereafter, it pays the service fee
periodically in arrears in an amount up to 0.25% of the average annual net
assets of the Fund. Selling Brokers receive the fee as compensation for
providing personal and account maintenance services to shareholders.
</TABLE>
Sales charges ARE NOT APPLIED to any dividends which are reinvested in
additional Class A shares of either Fund.
John Hancock Funds will pay certain affiliated Selling Brokers at an annual rate
of up to 0.05% of the daily net assets of accounts attributable to such brokers.
Under certain circumstances as described below, investors in Class A shares may
be entitled to pay reduced sales charges. See "Qualifying for a Reduced Sales
Charge."
20
<PAGE> 24
<TABLE>
CONTINGENT DEFERRED SALES CHARGE ON CLASS A SHARES -- INVESTMENTS OF $1 MILLION
OR MORE IN CLASS A SHARES. Purchases of $1 million or more of Class A shares
will be made at net asset value with no initial sales charge, but if the shares
are redeemed within 12 months after the end of the calendar month in which the
purchase was made (the contingent deferred sales charge period), a contingent
deferred sales charge will be imposed. The rate of the CDSC will depend on the
amount invested as follows:
<CAPTION>
AMOUNT INVESTED CDSC RATE
- --------------- ---------
<S> <C>
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
</TABLE>
The contingent deferred sales charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the Class A
shares redeemed. Accordingly, no CDSC will be imposed on increases in account
value above the initial purchase price, including any dividends which have been
reinvested in additional shares.
Existing full service clients of John Hancock Mutual Life Insurance Company who
were group annuity contract holders as of September 1, 1994 may purchase Class A
shares with no initial sales charge, but if the shares are redeemed within 12
months after the end of the calendar year in which the purchase was made, a
contingent deferred sales charge will be imposed at the above rate.
In determining whether a CDSC applies to a redemption the calculation will be
determined in a manner that results in the lowest possible rate being charged.
Therefore, it will be assumed that the redemption is first made from any shares
in your account that are not subject to the CDSC. The CDSC is waived on
redemption in certain circumstances. See "Waiver of Contingent Deferred Sales
Charge" below.
QUALIFYING FOR A REDUCED SALES CHARGE. If you invest more than $50,000 in Class
A shares of the Funds or combination of John Hancock funds (except money market
funds), you may qualify for a reduced sales charge on your investments through a
LETTER OF INTENTION. You may also be able to use the ACCUMULATION PRIVILEGE and
COMBINATION PRIVILEGE to take advantage of the value of your previous
investments in Class A shares of the John Hancock funds when meeting the
breakpoints for a reduced sales charge. For the ACCUMULATION PRIVILEGE and
COMBINATION PRIVILEGE, the applicable sales charge will be based on the total
of:
- -------------------------------------------------------------------------------
YOU MAY QUALIFY FOR A
REDUCED SALES CHARGE ON
YOUR INVESTMENT IN
CLASS A SHARES.
- -------------------------------------------------------------------------------
1. Your current purchase of Class A shares of the applicable Fund.
2. The net asset value (at the close of business on the previous day) of (a) all
Class A shares of that Fund you hold, and (b) all Class A shares of any other
John Hancock funds you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
21
<PAGE> 25
EXAMPLE:
If you hold Class A shares of a John Hancock fund with a net asset value of
$20,000 and, subsequently, invest $30,000 in Class A shares of either Fund, the
sales charge on this subsequent investment would be 4.50% and not 5.00% (the
rate that would otherwise be applicable to investments of less than $50,000. See
"Initial Sales Charge Alternative -- Class A Shares.")
If you are in one of the following categories, you may purchase Class A shares
of the Funds without paying a sales charge:
- - A Trustee or officer of the Trust; a Director or officer of the Adviser and
its affiliates or Selling Brokers; employees or sales representatives of any
of the foregoing; retired officers, employees or Directors of any of the
foregoing; a member of the immediate family of any of the foregoing; or any
Fund, pension, profit sharing or other benefit plan for the individuals
described above.
- -------------------------------------------------------------------------------
CLASS A SHARES MAY BE
AVAILABLE WITHOUT A
SALES CHARGE TO
CERTAIN INDIVIDUALS
AND ORGANIZATIONS.
- -------------------------------------------------------------------------------
- - Any state, county, city or any instrumentality, department, authority, or
agency of these entities which is prohibited by applicable investment laws
from paying a sales charge or commission when it purchases shares of any
registered investment management company.*
- - A bank, trust company, credit union, savings institution or other depository
institution, its trust departments or common trust funds if it is purchasing
$1 million or more for non-discretionary customers or accounts.*
- - A broker, dealer or registered investment adviser that has entered into an
agreement with John Hancock Funds providing specifically for the use of Fund
shares in fee-based investment products made available to their clients.
- - A former participant in an employee benefit plan with John Hancock funds, when
he/she withdraws from his/her plan and transfers any or all of his/her plan
distributions directly to the Fund.
- ---------------
* For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A shares of the Funds may also be purchased without an initial sales
charge in connection with certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding companies.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. Class B shares
are offered at net asset value per share without the imposition of a sales
charge so that your entire initial investment will go to work at the time of
purchase. However, Class B shares redeemed within six years of purchase will be
subject to a CDSC at the rates set forth below. This charge will be assessed on
an amount equal to the lesser of the current market value or the original
purchase cost of the shares being redeemed. Accordingly, you will not be
assessed a CDSC on increases in account value above the initial purchase price,
including shares derived from dividend reinvestment.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
22
<PAGE> 26
dividend reinvestment, and next from the shares you have held the longest during
the six-year period. The CDSC is waived on redemptions in certain circumstances.
See the discussion "Waiver of Contingent Deferred Sales Charges" below.
EXAMPLE:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time, your CDSC will be calculated as follows:
<TABLE>
<S> <C>
- - Proceeds of 50 shares redeemed at $12 per share $ 600
- - Minus proceeds of 10 shares not subject to CDSC because they were
acquired through dividend reinvestment (10 x $12) -120
- - Minus appreciation on remaining shares, also not subject to CDSC (40 x
$2) -80
------
- - Amount subject to CDSC $ 400
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses
all or part of them to defray its expenses related to providing the Funds with
distribution services in connection with the sale of Class B shares, such as
compensating Selling Brokers for selling these shares. The combination of the
CDSC and the distribution and service fees makes it possible for the Funds to
sell Class B shares without deducting a sales charge at the time of purchase.
<TABLE>
The amount of the CDSC, if any, will vary depending on the number of years from
the time you purchase your Class B shares until the time you redeemed them.
Solely for purposes of determining this holding period, any payments you make
during the month will be aggregated and deemed to have been made on the last day
of the month.
<CAPTION>
CONTINGENT
DEFERRED SALES
CHARGE AS A
YEAR IN WHICH CLASS B SHARES PERCENTAGE
REDEEMED FOLLOWING PURCHASE OF AMOUNT REDEEMED
- ---------------------------- ------------------
<S> <C>
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
</TABLE>
A commission equal to 3.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for the provision of
personal and account maintenance services to shareholders during the twelve
months following the sale, and thereafter the service fee is paid in arrears.
If you purchased Class B shares during 1992 or 1993, the applicable CDSC as a
percentage of the amount redeemed will be: 4% for redemptions during the first
year after purchase, 3.5% for redemptions during the second year, 3% for
redemptions during the third year, 2.5% for redemptions during the fourth year,
2%
23
<PAGE> 27
for redemptions during the fifth year, 1% for redemptions during the sixth year,
and no CDSC for redemptions during the seventh year and thereafter. If you
purchased Class B shares before 1992, the applicable CDSC as a percentage of the
amount redeemed will be: 1% for redemptions during the third, fourth and fifth
year after purchase and no CDSC for redemptions during the sixth year and
thereafter.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to a CDSC
unless indicated otherwise, in the circumstances defined below:
- - Redemptions of Class B shares made under a Systematic Withdrawal Plan (see
"How to Redeem Shares"), as long as your annual redemptions do not exceed 10%
of your account value at the time you established your Systematic Withdrawal
Plan and 10% of the value of subsequent investments (less redemptions) in that
account at the time you notify Investor Services. This waiver does not apply
to Systematic Withdrawal Plan redemptions of Class A shares that are subject
to a CDSC.
- -------------------------------------------------------------------------------
UNDER CERTAIN
CIRCUMSTANCES, THE CDSC ON
CLASS B AND CLASS A SHARE
REDEMPTIONS WILL BE WAIVED.
- -------------------------------------------------------------------------------
- - Redemptions made to effect distributions from an Individual Retirement Account
either before or after age 59 1/2, as long as the distributions are based on
your life expectancy or the joint-and-last survivor life expectancy of you and
your beneficiary. These distributions must be free from penalty under the
Code.
- - Redemptions made to effect mandatory distributions under the Code after age
70 1/2 from a tax-deferred retirement plan.
- - Redemptions made to effect distributions to participants or beneficiaries from
certain employer-sponsored retirement plans including those qualified under
section 401(a) of the Code, custodial accounts under Section 403(b)(7) of the
Code and deferred compensation plans under Section 457 of the Code. The waiver
also applies to certain returns of excess contributions made to these plans.
In all cases, the distributions must be free from penalty under the Code.
- - Redemptions due to death or disability.
- - Redemptions made under the Reinvestment Privilege, as described in "Additional
Services and Programs" of this Prospectus.
- - Redemptions made pursuant to a Fund's right to liquidate your account if you
own fewer than 50 shares.
- - Redemptions made in connection with certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
- - Redemptions from certain IRA and retirement plans which purchased shares prior
to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you must notify
Investor Services either directly or through your Selling Broker at the time you
make your redemption. The waiver will be granted once Investor Services has
confirmed that you are entitled to the waiver.
24
<PAGE> 28
CONVERSION OF CLASS B SHARES. Your Class B shares and an appropriate portion of
reinvested dividends on those shares will be converted into Class A shares
automatically no later than the month following eight years after the shares
were purchased, resulting in lower annual distribution fees. If you exchanged
Class B shares into either Fund from another John Hancock fund, the calculation
will be based on the time you purchased the shares in the original fund. The
Funds have been advised that the conversion of Class B shares to Class A shares
of the Fund should not be taxable for Federal income tax purposes and should not
change a shareholder's tax basis or holding period for the converted shares.
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any business day. Your shares
will be redeemed at the next NAV calculated after your redemption request is
received in good order by Investor Services, less any applicable CDSC. A Fund
may hold payment until reasonably satisfied that investments that were recently
made by check or Invest-by-Phone have been collected (which may take up to 10
calendar days).
Once your shares are redeemed, a Fund generally sends you payment on the next
business day. When you redeem your shares, you may realize a taxable gain or
loss depending usually on the difference between what you paid for them and what
you receive for them, subject to certain tax rules. Under unusual circumstances,
a Fund may suspend redemptions or postpone payment for up to seven days or
longer, as permitted by Federal securities laws.
25
<PAGE> 29
<TABLE>
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
BY TELEPHONE All Fund shareholders are automatically eligible for the
telephone redemption privilege. Call 1-800-225-5291, from
8:00 A.M. to 4:00 P.M. (New York time), Monday through
Friday, excluding days on which the New York Stock Exchange
is closed. Investor Services employs the following
procedures to confirm that instructions received by
telephone are genuine. Your name, the account number,
taxpayer identification number applicable to the account
and other relevant information may be requested. In
addition, telephone instructions are recorded.
You may redeem up to $100,000 by telephone, but the address
on the account must not have changed for the last 30 days.
A check will be mailed to the exact name(s) and address
shown on the account.
- -----------------------------------------------------------------------------------------
TO ASSURE ACCEPTANCE OF
YOUR REDEMPTION REQUEST,
PLEASE FOLLOW THESE
PROCEDURES.
- -----------------------------------------------------------------------------------------
If reasonable procedures, such as those described above,
are not followed, the Funds may be liable for any loss due
to unauthorized or fraudulent telephone instructions. In
all other cases, neither the Funds nor Investor Services
will be liable for any loss or expense for acting upon
telephone instructions made in accordance with the
telephone transaction procedures mentioned above.
Telephone redemption is not available for IRAs or other
tax-qualified retirement plans or shares of a Fund that are
in certificated form.
During periods of extreme economic conditions or market
changes, telephone requests may be difficult to implement
due to a large volume of calls. During these times you
should consider placing redemption requests in writing or
use EASI-Line. EASI-Line's telephone number is
1-800-338-8080.
- -----------------------------------------------------------------------------------------
BY WIRE If you have a telephone redemption form on file with a
Fund, redemption proceeds of $1,000 or more can be wired on
the next business day to your designated bank account and a
fee (currently $4.00) will be deducted. You may also use
electronic funds transfer to your assigned bank account and
the funds are usually collectable after two business days.
Your bank may or may not charge a fee for this service.
Redemptions of less than $1,000 will be sent by check or
electronic funds transfer.
This feature may be elected by completing the "Telephone
Redemption" section on the Account Privileges Application
that is included with this Prospectus.
- -----------------------------------------------------------------------------------------
IN WRITING Send a stock power or "letter of instruction" specifying
the name of the Fund, the dollar amount or the number of
shares to be redeemed, your name, class of shares, your
account number, and the additional requirements listed
below that apply to your particular account.
- -----------------------------------------------------------------------------------------
TYPE OF REGISTRATION REQUIREMENTS
---------------- -----------
Individual, Joint Tenants, Sole A letter of instruction signed (with titles
Proprietorship, Custodial where applicable) by all persons authorized
(Uniform Gifts or Transfer to to sign for the account, exactly as it is
Minors Act), General Partners registered with the signature(s) guaranteed
Corporation, Association A letter of instruction and a corporate
resolution, signed by person(s) authorized
to act on the account with the signature(s)
guaranteed
Trusts A letter of instruction signed by the
Trustee(s) with the signature guaranteed.
(If the Trustee's name is not registered on
your account, also provide a copy of the
trust document, certified within the last 60
days.)
If you do not fall into any of these registration categories, please call
1-800-225-5291 for further instructions.
- -----------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 30
- -------------------------------------------------------------------------------
WHO MAY GUARANTEE YOUR
SIGNATURE.
- -------------------------------------------------------------------------------
A signature guarantee is a widely accepted way to protect you and the Funds
by verifying the signature on your request. It may not be provided by a
notary public. If the net asset value of the shares redeemed is $100,000 or
less, John Hancock Funds may guarantee the signature. The following
institutions may provide you with a signature guarantee, provided that the
institution meets credit standards established by Investor Services: (i) a
bank; (ii) a securities broker or dealer, including a government or
municipal securities broker or dealer, that is a member of a clearing
corporation or meets certain net capital requirements; (iii) a credit union
having authority to issue signature guarantees; (iv) a savings and loan
association, a building and loan association, a cooperative bank, a federal
savings bank or association; or (v) a national securities exchange, a
registered securities exchange or a clearing agency.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT REDEMPTIONS.
- -------------------------------------------------------------------------------
THROUGH YOUR BROKER. Your broker may be able to initiate the redemption.
Contact your broker for instructions.
- -------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your
stock power or a letter of instruction. Unless you specify to the contrary,
any outstanding Class A shares will be redeemed before Class B shares. You
may not redeem certificated shares by telephone.
Due to the proportionately high cost of maintaining smaller accounts, the
Fund reserves the right to redeem at net asset value all shares in an
account which holds fewer than 50 shares (except accounts under retirement
plans) and to mail the proceeds to the shareholder or the transfer agent
may impose an annual fee of $10.00. No account will be involuntarily
redeemed or additional fee imposed, if the value of the account is in
excess of the Fund's minimum investment. No CDSC will be imposed on
involuntary redemption of shares.
Shareholders will be notified before these redemptions are to be made or
this fee is imposed and will have 30 days to purchase additional shares to
bring their account balance up to the required minimum. Unless the number
of shares acquired by further purchases and dividend reinvestments, if
any, exceeds the number of shares redeemed, repeated redemptions from a
smaller account may eventually trigger this policy.
- -------------------------------------------------------------------------------
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of investment
goals. Contact your registered representative or Selling Broker and request a
prospectus for the John Hancock funds that interest you. Read the prospectus
carefully before exchanging your shares. You can exchange shares of each class
of a Fund only for shares of the same class of another John Hancock fund. For
this purpose, John Hancock funds with only one class of shares will be treated
as Class A whether or not they have been so designated.
- -------------------------------------------------------------------------------
YOU MAY EXCHANGE SHARES OF
EITHER FUND FOR SHARES OF
THE SAME CLASS IN ANOTHER
JOHN HANCOCK FUND.
- -------------------------------------------------------------------------------
Exchanges between funds which are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is imposed.
Class B shares of either Fund which are subject to a CDSC may be exchanged into
Class B shares of another John Hancock fund without incurring the CDSC; however,
these shares will be subject to the CDSC schedule of the shares acquired (except
exchanges into John Hancock Short-Term Strategic Income Fund and John Hancock
Limited Term Government Fund which will be subject to the initial fund's CDSC).
For purposes of computing the CDSC payable upon redemption of shares acquired in
an exchange, the holding period of the original shares is added to the holding
period of the shares acquired in an exchange. However, if you exchange Class B
shares purchased prior to January 1, 1994 for Class B shares of any other John
Hancock fund, you will be subject to the CDSC schedule that was in effect at
your initial purchase date.
You may exchange Class B shares of the Funds into shares of John Hancock Cash
Management Fund at net asset value. However, you will continue to be subject
to a
27
<PAGE> 31
CDSC upon redemption. The rate of the CDSC will be the rate in effect for the
original fund at the time of exchange.
Each Fund reserves the right to require you to keep previously exchanged shares
(and reinvested dividends) in the Fund for 90 days before you are permitted to
execute a new exchange. The Funds may also terminate or alter the terms of the
exchange privilege to shareholders upon 60 days' notice.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares in another for Federal income tax purposes. An exchange may
result in a taxable gain or loss.
When you make an exchange, your account registration in both the existing and
new account must be identical. The exchange privilege is available only in
states where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers and
investment advisers may exchange their client's Fund shares, subject to the
terms of those agreements and John Hancock Funds' right to reject or suspend
those exchanges at any time. Because of the restrictions and procedures under
those agreements, the exchanges may be subject to timing limitations and other
restrictions that do not apply to exchanges requested by shareholders directly,
as described above.
Because Fund performance and shareholders can be hurt by excessive trading, each
Fund reserves the right to terminate the exchange privilege for any person or
group that, in John Hancock Funds' judgment, is involved in a pattern of
exchanges that coincide with a "market timing" strategy that may disrupt each
Fund's ability to invest effectively according to its investment objective and
policies, or might otherwise affect the Fund and its shareholders adversely. The
Funds may also temporarily or permanently terminate the exchange privilege for
any person who makes seven or more exchanges out of a Fund per calendar year.
Accounts under common control or ownership will be aggregated for this purpose.
Although the Funds will attempt to give you prior notice whenever it is
reasonably able to do so, they may impose these restrictions at any time.
BY TELEPHONE
1. When you fill out the application for your purchase of Fund shares, you
automatically authorize exchanges by telephone unless you check the box
indicating that you do not wish to authorize the telephone exchange
privilege.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.
3. Investors Services employs the following procedures to confirm that
instructions received by telephone are genuine. Your name, the account
number, taxpayer identification number applicable to the account and other
relevant information may be requested. In addition, telephone instructions
are recorded.
28
<PAGE> 32
IN WRITING
1. In a letter request an exchange and list the following:
-- the name and class of the fund whose shares you currently own
-- your account number
-- the name(s) in which the account is registered
-- the name of the fund in which you wish your exchange to be invested
-- the number of shares, all shares or dollar amount
you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
REINVESTMENT PRIVILEGE
1. You will not be subject to a sales charge on Class A shares reinvested in any
John Hancock fund that is otherwise subject to a sales charge as long as the
reinvestment is made within 120 days from the redemption date. If a CDSC was
paid upon a redemption, you may reinvest at net asset value in the same class
of shares from which the redemption was made within 120 days. Your account
will be credited with the amount of the CDSC previously charged and the
reinvested shares will continue to be subject to the CDSC. For purposes of
computing the CDSC payable upon a subsequent redemption, the holding period
of the shares acquired through reinvestment will include the holding period
of the redeemed shares.
- -------------------------------------------------------------------------------
IF YOU REDEEM SHARES OF EITHER FUND, YOU
MAY BE ABLE TO REINVEST THE PROCEEDS IN
SHARES OF THAT FUND OR ANOTHER JOHN
HANCOCK FUND WITHOUT PAYING AN ADDITIONAL
SALES CHARGE.
- -------------------------------------------------------------------------------
2. Any portion of the redemption may be reinvested in Fund shares or in shares
of any of the other John Hancock funds, subject to the minimum investment
limit of that fund.
3. To reinvest, you must notify Investor Services in writing. Include the
Fund(s) name, the account number and class from which your shares were
originally redeemed.
SYSTEMATIC WITHDRAWAL PLAN
1. You may elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You can
also obtain the Application from your registered representative or by calling
1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semi-annually or
on a selected monthly basis to yourself or any other designated payee.
- -------------------------------------------------------------------------------
YOU CAN PAY ROUTINE BILLS
FROM YOUR ACCOUNT OR MAKE
PERIODIC DISBURSEMENTS FROM
YOUR RETIREMENT ACCOUNTS
TO COMPLY WITH IRS
REGULATIONS.
- -------------------------------------------------------------------------------
4. There is no limit on the number of payees you may authorize, but all payments
must be made at the same time or intervals.
29
<PAGE> 33
5. It is not advantageous to maintain a Systematic Withdrawal Plan concurrently
with purchases of additional Class A or Class B shares because you may be
subject to initial sales charges on purchases of Class A shares or to a CDSC
on your redemptions of Class B shares. In addition, your redemptions are
taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks, or if deposits to a bank account are returned for any reason.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
1. You may authorize an investment to be automatically drawn each month from
your bank for investment in fund shares under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.
- -------------------------------------------------------------------------------
YOU CAN MAKE AUTOMATIC
INVESTMENTS AND SIMPLIFY
YOUR INVESTING.
- -------------------------------------------------------------------------------
2. You may also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
3. You may terminate your Monthly Automatic Accumulation Program at any time.
4. There is no charge to you for this program, and there is no cost to the
Funds.
5. If you have payments being withdrawn from a bank account and we are notified
that the account has been closed, withdrawals will be discontinued.
GROUP INVESTMENT PROGRAM
1. An individual account will be established for each participant, but the sales
charge for Class A shares will be based on the aggregate dollar amount of all
participants' investments. To determine how to qualify for this program,
contact your registered representative or call 1-800-225-5291.
- -------------------------------------------------------------------------------
ORGANIZED GROUPS OF AT
LEAST FOUR PERSONS MAY
ESTABLISH ACCOUNTS.
- -------------------------------------------------------------------------------
2. The initial aggregate investment of all participants in the group must be at
least $250.
3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum, and you may terminate the program at any
time.
RETIREMENT PLANS
1. You may use either Fund as an investment vehicle for various types of
qualified retirement plans, including Individual Retirement Accounts, Keogh
Plans (H.R.10), Pension and Profit Sharing Plans (including 401(k) Plans),
Tax Sheltered Annuity Retirement Plans (403(b) Plans), and 457 Plans.
2. The initial investment minimum or aggregate minimum for any of these plans is
$500. However, accounts being established as group IRA, SEP, SARSEP, TSA,
401(k) and 457 Plans will be accepted without an initial minimum investment.
30
(NOTES)
<PAGE> 34
(NOTES)
<PAGE> 35
JOHN HANCOCK
JOHN HANCOCK GOLD
[/R]
<PAGE> 36
JOHN HANCOCK GOLD JOHN HANCOCK
& GOVERNMENT FUND GOLD &
GOVERNMENT
JOHN HANCOCK FUND
REGIONAL BANK FUND
A MUTUAL FUND SEEKING TO
INVESTMENT ADVISER ACHIEVE CAPITAL APPRECIATION
John Hancock Advisers, Inc. AND PRESERVATION OF THE
101 Huntington Avenue PURCHASING POWER OF THE
Boston, Massachusetts 02199-7603 INVESTOR'S CAPITAL.
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603 JOHN HANCOCK
REGIONAL
CUSTODIAN BANK FUND
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110 A MUTUAL FUND SEEKING TO
ACHIEVE CAPITAL APPRECIATION
TRANSFER AGENT FROM A PORTFOLIO
John Hancock Investor Services OF EQUITY SECURITIES
Corporation OF REGIONAL BANKS AND LENDING
P.O. Box 9116 INSTITUTIONS.
Boston, Massachusetts 02205-9116
INDEPENDENT AUDITOR
Price Waterhouse LLP CLASS A AND CLASS B SHARES
160 Federal Street PROSPECTUS
Boston, Massachusetts 02110 MARCH 1, 1995
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchange
101 HUNTINGTON AVENUE
call 1-800-225-5291 BOSTON, MASSACHUSETTS
Invest-by-Phone 02199-7603
Telephone Redemption TELEPHONE 1-800-225-5291
For: TDD
call 1-800-544-6713
JHD-0104P
3/95(LOGO) Printed on Recycled
Paper
<PAGE> 37
JOHN HANCOCK MANAGED
TAX-EXEMPT FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 1, 1995
<TABLE>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
Expense Information......................................................... 2
The Fund's Financial Highlights............................................. 3
Investment Objective and Policies........................................... 5
Organization and Management of the Fund..................................... 8
Alternative Purchase Arrangements........................................... 9
The Fund's Expenses......................................................... 10
Dividends and Taxes......................................................... 11
Performance................................................................. 12
How to Buy Shares........................................................... 14
Share Price................................................................. 15
How to Redeem Shares........................................................ 21
Additional Services and Programs............................................ 23
</TABLE>
This Prospectus sets forth information about John Hancock Managed
Tax-Exempt Fund (the "Fund"), a diversified series of Freedom Investment Trust
(the "trust"), that you should know before investing. Please read and retain it
for future reference.
Additional information about the Fund has been filed with the Securities
and Exchange Commission (the "SEC"). You can obtain a copy of the Statement of
Additional Information, dated March 1, 1995, and incorporated by reference into
this Prospectus, free of charge by writing or telephoning: John Hancock Investor
Services Corporation, P.O. Box 9116, Boston, Massachusetts 02205-9116,
1-800-225-5291 (1-800-554-6713 TDD).
SHARES OF THE FUND 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 38
EXPENSE INFORMATION
The purpose of the following information is to help you understand the
various fees and expenses you will bear, directly or indirectly, when you
purchase Fund shares. The operating expenses included in the table and
hypothetical example below are based on fees and expenses for the Fund's fiscal
year ended October 31, 1994 adjusted to reflect certain current expenses.
Actual fees and expenses in the future may be greater or less than those shown.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------- --------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of offering price)............................ 4.50% None
Maximum sales charge imposed on reinvested dividends..................................................... None None
Maximum deferred sales charge............................................................................ None* 5.00%
Redemption fee+.......................................................................................... None None
Exchange fee............................................................................................. None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fee (net of waiver by Adviser)(a)............................................................. 0.55% 0.55%
12b-1 fee**.............................................................................................. 0.30% 1.00%
Other expenses........................................................................................... 0.15% 0.14%
Total Fund operating expenses............................................................................ 1.00% 1.69%
- ------------
<FN>
* No sales charge is payable at the time of purchase on investments of $1 million or more, but for these investments a
contingent deferred sales charge may be imposed, as described under the caption "Share Price, " in the event of certain
redemption transactions within one year of purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to 0.25% of the Fund's average daily net assets,
and the remaining portion will be used to cover distribution expenses. See "The Fund's Expenses".
(a) Reflects a voluntary waiver by the Adviser of a portion of its management fee which would normally be 0.60% of average
daily net assets. In the absence of a waiver by the Adviser, the total expenses would have been 1.05% and 1.74% of the
Fund's average daily net assets for Class A and Class B shares, respectively.
+ Redemption by wire fee (currently $4.00) not included.
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- ------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a hypothetical
$1,000 investment
assuming a 5% annual return:
Class A shares........................................................................... $55 $75 $ 98 $162
Class B shares
--Assuming complete redemption at end of period.......................................... $67 $83 $112 $181
--Assuming no redemption................................................................. $17 $53 $ 92 $181
<FN>
(The example should not be considered as a representation of past or future expenses or future investment returns. Actual
expenses may be greater or less than shown.)
</TABLE>
The Fund's payment of a distribution fee may result in a long-term shareholder
indirectly paying more than the economic equivalent of the maximum front-end
sales charge permitted under National Association of Securities Dealers Rules of
Fair Practice.
The management and 12b-1 fees referred to above are more fully explained in this
Prospectus under the caption "The Fund's Expenses" and in the Statement of
Additional Information under the captions "Investment Advisory and Other
Services" and "Distribution Contract."
2
<PAGE> 39
THE FUND'S FINANCIAL HIGHLIGHTS
The following table of Financial Highlights has been examined by Price
Waterhouse LLP, the Fund's independent accountants, whose unqualified report is
included in the Fund's 1994 Annual Report and is included in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to shareholders which may be obtained
free of charge by writing or telephoning John Hancock Investor Services
Corporation ("Investor Services"), at the address or telephone number listed on
the front page of this Prospectus.
Selected data for each class of shares outstanding throughout each year
indicated is as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------
1994 1993 1992(a)
-------- -------- --------
<S> <C> <C> <C>
CLASS A
Per share operating performance
Net asset value, beginning of year................... $ 12.13 $ 11.12 $ 11.25
-------- -------- --------
Net investment income................................ 0.64 0.70 0.55
Net realized and unrealized gain (loss) on
investments and financial futures contracts........ (1.25) 1.05 (0.11)
-------- -------- --------
Total from investment operations............. (0.61) 1.75 0.44
-------- -------- --------
Less distributions:
Dividends from net investment income............... (0.64) (0.70) (0.53)
Distributions from net realized gain on investments
sold and financial futures contracts............. (0.09) (0.04) (0.04)
-------- -------- --------
Total distributions.......................... (0.73) (0.74) (0.57)
-------- -------- --------
Net asset value, end of year......................... $ 10.79 $ 12.13 $ 11.12
======== ======== ========
Total investment return at net asset value(c)........ (5.22)% 16.10% 4.74%
-------- -------- --------
Ratios and supplemental data
Net assets, end of year (000's omitted).............. $ 20,968 $ 14,244 $ 9,589
Ratio of expenses to average net assets**............ 0.95% 0.70% 0.78%*
Ratio of adjusted expenses to average net
assets(b).......................................... 1.02% 1.03% 1.01%*
Ratio of net investment income to average net
assets**........................................... 5.52% 5.98% 6.24%*
Ratio of adjusted net investment income to average
net assets(b)...................................... 5.42% 5.65% 6.01%*
Portfolio turnover rate.............................. 59% 23% 23%
**Expense reimbursement per share.................... $ 0.01 $ 0.04 $ 0.02
</TABLE>
3
<PAGE> 40
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------------------
1994 1993 1992(a) 1991 1990 1989 1988 1987(d)
-------- -------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B
Per share operating performance
Net asset value, beginning of year.... $ 12.13 $ 11.12 $ 11.12 $ 10.61 $ 10.78 $ 10.73 $ 9.69 $10.00
-------- -------- -------- -------- -------- -------- ------- -------
Net investment income................. 0.56 0.64 0.66 0.68 0.73 0.74 0.74 0.27
Net realized and unrealized gain
(loss) on investments and futures
contracts........................... (1.25) 1.05 0.04 0.61 (0.14) 0.12 1.04 (0.31)
-------- -------- -------- -------- -------- -------- ------- -------
Total from investment
operations.................. (0.69) 1.69 0.70 1.29 0.59 0.86 1.78 (0.04)
-------- -------- -------- -------- -------- -------- ------- -------
Less Distributions:
Dividends from net investment
income............................ (0.56) (0.64) (0.64) (0.72) (0.72) (0.74) (0.74) (0.27)
Distributions from net realized gain
on investments sold and financial
futures contracts................. (0.09) (0.04) (0.06) (0.06) (0.04) (0.07) 0.00 0.00
-------- -------- -------- -------- -------- -------- ------- -------
Total distributions........... (0.65) (0.68) (0.70) (0.78) (0.76) (0.81) (0.74) (0.27)
-------- -------- -------- -------- -------- -------- ------- -------
Net asset value, end of year.......... $ 10.79 $ 12.13 $ 11.12 $ 11.12 $ 10.61 $ 10.78 $ 10.73 $ 9.69
======== ======== ======== ======== ======== ======== ======= ======
Total investment return at net asset
value(c)............................ (5.85)% 15.51% 6.39% 12.55% 5.66% 8.25% 18.98% (1.31) %(c)
-------- -------- -------- -------- -------- -------- ------- ------
Ratios and supplemental data
Net assets, end of year (000's
omitted)............................ $217,066 $256,342 $226,943 $199,955 $140,803 $106,107 $46,329 $8,220
Ratio of expenses to average net
assets**............................ 1.62% 1.23% 1.35% 1.19% 0.95% 0.93% 0.74% 1.40 %*
Ratio of adjusted expenses to average
net
assets(b)........................... 1.69% 1.56% 1.54% 1.50% 1.51% 1.52% 1.72% 2.58 %*
Ratio of net investment income to
average net assets**................ 4.84% 5.49% 5.74% 6.19% 6.74% 6.81% 6.90% 6.11 %*
Ratio of adjusted net investment
income to average net assets(b)..... 4.77% 5.16% 5.55% 5.88% 6.18% 6.22% 5.92% 4.93 %*
Portfolio turnover rate............... 59% 23% 23% 30% 54% 94% 186% 174 %
**Expense reimbursement per share..... $ 0.01 $ 0.04 $ 0.02 $ 0.04 $ 0.06 $ 0.06 $ 0.10 $ 0.05 *
- ---------------
<FN>
* On a annualized basis.
(a) Class A shares commenced operations on January 3, 1992.
(b) Percentages on an unreimbursed basis reflect what the actual ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been.
(c) Without the reimbursement the total investment return would have been lower.
(d) From commencement of operations, April 22, 1987.
</TABLE>
4
<PAGE> 41
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek as high a level of current income
exempt from Federal income tax as is consistent with preservation of capital, by
investing primarily in municipal securities. There are market risks in any
investment and therefore there can be no assurance that the Fund will achieve
its investment objectives.
The Fund will invest at least 80% of its total assets in municipal securities
with varying maturities, the interest from which is, in the opinion of bond
counsel for the issuer, exempt from Federal income tax. Municipal securities are
issued to obtain funds for various public purposes. The two principal
classifications of municipal securities are "general obligation" and "revenue"
bonds. General obligation bonds are secured by the issuer's pledge of its full
faith and credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or a specific revenue source, and generally are
not payable from the unlimited revenues of the issuer. Industrial development
bonds issued by or on behalf of public authorities to obtain funds for
privately-operated facilities are in most cases revenue bonds which do not
generally carry the pledge of the full faith and credit of the issuer of such
bonds, but depend for payment on the ability of the industrial user to meet its
obligations.
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK
AS HIGH A LEVEL OF CURRENT INCOME EXEMPT
FROM FEDERAL INCOME TAX AS IS CONSISTENT
WITH PRESERVATION OF CAPITAL, BY INVESTING
PRIMARILY IN MUNICIPAL SECURITIES.
- -------------------------------------------------------------------------------
At least 65% of the Fund's investments in municipal securities will be of
"investment grade" quality, that is securities rated within the four highest
rating categories of Standard & Poor's Ratings Group (AAA, AA, A, BBB), Moody's
Investors Service, Inc. (Aaa, Aa, A, Baa), or Fitch Investors Service, Inc.
(AAA, AA, A, BBB) (collectively, "investment grade securities"). While it is not
the present intention of the Fund to invest in below investment grade
securities, upon Trustee approval, the Fund may invest less than 35% of its
total assets in municipal securities that are rated BB or B by Standard &
Poor's, Ba or B by Moody's, or BB or B by Fitch. The Fund may purchase unrated
municipal securities that are determined to be of comparable quality to rated
investment grade securities by John Hancock Advisers, Inc. (the "Adviser").
There are no percentage limitations on the Fund's investments in municipal
securities within particular rating classifications of investment grade
securities. Therefore, it may invest its entire portfolio in securities rated as
"medium grade" obligations (i.e., BBB or Baa). Medium grade bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments. A description of the ratings of Standard & Poor's,
Moody's and Fitch is contained in the Statement of Additional Information.
The Fund will not generally invest more than 25% of its total assets in any
industry. Governmental issuers of municipal securities are not considered part
of any "industry." However, municipal securities backed only by the assets and
revenues of non-governmental users will be subject to this limitation. It is
possible that the Fund may from time to time invest more than 25% of its assets
in a particular segment of the municipal securities market, such as hospital
revenue obligations, housing agency obligations, or airport revenue obligations.
This would
5
<PAGE> 42
be the case only if the Adviser determined that the yields available from
obligations in a particular segment of the market justified the additional risks
associated with such concentration. Economic, business, political and other
developments generally affecting the revenues of issuers in such a market
segment (e.g. proposed legislation or pending court decisions affecting the
financing of such projects and market factors affecting the demand for their
services or products) may have a general adverse effect on all municipal
securities in such segment. The Fund reserves the right to invest more than 25%
of its assets in industrial development bonds or in issuers located in any
particular state. The Fund may also invest in variable rate and floating rate
municipal obligations which have interest rates that are adjusted at designated
intervals or whenever there are changes in the market rates of interest on which
the interest rates are based. The Fund's distributions of the interest on
certain tax exempt securities which the Fund may purchase may be treated as an
item of tax preference under the federal alternative minimum tax. The Fund's
present policy is to invest no more than 20% of its total assets in taxable
securities including those generating interest that is an item of tax preference
under the alternative minimum tax.
SHORT-TERM INVESTMENTS. Although the Fund's portfolio generally will consist
primarily of municipal bonds, for liquidity purposes and for maintaining a
defensive position, in anticipation of a market decline, all or a portion of the
Fund's assets may be held in cash or invested in short-term municipal securities
(i.e., those with less than one year remaining to maturity). Short-term
municipal securities consist of short-term municipal notes and short-term
municipal loans and obligations, including municipal paper, master demand notes
and variable rate demand notes. Investments in short-term municipal securities
will, at the time of purchase, be rated within the three highest rating
categories of Standard & Poor's, Fitch or Moody's, or if unrated determined to
be of comparable quality by the Adviser. The Fund's investments in short-term
municipal securities will represent less than 25% of its total assets except
when the Fund is in a temporary defensive investment position in anticipation of
a market decline.
The Fund may also invest for liquidity or temporary defensive purposes in
taxable short-term obligations of the U.S. Government, its agencies or
instrumentalities; commercial paper rated in the highest grade by the rating
services (A-1, Prime-1 or F-1+, respectively); certificates of deposit and
bankers' acceptances; and repurchase agreements with respect to any securities
eligible for investment by the Fund, including municipal securities. The Fund
may also borrow an amount equal to up to 10% of its total assets to meet
anticipated redemptions but will not make any additional investments so long as
such borrowings exceed 5% of the value of its total assets.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may buy and sell financial
futures contracts and options on futures to hedge against the effects of
fluctuations in securities prices, interest rates, currency exchange rates and
other market conditions and for speculative purposes. The potential loss
incurred by the Fund in writing options on futures is unlimited and may exceed
the amount of the premium received. The Fund's futures contracts and options on
futures will be traded on a U.S. commodity exchange or board of trade. The Fund
will not engage in a futures
6
<PAGE> 43
or options transaction for speculative purposes, if immediately thereafter, the
sum of initial margin deposits on existing positions and premiums required to
establish speculative positions in futures contracts and options on futures
would exceed 5% of the Fund's net assets. The Fund intends to comply with the
CFTC regulations with respect to its speculative transactions. These regulations
are discussed further in the Statement of Additional Information.
RESTRICTED SECURITIES. The Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to Rule
144A under the Securities Act of 1933 (the "Securities Act"). The Trustees will
carefully monitor the Fund's investments in these securities, focusing on
certain factors, including valuation, liquidity and availability of information.
Purchases of other restricted securities are subject to a nonfundamental
investment restriction limiting all the Fund's illiquid securities to not more
than 10% of the Fund's net assets.
REPURCHASE AGREEMENTS, FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. The Fund
may enter into repurchase agreements and may purchase securities on a forward
commitment or when-issued basis. In a repurchase agreement, the Fund buys a
security subject to the right and obligation to sell it back to the seller at a
higher price. These transactions must be fully collateralized at all times, but
involve some credit risk to the Fund if the other party defaults on its
obligation and the Fund is delayed in or prevented from liquidating the
collateral. The Fund will segregate in a separate account cash or liquid, high
grade debt securities equal in value to its forward commitments and when-issued
securities. Purchasing debt securities for future delivery or on a when-issued
basis may increase the Fund's overall investment exposure and involves a risk of
loss if the value of the securities declines before the settlement date. The
Fund's distributions of income from repurchase agreements and any net gains
realized from the disposition of rights to when-issued securities or forward
commitments purchased prior to delivery will be taxable to shareholders.
STAND-BY COMMITMENTS. The Fund may acquire stand-by commitments from banks with
respect to municipal securities held by the Fund. Under a stand-by commitment, a
bank that acts as a municipal securities dealer agrees to purchase, at the
Fund's option, specified municipal securities at a specified price. The Fund's
right to exercise stand-by commitments is unconditional and unqualified. The
total amount paid for outstanding stand-by commitments is not expected to exceed
1/2 of 1% of the Fund's total asset value calculated immediately after each
stand-by commitment is acquired. The Fund uses stand-by commitments for
liquidity purposes (i.e., to provide a ready market for its municipal securities
to meet cash needs).
SHORT-TERM TRADING. The Fund may engage in short-term trading, if the Adviser
believes that these transactions will improve the overall return of the Fund's
portfolio and therefore may have higher portfolio turnover than that of other
funds with similar objectives. Portfolio turnover may involve higher transaction
costs and may result in the realization of net capital gains, which are not
tax-exempt when distributed to you.
7
<PAGE> 44
The Fund has adopted certain investment restrictions which are detailed in the
Statement of Additional Information, where they are classified as fundamental or
non-fundamental. The Fund's investment objective and those investment
restrictions designated as fundamental may not be changed without shareholder
approval. The Fund's non-fundamental investment policies and restrictions,
however, may be changed by a vote of the Trustees without shareholder approval.
The Fund's portfolio turnover rates for recent periods are shown in the section
"The Fund's Financial Highlights."
- -------------------------------------------------------------------------------
THE FUND FOLLOWS CERTAIN POLICIES, THAT
MAY HELP REDUCE INVESTMENT RISK.
- -------------------------------------------------------------------------------
When choosing brokerage firms to carry out the Fund's transactions, the Adviser
gives primary consideration is execution at the most favorable prices, taking
into account the broker's professional ability and quality of service.
Consideration may also be given to the broker's sale of Fund shares. Pursuant to
procedures determined by the Trustees, the Adviser may place securities
transactions with brokers affiliated with the Adviser. These brokers include
Tucker Anthony Incorporated, John Hancock Distributors, Inc. and Sutro & Company
Inc., which are indirectly owned by John Hancock Mutual Life Insurance Company,
which in turn indirectly owns the Adviser.
- -------------------------------------------------------------------------------
BROKERS ARE CHOSEN ON BEST PRICE AND
EXECUTION.
- -------------------------------------------------------------------------------
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is a diversified series of Freedom Investment Trust, an open-end
management investment company organized as a Massachusetts business trust in
1984 (the "Trust"). The Trust reserves the right to create and issue a number of
series of shares, or funds or classes thereof, which are separately managed and
have different investment objectives. The Trust is not required to and does not
intend to hold annual meetings of shareholders, although special meetings may be
held for such purposes as electing or removing Trustees, changing fundamental
policies or approving a management contract. The Trust, under certain
circumstances, will assist in shareholder communications with other
shareholders.
- -------------------------------------------------------------------------------
THE TRUSTEES ELECT OFFICERS AND RETAIN THE
INVESTMENT ADVISER WHO IS RESPONSIBLE FOR
THE DAY-TO-DAY OPERATIONS OF THE FUND,
SUBJECT TO THE TRUSTEES' POLICIES AND
SUPERVISION.
- -------------------------------------------------------------------------------
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
the John Hancock Mutual Life Insurance Company, a financial services company. It
provides the Fund, and other investment companies in the John Hancock group of
funds, with investment research and portfolio management services. John Hancock
Funds, Inc. ("John Hancock Funds") distributes shares for all of the John
Hancock funds directly and through selected broker-dealers ("Selling Brokers").
Freedom Distributors Corporation, a co-distributor of the Fund, is, along with
John Hancock Funds (together with John Hancock Funds, the "Distributors"), an
indirect subsidiary of John Hancock Mutual Life Insurance Company. Certain Fund
officers are also officers of the Adviser and John Hancock Funds. Pursuant to an
order granted by the Securities and Exchange Commission, the Fund has adopted a
deferred compensation plan for its independent Trustees which allows Trustees'
fees to be invested by the Fund in other John Hancock funds.
- -------------------------------------------------------------------------------
JOHN HANCOCK ADVISERS, INC. ADVISES
INVESTMENT COMPANIES HAVING TOTAL ASSETS
OF MORE THAN $13 BILLION.
- -------------------------------------------------------------------------------
Frank A. Lucibella is Second Vice President and portfolio manager of the Fund
and of John Hancock Tax-Exempt Income Fund. He is assisted by a team of analysts
in the day to day management of the Fund. He joined the Adviser in 1988 after
six years of investment experience with Eaton Vance and The Travelers
Corporation.
8
<PAGE> 45
In order to avoid any conflict with portfolio trades for the Fund, the Adviser
and the Fund have adopted extensive restrictions on personal securities trading
by personnel of the Adviser and its affiliates. 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. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.
ALTERNATIVE PURCHASE ARRANGEMENTS
You can purchase shares of the Fund at a price equal to their net asset value
per share, plus a sales charge. At your election, this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge Alternative--Class
A shares") or on a contingent deferred basis (See "Contingent Deferred Sales
Charge Alternative--Class B shares"). If you do not specify on your account
application which class of shares you are purchasing, it will be assumed that
you are investing in Class A shares.
- -------------------------------------------------------------------------------
AN ALTERNATIVE PURCHASE PLAN ALLOWS YOU TO
CHOOSE THE METHOD OF PAYMENT THAT IS BEST
FOR YOU.
- -------------------------------------------------------------------------------
CLASS A SHARES. If you elect to purchase Class A shares, you will incur an
initial sales charge unless the amount of your purchase is $1 million or more.
If you purchase $1 million or more of Class A shares, you will not be subject to
an initial sales charge but you will incur a sales charge if you redeem your
shares within one year of purchase. Class A shares are subject to ongoing
distribution and service fees at a combined annual rate of up to 0.30% of the
Fund's average daily net assets attributable to the Class A shares. Certain
purchases of Class A shares qualify for a reduced initial sales charge. See
"Share Price--Qualifying for a Reduced Sales Charge."
- -------------------------------------------------------------------------------
INVESTMENTS IN CLASS A SHARES ARE SUBJECT
TO AN INITIAL SALES CHARGE.
- -------------------------------------------------------------------------------
CLASS B SHARES. You will not incur a sales charge when you purchase Class B
shares but the shares are subject to a sales charge if you redeem them within
six years of purchase (the "contingent deferred sales charge" or the "CDSC").
Class B shares are subject to ongoing distribution and service fees at a
combined annual rate of up to 1.00% of the Fund's average daily net assets
attributable to the Class B shares. Investing in Class B shares permits all your
dollars to work from the time you make your investment, but the higher ongoing
distribution fee will cause these shares to have a higher expense ratio than
that of Class A shares. To the extent that any dividends are paid by the Fund,
these higher expenses will also result in lower dividends than those paid on
Class A shares.
- -------------------------------------------------------------------------------
INVESTMENTS IN CLASS B SHARES ARE SUBJECT
TO A CONTINGENT DEFERRED SALES CHARGE.
- -------------------------------------------------------------------------------
Class B shares are not available to full service defined contribution plans
administered by Investor Services or John Hancock Mutual Life Insurance Company
that had more than 100 eligible employees at the inception of the Fund account.
- -------------------------------------------------------------------------------
YOU SHOULD CONSIDER WHICH CLASS OF SHARES
WILL BE MORE BENEFICIAL FOR YOU.
- -------------------------------------------------------------------------------
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider whether,
during the anticipated life of your Fund investment, the CDSC and accumulated
fees on Class B shares would be less than the initial sales charge and
accumulated
9
<PAGE> 46
fees on Class A shares purchased at the same time; and to what
extent this differential would be offset by the Class A shares' lower expenses.
To help you make this determination, the table under the caption "Expense
Information" on page 2 of this Prospectus shows examples of the charges
applicable to each class of shares. Class A shares will normally be more
beneficial if you qualify for a reduced sales charge. See "Share
Price--Qualifying for a Reduced Sales Charge."
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent any
dividends are paid. However, because initial sales charges are deducted at the
time of purchase, you would not have all of your funds invested initially and,
therefore, would initially own fewer shares. If you do not qualify for reduced
initial sales charges and expect to maintain your investment for an extended
period of time, you might consider purchasing Class A shares because the
accumulated distribution and service charges on Class B shares may exceed the
initial sales charge and accumulated distribution and service charges on Class A
shares during the life of your investment.
Alternatively, you might determine that it would be more advantageous to
purchase Class B shares in order to have all of your funds invested initially.
However, you would be subject to higher distribution fees and, for a six-year
period, a CDSC.
In the case of Class A shares, distribution expenses that John Hancock Funds
incurs in connection with the sale of the shares will be paid from the proceeds
of the initial sales charge and the ongoing distribution and service fees. In
the case of Class B shares, the expenses will be paid from the proceeds of the
ongoing distribution and service fees as well as the CDSC incurred upon
redemption within six years of purchase. The purpose and function of the Class B
shares' CDSC and ongoing distribution and service fees are the same as those of
the Class A shares' initial sales charge and ongoing distribution and service
fees. Sales personnel distributing the Fund's shares may receive different
compensation for selling each class of shares.
Dividends, if any, on Class A and Class B shares will be calculated in the same
manner, at the same time, on the same day and will be in the same amount, except
for differences resulting from the fact that each class will bear only its own
distribution and service fees, shareholder meeting expenses and any incremental
transfer agency costs. See "Dividends and Taxes."
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a monthly fee to
the Adviser, which for the 1994 fiscal year was 0.55% of the Fund's average
daily net assets. The Adviser has voluntarily agreed to limit its management fee
to 0.55% of the Fund's average daily net assets.
- -------------------------------------------------------------------------------
THE FUND PAYS DISTRIBUTION AND SERVICE
FEES FOR MARKETING AND SALES RELATED
SHAREHOLDER SERVICING.
- -------------------------------------------------------------------------------
The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
these plans the Fund will pay distribution and service fees at an aggregate
annual rate of up to 0.30% of the Class A shares' average daily net assets and
an annual rate of 1.00% of the Class B shares' average daily net assets. In each
case, up to 0.25% is for service expenses and the remaining amount is for
distribution
10
<PAGE> 47
expenses. Distribution fees are used to reimburse the Distributors
for their distribution expenses, including but not limited to: (i) initial and
ongoing sales compensation to Selling Brokers and others (including affiliates
of the Distributors) engaged in the sale of Fund shares; (ii) marketing,
promotional and overhead expenses incurred in connection with the distribution
of Fund shares; and (iii) with respect to Class B shares only, interest expenses
on unreimbursed distribution expenses. Service fees are paid to the Distributors
to compensate Selling Brokers for providing personal and account maintenance
services to shareholders.
In the event the Distributors are not fully reimbursed for payments made or
expenses incurred by them under the Class A Plan, these expenses will not be
carried beyond one year from the date they were incurred. These unreimbursed
expenses under the Class B Plan will be carried forward together with interest
on the balance of these unreimbursed expenses. For the fiscal year ended October
31, 1994 an aggregate of $7,591,093 of distribution expenses or 2.91%, of the
average net assets of the Class B shares of the Fund, was not reimbursed or
recovered by the Distributors through the receipt of deferred sales charges or
12b-1 fees in prior periods.
The Fund's total expenses for the fiscal year ended October 31, 1994, for Class
A shares and Class B shares, respectively, were 0.95% and 1.62% of average net
assets.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund generally declares dividends daily and distributes
dividends monthly, representing all or substantially all of its net investment
income. The Fund will distribute net realized long-term and short-term capital
gains, if any, annually after the close of the fiscal year (October 31).
Dividends are reinvested in additional shares of your class unless you elect the
option to receive them in cash. If you elect the cash option and the U.S. Postal
Service cannot deliver your checks, your election will be converted to the
reinvestment option. Because of the higher expenses associated with Class B
shares, any dividends on these shares will be lower than those on the Class A
shares. See "Share Price."
TAXATION. The Fund intends to meet certain federal tax requirements so that its
distributions of the tax-exempt interest it earns may be treated as
"exempt-interest dividends" which you are entitled to treat as tax-exempt
interest. That portion of exempt-interest dividends, if any, attributable to
interest on certain tax-exempt obligations that are "private activity bonds" may
increase certain shareholders' alternative minimum tax. Any exempt-interest
dividend may increase a corporate shareholder's alternative minimum tax. The
Fund will send you a statement by January 31 showing the tax status of the
dividends you received for the prior year.
Shareholders receiving social security benefits and certain railroad retirement
benefits may be subject to Federal income tax on up to 85 percent of such
benefits as a result of receiving investment income, including tax-exempt income
(such as exempt-interest dividends) and other dividends paid by the Fund. Shares
of the Fund may not be an appropriate investment for persons who are
"substantial
11
<PAGE> 48
users" of facilities financed by industrial development or private activity
bonds, or persons related to "substantial users." Consult your tax advisor if
you think this may apply to you.
Dividends from the Fund's net taxable income, if any, including any market
discount included in the Fund's income, and from the Fund's net short-term
capital gains are taxable to you as ordinary income. Dividends from the Fund's
net long-term capital gains are taxable as long-term capital gain. These
dividends are taxable, whether received in cash or reinvested in additional
shares. Certain dividends may be paid by the Fund in January of a given year but
may be treated as if you received them the previous December.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code."). As a regulated investment company, the Fund will not be
subject to Federal income tax on any net investment income or net realized
capital gains distributed to its shareholders within the time period prescribed
by the Code.
When you redeem (sell) or exchange shares, you may realize a taxable gain or
loss.
On the account application you must certify that your social security or other
tax-payer identification number is correct and that you are not subject to
backup withholding of Federal income tax. If you do not provide this information
or are otherwise subject to this withholding, the Fund may be required to
withhold 31% of your taxable dividends and the proceeds of redemptions or
exchanges.
In addition to Federal taxes, you may be subject to state and local taxes with
respect to your investment in and distributions from the Fund. A state income
(and possibly local income and/or intangible property) tax exemption is
generally available to the extent the Fund's distributions are derived from
interest on (or, in the case of intangibles taxes, the value of its assets is
attributable to) certain U.S. Government obligations and/or tax-exempt municipal
obligations issued by or on behalf of the particular state or a political
subdivision thereof, provided in some states that certain thresholds for
holdings of such obligations and/or reporting requirements are satisfied. You
will receive tax information each year showing the percentage of the Fund's
exempt-interest dividends attributable to each state. You should consult your
tax adviser for specific advice.
PERFORMANCE
Yield reflects the 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 maximum
offering price per share on the last day of that period. Yield is also
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, the Fund's yield may not equal the income paid on
shares or the income reported in the Fund's financial statements. The Fund may
also utilize tax equivalent yields of its Class A and Class B shares computed in
the same manner, with adjustment for assumed Federal income tax rates. For a
comparison of yields
- -------------------------------------------------------------------------------
THE FUND MAY ADVERTISE ITS YIELD AND TOTAL
RETURN.
- -------------------------------------------------------------------------------
12
<PAGE> 49
on municipal securities and taxable securities, see the Taxable Equivalent
Yield Table in Appendix A.
The Fund's total return shows the overall dollar or percentage change in value
of a hypothetical investment in the Fund, assuming the reinvestment of all
dividends. Cumulative total return shows the Fund's performance over a period of
time. Average annual total return shows the cumulative return of the respective
class of shares of the Fund divided by the number of years included in the
period. Because average annual total return tends to smooth out variations in
the Fund's performance, you should recognize that it is not the same as actual
year-to-year results.
Both total return and yield calculations for Class A shares generally include
the effect of paying the maximum sales charge (except as shown in "The Fund's
Financial Highlights"). Investments at lower sales charges would result in
higher performance figures. Yield and total return for the Class B shares
reflect deduction of the applicable contingent deferred sales charge imposed on
a redemption of shares held for the applicable period. All calculations assume
that all dividends are reinvested at net asset value on the reinvestment dates
during the periods. Yield and total return of Class A and Class B shares will be
calculated separately and, because each class is subject to certain different
expenses, the yield and total return may differ with respect to that class for
the same period. The relative performance of the Class A and Class B shares will
be affected by a variety of factors, including the higher operating expenses
attributable to the Class B shares, whether the Fund's investment performance is
better in the earlier or later portions of the period measured and the level of
net assets of the classes during the period. The Fund will include the total
return of both Class A and Class B shares in any advertisement or promotional
materials including Fund performance data. The value of Fund shares, when
redeemed, may be more or less than their original cost. Both yield and total
return are historical calculations and are not an indication of future
performance. See "Factors to Consider in Choosing an Alternative."
13
<PAGE> 50
<TABLE>
<CAPTION>
HOW TO BUY SHARES
- ------------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT.
- ------------------------------------------------------------------------------------------------------------
The minimum initial investment in Class A or Class B shares is $1,000 ($250 for group
investments).
Complete the Account Application attached to the Prospectus. Indicate whether you are purchasing
Class A or Class B shares. If you do not specify which class of shares you are purchasing, Fund
Services will assume you are investing in Class A shares.
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY CHECK 1. Make your check payable to John Hancock Investor Services Corporation.
("Investor Services").
2. Deliver the completed application and check to your registered representative,
Selling Broker or mail it directly to Investor Services.
- ------------------------------------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by contacting your registered representative, Selling
Broker, or by calling 1-800-225-5291.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Managed Tax-Exempt Fund
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered representative, Selling
Broker or mail it directly to Investor Services.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A
AND CLASS B SHARES.
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Complete the "Automatic Investing" and "Bank Information" sections on the
MONTHLY Account Privileges Application designating a bank account from which your
AUTOMATIC funds may be drawn.
ACCUMULATION
PROGRAM 2. The amount you elect to invest will be automatically withdrawn from your
(MAAP) bank or credit union account.
- ------------------------------------------------------------------------------------------------------------
BY TELEPHONE 1. Complete the "Invest-by-Phone" and "Bank Information" sections on the
Account Privileges Application designating a bank account from which your
funds may be drawn. Note that in order to invest by phone, your account must
be in a bank or credit union that is a member of the Automated Clearing House
system (ACH).
2. After your authorization form has been processed, you may purchase additional
Class A or Class B shares by calling Investor Services toll-free at 1-800-225-
5291.
3. Give the Investor Services representative the name(s) in which your account is
registered, the Fund name, the class of shares you own, your account number,
and the amount you wish to invest.
4. Your investment normally will be credited to your account the business day
following your phone request.
- ------------------------------------------------------------------------------------------------------------
BY CHECK 1. Either complete the detachable stub included on your account statement or
include a note with your investment listing the name of the Fund, the class, your
account number and the name(s) in which the account is registered.
2. Make your check payable to John Hancock Investor Services Corporation.
3. Mail the account information and check to
John Hancock Investor Services Corporation
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling Broker.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 51
- --------------------------------------------------------------------------------
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Managed Tax-Exempt Fund
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
- -------------------------------------------------------------------------------
Other Requirements. All purchases must be made in U.S. dollars. Checks
written on foreign banks will delay purchases until U.S. funds are received,
and a collection charge may be imposed. Shares of the Fund are priced at the
offering price based on the net asset value computed after John Hancock
Funds receives notification of the dollar equivalent from the Fund's
custodian bank. Wire purchases normally take two or more hours to complete
and, to be accepted the same day, must be received by 4:00 p.m., New York
time. Your bank may charge a fee to wire funds. Telephone transactions are
recorded to verify information. Certificates are not issued unless a request
is made in writing to Investor Services.
- --------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT STATEMENTS WHICH
YOU SHOULD KEEP TO HELP WITH YOUR PERSONAL
RECORDKEEPING.
- -------------------------------------------------------------------------------
You will receive a statement of your account after any transaction that affects
your share balance or registration (statements related to reinvestment of
dividends and automatic investment/withdrawal plans will be sent to you
quarterly). A tax information statement will be mailed to you by January 31 of
each year.
- -------------------------------------------------------------------------------
SHARE PRICE
The net asset value per share (the "NAV") is the value of one share. The NAV is
calculated by dividing the net assets of each class by the number of outstanding
shares of that class. The NAV is calculated by dividing the net assets of each
class by the number of outstanding shares of that class. The NAV of each class
can differ in value. Securities in the 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 in accordance with procedures approved by
the Trustees. Short-term debt investments maturing within 60 days are valued at
amortized cost which approximates market value. 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 believes 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 that the
Exchange is open.
- -------------------------------------------------------------------------------
THE OFFERING PRICE OF YOUR SHARES IS THEIR
NET ASSET VALUE PLUS A SALES CHARGE, IF
APPLICABLE, WHICH WILL VARY WITH THE
PURCHASE ALTERNATIVE YOU CHOOSE.
- -------------------------------------------------------------------------------
Shares of the Fund are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock Funds.
If you buy shares of the Fund through a Selling Broker, the Selling Broker must
receive your investment before the close of regular trading on the New York
Stock Exchange and transmit it to John Hancock Funds before its close of
business to receive that day's offering price.
15
<PAGE> 52
<TABLE>
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge, as follows:
<CAPTION>
REALLOWANCE TO
COMBINED SELLING BROKER
REALLOWANCE AS
AMOUNT INVESTED SALES CHARGE AS SALES CHARGE AS AND SERVICE FEE A PERCENTAGE OF
(INCLUDING SALES A PERCENTAGE OF A PERCENTAGE OF AS A PERCENTAGE OFFERING
CHARGE) OFFERING PRICE THE AMOUNT INVESTED OF OFFERING PRICE(+) PRICE(*)
- ---------------------- --------------- ------------------- -------------------- ----------------
<S> <C> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00% 3.76%
$100,000 to $249,999 3.75% 3.90% 3.25% 3.01%
$250,000 to $499,999 3.00% 3.09% 2.50% 2.26%
$500,000 to $999,999 2.00% 2.04% 1.75% 1.51%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(***)
- --------------
<FN>
(*) Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales
charge. In addition to the reallowance allowed to all Selling Brokers,
John Hancock Funds will pay the following: round trip airfare to a resort
will be offered to each registered representative of a Selling Broker (if
the Selling Broker has agreed to participate) who sells certain amounts of
shares of John Hancock Funds. John Hancock Funds will make these incentive
payments out of its own resources. Other than distribution fees, the Fund
does not bear distribution expenses. A Selling Broker to whom
substantially the entire sales charge is reallowed may be deemed to be an
underwriter under the Securities Act of 1933.
(**) No sales charge is payable at the time of purchase of Class A shares of $1
million or more, but a contingent deferred sales charge may be imposed in
the event of certain redemption transactions made within one year of
purchase.
(***) John Hancock Funds may pay a commission and first year's service fee (as
described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of $1 million or more in the aggregate as
follows: 1% on sales to $4,999,999, 0.50% on the next $5 million and 0.25%
on $10 million and over.
(+) At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance, in an amount equal to 0.25% of the net
assets invested in the Fund. Thereafter, it pays the service fee
periodically in arrears in an amount up to 0.25% of the average annual net
assets of the Fund. Selling Brokers receive the fee as compensation for
providing personal and account maintenance services to shareholders.
</TABLE>
Sales charges ARE NOT APPLIED to any dividends which are reinvested in
additional Class A shares of the Fund.
In addition, John Hancock Funds will pay certain affiliated Selling Brokers at
an annual rate of up to 0.05% of the daily net assets of the accounts
attributable to such brokers.
Under certain circumstances as described below, investors in Class A shares may
be entitled to pay reduced sales charges. See "Qualifying for a Reduced Sales
Charge."
CONTINGENT DEFERRED SALES CHARGE -- INVESTMENTS OF $1 MILLION OR MORE IN CLASS A
SHARES. Purchases of $1 million or more of the Fund's Class A shares will be
made at net asset value with no initial sales charge, but if shares are redeemed
within 12 months after the end of the calendar month in which the purchase was
made (the contingent deferred sales charge period), a contingent deferred sales
16
<PAGE> 53
charge will be imposed. The rate of the CDSC will depend on the amount invested
as follows:
<TABLE>
<CAPTION>
AMOUNT INVESTED CDSC RATE
- --------------- ---------
<S> <C>
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
</TABLE>
Existing full service clients of John Hancock Mutual Life Insurance Company who
were group annuity contract holders as of September 1, 1994 may purchase Class A
shares with no initial sales charge, but if the shares are redeemed within 12
months after the end of the calendar month in which the purchase was made, a
contingent deferred sales charge will be imposed at the above rate.
The contingent deferred sales charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the Class A
shares redeemed. Accordingly, no CDSC will be imposed on increases in account
value above the initial purchase price, including any dividends which have been
reinvested in additional shares.
In determining whether a CDSC is applicable to a redemption, the calculation
will be determined in a manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that redemption is first made from any
shares in the shareholder's account not subject to the CDSC. The CDSC is waived
on redemption in certain circumstances. See "Waiver of Contingent Deferred Sales
Charge" below.
- -------------------------------------------------------------------------------
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE
ON YOUR INVESTMENT IN CLASS A SHARES.
- -------------------------------------------------------------------------------
QUALIFYING FOR A REDUCED SALES CHARGE. If you invest more than $100,000 in
Class A shares of the Fund or combination of John Hancock funds (except money
market funds), you may qualify for a reduced sales charge on your investments in
Class A shares through a LETTER OF INTENTION. You may also be able to use the
ACCUMULATION PRIVILEGE and COMBINATION PRIVILEGE to take advantage of the value
of your previous investments in Class A shares of the John Hancock funds in
meeting the breakpoints for a reduced sales charge. For the ACCUMULATION
PRIVILEGE and COMBINATION PRIVILEGE, the applicable sales charge will be based
on the total of:
1. Your current purchase of Class A shares of the Fund,
2. The net asset value (at the close of business on the previous day) of (a)
all Class A shares of the Fund you hold, and (b) all Class A shares of any
other John Hancock funds you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
EXAMPLE:
- -------
If you hold Class A shares of a John Hancock fund with a net asset value of
$80,000 and, subsequently, invest $20,000 in Class A shares of the Fund, the
sales charge on this subsequent investment would be 3.75% and not 4.50% (the
rate that would otherwise be applicable to investments of less than $100,000.
See "Initial Sales Charge Alternative--Class A Shares.")
17
<PAGE> 54
- -------------------------------------------------------------------------------
CLASS A SHARES MAY BE AVAILABLE WITHOUT A
SALES CHARGE TO CERTAIN INDIVIDUALS AND
ORGANIZATIONS.
- -------------------------------------------------------------------------------
If you are in one of the following categories, you may purchase Class A shares
of the Fund without paying a sales charge:
- - A Trustee or officer of the Trust; a Director or officer of the Adviser and
its affiliates or Selling Brokers; employees or sales representatives of any
of the foregoing; retired officers, employees or Directors of any of the
foregoing; a member of the immediate family of any of the foregoing; or any
Fund, pension, profit sharing or other benefit plan for the individuals
described above.
- - Any state, county, city or any instrumentality, department, authority, or
agency of these entities which is prohibited by applicable investment laws
from paying a sales charge or commission when it purchases shares of any
registered investment management company.*
- - A bank, trust company, credit union, savings institution or other depository
institution, its trust departments or common trust funds if it is purchasing
$1 million or more for non-discretionary customers or accounts.*
- - A broker, dealer or registered investment adviser that has entered into an
agreement with John Hancock Funds providing specifically for the use of Fund
shares in fee-based investment products made available to their clients.
- - A former participant in an employee benefit plan with John Hancock funds, when
he/she withdraws from his/her plan and transfers any or all of his/her plan
distributions directly to the Fund.
- ---------------
* For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A shares of the Fund may also by purchased without an initial sales charge
in connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. Class B shares
are offered at net asset value per share without a sales charge, so that your
entire initial investment will go to work at the time of purchase. However,
Class B shares redeemed within six years of purchase will be subject to a CDSC
at the rates set forth below. This charge will be assessed on an amount equal to
the lesser of the current market value or the original purchase cost of the
shares being redeemed. Accordingly, you will not be assessed a CDSC on increases
in account value above the initial purchase price, including shares derived from
dividend reinvestment.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
dividend reinvestment, and next from the shares you have held the longest during
the six-year period. The CDSC is waived on redemptions in certain circumstances.
See the discussion "Waiver of Contingent Deferred Sales Charges" below.
18
<PAGE> 55
EXAMPLE:
- --------
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time, your CDSC will be calculated as follows:
<TABLE>
<S> <C>
- - Proceeds of 50 shares redeemed at $12 per share $600
- - Minus proceeds of 10 shares not subject to CDSC because they were
acquired through dividend reinvestment (10 x $12) -120
- - Minus appreciation on remaining shares, also not subject to CDSC (40 x
$2) -80
-----
- - Amount subject to CDSC $400
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses
all or part of them to defray its expenses related to providing the Fund with
distribution services in connection with the sale of Class B shares, such as
compensating Selling Brokers for selling these shares. The combination of the
CDSC and the distribution and service fees makes it possible for the Fund to
sell Class B shares without deducting a sales charge at the time of purchase.
The amount of the CDSC, if any, will vary depending on the number of years from
the time you purchase the Class B shares of the Fund until the time you redeem
them. Solely for determining this holding period, any payment you make during
the month will be aggregated and deemed to have been made on the last day of the
month.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
YEAR IN WHICH CLASS B SHARES AS A PERCENTAGE
REDEEMED FOLLOWING PURCHASE AMOUNT REDEEMED
- --------------------------- ---------------
<S> <C>
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
</TABLE>
A commission equal to 3.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for the provision of
personal and account maintenance services to shareholders during the twelve
months following the sale, and thereafter the service fee is paid in arrears.
If you purchased Class B shares during 1992 or 1993, the applicable CDSC as a
percentage of the amount redeemed will be: 4% for redemptions during the first
year after purchase, 3.5% for redemptions during the second year, 3% for
redemptions during the third year, 2.5% for redemptions during the fourth year,
2% for redemptions during the fifth year, 1% for redemption during the sixth
year, and no CDSC for redemptions during the seventh year and thereafter. If you
purchased Class B shares before 1992, the applicable CDSC as a percentage of the
amount
19
<PAGE> 56
redeemed will be: 1% for redemptions during the third, fourth and fifth years
after purchase and no CDSC for redemptions during the sixth year and thereafter.
WAIVER OF CONTINGENT SALES CHARGES. The CDSC will be waived on redemptions of
Class B shares and of Class A shares that are subject to a CDSC, unless
indicated otherwise, in the circumstances defined below:
- - Redemptions of Class B shares made under Systematic Withdrawal Plan (see "How
to Redeem Shares"), as long as your annual redemptions do not exceed 10% of
your account value at the time you established your Systematic Withdrawal Plan
and 10% of the value of subsequent investments (less redemptions) in that
account at the time you notify Investor Services. This waiver does not apply
to Systematic Withdrawal Plan redemptions of Class A shares that are subject
to a CDSC.
- -------------------------------------------------------------------------------
UNDER CERTAIN CIRCUMSTANCES, THE CDSC ON
CLASS B AND CLASS A SHARE REDEMPTIONS WILL
BE WAIVED.
- -------------------------------------------------------------------------------
- - Redemptions made to effect distributions from an Individual Retirement Account
either before or after age 59 1/2, as long as the distributions are based on
the life expectancy or the joint-and-last survivor life expectancy of you and
your beneficiary. These distributions must be free from penalty under the
Code.
- - Redemptions made to effect mandatory distributions under the Code after age
70 1/2 from a tax-deferred retirement plan.
- - Redemptions made to effect distributions to participants or beneficiaries from
certain employer-sponsored retirement plans including those qualified under
Section 401(a) of the Code, custodial accounts under Section 403(b)(7) of the
Code and deferred compensation plans under Section 457 of the Code. The waiver
also applies to certain returns of excess contributions made to these plans.
In all cases, the distributions must be free from penalty under the Code.
- - Redemptions due to death or disability.
- - Redemptions made under the Reinvestment Privilege, as describe in "Additional
Services and Programs" of this Prospectus.
- - Redemptions made pursuant to the Fund's right to liquidate your account if you
own fewer than 50 shares.
- - Redemptions made in connection with certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
- - Redemptions from certain IRA and retirement plans which purchased shares prior
to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you must notify
Investor Services either directly or through your Selling Broker at the time you
make your redemption. The waiver will be granted once Investor Services has
confirmed that you are entitled to the waiver.
CONVERSION OF CLASS B SHARES. Your Class B shares and an appropriate portion of
reinvested dividends on those shares will be converted into Class A shares
automatically at the end of the month eight years after the shares were
purchased,
20
<PAGE> 57
resulting in lower annual distribution fees. If you exchanged Class B shares
into the Fund from another John Hancock fund, the conversion will be based on
the time you purchased the shares in the original fund. The Fund has been
advised that the conversion of Class B shares to Class A shares of the Fund
should not be taxable for Federal income tax purposes and should not change a
shareholder's tax basis or tax holding period for the converted shares.
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any business day. Your shares
will be redeemed at the next NAV calculated after your redemption request is
received in good order by Investor Services less any applicable CDSC. The Fund
may hold payment until reasonably satisfied that investments that were recently
made by check or Invest-by-Phone have been collected (which may take up to 10
calendar days).
- -------------------------------------------------------------------------------
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION
REQUEST, PLEASE FOLLOW THESE PROCEDURES.
- -------------------------------------------------------------------------------
Once your shares are redeemed, the Fund generally sends you payment on the next
business day. When you redeem your shares, you may realize a taxable gain or
loss depending usually on the difference between what you paid for them and what
you receive for them, subject to certain tax rules. Under unusual circumstances,
the Fund may suspend redemptions or postpone payment for up to seven days or
longer, as permitted by Federal securities laws.
- --------------------------------------------------------------------------------
BY TELEPHONE All Fund shareholders are automatically eligible for the
telephone redemption privilege. Call 1-800-225-5291, from
8:00 A.M. to 4:00 P.M. (New York time), Monday through
Friday, excluding days on which the New York Stock Exchange
is closed. Investor Services employs the following
procedures to confirm that instructions received by
telephone are genuine. Your name, the account number,
taxpayer identification number applicable to the account
and other relevant information may be requested. In
addition, telephone instructions are recorded.
You may redeem up to $100,000 by telephone, but the address
on the account must not have changed for the last 30 days.
A check will be mailed to the exact name(s) and address
shown on the account.
If reasonable procedures, such as those described above,
are not followed, the Fund may be liable for any loss due
to unauthorized or fraudulent telephone instructions. In
all other cases, neither the Fund nor Investor Services
will be liable for any loss or expense for acting upon
telephone instructions made in accordance with the
telephone transaction procedures mentioned above.
Telephone redemption is not available for IRAs or other
tax-qualified retirement plans or shares of the Fund that
are in certificated form.
During periods of extreme economic conditions or market
changes, telephone requests may be difficult to implement
due to a large volume of calls. During these times you
should consider placing redemption requests in writing or
using EASI-Line. EASI-Line's telephone number is
1-800-338-8080.
- ----------------------------------------------------------------------------
21
<PAGE> 58
- --------------------------------------------------------------------------------
BY WIRE If you have a telephone redemption form on file with the
Fund, redemption proceeds of $1,000 or more can be wired on
the next business day to your designated bank account and a
fee (currently $4.00) will be deducted. You may also use
electronic funds transfer to your assigned bank account and
the funds are usually collectable after two business days.
Your bank may or may not charge for this service.
Redemptions of less than $1,000 will be sent by check or
electronic funds transfer.
This feature may be elected by completing the "Telephone
Redemption" section on the Account Privileges Application
that is included with this Prospectus.
- -------------------------------------------------------------------------
IN WRITING Send a stock power or "letter of instruction" specifying
the name of the Fund, the dollar amount or the number of
shares to be redeemed, your name, class of shares, your
account number, and the additional requirements listed
below that apply to your particular account.
- -------------------------------------------------------------------------
TYPE OF REGISTRATION REQUIREMENTS
-------------------- ------------
Individual, Joint Tenants, Sole A letter of instruction signed (with
Proprietorship, Custodial titles where applicable) by all persons
(Uniform Gifts or Transfer to authorized to sign for the account,
Minors Act), General Partners exactly as it is registered with the
Corporation, Association signature(s) guaranteed
A letter of instruction and a corporate
resolution, signed by person(s)
authorized to act on the account with
the signature(s) guaranteed
Trusts A letter of instruction signed by the
Trustee(s) with the signature
guaranteed. (If the Trustee's name is
not registered on your account, also
provide a copy of the trust document,
certified within the last 60 days.)
If you do not fall into any of these registration categories, please call
1-800-225-5291 for further instructions.
- --------------------------------------------------------------------------------
WHO MAY GUARANTEE YOUR SIGNATURE.
- -------------------------------------------------------------------------------
A signature guarantee is a widely accepted way to protect you and the
Fund by verifying the signature on your request. It may not be provided by a
notary public. If the net asset value of the shares redeemed is $100,000 or
less, John Hancock Funds may guarantee the signature. The following
institutions may provide you with a signature guarantee, provided that the
institution meets credit standards established by Investor Services: (i) a
bank; (ii) a securities broker or dealer, including a government or
municipal securities broker or dealer, that is a member of a clearing
corporation or meets certain net capital requirements; (iii) a credit union
having authority to issue signature guarantees; (iv) a savings and loan
association, a building and loan association, a cooperative bank, a federal
savings bank or association; or (v) a national securities exchange, a
registered securities exchange or a clearing agency.
- -------------------------------------------------------------------------------
THROUGH YOUR BROKER. Your broker may be able to initiate the redemption.
Contact your broker for instructions.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
- -------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your
stock power or a letter of instruction. Unless you specify to the contrary,
any outstanding Class A shares will be redeemed before Class B shares. You
may not redeem certificated shares by telephone.
Due to the proportionately high cost of maintaining smaller accounts,
the Fund reserves the right to redeem at net asset value all shares in an
account which holds fewer than 50 shares (except accounts under retirement
plans) and to mail the proceeds to the shareholder or the transfer agent may
impose an annual fee of $10.00. No account will be involuntarily redeemed or
additional fee imposed, if the value of the account is in excess of the
Fund's minimum initial investment. No CDSC will be imposed on involuntary
redemption of shares.
Shareholders will be notified before these redemptions are to be made or
this fee is imposed and will have 30 days to purchase additional shares to
bring their account balance up to the required minimum. Unless the number of
shares acquired by further purchases and dividend reinvestments, if any,
exceeds the number of shares redeemed, repeated redemptions from a smaller
account may eventually trigger this policy.
- --------------------------------------------------------------------------------
22
<PAGE> 59
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of investment
goals. Contact your registered representative or Selling Broker and request a
prospectus for the John Hancock funds that interest you. Read the prospectus
carefully before exchanging your shares. You can exchange shares of each class
of the Fund only for shares of the same class of another John Hancock fund. For
this purpose, John Hancock funds with only one class of shares will be treated
as Class A whether or not they have been so designated.
- -------------------------------------------------------------------------------
YOU MAY EXCHANGE SHARES OF THE FUND FOR
SHARES OF THE SAME CLASS IN ANOTHER JOHN
HANCOCK FUND.
- -------------------------------------------------------------------------------
Exchanges between funds which are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is imposed.
Class B shares of the Fund which are subject to a CDSC may be exchanged for
Class B shares of any of another John Hancock fund without incurring the CDSC;
however, these shares will be subject to the CDSC schedule of the shares
acquired (except exchanges into John Hancock Short-Term Strategic Income Fund
and John Hancock Limited Term Government Fund which will be subject to the
initial Fund's CDSC). For purposes of computing the CDSC payable upon redemption
of shares acquired in an exchange, the holding period of the original shares is
added to the holding period of the shares acquired in an exchange. However, if
you exchange Class B shares purchased prior to January 1, 1994 for Class B
shares of any other John Hancock fund, you will be subject to the CDSC schedule
that was in effect at your initial purchase date.
You may exchange Class B shares of any Fund into shares of John Hancock Cash
Management Fund at net asset value. However, you will continue to be subject to
a CDSC upon redemption. The rate of the CDSC will be the rate in effect on the
original Fund at the time of the exchange.
The Fund reserves the right to require that you keep previously exchanged shares
(and reinvested dividends) in the Fund for 90 days before you are permitted to
execute a new exchange. The Fund may also terminate or alter the terms of the
exchange privilege upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares in another for Federal income tax purposes. An exchange may
result in a taxable gain or loss.
When you make an exchange, your account registration in both the existing and
new account must be identical. The exchange privilege is available only in
states where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers and
investment advisers may exchange their clients' Fund shares, subject to the
terms of those agreements and John Hancock Funds' right to reject or suspend
those exchanges at any time. Because of the restrictions and procedures under
those agreements, the exchanges may be subject to timing limitations and other
23
<PAGE> 60
restrictions that do not apply to exchanges requested by shareholders directly,
as described above.
Because Fund performance and shareholders can be hurt by excessive trading, the
Fund reserves the right to terminate the exchange privilege for any person or
group that, in John Hancock Funds' judgment, is involved in a pattern of
exchanges that coincide with a "market timing" strategy that may disrupt the
Fund's ability to invest effectively according to its investment objective and
policies, or might otherwise affect the Fund and its shareholders adversely. The
Fund may also temporarily or permanently terminate the exchange privilege for
any person who makes seven or more exchanges out of the Fund per calendar year.
Accounts under common control or ownership will be aggregated for this purpose.
Although the Fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
BY TELEPHONE
1. When you fill out the application for your purchase of Fund shares, you
automatically authorize exchanges by telephone unless you check the box
indicating that you do not wish to authorize telephone exchanges.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.
3. Investors Services employs the following procedures to confirm that
instructions received by telephone are genuine. Your name, the account
number, taxpayer identification number applicable to the account and other
relevant information may be requested. In addition, telephone instructions
are recorded.
IN WRITING
1. In a letter request an exchange and list the following:
- name and class of the fund whose shares you currently own
- your account number
- the name(s) in which the account is registered
- the name of the fund in which you wish your exchange to be invested
- the number of shares, all shares or the dollar amount you wish to
exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
24
<PAGE> 61
REINVESTMENT PRIVILEGE
1. You will not be subject to a sales charge on Class A shares reinvested in any
John Hancock fund that is otherwise subject to a sales charge as long as you
reinvest within 120 days of the redemption date. If you paid a CDSC upon a
redemption, you may reinvest at net asset value in the same class of shares
from which you redeemed within 120 days. Your account will be credited with
the amount of the CDSC previously charged, and the reinvested shares will
continue to be subject to the CDSC. For purposes of computing the CDSC
payable upon a subsequent redemption, the holding period of the shares
acquired through reinvestment will include the holding period of the redeemed
shares.
- -------------------------------------------------------------------------------
IF YOU REDEEM SHARES OF THE FUND, YOU MAY
BE ABLE TO REINVEST THE PROCEEDS IN SHARES
OF THE FUND OR ANOTHER JOHN HANCOCK FUND
WITHOUT PAYING AN ADDITIONAL SALES CHARGE.
- -------------------------------------------------------------------------------
2. Any portion of your redemption may be reinvested in Fund shares or in any
other John Hancock fund, subject to the minimum investment limit of that
fund.
3. To reinvest, you must notify Investor Services in writing. Include the
Fund(s) name, the account number and class from which your shares were
originally redeemed.
SYSTEMATIC WITHDRAWAL PLAN
1. You may elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You can
also obtain the application by calling your registered representative or by
calling 1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semi-annually or
on a selected monthly basis to yourself or any other designated payee.
- -------------------------------------------------------------------------------
YOU CAN PAY ROUTINE BILLS FROM YOUR
ACCOUNT OR MAKE PERIODIC DISBURSEMENTS
FROM YOUR RETIREMENT ACCOUNT TO COMPLY
WITH IRS REGULATIONS.
- -------------------------------------------------------------------------------
4. There is no limit on the number of payees you may authorize, but all payments
must be made at the same time or intervals.
5. It is not advantageous to maintain a Systematic Withdrawal Plan concurrently
with purchases of additional Class A or Class B shares, because you may be
subject to initial sales charges on your purchases of Class A shares or a
CDSC on your redemptions of Class B shares. In addition, your redemptions are
taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks, or if deposits to a bank account are returned for any reason.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
1. You may authorize an investment to be automatically drawn each month from
your bank for investment in fund shares under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.
- -------------------------------------------------------------------------------
YOU CAN MAKE AUTOMATIC INVESTMENTS AND
SIMPLIFY YOUR INVESTING.
- -------------------------------------------------------------------------------
2. You may also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
25
<PAGE> 62
3. You may terminate your Monthly Automatic Accumulation Program at any time.
4. There is no charge to you for this program, and there is no cost to the Fund.
5. If you have payments being withdrawn from a bank account and we are notified
that the account has been closed, withdrawals will be discontinued.
GROUP INVESTMENT PROGRAM
1. An individual account will be established for each participant, but the
initial sales charge for Class A shares will be based on the aggregate dollar
amount of all participants' investments. To determine how to qualify for this
program, contact your registered representative or call 1-800-225-5291.
- -------------------------------------------------------------------------------
ORGANIZED GROUPS OF AT LEAST FOUR PERSONS
MAY ESTABLISH ACCOUNTS.
- -------------------------------------------------------------------------------
2. The initial aggregate investment of all participants in the group must be at
least $250.
3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum, and you may terminate the program at any
time.
26
<PAGE> 63
APPENDIX A
TAXABLE EQUIVALENT YIELD TABLE
(UNDER FEDERAL INCOME TAX LAW AND RATES FOR 1995)
The table below shows the approximate taxable bond yields which are equivalent
to tax-exempt bond yields from 4% to 10% under Federal income tax laws that
apply to 1995. Separate calculations, showing the applicable taxable income
brackets, are provided for investors who file joint returns and for those
investors who file single returns.
EQUIVALENT YIELD TABLE
<TABLE>
<CAPTION>
(TAXABLE INCOME)* INCOME TAX-EXEMPT YIELD
----------------- TAX ----------------------------------------------------------------------
SINGLE RETURN JOINT RETURN BRACKET 4% 5% 6% 7% 8% 9% 10%
- ----------------- ----------------- ------- ------ ------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-23,350 $0-39,000 15.0% 4.71% 5.88% 7.06% 8.24% 9.41% 10.59% 11.76%
$23,351-56,550 $39,001-94,250 28.0% 5.56% 6.94% 8.33% 9.72% 11.11% 12.50% 13.89%
$56,551-117,950 $94,251-143,600 31.0% 5.80% 7.25% 8.70% 10.14% 11.59% 13.04% 14.49%
$117,951-256,500 $143,601-256,500 36.0% 6.25% 7.81% 9.38% 10.94% 12.50% 14.06% 15.63%
Over $256,500 Over $256,500 39.6% 6.62% 8.28% 9.93% 11.59% 13.25% 14.90% 16.56%
</TABLE>
- ---------------
* Net amount subject to Federal income tax after deductions and exemptions. It
is assumed that an investor filing a single return is not a "head of household,"
a "married individual filing a separate return," or a "surviving spouse." The
table does not take into account the effects of reductions in the deductibility
of itemized deductions or the phaseout of personal exemptions for taxpayers with
adjusted gross income in excess of specified amounts. Further, the table does
not attempt to show any alternative minimum tax consequences, which will depend
on each shareholder's particular tax situation and may vary according to what
portion, if any, of the Fund's exempt-interest dividends is attributable to
interest on certain private activity bonds for any particular taxable year. No
assurance can be given that the Fund will achieve any specific tax-exempt yield
or that all of its income distributions will be tax-exempt. Distributions
attributable to any taxable income or capital gains realized by the Fund will
not be tax-exempt.
The information set forth above is as of the date of this Prospectus. Subsequent
tax law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax-equivalent yields set forth above.
27
<PAGE> 64
JOHN HANCOCK
JOHN HANCOCK MANAGED MANAGED
TAX-EXEMPT FUND TAX-EXEMPT
FUND
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue CLASS A AND CLASS B SHARES
Boston, Massachusetts 02199-7603 PROSPECTUS
MARCH 1, 1995
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc. A MUTUAL FUND SEEKING AS
101 Huntington Avenue HIGH A LEVEL OF CURRENT INCOME
Boston, Massachusetts 02199-7603 EXEMPT FROM FEDERAL INCOME TAX
AS IS CONSISTENT WITH PRESERVATION
CUSTODIAN OF CAPITAL BY INVESTING
Investors Bank & Trust Company PRIMARILY IN MUNICIPAL
24 Federal Street SECURITIES.
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services
Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INDEPENDENT AUDITOR
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
<TABLE>
<CAPTION>
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
<S> <C> <C>
For: Service Information
Telephone Exchange call 1-800-225-5291 101 HUNTINGTON AVENUE
Invest-by-Phone BOSTON, MASSACHUSETTS 02199-7603
Telephone Redemption TELEPHONE 1-800-225-5291
For: TDD call 1-800-554-6713
</TABLE>
JHD-0700P 3-95
[LOGO] Printed on Recycled Paper
<PAGE> 65
JOHN HANCOCK
SOVEREIGN U.S.
GOVERNMENT INCOME FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 1, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Expense Information 2
The Fund's Financial Highlights 3
Investment Objective and Policies 4
Organization and Management of the Fund 7
Alternative Purchase Arrangements 8
The Fund's Expenses 9
Dividends and Taxes 10
Performance 11
How to Buy Shares 12
Share Price 13
How to Redeem Shares 18
Additional Services and Programs 21
</TABLE>
This Prospectus sets forth information about John Hancock Sovereign U.S.
Government Income Fund (the "Fund"), a diversified series of Freedom
Investment Trust (the "Trust"), that you should know before investing. Please
read and retain it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC"). You can obtain a copy of the Statement of
Additional Information, dated March 1, 1995 and incorporated by reference
into this Prospectus, free of charge by writing or telephoning: John Hancock
Investor Services Corporation, P.O. Box 9116, Boston, Massachusetts
02205-9116, 1-800-225-5291 (1-800-554-6713 TDD).
Shares of Fund 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE> 66
EXPENSE INFORMATION
The purpose of the following information is to help you understand the
various fees and expenses that you will bear, directly or indirectly, when
you purchase Fund shares. The operating expenses included in the table and
hypothetical example below are based on fees and expenses for the Fund's
fiscal year ended October 31, 1994 adjusted to reflect certain current
expenses. Actual fees and expenses in the future may be greater or less than
those shown.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases (as a percentage of offering price) 4.50% None
Maximum sales charge imposed on reinvested dividends None None
Maximum deferred sales charge None* 5.00%
Redemption fee+ None None
Exchange fee None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fee 0.50% 0.50%
12b-1 fee** 0.30% 1.00%
Other expenses 0.44% 0.24%
Total Fund operating expenses 1.24% 1.77%
</TABLE>
*No sales charge is payable at the time of purchase on investments of $1
million or more, but for such investments a contingent deferred sales charge
may be imposed, as described under the caption "Share Price," in the event of
certain redemption transactions within one year of purchase.
**The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of average daily net assets, and the remaining portion will be used to
cover distribution expenses.
+Redemption by wire fee (currently $4.00) not included.
<TABLE>
<CAPTION>
Example 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated
period of years on a hypothetical $1,000 investment
assuming a 5% annual return:
Class A shares $57 $83 $110 $188
Class B shares
--Assuming complete redemption at end of period $68 $85 $114 $192
--Assuming no redemption $18 $55 $ 94 $192
</TABLE>
You would pay the following expenses for the indicated period of years on a
$1,000 investment in Class C shares, assuming a 5% annual return: 1 year, $8;
3 years, $24; 5 years, $42; and 10 years, $94.
(The example should not be considered as a representation of past or future
expenses. Actual expenses may be greater or less than shown.)
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the
maximum front-end sales charge permitted under the National Association of
Securities Dealers Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully explained in
this Prospectus under the caption "The Fund's Expenses" and in the Statement
of Additional Information under the captions "Investment Advisory and Other
Services" and "Distribution Contract."
2
<PAGE> 67
THE FUND'S FINANCIAL HIGHLIGHTS
The following financial highlights have been examined by Price Waterhouse
LLP, the Fund's independent accountants, whose unqualified report is included
in the Fund's 1994 Annual Report and is included in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to shareholders which may be
obtained free of charge by writing or telephoning John Hancock Investor
Services Corporation ("Investor Services"), at the address or telephone
number listed on the front page of this Prospectus.
Selected data for each class of shares outstanding throughout each period
indicated is as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
1994 1993 1992(a) 1991 1990
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $10.89 $10.29 $10.51
Net Investment Income 0.65 0.68** 0.64
Net Realized and Unrealized Gain (Loss)
on Investments and Financial Futures
Contracts (1.34) 0.61 (0.22)
Total from Investment Operations (0.69) 1.29 0.42
Less Distributions:
Dividends from Net Investment Income (0.65) (0.68) (0.64)
Distributions from Net Realized Gain on
Investments Sold (0.31) (0.01) --
Total Distributions (0.96) (0.69) (0.64)
Net Asset Value, End of Period $ 9.24 $10.89 $10.29
Total Investment Return at Net Asset
Value (6.66%) 12.89% 4.93%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $315,372 $375,416 $350,907
Ratio of Expenses to Average Net Assets 1.23% 1.30% 1.06%*
Ratio of Net Investment Income to Average
Net Assets 6.62% 6.47% 7.11%*
Portfolio Turnover Rate 127% 273% 140%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $10.88 $10.28 $10.29 $ 9.83 $10.01
Net Investment Income 0.61 0.66** 0.76 0.85 0.85+
Net Realized and Unrealized Gain (Loss)
on Investments and Financial Futures
Contracts (1.34) 0.61 -- 0.51 (0.25)
Total from Investment Operations (0.73) 1.27 0.76 1.36 0.60
Less Distributions:
Dividends from Net Investment Income (0.61) (0.66) (0.77) (0.90) (0.78)
Distributions from Net Realized Gain on
Investments Sold (0.31) (0.01) -- -- --
Total Distributions (0.92) (0.67) (0.77) (0.90) (0.78)
Net Asset Value, End of Period $ 9.23 $10.88 $10.28 $10.29 $ 9.83
Total Investment Return at Net Asset
Value (f) (7.05%) 12.66% 7.58% 14.46% 6.24%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $196,899 $244,133 $197,032 $164,347 $133,778
Ratio of Expenses to Average Net Assets+ 1.64% 1.51% 1.55% 1.51% 1.54%
Ratio of Adjusted Expenses to Average Net
Assets (b) n/a n/a n/a n/a 1.55%
Ratio of Net Investment Income to Average
Net Assets+ 6.19% 6.23% 7.35% 8.53% 8.54%
Ratio of Adjusted Net Investment Income
to Average Net Assets (b) n/a n/a n/a n/a 8.53%
Portfolio Turnover Rate 127% 273% 140% 62% 63%
+Expense Reimbursement Per Share n/a n/a n/a n/a $ 0.01
</TABLE>
* On an annualized basis. ** Net investment income per share has been
calculated on average shares outstanding during the year. (a) Class A shares
commenced operations on January 3, 1992. (b) Percentage on an unreimbursed
basis reflect what the actual ratio of expenses to average net assets and the
ratio of net investment income to average net assets would have been. (c)
Total return for the period is on an annualized basis. (d) From April 1,
1987. (e) From commencement of operations, June 5, 1986. (f) Without
reimbursement total return would have been lower.
3
<PAGE> 68
<TABLE>
<CAPTION>
Period
ended
March 31,
1989 1988 1987(d) 1987(e)
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period
Net Investment Income
Net Realized and Unrealized Gain (Loss)
on Investments and Financial Futures
Contracts
Total from Investment Operations
Less Distributions:
Dividends from Net Investment Income
Distributions from Net Realized Gain on
Investments Sold
Total Distributions
Net Asset Value, End of Period
Total Investment Return at Net Asset
Value
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)
Ratio of Expenses to Average Net Assets
Ratio of Net Investment Income to Average
Net Assets
Portfolio Turnover Rate
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 9.73 $ 9.45 $ 10.28 $10.00
Net Investment Income 0.81+ 0.78+ 0.48+ 0.56
Net Realized and Unrealized Gain (Loss)
on Investments and Financial Futures
Contracts 0.25 0.28 (0.75) 0.36
Total from Investment Operations 1.06 1.06 (0.27) 0.92
Less Distributions:
Dividends from Net Investment Income (0.77) (0.77) (0.48) (0.57)
Distributions from Net Realized Gain on
Investments Sold (0.01) (0.01) (0.08) (0.07)
Total Distributions (0.78) (0.78) (0.56) (0.64)
Net Asset Value, End of Period $ 10.01 $ 9.73 $ 9.45 $10.28
Total Investment Return at Net Asset
Value (f) 11.52% 11.53% 3.70% 2.61%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $144,756 $161,163 $170,030 $164,001
Ratio of Expenses to Average Net Assets+ 1.35% 1.29% 1.24%* 1.26%*
Ratio of Adjusted Expenses to Average Net
Assets (b) 1.58% 1.35% 1.32%* n/a
Ratio of Net Investment Income to Average
Net Assets+ 8.34% 8.09% 7.94%* 7.56%*
Ratio of Adjusted Net Investment Income
to Average Net Assets (b) 8.11% 8.03% 7.86%* n/a
Portfolio Turnover Rate 45% 79% 83%* 108%*
+Expense Reimbursement Per Share $ 0.02 $ 0.01 $ 0.01 n/a
</TABLE>
* On an annualized basis. ** Net investment income per share has been
calculated on average shares outstanding during the year. (a) Class A shares
commenced operations on January 3, 1992. (b) Percentage on an unreimbursed
basis reflect what the actual ratio of expenses to average net assets and the
ratio of net investment income to average net assets would have been. (c)
Total return for the period is on an annualized basis. (d) From April 1,
1987. (e) From commencement of operations, June 5, 1986. (f) Without
reimbursement total return would have been lower.
3
<PAGE> 69
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide as high a level of income as is
consistent with long-term total return by investing in government securities.
The Fund's investment objective is to provide as high a level of income as is
consistent with long-term total return by investing in securities issued,
guaranteed or otherwise backed by the United States government, its agencies
or instrumentalities ("Government Securities"). There are market fluctuations
and risks in any investment and therefore there is no assurance that the Fund
will achieve its investment objective.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in Government Securities. The Government Securities that may be
purchased by the Fund include, but are not limited to: (i) U.S. Treasury
obligations: Treasury Bills (maturities of one year or less), Treasury Notes
(maturities of one to ten years) and Treasury Bonds (generally maturities of
greater than ten years); and (ii) obligations issued, guaranteed or otherwise
backed by U.S. Government agencies and instrumentalities that are supported
by any of the following: (a) the full faith and credit of the U.S. Treasury
(such as obligations of the Government National Mortgage Association (GNMA),
the General Services Administration and the Federal Maritime Administration),
(b) the right of the issuer to borrow an amount limited to a specific line of
credit from the U.S. Treasury (such as obligations of Federal Home Loan
Banks, the Federal Home Loan Mortgage Corporation and the U.S. Postal
Service) or (c) the credit of the agency or instrumentality (such as
obligations of the Federal National Mortgage Association and Federal Farm
Credit System). Up to 5% of the Fund's net assets may be invested in
Government securities denominated in foreign currencies.
The composition and weighted average maturity of the Fund's portfolio will
vary from time to time, based upon the determination of John Hancock
Advisers, Inc. (the "Adviser") of how best to further the Fund's investment
objective.
The Fund may invest in Government Securities of all maturities: short-term,
intermediate-term and long-term. The Fund may also enter into repurchase
agreements. The Fund may also, for temporary defensive purposes and without
limitation, hold cash and invest in short-term (less than one year)
instruments, including securities rated in the three highest categories by
Standard & Poor's Ratings Group or Moody's Investor's Service, Inc. (i.e.,
rated at the time of purchase AAA, AA or A by Standard & Poor's or Aaa, Aa or
A by Moody's), debt securities of corporations (such as commercial paper,
notes, bonds or debentures), certificates of deposit of domestic banks, or
repurchase agreements with respect to Government Securities, including
repurchase agreements that mature in more than seven days. In the event these
securities are subsequently downgraded below such ratings, the Adviser will
consider this event in its determination of whether the Fund should continue
to hold the securities. The Fund may also invest in collateralized
mortgage-backed obligations that are issued or sponsored by a governmental
agency. See Appendix A to the Statement of Additional Information for a
description of the various ratings of investment grade debt securities.
Options Transactions. The Fund may also purchase put options on Government
Securities provided that no more than 5% of its assets may be invested in
these options. The Fund may write (sell) covered call and put options on all
or any part of the Fund's portfolio of Government Securities. The Fund may
deal in options on Government Securities listed for trading on a national
securities exchange and traded over-the-counter. The Fund will engage in
over-the-counter options only with member banks of the Federal Reserve Sys-
4
<PAGE> 70
tem and primary dealers in U.S. Government securities. The staff of the SEC
considers over-the-counter options to be illiquid except under prescribed
conditions, which are discussed in the Statement of Additional Information.
Futures Contracts and Options on Futures. The Fund may buy and sell financial
futures contracts and options on futures to hedge against the effects of
fluctuations in securities prices, interest rates, currency exchange rates
and other market conditions and for speculative purposes. The potential loss
incurred by the Fund in writing options on futures is unlimited and may
exceed the amount of the premium received. The Fund's futures contracts and
options on futures will be traded on a U.S. commodity exchange or board of
trade. The Fund will not engage in a futures or options transaction for
speculative purposes, if immediately thereafter, the sum of initial margin
deposits on existing positions and premiums required to establish speculative
positions in futures contracts and options on futures would exceed 5% of the
Fund's net assets. The fund intends to comply with the CFTC regulations with
respect to its speculative transactions. These regulations are discussed
further in the Statement of Additional Information.
Restricted Securities. The Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to
Rule 144A under the Securities Act of 1933 (the "Securities Act"). The
Trustees will monitor the Fund's investments in those securities, focusing on
certain factors including valuation, liquidity and availability of
information. Purchase of other restricted securities are subject to an
investment restriction limiting all the Fund's illiquid securities held by
the Fund to not more than 15% of the Fund's net assets.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
Government Securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities. When the Fund
lends portfolio securities, there is a risk that the borrower may fail to
return the loaned securities. As a result, the Fund may incur a loss or, in
the event of the borrower's bankruptcy, may be delayed in or prevented from
liquidating the collateral. It is a fundamental policy of the Fund not to
lend portfolio securities having a total value in excess of 30% of its total
assets.
Borrowing. The Fund may borrow from banks to increase its portfolio holdings
of Government Securities. These borrowings will be unsecured but the Fund
will be required to maintain continuous asset coverage of not less than 300%
with respect to them. If such asset coverage should decline to less than 300%
due to market fluctuations or other reasons, the Fund may be required to sell
some of its portfolio holdings within three days in order to reduce its debt
and restore the 300% asset coverage, even though it may be disadvantageous
from an investment standpoint to sell securities at that time. Leveraging
will exaggerate any increase or decrease in the net asset value of the Fund's
portfolio. The Fund may also borrow money for temporary extraordinary or
emergency purposes up to 5% of the value of the Fund's total assets when the
loan is made. The Fund may pledge up to 10% of the lesser of cost or value of
its total assets to secure these borrowings.
5
<PAGE> 71
Repurchase Agreements, Forward Commitments and When-Issued Securities. The
Fund may enter into repurchase agreements and may purchase securities on a
forward commitment or when-issued basis. In a repurchase agreement, the Fund
buys a security subject to the right and obligation to sell it back to the
seller at a higher price. These transactions must be fully collateralized at
all times, but involve some credit risk to the Fund if the other party
defaults on its obligation and the Fund is delayed in or prevented from
liquidating the collateral. The Fund will segregate, in a separate account,
cash or liquid high grade debt securities equal in value to its forward
commitments and when-issued securities. Purchasing debt securities for future
delivery or on a when-issued basis may increase the Fund's overall investment
exposure and involves a risk of loss if the value of the securities declines
before the settlement date.
The Fund follows certain policies, which may help reduce investment risk.
The Fund has adopted certain investment restrictions that are detailed in the
Statement of Additional Information, where they are classified as fundamental
or non-fundamental. The Fund's investment objective and those investment
restrictions designated as fundamental may not be changed without shareholder
approval. The Fund's non-fundamental investment policies and restrictions,
however, may be changed by a vote of the Trustees without shareholder
approval. The Fund's portfolio turnover rates for recent periods are shown in
the section "The Fund's Financial Highlights."
Risk Factors and Special Considerations. Government Securities of the type
included in the Fund's portfolio have historically involved minimal credit
risk. However, the prices of the securities are inversely affected by changes
in interest rate levels. A decrease in rates generally produces an increase
in the value of the Fund's investments, while an increase in rates generally
reduces the value of these investments.
Mortgage-backed securities 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 the Fund's portfolio at the time the Fund
receives these 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 the 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.
In a rising interest rate environment, a declining prepayment rate will
extend the average life of many mortgage-backed securities. Extending the
average life of a mortgage-backed security increases the risk of depreciation
due to future increases in market interest rates.
The principal of and/or interest on certain Government Securities that the
Fund may purchase could be increased or diminished as a result of changes in
the value of the U.S. dollar relative to the value of foreign currencies. The
value of portfolio securities denominated in foreign currencies may be
affected favorably or unfavorably by changes in the exchange rate between
foreign currencies and the U.S. dollar. In order to limit the risk
6
<PAGE> 72
inherent in this type of security, it is the current policy of the Fund not
to purchase any such security if after the purchase more than 5% of its net
assets (taken at market value) would be invested in securities denominated in
foreign currencies.
If the Fund writes (sell) a substantial number of call options and the market
prices of the underlying securities appreciate, or if the Fund writes a
substantial number of put options and the market prices of the underlying
securities depreciate, there may be a very substantial turnover of the
portfolio. A high rate of portfolio turnover involves correspondingly higher
brokerage expense to the Fund and may, under certain circumstances, make it
more difficult for the Fund to qualify as a regulated investment company
under the Internal Revenue Code. See the Statement of Additional Information
for a further discussion of these special considerations.
Brokers are chosen based on best price and execution.
When choosing brokerage firms to carry out the Fund's transactions, the
Adviser gives primary consideration is execution at the most favorable
prices, taking into account the broker's professional ability and quality of
service. Consideration may also be given to the broker's sales of shares of
the Fund. Pursuant to procedures determined by the Trustees, the Adviser may
place securities transactions with brokers affiliated with the Adviser. These
brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc.
and Sutro & Company Inc., which are indirectly owned by John Hancock Mutual
Life Insurance Company, which in turn indirectly owns the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Trustees elect officers and retain the investment adviser who is
responsible for the day- to-day operations of the Fund, subject to the
Trustees' policies and supervision.
The Fund is a diversified series of Freedom Investment Trust, an open-end
management investment company organized as a Massachusetts business trust in
1984 (the "Trust"). The Trust reserves the right to create and issue a number
of series of shares, or funds or classes thereof, which are separately
managed and have different investment objectives. As of the date of this
Prospectus, the Trustees have authorized Class A, and Class B and Class C
shares, although Class C is no longer offered for sale, all of which shares
have equal rights as to voting, redemption, dividends and liquidation. The
shares of each class have exclusive voting rights with respect to their
respective Rule 12b-1 distribution plans. The Trust is not required to and
does not intend to hold annual meetings of shareholders, although special
meetings may be held for such purposes as electing or removing Trustees,
changing fundamental policies or approving a management contract. The Trust,
under certain circumstances, will assist in shareholder communications with
other shareholders.
John Hancock Advisers, Inc. advises investment companies having a total asset
value of more than $13 billion.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary
of the John Hancock Mutual Life Insurance Company, a financial services
company. It provides the Fund, and other investment companies in the John
Hancock group of funds, with investment research and portfolio management
services. John Hancock Funds, Inc. ("John Hancock Funds") distributes shares
for all of the John Hancock mutual funds directly and through selected
broker-dealers ("Selling Brokers"). Freedom Distributors Corporation, a
co-distributor of the Fund, is, along with John Hancock Funds, an indirect
subsidiary of John Hancock Mutual Life Insurance Company (together with John
Hancock Funds, the "Distributors"). Certain Fund officers are also officers
of the Adviser and John Hancock Funds. Pursuant to an order granted by the
Securities and Exchange Commission, the Fund has adopted a deferred
compensation
7
<PAGE> 73
plan for its independent Trustees which allows Trustees' fees to be invested
by the Fund in other John Hancock funds.
Barry Evans is Vice President and Portfolio Manager of the Fund and also
leads a team of managers on several other Hancock funds. Mr. Evans has
managed bond funds since he joined John Hancock in 1986.
In order to avoid any conflict with portfolio trades for the Fund, the
Adviser and the Fund have adopted extensive restrictions on personal
securities trading by personnel of the Adviser and its affiliates. 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.
These restrictions are a continuation of the basic principle that the
interests of the Fund and its shareholders come first.
ALTERNATIVE PURCHASE ARRANGEMENTS
An alternative purchase plan allows you to choose the method of payment that
is best for you.
You can purchase shares of the Fund at a price equal to their net asset value
per share plus a sales charge. At your election, this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge
Alternative--Class A shares") or on a contingent deferred basis (see
"Contingent Deferred Sales Charge Alternative--Class B shares"). If you do
not specify on you account application which class of shares you are
purchasing, it will be assumed that you are investing in Class A shares.
Investments in Class A shares are subject to an initial sales charge.
Class A Shares. If you elect to purchase Class A shares, you will incur an
initial sales charge unless the amount of your purchase is $1 million or
more. If you purchase $1 million or more of Class A shares, you will not be
subject to an initial sales charge, but you will incur a sales charge if you
redeem your shares within one year of purchase. Class A shares are subject to
ongoing distribution and service fees at a combined annual rate of up to
0.30% of the Fund's average daily net assets attributable to the Class A
shares. Certain purchases of Class A shares qualify for reduced initial sales
charges. See "Share Price--Qualifying for a Reduced Sales Charge."
Investments in Class B shares are subject to a contingent deferred sales
charge.
Class B Shares. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them
within six years of purchase (the "contingent deferred sales charge" or the
"CDSC"). Class B shares are subject to ongoing distribution and service fees
at a combined annual rate of up to 1.00% of the Fund's average daily net
assets attributable to the Class B shares. Investing in Class B shares
permits all your dollars to work from the time you make your investment, but
the higher ongoing distribution fee will cause these shares to have a higher
expense ratio than that of Class A shares. To the extent that any dividends
are paid by the Fund, these higher expenses will also result in lower
dividends than those paid on Class A shares.
Class B shares are not available to full service defined contribution plans
administered by Investment Services or John Hancock Mutual Life Insurance
Company that had more than 100 eligible employees at the inception of the
fund account.
8
<PAGE> 74
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE
You should consider which class of shares will be more beneficial for you.
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider
whether, during the anticipated life your Fund investments, the CDSC and
accumulated fees on Class B shares would be less than the initial sales
charge and accumulated fees on Class A shares purchased at the same time; and
to what extent this differential would be offset by the Class A shares' lower
expenses. To help you make this determination, the table under the caption
"Expense Information" on the inside cover page of this Prospectus shows
examples of the charges applicable to each class of shares. Class A shares
will normally be more beneficial if you qualify for reduced sales charges.
See "Share Price--Qualifying for a Reduced Sales Charge."
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent
any dividends are paid. However, because initial sales charges are deducted
at the time of purchase, you would not have all of your funds invested
initially and, therefore, would initially own fewer shares. If you do not
qualify for reduced initial sales charges and expect to maintain your
investment for an extended period of time, you might consider purchasing
Class A shares because the accumulated distribution and service charges on
Class B shares may exceed the initial sales charge and accumulated
distribution and service charges on Class A shares during the life of your
investment.
Alternatively, you might determine that it would be more advantageous to
purchase Class B shares in order to have all of your funds invested
initially. However, you would be subject to higher distribution charges and,
for a six-year period, a CDSC.
In the case of Class A shares, the distribution expenses that John Hancock
Funds incurs in connection with the sale of the shares will be paid from the
proceeds of the initial sales charge and the ongoing distribution and service
fees. In the case of Class B shares, the expenses will be paid from the
proceeds of the ongoing distribution and service fees, as well as the CDSC
incurred upon redemption within six years of purchase. The purpose and
function of the Class B shares' CDSC and ongoing distribution and service
fees are the same as those of the Class A shares' initial sales charge and
ongoing distribution and service fees. Sales personnel distributing the
Fund's shares may receive different compensation for selling each class of
shares.
Dividends, if any, on Class A and Class B shares will be calculated in the
same manner, at the same time and on the same day and will be in the same
amount, except for differences resulting from the fact that each class will
bear only its own distribution and service fees, shareholder meeting expenses
and any incremental transfer agency costs. See "Dividends and Taxes."
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a monthly fee
to the Adviser which for the 1994 fiscal year was 0.50% of the Fund's average
net assets.
9
<PAGE> 75
The Fund pays distribution and service fees for marketing and sales related
shareholder servicing.
The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Under these Plans, the Fund will pay distribution and service fees at an
aggregate annual rate of 0.30% of the Class A shares' average daily net
assets and an aggregate annual rate of 1.00% of the Class B shares' average
daily net assets. In each case, up to 0.25% is for service expenses and the
remaining amount is for distribution expenses. Distribution fees are used to
reimburse the Distributors for their distribution expenses, including but not
limited to: (i) initial and ongoing sales compensation to Selling Brokers and
others (including affiliates of the Distributors) engaged in the sale of
shares of the Funds; (ii) marketing, promotional and overhead expenses
incurred in connection with the distribution of shares of the Funds; and
(iii) with respect to Class B shares only, interest expenses on unreimbursed
distribution expenses. Service fees are paid to Distributors to compensate
Selling Brokers for providing personal and account maintenance services to
shareholders. In the event the Distributors are not fully reimbursed for
payments made or expenses incurred by them under the Class A Plan, these
expenses will not be carried beyond one year from the date they were
incurred. These unreimbursed expenses under the Class B Plan will be carried
forward together with interest on the balance of these unreimbursed expenses.
For the fiscal year ended October 31, 1994 an aggregate of $2,064,965 of
distribution expenses or .93%, of the average net assets of the Class B
shares of the Fund, was not reimbursed or recovered by the Distributors
through the receipt of deferred sales charges or 12b-1 fees in prior periods.
The Fund's total expenses for the fiscal year ended October 31, 1994, for
Class A shares and Class B shares, respectively, were 1.23% and 1.64% of
average net assets.
DIVIDENDS AND TAXES
Dividends. The Fund generally declares daily and distributes monthly
dividends representing all or substantially all net investment income. The
Fund may distribute net realized short-term capital gains and net long-term
capital gains, if any, annually after the close of the fiscal year (October
31).
Dividends are reinvested in additional shares of your class unless you elect
the option to receive them in cash. If you elect the cash option and the U.S.
Postal Service cannot deliver your checks, your election will be converted to
the reinvestment option. Because of the higher expenses associated with Class
B shares, any dividend on these shares will be lower than on the Class A
shares. See "Share Price."
You should keep the account statements that you receive from the Fund for
your personal tax records.
Taxation. Dividends from the Fund's net investment income, certain net
foreign exchange gains and net short-term capital gains are taxable to you as
ordinary income and dividends from the Fund's net long-term capital gains are
taxable as long-term capital gain. These dividends are taxable whether you
take them in cash or reinvest in additional shares. Certain dividends may be
paid in January of a given year but may be taxable as if you received them
the previous December. The Fund will send you a statement by January 31
showing the tax status of the dividends you received for the prior year.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). As a regulated investment company, the Fund will not
be subject to Fed-
10
<PAGE> 76
eral income tax on any net investment income or net realized capital gains
that are distributed to its shareholders within the time period prescribed by
the Code.
When you redeem (sell) or exchange shares, you may realize a taxable gain or
loss.
On the account application you must certify that your social security or
other taxpayer identification number is correct and that you are not subject
to backup withholding of Federal income tax. If you do not provide this
information or are otherwise subject to this withholding, the Fund may be
required to withhold 31% of your dividends and the proceeds of redemptions or
exchanges.
In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respect to your investment in and distributions from the Fund.
Non-U.S. shareholders and tax-exempt shareholders are subject to different
tax treatment not described above. A state income (and possibly local income
and/or intangible property) tax exemption is generally available to the
extent the Fund's distributions are derived from interest on (or, in the case
of intangible taxes, the value of its assets is attributable to) certain U.S.
Government obligations, provided in some states that certain thresholds for
holdings of such obligations and/or reporting requirements are satisfied. You
should consult your tax adviser for specific advice.
PERFORMANCE
The Fund may advertise its yield and total return.
Yield reflects the 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
maximum offering price per share on the last day of that period. Yield is
also 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, the Fund's yield may not equal
the income paid on shares or the income reported in the Fund's financial
statements.
The Fund's total return shows the overall dollar or percentage change in
value of a hypothetical investment in the Fund, assuming the reinvestment of
all dividends. Cumulative total return shows the Fund's performance over a
period of time. Average annual total return shows the cumulative return of
the respective class of shares of the Fund divided by the number of years
included in the period. Because average annual total return tends to smooth
out variations in the Fund's performance, you should recognize that it is not
the same as actual year-to-year results.
Both total return and yield calculations for Class A shares generally include
the effect of paying the maximum sales charge (except as shown in "The Fund's
Financial Highlights"). Investments at lower sales charges would result in
higher performance figures. Yield and total return for the Class B shares
reflect deduction of the applicable contingent deferred sales charge imposed
on a redemption of shares held for the applicable period. All calculations
assume that all dividends are reinvested at net asset value on the
reinvestment dates during the periods. Yield and total return of Class A and
Class B shares will be calculated separately and, because each class is
subject to certain different expenses, the yield and total return may differ
with respect to classes of the Fund for the same period. The relative
performance of the Class A and Class B shares will be affected by a variety
of factors, including the higher operating expenses attributable to the Class
B shares, whether the Fund's investment performance is better in the earlier
or later portions of the period measured and the level of
11
<PAGE> 77
net assets of the classes during the period. The Fund will include the total
return and yield of both Class A and Class B shares in any advertisement or
promotional materials including Fund performance data. The value of Fund
shares, when redeemed, may be more or less than their original cost. Both
yield and total return are historical calculations and are not an indication
of future performance. See "Factors to Consider in Choosing an Alternative."
HOW TO BUY SHARES
Opening an account.
Buying additional Class A
and Class B shares.
<TABLE>
<S> <C>
The minimum initial investment in Class A or Class B shares is $1,000 ($250 for group investments or $500
for retirement plans).
Complete the Account Application attached to this Prospectus. Indicate whether you are buying Class A or
Class B shares. If you do not specify which class of shares you are purchasing, it will be assumed you
are investing in Class A shares.
By Check 1. Make your check payable to John Hancock Investor Services Corporation ("Investor
Services").
2. Deliver the completed application and check to your registered representative or
Selling Broker, or mail it directly to Investor Services.
By Wire 1. Obtain an account number by, contacting your registered representative, Selling
Broker, or by calling 1-800-225-5291.
2. Instruct your bank to wire funds:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Sovereign U.S. Government Income Fund
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered representative, Selling Broker or
mail it directly to Investor Services.
Monthly 1. Complete the "Automatic Investing" and "Bank Information" sections on the Account
Automatic Privileges Application designating a bank account from which funds may be drawn.
Accumulation 2. The amount you elect to invest will be automatically withdrawn from your bank or
Program credit union account.
(MAAP)
By Telephone 1. Complete the "Invest-by-Phone" and "Bank Information" sections on the Account
Privileges Application designating a bank account from which your funds may be drawn.
Note that in order to invest by phone, your account must be in a bank or credit union
that is a member of the Automated Clearing House system (ACH).
2. After your authorization form has been processed, you may purchase shares by calling
Investor Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name of the person(s) in which your
account is registered, the Fund name, the class of shares you own, your account number
and the amount you wish to invest.
4. Your investment normally will be credited to your account the business day following
your phone request.
</TABLE>
12
<PAGE> 78
<TABLE>
<C> <S>
By Check 1. Either complete the detachable stub included on your account statement or include a
note with your investment listing the name of the Fund, the class, your account number
and the name(s) in which the account is registered.
2. Make your check payable to John Hancock Investor Services Corporation.
3. Mail the account information and check to
John Hancock Investor Services Corporation
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling Broker.
By Wire Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA No. 211475000
For credit to: John Hancock Sovereign U.S. Government Income Fund
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
Other Requirements. All purchases must be made in U.S. dollars. Checks written on foreign banks will delay
purchases until U.S. funds are received, and a collection charge may be imposed. Shares of the Fund are
priced at the offering price based on the net asset value computed after John Hancock Funds receives
notification of the dollar equivalent from the Fund's custodian bank. Wire purchases normally take two or
more hours to complete and, to be accepted the same day, must be received by 4:00 p.m., New York time.
Your bank may charge a fee to wire funds. Telephone transactions are recorded to verify information.
Certificates are not issued unless a request is made in writing to Investor Services.
Institutional Investors. Certain institutional investors may purchase Class C shares of the Fund, which
have no sales charge or 12b-1 fee. See "Institutional Investors" for further information.
</TABLE>
You will receive account statements which you should keep to help with your
personal recordkeeping.
You will receive a statement of your account after any transaction that
affects your share balance or registration (statements related to
reinvestment of dividends and automatic investment/withdrawal plans will be
sent to you quarterly.) A tax information statement will be mailed to you by
January 31 of each year.
SHARE PRICE
The offering price of shares is their net asset value plus a sales charge, if
applicable, which will vary with the purchase alternative you choose.
The net asset value per share ("NAV") is the value of one share. The NAV is
calculated by dividing the net assets of each class by the number of
outstanding shares of that class. The NAV of each class can differ in value.
Securities in the 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 in accordance with procedures approved by
the Trustees. Short-term debt investments maturing within 60 days are valued
at amortized cost which approximates market value. 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 that the Exchange is open.
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<PAGE> 79
Shares of the Fund are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock
Funds. If you buy shares of the Fund through a Selling Broker, the Selling
Broker must receive your investment before the close of regular trading on
the New York Stock Exchange and transmit it to John Hancock Funds before its
close of business to receive that day's offering price.
Initial Sales Charge Alternative--Class A Shares. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge as follows:
<TABLE>
<CAPTION>
Sales Combined
Sales Charge Reallowance Reallowance
Charge as a and Service to Selling
as a Percentage Fee as a Broker as a
Percentage of the Percentage Percentage
Amount invested of Offering Amount of Offering of Offering
(including Sales Charge) Price Invested Price(+) Price (*)
<S> <C> <C> <C> <C>
less than $100,000 4.50% 4.71% 4.00% 3.76%
$100,000 to $249,999 3.75% 3.90% 3.25% 3.01%
$250,000 to $499,999 2.75% 2.83% 2.30% 2.06%
$500,000 to $999,999 2.00% 2.04% 1.75% 1.51%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(**)
</TABLE>
(*) Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales charge.
In addition to the reallowance allowed to all Selling Brokers, John Hancock
Funds will pay the following: Round trip airfare to a resort will be offered
to each registered representative of a Selling Broker (if the Selling Broker
has agreed to participate) who sells certain amounts of shares of John
Hancock funds. John Hancock Funds will make these incentive payments out of
its own resources. Other than distribution fees, the Fund does not bear
distribution expenses. A Selling Broker to whom substantially the entire
sales charge is reallowed may be deemed to be an underwriter under the
Securities Act of 1933.
(**) No sales charge is payable at the time of purchase of Class A shares of
$1 million or more, but a contingent deferred sales charge may be imposed, in
the event of certain redemption transactions made within one year of
purchase.
(***) John Hancock Funds may pay a commission and first year's service fee
(as described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of $1 million or more in aggregate as follows: 1%
on sales to $4,999,999, 0.50% on the next $5 million and 0.25% on $10 million
and over.
(+) At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance, in an amount equal to 0.25% of the net assets
invested in the Fund. Thereafter it pays the service fee periodically in
arrears in an amount up to 0.25% of the average annual net assets of the
Fund. Selling Brokers receive the fee as compensation for providing personal
and account maintenance services to shareholders.
Sales charges ARE NOT APPLIED to any dividends which are reinvested in
additional Class A shares of the Fund.
In addition, John Hancock Funds will pay certain affiliated Selling Brokers
at an annual rate of up to 0.05% of the daily net assets of the accounts
attributable to these brokers.
Under certain circumstances described below, investors in Class A shares may
be entitled to pay reduced sales charges. See "Qualifying for a Reduced Sales
Charge."
Contingent Deferred Sales Charge--Investments of $1 million or more in Class
A Shares. Purchases of $1 million or more of the Fund's Class A shares will
be made at net asset value with no initial sales charge, but if shares are
redeemed within 12 months after the end of the calendar month in which the
purchase was made (the contingent deferred sales charge period), a contingent
deferred sales charge will be imposed. The rate of CDSC will depend on the
amount invested as follows:
14
<PAGE> 80
<TABLE>
<CAPTION>
Amount Invested CDSC Rate
<S> <C>
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
</TABLE>
Existing full service clients of John Hancock Mutual Life Insurance Company
who were group annuity contract holders as of September 1, 1994, may purchase
Class A shares with no initial sales charge, but if the shares are redeemed
within 12 months after the end of the calendar year in which the purchase was
made, a contingent deferred sales charge will be imposed at the above rate.
The charge will be assessed on an amount equal to the lesser of the current
market value or the original purchase cost of the Class A shares redeemed.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any distributions which have been
reinvested in additional Class A shares.
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the redemption is first made from
any shares in your account that are not subject to the CDSC. The CDSC is
waived on redemptions in certain circumstances. See "Waiver of Contingent
Deferred Sales Charge."
You may qualify for a reduced sales charge on your investment in Class A
shares.
Qualifying for a Reduced Sales Charge. If you invest more than $100,000 in
Class A shares of the Fund or combination of John Hancock funds (except money
market funds), you may qualify for a reduced sales charge on your investments
in Class A shares through a LETTER OF INTENTION. You may also be able to use
the ACCUMULATION PRIVILEGE and COMBINATION PRIVILEGE to take advantage of the
value of your previous investments in Class A shares of the John Hancock funds
in meeting the breakpoints for a reduced sales charge. For the ACCUMULATION
PRIVILEGE and COMBINATION PRIVILEGE the applicable sales charge will be based
on the total of:
1. Your current purchase of Class A shares of the Fund.
2. The net asset value (at the close of business on the previous day) of (a)
all Class A shares of the Fund you hold, and (b) all Class A shares of any
other John Hancock mutual fund you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
Example:
If you hold Class A shares of a John Hancock fund with a net asset value of
$80,000 and, subsequently, invest $20,000 in Class A shares of the Fund, the
sales charge on this subsequent investment would be 3.75% and not 4.50% (the
rate that would otherwise be applicable to investments of less than $100,000.
See "Initial Sales Charge Alternative--Class A shares.")
If you are in one of the following categories, you may purchase Class A
shares of the Fund without paying a sales charge:
Class A shares may be available without a sales charge to certain individuals
and organizations.
* A Trustee or officer of the Trust; a Director or officer of the Adviser and
its affiliates or Selling Brokers; employees or sales representatives of any
of the foregoing; retired officers, employees or Directors of any of the
foregoing; a member of the
15
<PAGE> 81
immediate family of any of the foregoing; or any Fund, pension, profit
sharing or other benefit plan for the individuals described above.
* Any state, county, city or any instrumentality, department, authority or
agency of these entities which is prohibited by applicable investment laws
from paying a sales charge or commission when it purchases shares of any
registered investment management company.*
* A bank, trust company, credit union, savings institution or other
depository institution, its trust departments or common trust funds if it is
purchasing $1 million or more for non-discretionary customers or accounts.*
* A broker, dealer or registered investment adviser that has entered into an
agreement with John Hancock Funds providing specifically for the use of Fund
shares in fee- based investment products made available to their clients.
* A former participant in an employee benefit plan with John Hancock funds,
when s/he withdraws from his/her plan and transfers any or all of his/her
plan distributions directly to the Fund.
* For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A shares of the Fund may also be purchased without a sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
Contingent Deferred Sales Charge Alternative--Class B Shares. Class B shares
are offered at net asset value per share without a sales charge, so that your
entire initial investment will go to work at the time of purchase. Class B
shares redeemed within six years of purchase will be subject to a CDSC at the
rates set forth below. This charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the
shares being redeemed. Accordingly, you will not be assessed a CDSC on
increases in account value above the initial purchase price, including shares
derived from dividend reinvestments.
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. It will be assumed that your redemption comes first from shares you
have held beyond the six-year CDSC redemption period or those you acquired
through reinvestment of dividends, and next from the shares you have held the
longest during the six-year period.
The CDSC is waived on redemptions in certain circumstances. See the
discussion "Waiver of Contingent Deferred Sales Charges" below.
Example:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time, the CDSC will be calculated as follows:
16
<PAGE> 82
<TABLE>
<CAPTION>
<S> <C>
* Proceeds of 50 shares redeemed at $12 per share $ 600
* Minus proceeds of 10 shares not subject to CDSC because they
were acquired through dividend reinvestment (10 X $12) -120
* Minus appreciation on remaining shares, also not subject to
CDSC (40 X $2) -80
* Amount subject to CDSC $ 400
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds
uses all or part of them to defray its expenses related to providing the Fund
with distribution services in connection with the sale of the Class B shares,
such as compensating Selling Brokers for selling these shares. The
combination of the CDSC and the distribution and service fees makes it
possible for the Fund to sell Class B shares without deducting a sales charge
at the time of the purchase.
The amount of the CDSC, if any, will vary depending on the number of years
from the time you purchase your Class B shares until the time you redeem
them. Solely for determining this holding period, any payments you make
during the month will be aggregated and deemed to have been made on the last
day of the month.
<TABLE>
<CAPTION>
Contingent Deferred Sales
Charge As a Percentage
Year in Which Class B Shares of Dollar Amount
Redeemed Following Purchase Subject to CDSC
<S> <C>
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
</TABLE>
A commission equal to 3.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for the provision
of personal and account maintenance services to shareholders during the
twelve months following the sale, and thereafter the service fee is paid in
arrears.
If you purchased Class B shares during 1992 or 1993, the applicable CDSC as a
percentage of the amount redeemed will be: 4% for redemptions during the
first year after purchase, 3.5% for redemptions during the second year, 3%
for redemptions during the third year, 2.5% for redemptions during the fourth
year, 2% for redemptions during the fifth year, 1% for redemptions during the
sixth year, and no CDSC for redemptions during the seventh year and
thereafter. If you purchased Class B shares before 1992, the applicable CDSC
as a percentage of the amount redeemed will be: 1% for redemptions during the
third, fourth and fifth years after purchase and no CDSC for redemptions
during the sixth year and thereafter.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to CDSC,
unless indicated otherwise in the circumstances defined below:
* Redemptions of Class B shares made under a Systematic Withdrawal Plan (see
"How To Redeem Shares"), as long as your annual redemptions do not exceed 10%
of your account value at the time you established your Systematic Withdrawal
Plan and 10% of the value of subsequent investments (less redemptions) in
that account at the time you notify Investor Services. This waiver does not
apply to Systematic Withdrawal Plan redemptions of Class A shares that are
subject to a CDSC.
17
<PAGE> 83
* Redemptions made to effect distributions from an Individual Retirement
Account either before or after age 59-1/2, as long as the distributions are
based on your life expectancy or the joint-and-last survivor life expectancy
of you and your beneficiary. These distributions must be free from penalty
under the Code.
* Redemptions made to effect mandatory distributions under the Code after age
70-1/2 from a tax-deferred retirement plan.
* Redemptions made to effect distributions to participants or beneficiaries
from certain employer-sponsored retirement plans including those qualified
under Section 401(a) of the Code, custodial accounts under Section 403(b)(7)
of the Code and deferred compensation plans under Section 457 of the Code.
The waiver also applies to certain returns of excess contributions made to
these plans. In all cases, the distributions must be free from penalty under
the Code.
* Redemptions due to death or disability.
* Redemptions made under the Reinvestment Privilege, as described in
"Additional Services and Programs" of this Prospectus.
* Redemptions made pursuant to the Fund's right to liquidate your account if
you own fewer than 50 shares.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you must
notify Investor Services either directly or through your Selling Broker at
the time you make your redemption. The waiver will be granted once Investor
Services has confirmed that you are entitled to the waiver.
Conversion of Class B Shares.
Your Class B shares and an appropriate portion of reinvested dividends on
those shares will be converted into Class A shares automatically at the end
of the month eight years after the shares were purchased, resulting in lower
annual distribution fees. If you exchanged Class B shares into the Fund from
another John Hancock fund, conversion will be based on the time you purchased
the shares in the original fund. The Fund has been advised that the
conversion of Class B shares to Class A shares of the Fund should not be
taxable for Federal income tax purposes and should not change a shareholder's
tax basis or tax holding period for the converted shares.
HOW TO REDEEM SHARES
To assure acceptance of your redemption request, please follow these
procedures.
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next NAV calculated after your redemption
request is received in good order by Investor Services less any applicable
CDSC. The Fund may hold payment until reasonably satisfied that investments
that were recently made by check or Invest-by- Phone have been collected
(which may take up to 10 calendar days).
18
<PAGE> 84
Once your shares are redeemed, the Fund generally sends you payment on the
next business day. When you redeem your shares, you may realize a taxable
gain or loss depending usually on the difference between what you paid for
them and what you receive for them, subject to certain tax rules. Under
unusual circumstances, the Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities laws.
<TABLE>
<CAPTION>
<S> <C>
By Telephone All Fund shareholders are automatically eligible for the telephone redemption
privilege. Call 1-800-225-5291, from 8:00 A.M. to 4:00 P.M. (New York time),
Monday through Friday, excluding days on which the New York Stock Exchange is
closed. Investor Services employs the following procedures to confirm that
instructions received by telephone are genuine. Your name, the account number,
taxpayer identification number applicable to the account and other relevant
information may be requested. In addition, telephone instructions are recorded.
You may redeem up to $100,000 by telephone, but the address on the account must
not have changed for the last 30 days. A check will be mailed to the exact
name(s) and address shown on the account.
If reasonable procedures, such as those described above, are not followed, the
Fund may be liable for any loss due to unauthorized or fraudulent telephone
instructions. In all other cases, neither the Fund nor Investor Services will
be liable for any loss or expense for acting upon telephone instructions made
in accordance with the telephone transaction procedures mentioned above.
Telephone redemption is not available for IRAs or other tax-qualified
retirement plans or shares of the Fund that are in certificated form. During
periods of extreme economic conditions or market changes, telephone requests
may be difficult to implement due to a large volume of calls. During these
times shareholders should consider placing redemption requests in writing or
using EASI-LINE. EASI-LINE's telephone number is 1-800-338-8080.
By Wire If you have a telephone redemption form on file with the Fund, redemption
proceeds of $1,000 or more can be wired on the next business day to your
designated bank account and a fee (currently $4.00) will be deducted. You may
also use electronic funds transfer to your assigned bank account and the funds
are usually collectable after two business days. Your bank may charge a fee for
this service. Redemptions of less than $1,000 will be sent by check or
electronic funds transfer.
This feature may be elected by completing the "Telephone Redemption" section on
the Account Privileges Application that is included with the Prospectus.
In Writing Send a stock power or "letter of instruction" specifying the name of the Fund,
the dollar amount or the number of shares to be redeemed, your name, class of
shares, your account number, and the additional requirements listed below that
apply to your particular account.
By Check You may elect the checkwriting option on the account application, which allows
(Class A you to write checks in amounts from a minimum of $100. Checks may not be
shares written against shares in your account which have been purchased within the
only) last 15 days, except for shares purchased by wire transfer (which are
immediately available), or for Fund shares that are in certificate form.
Expenses relating to checkwriting are borne by the Fund.
19
<PAGE> 85
You should make sure that there are sufficient shares in the account to cover
the amount of any check drawn, since the net asset value of shares will
fluctuate. If insufficient shares are in the account, the check will be
returned marked "insufficient funds" and no shares will be redeemed.
It is not possible to determine in advance the total value of your account so
as to write a check for the value of the entire account because dividends
declared on shares held in the account or prior redemptions and possible
changes in net asset value may cause the account to change in amount.
Accordingly, you should not close your account by writing a check. Shareholders
may not maintain a Systematic Withdrawal Plan and utilize the checkwriting
service at the same time.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Type of Registration Requirements
Individual, Joint Tenants, Sole
Proprietorship, Custodial A letter of instruction signed (with titles where applicable) by all
(Uniform Gifts or Transfer to persons authorized to sign for the account, exactly as it is
Minors Act), General Partners registered with the signature(s) guaranteed.
Corporation, Association A letter of instruction and a corporate resolution, signed by
person(s) authorized to act on the account, with the signature(s)
guaranteed.
Trusts A letter of instruction signed by the Trustee(s) with the signature
guaranteed. (If the Trustee's name is not registered on your account,
also provide a copy of the trust document, certified within the last
60 days.)
If you do not fall into any of these registration categories please call 1-800-225-5291 for further instructions.
Who may guarantee
your signature.
A signature guarantee is a widely accepted way to protect you and the Fund by verifying the signature on your request.
It may not be provided by a notary public. If the net asset value of the shares redeemed is $100,000 or less, John
Hancock Funds may guarantee the signature. The following institutions may provide you with a signature guarantee,
provided that the institution meets credit standards established by Investor Services: (i) a bank; (ii) a securities
broker or dealer, including a government or municipal securities broker or dealer, that is a member of a clearing
corporation or meets certain net capital requirements; (iii) a credit union having authority to issue signature
guarantees; (iv) a savings and loan association, a building and loan association, a cooperative bank, a federal
savings bank or association; or (v) a national securities exchange, a registered securities exchange or a clearing
agency.
Through Your
Broker
Your broker may be able to initiate the redemption. Contact your broker for instructions.
Additional information about redemptions.
If you have certificates for your shares, you must submit them with your stock power or a letter of instruction.
Unless you specify to the contrary, any outstanding Class A shares will be redeemed before Class B shares. You
may not redeem certificated shares by telephone.
Due to the proportionately high cost of maintaining smaller accounts, the Fund reserves the right to redeem at net
asset value all shares in an account which holds fewer than 50 shares (except accounts under retirement plans)
and to mail the proceeds to the shareholder, or the transfer agent may impose an annual fee of $10.00. No account
will be involuntarily redeemed or additional fee imposed, if the value of the account is in excess of the Fund's
minimum initial investment. No CDSC will be imposed on any involuntary redemption of shares.
Shareholders will be notified before these redemptions are to be made or this fee is imposed and will have 30 days
to purchase additional shares to bring their account balance up to the required minimum. Unless the number of shares
acquired by further purchases and dividend reinvestments, if any, exceeds the number of shares redeemed, repeated
redemptions from a smaller account may eventually trigger this policy.
</TABLE>
[/R]
20
<PAGE> 86
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege
You may exchange shares of the Fund for shares of the same class in another
John Hancock fund.
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of
investment goals. Contact your registered representative or Selling Broker
and request a prospectus for the John Hancock funds that interest you. Read
the prospectus carefully before exchanging your shares. You can exchange
shares of each class of the Fund only for shares of the same class of another
John Hancock fund. For this purpose, John Hancock funds with only one class
of shares will be treated as Class A whether or not they have been so
designated.
Exchanges between funds which are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is
imposed. Class B shares of the Fund which are subject to a CDSC may be
exchanged for Class B shares of another John Hancock fund without incurring
the CDSC; however, the shares will be subject to the CDSC schedule of the
shares acquired (except shares exchanged for John Hancock Short-Term
Strategic Income Fund and John Hancock Limited Term Government Fund which
will be subject to the initial Fund's CDSC). For purposes of computing the
CDSC payable upon redemption of shares acquired in an exchange, the holding
period of the original shares is added to the holding period of the shares
acquired in an exchange.
However, if you exchange Class B shares purchased prior to January 1, 1994
for Class B shares of any other John Hancock fund, you will be subject to the
CDSC schedule that was in effect at your initial purchase date.
You may exchange Class B shares of the Fund into shares of John Hancock Cash
Management Fund at net asset value. However, you will continue to be subject
to a CDSC upon redemption. The rate of the CDSC will be the rate in effect on
the original fund at the time of the exchange.
The Fund reserves the right to require that you keep previously exchanged
shares (and reinvested dividends) in the Fund for 90 days before you are
permitted a new exchange. The Fund may also terminate or alter the terms of
the exchange privilege, upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and
the purchase of shares in another for Federal income tax purposes. An
exchange may result in a taxable gain or loss.
When you make an exchange, your account registration in both the old and new
account must be identical. The exchange privilege is only available in states
where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers
and investment advisers may exchange their clients' Fund shares, subject to
the terms of those agreements and John Hancock Funds right to reject or
suspend those exchanges at any time. Because of the restrictions and
procedures under those agreements, the exchanges may be subject to timing
limitations and other restrictions that do not apply to exchanges requested
by shareholders directly, as described above.
Because Fund performance and shareholders can be hurt by excessive trading,
the Fund reserves the right to terminate the exchange privilege for any
person or group that, in John Hancock Funds' judgment, is involved in a
pattern of exchanges that coincide with
21
<PAGE> 87
a "market timing" strategy that may disrupt the Fund's ability to invest
effectively according to its investment objective and policies, or might
otherwise affect the Fund and its shareholders adversely. The Fund may also
temporarily or permanently terminate the exchange privilege for any person
who makes seven or more exchanges out of the Fund per calendar year. Accounts
under common control or ownership will be aggregated for this purpose.
Although the Fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
By Telephone
1. When you fill out the application for your purchase of Fund shares, you
automatically authorize exchanges by telephone unless you check the box
indicating that you do not wish to authorize telephone exchanges.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give the telephone
representative.
3. Investors Services employs the following procedures to confirm that
instructions received by telephone are genuine. Your name, the account
number, taxpayer identification number applicable to the account and other
relevant information may be requested. In addition, telephone instructions
are recorded.
In Writing
1. In a letter request an exchange and list the following:
- --the name and class of the fund whose shares you currently own
- --your account number
- --the name(s) in which the account is registered
- --the name of the fund in which you wish your exchange to be invested
- --the number of shares, all shares or the dollar amount you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
Reinvestment Privilege
If you redeem shares of the Fund, you may be able to reinvest the proceeds in
the Fund or another John Hancock Fund without paying an additional sales
charge.
1. You will not be subject to a sales charge on Class A shares that are
reinvested in any John Hancock fund that is otherwise subject to a sales
charge as long as you reinvest within 120 days from the redemption date. If
you paid a CDSC upon a redemption, you may reinvest at net asset value in the
same class of shares from which you redeemed within 120 days. Your account
will be credited with the amount of the CDSC previously charged, and the
reinvested shares will continue to be subject to a CDSC. For purposes of
computing the CDSC payable upon a subsequent redemption, the holding period
of the shares acquired through reinvestment will include the holding period
of the redeemed shares.
2. Any portion of your redemption may be reinvested in Fund shares or in any
other John Hancock fund, subject to the minimum investment limit of that
fund.
3. To reinvest, you must notify Investor Services in writing. Include the
Fund's name, account number and class from which your shares were originally
redeemed.
22
<PAGE> 88
Systematic Withdrawal Plan
You can pay routine bills from your account or make periodic disbursements
from your retirement account to comply with IRS regulations.
1. You may elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You can
also obtain the application by calling your registered representative or by
calling 1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semi-annually
or on a selected monthly basis to yourself or any other designated payee.
4. There is no limit on the number of payees you may authorize, but all
payments must be made at the same time or intervals.
5. It is not advantageous to maintain a Systematic Withdrawal Plan
concurrently with purchases of additional Class A or Class B shares, because
you may be subject to initial sales charges on your purchases of Class A
shares or to a CDSC on your redemptions of Class B shares. In addition, your
redemptions are taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks, or if deposits to a bank account are returned for any reason.
Monthly Automatic Accumulation Program (MAAP)
You can make automatic investments and simplify your investing.
1. You may authorize an investment to be automatically drawn each month from
your bank for investment in Fund shares under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.
2. You may also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
3. You may terminate your Monthly Automatic Accumulation Program at any time.
4. There is no charge to your for this program, and there is no cost to the
Fund.
5. If you have payments being withdrawn from a bank account and we are
notified that the account has been closed, withdrawals will be discontinued.
Group Investment Program
Organized groups of at least four persons may establish accounts.
1. An individual account will be established for each participant, but the
sales charge for Class A shares will be based on the aggregate dollar amount
of all participants' investments. To determine how to qualify for the
program, contact your registered representative or call 1-800-225-5291.
2. The initial aggregate investment of all participants in the group must be
at least $250.
3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum, and you may terminate the program at any
time.
Retirement Plans
1. You may use the Fund as a funding medium for various types of qualified
retirement plans, including Individual Retirement Accounts, Keogh Plans
(H.R.10), Pension and Profit Sharing Plans (including 401(k) Plans), Tax
Sheltered Annuity Retirement Plans (403(b) or TSA Plans) and 457 Plans.
2. The initial investment minimum or aggregate minimum for any of the above
plans is $500. However, accounts being established as group IRA, SEP, SARSEP,
TSA, 401(k) and 457 Plans will be accepted without an initial minimum
investment.
23
<PAGE> 89
JOHN HANCOCK SOVEREIGN
U.S. GOVERNMENT INCOME FUND
Investment Adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Principal Distributor
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Custodian
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
Transfer Agent
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
Independent Auditors
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchangecall 1-800-225-5291
Invest-by-Phone
Telephone Redemption
For: TDD call 1-800-554-6713
JHD-0200P 3/95 (Recycled Logo) Printed on recycled paper using soybean ink
JOHN HANCOCK
SOVEREIGN U.S.
GOVERNMENT INCOME FUND
Class A and Class B Shares
Prospectus
March 1, 1995
A mutual fund seeking to provide as high a level of income as is consistent
with long- term total return by investing in securities issued, guaranteed or
otherwise backed by the United States Government, its agencies or
instrumentalities.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Telephone 1-800-225-5291
24
<PAGE> 90
JOHN HANCOCK
SOVEREIGN U.S.
GOVERNMENT INCOME FUND
CLASS C SHARES
PROSPECTUS
MARCH 1, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Expense Information 2
The Fund's Financial Highlights 3
Investment Objective and Policies 4
Organization and Management of the Fund 7
The Fund's Expenses 8
Dividends and Taxes 8
Performance 9
Who Can Buy Class C Shares 9
How to Buy Class C Shares 10
Class C Share Price 11
How to Redeem Class C Shares 12
Additional Services and Programs 14
</TABLE>
This Prospectus sets forth information about John Hancock Sovereign U.S.
Government Income Fund (the "Fund"), a diversified series of Freedom
Investment Trust (the "Trust"), that you should know before investing. Please
read and retain it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC"). You can obtain a copy of the Statement of
Additional Information, dated March 1, 1995, and incorporated by reference
into this Prospectus, free of charge by writing or telephoning: John Hancock
Investor Services Corporation, Attention: Institutional Services, P.O. Box
9277, Boston, Massachusetts 02205-9277, 1-800-437-9312.
Shares of the Fund 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 91
EXPENSE INFORMATION
The purpose of the following information is to help you understand the
various fees and expenses you will bear, directly or indirectly when you
purchase Fund shares. The operating expenses included in the table and
hypothetical example below are based on fees and expenses (excluding 12b-1
fees) for the Class A and Class B shares of the Fund for the fiscal year
ended October 31, 1994. Actual fees and expenses of Class C shares in the
future may be greater or less than those shown.
<TABLE>
<CAPTION>
Class C
Shares*
<S> <C>
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases (as a percentage
of offering price) None
Maximum sales charge imposed on reinvested dividends None
Maximum deferred sales charge None
Redemption fee+ None
Exchange fee None
Annual Fund Operating Expenses
(As a percentage of average net assets)
Management fee 0.50%
Other expenses 0.19%
Total Fund operating expenses 0.69%
<FN>
* The information set forth in the foregoing table relates only to Class C
shares of the Fund.
+ Redemption by wire fee (currently $4.00) not included.
</FN>
</TABLE>
For further information on how to purchase shares, see "How to Buy Class C
Shares." For further information on management fees, see "The Fund's
Expenses."
<TABLE>
<CAPTION>
Example: Class C Shares 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated
period of years on a hypothetical $1,000 investment
assuming a 5% annual return: $7 $22 $38 $86
</TABLE>
(This example should not be considered a representation of past or future
expenses or future investment returns. Actual expenses of Class C shares may
be greater or less than those shown.)
The management fee referenced above is more fully explained in this
Prospectus under the caption "The Fund's Expenses" and in the Statement of
Additional Information under the caption "Investment Advisory and Other
Services." In addition to Class C shares, the Fund also offers Class A and B
shares. Class A and B shares are available to individual investors at net
asset value plus a maximum initial sales charge of 4.50% for A shares and a
maximum contingent deferred sales charge of 5.00% for B shares. Class A and B
shares are subject to ongoing distribution and service fees of 0.30% and
1.00%, respectively, of the Fund's average daily net assets in accordance
with plans adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940. The minimum initial investment in Class A or B shares is $1,000 ($250
for group investments of $500 for retirement plans). Generally, investors who
are eligible to purchase Class C shares are able to purchase A or B shares.
If you are considering a purchase of Class A or B shares, please call John
Hancock Investor Services Corporation ("Investor Services") at 1-800-
437-9312 for more information about eligibility, instructions for purchase by
check or wire and an Account Application.
Class A and B shares generally have operating expenses similar to Class C
shares, except for the sales charge and distribution and transfer agent fees.
Class A and B shareholders are eligible for a reinvestment privilege,
systematic withdrawal plan, monthly automatic accumulation program and use of
the Fund as a funding vehicle for a retirement plan. Investors wishing
information about any of these services and expenses should contact Investor
Services at 1-800-437-9312.
Barry Evans is Vice President and Portfolio Manager of the Fund and also
leads a team of managers on several other Hancock funds. Mr. Evans has
managed bond funds since he joined John Hancock in 1986.
<PAGE> 92
THE FUND'S FINANCIAL HIGHLIGHTS
The following financial highlights have been examined by Price Waterhouse
LLP, the Fund's independent accountants, whose unqualified report is included
in the Fund's 1994 Annual Report and is included in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to shareholders which may be
obtained free of charge by writing or telephoning John Hancock Investor
Services Corporation ("Investor Services"), at the address or telephone
number listed on the front page of this Prospectus.
Selected data for each class of shares outstanding throughout each period
indicated is as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
Period
ended
March 31,
1994 1993 1992(a) 1991 1990 1989 1988 1987(d) 1987(e)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
PER SHARE
OPERATING
PERFORMANCE
Net Asset
Value,
Beginning of
Period $10.89 $10.29 $10.51
Net Investment
Income 0.65 0.68** 0.64
Net Realized
and Unrealized
Gain (Loss) on
Investments and
Financial
Futures
Contracts (1.34) 0.61 (0.22)
Total from
Investment
Operations (0.69) 1.29 0.42
Less
Distributions:
Dividends from
Net Investment
Income (0.65) (0.68) (0.64)
Distributions
from Net
Realized Gain
on Investments
Sold (0.31) (0.01) --
Total
Distributions (0.96) (0.69) (0.64)
Net Asset
Value, End of
Period $ 9.24 $10.89 $10.29
Total
Investment
Return at Net
Asset Value (6.66%) 12.89% 4.93%(c)
RATIOS AND
SUPPLEMENTAL
DATA
Net Assets, End
of Period
(000's omitted) $315,372 $375,416 $350,907
Ratio of
Expenses to
Average Net
Assets 1.23% 1.30% 1.06%*
Ratio of Net
Investment
Income to
Average Net
Assets 6.62% 6.47% 7.11%*
Portfolio
Turnover Rate 127% 273% 140%
CLASS B
PER SHARE
OPERATING
PERFORMANCE
Net Asset
Value,
Beginning of
Period $10.88 $10.28 $10.29 $ 9.83 $10.01 $ 9.73 $ 9.45 $10.28 $10.00
Net Investment
Income 0.61 0.66** 0.76 0.85 0.85+ 0.81+ 0.78+ 0.48+ 0.56
Net Realized
and Unrealized
Gain (Loss) on
Investments and
Financial
Futures
Contracts (1.34) 0.61 -- 0.51 (0.25) 0.25 0.28 (0.75) 0.36
Total from
Investment
Operations (0.73) 1.27 0.76 1.36 0.60 1.06 1.06 (0.27) 0.92
Less
Distributions:
Dividends from
Net Investment
Income (0.61) (0.66) (0.77) (0.90) (0.78) (0.77) (0.77) (0.48) (0.57)
Distributions
from Net
Realized Gain
on Investments
Sold (0.31) (0.01) -- -- -- (0.01) (0.01) (0.08) (0.07)
Total
Distributions (0.92) (0.67) (0.77) (0.90) (0.78) (0.78) (0.78) (0.56) (0.64)
Net Asset
Value, End of
Period $ 9.23 $10.88 $10.28 $10.29 $ 9.83 $10.01 $ 9.73 $ 9.45 $10.28
Total
Investment
Return at Net
Asset Value (f) (7.05%) 12.66% 7.58% 14.46% 6.24% 11.52% 11.53 % 3.70% 2.61%
RATIOS AND
SUPPLEMENTAL
DATA
Net Assets, End
of Period
(000's omitted) $196,899 $244,133 $197,032 $164,347 $133,778 $144,756 $161,163 $170,030 $164,001
Ratio of
Expenses to
Average Net
Assets+ 1.64% 1.51% 1.55% 1.51% 1.54% 1.35% 1.29% 1.24%* 1.26%*
Ratio of
Adjusted
Expenses to
Average Net
Assets (b) n/a n/a n/a n/a 1.55% 1.58% 1.35% 1.32%* n/a
Ratio of Net
Investment
Income to
Average Net
Assets+ 6.19% 6.23 % 7.35% 8.53% 8.54 % 8.34% 8.09% 7.94%* 7.56%*
Ratio of
Adjusted Net
Investment
Income to
Average Net
Assets (b) n/a n/a n/a n/a 8.53 % 8.11% 8.03% 7.86%* n/a
Portfolio
Turnover Rate 127% 273% 140% 62% 63% 45% 79% 83%* 108%*
+Expense
Reimbursement
Per Share n/a n/a n/a n/a $ 0.01 $ 0.02 $ 0.01 $ 0.01 n/a
</TABLE>
* On an annualized basis. ** Net investment income per share has been
calculated on average shares outstanding during the year. (a) Class A shares
commenced operations on January 3, 1992. (b) Percentage on an unreimbursed
basis reflect what the actual ratio of expenses to average net assets and the
ratio of net investment income to average net assets would have been. (c)
Total return for the period is on an annualized basis. (d) From April 1,
1987. (e) From commencement of operations, June 5, 1986. (f) Without
reimbursement, total return would have been lower.
<PAGE> 93
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective
is to provide as high a level of
income as is consistent with
long-term total return by
investors in Government
Securities.
The Fund's investment objective is to provide as high a level of income as is
consistent with long-term total return by investing in securities issued,
guaranteed or otherwise backed by the United States government, its agencies
or instrumentalities ("Government Securities"). There are market fluctuations
and risks in any investment and therefore there is no assurance that the Fund
will achieve its investment objective.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in Government Securities. The Government Securities which may be
purchased by the Fund include but are not limited to (i) U.S. Treasury
obligations: Treasury Bills (maturities of one year or less), Treasury Notes
(maturities of one to ten years) and Treasury Bonds (generally maturities of
greater than ten years); and (ii) obligations issued, guaranteed or otherwise
backed by U.S. Government agencies and instrumentalities which are supported
by any of the following: (a) the full faith and credit of the U.S. Treasury
(such as obligations of the Government National Mortgage Association (GNMA),
the General Services Administration and the Federal Maritime Administration),
(b) the right of the issuer to borrow an amount limited to a specific line of
credit from the U.S. Treasury (such as obligations of Federal Home Loan
Banks, the Federal Home Loan Mortgage Corporation and the U.S. Postal
Service) or (c) the credit of the agency or instrumentality (such as
obligations of the Federal National Mortgage Association and Federal Farm
Credit System). Up to 5% of the Fund's net assets may be invested in
Government Securities, denominated in foreign currencies.
The composition and weighted average maturity of the Fund's portfolio will
vary from time to time, based upon the determination of John Hancock
Advisers, Inc. (the "Adviser") of how best to further the Fund's investment
objective.
The Fund may invest in Government Securities of all maturities: short-term,
intermediate-term and long-term. The Fund may also enter into repurchase
agreements. The Fund may also, for temporary defensive purposes and without
limitation, hold cash and invest in short-term (less than one year)
instruments, including securities rated in the three highest categories by
Standard & Poor's Ratings Group or Moody's Investors Service, Inc. (i.e.,
rated at the time of purchase AAA, AA or A by Standard & Poor's or Aaa, Aa or
A by Moody's) debt securities of corporations (such as commercial paper,
notes, bonds or debentures), certificates of deposit of domestic banks, or
repurchase agreements with respect to Government Securities, including
repurchase agreements that mature in more than seven days. In the event such
securities are subsequently downgraded below such ratings, the Adviser will
consider such an event in its determination of whether the Fund should
continue to hold the securities. The Fund may also invest in collateralized
mortgage-backed obligations that are issued or sponsored by a governmental
agency. See Appendix A to the Statement of Additional Information for a
description of the various ratings of investment grade debt securities.
Repurchase agreements may also be used as one of the Fund's normal investment
techniques.
Options Transactions. The Fund may also purchase put options on Government
Securities provided that no more than 5% of its assets may be invested in
such options. The Fund may write (sell) covered call and put options on all
or any part of the Fund's portfolio of Government Securities. The Fund may
deal in options on Government Securities listed
<PAGE> 94
for trading on a national securities exchange and traded over-the-counter.
The Fund will engage in over-the-counter options only with member banks of
the Federal Reserve System and primary dealers in U.S. Government securities.
The staff of the SEC considers over-the-counter options to be illiquid except
under prescribed conditions which are discussed in the Statement of
Additional Information.
Futures Contracts and Options on Futures. The Fund may buy and sell financial
futures contracts and options on futures to hedge against the effects of
fluctuations in securities prices, interest rates, currency exchange rates
and other market conditions and for speculative purposes. The potential loss
incurred by the Fund in writing options on futures is unlimited and may
exceed the amount of the premium received. The Fund's futures contracts and
options on futures will be traded on a U.S. commodity exchange or board of
trade. The Fund will not engage in a futures or options transaction for
speculative purposes, if immediately thereafter, the sum of initial margin
deposits on existing positions and premiums required to establish speculative
positions in futures contracts and options on futures would exceed 5% of the
Fund's net assets. The Fund intends to comply with the CFTC regulations with
respect to its speculative transactions. These regulations are discussed
further in the Statement of Additional Information.
Restricted Securities. The Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to
Rule 144A under the Securities Act of 1933 (the "Securities Act"). The
Trustees will monitor the Fund's investments in these securities, focusing on
certain factors including valuation, liquidity and availability of
information. Purchase of other restricted securities are subject to an
investment restriction limiting all illiquid securities held by the Fund to
not more than 15% of the Fund's net assets.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
Government Securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities. When the Fund
lends portfolio securities, there is a risk that the borrower may fail to
return the loaned securities. As a result, the Fund may incur a loss or, in
the event of the borrower's bankruptcy, the Fund may be delayed in or
prevented from liquidating the collateral. It is a fundamental policy of the
Fund not to lend portfolio securities having a total value in excess of 30%
of its total assets.
Borrowing. The Fund may borrow from banks to increase its portfolio holdings
of Government Securities. Such borrowings will be unsecured but the Fund will
be required to maintain continuous asset coverage of not less than 300% with
respect to such borrowings. If such asset coverage should decline to less
than 300% due to market fluctuations or other reasons, the Fund may be
required to sell some of its portfolio holdings within three days in order to
reduce the Fund's debt and restore the 300% asset coverage, even though it
may be disadvantageous from an investment standpoint to sell securities at
that time. Leveraging will exaggerate any increase or decrease in the net
asset value of the Fund's portfolio. The Fund may also borrow money for
temporary extraordinary or emergency purposes. Such borrowings may not exceed
5% of the value of the Fund's total assets when the loan is made. The Fund
may pledge up to 10% of the lesser of cost or value of its total assets to
secure such borrowings.
<PAGE> 95
Repurchase Agreements, Forward Commitments and When-Issued Securities. The
Fund may enter into repurchase agreements and may purchase securities on a
forward commitment or when-issued basis. In a repurchase agreement, the Fund
buys a security subject to the right and obligation to sell it back to the
seller at a higher price. These transactions must be fully collateralized at
all times, but involve some credit risk to the Fund if the other party
defaults on its obligation and the Fund is delayed in or prevented from
liquidating the collateral. The Fund will segregate in a separate account
cash or liquid, high grade debt securities equal in value to its forward
commitments and when-issued securities. Purchasing debt securities for future
delivery or on a when-issued basis may increase the Fund's overall investment
exposure and involves a risk of loss if the value of the securities declines
before the settlement date.
The Fund follows certain
policies, which may help reduce
investment risk.
The Fund has adopted certain investment restrictions which are enumerated in
detail in the Statement of Additional Information where they are classified
as fundamental or non-fundamental. The Fund's investment objective and those
investment restrictions designated as fundamental may not be changed without
shareholder approval. The Fund's non-fundamental investment policies and
restrictions, however, may be changed by a vote of the Trustees without
shareholder approval. The Fund's portfolio turnover rates for recent periods
are shown in the section "The Fund's Financial Highlights."
Risk Factors and Special Considerations. Government Securities of the type
included in the Fund's portfolio have historically involved minimal credit
risk. However, the prices of such securities are inversely affected by
changes in interest rate levels. A decrease in rates generally produces an
increase in the value of the Fund's investments while an increase in rates
generally reduces the value of these investments.
Mortgage-backed securities 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 the Fund's portfolio at the time such
payments are received by the Fund 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 the 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.
In a rising interest rate environment, a declining prepayment rate will
extend the average life of many mortgage-backed securities. Extending the
average life of a mortgage-backed security increases the risk of depreciation
due to future increases in market interest rates.
The principal of and/or interest on certain Government Securities which may
be purchased by the Fund could be increased or diminished as a result of
changes in the value of the U.S. dollar relative to the value of foreign
currencies. The value of such portfolio securities denominated in foreign
currencies may be affected favorably or unfavorably by changes in the
exchange rate between foreign currencies and the U.S. dollar. In order to
limit the risk inherent in this type of security, it is the current policy
<PAGE> 96
of the Fund not to purchase any such security if after such purchase more
than 5% of its net assets (taken at market value) would be invested in
securities denominated in foreign currencies.
If the Fund writes a substantial number of call options and the market prices
of the underlying securities appreciate, or if the Fund writes a substantial
number of put options and the market prices of the underlying securities
depreciate, there may be a very substantial turnover of the portfolio. A high
rate of portfolio turnover involves correspondingly higher brokerage expense
to the Fund and may, under certain circumstances, make it more difficult for
the Fund to qualify as a regulated investment company under the Internal
Revenue Code. See the Statement of Additional Information for a further
discussion of these special considerations.
Brokers are chosen based on best
price and execution.
When choosing brokerage firms to carry out the Fund's transactions, the
Adviser gives primary consideration is execution at the most favorable
prices, taking into account the broker's professional ability and quality of
service. Consideration may also be given to the broker's sales of shares of
the Fund. Pursuant to procedures determined by the Trustees, the Adviser may
place securities transactions with brokers affiliated with the Adviser. These
brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc.
and Sutro & Company Inc., which are indirectly owned by John Hancock Mutual
Life Insurance Company, which in turn indirectly owns the Adviser.
The Trustees elect officers and
retain the investment adviser who
is responsible for the day-to-day
operations of the Fund, subject
to the Trustees' policies and
supervision.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is a diversified series of Freedom Investment Trust, an open-end
management investment company organized as a Massachusetts business trust in
1984. The Trust reserves the right to create and issue a number of series of
shares, or funds or classes thereof, which are separately managed and have
different investment objectives. As of the date of this Prospectus, the Fund
has authorized Class A shares, Class B shares and Class C shares, all of
which shares have equal rights as to voting, redemption, dividends and
liquidation, except that Class A and Class B shares have exclusive voting
rights with respect to their respective Rule 12b-1 distribution plans. The
Trust is not required to and does not intend to hold annual meetings of
shareholders, although special meetings may be held for such purposes as
electing or removing Trustees, changing fundamental policies or approving a
management contract. The Trust, under certain circumstances, will assist in
shareholder communications with other shareholders.
John Hancock Advisers, Inc.
advises investment companies
having a total asset value of
more than $13 billion.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary
of the John Hancock Mutual Life Insurance Company, a financial services
company. It provides the Fund, and other investment companies in the John
Hancock group of funds, with investment research and portfolio management
services. John Hancock Funds, Inc. ("John Hancock Funds") distributes shares
for all of the John Hancock funds directly and through selected
broker-dealers ("Selling Brokers"). Freedom Distributors Corporation, a
co-distributor of the Fund, is, along with John Hancock Funds, an indirect
subsidiary of John Hancock Mutual Life Insurance Company. Certain Fund
officers are also officers of the Adviser and John Hancock Funds. Pursuant to
an order granted by the Securities and Exchange Commission, the Fund has
adopted a deferred compensation plan for its independent Trustees which
allows Trustees' fees to be invested by the Fund in other John Hancock funds.
<PAGE> 97
Barry Evans is Vice President and portfolio manager of the Fund. Prior to
joining the Adviser in 1984, Ms. Hodsdon was senior investment officer for
Boston Safe Deposit & Trust Company.
In order to avoid any conflict with portfolio trades for the Fund, the
Adviser and the Fund have adopted extensive restrictions on personal
securities trading by personnel of the Adviser and its affiliates. Some of
these restrictions are: preclearance 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. These
restrictions are a continuation of the basic principle that the interests of
the Fund and its shareholders come first.
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a fee to the
Adviser, which for the 1994 fiscal year was 0.50% of the Fund's average daily
net assets.
Expenses related to the distributions of Class A and Class B shares are borne
solely by Class A and Class B shares, respectively.
John Hancock Funds and Freedom Distributors Corporation (together, the
"Distributors"), serve as principal underwriters for the Fund pursuant to a
distribution agreement with the Trust and in that connection pay commissions
to Selling Brokers for the sale of Fund shares.
The Fund's total expenses for the year ended October 31, 1994 for Class A
shares and for Class B shares, respectively, were 1.23% and 1.64% of average
daily net asset value. No Class C shares were actually outstanding during
that period. Actual expenses of Class C shares in the future may be greater
or less.
DIVIDENDS AND TAXES
Dividends. The Fund generally declares daily and distributes monthly
dividends representing all or substantially all net investment income. The
Fund may distribute net realized short-term capital gains, and net long-term
capital gains, if any, annually after the close of the fiscal year (October
31).
Dividends are reinvested on the record date in additional shares of your
class unless you elect the option to receive them in cash. If you elect the
cash option and the U.S. Postal Service cannot deliver your checks, your
election will be converted to the reinvestment option.
Taxation. For investors who are not exempt from federal income taxes,
dividends from the Fund's net investment income, certain net foreign exchange
gains and net short-term capital gains are taxable to you as ordinary income
and dividends from the Fund's net long-term capital gains are taxable as
long-term capital gain. These dividends are taxable whether received in cash
or reinvested in additional Class C shares. Certain dividends may be paid in
January of a given year but may be taxable as if you received them the
previous December. The Fund will send you a statement by January 31 showing
the tax status of the dividends you received for the prior year.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). As a regulated investment company, the Fund will not
be subject to Federal income tax on any net investment income or net realized
capital gains distributed to its shareholders within the time period
prescribed by the Code.
<PAGE> 98
When you redeem (sell) or exchange shares, you may realize a taxable gain or
loss.
On the account application you must certify that your social security or
other taxpayer identification number you provide is correct and that you are
not subject to backup withholding of Federal income tax. If you do not
provide this information or are otherwise subject to this withholding, the
Fund may be required to withhold 31% of your dividends and the proceeds of
redemptions or exchanges.
In addition to Federal taxes, you may be subject to state and local taxes
with respect to your investment in and distributions from the Fund. A state
income (and possibly local income and/or intangible property) tax exemption
is generally available to the extent the Fund's distributions are derived
from interest on (or, in the case of intangibles taxes, the value of its
assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. The foregoing discussion relates to
U.S. investors that are not exempt from U.S. Federal income tax. Different
tax consequences will apply to plan participants, tax-exempt investors and
investors that are subject to tax deferral. Non-U.S. shareholders are also
subject to different tax treatment not described above. You should consult
your tax adviser for specific advice. Under the Code, a tax-exempt investor
in the Fund will not generally recognize unrelated business taxable income
from its investment in the Fund unless the tax-exempt investor incurred
indebtedness to acquire or continue to hold Fund shares and such indebtedness
remains unpaid.
PERFORMANCE
The Fund may advertise the yield
and total return on its Class C
shares.
Yield reflects the Fund's rate of income on portfolio investments as a
percentage of the Class C 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 Class C share on the last day of that period.
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, the Fund's yield may not equal
the income paid on Class C shares or the income reported in the Fund's
financial statements.
The Fund's total return on Class C shares shows the overall dollar or
percentage change in value of a hypothetical investment in the Fund, assuming
the reinvestment of all dividends in Class C shares. Cumulative total return
shows the performance of Class C shares over a period of time. Average annual
total return shows the cumulative return of the Class C shares of the Fund
divided by the number of years included in the period. Because average annual
total return tends to smooth out variations in the performance of the Class C
shares of the Fund, you should recognize that it is not the same as actual
year-to-year results.
Neither total return nor yield calculations with respect to Class C shares
reflect the imposition of any sales charge. The value of Class C shares of
the Fund, when redeemed, may be more or less than their original cost. Both
total return and yield are historical calculations and are not an indication
of future performance.
WHO CAN BUY CLASS C SHARES
Class C shares are available to
certain institutional investors.
In order to qualify to buy Class C shares of the Fund, you must qualify as
one of the following types of institutional investors: (i) Benefit plans
(other than self-directed plans) not affiliated with the Adviser which have
at least $25,000,000 in plan assets, a separate
<PAGE> 99
trustee vested with investment discretion and certain limitations on the
ability of the plan beneficiaries to access their plan investments without
incurring adverse tax consequences; or allow their participants to select
among one or more investment options ("participant-directed plans"); (ii)
Banks and insurance companies which are not affiliated with the Adviser
purchasing shares for their own account; (iii) Investment companies not
affiliated with the Adviser; (iv) Tax exempt retirement plans of the Adviser
and its affiliates, including affiliated brokers; and (v) Unit investment
trusts sponsored by John Hancock Funds and certain other sponsors and (vi)
existing full-service clients of John Hancock Mutual Life Insurance Company
who were group annuity contract holders as of September 1, 1994.
Participant-directed plans include but are not limited to 401(k), TSA and 457
Plans. If you qualify to purchase Class C Shares of the Fund, you will not be
permitted to purchase shares of any other class of the Fund.
HOW TO BUY CLASS C SHARES
Opening an account.
<TABLE>
<CAPTION>
The minimum initial investment is $1 million, except that this requirement may
be waived at the discretion of the Fund's officers. You may qualify for the
minimum investment if you invest more than $1 million in Class C shares of the
Fund and Class C shares of other funds in the John Hancock family of funds. This
is discussed in greater detail in the Statement of Additional Information.
Complete the application attached to the Prospectus.
<S> <C>
By Check 1. Make your check payable to John Hancock Investor Services
Corporation ("Investor Services").
2. Deliver the completed application and check to your registered
representative or Selling Broker or mail it directly to Investor
Services.
By Wire 1. Obtain an account number by contacting your registered
representative or Selling Broker, or by calling 1-800-437-9312.
2. Instruct your bank to wire funds:
First Signature Bank and Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Sovereign U.S. Government Income
Fund Class C shares
Your account number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative or Selling Broker, or mail it directly to Investor
Services.
By 1. Complete the "Invest-by-Phone" and "Bank Information" section
Telephone on the Account Privileges Application designating a bank account
from which your funds may be drawn. Note that in order to invest
by phone, your account must be in a bank or credit union that is a
member of the Automated Clearing House system (ACH). 2. After your
authorization form has been processed, you may purchase additional
Class C shares by calling Investor Services toll free at
1-800-437-9312. 3. Give the Fund Services representative the name
of the person(s) in which your account is registered, the Fund
name and your account number and the amount you wish to invest in
Class C shares. 4. Your investment normally will be credited to
your account the business day following your phone request.
</TABLE>
<PAGE> 100
<TABLE>
<C> <S>
By Check 1. Either fill out the stub attached to your account
statement or include a note with your investment listing the name
of the Fund and class of shares, your account number and the
name(s) in which the account is registered.
2. Make your check payable to John Hancock Investor Services
Corporation
3. Mail the account information and check to
John Hancock Investor Services Corporation
P.O. Box 9277
Boston, MA 02205-9277
or deliver it to your registered representative or Selling Broker.
By Wire Instruct your bank to wire funds to:
First Signature Bank and Trust
John Hancock Deposit Account No. 900000260
ABA No. 211475000
For credit to: John Hancock Sovereign U.S. Government Income Fund
Class C shares
Your Account Number
Name(s) under which account is registered
Other Requirements. All purchases must be made in U.S. dollars. Checks written
on foreign banks will delay purchases until U.S. funds are received, and a
collection charge may be imposed. Shares of the Fund are priced at the offering
price based on the net asset value computed after John Hancock Funds receives
notification of the dollar equivalent from the Fund's custodian bank. Wire
purchases normally take two or more hours to complete and, to be accepted the
same day, must be received by 4:00 p.m., New York time. Your bank may charge a
fee to wire funds. Telephone transactions are recorded to verify information.
Class C share certificates are not issued unless a request is made to Investor
Services.
</TABLE>
Buying additional Class C shares.
You will receive account
statements which you should keep
with your personal recordkeeping.
You will receive a statement of your account after any transaction that
affects your share balance or registration (statements related to
reinvestment of dividends and automatic investment/withdrawal plans will be
sent to you quarterly.) A tax information statement will be mailed to you by
January 31 of each year. You will be required to pay a fee to Fund Services
to obtain copies of your account statements for past periods.
CLASS C SHARE PRICE
The offering price of your Class
C shares is their net asset
value.
The net asset value per share ("NAV") of a Class C share is the value of one
Class C share. The NAV per share is calculated by dividing the net assets of
each class by the number of outstanding shares of that class. The NAV of each
class can differ in value. Securities in the 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 in accordance with
procedures approved by the Trustees. Short-term debt investments maturing
within 60 days are valued at amortized cost which approximates market value.
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 have been materially affected by events occurring
after the closing of a foreign market, assets are valued by a method that the
Trustees believes accurately reflects fair value.
The NAV of Class C shares 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 that the Exchange is open.
<PAGE> 101
Class C shares of the Fund are sold at the offering price based on the NAV
computed after your investment request is received in good order by John
Hancock Funds. If you buy shares of the Fund through a Selling Broker, the
Selling Broker must receive your investment before the close of regular
trading on the New York Stock Exchange and transmit it to John Hancock Funds
prior to its close of business to receive that day's offering price. There is
no sales charge imposed on the purchase of Class C shares. John Hancock
Funds, out of its own resources, may pay to a Selling Broker an annual
service fee up to 0.20% of the amount invested in Class C shares by these
clients.
A one-time payment of up to 0.15% of the amount invested in Class C shares
may be made by John Hancock Funds to a Selling Broker for sales of Class C
shares made by that Selling Broker. A person entitled to receive compensation
for selling shares of the Fund may receive different compensation with
respect to sales of Class A shares, Class B shares or Class C shares or any
additional future class of shares of the Fund.
HOW TO REDEEM CLASS C SHARES
To assure acceptance of your
redemption request, please follow
the procedures.
You may redeem all or a portion of your Class C shares on any business day.
Your Class C shares will be redeemed at the next NAV for Class C shares
calculated after your redemption request is received in good order by
Investor Services. The Fund may hold payment until reasonably satisfied that
investments that were made recently by check or Invest-by-Phone have been
collected (which may take up to 10 calendar days).
Once your Class C shares are redeemed, the Fund generally sends you payment
on the next business day. When you redeem your Class C shares, if you are
subject to tax, you may realize a taxable gain or loss depending usually on
the difference between what you paid for them and what you receive for them,
subject to certain tax rules. Under unusual circumstances, the Fund may
suspend redemptions or postpone payment for up to seven days or longer, as
permitted by Federal securities laws.
How to Redeem Class C Shares
<TABLE>
<CAPTION>
<S> <C>
By All shareholders of the Fund are automatically eligible for the
Telephone telephone redemption privilege. Call 1-800-437-9312, from 8:00
A.M. to 4:00 P.M. (New York time), Monday through Friday,
excluding days on which the New York Stock Exchange is closed.
Investor Services employs the following procedures to confirm
that instructions received by telephone are genuine. Your name,
the account number, taxpayer identification number applicable
to the account and other relevant information may be requested.
In addition, telephone instructions are recorded.
You may redeem up to $100,000, but the address on the account
must not have changed for the last thirty days. A check will be
mailed to the exact name(s) and address on the account. If
reasonable procedures, such as those described above, are not
followed, the Fund may be liable for any loss due to
unauthorized or fraudulent telephone instructions. In all other
cases, neither the Fund nor Investor Services will be liable
for any loss or expense for acting upon telephone instructions
made in accordance with the telephone transaction procedures
mentioned above.
Telephone redemption is not available for tax-qualified
retirement plans or Class C shares of the Fund that are in
certificated form.
During periods of extreme economic conditions or market
changes, telephone requests may be difficult to implement due
to a large volume of calls. During such times you should
consider placing redemption requests in writing or using
EASI-Line. EASI-Line's telephone number is 1-800-338-8080.
</TABLE>
<PAGE> 102
<TABLE>
<C> <S>
By Wire If you have a telephone redemption form on file with the
Fund, redemption proceeds of $1,000 or more can be wired on
the next business day to your designated bank account and a
fee (currently $4.00) will be deducted. You may also use
electronic funds transfer to your assigned bank account and
the funds are usually collectable after two business days.
Your bank may charge a fee for this service. Redemptions of
less than $1,000 will be sent by check or electronic funds
transfer.
This feature may be elected by completing the "Telephone
Redemption" section on the Institutional Account Application
that is included with the Prospectus.
Send a stock power or "letter of instruction" specifying the
In name of the Fund, the dollar amount or the number of Class C
Writing shares to be redeemed, your name, class of shares, your
account number, and the additional requirements listed below
that apply to your particular account.
Type of
Registration Requirements
Corporation, A letter of instruction and a corporate resolution,
Association signed by person(s) authorized to act on the account,
with the signature(s) guaranteed.
Trusts A letter of instruction signed by the Trustee(s) with
signature guarantees. (If the Trustee's name is not
registered on your account, also provide a copy of the
trust document, certified within the last 60 days.)
</TABLE>
If you do not fall into any of these registration categories please call
1-800-437-9312 for further instructions.
Who may guarantee your signature.
A signature guarantee is a widely accepted way to protect you and the Fund by
verifying the signature on your request. It may not be provided by a notary
public. If the net asset value of the Class C shares redeemed is $100,000 or
less, John Hancock Funds may guarantee the signature. The following
institutions may provide you with a signature guarantee, provided that the
institution meets credit standards established by Investor Services: (i) a
bank; (ii) a securities broker or dealer, including a government or municipal
securities broker or dealer, that is a member of a clearing corporation or
meets certain net capital requirements; (iii) a credit union having authority
to issue signature guarantees; (iv) a savings and loan association, a
building and loan association, a cooperative bank, a federal savings bank or
association; or (v) a national securities exchange, a registered securities
exchange or a clearing agency.
Additional information about
redemptions.
<TABLE>
<CAPTION>
<S> <C>
Through Your broker may be able to initiate the redemption. Contact
Your your broker for instructions.
Broker
Your broker will be responsible for the prompt transmittal of
your redemption request to Fund Services. If you have
certificates for your Class C shares, you must submit them
with your stock power or a letter of instruction. You may not
redeem certificated shares by telephone.
</TABLE>
Due to the proportionately high cost of maintaining small accounts, the Fund
reserves the right to redeem all Class C shares in an account which holds
fewer than 50 shares (except accounts under retirement plans) and to mail the
proceeds to the shareholder or the transfer agent may impose an annual fee of
$10.00. No account will be involuntarily redeemed or additional fee imposed,
if the value of the account is in excess of the Fund's minimum initial
investment. Shareholders will be notified before these redemptions are to be
made or this charge is imposed and will have 30 days to purchase additional
Class C shares to bring their account balance up to the required minimum.
Unless the number of Class C shares acquired by further purchases and
dividend reinvestments, if any, exceeds the number of Class C shares
redeemed, repeated redemptions from a smaller account may eventually trigger
this policy.
<PAGE> 103
ADDITIONAL SERVICES AND PROGRAMS
You may exchange Class C shares
of the Fund only for Class C
shares in any other John Hancock
fund.
Exchange Privilege
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of
investment goals. Not all John Hancock funds offer Class C shares. Contact
your registered representative or Selling Broker and request a prospectus for
the John Hancock Fund that interests you. Read the prospectus carefully
before exchanging your Class C shares. Exchanges may only be made into Class
C shares of other John Hancock funds that offer Class C shares.
Exchanges between funds are based on their respective net asset values. No
sales charge or transaction charge is imposed.
The Fund reserves the right to require you to keep previously exchanged Class
C shares (and reinvested dividends) in the Fund for 90 days before you are
permitted to execute a new exchange. The Fund may also terminate or alter the
terms of the exchange privilege upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and
the purchase of shares of another for Federal income tax purposes. An
exchange may result in a taxable gain or loss.
When you make an exchange, your account registration in both the old and new
account must be identical. The exchange privilege is available only in states
where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers
and investment advisers may exchange their clients' Fund shares, subject to
the terms of those agreements and John Hancock Funds' right to reject or
suspend those exchanges at any time. Because of the restrictions and
procedures under those agreements, the exchanges may be subject to timing
limitations and other restrictions that do not apply to exchanges requested
by shareholders directly, as described above.
Because Fund performance and shareholders can be hurt by excessive trading,
the Fund reserves the right to terminate the exchange privilege for any
person or group that, in John Hancock Funds' judgment, is involved in a
pattern of exchanges that coincide with a "market timing" strategy that may
disrupt the Fund's ability to invest effectively according to its investment
objective and policies, or might otherwise affect the Fund and its
shareholders adversely. The Fund may also temporarily or permanently
terminate the exchange privilege for any person who makes seven or more
exchanges out of the Fund per calendar year. Accounts under common control or
ownership will be aggregated for this purpose. Although the Fund will attempt
to give you prior notice whenever it is reasonably able to do so, it may
impose these restrictions at any time.
By Telephone
1. When you complete the application for your purchase of Class C shares of
the Fund, you automatically authorize exchanges by telephone unless you check
the box indicating that you do not wish to authorize telephone exchanges.
2. Call 1-800-437-9312. Have the account number of your current fund and the
exact name in which it is registered available to give the customer service
representative.
<PAGE> 104
3. Investors Services employs the following procedures to confirm that
instructions received by telephone are genuine. Your name, the account
number, taxpayer identification number applicable to the account and other
relevant information may be requested. In addition, telephone instructions
are recorded.
In Writing
1. In a letter request an exchange and list the following:
--the name of the fund whose Class C shares you currently own
--your account number
--the name(s) in which the account is registered
--the name of the fund in which you wish your exchange to be invested
--the number of Class C shares, all Class C shares or the dollar amount you
wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
Attn: Institutional Services
P.O. Box 9277
Boston, Massachusetts 02205-9277
<PAGE> 105
(back cover)
JOHN HANCOCK SOVEREIGN
U.S. GOVERNMENT INCOME FUND
Investment Adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Principal Distributor
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Custodian
Investor Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
Transfer Agent
John Hancock Investor Services Corporation
P.O. Box 9277
Boston, Massachusetts 02205-9277
Independent Auditors
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchangecall 1-800-437-9312
Invest-by-Phone
Telephone Redemption
JHD-020PC 3/95
(front cover)
JOHN HANCOCK
SOVEREIGN U.S.
GOVERNMENT INCOME FUND
Class C Shares
Prospectus
March 1, 1995
A mutual fund seeking to provide as high a level of income as is consistent
with long-term total return by investing in securities issued, guaranteed or
otherwise backed by the United States Government, its agencies or
instrumentalities.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Telephone 1-800-437-9312
("Recycled" logo) Printed on recycled paper using soybean ink
<PAGE> 106
John Hancock
Sovereign
Achievers Fund
Class A and Class B Shares
Prospectus
March 1, 1995
TABLE OF CONTENTS
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Page
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Expense Information 2
The Fund's Financial Highlights 3
Investment Objective and Policies 4
Organization and Management of the Fund 6
Alternative Purchase Arrangements 7
The Fund's Expenses 9
Dividends and Taxes 9
Performance 10
How to Buy Shares 11
Share Price 13
How to Redeem Shares 18
Additional Services and Programs 20
</TABLE>
This Prospectus sets forth information about John Hancock Sovereign Achievers
Fund (the "Fund"), a diversified series of Freedom Investment Trust (the
"Trust"), that you should know before investing. Please read and retain it
for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC"). You can obtain a copy of the Fund's
Statement of Additional Information, dated March 1, 1995 and incorporated by
reference into this Prospectus, free of charge by writing or telephoning:
John Hancock Investor Services Corporation, P.O. Box 9116, Boston,
Massachusetts 02205-9116, 1-800-225-5291 (1-800-554-6713 TDD).
Shares of the Fund 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 107
EXPENSE INFORMATION
The purpose of the following information is to help you understand the
various fees and expenses that you will bear, directly or indirectly, when
you purchase Fund shares. The operating expenses included in the table and
hypothetical example below are based on fees and expenses for the Fund's
fiscal year ended October 31, 1994 adjusted to reflect current expenses.
Actual fees and expenses in the future may be greater or less than those
shown.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
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Shareholder Transaction Expenses
Maximum sales charge imposed on purchases (as a percentage of offering
price) 5.00% None
Maximum sales charge imposed on reinvested dividends None None
Maximum deferred sales charge None* 5.00%
Redemption fee+ None None
Exchange fee None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fee 0.75% 0.75%
12b-1 fee** 0.30% 1.00%
Other expenses 0.48% 0.47%
Total Fund operating expenses 1.53% 2.22%
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, but for such investments, a contingent deferred sales charge
may be imposed, as described under the caption "Share Price," in the event of
certain redemption transactions within one year of purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of average daily net assets, and the remaining portion will be used to
cover distribution expenses. See "The Fund's Expenses."
+Redemption by wire fee (currently $4.00) not included.
<TABLE>
<CAPTION>
Example: 1 Year 3 Years 5 Years 10 Years
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You would pay the following expenses for the indicated
period of years on a hypothetical $1,000 investment,
assuming a 5% annual return:
Class A shares $65 $96 $129 $223
Class B shares
--Assuming complete redemption at end of period $73 $99 $139 $238
--Assuming no redemption $23 $69 $119 $238
</TABLE>
(The example should not be considered as a representation of past or future
expenses. Actual expenses may be greater or less than shown.)
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the
maximum front-end sales charge permitted under the National Association of
Securities Dealers Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully explained in
this Prospectus under the caption "The Fund's Expenses" and in the Statement
of Additional Information under the captions "Investment Advisory and Other
Services" and "Distribution Contract."
<PAGE> 108
THE FUND'S FINANCIAL HIGHLIGHTS
The following table of Financial Highlights has been examined by Price
Waterhouse LLP, the Fund's independent accountants, whose unqualified report
is included in the Fund's 1994 Annual Report and is included in the Statement
of Additional Information. Further information about the performance of the
Fund is contained in the Fund's Annual Report to shareholders, which may be
obtained free of charge by writing or telephoning John Hancock Investor
Services Corporation ("Investor Services") at the address or telephone number
listed on the front page of this Prospectus.
Selected data for each class of shares outstanding throughout each period
indicated is as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
1994 1993 1992 1991
<S> <C> <C> <C> <C>
CLASS A**
Per Share Operating Performance
Net Asset Value, Beginning of
Period $12.39 $ 10.99 $ 12.81
Net Investment Income 0.10 0.08(a) 0.06(a)
Net Realized and Unrealized Gain
(Loss) on Investments 0.07 1.34 (0.06)
Total from Investment Operations 0.17 1.42 0.00
Less Distributions:
Dividends from Net Investment
Income (0.10) (0.02) (0.07)
Distributions from Net Realized
Gain on Investments Sold (0.44) -- (1.74)
Distributions from Capital Paid In -- -- (0.01)
Total Distributions (0.54) (0.02) (1.82)
Net Asset Value, End of Period $12.02 $ 12.39 $ 10.99
Total Investment Return at Net
Asset Value 1.35% 12.97% 0.19%(b)
Ratios and Supplemental Data
Net Assets, End of Period (000's
omitted) $23,292 $23,372 $1,771
Ratio of Expenses to Average Net
Assets 1.53% 1.60% 1.73%*
Ratio of Net Investment Income to
Average Net Assets 0.83% 0.64% 0.62%*
Portfolio Turnover Rate 60% 71% 246%
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of
Period $12.31 $ 10.97 $ 11.71 $ 9.22
Net Investment Income 0.03 0.02(a) 0.01(a) 0.07
Net Realized and Unrealized Gain
(loss) on Investments 0.07 1.33 1.05 2.67
Total from Investment Operations 0.10 1.35 1.06 2.74
Less Distributions:
Dividends from Net Investment
Income (0.02) (0.01) (0.03) (0.20)
Distributions from Net Realized
Gain on Investments Sold (0.44) -- (1.76) (0.05)
Distributions from Capital Paid-In -- -- (0.01) --
Total Distributions (0.46) (0.01) (1.80) (0.25)
Net Asset Value, End of Period $11.95 $ 12.31 $ 10.97 $11.71
Total Investment Return at Net
Asset Value 0.78% 12.34% 7.22% 30.21%
Ratios and Supplemental Data
Net Assets, End of Period (000's
omitted) $94,431 $93,853 $23,525 $21,826
Ratio of Expenses to Average Net
Assets 2.10% 2.09% 2.27% 2.24%
Ratio of Net Investment Income to
Average Net Assets 0.25% 0.17% 0.10% 0.66%
Portfolio Turnover Rate 60% 71% 246% 217%
<FN>
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
(a) Investment Income per share has been calculated based on average monthly
shares outstanding.
(b) Not annualized.
(c) From commencement of operations, April 22, 1987.
+ Net of advisory expense reimbursements per share of $0.01 for the fiscal
year ended October 31, 1988 and less than $.01 for the fiscal year ended
October 31, 1987.
</FN>
</TABLE>
<PAGE> 109
Selected data for each class of shares outstanding throughout each period
indicated is as follows:
<TABLE>
<CAPTION>
1990 1989 1988 1987(c)
<S> <C> <C> <C> <C>
CLASS A**
Per Share Operating Performance
Net Asset Value, Beginning of
Period
Net Investment Income
Net Realized and Unrealized Gain
(Loss) on Investments
Total from Investment Operations
Less Distributions:
Dividends from Net Investment
Income
Distributions from Net Realized
Gain on
Investments Sold
Distributions from Capital Paid
In
Total Distributions
Net Asset Value, End of Period
Total Investment Return at Net
Asset Value
Ratios and Supplemental Data
Net Assets, End of Period (000's
omitted)
Ratio of Expenses to Average Net
Assets
Ratio of Net Investment Income to
Average Net Assets
Portfolio Turnover Rate
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $11.52 $10.29 $8.34 $10.00
Net Investment Income 0.18 0.19 0.13 0.06
Net Realized and Unrealized Gain
(loss) on Investments (2.00) 1.25 2.05 (1.70)
Total from Investment Operations (1.82) 1.44 2.18 (1.64)
Less Distributions:
Dividends from Net Investment Income (0.20) (0.12) (0.09) (0.02)
Distributions from Net Realized
Gain on
Investments Sold (0.28) (0.09) (0.14) --
Distributions from Capital Paid-In -- -- -- --
Total Distributions (0.48) (0.21) (0.23) (0.02)
Net Asset Value, End of Period $9.22 $11.52 $10.29 $8.34
Total Investment Return at Net
Asset Value (16.46%) 14.27% 26.69% (16.44%)(b)
Ratios and Supplemental Data
Net Assets, End of Period (000's
omitted) $17,714 $23,813 $14,927 $14,016
Ratio of Expenses to Average Net Assets 2.13% 2.30% 2.61%+ 2.56%*+
Ratio of Net Investment Income to
Average Net Assets 1.64% 1.75% 1.46%+ 0.93%*+
Portfolio Turnover Rate 165% 94% 54% 40%*
<FN>
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
(a) Investment Income per share has been calculated based on average monthly
shares outstanding.
(b) Not annualized.
(c) From commencement of operations, April 22, 1987.
+ Net of advisory expense reimbursements per share of $0.01 for the fiscal
year ended October 31, 1988 and less than $.01 for the fiscal year ended
October 31, 1987.
</FN>
</TABLE>
<PAGE> 110
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective
is to achieve long-term
growth of capital
primarily from a portfolio
of common stocks and other
equity investments.
The Fund's investment objective is to achieve long-term growth of capital
primarily from a portfolio of common stocks and other equity investments.
Moderate income is a secondary objective. There are market fluctuations and
risks in any investment and therefore there can be no assurance that the Fund
will achieve its investment, objective.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in equity securities, including common stock, preferred stock and debt
securities convertible into common stock. John Hancock Advisers, Inc. (the
"Adviser") will seek to invest the assets of the Fund in a diversified
portfolio consisting primarily of common stocks of high-quality,
growth-oriented companies which the Adviser believes will provide the Fund
with above-average value. Using a company's dividend history as a fundamental
indicator of its financial strength and growth prospects, the Adviser will
pursue a strategy of investing only in those companies which have increased
their dividends for a minimum of five successive years. In addition, the
Adviser will seek to invest in companies exhibiting one or more of the
following traits: a strong rate of growth in earnings per share, a low ratio
of debt to total capital, a seasoned, capable management, or a strong
industry position due to recognized brands or patent protection.
The Fund may purchase securities traded both on recognized securities
exchanges and in the over-the-counter market. While the Fund may invest in
some foreign securities, these investments are expected to constitute less
than 10% of the Fund's portfolio. It is the Fund's current intention to
purchase sponsored or unsponsored American Depositary Receipts ("ADRs")
rather than the actual securities of a foreign issuer. ADRs are receipts
typically issued by an American bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation, and are
designed for trading in United States securities markets. Issuers of
unsponsored ADRs are not contractually obligated to disclose material
information, including financial information, in the United States and,
therefore, there may not be a correlation between such information and the
market value of the unsponsored ADR.
To avoid the need to sell equity securities in the portfolio to provide funds
for redemption, and to provide flexibility to the Fund to take advantage of
investment opportunities, the Fund may invest up to 15% of its net assets in
long- and short-term debt instruments of varying maturities, including
investment grade (i.e., rated at the time of purchase AAA, AA, A or BBB by
Standard & Poor's Ratings Group or Aaa, Aa, A or Baa by Moody's Investors
Service, Inc.) debt securities of corporations (such as commercial paper,
notes, bonds or debentures), certificates of deposit, money market securities
and obligations of the U.S. Government, its agencies and instrumentalities.
When the Adviser believes that financial conditions present unusual risks
with respect to equity securities, the Fund may invest up to 80% of the
Fund's assets in these securities, rated in the three highest categories, for
temporary defensive purposes. Medium grade obligations (i.e., those rated BBB
or Baa) lack outstanding investment characteristics and in fact have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make
principal and interest payments due on medium grade securities. In the event
these securities are subsequently downgraded below such ratings, the Adviser
will consider
<PAGE> 111
this event in determining whether the Fund should continue to hold the
securities. See Appendix A to the Statement of Additional Information for a
description of the various ratings of investment grade debt securities. The
Fund may also enter into repurchase agreements that are fully collateralized
by U.S. Government obligations, including repurchase agreements that mature
in more than seven days.
Futures Contracts and Options on Futures The Fund may buy and sell financial
futures contracts and options on futures to hedge against the effects of
fluctuations in securities prices, interest rates, currency exchange rates
and other market conditions and for speculative purposes. The potential loss
incurred by the Fund in writing options on futures is unlimited and may
exceed the amount of the premium received. The Fund's futures contracts and
options on futures will be traded on a U.S. commodity exchange or board of
trade. The Fund will not engage in a futures or options transaction for
speculative purposes, if immediately thereafter, the sum of initial margin
deposits on existing positions and premiums required to establish speculative
positions in futures contracts and options on futures would exceed 5% of the
Fund's net assets. The Fund intends to comply with the CFTC regulations with
respect to its speculative transactions. These regulations are discussed
further in the Statement of Additional Information.
Restricted Securities. The Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to
Rule 144A under the Securities Act of 1933 (the "Securities Act"). Purchases
of other restricted securities are subject to a non-fundamental investment
restriction limiting all illiquid securities held by the Fund to not more
than 15% of the Fund's net assets. The Trustees will carefully monitor the
Fund's investments in these securities, focusing on certain factors,
including valuation, liquidity and availability of information.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. government securities according to applicable regulatory requirements.
The Fund may reinvest any cash collateral in short-term securities. When the
Fund lends portfolio securities, there is a risk that the borrower may fail
to return the loaned securities. As a result, the Fund may incur a loss or,
in the event of the borrower's bankruptcy, the Fund may be delayed in or
prevented from liquidating the collateral. It is a fundamental policy of the
Fund not to lend portfolio securities having a total value in excess of 5% of
its total assets.
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, but they involve some credit risk to the Fund if the other
party defaults on its obligations and the Fund is delayed in or prevented
from liquidating the collateral.
The Fund follows certain
policies, which may help
to reduce investment risk.
The Fund has adopted certain investment restrictions which are enumerated in
detail in the Statement of Additional Information, where they are classified
as fundamental or non-fundamental. The Fund's investment objective and those
investment restrictions designated as fundamental may not be changed without
shareholder approval. The Fund's non-fundamental investment policies and
restrictions, however, may be changed by a vote of the Trustees without
shareholder approval. The Fund's portfolio turnover rates for recent periods
are shown in the section "The Fund's Financial Highlights."
<PAGE> 112
Investments in foreign
securities may involve
risks and considerations
that are not present in
domestic investments.
Global Risks. Investments in foreign securities may involve risks not present
in domestic investments 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 subject to the same uniform
financial reporting requirements, accounting standards and government
supervision as domestic companies, and foreign exchange markets are regulated
differently from the U.S. stock market. Security trading practices abroad may
offer less protection to investors such as the Fund. In addition, foreign
securities may be denominated in the currency of the country in which the
issuer is located. Consequently, changes in foreign exchange rates will
affect the value of the Fund's shares and dividends.
Brokers are chosen based
on best price and execution.
When choosing brokerage firms to carry out the Fund's transactions, the
primary consideration is execution at the most favorable prices, taking into
account the broker's professional ability and quality of service.
Consideration may also be given to the broker's sales of shares of the Fund.
Pursuant to procedures determined by the Trustees, the Adviser may place
securities transactions with brokers affiliated with the Adviser. These
brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc.
and Sutro & Company Inc., which are indirectly owned by John Hancock Mutual
Life Insurance Company, which in turn indirectly owns the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Trustees elect officers
and retain the investment
adviser who is responsible
for the day-to-day operations
of the Fund, subject to the
Trustees' policies and supervision.
The Fund is a diversified series of Freedom Investment Trust (the "Trust"),
an open-end management investment company organized as a Massachusetts
business trust in 1984. The Trust reserves the right to create and issue a
number of series of shares, or funds or classes thereof, which are separately
managed and have different investment objectives. The Trust is not required
to and does not intend to hold annual meetings of shareholders, although
special meetings may be held for such purposes as electing or removing
Trustees, changing fundamental policies or approving a management contract.
The Fund, under certain circumstances, will assist in shareholder
communications with other shareholders.
John Hancock Advisers, Inc.
advises investment companies
having total assets
of more than $13 billion.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary
of John Hancock Mutual Life Insurance Company, a financial services company.
It provides the Fund, and other investment companies in the John Hancock
group of funds, with investment research and portfolio management services.
Sovereign Asset Management Corporation ("Samcorp"), an affiliate of the
Adviser, provides certain investment research and portfolio management
services to the Fund. John Hancock Funds, Inc. ("John Hancock Funds")
distributes shares for all of the John Hancock funds directly and through
selected broker-dealers ("Selling Brokers"). Freedom Distributors
Corporation, a co-distributor of the Fund, is, along with John Hancock Funds,
an indirect subsidiary of John Hancock Mutual Life Insurance Company
(together with John Hancock Funds, the "Distributors"). Certain Fund officers
are also officers of the Adviser and John Hancock Funds. Pursuant to an order
granted by the Securities and Exchange Commission, the Fund has adopted a
deferred compensation plan for its independent Trustees which allows
Trustees' fees to be invested by the Fund in other John Hancock funds.
<PAGE> 113
John F. Snyder III is primarily responsible for management of the Fund. He is
assisted by a team of co-portfolio managers and analysts in the day to day
management of the Fund. Mr. Snyder is Senior Vice President of Samcorp and
has been a co-portfolio manager of the Fund since 1992. He has been
associated with the Adviser since 1991. He is also co-portfolio manager of
John Hancock Sovereign Investors Fund Inc. and John Hancock Sovereign
Balanced Fund.
In order to avoid any conflict with portfolio trades for the Fund, the
Adviser and the Fund have adopted extensive restrictions on personal
securities trading by personnel of the Adviser and its affiliates. 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.
These restrictions are a continuation of the basic principle that the
interests of the Fund and its shareholders come first.
ALTERNATIVE PURCHASE ARRANGEMENTS
An alternative purchase
plan allows you to
choose the method of
payment that is best for you.
You can purchase shares of the Fund at a price equal to their net asset value
per share plus a sales charge. At your election, this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge Alternative,"
Class A shares) or on a contingent deferred basis (see "Contingent Deferred
Sales Charge Alternative," Class B shares). If you do not specify on your
account application which class of shares you are purchasing, it will be
assumed that you are investing in Class A shares.
Investments in Class A
shares are subject to
an initial sales charge.
Class A Shares. If you elect to purchase Class A shares, you will incur an
initial sales charge unless the amount of your purchase is $1 million or
more. If you purchase $1 million or more of Class A shares, you will not be
subject to an initial sales charge, but you will incur a sales charge if you
redeem your shares within one year of purchase. Class A shares are subject to
ongoing distribution and service fees at a combined annual rate of up to
0.30% of the Fund's average daily net assets attributable to the Class A
shares. Certain purchases of Class A shares qualify for reduced initial sales
charges. See "Share Price--Qualifying for a Reduced Sales Charge."
Investments in Class B
shares are subject to
a contingent deferred sales
charge.
Class B Shares. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them
within six years of purchase (the "contingent deferred sales charge" or the
"CDSC"). Class B shares are subject to ongoing distribution and service fees
at a combined annual rate of up to 1.00% of the Fund's average daily net
assets attributable to the Class B shares. Investing in Class B shares
permits all your dollars to work from the time you make your investment, but
the higher ongoing distribution fee will cause the shares to have a higher
expense ratio than that of Class A shares. To the extent that any dividends
are paid by the Fund, these higher expenses will also result in lower
dividends than those paid on Class A shares.
Class B shares are not available to full service defined contribution plans
administered by Investor Services or John Hancock Mutual Life Insurance
Company that had more than 100 eligible employees at the inception of the
Fund account.
<PAGE> 114
Factors to consider in Choosing an Alternative
You should consider which
class of shares will be
more beneficial for you.
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider
whether, during the anticipated life of your Fund investment, the CDSC and
accumulated fees on Class B shares would be less than the initial sales
charge and accumulated fees on Class A shares purchased at the same time; and
to what extent this differential would be offset by the Class A shares' lower
expenses. To help you make this determination, the table under the caption
"Expense Information" on the inside cover page of this Prospectus shows
examples of the charges applicable to each class of shares. Class A shares
will normally be more beneficial if you qualify for a reduced sales charge.
See "Share Price--Qualifying for a Reduced Sales Charge."
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent
any dividends are paid. However, because initial sales charges are deducted
at the time of purchase, you would not have all of your funds invested
initially and, therefore, would initially own fewer shares. If you do not
qualify for reduced initial sales charges and expect to maintain your
investment for an extended period of time, you might consider purchasing
Class A shares because the accumulated distribution and service charges on
Class B shares may exceed the initial sales charge and accumulated
distribution and service charges on Class A shares during the life of your
investment.
Alternatively, you might determine that it would be more advantageous to
purchase Class B shares in order to have all of your funds invested
initially. However, you would be subject to higher distribution fees and, for
a six-year period, a CDSC.
In the case of Class A shares, the distribution expenses that John Hancock
Funds incurs in connection with the sale of the shares will be paid from the
proceeds of the initial sales charge and the ongoing distribution and service
fees. In the case of Class B shares, the expenses will be paid from the
proceeds of the ongoing distribution and service fees, as well as the CDSC
incurred upon redemption within six years of purchase. The purpose and
function of the Class B shares' CDSC and ongoing distribution and service
fees are the same as those of the Class A shares' initial sales charge and
ongoing distribution and service fees. Sales personnel distributing the
Fund's shares may receive different compensation for selling each class of
shares.
Dividends, if any, on Class A and Class B shares will be calculated in the
same manner, at the same time and on the same day and will be in the same
amount, except for differences resulting from the fact that each class will
bear only its own distribution and service fees, shareholder meeting expenses
and any incremental transfer agency costs. See "Dividends and Taxes."
<PAGE> 115
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a fee to the
Adviser, which for the 1994 fiscal year was 0.75% of the Fund's average daily
net assets. The Adviser pays Samcorp a portion of the fee received by the
Adviser from the Fund. There is no additional cost to the Fund. The
investment management fee paid by the Fund is higher than the fees paid by
most mutual funds but is comparable to fees paid by those funds with a
similar investment objective.
The Fund pays distribution
and service fees for
marketing and sales-related
shareholder servicing.
The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Under these Plans the Fund will pay distribution and service fees at an
aggregate annual rate of up to 0.30% of the Class A shares' average daily net
assets and at an aggregate annual rate of up to 1.00% of the Class B shares'
average daily net assets. In each case, up to 0.25% is for service expenses
and the remaining amount, is for distribution expenses. Distribution fees are
used to reimburse the Distributors for their distribution expenses, including
but not limited to: (i) initial and ongoing sales compensation to Selling
Brokers and others (including affiliates of the Distributors) engaged in the
sale of Fund shares; (ii) marketing, promotional and overhead expenses
incurred in connection with the distribution of Fund shares; and (iii) with
respect to Class B shares only, interest expenses on unreimbursed
distribution expenses. Service fees are paid to the Distributors to
compensate Selling Brokers for providing personal and account maintenance
services to shareholders. In the event the Distributors are not fully
reimbursed for payments made or expenses incurred by them under the Class A
Plan, these expenses will not be carried beyond one year from the date they
were incurred. These unreimbursed expenses under the Class B Plan will be
carried forward together with interest on the balance of these unreimbursed
expenses. For the fiscal year ended October 31, 1994 an aggregate of
$3,916,943 of distribution expenses or 4%, of the average net assets of the
Class B shares of the Fund, was not reimbursed or recovered by the
Distributors through the receipt of deferred sales charges or 12b-1 fees in
prior periods.
The Fund's total expenses for the fiscal year ended October 31, 1994, for
Class A shares and Class B shares, respectively, were 1.53% and 2.10% of
average daily net asset value of each class.
DIVIDENDS AND TAXES
Dividends. The Fund generally declares and distributes dividends representing
all or substantially all net investment income semi-annually. The Fund may
distribute net short-term capital gains, if any, semi-annually, and will
distribute net long-term capital gains, if any, annually after the close of
its fiscal year (October 31).
Dividends are reinvested in additional shares of your class unless you elect
the option to receive them in cash. If you elect the cash option and the U.S.
Postal Service cannot deliver your checks, your election will be converted to
the reinvestment option. Because of the higher expenses associated with Class
B shares, any dividend on these shares will be lower than a dividend on the
Class A shares. See "Share Price."
Taxation. Dividends from the Fund's net investment income, certain net
foreign exchange gains, and net short-term capital gains are taxable to you
as ordinary
<PAGE> 116
income. Dividends from the Fund's net long-term capital gains are taxable as
long-term capital gain. These dividends are taxable whether received in cash
or reinvested in additional shares. Corporate shareholders may be entitled to
take a corporate dividends received deduction for dividends paid by the Fund
attributable to the dividends it receives from U.S. domestic corporations,
subject to certain restrictions in the Internal Revenue Code of 1986, as
amended (the "Code"). Certain dividends may be paid in January of a given
year but may be taxable as if you received them the previous December. The
Fund will send you a statement by January 31 showing the tax status of the
dividends you received for the prior year.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. As a regulated investment
company, the Fund will not be subject to Federal income tax on any net
investment income or net realized capital gains distributed to its
shareholders within the time period prescribed by the Code.
When you redeem (sell) or exchange shares, you may realize a taxable gain or
loss.
The Fund anticipates that it will be subject to foreign withholding taxes or
other foreign taxes on income (possibly including capital gains) on certain
foreign investments, which will reduce the yield on those investments. The
Fund does not expect to qualify to pass such taxes and any associated tax
deductions or credits through to its shareholders.
On the account application you must certify that your social security or
other taxpayer identification number you provide is correct and that you are
not subject to backup withholding of Federal income tax. If you do not
provide this information or are otherwise subject to this withholding, the
Fund may be required to withhold 31% of your dividends and the proceeds of
redemptions and exchanges.
In addition to Federal taxes, you may be subject to state and local or
foreign taxes with respect to your investment in and distributions from the
Fund. Non-U.S. shareholders and tax-exempt shareholders are subject to
different tax treatment not described above. A state income (and possibly
local income and/or intangible property) tax exemption is generally available
to the extent the Fund's distributions are derived from interest on (or, in
the case of intangibles taxes, the value of its assets is attributable to)
certain U.S. Government obligations, provided in some states that certain
thresholds for holdings of such obligations and/or reporting requirements are
satisfied. You should consult your tax adviser for specific advice.
PERFORMANCE
The Fund may advertise
its yield and total return.
Yield reflects the 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
maximum offering price per share on the last day of that period. Yield is
also 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, the Fund's yield may not equal
the income paid on your shares or the income reported in the Fund's financial
statements.
The Fund's total return shows the overall dollar or percentage change in
value of a hypothetical investment in the Fund, assuming the reinvestment of
all dividends.
<PAGE> 117
Cumulative total return shows the Fund's performance over a period of time.
Average annual total return shows the cumulative return divided by the number
of years included in the period. Because average annual total return tends to
smooth out variations in the Fund's performance, you should recognize that it
is not the same as actual year-to-year results.
Both total return and yield calculations for Class A shares generally include
the effect of paying the maximum sales charge of 5.00% (except as shown in
"The Fund's Financial Highlights"). Investments at lower sales charges would
result in higher performance figures. Yield and total return for the Class B
shares reflect deduction of the applicable contingent deferred sales charge
imposed on a redemption of shares held for the applicable period. All
calculations assume that all dividends are reinvested at net asset value on
the reinvestment dates during the periods. Yield and total return of Class A
and Class B shares will be calculated separately and, because each class is
subject to certain different expenses, the yield and total return may differ
with respect to that class for the same period. The relative performance of
the Class A and Class B shares will be affected by a variety of factors,
including the higher operating expenses attributable to the Class B shares,
whether the Fund's investment performance is better in the earlier or later
portions of the period measured and the level of net assets of the Classes
during the period. The Fund will include the total return of both Class A and
Class B shares in any advertisement or promotional materials including Fund
performance data. The value of the Fund's shares, when redeemed, may be more
or less than their original cost. Both yield and total return are historical
calculations and are not an indication of future performance. See "Factors to
Consider in Choosing an Alternative."
HOW TO BUY SHARES
Opening an account.
The minimum initial investment in Class A and Class B shares is $1,000 ($250
for group investments or $500 for retirement plans).
Complete the Account Application attached to the Prospectus. Indicate whether
you are purchasing Class A or Class B shares. If you do not specify which
class of shares you are purchasing, Fund Services will assume you are
investing in Class A shares.
By Check 1. Make your check payable to John Hancock Investor Services
Corporation ("Investor Services").
2. Deliver the completed application and check to your
registered representative, Selling Broker or mail it directly
to Investor Services.
By Wire 1. Obtain an account number by contacting your registered
representative, Selling Broker or by calling 1-800-225-5291.
2. Instruct your bank to wire funds:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Sovereign Achievers Fund
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative, Selling Broker or mail it directly to Investor
Services.
<PAGE> 118
Buying additional Class A
and Class B shares.
Monthly
Automatic
Accumulation 1. Complete the "Automatic Investing" and "Bank Information"
Program sections on the Account Privileges Application designating a
bank (MAAP) account from which funds may be drawn.
2. The amount you elect to invest will be automatically
withdrawn from your bank or credit union account.
By Telephone 1. Complete the "Invest-by-Phone" and "Bank Information" section
on the Account Privileges Application designating a bank account
from which funds may be drawn. Note that in order to invest by
phone, your account must be in a bank or credit union that is a
member of the Automated Clearing House system (ACH).
2. After your authorization form has been processed, you may
purchase additional Class A and Class B shares by calling
Investor Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(s) in
which your account is registered, the Fund name, the class of
shares you own, your account number and the amount you wish
to invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
By Check 1. Either complete the detachable stub included on your account
statement or include a note with your investment listing the
name of the Fund, the class, your account number and the
name(s) in which the account is registered.
2. Make your check payable to John Hancock Investor Services
Corporation
3. Mail the account information and check to:
John Hancock Investor Services, Inc.
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or
Selling Broker.
By Wire Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Sovereign Achievers Fund
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
Other Requirements. All purchases must be made in U.S. dollars. Checks written
on foreign banks will delay purchases until U.S. funds are received, and a
collection charge may be imposed. Shares of the Fund are priced at the
offering price based on the net asset value computed after John Hancock
Funds receives notification of the dollar equivalent from the Fund's
custodian bank. Wire purchases normally take two or more hours to complete
and, to be accepted the same day, must be received by 4:00 p.m., New York
time. Your bank may charge a fee to wire funds. Telephone transactions are
recorded to verify information. Certificates are not issued unless
a request is made in writing to Investor Services.
You will receive account
statements which you
should keep to help with your
personal recordkeeping.
You will receive a statement of your account after any transaction that
affects your share balance or registration (statements related to
reinvestment of dividends and automatic investment/withdrawal plans will be
sent to you quarterly). A tax information statement will be mailed to you by
January 31 of each year.
<PAGE> 119
SHARE PRICE
The offering price of your
shares is their net asset
value plus a sales
charge, if applicable,
which will vary with
the purchase alternative
you choose.
The net asset value per share ("NAV") is the value of one share. The NAV is
calculated by dividing the net assets of each class by the number of
outstanding shares of that class. The NAV of each class can differ in value.
Securities in the 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 in accordance with procedures approved by
the Trustees. Short-term debt investments maturing within 60 days are valued
at amortized cost which approximates market value. 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 that the Exchange is open.
Shares of the Fund are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock
Funds. If you buy shares of the Fund through a Selling Broker, the Selling
Broker must receive your investment before the close of regular trading on
the New York Stock Exchange and transmit it to John Hancock Funds before its
close of business to receive that day's offering price.
Initial Sales Charge Alternative--Class A Shares. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge as follows:
<TABLE>
<CAPTION>
Reallowance
Combined to Selling
Sales Charge Reallowance Broker
Sales Charge as a and Service as a
as a Percentage Fee as a Percentage
Percentage of the Percentage of the
Amount invested of Offering Amount of Offering Offering
(including Sales Charge) Price Invested Price(+) Price(*)
<S> <C> <C> <C> <C>
Less than $50,000 5.00% 5.26% 4.25% 4.01%
$50,000 to $99,999 4.50% 4.71% 3.75% 3.51%
$100,000 to $249,999 3.50% 3.63% 2.85% 2.61%
$250,000 to $499,999 2.50% 2.56% 2.10% 1.86%
$500,000 to $999,999 2.00% 2.04% 1.60% 1.36%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(***)
</TABLE>
(*) Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales charge.
In addition to the reallowance allowed to all Selling Brokers, John Hancock
Funds will pay the following: round trip airfare to a resort will be offered
to each registered representative of a Selling Broker (if the Selling Broker
has agreed to participate) who sells certain amounts of shares of John
Hancock funds. John Hancock Funds will make these incentive payments out of
its own resources. Other than distribution fees, the Fund does not bear
distribution expenses. A Selling Broker to whom substantially the entire
sales charge is reallowed may be deemed to be an underwriter under the
Securities Act of 1933.
(**) No sales charge is payable at the time of purchase of Class A shares of
$1 million or more, but a contingent deferred sales charge may be imposed in
the event of certain redemption transactions made within one year of
purchase.
<PAGE> 120
(***) John Hancock Funds may pay a commission and first year's service fee
(as described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of Class A shares of $1 million or more in
aggregate as follows: 1% on sales to $4,999,999, 0.50% on the next $5 million
and 0.25% on $10 million and over.
(+) At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance, in an amount equal to 0.25% of the net assets
invested in the Fund. Thereafter, it pays the service fee periodically in
arrears in an amount up to 0.25% of the average annual net assets of the
Fund. Selling Brokers receive the fee as compensation for providing personal
and account maintenance services to shareholders.
Sales charges ARE NOT APPLIED to any dividends which are reinvested in
additional Class A shares of the Fund.
In addition, John Hancock Funds will pay certain affiliated Selling Brokers
at an annual rate of up to 0.05% of the daily net assets of the accounts
attributable to such brokers.
Under certain circumstances as described below, investors in Class A shares
may be entitled to pay reduced sales charges. See "Qualifying for a Reduced
Sales Charge."
Contingent Deferred Sales Charge on Class A Shares--Investments of $1 Million
or More in Class A Shares. Purchases of $1 million or more of the Fund's
Class A shares will be made at net asset value with no initial sales charge,
but if shares are redeemed within 12 months after the end of the calendar
month in which the purchase was made (the contingent deferred sales charge
period), a contingent deferred sales charge will be imposed. The rate of the
CDSC will depend on the amount invested as follows:
<TABLE>
<CAPTION>
Amount Invested CDSC Rate
<S> <C>
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
</TABLE>
Existing full service clients of John Hancock Mutual Life Insurance Company
who were group annuity contract holders as of September 1, 1994, may purchase
Class A shares with no initial sales charge, but if the shares are redeemed
within 12 months after the end of the calendar year in which the purchase was
made, a contingent deferred sales charge will be imposed at the above rate.
The charge will be assessed on an amount equal to the lesser of the current
market value or the original purchase cost of the Class A shares redeemed.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any dividends which have been reinvested in
additional Class A shares.
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the redemption is first made from
any shares in your account that are not subject to the CDSC. The CDSC is
waived on redemptions in certain circumstances. See "Waiver of Contingent
Deferred Sales Charges" below.
<PAGE> 121
You may qualify for a reduced sales charge on your investment in Class A
shares.
Qualifying for a Reduced Sales Charge. If you invest more than $50,000 in
Class A shares of the Fund or a combination of funds (except money market
funds), you may qualify for a reduced sales charge on your investments
through a LETTER OF INTENTION. You may also be able to use the ACCUMULATION
PRIVILEGE and COMBINATION PRIVILEGE to take advantage of the value of your
previous investments in Class A shares of the John Hancock funds when meeting
the breakpoints for a reduced sales charge. For the ACCUMULATION PRIVILEGE
and COMBINATION PRIVILEGE the applicable sales charge will be based on the
total of:
1. Your current purchase of Class A shares of the Fund.
2. The net asset value (at the close of business on the previous day) of (a)
all Class A shares of the Fund you hold, and (b) all Class A shares of any
other John Hancock mutual fund you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
Example:
If you hold Class A shares of a John Hancock mutual fund with a net asset
value of $20,000 and, subsequently, invest $30,000 in Class A shares of the
Fund, the sales charge on this subsequent investment would be 4.50% and not
5.00% (the rate that would otherwise be applicable to investments of less
than $50,000. See "Initial Sales Charge Alternative--Class A shares.")
Class A shares may be available
without a sales charge to certain
individuals and organizations.
If you are in one of the following categories, you may purchase Class A
shares of the Fund without paying a sales charge:
* A Trustee or officer of the Trust; a Director or officer of the Adviser and
its affiliates or Selling Brokers; employees or sales representatives of any
of the foregoing; retired officers, employees or Directors of any of the
foregoing; a member of the immediate family of any of the foregoing; or any
Fund, pension, profit sharing or other benefit plan for the individuals
described above.
* Any state, county, city or any instrumentality, department, authority, or
agency of these entities which is prohibited by applicable investment laws
from paying a sales charge or commission when it purchases shares of any
registered investment management company.*
* A bank, trust company, credit union, savings institution or other
depository institution, its trust departments or common trust funds if it is
purchasing $1 million or more for non-discretionary customers or accounts.*
* A broker, dealer or registered investment adviser that has entered into an
agreement with John Hancock Funds providing specifically for the use of Fund
shares in fee-based investment products made available to their clients.
* A former participant in an employee benefit plan with John Hancock Mutual
Funds, when s/he withdraws from his/her plan and transfers any or all of
his/her plan distributions to the Fund.
*For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
<PAGE> 122
Class A shares of the Fund may also be purchased without a sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
Contingent Deferred Sales Charge Alternative--Class B Shares. Class B shares
are offered at net asset value per share without a sales charge, so that your
entire initial investment will go to work at the time of purchase. However
Class B shares redeemed within six years of purchase will be subject to a
CDSC at the rates set forth below. This charge will be assessed on an amount
equal to the lesser of the current market value or the original purchase cost
of the shares being redeemed. Accordingly, you will not be assessed a CDSC on
increases in account value above the initial purchase price, including shares
derived from reinvested dividends.
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. It will be assumed that your redemption comes first from shares you
have held beyond the six-year CDSC redemption period or those you acquired
through reinvestment of dividends, and next from the shares you have held the
longest during the six-year period. The CDSC is waived on redemptions in
certain circumstances. See the discussion "Waiver of Contingent Deferred
Sales Charges" below.
Example:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time, your CDSC will be calculated as
follows:
* Proceeds of 50 shares redeemed at $12 per share $600
* Minus proceeds of 10 shares not subject to CDSC
because they were acquired through dividend
reinvestment (10 X $12) -120
* Minus appreciation on remaining shares, also
not subject to CDSC (40 X $2) -80
* Amount subject to CDSC $400
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds
uses all or part of them to defray its expenses related to providing the Fund
with distribution services in connection with the sale of the Class B shares,
such as compensating Selling Brokers for selling Class B shares. The
combination of the CDSC and the distribution and service fees makes it
possible for the Fund to sell the Class B shares without deducting a sales
charge at the time of purchase.
The amount of the CDSC if any, will vary depending on the number of years
from the time you purchase the Class B shares until the time you redeem them.
Solely for purposes of determining this holding period, any payments you make
during the month will be aggregated and deemed to have been made on the last
day of the month.
<PAGE> 123
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge As a
Year in Which Class B Shares Percentage
Redeemed Following Purchase of Amount Redeemed
<S> <C>
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
</TABLE>
A commission equal to 3.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for the provision
of personal and account maintenance services to shareholders during the
twelve months following the sale, and thereafter the service fee is paid in
arrears.
If you purchased Class B shares during 1992 or 1993, the applicable CDSC as a
percentage of the amount redeemed will be: 4% for redemptions during the
first year after purchase, 3.5% for redemptions during the second year, 3%
for redemptions during the third year, 2.5% for redemptions during the fourth
year, 2% for redemptions during the fifth year, 1% for redemptions during the
sixth year, and no CDSC for redemption during the seventh year and
thereafter. If you purchased Class B shares before 1992, the applicable CDSC
as a percentage of the amount redeemed will be: 1% for redemptions during the
third, fourth and fifth years after purchase and no CDSC for redemption
during the sixth year and thereafter.
Under certain circumstances,
the CDSC on Class B and
certain Class A share
redemptions will be waived.
Waiver of Contingent Deferred Sales Charges. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to a
CDSC, unless indicated otherwise, in the circumstances defined below:
* Redemptions of Class B shares made under a Systematic Withdrawal Plan (see
"How to Redeem Shares"), as long as your annual redemptions do not exceed 10%
of your account value at the time you established your Systematic Withdrawal
Plan and 10% of the value of subsequent investments (less redemptions) in
that account at the time you notify Investor Services. This waiver does not
apply to Systematic Withdrawal Plan redemptions of Class A shares that are
subject to a CDSC.
* Redemptions made to effect distributions from an Individual Retirement
Account either before or after age 59-1/2, as long as the distributions are
based on your life expectancy or the joint-and-last survivor life expectancy
of you and your beneficiary. These distributions must be free from penalty
under the Code.
* Redemptions made to effect mandatory distributions under the Code after age
70-1/2 from a tax-deferred retirement plan.
* Redemptions made to effect distributions to participants or beneficiaries
from certain employer-sponsored retirement plans including those qualified
under Section 401(a) of the Code, custodial accounts under Section 403(b)(7)
of the Code and deferred compensation plans under Section 457 of the Code.
The waiver also applies to certain returns of excess contributions made to
these plans. In all cases, the distributions must be free from penalty under
the Code.
<PAGE> 124
* Redemptions due to death or disability.
* Redemptions made under the Reinvestment Privilege, as described in
"Additional Services and Programs" of this Prospectus.
* Redemptions made pursuant to the Fund's right to liquidate your account if
you own fewer than 50 shares.
* Redemptions made in connection with certain liquidation, merger or
acquisition transactions involving other investment companies or personal
holding companies.
* Redemptions from certain IRA and retirement plans which purchased shares
prior to October 1, 1992
If you qualify for a CDSC waiver under one of these situations, you must
notify Investor Services either directly or through your Selling Broker at
the time you make your redemption. The waiver will be granted once Investor
Services has confirmed that you are entitled to the waiver.
Conversion of Class B Shares Your Class B shares and an appropriate portion
of reinvested dividends on those shares will be converted into Class A shares
automatically no later than the month following eight years after the shares
were purchased, resulting in lower annual distribution fees. If you exchanged
Class B shares into the Fund from another John Hancock fund, the conversion
will be based on the time the shares in the original fund were purchased. The
Fund has been advised that the conversion of Class B shares to Class A shares
should not be taxable for Federal income tax purposes and should not change a
shareholder's tax basis or holding period for the converted shares.
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next NAV calculated after your redemption
request is received in good order by Investor Services less any applicable
CDSC. The Fund may hold payment until reasonably satisfied that investments
that were recently made by check or Invest-by-Phone have been collected
(which may take up to 10 calendar days).
Once your shares are redeemed, the Fund generally sends you payment on the
next business day. When you redeem your shares, you may realize a taxable
gain or loss depending usually on the difference between what you paid for
them and what you receive for them, subject to certain tax rules. Under
unusual circumstances, the Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities laws.
<PAGE> 125
To assure acceptance of
your redemption request,
please follow these
procedures.
By All Fund shareholders are automatically eligible for the telephone
Telephone redemption privilege. Call 1-800-225-5291, from 8:00 A.M. to
4:00 P.M. (New York time), Monday through Friday, excluding days on
which the New York Stock Exchange is closed. Investor Services
employs the following procedures to confirm that instructions
received by telephone are genuine. Your name, the account number,
taxpayer identification number applicable to the account and other
relevant information may be requested. In addition, telephone
instructions are recorded.
You may redeem up to $100,000 by telephone, but the address on the
account must not have changed for the last 30 days. A check will be
mailed to the exact name(s) and address shown on the account. If
reasonable procedures, such as those described above, are not
followed, the Fund may be liable for any loss due to unauthorized or
fraudulent telephone instructions. In all other cases, neither the
Fund nor Investor Services will be liable for any loss or expense
for acting upon telephone instructions made in accordance with the
telephone transaction procedures mentioned above. Telephone
redemption is not available for IRAs or other tax-qualified
retirement plans or shares of the Fund that are in certificated
form.
During periods of extreme economic conditions or market changes,
telephone requests may be difficult to implement due to a large
volume of calls. During these times you should consider placing
redemption requests in writing or use EASI Line. EASI Line's number
is 1-800-338-8080.
By Wire If you have a telephone redemption form on file with the Fund,
redemption proceeds of $1,000 or more can be wired on the next
business day to your designated bank account and a fee (currently
$4.00) will be deducted. You may also use electronic funds transfer
to your assigned bank account and the funds are usually collectable
after two business days. Your bank may or may not charge for this
service. Redemptions of less than $1,000 will be sent by check or
electronic funds transfer.
This feature may be elected by completing the "Telephone Redemption"
section on the Account Privileges Application that is included with
the Prospectus.
In Writing Send a stock power or "letter of instruction" specifying the name
of the Fund, the dollar amount or the number of shares to be
redeemed, your name, class of shares, your account number, and the
additional requirements listed below that apply to your particular
account.
Type of Registration Requirements
Individual, Joint Tenants,
Sole Proprietorship, A letter of instruction signed (with titles where
Custodial (Uniform Gifts applicable) by all persons authorized to sign
or Transfer to Minors for the account, exactly as it is registered with
Act), General Partners the signature(s) guaranteed.
Corporation, Association A letter of instruction and a corporate resolution,
signed by person(s) authorized to act on the
account, with the signature(s) guaranteed.
Trusts A letter of instruction signed by the Trustee(s)
with the signature guaranteed. (If the Trustee's
name is not registered on your account, also
provide a copy of the trust document, certified
within the last 60 days.)
If you do not fall into any of these registration categories please call
1-800-225-5291 for further instructions.
<PAGE> 126
Who may guarantee your signature.
A signature guarantee is a widely accepted way to protect you and the Fund by
verifying the signature on your request. It may not be provided by a notary
public. If the net asset value of the shares redeemed is $100,000 or less,
John Hancock Funds may guarantee the signature. The following institutions
may provide you with a signature guarantee, provided that the institution
meets credit standards established by Investor Services: (i) a bank; (ii) a
securities broker or dealer, including a government or municipal securities
broker or dealer, that is a member of a clearing corporation or meets certain
net capital requirements; (iii) a credit union having authority to issue
signature guarantees; (iv) a savings and loan association, a building and
loan association, a cooperative bank, a federal savings bank or association;
or (v) a national securities exchange, a registered securities exchange or a
clearing agency.
Additional information about redemptions.
Through Your Your broker may be able to initiate the redemption. Contact your
Broker broker for instructions.
If you have certificates for your shares, you must submit them with your
stock power or a letter of instruction. Unless you specify to the contrary,
any outstanding Class A shares will be redeemed before Class B shares. You
may not redeem certificated shares by telephone.
Due to the proportionately high cost of maintaining small accounts, the Fund
reserves the right to redeem at net asset value all shares in an account
which holds fewer than 50 shares (except accounts under retirement plans)
and to mail the proceeds to the shareholder, or the transfer agent may
impose an annual fee of $10.00. No account will be involuntarily redeemed or
additional fee imposed, if the value of the account is in excess of the
Fund's minimum initial investment. No CDSC will be imposed on involuntary
redemption of shares.
Shareholders will be notified before these redemptions are to be made or
this fee is imposed and will have 30 days to purchase additional shares to
bring their account balance up to the required minimum. Unless the number of
shares acquired by further purchases and dividend reinvestments, if any,
exceeds the number of shares redeemed, repeated redemptions from a smaller
account eventually may trigger this policy.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege
You may exchange shares of the Fund for shares of the same class in another
John Hancock fund.
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of
investment goals. Contact your registered representative or Selling Broker
and request a prospectus for the John Hancock funds that interest you. Read
the prospectus carefully before exchanging your shares. You can exchange
shares of the same class of the Fund only for shares of the same class of
another John Hancock fund. For this purpose, John Hancock funds with only one
class of shares will be treated as Class A whether or not they have been so
designated.
Exchanges between funds which are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is
imposed. Class B shares of the Fund which are subject to a CDSC may be
exchanged into Class B shares of another John Hancock fund without incurring
the CDSC; however, the shares will be subject to the CDSC schedule of the
shares acquired (except shares exchanged for John Hancock Short-Term
Strategic Income Fund and John Hancock Limited Term Government Fund which
will be subject to the initial Fund's CDSC). For purposes of computing the
CDSC payable upon redemption of shares acquired in an exchange, the holding
period of the original shares is added to the holding period of the shares
acquired in an exchange. However, if you exchange Class B shares purchased
prior to January 1, 1994 for Class B shares of any other John Hancock fund,
you will be subject to the CDSC schedule that was in effect at your initial
purchase date.
<PAGE> 127
You may exchange Class B shares of any Fund into shares of John Hancock Cash
Management Fund at net asset value. However, you will continue to be subject
to a CDSC upon redemption. The rate of the CDSC will be the rate in effect on
the original Fund at the time of the exchange.
The Fund reserves the right to require you to keep previously exchanged
shares (and reinvested dividends) in the Fund for 90 days before you are
permitted to execute a new exchange. The Fund may also terminate or alter the
terms of the exchange privilege upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and
the purchase of shares in another for Federal income tax purposes. An
exchange may result in a taxable gain or loss.
When you make an exchange, your account registration in both the existing and
new account must be identical. The exchange privilege is available only in
states where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers
and investment advisers may exchange their clients' Fund shares, subject to
the terms of those agreements and John Hancock Funds' right to reject or
suspend those exchanges at any time. Because of the restrictions and
procedures under those agreements, the exchanges may be subject to timing
limitations and other restrictions that do not apply to exchanges requested
by shareholders directly, as described above.
Because Fund performance and shareholders can be hurt by excessive trading,
the Fund reserves the right to terminate the exchange privilege for any
person or group that, in John Hancock Funds' judgment, is involved in a
pattern of exchanges that coincide with a "market timing" strategy that may
disrupt the Fund's ability to invest effectively according to its investment
objective and policies, or might otherwise affect the Fund and its
shareholders adversely. The Fund may also temporarily or permanently
terminate the exchange privilege for any person who makes seven or more
exchanges out of the Fund per calendar year. Accounts under common control or
ownership will be aggregated for this purpose. Although the Fund will attempt
to give you prior notice whenever it is reasonably able to do so, it may
impose these restrictions at any time.
By Telephone
1. When you fill out the application for your purchase of Fund shares, you
automatically authorize exchanges by telephone unless you check the box
indicating that you do not wish to authorize telephone exchanges.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give the telephone
representative.
3. Investors Services employs the following procedures to confirm that
instructions received by telephone are genuine. Your name, the account
number, taxpayer identification number applicable to the account and other
relevant information may be requested. In addition, telephone instructions
are recorded.
In Writing
1. In a letter request an exchange and list the following:
- --the name and class of the fund whose shares you currently own
- --your account number
<PAGE> 128
- --the name(s) in which the account is registered
- --the name of the fund in which you wish your exchange to be invested
- --the number of shares, all shares or dollar amount you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
Reinvestment Privilege
If you redeem shares of the Fund, you may be able to reinvest the proceeds in
this Fund or another John Hancock fund without paying an additional sales
charge.
1. You will not be subject to a sales charge on Class A shares that are
reinvested in any John Hancock funds which are otherwise subject to a sales
charge as long as you reinvest within 120 days from the redemption date. If
you paid a CDSC upon a redemption, you may reinvest at net asset value in the
same class of shares from which you redeemed within 120 days. Your account
will be credited with the amount of the CDSC previously charged, and the
reinvested shares will continue to be subject to a CDSC for purposes of
computing the CDSC payable upon a subsequent redemption. The holding period
of the shares acquired through reinvestment will include the holding period
of the redeemed shares.
2. Any portion of your redemption may be reinvested in Fund shares or in
shares of any of the other John Hancock funds, subject to the minimum
investment limit of that fund.
3. To reinvest, you must notify Investor Services in writing. Include the
Fund(s) name, account number and class from which your shares were originally
redeemed.
Systematic Withdrawal Plan
You can pay routine bills from your account or make periodic disbursements
from your retirement accounts to comply with IRS regulations.
1. You may elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You can
also obtain the Application from your registered representative or by calling
1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semiannually or
on a selected monthly basis to yourself or any other designated payee.
4. There is no limit on the number of payees you may authorize, but all
payments must be made at the same time or intervals.
5. It is not advantageous to maintain a Systematic Withdrawal Plan
concurrently with purchases of additional Class A or Class B shares because
you may be subject to an initial sales charge on your purchases of Class A
shares or to a CDSC on your redemptions of Class B shares. In addition, your
redemptions are taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks, or if deposits to a bank account are returned for any reason.
Monthly Automatic Accumulation Program (MAAP)
You can make automatic investments and simplify your investing.
1. You may authorize an investment to be automatically drawn each month from
your bank for investment in fund shares under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.
<PAGE> 129
2. You may also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
3. You may terminate your Monthly Automatic Accumulation Program at any time.
4. There is no charge to you for this program, and there is no cost to the
Fund.
5. If you have payments being withdrawn from a bank account and we are
notified that the account has been closed, withdrawals will be discontinued.
Group Investment Program
Organized groups of at least four persons may establish accounts.
1. An individual account will be established for each participant, but the
sales charge for Class A shares will be based on the aggregate dollar amount
of all participants' investments. To determine how to qualify for this
program, contact your registered representative or call 1-800-225-5291.
2. The initial aggregate investment of all participants in the group must be
at least $250.
3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum and you may terminate the program at any
time.
Retirement Plans
1. You may use the Fund as an investment vehicle for various types of
qualified retirement plans, including Individual Retirement Accounts, Keogh
Plans (H.R.10), Pension and Profit Sharing Plans (including 401(k) Plans),
Tax Sheltered Annuity Retirement Plans (403(b)Plans), and 457 Plans.
2. The initial investment minimum or aggregate minimum for any of these plans
is $500. However, accounts being established as group IRA, SEP, SARSEP, TSA,
401(k), and 457 Plans will be accepted without an initial minimum investment.
<PAGE> 130
JOHN HANCOCK SOVEREIGN
ACHIEVERS FUND
Investment Adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Principal Distributor
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Custodian
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
Transfer Agent
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
Independent Auditors
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchange call 1-800-225-5291
Invest-by-Phone
Telephone Redemption
For: TDD call 1-800-554-6713
JHD-3500P 3/95
JOHN HANCOCK
SOVEREIGN
ACHIEVERS
FUND
Class A and Class B Shares
Prospectus
March 1, 1995
A mutual fund seeking long-term growth of capital primarily from a portfolio
of common stocks and other equity investments.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Telephone 1-800-225-5291
[Recycled Logo] Printed on recycled paper using soybean ink
<PAGE> 131
FREEDOM INVESTMENT TRUST
consisting of five series
which are included herein:
- John Hancock Sovereign U.S. Government Income Fund
- John Hancock Managed Tax-Exempt Fund
- John Hancock Gold & Government Fund
- John Hancock Sovereign Achievers Fund
- John Hancock Regional Bank Fund
and
FREEDOM INVESTMENT TRUST II
consisting of five series,
two of which are included herein:
- John Hancock Global Fund
- John Hancock Global Income Fund
CLASS A AND CLASS B SHARES
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1995
This Statement of Additional Information provides information about
John Hancock Sovereign U.S. Government Income Fund, John Hancock Managed
Tax-Exempt Fund, John Hancock Gold & Government Fund, John Hancock Sovereign
Achievers Fund, John Hancock Regional Bank Fund, John Hancock Global Fund and
John Hancock Global Income Fund in addition to the information that is contained
in the Funds' Class A and Class B Shares Prospectus dated March 1, 1995
(together, the "Prospectuses").
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Funds' Prospectuses, a copy of which can be
obtained free of charge by writing or telephoning:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
1-800-225-5291
1
<PAGE> 132
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
STATEMENT OF
ADDITIONAL
INFORMATION
PAGE
<S> <C>
ORGANIZATION OF THE FUNDS 3
INVESTMENT OBJECTIVES AND POLICIES 3
- ---John Hancock Sovereign U.S. Government Income Fund
- ---John Hancock Managed Tax-Exempt Fund
- ---John Hancock Gold & Government Fund
- ---John Hancock Sovereign Achievers Fund
- ---John Hancock Regional Bank Fund
- ---John Hancock Global Fund
- ---John Hancock Global Income Fund
THE FUNDS' OPTIONS TRADING ACTIVITIES 19
THE FUNDS' INVESTMENTS IN FUTURES CONTRACTS 26
CERTAIN INVESTMENT PRACTICES. 31
INVESTMENT RESTRICTIONS 36
TAX STATUS 41
THOSE RESPONSIBLE FOR MANAGEMENT 46
INVESTMENT ADVISORY AND OTHER SERVICES 54
DISTRIBUTION CONTRACTS 58
NET ASSET VALUE 60
INITIAL SALES CHARGE ON CLASS A SHARES 61
DEFERRED SALES CHARGE ON CLASS B SHARES 62
SPECIAL REDEMPTIONS 63
ADDITIONAL SERVICES AND PROGRAMS 63
DESCRIPTION OF THE FUNDS' SHARES 65
CALCULATION OF PERFORMANCE 66
BROKERAGE ALLOCATION 71
DISTRIBUTIONS 75
TRANSFER AGENT SERVICES 76
CUSTODY OF PORTFOLIO 76
INDEPENDENT ACCOUNTANTS 77
APPENDIX A - BOND AND COMMERCIAL 78
PAPER RATINGS 79
</TABLE>
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<PAGE> 133
ORGANIZATION OF THE FUNDS
Freedom Investment Trust is a diversified open-end management
investment company organized as a Massachusetts business trust on March 29,
1984. Freedom Investment Trust was originally organized under the name Freedom
Gold & Government Trust. It changed its name to Freedom Investment Trust on July
22, 1985. The Trustees have authority to issue an unlimited number of shares of
beneficial interest of separate series without par value. To date, five series
of Freedom Investment Trust have been authorized for sale to the public by the
Board of Trustees: John Hancock Gold & Government Fund (formerly John Hancock
Freedom Gold & Government Trust), created on March 29, 1984 ("Gold & Government
Fund"), John Hancock Regional Bank Fund (formerly John Hancock Freedom Regional
Bank Fund), created on April 2, 1985 ("Regional Bank Fund"), John Hancock
Sovereign U.S. Government Income Fund (formerly Freedom Government Income Fund),
created on January 16, 1986 ("Government Fund"), John Hancock Sovereign
Achievers Fund (formerly Freedom Equity Value Fund), created on January 16, 1986
("Sovereign Achievers Fund"), and John Hancock Managed Tax-Exempt Fund (formerly
John Hancock Freedom Managed Tax Exempt Fund).
Freedom Investment Trust II (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on March 31,
1986. The Trust currently has five series of shares, John Hancock Global Fund
(formerly John Hancock Freedom Global Fund), created on March 31, 1986 ("Global
Fund"), John Hancock Global Income Fund (formerly John Hancock Freedom Global
Income Fund), created on July 30, 1986 ("Global Income Fund") and John Hancock
Short-Term Strategic Income Fund (formerly John Hancock Freedom Short-Term World
Income Fund), created on July 31, 1990; John Hancock Special Opportunities Fund,
created on November 1, 1993 ("Special Opportunities Fund"), and John Hancock
International Fund (formerly John Hancock Freedom International Fund), created
on January 3, 1994 ("International Fund").
Freedom Investment Trust and Freedom Investment Trust II may be
referred to individually as a "Trust" and collectively as the "Trusts". Gold &
Government Fund, Regional Bank Fund, Government Fund, Sovereign Achievers Fund,
Managed Tax-Exempt Fund, Global Fund and Global Income Fund may be referred to
individually as a "Fund" and collectively as the "Funds."
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of each Fund's
investment objectives and policies discussed in each Fund's respective
Prospectus. The Adviser for all the Funds is John Hancock Advisers, Inc. (the
"Adviser"). John Hancock Advisers International Limited ("JH Advisers
International") is the sub-adviser for the Global Fund.
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<PAGE> 134
John Hancock Sovereign U.S. Government Income Fund
The Adviser believes that a high current income consistent with
long-term total return may be derived from: (i) interest income from Government
Securities; (ii) income from premiums from expired put and call options on
Government Securities written by the Government Fund; (iii) net gains from
closing purchase and sale transactions with respect to options on Government
Securities; and (iv) net gains from sales of portfolio securities on exercise of
options or otherwise.
Since interest yields on Government Securities and opportunities to
realize net gains from options transactions may vary from time to time because
of general economic and market conditions and many other factors, it is
anticipated that the Government Fund's share price and yield will fluctuate, and
there can be no assurance that the Government Fund's objective will be achieved.
Government Securities
U.S. Treasury Securities. The Government Fund may invest in U.S. Treasury
securities, including Bills, Notes, Bonds and other debt securities issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
Government and differ primarily in their interest rates, the lengths of their
maturities and the times of their issuance.
Securities Issued or Guaranteed by U.S. Government Agencies and
Instrumentalities. The Government Fund may also invest in securities issued by
agencies of the U.S. Government or instrumentalities established or sponsored by
the U.S. Government. The obligations, including those which are guaranteed by
Federal agencies or instrumentalities, may or may not be backed by the "full
faith and credit" of the United States. In the case of securities not backed by
the full faith and credit of the United States, the Government Fund must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment and may not be able to assert a claim against the United States itself
in the event the agency or instrumentality does not meet its commitments.
Securities in which the Government Fund may invest but which are not backed by
the full faith and credit of the United States include but are not limited to
obligations of the Tennessee Valley Authority, the Federal Home Loan Mortgage
Corporation ("FHLMC") and the United States Postal Service, each of which has
the right to borrow from the United States Treasury to meet its obligations, and
obligations of the Federal Farm Credit System, the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Banks, the obligations of which
may only be satisfied by the individual credit of the issuing agency.
Obligations of the Government National Mortgage Association ("GNMA"), the
Farmers Home Administration and the Export-Import Bank are backed by the full
faith and credit of the United States.
Securities of International Bank for Reconstruction and Development
The Government Fund may also purchase obligations of the International
Bank for Reconstruction and Development ("World Bank"), which, while technically
not a U.S. Government agency or instrumentality, has the right to borrow from
the participating countries, including the United States.
4
<PAGE> 135
Mortgage-Related Securities
The Government Fund may invest in mortgage-backed securities, including
those representing an undivided ownership interest in a pool of mortgage loans,
e.g., securities of the GNMA and pass-through securities issued by the FHLMC and
FNMA.
GNMA Certificates. Certificates of the Government National Mortgage Association
("GNMA Certificates") are mortgage-backed securities, which evidence an
undivided interest in a pool of mortgage loans. GNMA Certificates differ from
bonds in that the principal is paid back monthly by the borrower over the term
of the loan rather than returned in a lump sum at maturity. GNMA Certificates
that the Government Fund purchases are the "modified pass-through" type.
"Modified pass-through" GNMA Certificates entitle the holder to receive a share
of all interest and principal payments paid and owed on the mortgage pool, net
of fees paid to the "issuer" and GNMA, regardless of whether or not the
mortgagor actually makes the payment.
GNMA Guarantee. The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of mortgages
insured by the Federal Housing Administration ("FHA") or the Farmers' Home
Administration ("FMHA"), or guaranteed by the Veterans Administration ("VA").
The GNMA guarantee is backed by the full faith and credit of the United States.
The GNMA is also empowered to borrow without limit from the U.S. Treasury if
necessary to make any payments required under its guarantee.
Life of GNMA Certificates. The average life of a GNMA Certificate is likely to
be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of principal
investment long before the contractual maturity of the mortgages in the pool.
Foreclosures impose no risk to principal investment because of the GNMA
guarantee. Because they represent the underlying mortgages, GNMA Certificates
may not be an effective means of locking in long-term interest rates due to the
need for the Government Fund to reinvest scheduled and unscheduled principal
payments. At the time principal payments or prepayments are received by the
Government Fund, prevailing interest rates may be higher or lower than the
current yield of the Fund's portfolio.
Statistics published by the FHA indicate that the average life of
single-family dwelling mortgages with 25- to 30-year maturities, the type of
mortgages backing the vast majority of GNMA Certificates, is approximately 12
years. However, because prepayment rates of individual mortgage pools vary
widely, it is not possible to predict accurately the average life of a
particular issue of GNMA Certificates.
Yield Characteristics of GNMA Certificates. The coupon rate of interest on GNMA
Certificates is lower than the interest rate paid on the VA-guaranteed or
FHA-insured mortgages underlying the Certificates, by the amount of the fees
paid to GNMA and the issuer.
5
<PAGE> 136
The coupon rate by itself, however, does not indicate the yield which
will be earned on GNMA Certificates. First, GNMA Certificates may be issued at a
premium or discount, rather than at par, and, after issuance, GNMA Certificates
may trade in the secondary market at a premium or discount. Second, interest is
earned monthly, rather than semi-annually as with traditional bonds; monthly
compounding raises the effective yield earned. Finally, the actual yield of a
GNMA Certificate is influenced by the prepayment experience of the mortgage pool
underlying it. For example, if the higher-yielding mortgages from the pool are
prepaid, the yield on the remaining pool will be reduced. Prepayments of
principal by mortgagors (which can be made at any time without penalty) may
increase during periods when interest rates are falling.
FHLMC Securities. The Federal Home Loan Mortgage Corporation was created in 1970
through enactment of Title III of the Emergency Home Finance Act of 1970. Its
purpose is to promote development of a nationwide secondary market in
conventional residential mortgages.
The FHLMC issues two types of mortgage pass-through securities,
mortgage participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro rata
share of all interest and principal payments made and owed on the underlying
pool. The FHLMC guarantees timely payment of interest on PCs and the full return
of principal.
GMC's also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return principal once
a year in guaranteed minimum payments.
FNMA Securities. The Federal National Mortgage Association was established in
1938 to create a secondary market in mortgages insured by the FHA.
FNMA Issued Guaranteed Mortgage Pass-through Certificates ("FNMA Certificates").
FNMA Certificates resemble GNMA Certificates in that each FNMA Certificate
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. FNMA guarantees timely payment of interest on FNMA
Certificates and the full return of principal.
Collateralized Mortgage-Backed Obligations ("CMO's"). CMOs are
fully-collateralized bonds which are the general obligations of the issuer
thereof, either the U.S. Government or a U.S. Government instrumentality. Such
bonds generally are secured by an assignment to a trustee (under the indenture
pursuant to which the bonds are issued) of collateral consisting of a pool of
mortgages. Payments with respect to the underlying mortgages generally are made
to the trustee under the indenture. Payments of principal and interest on the
underlying mortgages are not passed through to the holders of the CMOs as such
(i.e. the character of payments of principal and interest is not passed through,
and therefore payments to holders of CMOs attributable to interest paid and
principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such payments
are dedicated to payment of interest on and repayment of principal of the CMOs.
CMOs often are issued in two or more classes with varying maturities and stated
rates of interest. Because interest and principal payments on the underlying
mortgages are not passed through to holders of CMOs, CMOs of varying maturities
may be secured by the same pool of mortgages, the payments on which are
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<PAGE> 137
used to pay interest on each class and to retire successive maturities in
sequence. Unlike other mortgage-backed securities (discussed above), CMOs are
designed to be retired as the underlying mortgages are repaid. In the event of
prepayment on such mortgages, the class of CMO first to mature generally will be
paid down. Therefore, although in most cases the issuer of CMOs will not supply
additional collateral in the event of such prepayment, there will be sufficient
collateral to secure CMOs that remain outstanding.
Inverse Floating Rate Securities. The Government Fund may invest in inverse
floating rate securities. It is the current intention of the Fund to invest no
more than 5% of its net assets in inverse floating rate securities. The interest
rate on an inverse floating rate security resets in the opposite direction from
the market rate of interest to which the inverse floating rate security is
indexed. An inverse floating rate security may be considered to be leveraged to
the extent that its interest rate varies by a multiple of the index rate of
interest. A higher degree of leverage in the inverse floating rate security is
associated with greater volatility in the market value of such security.
The inverse floating rate securities that the Government Fund may
invest in include but are not limited to, an inverse floating rate class of a
government agency issued CMO and a government agency issued yield curve note.
Typically, an inverse floating rate class of a CMO is one of two components
created from the cash flows from a pool of fixed rate mortgages. The other
component is a floating rate security in which the amount of interest payable
varies directly with a market interest rate index. A yield curve note is a fixed
income security that bears interest at a floating rate that is reset
periodically based on an interest rate benchmark. The interest rate resets on a
yield curve note in the opposite direction from the interest rate benchmark.
Portfolio Turnover
If the Government Fund writes a number of call options and the market
prices of the underlying securities appreciate, or if the Fund writes a number
of put options and the market prices of the underlying securities depreciate,
there may be a substantial turnover of the portfolio. While the Government Fund
will pay commissions in connection with its options transactions, Government
Securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission. Nevertheless, high
portfolio turnover may involve correspondingly greater commissions and other
transaction costs, which will be borne directly by the Fund.
John Hancock Managed Tax-Exempt Fund
Municipal Securities
Municipal securities are issued by or on behalf of states, territories
and possessions of the United States and their political subdivisions, agencies
and instrumentalities to obtain funds for various public purposes. The interest
on these obligations is generally exempt from federal income tax in the hands of
most investors. The two principal classifications of municipal securities are
"Notes" and "Bonds".
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<PAGE> 138
Municipal Notes. Municipal Notes are generally used to provide for short-term
capital needs and generally have maturities of one year or less. Municipal Notes
include: Project Notes (which carry a U.S. Government guarantee), Tax
Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes and
Construction Loan Notes.
Project Notes are issued by public bodies (called "Local Issuing
Agencies") created under the laws of a state, territory, or U.S. possession.
They have maturities that range up to one year from the date of issuance.
Project Notes are backed by an agreement between the Local Issuing Agency and
the U.S. Department of Housing and Urban Development to provide financing for a
range of programs of financial assistance for housing, redevelopment, and
related needs such as low-income housing programs and urban renewal programs.
While they are the primary obligations of the local public housing agencies or
the local urban renewal agencies, the agreement provides for the additional
security of the full faith and credit of the U.S. Government.
Tax Anticipation Notes are sold to finance working capital needs of
municipalities. They are generally payable from specific tax revenues expected
to be received at a future date. Revenue Anticipation Notes are issued in
expectation of receipt of other types of revenue such as federal revenues
available under the Federal Revenue Sharing Program. Tax Anticipation Notes and
Revenue Anticipation Notes are generally issued in anticipation of various
seasonal revenues such as income, sales, use, and business taxes. Bond
Anticipation Notes are sold to provide interim financing. These notes are
generally issued in anticipation of long-term financing in the market. In most
cases, these monies provide for the repayment of the notes. Construction Loan
Notes are sold to provide construction financing. After the projects are
successfully completed and accepted, many projects receive permanent financing
through the Federal Housing Administration under "Fannie Mae" (the Federal
National Mortgage Association) or "Ginnie Mae" (the Government National Mortgage
Association). There are, of course, a number of other types of notes issued for
different purposes and secured differently from those described above.
Municipal Bonds. Municipal Bonds, which meet longer term capital needs and
generally have maturities of more than one year when issued, have two principal
classifications: "General Obligation" Bonds and "Revenue" Bonds.
Issuers of General Obligation Bonds include states, counties, cities,
towns and regional districts. The proceeds of these obligations are used to fund
a wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of General Obligation Bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate or amount of special assessments.
The principal security for a Revenue Bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
Bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water and sewer systems; highways, bridges and tunnels; port and
airport facilities; colleges and universities; and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service
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<PAGE> 139
reserve fund whose monies may also be used to make principal and interest
payments on the issuer's obligations. Housing finance authorities have a wide
range of security including partially or fully insured, rent subsidized and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. In addition to a debt service reserve fund, some authorities provide
further security in the form of a state's ability (without obligation) to make
up deficiencies in the debt service reserve fund. Lease rental revenue bonds
issued by a state or local authority for capital projects are secured by annual
lease rental payments from the state or locality to the authority sufficient to
cover debt service on the authority's obligations.
Industrial Development and Pollution Control Bonds, although nominally
issued by municipal authorities, are generally not secured by the taxing power
of the municipality but are secured by the revenues of the authority derived
from payments by the industrial user.
Variable and Floating Rate Municipal Obligations. Variable and floating rate
municipal obligations are tax-exempt obligations that provide for a periodic
adjustment in the interest rate paid on the obligations. Certain of these
obligations also permit the holder to demand payment of the unpaid principal
balance plus accrued interest upon a specified number of days' notice either
from the issuer or by drawing on a bank letter of credit or comparable guarantee
issued with respect to such obligations. The issuer of such an obligation may
have a corresponding right to prepay in its discretion the outstanding principal
of the obligation plus accrued interest upon notice comparable to that required
for the holder to demand payment.
The principal and accrued interest payable to the Managed Tax-Exempt
Fund on certain floating rate demand obligations is frequently supported by an
irrevocable letter of credit or comparable guarantee of a financial institution
(generally a commercial bank).
The terms of such variable and floating rate municipal obligations
provide that interest rates are adjustable at intervals ranging from weekly up
to annually. Interest rate adjustments on floating rate obligations are based
upon the prime rate of a bank or other appropriate interest rate adjustment
index. Variable and floating rate obligations are subject to the quality
characteristics for municipal obligations described in the Appendix to this
Statement of Additional Information.
Other Municipal Securities. There is, in addition, a variety of hybrid and
special types of municipal securities as well as numerous differences in the
security of municipal securities both within and between the two principal
classifications above.
For the purpose of certain requirements of various of the Fund's
investment restrictions, identification of the "issuer" of a municipal security
depends on the terms and conditions of the security. When the assets and
revenues of a political subdivision are separate from those of the government
which created the subdivision and the security is backed only by the assets and
revenues of the subdivision, the subdivision would be deemed to be the sole
issuer. Similarly, in the case of an industrial development bond, if that bond
is backed only by the assets and revenues of the nongovernmental user, then the
nongovernmental user would be deemed to be the sole issuer. If, however, in
either case, the creating government or some other entity guarantees the
security, the guarantee would be considered a separate security and would be
treated as an issue of the government or other agency.
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Ratings as Investment Criteria
(See Appendix A.) In general, the ratings of Moody's Investors Service,
Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P") represent the
opinions of these agencies as to the quality of the municipal securities which
they rate. It should be emphasized, however, that such ratings are relative and
subjective and are not absolute standards of quality. These ratings will be used
by the Managed Tax-Exempt Fund as initial criteria for the selection of
portfolio securities, but the Fund will also rely upon the independent advice of
the Adviser to evaluate potential investments. Among the factors which will be
considered are the long-term ability of the issuer to pay principal and interest
and general economic trends. Appendix A contains further information concerning
the ratings of Moody's and S&P and their significance.
Subsequent to its purchase by the Managed Tax-Exempt Fund, an issue of
municipal securities may cease to be rated or its rating may be reduced below
the minimum required for purchase by the Managed Tax-Exempt Fund. Neither event
will require the sale of such municipal securities by the Fund, but the Adviser
will consider such event in its determination of whether the Fund should
continue to hold the securities.
Risk Factors
The yields on municipal securities are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions of the municipal securities market, size of a particular
offering, maturity of the obligation, and rating of the issue.
Municipal securities are also subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Code, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. There is also
the possibility that as a result of litigation or other conditions the power or
ability of any one or more issuers to pay, when due, principal of and interest
on certain municipal securities may be materially affected.
From time to time, proposals to restrict or eliminate the Federal
income tax-exemption for interest on municipal securities have been introduced
before Congress. If such a proposal were enacted, the availability of municipal
securities for investment by the Managed Tax-Exempt Fund would be adversely
affected. In such event, the Fund would re-evaluate its investment objective and
policies and submit possible changes in its structure for the consideration of
shareholders.
John Hancock Gold & Government Fund
The Adviser believes that during periods of increasing inflation or
economic or monetary instability, gold and related assets have served as a
storehouse of value and their prices have tended to increase at least as rapidly
as the rate of inflation. During such periods, interest rates have tended to
increase, causing the market value of debt instruments to decline. Conversely,
during periods of disinflation (when inflationary pressures are being reversed),
the price of high grade debt instruments has tended to increase while the value
of precious metals and related instruments has tended to decline.
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The Adviser's determination as to whether the economy is in an
inflationary or disinflationary environment will be made based upon its
evaluation of numerous economic and monetary factors. These factors will
include, but not necessarily be limited to, the actual and anticipated rate of
change of the Consumer Price Index ("CPI") over specified periods of time,
actual and anticipated changes and rate of changes in the value of the U.S.
dollar in relation to other key foreign currencies (e.g., the German mark, the
British pound and the Japanese yen), actual and anticipated changes, and rate of
changes, in short and long term interest rates and real interest rates (i.e.,
inflation adjusted interest rates), actual and anticipated changes in the money
supply, and actual and anticipated governmental fiscal and monetary policy. It
should be emphasized that the Adviser will not apply a rigid, mechanical
determination in assessing whether the economy is in an inflationary or
disinflationary environment. Rather, its determination will be the result of its
subjective judgment of all factors it deems relevant.
Additional Information on Investments
Precious metal and mining securities and currencies can be extremely
volatile at times. Gold mining securities and other precious metal and mining
securities likewise fluctuate with gold, but generally even more so. Mining and
other related securities tend to fluctuate more than gold in a major cycle price
change because operating results will usually be positively or negatively
leveraged by considerable upward or downward movements of the gold price. This
is due to the fact that the costs of mining gold remain relatively fixed, so
that an increase or decrease in the price of gold has a direct effect on the
profits of the company. Also, the prices of precious metals-related securities
are likely to be further affected by changes in the currency value of the
country of domicile relative to the dollar. Additionally, precious metal mining
and other related securities generally will be more volatile than gold in a
major cycle of price change either because of a greater or lesser supply of such
securities relative to gold, or because of economic, speculative or other
factors.
Gold Bullion and Coins
The Gold & Government Fund's gold holdings ordinarily will consist of
gold bullion and bullion-type coins, such as South African Krugerrands and
Canadian Maple Leaf coins. The Fund does not expect to acquire coins for their
numismatic value. The Gold & Government Fund may purchase and sell gold coins
through the American Gold Coin Exchange or other appropriate gold coin and
bullion dealers and may purchase gold bullion through any appropriate gold
bullion dealer. No more than 10% of the Fund's portfolio may be invested in gold
bullion or coins. Unlike investments in gold or precious metals securities,
which may produce income in addition to offering potential for capital
appreciation, gold bullion or coins earn no investment income. Furthermore, the
Fund will incur storage or extra costs which may be higher than costs associated
with more traditional forms of investments.
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U.S. Government Securities
The Gold & Government Fund may invest up to 5% of its total assets in
securities issued or guaranteed as to principal and interest by the U.S.
Government in the form of separately traded principal and interest components of
securities issued or guaranteed by the U.S. Treasury. The principal and interest
components of selected securities are traded independently under the Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") program.
Under the STRIPS program, the principal and interest components are individually
numbered and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Risk Factors
Because of the following considerations, an investment in the Gold &
Government Fund should not be considered a complete investment program.
1. Failure to Anticipate Changes in Economic Cycles. The Gold &
Government Fund's investment success will be dependent to a high degree on
the Adviser's ability to anticipate the onset and termination of
inflationary and disinflationary cycles. A failure to anticipate a
disinflationary cycle could result in the Fund's assets being
disproportionately invested in securities of gold or other mining
companies. Conversely, a failure to predict an inflationary cycle could
result in the Fund's assets being disproportionately invested in U.S.
Government securities.
2. Unanticipated Economic Activity. The Gold & Government Fund's
investment success will depend to a high degree on the validity of the
premise that the values of securities of gold and precious metals companies
will move in a different direction than the values of U.S. Government
securities during periods of inflation or disinflation. If the values of
both types of securities move down during the same period of time the value
of the shareholder's investment will decline rather than stabilize or
increase, as anticipated, regardless of whether the Fund is primarily
invested in gold or government securities.
3. Concentration in and Volatility of Mining Stocks. The securities of
companies engaged in the exploration for and/or mining and processing of
gold and precious metals have been volatile historically. Mining and other
related securities tend to fluctuate as much as or more than gold during
periods of market instability because operating results will usually be
positively or negatively leveraged by considerable movements in the price
of gold. Such securities are further affected by changes in value of the
currency of the country of domicile. Since the Gold & Government Fund may
from time to time, as set forth in the Prospectus, invest up to 80% of its
total assets in gold and precious metals mining stocks, its shares may be
subject to greater risks and market fluctuations than other investment
companies with investment portfolios having a broader range of investment
alternatives.
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4. Investment in Gold Bullion and Coins. Precious metals prices are
affected by various factors such as economic conditions, political events
and monetary policies. In addition, gold bullion and coins do not generate
income and may subject the Gold & Government Fund to taxes and insurance,
shipping and storage costs. The sole source of return to the Fund from such
investments would be gains realized on sales; a negative return would be
realized if gold is sold at a loss. The price of gold has historically been
subject to dramatic upward and downward price movements over short periods
of time. In the event of a substantial decrease in the price of gold, the
Gold & Government Fund would incur realized or unrealized losses on its
investment in gold bullion. In the event of a substantial increase in the
price of gold, the Fund may be forced to liquidate a portion of its
holdings of gold bullion to ensure that the value thereof does not increase
to the extent that, at the close of any fiscal quarter, more than 25% of
the value of the Fund's total assets are invested in securities of any one
issuer or more than 50% of its total assets are invested in gold bullion in
order to remain qualified under the Internal Revenue Code as a regulated
investment company. Therefore, the Fund may be forced to partially
liquidate its holdings of gold bullion even if the Adviser anticipates
further increases in the price of gold. Furthermore, Gold & Government Fund
may derive no more than 10% of its gross income in any taxable year from
gross gains from transactions in gold bullion to remain so qualified and
therefore may be required either to dispose of or continue to hold gold
bullion when it would not otherwise do so for investment reasons.
5. Tax or Currency Laws. Changes in the tax or currency laws of the U.S.
and of foreign countries, such as imposition of withholding or other taxes
or exchange controls on foreign currencies may increase the cost of, or
inhibit the Gold & Government Fund's ability to pursue, its investment
program.
6. Unpredictable International Monetary Policies, Economic and
Political Conditions. There is the possibility that under unusual
international monetary or political conditions the Gold & Government Fund's
assets might be less liquid or that the change in value of its assets might
be more volatile than would be the case with other investments. In
particular, because the price of gold may be affected by unpredictable
international monetary policies and economic conditions there may be
greater likelihood of a more dramatic impact upon the market prices of
securities of companies mining, processing or dealing in gold than changes
which would occur in other industries.
Although Gold & Government Fund expects to take delivery of its investments
in the United States, any investment where delivery takes place outside of the
United States will be conducted in compliance with any applicable United States
and foreign currency restrictions and other laws limiting the amount and types
of foreign investments. Since the Adviser expects to make substantially all of
the Fund's purchases and sales of securities and gold bullion in the U.S.
markets and in U.S. dollars, the Adviser does not believe that it will be
materially affected by changes in exchange rates, currency convertibility and
repatriation except to the extent the Fund holds foreign currencies, including
gold coins, as part of its cash position. However, changes in governmental
administrations or of economic or monetary policies, in the United States or
abroad, or changed circumstances in dealings between nations could result in
investment losses to the Fund and otherwise affect the Fund's operations
adversely.
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7. Foreign Securities. Although the Adviser does not believe the risk to
be substantial, foreign issuers of securities in many countries are subject
to less stringent standards of disclosure and regulatory controls than are
found in the United States which may result in less reliable and less
detailed information being available to the Gold & Government Fund than
would be the case with United States companies. In addition, investments in
foreign issuers may be affected by fluctuating exchange rates and adverse
changes in foreign investment or exchange control regulation. However, the
Fund's policy of generally investing in American depository receipts
("ADRs") or other securities which can be sold for United States dollars
and for which market quotations are readily available in New York may
minimize some of these risks. (ADRs are certificates issued by United
States banks representing the right to receive securities of a foreign
issuer deposited in that bank or a correspondent bank.)
Portfolio Turnover
Gold & Government Fund's rate of portfolio turnover may vary widely
from year to year, and may be higher than many other mutual funds with similar
investment objectives. Nevertheless, high portfolio turnover in any given year
will result in the Fund's payment of above-average amounts of commissions and
other transaction costs and may result in the realization of greater amounts of
net short-term capital gains, distributions from which will be taxable to
shareholders as ordinary income.
John Hancock Sovereign Achievers Fund
Foreign Investments
While Sovereign Achievers Fund may invest in some foreign securities,
such investments are expected to constitute less than 10% of the Fund's
portfolio. Although the Adviser does not believe the risk to be substantial,
foreign issuers of securities in many countries are subject to less stringent
standards of disclosure and regulatory controls than are found in the United
States which may result in less reliable and less detailed information being
available to the Fund than would be the case with United States companies. In
addition, investments in foreign issuers may be affected by fluctuating exchange
rates and adverse changes in foreign investment or exchange control regulation.
However, Sovereign Achievers Fund's policy of generally investing in American
depository receipts ("ADRs") or other securities which can be sold for United
States dollars and for which market quotations are readily available in New York
may minimize some of these risks. ADRs are certificates issued by United States
banks representing the right to receive securities of a foreign issuer deposited
in that bank or a correspondent bank.
John Hancock Regional Bank Fund
The Adviser believes that the ongoing deregulation of the banking
industry continues to provide new opportunities for banks. As deregulation
continues and interstate banking becomes more likely, some Regional Banks may
become attractive acquisition candidates for large money center banks or other
Regional Banks. Typically, acquisitions accelerate the capital appreciation of
the shares of the company to be acquired.
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In addition, Regional Banks located in sections of the country
experiencing strong economic growth are likely to participate in and benefit
from such growth through increased deposits and earnings. Many banks which are
actively and aggressively managed and are expanding services as deregulation
opens up new opportunities also show potential for capital appreciation.
The Adviser will seek to invest in those Regional Banks it believes are
well positioned to take advantage of the changes in the banking industry. A
Regional Bank may be well positioned for a number of reasons. It may be an
attractive acquisition for a bank wishing to strengthen its presence in the
geographic region or to expand into interstate activities, or it may be planning
on a regional merger to strengthen its position in the geographic area. The
Regional Bank may be located in a geographic region with strong economic growth
and be actively seeking to participate in such growth, or it may be expanding
into financial services previously unavailable to it (due to an easing of
regulatory constraints) in order to become a full service financial center.
Risk Factors
Banks, finance companies and other financial services organizations are
subject to extensive governmental regulations which may limit both the amounts
and types of loans and other financial commitments which may be made and the
interest rates and fees which may be charged. The profitability of these
concerns is largely dependent upon the availability and cost of capital funds,
and has shown significant recent fluctuation as a result of volatile interest
rate levels. Volatile interest rates will also affect the market value of debt
securities held by the Regional Bank Fund. In addition, general economic
conditions are important to the operations of these concerns, with exposure to
credit losses resulting from possible financial difficulties of borrowers
potentially having an adverse effect.
John Hancock Global Fund and
John Hancock Global Income Fund
Today, more than two-thirds of the world's stock market value is traded
on stock exchanges located outside of the United States. Europe is poised for
economic change. The European Economic Commission has ratified the economic
directives which will essentially create a single, unified market amongst the
European nations allowing the free movement of goods and services within a
population which is larger than that of the USA. Europe also intends to
participate in the restructuring of the social and economic policies of the
former Soviet Union and other Eastern bloc countries. The Pacific Region, which
includes Japan, Hong Kong, Korea, Taiwan, Thailand, Singapore, Malaysia and
Australia, has experienced substantial economic growth in recent years. The
Global Fund provides you with access to the stock markets of the world, enabling
you to diversify your investments among a variety of countries, companies and
industrial sectors.
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In general, the securities in which Global Income Fund may invest
include debt obligations issued or guaranteed by United States or foreign
governments, political subdivisions thereof (including states, provinces and
municipalities) or their agencies and instrumentalities ("governmental
entities"), or issued or guaranteed by international organizations designated or
supported by governmental entities to promote economic reconstruction or
development ("supranational entities"), or issued by corporations or financial
institutions. Examples of supranational entities include the International Bank
for Reconstruction and Development (the "World Bank"), the European Steel and
Coal Community, the Asian Development Bank and the Inter-American Development
Bank. The governmental members, or "stockholders", usually make initial capital
contributions to the supranational entity and in many cases are committed to
make additional capital contributions if the supranational entity is unable to
repay its borrowings. Securities issued by supranational entities may be
denominated in U.S. dollars, a foreign currency or a multi-national currency
unit such as the European Currency Unit ("ECU"). The ECU is a composite currency
consisting of specified amounts of each of the currencies of the member
countries of the European Economic Community. Securities of corporations and
financial institutions in which the Fund may invest include corporate and
commercial obligations, such as medium-term notes and commercial paper, which
may be indexed to foreign currency exchange rates. In accordance with guidelines
promulgated by the Staff of the Securities and Exchange Commission, the Fund
will consider as an industry any category of such supranational entities which
may have been designated by the Commission.
American Depository Receipts and European Depository Receipts
In addition to purchasing equity securities of foreign issuers in
foreign markets, Global Fund and the Global Income Fund may invest in American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs") or other
securities convertible into securities of corporations domiciled in foreign
countries. These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. Generally, ADRs, in
registered form, are designed for use in the U.S. securities markets and EDRs,
in bearer form, are designed for use in European securities markets. ADRs are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying securities. EDRs are European receipts evidencing a
similar arrangement. It is the current intention of JH Advisers International
that no more than 5% of the Global Fund's assets will be invested in ADRs and
EDRs.
Foreign Currency Transactions
Global Fund and Global Income Fund will conduct their foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
forward contracts to purchase or sell foreign currencies. A forward foreign
currency exchange contract involves an obligation to purchase or sell a specific
amount of currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are usually traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for such trades.
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The Global Fund and the Global Income Fund may enter into forward
foreign currency exchange contracts in two circumstances. First, when a Fund
enters into a contract for the purchase or sale of a security denominated in a
foreign currency, a Fund may desire to "lock-in" the United States dollar price
of the security. By entering into a forward contract for a fixed amount of
dollars for the purchase or sale of the amount of foreign currency involved in
the underlying transactions, a Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
United States dollar and such foreign currency during the period between the
date on which the security is purchased or sold and the date on which payment is
made or received.
Second, when the Adviser or JH Advisers International believes that the
currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, a Fund may enter into a forward contract to
sell or buy the amount of the former foreign currency approximating the value of
some or all of that Fund's portfolio securities denominated in such foreign
currency. This second investment practice is generally referred to as
"cross-hedging." The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible since the future
value of securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date on which the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain. Neither the Global Fund nor
the Global Income Fund intends to enter into forward contracts under this second
circumstance on a regular or continuous basis, and neither Fund will do so, if,
as a result, it will have more than 50% of the value of its total assets,
computed at market value, at the time of commitment, committed to the
consummation of such contracts. A Fund will also not enter into such forward
contracts or maintain a net exposure to such contracts where the consummation of
the contracts would obligate that Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency.
Under normal circumstances, consideration of the prospects for currency
exchange rates will be incorporated into a Fund's long-term investment decisions
made with regard to overall investment strategies. However, each Fund believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the Fund will thereby be
served. State Street Bank and Trust Company, the Funds' custodian, will place
cash or liquid debt securities into a segregated account of each Fund in an
amount equal to the value of that Fund's total assets committed to the
consummation of forward foreign currency exchange contracts. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with respect to such
contracts.
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Neither the Global Fund nor the Global Income Fund will enter into any
forward contract with a term of greater than one year. At the maturity of a
forward contract, a Fund may either sell the portfolio security and make
delivery of the foreign currency, or it may retain the security and terminate
its contractual obligation to deliver the foreign currency by purchasing an
"offsetting" contract with the same currency trader obligating it to purchase,
on the same maturity date, the same amount of the foreign currency. There can be
no assurance, however, that either Fund will be able to effect such a closing
purchase transaction.
It is impossible to forecast the market value of a particular portfolio
security at the expiration of the contract. Accordingly, it may be necessary for
a Fund to purchase additional foreign currency on the spot market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency that the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
If either the Global Fund or the Global Income Fund retains the
portfolio security and engages in an offsetting transaction, that Fund will
incur a gain or a loss (as described below) to the extent that there has been
movement in forward contract prices. Should forward prices decline during the
period between a Fund's entering into a forward contract for the sale of a
foreign currency and the date it enters into an offsetting contract for the
purchase of the foreign currency, such Fund will realize a gain to the extent
that the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent that the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
The dealing in forward foreign currency exchange contracts by the
Global Fund and the Global Income Fund will be limited to the transactions
described above. The Funds are not required to enter into such transactions with
regard to their foreign currency-denominated securities. It also should be
realized that this method of protecting the value of a Fund's portfolio
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. It simply establishes a
rate of exchange which one can achieve at some future point in time.
Additionally, although such contracts tend to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result should the value of such currency
increase.
Although the Global Fund and the Global Income Fund value their assets
daily in terms of United States dollars, neither Fund intends to convert its
holdings of foreign currencies into United States dollars on a daily basis. A
Fund will do so from time to time, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "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 resell that
currency to the dealer.
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Portfolio Turnover
The Global Income Fund's portfolio turnover rate may vary widely from
year to year and may be higher than that of many other mutual funds with similar
investment objectives. For example, if the Global Income Fund writes a
substantial number of call options and the market prices of the underlying
securities appreciate, or if it writes a substantial number of put options and
the market prices of the underlying securities depreciate, there may be a very
substantial turnover of the portfolio. While the Fund will pay commissions in
connection with its options transactions, government securities are generally
traded on a "net" basis with dealers acting as principal for their own accounts
without a stated commission. Nevertheless, high portfolio turnover may involve
correspondingly greater commissions and other transaction costs, which will be
borne directly by the Fund.
THE FUNDS' OPTIONS TRADING ACTIVITIES
The following information supplements the discussion in the
Prospectuses regarding options transactions in which the Funds may engage.
A call option gives the purchaser of the option the right to buy, and
the writer the obligation to sell (if the option is exercised), the underlying
security or asset at the exercise price during the option period. Conversely, a
put option gives the purchaser the right to sell, and the writer the obligation
to buy, (if the option is exercised) the underlying security or asset at the
exercise price during the option period.
The principal reason for writing covered call options on a portfolio
security or foreign currency is to attempt to realize through the receipt of
premiums a greater return than would be realized on the security or foreign
currency alone. A covered call option writer, in return for the premium, has
given up the opportunity for profit from a price increase in the underlying
security or currency above the exercise price so long as its obligation
continues, but has retained the risk of loss should the price of the security
decline. The call option writer has no control over when it may be required to
sell its securities, since it may be assigned an exercise notice at any time
prior to the termination of its obligation as a writer. If an option expires,
the writer realizes a gain in the amount of the premium. Such a gain, of course,
may be offset by a decline in the market value of the underlying security during
the option period. If a call option is exercised, the writer realizes a gain or
loss from the sale of the underlying security or currency.
It is the policy of each Fund to meet the requirements of the Internal
Revenue Code to qualify as a regulated investment company to prevent double
taxation of the Fund and its investors. One of these requirements is that less
than 30% of a Fund's gross income for each taxable year must be derived from
gross gains from the sale or other disposition of certain financial assets,
including stocks, securities, and most options, futures and forward contracts,
held for less than three months. The extent to which the Funds may engage in
options, futures and forward transactions may be materially limited by this 30%
test.
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Gold & Government Fund, Sovereign Achievers Fund and Regional Bank Fund
Call Options
Each Fund may trade in options, including purchasing calls and writing
covered calls. Gold & Government Fund may write covered call options and
purchase put and call options on gold bullion, U.S. Government securities and
equity securities in which it may invest. Call options ("calls") may be written
(i.e., sold) by each Fund if (i) the calls are listed on a domestic exchange or
are traded over-the-counter; and (ii) the calls are covered, i.e., the Fund owns
the assets subject to the call (or other assets acceptable for escrow
arrangements) while the call is outstanding.
Each Fund may write call options to obtain additional income. When a
Fund writes a call it receives a premium and agrees to sell the callable
securities to the purchaser of the call, if the option is exercised during the
call period, at a fixed exercise price (which may differ from the market price)
regardless of market price changes during the call period. Thus, in exchange for
the premium received, the Fund foregoes any possible profit from an increase in
market price over the exercise price.
When a Fund writes a call option, an amount equal to the premium
received by it is included in that Fund's Statement of Assets and Liabilities as
an asset and as an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of the option
written. The premium paid by a Fund for the purchase of a call or put option is
included in the assets section of the Statement of Assets and Liabilities as an
investment and subsequently adjusted to the current market value of the option.
The current market value of a purchased or written option is the last sale price
on the principal exchange on which such option is traded or, in the absence of a
sale or in the case of an unlisted option, the mean between the last bid and
offering prices.
To terminate its obligation on a call which it has written, each Fund
may purchase a call in a "closing purchase transaction." (As discussed below,
each Fund may also purchase calls other than as part of such transactions.) A
profit or loss will be realized depending on the amount of option transaction
costs and whether the premium previously received is more or less than the price
of the call purchased. A profit may also be realized if the call lapses
unexercised, because the Fund retains the underlying security and the premium
received. Any such profits are considered short-term gains for federal tax
purposes and, when distributed by the Fund, are taxable as ordinary income.
Each Fund may purchase calls only if the calls are listed on a domestic
exchange or traded over-the-counter. Each Fund will purchase call options to
attempt to obtain capital appreciation. When a Fund buys a call, it pays a
premium and has the right to buy the callable securities from the seller of a
call during a period at a fixed exercise price. The Fund benefits only if the
market price of the callable securities is above the call price during the call
period and the call is either exercised or sold at a profit. If the call is not
exercised or sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payment and the right to
purchase the underlying security.
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In the case of Gold & Government Fund, hedging by writing covered call
options on gold bullion is similar to hedging through the use of similar options
on securities as described above. In addition, Gold & Government Fund may
purchase call options on gold bullion if it desires to achieve a more rapid
exposure to anticipated increases in the price of gold mining shares or gold
bullion than is practical by buying such assets.
Put Options
Any of the Funds may purchase put options ("puts") if they are listed
on a domestic exchange or traded over-the-counter. None of the Funds may write
(sell) puts, but may resell puts previously purchased by it to third parties who
are not broker-dealers. When a Fund buys a put, it pays a premium and has the
right to sell the underlying assets to the seller of the put during the put
period at a fixed exercise price.
Each Fund may buy puts related to securities it owns ("protective
puts") or to securities it does not own ("nonprotective puts"). Buying a
protective put permits the Fund to protect itself during the put period against
a decline in the value of the underlying securities below the exercise price by
selling them through the exercise of the put. Thus, protective puts will assist
the Funds in achieving their investment objectives of capital appreciation by
protecting them against a decline in the market value of their portfolio
securities.
Buying a non-protective put permits each Fund, if the market price of
the underlying securities is below the put price during the put period, either
to resell the put or to buy the underlying securities and sell them at the
exercise price. A non-protective put can enable each Fund to achieve
appreciation during a period when the price of securities underlying such put is
declining. If the market price of the underlying securities is above the
exercise price and as a result, the put is not exercised or resold (whether or
not at a profit), the put will become worthless at its expiration date.
In the case of the Gold & Government Fund, hedging by purchasing put
options on gold bullion is similar to hedging through the use of similar options
on securities as described above.
Government Fund
Writing Covered Options on Government Securities
The Government Fund may write (sell) covered call options and covered
put options on all or any part of the Fund's portfolio of Government Securities.
The Government Fund may write (i.e., sell) options which are traded on
registered securities exchanges ("Exchanges") and may also write options on
Government Securities which are traded over-the-counter. A call option gives the
purchaser of the option the right to buy, and the writer the obligation to sell,
the underlying security at the exercise price if the option is exercised during
the option period. Conversely, a put option gives the purchaser the right to
sell, and the writer the obligation to buy (if the option is exercised) the
underlying security at the exercise price during the option period. The Fund may
also write straddles (combinations of covered puts and calls on the same
underlying security).
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The Government Fund writes only "covered" options. This means that as
long as the Fund is obligated as the writer of a call option, it will own the
underlying securities subject to the option, except that, in the case of call
options on U.S. Treasury Bills, the Fund might own U.S. Treasury Bills of a
different series from those underlying the call option, but with a principal
amount corresponding to the option contract amount and a maturity date no later
than that of the securities deliverable under the call option. See "Risk Factors
Applicable to Options" below.
The Government Fund will be considered "covered" with respect to a put
option it writes if, as long as it is obligated as the writer of a put option,
it deposits and maintains with its Custodian, cash, Government Securities or
other high-grade debt obligations having a value equal to or greater than the
exercise price of the option.
So long as the obligation of the writer continues, the writer may be
assigned an exercise notice by the broker-dealer through whom the option was
sold. The exercise notice would require the writer to deliver, in the case of a
call, or take delivery of, in the case of a put, the underlying security against
payment of the exercise price. This obligation terminates upon expiration of the
option, or at such earlier time that the writer effects a closing purchase
transaction by purchasing an option covering the same underlying security and
having the same exercise price and expiration date ("of the same series") as the
one previously sold. Once an option has been exercised, the writer may not
execute a closing purchase transaction. To secure the obligation to deliver the
underlying security in the case of a call option, the writer of the option is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing Corporation (the "OCC"), an
institution created to interpose itself between buyers and sellers of options.
Technically, the OCC assumes the other side of every purchase and sale
transaction on an Exchange and, by doing so, gives its guarantee to the
transaction.
The principal reason for writing options on a securities portfolio is
to attempt to realize, through the receipt of premiums, a greater return than
would be realized on the underlying securities alone. In return for the premium,
the covered call option writer has given up the opportunity for profit from a
price increase in the underlying security above the exercise price as so long as
the option remains open, but retains the risk of loss should the price of the
security decline. Conversely, the put option writer gains a profit, in the form
of the premium, so long as the price of the underlying security remains above
the exercise price, but assumes an obligation to purchase the underlying
security from the buyer of the put option at the exercise price, even though the
security may fall below the exercise price, at any time during the option
period. If an option expires, the writer realizes a gain in the amount of the
premium. Such a gain may, in the case of a covered call option, be offset by a
decline in the market value of the underlying security during the option period.
If a call option is exercised, the writer realizes a gain or loss from the sale
of the underlying security. If a put option is exercised, the writer must
fulfill his obligation to purchase the underlying security at the exercise
price, which will usually exceed the then-market value of the underlying
security.
Because the Government Fund can write only covered options, it may at
times be unable to write additional options unless it sells a portion of its
portfolio holdings to obtain new debt securities against which it can write
options. This may result in higher portfolio turnover and correspondingly
greater brokerage commissions and other transaction costs.
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To the extent that a secondary market is available on the Exchanges,
the covered option writer may close out options it has written prior to the
assignment of an exercise notice by purchasing, in a closing purchase
transaction, an option of the same series as the option previously written. If
the cost of such a closing purchase, plus transaction costs, is greater than the
premium received upon writing the original option, the writer will incur a loss
in the transaction.
The extent to which the Government Fund may write covered call and put
options and enter into so-called "straddle" transactions may be limited by the
Code's requirements for qualification as a regulated investment company and the
Fund's intention to qualify as such.
Purchasing Put Options on Government Securities
The Government Fund may purchase put options on optionable Government
Securities in anticipation of a price decline in the underlying security. This
contemplates the purchase of put options at a time when the Fund does not own
the underlying security and it seeks to benefit from an anticipated decline in
the market price of the underlying security. If the put option is not sold when
it has remaining value, and if the market price of the underlying security
remains equal to or greater than the exercise price during the life of the put
option, the Fund will lose its entire investment in the put option. Further,
unless the put option is sold in a closing sale transaction, in order for the
purchase of a put option to be profitable, the market price of the underlying
security must decline sufficiently below the exercise price to cover the premium
and transaction costs.
The Government Fund may also purchase put options ("protective puts")
to protect its holdings in an underlying security against a substantial decline
in market value. Such hedge protection is provided only during the life of the
put option when the Fund as the holder of the put option is able to sell the
underlying security at the exercise price regardless of any decline in the
underlying security's market price. By using put options in this manner, the
Fund will reduce any profit it might otherwise have realized in its underlying
security by the premium paid for the put option and by transaction costs.
The Government Fund will not invest more than 5% of its net assets in
put options.
Risk Factors Applicable to Options (Government Fund, Gold & Government Fund and
Global Income Fund Only)
On Treasury Bonds and Notes. Because trading interest in Treasury Bonds
and Notes tends to center on the most recently auctioned issues, the Exchanges
will not indefinitely continue to introduce new series of options with
expirations to replace expiring options on particular issues. Instead, the
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run their course, with the possible addition of a
limited number of new expirations as the original ones expire. Options trading
on each series of Bonds or Notes will thus be phased out as new options are
listed on the more recent issues, and a full range of expiration dates will not
ordinarily be available for every series on which options are traded.
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On Treasury Bills. Because the deliverable Treasury Bill changes from
week to week, writers of Treasury Bill call options cannot provide in advance
for their potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Government Fund or the Gold & Government
Fund holds a long position in Treasury Bills with a principal amount
corresponding to the option contract size, such Fund may be hedged from a risk
standpoint. In addition, each Fund will maintain in a segregated account with
its custodian Treasury Bills maturing no later than those which would be
deliverable in the event of an assignment of an exercise notice to ensure that
it can meet its open options obligations.
Additional Risks of Options On Government Securities. The Gold &
Government Fund, the Government Fund and the Global Income Fund may purchase and
sell options on Government Securities including securities issued by the
Government National Mortgage Association. Certain options on Government
Securities are traded "over-the-counter" rather than on an exchange. This means
that each of these Funds will enter into such options with particular
broker-dealers who make markets in these options. With respect to options not
traded on an exchange, there is the additional risk that a Fund may not be able
to enter into a closing transaction with the other party to the option on
satisfactory terms or that such other party may be unable to fulfill its
contractual obligations. However, the Adviser or JH Advisers International, as
the case may be, will enter into transactions in non-listed options only with
responsible dealers where it does not believe that the foregoing factors present
a material risk. There is no assurance that the Funds will be able to effect
closing transactions at any particular time or at an acceptable price. A Fund's
ability to terminate options positions in Government Securities may involve the
risk that broker-dealers participating in such transactions will fail to meet
their obligations to the Fund. The Funds will purchase options on Government
Securities only from broker-dealers whose debt securities are investment grade
(as determined by the Boards of Trustees).
All Funds
Put and Call Options: General
A call option position may be closed out only on an exchange which provides
a secondary market for options of the same series or, in the case of an
over-the-counter option, only with the other party to the transaction. 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
transactions are two-party contracts with price and terms negotiated by the
buyer and seller. There is no assurance that the Funds will be able to close out
options acquired or sold over-the-counter.
The Funds will acquire only those over-the-counter options for which
management believes the Funds 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 over-the-counter options valued by an independent
pricing service. The Funds will write and purchase over-the-counter 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 over-the-counter options
are illiquid securities, subject to the restriction that
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illiquid securities are limited to not more than 10% of a Fund's assets. The
SEC, however, has a partial exemption from the above restrictions on
transactions in over-the-counter options. The SEC allows a Fund to exclude from
the 10% limitation on illiquid securities a portion of the value of the
over-the-counter options written by the fund, provided that certain conditions
are met. First, the other party to the over-the-counter options has to be a
primary U.S. Government securities dealer designated as such by the Federal
Reserve Bank. Second, the Funds would have an absolute contractual right to
repurchase the over-the-counter options at a formula price. If the above
conditions are met, a Fund must treat as illiquid only that portion of the
over-the-counter option's value (and the value of its underlying securities)
which is equal to the formula price for repurchasing the over-the-counter
option, less the over-the-counter option's intrinsic value.
Although the Funds will generally purchase or write only those
exchange-traded options for which there appears to be an active secondary
market, there can be no assurance that a liquid secondary market on an exchange
will exist for any particular option, or at any particular time. In the event
that no liquid secondary market exists, it might not be possible to effect
closing transactions in particular options. If Fund cannot close out an
exchange-traded or over-the-counter option which it holds, it would have to
exercise such option in order to realize any profit and would incur transaction
costs on the purchase or sale of underlying assets. If the Government Fund, Gold
& Government Fund, Sovereign Achievers Fund, Regional Bank Fund, Global Fund or
Global Income Fund, as covered call option writers, are unable to effect a
closing purchase transaction, they will not be able to sell the underlying
assets until the option expires or they deliver the underlying asset upon
exercise. Accordingly, these Funds may run the risk of either foregoing the
opportunity to sell the underlying asset at a profit or being unable to sell the
underlying asset as its price declines.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) an exchange may impose restrictions on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the exchanges and the Options
Clearing Corporation have had only limited experience with the trading of
certain options and the facilities of an exchange or the Options Clearing
Corporation may not at all times be adequate to handle current trading volume;
or (vi) one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in that class or series of options) would cease to exist,
although outstanding options that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
The put and call options activities of Government Fund, Gold &
Government Fund, Sovereign Achievers Fund, Regional Bank Fund, Global Fund and
Global Income Fund may affect their turnover rates and the amount of brokerage
commissions paid by them. The exercise of calls written by these Funds may cause
them to sell portfolio securities or other assets at times and amounts
controlled by the holder of a call, thus increasing the Funds' portfolio
turnover rates and brokerage commission payments. The exercise of puts purchased
by the Fund may also cause the sale of securities or other assets, also
increasing turnover. Although such exercise is within
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the Funds' control, holding a protective put might cause the Funds to sell the
underlying securities or other assets for reasons which would not exist in the
absence of the put. Holding a non-protective put might cause the purchase of the
underlying securities or other assets to permit the Funds to exercise the put.
The put and call activities of Gold & Government Fund will be restricted by the
limited availability of options relating to mining securities and foreign
investments that are listed on domestic exchanges or quoted at some future date
on NASDAQ.
A Fund will pay a brokerage commission each time it buys or sells a put
or call or buys or sells a security in connection with the exercise of a put or
call. Such commissions may be higher than those which would apply to direct
purchases or sales of equity securities.
There is no limit as to how many times either the Global Fund's or the
Global Income Fund's options positions may be replaced and therefore the
potential risks to each Fund may be greater than 5% of its net assets.
Successful use by the Adviser or JH Advisers International of options on
securities, foreign currencies and/or forward foreign currency exchange
contracts will be based upon predictions by the Adviser or JH Advisers
International as to anticipated movements of foreign currency exchange rates
and/or interest rates.
The Funds' Custodian, or a securities depository acting for it, will
act as the Funds' escrow agent as to the securities on which they have written
calls, or as to other securities acceptable for such escrow, so that pursuant to
the rules of the Options Clearing Corporation and certain exchanges, no margin
deposit will be required of the Funds. Until the securities are released from
escrow, they cannot be sold by the Funds; this release will take place on the
expiration of the call or the Funds' entering into a closing purchase
transaction. For information on the valuation of the puts and calls, see "Net
Asset Value."
Managed Tax-Exempt Fund
The Managed Tax-Exempt Fund does not engage in any options related
transactions except options on interest rate futures contracts and municipal
bond index futures contracts as described in "The Funds' Investments in Futures
Contracts" below.
THE FUNDS' INVESTMENTS IN FUTURES CONTRACTS
The following information supplements the discussion in the
Prospectuses regarding investment by certain Funds in futures contracts and
related options.
Interest Rate Futures Contracts. The Government Fund, Managed Tax-Exempt Fund,
Gold & Government Fund and Global Income Fund may invest in interest rate
futures contracts and related options that are traded on a United States
exchange or board of trade. Such investments may be made by the Funds solely for
the purpose of hedging against changes in the value of their portfolio
securities due to anticipated changes in interest rates or market conditions,
and not for the purpose of speculation.
Currently, interest rate futures contracts can be purchased and sold with
respect to U.S. Treasury bonds, U.S. Treasury notes, Government National
Mortgage Association mortgage-backed certificates, U.S. Treasury bills and
ninety-day commercial paper.
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The purpose of the purchase or sale of interest rate futures contracts
by the Funds will be to protect the Funds from fluctuations in interest rates
without necessarily buying or selling fixed income securities. For example, if a
Fund owns bonds and interest rates are expected to increase, that Fund might
sell futures contracts on debt securities having characteristics similar to
those held in the portfolio. Such a sale would have much the effect as selling
an equivalent value of the bonds owned by the Fund. If interest rates did
increase, the value of the debt securities in the portfolio would decline, but
the value of the futures contracts to the Fund would increase at approximately
the same rate, thereby keeping the net asset value of the Fund from declining as
much as it otherwise would have.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against having to make an
anticipated purchase of bonds at the higher prices subsequently expected to
prevail. Since the fluctuations in the value of appropriately selected futures
contracts should be similar to that of the bonds that will be purchased, a Fund
could take advantage of the anticipated rise in the cost of the bonds without
actually buying them until the market has stabilized. At this time, that Fund
could make the intended purchase of the bonds in the cash market and the futures
contracts could be liquidated. To the extent a Fund enters into futures
contracts for this purpose, it will maintain in a segregated account assets
sufficient to cover its obligations with respect to such futures contracts,
which will consist of cash or U.S. Government or other high quality debt
securities from its portfolio in an amount equal to the difference between the
fluctuating market value of such futures contracts and the aggregate value of
the initial and variation margin payments made by the Fund with respect to such
futures contracts.
Municipal Bond Index Futures Contracts. The Managed Tax-Exempt Fund may invest
in municipal bond index futures contracts that are traded on a United States
exchange or board of trade. Such investments may be made by the Fund solely for
the purposes of hedging against changes in the value of its portfolio securities
due to anticipated changes in interest rates and market conditions, and not for
purposes of speculation.
A municipal bond index futures contract is an agreement pursuant to
which two parties agree to take or make delivery of an amount of cash equal to
the difference between the value of the index at the close of the last trading
day of the contract and the price at which the index contract was originally
written. No physical delivery of the underlying municipal bonds in the index is
made.
The purpose of the acquisition or sale of a municipal bond index
futures contract by the Managed Tax-Exempt Fund, as the holder of long-term
municipal securities, is to protect the Fund from fluctuations in interest rates
on municipal securities without actually buying or selling long-term municipal
securities. For example, if the Fund owns long-term bonds and interest rates are
expected to increase, it might sell municipal bond index futures contracts. Such
a sale would have much the same effect as selling some of the long-term bonds in
the Fund's portfolio. If interest rates increase as anticipated by the Adviser,
the value of certain long-term municipal securities in the portfolio would
decline, but the value of the Fund's futures contracts would increase at
approximately the same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have. Of course, since the value of
the municipal
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securities in the Managed Tax-Exempt Fund's portfolio may exceed the value of
the futures contracts sold by the Fund, an increase in the value of the futures
contracts might only mitigate - but not totally offset - the decline in the
value of the portfolio.
Similarly, when it is expected that interest rates may decline,
municipal bond index futures contracts could be purchased to hedge against the
Managed Tax-Exempt Fund's anticipated purchases of long-term municipal
securities at higher prices. Since the rate of fluctuation in the value of
municipal bond index futures contracts should be similar to that of long-term
bonds, the Fund could take advantage of the anticipated rise in the value of
long-term bonds without actually buying them until the market had stabilized. At
that time, the futures contracts could be liquidated and the Fund's cash could
be used to buy long-term bonds in the cash market. The Managed Tax-Exempt Fund
could accomplish similar results by selling municipal securities with long
maturities and investing in municipal securities with short maturities when
interest rates are expected to increase or buying municipal securities with long
maturities and selling municipal securities with short maturities when interest
rates are expected to decline. However, in circumstances when the market for
municipal securities may not be as liquid as that for the municipal bond index
futures contracts, the ability to invest in such contracts could enable the Fund
to react more quickly to anticipated changes in market conditions or interest
rates.
Gold Bullion Futures Contracts. The Gold & Government Fund may invest in gold
bullion futures contracts and related options that are traded on a United States
exchange or board of trade. Such investments may be made by the Gold &
Government Fund solely for the purpose of hedging against changes in the value
of its portfolio securities due to anticipated changes in gold prices, interest
rates or market conditions, and not for the purposes of speculation.
Generally, futures contracts on gold bullion are similar to the
interest rate futures contracts discussed above. By entering into gold bullion
futures contracts, the Fund will be able to establish the rate at which it will
be entitled to purchase set amounts of gold bullion in a future month. By
selling such futures, the Fund can establish the price it will receive in the
delivery month for a specified amount of gold bullion, or the Fund can attempt
to "lock in" the value of some or all of the gold bullion held in its portfolio
at a particular time.
Foreign Currency Futures Contracts. The Global Income Fund may invest in foreign
currency futures contracts and related options that are traded on a United
States exchange or board of trade. Such investments may be made by the Global
Income Fund solely for the purpose of hedging against changes in the value of
its portfolio securities due to anticipated changes in interest rates, foreign
currency exchange rates or market conditions, and not for the purposes of
speculation.
Foreign currency futures contracts can be purchased and sold with
respect to the British Pound, Deutsche Mark, Japanese Yen and other currencies
or groups of currencies in which securities held by the Global Income Fund are
denominated or which are sufficiently correlated with such currencies as to
constitute an appropriate vehicle for hedging.
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Generally, foreign currency futures contracts are similar to the
interest rate futures contracts discussed above. By entering into foreign
currency futures contracts, the Global Income Fund will be able to establish the
rate at which it will be entitled to exchange U.S. dollars (or another foreign
currency) for another currency in a future month. By selling currency futures,
the Fund can establish the number of dollars (or another foreign currency) it
will receive in the delivery month for a certain amount of a foreign currency
against the U.S. dollar (or another foreign currency), or the Fund can attempt
to "lock in" the U.S. dollar value (or other foreign currency value) of some or
all of the securities held in its portfolio and denominated in that currency. By
purchasing currency futures, the Fund can establish the number of dollars it
will be required to pay for a specified amount of a foreign currency in the
delivery month. For example, if the Fund intends to buy securities in the future
and expects the U.S. dollar to decline against the relevant foreign currency
during the period before the purchase is effected, the Fund can attempt to "lock
in" the price in U.S. dollars of the securities it intends to acquire.
Foreign Debt Securities Futures Contracts. The Global Income Fund may also
invest in foreign debt futures contracts that are traded on a U.S. exchange or
board of trade or, consistent with U.S. Commodity Futures Trading Commission
regulations, traded on foreign exchanges. Such investments may be made solely
for the purpose of hedging against changes in the value of its portfolio
securities due to anticipated changes in interest rates, foreign currency
exchange rates or market conditions, and not for the purpose of speculation.
Foreign debt futures contracts are similar to the interest rate futures
contracts discussed above. By purchasing a futures contract, the Global Income
Fund will legally obligate itself to accept delivery of the underlying foreign
debt security and pay the agreed price; by selling a foreign debt futures
contract, it will legally obligate itself to make delivery of the security
against payment of the agreement price. Futures contracts for the purchase and
sale of foreign debt futures contracts currently are actively traded on the
London International Financial Futures Exchange, the Tokyo Stock Exchange and
the Paris Stock Exchange.
Risk Factors. Unlike the purchase or sale of a security, no consideration is
paid or received by a Fund upon the purchase or sale of a futures contract.
Initially, a Fund will be required to deposit with the broker an amount of cash
or cash equivalents, known as "initial margin", as a type of performance bond or
good faith deposit which is returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied. The required
amount of initial margin is subject to change by the board of trade or exchange
on which the contract is traded and members of such board of trade or exchange
may charge a higher amount. Subsequent payments, known as "variation margin", to
and from the broker, will be made on a daily basis as the price of the futures
contract fluctuates making long and short positions in the contract more or less
valuable, a process known as marking-to-market. At any time prior to the
expiration of the contract, a Fund may elect to close the position, which will
operate to terminate the Fund's existing position in the futures contract.
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There are several risks in connection with the use of futures contracts
as a hedging device. Successful use of futures contracts by the Funds is subject
to the Adviser's ability to predict correctly movements in the direction of
interest rates, gold prices or foreign currency exchange rates, as the case may
be. A decision of 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 market behavior or unexpected trends in such rates and prices. In
addition, there can be no assurance that there will be a correlation between
movements in the price of the futures contracts and movements in the price of
the related securities, gold or foreign currencies which are the subject of the
hedge. The degree of imperfection or correlation depends upon various
circumstances such as, for example, variations in speculative market demand for
futures contracts and the specific securities, gold or foreign currencies being
hedged and upon the securities, gold or foreign currencies, as the case may be,
underlying the futures contracts.
Although the Funds intend to purchase or sell futures contracts only if
there is an active market for such contracts, there is no assurance that a
liquid market will exist for the contract at any particular time. Most domestic
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular contract,
no trades may be made that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses because the limit may prevent the liquidation of
unfavorable positions. It is possible that futures contract prices could move to
the daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of the futures position and subjecting
some futures traders to substantial losses. In such event, it will not be
possible to close a futures position, and in the event of adverse price
movements, a Fund would be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may partially or completely offset losses on the
futures contract. However, as described above, there is no guarantee that the
price of the securities, gold or foreign currencies, as the case may be, will,
in fact, correlate with the price movements in the respective futures contracts
and thus provide an offset to losses on such futures contracts.
If a Fund has hedged against the possibility of an increase in interest
rates, gold prices or foreign currency rates adversely affecting the value of
the securities, gold bullion or foreign currencies held in its portfolio and
rates decrease instead, the Fund will lose part or all of the benefit of the
increased value of the respective securities, gold bullion or foreign currencies
which it has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if a Fund has insufficient cash, it
may have to sell securities to meet daily variation margin requirements. Such
sales of securities may, but will not necessarily, be at increased prices which
reflect the decline in interest rates, gold prices or foreign currency exchange
rates, as the case may be. The Funds may have to sell securities at a time when
it may be disadvantageous to do so.
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Options on Interest Rate, Gold Bullion and Foreign Currency Futures Contracts.
An option on a futures contract, as contrasted with the direct investment in
such a contract, gives the purchaser the right, in return for the premium paid,
to assume a position in the futures contract at a specified exercise price at
any time prior to the expiration of the option. The potential loss related to
the purchase of an option on a futures contract is limited to the premium paid
for the option (plus transaction costs).
The Funds may purchase and write put and call options on interest rate,
gold bullion and foreign currency futures contracts, as the case may be, that
are traded on a United States exchange or board of trade as a hedge against the
value of their portfolio securities due to anticipated changes in interest
rates, gold prices, foreign currency exchange rates or market conditions, and
may enter into closing transactions with respect to such options to terminate
existing positions.
In addition to the risks which apply to futures transactions generally
as described above, there are additional risks relating to options on futures
contracts. The ability to establish and close out positions on such options will
be subject to the existence of a liquid market. In addition, the purchase or
sale of put or call options will be based upon predictions as to anticipated
interest rate trends, gold bullion or foreign currency valuation trends, as the
case may be, by the Adviser which could prove to be incorrect. Even if the
expectations of the Adviser are correct, there may be an imperfect correlation
between the change in the value of the options and of the portfolio securities
hedged. In addition, the ability of the Funds to trade in futures contracts may
be materially limited by the requirements of the Internal Revenue Code.
When a Fund writes a call option or put option it will be required to
deposit initial margin and variation margin pursuant to broker's requirements
similar to those applicable to futures contracts. In addition, net option
premiums received for writing options will be included as initial margin
deposits.
There is no limit as to how many times the Gold & Government Fund's or
the Global Income Fund's options positions may be replaced, and, therefore, the
potential risks to those Funds may be greater than 5% of their net assets.
Successful use by the Adviser of options will be based upon predictions by the
Adviser as to anticipated movements of interest rates, gold prices and/or
foreign currency exchange rates.
CERTAIN INVESTMENT PRACTICES
The following information supplements the discussion of the Funds'
investment strategies and techniques in the Prospectuses.
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Investment in Foreign Securities
Because of the following considerations, shares of the Global Fund and
the Global Income Fund should not be considered a complete investment program.
There is generally less publicly available information about foreign companies
and other issuers comparable to reports and ratings that are published about
issuers in the United States. Foreign issuers are also generally not subject to
uniform accounting and auditing and financial reporting standards, practices and
requirements comparable to those applicable to United States issuers.
It is contemplated that most foreign securities will be purchased in
over-the-counter markets or on exchanges located in the countries in which the
respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Similarly, volume
and liquidity in most foreign bond markets is less than in the United States and
at times, volatility of price can be greater than in the United States. Fixed
commissions on foreign exchanges are generally higher than negotiated
commissions on United States exchanges, although each Fund will endeavor to
achieve the most favorable net results on its portfolio transactions. There is
generally less government supervision and regulation of securities exchanges,
brokers and listed issuers than in the United States.
With respect to certain foreign countries, there is the possibility of
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of a
Fund, political or social instability, or diplomatic developments which could
affect United States investments in those countries. Moreover, individual
foreign economies may differ favorably or unfavorably from the United States'
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
The dividends and interest payable on certain of the Global Fund's and
the Global Income Fund's foreign portfolio securities may be subject to foreign
withholding taxes, thus reducing the net amount of income available for
distribution to each Fund's shareholders. See "Tax Status".
Investors should understand that the expense ratio of each of the
Global Fund and the Global Income Fund can be expected to be higher than that of
investment companies investing in domestic securities since the expenses of the
Funds, such as the cost of maintaining the custody of foreign securities and the
rate of advisory fees paid by the Funds, are higher.
Repurchase Agreements
The Funds may also enter into repurchase agreements with domestic
broker-dealers, banks and financial institutions, but Government Fund, Managed
Tax-Exempt Fund, Gold & Government Fund, Sovereign Achievers Fund, Global Fund
and Global Income Fund may not invest more than 10% and Regional Bank Fund may
not invest more than 5% of their respective net assets in repurchase agreements
having maturities of greater than seven days.
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A repurchase agreement is a contract pursuant to which a Fund, against
receipt of securities of at least equal value including accrued interest, agrees
to advance a specified sum to a broker-dealer, bank or financial institution
which agrees to reacquire the securities at a mutually agreed upon time and
price. Repurchase agreements, which are usually for periods of one week or less,
enable a Fund to invest its cash reserves at fixed rates of return. A Fund may
enter into repurchase agreements with domestic broker-dealers, banks and other
financial institutions, provided the Fund's custodian always has possession of
securities serving as collateral whose market value at least equals the amount
of the institution's repurchase obligation. The Global Fund and the Global
Income Fund will only enter into repurchase agreements which are collateralized
at all times by U.S. Government obligations. To minimize the risk of loss the
Funds will enter into repurchase agreements only with institutions and dealers
which the Boards of Trustees of the Trusts consider to be creditworthy. If an
institution enters an insolvency proceeding, the resulting delay in liquidation
of the securities serving as collateral could cause the relevant Fund some loss,
as well as legal expense, if the value of the securities declined prior to
liquidation.
When-Issued and Delayed Delivery Securities
As stated in the Prospectus, the Managed Tax-Exempt Fund may purchase
and sell municipal securities and the Gold & Government Fund and the Global
Income Fund may purchase and sell fixed income securities (including GNMA, FHLMC
and FNMA Certificates) on a when-issued or delayed delivery basis. When-issued
or delayed delivery transactions arise when securities are purchased or sold by
a Fund with payment and delivery taking place in the future in order to secure
what is considered to be an advantageous price and yield. However, the yield on
a comparable security available when delivery takes place may vary from the
yield on the security at the time that the when-issued or delayed delivery
transaction was entered into. When a Fund engages in when-issued and delayed
delivery transactions, it relies on the seller or buyer, as the case may be, to
consummate the sale. Failure to do so may result in the Fund missing the
opportunity of obtaining a price or yield considered to be advantageous.
When-issued and delayed delivery transactions may be expected to settle within
three months from the date the transactions are entered into. However, no
payment or delivery is made by the Fund until it receives delivery or payment
from the other party to the transaction.
To the extent that a Fund remains substantially fully invested at the
same time that it has purchased when-issued securities, as it would normally
expect to do, there may be greater fluctuations in its net assets than if the
Fund set aside cash to satisfy its purchase commitment.
When a Fund purchases securities on a when-issued basis, it will
maintain in a segregated account with its Custodian cash, Government Securities
or other high-grade debt obligations readily convertible into cash having an
aggregate value equal to the amount of such purchase commitments until payment
is made. If necessary, additional assets will be placed in the account daily so
that the value of the account will equal or exceed the amount of the Fund's
purchase commitment. The Government Fund, the Global Income Fund and the Managed
Tax-Exempt Fund will likewise segregate securities they sell on a delayed
delivery basis.
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The Managed Tax-Exempt Fund expects that commitments to purchase
when-issued securities will not normally exceed 25% of its net asset value.
Stand-By Commitments
When the Managed Tax-Exempt Fund exercises a stand-by commitment that
it has acquired from a dealer with respect to a municipal security held in its
portfolio, the dealer will normally pay to the Managed Tax-Exempt Fund an amount
equal to: (1) the Fund's acquisition cost of the municipal securities (excluding
any accrued interest which the Fund paid on their acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (2) all interest accrued
on the securities since the last interest payment date or the date the
securities were purchased by the Fund, whichever is later. The Fund's right to
exercise stand-by commitments would be unconditional and unqualified. A stand-by
commitment would not be transferable by the Managed Tax-Exempt Fund, although it
could sell the underlying municipal securities to a third party at any time.
The Managed Tax-Exempt Fund intends to enter into stand-by commitments
only with those banks which, in the opinion of the Adviser, present minimal
credit risk. The Managed Tax-Exempt Fund may pay for stand-by commitments either
separately, in cash or by paying a higher price for portfolio securities which
are acquired subject to such a commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid for
outstanding stand-by commitments held by the Managed Tax-Exempt Fund is not
expected to exceed 1/2 of 1% of the Fund's total asset value calculated
immediately after each stand-by commitment is acquired. The Fund intends to
acquire stand-by commitments solely to facilitate portfolio liquidity and does
not intend to exercise its rights thereunder for trading purposes. The
acquisition of a stand-by commitment would not ordinarily affect the valuation
or maturity of the underlying municipal securities. Stand-by commitments
acquired by the Managed Tax-Exempt Fund would be valued at zero in determining
net asset value. Where the Fund paid directly or indirectly for a stand-by
commitment, its cost would be amortized over the period the commitment is held
by the Fund. Although Federal income tax law may not be entirely clear in
certain cases, the Fund intends to take the position that it is the owner of
municipal securities it holds subject to stand-by commitments.
Leverage Through Borrowing
The Government Fund may borrow from banks to increase its portfolio
holdings of Government Securities. Such borrowings will be unsecured. The 1940
Act requires the Fund to maintain continuous asset coverage of not less than
300% with respect to such borrowings. This allows the Fund to borrow for such
purposes an amount (when taken together with any borrowings for temporary
extraordinary or emergency purposes as described below) equal to as much as 50%
of the value of its net assets (not including such borrowings). If such asset
coverage should decline to less than 300% due to market fluctuations or other
reasons, the Fund may be required to sell some of its portfolio holdings within
three days in order to reduce the Fund's debt and restore the 300% asset
coverage, even though it may be disadvantageous from an investment standpoint to
sell securities at that time. Leveraging will exaggerate any increase or
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decrease in the net asset value of the Fund's portfolio, and in that respect may
be considered a speculative practice. Money borrowed for leveraging will be
subject to interest costs which may or may not exceed the investment return
received from the securities purchased.
The Fund may also borrow money for temporary extraordinary or emergency
purposes. Such borrowings may not exceed 5% of the value of the Fund's total
assets when the loan is made. The Fund may pledge up to 10% of the lesser of
cost or value of its total assets to secure such borrowings.
Trading of Securities
The Government Fund may trade those Government Securities which are not
covering outstanding options positions and are not on loan to broker-dealers if
the Fund's Adviser believes that there are opportunities to exploit
differentials in prices and yields or fluctuations in interest rates, consistent
with its investment objective.
Investment in Rule 144A Securities and Other Restricted Securities
The Funds may purchase restricted securities eligible for resale to
"qualified institutional buyers" pursuant to Rule 144A under the Securities Act
of 1933 and other securities for which market quotations are not readily
available if the Funds' Boards of Trustees or the Adviser have determined under
Board-approved guidelines that such restricted securities are liquid. The Boards
of Trustees will determine as a question of fact the liquidity of Rule 144A
securities in each Fund's portfolio using the guidelines set forth below.
In their determination of liquidity, the Boards of Trustees will
consider the following factors, among others: (1) the frequency of trades and
quotes for the security, (2) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers, (3) dealer
undertakings to make a market in the security, and (4) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
transfer). In accordance with Rule 144A, each Board intends to delegate its
responsibility to the Adviser to determine the liquidity of each restricted
security purchased by the Funds pursuant to Rule 144A, subject to the Board's
oversight and review. The foregoing investment practice could have the effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing the Rule 144A
securities. The Funds will not invest more than 5% of their total assets in Rule
144A securities without first supplementing the prospectuses and providing
additional information to shareholders.
The Funds may acquire other restricted securities including securities
for which market quotations are not readily available. These securities may be
sold only in privately negotiated transactions or in public offerings with
respect to which a registration statement is in effect under the Securities Act
of 1933. Where registration is required, a Fund may be obligated to pay all or
part of the registration expenses and a considerable period may elapse between
the time of the decision to sell and the time the Fund may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, a Fund might obtain a less favorable
price than prevailed when it decided to sell. Restricted
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securities will be priced at fair value as determined in good faith by the
Funds' Boards of Trustees. If through the appreciation of restricted securities
or the depreciation of unrestricted securities, a Fund should be in a position
where more than 10% of the value of its assets is invested in illiquid
securities (including repurchase agreements which mature in more than seven days
and options which are traded over-the-counter and their underlying securities),
the Fund will bring its holdings of illiquid securities below the 10%
limitation.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The following investment restrictions (as well as the Fund's investment
objective) will not be changed without approval of a majority of outstanding
voting securities which, as used in the Prospectuses and this Statement of
Additional Information, means approval of the lesser of (1) the holders of 67%
or more of the shares represented at a meeting if the holders of more than 50%
of the outstanding shares are present in person or by proxy or (2) the holders
of more than 50% of the outstanding shares.
A Fund may not:
1. Purchases on Margin and Short Sales. Purchase securities on margin or
sell short, except that a Fund may obtain such short term credits as are
necessary for the clearance of securities transactions. The deposit or
payment by a Fund of initial or maintenance margin in connection with
futures contracts or related options transactions is not considered the
purchase of a security on margin.
2. Borrowing. Borrow money, except from banks temporarily for
extraordinary or emergency purposes (not for leveraging or investment) and
then in an aggregate amount not in excess of (a) 5% of the value of the
Fund's net assets at the time of such borrowing with respect to the Gold &
Government Fund, Regional Bank Fund and Sovereign Achievers Fund; (b) 10%
of the value of the Fund's total assets at the time of such borrowing with
respect to the Managed Tax-Exempt Fund, Global Fund and Global Income Fund,
provided that the Fund will not purchase securities for investment while
borrowings equaling 5% or more of the Fund's total assets are outstanding;
and (c) with respect to the Government Fund, 33 1/3% of the value of the
Fund's total assets (including the amount borrowed) less liabilities (not
including the amount borrowed).
3. Underwriting Securities. Act as an underwriter of securities of other
issuers, except to the extent that it may be deemed to act as an
underwriter in certain cases when disposing of restricted securities. (See
also Restriction 14.)
4. Senior Securities. Issue senior securities except as appropriate to
evidence indebtedness which a Fund is permitted to incur, provided that, to
the extent applicable, (i) the purchase and sale of futures contracts or
related options, (ii) collateral arrangements with respect to futures
contracts, related options, forward foreign currency exchange
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contracts or other permitted investments of a Fund as described in the
Prospectus, including deposits of initial and variation margin, and (iii)
the establishment of separate classes of shares of a Fund for providing
alternative distribution methods are not considered to be the issuance of
senior securities for purposes of this restriction.
5. Warrants. With respect to the Managed Tax-Exempt Fund and Government
Fund, invest in marketable warrants to purchase common stock; with respect
to the Gold & Government Fund, Regional Bank Fund and Sovereign Achievers
Fund, invest more than 5% of the value of the Fund's net assets in
marketable warrants to purchase common stock; and with respect to the
Global Fund and the Global Income Fund, invest more than 5% of the Fund's
total assets in warrants, whether or not the warrants are listed on the New
York or American Stock Exchanges, or more than 2% of the value of the
Fund's total assets in warrants which are not listed on those exchanges.
Warrants acquired in units or attached to securities are not included in
this restriction.
6. Single Issuer Limitation/Diversification. Purchase securities of any
one issuer, except securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, if immediately after such purchase more
than 5% of the value of a Fund's total assets would be invested in such
issuer or the Fund would own or hold more than 10% of the outstanding
voting securities of such issuer; provided, however, that with respect to
all Funds, up to 25% of the value of a Fund's total assets may be invested
without regard to these limitations. This restriction does not apply to
Global Income Fund, which is a non-diversified fund under the 1940 Act.
7. Single Class of Issuer Limitation. Acquire more than 5% of any class
of securities of an issuer, except securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities. For this purpose, all
outstanding bonds, preferred stocks, and other evidences of indebtedness
shall be deemed a single class regardless of maturities, priorities,
coupon rates, series, designations, conversion rights, security or other
differences. This Restriction does not apply to the Managed Tax-Exempt Fund
or Global Income Fund.
8. Real Estate. Purchase or sell real estate although a Fund may purchase
and sell securities which are secured by real estate, mortgages or
interests therein, or issued by companies which invest in real estate or
interests therein; provided, however, that no Fund will purchase real
estate limited partnership interests.
9. Commodities; Commodity Futures; Oil and Gas Exploration and
Development Programs. Purchase or sell commodities or commodity futures
contracts or interests in oil, gas or other mineral exploration or
development programs, except a Fund (other than the Regional Bank Fund) may
engage in such forward foreign currency contracts and/or purchase or sell
such futures contracts and options thereon as described in the Prospectus.
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10. Making Loans. Make loans, except that a Fund may purchase or hold
debt instruments and may enter into repurchase agreements (subject to
Restriction 14) in accordance with its investment objectives and policies
and, with respect to the Sovereign Achievers Fund, Government Fund, Global
Fund and Global Income Fund, make loans of portfolio securities provided
that as a result, no more than 5% of the Sovereign Achievers Fund's total
assets, 10% of the Global Fund's total assets and 30% of the total assets
of the Government Fund or Global Income Fund, taken at current value would
be so loaned.
11. Securities of Other Investment Companies. Purchase securities of
other open-end investment companies, except in connection with a merger,
consolidation, acquisition or reorganization; or purchase more than 3% of
the total outstanding voting stock of any closed-end investment company if
more than 5% of a Fund's total assets would be invested in securities of
any closed-end investment company, or more than 10% of the Fund's total
assets would be invested in securities of any closed-end investment
companies in general. In addition, a Fund may not invest in the securities
of closed-end investment companies except by purchase in the open market
involving only customary broker's commissions.
12. Industry Concentration. Purchase any securities which would cause
more than 25% of the market value of a Fund's total assets at the time of
such purchase to be invested in the securities of one or more issuers
having their principal business activities in the same industry, provided
that there is no limitation with respect to investments in obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; provided that, notwithstanding the foregoing, (A) the
Gold & Government Fund will invest more than 25% of its total assets in
gold and gold mining industries, and will not at any time have less than
65% of its total assets invested in some combination of gold and gold
mining securities and obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; and (B) the Regional Bank
Fund will invest more than 25% of its total assets in issuers in the
banking industry; all as more fully set forth in the Prospectus. For
purposes of this Restriction, with respect to the Managed Tax-Exempt Fund,
state and municipal governments and their political subdivisions are not
considered members of any industry. With respect to Managed Tax-Exempt
Fund, this limitation shall not be applicable to investments in Tax-Exempt
securities issued by any state and municipal governments and their
political subdivisions. With respect to Global Income Fund, this
restriction will apply to obligations of a foreign government unless the
Securities and Exchange Commission permits their exclusion.
Nonfundamental Investment Restrictions
The following restrictions are designated as nonfundamental and may be
changed by the Board of Trustees without shareholder approval.
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A Fund may not:
13. Options Transactions. Write, purchase, or sell puts, calls or
combinations thereof except that a Fund may write, purchase or sell puts
and calls on securities as described in the Prospectuses, and the Global
Income Fund may purchase or sell puts and calls on foreign currencies as
described in the Prospectus.
14. Illiquid Securities. Purchase or otherwise acquire any security if,
as a result, more than 10% of a Fund's net assets (taken at current value)
would be invested in securities that are illiquid by virtue of the absence
of a readily available market or legal or contractual restrictions on
resale. This policy includes repurchase agreements maturing in more than
seven days. This policy does not include restricted securities eligible for
resale pursuant to Rule 144A under the Securities Act of l933 which the
Board of Trustees or the Adviser has determined under Board-approved
guidelines are liquid.
15. Acquisition for Control Purposes. Purchase securities of any issuer
for the purpose of exercising control or management, except in connection
with a merger, consolidation, acquisition or reorganization.
16. Unseasoned Issuers. Purchase securities of any issuer with a record
of less than three years continuous operations, including predecessors, if
such purchase would cause the investments of a Fund in all such issuers to
exceed 5% of the total assets of the Fund taken at market value, except
this restriction shall not apply to (i) obligations of the U.S. Government,
its agencies or instrumentalities and (ii) securities of such issuers which
are rated by at least one nationally recognized statistical rating
organization. With respect to Managed Tax-Exempt Fund, this restriction
shall not apply to municipal obligations for the payment of which is
pledged the faith, credit and taxing power of any person authorized to
issue such securities. With respect to the Global Income Fund, this
restriction shall not apply to obligations issued or guaranteed by any
foreign government or its agencies or instrumentalities.
17. Beneficial Ownership of Officers and Directors of Fund and Adviser.
Purchase or retain the securities of any issuer if those officers or
trustees of a Fund or officers or directors of the Adviser who each own
beneficially more than 1/2 of 1% of the securities of that issuer together
own more than 5% of the securities of such issuer.
18. Hypothecating, Mortgaging and Pledging Assets. Hypothecate,
mortgage or pledge any of its assets except (a) with respect to the Gold &
Government Fund, Regional Bank Fund, Sovereign Achievers Fund and Managed
Tax-Exempt Fund, to secure loans as a temporary measure for extraordinary
purposes and (b) with respect to Government Fund, Global Fund and Global
Income Fund, as may be necessary in connection with permitted borrowings
and then not in excess of 5% of the Fund's total assets, taken at cost. For
the purpose of this restriction, (i) forward foreign currency exchange
contracts
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are not deemed to be a pledge of assets, (ii) the purchase or sale of
securities by a Fund on a when-issued or delayed delivery basis and
collateral arrangements with respect to the writing of options on debt
securities or on futures contracts are not deemed to be a pledge of assets;
and (iii) the deposit in escrow of underlying securities in connection with
the writing of call options is not deemed to be a pledge of assets.
19. Joint Trading Accounts. Participate on a joint or joint and several
basis in any trading account in securities (except for a joint account with
other funds managed by the Adviser for repurchase agreements permitted by
the Securities and Exchange Commission pursuant to an exemptive order).
20. Notwithstanding any investment restriction to the contrary, the Fund
may, in connection with the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees/Directors, purchase
securities of other investment companies within the John Hancock Group of
Funds provided that, as a result, (i) no more than 10% of the Fund's assets
would be invested in securities of all other investment companies, (ii)
such purchase would not result in more than 3% of the total outstanding
voting securities of any one such investment company being held by the Fund
and (iii) no more than 5% of the Fund's assets would be invested in any one
such investment company.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amounts of net assets will not be considered a violation
of any of the foregoing restrictions (with the exception of Restriction 2
permitting Government Fund to borrow up to 33 1/3%, and Sovereign Achievers Fund
to borrow up to 5% of the value of their total assets).
The Global Income Fund has registered as a "non-diversified" investment
company under the Investment Company Act of 1940. However, the Fund intends to
limit its investments to the extent required by the diversification requirements
of the Internal Revenue Code. See "Taxes".
In addition, it is a fundamental policy of the Managed Tax-Exempt Fund
that the Managed Tax-Exempt Fund will invest at least 80% of its total assets in
municipal securities with varying maturities, the interest from which is, in the
opinion of bond counsel for the issuer, exempt from federal income tax.
In order to permit the sale of Class C shares of the Government Fund,
the Global Fund, and Global Income Fund in certain states, the Trustees may, in
their sole discretion, adopt restrictions on investment policy more restrictive
than those described above. Should the Trustees determine that any such more
restrictive policy is no longer in the best interest of the Government Fund, the
Global Fund, or Global Income Fund and their Class C shareholders, the
Government Fund, the Global Fund , or Global Income Fund may cease offering
Class C shares in the state involved and the Trustees may revoke such
restrictive policy. Moreover, if the states involved shall no longer require any
such restrictive policy, the Trustees may, at their sole discretion, revoke such
policy.
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TAX STATUS
Each Fund is treated as a separate entity for accounting and tax
purposes. Each Fund has qualified and elected to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and intends to continue to so qualify in the future. 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
if its assets, each Fund will not be subject to Federal income tax on taxable
income (including net short-term and long-term capital gains from the
disposition of portfolio securities or the right to when-issued securities prior
to issuance or the lapse, exercise, delivery under or closing out of certain
options, futures and forward contracts, income from repurchase agreements and
other taxable securities, income attributable to accrued market discount, and a
portion of the discount from certain stripped tax-exempt obligations or their
coupons) which is distributed to shareholders at least annually in accordance
with the timing requirements of the Code.
Each Fund will be subject to a 4% non-deductible Federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements. Each
Fund intends under normal circumstances to avoid liability for such tax by
satisfying such distribution requirements.
Distributions from a Fund's current or accumulated earnings and profits
("E&P"), as computed for Federal income tax purposes, will be taxable as
described in the Funds' Prospectuses whether taken in shares or in cash. Amounts
that are not allowable as a deduction in computing taxable income, including
expenses associated with earning tax-exempt interest income, do not reduce
current E&P for this purpose. Distributions, if any, in excess of an investor's
tax basis in Fund shares and thereafter (after such basis is reduced to zero)
will generally give rise to capital gains. Shareholders electing to receive
distributions in the form of additional shares will have a cost basis for
Federal income tax purposes in each share so received equal to the amount of
cash they would have received had they elected to receive the distributions in
cash, divided by the number of shares received.
Distributions of tax-exempt interest ("exempt-interest dividend")
timely designated as such by the Managed Tax-Exempt Fund to its shareholders
will be treated as tax-exempt interest under the Code, provided that such Fund
qualifies as a regulated investment company and at least 50% of the value of its
assets at the end of each quarter of its taxable year is invested in tax-exempt
obligations. Shareholders are required to report their receipt of tax-exempt
interest, including such distributions, on their Federal income tax returns. The
portion of the Managed Tax-Exempt Fund's distributions designated as
exempt-interest dividends may differ from the actual percentage that its
tax-exempt income comprised of its total income during the period of any
particular shareholder's investment. This Fund will report to Shareholders the
amount designated as exempt-interest dividends for each year.
41
<PAGE> 172
Interest income from certain types of tax-exempt bonds that are private
activity bonds in which the Managed Tax-Exempt Fund may invest is treated as an
item of tax preference for purposes of the Federal alternative minimum tax. To
the extent that the Managed Tax-Exempt Fund invests in these types of tax-exempt
bonds, shareholders will be required to treat as an item of tax preference for
Federal alternative minimum purposes that part of such Fund's exempt-interest
dividends which is derived from interest on these tax-exempt bonds.
Exempt-interest dividends derived from interest income from all tax-exempt bonds
may be included in corporate "adjusted current earnings" for purposes of
computing the alternative minimum tax liability, if any, of corporate
shareholders of the Managed Tax-Exempt Fund.
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, dividend, 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
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 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 (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.
42
<PAGE> 173
Some Funds may be subject to withholding and other taxes imposed by
foreign countries with respect to their investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. Investors may be entitled to claim U.S. foreign tax credits with respect
to such taxes, subject to certain provisions and limitations contained in the
Code. Specifically, if more than 50% of the value of a Fund's total assets at
the close of any taxable year consists of stock or securities of foreign
corporations, the Fund may file an election with the Internal Revenue Service
Pursuant to which shareholders of the Fund will be required to (i) include in
ordinary gross income (in addition to taxable dividends actually received) their
pro rata shares of foreign income taxes paid by the Fund even though not
actually received by them, and (ii) treat such respective pro rata portions as
foreign income taxes paid by them.
If a Fund makes this election, shareholders may then deduct such pro
rata portions of foreign income taxes in computing their taxable incomes, or
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of foreign income taxes paid by the Fund, although
such shareholders will be required to include their share of such taxes in gross
income. Shareholders who claim a foreign tax credit for such foreign taxes may
be required to treat a portion of dividends received from the Fund as a separate
category of income for purposes of computing the limitations on the foreign tax
credits. Tax-exempt shareholders will ordinarily not benefit from this
elections. Each year that a Fund files the election described above, its
shareholders will be notified of the amount of (i) each shareholder's pro rata
share of foreign income taxes paid by the Fund and (ii) the portion of Fund
dividends which represents income from each foreign country. A Fund that cannot
or does not make this election may deduct such taxes in computing its taxable
income.
For each Fund, the amount of net short-term and long-term capital
gains, if any, in any given year will vary depending upon the Adviser's current
investment strategy and whether the Adviser believes it to be in the best
interest of the Fund to dispose of portfolio securities or enter into options or
futures transactions that will generate capital gains. At the time of an
investor's purchase of Fund shares, a portion of the purchase price is often
attributable to realized or unrealized appreciation in the Fund's portfolio or
undistributed taxable income of the Fund. Consequently, subsequent distributions
from such appreciation or income may be taxable to such investor even if the net
asset value of the investor's shares is, as a result of the distributions,
reduced below the investor's cost for such shares, and the distributions in
reality represent a return of a portion of the purchase price.
43
<PAGE> 174
Upon a redemption of shares of a Fund (including by exercise of the
exchange privilege) a shareholder may realize a taxable gain or loss depending
upon his basis in his shares. Such gain or loss will be treated as capital gain
or loss if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, depending upon the shareholder's tax holding period for
the shares. A sales charge paid in purchasing Class A shares of a Fund cannot be
taken into account for purposes of determining gain or loss on the redemption or
exchange of such shares of the Fund or another John Hancock Fund are
subsequently acquired without payment of a sales charge pursuant to the
reinvestment or exchange privilege. Such disregarded load will result in an
increase in the shareholder's tax basis in the shares subsequently acquired.
Also, any loss realized on a redemption or exchange will be disallowed to the
extent the shares disposed of are replaced within a period of 61 days beginning
30 days before and ending 30 days after the shares are disposed of, such as
pursuant to the Dividend Reinvestment Plan. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized upon the redemption of shares will a tax holding period of six months
or less will be disallowed to the extent of all exempt-interest dividends paid
with respect to such shares and, if not thus disallowed, will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain with respect to such shares.
Although its present intention is to distribute all net short-term and
long-term capital gains, if any, each Fund reserves the right to retain and
reinvest all or any portion of its "net capital gain", which is the excess, as
computer for Federal income tax purposes, of net long-term capital gain over net
short-term capital loss in any year. The Funds will not in any event distribute
net long-term capital gains realized in any year to the extend that a capital
loss is carried forward from prior years against such gain. To the extent such
excess was retained and not exhausted by the carryforward of prior years'
capital losses, it would be subject to Federal income tax in the hands of a
Fund. Each shareholder would be treated for Federal income tax purposes as if
such Fund had distributed to him on the last day of its taxable year his pro
rata share of such excess, and he had paid his pro rata share of the taxes paid
by the Fund and reinvested the remainder of the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain income in his return for his taxable year in which the last day of
the Fund's taxable year falls, (b) be entitled either to a tax credit on his
return for, or a refund of, his pro rata share of the taxes paid by the Fund,
and (c) be entitled to increase the adjusted tax basis for his shares in the
Fund by the difference between his pro rata share of such excess and his pro
rata share of such taxes.
For Federal income tax purposes, each Fund is permitted to carryforward
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, as noted above, would not be
distributed as such to shareholders. The capital loss carryforwards for each of
the Funds are as follows: John Hancock Sovereign U.S. Government Income Fund has
$16,832,068 of capital loss carryforwards which will expire October 31, 1997 --
$282,637 and October 31, 2002-- $16,549,431. John Hancock Managed Tax Exempt
Fund has $792,869 of capital loss carryforwards which will expire October 31,
2002. John Hancock Gold & Government Fund has $8,066,420 of capital loss
carryforwards which will expire October 31,2002. John Hancock Sovereign
Achievers Fund has no capital loss carryforwards. John Hancock Regional Bank
Fund
44
<PAGE> 175
has no capital loss carryforwards. John Hancock Global Fund has no capital loss
carryforwards. John Hancock Global Income Fund has $4,488,199 which will expire
October 31, 2002.
Interest on indebtedness incurred by a shareholder to purchase or carry
shares of the Managed Tax-Exempt Fund will not be deductible for Federal income
tax purposes to the extent it is deemed related to exempt-interest dividends
paid by such Fund. Pursuant to published guidelines, the Internal Revenue
Service may deem indebtedness to have been incurred for the purpose of
purchasing or carrying shares of this Fund even though the borrowed funds may
not be directly traceable to the purchase of shares.
For purposes of the dividends received deduction available to
corporations, dividends received by a Fund, if any, from U.S. domestic
corporations in respect of the stock of such corporations held by the Fund, for
U.S. Federal income tax purposes, for at least 46 days (91 days in the case of
certain preferred stock) and distributed and designated by the Fund may be
treated as qualifying dividends. Only Sovereign Achievers Fund and Regional Bank
Fund would generally have any significant portion of its distributions treated
as qualifying dividends. Corporate shareholders must meet the minimum holding
period requirement stated above (46 or 91 days) with respect to their shares of
the applicable Fund in order to qualify for the deduction and, if they borrow to
acquire such shares, may be denied a portion of the dividends received
deduction. The entire qualifying dividend, including the otherwise deductible
amount, will be included in determining the excess (if any) of a corporate
shareholder's adjusted current earnings over its alternative minimum taxable
income, which may increase its alternative minimum tax liability. Additionally,
any corporate shareholder should consult its tax adviser regarding the
possibility that its basis in its shares may be reduced, for Federal income tax
purposes, by reason of "extraordinary dividends" received with respect to the
shares, for the purpose of computing its gain or loss on redemption or other
disposition of the shares.
Investment in debt obligations that are at risk of or in default
presents special tax issues for any Fund that may hold such obligations. Tax
rules are not entirely clear about issues such as when the Fund may cease to
accrue interest, original issue discount, or market discount, when and to what
extent deductions may be taken for bad debts or worthless securities, how
payments received on obligations in default should be allocated between
principal and income, and whether exchanges of debt obligations in a workout
context are taxable. These and other issues will be addressed by 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 or excise tax.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.
Limitations imposed by the Code on regulated investment companies like
the Funds may restrict each Fund's ability to enter into futures, options, and
forward transactions.
45
<PAGE> 176
Certain options, futures and forward foreign currency transactions
undertaken by a fund may cause the Fund to recognize gains or losses from
marking to market even though its positions have not been sold or terminated and
affect the character as long-term or short-term (or, in the case of certain
currency forward, 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 or forward contracts
and/or offsetting portfolio positions may be deferred rather than being taken
into account currently in calculating the Fund's taxable income. Certain of the
applicable tax rules may be modified if a Fund is eligible and chooses to make
one or more of certain tax elections that may be available. These transactions
may therefore affect the amount, timing and character of a Fund's distributions
to shareholders. 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 foregoing discussion relates solely to U.S. Federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions. Dividends, capital gain distributions, and ownership
of or gains realized on the redemption (including an exchange) of Fund shares
may also be subject to state and local taxes. Shareholders should consult their
own tax advisers as to the Federal, state or local tax consequences of ownership
of shares of, and receipt of distributions from, the Funds in their particular
circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in a Fund is effectively connected will be subject to U.S.
Federal income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable a tax treaty) on amounts treated as
ordinary dividends from a Fund and, unless an effective IRS Form W-8 or
authorized substitute is on file, to 31% backup withholding on certain other
payments from the Fund. Non-U.S. investors should consult their tax advisers
regarding such treatment and the application of foreign taxes to an investment
in any Fund.
The Funds are not subject to Massachusetts corporate excise or
franchise taxes. Provided that a fund qualifies as a regulated investment
company under the Code, it will also not be required to pay any Massachusetts
income tax.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of each Fund is managed by the Trustees, who elect
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Funds are also officers and directors of the Adviser or
directors of the Funds' principal distributor, John Hancock Funds, Inc. ("John
Hancock Funds").
The following table sets forth the principal occupation of employment
of the Trustees and principal officers of the Funds during the past five years:
46
<PAGE> 177
<TABLE>
<S> <C> <C>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH REGISTRANTS DURING PAST 5 YEARS
*Edward J. Boudreau, Jr. Chairman (3,4) Chairman and Chief Executive Officer,
the Adviser and The 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 Funds"); John
Hancock Investor Services Corporation
("Investor Services") and Sovereign
Asset Management Corporation
("SAMCorp"); (hereinafter the Adviser,
the Berkeley Group, NM Capital,
Advisers International, John Hancock
Funds, Investor Services and SAMCorp
are collectively referred to as the
"Affiliated Companies"); Chairman,
First Signature Bank & Trust; Director,
John Hancock Freedom Securities Corp.,
John Hancock Capital Corp., 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 July 1992); Chairman,
John Hancock Distributors, Inc.
("Distributors") until April 1994.
William A. Barron, III Trustee (1, 2) Trustee, H.M. Payson & Company since 1991.
RR 1
325 Sea Meadows Lane
Yarmouth, Maine 04096
</TABLE>
- ------------
*Trustee may be deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
(1) Member of the Audit Committees of the Trusts.
(2) Member of the Committees on Administration of the Trusts.
(3) Member of the Executive Committee of each Trust. The Executive Committee
may generally exercise most powers of the Trustees between regularly
scheduled meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
47
<PAGE> 178
<TABLE>
<S> <C> <C>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH REGISTRANTS DURING PAST 5 YEARS
Douglas M. Costle Trustee (1, 2) Distinguished Senior Fellow, Institute
RR2 Box 480 for Sustainable Communities, Vermont Law
Woodstock, Vermont 05091 School, since 1991. Dean Vermont Law
School, until 1991. Director, Air and
Water Technologies Corporation
(environmental services and equipment),
Niagara Mohawk Power Company (electric
services) and MITRE Corporation
(governmental consulting services).
*Hugh A. Dunlap, Jr. Trustee and Vice Chairman of the Adviser; President of
President (3, 4) Freedom Capital Management Corporation from
1983 to 1992.
Leland O. Erdahl Trustee (1, 2) President of Stolar, Inc. from 1987 to
161 Camino Barranca 1991 and President of Albuquerque Uranium
Placitas, New Mexico 87043 Corporation from 1985 to 1992. Director
of Freeport-McMoRan Copper & Gold
Company, Inc., Hecla Mining Company,
Canyon Resources Corporation and Original
Sixteen to One Mines, Inc. From 1984 to
1987 and 1991, management consultant.
Richard A. Farrell Trustee(1, 2) President of Farrell, Healer & Co., a venture
Farrell, Healer & Company, Inc. capital management firm, since 1980. Prior to
160 Federal Street -- 23rd Floor hat date, Mr. Farrell headed the venture
Boston, MA 02110 capital group at Bank of Boston Corporation.
William F. Glavin Trustee (1, 2) President, Babson College; Vice Chairman,
Babson College Xerox Corporation until June 1989. Director,
Horn Library Caldor Inc. and Inco Ltd.
Babson Park, MA 02157
</TABLE>
- -----------
*Trustee may be deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
(1) Member of the Audit Committees of the Trusts.
(2) Member of the Committees on Administration of the Trusts.
(3) Member of the Executive Committee of each Trust. The Executive Committee
may generally exercise most powers of the Trustees between regularly
scheduled meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
48
<PAGE> 179
<TABLE>
<S> <C> <C>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH REGISTRANTS DURING PAST 5 YEARS
Patrick Grant Trustee (1, 2, 3) President, Financial Management Incorporated,
5 Haven Street a professional treasurer, since 1978. Prior
Dedham, MA 02026 to that date Mr. Grant was Treasurer of
Endowment Management & Research Corp., an
investment advisory firm, and Omega Fund,
Inc., an open-end investment company.
Ralph Lowell, Jr. Trustee (1, 2) Director, Lowell Blake and Associates, a
45 Mill Street registered investment adviser since 1978.
Edgartown, MA 02539 Mr. Lowell was Vice President of that
company from 1978 to 1985.
Dr. John A. Moore Trustee (1, 2) President and Chief Executive Officer,
Institute for Evaluating Health Institute for Evaluating Health Risks, a
Risks nonprofit institution, since September 1989.
1101 Vermont Avenue N.W. Assistant Administrator of the Office of
Suite 608 Pesticides and Toxic Substances at the
Washington, DC 20005 Environmental Protection Agency from December
1983 to July 1989.
Patti McGill Peterson Trustee (1, 2) President, St. Lawrence University;
St. Lawrence University Director, Niagara Mohawk Power Corporation
110 Vilas Hall and Secretary, Mutual Life.
Canton, NY 13617
John W. Pratt Trustee (1, 2) Since 1961, Professor of Business
2 Gray Gardens East Administration at Harvard University
Cambridge, MA 02138 Graduate School of Business Administration.
</TABLE>
- ------------
*Trustee may be deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
(1) Member of the Audit Committees of the Trusts.
(2) Member of the Committees on Administration of the Trusts.
(3) Member of the Executive Committee of each Trust. The Executive Committee
may generally exercise most powers of the Trustees between regularly
scheduled meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
49
<PAGE> 180
<TABLE>
<S> <C> <C>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH REGISTRANTS DURING PAST 5 YEARS
Robert G. Freedman Vice Chairman and Chief Vice Chairman and Chief Investment Officer, the
Investment Officer Adviser; President (until December 1994).
Anne C. Hodsdon President President and Chief Operations Officer; Executive
Vice President, the Adviser (until December 1994).
James B. Little Senior Vice President, Senior Vice President, the Adviser.
Chief Financial Officer
Thomas H. Drohan Senior Vice President Senior Vice President and Secretary, the Adviser.
and Secretary
James K. Ho Senior Vice President Senior Vice President, the Adviser.
Michael P. DiCarlo Senior Vice President Senior Vice President, the Adviser.
Lawrence J. Daly Senior Vice President Senior Vice President, the Adviser; Senior Vice
President, Putman Investment Management, Inc.
Anthony A. Goodchild Senior Vice President Senior Vice President, the Adviser; Senior Vice
President, Putman Investment Management, Inc.
Andrew St. Pierre Senior Vice President Senior Vice President, the Adviser; President,
John Hancock Closed-End Funds; Portfolio Manager,
Harvard Management Corp. (until October, 1991).
</TABLE>
- ------------
*Trustee may be deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
(1) Member of the Audit Committees of the Trusts.
(2) Member of the Committees on Administration of the Trusts.
(3) Member of the Executive Committee of each Trust. The Executive Committee
may generally exercise most powers of the Trustees between regularly
scheduled meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
50
<PAGE> 181
<TABLE>
<S> <C> <C>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH REGISTRANTS DURING PAST 5 YEARS
James K. Schmidt Senior Vice President Senior Vice President, the Adviser.
John A. Morin Vice President Vice President, the Adviser.
Susan S. Newton Vice President, Vice President and Assistant Secretary,
Assistant Secretary the and Adviser.
Compliance Officer
James J. Stokowski Vice President and Vice President, the Adviser.
Treasurer
David S. Beckwith Vice President Vice President, the Adviser.
Anne McDonley Vice President Vice President, the Adviser.
</TABLE>
- ------------
*Trustee may be deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
(1) Member of the Audit Committees of the Trusts.
(2) Member of the Committees on Administration of the Trusts.
(3) Member of the Executive Committee of each Trust. The Executive Committee
may generally exercise most powers of the Trustees between regularly
scheduled meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
51
<PAGE> 182
All of the officers listed are officers or employees of the Adviser or
affiliated companies. Some of the Trustees and officers may also be officers
and/or directors and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
The following table provides information regarding the compensation
paid by the Funds and the other investment companies in the John Hancock Fund
Complex to the Independent Trustees for their services for each Fund's 1994
fiscal year. The two non-Independent Trustees, Messrs. Boudreau and Dunlap, and
each of the officers of the Funds are interested persons of the Adviser, are
compensated by the Adviser and receive no compensation from the Funds for their
services.
AGGREGATE COMPENSATION
----------------------
<TABLE>
<CAPTION>
SOVEREIGN U.S.
INDEPENDENT TRUSTEES GOVERNMENT MANAGED TAX EXEMPT GOLD & GOVERNMENT
- -------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
William A. Barron, III $ 12,096 $ 5,288 $ 1,601
Douglas M. Costle 12,096 5,288 1,601
Leland O. Erdahl 12,096 5,288 1,601
Richard A. Farrell 12,558 5,491 1,664
William F. Glavin 12,096 5,288 1,601
Patrick Grant 12,713 5,558 1,685
Ralph Lowell, Jr. 12,096 5,288 1,601
Dr. John A. Moore 12,096 5,288 1,601
Patti McGill Peterson 12,096 5,288 1,601
John W. Pratt 12,096 5,288 1,601
-------- ------- -------
Totals $122,039 $53,353 $16,157
</TABLE>
AGGREGATE COMPENSATION
----------------------
<TABLE>
<CAPTION>
SOVEREIGN
INDEPENDENT TRUSTEES ACHIEVERS REGIONAL BANK GLOBAL GLOBAL INCOME
- -------------------- --------- ------------- ------- -------------
<S> <C> <C> <C> <C>
William A. Barron, III $ 2,567 $ 6,753 $ 2,501 $ 4,021
Douglas M. Costle 2,567 6,753 2,501 4,021
Leland O. Erdahl 2,567 6,753 2,501 4,021
Richard A. Farrell 2,646 6,927 2,578 4,151
William F. Glavin 2,568 6,755 2,501 4,023
Patrick Grant 2,673 6,985 2,603 4,021
Ralph Lowell, Jr. 2,567 6,753 2,501 4,021
Dr. John A. Moore 2,567 6,753 2,501 4,021
Patti McGill Peterson 2,567 6,753 2,501 4,021
John W. Pratt 2,567 6,753 2,501 4,021
------- ------- ------- -------
Totals $25,856 $67,938 $25,189 $40,342
</TABLE>
52
<PAGE> 183
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION FROM
ACCRUED AS PART OF BENEFITS UPON FUNDS AND JOHN HANCOCK
INDEPENDENT TRUSTEES EACH FUND'S EXPENSES RETIREMENT FUND COMPLEX TO TRUSTEES(1)
- -------------------- -------------------- ---------------- ---------------------------
(TOTAL OF 11 FUNDS)
<S> <C> <C> <C>
William A. Barron, III - - $ 42,000
Douglas M. Costle - - 42,000
Leland O. Erdahl - - 42,000
Richard A. Farrell - - 43,500
William F. Glavin - - 41,750
Patrick Grant - - 44,000
Ralph Lowell, Jr. - - 42,000
Dr. John A. Moore - - 41,750
Patti McGill Peterson - - 42,000
John W. Pratt - - 42,000
- - --------
Totals $423,000
</TABLE>
(1)The total compensation paid the John Hancock Fund Complex to the Independent
Trustees is as of calendar year ended December 31, 1994.
The nominees of the Funds may at times be the record holders of in
excess of 5% of shares of any one or more Funds by virtue of holding shares in
"street name." As of January 19, 1995 the officers and trustees of the Trusts as
a group owned less than 1% of the outstanding shares of each class of each of
the Funds.
As of January 19, 1995 the following shareholders beneficially owned 5%
of or more of the outstanding shares of the Funds listed below:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
NUMBER OF SHARES OF OUTSTANDING SHARES OF
NAME AND ADDRESS OF SHAREHOLDER FUND AND CLASS OF SHARES BENEFICIAL INTEREST OWNED THE CLASS OF THE FUND
- ------------------------------- ------------------------ ------------------------- ---------------------
<S> <C> <C> <C>
Francesca M. Dodd Global Income 109,602.000 10.18%
1989 Rev. Tr. DTD 12/8/89 Class A shares
Richard S. Dodd, Francesca M.
Dodd
and Michael L. Fay
TTEES
One White Path
Dodd Realty
South Yarmouth, MA 02664
Merrill Lynch Pierce Fenner & Regional Bank Fund 571,336 5.71%
Smith Inc. Class A shares
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
</TABLE>
53
<PAGE> 184
<TABLE>
<S> <C> <C> <C>
Elwood Insurance Limited Managed Tax-Exempt Fund 92,224 5.32%
P.O. Box HM 1022 Class A shares
c/o Cummings & L
Church Street West
Hamilton HM DX
Bermuda
James J. McDonough Managed Tax-Exempt Fund 104,715 6.04%
10355 South California Avenue Class A shares
Chicago, IL 60655-16110
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser for each of the Funds is John Hancock Advisers,
Inc., a Massachusetts corporation (the "Adviser"), with offices at 101
Huntington Avenue, Boston, Massachusetts 02199-7603. The Adviser is a registered
investment advisory firm which maintains a securities research department, the
efforts of which will be made available to the Funds.
The Adviser was organized in 1968 and presently has over $13 billion in
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 1,600,000 shareholders.
The Adviser is an affiliate of John Hancock Mutual Life Insurance Company, one
of the most recognized and respected financial institutions in the nation. With
total assets under management of approximately $80 billion, John Hancock Mutual
Life Insurance Company is one of the 10 largest life insurance companies in the
United States, and carries Standard & Poor's and A.M. Best's highest ratings.
Founded in 1862, John Hancock Mutual Life Insurance Company has been serving
clients for over 125 years.
The Trusts have entered into investment advisory agreements (the
"Advisory Agreements") dated as of November 6, 1986 as amended and restated
January 1, 1994 between Freedom Investment Trust and the Adviser, and dated as
of June 26, 1986 as amended and restated January 1, 1994 between Freedom
Investment Trust II and the Adviser. Pursuant to the Advisory Agreements, the
Adviser agreed to act as investment adviser and manager to the Funds. As manager
and investment adviser, the Adviser will: (a) furnish continuously an investment
program for each of the Funds and determine, subject to the overall supervision
and review of the Boards of Trustees, which investments should be purchased,
held, sold or exchanged, (b) provide supervision over all aspects of each Fund's
operations except those which are delegated to a custodian, transfer agent or
other agent, and (c) provide each of the Funds with such executive,
administrative and clerical personnel, officers and equipment as are deemed
necessary for the conduct of their business.
As compensation for its services under the Advisory Agreements, the
Adviser receives from each Fund a fee computed and paid monthly based upon the
following annual rates: (a) for each of Regional Bank Fund and Gold & Government
Fund, 0.80% of each respective Fund's first $500 million of average daily net
assets, and 0.75% of average daily net assets over $500 million; (b) for the
Sovereign Achievers Fund, 0.75% of the Fund's first $500 million of average
daily net assets, and 0.65% of average daily net assets in excess of that
amount; (c) for Government Fund, 0.50% of the Fund's first $500 million of
average daily net assets, and 0.45% of average daily net
54
<PAGE> 185
assets in excess of that amount; (d) for Managed Tax-Exempt Fund, 0.60% of the
Fund's first $250 million of average daily net assets, 0.50% of the next $500
million of average daily net assets, and 0.45% of average daily net assets in
excess of that amount; (e) for Global Fund, 1% on the first $100 million of
average daily net assets of the Fund, 0.80% on the next $200 million of average
net assets, 0.75% on the next $200 million of average net assets and 0.625% of
average net assets in excess of $500 million; and (f) for the Global Income Fund
0.75% on the first $250 million of average daily net assets, and 0.70% of
average net assets in excess of $250 million. The rates for some Funds are
higher than those for others because of the extensive amount of research
required to manage such portfolios in comparison to the portfolios of other
Funds.
The Global Fund and the Adviser have entered into a sub-investment
management contract with John Hancock Advisers International Limited under which
John Hancock Advisers International, subject to the review of the Trustees and
the overall supervision of the Adviser, is responsible for providing the Fund
with advice with respect to that portion of the assets invested in countries
other than the United States and Canada. As compensation for its services under
the Sub-Advisory Agreement, JH Advisers International receives from the Adviser
a monthly fee equal to 0.70% on an annual basis of the average daily net asset
value of the Global Fund for each calendar month up to $200 million of average
daily net assets; and 0.6375% on an annual basis of the average daily net asset
value over $200 million. The Sub-Adviser, with offices located at 34 Dover
Street, London, England W1X 3RA, is a wholly-owned subsidiary of the Adviser
formed in 1987 to provide international investment research and advisory
services to U.S. institutional clients.
The Adviser has entered into a service agreement with Sovereign Asset
Management Corporation ("SAMCORP"), which is an indirect wholly-owned subsidiary
of the Life Insurance Company. The service agreement provides that SAMCORP will
provide to the Adviser certain portfolio management services with respect to the
equity securities held in the portfolio of the Sovereign Achievers Fund. The
service agreement further provides that the Adviser will remain ultimately
responsible for all of its obligations under the investment management contract
between the Adviser and the Sovereign Achievers Fund. Subject to the supervision
of the Adviser, SAMCORP furnishes the Sovereign Achievers Fund with
recommendations with respect to the purchase, holding and disposition of equity
securities in the Sovereign Achievers Fund's portfolio; furnishes the Sovereign
Achievers Fund with research, economic and statistical data in connection with
the Sovereign Achievers Fund's equity investments; and places orders for
transactions in equity securities. The Adviser pays to SAMCORP 40% of the
monthly investment management fee received by the Adviser with respect to the
equity securities held in the portfolio of the Sovereign Achievers Fund during
such month. The fees paid by the Sovereign Achievers Fund to the Adviser under
the investment management contract are not affected by this arrangement.
All expenses which are not specifically paid by the Adviser and which
are incurred in the operation of the Fund (including fees of Trustees of the
Fund who are not "interested persons," as such term is defined in the Investment
Company Act, but excluding certain distribution-related activities required to
be paid by the Adviser or John Hancock Funds) and the continuous public offering
of the shares of the Fund are borne by the Fund. Class expenses properly
allocable to Class A or Class B shares will be borne exclusively by such class
of shares, subject to certain conditions imposed by the Internal Revenue Service
in issuing rulings to funds with a multiple-class structure.
55
<PAGE> 186
The State of California imposes a limitation on the expenses of the
Funds. The Advisory Agreement provides that if, in any fiscal year, the total
expenses of a Fund (excluding taxes, interest, brokerage commissions and
extraordinary items, but including the management fee) exceed the expense
limitations applicable to a Fund imposed by the securities regulations of any
state in which it is then registered to sell shares, the Adviser will reduce
it's fee for that Fund in the amount of that excess up to the amount of its
management fee during that fiscal year. The Adviser and JH Advisers
International have agreed that if, in any fiscal year, the total expenses of the
Global Fund (excluding taxes, interest, brokerage commissions and extraordinary
items, but including the Adviser's fee and the portion thereof paid to JH
Advisers International) exceed the expense limitations applicable to such Fund,
the Adviser and JH Advisers International will each reduce it's fee for that
Fund in the amount of that excess up to the amount of its fee during that fiscal
year. Although there is no certainty that any limitations will be in effect in
the future, the California limitation on an annual basis currently is 2.5% of
the first $30 million of average net assets, 2.0% of the next $70 million of net
assets and 1.5% of the remaining net assets.
The continuation of the Advisory Agreement for Freedom Investment Trust
was last approved on May 18, 1993 by all of the Trustees, including all of the
Trustees who are not parties to the Advisory Agreement or "interested persons"
of any such party. The shareholders of Gold & Government Fund, Regional Bank
Fund and Government Fund also approved the Advisory Agreement on November 6,
1986. The Advisory Agreement was approved by the respective shareholders of the
Sovereign Achievers Fund and the Managed Tax-Exempt Fund on February 26, 1988.
An amendment to the Advisory Agreement to increase the fee payable thereunder
effective January 1, 1994, was approved by the respective shareholders of Gold &
Government Fund and Regional Bank Fund on October 28, 1993. The Advisory
Agreement will continue in effect from year to year, provided that its
continuance is approved annually both (i) by the holders of a majority of the
outstanding voting securities of the Trust or by the Board of Trustees, and (ii)
by a majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any such party. The Advisory Agreement may be terminated
on 60 days written notice by any party and will terminate automatically if it is
assigned.
For the fiscal year ended October 31, 1992, Freedom Investment Trust
paid the Adviser and Freedom Capital, the Funds' previous Adviser, an investment
advisory fee of $3,084,161 pursuant to the Advisory Agreement. Of this amount,
$407,350 was attributable to the Gold & Government Fund, $496,112 was
attributable to the Regional Bank Fund, $1,108,589 was attributable to the
Government Fund, $909,184 was attributable to the Managed Tax-Exempt Fund, and
$162,926 was attributable to the Sovereign Achievers Fund. Under the terms of
the Advisory Agreement the Adviser may voluntarily not impose all or part of its
management fees. During the year ended October 31, 1992, for the Managed
Tax-Exempt Fund the Adviser and Freedom Capital agreed not to impose management
fees in the amount of $437,271.
56
<PAGE> 187
For the fiscal year ended October 31, 1993, Freedom Investment Trust
paid the Adviser an investment advisory fee of $6,061,838 pursuant to the
Advisory Agreement. Of this amount, $451,050 was attributable to the Gold &
Government Fund, $1,354,664 was attributable to the Regional Bank Fund,
$2,862,505 was attributable to the Government Fund, $583,838 was attributable to
the Sovereign Achievers Fund and $809,781 was attributable to the Managed
Tax-Exempt Fund. Under the terms of the Advisory Agreement the Adviser may
voluntarily not impose all or part of its management fees. During the year ended
October 31, 1993, for the Managed Tax-Exempt Fund in the amount of $733,749.
For the fiscal year ended October 31, 1994, Freedom Investment Trust
paid the Adviser, the Funds' previous Adviser, an investment advisory fee of
$9,390,998 pursuant to the Advisory Agreement. Of this amount, $530,798 was
attributable to the Gold & Government Fund, $3,686,366 was attributable to the
Regional Bank Fund, $2,839,185 was attributable to the Government Fund, $902,465
was attributable to the Sovereign Achievers Fund and $1,432,184 was attributable
to the Managed Tax-Exempt Fund. During the year ended October 31, 1994, for the
Managed Tax-Exempt Fund, the Adviser agreed not to impose management fees in the
amount of $131,878 the Adviser's expense limitation may be discontinued at any
time.
The continuation of the Advisory Agreement for the Global Fund and for
the Global Income Fund were approved on May 18, 1993 by all of the Trustees of
Freedom Investment Trust II, including all of the Trustees who are not parties
to the Agreements or "interested persons" of any such party. The current
Sub-Advisory Agreement between the Adviser and JH Advisers International was
approved by all of the Trustees of Freedom Investment Trust II on June 25, 1992
and became effective on August 1, 1992. The shareholders of each Fund approved
the Advisory Agreement with respect to each Fund on May 8, 1987 and the
shareholders of the Global Fund approved the Sub-Advisory Agreement on September
25, 1992. An amendment to the Advisory Agreement to increase the fee payable
thereunder effective January 1, 1994 was approved by the shareholders of Global
Income Fund on October 28, 1993. The Agreements will continue in effect for a
period of two years from the date of their execution and thereafter from year to
year, provided that their continuance is approved annually both (i) by the
holders of a majority of the outstanding voting securities of each Fund or by
the Board of Trustees of Freedom Investment Trust II, and (ii) by a majority of
the Trustees who are not parties to the Agreements or "interested persons" of
any such party. The Agreements may be terminated on 60 days' written notice by
either party and will terminate automatically if they are assigned.
For the fiscal year ended October 31, 1992, Freedom Investment Trust II
paid the Adviser and Freedom Capital, the Funds' previous Adviser, investment
advisory fees of $332,648 with respect to the Global Fund and $1,411,692 with
respect to the Global Income Fund. For the fiscal year ended October 31, 1993,
Freedom Investment Trust II paid the Adviser investment advisory fees of
$922,722 with respect to the Global Fund and $1,441,163 with respect to the
Global Income Fund. For the fiscal year ended October 31, 1994, Freedom
Investment Trust II the Adviser investment advisory fees of $1,175,313 with
respect to the Global Fund and $1,207,673 with respect to the Global Income
Fund.
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<PAGE> 188
DISTRIBUTION CONTRACT
Freedom Investment Trust and Freedom Investment Trust II have entered
into Distribution Agreements with John Hancock Broker Distribution Services,
Inc. and Freedom Distributors Corporation (together the "Distributors") whereby
the Distributors act as exclusive selling agent of the Funds, selling shares of
each class of each Fund on a "best efforts" basis. Shares of each class of each
Fund are sold to selected broker-dealers who have entered into dealer agreements
with the Distributors (the "Selling Brokers").
The Distributors accept orders for the purchase of the shares of the
Funds which are continually offered at net asset value next determined plus an
applicable sales charge, if any. In connection with the sale of Class A or Class
B shares of the Funds, the Distributors and Selling Brokers receive compensation
in the form of a sales charge imposed, in the case of Class A shares at the time
of sale or, in the case of Class B shares, or on a deferred basis. The sales
charges are discussed further in the Class A and Class B Shares Prospectus.
The Trustees have adopted Distribution Plans with respect to Class A
and Class B shares ("the Plans"), pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Under the Plans, each Fund will pay distribution and
service fees at an aggregate annual rate of up to 0.30% and 1.00% respectively,
of the Fund's daily net assets attributable to Class A and Class B shares,
respectively. However, the amount of the service fee will not exceed 0.25% of
the applicable Fund's average daily net assets attributable to each class of
shares. The distribution fees reimburse the Distributors for their distribution
costs incurred in the promotion of sales of shares of the Funds, and the service
fees compensate Selling Brokers for providing personal and account maintenance
services to shareholders. In the event that the Distributors are not fully
reimbursed for expenses they incur under the Class B Plan in any fiscal year,
the Distributors may carry these expenses forward, provided, however, that the
Trustees may terminate the Class B Plan and thus any Fund's obligation to make
further payments at any time. Accordingly, the Funds do not treat unreimbursed
expenses relating to the Class B shares as a liability. The Plans were approved
by a majority of the voting securities of each Fund. The Plans and all
amendments were approved by the Trustees, including a majority of the Trustees
who are not interested persons of the applicable Fund and who have no direct or
indirect financial interest in the operation of the Plans (the "Independent
Trustees"), by votes cast in person at a meeting called for the purpose of
voting on such Plans.
Pursuant to the Plans, at least quarterly, the Distributors provide the
Funds with a written report of the amounts expended under the Plans and the
purpose for which these expenditures were made. The Trustees review these
reports on a quarterly basis.
Each of the Plans provides that it will continue in effect only so long
as its continuance is approved at least annually by a majority of both the
Trustees and the Independent Trustees. Each of the Plans provides that it may be
terminated without penalty, (a) by vote of a majority of the Independent
Trustees, (b) by a vote of a majority of the applicable Fund's outstanding
shares of the applicable class in each case upon 60 day's written notice to the
Distributors and (c) automatically in the event of assignment. Each of the Plans
further provides that it may not be amended to increase the maximum amount of
the fees for the services described therein without
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<PAGE> 189
the approval of a majority of the outstanding shares of the class of the
applicable Fund which has voting rights with respect to the Plan. And finally,
each of the Plans provides that no material amendment tot he Plan will, in any
event, be effective unless it is approved by a vote of the Trustees and the
Independent Trustees of the applicable Fund. The holders of Class A and Class B
shares have exclusive voting rights with respect to the Plan applicable to their
respective class of shares. In adopting the Plans the Trustees concluded that,
in their judgment, there is a reasonable likelihood that the plans will benefit
the holders of the applicable of shares of each Fund.
During the fiscal year ended October 31, 1994, the Funds paid the
Distributors the following amounts of expenses with respect to the Class A
shares and Class B shares of each of the Funds:
<TABLE>
<CAPTION>
Expense Items
-------------
Printing and Interest,
Mailing of Carrying or
Prospectuses to Expense of Compensation to Other Finance
Advertising New Distributors Selling Brokers Charges Other
----------- Shareholders ------------ --------------- -------------
---------------
<S> <C> <C> <C> <C> <C>
Government Fund
Class A Shares $ 73,002 $ 9,097 $185,811 $ 740,304 NONE
Class B Shares $ 66,771 $ 7,896 $172,327 $1,631,682 $ 185,790
Managed Tax-Exempt Fund
Class A Shares
Class B Shares $ 8,795 $ 1,275 $ 22,073 $ 24,692 NONE
$ 88,369 $12,687 $205,743 $1,694,748 $ 270,961
Gold & Government Fund
Class A Shares $ 5,186 $ 4,667 $ 12,527 $ 32,242 NONE
Class B Shares $ 17,015 $ 9,744 $ 40,719 $ 364,100 $ 9,163
Sovereign Achievers Fund
Class A Shares $ 12,145 $ 3,040 $ 22,564 $ 31,331 NONE
Class B Shares $ 45,576 $10,709 $ 85,937 $ 614,800 $ 116,923
Regional Bank Fund
Class A Shares $109,242 $ 6,249 $226,525 $ 101,747 NONE
Class B Shares $138,568 $ 8,085 $308,751 $2,559,512 $ 48,525
</TABLE>
59
<PAGE> 190
<TABLE>
<S> <C> <C> <C> <C> <C>
Global Fund
Class A Shares $75,923 $ 8,116 $ 93,399 $ 106,624 NONE
Class B Shares $34,941 $ 3,506 $ 43,794 $ 164,524 $4,206
Global Income Fund
Class A Shares $ 6,680 $ 1,861 $ 10,271 $ 11,991 NONE
Class B Shares $71,797 $19,847 $103,045 $1,034,749 $193,006
</TABLE>
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of a Fund's
shares, the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations
furnished by a principal market maker or a pricing service, both of which
generally utilize electronic data processing techniques to determine valuations
for normal institutional size trading units of debt securities without exclusive
reliance upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National
Market Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
other securities traded over-the-counter are generally valued at the mean
between the current closing bid and asked prices.
Short-term debt investments which have a remaining maturity of 60 days
or less are generally valued at amortized cost which approximates market value.
If market quotations are not readily available or if in the opinion of the
Adviser any quotation or price is not representative of true market value, the
fair value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Any assets or liabilities expressed in terms of foreign currencies are
translated into U.S. dollars by the custodian bank based on London currency
exchange quotations as of 5:00 p.m., London time ( 12:00 noon, New York time) on
the date of any determination of a Fund's NAV.
A Fund will not price its 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 close 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 securities may be significantly affected on days when a shareholder
has no access to the Fund.
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<PAGE> 191
INITIAL SALES CHARGE ON CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the
Funds are described in the Funds' Class A and Class B Prospectuses. Methods of
obtaining reduced sales charges referred to generally in the Class A and Class B
Prospectuses are described in detail below. In calculating the sales charge
applicable to current purchases of Class A shares, the investor is entitled to
cumulate current purchases with the greater of the current value (at offering
price) of the Class A shares of the Funds, or if Investor Services is notified
by the investor's dealer or the investor at the time of the purchase, the cost
of the Class A shares owned.
Combined Purchases. In calculating the sales charge applicable to purchases of
Class A shares made at one time, the purchases will be combined if made by (a)
an individual, his or her spouse and their children under the age of 21,
purchasing securities for his, her or their own account, (b) a trustee or other
fiduciary purchasing for a single trust, estate or fiduciary account and (c)
certain groups of four or more individuals making use of salary deductions or
similar group methods of payment whose funds are combined for the purchase of
mutual fund shares. Further information about combined purchases, including
certain restrictions on combined group purchases, is available from Investor
Services or a Selling Broker's representative.
Without Sales Charges. As described in the Class A and Class B Prospectuses,
Class A shares of the Funds may be sold without a sales charge to certain
persons described in the Prospectus.
Accumulation Privilege. Investors (including investors combining purchases) who
are already Class A shareholders may also obtain the benefit of the reduced
sales charge by taking into account not only the amount then being invested but
also the purchase price of the Class A shares already held by such person.
Combination Privilege. Reduced sales charges (according to the schedule set
forth in the Class A and Class B Prospectus) are also available to an investor
based on the aggregate amount of his concurrent and prior investments in Class A
shares of the Fund and shares of all other John Hancock funds which carry a
sales charge.
Letter of Intention. The reduced sales charges are also applicable to
investments made over a specified period pursuant to a Letter of Intention (the
"LOI"), which should be read carefully prior to its execution by an investor.
The Fund offers two options regarding the specified period for making
investments under the LOI. All investors have the option of making their
investments over a specified period of thirteen (13) months. Investors who are
using the Fund as a funding medium for a qualified retirement plan, however, may
opt to make the necessary investments called for by the LOI over a forty-eight
(48) month period. These qualified retirement plans include group IRA, SEP,
SARSEP, TSA, 401(k), ISA and 457 plans. Such an investment (including
accumulations and combinations) must aggregate $100,000 or more invested during
the specified period from the date of the LOI or from a date within ninety (90)
days prior thereto, upon written request to Investor Services. The sales charge
applicable to all amounts invested under the LOI is computed as if the aggregate
amount intended to be invested had been invested immediately. If such aggregate
amount is not actually invested, the difference in the sales charge actually
paid and the sales charge payable had the LOI not been in effect is due from the
investor.
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<PAGE> 192
However, for the purchases actually made within the specified period the sales
charge applicable will not be higher than that which would have applied
(including accumulations and combinations) had the LOI been for the amount
actually invested.
The LOI authorizes Investor Services to hold in escrow a number of
Class A shares (approximately 5% of the aggregate) sufficient to make up any
difference in sales charges on the amount intended to be invested and the amount
actually invested, until such investment is completed within the specified
period, at which time the escrow shares will be released. If the total
investment specified in the LOI is not completed, the Class A shares held in
escrow may be redeemed and the proceeds used as required to pay such sales
charge as may be due. By signing the LOI, the investor authorizes Investor
Services to act as his or her attorney-in-fact to redeem any escrowed shares and
adjust the sales charge, if necessary. A LOI does not constitute a binding
commitment by an investor to purchase, or by the Funds to sell, any additional
Class A shares and may be terminated at any time.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per
share without the imposition of an initial sales charge so that the Funds will
receive the full amount of the purchase price.
Contingent Deferred Sales Charge. Class B shares which are redeemed within six
years of purchase will be subject to a contingent deferred sales charge ("CDSC")
at the rates set forth in the Class A and Class B Prospectus as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the current market value or the original purchase cost of
the Class B shares being redeemed. Accordingly, no CDSC will be imposed on
increases in account value above the initial purchase prices, including
increases in account value derived from reinvestment of dividends or capital
gains distributions.
The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares. Solely for purposes of determining this number all
payments during a month will be aggregated and deemed to have been made on the
last day of the month.
62
<PAGE> 193
Proceeds from the CDSC are paid to John Hancock Funds not "the
Distributors" and are used in whole or in part by John Hancock Funds to defray
its expenses related to providing distribution-related services to the Funds in
connection with the sale of the Class B shares, such as the payment of
compensation to select Selling Brokers for selling Class B shares. The
combination of the CDSC and the distribution and service fees facilitates the
ability of the Funds to sell the Class B shares without a sales charge being
deducted at the time of the purchase. See the Class A and Class B Prospectuses
for additional information regarding the CDSC.
SPECIAL REDEMPTIONS
Although they would not normally do so, the Funds have the right to pay
the redemption price of shares of the Funds in whole or in part in portfolio
securities as prescribed by the Trustees. If the shareholder were to sell
portfolio securities received in this fashion, he would incur a brokerage
charge. Any such securities would be valued for the purposes of making such
payment at the same value as used in determining net asset value. The Funds
have, however, elected to be governed by Rule 18f-1 under the Investment Company
Act. Under that rule, the Funds must redeem their shares for cash except to the
extent that the redemption payments to any shareholder during any 90-day period
would exceed the lesser of $250,000 or 1% of the applicable Fund's net asset
value at the beginning of such period.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. As described more fully in the Prospectuses, the Funds
permit exchanges of shares of any class of a Fund for shares of the same class
in any other John Hancock fund offering that class.
Exchanges between funds with shares that are not subject to a CDSC are
based on their respective net asset values. No sales charge or transaction
charge is imposed. Shares of the Funds which are subject to a CDSC may be
exchanged into shares of any of the other John Hancock funds that are subject to
a CDSC without incurring the CDSC; however, the shares acquired in an exchange
will be subject to the CDSC schedule of the shares acquired if and when such
shares are redeemed (except that shares exchanged into John Hancock Short-Term
Strategic Income Fund and John Hancock Limited Term Government Fund will retain
the exchanged fund's CDSC schedule). For purposes of computing the CDSC payable
upon redemption of shares acquired in an exchange, the holding period of the
original shares is added to the holding period of the shares acquired in an
exchange.
Shares of each class may be exchanged only for shares of the same class
in another John Hancock fund and for shares of John Hancock Cash Management
Fund, a money market fund. A shareholder may exchange Class B shares of a Fund
into shares of John Hancock Cash Management Fund at net asset value. Shares so
acquired will continue to be subject to a CDSC upon redemption. The rate of the
CDSC will be the rate in effect on the original fund at the time of the
exchange.
63
<PAGE> 194
If a shareholder exchanges Class B shares purchased prior to January 1,
1994 (except John Hancock Short-Term Strategic Income Fund) for Class B shares
of any other John Hancock fund, the acquired shares will continue to be subject
to the CDSC schedule that was in effect when the exchanged shares were
purchased.
Each Fund reserves the right to require that previously exchanged
shares (and reinvested dividends) be in the Fund for 90 days before a
shareholder is permitted a new exchange. The Funds may also terminate or alter
the terms of the exchange privilege upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and
the purchase of shares of another for Federal income tax purposes. An exchange
may result in a taxable gain or loss. See "Tax Status."
To make an exchange, the account registration in both the existing and
new account, must be identical. The exchange privilege is available only in
states where the exchange can be made legally.
Systematic Withdrawal Plan. As described briefly in the Class A and Class B
Prospectuses, each Fund permits the establishment of a Systematic Withdrawal
Plan. Payments under this plan represent proceeds from the redemption of shares
of the applicable Fund. Since the redemption price of the shares of a Fund may
be more or less than the shareholder's cost, depending upon the market value of
the securities owned by the Fund at the time of redemption, the distribution of
cash pursuant to this plan may result in realization of gain or loss for
purposes of Federal, state and local income taxes. The maintenance of a
Systematic Withdrawal Plan concurrently with purchases of additional Class A or
Class B shares of a Fund could be disadvantageous to a shareholder because of
the initial sales charge payable on such purchases of Class A shares and the
CDSC imposed on redemptions of Class B shares and because redemptions are
taxable events. Therefore, a shareholder should not purchase Class A or Class B
shares of a Fund at the same time a Systematic Withdrawal Plan is in effect. The
Funds reserve the right to modify or discontinue the Systematic Withdrawal Plan
of any shareholder on 30 days' prior written notice to such shareholder, or to
discontinue the availability of such plan in the future. The shareholder may
terminate the plan at any time by giving proper notice to Investor Services.
Monthly Automatic Accumulation Program ("MAAP"). This program is explained more
fully in the Funds' Class A and Class B Prospectus and the Account Privileges
Application. The program, as it relates to automatic investment checks, is
subject to the following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by Investor Services without prior notice if
any investment is not honored by the shareholder's bank. The bank shall be under
no obligation to notify the shareholder as to the non-payment of any check.
64
<PAGE> 195
The program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is received
at least five (5) business days prior to the processing date of any investment.
Reinvestment Privilege. A shareholder who has redeemed Fund shares may, within
120 days after the date of redemption, reinvest without payment of a sales
charge any part of the redemption proceeds in shares of the same class of the
same Fund or in any other John Hancock fund, subject to the minimum investment
limit of that fund. The proceeds from the redemption of Class A shares may be
reinvested at net asset value without paying a sales charge in Class A shares of
the same Fund or in Class A shares of another John Hancock fund. If a CDSC was
paid upon a redemption, a shareholder may reinvest the proceeds from this
redemption at net asset value in additional shares of the class from which the
redemption was made. The shareholder's account will be credited with the amount
of any CDSC charged upon the prior redemption and the new shares will continue
to be subject to the CDSC. The holding period of the shares acquired through
reinvestment will, for purposes of computing the CDSC payable upon a subsequent
redemption, include the holding period of the redeemed shares. The Funds may
modify or terminate the reinvestment privilege at any time.
A redemption or exchange of Fund shares is a taxable transaction for
Federal income tax purposes even if the reinvestment privilege is exercised, and
any gain or loss realized by a shareholder on the redemption or other
disposition of Fund shares will be treated for tax purposes as described under
the caption "Tax Status."
DESCRIPTION OF THE FUNDS' SHARES
The Trustees of the Trust are responsible for the management and
supervision of the Funds. The Declaration of Trust permits the Trustees to issue
an unlimited number of full and fractional shares of beneficial interest of the
Trust, 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 Statement
of Additional Information, the Trustees have authorized the issuance of two
classes of shares of the Funds, designated as Class A and Class B.
The shares of each class of a Fund represent an equal proportionate
interest in the aggregate net assets attributable to the classes of the Fund.
Class A shares and Class B shares of the Funds will be sold exclusively to
members of the public (other than the institutional investors described in the
Class A and Class B Prospectuses) at net asset value. A sales charge will be
imposed either at the time of the purchase, for Class A shares, or on a
contingent deferred basis, for Class B shares. For Class A shares, no sales
charge is payable at the time of purchase on investments of $1 million or more,
but for such investments a contingent deferred sales charge may be imposed in
the event of certain redemption transactions within one year of purchase.
Holders of Class A shares and Class B shares have certain exclusive
voting rights on matters relating to their respective distribution plans. The
different classes of a Fund may bear different expenses relating to the cost of
holding shareholder meetings necessitated by the exclusive voting rights of any
class of shares.
65
<PAGE> 196
Dividends paid by the Fund, if any, with respect to each class of
shares will be calculated in the same manner, at the same time and will be in
the same amount, except that (i) the distribution and service fees relating the
Class A and Class B shares will be borne exclusively by that class (ii) Class B
shares will pay higher distribution and service fees than Class A shares and
(iii) Class A shares and Class B shares will bear any other class expenses
properly allocable to such class of shares, subject to the conditions set forth
in a private letter ruling that each Fund has received from the Internal Revenue
Service relating to its multiple-class structure. The net asset value per share
may vary depending on whether Class A shares or Class B shares are purchased.
In the event of liquidation, shareholders are entitled to share pro
rata in the net assets of the applicable Fund available for distribution to such
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable except as set forth in the
Prospectuses.
Unless otherwise required by the Investment Company Act or the
Declaration of Trust, each Fund has no intention of holding annual meetings of
shareholders. Fund shareholders may remove a Trustee by the affirmative vote of
at least two-thirds of the Trust's outstanding shares, and the Trustees shall
promptly call a meeting for such purpose when requested to do so in writing by
the record holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with a request for a special meeting of shareholders.
However, at any time that less than a majority of the 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 Fund. The Declaration of Trust also provides for indemnification out of the
Funds' assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. Liability is therefor
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
The following information supplements the discussion in the
Prospectuses regarding performance information.
Total Return. Average annual total return is determined separately for each
class of shares.
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<PAGE> 197
Set forth below are tables showing the performance on a total return
basis (i.e., with all dividends and distributions reinvested) of a hypothetical
$1,000 investment in the Class A and Class B shares of the Gold & Government
Fund, Regional Bank Fund, Government Fund, Managed Tax-Exempt Fund, Sovereign
Achievers Fund, Global Fund and Global Income Fund. The performance information
for each Fund is stated for the fiscal year ended October 31, 1994, for the five
year period ended October 31, 1994 with respect to the Class B shares of each
Funds for the one year period of Class A shares of each Fund and for the period
from the commencement of operations (indicated by an asterisk) of the Class A
shares and Class B shares of each Fund to October 31, 1994.
<TABLE>
<CAPTION>
Gold & Government Fund
----------------------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 9/26/84* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
--------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
(14.59)% 1.20% (15.16)% 4.14% 7.41%
</TABLE>
<TABLE>
<CAPTION>
Regional Bank Fund
------------------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 10/4/85* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
--------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
1.11% 23.71% 0.69% 18.47% 19.53%
</TABLE>
<TABLE>
<CAPTION>
Government Income Fund
----------------------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 6/5/86* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
-------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
(10.84)% 1.25% (11.69)% 6.04% 7.39%
</TABLE>
<TABLE>
<CAPTION>
Managed Tax-Exempt Fund
-----------------------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 4/22/87* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
-------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
(9.47)% 3.29% (10.56)% 6.28% 7.75%
</TABLE>
67
<PAGE> 198
<TABLE>
<CAPTION>
Sovereign Achievers Fund
------------------------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 4/22/87* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
-------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
3.70% 3.10% (4.23)% 5.39% 6.42%
</TABLE>
<TABLE>
<CAPTION>
Global Fund
-----------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares Class C Shares Class C Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 9/2/86* to One year ended 5/7/93* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
-------------- -------------- -------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
3.23% 9.86% 2.97% 7.15% 10.41% 9.15% 21.33%
</TABLE>
<TABLE>
<CAPTION>
Global Income Fund
------------------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 12/17/86* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
-------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
(5.71)% 0.09% (6.79)% 5.32% 8.84%
</TABLE>
* Commencement of operations.
The "distribution rate" is determined by annualizing the result of
dividing the declared dividends of a Fund during the period stated by the
maximum offering price and net asset value at the end of the period. Excluding a
Fund's sales load from the distribution rate produces a higher rate.
Total return is computed by finding the average annual compounded rates
of return over the designated periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
[GRAPHIC OMMITTED]
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
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.
68
<PAGE> 199
This calculation assumes that the maximum sales charge for Class A
shares of 5% for Gold & Government Fund, Sovereign Achievers Fund, Regional Bank
Fund and Global Fund and 4.5% for Government Income Fund, Managed Tax-Exempt
Fund, and Global Income Fund is included in the initial investment or, for Class
B shares, the applicable CDSC is applied at the end of the period. This
calculation also assumes that all dividends and distributions are reinvested at
net asset value on the reinvestment dates during the period.
In addition to average annual total returns, the Funds may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Cumulative total returns may be quoted as a
percentage or as a dollar amount, and may be calculated for a single investment,
a series of investments, and/or a series of redemptions, over any time period.
Total returns may be quoted with or without taking the Funds' sales charge on
Class A shares or the CDSC on Class B shares into account. Excluding the Funds'
sales charge on Class A shares and the CDSC on Class B shares from a total
return calculation produces a higher total return figure.
Yield. Yield is determined separately for Class A and Class B shares. The yields
for the Class A shares of the Gold & Government Fund, Government Fund, Managed
Tax-Exempt Fund and Global Income Fund for the thirty days ended October 31,
1994 were 1.46%, 6.22%, 5.40% and 7.22%, respectively. The yields for the Class
B shares of the Gold & Government Fund, Government Fund, Managed Tax-Exempt Fund
and Global Income Fund for the thirty days ended October 31, 1994 were 0.91%,
6.03%, 4.91% and 6.90%, respectively.
Yield is computed by dividing the net investment income per share
earned during a specified 30 day period by the maximum offering price per share
on the last day of such period, according to the following formula:
[GRAPHIC OMMITTED]
Where: a= dividends and interest earned during the period
b= net expenses accrued for the period
c= the average daily number of share outstanding during the
period that were entitled to receive dividends
d= the maximum offering price per share on the last day of the
period.
69
<PAGE> 200
To calculate interest earned (for the purpose of "a" above) on debt
obligations, a Fund computes the yield to maturity of each obligation held by
the Fund based on the market value of the obligation (including actual accrued
interest) at the close of last business day of the period, or, with respect to
obligations purchased during the period, the purchase price (plus actual accrued
interest). The yield to maturity is then divided by 360 and the quotient is
multiplied by the market value of the obligation (including actual accrued
interest) to determine the interest income on the obligation for each day of the
subsequent period that the obligation is in the portfolio.
Managed Tax-Exempt Fund only. In the case of a tax-exempt obligation
issued without original issue discount and having a current market discount, the
coupon rate of interest is used in lieu of the yield to maturity. Where, in the
case of a tax-exempt obligation with original issue discount, the discount based
on the current market value exceeds the then-remaining portion of original issue
discount (market discount), the yield to maturity is the imputed rate based on
the original issue discount calculation. Where, in the case of a tax-exempt
obligation with original issue discount, the discount based on the current
market value is less than the then-remaining portion of original issue discount
(market premium), the yield to maturity is based on the market value.
Government Fund and Gold & Government Fund only. With respect to the
treatment of discount and premium on mortgage or other receivables-backed
obligations which are expected to be subject to monthly payments of principal
and interest ("paydowns") each Fund accounts for gain or loss attributable to
actual monthly paydowns as an increase or decrease to interest income during the
period.
Global Income Fund only. To calculate interest earned (for the purpose
of "a" above) on foreign debt obligations, the Fund computes the yield to
maturity of each obligation based on the local foreign currency market value of
the obligation (including actual accrued interest) at the beginning of the
period, or, with respect to obligations purchased during the period, the
purchase price plus accrued interest. The yield to maturity is then divided by
360 and the quotient is multiplied by the current market value of the obligation
(including actual accrued interest in local currency denomination), then
converted to U.S. dollars using exchange rates from the close of the last
business day of the period to determine the interest income on the obligation
for each day of the subsequent period that the obligation is in the portfolio.
Applicable foreign withholding taxes, net of reclaim, are included in the "b"
expense component.
Solely for the purpose of computing yield, each Fund recognizes
dividend income by accruing 1/360 of the stated dividend rate of a security each
day that a security is in the portfolio.
Undeclared earned income, computed in accordance with generally
accepted accounting principles, may be subtracted from the maximum offering
price. Undeclared earned income is the net investment income which, at the end
of the base period, has not been declared as a dividend, but is reasonably
expected to be declared as a dividend shortly thereafter.
All accrued expenses are taken to account as described later herein.
70
<PAGE> 201
From time to time, in reports and promotional literature, the Funds'
total return and yield will be ranked or compared to indices of mutual funds
such as Lipper Analytical Services, Inc.'s "Lipper Mutual Performance Analysis,"
a monthly publication which tracks net assets, total return, and yield on mutual
funds in the United States. Ibottson and Associates, CDA Weisenberger and F.C.
Towers are also used for comparison purposes, as well as Russell and Wilshire
indices.
Performance rankings and ratings reported periodically in national
financial publications such as MONEY Magazine, FORBES, BUSINESS WEEK, THE WALL
STREET JOURNAL, MORNINGSTAR, STANGER'S and BARRON'S will also be utilized.
The performance of the Funds is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of the
Funds for any period in the future. The performance of any Fund is a function of
many factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales, and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Funds' performances.
BROKERAGE ALLOCATION
Each Advisory Agreement authorizes the Adviser (subject to the control
of the Boards of Trustees) to select brokers and dealers to execute purchases
and sales of portfolio securities and gold bullion and coins. It directs the
Adviser to use its best efforts to obtain the best overall terms for the Funds,
taking into account such factors as price (including dealer spread), the size,
type and difficulty of the transaction involved, and the financial condition and
execution capability of the broker or dealer.
The Sub-Advisory Agreement between the Adviser and JH Advisers
International authorizes JH Advisers International (subject to the control of
the Board of Trustees of Freedom Investment Trust II) to provide the Global Fund
with a continuing and suitable investment program with respect to investments by
the Fund in countries other than the United States and Canada.
To the extent that the execution and price offered by more than one
dealer are comparable, the Adviser or JH Advisers International, as the case may
be, may, in their discretion, decide to effect transactions in portfolio
securities with dealers on the basis of the dealer's sales of shares of the
Funds or with dealers who provide the Funds, the Adviser or JH Advisers
International with services such as research and the provision of statistical or
pricing information. In addition, the Funds may pay brokerage commissions to
brokers or dealers in excess of those otherwise available upon a determination
that the commission is reasonable in relation to the value of the brokerage
services provided, viewed in terms of either a specific transaction or overall
71
<PAGE> 202
brokerage services provided with respect to the Funds' portfolio transactions by
such broker or dealer. Any such research services would be available for use on
all investment advisory accounts of the Adviser or JH Advisers International.
The Funds may from time to time allocate brokerage on the basis of sales of
their shares. Review of compliance with these policies, including evaluation of
the overall reasonableness of brokerage commissions paid, is made by the Board
of Trustees.
The Adviser places all orders for purchases and sales of portfolio
securities of the Funds. In selecting broker-dealers, the Adviser may consider
research and brokerage services furnished to them. The Adviser may use this
research information in managing the Funds' assets, as well as assets of other
clients.
Municipal securities, foreign debt securities and Government Securities
are generally traded on the over-the-counter market on a "net" basis without a
stated commission, through dealers acting for their own account and not as
brokers. The Managed Tax-Exempt Fund, Global Income Fund, Sovereign Government
Fund and Gold & Government Fund (with respect to Government Securities in its
portfolio) will primarily engage in transactions with these dealers or deal
directly with the issuer. Prices paid to the dealer will generally include a
"spread", which is the difference between the prices at which the dealer is
willing to purchase and sell the specific security at that time.
During the fiscal year ended October 31, 1992, Freedom Investment Trust
paid $183,983 in negotiated brokerage commissions on behalf of the Funds of
which $8,460 was attributable to the Gold & Government Fund, $49,951 was
attributable to the Regional Bank Fund and $125,572 was attributable to the
Sovereign Achievers Fund. During the fiscal year ended October 31, 1993, Freedom
Investment Trust paid $161,459 in negotiated brokerage commissions on behalf of
the Funds of which $22,233 was attributable to the Gold & Government Fund,
$3,000 was attributable to Sovereign Government Fund, $49,951 was attributable
to the Regional Bank Fund and $86,275 was attributable to the Sovereign
Achievers Fund. During the fiscal year ended October 31, 1994, Freedom
Investment Trust paid $833,722 in brokerage commissions on behalf of the Funds,
of which $10,051 was attributable to the Managed Tax-Exempt Fund, $512,936 was
attributed to the Regional Bank Fund, $232,625 was attributable to the Sovereign
Achievers Fund, $48,650 was attributable to the Gold & Government Fund and
$29,450 was attributable to Sovereign Government Fund.
During the fiscal year ended October 31, 1992, Freedom Investment Trust
II paid $148,084 in negotiated brokerage commissions on behalf of the Global
Fund and none on behalf of the Global Income Fund. During the fiscal year ended
October 31, 1993, Freedom Investment Trust II paid $806,269 in brokerage
commissions on behalf of the Global Fund and none on behalf of the Global Income
Fund. During the fiscal year ended October 31, 1994, Freedom Investment Trust II
paid $509,845 in brokerage commissions on behalf of the Global Fund and no
brokerage commissions on behalf of the Global Income Fund.
72
<PAGE> 203
When a Fund engages in an option transaction, ordinarily the same
broker will be used for the purchase or sale of the option and any transactions
in the securities to which the option relates. The writing of calls and the
purchase of puts and calls by a Fund will be subject to limitations established
(and changed from time to time) by each of the Exchanges governing the maximum
number of puts and calls covering the same underlying security which may be
written or purchased by a single investor or group of investors acting in
concert, regardless of whether the options are written or purchased on the same
or different Exchanges, held or written in one or more accounts or through one
or more brokers. Thus, the number of options which a Fund may write or purchase
may be affected by options written or purchased by other investment companies
and other investment advisory clients of the Adviser and its affiliates or JH
Advisers International. An Exchange may order the liquidation of positions found
to be in violation of these limits, and it may impose certain other sanctions.
In the U.S. Government securities market, securities are generally
traded on a "net" basis with dealers acting as principal for their own account
without a stated commission, although the price of the security usually includes
a profit to the dealer. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or premiums are paid.
Municipal securities are generally traded on the over-the-counter
market on a "net" basis without a stated commission, through dealers acting for
their own account and not as brokers. The Managed Tax-Exempt Fund will primarily
engage in transactions with these dealers or deal directly with the issuer.
Prices paid to a municipal securities dealer will generally include a "spread",
which is the difference between the prices at which the dealer is willing to
purchase and sell the specific security at that time.
The Adviser's indirect parent, John Hancock Mutual Life Insurance
Company, is the indirect sole shareholder of John Hancock Freedom Securities
Corporation and its subsidiaries, two of which, Tucker Anthony Incorporated
("Tucker Anthony"), John Hancock Distributors, Inc. and Sutro & Company, Inc.
("Sutro"), are broker dealers (together, "Affiliated Brokers"). The Trusts'
Boards of Trustees have determined that any portfolio transaction for the Funds
may be executed through Affiliated Brokers if, in the judgment of the Adviser or
JH Advisers International, as the case may be, the use of Affiliated Brokers is
likely to result in price and execution at least as favorable as those of other
qualified brokers, and if, in the transaction, Affiliated Brokers charges the
Funds a commission rate consistent with those charged by Affiliated Brokers to
comparable unaffiliated customers in similar transactions. Affiliated Brokers
will not participate in commissions in brokerage given by a Fund to other
brokers or dealers and neither will receive any reciprocal brokerage business
resulting therefrom. Over-the-counter purchases and sales are transacted
directly with principal market makers except in those cases in which better
prices and executions may be obtained elsewhere. Affiliated Brokers will not
receive any brokerage commissions for orders they execute for a Fund in the
over-the-counter market. A Fund will in no event effect principal transactions
with Affiliated Brokers in the over-the-counter securities in which Affiliated
Brokers makes a market.
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<PAGE> 204
During the fiscal year ended October 31, 1992, Freedom Investment Trust
paid $8,160 in brokerage commissions to Tucker Anthony, $3,760 of which was
attributable to Gold & Government Fund and $4,400 of which was attributable to
Regional Bank Fund. Commissions paid to Tucker Anthony represent approximately
3.7% of the total brokerage commissions paid by Freedom Investment Trust for the
fiscal year ended October 31, 1992. Approximately 0.5% of Freedom Investment
Trust's aggregate dollar amount of transactions involving the payment of
commissions were effected through Tucker Anthony for the fiscal year ended
October 31, 1993. During the fiscal year ended October 31, 1993, Freedom
Investment Trust paid $7,303 in brokerage commissions to Tucker Anthony, $6,620
of which was attributable to Gold & Government Trust and $683 of which was
attributable to Regional Bank Fund. Commissions paid to Tucker Anthony represent
approximately 3.5% of the total brokerage commissions paid by Freedom Investment
Trust for the fiscal year ended October 31, 1993. During the fiscal year ended
October 31, 1994, Freedom Investment Trust paid $3,962 in brokerage commissions
to Tucker Anthony, $7,750 of which was attributable to Gold & Government Fund.
Commissions paid to Tucker Anthony represent approximately 0.5% of the total
brokerage commissions paid by Freedom Investment Trust for the fiscal year ended
October 31, 1994. Approximately 2% of Freedom Investment Trust's aggregate
dollar amount of transactions involving the payment of commissions were effected
through Tucker Anthony for the fiscal year ended October 31, 1994.
During the fiscal periods ended October 31, 1992, 1993 and 1994 no
brokerage commissions were paid to Affiliated Brokers in connection with the
portfolio transactions of either the Global Fund or the Global Income Fund.
Other investment advisory clients advised by the Adviser or JH Advisers
International, as the case may be, may also invest in the same securities as a
Fund. When these clients buy or sell the same securities at substantially the
same time, the Adviser or JH Advisers International may average the transactions
as to price and allocate the amount of available investments in a manner which
the Adviser or JH Advisers International believes to be equitable to each
client, including the Funds. In some instances, this investment procedure may
adversely affect the price paid or received by a Fund or the size of the
position obtainable for it. On the other hand, to the extent permitted by law,
the Adviser or JH Advisers International may aggregate the securities to be sold
as permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the trustees that such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time. During the fiscal year ended October 31,
1994, Regional Bank paid $15,168, Sovereign Achievers paid $37,254, Gold &
Government paid $14,4000, Global Paid $5,054 or purchased for a Fund with those
to be sold or purchased for other clients managed by it in order to obtain best
execution.
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<PAGE> 205
DISTRIBUTIONS
Government Fund, Managed Tax-Exempt Fund and Global Income Fund declare
dividends from net investment income daily and pay dividends monthly.
Distribution of net long-term capital gains, if any, recognized on other
portfolio investments for the fiscal year, which ends October 31, will be made
at least annually.
Quarterly each shareholder of Government Fund, Managed Tax-Exempt Fund
and Global Income Fund will receive a statement setting forth the amount of the
monthly or daily dividends, as the case may be, paid that month from net
investment income for the preceding period. If any of such monthly or daily
dividends were made from sources other than (i) net income for the current or
preceding fiscal year, or accumulated undistributed net income, or both (not
including in either case profits or losses from the sale of securities or other
assets) or (ii) accumulated undistributed net profits from the sale of
securities or other assets (in each case determined in accordance with generally
accepted accounting principles), such statement will indicate what portion of
the distribution per share was made from the sources referred to in (i) and (ii)
above and from paid-in surplus or other capital sources.
A shareholder of Government Fund, Managed Tax-Exempt Fund and/or Global
Income Fund will not be credited with a monthly or daily dividend, as the case
may be, until payment for shares purchased is received by the Funds' transfer
agent. Dividends normally will be paid in the form of additional full and
fractional shares at the net asset value determined on the payment date, unless
the shareholder elects to receive dividends in cash as described in the
respective Prospectus. If a shareholder redeems the entire value of his account
in any of these Funds, the amount of dividends declared but unpaid on his shares
through the date preceding the date of redemption will be paid on the next
succeeding dividend payment date.
Gold & Government Fund and Regional Bank Fund. Each Fund will
distribute net short-term capital gains, if any, quarterly, and net long-term
capital gains, if any, at least annually after the close of their fiscal year
(October 31). Sovereign Achievers Fund will distribute net short-term capital
gains, if any, semi-annually, and net long-term capital gains, if any, at least
annually after the close of their fiscal year (October 31).
Managed Tax-Exempt Fund. Dividends from net investment income are
declared daily and paid monthly on or about the tenth day of the following month
by each Fund. You will not be credited with a daily dividend or become a
shareholder until payment for shares of a Fund is received by Fund Services, the
Funds' transfer agent. The net investment income of the Fund for dividend
purposes consists of interest earned on portfolio securities, less expenses, in
each case computed since the most recent determination of the net asset value.
If you redeem the entire value of your account in a Fund, you will receive a
separate amount by check or wire representing all dividends declared but unpaid,
in addition to the net asset value of the shares redeemed. The Funds will
distribute net realized short-term capital gains, if any, quarterly and the Fund
will distribute net realized long-term capital gains, if any, at least annually
after the close of our fiscal year (October 31).
75
<PAGE> 206
Certain realized gains or losses on the sale or retirement of
international bonds held by the Global Income Fund, to the extent attributable
to fluctuations in currency exchange rates, as well as certain other gains or
losses attributable to exchange rate fluctuations, must be treated as ordinary
income or loss for federal income tax purposes. Such income or loss may increase
or decrease (or possibly eliminate) the Fund's investment income available for
distribution. If, under rules governing the tax treatment of foreign currency
gains and losses, the Fund's investment income available for distribution is
decreased or eliminated, all or a portion of the dividends declared by the Fund
may be treated for federal income tax purposes as a return of capital or, in
some circumstances, as capital gain. Your tax basis in your Global Income Fund
shares will be reduced to the extent that an amount distributed to you is
treated as a return of capital and distributions after your basis has been
reduced on zero will generally be treated as capital gains.
The per share dividends on the Class B shares will be lower than the
per share dividends on the Class A shares of the Funds as a result of the higher
distribution fee applicable with respect to the Class B shares. The per share
dividends of the Class B shares of the Government Fund and the Global Fund will
also be lower than the per share dividends of the Class C shares of the
Government Fund, the Global Fund, and Global Income Fund.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation ("Investor Services"), P.O.
Box 9116, Boston, MA 02205-9116 a wholly-owned indirect subsidiary of John
Hancock Mutual Life Insurance Co., is the transfer and dividend paying agent for
the Funds. The Gold & Government Fund, Regional Bank Fund, Sovereign Achievers
Fund and Global Fund pays Investor Services an annual fee for Class A shares of
$16.00 per shareholder account and for Class B shares of $18.50 per shareholder
account. The Government Fund and Global Income Fund pay Investor Services an
annual fee for Class A shares of $20.00 per shareholder account and for Class B
shares of $22.50 per account. The Managed Tax Exempt Fund pays Investor Services
an annual fee for Class A shares of $19.00 per shareholder account and for Class
B shares of $21.50 per shareholder account.
CUSTODY OF PORTFOLIO
Portfolio securities of the Funds are held pursuant to a custodian
agreement between the Trust and Investors Bank & Trust Company, 24 Federal
Street, Boston, Massachusetts 02110. Under the custodian agreement, Investors
Bank & Trust Company performs custody, portfolio and fund accounting services.
The Trustees have determined that, except as otherwise permitted under
applicable Securities and Exchange Commission "no-action" letters or exemptive
orders, it is in the best interests of the Funds to hold foreign assets of the
Funds in qualified foreign banks and depositories meeting the requirements of
Rule 17f-5 under the Investment Company Act.
76
<PAGE> 207
INDEPENDENT AUDITORS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts serves
as the Trusts' independent auditors, providing services including (1)
examination of annual financial statements, (2) assistance and consultation in
connection with Securities and Exchange Commission filings, and (3) preparation
of the annual Federal income tax returns filed on behalf of the Funds.
77
<PAGE> 208
APPENDIX A
DESCRIPTION OF BOND RATINGS*
Moody's Bond ratings
Bonds. "Bonds which are rated 'Aaa' are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge.' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most likely to impair
the fundamentally strong position of such issues.
"Bonds which are rated 'Aa' are judged to be of high quality by all standards.
Together with the 'Aaa' group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in 'Aaa' securities or fluctuation of
protective elements may be of grater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in 'Aaa'
securities.
"Bonds which are rated 'A' possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Bonds which are rated 'Baa' are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Bonds which are rated 'Ba' are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position,
characterizes bonds in this class.
"Bonds which are rated 'B' generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue. Should
no rating be assigned, the reason may be one of the following: (i) an
application for rating was not received or accepted; (ii) the issue or issuer
belongs to a group of securities that are not rated as a matter of policy; (iii)
there is a lack of essential data pertaining to the issue or issuer; or (iv) the
issue was privately placed, in which case the rating is not published in Moody's
publications.
- ------------
*As described by the rating companies themselves.
78
<PAGE> 209
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Standard & Poor's Bond ratings
"AAA. Debt rated 'AAA' has the highest rating by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
"AA. Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
"A. Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
"BBB. Debt rated 'BBB' is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
Debt rated "BB," or "B," is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and pay principal in
accordance with the terms of the obligation. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major risk exposures to adverse conditions.
UNRATED. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper Ratings
Moody's ratings for commercial paper are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's two highest commercial paper rating categories
are as follows:
"P-1 -- "Prime-1" indicates the highest quality repayment capacity of the rated
issues.
"P-2 -- "Prime-2" indicates that the issuer has a strong capacity for repayment
of short-term promissory obligations. Earnings trends and coverage ratios, while
sound, will be more subjective to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained."
79
<PAGE> 210
Standard & Poor's Commercial Paper Ratings
Standard & Poor's commercial paper ratings are current assessments of the
likelihood of timely payment of debts having an original maturity of no more
than 365 days. Standard & Poor's two highest commercial paper rating categories
are as follows:
"A-1 -- This designation indicates that the degree of safety regarding timely
payment is very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus (+) sign designation.
"A-2 -- Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1."
80
<PAGE> 211
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND
SHOWS THE VALUE OF WHAT THE fUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1994.
YOU'LL ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE
AS OF THAT DATE.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value - Note C:
Common stocks (cost - $110,309,613)................ $109,779,375
Joint repurchase agreement (cost - $8,012,000)..... 8,012,000
Corporate savings account.......................... 210
------------
117,791,585
Receivable for shares sold........................... 44,186
Receivable for investments sold...................... 372,780
Interest receivable.................................. 1,057
Dividends receivable................................. 199,025
Other assets......................................... 1,328
------------
Total Assets................... 118,409,961
----------------------------------------------
LIABILITIES:
Payable for shares repurchased....................... 84,396
Payable for investments purchased.................... 447,836
Payable to John Hancock Advisers, Inc.
and affiliates - Note B............................ 101,595
Accounts payable and accrued expenses................ 52,766
------------
Total Liabilities.............. 686,593
----------------------------------------------
NET ASSETS:
Capital paid-in...................................... 112,974,318
Accumulated net realized gain on investments......... 5,080,826
Net unrealized depreciation of investments........... ( 530,238)
Undistributed net investment income.................. 198,462
------------
Net Assets..................... $117,723,368
==============================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value)
Class A - $23,292,185/1,938,449...................... $ 12.02
====================================================================
Class B - $94,431,183/7,902,050...................... $ 11.95
====================================================================
MAXIMUM OFFERING PRICE *
Class A - ($12.02 x 105.26%)......................... $ 12.65
====================================================================
</TABLE>
* On a single retail sale of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED
AND EXPENSES INCURRED IN OPERATING THE FUND. iT ALSO SHOWS NET GAINS (LOSSES)
FOR THE PERIOD STATED.
STATEMENT OF OPERATIONS
Year ended October 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................................ $ 2,421,377
Interest............................................. 409,684
------------
2,831,061
------------
Expenses:
Investment management fee - Note B................. 902,465
Distribution/service fee - Note B
Class A.......................................... 69,080
Class B.......................................... 873,945
Transfer agent fee - Note B
Class A.......................................... 72,087
Class B.......................................... 261,247
Custodian fee...................................... 74,142
Registration and filing fees....................... 45,611
Trustees' fees..................................... 28,954
Auditing fee....................................... 26,217
Printing........................................... 21,817
Miscellaneous...................................... 16,108
----------
Total Expenses ................ 2,391,673
----------------------------------------------
Net Investment Income ......... 439,388
----------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments sold................ 5,079,274
Change in net unrealized appreciation/depreciation
of investments....................................... ( 4,547,665)
----------
Net Realized and Unrealized
Gain on Investments............ 531,609
----------------------------------------------
Net Increase in Net Assets
Resulting from Operations...... $ 970,997
==============================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 212
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------
1994 1993
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income........................................................................ $ 439,388 $ 192,528
Net realized gain on investments sold........................................................ 5,079,274 4,375,191
Change in net unrealized appreciation/depreciation of investments............................ ( 4,547,665) 2,591,010
------------ ------------
Net Increase in Net Assets Resulting from Operations....................................... 970,997 7,158,729
------------ ------------
INCOME EQUALIZATION*
Amount transferred to capital paid-in........................................................ -- ( 33,293)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.0985 and $0.0243 per share, respectively).................................... ( 192,364) ( 24,842)
Class B - ($0.0196 and $0.0130 per share, respectively).................................... ( 155,215) ( 61,033)
Distributions from net realized gain on investments sold
Class A - ($0.4437 and none per share, respectively)....................................... ( 865,748) --
Class B - ($0.4437 and none per share, respectively)....................................... ( 3,478,874) --
------------ ------------
Total Distributions to Shareholders.......................................................... ( 4,692,201) ( 85,875)
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET**
Net increase from Fund share transactions.................................................... 4,219,619 84,856,914
Amount transferred from undistributed net investment to capital paid-in*..................... -- 33,293
------------ ------------
Total from Fund Share Transactions - Net.................................................... 4,219,619 84,890,207
------------ ------------
NET ASSETS:
Beginning of period........................................................................... 117,224,953 25,295,185
------------ ------------
End of period (including undistributed net investment income
of $198,462 and $106,653, respectively)..................................................... $117,723,368 $117,224,953
============ ============
</TABLE>
** ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
1994 1993
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold...................................................... 2,105,977 $25,842,725 3,137,489 $ 37,689,984
Shares issued to shareholders in reinvestment of distributions... 85,071 1,034,292 2,012 24,142
--------- ---------- ------------ ------------
2,191,048 26,877,017 3,139,501 37,714,126
Less shares repurchased.......................................... (2,139,424) ( 26,191,185) ( 1,413,796) ( 17,239,434)
--------- ---------- ------------ ------------
Net increase..................................................... 51,624 $ 685,832 1,725,705 $ 20,474,692
========= =========== ============ ============
CLASS B
Shares sold...................................................... 1,454,076 $17,601,685 6,475,138 $ 76,216,363
Shares issued to shareholders in reinvestment of distributions... 281,030 3,417,866 5,515 67,355
--------- ----------- ------------ ------------
1,735,106 21,019,551 6,480,653 76,283,718
Less shares repurchased.......................................... (1,456,639) ( 17,485,764) ( 1,001,766) ( 11,901,496)
--------- ----------- ------------ ------------
Net increase..................................................... 278,467 $ 3,533,787 5,478,887 $ 64,382,222
========= =========== ============ ============
</TABLE>
* Equalization accounting was discontinued November 1, 1992.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 213
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1994 1993 1992 1991 1990
-------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
CLASS A**
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........................... $ 12.39 $ 10.99 $ 12.81
------- ------- -------
Net Investment Income ......................................... 0.10 0.08(a) 0.06(a)
Net Realized and Unrealized Gain (Loss) on Investments......... 0.07 1.34 ( 0.06)
------- ------- -------
Total from Investment Operations............................... 0.17 1.42 0.00
------- ------- -------
Less Distributions:
Dividends from Net Investment Income........................... ( 0.10) ( 0.02) ( 0.07)
Distributions from Net Realized Gain on Investments Sold....... ( 0.44) -- ( 1.74)
Distributions from Capital Paid-In............................. -- -- ( 0.01)
------- ------- -------
Total Distributions............................................ ( 0.54) ( 0.02) ( 1.82)
------- ------- -------
Net Asset Value, End of Period................................. $ 12.02 $ 12.39 $ 10.99
======= ======= =======
Total Investment Return at Net Asset Value..................... 1.35% 12.97% 0.19%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)...................... $23,292 $23,372 $ 1,771
Ratio of Expenses to Average Net Assets........................ 1.53% 1.60% 1.73%*
Ratio of Net Investment Income to Average Net Assets........... 0.83% 0.64% 0.62%*
Portfolio Turnover Rate........................................ 60% 71% 246%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........................... $ 12.31 $ 10.97 $ 11.71 $ 9.22 $ 11.52
------- ------- ------- ------- -------
Net Investment Income ......................................... 0.03 0.02(a) 0.01(a) 0.07 0.18
Net Realized and Unrealized Gain (Loss) on Investments......... 0.07 1.33 1.05 2.67 ( 2.00)
------- ------- ------- ------- -------
Total from Investment Operations............................... 0.10 1.35 1.06 2.74 ( 1.82)
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income........................... ( 0.02) ( 0.01) ( 0.03) ( 0.20) ( 0.20)
Distributions from Net Realized Gain on Investments Sold....... ( 0.44) -- ( 1.76) ( 0.05) ( 0.28)
Distributions from Capital Paid-In............................. -- -- ( 0.01) -- --
------- ------- ------- ------- -------
Total Distributions............................................ ( 0.46) ( 0.01) ( 1.80) ( 0.25) ( 0.48)
------- ------- ------- ------- -------
Net Asset Value, End of Period................................. $ 11.95 $ 12.31 $ 10.97 $ 11.71 $ 9.22
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value..................... 0.78% 12.34% 7.22% 30.21% ( 16.46%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)...................... $94,431 $93,853 $23,525 $21,826 $17,714
Ratio of Expenses to Average Net Assets........................ 2.10% 2.09% 2.27% 2.24% 2.13%
Ratio of Net Investment Income to Average Net Assets........... 0.25% 0.17% 0.10% 0.66% 1.64%
Portfolio Turnover Rate........................................ 60% 71% 246% 217% 165%
</TABLE>
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
(a) On average month end shares outstanding.
(b) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 214
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
SOVEREIGN ACHIEVERS FUND ON OCTOBER 31, 1994. IT'S DIVIDED INTO TWO MAIN
CATEGORIES: COMMON STOCKS AND SHORT-TERM INVESTMENTS. tHE MAIN CATEGORY OF
COMMON STOCKS IS FURTHER BROKEN DOWN BY INDUSTRY GROUPS. SHORT-TERM
INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION, ARE LISTED LAST.
SCHEDULE OF INVESTMENTS
October 31, 1994
Per share earnings and dividends and their compound growth rates are shown
for the years 1990 to 1994 on common stocks, but are not audited.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS (93.25%) RATE VALUE
- --------- -------- -----------
<S> <C> <C>
ADVERTISING (1.96%)
70,000 Interpublic Group of Cos., Inc. (The)............. $ 2,310,000
One of the largest advertising agencies in -----------
the world
Earnings P/S.........$1.05, 1.19, 1.30, 1.50, 1.67 12.3%
Dividends P/S.............$.37, .41, .45, .49, .55 10.4%
Price/Earnings Ratio......................... 19.8
BANKS (7.34%)
30,000 Bankers Trust NY Corp. ........................... 2,002,500
New York-based merchant bank
Earnings P/S.....$(12.10), 7.70, 7.75, 7.23, 12.40 NMF
Dividends P/S........$2.33, 2.54, 2.80, 3.12, 3.60 11.5%
Price/Earnings Ratio...........................6.7
60,000 NationsBank Corp. ................................ 2,970,000
Largest superregional bank in Southeast
Earnings P/S..........$4.44, 3.34, .76, 4.60, 5.00 3.0%
Dividends P/S........$1.42, 1.48, 1.51, 1.64, 1.88 7.3%
Price/Earnings Ratio...........................8.1
150,000 Norwest Corp. .................................... 3,675,000
Minneapolis-based superregional bank
Earnings P/S.........$1.26, 1.36, 1.46, 1.41, 2.13 14.0%
Dividends P/S.............$.42, .47, .54, .64, .77 16.4%
Price/Earnings Ratio...........................9.8
-----------
8,647,500
-----------
CAPITAL GOODS (5.49%)
187,500 Myers Industries, Inc. ........................... 3,187,500
Manufacturer of polymer and metal products for the
transportation industries
Earnings P/S.............$.70, .78, .76, .82, 1.05 10.7%
Dividends P/S.............$.10, .11, .12, .13, .15 10.7%
Price/Earnings Ratio..........................13.8
85,000* Stewart & Stevenson Services, Inc. ............... 3,272,500
Leading manufacturer of custom diesel and
gas turbine power systems
Earnings P/S...........$.96, .98, 1.18, 1.35, 1.73 15.9%
Dividends P/S.............$.07, .10, .14, .18, .22 33.2%
Price/Earnings Ratio..........................22.3
-----------
6,460,000
-----------
CHEMICALS - DIVERSIFIED (6.74%)
150,000* Crompton & Knowles Corp. ......................... 2,118,750
Produces and markets specialty chemicals
Earnings P/S.............$.50, .61, .73, .83, 1.00 18.9%
Dividends P/S.............$.15, .20, .25, .31, .38 26.2%
Price/Earnings Ratio..........................14.8
50,000* Rohm & Haas Co. .................................. 3,018,750
Producer of plastics and related products
Earnings P/S.........$2.65, 3.10, 2.45, 2.56, 1.74 NMF
Dividends P/S........$1.16, 1.22, 1.24, 1.28, 1.36 4.1%
Price/Earnings Ratio..........................16.6
100,000 Witco Corp. ...................................... 2,800,000
Producer of special petroleum chemicals
Earnings P/S...........$.80, 1.38, 1.61, 1.19, .64 NMF
Dividends P/S............$.86, .89, .92, .94, 1.03 4.6%
Price/Earnings Ratio..........................24.5
-----------
7,937,500
-----------
COMMERCIAL SERVICES (4.84%)
150,000 Ecolab, Inc. ..................................... 3,206,250
Leading developer/marketing of
cleaning products
Earnings P/S............$.05, .98, .94, 1.03, 1.21 121.8%
Dividends P/S.............$.33, .35, .36, .38, .44 7.5%
Price/Earnings Ratio..........................15.7
100,000 Sysco Corp. ...................................... 2,487,500
Largest distributor of foodservice products
Earnings P/S............$.73, .84, .93, 1.08, 1.18 12.8%
Dividends P/S.............$.10, .14, .22, .28, .36 37.7%
Price/Earnings Ratio..........................21.2
-----------
5,693,750
-----------
CONSUMER DURABLES (11.54%)
125,000* Fleetwood Enterprises, Inc. ...................... 2,875,000
Largest U.S. manufacturer of recreational
vehicles and manufactured housing
Earnings P/S...........$1.21, .68, .88, 1.23, 1.46 4.8%
Dividends P/S.............$.35, .40, .43, .45, .49 8.8%
Price/Earnings Ratio..........................14.3
170,000 Juno Lighting, Inc. .............................. 3,187,500
Manufactures/markets full line of recessed
and track lighting fixtures
Earnings P/S..............$.71, .77, .70, .83, .98 8.4%
Dividends P/S.............$.10, .13, .14, .19, .23 23.2%
Price/Earnings Ratio..........................15.7
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 215
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS RATE VALUE
- --------- -------- -----------
<S> <C> <C>
CONSUMER DURABLES (CONTINUED)
75,000 Leggett & Platt, Inc. ............................ $ 2,793,750
Produces intermediate products for the home
furnishings industry
Earnings P/S..........$1.34, .82, 1.08, 1.64, 2.09 11.8%
Dividends P/S.............$.37, .42, .43, .46, .54 9.9%
Price/Earnings Ratio..........................13.8
75,000 Masco Corp. ...................................... 1,781,250
Leading manufacturer of brand-name building
and home improvement products
Earnings P/S...........$1.42, .91, .30, 1.21, 1.45 0.5%
Dividends P/S..............$.50, .54,.57, .61, .65 6.8%
Price/Earnings Ratio..........................13.7
100,000* Superior Industries International, Inc. .......... 2,950,000
Manufacturer of automotive wheels
Earnings P/S.............$.56, .54, .63, .95, 1.45 26.9%
Dividends P/S.............$.07, .08, .09, .10, .11 12.0%
Price/Earnings Ratio..........................16.5
-----------
13,587,500
-----------
CONSUMER NON-DURABLES (10.70%)
115,000* McCormick & Co., Inc. ............................ 2,271,250
Manufacturer of spices, mixes, teas, and other
food related products
Earnings P/S............$.58, .76, .98, 1.14, 1.22 20.4%
Dividends P/S.............$.17, .23, .28, .38, .44 26.8%
Price/Earnings Ratio..........................14.9
100,000 PepsiCo Inc. ..................................... 3,500,000
Second largest soft drink company
Earnings P/S.........$1.13, 1.36, 1.35, 1.61, 1.96 14.8%
Dividends P/S.............$.32, .38, .46, .51, .61 17.5%
Price/Earnings Ratio..........................17.1
60,000 Procter & Gamble Co. (The)........................ 3,750,000
Produces laundry and cleaning products,
personal care items, food, beverages, etc.
Earnings P/S.........$1.74, 2.14, 2.31, 2.45, 3.26 17.0%
Dividends P/S..........$.83, .93, 1.00, 1.08, 1.17 9.0%
Price/Earnings Ratio..........................17.3
125,000 Sara Lee Corp. ................................... 3,078,125
Manufactures brand name packaged foods
and consumer products
Earnings P/S...........$.88, .94, 1.05, 1.54, 1.40 12.3%
Dividends P/S.............$.36, .42, .47, .50, .58 12.7%
Price/Earnings Ratio..........................17.6
-----------
12,599,375
-----------
DIVERSIFIED OPERATIONS (6.65%)
70,000 General Electric Co. ............................. 3,421,250
Dominant force in home appliances, electrical
power, and financial services
Earnings P/S.........$2.18, 2.43, 2.56, 2.51, 2.59 4.4%
Dividends P/S.........$.94, 1.02, 1.12, 1.26, 1.44 11.3%
Price/Earnings Ratio..........................15.3
50,000* ITT Corp. ........................................ 4,412,500
Conglomerate with interest in manufacturing,
finance, and hotels
Earnings P/S.......$6.30, 7.57, 5.84, (2.47), 7.29 3.7%
Dividends P/S........$1.46, 1.57, 1.66, 1.78, 1.90 6.8%
Price/Earnings Ratio..........................11.8
-----------
7,833,750
-----------
ELECTRONICS (3.74%)
45,000* Hewlett-Packard Co. .............................. 4,398,750
Manufactures a broad array of electronic
instruments and computer systems
Earnings P/S.........$3.52, 3.06, 3.02, 3.51, 4.65 7.2%
Dividends P/S.............$.38, .42, .50, .80, .95 25.7%
Price/Earnings Ratio..........................17.9
HEALTHCARE (5.11%)
125,000 Abbott Laboratories............................... 3,875,000
Major pharmaceutical and healthcare firm
Earnings P/S..........$.96, 1.11, 1.27, 1.47, 1.69 15.2%
Dividends P/S.............$.34, .40, .48, .58, .66 18.0%
Price/Earnings Ratio..........................17.5
30,000 Schering-Plough Corp. ............................ 2,137,500
Major pharmaceutical corp.
Earnings P/S.........$2.09, 2.50, 3.01, 3.60, 4.23 19.3%
Dividends P/S.........$.88, 1.07, 1.27, 1.50, 1.74 18.6%
Price/Earnings Ratio..........................15.7
-----------
6,012,500
-----------
INSURANCE (6.17%)
30,000* American International Group, Inc. ............... 2,808,750
Leading global insurance company
Earnings P/S.........$4.42, 4.61, 4.85, 5.11, 6.04 8.1%
Dividends P/S.............$.23, .27, .31, .35, .39 14.1%
Price/Earnings Ratio..........................14.1
75,000* NWNL Companies Inc. (The)......................... 2,156,250
Diversified holding company specializing in
insurance and financial services
Earnings P/S.........$2.07, 2.09, 1.71, 2.06, 1.28 NMF
Dividends P/S.............$.65, .69, .73, .79, .88 7.9%
Price/Earnings Ratio...........................9.6
50,000 Unum Corp. ....................................... 2,293,750
Leading provider of disability income insurance
Earnings P/S.........$1.94, 2.51, 3.08, 3.71, 3.96 19.5%
Dividends P/S.............$.38, .49, .63, .77, .92 24.7%
Price/Earnings Ratio..........................16.5
-----------
7,258,750
-----------
POLLUTION CONTROL (2.25%)
90,000 WMX Technologies Inc. ............................ 2,643,750
Nation's largest provider of waste -----------
management services
Earnings P/S..........$1.22, 1.49, 1.23, 1.86, .94 NMF
Dividends P/S..............$.34, .40, .48, .56 .60 15.3%
Price/Earnings Ratio..........................18.1
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 216
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS RATE VALUE
- --------- -------- ------------
<S> <C> <C>
PUBLISHING (5.70%)
70,000 A.H. Belo Corp..................................... $ 3,832,500
Publishes 8 newspapers and operates
6 TV stations
Earnings P/S...........$1.16, 1.55, .65, 1.74, 2.40 19.9%
Dividends P/S..............$.44, .48, .52, .54, .56 6.2%
Price/Earnings Ratio...........................18.8
60,000 Gannett Co., Inc................................... 2,880,000
Publishes 81 daily/50 non-daily newspapers,
operates 10 TV, 8 FM and 7 AM Stations
Earnings P/S..........$2.47, 2.36, 2.00, 2.40, 2.73 2.5%
Dividends P/S.........$1.11, 1.21, 1.24, 1.26, 1.30 4.0%
Price/Earnings Ratio...........................15.8
------------
6,712,500
------------
RETAIL (4.91%)
60,000 May Department Stores Co. (The).................... 2,257,500
Operates 318 department stores and 3,295
shoe stores
Earnings P/S..........$1.87, 1.94, 2.01, 2.36, 2.77 10.3%
Dividends P/S..............$.69, .77, .81, .83, .90 6.9%
Price/Earnings Ratio...........................14.3
150,000* Wal-Mart Stores, Inc............................... 3,525,000
Operates a chain of discount department
stores
Earnings P/S...............$.48, .57, .70, .69, .87 16.0%
Dividends P/S..............$.05, .07, .09, .11, .13 27.0%
Price/Earnings Ratio...........................25.7
------------
5,782,500
------------
TELECOMMUNICATIONS (3.00%)
60,000 ALLTEL Corporation................................. 1,552,500
One of the country's largest telephone systems
Earnings P/S..........$1.13, 1.17, 1.12, 1.22, 1.39 5.3%
Dividends P/S..............$.64, .70, .74, .80, .88 8.3%
Price/Earnings Ratio...........................17.9
40,000 Telephone & Data Systems, Inc...................... 1,980,000
Holding company providing telephone, cellular,
and radio paging.
Earnings P/S...............$.35, .86, .59, .91, .67 17.6%
Dividends P/S...............$.26, .28, .30,.32, .34 6.9%
Price/Earnings Ratio...........................52.9
------------
3,532,500
------------
TOYS/GAMES/HOBBY PROD (2.80%)
100,000 Hasbro Inc......................................... 3,300,000
World's leading manufacturer and marketer of ------------
toys, games, puzzles, and infant care products
Earnings P/S...........$1.04, 1.03, .93, 2.00, 2.22 20.9%
Dividends P/S..............$.10, .13, .15, .19, .24 24.5%
Price/Earnings Ratio...........................16.1
TRANSPORTATION (4.31%)
150,000 Atlantic Southeast Airlines, Inc................... 2,625,000
Largest regional airline in the Southeastern U.S.
Earnings P/S.............$.76, .73, .95, 1.08, 1.35 15.5%
Dividends P/S..............$.08, .16, .20, .24, .28 36.8%
Price/Earnings Ratio............................9.7
TRANSPORTATION (CONTINUED)
50,000* Union Pacific Co................................... 2,443,750
Railroad transportation of oil/gas, trucking,
mining, and real estate
Earnings P/S...........$2.81, 3.09, .31, 3.57, 3.42 5.0%
Dividends P/S.........$1.16, 1.28, 1.39, 1.51, 1.63 8.9%
Price/Earnings Ratio...........................10.2
-------------
5,068,750
-------------
TOTAL COMMON STOCKS
(Cost $110,309,613) 109,779,375
-------------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
(000's SHORT-TERM INTEREST
OMITTED) INVESTMENTS (6.81%) RATE
- --------- ----
<S> <C> <C> <C>
$8,012 JOINT REPURCHASE AGREEMENT (6.81%)
Investment in a joint repurchase agreement
transaction with Kidder Peabody & Co.,
Inc. - Dated 10-31-94, Due 11-01-94
(secured by U.S. Treasury Bond, 9.00%
Due 11-15-18 and by U.S. Treasury
Notes, 6.75% Due 02-28-97 and 5.625%
Due 01-31-98) Note A............................... 4.77% 8,012,000
------------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 2.15%................................. 210
------------
TOTAL SHORT-TERM INVESTMENTS 8,012,210
------------
TOTAL INVESTMENTS (100.06%) $117,791,585
======= ============
</TABLE>
* Securities, other than short-term investments, newly added to the
portfolio during the year ended October 31, 1994.
NMF No Meaningful Figure
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 217
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
NOTE A -
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Sovereign Achievers Fund (the "Fund"),
John Hancock Freedom Gold & Government Fund, John Hancock Freedom Regional Bank
Fund, John Hancock Sovereign U.S. Government Income Fund and John Hancock
Managed Tax-Exempt Fund.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B shares. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, dividends, and liquidation, except that certain expenses,
subject to the approval of the Trustees, may be applied differently to each
class of shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a class,
which bears distribution/service expenses under terms of a distribution plan,
have exclusive voting rights regarding such distribution plan. Significant
accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Investments in equity securities traded on national
securities exchanges are normally valued at the last quoted sales price on the
day of valuation. Securities traded in the over-the-counter market and listed
securities for which no sale was reported on valuation date are valued at the
mean between the current closing bid and ask prices. Debt securities having an
over-the-counter primary market are valued on the basis of valuations furnished
by a pricing service which determines valuations for normal institutional size
trading units of debt securities without exclusive reliance upon quoted prices.
Short-term debt investments which have a remaining maturity of 60 days or less
are valued at amortized cost, which generally approximates market value.
Investment securities for which no current market quotations are available,
restricted investment securities and other assets, are valued at fair value
based on procedures approved by the Trustees.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies. It
will not be subject to Federal income tax on taxable earnings which are
distributed to shareholders.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.
The fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
13
<PAGE> 218
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes. Transfer
agent expenses and distribution/service fees if any, are calculated daily at the
class level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.75% of the first $500,000,000 of the
Fund's average daily net asset value and (b) 0.65% of the Fund's average daily
net asset value in excess of $500,000,000. The Adviser has entered into a
service agreement with Sovereign Asset Management Corporation ("SAMCORP") an
affiliate of the Adviser, to provide certain investment research and portfolio
management services to the Fund, for which the Adviser pays SAMCORP 40% of its
management fee.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
John Hancock Broker Distribution Services, Inc. ("Broker Services"), a
wholly-owned subsidiary of the Adviser, and Freedom Distributors Corporation
("FDC") act as Co-Distributors for shares of the Fund. For the year ended
October 31, 1994, net sales charges received on the sales of Class A shares
amounted to $147,456. Out of this amount, $23,469 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, $58,438
was paid as sales commissions to unrelated broker-dealers, and $65,549 was paid
as sales commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"). The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company, is the indirect sole shareholder of Distributors and John
Hancock Freedom Securities Corporation and its subsidiaries which include FDC,
Tucker Anthony and Sutro, all of which are broker-dealers.
Class B shares that are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.00% (4.00% on purchases made prior to January 1, 1994) of the
lesser of the current market value at the time of redemption or the original
purchase cost of the shares being redeemed. Proceeds from the CDSC are paid to
Broker Services and are used in whole or in part to defray its expenses related
to providing distribution related services to the Fund in connection with the
sale of Class B shares. For the year ended October 31, 1994 contingent deferred
sales charges received by Broker Services amounted to $267,460.
In addition, to compensate the Co-Distributors for the services they
provide as distributors of shares of the Fund, the Fund has adopted a
Distribution Plan with respect to Class A and Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. Accordingly, the Fund will make
payments to the Co-Distributors, for distribution and service expenses which, in
total, will not exceed on an annual basis 0.30% of the Fund's average daily net
assets attributable to Class A shares (0.25% prior to January 1, 1994) and 1.00%
of the Fund's average daily net assets attributable to Class B shares (0.75%
prior to January 1, 1994), to reimburse the Co-Distributors for their
distribution/service costs. Up to a maximum of 0.25% of such payments may be
service fees as defined by the amended Rules of Fair Practice of the National
Association of Securities Dealers which became e ffective July 7, 1993. Under
the amended Rules of Fair Practice, curtailment
14
<PAGE> 219
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
of a portion of the Fund's 12b-1 payments could occur under certain
circumstances. In order to comply with this rule, the 12b-1 fee was decreased on
Class B shares to 0.90% effective May 1, 1994 and to 0.85% effective October 1,
1994.
The Fund has a transfer agent agreement with John Hancock Fund Services,
Inc. ("Fund Services"), a wholly-owned subsidiary of The Berkeley Financial
Group. The Fund pays Fund Services a monthly transfer agent fee equivalent, on
an annual basis, to 0.30% and 0.27% of the average daily net asset value of
Class A and Class B shares of the Fund, respectively, plus out of pocket
expenses incurred by Fund Services on behalf of the Fund for proxy mailings.
Messers. Edward J. Boudreau, Jr. and Hugh A. Dunlap, Jr. are directors and
officers of the Adviser, and its affiliates, as well as Trustees of the Fund.
The compensation of unaffiliated Trustees is borne by the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the year
ended October 31, 1994, aggregated $68,062,971 and $65,855,486, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the year ended October 31, 1994.
The cost of investments owned at October 31, 1994 (including the short-term
investment) for Federal income tax purposes was $118,321,613. Gross unrealized
appreciation and depreciation of investments aggregated $5,616,402 and
$6,146,640, respectively, resulting in net unrealized depreciation of $530,238.
15
<PAGE> 220
John Hancock Funds - Sovereign Achievers Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Freedom Investment Trust and to the Shareholders of
John Hancock Sovereign Achievers Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments (except for the per share earnings and dividends,
their compound growth rates and price/earnings ratios), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
John Hancock Sovereign Achievers Fund (the "Fund") (a portfolio of Freedom
Investment Trust) at October 31, 1994, the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1994 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 16, 1994
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during its fiscal year ended October
31, 1994.
The Fund designated distributions to shareholders of $611,150 as a
long-term capital gain. These amounts were reported on the 1993 U.S. Treasury
Department Form 1099-DIV. It is anticipated that there will be a distribution
from net realized gains from sales of securities to shareholders of record on
December 23, 1994 and payable December 29, 1994. Shareholders will receive a
1994 U.S. Treasury Department Form 1099-DIV in January 1995 representing their
proportionate share.
For the fiscal year ended October 31, 1994, 100% of the ordinary income
distributions qualify for the corporate dividends received deduction.
16
<PAGE> 221
John Hancock Funds - Sovereign Achievers Fund
HISTORICAL DATA (UNAUDITED)
The table below shows the record of the Fund from its inception in 1987.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A PER SHARE
YEAR ---------------------------------------
ENDED SHARES NET ASSET CAPITAL GAINS
OCT. 31 OUTSTANDING DIVIDENDS VALUE DISTRIBUTION
- ------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C>
1992(1) 161,120 $0.070 $10.99 $1.74
1993 1,886,825 0.024 12.39 -
1994 1,938,449 0.099 12.02 0.44
</TABLE>
<TABLE>
<CAPTION>
CLASS B PER SHARE
YEAR ---------------------------------------
ENDED SHARES NET ASSET CAPITAL GAINS
OCT. 31 OUTSTANDING DIVIDENDS VALUE DISTRIBUTION
- ------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C>
1987(2) 1,680,681 $0.020 $ 8.34 $ -
1988 1,450,348 0.090 10.29 0.14
1989 2,067,791 0.120 11.52 0.09
1990 1,920,447 0.200 9.22 0.28
1991 1,863,882 0.200 11.71 0.05
1992 2,144,696 0.030 10.97 1.76
1993 7,623,583 0.013 12.31 -
1994 7,902,050 0.020 11.95 0.44
</TABLE>
(1) For the period January 3, 1992 (commencement of operations) to October
31, 1992.
(2) For the period April 22, 1987 (commencement of operations) to
October 31, 1987.
DIVIDEND INCREASES (UNAUDITED)
Listed below are the most recent dividend increases for the common stocks
held in the Sovereign Achievers Fund as of October 31, 1994.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
DIVIDEND INCREASE
-----------------
<S> <C>
A.H. Belo Corp........................... 7.1%
Abbott Laboratories...................... 11.8
ALLTEL Corp.............................. 9.1
American International Group, Inc........ 15.0
Atlantic Southeast Airlines, Inc......... 14.3
Bankers Trust NY Corp.................... 15.4
Crompton & Knowles Corp.................. 20.0
Ecolab Inc............................... 15.8
Fleetwood Enterprises, Inc............... 12.0
Gannett Co., Inc......................... 3.0
General Electric Co...................... 14.8
Hasbro Inc............................... 16.7
Hewlett-Packard Co....................... 20.0
Interpublic Group of Cos., Inc. (The).... 12.0
ITT Corp................................. 9.2
Juno Lighting, Inc....................... 16.7
Leggett & Platt, Inc..................... 6.7
Masco Corp............................... 5.9
May Department Stores Co. (The).......... 13.0
McCormick & Co., Inc..................... 9.1
Myers Industries, Inc.................... 11.1
NationsBank Corp......................... 8.7
Norwest Corp............................. 13.5
NWNL Companies Inc....................... 12.5
PepsiCo Inc.............................. 12.5
Procter & Gamble Co. (The)............... 12.9
Rohm & Haas Co........................... 5.7
Sara Lee Corp............................ 6.3
Schering-Plough Corp..................... 13.3
Stewart & Stevenson Services, Inc........ 16.7
Superior Industries International, Inc... 5.0
Sysco Corp............................... 22.2
Telephone & Data Systems, Inc............ 5.9
Union Pacific Co......................... 7.5
Unum Corp................................ 20.0
Wal-Mart Stores, Inc..................... 30.8
Witco Corp............................... 12.0
WMX Technologies Inc..................... 15.4
</TABLE>
The average dividend increase for this group was 12.6%
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 222
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1994. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment at value - Note C:
Tax-exempt long-term bonds (cost - $232,224,273)........ $231,631,532
------------
Cash...................................................... 793,619
Receivable for shares sold................................ 187,798
Receivable for investments sold........................... 8,703,889
Interest receivable....................................... 5,080,176
Segregated assets for financial futures contracts......... 245,000
Variation margin receivable............................... 3,125
Other assets.............................................. 29,127
------------
Total Assets........................ 246,674,266
----------------------------------------------------
LIABILITIES:
Dividend payable.......................................... 714,535
Payable for shares repurchased............................ 29,480
Payable for investments purchased......................... 7,714,349
Payable to John Hancock Advisers, Inc. ...................
and affiliates - Note B................................. 137,993
Accounts payable and accrued expenses..................... 43,782
------------
Total Liabilities................... 8,640,139
----------------------------------------------------
NET ASSETS:
Capital paid-in........................................... 239,366,267
Accumulated net realized loss on investments and
financial futures contracts............................. ( 892,930)
Net unrealized depreciation of investments and
financial futures contracts............................. ( 439,210)
------------
Net Assets.......................... $238,034,127
====================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value, respectively)
Class A - $20,967,679/1,942,791........................... $ 10.79
==========================================================================
Class B - $217,066,448/20,112,970......................... $ 10.79
==========================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($10.79 x 104.71%).............................. $ 11.30
===========================================================================
</TABLE>
* On single retail sales of less than $100,000. On sales of $100,000 or more
and on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
STATEMENT OF OPERATIONS
Year ended October 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................. $ 16,954,538
------------
Expenses:
Distribution/service fee - Note B
Class A............................................... 56,835
Class B............................................... 2,272,508
Investment management fee - Note B...................... 1,564,062
Transfer agent fee - Note B
Class A............................................... 6,201
Class B............................................... 149,893
Custodian fee........................................... 80,754
Trustees' fees.......................................... 55,908
Registration and filing fees............................ 41,162
Auditing fee............................................ 39,562
Printing................................................ 23,019
Miscellaneous........................................... 15,670
Legal fees.............................................. 8,394
------------
Total Expenses...................... 4,313,968
Less Expense Reductions -
Note B.............................. ( 190,622)
----------------------------------------------------
Net Expenses........................ 4,123,346
----------------------------------------------------
Net Investment Income............... 12,831,192
----------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FINANCIAL FUTURES CONTRACTS:
Net realized loss on investments sold..................... ( 1,181,273)
Net realized gain on financial futures contracts.......... 441,387
Change in net unrealized appreciation/depreciation
of investments.......................................... ( 28,015,956)
Change in net unrealized appreciation/depreciation
of financial futures contracts.......................... 153,531
------------
Net Realized and Unrealized Loss
on Investments and Financial
Futures Contracts................... ( 28,602,311)
----------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations........... ( $15,771,119)
====================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 223
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
1994 1993
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income........................................................................... $ 12,831,192 $ 14,178,058
Net realized gain (loss) on investments sold and financial futures contracts.................... ( 739,886) 2,072,368
Change in net unrealized appreciation/depreciation of investments and ------------ ------------
financial futures contracts................................................................... ( 27,862,425) 20,745,826
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations............................... ( 15,771,119) 36,996,252
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.6387 and $0.7024 per share, respectively)....................................... ( 1,070,853) ( 710,783)
Class B - ($0.5610 and $0.6415 per share, respectively)....................................... ( 11,760,339) ( 13,383,850)
Distributions from net realized gain on investments sold and financial
futures contracts
Class A - ($0.0898 and $0.0421 per share, respectively)....................................... ( 120,420) ( 37,927)
Class B - ($0.0898 and $0.0421 per share, respectively)....................................... ( 1,901,276) ( 871,514)
------------ ------------
Total Distributions to Shareholders......................................................... ( 14,852,888) ( 15,004,074)
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET*.............................................................. ( 1,927,851) 12,062,571
------------ ------------
NET ASSETS:
Beginning of period............................................................................. 270,585,985 236,531,236
------------ ------------
End of period (including undistributed net investment income of none
and $71,928, respectively).................................................................... $238,034,127 $270,585,985
------------ ------------
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1994 1993
-------------------------- ----------------------------
Shares Amount Shares Amount
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold....................................................... 1,179,686 $ 13,702,193 1,163,452 $ 13,576,109
Shares issued to shareholders in
reinvestment of distributions................................... 60,754 696,640 38,765 455,386
---------- ------------ ------------ ------------
1,240,440 14,398,833 1,202,217 14,031,495
Less shares repurchased........................................... ( 472,296) ( 5,404,052) ( 889,685) ( 10,364,170)
---------- ------------ ------------ ------------
Net increase...................................................... 768,144 $ 8,994,781 312,532 $ 3,667,325
========== ============ ============ ============
CLASS B
Shares sold....................................................... 2,722,911 $ 31,724,838 3,751,909 $ 44,003,649
Shares issued to shareholders in reinvestment of distributions.... 586,954 6,775,123 546,241 6,407,445
---------- ------------ ------------ ------------
3,309,865 38,499,961 4,298,150 50,411,094
Less shares repurchased........................................... ( 4,333,843) ( 49,422,593) ( 3,565,043) ( 42,015,848)
---------- ------------ ------------ ------------
Net increase (decrease)........................................... ( 1,023,978) ($ 10,922,632) 733,107 $ 8,395,246
========== ============ ============ ============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS FISCAL YEAR. THE DIFFERENCE
REFLECTS EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS
PAID TO SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY SHAREHOLDERS
INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND SHARES SOLD,
REINVESTED AND REDEEMED DURING THE LAST TWO PERIODS, ALONG WITH THE
CORRESPONDING DOLLAR VALUES.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 224
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended October 31,
--------------------------------
1994 1993 1992(a)
-------- -------- --------
<S> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period................................ $ 12.13 $ 11.12 $ 11.25
-------- -------- --------
Net Investment Income............................................... 0.64 0.70 0.55
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts................................... ( 1.25) 1.05 ( 0.11)
-------- -------- --------
Total from Investment Operations.................................. ( 0.61) 1.75 0.44
-------- -------- --------
Less Distributions:
Dividends from Net Investment Income................................ ( 0.64) ( 0.70) ( 0.53)
Distributions from Net Realized Gain on Investments Sold
and Financial Futures Contracts................................... ( 0.09) ( 0.04) ( 0.04)
-------- -------- --------
Total Distributions............................................... ( 0.73) ( 0.74) ( 0.57)
-------- -------- --------
Net Asset Value, End of Period...................................... $ 10.79 $ 12.13 $ 11.12
======== ======== ========
Total Investment Return at Net Asset Value(c)....................... ( 5.22%) 16.10% 4.74%*
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)........................... $ 20,968 $ 14,244 $ 9,589
Ratio of Expenses to Average Net Assets**........................... 0.95% 0.70% 0.78%*
Ratio of Adjusted Expenses to Average Net Assets(b)................. 1.02% 1.03% 1.01%*
Ratio of Net Investment Income to Average Net Assets**.............. 5.52% 5.98% 6.24%*
Ratio of Adjusted Net Investment Income to Average Net Assets(b).... 5.42% 5.65% 6.01%*
Portfolio Turnover Rate............................................. 59% 23% 23%
** Expense Reimbursement Per Share.................................. $ 0.01 $ 0.04 $ 0.02
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIODS INDICATED: THE NET INVESTMENT INCOME, GAINS
(LOSSES), DIVIDENDS AND TOTAL INVESTMENT RETURNS OF THE FUND. IT SHOWS HOW THE
FUND'S NET ASSET VALUE FOR A SHARE HAS CHANGED SINCE THE END OF THE PREVIOUS
PERIOD. ADDITIONALLY, IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN
THE FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 225
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
FINANCIAL HIGHLIGHTS (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................... $ 12.13 $ 11.12 $ 11.12 $ 10.61 $ 10.78
-------- -------- -------- -------- --------
Net Investment Income.............................................. 0.56 0.64 0.66 0.68 0.73
Net Realized and Unrealized Gain (Loss) on Investments and
Financial Futures Contracts...................................... ( 1.25) 1.05 0.04 0.61 ( 0.14)
-------- -------- -------- -------- --------
Total from Investment Operations................................. ( 0.69) 1.69 0.70 1.29 0.59
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income............................... ( 0.56) ( 0.64) ( 0.64) ( 0.72) ( 0.72)
Distributions from Net Realized Gain on Investments Sold and
Financial Futures Contracts...................................... ( 0.09) ( 0.04) ( 0.06) ( 0.06) ( 0.04)
-------- -------- -------- -------- --------
Total Distributions.............................................. ( 0.65) ( 0.68) ( 0.70) ( 0.78) ( 0.76)
-------- -------- -------- -------- --------
Net Asset Value, End of Period..................................... $ 10.79 $ 12.13 $ 11.12 $ 11.12 $ 10.61
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value(c)...................... ( 5.85%) 15.51% 6.39% 12.55% 5.66%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).......................... $217,066 $256,342 $226,943 $199,955 $140,803
Ratio of Expenses to Average Net Assets**.......................... 1.62% 1.23% 1.35% 1.19% 0.95%
Ratio of Adjusted Expenses to Average Net Assets(b)................ 1.69% 1.56% 1.54% 1.50% 1.51%
Ratio of Net Investment Income to Average Net Assets**............. 4.84% 5.49% 5.74% 6.19% 6.74%
Ratio of Adjusted Net Investment Income to Average Net Assets(b)... 4.77% 5.16% 5.55% 5.88% 6.18%
Portfolio Turnover Rate............................................ 59% 23% 23% 30% 54%
** Expense Reimbursement Per Share................................. $ 0.01 $ 0.04 $ 0.02 $ 0.04 $ 0.06
</TABLE>
* On an annualized basis.
(a) Class A shares commenced operations on January 3, 1992.
(b) On an unreimbursed basis.
(c) Without the reimbursement, the total investment return would be lower.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 226
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
SCHEDULE OF INVESTMENTS
October 31, 1994
- -------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
MANAGED TAX-EXEMPT FUND ON OCTOBER 31, 1994. IT HAS ONE MAIN CATEGORY:
TAX-EXEMPT LONG-TERM BONDS. THE TAX-EXEMPT BONDS ARE FURTHER BROKEN DOWN BY
STATE. UNDER EACH STATE IS A LIST OF THE SECURITIES OWNED BY THE FUND.
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
TAX EXEMPT LONG-TERM BONDS
ALABAMA (1.70%)
Birmingham, City of,
GO Iss of 1989........................................... 7.350% 03-01-14 A1** $ 750 $ 810,502 6.80%
Birmingham Special Care Facilities Financing Auth,
Hlth Care Facil Rev Children's Hosp...................... 7.000 06-01-14 AAA 1,500 1,619,070 6.49
Citronelle Industrial Development Board,
Stauffer Chemical Co Proj 1982........................... 8.000 12-01-12 NR 500 542,860 7.37
Cullman, County of,
Wtr Rev Iss of 1989...................................... 6.900 05-01-13 AAA 1,000 1,070,460 6.45
------------
4,042,892
------------
ALASKA (1.84%)
Alaska Housing Finance Corp,
Coll Home Mtg Ser A-3 GNMA/FNMA Coll..................... 7.700 12-01-13 AAA 775 790,321 7.55
Coll Home Mtg Ser B-1 GNMA Coll.......................... 7.650 06-01-24 AAA 2,000 2,002,980 7.64
Coll Home Mtg Ser B-2 GNMA Coll.......................... 7.875 06-01-24 AAA 565 572,785 7.77
Valdez Alaska Marine Terminal,
Rev Ref Sohio Pipe Line Co. Proj Ser 1985................ 7.125 12-01-25 AA- 1,000 1,011,710 7.04
------------
4,377,796
------------
ARIZONA (2.65%)
Arizona Municipal Financing Program,
Cert of Part Ser 25...................................... 7.875 08-01-14 AAA 1,000 1,152,830 6.83
Navajo, County of,
Poll Control Corp Rev Ref Arizona Pub Serv Co Ser A...... 5.875 08-15-28 BBB 3,000 2,465,850 7.15
Pima, County of,
Swr Rev Ref Ser 1991..................................... 6.750 07-01-15 AAA 460 493,023 6.30
Pima, County of,
Swr Rev Ref Ser 1991..................................... 6.750 07-01-15 AAA 540 545,216 6.69
Salt River Agriculture Project,
Ref Salt River Proj Ser B................................ 5.250 01-01-19 AA *2,000 1,638,460 6.41
------------
6,295,379
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 227
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
ARKANSAS (0.32%)
Arkansas Development Finance Auth,
Single Family Mtg Rev Ref Ser 1991 A......................... 8.000% 08-15-11 AA $ 730 $ 766,237 7.62%
------------
CALIFORNIA (1.83%)
Central Valley Finance Agency,
California Cogeneration Proj Rev Carson Ice Gen Proj....... 6.100 07-01-13 BBB- 1,900 1,695,845 6.83
California Cogeneration Proj Rev Carson Ice Gen Proj....... 6.200 07-01-20 BBB- *2,000 1,754,500 7.07
Sacramento Municipal Utilities District,
Elec Rev Ref Ser 1992 A Inflos............................. 8.838# 08-15-18 AAA 1,000 893,750 9.89
------------
4,344,095
------------
COLORADO (1.35%)
Colorado Housing Finance Auth,
Single Family Prog Sr Iss A-2.............................. 7.625 08-01-17 AA 1,175 1,180,299 7.59
Single Family Residential Rev Ser C........................ 8.750 09-01-17 Aa** 550 557,590 8.63
Douglas County School District No. Re. 1,
Douglas and Elbert Counties CO, GO Improvement Ser 1994A... 6.400 12-15-11 AA *1,500 1,478,385 6.49
------------
3,216,274
------------
CONNECTICUT (0.88%)
Connecticut Health & Educational Facilities Auth,
Rev Quinnipiac College Ser D............................... 6.000 07-01-23 BBB- 2,500 2,098,500 7.15
------------
DELAWARE (0.04%)
Delaware State Housing Auth,
Multi Family Mtg........................................... 7.000 07-01-14 A+ 145 102,225 9.93
------------
DISTRICT OF COLUMBIA (0.49%)
District of Columbia,
GO Ref Ser A............................................... 6.000 06-01-07 A- 1,250 1,167,237 6.43
------------
FLORIDA (7.23%)
Broward, County of,
Resource Recovery SES Broward Co., L.P. South Proj......... 7.950 12-01-08 A 4,715 5,077,112 7.38
Hernando, County of,
Criminal Justice Complex Rev Ser 1986...................... 7.650 07-01-16 AAA 500 566,910 6.75
Jacksonville Health Facilities Auth,
Hosp Rev Ref St. Luke's Hosp Assn. Proj Mayo
Foundation Ser 1991...................................... 7.125 11-15-20 AA+ 2,000 2,036,520 7.00
Lee, County of,
Hosp Board of Directors Hosp Rev Inflos.................... 9.469# 04-01-20 AAA 2,000 1,975,000 9.59
Orange County Health Facilities Auth,
Hosp Rev Orlando Regional Medical Center................... 9.101# 10-29-21 AAA 1,000 941,250 9.67
Reedy Creek Improvement District,
Util Rev Ref Ser 1......................................... 5.000 10-01-14 AAA *1,100 888,657 6.19
St. Lucie, County of,
Solid Waste Sys Rev Ser 1990............................... 6.000 09-01-15 AAA 1,000 1,028,970 5.83
Tallahassee, City of,
Consol Util Sys Rev Ser 1991 B............................. 6.900 10-01-14 AA- 1,000 1,024,770 6.73
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 228
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
FLORIDA (Continued)
Tampa, City of,
Cap Imp Prog Rev Ser B Iss of 1988....................... 8.375% 10-01-18 A- $ 3,500 $ 3,680,320 7.96%
------------
17,219,509
------------
GEORGIA (3.71%)
Atlanta, City of,
Airport Facil Rev Ser B.................................. 6.000 01-01-14 AAA *3,300 2,994,486 6.61
Georgia Municipal Electric Auth,
Pwr Rev Ref Gen Ser B.................................... 6.375 01-01-16 AA- 2,500 2,402,975 6.63
Spec Oblig 3rd Crossover Ser............................. 6.600 01-01-18 AA- 2,500 2,441,750 6.76
Savannah Economic Development Auth,
Ind'l Dev Rev Hershey Food Corp Proj..................... 6.600 06-01-12 AA 1,000 992,720 6.65
------------
8,831,931
------------
ILLINOIS (6.92%)
Central Lake County Joint Action Water Agency,
Rev Ser A................................................ 7.000 05-01-19 AAA 500 542,850 6.45
Chicago, City of,
Chicago-O'Hare Int'l Airport Int'l Terminal Spec Rev
Ser 1990A.............................................. 6.500 01-01-18 AAA *1,600 1,512,176 6.88
Illinois, State of,
Build Illinois Sales Tax Rev Ser V....................... 6.375 06-15-14 AAA *2,035 1,963,165 6.61
Build Illinois Sales Tax Rev Ser V....................... 6.375 06-15-17 AAA *2,000 1,908,940 6.68
Dedicated Tax............................................ 6.250 12-15-20 AAA 500 465,975 6.71
Toll Highway Priority Rev Ser A.......................... 6.375 01-01-15 A+ *2,000 1,865,720 6.83
Illinois Health Facilities Auth,
Rev Lutheran Hlth Sys Ser C.............................. 7.375 04-01-08 A+ 1,000 1,091,600 6.76
Rev Methodist Hlth Serv Corp Ser 1991 B.................. 10.760# 05-01-21 AAA 1,000 990,000 10.87
Rev Methodist Medical Center Illinois Ref A.............. 8.000 10-01-14 A 1,000 1,024,420 7.81
Rev Swedish-American Hosp................................ 7.400 04-01-20 AAA 750 827,190 6.71
Public Building Commission of Chicago,
Bldg Rev Ser 1990A (Board of Ed of the City of Chicago).. 7.000 01-01-20 AAA 2,000 2,122,840 6.59
Bldg Rev Ser 1990A (Board of Ed of the City of Chicago).. 7.125 01-01-15 AAA 1,000 1,086,130 6.56
Bldg Rev Ser 1990B (Board of Ed of the City of Chicago).. 7.000 01-01-15 AAA 1,000 1,072,050 6.53
------------
16,473,056
------------
INDIANA (3.27%)
Hammond Local Public Improvement,
Bond Bank Ser A Township of Schererville
Multi-Financing Prog................................... 7.000 03-15-09 AAA 750 777,563 6.75
Indiana State Office Building Commission,
Indiana Government Center................................ 7.750 07-01-09 A+ 500 549,940 7.05
Indiana Transportation Finance Auth,
Airport Facil Lease Rev Ser A............................ 6.250 11-01-16 A 2,500 2,252,300 6.94
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 229
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
INDIANA (CONTINUED)
Indianapolis Local Public Improvement,
Bank Bonds Ser 1990 A.................................... 7.400% 01-01-20 Aa** $ 1,700 $ 1,881,118 6.69%
Bank Bonds Ser C......................................... 8.000 01-10-13 AA 720 797,976 7.22
Bank Bonds Ser D......................................... 6.750 02-01-20 A+ *1,600 1,525,424 7.08
------------
7,784,321
------------
KANSAS (1.98%)
Kansas City, City of,
Util Sys Ref & Impt Rev Ser 1994......................... 6.375 09-01-23 AAA *2,000 1,932,080 6.60
Sedgwick, County of,
GNMA Coll Mtg Ln Rev Ser C............................... 8.625 11-01-18 AAA 2,590 2,782,437 8.03
------------
4,714,517
------------
LOUISIANA (0.90%)
Calcasieu Parish Public Trust Auth,
Mtg Rev Ref 1991 Ser A................................... 7.750 06-01-12 A** 620 629,970 7.63
Louisiana, State of,
GO Ser A Iss of 1992..................................... 6.500 05-01-11 AAA 1,500 1,499,970 6.50
------------
2,129,940
------------
MAINE (0.55%)
Maine State Housing Auth,
Mtg Purchase Ser A-3..................................... 7.800 11-15-15 AA- 1,250 1,302,113 7.49
------------
MASSACHUSETTS (4.53%)
Greater New Bedford Regional Refuse Management District,
Mass GO Landfill......................................... 5.875 05-01-13 Baa** *750 649,237 6.79
Massachusetts Bay Transportation Auth,
Gen Trans Sys Ser B...................................... 5.400 03-01-05 A+ *1,695 1,519,127 6.03
Massachusetts Health & Educational Facilities Auth,
Childrens Hosp Ser D..................................... 7.750 12-01-18 AA 850 933,521 7.06
Rev New England Deaconess Hosp Iss Ser D................. 6.875 04-01-22 A *2,450 2,313,315 7.28
Rev St. Elizabeth's Hosp of Boston Ser E................. 9.770# 08-15-21 AAA 1,000 977,500 9.99
Massachusetts Housing Finance Agency,
Insured Rental Ser A..................................... 6.650 07-01-19 AAA *2,500 2,411,750 6.89
Single Family Hsg Ser 8.................................. 7.700 06-01-17 A+ 1,000 1,031,640 7.46
Massachusetts Water Pollution Abatement Trust,
Wtr Poll Abatement Rev (SESD Ln Prog) 1994 Ser A......... 6.375 02-01-15 AA- *1,000 956,660 6.66
------------
10,792,750
------------
MICHIGAN (2.19%)
Michigan Housing Development Auth,
Single Family Mtg Rev Ser A.............................. 7.500 06-01-15 AA 1,415 1,442,663 7.36
Plymouth Canton Michigan Community School District,
Counties of Wayne & Washtenaw Ser B...................... 6.800 05-01-17 AA 2,000 2,143,200 6.35
Royal Oak Hospital Finance Auth,
Rev William Beaumont Hosp Ser 1989 C..................... 7.375 01-01-20 AA 1,500 1,632,480 6.78
------------
5,218,343
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 230
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
MINNESOTA (0.15%)
Minnesota Housing Finance Agency
Single Family Mtg 1990 Ser C............................. 7.700% 07-01-14 AA $ 350 $ 357,441 7.54%
------------
NEBRASKA (0.63%)
Omaha Public Power District,
Elec Rev Ser B........................................... 6.200 02-01-17 AA *500 476,210 6.51
Elec Rev Ser C........................................... 5.500 02-01-17 AA *1,200 1,013,148 6.51
------------
1,489,358
------------
NEVADA (1.56%)
Nevada Housing Division,
Single Family Proj Sr Rev Ser 1989 Iss A-1............... 7.350 04-01-16 AA 975 977,379 7.33
Single Family Proj Sr Rev Ser 1990 Iss C-1............... 7.850 10-01-15 AA 360 370,336 7.63
Nevada, State of,
GO Ltd Tax Municipal Bond Bank Proj No. 38............... 6.750 07-01-09 AA 1,000 1,067,400 6.32
Reno Hospital,
Rev St. Mary's Regional Medical Center Ser A............. 7.750 07-01-07 AAA 1,200 1,296,624 7.17
------------
3,711,739
------------
NEW MEXICO (0.73%)
Albuquerque Joint Water & Sewage System,
Rev Ser A Iss of 1990.................................... 6.000 07-01-15 AA 1,700 1,744,064 5.85
------------
NEW YORK (12.37%)
New York City Municipal Water Finance Auth,
Wtr & Swr Sys Rev Ser A.................................. 7.625 06-15-16 A- 1,110 1,199,799 7.05
New York Local Government Assistance Corp.,
Ser 1991 C............................................... 6.500 04-01-15 A *1,900 1,839,447 6.71
Ser 1993 B............................................... 5.375 04-01-16 A *3,000 2,491,710 6.47
New York State Dormitory Authority,
City Univ Sys 2nd Gen Rev Ser A.......................... 5.750 07-01-09 BBB *1,000 896,920 6.41
Court Facil Lease Rev Ser A.............................. 5.375 05-15-16 BBB+ *4,500 3,628,710 6.67
State Univ Ed Facil Rev Ser 1990B........................ 7.000 05-15-16 BBB+ 5,000 4,999,750 7.00
State Univ Ed Facil Rev Ser 1992A........................ 6.375 05-15-14 BBB+ *2,000 1,867,900 6.83
State Univ Ed Facil Rev Ser 1993A........................ 5.875 05-15-11 BBB+ *1,000 893,410 6.58
New York State Environmental Facilities Corp,
State Wtr Poll Control Revolving Fund Rev Ser 1990 A,
NYC Municipal Wtr Fin Auth Proj.......................... 7.500 06-15-12 A 600 648,030 6.94
New York State Medical Care Facilities Finance Agency,
Mental Hlth Serv Imp Rev Ser F........................... 6.500 08-15-12 BBB+ *2,000 1,896,900 6.85
New York State Mortgage Agency,
Rev Homeownership Ser BB-2............................... 7.950 10-01-15 Aa** 560 588,885 7.56
New York State Power Auth,
Gen Purpose Rev Ser Z.................................... 6.500 01-01-19 AA- *1,500 1,462,380 6.67
New York Urban Development Auth.
Ref Correctional Facil Ser A............................. 5.500 01-01-16 BBB *4,000 3,288,760 6.69
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 231
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
Triborough Bridge & Tunnel Auth,
Rev Ref Ser 1987 L....................................... 8.000% 01-01-07 A+ $ 500 $ 550,810 7.26%
Rev Gen Purpose Ser X.................................... 6.500 01-01-19 A+ *3,250 3,183,700 6.64
------------
29,437,111
------------
NORTH CAROLINA (1.15%)
North Carolina Eastern Municipal Power Agency,
Pwr Sys Rev Ref Ser A.................................... 5.750 01-01-19 A- 3,250 2,736,110 7.72
------------
OHIO (0.64%)
Cuyahoga, County of,
Hosp Imp Rev Deaconess Hosp of Cleveland Proj
Ser 1985 B............................................. 7.450 10-01-18 A+ 750 782,160 7.14
Hosp Rev Meridia Hlth Sys Ser 1991....................... 7.000 08-15-23 A 750 740,737 7.09
------------
1,522,897
------------
OKLAHOMA (0.68%)
Tulsa County Industrial Auth,
Hlth Care Rev St. Francis Hosp Inc....................... 6.900 12-15-05 AA 1,500 1,627,320 6.36
------------
OREGON (1.50%)
Portland, City of,
Swr Sys Rev 1994 Ser A................................... 6.250 06-01-15 A+ *3,750 3,562,650 6.58
------------
PENNSYLVANIA (2.98%)
Northumberland County Auth,
Commonwealth Lease Rev Ser 1991.......................... 6.250 10-15-09 AAA 1,000 988,020 6.33
Pennsylvania Turnpike Commission,
Turnpike Rev Ser K....................................... 7.625 12-01-09 AAA 500 556,705 6.85
Philadelphia, City of,
Wtr & Wastewater Rev..................................... 5.750 06-15-13 BBB 2,300 1,992,283 6.64
Philadelphia Hospital & Higher Education Facilities Auth,
Hosp Rev Children's Hosp Philadelphia Proj Ser A......... 7.875 07-01-08 AA 500 541,995 7.26
Hosp Rev Temple Univ Hosp Ser A.......................... 6.625 11-15-23 BBB+ 3,375 3,005,741 7.44
------------
7,084,744
------------
SOUTH CAROLINA (2.96%)
Berkeley, County of,
Wtr & Swr Sys Rev Ser 1991............................... 7.000 06-01-16 AAA 1,000 1,090,610 6.42
James Island Public Service District,
Charleston County Swr Sys Ref............................ 7.500 06-01-18 AAA 1,250 1,373,738 6.82
Lexington County School District No. 1,
Cert of Part 1989 Ser B Pelion High School Proj.......... 7.650 09-01-09 AAA 1,145 1,261,870 6.94
Richland, County of,
Poll Control Rev Union Camp Corp Proj Ser 1992 B......... 6.625 05-01-22 A 2,460 2,371,219 6.87
Poll Control Rev Union Camp Corp Proj Ser C.............. 6.550 11-01-20 A 1,000 955,630 6.85
------------
7,053,067
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 232
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
SOUTH DAKOTA (0.46%)
South Dakota Health & Educational Facilities Auth,
Rev Ser 1989 Sioux Valley Hosp Iss....................... 7.625% 11-01-13 AA- $ 925 $ 1,018,009 6.93%
Rev Ser 1989 Sioux Valley Hosp Iss....................... 7.625 11-01-13 AA- 75 79,205 7.22
------------
1,097,214
------------
TENNESSEE (5.44%)
Chattanooga-Hamilton County Hospital Auth,
Erlanger Medical Center.................................. 7.400 10-01-06 AAA 1,000 1,066,970 6.94
Eastside Utility District of Hamilton,
Waterworks Rev Iss....................................... 6.750 11-01-11 BBB+ 1,000 973,410 6.93
Humphreys, County of,
Indl Devel Board Solid Waste Disp Rev
(E.I. DuPont DeNemours & Co.).......................... 6.700 05-01-24 AA *6,500 6,250,010 6.97
Maury County Industrial Development Board,
Multi-Modal Interchangeable Rate Poll Control Ref
Ref Saturn Corp Proj Ser 1994.......................... 6.500 09-01-24 BBB+ *1,900 1,772,491 6.97
Metropolitan Nashville & Davidson County Health &
Education Facility Board,
Rev Ref Vanderbilt Univ Ser A.......................... 7.625 05-01-16 AA 1,750 1,868,965 7.14
Tennessee Housing Development Agency,
Homeownership Prog Proj J................................ 7.750 07-01-17 A+ 1,000 1,015,390 7.63
------------
12,947,236
------------
TEXAS (7.53%)
Austin, City of,
Utility Sys Rev Ref Ser B................................ 7.800 11-15-12 A 1,000 1,085,200 7.19
Corpus Christi Housing Finance Corp,
Single Family Mtg Sr Rev Ref Ser 1991 A.................. 7.700 07-01-11 AAA 840 885,150 7.31
Edinburg Consolidated Ind. School District,
Hidalgo County Unltd School Building & Ref............... 5.875 02-15-17 Aaa** 1,000 902,920 6.51
El Paso Housing Finance Corp,
Single Family Mtg Rev Ref Bonds 1991 Ser A............... 8.750 10-01-11 A** 745 790,631 8.24
Harris County Health Facilities Development Corp,
Hospital Rev Saint Luke's Episcopal...................... 8.250 02-15-08 AAA 1,475 1,659,478 7.33
SCH Hlth Care Sys Rev Sisters of Charity Ser 1991 A...... 7.100 07-01-21 AA 1,000 1,019,270 6.97
Harris, County of,
Toll Road Unltd Tax & Sub Lien Rev Ref................... 8.100 08-01-08 AA+ 250 278,230 7.28
Toll Road Unltd Tax & Sub Lien Rev Ref................... 8.125 08-01-15 AA+ 250 278,445 7.29
Houston Independent School District,
GO Ltd Tax Schoolhouse & Ref............................. 7.125 08-15-14 AA+ 1,000 1,072,250 6.64
Houston Water & Sewer System,
Rev Ref Prior Lien Ser B................................. 6.750 12-01-08 A 1,500 1,525,305 6.64
Rev Ref Prior Lien Ser B................................. 6.375 12-01-14 A *1,200 1,146,984 6.67
North Central Texas Health Facility Development Corp,
Hospital Rev Baylor Univ Medical Center Ser 1991 A....... 10.070# 05-15-16 AA 1,000 1,000,000 10.07
Tarrant County Water Control & Improvement District No. 1
Wtr Rev Ref & Imp........................................ 6.000 03-01-10 AA 3,000 3,067,770 5.87
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 233
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
TEXAS (CONTINUED)
Texas Housing Agency,
Mtg Rev Single Family Ser A.............................. 8.250% 03-01-17 A+ $ 1,030 $ 1,068,079 7.96%
Texas, State of,
Veterans' Land Board GO.................................. 7.125 12-01-09 AA 1,000 1,039,570 6.85
Veterans' Land Board GO.................................. 8.250 12-01-10 AA 390 412,066 7.81
Veterans' Land Board GO Prerefunded...................... 8.250 12-01-10 AAA 610 686,622 7.33
------------
17,917,970
------------
UTAH (2.92%)
Intermountain Power Agency,
Pwr Supply Rev Ref Ser A................................. 5.000 07-01-21 AA 2,000 1,513,720 6.61
Pwr Supply Spec Oblig-Registered-1st Crossover Ser....... 5.000 07-01-16 AA- 1,935 1,501,018 6.45
Salt Lake City Hospital,
Rev Ref IHC Hosp Inc Ser B............................... 8.000 05-15-07 AA 350 385,417 7.26
Rev Ref IHC Hosp Inc VRDN/RIBS........................... 9.920# 05-15-20 AAA 1,500 1,430,625 10.40
Rev Ref Ser A............................................ 8.125 05-15-15 AAA 1,000 1,103,000 7.37
Utah Housing Finance Agency,
Single Family Mtg Sr Bonds 1990 Iss B-2.................. 7.700 07-01-15 AA 560 562,150 7.67
Single Family Mtg Sr Bonds 1991 Iss B-1.................. 7.500 07-01-16 AA 450 452,921 7.45
------------
6,948,851
------------
VIRGINIA (2.27%)
Arlington County Industrial Development Auth,
Hosp Facil Rev Arlington Hosp Ser 1991 A................. 7.125 09-01-21 A1** 500 549,300 6.49
Fairfax County Industrial Development Auth,
Rev RITES................................................ 9.879# 08-29-23 AA- 1,000 1,160,000 8.52
Fredericksburg Industrial Auth,
Hosp Facil Rev........................................... 9.468# 08-15-23 AAA 1,500 1,419,375 10.01
Norfolk Industrial Development Board,
Ref Childrens Hosp Kings................................. 5.500 06-01-13 AAA *2,000 1,727,760 6.37
Richmond, City of,
Pub Util Rev Ser A..................................... 8.000 01-15-18 AAA 500 548,795 7.29
------------
5,405,230
------------
WASHINGTON (6.43%)
Grant County Public Utility District No. 002
Wanapum Hydro-Electric Rev 2nd Ser A..................... 6.375 01-01-23 A+ 1,000 944,470 6.75
Lewis County Public Utility District No. 1,
Cowlitz Falls Hydro-Electric Proj Ser 1991............... 7.000 10-01-22 AA 1,500 1,638,525 6.41
Seattle Municipal Light & Power,
Rev Ser A of 1992........................................ 5.750 08-01-15 AA 3,000 2,664,120 6.47
Seattle, Port of,
GO Ser 1994 A............................................ 5.750 05-01-14 AA+ *4,100 3,541,867 6.66
Tacoma Electric System,
Rev Iss of 1989.......................................... 7.375 01-01-08 AAA 1,000 1,083,340 6.81
Rev VRDN/RIBS Iss of 1991................................ 9.245# 01-01-15 AAA 1,000 947,500 9.76
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 234
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
WASHINGTON (CONTINUED)
University of Washington,
Housing & Dining Sys Rev Ser 1991........................ 7.000% 12-01-21 AAA $ 750 $ 760,485 6.90%
Washington Public Power Supply System,
Nuclear Proj No 2 Rev Ref Ser A.......................... 6.000 07-01-12 AA 3,000 2,717,730 6.62
Washington, State of,
GO Ser A of 1990......................................... 6.750 02-01-15 AA 1,000 1,013,690 6.66
------------
15,311,727
------------
WEST VIRGINIA (1.84%)
West Virginia Parkways Economic Development & Tourism Auth,
Iss of 1989.............................................. 7.125 07-01-19 AAA 2,000 2,171,820 6.56
West Virginia Water Development Auth,
Wtr Dev Rev Ln Prog II Ser B............................. 7.500 11-01-29 AAA 2,000 2,211,600 6.78
------------
4,383,420
------------
WISCONSIN (1.58%)
Sturgeon Bay, City of,
Door County Combined Util Mtg Rev Ser 1990............... 7.500 01-01-10 AAA 770 855,432 6.75
Door County Combined Util Mtg Rev Ser 1990............... 7.500 01-01-10 AAA 230 245,631 7.02
Wisconsin Public Power Inc,
Pwr Supply Sys Rev Ser 1990A............................. 7.400 07-01-20 AAA 1,000 1,106,540 6.69
Wisconsin, State of
GO Ser A................................................. 6.300 05-01-10 AA 1,500 1,558,005 6.07
------------
3,765,608
------------
WYOMING (1.11%)
Sweetwater County Pollution Control,
Rev Idaho Pwr Co. Ser A.................................. 7.625 12-01-14 A- 500 529,700 7.20
Rev Idaho Pwr Co. Ser B.................................. 7.625 12-01-13 A- 1,000 1,059,400 7.20
Rev Idaho Pwr Co. Ser B MBIA............................. 7.625 12-01-13 AAA 1,000 1,061,560 7.18
------------
2,650,660
------------
TOTAL TAX-EXEMPT LONG-TERM BONDS
(Cost $232,224,273) (97.31%) $231,631,532
====== ============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
* Securities, other than short-term investments, newly added to the portfolio
during the year ended October 31, 1994.
** Rated by Moody's Investors Services or John Hancock Advisers, Inc. where
Standard & Poor's ratings are not available. NR Security is not rated.
*** Credit ratings are unaudited.
+ The yeild is unaudited and not calculated in accordance with guidelines
established by the U.S. Securities and Exchange Commission.
# Represents rate in effect on October 31, 1994.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 235
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
PORTFOLIO CONCENTRATION (UNAUDITED)
- -------------------------------------------------------------------------------
THE JOHN HANCOCK MANAGED TAX-EXEMPT FUND INVESTS PRIMARILY IN SECURITIES
ISSUED BY VARIOUS STATES AND THEIR VARIOUS POLITICAL SUBDIVISIONS. THE
PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE ECONOMIC CONDITIONS WITHIN THE
APPLICABLE STATES AND THE FINANCIAL CONDITION OF THE STATES AND THEIR
AGENCIES AND MUNICIPALITIES. THE CONCENTRATION OF INVESTMENTS BY STATES AND
CREDIT RATINGS FOR INDIVIDUAL SECURITIES HELD BY THE FUND IS SHOWN IN THE
SCHEDULE OF INVESTMENTS. IN ADDITION, THE CONCENTRATION OF INVESTMENTS CAN BE
AGGREGATED BY VARIOUS SECTOR CATEGORIES.
THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS AT OCTOBER
31, 1994 ASSIGNED TO THE VARIOUS SECTOR CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE AS A PERCENTAGE OF
SECTOR DISTRIBUTION THE FUND'S NET ASSETS:
- ------------------- -------------------------------
<S> <C>
General Obligation.................................................................... 5.93%
Revenue Bonds - Electric.............................................................. 13.10
Revenue Bonds - Health/Education...................................................... 26.68
Revenue Bonds - Housing............................................................... 9.51
Revenue Bonds - Transportation........................................................ 8.03
Revenue Bonds - Pollution Control .................................................... 8.26
Revenue Bonds - Water & Sewer ........................................................ 12.04
Revenue Bonds - Other................................................................. 13.76
-----
TOTAL TAX-EXEMPT LONG-TERM BONDS 97.31%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 236
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is a an open-end investment management
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Managed Tax-Exempt Fund (the "Fund"),
John Hancock Freedom Gold & Government Fund, John Hancock Freedom Regional Bank
Fund, John Hancock Sovereign U.S. Government Income Fund and John Hancock
Sovereign Achievers Fund.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B shares. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, dividends, and liquidation, except that certain expenses,
subject to the approval of the Trustees, may be applied differently to each
class of shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a class
which bears distribution/service expenses under the terms of a distribution
plan, have exclusive voting rights regarding such distribution plan. Significant
accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Municipal bonds have an over-the-counter primary market
and are valued on the basis of valuations furnished by a pricing service which
determines valuations for normal institutional size trading units of debt
securities, without exclusive reliance upon quoted prices. Short-term municipal
debt instruments and short-term taxable debt investments which have a remaining
maturity of 60 days or less are valued at amortized cost, which generally
approximates market value. Investment securities for which no current market
quotations are available, are valued at fair value based on procedures approved
by the Trustees.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $792,869 of a capital
loss carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the Fund,
no capital gain distributions will be made. The carryforward expires October 31,
2002.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
is recorded on the accrual basis.
The fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly identifiable
to an individual Fund. Expenses which are not readily identifiable to a
specific Fund are allocated in such a manner as deemed
21
<PAGE> 237
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
equitable, taking into consideration, among other things, the nature and type of
expense and the relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes. Transfer
agent expenses and distribution/service fees if any, are calculated daily at the
class level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.
PREMIUM AND DISCOUNT For tax-exempt issues, the Fund amortizes the amount paid
in excess of par value on securities purchased from either the date of purchase
or date of issue to date of sale, maturity or to next call date, if applicable.
The premium amortization reduces interest income. The Fund accretes original
issue discount from par value on securities purchased from either the date of
issue or the date of purchase over the life of the security, as required by the
Internal Revenue Code. The Fund records market discount on bonds purchased after
April 30, 1993 at time of disposition.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates and
other market conditions. At the time the 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," equal to a
certain percentage of the value of the financial futures contract being traded.
Each day, the futures contract is valued at the official settlement price of the
board of trade or U.S. commodities exchange. 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. Daily variation
margin adjustments, arising from this "mark to market," are recorded by the Fund
as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss.
Risks of entering into futures contracts include the possibility that there may
be an illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities.
For Federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1994 open positions in financial futures contracts were
as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
EXPIRATION OPEN CONTRACTS POSITION (DEPRECIATION)
- ------------- ----------------- -------- --------------
<S> <C> <C> <C>
DECEMBER 1994 25 MUNI BOND SHORT ($ 1,563)
DECEMBER 1994 100 TREASURY BOND SHORT 155,094
--------
$153,531
========
</TABLE>
At October 31, 1994, the Fund has deposited in a segregated account
$245,000 to cover margin requirements on open financial futures contracts.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned
subsidiary of The Berkeley Financial Group, for a continuous investment program
equivalent, on an annual basis, to the sum of (a) 0.60% of the first
$250,000,000 of the Fund's average daily net asset value, (b) 0.50% of the next
$500,000,000, and (c) 0.45% of the Fund's average daily net asset value in
excess of $750,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value. Additionally, the Adviser may
voluntarily waive part or all of its management fee for a
22
<PAGE> 238
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
period under the terms of the Advisory Agreement. Such a waiver was provided to
John Hancock Managed Tax-Exempt Fund for the year ended October 31, 1994 in the
amount of $131,878. Such waiver may be discontinued at any time. Furthermore,
$58,744 of custodian fees have been reduced by balance credits applied during
the year ended October 31, 1994.
John Hancock Broker Distribution Services, Inc. ("Broker Services"), a
wholly-owned subsidiary of the Adviser, and Freedom Distributors Corporation
("FDC") act as Co-Distributors for shares of the Fund. For the year ended
October 31, 1994, net sales charges received on sales of Class A shares of the
Fund amounted to $366,629. Out of this amount, $45,027 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, $67,653
was paid as sales commissions to unrelated broker- dealers and $253,949 was paid
as sales commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"). The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company, is the indirect sole shareholder of Distributors and John
Hancock Freedom Securities Corporation and its subsidiaries, which include FDC,
Tucker Anthony and Sutro, all of which are broker-dealers.
Class B shares which are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% (4.0% on purchases made prior to January 1, 1994) of the
lesser of the current market value at the time of redemption or the original
purchase cost of the shares being redeemed. Proceeds from the CDSC are paid to
Broker Services and are used in whole or in part to defray its expenses related
to providing distribution related services to the Fund in connection with the
sales of Class B shares. For the year ended October 31, 1994 the contingent
deferred sales charges received by Broker Services amounted to $393,105.
In addition, to compensate the Co-Distributors for the services they
provide as distributors of shares of the Fund, the Fund has adopted a
Distribution Plan with respect to Class A and Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. Accordingly, the Fund will make
payments to the Co-Distributors, for distribution and service expenses at an
annual rate not to exceed 0.30% of the Fund's average net assets attributable to
Class A shares (0.25% prior to January 1, 1994) and 1.00% of the Fund's average
daily net assets attributable to Class B shares (0.75% prior to January 1,
1994), to reimburse the Co-Distributors for their distribution/service costs. Up
to a maximum of 0.25% of these payments may be service fees as defined by the
amended Rules of Fair Practice of the National Association of Securities
Dealers, which became effective July 7, 1993. Under the amended Rules of Fair
Practice, curtailment of a portion of the Fund's 12b-1 payments could occur
under certain circumstances. During the fiscal year, Class B 12b-1 fees were
reduced to 0.95% on June 1, 1994 and 0.90% on July 1, 1994 in order to comply
with the above. On September 1, 1994 the 12b-1 fee was increased to 1.00%.
The Fund has a transfer agent agreement with John Hancock Fund
Services, Inc. ("Fund Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. The Fund pays Fund Services a monthly transfer agent fee
equivalent, on an annual basis, to 0.03% and 0.06% of the average daily net
asset value of Class A and Class B shares of the Fund, respectively, plus out
of pocket expenses incurred by Fund Services on behalf of the Fund for proxy
mailings.
Messers. Edward J. Boudreau, Jr. and Hugh A. Dunlap, Jr. are directors
and officers of the Adviser, and its affiliates, as well as Trustees of the
Fund. The compensation of unaffiliated Trustees is borne by the Fund.
23
<PAGE> 239
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the year
ended October 31, 1994, aggregated $150,046,382 and $153,884,851, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the year ended October 31, 1994.
The cost of investments owned at October 31, 1994 (including the
short-term investments) for Federal income tax purposes was $232,226,273. Gross
unrealized appreciation and depreciation of investments aggregated $6,403,645
and $6,998,386, respectively, resulting in net unrealized depreciation of
$594,741.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified amounts to
reflect an increase in capital paid-in of $73,294, a decrease in undistributed
net investment income of $71,928 and an increase in accumulated net realized
loss of investments and financial futures contracts of $1,366. This represents
the cumulative amount necessary to report these balances on a tax basis,
excluding certain temporary differences, as of October 31, 1994. Additional
adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the Fund, are
primarily attributable to certain differences in the computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles.
24
<PAGE> 240
John Hancock Funds - Managed Tax-Exempt Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Freedom Investment Trust and to the Shareholders
of John Hancock Managed Tax-Exempt Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments (except for Moody's and Standard & Poor's ratings
and yields at market), and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of John Hancock Managed Tax-Exempt Fund (the
"Fund") (a portfolio of Freedom Investment Trust) at October 31, 1994, the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1994 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 16, 1994
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during the fiscal year ended October
31, 1994.
The fund has designated distributions to shareholders of $1,065,869 as
long-term capital gain dividends. These amounts were reported on the 1993 U.S.
Treasury Department Form 1099-DIV.
Income dividends for the Fund are 100% tax-exempt.
25
<PAGE> 241
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Gold & Government Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1994. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies obligations
(cost - $14,758,020).................................... $14,661,453
Common stocks (cost - $29,134,911)........................ 30,458,635
Preferred stocks (cost - $3,006,196)...................... 3,087,500
Short-term notes (cost - $3,998,967)...................... 3,998,967
Joint repurchase agreement (cost - $5,292,000)............ 5,292,000
Corporate savings account................................. 52
-----------
57,498,607
Receivable for shares sold.................................. 15,655
Interest receivable......................................... 488,046
Dividends receivable........................................ 19,750
Other assets................................................ 7,553
------------
Total Assets.......................... 58,029,611
----------------------------------------------------
LIABILITIES:
Payable for shares repurchased.............................. 95,597
Payable for investments purchased........................... 2,319,109
Payable to John Hancock Advisers, Inc. and
affiliates - Note B....................................... 51,108
Payable for variation margin................................ 33,975
Accounts payable and accrued expenses....................... 69,158
-----------
Total Liabilities..................... 2,568,947
----------------------------------------------------
NET ASSETS:
Capital paid-in............................................. 62,607,445
Accumulated net realized loss on investments and
financial futures contracts............................... ( 8,528,361)
Net unrealized appreciation of investments.................. 1,308,461
Undistributed net investment income......................... 73,119
-----------
Net Assets............................ $55,460,664
====================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value, respectively)
Class A - $16,468,787/1,147,566............................. $ 14.35
==========================================================================
Class B - $38,991,877/2,720,942............................. $ 14.33
==========================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($14.35 x 105.26%)................................ $ 15.11
==========================================================================
</TABLE>
* On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED
AND EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES)
FOR THE PERIOD STATED.
STATEMENT OF OPERATIONS
Year ended October 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 3,631,919
Dividends (net of foreign withholding taxes of $6,412)...... 114,940
-----------
3,746,859
-----------
Expenses:
Investment management fee - Note B........................ 530,798
Distribution/service fee - Note B
Class A................................................. 54,623
Class B................................................. 440,740
Transfer agent fee - Note B
Class A................................................. 43,367
Class B................................................. 121,238
Custodian fee............................................. 57,000
Auditing fee.............................................. 37,636
Registration and filing fees.............................. 20,371
Trustees' fees............................................ 16,788
Printing.................................................. 11,682
Miscellaneous............................................. 4,447
Legal fees................................................ 1,579
-----------
Total Expenses........................ 1,340,269
----------------------------------------------------
Net Investment Income................. 2,406,590
----------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FINANCIAL FUTURES CONTRACTS:
Net realized loss on investments sold....................... ( 6,826,157)
Net realized loss on financial futures contracts............ ( 273,804)
Net realized gain on foreign currency transactions.......... 15,218
Change in net unrealized appreciation/depreciation of
investments............................................... ( 3,457,549)
Change in net unrealized appreciation/depreciation of
financial futures contracts............................... 443,094
-----------
Net Realized and Unrealized
Loss on Investments and
Financial Futures Contracts........... ( 10,099,198)
----------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations............. ($ 7,692,608)
====================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 242
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Gold & Government Fund
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------
1994 1993
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............................................................................... $ 2,406,590 $ 2,684,315
Net realized loss on investments sold and financial futures contracts............................... ( 7,084,743) ( 6,233)
Change in net unrealized appreciation/depreciation of investments and financial futures contracts... ( 3,014,455) 6,634,615
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations................................... ( 7,692,608) 9,312,697
----------- -----------
INCOME EQUALIZATION
Amount transferred to capital paid-in............................................................... -- ( 344,206)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.6674 and $0.8043 per share, respectively)........................................... ( 803,396) ( 955,248)
Class B - ($0.5659 and $0.7273 per share, respectively)........................................... ( 1,761,166) ( 1,879,617)
Distributions in excess of net realized gain on investments sold and financial futures contracts
Class A - ($0.2390 and none per share, respectively).............................................. ( 291,352) --
Class B - ($0.2390 and none per share, respectively).............................................. ( 753,474) --
----------- -----------
Total Distributions to Shareholders............................................................... ( 3,609,388) ( 2,834,865)
----------- -----------
FROM FUND SHARE TRANSACTIONS - NET*
Net increase (decrease) in net assets from Fund share transactions.................................. ( 5,494,834) 12,082,984
Amount transferred from accumulated net investment loss to capital paid-in.......................... -- 344,206
----------- -----------
Total from Fund Share Transactions - Net.......................................................... ( 5,494,834) 12,427,190
----------- ----------
NET ASSETS:
Beginning of period................................................................................. 72,257,494 53,696,678
----------- -----------
End of period (including undistributed net investment income of $73,119 and $215,873,
respectively)..................................................................................... $55,460,664 $72,257,494
=========== ===========
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------
1994 1993
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold...................................................... 310,979 $ 4,916,203 424,656 $ 6,825,356
Shares issued to shareholders in reinvestment of distributions... 57,814 900,802 48,723 769,798
--------- ----------- --------- -----------
368,793 5,817,005 473,379 7,595,154
Less shares repurchased.......................................... ( 426,433) ( 6,603,119) ( 426,588) ( 6,797,709)
Amount transferred from undistributed net investment income to
capital paid-in................................................ -- -- -- 78,628
--------- ----------- --------- -----------
Net increase (decrease).......................................... ( 57,640) ($ 786,114) 46,791 $ 876,073
========= =========== ========= ===========
CLASS B
Shares sold...................................................... 557,733 $ 8,893,162 1,045,359 $16,915,174
Shares issued to shareholders in reinvestment of distributions... 117,910 1,843,490 85,873 1,359,268
--------- ----------- --------- -----------
675,643 10,736,652 1,131,232 18,274,442
Less shares repurchased.......................................... (1,026,605) ( 15,445,372) ( 439,331) ( 6,988,903)
Amount transferred from undistributed net investment income to
capital paid-in................................................ -- -- -- 265,578
--------- ----------- --------- -----------
Net increase (decrease).......................................... ( 350,962) ($ 4,708,720) 691,901 $11,551,117
========= =========== ========= ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 243
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Gold & Government Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
1994 1993 1992(a)
------- ------- -------
<S> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........................................ $ 16.91 $ 15.19 $ 15.31
------- ------- -------
Net Investment Income....................................................... 0.63 0.76** 0.72
Net Realized and Unrealized Gain (Loss) on Investments, Financial Futures
Contracts and Written Options............................................. ( 2.28) 1.76 ( 0.21)
------- ------- -------
Total from Investment Operations........................................ ( 1.65) 2.52 0.51
------- ------- -------
Less Distributions:
Dividends from Net Investment Income........................................ ( 0.67) ( 0.80) ( 0.63)
Distributions in excess of Net Realized Gains on Investments Sold,
Written Options and Financial Futures Contracts........................... ( 0.24) -- --
------- ------- -------
Total Distributions..................................................... ( 0.91) ( 0.80) ( 0.63)
------- ------- -------
Net Asset Value, End of Period.............................................. $ 14.35 $ 16.91 $ 15.19
======= ======= =======
Total Investment Return at Net Asset Value.................................. ( 10.10%) 17.10% 3.44%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................................... $16,469 $20,385 $17,593
Ratio of Expenses to Average Net Assets..................................... 1.53% 1.59% 1.68%*
Ratio of Net Investment Income to Average Net Assets........................ 4.02% 4.84% 5.49%*
Portfolio Turnover Rate..................................................... 147% 118% 209%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT INCOME, GAINS
(LOSSES), DIVIDENDS AND TOTAL INVESTMENT RETURNS OF THE FUND. IT SHOWS HOW
THE FUND'S NET ASSET VALUE FOR A SHARE HAS CHANGED SINCE THE END OF THE
PREVIOUS PERIOD. ADDITIONALLY, IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS
PRESENTED IN THE FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 244
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Gold & Government Fund
FINANCIAL HIGHLIGHTS (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------
1994 1993 1992(a) 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................. $ 16.89 $ 15.17 $ 15.13 $ 14.51 $ 15.45
------- ------- ------- ------- -------
Net Investment Income............................................ 0.53 0.69** 0.83 0.87+ 0.91+
Net Realized and Unrealized Gain (Loss) on Investments, Financial
Futures Contracts and Written Options.......................... ( 2.28) 1.76 0.11 0.76 ( 0.81)
------- ------- ------- ------- -------
Total from Investment Operations............................. ( 1.75) 2.45 0.94 1.63 0.10
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income............................. ( 0.57) ( 0.73) ( 0.90) ( 1.01) ( 1.04)
Distributions in excess of Net Realized Gain on Investments Sold,
Written Options and Financial Futures Contracts................ ( 0.24) -- -- -- --
------- ------- ------- ------- -------
Total Distributions.......................................... ( 0.81) ( 0.73) ( 0.90) ( 1.01) ( 1.04)
------- ------- ------- ------- -------
Net Asset Value, End of Period................................... $ 14.33 $ 16.89 $ 15.17 $ 15.13 $ 14.51
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value....................... ( 10.70%) 16.56% 6.42% 11.78%+ 0.55%+
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)........................ $38,992 $51,872 $36,103 $56,928 $65,498
Ratio of Expenses to Average Net Assets.......................... 2.18% 2.11% 1.63% 1.82%+ 1.90%+
Ratio of Net Investment Income to Average Net Assets............. 3.41% 4.29% 5.56% 5.96%+ 6.03%+
Portfolio Turnover Rate.......................................... 147% 118% 209% 134% 171%
</TABLE>
* On an annualized basis.
** On average month end shares outstanding.
(a) Class A shares commenced operations on January 3, 1992.
(b) Not annualized.
+ Reflects expense limitations in effect during the years indicated (see
Note B). As a result of such limitations, expenses of Class B shares for the
years ended, October 31, 1991 and 1990, reflect reductions of $0.01 and less
than $0.01, per share, respectively. Absent of such reductions, for the
years ended October 31, 1991 and 1990, the ratio of expenses to average net
assets would have been 1.91% and 1.93%, respectively, and the ratio of net
investment income to average net assets would have been 5.87% and 6.00%,
respectively. Without the reimbursement, total investment return would be
lower.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 245
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Gold & Government Fund
SCHEDULE OF INVESTMENTS
October 31, 1994
- -------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
FREEDOM GOLD &GOVERNMENT FUND ON OCTOBER 31, 1994. IT'S DIVIDED INTO FOUR MAIN
CATEGORIES: U.S. GOVERNMENT AND AGENCIES OBLIGATIONS, COMMON STOCKS, PREFERRED
STOCKS AND SHORT-TERM INVESTMENTS. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE
FUND'S "CASH" POSITION, ARE LISTED LAST.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- -------- -------- --------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS
GOVERNMENTAL - U.S. (26.43%)
United States Treasury, Note..................................... 7.250% 11-15-96 $14,550* $14,661,453
-----------
TOTAL U.S. GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $14,758,020) ( 26.43%) 14,661,453
------- -----------
</TABLE>
<TABLE>
<CAPTION> NUMBER
OF SHARES
---------
<S> <C> <C>
COMMON STOCKS
GOLD AND MINING PRODUCTS (54.92%)
Agnico-Eagle Mines Ltd. (Canada)................................................... 80,000* 1,030,000
Asarco, Inc........................................................................ 80,000* 2,510,000
Aurora Gold Ltd.................................................................... 1,500,000* 1,948,050
Battle Mountain Gold Co............................................................ 190,000 2,113,750
Coeur D'Alene Mines Corp........................................................... 60,000* 1,117,500
Driefontein Consolidated Ltd. American Depository Receipts......................... 40,000* 625,000
Echo Bay Mines Ltd................................................................. 100,000* 1,225,000
Glamis Gold, Ltd................................................................... 240,000* 2,010,000
Handy & Harman..................................................................... 60,000* 997,500
Hecla Mining Co.**................................................................. 200,000* 2,250,000
Hemlo Gold Mines, Inc. (Canada).................................................... 50,000 531,250
Homestake Mining Co................................................................ 35,000* 656,250
Kinross Gold Corp. (Canada) **..................................................... 500,000* 2,750,000
Kloof Gold Mining Co. Ltd. Ameican Depository Receipts............................. 40,000* 655,000
Magma Copper Co.**................................................................. 75,000* 1,340,625
Placer Dome, Inc................................................................... 32,000 692,000
Prime Resources Group Inc. (Canada)**.............................................. 300,000* 2,356,710
Santa Fe Pacific Gold Corp.**...................................................... 200,000* 2,875,000
Sunshine Mining & Refining Co.**................................................... 300,000* 637,500
TVX Gold, Inc.**................................................................... 300,000 2,137,500
-----------
TOTAL COMMON STOCKS
(Cost $29,134,911) ( 54.92%) 30,458,635
------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 246
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Gold & Government Fund
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
PREFERRED STOCKS
GOLD AND MINING PRODUCTS (5.57%)
Freeport-McMoRan Copper & Gold, Inc., Ser SILV **.................................... 120,000* $ 2,625,000
Sunshine Mining Co., ** $1.19........................................................ 50,000* 462,500
-----------
TOTAL PREFERRED STOCKS
(Cost $3,006,196) ( 5.57%) 3,087,500
------- -----------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000's
RATE DATE OMITTED)
-------- -------- ---------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS
SHORT-TERM NOTES (7.21%)
Federal National Mortgage Association............................. 4.650% 11-03-94 $ 4,000 3,998,967
JOINT REPURCHASE AGREEMENT (9.54%)
Investment in a joint repurchase agreement
transaction with Kidder, Peabody & Co., Inc. -
Dated 10-31-94, Due 11-01-94
(secured by U.S. Treasury Bond, 9.00%
Due 11-15-18, U.S. Treasury Notes, 6.750% Due
02-28-97, and 5.625% Due 01-31-98) Note A........................ 4.770 11-01-94 5,292 5,292,000
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 2.15%............................................... 52
-----------
TOTAL SHORT-TERM INVESTMENTS ( 16.75%) 9,291,019
------- -----------
TOTAL INVESTMENTS (103.67%) $57,498,607
======= ===========
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the year ended October 31, 1994.
** Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 247
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Gold & Government Fund
NOTE A -
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end investment management
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Freedom Gold & Government Fund (the
"Fund"), John Hancock Freedom Regional Bank Fund, John Hancock Sovereign U.S.
Government Income Fund, John Hancock Sovereign Achievers Fund and John Hancock
Managed Tax-Exempt Fund.
The Trustees have authorized the issuance of two classes of shares of
the Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemption, dividends, and liquidation, except that
certain expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Investments in securities traded on national securities
exchanges are normally valued at the last quoted sales price on the day of
valuation. Securities traded in the over-the-counter market and listed
securities for which no sale was reported on the valuation date are valued at
the mean between the current closing bid and asked prices. Debt securities
having an over the-counter primary market are valued on the basis of valuations
furnished by a pricing service which determines valuations for normal
institutional size trading units, without exclusive reliance upon quoted prices.
Short-term debt investments which have a remaining maturity of 60 days or less
are valued at amortized cost, which generally approximates market value.
Investment securities for which no current market quotations are available are
valued at fair value based on procedures approved by the Trustees.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of
the Internal Revenue Code that are applicable to regulated investment companies
and to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $8,066,420 of a capital
loss carry forward available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the Fund,
no capital gain distributions will be made. The carryforward expires October
31, 2002.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities
is recorded on the accrual basis.
The fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class as explained previously.
13
<PAGE> 248
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Gold & Government Fund
EXPENSES The majority of the expenses of the Trust are directly identifiable
to an individual Fund. Expenses which are not readily identifiable to a
specific Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things the nature and type of expense and the
relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class
of shares based on the appropriate net assets of the respective classes.
Transfer agent expenses and distribution/service fees if any, are calculated
daily at the class level based on the appropriate net assets of each class
and the specific expense rate(s) applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on
securities from either the date of issue or the date of purchase over the
life of the security, as required by the Internal Revenue Code.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates. At the
time the 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," equal to a certain percentage of the
value of the financial futures contract being traded. Each day, the futures
contract is valued at the official settlement price of the board of trade or
U.S. commodities exchange. 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. Daily variation margin adjustments,
arising from this "Mark to market," are recorded by the Fund as unrealized gains
or losses.
When the contracts are closed, the Fund recognizes a gain or loss.
Risks of entering into futures contracts include the possibility that there
may be an illiquid market and/or that a change in the value of the contract
may not correlate with changes in the value of the underlying securities.
For Federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1994, there were no open positions in financial futures
contracts.
OPTIONS Listed options are valued at the last quoted sales price on the exchange
on which they are primarily traded. Purchased put or call over-the-counter
options are valued at the average of the "bid" prices obtained from two
independent brokers. Written put or call over-the-counter options are valued at
the average of the "asked" prices obtained from two independent brokers. Upon
the writing of a call or put option, an amount equal to the premium received by
the Fund is included in the Statement of Assets and Liabilities as an asset and
corresponding liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the written option.
There were no transactions in written call options during the year
ended October 31, 1994.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.80% of the first $500,000,000 of the
Fund's average daily net asset value and (b) 0.75% of the Fund's average daily
net asset value in excess of $500,000,000. Prior to January 1, 1994, the Fund
paid a monthly management fee to the Adviser equivalent on an annual basis, to
the sum of (a) 0.75% of the first $250,000,000 of the Fund's average daily net
asset value, (b) 0.625% of the next $250,000,000, and (c) 0.50% of the Fund's
average daily net asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average
14
<PAGE> 249
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Gold & Government Fund
daily net asset value, 2.0% of the next $70,000,000 and 1.5% of the remaining
average daily net asset value.
John Hancock Broker Distribution Services, Inc. ("Broker Services"), a
wholly-owned subsidiary of the Adviser, and Freedom Distributors Corporation
("FDC") act as Co-Distributors for shares of the Fund. For the year ended
October 31, 1994, net sales charges received on sales of Class A shares amounted
to $49,048. Out of this amount, $7,882 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $15,006 was paid
as sales commissions to unrelated broker-dealers and $26,160 was paid as sales
commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"). The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company, is the indirect sole shareholder of Distributors and John
Hancock Freedom Securities Corporation and its subsidiaries, which include FDC,
Tucker Anthony and Sutro, all of which are broker-dealers. Brokerage commissions
to Tucker Anthony in connection with portfolio transactions of the Fund, for the
year ended October 31, 1994, amounted to $1,750.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% (4.0% on purchases made prior to January 1, 1994) of the
lesser of the current market value at the time of redemption or the original
purchase cost of the shares being redeemed. Proceeds from the CDSC are paid to
Broker Services and are used in whole or in part to defray its expenses related
to providing distribution related services to the Fund in connection with the
sale of Class B shares. For the year ended October 31, 1994 the contingent
deferred sales charges received by Broker Services amounted to $85,979.
In addition, to compensate the Co-Distributors for the services they
provide as distributors of shares of the Fund, the Fund has adopted a
Distribution Plan with respect to Class A and Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. Accordingly, the Fund will make
payments to the Co-Distributors, for distribution and service expenses at an
annual rate not to exceed 0.30% (0.25% prior to January 1, 1994) of the Fund's
average daily net assets attributable to Class A shares and 1.00% (0.75% prior
to January 1, 1994) of the Fund's average daily net assets attributable to Class
B shares, to reimburse the Co-Distributor for their distribution/service costs.
Up to a maximum of 0.25% of these payments may be service fees as defined by the
amended Rules of Fair Practice of the National Association of Securities
Dealers, which became effective July 7, 1993. Under the amended Rules of Fair
Practice, curtailment of a portion of the Fund's 12b-1 payments could occur
under certain circumstances. In order to comply with this rule, the 12b-1 fee
was decreased on Class B shares to 0.90% effective May 1, 1994 and to 0.95%
effective October 1, 1994.
The Fund has a transfer agent agreement with John Hancock Fund Services,
Inc. ("Fund Services"), a wholly-owned subsidiary of The Berkeley Financial
Group. The Fund pays Fund Services a monthly transfer agent fee equivalent, on
an annual basis, to 0.23% and 0.25% of the average daily net asset value of
Class A and Class B shares of the Fund, respectively, plus out of pocket
expenses incurred by Fund Services on behalf of the Fund for proxy mailings.
Messers. Edward J. Boudreau, Jr. and Hugh A. Dunlap, Jr. are directors
and officers of the Adviser, and its affiliates, as well as Trustees of the
Fund. The compensation of unaffiliated Trustees is borne by the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the year
ended October 31, 1994, aggregated $42,112,765 and $18,500,861, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies, during the year ended October 31, 1994, aggregated $47,042,392 and
$80,605,746, respectively.
15
<PAGE> 250
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Gold & Government Fund
The cost of investments owned at October 31, 1994 (including the
short-term investments) for Federal income tax purposes was $56,652,036. Gross
unrealized appreciation and depreciation of investments aggregated $1,516,569
and $670,050, respectively, resulting in net unrealized appreciation of
$846,519.
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified the
accumulated realized gain of $15,218 to undistributed net investment income.
This represents the cumulative amount necessary to report these balances on a
tax basis, excluding certain temporary differences, as of October 31, 1994.
Additional adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the Fund,
are primarily attributable to certain differences in the computation of
distributable income and capital gains under federal tax rules versus
generally accepted accounting principles.
16
<PAGE> 251
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Gold & Government Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Freedom Investment Trust and to the Shareholders of
John Hancock Freedom Gold & Government Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Freedom Gold &
Government Fund (the "Fund") (a portfolio of Freedom Investment Trust) at
October 31, 1994, the results of its operations, the changes in its net assets
and the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1994 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 16, 1994
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is furnished with
respect to the taxable distributions of the Fund during its fiscal year ended
October 31, 1994.
The Fund designated distributions to shareholders of $151,683 as a
long-term capital gain dividend. These amounts were reported on the 1993 U.S.
Treasury Department Form 1099-DIV.
For the fiscal year ended October 31, 1994, 3.7% of the ordinary
income distributions qualify for the corporate dividends received deduction.
17
<PAGE> 252
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE Fund OWNS, IS DUE AND OWES ON OCTOBER 31, 1994. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies
obligations (cost - $499,049,917).................. $445,872,585
Short-term investments (cost - $61,555,608).......... 61,555,608
------------
507,428,193
Receivable for shares sold............................. 131,794
Interest receivable.................................... 7,277,403
Other assets........................................... 23,327
------------
Total Assets................. 514,860,717
---------------------------------------------
LIABILITIES:
Dividend payable....................................... 1,945,038
Payable for shares repurchased......................... 222,710
Payable to John Hancock Advisers, Inc.
and affiliates - Note B.............................. 330,535
Accounts payable and accrued expenses.................. 91,439
------------
Total Liabilities............ 2,589,722
---------------------------------------------
NET ASSETS:
Capital paid-in........................................ 582,246,061
Accumulated net realized loss on investments and
financial futures contracts.......................... ( 16,797,734)
Net unrealized depreciation of investments............. ( 53,177,332)
------------
Net Assets $512,270,995
=============================================
NET ASSET VALUE PER SHARE:
(Based on net assets and shares of beneficial interest
outstanding - unlimited number of shares authorized
with no par value, respectively)
Class A - $315,372,098 / 34,135,155.................... $ 9.24
=======================================================================
Class B - $196,898,897 / 21,336,247.................... $ 9.23
=======================================================================
MAXIMUM OFFERING PRICE PER SHARE:*
Class A - ($9.24 x 104.71%)............................ $ 9.68
=======================================================================
</TABLE>
*On single retail sales of less than $100,000. On sales of $100,000 or
more and on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND.IT ALSO SHOWS NET GAINS (LOSSES) FOR THE
PERIOD STATED.
STATEMENT OF OPERATIONS
Year ended October 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................... $ 44,423,481
------------
Expenses:
Distribution/service fee - Note B
Class A............................................ 1,008,214
Class B............................................ 2,064,965
Investment management fee - Note B 2,815,642
Transfer agent fee - Note B
Class A............................................ 1,191,522
Class B............................................ 275,379
Trustees' fees....................................... 128,950
Custodian fee........................................ 110,898
Registration and filing fees......................... 88,861
Printing............................................. 58,257
Legal fees........................................... 54,605
Auditing fee......................................... 44,138
Miscellaneous........................................ 27,601
------------
Total Expenses............... 7,869,032
---------------------------------------------
Net Investment Income........ 36,554,449
---------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FINANCIAL FUTURES CONTRACTS:
Net realized loss on investments sold.................. ( 16,632,554)
Net realized gain on financial futures contracts....... 223,650
Change in net unrealized appreciation/depreciation
of investments....................................... ( 60,739,209)
------------
Net Realized and Unrealized
Loss on Investments and
Financial Futures Contracts.. ( 77,148,113)
---------------------------------------------
Net Decrease in Net Assets
Resulting from Operations.... ($ 40,593,664)
=============================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 253
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
1994 1993
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income......................................................................... $ 36,554,449 $ 37,071,327
Net realized gain (loss) on investments sold and financial futures contracts.................. ( 16,408,904) 30,013,632
Change in net unrealized appreciation/depreciation of investments............................. ( 60,739,209) 3,023,333
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations............................. ( 40,593,664) 70,108,292
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.6544 and $0.6844 per share, respectively)..................................... ( 22,812,484) ( 23,375,780)
Class B - ($0.6130 and $0.6637 per share, respectively)..................................... ( 13,741,965) ( 13,718,339)
Distributions from net realized gain on investments sold
Class A - ($0.3080 and $0.0064 per share, respectively)..................................... ( 10,604,649) ( 219,097)
Class B - ($0.3080 and $0.0064 per share, respectively)..................................... ( 6,971,522) ( 126,288)
------------ ------------
Total Distributions to Shareholders......................................................... ( 54,130,620) ( 37,439,504)
------------ ------------
FROM FUND SHARE TRANSACTIONS - NET*............................................................. ( 12,554,565) 38,941,967
------------ ------------
NET ASSETS:
Beginning of period........................................................................... 619,549,844 547,939,089
------------ ------------
End of period................................................................................. $512,270,995 $619,549,844
============ ============
</TABLE>
<TABLE>
<CAPTION>
* ANALYSIS OF FUND SHARE TRANSACTIONS: YEAR ENDED OCTOBER 31,
------------------------------------------------------------
1994 1993
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold................................................... 3,159,870 $ 31,833,752 4,358,792 $ 46,379,634
Shares issued to shareholders in reinvestment of
distributions............................................... 2,873,408 28,806,391 1,887,905 20,038,804
----------- ------------ ------------ ------------
6,033,278 60,640,143 6,246,697 66,418,438
Less shares repurchased....................................... ( 6,370,807) ( 63,185,012) ( 5,865,597) ( 62,292,198)
----------- ------------ ------------ ------------
Net increase (decrease)....................................... ( 337,529) ($ 2,544,869) 381,100 $ 4,126,240
=========== ============ ============ ============
CLASS B
Shares sold................................................... 3,469,697 $ 34,758,586 6,115,799 $ 64,989,278
Shares issued to shareholders in reinvestment of
distributions............................................... 1,168,067 11,734,449 667,324 7,086,885
----------- ------------ ------------ ------------
4,637,764 46,493,035 6,783,123 72,076,163
Less shares repurchased....................................... ( 5,742,895) ( 56,502,731) ( 3,501,127) ( 37,260,436)
----------- ------------ ------------ ------------
Net increase (decrease)....................................... ( 1,105,131) ($ 10,009,696) 3,281,996 $ 34,815,727
=========== ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 254
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------
1994 1993 1992(a) 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period....................... $ 10.89 $ 10.29 $ 10.51
-------- -------- --------
Net Investment Income...................................... 0.65 0.68** 0.64
Net Realized and Unrealized Gain (Loss) on Investments and
Financial Futures Contracts ............................. ( 1.34) 0.61 ( 0.22)
-------- -------- --------
Total from Investment Operations......................... ( 0.69) 1.29 0.42
-------- -------- --------
Less Distributions:
Dividends from Net Investment Income....................... ( 0.65) ( 0.68) ( 0.64)
Distributions from Net Realized Gain on Investments Sold... ( 0.31) ( 0.01) --
-------- -------- --------
Total Distributions...................................... ( 0.96) ( 0.69) ( 0.64)
-------- -------- --------
Net Asset Value, End of Period............................. $ 9.24 $ 10.89 $ 10.29
======== ======== ========
Total Investment Return at Net Asset Value................. ( 6.66%) 12.89% 4.93%*
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).................. $315,372 $375,416 $350,907
Ratio of Expenses to Average Net Assets.................... 1.23% 1.30% 1.06%*
Ratio of Net Investment Income to Average Net Assets....... 6.62% 6.47% 7.11%*
Portfolio Turnover Rate.................................... 127% 273% 140%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period....................... $ 10.88 $ 10.28 $ 10.29 $ 9.83 $ 10.01
-------- -------- -------- -------- --------
Net Investment Income...................................... 0.61 0.66** 0.76 0.85 0.85+
Net Realized and Unrealized Gain (Loss) on Investments and
Financial Futures Contracts.............................. ( 1.34) 0.61 -- 0.51 ( 0.25)
-------- -------- -------- -------- --------
Total from Investment Operations....................... ( 0.73) 1.27 0.76 1.36 0.60
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income....................... ( 0.61) ( 0.66) ( 0.77) ( 0.90) ( 0.78)
Distributions from Net Realized Gain on Investments Sold... ( 0.31) ( 0.01) -- -- --
-------- -------- -------- -------- --------
Total Distributions.................................... ( 0.92) ( 0.67) ( 0.77) ( 0.90) ( 0.78)
-------- -------- -------- -------- --------
Net Asset Value, End of Period............................. $ 9.23 $ 10.88 $ 10.28 $ 10.29 $ 9.83
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value................. ( 7.05%) 12.66% 7.58% 14.46% 6.24%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).................. $196,899 $244,133 $197,032 $164,347 $133,778
Ratio of Expenses to Average Net Assets.................... 1.64% 1.51% 1.55% 1.51% 1.54%+
Ratio of Net Investment Income to Average Net Assets 6.19% 6.23% 7.35% 8.53% 8.54%+
Portfolio Turnover Rate.................................... 127% 273% 140% 62% 63%
</TABLE>
* On an annualized basis.
** On average month end shares outstanding.
+ Net of expense reimbursement per share, amounting to less than $.01
for the year ended October 31, 1990. Absent of such reductions for the
year ended October 31, 1990 the ratio of expenses to average net assets
would have been 1.55% and the ratio of net investment income to average
net assets would have been 8.53%. Without the reimbursement, total
investment return would be lower.
(a) Class A shares commenced operations on January 3, 1992.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 255
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
SCHEDULE OF INVESTMENTS
October 31, 1994
- -------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
SOVEREIGN U.S. GOVERNMENT INCOME FUND ON OCTOBER 31, 1994. THE SCHEDULE
CONSISTS OF TWO MAIN CATEGORIES: U.S. GOVERNMENT AND AGENCIES OBLIGATIONS AND
SHORT-TERM INVESTMENTS. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S
"CASH" POSITION, ARE LISTED LAST.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000's MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- -------- -------- --------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES SECURITIES
GOVERNMENTAL - U.S. (66.78%)
United States Treasury, Bond.......................................... 10.750% 08-15-05 $121,885 $147,099,350
United States Treasury, Bond.......................................... 9.250 02-15-16 175,000 195,014,750
------------
342,114,100
Governmental - U.S. Agencies (20.26%) ------------
Federal Home Loan Mortgage Corp,
CMO REMIC 1064-D.................................................... 8.250 08-15-19 5,104 5,088,479
CMO REMIC 1122-E.................................................... 8.000 05-15-20 8,983 8,877,353
CMO REMIC 1142-H.................................................... 7.950 12-15-20 10,000 9,582,813
CMO REMIC 1427-S.................................................... 7.021# 12-15-97 3,656 3,231,874
CMO REMIC 1436-SC................................................... 7.188# 12-15-97 3,167 2,765,800
CMO REMIC 1442-S.................................................... 7.020# 12-15-97 7,754 6,864,432
CMO REMIC 1516-S.................................................... 6.176# 06-15-00 5,137 4,009,681
Federal National Mortgage Association,
GTD REMIC Pass Thru Ctf 1990-42-E................................... 9.800 05-25-19 17,901 18,175,178
GTD REMIC Pass Thru Ctf 1991-76-M................................... 9.000 07-25-06 5,000 5,081,250
GTD REMIC Pass Thru Ctf 1991-159-C.................................. 7.000 10-25-04 20,000* 19,437,500
GTD REMIC Pass Thru Ctf 1991-G8-E................................... 9.000 04-25-21 6,000 6,037,500
GTD REMIC Pass Thru Ctf 1992-212-SA................................. 4.928# 11-25-99 2,889 2,131,811
GTD REMIC Pass Thru Ctf G 17-B...................................... 8.750 09-25-19 2,484 2,500,524
Multicurrency PERLS................................................. 10.500 08-29-95 1,000 529,790
Multicurrency PERLS................................................. 11.450 07-10-96 1,000 342,290
Multicurrency PERLS................................................. 12.950 03-09-95 1,000 355,060
Multicurrency PERLS................................................. 13.050 06-07-95 1,500 344,370
Financing Corp.,
Bond Ser C.......................................................... 9.800 11-30-17 7,000 8,022,630
Student Loan Marketing Association,
Multicurrency PERLS................................................. 10.000 11-19-96 1,000 330,190
Multicurrency PERLS................................................. 11.100# 04-07-97 200 49,960
------------
103,758,485
TOTAL U.S. GOVERNMENT AND ------------
AGENCIES SECURITIES
(Cost $499,049,917) ( 87.04%) 445,872,485
------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 256
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000's Market
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- -------- -------- --------- -----------
<S> <C> <C> <C> <C>
SHORT TERM INVESTMENTS
Joint Repurchase Agreement (0.23%)
Investment in a joint repurchase agreement transaction with
Kidder Peabody & Co. Inc., Dated 10-31-94, Due 11-01-94
(secured by U.S. Treasury Bond, 9.00% Due 11-15-18,
U.S. Treasury Notes, 6.75% Due 02-28-97 and 5.625% Due 01-31-98) Note A... 4.770% 11-01-94 $ 1,203 $ 1,203,000
------------
GOVERNMENTAL - U.S. AGENCIES (11.78%)
Federal Home Loan Bank,..................................................... 4.620 11-04-94 13,000 12,994,995
Federal Home Loan Mortgage Corp,............................................ 4.650 11-02-94 28,407 28,403,331
Federal Home Loan Mortgage Corp,............................................ 4.660 11-02-94 15,500 15,497,994
Federal National Mortgage Association,...................................... 4.650 11-01-94 3,455 3,455,000
------------
60,351,320
------------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account Current Rate 2.15%........................... 1,288
------------
TOTAL SHORT-TERM INVESTMENTS ( 12.01%) 61,555,608
------- ------------
TOTAL INVESTMENTS ( 99.05%) $507,428,193
======= ============
</TABLE>
* Securities, other than short-term investments, newly added to the
portfolio during the year ended October 31, 1994.
# Represents rate in effect on October 31, 1994.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 257
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
NOTE A -
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end management investment
company registered under the Investment Company Act of 1940. The Trust
consists of five series portfolios: John Hancock Sovereign U.S. Government
Income Fund (the "Fund"), John Hancock Freedom Gold & Government Fund, John
Hancock Freedom Regional Bank Fund, John Hancock Sovereign Achievers Fund and
John Hancock Managed Tax-Exempt Fund.
The Trustees have authorized the issuance of three classes of the
Fund, designated as Class A, Class B and Class C shares. The shares of each
class represent an interest in the same portfolio of investments of the Fund
and have equal rights to voting, redemption, dividends, and liquidation,
except that certain expenses, subject to the approval of the Trustees, may be
applied differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission and the Internal
Revenue Service. Shareholders of a class which bears distribution/service
expenses under the terms of a distribution plan, have exclusive voting rights
regarding such distribution plan. No Class C shares of the Fund have been
issued as of October 31, 1994. Significant accounting policies of the Fund
are as follows:
VALUATION OF INVESTMENTS Obligations of the U.S. government and its agencies
have an over-the-counter primary market and are valued on the basis of
valuations furnished by a pricing service which determines valuations for
normal institutional size trading units, without exclusive reliance upon
quoted prices. Short-term debt investments which have a remaining maturity of
60 days or less are valued at amortized cost, which generally approximates
market value. Investment securities for which no current market quotations
are available are valued at fair value based on procedures approved by the
Trustees.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial
Group, may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date
of purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements
of the Internal Revenue Code that are applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investment, to its shareholders. Therefore, no federal
income tax provision is required. For federal income tax purposes, the
Fund has $16,832,068 of capital loss carryforwards available, to the
extent provided by regulations, to offset future net realized capital
gains. If such carryforwards are used by the Fund, no capital gain
distributions will be made. The carryforwards expire as follows: October 31,
1997 - $282,637, and October 31, 2002 - $16,549,431.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment
securities is recorded on the ex-dividend date. Interest income on investment
securities is recorded on the accrual basis.
The fund records all distributions to shareholders from net
investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax regulations, which
may differ from generally accepted accounting principles. Dividends paid by
the Fund with respect to each class of shares will be calculated in the same
manner, at the same time and will be in the same amount, except for the
effect of expenses that may be applied differently to each class as explained
previously.
EXPENSES The majority of the expenses of the Trusts are directly identifiable
to an individual Fund. Expenses which are not readily identifiable to a
specific Fund are allocated in such manner as deemed
12
<PAGE> 258
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
equitable, taking into consideration, among other things, the nature and type
of expense and the relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class
of shares based on the appropriate net assets of the respective classes.
Transfer agent expenses and distribution/service fees if any, are calculated
daily at the class level based on the appropriate net assets of each class
and the specific expense rate(s) applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on
securities from either the date of issue or the date of purchase over the
life of the security, as required by the Internal Revenue Code.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates. At the
time the 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", equal to a certain percentage of the
value of the financial futures contract being traded. Each day, the futures
contract is valued at the official settlement price of the board of trade or
U.S. commodity exchange. 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. Daily variation margin adjustments,
arising from this "Mark to market", are recorded by the Fund as unrealized gains
or losses.
When the contracts are closed, the Fund recognizes a gain or loss.
Risks of entering into futures contracts include the possibility that there
may be an illiquid market and/or that a change in the value of the contract
may not correlate with changes in the value of the underlying securities.
For Federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of futures
contracts.
At October 31, 1994, there were no open positions in financial
futures contracts.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.50% of the first $500,000,000 of the
Fund's average daily net asset value, and (b) 0.45% of the Fund's average
daily net asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most
restrictive state limit where the Fund is registered to sell shares of
beneficial interest, the fee payable to the Adviser will be reduced to the
extent of such excess and the Adviser will make additional arrangements
necessary to eliminate any remaining excess expenses. The current limits are
2.5% of the first $30,000,000 of the Fund's average daily net asset value,
2.0% of the next $70,000,000, and 1.5% of the remaining average daily net
asset value.
John Hancock Broker Distribution Services, Inc. ("Broker Services"),
a wholly-owned subsidiary of the Adviser, and Freedom Distributors
Corporation ("FDC") act as Co-Distributors for shares of the Fund. For the
year ended October 31, 1994, net sales charges received on sales of Class A
shares of the Fund amounted to $768,336. Out of this amount, $94,695 was
retained and used for printing prospectuses, advertising, sales literature,
and other purposes, $79,037 was paid as sales commissions to unrelated broker-
dealers and $594,604 was paid as sales commissions to sales personnel of John
Hancock Distributors, Inc. ("Distributors"), Tucker Anthony, Incorporated
("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"). The Adviser's indirect
parent, John Hancock Mutual Life Insurance Company, is the indirect sole
shareholder of Distributors and John Hancock Freedom Securities Corporation
and its subsidiaries, which include FDC, Tucker Anthony and Sutro, all of
which are broker-dealers.
Class B shares which are redeemed within six years of purchase will
be subject to a contingent deferred sales charge ("CDSC") at
13
<PAGE> 259
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
declining rates beginning at 5.0% (4.0% on purchases made prior to January 1,
1994) of the lesser of the current market value at the time of redemption or the
original purchase cost of the shares being redeemed. Proceeds from the CDSC are
paid to Broker Services and are used in whole or in part to defray its expenses
related to providing distribution related services to the Fund in connection
with the sale of Class B shares. For the year ended October 31, 1994 the
contingent deferred sales charges received by Broker Services amounted to
$481,153.
In addition, to compensate the Co-Distributors for the services they
provide as distributors of shares of the Fund, the Fund has adopted a
Distribution Plan with respect to Class A and Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. Accordingly, the Fund will
make payments to the Co-Distributors for distribution and service expenses at
an annual rate not to exceed 0.30% of the Fund's average daily net assets
attributable to Class A shares and 1.00% of the Fund's average daily net
assets attributable to Class B shares (0.75% prior to January 1, 1994) to
reimburse the Co-Distributors for their distribution/service costs. Up to a
maximum of 0.25% of these payments may be service fees as defined by the
amended Rules of Fair Practice of the National Association of Securities
Dealers, which became effective July 7, 1993. Under the amended Rules of Fair
Practice, curtailment of a portion of the Fund's 12b-1 payments could occur
under certain circumstances. In order to comply with this rule, the 12b-1 fee
was decreased on Class B shares to 0.95% effective May 1, 1994, 0.90%
effective June 1, 1994 and increased to 1.00% effective September 1, 1994.
The Fund has a transfer agent agreement with John Hancock Fund
Services, Inc. ("Fund Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. The Fund pays Fund Services a monthly transfer agent fee
equivalent, on an annual basis, to 0.34% and 0.12% of the average daily net
asset value of Class A and Class B shares of the Fund, respectively, plus out
of pocket expenses incurred by Fund Services on behalf of the Fund for proxy
mailings. The transfer agent fee, on an annual basis, attributable to Class C
shares when they become outstanding is 0.10% of its average daily net asset
value.
Messrs. Edward J. Boudreau, Jr. and Hugh A. Dunlap Jr., are directors
and officers of the Adviser and its affiliates, as well as Trustees of the
Fund. The compensation of unaffiliated Trustees is borne by the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of obligations of the U.S.
government and its agencies, other than short-term securities, during the
year ended October 31, 1994 aggregated $620,102,207 and $701,816,344,
respectively.
The cost of investments owned at October 31, 1994 (including the
short-term investments) for Federal income tax purposes was $560,605,525.
Gross unrealized appreciation and depreciation of investments aggregated
$59,930 and $53,237,262, respectively, resulting in net unrealized
depreciation of $53,177,332.
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified $12,772,908
of capital paid-in to accumulated net realized loss on investments and
financial futures contracts. This represents the cumulative amount necessary
to report these balances on a tax basis, excluding certain temporary
differences, as of October 31, 1994. Additional adjustments may be needed in
subsequent reporting periods. These reclassifications, which have no impact
on the net asset value of the Fund, are primarily attributable to certain
differences in the computation of distributable income and capital gains
under federal tax rules versus generally accepted accounting principles.
14
<PAGE> 260
John Hancock Funds - Sovereign U.S. Government Income Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Freedom Investment Trust and to the Shareholders of
John Hancock Sovereign U.S. Government Income Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Sovereign U.S. Income
Fund (the "Fund") (a portfolio of Freedom Investment Trust) at October 31, 1994,
the results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements" ) are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1994 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Boston, Massachusetts
December 16, 1994
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is furnished with
respect to the taxable distributions of the Fund during its fiscal year ended
October 31, 1994.
The Fund designated distributions to shareholders of $7,903,440 as a
long-term capital gain dividend. These amounts were reported on the 1993 U.S.
Treasury Department Form 1099-DIV.
None of the distributions noted above qualify for the corporate
dividends received deduction.
15
<PAGE> 261
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1994. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value - Note C:
Common and preferred stocks
and warrants (cost - $628,246,596).................... $670,963,169
Bonds (cost - $5,549,263)............................... 5,544,125
Joint repurchase agreement (cost - $64,987,000)......... 64,987,000
Corporate savings account............................... 12,220
------------
741,506,514
Receivable for investments sold........................... 977,109
Receivable for shares sold................................ 933,867
Dividends receivable...................................... 958,395
Interest receivable....................................... 136,733
Other assets.............................................. 3,662
------------
Total Assets........................ 744,516,280
--------------------------------------------------
LIABILITIES:
Payable for investments purchased......................... 4,297,950
Payable for shares repurchased............................ 275,367
Payable to John Hancock Advisers, Inc. and affiliates -
Note B.................................................. 643,077
Accounts payable and accrued expenses..................... 114,892
------------
Total Liabilities................... 5,331,286
--------------------------------------------------
NET ASSETS:
Capital paid-in........................................... 684,823,005
Accumulated net realized gain on investments.............. 11,425,842
Net unrealized appreciation of investments................ 42,711,435
Undistributed net investment income....................... 224,712
------------
Net Assets.......................... $739,184,994
==================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value, respectively)
Class A - $216,977,533/10,084,092......................... $ 21.52
========================================================================
Class B - $522,207,461/24,369,889......................... $ 21.43
========================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($21.52 x 105.26%).............................. $ 22.65
========================================================================
</TABLE>
* On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
STATEMENT OF OPERATIONS
Year ended October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................. $11,382,944
Interest.................................................. 3,142,298
-----------
14,525,242
Expenses:
Investment management fee - Note B...................... 3,686,366
Distribution/service fee - Note B
Class A............................................... 443,763
Class B............................................... 3,063,441
Transfer agent fee - Note B
Class A............................................... 227,090
Class B............................................... 567,889
Registration and filing fees............................ 146,916
Custodian fee........................................... 128,328
Trustees' fees.......................................... 71,855
Printing................................................ 49,818
Auditing fee............................................ 39,732
Legal fees.............................................. 34,117
Miscellaneous........................................... 22,793
-----------
Total Expenses...................... 8,482,108
--------------------------------------------------
Net Investment Income............... 6,043,134
--------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments sold..................... 11,428,717
Change in net unrealized appreciation/
depreciation of investments............................. ( 7,116,756)
-----------
Net Realized and Unrealized
Gain on Investments................. 4,311,961
--------------------------------------------------
Net Increase in Net Assets
Resulting from Operations........... $10,355,095
==================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 262
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------
1994 1993
------------ --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............................................................ $ 6,043,134 $ 1,723,421
Net realized gain on investments sold............................................ 11,428,717 13,549,549
Change in net unrealized appreciation/depreciation of investments................ ( 7,116,756) 30,764,249
------------ ------------
Net Increase in Net Assets Resulting from Operations........................... 10,355,095 46,037,219
------------ ------------
INCOME EQUALIZATION*
Amount transferred to capital paid-in............................................ -- 96,487
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.3356 and $0.2596 per share, respectively)........................ ( 2,449,060) ( 867,706)
Class B - ($0.2112 and $0.1673 per share, respectively)........................ ( 3,373,113) ( 963,482)
Distributions from net realized gain on investments sold
Class A - ($1.0644 and $1.6913 per share, respectively)........................ ( 4,773,906) ( 3,457,676)
Class B - ($1.0644 and $1.6913 per share, respectively)........................ ( 8,743,106) ( 6,042,278)
------------ ------------
Total Distributions to Shareholders.......................................... ( 19,339,185) ( 11,331,142)
------------ ------------
FROM FUND SHARE TRANSACTIONS - NET**
Net increase in net assets from Fund share transactions.......................... 482,203,467 143,937,397
Amount transferred from undistributed net investment
income to capital paid-in........................................................ -- ( 96,487)
------------ ------------
Total from Fund Share Transactions - Net....................................... 482,203,467 143,840,910
------------ ------------
NET ASSETS:
Beginning of period.............................................................. 265,965,617 87,322,143
------------ ------------
End of period (including undistributed net investment
income of $224,712 and $49,020, respectively)................................... $739,184,994 $265,965,617
============ ============
</TABLE>
** ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------
1994 1993
----------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold.................................... 7,852,429 $170,793,204 4,221,116 $ 83,242,907
Shares issued to shareholders
in reinvestment of distributions............... 323,274 6,649,805 210,867 3,794,220
---------- ------------ ------------ ------------
8,175,703 177,443,009 4,431,983 87,037,127
Less shares repurchased........................ ( 2,446,139) ( 52,952,434) ( 1,869,081) ( 37,112,792)
---------- ------------ ------------ ------------
Net increase................................... 5,729,564 $124,490,575 2,562,902 $ 49,924,335
========== ============ ============ ============
CLASS B
Shares sold.................................... 17,745,423 $386,853,695 5,859,394 $116,424,420
Shares issued to shareholders in
reinvestment of distributions.................. 519,637 10,621,844 340,336 6,061,705
---------- ------------ ------------ ------------
18,265,060 397,475,539 6,199,730 122,486,125
Less shares repurchased........................ ( 1,862,961) ( 39,762,647) ( 1,444,546) ( 28,473,063)
---------- ------------ ------------ ------------
Net increase................................... 16,402,099 $357,712,892 4,755,184 $ 94,013,062
========== ============ ============ ============
</TABLE>
* Equalization accounting was discontinued November 1, 1992.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 263
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1994 1993 1992 1991 1990
-------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
CLASS A**
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........................ $ 21.62 $ 17.47 $ 13.47
-------- -------- -------
Net Investment Income....................................... 0.39*** 0.26*** 0.21
Net Realized and Unrealized Gain (Loss) on Investments...... 0.91 5.84 3.98
-------- -------- -------
Total from Investment Operations.......................... 1.30 6.10 4.19
-------- -------- -------
Less Distributions:
Dividends from Net Investment Income........................ ( 0.34) ( 0.26) ( 0.19)
Distributions from Net Realized Gain on Investments Sold.... ( 1.06) ( 1.69) --
-------- -------- -------
Total Distributions....................................... ( 1.40) ( 1.95) ( 0.19)
-------- -------- -------
Net Asset Value, End of Period.............................. $ 21.52 $ 21.62 $ 17.47
======== ======== =======
Total Investment Return at Net Asset Value.................. 6.44% 37.45% 31.26%(a)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................... $216,978 $ 94,158 $31,306
Ratio of Expenses to Average Net Assets..................... 1.34% 1.35% 1.41%*
Ratio of Net Investment Income to Average Net Assets........ 1.78% 1.29% 1.64%*
Portfolio Turnover Rate..................................... 13% 35% 53%
CLASS B
PER SHARE OPERATING PERFOMANCE
Net Asset Value, Beginning of Period........................ $ 21.56 $ 17.44 $ 13.76 $ 8.13 $ 13.00
-------- -------- ------- ------- -------
Net Investment Income....................................... 0.23*** 0.15*** 0.18 0.29 0.30
Net Realized and Unrealized Gain (Loss) on Investments...... 0.91 5.83 4.56 5.68 ( 4.19)
-------- -------- ------- ------- -------
Total from Investment Operations............................ 1.14 5.98 4.74 5.97 ( 3.89)
-------- -------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income........................ ( 0.21) ( 0.17) ( 0.28) ( 0.34) ( 0.19)
Distributions from Net Realized Gain on Investments Sold.... ( 1.06) ( 1.69) ( 0.78) -- ( 0.76)
Distributions from Capital Paid-In.......................... -- -- -- -- ( 0.03)
-------- -------- ------- ------- -------
Total Distributions......................................... ( 1.27) ( 1.86) ( 1.06) ( 0.34) ( 0.98)
-------- -------- ------- ------- -------
Net Asset Value, End of Period.............................. $ 21.43 $ 21.56 $ 17.44 $ 13.76 $ 8.13
======== ======== ======= ======= =======
Total Investment Return at Net Asset Value.................. 5.69% 36.71% 37.20% 75.35% ( 32.29%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................... $522,207 $171,808 $56,016 $52,098 $38,992
Ratio of Expenses to Average Net Assets..................... 2.06% 1.88% 1.96% 2.04% 1.99%
Ratio of Net Investment Income to Average Net Assets........ 1.07% 0.76% 1.21% 2.65% 2.51%
Portfolio Turnover Rate..................................... 13% 35% 53% 75% 56%
</TABLE>
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
*** On average month end shares outstanding.
(a) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 264
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
REGIONAL BANK FUND ON OCTOBER 31, 1994. IT'S DIVIDED INTO FOUR MAIN CATEGORIES:
COMMON STOCKS AND WARRANTS, PREFERRED STOCKS, BONDS, AND SHORT-TERM INVESTMENTS.
COMMON STOCKS ARE FURTHER BROKEN DOWN BY REGION. sHORT-TERM INVESTMENTS, WHICH
REPRESENT THE fUND'S "CASH" POSITION, ARE LAST.
SCHEDULE OF INVESTMENTS
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
STATE, ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- ------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS
MONEY CENTER BANKS (2.27%)
Chase Manhattan Corp. (NY)................ 208,000 $ 7,488,000
Chemical Banking Corp. (NY)............... 71,000 2,698,000
Morgan (J.P.) & Co., Inc. (NY)............ 106,000 6,558,750
------------
16,744,750
------------
SUPER REGIONALS (10.82%)
Banc One Corp. (OH)... ................... 295,250 8,525,344
BankAmerica Corp. (CA).................... 105,987* 4,610,435
Bank of Boston Corp. (MA)................. 416,250 11,967,188
Bank of New York, Inc. (NY)............... 112,000 3,556,000
Barnett Banks, Inc. (FL).................. 315,000 13,072,500
First Bank Systems, Inc. (MN)............. 15,699 584,788
First Fidelity Bancorp. (NJ).............. 38,000* 1,710,000
First Interstate Bancorp. (CA)............ 149,500* 11,960,000
First Union Corp. (NC).................... 51,500 2,317,500
Fleet Financial Group, Inc. (RI).......... 195,000* 6,678,750
KeyCorp. (OH)............................. 159,905* 4,577,281
Mellon Bank Corp. (PA).................... 18,801 1,045,806
NationsBank Corp. (NC).................... 72,000 3,564,000
NBD Bancorp., Inc. (MI)................... 27,008 830,496
Norwest Corp. (MN)........................ 60,500* 1,482,250
PNC Bank Corp. (PA)....................... 50,000* 1,175,000
Wachovia Corp. (NC)....................... 70,000* 2,345,000
------------
80,002,338
------------
REGIONALS (55.13%)
ABC Bancorp. (GA)......................... 60,000* 825,000
ANB Corp. (IN)............................ 48,500* 1,188,250
American Bancorp. (WV).................... 74,000 1,147,000
AmSouth Bancorp. (AL)..................... 402,293 11,968,217
Bancfirst Corp. (OK)...................... 43,600* 643,100
Bancorp. Hawaii, Inc (HI)................. 550,000* 15,193,750
Bank of New Hampshire Corp. (NH).......... 86,800 2,213,400
Banknorth Group, Inc. (VT)................ 220,000 5,005,000
Bank South Corp. (GA)..................... 87,000* 1,511,625
BB&T Financial Corp. (NC)................. 148,000* 4,366,000
B M J Financial Corp. **(NJ).............. 132,632 1,591,584
BNH Bancshares, Inc. **(CT)............... 645,000 886,875
Boatmens' Bancshares, Inc. (MO)........... 199,734 5,917,120
Brenton Banks, Inc. (IA).................. 154,600 3,053,350
Bryn Mawr Bank Corp. (PA)................. 27,600* 893,550
BT Financial Corp. (PA)................... 19,950* 568,575
California Commercial Bankshares**(CA).... 52,747 243,955
Capital Bank (MO)......................... 79,000 1,905,875
Cardinal Bancshares, Inc. (KY)............ 6,975* 209,250
Carnegie Bancorp. (NJ).................... 45,000* 573,750
CB Bancorp., Inc. **(IN).................. 57,870* 694,440
CB Bancshares, Inc. (HI).................. 30,000 1,005,000
CCB Financial Corp. (NC).................. 30,000* 1,207,500
Central Mtg Bancshares, Inc. (MO)......... 151,000 3,095,500
Centura Banks, Inc. (NC).................. 226,700 4,987,400
CM Bank Holding Co. (LA) (formerly
Calcasieu Marine National Bank)......... 8,000 480,000
Cole Taylor Financial Group, Inc. (IL).... 30,000* 592,500
Colonial BancGroup, Inc. (Class A) (AL)... 166,500 3,808,687
Comerica, Inc. (MI)....................... 311,398 8,602,370
Commerce Bancshares, Inc. (MO)............ 50,250 1,595,438
Commerce Bank (VA)........................ 80,607 2,982,459
Commercial Bankshares, Inc. **(FL)........ 125,000 1,640,625
Community Bank System, Inc. (NY).......... 115,800 3,560,850
Compass Bancshares, Inc. (AL)............. 431,500* 9,600,875
Continental Pacific Bank (CA)............. 30,020 480,320
CoreStates Financial Corp. (PA)........... 181,708* 4,701,695
Crestar Financial Corp. (VA).............. 131,000 5,403,750
CU Bancorp. **(CA)........................ 46,211 352,359
Cupertino National Bancorp. (CA).......... 27,277 262,540
Dauphin Deposit Corp. (PA)................ 53,000 1,219,000
Deposit Guaranty Corp. (MS)............... 108,100* 3,161,925
Evergreen Bancorp., Inc. (NY)............. 95,350 1,573,275
F & M National Corp. (VA)................. 79,950 1,279,200
First American Corp. (TN)................. 257,500 7,885,938
First of America Bank Corp. (MI).......... 447,300 15,152,288
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 265
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
<TABLE>
<CAPTION>
MARKET
STATE, ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- -----------
<S> <C> <C>
REGIONALS (CONTINUED)
First Bancorp. Ohio (OH).................. 50,000 $ 1,190,625
First Citizens Bancshares, Inc.
(Class A) (NC).......................... 5,000 223,750
First Colonial Bankshares Corp.
(Class A) (IL).......................... 36,500 821,250
First Colonial Group, Inc. (PA)........... 21,000 380,625
First Commerce Corp. (LA)................. 377,887 9,919,534
First Commercial Corp.(AR)................ 101,575 2,133,075
First Merchants Corp. (IN)................ 15,000 487,500
First National Bancorp. (GA).............. 33,500 653,250
First Patriot Bankshares **(VA)........... 56,100 378,675
First Security Corp. (UT)................. 105,000 2,756,250
First Source Corp. (IN)................... 45,806 1,139,424
First State Bancorp. (NM)................. 37,000* 490,250
First Tennesse National Corp.(TN)......... 144,750 6,803,250
Firstar Corp. (WI)........................ 151,080 4,475,745
FirstBanc Corp. (MI)...................... 43,050 904,050
Firstbank of Illinois Co. (IL)............ 34,850 1,324,300
FirsTier Financial, Inc. (NE)............. 33,000 1,068,375
FNB Corp. (PA)............................ 33,626 538,020
FNB Rochester Corp. **(NY)................ 153,737* 922,422
Fourth Financial Corp.
(Dep Shares) (KS)....................... 65,000* 1,917,500
Fourth Financial Corp. (KS)............... 25,000 800,000
Franklin Bank, NA (MI).................... 52,500 472,500
Fulton Financial Corp. (PA)............... 162,831 3,012,373
Grenada Sunburst Systems Corp. (MS)....... 23,000 707,250
Hancock Holdings Co. (MS)................. 233,000 6,640,500
Hawkeye Bancorp. (IA)..................... 106,000 2,173,000
Hubco, Inc. (NJ).......................... 75,000 1,612,500
Huntington Bancshares, Inc. (OH).......... 70,000* 1,225,000
Independent Bancorp. **(AZ)............... 187,818 4,131,996
Independent Bank Corp. (MA)............... 100,000 550,000
Integra Financial Corp. (PA).............. 294,980 12,794,757
Interchange Financial Services Corp. (NJ). 80,000 1,280,000
Intercontinental Bank (FL)................ 60,000 1,230,000
Lafayette American Bancorp.,
Inc. **(CT)............................. 306,513* 1,915,706
Liberty Bancorp., Inc. (OK)............... 15,000* 472,500
LSB Bancshares, Inc. (NC)................. 10,727 209,177
Magna Group, Inc. (MO).................... 67,000 1,373,500
Marshall and Ilsley Corp. (WI)............ 184,480* 3,793,370
Mercantile Bancorp., Inc. (MO)............ 322,843* 11,218,777
Mercantile Bankshares Corp. (MD).......... 310,000* 6,510,000
Merchants Bancorp., Inc. (IL)............. 28,800 748,800
Meridian Bancorp., Inc. (PA).............. 295,493 8,550,829
MetroBanCorp **(IN)....................... 75,000* 487,500
Michigan Financial Corp. (MI)............. 61,552 1,200,264
Michigan National Corp. (MI).............. 45,000 3,498,750
Midlantic Corp., Inc. (NJ)................ 35,000 980,000
Mississippi Valley Bancshares (MO)........ 72,000 1,242,000
Mountain Parks Financial Corp. **(CO)..... 35,000 542,500
North Fork Bancorp., Inc. (NY)............ 86,609 1,320,787
North Valley Bank (CA).................... 51,067 1,085,174
Northwest Illinois Bancorp., Inc. (IL).... 102,200 1,814,050
Old Kent Financial Corp. (MI)............. 152,500 4,899,062
One Valley Bancorp. of West Virginia,
Inc. (WV)............................... 24,000 714,000
Pacific Bank N.A. **(CA).................. 76,923* 971,153
Peoples Bank Corp. of Indianapolis (IN)... 22,500* 472,500
Piedmont BankGroup, Inc. (VA)............. 51,850* 1,283,287
Premier Bancorp., Inc. **(LA)............. 270,800* 4,400,500
Premier Bankshares Corp. (VA)............. 85,000* 1,551,250
Premier Financial Services, Inc. (IL)..... 160,500 1,203,750
Princeton National Bancorp., Inc. (IL).... 64,500 943,313
Provident Bancorp., Inc. (OH)............. 97,500 3,266,250
Regions Financial Corp. (AL).............. 65,000* 2,059,687
Republic Bancorp., Inc. (MI).............. 44,911 544,543
Republic New York Corp. (NY).............. 179,000 8,189,250
Riggs National Corp. **(DC)............... 175,000 1,575,000
SC Bancorp. **(CA)........................ 219,051* 1,054,183
Seacoast Banking Corp. of Florida
(Class A) (FL).......................... 98,500 1,846,875
Shawmut National Corp. (MA)............... 646,641* 13,336,971
Signet Banking Corp. (VA)................. 206,000 7,004,000
Simmons First National Corp. (AR)......... 60,000 1,635,000
Southern National Corp. (NC).............. 50,000* 1,031,250
SouthTrust Corp. (AL)..................... 475,500 9,123,656
Southwest Bancorp., Inc. (OK)............. 122,000* 1,708,000
State Financial Services Corp.
(Class A) (WI).......................... 48,000 684,000
Sterling Bancshares (TX).................. 57,000 1,011,750
Summit Bancorp., Inc. (NJ)................ 110,000* 2,323,750
Susquehanna Bancshares, Inc. (PA)......... 172,175 3,927,742
Texas Regional Bancshares, Inc.
(Class A) (TX).......................... 60,000* 735,000
Trico Bancshares (CA)..................... 53,000 848,000
Trustmark Corp. (MS)...................... 72,000 1,260,000
UJB Financial Corp. (NJ).................. 315,000 8,505,000
Union Bank (CA)........................... 48,000 1,422,000
Union Planters Corp. (TN)................. 627,700 14,437,100
US Bancorp. (OR).......................... 412,805 10,216,924
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 266
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
<TABLE>
<CAPTION>
MARKET
STATE, ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- ------------
<S> <C> <C>
REGIONALS (CONTINUED)
USBANCORP, Inc. (PA)...................... 48,000 $ 1,152,000
Vectra Banking Corp. **(CO)............... 35,000* 420,000
Vermont Financial Services (VT)........... 144,900* 3,224,025
Westamerica Bancorp. (CA)................. 67,800 2,152,650
West Coast Bancorp., Inc. (FL)............ 30,000 363,750
Whitney Holding Corp. (LA)................ 307,500 6,841,875
Worthen Banking Corp. (AR)................ 175,000* 5,009,375
Zions Bancorp. (UT)....................... 182,000 6,847,750
------------
407,548,761
------------
THRIFTS (18.73%)
ALBANK Financial Corp. (NY)............... 20,000 447,500
Allied Bank Capital, Inc. **(NC).......... 45,500 1,330,875
American Federal Bank FSB (SC)............ 160,000 1,920,000
American National Savings Bank (MD)....... 40,000* 500,000
AMFED Financial, Inc. (NV)................ 182,500 4,060,625
Anchor Bancorp., Inc. **(NY).............. 150,000* 2,221,875
Astoria Financial Corp. **(NY)............ 315,000* 9,056,250
BankUnited Financial Corp. (FL)........... 20,000 125,000
Bedford Bancshares, Inc. **(VA)........... 30,000* 318,750
Brooklyn Bancorp., Inc. **(NY)............ 401,200* 13,339,900
California Federal Bank **(CA)............ 108,334* 1,245,840
California Financial Holding Co. (CA)..... 126,000* 1,890,000
Calumet Bancorp., Inc. **(IL)............. 40,000 1,370,000
Cenfed Financial Corp. (CA)............... 30,000* 547,500
CENIT Bancorp., Inc. (VA)................. 62,000 1,875,500
Center Banks, Inc. (NY)................... 23,000 287,500
CFX Corp. (NH)............................ 25,606* 460,908
Coast Savings Financial, Inc. **(CA)...... 115,000 1,638,750
Conestoga Bancorp., Inc. **(NY)........... 120,000* 1,320,000
DeerBank Corp. (IL)....................... 12,000 438,000
Dime Savings Bank of New York **(NY)...... 62,000 542,500
Eagle Bancshares (GA)..................... 52,000 1,248,000
Elmira Savings Bank (NY).................. 34,950 629,100
F & C Bancshares, Inc. (FL)............... 112,500 2,320,312
Farmers & Mechanics Bank **(CT)........... 51,300* 718,200
FFW Corp. (IN)............................ 25,000 381,250
Fidelity New York FSB **(NY).............. 25,000* 701,562
First Bankshares, Inc. (MO)............... 40,000* 520,000
Firstfed Michigan Corp. (MI).............. 22,500 466,875
First Federal Capital Corp. (WI).......... 19,945 319,120
First Financial Corp. (WI)................ 40,000 560,000
First Financial Corp. of Western
Maryland (MD)........................... 65,500 1,604,750
First Independence Corp. (KS)............. 35,500* 465,937
First Indiana Corp. (IN).................. 41,166 638,073
First Republic Bancorp., Inc. **(CA)...... 179,162 2,239,525
FirstRock Bancorp., Inc. **(IL)........... 42,000 1,018,500
First Southern Bancorp., Inc. (NC)........ 45,000 1,203,750
FMS Financial Corp. **(NJ)................ 12,000 276,000
Fort Bend Holdings Corp. (TX)............. 44,000 671,000
Glendale Federal Bank **(CA).............. 221,000 2,403,375
Golden West Financial (CA)................ 30,000 1,170,000
GP Financial Corp. (NY)................... 472,000* 10,561,000
Great Lakes Bancorp. **(MI)............... 40,600 1,045,450
Great Southern Bancorp., Inc. (MO)........ 86,000 1,440,500
Harbor Federal Bancorp.,
Inc. **(MD)............................. 80,000* 890,000
Haven Bancorp. **(NY)..................... 182,500 2,532,187
HF Financial Corp. (SD)................... 75,000 2,043,750
HMN Financial, Inc. **(MN)................ 165,000* 1,918,125
Home Federal Bancorp. (IN)................ 7,500* 193,125
Lakeview Financial Corp. (NJ)............. 30,000* 472,500
Landmark Bancshares, Inc. (KS)............ 110,000* 1,265,000
Long Island Bancorp., Inc. **(NY)......... 50,000* 750,000
MAF Bancorp., Inc. (IL)................... 133,500 2,853,562
Marble Financial Corp. (VT)............... 15,000 176,250
Marion Capital Holdings, Inc. (IN)........ 72,500 1,250,625
Marshalltown Financial Corp. **(IA)....... 20,000* 210,000
MassBank Corp. (MA)....................... 30,000* 701,250
Metropolitan Financial Corp. (MN)......... 227,285 5,454,840
MFB Corp. **(IN).......................... 90,000* 1,102,500
MLF Bancorp., Inc. **(PA)................. 55,000* 831,875
Morgan Financial Corp. (CO)............... 21,000 354,375
MSB Bankcorp., Inc. (NY).................. 20,000 430,000
Northeast Federal Corp. **(CT)............ 70,000 673,750
Palfed, Inc. **(SC)....................... 98,000 845,250
Park View Federal Savings Bank **(OH)..... 11,000 247,500
Pennfirst Bancorp., Inc. (PA)............. 67,742* 999,195
Permanent Bancorp., Inc. **(IN)........... 98,500* 1,083,500
Plains Spirit Financial Corp. (IA)........ 50,000 1,200,000
Poughkeepsie Savings Bank **(NY).......... 78,000 390,000
Redfed Bancorp., Inc. **(CA).............. 65,000* 650,000
River Bank America, Inc. **(NY)........... 150,000* 1,725,000
Roosevelt Financial Group, Inc. (MO)...... 484,123 7,322,360
Southern Financial Federal Savings
Bank (VA)............................... 46,549* 651,686
Southern Missouri Bancorp., Inc. (MO)..... 70,000* 770,000
Sovereign Bancorp. (PA)................... 25,498 229,482
St. Paul Bancorp., Inc. (IL).............. 85,000 1,763,750
Sterling Financial Corp. **(WA)........... 63,525 714,656
Suncoast Savings and Loan Assn. **(FL).... 45,000* 281,250
TCF Financial Corp. (MN).................. 34,076 1,328,964
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 267
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
<TABLE>
<CAPTION>
MARKET
STATE, ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- ------------
<S> <C> <C>
THRIFTS (CONTINUED)
TeleBanc Financial Corp. **(VA)............. 100,000* $ 587,500
TR Financial Corp. **(NY)................... 90,000 1,305,000
UF Bancorp, Inc. (IN)....................... 42,700 1,248,975
United Financial Bancorp., Inc. (IN)........ 20,000 515,000
UNSL Financial Corp. (MO)................... 29,000 1,065,750
Virginia First Financial Corp.(VA).......... 130,000* 1,966,250
Washington Mutual Savings Bank (WA)......... 350,000* 6,256,250
WesterFed Financial Corp. (MT).............. 230,000* 3,133,750
WSFS Financial Corp. **(DE)................. 129,400* 517,600
------------
138,441,934
------------
OTHER - FINANCIAL (0.63%)
Financial Security Assurance Holdings Ltd... 10,000* 225,000
First Washington Realty Trust (R)........... 79,470* 1,549,665
KBK Capital Corp. **........................ 50,000* 331,250
Lomas Financial Corp. **.................... 180,000* 810,000
PMC Capital, Inc............................ 25,000 346,875
Prime Residential, Inc...................... 70,000* 1,102,500
Prime Retail, Inc........................... 15,000* 256,875
------------
4,622,165
------------
WARRANTS (0.10%)
Carnegie Bancorp. **(NJ).................... 45,000* 53,438
Glendale Federal Bank **(CA)................ 200,000* 712,500
------------
765,938
------------
TOTAL COMMON STOCKS
AND WARRANTS
(Cost $605,928,027) (87.68%) 648,125,886
------ ------------
PREFERRED STOCKS
California Federal Bank, Ser B,
10.625% (CA).............................. 13,333* 1,356,633
Carolina First Corp. 7.32% (SC)............. 2,200* 59,950
Chevy Chase Savings 13.00% (MD)............. 50,000* 1,350,000
Community Bank, Ser B, 13.00% (CA).......... 40,000* 970,000
FirstFederal Financial Corp., Ser A,
7.00% (OH)................................ 10,000 425,000
First Nationwide Bank 11.50% (CA)........... 30,000* 3,075,000
First Washington Realty Trust
9.75% (WA) (R)............................ 115,248* 2,881,200
Glendale Federal Bank, Ser E,
8.75% (CA)................................ 100,000 3,137,500
Greater NY Savings Bank, Ser B,
12.00% (NY)............................... 120,000 2,940,000
National City Corp. 8.00% (OH).............. 7,000 465,500
Prime Retail Inc., Ser B, 8.50% (DE)........ 50,000* 1,175,000
Riggs National Corp., Ser B,
10.75% (DC)............................... 64,300* 1,607,500
River Bank America Inc., Ser A,
15.00% (NY)............................... 10,000* 265,000
Roosevelt Financial Group,Inc., Ser F,
6.50% (MD)................................ 16,000* 860,000
Southern National Corp., Ser A,
6.75% (NC)................................ 50,000* 1,550,000
Suncoast Savings and Loan Assn., Ser A,
8.00% (FL)................................ 28,000 371,000
Washington Mutual Savings Bank, Ser D,
$6.00 (WA)................................ 4,000 348,000
------------
TOTAL PREFERRED STOCKS
(Cost $22,318,569) ( 3.09%) 22,837,283
------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 268
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- -------- --------------- ------------
<S> <C> <C> <C>
BONDS
Ameribanc, Inc
Conv Sub Cap Note
04-01-95................... 8.00% 500 $ 931,875
Bank of New York, Inc
Conv Note 08-15-01......... 7.50 200 318,000
Chevy Chase Savings
Sub Deb 12-01-05........... 9.25 500* 437,500
Crossland Federal Savings
Sub Deb 09-01-03........... 9.00 2,000 1,850,000
Great Lakes Bancorp
Sr Sub Deb 03-01-06........ 18.00 225 265,500
Riggs National Corp.
Sub Deb 06-15-09........... 9.65 500* 492,500
Sierra Tahoe Bancorp.
Conv Sub Deb 02-01-04...... 8.50 500* 540,000
TeleBanc Financial Corp
Sub Note 05-01-04.......... 11.50 750* 708,750
------------
TOTAL BONDS
(Cost $5,549,263) ( 0.75%) 5,544,125
------ ------------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (8.79%)
Investment in a joint repurchase
transaction agreement with
Kidder Peabody & Co. Inc.,
Dated 10-31-94, Due 11-01-94
(secured by U.S. Treasury Bond,
9.00%, due 11-15-18 and
U.S. Treasury Notes, 6.75%
due 02-28-97 and 5.625%
due 01-31-98) Note A............ 4.77% $64,987 $ 64,987,000
------------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 2.15%.............. 12,220
------------
TOTAL SHORT-TERM INVESTMENTS ( 8.79%) 64,999,220
------- ------------
TOTAL INVESTMENTS (100.31%) $741,506,514
======= ============
</TABLE>
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $4,430,865 as of October 31, 1994. See Note A of the
Notes to the Financial Statements for valuation policy.
* Securities, other than short-term investments, newly added to the portfolio
during the year ended October 31, 1994.
** Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 269
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
NOTE A -
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Freedom Regional Bank Fund (the "Fund"),
John Hancock Freedom Gold & Government Fund, John Hancock Sovereign U.S.
Government Income Fund, John Hancock Sovereign Achievers Fund, and John Hancock
Managed Tax-Exempt Fund.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B shares. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, dividends, and liquidation, except that certain expenses,
subject to the approval of the Trustees, may be applied differently to each
class of shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a class
which bears distribution service expenses under the terms of a distribution
plan, have exclusive voting rights regarding such distribution plan. After the
close of business on July 22, 1994, the Fund was closed to new shareholders. The
Fund is expected to re-open on December 27, 1994. Significant policies of the
Fund are as follows:
VALUATION OF INVESTMENTS Investments in equity securities traded on national
securities exchanges are normally valued at the last quoted sales price on the
day of valuation. Securities traded in the over-the-counter market and listed
securities for which no sale was reported on valuation date are valued at the
mean between the current closing bid and asked prices. Debt securities having an
over-the-counter primary market are valued on the basis of valuations furnished
by a pricing service which determines valuations for normal institutional size
trading units of debt securities, without exclusive reliance upon quoted prices.
Short-term debt investments which have a remaining maturity of 60 days or less
are valued at amortized cost, which generally approximates market value.
Investment securities for which no current market quotations are available,
restricted securities and other assets, are valued at fair value based on
procedures approved by the Trustees.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies. It
will not be subject to Federal income tax on taxable earnings which are
distributed to shareholders.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.
The fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such a manner as deemed
16
<PAGE> 270
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
equitable, taking into consideration, among other things, the nature and type of
expense and the relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes. Transfer
agent expenses and distribution/service fees if any, are calculated daily at the
class level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
purchased from either the date of issue or the date of purchase over the life of
the security, as required by the Internal Revenue Code.
NOTE B -
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.80% of the first $500,000,000 of the
Fund's average daily net asset value and (b) 0.75% of the Fund's average daily
net asset value in excess of $500,000,000.
Prior to January 1, 1994 the Fund paid a monthly management fee to the
Adviser equivalent on an annual basis, to the sum of (a) 0.75% of the first
$250,000,000 of the Fund's average daily net asset value and (b) 0.625% of the
next $250,000,000 of the Fund's average daily net asset value and (c) 0.50% of
the Fund's average daily net asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
John Hancock Broker Distribution Services, Inc. ("Broker Services"), a
wholly-owned subsidiary of the Adviser, and Freedom Distributors Corporation
("FDC") act as Co-Distributors for shares of the Fund. For the year ended
October 31, 1994, net sales charges received on sales of Class A shares of the
Fund amounted to $4,505,728. Out of this amount, $695,242 was retained and used
for printing prospectuses, advertising, sales literature and other purposes,
$2,978,482 was paid as sales commissions to unrelated broker-dealers, and
$832,004 was paid as sales commissions to sales personnel of John Hancock
Distributors, Inc. ("Distributors"), Tucker Anthony, Incorporated ("Tucker
Anthony") and Sutro & Co., Inc. ("Sutro"). The Adviser's indirect parent, John
Hancock Mutual Life Insurance Company, is the indirect sole shareholder of
Distributors and John Hancock Freedom Securities Corporation and its
subsidiaries, which include FDC, Tucker Anthony and Sutro, all of which are
broker-dealers. Brokerage commissions to Tucker Anthony in connection with
portfolio transactions of the Fund, for the year ended Ocober 31, 1994, amounted
to $1,400.
Class B shares which are redeemed within six years of purchase are subject
to a contingent deferred sales charge ("CDSC") at declining rates beginning at
5.00% (4.00% on purchases made prior to January 1, 1994) of the lesser of the
current market value at the time of redemption or the original purchase cost of
the shares being redeemed. Proceeds from the CDSC are paid to Broker Services
and are used in whole or in part to defray its expenses related to providing
distribution related services to the Fund in connection with the sale of Class B
shares. For the year ended October 31, 1994 the contingent deferred sales
charges received by Broker Services amounted to $660,006.
In addition, to compensate the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has
17
<PAGE> 271
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
adopted a Distribution Plan with respect to Class A and Class B shares pursuant
to Rule 12b-1 under the Investment Company Act of 1940. Accordingly, the Fund
will make payments to the Co-Distributors, for distribution and service expenses
at an annual rate not to exceed 0.30% of the Fund's average daily net assets
attributable to Class A shares (0.25% prior to January 1, 1994) and 1.00% of the
Fund's average daily net assets attributable to Class B shares (0.75% prior to
January 1, 1994), to reimburse the Co-Distributors for their
distribution/service costs. Up to a maximum of 0.25% of these payments may be
service fees as defined by the amended Rules of Fair Practice of the National
Association of Securities Dealers which became effective July 7, 1993. Under the
amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Fund Services,
Inc. ("Fund Services"), a wholly-owned subsidiary of The Berkeley Financial
Group. The Fund pays Fund Services a monthly transfer agent fee equivalent, on
an annual basis, to 0.15% and 0.18% of the average daily net asset value of
Class A and Class B shares of the Fund, respectively, plus out of pocket
expenses incurred by Fund Services on behalf of the Fund for proxy mailings.
Messers Edward J. Boudreau, Jr. and Hugh A. Dunlap, Jr. are directors and
officers of the Adviser, and its affiliates, as well as Trustees of the Fund.
The compensation of unaffiliated Trustees is borne by the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the year
ended October 31, 1994, aggregated $489,076,718 and $52,744,319, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the year ended October 31, 1994.
The cost of investments owned at October 31, 1994 (including the joint
repurchase agreement) for Federal income tax purposes was $698,782,859. Gross
unrealized appreciation and depreciation of investments aggregated $61,144,297
and $18,432,862, respectively, resulting in net unrealized appreciation of
$42,711,435.
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified amounts to
reflect an increase in accumulated net realized gain on investments of $45,052,
a decrease in undistributed net investment income of $45,269 and an increase in
capital paid-in of $217. This represents the cumulative amounts necessary to
report these balances on a tax basis, excluding certain temporary differences,
as of October 31, 1994. Additional adjustments may be needed in subsequent
reporting periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to certain differences in
the computation of distributable income and capital gains under federal tax
rules versus generally accepted accounting principles.
18
<PAGE> 272
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Regional Bank Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Freedom Investment Trust and to the Shareholders of
John Hancock Freedom Regional Bank Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Freedom Regional Bank
Fund (the "Fund") (a portfolio of Freedom Investment Trust) at October 31, 1994,
the results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1994 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 16, 1994
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is furnished with
respect to the taxable distributions of the Fund during its fiscal year ended
October 31, 1994.
The Fund designated distributions to shareholders of $9,168,091 as a
long-term capital gain dividend. These amounts were reported on the 1993 U.S.
Treasury Department Form 1099-DIV. It is anticipated that there will be a
distribution from net realized gains from sales of securities to shareholders of
record on December 23, 1994 and payable December 29, 1994. Shareholders will
receive a 1994 U.S. Treasury Department Form 1099-DIV in January 1995
representing their proportionate share.
For the fiscal year ended October 31, 1994, 100% of the ordinary income
distributions qualify for the corporate dividends received deduction.
19
<PAGE> 273
PART C.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements included in the Registration Statement:
Freedom Investment Trust--
--------------------------
John Hancock Gold & Government Fund
John Hancock Regional Bank Fund
John Hancock Sovereign Achievers Fund
John Hancock Sovereign U.S. Government Fund
John Hancock Managed Tax Exempt Fund
Statement of Assets and Liabilities as of October 31, 1994.
Statement of Operations for the year ended October 31, 1994
Statement of Changes in Net Assets for each of the two years in the
period ended October 31, 1994.
Financial Highlights for each of the 10 years ended October 31, 1994.
Schedule of Investments as of October 31, 1994.
Notes to Financial Statements.
Schedule of Investment as of October 31, 1994
(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
No person is directly or indirectly controlled by or under common
control with Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of February 3, 1995 the number of record holders of shares of
Registrant was as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
John Hancock Gold & Government Fund 1,496 3,159 --
John Hancock Regional Bank Fund 24,502 45,321 --
John Hancock Managed Tax Exempt Fund 637 5,254 --
John Hancock Sovereign Achievers Fund 2,789 19,570 --
John Hancock Sovereign U.S. Government Fund 39,637 9,453 0
</TABLE>
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<PAGE> 274
ITEM 27. INDEMNIFICATION
(a) Under Article VI of the Registrant's Master Trust Agreement each
of its Trustees and Officers or person serving in such capacity with another
entity at the request of the Registrant ("Covered Person") shall be indemnified
against all liabilities, including, but not limited to, amounts paid in
satisfaction of judgments, in compromises or as fines or penalties, and
expenses, including reasonable legal and accounting fees, in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as a party or
otherwise or with which such person may be or may have been threatened, while
in office or thereafter, by reason of being or having been such a Trustee or
officer, director or trustee, except with respect to any matter as to which it
has been determined that such Covered Person (i) did not act in good faith in
the reasonable belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or (ii) had acted with willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office (either and both of the conduct
described in (i) and (ii) being referred to hereafter as "Disabling Conduct").
A determination that the Covered Person is entitled to indemnification may be
made by (i) a final decision on the merits by a court or other body before whom
the proceeding was brought that the person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable determination, based upon
a review of the facts, that the indemnitee was not liable by reason of
Disabling Conduct by (a) a vote of a majority of a quorum of Trustees who are
neither "interested persons" of the Trust as defined in section 2(a)(19) of the
1940 Act nor parties to the proceeding, or (b) an independent legal counsel in
a written opinion.
(b) Under the Distribution Agreement. Under Section 12 of the
Distribution Agreement, John Hancock Funds, Inc. ("John Hancock Funds" ) has
agreed to indemnify the Registrant and its Trustees, officers and controlling
persons against claims arising out of certain acts and statements of John
Hancock Funds.
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<PAGE> 275
Section 9(a) of the By-Laws of the Insurance Company provides, in
effect, that the Insurance Company will, subject to limitations of law,
indemnify each present and former director, officer and employee of the of the
Insurance Company who serves as a Trustee or officer of the Registrant at the
direction or request of the Insurance 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 Insurance Company. In addition, no such person will be
indemnified by the Insurance 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
Insurance 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 Insurance 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 John Hancock Funds and the
Adviser provide 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 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 the 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 a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such as person."
Insofar as indemnification for liabilities under the Securities Act of 1933
(the "Act") may be permitted to Trustees, officers and controlling persons of
Registrant pursuant to the Registrant's Amended and Restated Articles of
Incorporation, Article 10.1 of the Registrant's By-Laws, The underwriting
Agreement, the By-Laws of Distributors, the Adviser, or the Insurance Company
or otherwise, Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against policy as expressed in
the 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
C-3
<PAGE> 276
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
For information as to the business, profession, vocation or employment
of a substantial nature of each of the officers and Directors of the Investment
Adviser, reference is made to Forms ADV filed under the Investment Advisers Act
of 1940, herein incorporated by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) John Hancock Funds acts as principal underwriter for the Registrant and
also serves as principal underwriter or distributor of shares for John
Hancock Cash Reserve, Inc., John Hancock Bond Fund, John Hancock Capital
Growth Fund, John Hancock Current Interest, John Hancock Series, Inc.,
John Hancock Tax-Free Bond Fund, John Hancock California Tax- Free Income
Fund, John Hancock Capital Series, John Hancock Limited Term Government
Fund, John Hancock Tax-Exempt Fund, John Hancock Sovereign Investors Fund,
Inc., John Hancock Cash Management Fund, John Hancock Special Equities
Fund, John Hancock Sovereign Bond Fund, John Hancock Tax-Exempt
Series Fund, John Hancock Strategic Series, John Hancock Technology
Series, Inc. and John Hancock World Fund, John Hancock Freedom Investment
Trust, John Hancock Freedom Investment Trust II and John Hancock Freedom
Investment Trust III.
<TABLE>
(b) The following table lists, for each director and officer of John Hancock
Funds, the information indicated.
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
- -------------------------------------------------------------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. Chairman Chairman
101 Huntington Avenue
Boston, Massachusetts
Robert H. Watts Director and Senior Vice None
101 Huntington Avenue President
Boston, Massachusetts
C. Troy Shaver, Jr. President, Chief Executive None
101 Huntington Avenue Officer and Director
Boston, Massachusetts
Foster Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
</TABLE>
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<PAGE> 277
<TABLE>
<S> <C> <C>
Robert G. Freedman Director Vice Chairman and Chief
101 Huntington Avenue Investment Officer
Boston, Massachusetts
Stephen M. Blair Senior Vice President-Sales None
101 Huntington Avenue
Boston, Massachusetts
Thomas H. Drohan Senior Vice President Senior Vice President and
101 Huntington Avenue Secretary
Boston, Massachusetts
David A. King Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
James B. Little Senior Vice President Senior Vice President and
101 Huntington Avenue Chief Financial Officer
Boston, Massachusetts
John A. Morin Vice President Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Secretary Vice President, Assistant
101 Huntington Avenue Secretary and Compliance
Boston, Massachusetts Officer
Christopher M. Meyer Treasurer None
101 Huntington Avenue
Boston, Massachusetts
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
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
</TABLE>
C-5
<PAGE> 278
<TABLE>
<S> <C> <C>
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
</TABLE>
<TABLE>
(b) The name of each director and officer of Freedom, together
with the offices held by such person with Freedom and the Registrant, are set
forth below.
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------ --------------------- ---------------------
<S> <C> <C>
John J. Danello President, Director None
One Beacon Street and Clerk
Boston, Massachusetts
Thomas J. Brown Treasurer and Director None
One Beacon Street
Boston, Massachusetts
Dexter A. Dodge Vice President None
One Beacon Street
Boston, Massachusetts
</TABLE>
(b) Subadviser
Registrant's subadviser, John Hancock Advisers International Limited
("JHAIL"), 34 Dover Street, WIX 3RA, London, England, also acts as investment
adviser, to other Investment Company clients. Information pertaining to the
officers and directors of JHAIL and their affiliations is set forth in the Form
ADV of JHAIL, (File No. 801 - 29498) which is hereby incorporated by reference.
C-6
<PAGE> 279
(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-a(b), and 31a-2(a) under the Investment Company Act of 1940 as
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 of its securities, may be maintained
pursuant to Rule 31a-3 at the main office of Registrant's Transfer Agent and
Custodian.
ITEM 31. Management Services
-------------------
Not applicable.
ITEM 32. Undertakings
------------
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus with respect to a series of the Registrant is delivered with a copy
of the latest annual report to shareholders with respect to that series upon
request and without charge.
C-7
<PAGE> 280
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 pursuant to Rule 485(b) under the Securities Act of 1933 and 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 24th day of February, 1995.
FREEDOM INVESTMENT TRUST
By: *
----------------------
Edward J. Boudreau, Jr.
Chairman
<TABLE>
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.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman
- ------------------------------ (Principal Executive Officer)
Edward J. Boudreau, Jr.
James B. Little
- ------------------------------ Senior Vice President and Chief February 24, 1995
James B. Little Financial Officer (Principal Financial
and Accounting Officer)
* Trustee
- ------------------------------
William A. Barron III
* Trustee
- ------------------------------
Douglas M. Costle
* Trustee
- ------------------------------
Hugh A. Dunlap, Jr.
* Trustee
- ------------------------------
Leland O. Erdahl
* Trustee
- ------------------------------
Richard A. Farrell
* Trustee
- ------------------------------
William F. Glavin
* Trustee
- ------------------------------
Patrick Grant
</TABLE>
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<PAGE> 281
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Trustee
- ------------------------------
Ralph Lowell, Jr.
* Trustee
- ------------------------------
John A. Moore
* Trustee
- ------------------------------
Patti McGill Peterson
* Trustee
- ------------------------------
John W. Pratt
*By: Thomas H. Drohan February 24, 1995
-------------------------
Thomas H. Drohan, Attorney-in-Fact
under Powers of Attorney dated June 25, 1992,
December 14, 1992, and August 17, 1993.
</TABLE>
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<PAGE> 282
<TABLE>
EXHIBIT INDEX
The exhibits listed below which are marked by an asterisk (*) have previously
been filed with the Commission and are incorporated by reference.
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NUMBER
- ----------- ----------- -----------
<S> <C>
99.B1 Master Trust Agreement (Agreement and
Declaration of Trust) amended and restated
dated September 10, 1991; Amendment No. 1 to
the Master Trust Agreement dated June 25,
1992; Amendment No.2 to the Master Trust
Agreement dated June 25, 1992; Amendment No.
3 to the Master Trust Agreement dated
September 16, 1992; Amendment to the Master
Trust Agreement dated August 3, 1993;
Amendment to the Master Trust Agreement dated
September 2, 1994; Amendment to the Master
Trust Agreement dated September 27, 1994.
99.B2 By-Laws as amended September 16, 1992.
99.B3 None.
99.B4 Designation of Classes dated December 14, 1992.
99.B4.1 Specimen share certificate for Regional Bank
Fund (Classes A and B).
99.B4.2 Specimen share certificate for Sovereign U.S.
Government Income Fund (Classes A, B and C).
99.B4.3 Specimen shares certificate for Managed Tax
Exempt Fund (Classes A and B).
99.B4.4 Specimen shares certificate for Gold &
Government Fund (Classes A and B).
99.B4.5 Specimen Shares certificate for Sovereign
Achievers Fund (Classes A and B).
99.B5 Advisory Agreement restated January 1, 1994.
99.B6 Distribution Agreement with John Hancock
Broker Distribution Services, Inc. and
Freedom Distributors Corporation.
99.B6.1 Form of Financial Institution Sales and
Service Agreement.
99.B6.2 Form of Soliciting Dealer Agreement between
John Hancock Broker Distribution Services,
Inc. and Selected Dealers.
</TABLE>
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<PAGE> 283
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NUMBER
- ----------- ----------- -----------
<S> <C>
99.B7 None.
99.B8 Custodian Contract with Investors Bank and
Trust Company Bank, dated December 15, 1992.
99.B9 Transfer Agency and Service Agreement with
John Hancock Fund Services, Inc.
99.B9.1 Service Agreement between John Hancock
Advisers, Inc. and Berkeley Investment
Partners (now TBFG Advisers, Inc.) dated
October 1, 1992.
99.B10 Legal opinion and consent of Goodwin, Procter
& Hoar dated May 16, 1986.
99.B10.1 Legal opinion and consent of Goodwin, Procter
& Hoar dated February 3, 1986.
99.B10.2 Legal opinion and consent of Goodwin, Procter
& Hoar dated March 13, 1987.
99.B10.3 Legal opinion and consent of Goodwin, Procter
& Hoar dated December 20, 1991.
99.B104 Legal opinion and consent of Goodwin, Procter
& Hoar dated December 22, 1992.
99.B11 Consent of Price Waterhouse
99.B11.1 Consent of Morningstar Mutual Fund Values.
99.B12 Financial Statement of the Gold & Government
Fund for the year ended October 31, 1994
filed herewith in Part A and Part B.
99.B12.1 Financial Statement of the Regional Bank Fund
for the year ended October 31, 1994 filed
herewith in Part A and Part B.
99.B12.2 Financial Statement of the Sovereign U.S.
Government Fund for the year ended October
31, 1994 filed herewith in Part A and Part B.
99.B12.3 Financial Statement of the Sovereign
Achievers Fund for the year ended October 31,
1994 filed herewith in Part A and Part B.
99.B12.4 Financial Statement of the Managed Tax Exempt
Fund for the year ended October 31, 1994
filed herewith in Part A and Part B.
</TABLE>
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<PAGE> 284
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NUMBER
- ----------- ----------- -----------
<S> <C>
99.B13 NONE
99.B15 Plan of Distribution pursuant to Rule 12b-1
as amended and restated January 1, 1994.
99.B16* Working papers showing yield calculation for
yield and total return incorporated by
reference to Post-Effective Amendment.
99.B17 Power of Attorney dated June 25, 1992; Power
of Attorney date December 14, 1992 and Power
of Attorney dated August 17, 1993.
27.1A John Hancock Regional Bank Fund
27.1B John Hancock Regional Bank Fund
27.2A John Hancock Gold & Government Fund
27.2B John Hancock Gold & Government Fund
27.3A John Hancock Sovereign U.S. Government Fund
27.3B John Hancock Sovereign U.S. Government Fund
27.4A John Hancock Sovereign Achievers Fund
27.4B John Hancock Sovereign Achievers Fund
27.5A John Hancock Managed Tax Exempt Fund
27.5B John Hancock Managed Tax Exempt Fund
</TABLE>
C-12
<PAGE> 1
Exhibit 99.B1
FREEDOM INVESTMENT TRUST
MASTER TRUST AGREEMENT
AS AMENDED AND RESTATED
SEPTEMBER 10, 1991
[C] 1991 GOODWIN, PROCTER & HOAR
ALL RIGHTS RESERVED
<PAGE> 2
<TABLE>
FREEDOM INVESTMENT TRUST
AMENDED AND RESTATED
MASTER TRUST AGREEMENT
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. NAME AND DEFINITIONS 1
- ---------- --------------------
Section 1.1 Name and Principal Office 1
Section 1.2 Definitions 1
(a) "Trust" 1
(b) "Trustees" 1
(c) "Class" 2
(d) "Shares" 2
(e) "Sub-Trust" or "Series" 2
(f) "Shareholder" 2
(g) "1940 Act" 2
(h) "Commission" 2
(i) "Declaration of Trust" 2
(j) "By Laws" 2
ARTICLE II. PURPOSE OF TRUST 2
- ----------- ----------------
ARTICLE III. THE TRUSTEES 2
- ------------ ------------
Section 3.1 Number, Designation, Election, Term, etc. 2
(a) Trustees 2
(b) Number 2
(c) Election and Term 3
(d) Resignation and Retirement 3
(e) Removal 3
(f) Vacancies 3
(g) Effect of Death, Resignation, etc. 3
(h) No Accounting 4
Section 3.2 Powers of Trustees 4
(a) Investments 4
(b) Disposition of Assets 5
(c) Ownership Powers 5
(d) Subscription 5
(e) Form of Holding 5
(f) Reorganization, etc. 5
(g) Voting Trusts, etc. 5
(h) Compromise 5
(i) Partnerships, etc. 5
(j) Borrowing and Security 5
(k) Guarantees, etc. 5
(l) Insurance 6
(m) Pensions, etc. 6
Section 3.3 Certain Contracts 6
(a) Advisory 6
(b) Administration 7
(c) Distribution 7
(d) Custodian and Depository 7
(e) Transfer and Dividend Disbursing Agency 7
(f) Shareholder Servicing 7
(g) Accounting 7
Section 3.4 Payment of Trust Expenses and Compensation of Trustees 8
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 3.5 Ownership of Assets of the Trust 8
ARTICLE IV. SHARES 8
- ----------- ------
Section 4.1 Description of Shares 8
Section 4.2 Establishment and Designation of Sub-Trusts 10
(a) Assets Belonging to Sub-Trusts 10
(b) Liabilities Belonging to Sub-Trusts 10
(c) Dividends 11
(d) Liquidation 11
(e) Voting 12
(f) Redemption by Shareholder 12
(g) Redemption by Trust 12
(h) Net Asset Value 13
(i) Transfer 13
(j) Equality 13
(k) Fractions 14
(l) Conversion Rights 14
Section 4.3 Ownership of Shares 14
Section 4.4 Investments in the Trust 14
Section 4.5 No Pre-emptive Rights 14
Section 4.6 Status of Shares and Limitation of Personal Liability 14
ARTICLE V. SHAREHOLDERS' VOTING POWER AND MEETINGS 15
- ---------- ---------------------------------------
Section 5.1 Voting Powers 15
Section 5.2 Meetings 15
Section 5.3 Record Dates 15
Section 5.4 Quorum and Required Vote 16
Section 5.5 Action by Written Consent 16
Section 5.6 Inspection of Records 16
Section 5.7 Additional Provisions 16
Section 5.8 Shareholder Communications 16
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION 17
- ----------- ----------------------------------------
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice 17
Section 6.2 Trustee's Good Faith Action; Expert Advise; No Bond or Surety 17
Section 6.3 Indemnification of Shareholders 18
Section 6.4 Indemnification of Trustees, Officers, etc. 18
Section 6.5 Compromise Payment 19
Section 6.6 Indemnification Not Exclusive, etc. 19
Section 6.7 Liability of Third Persons Dealing with Trustees 19
ARTICLE VII. MISCELLANEOUS 19
- ------------ -------------
Section 7.1 Duration and Termination of Trust 19
Section 7.2 Reorganization 20
Section 7.3 Amendments 21
Section 7.4 Filing of Copies; References; Headings 21
Section 7.5 Applicable Law 21
</TABLE>
<PAGE> 4
FREEDOM INVESTMENT TRUST
AMENDED AND RESTATED
MASTER TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts on the 29th
day of March, 1984 (the "Original Master Trust Agreement"), by the Trustees
hereunder, and by the holders of shares of beneficial interest to be issued
hereunder as hereinafter provided, is amended and restated in its entirety this
10th day of September, 1991 in Boston, Massachusetts as follows.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an investment
company; and
WHEREAS this Trust is authorized to issue its shares of beneficial interest in
separate series, each separate series to be a Sub- Trust hereunder, and to
issue classes of Shares of any Sub-Trust or divide Shares of any Sub-Trust into
two or more classes, all in accordance with the provision hereinafter set
forth; and
WHEREAS the Trustees have agreed to manage all property coming into their hands
as trustees of a Massachusetts business trust in accordance with the provisions
hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust or Sub-Trusts (as
hereinafter defined) created hereunder as hereinafter set forth.
ARTICLE I
---------
NAME AND DEFINITIONS
--------------------
SECTION 1.1 NAME AND PRINCIPAL OFFICE. This Trust shall be known as "Freedom
Investment Trust" and the Trustees shall conduct the business of the Trust
under that name or any other name or names as they may from time to time
determine. The principal office of the Trust shall be located at One Beacon
Street, Boston, Massachusetts 02108 or at such other location as the Trustees
may from time to time determine.
SECTION 1.2 DEFINITIONS. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust established by
this Agreement and Declaration of Trust, as amended from time to time,
inclusive of each and every Sub-Trust established hereunder;
(b) "Trustees" refers to the Trustees of the Trust and of each Sub-Trust
hereunder named herein or elected in accordance with Article III;
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(c) "Class" refers to any class of Shares of any Series or Sub-Trust
established and designated under or in accordance with the provisions
of Article IV;
(d) "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust and each Sub-Trust of the Trust
and/or any class of any Sub-Trust (as the context may require) shall
be divided from time to time;
(e) "Series" or "Sub-Trust" refers to series of Shares established and
designated under or in accordance with he provision of Article IV,
each of which Series shall be a Sub-Trust of the Trust;
(f) "Shareholder" means a record owner of Shares;
(g) "1940 Act" refers to the Investment Company Act of 1940 and the Rules
and Regulations thereunder, all as amended from time to time;
(h) The term "Commission" shall have the meaning given it in the 1940 Act;
(i) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time;
(j) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time.
ARTICLE II
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PURPOSE OF TRUST
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The purpose of the Trust is to operate as an investment company and to offer
Shareholders of the Trust and each Sub-Trust of the Trust one or more
investment programs primarily in securities and debt instruments. The Trust
shall also have the power to invest in precious metals bullion and gold coins.
ARTICLE III
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THE TRUSTEES
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SECTION 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) TRUSTEES. The Trustees hereof and of each Sub-Trust hereunder shall
be William A. Barron, III, Thomas J. Brown, Douglas M. Costle, Hugh
A. Dunlap, Jr., Leland O. Erdahl, Richard A. Farrell, Patrick Grant,
Ralph Lowell, Jr., John A. Moore and John W. Pratt.
(b) NUMBER. The Trustees serving as such, whether named above or
hereafter becoming Trustees, may increase or decrease (to not less
than two) the number of Trustees to a number other than the number
theretofore determined. No decrease in the number of
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Trustees shall have the effect of removing any Trustee from office
prior to the expiration of his term, but the number of Trustees may be
decreased in conjunction with the removal of a Trustee pursuant to
subsection (e) of this Section 3.1.
(c) ELECTION AND TERM. The Trustees shall be elected by the Shareholders
of the Trust at the first meeting of the Shareholders following the
initial public offering of shares of the Trust. Each Trustee, whether
named above or hereafter becoming a Trustee, shall serve as a Trustee
of the Trust and of each Sub-Trust hereunder during the lifetime of
this Trust and until its termination as hereinafter provided except as
such Trustee sooner dies, resigns or is removed. Subject to Section
16(a) of the 1940 Act, the Trustees may elect their own successors and
may, pursuant to Section 3.1(f) hereof, appoint Trustees to fill
vacancies.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his trust or
retire as a Trustee, by written instrument signed by him and delivered
to the other Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such delivery or upon
such later date as is specified in such instrument and shall be
effective as to the Trust and each Sub-Trust hereunder.
(e) REMOVAL. Any Trustee may be removed with or without cause at any
time: (i) by written instrument, signed by at least two- thirds of
the number of Trustees in office immediately prior to such removal,
specifying the date upon which such removal shall become effective; or
(ii) by vote of Shareholders holding not less than two-thirds of the
Shares then outstanding, cast in person or by proxy at any meeting
called for the purpose; or (iii) by a written declaration signed by
Shareholders holding not less than two-thirds of the Shares then
outstanding and filed with the Trust's Custodian. Any such removal
shall be effective as to the Trust and each Sub-Trust hereunder.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation,
retirement, removal or incapacity of any of the Trustees, or resulting
from an increase in the number of Trustees by the other Trustees may
(but so long as there are at least two remaining Trustees, need not
unless required by the 1940 Act) be filled by a majority of the
remaining Trustees, subject to the provisions of Section 16(a) of the
1940 Act, through the appointment in writing of such other person as
such remaining Trustees in their discretion shall determine and such
appointment shall be effective upon the written acceptance of the
person named therein to serve as a Trustee and agreement by such
person to be bound by the provisions of this Declaration of Trust,
except that any such appointment in anticipation of a vacancy to occur
by reason of retirement, resignation or increase in number of Trustees
to be effective at a later date shall become effective only at or
after the effective date of said retirement, resignation or increase
in number of Trustees. As soon as any Trustee so appointed shall have
accepted such appointment and shall have agreed in writing to be bound
by this Declaration of Trust and the appointment is effective, the
Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation,
retirement, removal or incapacity of the Trustees, or any one of them,
shall not operate to annul or terminate the Trust or any Sub-Trust
hereunder or to revoke or terminate any existing agency or contract
created or entered into pursuant to the terms of this Declaration of
Trust.
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(h) NO ACCOUNTING. Except to the extent required by the 1940 Act or under
circumstances which would justify his removal for cause, no person
ceasing to be a Trustee as a result of his death, resignation,
retirement, removal or incapacity (nor the estate of any such person)
shall be required to make an accounting to the Shareholders or
remaining Trustees upon such cessation.
SECTION 3.2 POWERS OF TRUSTEES. Subject to the provisions of this Declaration
of Trust, the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or convenient to carry out that responsibility
and the purpose of the Trust. Without limiting the foregoing, the Trustees may
adopt By-Laws not inconsistent with this Declaration of Trust providing for the
conduct of the business and affairs of the Trust and may amend and repeal them
to the extent that such By-Laws do not reserve that right to the Shareholders;
they may from time to time in accordance with the provisions of Section 4.1
hereof establish Sub- Trusts, each such Sub-Trust to operate as a separate and
distinct investment medium and with separately defined investment objectives
and policies and distinct investment purposes and they may from time to time in
accordance with the provisions of Section 4.1 hereof establish classes of
Shares of any Series or Sub-Trust or divide the Shares of any Series or
Sub-Trust into classes; they may as they consider appropriate elect and remove
officers and appoint and terminate agents and consultants and hire and
terminate employees, any one or more of the foregoing of whom may be a Trustee,
any may provide for the compensation of all of the foregoing; they may appoint
from their own number, and terminate, any one or more committees consisting of
two or more Trustees, including without implied limitation an executive
committee, which may, when the Trustees are not in session and subject to the
1940 Act, exercise some or all of the power and authority of the Trustees as
the Trustees may determine; in accordance with Section 3.3 they may employ one
or more advisers, administrators, depositories and custodians and may authorize
any depository or custodian to employ subcustodians or agents and to deposit
all or any part of such assets in a system or systems for the central handling
of securities and debt instruments, retain transfer, dividend, accounting or
Shareholder servicing agents or any of the foregoing, provide for the
distribution of Shares by the Trust through one or more distributors, principal
underwriters or otherwise, and set record dates or times for the determination
of Shareholders or various of them with respect to various matters; they may
compensate or provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the
Trust or the Trustees on such terms as they deem appropriate; and in general
they may delegate to any officer of the Trust, to any committee of the Trustees
and to any employee, adviser, administrator, distributor, depository,
custodian, transfer and dividend disbursing agent, or any other agent or
consultant of the Trust such authority, powers, functions and duties as they
consider desirable or appropriate for the conduct of the business and affairs
of the Trust, including without implied limitation the power and authority to
act in the name of the Trust and any Sub-Trust and of the Trustees, to sign
documents and to act as attorney-in- fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with the 1940
Act or other applicable law, the Trustees shall have power and authority for
and on behalf of the Trust and each separate Sub-Trust established hereunder:
(a) INVESTMENTS. To invest and reinvest cash and other property, and to
hold cash or other property uninvested without in any event being
bound or limited by any present or future law or custom in regard to
investments by trustees;
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(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of
the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt
instruments or property; and to execute and deliver proxies or powers
of attorney to such person or persons as the Trustees shall deem
proper, granting to such person or persons such power and discretion
with relation to securities, debt instruments or property as the
Trustees shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or
debt instruments;
(e) FORM OF HOLDING. To hold any security, debt instrument or property in
a form not indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of the Trust
or of any Sub-Trust or in the name of a custodian, subcustodian or
other depository or a nominee or nominees or otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer,
any security or debt instrument of which is or was held in the Trust;
to consent to any contract, lease, mortgage, purchase or sale of
property by such corporation or issuer, and to pay calls or
subscriptions with respect to any security or debt instrument held in
the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any securities or
debt instruments in acting through a committee, depository, voting
trustee or otherwise, and in that connection to deposit any security
or debt instrument with, or transfer any security or debt instrument
to, any such committee, depository or trustee, and to delegate to them
such power and authority with relation to any security or debt
instrument (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such committee, depository
or trustee as the Trustees shall deem proper;
(h) COMPROMISE. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any Sub-Trust or any matter in
controversy, including but not limited to claims for taxes;
(i) PARTNERSHIPS, ETC. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage and pledge
the assets of the Trust or any part thereof to secure obligations
arising in connection with such borrowing;
(k) GUARANTEES, ETC. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust property or any part thereof to secure
any of or all such obligations;
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(1) INSURANCE. To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of distributions
and principal on its portfolio investments, and insurance policies
insuring the Shareholders, Trustees, officers, employees, agents,
consultants, investment advisers, managers, administrators,
distributors, principal underwriters, or independent contractors, or
any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or
position, or by reason of any action alleged to have been taken or
omitted by any such person in any such capacity, including any action
taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person
against such liability; and
(m) PENSIONS, ETC. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift
and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits,
for any or all of the Trustees, officers, employees and agents of the
Trust.
Except as otherwise provided by the 1940 Act or other applicable law, this
Declaration of Trust or the By-Laws, any action to be taken by the Trustees on
behalf of or with respect to the Trust or any Sub-Trust or class thereof may be
taken by a majority of the Trustees present at a meeting of Trustees (a quorum,
consisting of at least one-half of the Trustees then in office, being present),
within or without Massachusetts, including any meeting held by means of a
conference telephone or other 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 constitute presence in person at a meeting,
or by written consents of a majority of the Trustees then in office (or such
larger or different number as may be required by the 1940 Act or other
applicable law).
SECTION 3.3 CERTAIN CONTRACTS. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time and without limiting the generality of
their powers and authority otherwise set forth herein, enter into one or more
contracts with any one or more corporations, trusts, associations,
partnerships, limited partnerships, other type of organizations, or individuals
(a "Contracting Party"), to provide for the performance and assumption of some
or all of the following services, duties and responsibilities to, for or on
behalf of the Trust and/or any Sub-Trust, and/or the Trustees, and to provide
for the performance and assumption of such other services, duties and
responsibilities in addition to those set forth below as the Trustees may
determine appropriate:
(a) ADVISORY. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Sub-Trust
of the Trust (as that phrase is defined in subsection (a) of Section
4.2), to manage such investments and assets, make investment decisions
with respect thereto, and to place purchase and sale orders for
portfolio transactions relating to such investments and assets;
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(b) ADMINISTRATION. Subject to the general supervision of the Trustees
and in conformity with any policies of the Trustees with respect to
the operations of the Trust and each Sub-Trust, to supervise all or
any part of the operations of the Trust and each Sub-Trust, and to
provide all or any part of the administrative and clerical personnel,
office space and office equipment and services appropriate for the
efficient administration and operations of the Trust and each
Sub-Trust;
(c) DISTRIBUTION. To distribute the Shares of the Trust and each
Sub-Trust (including any classes thereof), to be principal underwriter
of such Shares, and/or to act as agent of the Trust and each Sub-Trust
in the sale of Shares and the acceptance or rejection of orders for
the purchase of Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to maintain
custody of the property of the Trust and each Sub-Trust and accounting
records in connection therewith;
(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain records of the
ownership of outstanding Shares, the issuance and redemption and the
transfer thereof, and to disburse any dividends declared by the
Trustees and in accordance with policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest any such
dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect
to Shareholders and their Shares, and similar matters; and
(g) ACCOUNTING. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties,
Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into sub-contractual arrangements relating to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting party, or of or for any parent or affiliate of any
Contracting Party or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust or
any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for the rendering
of any similar services to one or more other corporations, trusts,
associations, partnerships, limited partnerships or other
organizations, or have other business or interests,
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shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the Trust or
any Sub-Trust and/or the Trustees 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, any Sub-Trust or its Shareholders,
provided that in the case of any relationship or interest referred to in the
preceding clause (i) on the part of any Trustee or officer of the Trust either
(x) the material facts as to such relationship or interest have been disclosed
to or are known by the Trustees not having any such relationship or interest
and the contract involved is approved in good faith by a majority of such
Trustees not having any such relationship or interest (even though such
unrelated or disinterested Trustees are less than a quorum of all of the
Trustees), (y) the material facts as to such relationship or interest and as to
the contract have been disclosed to or are known by the Shareholders entitled
to vote thereon and the contract involved is specifically approved in good
faith by vote of the Shareholders, or (z) the specific contract involved is
fair to the Trust as of the time it is authorized, approved or ratified by the
Trustees or by the Shareholders.
SECTION 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust or any Sub-Trust, or partly out of principal and partly out
of income, and to charge or allocate the same to, between or among such one or
more of the Sub-Trusts and/or one or more classes of Shares thereof that may be
established and designated pursuant to Article IV, as the Trustees deem fair,
all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust or any Sub-Trust and/or any class of Shares thereof,
or in connection with the management thereof, including, but not limited to,
the Trustees' compensation and such expenses and charges for the services of
the Trust's officers, employees, investment adviser, administrator,
distributor, principal underwriter, auditor, counsel, depository, custodian,
transfer agent, dividend disbursing agent, accounting agent, Shareholder
servicing agent, and such other agents, consultants, and independent
contractors and such other expenses and charges as the Trustees may deem
necessary or proper to incur. Without limiting the generality of any other
provision hereof, the Trustees shall be entitled to reasonable compensation
from the Trust for their services as Trustees and may fix the amount of such
compensation.
SECTION 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets of
the Trust and of each Sub-Trust shall at all times be considered as vested in
the Trustees.
ARTICLE IV
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SHARES
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SECTION 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust shall
be divided into Shares, all without par value and of one class, but the
Trustees shall have the authority from time to time to issue Shares in one or
more Series of Shares (each of which Series of Shares shall represent the
beneficial interest in a separate and distinct Sub-Trust of the Trust,
including without limitation each Sub-Trust specifically established and
designated in Section 4.2), as they deem necessary or desirable. For all
purposes under this Declaration of Trust, including, without implied
limitation, (i) with respect to the rights of creditors and (ii) for purposes
of interpreting the relative rights of each Sub-Trust and the Shareholders of
each Sub-Trust, each Sub-Trust established hereunder shall be deemed to be a
separate trust under Massachusetts General Laws Chapter 182. The Trustees
shall have exclusive power without the requirement of Shareholder
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approval to establish and designate such separate and distinct Sub-Trusts, and
to fix and determine the relative rights and preferences as between the shares
of the separate Sub-Trusts as to right of redemption and the price, terms and
manner of redemption, special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund provisions,
conversion rights, and conditions under which the several Sub-Trusts shall have
separate voting rights or no voting rights.
In addition, the Trustees may issue classes of Shares of any Sub-Trust or
divide the Shares of any Sub-Trust into classes, having such different
dividend, liquidation, voting and other rights as the Trustees may determine,
and may establish or designate the specific classes of Shares of each
Sub-Trust. The fact that a Sub-Trust shall have initially been established and
designated without any specific establishment or designation of classes (i.e.,
that all Shares of such Sub-Trust are initially of a single class) or that a
Sub-Trust shall have more than one established and designated class, shall not
limit the authority of the Trustees to establish and designate separate
classes, or one or more further classes, of said Sub-Trust without approval of
the holders of the initial class thereof, or previously established and
designated class or classes thereof, if the establishment and designation of
such further separate classes would not adversely affect the rights of the
holders of the initial or previously established and designated class or
classes (within the meaning of section 77 of the Massachusetts Business
Corporation Law).
The number of authorized Shares and the number of Shares of each Sub-Trust or
class thereof that may be issued is unlimited, and the Trustees may issue
Shares of any Sub-Trust or class thereof for such consideration and on such
terms as they may determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the Shareholders. All
Shares when so issued on the terms determined by the Trustees shall be fully
paid and non-assessable (but may be subject to mandatory contribution back to
the Trust as provided in subsection (h) of Section 4.2). The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Sub-Trust or class thereof into one or more Sub-Trusts or
classes thereof that may be established and designated from time to time. The
Trustees may hold as treasury Shares, reissue for such consideration and on
such terms as they may determine, or cancel, at their discretion from time to
time, any Shares of any Sub-Trust reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish record
dates and times for the purposes of determining the holders of Shares entitled
to be treated as such, to the extent provided or referred to in Section 5.3.
The establishment and designation of any Sub-Trust or of any class of Shares of
any Sub-Trust in addition to those established and designated in Section 4.2
shall be effective (i) upon the execution by a majority of the then Trustees of
an instrument setting forth such establishment and designation of the relative
rights and preferences of the Shares of such Sub-Trust or class, (ii) upon the
execution of an instrument in writing by an officer of the Trust pursuant to
the vote of a majority of the Trustees, or (iii) as otherwise provided in
either such instrument. At any time that there are no Shares outstanding of
any particular Sub-Trust or class previously established and designated the
Trustees may by an instrument executed by a majority of their number abolish
that Sub- Trust and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment to this
Declaration of Trust.
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Any Trustee, officer or other agent of the Trust, and any organization in which
any such person is interested may acquire, own, hold and dispose of Shares of
any Sub-Trust (including any classes thereof) of the Trust to the same extent
as if such person were not a Trustee, officer or other agent of the Trust; and
the Trust may issue and sell or cause to be issued and sold and may purchase
Shares of any Sub-Trust (including any classes thereof) from any such person or
any such organization subject only to the general limitations, restrictions or
other provisions applicable to the sale or purchase of Shares of such Sub-Trust
(including any classes thereof) generally.
SECTION 4.2 ESTABLISHMENT AND DESIGNATION OF SUB-TRUSTS. Without limiting the
authority of the Trustees set forth in Section 4.1 to establish and designate
any further Sub-Trusts, the Trustees hereby establish and designate three
Sub-Trusts: Freedom Global Fund, Freedom Global Income Fund and Freedom
Short-Term World Income Fund. The Shares of such Sub-Trusts and any Shares of
any further Sub-Trust that may from time to time be established and designated
by the Trustees shall (unless the Trustees otherwise determine with respect to
some further Sub-Trust at the time of establishing and designating the same)
have the following relative rights and preferences:
(a) ASSETS BELONGING TO SUB-TRUSTS. All consideration received by the
Trust for the issue or sale of Shares of a particular Sub-Trust or any
classes thereof, 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
be held by the Trustees in trust for the benefit of the holders of
Shares of that Sub-Trust or class thereof and shall irrevocably belong
to that Sub-Trust (and be allocable to any classes thereof) for all
purposes, and shall be so recorded upon the books of account of the
Trust. Such consideration, assets, 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, together with any General Items (as hereinafter defined)
allocated to that Sub-Trust as provided in the following sentence, are
herein referred to as "assets belonging to" that Sub-Trust (and be
allocable to any classes thereof). 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 Sub-Trust (collectively "General Items"), the Trustees
shall allocate such General Items to and among any one or more of the
Sub-Trusts established and designated from time to time in such manner
and on such basis as they, in their sole discretion, deem fair and
equitable; and any General Items so allocated to a particular
Sub-Trust shall belong to that Sub- Trust (and be allocable to any
classes thereof). Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Sub-Trusts
(including any classes thereof) for all purposes.
(b) LIABILITIES BELONGING TO SUB-TRUSTS. The assets belonging to each
particular Sub-Trust shall be charged with the liabilities in respect
of that Sub-Trust and all expenses, costs, charges and reserves
belonging to that Sub-Trust, and any general liabilities, expenses,
costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Sub-Trust shall be
allocated and charged by the Trustees to and among any
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one or more of the Sub-Trusts 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. In addition, the liabilities in
respect of a particular class of Shares of a particular Sub-Trust and
all expenses, costs, charges and reserves belonging to that class of
Shares, and any general liabilities, expenses, costs, charges or
reserves of that particular Sub-Trust which are not readily
identifiable as belonging to any particular class of Shares of that
Sub-Trust shall be allocated and charged by the Trustees to and among
any one or more of the classes of Shares of that Sub-Trust 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. The
liabilities, expenses, costs, charges and reserves allocated and so
charged to a Sub-Trust or class thereof are herein referred to as
"liabilities belonging to" that Sub-Trust or class thereof. Each
allocation of liabilities, expenses, costs, charges and reserves by
the Trustees shall be conclusive and binding upon the Shareholders of
all Sub-Trusts (including any classes thereof) for all purposes. Any
creditor of any Sub-Trust may look only to the assets of that
Sub-Trust to satisfy such creditor's debt.
The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
Shareholders.
(c) DIVIDENDS. Dividends and distributions on Shares of a particular
Sub-Trust or any class thereof 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 holders of Shares of
that Sub-Trust or class, from such of the income and capital gains,
accrued or realized, from the assets belonging to that Sub-Trust, or
in the case of a class, belonging to that Sub-Trust and allocable to
that class, as the Trustees may determine, after providing for actual
and accrued liabilities belonging to that Sub-Trust or class. All
dividends and distributions on Shares of a particular Sub-Trust or
class thereof shall be distributed pro rata to the holders of Shares
of that Sub-Trust or class in proportion to the number of Shares of
that Sub-Trust or class held by such holders at the date and time of
record established for the payment of such dividends or distributions,
except that in connection with any dividend or distribution program or
procedure the Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's purchase
order and/or payment have not been received by the time or times
established by the Trustees under such program or procedure. Such
dividends and distributions may be made in cash or Shares of that
Sub-Trust or class or a combination thereof as determined by the
Trustees or pursuant to any program that the Trustees may have in
effect at the time for the election by each Shareholder of the mode of
the making of such dividend or distribution to that Shareholder. Any
such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with subsection (h) of
Section 4.2.
(d) LIQUIDATION. In the event of the liquidation or dissolution of the
Trust, the holders of Shares of each Sub-Trust or any class thereof
that has been established and designated shall be entitled to receive,
when and as declared by the Trustees, the excess of the assets
belonging to that Sub-Trust, or in the case of a class, belonging to
that Sub-Trust, and allocable to that class, over the liabilities
belonging to that Sub-Trust or class. The assets so distributable to
the holders of Shares of any particular Sub-Trust or class thereof
shall
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be distributed among such holders in proportion to the number of
Shares of that Sub-Trust or class thereof held by them and recorded on
the books of the Trust. The liquidation of any particular Sub-Trust
or class thereof may be authorized at any time by vote of a majority
of the Trustees then in office subject to the approval of a majority
of the outstanding voting Shares of that Sub-Trust, as defined in the
1940 Act.
(e) VOTING. On each matter submitted to a vote of the Shareholders, each
holder of a Share shall be entitled to one vote for each whole Share
and to a proportionate fractional vote for each fractional Share
standing in his name on the books of the Trust. All Shares of each
Sub-Trust shall vote as a separate class, except as to voting for
Trustees and as otherwise required by the 1940 Act, and except as set
forth in the provisions of the writing establishing and designating
any class of any Sub-Trust, and except that on any matter which does
not affect the interest of a particular Sub-Trust or class thereof,
only the holders of Shares of the one or more affected Sub-Trusts or
classes shall be entitled to vote.
(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular
Sub-Trust or any class thereof shall have the right at such times as
may be permitted by the Trust, but no less frequently than once each
week, to require the Trust to redeem all or any part of his Shares of
that Sub-Trust or class thereof at a redemption price equal to the net
asset value per Share of that Sub-Trust or class thereof next
determined in accordance with subsection (h) of this Section 4.2 after
the Shares are properly tendered for redemption, subject to any
contingent deferred sales charge in effect at the time of redemption.
Payment of the redemption price shall be in cash; provided, however,
that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash
unwise or undesirable, the Trust may, subject to the requirements of
the 1940 Act, make payment wholly or partly in securities or other
assets belonging to the Sub-Trust or which the Shares being redeemed
are part at the value of such securities or assets used in such
determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of
any Sub-Trust or class thereof to require the Trust to redeem Shares
of that Sub-Trust during any period or at any time when and to the
extent permissible under the 1940 Act.
(g) REDEMPTION BY TRUST. Each Share of each Sub-Trust or class thereof
that has been established and designated is subject to redemption by
the Trust at the redemption price which would be applicable if such
Share was then being redeemed by the Shareholder pursuant to
subsection (f) of this Section 4.2: (a) at any time, if the Trustees
determine in their sole discretion that failure to so redeem may have
materially adverse consequences to the holders of the Shares of the
Trust or any Sub-Trust thereof or class thereof, or (b) upon such
other conditions as may from time to time be determined by the
Trustees and set forth in the then current Prospectus of the Trust
with respect to maintenance of Shareholder accounts of a minimum
amount. Upon such redemption the holders of the Shares so redeemed
shall have no further right with respect thereto other than to receive
payment of such redemption price.
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(h) NET ASSET VALUE. The net asset value per Share of any Sub-Trust shall
be (i) in the case of a Sub-Trust whose Shares are not divided into
classes, the quotient obtained by dividing the value of the net assets
of that Sub-Trust (being the value of the assets belonging to that
Sub-Trust less the liabilities belonging to that Sub-Trust) by the
total number of Shares of that Sub-Trust outstanding, and (ii) in the
case of a class of Shares of a Sub-Trust whose Shares are divided into
classes, the quotient obtained by dividing the value of belonging to
that Sub-Trust allocable to such class less the liabilities belonging
to such class) by the total number of Shares of such class
outstanding; all determined in accordance with the methods and
procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time.
The Trustees may determine to maintain the net asset value per Share
of any Sub-Trust at a designated constant dollar amount and in
connection therewith may adopt procedures not inconsistent with the
1940 Act for the continuing declarations of income attributable to
that Sub-Trust as dividends payable in additional Shares of that
Sub-Trust at the designated constant dollar amount and for the
handling of any losses attributable to that Sub-Trust. Such
procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the capital of the Trust
attributable to that Sub-Trust his pro rata portion of the total
number of Shares required to be cancelled in order to permit the net
asset value per Share of that Sub-Trust to be maintained, after
reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the Trust shall be deemed to have agreed, by his
investment in any Sub-Trust with respect to which the Trustees shall
have adopted any such procedure, to make the contribution referred to
in the preceding sentence in the event of any such loss.
(i) TRANSFER. All Shares of each particular Sub-Trust or class thereof
shall be transferable, but transfers of Shares of a particular
Sub-Trust or class thereof will be recorded on the Share transfer
records of the Trust applicable to that Sub- Trust or class only at
such times as Shareholders shall have the right to require the Trust
to redeem Shares of that Sub- Trust or class and at such other times
as may be permitted by the Trustees.
(j) EQUALITY. Except as provided herein or in the instrument designating
and establishing any class of any Shares or any Sub- Trust, all Shares
of each particular Sub-Trust or class thereof shall represent an equal
proportionate interest in the assets belonging to that Sub-Trust, or
in the case of a class, belonging to that Sub-Trust and allocable to
that class, subject to the liabilities belonging to that Sub-Trust or
class, and each Share of any particular Sub-Trust or class shall be
equal to each other Share of that Sub-Trust or class; but the
provisions of this sentence shall not restrict any distinctions
permissible under subsection (c) of this Section 4.2 that may exist
with respect to dividends and distributions on Shares of the same
Sub-Trust or class. The Trustees may from time to time divide or
combine the Shares of any particular Sub-Trust or class into a greater
or lesser number of Shares of that Sub-Trust or class without thereby
changing the proportionate beneficial interest in the assets belonging
to that Sub-Trust or class or in any way affecting the rights of
Shares of any other Sub-Trust or class.
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(k) FRACTIONS. Any fractional Share of any Sub-Trust or class, if any
such fractional Share is outstanding, shall carry proportionately all
the rights and obligations of a whole Share of that Sub-Trust or
class, including rights and obligations with respect to voting,
receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust.
(l) CONVERSION RIGHTS. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that
holders of Shares of any Sub-Trust or class thereof shall have the
right to convert said Shares into Shares of one or more other
Sub-Trust or class thereof in accordance with such requirements and
procedures as may be established by the Trustees.
SECTION 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded on
the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Sub-Trust and each
class thereof that has been established and designated. No certificates
certifying the ownership of Shares need be issued except as the Trustees may
otherwise determine from time to time. The Trustees may make such rules as
they consider appropriate for the issuance of Share certificates, the use of
facsimile signatures, the transfer of Shares and similar matters. The record
books of the Trust as kept by the Trust or any transfer or similar agent, as
the case may be, shall be conclusive as to who are the Shareholders and as to
the number of Shares of each Sub-Trust and class thereof held from time to time
by each such Shareholder.
SECTION 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept investments in
the Trust and each Sub-Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any distributor,
principal underwriter, custodian, transfer agent or other person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any purchase orders for Shares whether or not conforming to such
authorized terms.
SECTION 4.5 NO PRE-EMPTIVE RIGHTS. Shareholders shall have no pre-emptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
SECTION 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. 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. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the Trust or any Sub-Trust thereof nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
only to the rights of said decedent under this Trust. Ownership of Shares
shall not entitle the Shareholder to any title in or to the whole or any part
of the Trust Property or right to call for a partition or division of the same
or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
Shareholder, nor except as specifically provided herein to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder, may at any time personally agree to pay.
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ARTICLE V
---------
SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
SECTION 5.1 VOTING POWERS. The Shareholders shall have power to vote only (i)
for the election or removal of Trustees as provided in Section 3.1, (ii) with
respect to any contract with a Contracting Party as provided in Section 3.3 as
to which Shareholder approval is as required by the 1940 Act, (iii) with
respect to any termination or reorganization of the Trust or any Sub-Trust to
the extent and as provided in Sections 7.1 and 7.2, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as provided in Section
7.3, (v) 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 any Sub-Trust thereof or the Shareholders (provided, however,
that a Shareholder of a particular Sub-Trust shall not be entitled to a
derivative or class action on behalf of any other Sub-Trust (or Shareholder of
any other Sub-Trust) of the Trust) and (vi) with respect to such additional
matters relating to the Trust as may be required by the 1940 Act, this
Declaration of Trust, the By-Laws or any registration of the Trust with the
Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them.
A proxy 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. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
SECTION 5.2 MEETINGS. No annual or regular meeting of Shareholders is
required. Special meetings of Shareholders may be called by the Trustees from
time to time for the purpose of taking action upon any matter requiring the
vote or authority of the Shareholders as herein provided or upon any other
matter deemed by the Trustees to be necessary or desirable. Written notice of
any meeting of Shareholders shall be given or caused to be given by the
Trustees by mailing such notice at least seven days before such meeting,
postage prepaid, stating the time, place and purpose of the meeting, to each
Shareholder at the Shareholder's address as it appears on the records of the
Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the Trust
when requested to do so in writing by Shareholders holding not less than 10% of
the Shares then outstanding. If the Trustees shall fail to call or give notice
of any meeting of Shareholders for a period of 30 days after written
application by Shareholders holding at least 10% of the Shares then outstanding
requesting a meeting be called for any other purpose requiring action by the
Shareholders as provided herein or in the By-Laws, then Shareholders holding at
least 10% of the Shares then outstanding may call and give notice of such
meeting, and thereupon the meeting shall be held in the manner provided for
herein in case of call thereof by the Trustees.
SECTION 5.3 RECORD DATES. For the purpose of determining the Shareholders who
are entitled to vote or act at any meeting or any adjournment thereof, or who
are entitled to participate in any dividend or distribution, or for the purpose
of any other action, the Trustees may from time to
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time close the transfer books for such period, not exceeding 30 days (except
at or in connection with the termination of the Trust), as the Trustees may
determine; or without closing the transfer books the Trustees may fix a date
and time not more than 60 days prior to the date of any meeting of Shareholders
or other action as the date and time of record for the determination of
Shareholders entitled to vote at such meeting or any adjournment thereof or to
be treated as Shareholders of record for purposes of such other action, and any
Shareholder who was a Shareholder at the date and time so fixed shall be
entitled to vote at such meeting or any adjournment thereof or to be treated as
a Shareholder of record for purposes of such other action, even though he has
since that date and time disposed of his Shares, and no Shareholder becoming
such after that date and time shall be so entitled to vote at such meeting or
any adjournment thereof or to be treated as a Shareholder of record for
purposes of such other action.
SECTION 5.4 QUORUM AND REQUIRED VOTE. A majority of the Shares entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is present shall
decide any questions and a plurality shall elect a Trustee, except when a
different vote is required or permitted by any provision of the 1940 Act or
other applicable law or by this Declaration of Trust or the By-Laws.
SECTION 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the 1940
Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by the 1940 Act or by
any express provision of this Declaration of Trust or the By-Laws) consent to
the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes
as a vote taken at a meeting of Shareholders.
SECTION 5.6 INSPECTION OF RECORDS. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted stockholders of a
Massachusetts business corporation under the Massachusetts Business Corporation
Law.
SECTION 5.7 ADDITIONAL PROVISIONS. The By-Laws may include further provisions
for Shareholders' votes and meetings and related matters not inconsistent with
the provisions hereof.
SECTION 5.8 SHAREHOLDER COMMUNICATIONS. Whenever ten or more Shareholders of
record who have been such for at least six months preceding the date of
application, and who hold in the aggregate either Shares having a net asset
value of at least $25,000 or at least 1% of the outstanding Shares, whichever
is less, shall apply to the Trustees in writing, stating that they wish to
communicate with other Shareholders with a view to obtaining signatures to a
request for a Shareholder meeting and accompanied by a form of communication
and request which they wish to transmit, the Trustees shall within five
business days after receipt of such application either (1) afford to such
applicants access to a list of the names and addresses of all Shareholders as
recorded on the books of the Trust or Sub-Trust, as applicable; or (2) inform
such applicants as to the approximate number of Shareholders of record, and the
approximate cost of mailing to them the proposed communication and form of
request.
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If the Trustees elect to follow the course specified in paragraph (2) above the
Trustees, upon the written request of such applicants, accompanied by a tender
of the material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all Shareholders of record at
their addresses as recorded on the books, unless within five business days
after such tender the Trustees shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Trustees to the effect that in
their opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion. The Trustees shall thereafter comply with the
requirements of the Investment Company Act of 1940.
ARTICLE VI
----------
LIMITATION OF LIABILITY; INDEMNIFICATION
----------------------------------------
SECTION 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Sub-Trust with which such person
dealt for payment under such credit, contract or claim; and neither the
Shareholders of any Sub-Trust nor the Trustees, nor any of the Trust's
officers, employees or agents, whether past, present or future, nor any other
Sub-Trust shall be personally liable therefor. Every note, bond, contract,
instrument, certificate or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust, any Sub-Trust or the Trustees or
any of them in connection with the Trust shall be conclusively deemed to have
been executed or done only by or for the Trust (or the Sub-Trust) or the
Trustees and not personally. Nothing in this Declaration of Trust shall
protect any Trustee or officer against any liability to the Trust or the
Shareholders to which such Trustee or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee or of
such officer.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that
this Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite to the effect that the same was executed or made
by or on behalf of the Trust or by them as Trustees or Trustee or as officers
or officer and not individually and that the obligations of such instrument are
not binding upon any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, or the particular Sub-Trust in
question, as the case may be, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
SECTION 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretion hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable
in any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, adviser, administrator, distributor or principal underwriter,
custodian or transfer, dividend disbursing, Shareholder servicing or
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accounting agent of the Trust, nor shall any Trustee be responsible for the act
or omission of any other Trustee; (b) the Trustees may take advice of counsel
or other experts, with respect to the meaning and operation of this Declaration
of Trust and their duties as Trustees, and shall be under no liability for any
act or omission in accordance with such advice or for failing to follow such
advice; and (c) in discharging their duties, the Trustees, when acting in good
faith, shall be entitled to rely upon the books of account of the Trust and
upon written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a
Contracting Party appointed by the Trustees pursuant to Section 3.3. The
Trustees as such shall not be required to give any bond or surety or any other
security for the performance of their duties.
SECTION 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder (or
former Shareholder) of any Sub-Trust of the Trust shall be charged or held to
be personally liable for any obligation or liability of the Trust solely by
reason of being or having been a Shareholder and not because of such
Shareholder's acts or omissions or for some other reason, said Sub-Trust (upon
proper and timely request by the Shareholder) shall assume the defense against
such charge and satisfy any judgment thereon, and the Shareholder or former
Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets of said
Sub-Trust estate to be held harmless from and indemnified against all loss and
expense arising from such liability.
SECTION 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust shall
indemnify (from the assets of the Sub-Trust or Sub-Trusts in question) each of
its Trustees and officers (including persons who serve at the Trust's request
as directors, officers or trustees of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise [hereinafter referred
to as "Covered Person"]) against all liabilities, including but limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants and counsel fees,
incurred by any Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person may
be or may have been involved as a party or otherwise or with which such person
may be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee, except
with respect to any matter as to which it has been determined that such Covered
Person (i) did not act in good faith in the reasonable belief that such Covered
Person's action was in or not opposed to the best interests of the Trust or
(ii) had acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office (either and both of the conduct described in (i) and (ii) being
referred to hereafter as "Disabling Conduct"). A determination that the
Covered Person is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an administrative proceeding
against a Covered Person for insufficiency of evidence of Disabling Conduct, or
(iii) a reasonable determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by (a) a vote of a
majority of a quorum of Trustees who are neither "interested persons" of the
Trust as defined in section 2(a) (19) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of judgments, in
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compromise or as fines or penalties), may be paid from time to time by the
Sub-Trust in question in advance of the final disposition of any such action,
suit or proceeding, provided that the Covered Person shall have undertaken to
repay the amounts so paid to the Sub-Trust in question if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article VI and (i) the Covered Person shall have provided security for such
undertaking, (ii) the Trust shall be insured against losses arising by reason
of any lawful advances, or (iii) a majority of a quorum of the disinterested
Trustees who are not a party to the proceeding, or an independent legal counsel
in a written opinion, shall have determined, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the Covered Person ultimately will be found entitled to
indemnification.
SECTION 6.5 COMPROMISE PAYMENT. As to any matter disposed of by a compromise
payment by any such Covered Person referred to in Section 6.4, pursuant to a
consent decree or otherwise, no such indemnification either for said payment or
for any other expenses shall be provided unless such indemnification shall be
approved (a) by a majority of the disinterested Trustees who are not parties to
the proceeding or (b) by an independent legal counsel in a written opinion.
Approval by the Trustees pursuant to clause (a) or by independent legal counsel
pursuant to clause (b) shall not prevent the recovery from any Covered Person
of any amount paid to such Covered Person in accordance with any of such
clauses as indemnification if such Covered Person is subsequently adjudicated
by a court of competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in or not opposed to
the best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of indemnification
provided by this Article VI shall not be exclusive of or affect any other
rights to which any such Covered Person may be entitled. As used in this
Article VI, "Covered Person" shall include such person's heirs, executors and
administrators, an "interested Covered Person" is one against whom the action,
suit or other proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened.
Nothing contained in this Article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the power of
the Trust to purchase and maintain liability insurance on behalf of any such
person.
SECTION 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
SECTION 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as provided
herein, the Trust shall continue without limitation of time and, without
limiting the generality of the
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foregoing, no change, alteration or modification with respect to any Sub-Trust
shall operate to terminate the Trust. The Trust or any Sub-Trust may be
terminated at any time by a majority of the Trustees then in office subject to
a favorable vote of a majority of the outstanding voting securities, as defined
in the 1940 Act, Shares of each Sub-Trust voting separately by Sub-Trust.
Upon termination, after paying or otherwise providing for all charges, taxes,
expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with
the provisions of subsection (d) of Section 4.2.
SECTION 7.2 REORGANIZATION. The Trustees may sell, convey, merge and transfer
the assets of the Trust, or the assets belonging to any one or more Sub-Trusts,
to another trust, partnership, association or corporation organized under the
laws of any state of the United States, or to the Trust to be held as assets
belonging to another Sub-Trust of the Trust, in exchange for cash, shares or
other securities (including, in the case of a transfer to another Sub-Trust of
the Trust, Shares of such other Sub-Trust or any class thereof) with such
transfer either (1) being made subject to, or with the assumption by the
transferee of, the liabilities belonging to each Sub-Trust the assets of which
are so transferred, or (2) not being made subject to, or not with the
assumption of, such liabilities; provided, however, that no assets belonging to
any particular Sub-Trust shall be so transferred unless the terms of such
transfer shall have first been approved at a meeting called for the purpose by
the affirmative vote of the holders of a majority of the outstanding voting
Shares, as defined in the 1940 Act, of that Sub-Trust. Following such
transfer, the Trustees shall distribute such cash, shares or other securities
(giving due effect to the assets and liabilities belonging to and any other
differences among the various Sub-Trusts or classes thereof the assets
belonging to which have so been transferred) among the Shareholders of the
Sub-Trust (taking into account the differences among the classes of Shares
thereof, if any) the assets belonging to which have been so transferred; and if
all of the assets of the Trust have been so transferred, the Trust shall be
terminated.
The Trust, or any one or more Sub-Trusts, may, either as the successor,
survivor, or non-survivor, (1) consolidate with one or more other trusts,
partnerships, associations or corporations organized under the laws of the
Commonwealth of Massachusetts or any other state of the United States, to form
a new consolidated trust, partnership, association or corporation under the
laws of which any one of the constituent entities is organized, or (2) merge
into one or more other trusts, partnerships, associations or corporations
organized under the laws of the Commonwealth of Massachusetts or any other
state of the United States, or have one or more such trusts, partnerships,
associations or corporations merged into it, any such consolidation or merger
to be upon such terms and conditions as are specified in an agreement and plan
of reorganization entered into by the Trust, or one or more Sub-Trusts as the
case may be, in connection therewith. The terms "merge" or "merger" as used
herein shall also include the purchase or acquisition of any assets of any
other trust, partnership, association or corporation which is an investment
company organized under the laws of the Commonwealth of Massachusetts or any
other state of the United States. Any such consolidation or merger shall
require the affirmative vote of the holders of a majority of the outstanding
voting Shares, as defined in the 1940 Act, of each Sub-Trust affected thereby.
20
<PAGE> 24
SECTION 7.3 AMENDMENTS. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or
Trustee or repeal the prohibition of assessment upon the Shareholders without
the express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time, so long as such
amendment does not adversely affect the rights of any Shareholder with respect
to which such amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including the 1940 Act, by
an instrument in writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to the vote of a majority of such Trustees). Any
amendment to this Declaration of Trust that adversely affects the rights of
Shareholders may be adopted at any time by an instrument in writing signed by a
majority of the then Trustees (or by an officer of the Trust pursuant to a vote
of a majority of such Trustees) when authorized to do so by the vote in
accordance with subsection (e) of Section 4.2 of Shareholders holding a
majority of the Shares entitled to vote. Subject to the foregoing, any such
amendment shall be effective as provided in the instrument containing the terms
of such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate
(which may be a part of such instrument) executed by a Trustee or officer of
the Trust to the effect that such amendment has been duly adopted.
SECTION 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The original or a copy of
this instrument and of each amendment hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this instrument
and of each amendment hereto shall be filed by the Trust with the Secretary of
The Commonwealth of Massachusetts and with the Boston City Clerk, as well as
any other governmental office where such filing may from time to time be
required, but the failure to make any such filing shall not impair the
effectiveness of this instrument or any such amendment. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made, as to the identities of the Trustees
and officers, and as to any matters in connection with the Trust hereunder;
and, with the same effect as if it were the original, may rely on a copy
certified by an officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment, references to
this instrument, and all expressions like "herein", "hereof" and "hereunder"
shall be deemed to refer to this instrument as a whole as the same may be
amended or affected by any such amendments. The masculine gender shall include
the feminine and neuter genders. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
SECTION 7.5 APPLICABLE LAW. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth,
including the Massachusetts Business Corporation Law as the same may be amended
from time to time, to which reference is made with the intention that matters
not specifically covered herein or as to which an ambiguity may exist shall be
resolved as if the Trust were a business corporation organized in
Massachusetts, but the reference to said Business Corporation Law is not
intended to give the Trust, the Trustees, the Shareholders or any other person
any right, power, authority or responsibility available only to or
21
<PAGE> 25
in connection with an entity organized in corporate form. The Trust shall be
of the type referred to in Section 1 of Chapter 182 of the Massachusetts
General Laws and of the type commonly called a Massachusetts business trust,
and without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a Trust.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals in
the City of Boston, Massachusetts for themselves and their assigns, as of the
day and year first above written.
\ s \ William A. Barron, III
_______________________________________________
\ s \ Thomas J. Brown
_______________________________________________
\ s \ Douglas M. Costle
_______________________________________________
\ s \ Hugh A. Dunlap, Jr.
_______________________________________________
\ s \ Leland O. Erdahl
_______________________________________________
\ s \ Richard A. Farrell
_______________________________________________
\ s \ Patrick Grant
_______________________________________________
\ s \ Ralph Lowell, Jr.
_______________________________________________
\ s \ John A. Moore
_______________________________________________
\ s \ John W. Pratt
_______________________________________________
22
<PAGE> 26
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss.
Then personally appeared the within-named William A. Barron, III, RR1, 325 Sea
Meadows Lane, Yarmouth, ME 04096, Thomas J. Brown, 13 Beaver Dam Drive,
Westford, MA 01886, Douglas M. Costle, RR2, Box 480, Woodstock, VT 05091,
John A. Moore, 1530 "O" Street, N.W., Washington, D.C. 20005, Hugh A. Dunlap,
Jr., 29 Lowell Road, Brookline, MA 02146, Leland O. Erdahl, 7690 West 70th
Drive, Arvada, CO 80004, Richard A. Farrell, 50 Beacon Street, Marblehead, MA
01945, Patrick Grant, 5 Haven Street, Dedham, MA 02026, Ralph Lowell, Jr., 45
Mill Street, Edgartown, MA 02539, and John W. Pratt, 2 Gray Gardens East,
Cambridge, MA 02138 who acknowledged the foregoing instrument to be their free
act and deed, before me, this 10th day of September, 1991.
\ s \ John J. Danello
_________________________________________
Notary Public
My commission expires: 12/5/91
23
<PAGE> 27
FREEDOM INVESTMENT TRUST
Instrument Changing Names of Series of Shares of the Trust
----------------------------------------------------------
The Trustees of Freedom Investment Trust (the "Trust"), hereby amend
the Trust's Master Trust Agreement, dated March 29, 1984 as amended and
restated September 10, 1991, to the extent necessary to reflect the change of
the name of the John Hancock Freedom Gold & Government Fund to John Hancock
Gold & Government Fund, and John Hancock Freedom Regional Bank Fund to John
Hancock Regional Bank Fund, effective January 2, 1995.
IN WITNESS WHEREOF, the Trustees of the Trust have executed this
Instrument on the 2th day of September, 1994.
/s/William A. Barron III /s/William F. Glavin
- ------------------------ --------------------
William A. Barron III William F. Glavin
/s/Edward J. Boudreau, Jr. /s/Patrick Grant
- -------------------------- ----------------
Edward J. Boudreau, Jr. Patrick Grant
/s/Douglas M. Costle /s/Ralph Lowell, Jr.
- -------------------- --------------------
Douglas M. Costle Ralph Lowell, Jr.
/s/Hugh A. Dunlap, Jr. /s/John A. Moore
- ---------------------- ----------------
Hugh A. Dunlap, Jr. John A. Moore
/s/Leland O. Erdahl /s/Patti McGill Peterson
- ------------------- ------------------------
Leland O. Erdahl Patti McGill Peterson
/s/Richard A. Farrell /s/John W. Pratt
- --------------------- ----------------
Richard A. Farrell John W. Pratt
<PAGE> 28
FREEDOM INVESTMENT TRUST
Instrument Changing Name of Series of Shares of the Trust
---------------------------------------------------------
The Trustees of Freedom Investment Trust (the "Trust"), hereby amend
the Trust's Amended and Restated Master Trust Agreement, dated March 29, 1984
as amended and restated September 10, 1991, to the extent necessary to reflect
the change of name of the John Hancock Freedom Managed Tax Exempt Fund to John
Hancock Managed Tax-Exempt Fund, effective September 1, 1993.
IN WITNESS WHEREOF, the Trustees of the Trust have executed this
Instrument on the 3rd day of August , 1993.
/s/ William A. Barron III /s/ William F. Glavin
- ------------------------- ---------------------
William A. Barron III William F. Glavin
/s/Edward J. Boudreau, Jr. /s/ Patrick Grant
----------------------- -----------------
Edward J. Boudreau, Jr Patrick Grant
/s/Douglas M. Costle /s/ Ralph Lowell, Jr.
- -------------------- ---------------------
Douglas M. Costle Ralph Lowell, Jr.
/s/ Hugh A. Dunlap, Jr. /s/John A. Moore
- ----------------------- ----------------
Hugh A. Dunlap, Jr John A. Moore
/s/Leland O. Erdahl /s/Patti McGill Peterson
- ------------------- ------------------------
Leland O. Erdahl Patti McGill Peterson
/s/Richard A. Farrell /s/John W. Pratt
- --------------------- ----------------
Richard A. Farrell John W. Pratt
<PAGE> 29
FREEDOM INVESTMENT TRUST
AMENDMENT TO MASTER TRUST AGREEMENT
Amendment to the Master Trust Agreement dated March 29, 1984, as
amended and restated, made at Boston, Massachusetts, as of this 27th day of
September, 1994.
W I T N E S S E T H
WHEREAS, Section 7.3 of the Master Trust Agreement dated March 29,
1984, as amended and restated (the "Agreement") of Freedom Investment Trust
(the "Trust") provides that the Agreement may be amended; and
WHEREAS, Section 4.1 of the Agreement provides that the Trustees of
the Trust may at any time there are no shares outstanding abolish a Sub-Trust
and the establishment and designation thereof by an instrument in writing,
signed by a majority of the Trustees of the Trust.
NOW, THEREFORE, the Trustees hereby state:
1. That Section 4.2 of the Agreement and all other appropriate references
in the Agreement are amended to abolish the establishment and designation of
the following Sub-Trusts: John Hancock Freedom Money Market Fund, Freedom
Massachusetts Tax-Exempt Fund, Freedom New York Tax Exempt Fund and Freedom
Growth and Income Fund, effective this date.
Accordingly, the initial paragraph of Section 4.2 of the Agreement as
heretofore in effect is hereby amended to read as follows:
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SUB-TRUSTS.
Without limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby establish
and designate five Sub-Trusts: John Hancock Freedom Gold & Government Fund,
John Hancock Freedom Regional Bank Fund, John Hancock Sovereign U.S. Government
Income Fund, John Hancock Sovereign Achievers Fund and John Hancock Managed
Tax-Exempt Fund. The Shares of such Sub-Trusts and any Shares of any further
Sub-Trusts that may from time to time be established and designated by the
Trustees shall (unless the Trustees otherwise determine with respect to some
further Sub-Trust at the time of establishing and designating the same) have
the following relative rights and preferences:
The undersigned, being a majority of the Trustees of the Trust,
hereby certify that the amendment set forth above has been duly adopted in
accordance with the provisions of the Master Trust Agreement of the Trust.
<PAGE> 30
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals for themselves and their assigns, as of this 27th day of September, 1994.
/s/William A. Baron, III /s/Edward J. Boudreau, Jr.
- ----------------------------- -----------------------------
William A. Barron, III Edward J. Boudreau, Jr.
/s/Douglas M. Costle /s/Hugh A. Dunlap, Jr.
- ----------------------------- -----------------------------
Douglas M. Costle Hugh A. Dunlap, Jr.
/s/Leland O. Erdahl /s/Richard A. Farrell
- ----------------------------- -----------------------------
Leland O. Erdahl Richard A. Farrell
/s/William F. Glavin /s/Patrick Grant
- ----------------------------- -----------------------------
William F. Glavin Patrick Grant
/s/Ralph Lowell, Jr. /s/John A. Moore
- ----------------------------- -----------------------------
Ralph Lowell, Jr. John A. Moore
/s/Patti McGill Peterson /s/John W. Pratt
- ----------------------------- -----------------------------
Patti McGill Peterson John W. Pratt
<PAGE> 31
COMMONWEALTH OF MASSACHUSETTS
SS:
COUNTY OF SUFFOLK:
Then personally appeared the above-named William A. Barron, III,
Edward J. Boudreau, Jr., Douglas M. Costle, Hugh A. Dunlap, Jr., Leland O.
Erdahl, Richard A. Farrell, William F. Glavin, Patrick Grant, Ralph Lowell,
Jr., John A. Moore, Patti McGill Peterson and John W. Pratt who each
acknowledged the foregoing instrument to be his or her free act and deed,
before me, this 27th day of September, 1994.
________________________________________
Notary Public
My commission expires:
<PAGE> 32
FREEDOM INVESTMENT TRUST
AMENDMENT NO.1 TO MASTER TRUST AGREEMENT
AS AMENDED AND RESTATED
Amendment No. 1 to the Master Trust Agreement dated March 29, 1984, as
amended and restated as of September 10, 1991, made at Boston, Massachusetts,
as of this 25th day of June, 1992.
W I T N E S S E T H:
WHEREAS, Section 7.3 of the Master Trust Agreement dated March 29,
1994, as amended and restated as of September 10, 1991 (the "Agreement") of
Freedom Investment Trust (the "Trust") provides that the Agreement may be
amended at any time, so long as such amendment does not adversely affect the
rights of any shareholder.
NOW, THEREFORE, the Trustees hereby state:
1. That Section 4.2 of the Agreement and all other appropriate
references in the Agreement are amended, effective August 10, 1992, to change
the name of the established and designated Sub-Trust Freedom Equity Value Fund
to John Hancock Sovereign Achievers Fund.
Furthermore, that the initial paragraph of Section 4.2 of the
Agreement as heretofore in effect is amended, effective August 10, 1992, to
read as follows:
"Section 4.2 Establishment and Designation of Sub-Trusts.
Without limiting the authority of the Trustees set forth in Section
4.1 to establish and designate any further Sub-Trusts, the Trustees
hereby establish and designate nine Sub- Trusts: Freedom Gold &
Government Trust, Freedom Regional Bank Fund, Freedom Government
Income Fund, John Hancock Sovereign Achievers Fund, Freedom Managed
Tax Exempt Fund, Freedom Massachusetts Tax Exempt Fund, Freedom New
York Tax Exempt Fund and Freedom Growth and Income Fund. The Shares
of such Sub-Trusts and any Shares of any further Sub-Trusts that may
from time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with respect to some further
Sub-Trust at the time of establishing and designating the same) have
the following relative rights and preferences:"
2. That Section 4.2 of the Agreement and all other appropriate
references in the Agreement are amended, effective October 1, 1992, to change
the names of the established and designated Sub-Trusts as follows:
Freedom Government Income Fund
to John Hancock Sovereign Government Fund
<PAGE> 33
Freedom Regional Bank Fund
to John Hancock Freedom Regional Bank Fund
Freedom Gold & Government Trust
to John Hancock Freedom Gold & Government Trust
Furthermore, that the initial paragraph of Section 4.2 of the
Agreement as heretofore in effect is amended, effective October 1, 1992, to
read as follows:
"Section 4.2 Establishment and Designation of Sub-Trusts.
Without limiting the authority of the Trustees set forth in Section
4.1 to establish and designate any further Sub-Trusts, the Trustees
hereby establish and designate nine Sub- Trusts: Freedom Gold &
Government Trust, Freedom Regional Bank Fund, Freedom Government
Income Fund, John Hancock Sovereign Achievers Fund, Freedom Managed
Tax Exempt Fund, Freedom Massachusetts Tax Exempt Fund, Freedom New
York Tax Exempt Fund and Freedom Growth and Income Fund. The Shares
of such Sub-Trusts and any Shares of any further Sub-Trusts that may
from time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with respect to some further
Sub-Trust at the time of establishing and designating the same) have
the following relative rights and preferences:"
3. That Section 1.1 of the Agreement and all other appropriate
references in the Agreement are amended, effective July 1, 1992, to change the
address of the Trust as follows:
One Beacon street
Boston, Massachusetts 02108
to
101 Huntington Avenue
Boston, Massachusetts 02199
Furthermore, that Section 1.1 of the Agreement as heretofore in effect
is amended, effective July 1, 1992, to read as follows:
"Section 1.1 Name and Principal Office. This Trust shall be
know as "Freedom Investment Trust" and the Trustees shall conduct the
business of the Trust under that name or any other name or names as
they may from time to time determine. The principal office of the
Trust shall be located at 101 Huntington Avenue, Boston, Massachusetts
02199 or at such other location as the Trustees may from time to time
determine."
The undersigned, being a majority of the Trustees of the Trust, hereby
certify that the amendment set forth above has been duly adopted in accordance
with the provisions of the Master Trust Agreement of the Trust.
<PAGE> 34
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals for themselves and their assigns, as of this 25th day of June, 1992.
/s/Hugh A. Dunlap, Jr. /s/Douglas M. Costle
- --------------------- --------------------
Hugh A. Dunlap, Jr. Douglas M. Costle
/s/Edward J. Boudreau, Jr. /s/William A. Barron, III
- -------------------------- -------------------------
Edward J. Boudreau, Jr. William A. Barron, III
/s/Richard A. Farrell /s/Ralph Lowell, Jr.
- --------------------- -------------------
Richard A. Farrell Ralph Lowell, Jr.
/s/Leland O. Erdahl /s/Patrick Grant
- ------------------- ----------------
Leland O. Erdahl Patrick Grant
/s/John A. Moore /s/John W. Pratt
- ---------------- ----------------
John A. Moore John W. Pratt
<PAGE> 35
COMMONWEALTH OF MASSACHUSETTS)
) SS
COUNTY OF SUFFOLK )
Then personally appeared the above-named Hugh A. Dunlap, Jr., Edward
J. Boudreau, Jr. Douglas Costle, John A. Moore, John W. Pratt, Patrick Grant,
Richard A. Farrell, Leland O. Erdahl, William A. Barron, III and Ralph Lowell,
Jr. and acknowledged this instrument to be his free act and deed as of the 25th
day of June, 1992
Regina M. Pis
-------------
Notary Public
My Commission expires: 1-24-97
<PAGE> 36
FREEDOM INVESTMENT TRUST
AMENDMENT NO. 2 TO MASTER TRUST AGREEMENT
AS AMENDED AND RESTATED
Amendment No. 2 to the Master Trust Agreement dated March 29, 1984, as
amended and restated as of September 10, 1991, made at Boston, Massachusetts,
as of this 25th day of June, 1992.
WITNESSETH:
WHEREAS, Section 7.3 of the Master Trust Agreement dated March 29,
1984, as amended and restated as of September 10, 1991 (the "Agreement") of
Freedom Investment Trust (the "Trust") provides that the Agreement may be
amended at any time, so long as such amendment does not adversely affect the
rights of any shareholder.
NOW, THEREFORE, the Trustees hereby state:
1. That Section 4.2 of the Agreement and all other appropriate
references in the Agreement are amended, effective October 1, 1992, to change
the name of the established and designated Sub-Trust Freedom Government Income
Fund to John Hancock Sovereign U.S. Government Inocme Fund.
Furthermore, that the initial paragraph of Section 4.2 of the
Agreement as heretofore in effect is amended, effective October 1, 1992, to
read as follows:
"Section 4.2 Establishment and Designation of Sub-Trusts. Without
limiting the authority of the Trustees set forth in Section 4.1 to establish
and designate any further Sub-Trusts, the Trustees hereby establish and
designate nine Sub-Trusts: John Hancock Freedom Gold & Government Trust, John
Hancock Freedom Regional Bank Fund, John Hancock Sovereign U.S. Government
Fund, John Hancock Sovereign Achievers Fund, Freedom Managed Tax Exempt Fund,
Freedom Massachusetts Tax Exempt Fund, Freedom New York Tax Exempt Fund and
Freedom Growth and Income Fund. The Shares of such Sub-Trusts and any Shares
of any further Sub-Trusts that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise determine with
respect to some further Sub-Trust at the time of establishing and designation
the same) have the following relative rights and preferences:"
The undersigned, being a majority of the Trustees of the Trust, hereby
certify that the amendment set forth above has been duly adopted in accordance
with the provisions of the Master Trust agreement of the Trust.
<PAGE> 37
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals for themselves and their assigns, as of this 25th day of June, 1992.
/s/Hugh A. Dunlap, Jr. /s/Douglas M. Costle
- --------------------- --------------------
Hugh A. Dunlap, Jr. Douglas M. Costle
/s/Edward J. Boudreau, Jr. /s/William A. Barron, III
- -------------------------- -------------------------
Edward J. Boudreau, Jr. William A. Barron, III
/s/Richard A. Farrell /s/Ralph Lowell, Jr.
- --------------------- -------------------
Richard A. Farrell Ralph Lowell, Jr.
/s/Leland O. Erdahl /s/Patrick Grant
- ------------------- ----------------
Leland O. Erdahl Patrick Grant
/s/John A. Moore /s/John W. Pratt
- ---------------- ----------------
John A. Moore John W. Pratt
<PAGE> 38
COMMONWEALTH OF MASSACHUSETTS)
) SS
COUNTY OF SUFFOLK )
Then personally appeared the above-named Hugh A. Dunlap, Jr., Edward
J. Boudreau, Jr. Douglas Costle, John A. Moore, John W. Pratt, Patrick Grant,
Richard A. Farrell, Leland O. Erdahl, William A. Barron, III and Ralph Lowell,
Jr. and acknowledged this instrument to be his free act and deed as of the 25th
day of June, 1992
Regina M. Pis
-------------
Notary Public
My Commission expires: 1-24-97
<PAGE> 39
FREEDOM INVESTMENT TRUST
AMENDMENT NO 3 TO MASTER TRUST AGREEMENT
AS AMENDED AND RESTATED
Amendment No. 3 to the Master Trust Agreement dated March 29, 1984, as
amended and restated as of September 10, 1991, made at Boston, Massachusetts,
as of the 16th of September ,1992.
WITNESSETH:
WHEREAS, Section 7.3 of the Master Trust Agreement dated March 29,
1984, as amended and restated as of September 10, 1991 (the "Agreement") of
Freedom Investment Trust (the "Trust") provides that the Agreement may be
amended at any time, so long as such amendment does not adversely affect the
rights of any shareholder.
NOW THEREFORE, the Trustees hereby state:
1. That Section 4.2 of the Agreement and all other appropriate
references in the Agreement are amended, effective October 1, 1992, to change
the name of the established and designated Sub-Trusts as follows:
Freedom Gold & Government Trust
to John Hancock Freedom Gold & Government Fund
(not John Hancock Freedom Gold & Government Trust
as set forth in Amendment No. 1 to the Agreement)
Freedom Managed Tax Exempt Fund
to John Hancock Freedom Managed Tax Exempt Fund
Freedom Money Market Fund
to John Hancock Freedom Money Market Fund
Furthermore, that the initial paragraph of Section 4.2 of the
Agreement as heretofore in effect is amended, effective October 1, 1992, to
read as follow:
"Section 4.2 Establishment and Designation of Sub-Trusts. Without
limiting the authority of the Trustees set forth in Section 4.1 to establish
and designate any further Sub-Trust, the Trustees hereby establish and
designate nine Sub-Trusts: John Hancock Freedom Gold & Government Fund, John
Hancock Freedom Regional Bank Fund, John Hancock Sovereign U.S. Government
Income Fund, John Hancock Sovereign Achievers Fund, John Hancock Freedom
Managed Tax Exempt Fund, John Hancock Freedom Money Market Fund, Freedom
Massachusetts Tax Exempt Fund, Freedom New York Tax Exempt Fund and Freedom
Growth and Income Fund. The Shares of such Sub-Trusts and any Shares of any
further Sub-Trusts that may from time to time be
<PAGE> 40
established and designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Sub-Trust at the time of
establishing and designating the same) have the following relative rights and
preferences:"
The undersigned, being a majority of the Trustees of the Trust, hereby
certify that the amendment set forth above has been duly adapted in accordance
with the provision of the Master Trust Agreement of the Trust.
IN WITNESS WHEREOF, the undersigned have hereunto set their hand and
seals for themselves and their assigns, as of this 16th day of September, 1992.
/s/Edward J. Boudreau, Jr. /s/Douglas M. Costle
- -------------------------- --------------------
Edward J. Boudreau, Jr. Douglas M. Costle
/s/Hugh A. Dunlap, Jr. /s/William A. Barron, III
- ---------------------- -------------------------
Hugh A. Dunlap, Jr. William A. Barron, III
/s/Richard A Farrell /s/Ralph Lowell, Jr.
- -------------------- -------------------
Richard A Farrell Ralph Lowell, Jr.
/s/Leland O. Erdahl /s/Patrick Grant
- ------------------- ----------------
Leland O. Erdahl Patrick Grant
/s/John A Moore /s/John W. Pratt
- --------------- ----------------
John A Moore John W. Pratt
<PAGE> 41
COMMONWEALTH OF MASSACHUSETTS)
) SS.
COUNTY OF SUFFOLK )
Then personally appeared the above-named Edward J. Boudreau, Jr., High A.
Dunlap, Jr., Douglas Costle, John A. Moore, John W. Pratt, Patrick Grant,
Richard A. Farrell, Leland O. Erdahl, William A. Barron, III, and Ralph Lowell,
Jr. and acknowledged this instrument to be his free act and deed as of the 16th
day of September, 1992.
Carmen M. Pelissier
Notary Public
My Commission expires: July 30, 1993
<PAGE> 1
Exhibit 99.B2
As amended September 16, 1992
BY-LAWS
OF
FREEDOM INVESTMENT TRUST
------------------------
ARTICLE 1
---------
Agreement and Declaration
-------------------------
of Trust and Principal Office
-----------------------------
1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be
subject to the Agreement and Declaration of Trust, as from time to time in
effect (the "Declaration of Trust"), of Freedom Investment Trust, the
Massachusetts business trust established by the Declaration of Trust (the
"Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the
Trust shall be located in Boston, Massachusetts.
ARTICLE 2
---------
Meetings of Trustees
--------------------
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be
held without call or notice at such places and at such times as the Trustees
may from time to time determine, provided that notice of the first regular
meeting following any such determination shall be given to absent Trustees.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be
held at any time and at any place designated in the call of the meeting when
called by the Chairman of the Trustees, the President or the Treasurer or by
two or more Trustees, sufficient notice thereof being given to each Trustee by
the Secretary or an Assistant Secretary or by the officer of the Trustees
calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a
special meeting to send notice by mail at least forty- eight hours or by
telegram at least twenty-four hours before the meeting addressed to the Trustee
at his or her usual or last known business or residence address or to give
notice to him or her in person or by telephone at least twenty-four hours
before the meeting. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him or her 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 or her. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
<PAGE> 2
2.4 QUORUM. At any meeting of the Trustees a majority of the
Trustees then in office shall constitute a quorum. Any meeting may be
adjourned from time to time by a majority of the votes cast upon the question,
whether or not a quorum is present, and the meeting may be held as adjourned
without further notice.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of
any committee of the Trustees may participate in a meeting thereof by means of
a conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
ARTICLE 3
---------
Officers
--------
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall
be a Chairman of the Trustees, a President, a Treasurer, a Secretary and such
other officers, including Vice Presidents, if any, as the Trustees from time to
time may in their discretion elect. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. The Chairman of
the Trustees shall be a Trustee and may but need not be a shareholder; and any
other officer may be but none need be a Trustee or shareholder. Any two or
more offices may be held by the same person.
3.2 ELECTION. The Chairman of the Trustees, the President, the
Treasurer, and the Secretary shall be elected by the Trustees. The meeting at
which the officers are elected shall be known as the annual meeting of
Trustees. Other officers, if any, may be elected or appointed by the Trustees
at said meeting or at any other time. Vacancies in any office may be filled at
any time.
3.3 TENURE. The officers of the Trust shall hold office and retain
authority at the pleasure of the Trustees.
3.4 POWERS. Subject to the other provisions of these By-Laws,
each officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 CHAIRMAN; PRESIDENT. Unless the Trustees otherwise provide,
the Chairman of the Trustees, or, if there is none, or in the absence of the
Chairman, the President shall preside at all meetings of the shareholders and
of the Trustees. The President shall be the chief executive officer.
3.6 VICE PRESIDENT. The Vice President, or if there be more than
one Vice President, the Vice Presidents in the order determined by the Trustees
(or if there be no such determination, then in the order of their election)
shall in the absence of the President or in the event of his inability or
refusal to act, perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall
2
<PAGE> 3
perform such other duties and have such other powers as the Board of Trustees
may from time to time prescribe.
3.7 CHIEF FINANCIAL OFFICER, TREASURER, ASSOCIATE TREASURER AND
ASSISTANT TREASURERS. The Chief Financial Officer shall be the principal
financial and accounting officer of the Trust and each Series thereof and shall
have general charge of the finances and books of account of the Trust and each
Series thereof. Except as otherwise provided by the Trustees, he shall have
general supervision of the funds and property of the Trust and of the Custodian
of its duties with respect thereto. The Chief Financial Officer shall render a
statement of condition of the finances of the Trust and each Series 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 the Chief Financial Officer
and such other duties as from time to time may be assigned to him by the
Trustees.
The Treasurer or any Associate or Assistant Treasurer may
perform such duties of the Chief Financial Officer as the Chief Financial
Officer or the Trustees may assign. In the absence of the Chief Financial
Officer, the Treasurer may perform all duties of the Chief Financial Officer.
In the absence of the Chief Financial Officer and the Treasurer, any Associate
or Assistant Treasurer may perform all duties of the Chief Financial Officer.
3.8 SECRETARY. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the
absence of the Secretary from any meeting of the shareholders or Trustees, an
assistant secretary, or if there be none or if he or she is absent, a temporary
secretary chosen at such meeting shall record the proceedings thereof in the
aforesaid books.
3.9 ASSISTANT SECRETARY The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order determined by the
Trustees (or if there be no determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Trustees may from time to time prescribe.
3.10 SUBORDINATE OFFICERS. The Trustees from time to time may
appoint such other subordinate officers or agents as they may deem advisable,
each of whom shall have such title, hold office for such period, have such
authority and perform such duties as the Trustees may determine. The Trustees
from time to time may delegate to one or more officers or agents the power to
appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
3.11 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at
any time by written instrument signed by him or her and delivered to the
Chairman, the President or the Secretary or to a meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time. The Trustees may remove any officer elected by them with or
without cause. Except to the extent expressly provided in a written agreement
with the Trust, no Trustee or officer resigning and no officer removed shall
have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal.
3
<PAGE> 4
ARTICLE 4
---------
Committees
----------
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees
then in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided
by the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these By-Laws for the Trustees
themselves. All members of such committees shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or
duties shall keep records of its meetings and shall report its action to the
Trustees. The Trustees shall have power to rescind any action of any
committee, but no such rescission shall have retroactive effect.
The Executive Committee of the Trustees may exercise all of
the power and authority of the Trustees between meetings of the Trustees,
provided that no committee shall have the power
a. to change the principal office of the Trust;
b. to amend the By-Laws;
c. to issue shares;
d. to elect or remove from office any Trustee or the
Chairman of the Board, the President, the Treasurer
or the Secretary of the Trust;
e. to increase or decrease the number of Trustees;
f. to declare a dividend or other distribution on the
shares;
g. to authorize the repurchase of shares;
h. to authorize any merger, consolidation or sale, lease
or exchange of all or substantially all of the Trust
property; or
i. to take or authorize the taking of any action that
under the Investment Company Act of 1940 or the rules
and regulations thereunder would require the taking
or the authorization of the taking of such action by
the Trustees.
4.2 OTHER COMMITTEES. The Trustees may appoint other committees,
each consisting of one or more persons who need not be Trustees. Each such
committee shall have such powers and perform such duties as may be assigned to
it from time to time by the Trustees, but shall not exercise any power which
may lawfully be exercised only by the Trustees or a committee thereof.
ARTICLE 5
---------
Reports
-------
5.1 GENERAL. The Trustees and officers shall render reports at
the time and in the manner required by the Declaration of Trust or any
applicable law. Officers and Committees shall
4
<PAGE> 5
render such additional reports as they may deem desirable or as may from time
to time be required by the Trustees.
ARTICLE 6
---------
Fiscal Year
-----------
6.1 GENERAL. The fiscal year of the Trust shall be fixed by
resolution of the Trustees.
ARTICLE 7
---------
Seal
----
7.1 GENERAL. The seal of the Trust shall consist of a flat-faced
die with the word "Massachusetts", together with the name of the Trust and the
year of its organization cut or engraved thereon, but, unless otherwise
required by the Trustees, the seal shall not be necessary to be placed on, and
its absence shall not impair the validity of, any document, instrument or other
paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
---------
Execution of Papers
-------------------
8.1 GENERAL. Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other manner, all
deeds, leases, contracts, notes and other obligations made by the Trustees
shall be signed by the President, any Vice President, or by the Treasurer and
need not bear the seal of the Trust.
ARTICLE 9
---------
Issuance of Share Certificates
------------------------------
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for
shares, the Trustees or the transfer agent may either issue receipts therefor
or may keep accounts upon the books of the Trust for the record holders of such
shares, who shall in either case be deemed, for all purposes hereunder, to be
the holders of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
The Trustees may at any time authorize the issuance of share
certificates either in limited cases or to all shareholders. In that event, a
shareholder may receive a certificate stating the number of shares owned by
him, in such form as shall be prescribed from time to time by the Trustees.
Such certificate shall be signed by the President or a Vice President and by
the Treasurer or Assistant Treasurer. Such signatures may be facsimiles if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case
5
<PAGE> 6
any officer who has signed or whose facsimile signature has been placed on such
certificate shall cease to be such officer before such certificate is issued,
it may be issued by the Trust with the same effect as if he were such officer
at the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees shall
prescribe.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if
the instrument of transfer substantially describes the debt or duty that is
intended to be secured thereby. Such new certificate shall express on its face
that it is held as collateral security, and the name of the pledgor shall be
stated thereon, who alone shall be liable as a shareholder, and entitled to
vote thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may
at any time discontinue the issuance of share certificates and may, by written
notice to each shareholder, require the surrender of shares certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
ARTICLE 10
----------
Dealings with Trustees and Officers
-----------------------------------
10.1 GENERAL. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he
were not a Trustee, officer or agent; and the Trustees may accept subscriptions
to shares or repurchase shares from any firm or company in which any Trustee,
officer or other agent of the Trust may have an interest.
ARTICLE 11
----------
Amendments to the By-Laws
-------------------------
11.1 GENERAL. These By-Laws may be amended or repealed, in whole
or in part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
6
<PAGE> 1
Exhibit 99.B4
FREEDOM INVESTMENT TRUST
OFFICER'S CERTIFICATE REGARDING
DESIGNATION OF CLASSES
WHEREAS, Section 4.1 of the Master Trust Agreement of Freedom
Investment Trust (the "Trust) dated March 29, 1984, as subsequently amended and
restated, authorizes the Trustees of the Trust to issue classes of shares of
any Sub-Trust or divide the shares of any Sub-Trust into classes, having
different dividend, liquidation, voting and other rights as the Trustees may
determine; and
WHEREAS, the Trustees unanimously voted on December 14, 1992 to
establish and designate Class C shares of John Hancock Sovereign U.S.
Government Income Fund.
NOW, THEREFORE, the undersigned President of the Trust hereby states
as follows:
1. That, pursuant to the vote of the Trustees, a third class of
shares, Class C shares, shall be added to the heretofore authorized,
established and designated Class A and Class B shares of the Sub-Trust, John
Hancock Sovereign U.S. Government Income Fund. The Class C shares shall have
the rights and preferences as set forth in the Prospectus and Statement of
Additional Information of such Sub-Trust describing such shares included in the
Trust's Registration Statement on Form N-1A under the Securities Act of 1933
and/or the Investment Company Act of 1940, as amended and as in effect at the
time of issuing such shares, and as such Prospectus and Statement of Additional
Information may be further amended from time to time.
IN WITNESS WHEREOF, the undersigned hereby sets his hand as of this
14th day of December, 1992.
FREEDOM INVESTMENT TRUST
/S/Hugh A. Dunlap, Jr.
_______________________________
By: Hugh A. Dunlap, Jr.
Title: President
<PAGE> 1
Exhibit 99.B4.1
FREEDOM INVESTMENT TRUST
(A Massachusetts Business Trust)
JOHN HANCOCK REGIONAL BANK FUND
SHARES OF BENEFICIAL INTEREST
CLASS A
fully paid and non-assessable shares (without par value) of John Hancock
Regional Bank Fund (the "Fund"), a Series of Shares established and designated
under the amended and restated Master Trust Agreement of FREEDOM INVESTMENT
TRUST (formerly Freedom Gold & Government Trust), a Massachusetts business
trust (the "Trust") dated September 10, 1991 as amended from time to time (the
"Trust Agreement"). The Terms of the Trust Agreement, a copy of which is on
file with the Secretary of the Commonwealth of Massachusetts, are hereby
incorporated by reference as fully as if set forth herein in their entirety.
As provided in the Trust Agreement, the beneficial interest in the Trust has
been divided into Shares of such Series as may be established and designated
from time to time, and the Shares evidenced hereby represent the beneficial
interest in an undivided proportionate part of the assets belonging to the
above designated Series subject to the liabilities belonging to such Series.
Such Series and other Series have the relative rights and preferences set forth
in the Trust Agreement, and the Trust will furnish to the holder of this
certificate upon written request and without charge a statement of such
relative rights and preferences. THE SHARES EVIDENCED HEREBY ARE SUBJECT TO
REDEMPTION BY THE TRUST pursuant to the procedures that may be determined by
the Trustees in accordance with the Trust Agreement. This certificate is
issued by the Trustees of FREEDOM INVESTMENT TRUST not individually but as
Trustees under the Trust Agreement, and represents Shares of the above
designated Series and does not bind any of the Trustees, Shareholders,
Officers, Employees or Agents of the Trust personally, but only the assets and
property of the Trust. Subject to the provisions of the Trust Agreement, the
Shares represented by this certificate are transferable upon the books of the
Trust by the registered holder hereof in person or by his duly authorized
attorney upon surrender of this certificate.
- ----------------------------------------------------------------------
Change date 12/30/94...jjm
Mass Fund
Signed by Dunlap, President
<PAGE> 1
Exhibit 99.B4.2
FREEDOM INVESTMENT TRUST
(A Massachusetts Business Trust)
JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND
SHARES OF BENEFICIAL INTEREST
CLASS A
fully paid and non-assessable shares (without par value) of John Hancock
Sovereign U.S. Government Income Fund (the "Fund"), a Series of Shares
established and designated under the Master Trust Agreement of FREEDOM
INVESTMENT TRUST (formerly Freedom Gold & Government Trust), a Massachusetts
business trust (the "Trust") dated March 29, 1984 as amended from time to time
(the "Trust Agreement"). The Terms of the Trust Agreement, a copy of which is
on file with the Secretary of the Commonwealth of Massachusetts, are hereby
incorporated by reference as fully as if set forth herein in their entirety. As
provided in the Trust Agreement, the beneficial interest in the Trust has been
divided into Shares of such Series as may be established and designated from
time to time, and the Shares evidenced hereby represent the beneficial
interest in an undivided proportionate part of the assets belonging to the
above designated Series subject to the liabilities belonging to such Series.
Such Series and other Series have the relative rights and preferences set forth
in the Trust Agreement, and the Trust will furnish to the holder of this
certificate upon written request and without charge a statement of such
relative rights and preferences. THE SHARES EVIDENCED HEREBY ARE SUBJECT TO
REDEMPTION BY THE TRUST pursuant to the procedures that may be determined by
the Trustees in accordance with the Trust Agreement. This certificate is
issued by the Trustees of FREEDOM INVESTMENT TRUST not individually but as
Trustees under the Trust Agreement, and represents Shares of the above
designated Series and does not bind any of the Trustees, Shareholders,
Officers, Employees or Agents of the Trust personally, but only the assets and
property of the Trust. Subject to the provisions of the Trust Agreement, the
Shares represented by this certificate are transferable upon the books of the
Trust by the registered holder hereof in person or by his duly authorized
attorney upon surrender of this certificate.
Change date 9/11/93...fpb
Mass Fund
Signed by Dunlap, President
<PAGE> 2
FREEDOM INVESTMENT TRUST
(A Massachusetts Business Trust)
JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND
SHARES OF BENEFICIAL INTEREST
CLASS B
<PAGE> 3
FREEDOM INVESTMENT TRUST
(A Massachusetts Business Trust)
JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND
SHARES OF BENEFICIAL INTEREST
CLASS C
<PAGE> 1
Exhibit 99.B4.3
FREEDOM INVESTMENT TRUST
(A Massachusetts Business Trust)
JOHN HANCOCK MANAGED TAX-EXEMPT FUND
SHARES OF BENEFICIAL INTEREST
CLASS A
fully paid and non-assessable shares (without par value) of John Hancock
Managed Tax-Exempt Fund (the "Fund"), a Series of Shares established and
designated under the Master Trust Agreement of FREEDOM INVESTMENT TRUST
(formerly Freedom Gold & Government Trust), a Massachusetts business trust (the
"Trust") dated March 29, 1984 as amended from time to time (the "Trust
Agreement"). The Terms of the Trust Agreement, a copy of which is on file with
the Secretary of the Commonwealth of Massachusetts, are hereby incorporated by
reference as fully as if set forth herein in their entirety. As provided in
the Trust Agreement, the beneficial interest in the Trust has been
divided into Shares of such Series as may be established and designated from
time to time, and the Shares evidenced hereby represent the beneficial interest
in an undivided proportionate part of the assets belonging to the above
designated Series subject to the liabilities belonging to such Series. Such
Series and other Series have the relative rights and preferences set forth in
the Trust Agreement, and the Trust will furnish to the holder of this
certificate upon written request and without charge a statement of such
relative rights and preferences. THE SHARES EVIDENCED HEREBY ARE SUBJECT TO
REDEMPTION BY THE TRUST pursuant to the procedures that may be determined by
the Trustees in accordance with the Trust Agreement. This certificate is
issued by the Trustees of FREEDOM INVESTMENT TRUST not individually but as
Trustees under the Trust Agreement, and represents Shares of the above
designated Series and does not bind any of the Trustees, Shareholders,
Officers, Employees or Agents of the Trust personally, but only the assets and
property of the Trust. Subject to the provisions of the Trust Agreement, the
Shares represented by this certificate are transferable upon the books of the
Trust by the registered holder hereof in person or by his duly authorized
attorney upon surrender of this certificate.
- -----------------------------------------------------------------
Change date 9/1/93 fpb
Change date 9/11/93...fpb
Mass Fund
signed by Dunlap, President
<PAGE> 2
FREEDOM INVESTMENT TRUST
(A Massachusetts Business Trust)
JOHN HANCOCK MANAGED TAX-EXEMPT FUND
SHARES OF BENEFICIAL INTEREST
CLASS B
Change date 9/10/93...fpb
<PAGE> 1
Exhibit 99.B4.4
FREEDOM INVESTMENT TRUST
(A Massachusetts Business Trust)
JOHN HANCOCK GOLD & GOVERNMENT FUND
SHARES OF BENEFICIAL INTEREST
CLASS A
fully paid and non-assessable shares (without par value) of John Hancock Gold &
Government Fund (the "Fund"), a Series of Shares established and designated
under the amended and restated Master Trust Agreement of FREEDOM INVESTMENT
TRUST (formerly Freedom Gold & Government Trust), a Massachusetts business
trust (the "Trust") dated September 10, 1991 as amended from time to time (the
"Trust Agreement"). The Terms of the Trust Agreement, a copy of which is on
file with the Secretary of the Commonwealth of Massachusetts, are hereby
incorporated by reference as fully as if set forth herein in their entirety.
As provided in the Trust Agreement, the beneficial interest in the Trust has
been divided into Shares of such Series as may be established and designated
from time to time, and the Shares evidenced hereby represent the beneficial
interest in an undivided proportionate part of the assets belonging to the
above designated Series subject to the liabilities belonging to such Series.
Such Series and other Series have the relative rights and preferences set forth
in the Trust Agreement, and the Trust will furnish to the holder of this
certificate upon written request and without charge a statement of such
relative rights and preferences. THE SHARES EVIDENCED HEREBY ARE SUBJECT TO
REDEMPTION BY THE TRUST pursuant to the procedures that may be determined by
the Trustees in accordance with the Trust Agreement. This certificate is
issued by the Trustees of FREEDOM INVESTMENT TRUST not individually but as
Trustees under the Trust Agreement, and represents Shares of the above
designated Series and does not bind any of the Trustees, Shareholders,
Officers, Employees or Agents of the Trust personally, but only the assets and
property of the Trust. Subject to the provisions of the Trust Agreement, the
Shares represented by this certificate are transferable upon the books of the
Trust by the registered holder hereof in person or by his duly authorized
attorney upon surrender of this certificate.
Change date 12/30/94...jjm
<PAGE> 2
FREEDOM INVESTMENT TRUST
(A Massachusetts Business Trust)
JOHN HANCOCK GOLD & GOVERNMENT FUND
SHARES OF BENEFICIAL INTEREST
CLASS B
<PAGE> 1
Exhibit 99.B4.5
FREEDOM INVESTMENT TRUST
(A Massachusetts Business Trust)
JOHN HANCOCK SOVEREIGN ACHIEVERS FUND
SHARES OF BENEFICIAL INTEREST
CLASS A
fully paid and non-assessable shares (without par value) of John Hancock
Sovereign Achievers Fund (the "Fund"), a Series of Shares established and
designated under the Master Trust Agreement of FREEDOM INVESTMENT TRUST
(formerly Freedom Gold & Government Trust), a Massachusetts business trust (the
"Trust") dated March 29, 1984 as amended from time to time (the "Trust
Agreement"). The Terms of the Trust Agreement, a copy of which is on file with
the Secretary of the Commonwealth of Massachusetts, are hereby incorporated by
reference as fully as if set forth herein in their entirety. As provided in
the Trust Agreement, the beneficial interest in the Trust has been divided into
Shares of such Series as may be established and designated from time to time,
and the Shares evidenced hereby represent the beneficial interest in an
undivided proportionate part of the assets belonging to the above designated
Series subject to the liabilities belonging to such Series. Such Series and
other Series have the relative rights and preferences set forth in the Trust
Agreement, and the Trust will furnish to the holder of this certificate upon
written request and without charge a statement of such relative rights and
preferences. THE SHARES EVIDENCED HEREBY ARE SUBJECT TO REDEMPTION BY THE
TRUST pursuant to the procedures that may be determined by the Trustees in
accordance with the Trust Agreement. This certificate is issued by the
Trustees of FREEDOM INVESTMENT TRUST not individually but as Trustees under the
Trust Agreement, and represents Shares of the above designated Series and does
not bind any of the Trustees, Shareholders, Officers, Employees or Agents of
the Trust personally, but only the assets and property of the Trust. Subject
to the provisions of the Trust Agreement, the Shares represented by this
certificate are transferable upon the books of the Trust by the registered
holder hereof in person or by his duly authorized attorney upon surrender of
this certificate.
Change date 9/10/93...fpb
<PAGE> 2
FREEDOM INVESTMENT TRUST
(A Massachusetts Business Trust)
JOHN HANCOCK SOVEREIGN ACHIEVERS FUND
SHARES OF BENEFICIAL INTEREST
CLASS B
<PAGE> 1
Exhibit 99.B5
ADVISORY AGREEMENT
ADVISORY AGREEMENT made as of the 6th day of November, 1986, as
amended and restated January 1, 1994, between JOHN HANCOCK ADVISERS, INC.
(successor to Tucker Anthony Management Corporation), a corporation organized
under the laws of Delaware and having its principal place of business in
Boston, Massachusetts (the "Manager"), and FREEDOM INVESTMENT TRUST, a
Massachusetts business trust having its principal place of business in Boston,
Massachusetts (the "Trust").
WHEREAS, the Trust proposes to engage in business as an open-end
management investment company and is so registered under the Investment Company
Act of 1940 (the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business of
rendering investment management services and is so registered under the
Investment Advisers Act of 1940 and
WHEREAS, the Trust is authorized to issue shares of beneficial
interest in separate series, with each such series representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Trust currently offers shares in six series, the John
Hancock Freedom Gold & Government Fund, the John Hancock Freedom Regional Bank
Fund, John Hancock Sovereign U.S. Government Income Fund, John Hancock Managed
Tax-Exempt Fund, John Hancock Freedom Money Market Fund and John Hancock
Sovereign Achievers Fund, (such series being herein collectively referred to as
the "Funds");
NOW THEREFORE, WITNESSETH: That it is hereby agreed between the
parties hereto as follows:
1. APPOINTMENT OF MANAGER.
(a) Funds. The Trust hereby appoints the Manager to act as
manager and investment adviser to the Funds for the period and on the
terms herein set forth. The Manager accepts such appointment and
agrees to render such services herein set forth, for the compensation
herein provided.
(b) Additional Funds. In the event that the Trust establishes
one or more series of shares other than the Funds with respect to
which it desires to retain the Manager to render management and
investment advisory services hereunder, it shall so notify the Manager
in writing. If the Manager is willing to render such services on the
terms provided for herein, it shall notify the Trust in writing,
whereupon such series of shares shall become a Fund hereunder.
<PAGE> 2
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following services
and facilities to the Trust:
(a) Investment Program. The Manager will (i) furnish
continuously an investment program for each Fund, (ii) determine
(subject to the overall supervision and review of the Board of
Trustees of the Trust) what investments shall be purchased, held, sold
or exchanged by each Fund and what portion if any, of the assets of
each Fund shall be held uninvested, and (iii) make changes on behalf
of the Trust in the investments of each Fund. The Manager will also
manage, supervise and conduct the other affairs and business of the
Trust and each Fund thereof and all matters incidental thereto,
subject always to the control of the Board of Trustees of the Trust
and to the provisions of the Trust's Agreement and Declaration of
Trust and By-laws and the 1940 Act.
(b) Regulatory Reports. The Manager shall furnish to the Trust
necessary assistance in:
(i) the preparation of all reports now or hereafter required
by Federal or other laws; and
(ii) the preparation of prospectuses, registration statements
and amendments thereto that may be required by Federal or
other laws or by rules or regulations of any duly authorized
commission or administrative body.
(c) Office Space and Facilities. The Manager shall furnish to
the Trust office space in the offices of the Manager or in such other
place or places as may be agreed upon from time to time, and all
necessary office facilities, simple business equipment, supplies,
utilities and telephone service.
(d) Services of Personnel. The Manager shall furnish to the
Trust all executive and administrative personnel necessary for
managing the affairs and investments of the Trust, including personnel
to perform clerical, bookkeeping, accounting and other office
functions. These services are exclusive of the necessary records or
services of any dividend disbursing agent, transfer agent, registrar
or custodian. The Manager shall compensate all personnel, officers
and directors of the Trust if such persons are also employees of the
Manager or its affiliates.
(e) Fidelity Bond. The Manager shall arrange for providing and
maintaining a bond issued by a reputable insurance company authorized
to do business in the place where the bond is issued against larceny
and embezzlement
2
<PAGE> 3
covering each officer and employee of the Trust and the Manager who may
singly or jointly with others have access to funds or securities of the
Trust, with direct or indirect authority to draw upon such funds or to
direct generally the disposition of such funds. The bond shall be in
such reasonable amount as a majority of the Trustees who are not
"interested persons" of the Trust, as defined in the 1940 Act, shall
determine, with due consideration to the aggregate assets of the Trust
to which any such officer or employee may have access. The premium for
the bond shall be payable by the Trust in accordance with paragraph
3(17).
3. ALLOCATION OF EXPENSES.
Except for the services and facilities to be provided by the
Manager set forth in paragraph 2 above, the Trust assumes and shall
pay all expenses for all other Trust operations and activities and
shall reimburse the Manager for any such expense incurred by the
Manager. The expenses to be borne by the Trust shall include, without
limitation:
(1) all expenses of organizing the Trust or forming any series
thereof;
(2) all expenses (including information, materials and
services other than services of the Manager) of preparing, printing
and mailing all annual, semiannual and periodic reports, proxy
materials and other communications (including registration statements,
prospectuses and amendments and revisions thereto) furnished to
existing shareholders of the Trust and/or regulatory authorities;
(3) fees involved in registering and maintaining registration
of the Trust and its shares with the Securities and Exchange
Commission and state regulatory authorities;
(4) any other registration, filing or other fees in connection
with requirements of regulatory authorities;
(5) expenses, including the cost of printing of certificates,
relating to issuance of shares of the Trust;
(6) the expenses of maintaining a shareholder account and
furnishing, or causing to be furnished, to each shareholder a
statement of his account, including the expense of mailing;
(7) taxes and fees payable by the Trust to Federal, state or
other governmental agencies;
(8) expenses related to the redemption of its shares,
including expenses attributable to any program of periodic redemption;
3
<PAGE> 4
(9) all issue and transfer taxes, brokers' commissions and
other costs chargeable to the Trust in connection with securities
transactions to which the Trust is a party, including any portion of
such commissions attributable to research and brokerage services as
defined by section 28(e) of the Securities Exchange Act of 1934, as
amended from time to time;
(10) the charges and expenses of the custodian appointed by
the Trust, or any depository utilized by such custodian, for the
safekeeping of its property;
(11) charges and expenses of any shareholder servicing agents,
transfer agents and registrars appointed by the Trust, including costs
of servicing shareholder investment accounts;
(12) charges and expenses of independent accountants retained
by the Trust;
(13) legal fees and expenses in connection with the affairs of
the Trust, including legal fees and expenses in connection with
registering and qualifying its shares with Federal and state
regulatory authorities;
(14) compensation and expenses of Trustees of the Trust who
are not "interested persons" of the Trust (as defined in the 1940
Act);
(15) expenses of shareholders' and Trustees' meetings;
(16) membership dues in, and assessments of, the Investment
Company Institute or similar organizations;
(17) insurance premiums on fidelity, errors and omissions and
other coverages; and
(18) such other non-recurring expenses of the Trust as may
arise, including expenses of actions, suits, or proceedings to which
the Trust is a party and the legal obligation which the Trust may have
to indemnify its Trustees or shareholders with respect thereto.
4. ADVISORY FEE.
For the services and facilities to be provided by the Manager
as set forth in paragraph 2 hereof, the Trust shall pay to the Manager
a monthly fee with respect to each Fund as soon as practical after the
last day of each calendar month, which fee shall be paid at a rate
equal to (i) with respect to John Hancock Freedom Gold & Government
Fund and John Hancock Freedom Regional Bank Fund, four-fifths of one
percent (.80%) on an annual basis of the average daily net asset value
of such Fund for such calendar month up to the first $500 million of
average daily
4
<PAGE> 5
net assets, and (ii) three-quarters of one percent (.75%) on an annual
basis of the average daily net asset value of such Fund for such
calendar month in excess of $500 million. With respect to John
Hancock Sovereign Achievers Fund, the Trust shall pay to the Manager
such monthly fee at a rate equal to (i) three-quarters of one percent
(.75%) on an annual basis of the average daily net asset value of such
Fund for such calendar month up to $500 million of average daily net
assets and (ii) thirteen-twentieths of one percent (.65%) on an annual
basis of the average daily net asset value of such Fund for such
calendar month in excess of $500 million. With respect to John
Hancock Managed Tax-Exempt Fund, the Trust shall pay to the Manager
such monthly fee at a rate equal to (i) three-fifths of one percent
(.60%) on an annual basis of the average daily net asset value of such
Fund for such calendar month up to $250 million of average daily net
assets, (ii) one-half of one percent (.50%) on an annual basis of the
next $500 million of the average daily net asset value of such Fund
for such calendar month and (iii) nine-twentieths of one percent
(.45%) on an annual basis of the average daily net asset value of such
Fund for such calendar month in excess of $750 million. With respect
to John Hancock Sovereign U.S. Government Income Fund, the Trust shall
pay to the Manager such monthly fee at a rate equal to (i) one-half of
one percent (.50%) on an annual basis of the first $500 million of the
average daily net asset value of such Fund for such calendar month and
(ii) nine-twentieths of one percent (.45%) on an annual basis of the
average daily net asset value of such Fund for such calendar month in
excess of $500 million. With respect to John Hancock Freedom Money
Market Fund, the Trust shall pay to the Manager such monthly fee at a
rate equal to (i) one-half of one percent (.50%) on an annual basis of
the first $500 million of the average daily net asset value of such
Fund for such calendar month and (ii) nine-twentieths of one percent
(.45%) on an annual basis of the average daily net asset value of the
Fund for such calendar month in excess of $500 million.
In the case of commencement or termination of this Agreement
with respect to any Fund during any calendar month, the fee with
respect to such Fund for that month shall be reduced proportionately
based upon the number of calendar days during which it is in effect
and the fee shall be computed upon the daily average net asset value
of such Fund for the days during which it is in effect.
5. EXPENSE LIMITATION.
The Manager agrees that if the total expenses of any Fund
(exclusive of interest, taxes, brokerage expenses and extraordinary
items) for any fiscal year of the Trust exceed the lowest expense
limitation imposed in any jurisdiction in which that Fund is making
sales of its shares or in which its shares are then qualified for sale
the Manager will pay or reimburse such Fund for that excess up to the
amount of its advisory fee payable with respect to that Fund during
the fiscal year. The amount of the monthly advisory fee payable under
Paragraph 4 hereof shall be reduced to the extent that the annualized
expenses of any Fund for
5
<PAGE> 6
that month exceed the foregoing limitation. At the end of each fiscal
year of the Trust, if the aggregate annual expenses chargeable to any
Fund for that year exceed the foregoing limitation based upon the
average of the monthly average net asset value of that Fund for the
year, the Manager will promptly reimburse that Fund for the amount of
such excess, but if such expenses are within the foregoing limitation,
any excess amount previously withheld from the advisory fee during
that fiscal year will be promptly paid over to the Manager.
In the event that this agreement is terminated with respect to
any one or more Funds as of a date other than the last day of the
fiscal year of the Trust, then the expenses shall be annualized and
the Manager shall pay to, or receive from the Trust a pro rata portion
of the amount that the Manager would have been required to pay or
would have received, if any, had this Agreement remained in effect for
the full fiscal year.
6. PORTFOLIO TRANSACTIONS.
In connection with the management of the investment and
reinvestment of the assets of the Trust, the Manager, acting by its
own officers, directors or employees or by a duly authorized
subcontractor, is authorized to select the brokers or dealers that
will execute purchase and sale transactions for the Trust. In
executing portfolio transactions and selecting brokers or dealers, if
any, the Manager will use its best efforts to seek on behalf of a Fund
the best overall terms available. In assessing the best overall terms
available for any transaction, the Manager shall consider all factors
it deems relevant, including the breadth of the market in and the
price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the
commission, if any (for the specific transaction and on a continuing
basis). In evaluating the best overall terms available, and in
selecting the broker or dealer, if any, to execute a particular
transaction, the Manager may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities and Exchange Act of 1934) provided to any Fund of the Trust
and/or other accounts over which the Manager or an affiliate of the
Manager exercises investment discretion. With the approval of the
Trustees, the Manager may pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another
broker or dealer would have charged for effecting the transaction if,
but only if, the Manager determines in good faith that such commission
was reasonable in relation to the value of the brokerage and research
services provided.
7. RELATIONS WITH THE TRUST.
Subject to and in accordance with the Master Trust Agreement
and By-laws of the Trust and the Articles of Organization and By-laws
of the Manager, it
6
<PAGE> 7
is understood that Trustees, officers, agents, and shareholders of the
Trust are or may be interested in the Manager (or any successor
thereof) as directors, officers or otherwise, that directors,
officers, agents, and shareholders of the Manager (or any successor)
are or may be interested in the Trust as Trustees, officers,
shareholders or otherwise, that the Manager (or any such successor
thereof) is or may be interested in the Trust as a shareholder or
otherwise and that the effect of any such adeverse interests shall be
governed by said Master Trust Agreement, Articles of Organization and
By- laws.
The Manager agrees that neither it nor any of its officers or
directors will take any long or short term position in the shares of
the Trust; provided, however, that such prohibition: (i) shall not
prevent any affiliate of the Manager which acts as a distributor of
the Trust shares pursuant to a written contract from purchasing shares
of the Trust in such capacity; and (ii) shall not prevent the purchase
of shares of the Trust by any of the persons above described for their
own account and for investment at the per share net asset value
thereof at the time of purchase or as part of the initial
capitalization of the Trust.
8. LIABILITY OF MANAGER.
The Manager shall not be liable to the Trust for any error of
judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Advisory Agreement relates;
provided that no provision of this Agreement shall be deemed to
protect the Manager against liability to the Trust or its shareholders
to which it might otherwise be subject by reason of any willful
misfeasance, bad faith or gross negligence in the performance of its
duties or the reckless disregard of its obligations and duties under
this Agreement. Nor shall any provision hereof be deemed to protect
any Trustee or Officer of the Trust against any such liability to
which he might otherwise be subject by reason of any willful
misfeasance, bad faith or gross negligence in the performance of his
duties or the reckless disregard of his obligations and duties. If
any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with
respect to the Initial Funds (defined for purposes hereof as John
Hancock Freedom Gold & Government Fund, John Hancock Freedom Regional
Bank Fund, John Hancock Sovereign U.S. Government Income Fund and
John Hancock Sovereign Achievers Fund) on November 6, 1986 and with
respect to any additional Fund on the date of receipt by the Trust of
notice from the Manager in accordance with paragraph 1(b) hereof that
the Manager is willing to serve as Manager with respect to such Fund.
Unless terminated as herein provided, this Agreement shall remain in
full force and effect for two years from November 6, 1986 with respect
7
<PAGE> 8
to the Initial Funds and, with respect to each additional Fund, for
two years from the date on which such Fund becomes a Fund hereunder.
Subsequent to such initial periods of effectiveness, this Agreement
shall continue in full force and effect for periods of one year
thereafter with respect to each Fund so long as such continuance with
respect to any such Fund is approved at least annually (a) by either
the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of such Fund (as defined in the 1940 Act), and (b)
in either event, by the vote of a majority of the Trustees of the
Trust who are not parties to this Agreement or "interested persons"
(as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing provisions of this Section 9(a), the
continuance of this Agreement with respect to any additional Fund is
subject to the approval of this Agreement by a majority of the
outstanding voting securities of that Fund (as defined in the 1940
Act) at the first annual or special meeting of shareholders after this
Agreement becomes effective with respect to that Fund.
(b) Amendment. Any amendment to this Agreement shall become
effective with respect to any Fund upon approval of a majority of the
outstanding voting securities (as defined in the 1940 Act) of that
Fund.
(c) Termination. This Agreement may be terminated with respect
to any Fund at any time, without payment of any penalty, by vote of
the Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that Fund, or by the
Manager, in each case on sixty (60) days' prior written notice to the
other party.
(d) Automatic Termination. This Agreement shall automatically
and immediately terminate in the event of its assignment.
(e) Approval, Amendment or Termination by Individual Fund. Any
approval, amendment or termination of this Agreement by the holders of
a majority of the outstanding voting securities (as defined in the
1940 Act) of any Fund shall be effective to continue, amend or
terminate this Agreement with respect to any such Fund notwithstanding
(i) that such action has not been approved by the holders of a
majority of the outstanding voting securities of any other Fund
affected thereby, and (ii) that such action has not been approved by
the vote of a majority of the outstanding voting securities of the
Trust, unless such action shall be required by any applicable law or
otherwise.
10. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Trust hereunder are not to
be deemed exclusive, and the Manager shall be free to render similar
services to others so long as its services hereunder are not impaired
thereby.
8
<PAGE> 9
11. LIMITATION OF LIABILITY.
The term "Freedom Investment Trust" means and refers to the
Trustees from time to time serving under the Master Trust Agreement of
the Fund dated March 29, 1984 as the same may subsequently thereto
have been, or subsequently hereto may be, amended. It is expressly
agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the
trust property of the Trust, as provided in the Master Trust Agreement
of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees and the initial shareholder of the Trust
and signed by the President of the Trust, acting as such, and neither
such authorization by such Trustees and shareholder nor such execution
and delivery shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the trust Property of the Trust as provided in its
Master Trust Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
Attest: FREEDOM INVESTMENT TRUST
/s/Thomas H. Drohan By:/s/Hugh A. Dunlap, Jr.
Thomas H. Drohan Hugh A. Dunlap
Secretary President
Attest: JOHN HANCOCK ADVISERS, INC.
/s/Thomas H. Drohan By: /s/Robert G. Freedman
Thomas H. Drohan Robert G. Freedman
Secretary President
9
<PAGE> 1
Exhibit 99.B6
DISTRIBUTION AGREEMENT
----------------------
Distribution Agreement dated as of July 1, 1992 (the "Distribution
Agreement") by and among FREEDOM DISTRIBUTORS CORPORATION, and JOHN HANCOCK
BROKER DISTRIBUTION SERVICES, INC., both corporations organized under the laws
of the Commonwealth of Massachusetts and having places of business at One
Beacon Street, Boston, Massachusetts and 101 Huntington Avenue, Boston,
Massachusetts, respectively (Freedom Distributors Corporation and John Hancock
Broker Distribution Services, Inc. are collectively referred to herein as the
"Distributor"), and FREEDOM INVESTMENT TRUST , a Massachusetts business trust
having a place of business at One Beacon Street, Boston, Massachusetts (the
"Trust") which offers shares of beneficial interest in different series
representing interests in separate portfolios of assets (each series being
referred to herein as a "Fund" and such series being referred to herein
collectively as the "Funds").
WITNESSETH:
-----------
In consideration of the agreements herein contained and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, it is agreed:
1. APPOINTMENT OF DISTRIBUTOR. The Trust hereby appoints Freedom
Distributors Corporation and John Hancock Broker Distribution Services, Inc.
each as distributors and as its exclusive agents to sell and distribute three
separate classes of shares, Class A Shares, Class B Shares and Class C Shares,
each as more fully described in Section 4 hereof (the Class A Shares, Class B
Shares and the Class C Shares (if any) being collectively referred to herein as
the "shares") of each Fund of the Trust in existence as of the date hereof (the
"Initial Funds"). Distributor hereby accepts such appointment and agrees
during the term of this Distribution Agreement to provide the services and to
assume the obligations herein set forth. In the event that the Trust
establishes one or more series of shares other than the Initial Funds with
respect to which it desires to retain Distributor to serve as distributors and
principal underwriters hereunder, it shall so notify Distributor in writing.
If Distributor is willing to render such services, it shall so notify the Trust
in writing, whereupon such series of shares shall become a Fund hereunder. In
such event a writing signed by each of the Trust and Distributor shall be
annexed hereto as a part hereof indicating that such additional series of
shares has become a Fund hereunder.
2. SALE OF SHARES. Shares of each Fund shall be sold at the
offering price thereof as from time to time determined in the manner described
in Section 4 hereof. The Trust agrees that it will not, without Distributor's
consent, sell or agree to sell any shares of a Fund otherwise than through
Distributor, except that the Trust may sell and/or issue shares for not less
than the net asset value thereof (i) to such persons or classes of persons as
may be indicated in the applicable Fund prospectus as from time to time amended
and in effect, (ii) directly to holders of shares of any Fund upon such terms
and for such consideration, if any, as it may determine, whether in connection
with the distribution of subscription or purchase rights, the payment or
reinvestment of distributions or dividends, the exercise of any applicable
retirement privilege, or otherwise,
<PAGE> 2
(iii) to the shareholders of any other Fund or investment company for which the
Trust's investment adviser acts as investment adviser in connection with the
exercise of exchange privileges offered by the Trust, and (iv) in connection
with a merger, consolidation or acquisition of assets on such basis as may be
authorized or permitted under the Investment Company Act of 1940 (the "1940
Act").
3. BASIS OF SALE OF SHARES; DEALERS. Distributor does not agree
to sell any specific number of shares. Shares will be sold by the Distributor
as agents for the Funds and Trust only against orders therefor. Distributor
will not purchase shares except as agents for the Trust. Notwithstanding
anything herein to the contrary, the Trust may terminate, suspend or withdraw
the offering of shares whenever, in its sole discretion, it deems such action
desirable. In connection with its performance of services hereunder,
Distributor may engage other members in good standing of the National
Association of Securities Dealers, Inc., to act as dealers in accordance with
the terms of a dealer agreement in substantially the form attached hereto as
EXHIBIT A.
4. OFFERING PRICE. The offering price for shares of any Fund of
the Trust shall be the "net asset value per share" for that Fund determined in
accordance with the Master Trust Agreement of the Trust, as amended from time
to time (the "Master Trust Agreement"); plus a sales charge which may be
imposed (i) on shares designated as Class A Shares at the time of purchase (the
"Class A Shares") upon the terms and conditions and as described in the
applicable Fund prospectus as from time to time amended and in effect or (ii)
on shares designated as Class B Shares on a deferred basis upon certain
redemptions of shares of the Funds (the "Class B Shares") upon the terms and
conditions and as described in the applicable Fund prospectus as from time to
time amended and in effect. In addition, the Trust may offer shares designated
as Class C Shares of any Fund to certain investors at their net asset value
without the imposition of any sales charges, either at the time of purchase or
upon redemption (the "Class C Shares"). The net asset value per share for each
Fund shall be determined at such time and on such days as are established by
the Board of Trustees of the Trust from time to time.
5. Compensation of Distributor.
----------------------------
(a) INITIAL AND DEFERRED SALES CHARGES. Distributor
shall be entitled to receive that portion of any sales charge or underwriting
discount that is not allowed by the Distributor as a concession to dealers in
connection with the sale of Class A Shares of a Fund and any applicable
deferred sales charge on redemptions of Class B Shares of a Fund as described
in the applicable Fund prospectus as from time to time amended and in effect.
(b) 12B-1 EXPENSES. The Trust has adopted a Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plan") attached
hereto as Exhibit B, pursuant to which Distributor shall receive monthly
payments from each Fund, with respect to the Class A Shares and the Class B
Shares. Such 12b-1 payments shall be made at the rates and upon the terms and
conditions set forth in the 12b-1 Plan as amended from time to time, including
without limitation the maximum amounts set forth therein, during such period as
the 12b-1 Plan shall be in effect with respect to such Fund or class of shares
thereof. Class C Shares will not be subject to
<PAGE> 3
any distribution fees pursuant to the Trust's 12b-1 Plan. Distributor shall
only use such 12b-1 payments for the purposes set forth in the 12b-1
Plan.
6. MANNER OF OFFERING. Distributor will conform to the
securities laws of any jurisdiction in which it sells, directly or indirectly,
any shares of the Funds. Distributor also agrees to furnish to the Trust
sufficient copies of any agreements, plans or sales literature it intends to
use in connection with any sales of shares in adequate time for the Trust to
file and clear them with the proper authorities before they are put in use, and
not to use them until so filed and cleared.
Distributor and the Trust shall have the right to accept or reject
orders for the purchase of shares of the Trust. Any consideration which the
Distributor may receive in connection with a rejected purchase order will be
returned promptly to the prospective purchaser. Distributor, or its duly
appointed transfer or shareholder servicing agent, agrees promptly to issue
confirmations of all accepted purchase orders and to transmit a copy of such
confirmations to the Trust. The net asset value of all shares which are the
subject of such confirmations, computed in accordance with the applicable rules
under the 1940 Act, shall be a liability of Distributor to the Trust to be paid
promptly after receipt of payment from the originating dealer and not later
than eleven calendar days after such confirmation even if Distributor has not
actually received payment from the originating dealer. If the originating
dealer shall fail to make timely settlement of its purchase order in accordance
with the rules of the National Association of Securities Dealers, Inc.,
Distributor shall have the right to cancel such purchase order and, at
Distributor's account and risk, to hold the originating dealer responsible.
Distributor agrees promptly to reimburse the Trust for any amount by which the
Trust's losses attributable to any such cancellation, or to accepted purchase
orders, exceed contemporaneous gains realized by the Trust for either of such
reasons in respect to other purchase orders. The Trust shall register or cause
to be registered all shares sold by the Distributor pursuant to the provisions
hereof in such name or names and amounts as Distributor may request from time
to time. All shares of the Trust, when so issued and paid for, shall be fully
paid and non-assessable.
The Distributor agrees that if any person tenders to the Trust for
redemption any shares of the Fund purchased from the Trust within seven days of
the redemption request, the Distributor will promptly pay to the Trust the full
sales commission paid with respect to the shares so tendered for redemption,
such payment to be made (in the case of such a tender by the Distributor) by
the Trust's withholding the amount thereof from payment upon redemption, and
such payment to be made (in the case of such a tender by a person other than
the Distributor) promptly after notification by the Trust to the Distributor of
liability for such a payment; provided, however, that the Distributor shall not
be obligated to make any such payments in respect of shares sold through
Selected Dealers who have entered into Dealer Agreements with the Distributor
in the form attached hereto as Exhibit A, which Dealer Agreements, insofar as
they provide for similar payments by a Selected Dealer to the Trust, are
intended to be for the benefit of the Trust.
7. SECURITIES LAWS. The Trust has delivered to the Distributor a
copy of each Fund's applicable prospectus as in effect on the date hereof. The
Trust agrees that it will use its best efforts to continue the effectiveness of
the Trust's Registration Statement under the Securities Act
<PAGE> 4
of 1933, as amended (the "Securities Act") and the 1940 Act. The Trust further
agrees to prepare and file any amendments to its Registration Statement and any
supplemental data as may be necessary in order to comply with the
Securities Act and the 1940 Act. The Trust has already registered under the
1940 Act as an investment company, and it will use its best efforts to maintain
such registration and to comply with the requirements of said Act.
At the Distributor's request, the Trust will take such steps as may be
necessary and feasible to qualify shares of the Funds for sale in states,
territories or dependencies of the United States of America, in the District of
Columbia and in foreign countries, in accordance with the laws thereof, and to
renew or extend any such qualification; provided, however, that the Trust shall
not be required to qualify shares or to maintain the qualification of shares in
any state, territory, dependency, district or country where it shall deem such
qualification disadvantageous to the Trust.
The Distributor agrees that:
(a) Distributor shall furnish to the Trust any pertinent
information required to be inserted with respect to the Distributor as
Distributor within the purview of the Securities Act in any reports or
registration required to be filed with any governmental authority;
(b) Distributor will not make any representations
inconsistent with the Registration Statement or Prospectus of the Funds filed
under the Securities Act, as from time to time amended.
(c) Distributor will not use, distribute or disseminate
or authorize the use, distribution or dissemination by others in connection
with the sale of shares of the Funds, any statement, other than those contained
in the applicable Fund prospectus as from time to time amended and in effect,
except such supplemental literature or advertising as shall be approved by the
Trust;
(d) Distributor will conform to the requirements of all
state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. relating to the sale of shares of the
Funds (including, without limitation, the maintenance of effective
broker-dealer registrations as required); and
(e) Distributor will observe and be bound by all the
provisions of the Master Trust Agreement (and of any fundamental policies
adopted by the Trust pursuant to the 1940 Act, notice of which shall have been
given to Distributor) which at the time in any way require, limit, restrict or
prohibit or otherwise regulate any action on the part of Distributor.
8. QUARTERLY REPORTS. Distributor will prepare reports to the
Board of Trustees of the Trust on a quarterly basis showing the manner in which
any distribution fees paid by the Trust to Distributor pursuant to the 12b-1
Plan in accordance with Section 5(b) hereof have been spent by Distributor for
the preceding quarter.
9. Allocation of Expenses.
-----------------------
<PAGE> 5
(a) The Funds, either directly or through their
investment adviser, will be responsible for, and shall pay its allocable
portions of the expenses of:
(i) providing all necessary services, including
fees and disbursements of counsel, related to the preparation, setting
in type, printing and filing of any registration statement and/or
prospectus required under the Securities Act or 1940 Act, or under
state securities laws covering their shares, and all amendments and
supplements thereto, the mailing of any such prospectus to existing
shareholders, and preparing, setting in type, printing and mailing
periodic reports to existing shareholders;
(ii) the cost of all registration or qualification
fees relating to the Funds' shares;
(iii) the cost of preparing temporary and permanent
share certificates for shares of the Funds, if any;
(iv) any and all federal and state (if any) issue
and/or transfer taxes payable upon the issue by or (in the case of
treasury shares) transfer from a Fund to Distributor of any and all
shares distributed hereunder.
(b) Distributor agrees that, after the Funds' prospectus
and periodic reports have been set in type, it will bear the expense of
printing and distributing any copies thereof which are to be used in connection
with the offering of shares to investors. Distributor further agrees that it
will bear the expenses of preparing, printing and distributing any other
literature used by the Distributor or furnished by it for use in connection
with the offering of the shares for sale to the public, and any expenses of
advertising in connection with such offering. It is understood and agreed
that, so long as the 12b-1 Plan continues in effect, any expenses incurred by
the Distributor pursuant to this Distribution Agreement or the dealer
agreements, including the payment of sales commissions for Class B Shares of a
Fund and service compensation for both Class A and Class B Shares of a Fund to
account executives or dealers, may be paid from amounts received by Distributor
from the Trust under the 12b-1 Plan.
(c) The Funds will be responsible for, and shall pay the
expenses of, maintaining shareholder accounts and furnishing or causing to be
furnished to each shareholder a statement of his account.
10. DISTRIBUTOR IS INDEPENDENT CONTRACTOR. Distributor shall be
an independent contractor. Distributor is responsible for its own conduct, for
the employment, control and conduct of its agents and employees and for injury
to such agents or employees or to others through its agents or employees.
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employer taxes thereunder.
11. TERM OF CONTRACT. This Distribution Agreement shall become
effective (i) with respect to the Initial Funds and each class of shares
thereof, on the date of its execution, and (ii) with respect to any additional
Fund or class of shares thereof, on the date of receipt by the Trust of notice
from the Distributor in accordance with Section 1(a) hereof that the
Distributor is
<PAGE> 6
willing to serve as Distributor with respect to such Fund or class of shares
thereof. This Distribution Agreement shall thereafter continue in full force
and effect, subject to the last sentence of this Section 11, for successive
one-year periods with respect to each Fund and class of shares thereof so long
as such continuance with respect to such Fund or class of shares thereof is
approved at least annually (a) by either the Trustees of the Trust or by vote of
a majority of the outstanding voting securities (as defined in the 1940 Act) of
such Fund or class of shares thereof, and (b) in either event, by the vote of a
majority of the Trustees of the Trust who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party or the Trust
and who have no direct or indirect financial interest in the operation of the
12b-1 Plan or this Agreement (the "Qualified Trustees"), cast in person at a
meeting called for the purpose of voting on such approval. This Distribution
Agreement may remain in effect with respect to a Fund or class of shares thereof
even if it has not been continued in accordance with this Section 11 with
respect to one or more other Funds or class of shares thereof of the Trust.
12. TERMINATION. This Distribution Agreement may be terminated at
any time with respect to the Trust or any Fund of the Trust, or any class of
shares of any Fund, as the case may be, without the payment of any penalty, by
the vote of (i) a majority of the Qualified Trustees, or (ii) a majority of the
outstanding voting securities of the Trust or that Fund or that class of shares
of any Fund, as the case may be, in each case on at least sixty (60) days'
prior written notice to any other party to this Distribution Agreement. This
Distribution Agreement may be terminated by Distributor on at least sixty (60)
days' prior written notice to the Trust. The Distribution Agreement may remain
in effect with respect to a Fund or a class of shares thereof even if it has
been terminated in accordance with this Section 12 with respect to one or more
Funds of the Trust or one or more classes of such Fund, as the case may be.
13. ASSIGNMENT. This Distribution Agreement may not be assigned
by Distributor and shall automatically terminate in the event of its assignment
as defined by the 1940 Act; provided, however, that the Distributor may employ
or enter into agreements with such other person, persons, corporation, or
corporations, as it shall determine in order to assist it in carrying out this
Distribution Agreement including, without limitation, Dealers as contemplated
by Section 3.
14. INDEMNIFICATION BY DISTRIBUTOR. Distributor agrees to
indemnify and hold harmless the Trust or any other person who has been, is, or
may hereafter be an officer, Trustee, employee or agent of the Trust against
any loss, damage or expense reasonably incurred by any of them in connection
with any claim or in connection with any action, suit, or proceeding to which
any of them may be a party, which arises out of or is alleged to arise out of
or is based upon any violation of any of its representations or covenants
herein contained or any untrue statement or alleged untrue statement of a
material fact, or the omission or alleged omission to state a material fact
necessary to make the statements made not misleading, on the part of
Distributor or any agent or employee of Distributor or any other person for
whose acts Distributor is responsible or is alleged to be responsible (such as
any dealer or person through whom sales are made pursuant to a dealer agreement
with Distributor), whether made orally or in writing, unless such statement or
omission was made in reliance upon written information furnished by the Trust.
The term "expenses" for purposes of this and the next paragraph includes
reasonable attorneys fees and amounts paid in satisfaction of judgments or in
settlements which are made with Distributor's
<PAGE> 7
consent. The foregoing rights of indemnification shall be in addition to
any other rights to which any of the foregoing indemnified parties may be
entitled as a matter of law.
15. INDEMNIFICATION BY TRUST. The Trust agrees to indemnify and
hold harmless the Distributor and each person who has been, is, or may
hereafter be an officer, director, employee or agent of the Distributor against
any loss, damage or expense reasonably incurred by any of them in connection
with any claim or in connection with any action, suit or proceeding to which
any of them may be a party, which arises out of or is alleged to arise out of
or is based upon any untrue or alleged untrue statement of material fact, or
the omission or alleged omission to state a material fact necessary to make the
statements therein not misleading, contained in a Registration Statement of the
Trust or applicable prospectus of the Trust or Funds, or any amendment or
supplement thereto, unless such statement or omission was made in reliance upon
written information furnished by the Distributor. The foregoing rights of
indemnification shall be in addition to any other rights to which any of the
foregoing indemnified parties may be entitled as a matter of law. Nothing
contained herein shall relieve the Distributor of any liability to the Trust or
its shareholders to which the Distributor would otherwise be subject by reason
of willful misfeasance, bad faith, or gross negligence in the performance of
its duties or reckless disregard of its obligations and duties hereunder.
16. NON-EXCLUSIVE AGREEMENT. The services of Distributor to the
Trust hereunder shall not be deemed to be exclusive, and Distributor shall be
free to (a) render similar services to, and act as underwriter or distributor
in connection with the distribution of shares of, other investment companies,
and (b) engage in any other businesses and activities from time to time.
17. AMENDMENT. This Distribution Agreement may be amended at any
time by mutual agreement in writing of the parties hereto, provided that any
such amendment is approved (i) by a majority of the Trustees of the Trust who
are not interested persons of the Distributor or (ii) by the holders of a
majority of the outstanding shares of the Funds.
18. GOVERNING LAW; COUNTERPARTS. This Distribution Agreement
shall be construed in accordance with the laws of the Commonwealth of
Massachusetts. This Distribution Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
19. LIMITATION OF LIABILITY. The term "Freedom Investment Trust "
means and refers to the Trustees from time to time serving under the Master
Trust Agreement of the Trust dated June 16, 1989, as the same may subsequently
hereto have been, or subsequently hereto may be, amended. It is expressly
agreed that the obligations of the Trust hereunder shall not be binding upon
any of the Trustees, shareholders, nominees, officers, agents or employees of
the Trust as individuals or personally, but shall bind only the trust property
of the Trust, as provided in the Master Trust Agreement of the Trust. The
execution and delivery of this Distribution Agreement have been authorized by
the Trustees of the Trust and signed by the President of the Trust, acting as
such, and neither such authorization nor such execution and delivery shall be
deemed to have been made individually or to impose any personal liability, but
shall bind only the trust property of the Trust as provided in its Master Trust
Agreement. The Master Trust Agreement of the Trust further provides, and it is
expressly agreed, that each Fund of the Trust shall be solely and
<PAGE> 8
exclusively responsible for the payment of its debts, liabilities and
obligations and that no other Fund shall be responsible or liable for the same.
20. PRIOR AGREEMENTS SUPERSEDED; CONSTRUCTION. This Distribution
Agreement supersedes any prior agreement relating to the subject matter hereof
between the parties hereto. Without limiting the generality of the foregoing,
all references to the Trust's prospectus shall include all prospectuses
thereunder.
21. NOTICES. Notices under this Distribution Agreement shall be
in writing and shall be addressed, and delivered or mailed postage prepaid, to
the other parties at such address as such other parties may designate from time
to time for the receipt of such notices. Until further notice to the other
party, the address of each party to this Distribution Agreement for this
purpose shall be as follows: Freedom Distributors Corporation, One Beacon
Street, 4th Floor, Boston, Massachusetts 02108; John Hancock Broker
Distribution Services, Inc., 101 Huntington Avenue, Boston, Massachusetts
02199, and Freedom Investment Trust, One Beacon Street, 4th Floor, Boston,
Massachusetts 02108.
<PAGE> 9
IN WITNESS WHEREOF, this Distribution Agreement has been executed for
the Distributor and the Trust by their duly authorized officers, as of the date
first set forth above.
FREEDOM DISTRIBUTORS CORPORATION
By: /s/ John Danello
----------------------------
Title: President
--------------------------
ATTEST: /s/ Elaine A. Borghesani
-------------------------
Title: Asst. Vice President
-------------------------
JOHN HANCOCK BROKER DISTRIBUTION
SERVICES, INC.
By: /s/ C. Troy Shaver, Jr.
----------------------------
President
ATTEST: /s/ Susan S. Newton
-------------------------
Secretary
FREEDOM INVESTMENT TRUST
By: /s/ Hugh Dunlap, Jr.
-----------------------------
President
ATTEST: /s/ John Danello
-------------------------
Secretary
<PAGE> 1
Exhibit 99.B6.1
SOLICITING DEALER AGREEMENT
[LOGO]
JOHN HANCOCK FUNDS, INC.
BOSTON -- MASSACHUSETTS -- 02199-7603
<PAGE> 2
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MA 02199-7603
SOLICITING DEALER AGREEMENT
Date
------------------------------
John Hancock Funds, Inc. ("the Distributor" or "Distributor") is the
principal distributor of the shares of beneficial interest (the "securities")
of each of the John Hancock Funds, ("We" or "us"), (the "Funds"). Such Funds
are those listed on Schedule A hereto which may be amended or supplemented from
time to time by the Distributor to include additional Funds for which the
Distributor is the principal distributor. You represent that you are a member
of the National Association of Securities Dealers, Inc., (the "NASD") and,
accordingly, we invite you to become a non-exclusive soliciting dealer to
distribute the securities of the Funds and you agree to solicit orders for the
purchase of the securities on the following terms. Securities are offered
pursuant to each Fund's prospectus and statement of additional information, as
such prospectus and statement of additional information may be amended from
time to time. To the extent that the prospectus or statement of additional
information contains provisions that are inconsistent with the terms of this
Agreement, the terms of the prospectus or statement of additional information
shall be controlling.
OFFERINGS
1. You agree to abide by the Rules of Fair Practice of the NASD and to all
other rules and regulations that are now or may become applicable to
transactions hereunder.
2. As principal distributor of the Funds, we shall have full authority to
take such action as we deem advisable in respect of all matters pertaining to
the distribution. This offer of shares of the Funds to you is made only in
such jurisdictions in which we may lawfully sell such shares of the Funds.
3. You shall not make any representation concerning the Funds or their
securities except those contained in the then- current prospectus or
statement of additional information for each Fund.
4. With the exception of listings of product offerings, you agree not to
furnish or cause to be furnished to any person or display, or publish any
information or materials relating to any Fund (including, without limitation,
promotional materials, sales literature, advertisements, press releases,
announcements, posters, signs and other similar materials), except such
information and materials as may be furnished to you by the Distributor or the
Fund. All other materials must receive written approval by the Distributor
before distribution or display to the public. Use of all approved advertising
and sales literature materials is restricted to appropriate distribution
channels.
5. You are not authorized to act as our agent. Nothing shall constitute you
as a syndicate, association, joint venture, partnership, unincorporated
business, or other separate entity or otherwise partners with us, but you shall
be liable for your proportionate share of any tax, liability or expense based
on any claim arising from the sale of shares of the Funds under this Agreement.
We shall not be under any liability to you, except for obligations expressly
assumed by us in this Agreement and liabilities under Section 11(f) of the
Securities Act of 1933, and no obligations on our part shall be implied or
inferred herefrom.
-2-
<PAGE> 3
6. DEALER COMPLIANCE/SUITABILITY STANDARDS (CLASS A AND CLASS B SHARES) -
Certain mutual funds distributed by the Distributor are being offered with two
or more classes of shares of the same investment portfolio ("Fund") - refer to
each Fund prospectus for availability and details. It is essential that the
following minimum compliance/suitability standards be adhered to in offering
and selling shares of these Funds to investors. All dealers offering shares of
the Funds and their associated persons agree to comply with these general
suitability and compliance standards.
SUITABILITY
With two classes of shares of certain funds available to individual
investors, (Class A and Class B), it is important that each investor purchases
not only the fund that best suits his or her investment objective but also the
class of shares that offers the most beneficial distribution financing method
for the investor based upon his or her particular situation and preferences.
Fund share recommendations and orders must be carefully reviewed by you and
your registered representatives in light of all the facts and circumstances, to
ascertain that the class of shares to be purchased by each investor is
appropriate and suitable. These recommendations should be based on several
factors, including but not limited to:
(A) the amount of money to be invested initially and over a period of
time;
(B) the current level of front-end sales load or back-end sales load
imposed by the Fund;
(C) the period of time over which the client expects to retain the
investment;
(D) the anticipated level of yield from fixed income funds' Class A and
Class B shares;
(E) any other relevant circumstances such as the availability of
reduced sales charges under letters of intent and/or rights of
accumulation.
There are instances when one distribution financing method may be more
appropriate than another. For example, shares subject to a front-end sales
charge may be more appropriate than shares subject to a contingent deferred
sales charge for large investors who qualify for a significant quantity
discount on the front-end sales charge. In addition, shares subject to a
contingent deferred sales charge may be more appropriate for investors whose
orders would not qualify for quantity discounts and who, therefore, may prefer
to defer sales charges and also for investors who determine it to be
advantageous to have all of their funds invested without deduction of a
front-end sales commission. However, if it is anticipated that an investor may
redeem his or her shares within a short period of time, the investor may,
depending on the amount of his or her purchase, bear higher distribution
expenses by purchasing contingent deferred sales charge shares than if he or
she had purchased shares subject to a front-end sales charge.
COMPLIANCE
Your supervisory procedures should be adequate to assure that an
appropriate person reviews and approves transactions entered into pursuant to
this Soliciting Dealer Agreement for compliance with the foregoing standards.
In certain instances, it may be appropriate to discuss the purchase with the
registered representatives involved or to review the advantages and
disadvantages of selecting one class of shares over another with the client.
The Distributor will not accept orders for Class B Shares in any Fund from you
for accounts maintained in street name. Trades for Class B Shares will only be
accepted in the name of the shareholder.
7. CLASS C SHARES - Certain mutual funds distributed by the Distributor may be
offered with Class C shares. Refer to each Fund prospectus for availability
and details. Class C shares are designed for institutional investors and
qualified benefit plans, including pension funds, and are sold without a sales
charge or 12b-1 fee. If a commission is paid to you for transactions in Class
C shares, it will be paid by the Distributor out of its own resources.
SALES
8. Orders for securities received by you from investors will be for the sale
of the securities at the public offering price, which will be the net asset
value per share as determined in the manner provided in the relevant Fund's
prospectus, as now in effect or as amended from time to time, next after
receipt by us (or the relevant Fund's transfer agent) of the purchase
application and payment for the securities, plus the relevant sales charges set
forth in the relevant Fund's then- current prospectus (the "Public Offering
Price"). The procedures relating to the handling of orders shall be subject to
our instructions which we will forward from time to time to you. All orders
are subject to acceptance by us, and we reserve the right in our sole
discretion to reject any order.
-3-
<PAGE> 4
In addition to the foregoing, you acknowledge and agree to the initial
and subsequent investment minimums, which may vary from year to year, as
described in the then-current prospectus for each Fund.
9. You agree to sell the securities only (a) to your customers at the public
offering price then in effect, or (b) back to the Funds at the currently quoted
net asset value.
10. The amount of sales charge to be reallowed to you (the "Reallowance") as a
percentage of the offering price is set forth in the then-current prospectus of
each Fund.
If a sales charge on the purchase is reduced in accordance with the
provisions of the relevant Fund's then-current prospectus pertaining to
"Methods of Obtaining Reduced Sales Charges," the Reallowance shall be reduced
pro rata.
11. We shall pay a Reallowance subject to the provisions of this agreement as
set forth in Schedule B hereto on all purchases made by your customers pursuant
to orders accepted by us (a) where an order for the purchase of securities is
obtained by a registered representative in your employ and remitted to us
promptly by you, (b) where a subsequent investment is made to an account
established by a registered representative in your employ or (c) where a
subsequent investment is made to an account established by a broker/dealer
other than you and is accompanied by a signed request from the account
shareholder that your registered representative receive the Reallowance for
that investment and/or for subsequent investments made in such account. If for
any reason, a purchase transaction is reversed, you shall not be entitled to
receive or retain any part of the Reallowance on such purchase and shall pay to
us on demand in full the amount of the Reallowance received by you in
connection with any such purchase. We may withhold and retain from the amount
of the Reallowance due you a sum sufficient to discharge any amount due and
payable by you to us.
12. Certain of the Funds have adopted a plan under Investment Company Act
Rule 12b-1 ("Distribution Plan" as described in the the prospectus). To the
extent you provide distribution and marketing services in the promotion of the
sale of shares of these Funds, including furnishing services and assistance to
your customers who invest in and own shares of such Funds and including, but
not limited to, answering routine inquiries regarding such Funds and assisting
in changing distribution options, account designations and addresses, you may
be entitled to receive compensation from us as set forth in Schedule C hereto.
All compensation, including 12b-1 fees, shall be payable to you only to the
extent that funds are received and in the possession of the Distributor.
13. We will advise you as to the jurisdictions in which we believe the shares
have been qualified for sale under the respective securities or "blue sky" laws
of such jurisdictions, but we assume no responsibility or obligations as to
your right to sell the shares of the Funds in any state or jurisdiction.
14. Orders may be placed through:
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
1-800-338-4265
SETTLEMENT
15. Settlements for wire orders shall be made within five business days after
our acceptance of your order to purchase shares of the Funds. Certificates,
when requested, will be delivered to you upon payment in full of the sum due
for the sale of the shares of the Funds. If payment is not so received or
made, we reserve the right forthwith to cancel the sale, or, at our option, to
liquidate the shares of the Fund subject to such sale at the then prevailing
net asset value, in which latter case you will agree to be responsible for any
loss resulting to the Funds or to us from your failure to make payments as
aforesaid.
-4-
<PAGE> 5
INDEMNIFICATION
16. The parties to this agreement hereby agree to indemnify and hold harmless
each other, their officers and directors, and any person who is or may be
deemed to be a controlling person of each other, from and against any losses,
claims, damages, liabilities or expenses (including reasonable fees of
counsel), whether joint or several, to which any such person or entity may
become subject insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arise out of or are based upon, (a) any untrue
statement or alleged untrue statement of material fact, or any omission or
alleged omission to state a material fact made or omitted by it herein, or, (b)
any willful misfeasance or gross misconduct by it in the performance of its
duties and obligations hereunder.
17. NSCC INDEMNITY - SHAREHOLDER AND HOUSE ACCOUNTS - In consideration of the
Distributor and John Hancock Investor Services Corporation ("Investor
Services") liquidating, exchanging, and/or transferring unissued shares of the
Funds for your customers without the use of original or underlying
documentation supporting such instructions (e.g., a signed stock power or
signature guarantee), you hereby agree to indemnify the Distributor, Investor
Services and each respective Fund against any losses, including reasonable
attorney's fees, that may arise from such liquidation exchange, and/or
transfer of unissued shares upon your direction. This indemnification shall
apply only to the liquidation, exchange and/or transfer of unissued shares in
shareholder and house accounts executed as wire orders transmitted via NSCC's
Fund/SERVsystem. You represent and warrant to the Funds, the Distributor and
Investor Services that all such transactions shall be properly authorized by
your customers.
The indemnification in this Section 16 shall not apply to any losses
(including attorney's fees) caused by a failure of the Distributor, Investor
Services or a Fund to comply with any of your instructions governing any of the
above transactions, or any negligent act or omission of the Distributor,
Investor Services or a Fund, or any of their directors, officers, employees or
agents. All transactions shall be settled upon your confirmation through NSCC
transmission to Investor Services.
The Distributor, Investor Services or you may revoke the indemnity
contained in this Section 16 upon prior written notice to each of the other
parties hereto, and in the case of such revocation, this indemnity agreement
shall remain effective as to trades made prior to such revocation.
MISCELLANEOUS
18. We will supply to you at our expense additional copies of the prospectus
and statement of additional information for each of the Funds and any printed
information supplemental to such material in reasonable quantities upon
request.
19. Any notice to you shall be duly given if mailed or telegraphed to you at
your address as registered from time to time with the NASD.
20. Miscellaneous provisions, if any, are attached hereto and incorporated
herein by reference.
21. This agreement, which shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, may be terminated by any party hereto at any
time upon written notice.
-5-
<PAGE> 6
SOLICITING DEALER
-------------------------------------------------
Name of Organization
By:-------------------------------------------------
Authorized Signature of Soliciting Dealer
-------------------------------------------------
Please Print or Type Name
-------------------------------------------------
Title
-------------------------------------------------
Print or Type Address
-------------------------------------------------
Telephone Number
Date:
-------------------------------------------------
In order to service you efficiently, please provide the following
information on your Mutual Funds Operations Department:
OPERATIONS MANAGER:
---------------------------------------------
ORDER ROOM MANAGER:
---------------------------------------------
OPERATIONS ADDRESS:
---------------------------------------------
---------------------------------------------
TELEPHONE: FAX:
-------------------------------- ------------------------------
<TABLE>
<S> <C>
TO BE COMPLETED BY: TO BE COMPLETED BY:
JOHN HANCOCK FUNDS, INC. JOHN HANCOCK INVESTOR
SERVICES CORPORATION
BY: BY:
------------------------------------------- -------------------------------------------
- ---------------------------------------------- ----------------------------------------------
TITLE TITLE
</TABLE>
DEALER NUMBER:
------------------------------------
-6-
<PAGE> 7
JOHNHANCOCK
MUTUAL FUNDS
John Hancock Broker Distrubution Services, Inc.
101 Huntington Avenue Boston, MA 02199-7608 1-800-225-5291
/s/ John Hancock
<PAGE> 1
Exhibit 99.B6.2
JOHN HANCOCK FUNDS, INC.
SCHEDULE A
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
<TABLE>
<S> <C>
John Hancock Sovereign Achievers Fund John Hancock National Aviation & Technology Fund
John Hancock Sovereign Investors Fund John Hancock Regional Bank Fund
John Hancock Sovereign Balanced Fund John Hancock Gold and Government Fund
John Hancock Sovereign Bond Fund John Hancock Global Rx Fund
John Hancock Sovereign U.S. Government Income Fund John Hancock Global Technology Fund
John Hancock Special Equities Fund* John Hancock Global Fund
John Hancock Special Opportunities Fund John Hancock Pacific Basin Equities Fund
John Hancock Discovery Fund John Hancock Global Income Fund
John Hancock Growth Fund John Hancock International Fund
John Hancock Strategic Income Fund John Hancock Global Resources Fund
John Hancock Limited-Term Government Fund John Hancock Emerging Growth Fund
John Hancock Cash Management Fund John Hancock Capital Growth Fund
John Hancock Managed Tax-Exempt Fund John Hancock Growth & Income Fund
John Hancock Tax-Exempt Income Fund John Hancock High Yield Bond Fund
John Hancock Tax-Exempt Series Fund John Hancock Investment Quality Bond Fund
John Hancock Special Value Fund John Hancock Government Securities Fund
John Hancock Strategic Short-Term Income Fund John Hancock U.S. Government Fund
John Hancock CA Tax-Free Fund John Hancock Government Income Fund
John Hancock High Yield Tax-Free Fund John Hancock Intermediate Government Fund
John Hancock Tax-Free Bond Fund John Hancock Adjustable U.S. Government Fund
John Hancock U.S. Government Cash Reserve Fund John Hancock Cash Reserve Money Market B Fund
</TABLE>
From time to time John Hancock Funds, Inc., as principal distributor of the
John Hancock funds, will offer additional funds for sale. These funds will
automatically become part of this Agreement and will be subject to all its
provisions unless otherwise directed by John Hancock Funds, Inc.
*Closed to new investors as of 9/30/94
<PAGE> 2
JOHN HANCOCK FUNDS, INC.
SCHEDULE B
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
I. REALLOWANCE
The Reallowance paid to the selling Brokers for sales of John Hancock
Funds is set forth in each Fund's then- current prospectus. No Commission will
be paid on sales of John Hancock Cash Management Fund or any John Hancock Fund
that is without a sales charge. Purchases of Class A shares of $1 million or
more, or purchases into an account or accounts whose aggregate value of fund
shares is $1 million or more will be made at net asset value with no initial
sales charge. On purchases of this type, John Hancock Funds, Inc. will pay a
commission as set forth in each Fund's then-current prospectus. John Hancock
Funds, Inc. will pay Brokers for sales of Class B shares of the Funds a
marketing fee as set forth in each Fund's then-current prospectus.
<PAGE> 3
JOHN HANCOCK FUNDS, INC.
SCHEDULE C
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
FIRST YEAR SERVICE FEES
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, John Hancock Funds, Inc. will advance to you a First Year
Service Fee related to the purchase of Class A shares (only if subject to sales
charge) or Class B shares of any of the Funds, as the case may be, sold by your
firm. This Service Fee will be compensation for your personal service and/or
the maintenance of shareholder accounts ("Customer Servicing") during the
twelve-month period immediately following the purchase of such shares, in the
amount not to exceed .25 of 1% of net assets invested in Class A shares or
Class B shares of the Fund, as the case may be, purchased by your customers.
SERVICE FEE SUBSEQUENT TO THE FIRST YEAR
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will pay you quarterly, in arrears, a
Service Fee commencing at the end of the twelve month period immediately
following the purchase of Class A shares (only if subject to sales charge) or
Class B shares, as the case may be, sold by your firm, for Customer Servicing,
in an amount not to exceed .25 of 1% of the average daily net assets
attributable to the Class A shares or Class B shares of the Fund, as the case
may be, purchased by your customers, provided your firm has under management
with the Funds combined average daily net assets for the preceding quarter of
no less than $1 million, or an individual representative of your firm has under
management with the Funds combined average daily net assets for the preceding
quarter of no less than $250,000 (an "Eligible Firm").
<PAGE> 4
JOHN HANCOCK BROKER DISTRIBUTION SERVICES, INC.
SCHEDULE D
DATED JULY 1, 1992 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK MUTUAL FUNDS
No broker/dealer shall represent the FUnds or Distribution Services in any
written communications without prior receipt of written approval from John
Hancock Broker Distribution Services, Inc. This includes but is not limited to
all advertising, public relations, marketing and sales literature, and media
contacts.
Further, subsequent to the creation of such materialsbefore written
approval from JHBDS will be given, a copy of the NASD review document
applicable to such materials must be furnished to John Hancock Broker
Distribution Services, Inc. for its review and files.
FOR PURPOSES OF THIS SCHEDULE D, THE FOLLOWING TERMS ARE DEFINED:
Advertising:
materials designed for the mass market, e.g. print ads, radio and tv
commercials, billboards, etc.
Sales literature:
materials designed for a directed market, e.g. prospecting letters,
brochures, mailers, stuffers, etc.
Coop Advertising:
advertising materials (as defined above) used by selling group members
for which John Hancock pays some or all of the costs of publication
whether the materials were developed by JHBDS Marketing or not.
John Hancock Broker Distribution Services, Inc. Approval of Advertising:
Approval has four meanings:approval of the material itself from a
marketing perspective (JHBDS product managers), proactive compliance
officer), parent company corporate advertising approval (John Hancock
Mutual Life Insurance Company Advertising Dept. personnel) and
approval for use and related cost-sharing arrangements (national sales
coordinators).
NASD Filing:
Materials created by JHBDS will be filed with the NASD by the JHBDS
Compliance Department. Materials not created by JHBDS but to be
included in the coop program will be filed with the NASD by the
broker-dealer creating the materials. However, prior to use of the
materials in our coop program, we will need a copy of the final
version of the material as well as the NASDcomment letter. When this
is received, the above approvals can be obtained.
<PAGE> 5
FINANCIAL INSTITUTION
SALES AND SERVICE AGREEMENT
[LOGO]
JOHN HANCOCK FUNDS, INC.
Boston - Massachusetts - 02199-7603
<PAGE> 6
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MA 02199-7603
FINANCIAL INSTITUTION
SALES AND SERVICE AGREEMENT
Date
--------------------------------
John Hancock Funds, Inc. ("The Distributor", or "Distributor"), ("We" or
"us"), is the principal distributor of the shares of beneficial interest (the
"securities") of each of the John Hancock Funds (the "Funds"). Such Funds are
those listed on Schedule A hereto which may be amended or supplemented from
time to time by the Distributor to include additional Funds for which the
Distributor is the principal distributor. You hereby represent that you are a
"bank" as defined in Section 3(a)(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and at the time of each transaction in shares of
the Funds, are not required to register as a broker/dealer under the Exchange
Act or regulations thereunder. We invite you to become a non-exclusive
soliciting financial institution ("Financial Institution") to distribute the
securities of the Funds and you agree to solicit orders for the purchase of the
securities on the following terms. Securities are offered pursuant to each
Fund's prospectus and statement of additional information, as such prospectus
and statement of additional information may be amended from time to time. To
the extent that the prospectus or statement of additional information contains
provisions that are inconsistent with the terms of this Agreement, the terms of
the prospectus or statement of additional information shall be controlling.
OFFERINGS
1. You represent and warrant that you will use your best efforts to ensure
that any purchase of shares of the Funds by your customers constitutes a
suitable investment for such customers. You acknowledge that you will base
such a decision of suitability on all the facts you have gathered about your
customer's financial situation, investment objectives, risk tolerance and
sophistication.
2. You represent and warrant that a copy of the then-current prospectus of a
Fund will be delivered to your customer before any purchase of shares of that
Fund are effected for that customer. You shall not effect any transaction in,
or induce any purchase or sale of, any shares of the Funds by means of any
manipulative, deceptive or other fraudulent device or contrivance, and shall
otherwise deal equitably and fairly with your customers with respect to
transactions in shares of a Fund.
3. You represent and warrant that you will not make shares of any Fund
available to your customers, including your fiduciary customers, except in
compliance with all Federal and state laws and rules and regulations of
regulatory agencies or authorities applicable to you, or any of your affiliates
engaging in such activity, which may affect your business practices. You
confirm that you are not in violation of any banking law or regulations as to
which you are subject. You agree that you will comply with the requirements of
Banking Circular 274 issued by the Office of the Comptroller of the Currency in
offering shares of the Funds to your customers. We agree that we will comply
with all Federal and state laws and rules and regulations of regulatory
agencies or authorities applicable to us. We and you acknowledge and agree
that the offering of shares of the Funds pursuant to this agreement is subject
to the oversight of your management and the regulatory authorities by which you
are subject to review, and that appropriate records and materials relating to
any activity by you or us undertaken pursuant to this agreement may be accessed
by bank examiners in the due course of any regulatory review to which you may
be subject.
4. As principal distributor of the Funds, we shall have full authority to take
such action as we deem advisable in respect of all matters pertaining to the
distribution. This offer of shares of the Funds to you is made only in such
jurisdictions in which we may lawfully sell such shares of the Funds.
-2-
<PAGE> 7
5. You shall not make any representation concerning the Funds or their
securities except those contained in the then-current prospectus or statement
of additional information for each Fund.
6. We will supply to you at our expense additional copies of the then-current
prospectus and statement of additional information for each of the Funds and
any printed information supplemental to such material in reasonable quantities
upon request. It shall be your obligation to ensure that all such information
and materials are distributed to your customers who own or seek to own shares
of the Funds in accordance with securities and/or banking law and regulations
and any other applicable regulations.
7. With the exception of listings of product offerings, you agree not to
furnish or cause to be furnished to any person or display, or publish any
information or materials relating to any Fund (including, without limitation,
promotional materials, sales literature, advertisements, press releases,
announcements, posters, signs and other similar materials), except such
information and materials as may be furnished to you by us the Distributor or
the Fund. All other materials must receive written approval by the Distributor
before distribution or display to the public. Use of all approved advertising
and sales literature materials is restricted to appropriate distribution
channels.
8. You are not authorized to act as our agent. In making available shares of
the Funds under this Financial Institution Sales and Service Agreement, nothing
herein shall be construed to constitute you or any of your agents, employees or
representatives as our agent or employee, or as an agent or employee of the
Funds, and you shall not make any representations to the contrary. Nothing
shall constitute you as a syndicate, association, unincorporated business, or
other separate entity or partners with us, but you shall be liable for your
proportionate share of any tax, liability or expense based on any claim arising
from the sale of shares of the Funds under this Agreement. We shall not be
under any liability to you, except for obligations expressly assumed by us in
this Agreement and liabilities under Section 11(f) of the Securities Act of
1933, and no obligations on our part shall be implied or inferred herefrom.
9. DEALER COMPLIANCE/SUITABILITY STANDARDS (CLASS A AND CLASS B SHARES) -
Certain mutual funds distributed by the Distributor are being offered with two
or more classes of shares of the same investment portfolio ("Fund") - refer to
each Fund prospectus for availability and details. It is essential that the
following minimum compliance/suitability standards be adhered to in offering
and selling shares of these Funds to investors. All soliciting financial
institutions offering shares of the Funds and their agents, employees and
representatives agree to comply with these general suitability and compliance
standards.
SUITABILITY
With two classes of shares of certain funds available to individual
investors, (Class A and Class B), it is important that each investor purchases
not only the fund that best suits his or her investment objective but also the
class of shares that offers the most beneficial distribution financing method
for the investor based upon his or her particular situation and preferences.
Fund share recommendations and orders must be carefully reviewed by you and
your agents, employees and representatives in light of all the facts and
circumstances, to ascertain that the class of shares to be purchased by each
investor is appropriate and suitable. These recommendations should be based on
several factors, including but not limited to:
(A) the amount of money to be invested initially and over
a period of time;
(B) the current level of front-end sales load or back-end
sales load imposed by the Fund;
(C) the period of time over which the customer expects to
retain the investment;
(D) the anticipated level of yield from fixed income
funds' Class A and Class B shares;
(E) any other relevant circumstances such as the
availability of reduced sales charges under letters
of intent and/or rights of accumulation.
There are instances when one distribution financing method may be more
appropriate than another. For example, shares subject to a front-end sales
charge may be more appropriate than shares subject to a contingent deferred
sales charge for large investors who qualify for a significant quantity
discount on the front-end sales charge. In addition, shares subject to a
contingent deferred sales charge may be more appropriate for investors whose
orders would not qualify for quantity discounts and who, therefore, may prefer
to defer sales charges and also for investors who determine it to be
advantageous to have all of their funds invested without deduction of a
front-end sales commission. However, if it is anticipated that an investor may
redeem his or her shares within a short period of time, the investor may,
depending on the amount of his or her purchase, bear higher distribution
expenses by purchasing contingent deferred sales charge shares than if he or
she had purchased shares subject to a front-end sales charge.
-3-
<PAGE> 8
COMPLIANCE
Your supervisory procedures should be adequate to assure that an
appropriate person reviews and approves transactions entered into pursuant to
this Financial Institution Sales and Service Agreement for compliance with the
foregoing standards. In certain instances, it may be appropriate to discuss
the purchase with the agents, employees and representatives involved or to
review the advantages and disadvantages of selecting one class of shares over
another with the client. The Distributor will not accept orders for Class B
Shares in any Fund from you for accounts maintained in your name or in the name
of your nominee for the benefit of certain of your customers. Trades for Class
B Shares will only be accepted in the name of the shareholder.
10. CLASS C SHARES - Certain mutual funds distributed by the Distributor may
be offered with Class C shares. Refer to each Fund prospectus for availability
and details. Class C shares are designed for institutional investors and
qualified benefit plans, including pension funds, and are sold without a sales
charge or 12b-1 fee. If a commission is paid to you for transactions in Class
C shares, it will be paid by the Distributor out of its own resources.
SALES
11. With respect to any and all transactions in the shares of any Fund
pursuant to this Financial Institution Sales and Service Agreement it is
understood and agreed in each case that: (a) you shall be acting solely as
agent for the account of your customer; (b) each transaction shall be initiated
solely upon the order of your customer; (c) we shall execute transactions only
upon receiving instructions from you acting as agent for your customer or upon
receiving instructions directly from your customer; (d) as between you and your
customer, your customer will have full beneficial ownership of all shares; (c)
each transaction shall be for the account of your customer and not for your
account; and (f) unless otherwise agreed in writing we will serve as a clearing
broker for you on a fully disclosed basis, and you shall serve as the
introducing agent for your customers' accounts. Subject to the foregoing,
however, and except for Class B shares, as described in Section 8 above, you
may maintain record ownership of such customers' shares in an account
registered in your name or the name of your nominee, for the benefit of such
customers. Each transaction shall be without recourse to you provided that you
act in accordance with the terms of this Financial Institution Sales and
Service Agreement. You represent and warrant to us that you will have full
right, power and authority to effect transactions (including, without
limitation, any purchases and redemptions) in shares of the Funds on behalf of
all customer accounts provided by you.
12. Orders for securities received by you from your customers will be for the
sale of the securities at the public offering price, which will be the net
asset value per share as determined in the manner provided in the relevant
Fund's prospectus, as now in effect or as amended from time to time, next after
receipt by us (or the relevant Fund's transfer agent) of the purchase
application and payment for the securities, plus the relevant sales charges set
forth in the relevant Fund's then-current prospectus (the "Public Offering
Price"). The procedures relating to the handling of orders shall be subject to
our instructions which we will forward from time to time to you. All orders
are subject to acceptance by us, and we reserve the right in our sole
discretion to reject any order.
In addition to the foregoing, you acknowledge and agree to the initial and
subsequent investment minimums, which may vary from year to year, as described
in the then-current prospectus for each Fund.
13. You agree to sell the securities only (a) to your customers at the public
offering price then in effect, or (b) back to the Funds at the currently quoted
net asset value.
14. The amount of sales charge to be reallowed to you (the "Reallowance") as a
percentage of the offering price is set forth in the then-current prospectus of
each Fund.
If a sales charge on the purchase is reduced in accordance with the
provisions of the relevant Fund's then- current prospectus pertaining to
"Methods of Obtaining Reduced Sales Charges," the Reallowance shall be reduced
pro rata.
15. We shall pay a Reallowance subject to the provisions of this agreement as
set forth in Schedule B hereto on all purchases made by your customers pursuant
to orders accepted by us (a) where an order for the purchase of securities is
obtained by you and remitted to us promptly by you, (b) where a subsequent
investment is made to an account established by you or (c) where a subsequent
investment is made to an account established by a financial institution or
-4-
<PAGE> 9
registered broker/dealer other than you and is accompanied by a signed request
from the account shareholder that you receive the Reallowance for that
investment and/or for subsequent investments made in such account. If for any
reason, a purchase transaction is reversed, you shall not be entitled to
receive or retain any part of the Reallowance on such purchase and shall pay to
us on demand in full the amount of the Reallowance received by you in
connection with any such purchase. We may withhold and retain from the amount
of the Reallowance due you a sum sufficient to discharge any amount due and
payable by you to us.
16. Certain of the Funds have adopted a plan under Investment Company Act
Rule 12b-1 ("Distribution Plan" as described in the prospectus). To the extent
you provide distribution and marketing services in the promotion of the sale of
shares of these Funds, including furnishing services and assistance to your
customers who invest in and own shares of such Funds and including, but not
limited to, answering routine inquiries regarding such Funds and assisting in
changing distribution options, account designations and addresses, you may be
entitled to receive compensation from us as set forth in Schedule C hereto.
All compensation, including 12b-1 fees, shall be payable to you only to the
extent that funds are received and in the possession of the Distributor.
17. We will advise you as to the jurisdictions in which we believe the shares
have been qualified for sale under the respective securities or "blue sky" laws
of such jurisdictions, but we assume no responsibility or obligations as to
your right to sell the shares of the Funds in any state or jurisdiction.
18. Orders may be placed through:
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
1-800-338-4265
SETTLEMENT
19. Settlements for wire orders shall be made within five business days after
our acceptance of your order to purchase shares of the Funds. Certificates,
when requested, will be delivered to you upon payment in full of the sum due
for the sale of the shares of the Funds. If payment is not so received or
made, we reserve the right forthwith to cancel the sale, or, at our option, to
liquidate the shares of the Fund subject to such sale at the then prevailing
net asset value, in which latter case you will agree to be responsible for any
loss resulting to the Funds or to us from your failure to make payments as
aforesaid.
INDEMNIFICATION
20. The parties to this agreement hereby agree to indemnify and hold harmless
each other, their officers and directors, and any person who is or may be
deemed to be a controlling person of each other, from and against any losses,
claims, damages, liabilities or expenses (including reasonable fees of
counsel), whether joint or several, to which any such person or entity may
become subject insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arise out of or are based upon, (a) any untrue
statement or alleged untrue statement of material fact, or any omission or
alleged omission to state a material fact made or omitted by it herein, or, (b)
any willful misfeasance or gross misconduct by it in the performance of its
duties and obligations hereunder.
MISCELLANEOUS
21. Any notice to you shall be duly given if mailed or telegraphed to you at
your address as most recently furnished to us by you.
22. Miscellaneous provisions, if any, are attached hereto and incorporated
herein by reference.
23. This agreement, which shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, may be terminated by any party hereto at any
time upon written notice.
-5-
<PAGE> 10
FINANCIAL INSTITUTION
-------------------------------------------------
Financial Institution
By:
-------------------------------------------------
Authorized Signature of Financial Institution
-------------------------------------------------
Please Print or Type Name
-------------------------------------------------
Title
-------------------------------------------------
Print or Type Address
-------------------------------------------------
Telephone Number
Date:
-------------------------------------------------
In order to service you efficiently, please provide the
following information on your Mutual Funds Operations Department:
OPERATIONS MANAGER:
---------------------------------------------
ORDER ROOM MANAGER:
---------------------------------------------
OPERATIONS ADDRESS:
---------------------------------------------
---------------------------------------------
TELEPHONE: FAX:
--------------------- ----------------------------
TO BE COMPLETED BY: JOHN HANCOCK INVESTOR
JOHN HANCOCK FUNDS, INC. SERVICES CORPORATION
By: By:
--------------------------------- ------------------------------------
- ------------------------------------ ------------------------------------
Title Title
TO BE COMPLETED BY:
FINANCIAL INSTITUTION NUMBER:
----------------------------------------------
-6-
<PAGE> 11
JOHN HANCOCK FUNDS, INC.
SCHEDULE A
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
<TABLE>
<S> <C>
John Hancock Sovereign Achievers Fund John Hancock National Aviation & Technology Fund
John Hancock Sovereign Investors Fund John Hancock Regional Bank Fund
John Hancock Sovereign Balanced Fund John Hancock Gold and Government Fund
John Hancock Sovereign Bond Fund John Hancock Global Rx Fund
John Hancock Sovereign U.S. Government Income Fund John Hancock Global Technology Fund
John Hancock Special Equities Fund* John Hancock Global Fund
John Hancock Special Opportunities Fund John Hancock Pacific Basin Equities Fund
John Hancock Discovery Fund John Hancock Global Income Fund
John Hancock Growth Fund John Hancock International Fund
John Hancock Strategic Income Fund John Hancock Global Rescources Fund
John Hancock Limited Term Government Fund John Hancock Emerging Growth Fund
John Hancock Cash Management Fund John Hancock Capital Growth Fund
John Hancock Managed Tax-Exempt Fund John Hancock Growth & Income Fund
John Hancock Tax-Exempt Income Fund John Hancock High Yield Bond Fund
John Hancock Tax-Exempt Series Fund John Hancock Investment Quality Bond Fund
John Hancock Special Value Fund John Hancock Government SecurritiesFund
John Hancock Strategic Short-Term Income Fund John Hancock U.S. Government Fund
John Hancock CA Tax-Free Fund John Hancock Governtment Income Fund
John Hancock High Yield Tax-Free Fund John Hancock Intermediate Government Fund
John Hancock Tax-Free Bond Fund John Hancock Adjustable U.S. Government Fund
John Hancock U.S. Government Cash Reserve Fund John Hancock Cash Reserve Money Market B Fund
</TABLE>
From time to time John Hancock Funds, as principal distributor of the
John Hancock Funds, will offer additional funds for sale. These funds will
automatically become part of this Agreement and will be subject to all its
provisions unless otherwise directed by John Hancock Funds, Inc.
* Closed to new invstors as of 9/30/94.
<PAGE> 12
JOHN HANCOCK FUNDS, INC.
SCHEDULE B
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
I. REALLOWANCE
The Reallowance paid to Financial Institutions for sales of John Hancock
Funds is the same as that paid to Selling Brokers described and set forth
in each Fund's then-current prospectus. No Commission will be paid on
sales of John Hancock Cash Management Fund or any John Hancock Fund that is
without a sales charge. Purchases of Class A shares of $1 million or more,
or purchases into an account or accounts whose aggregate value of fund
shares is $1 million or more will be made at net asset value with no
initial sales charge. On purchases of this type, the Distributor will pay a
commission as set forth in each Fund's then-current prospectus. John
Hancock Funds, Inc. will pay Financial Institutions for sales of Class B
shares of the Funds a marketing fee as set forth in each Fund's then-
current prospectus for Selling Brokers.
<PAGE> 13
JOHN HANCOCK FUNDS, INC.
SCHEDULE C
DISTRIBUTION PLAN SCHEDULE OF COMPENSATION
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
FIRST YEAR SERVICE FEE
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will advance to you a First Year Service
Fee related to the purchase of Class A shares (only if subject to sales charge)
or Class B shares of any of the Funds, as the case maybe, sold by your firm on
or after July 1, 1993. This Service Fee will be compensation for your personal
service and/or the maintenance of shareholder accounts ("Customer Servicing")
during the twelve-month period immediately following the purchase of such
shares, in an amount not to exceed .25 of 1% of the average daily net assets
attributable to Class A shares or Class B shares of the Fund, as the case may
be, purchased by your customers.
SERVICE FEE SUBSEQUENT TO THE FIRST YEAR
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will pay you quarterly, in arrears, a
Service Fee commencing at the end of the twelve-month period immediately
following the purchase of Class A shares (only if subject to sales charge) or
Class B shares, as the case may be, sold by your firm, for Customer Servicing,
in an amount not to exceed .25 of 1% of the average daily net assets
attributable to the Class A shares or Class B shares of the Fund, as the case
may be, purchased by your customers, provided your Financial Institution has
under management with the Funds combined average daily net assets for the
preceding quarter of no less than $1 million, or an individual representative
of your Financial Institution has under management with the Funds combined
average daily net assets for the preceding quarter of no less than $250,000 (an
"Eligible Financial Institution").
<PAGE> 1
Exhibit 99.B8
MASTER CUSTODIAN AGREEMENT
between
JOHN HANCOCK MUTUAL FUNDS
and
INVESTORS BANK & TRUST COMPANY
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3
2. Employment of Custodian and Property to be held by it . . . . . . . . . . . . . . . 3-4
3. Duties of the Custodian with Respect toProperty 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
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
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
</TABLE>
<PAGE> 4
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> 5
(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> 6
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> 7
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> 8
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> 9
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> 10
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> 11
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> 12
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> 13
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> 14
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> 15
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> 16
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> 17
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> 18
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> 19
(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> 20
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> 21
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> 22
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> 23
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> 24
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> 25
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> 26
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> 27
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> 28
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> 29
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> 30
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> 31
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> 32
Page 1 of 2
INVESTORS BANK & TRUST COMPANY
APPENDIX A
[EFFECTIVE JANUARY 30, 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
California Portfolio
Massachusetts Portfolio
New York Portfolio
John Hancock Technology Series, Inc.
John Hancock National Aviation & Technology Fund
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> 33
Page 2 of 2
INVESTORS BANK & TRUST COMPANY
APPENDIX A
[EFFECTIVE JANUARY 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 Money Market Fund B
John Hancock Cash Reserve, Inc.
John Hancock Current Interest
John Hancock U.S. Government Cash Reserve
John Hancock Capital Growth 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 Investment Quality Bond Fund
John Hancock Government Securities Trust
John Hancock U.S. Government Trust
John Hancock Adjustable U.S. Government Trust
John Hancock Adjustable U.S. Government Fund
John Hancock Intermediate Government Trust
John Hancock Institutional Series Trust
John Hancock Berkeley Dividend Performers Fund
John Hancock Berkeley Bond Fund
John Hancock Berkeley Fundamental Value Fund
John Hancock Berkeley Sector Opportunity 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
<PAGE> 1
Exhibit 99.B9
FREEDOM INVESTMENT TRUST
TRANSFER AGENCY AND SERVICE AGREEMENT
DATED AUGUST 10, 1992
<PAGE> 2
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 10th day of August, 1992 by and between
Freedom Investment Trust, a Massachusetts business trust having its principal
office and place of business at 101 Huntington Avenue, Boston, Massachusetts
(the "Fund"), and John Hancock Fund Services, Inc., a Delaware corporation
having its principal office and place of business at 101 Huntington Avenue,
Boston, Massachusetts 02199 ("JHFSI").
WITNESSETH:
WHEREAS, the Fund desires to appoint JHFSI as its transfer agent,
dividend disbursing agent and agent in connection with certain other
activities, and JHFSI desires to accept such appointment;
WHEREAS, the Fund 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 Fund presently offers shares of beneficial interest in
six series, such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Article 8, being herein referred to as the "Fund(s)";
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby, employs and appoints JHFSI to act as, and JHFSI
agrees to act as transfer agent for the Fund's authorized and issued shares of
beneficial interest ("Shares"), with any accumulation, open-account or similar
plans provided to the shareholders of the Fund ("Shareholders") and set out in
the currently effective prospectus of the Fund, including without limitation
any periodic investment plan or periodic withdrawal program.
1.02 JHFSI agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and JHFSI, JHFSI shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate documentation therefor to
the Custodian of the Fund authorized pursuant to the By-Laws of the Fund as in
effect on the date thereof (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the appropriate Shareholder account;
<PAGE> 3
(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 Fund; and
(vii) Maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(viii) Record the issuance of Shares of the Fund and
maintain pursuant to SEC Rule 17Ad-10(e) a record of the total number of Shares
of the Fund which are authorized, based upon data provided to it by the Fund,
and issued and outstanding. JHFSI shall also provide the 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 such Shares or to take cognizance of any
laws relating to the issue or sale of such Shares, which functions shall be the
sole responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in
the above paragraph (a), JHFSI shall: (i) perform all of the customary services
of a transfer agent, dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal program);
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 U.S. Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by federal authorities for
all Shareholders, preparing and mailing confirmations 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 Fund to monitor the
total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to JHFSI 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 JHFSI for the Fund's blue sky
State registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
(d) Additionally, JHFSI shall:
<PAGE> 4
(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 the Fund of such
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 exceed a dollar amount equivalent to 1/2 of 1
cent per share, JHFSI 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 (adjusted by the amount of all prior payments and credits
by JHFSI 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 (adjusted by the amount of all prior
payments and credits by JHFSI and the Fund) is positive, JHFSI shall be
entitled to recover certain past payments and reductions in fees, and to 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 shall be deemed to be a credit to JHFSI which shall first be
applied to permit JHFSI 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 made by
JHFSI 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 JHFSI 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) JHFSI 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. JHFSI shall promptly advise the Fund if at any
time the cumulative net effect 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, the Fund shall promptly pay to JHFSI 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, JHFSI shall promptly pay to
the Fund an amount in cash equal to the amount of such cumulative net effect.
<PAGE> 5
Procedures applicable to certain of these services may be establishes
from time to time by agreement between the Fund and JHFSI but the failure of
the Fund to establish such procedures with respect to any service shall not in
any way diminish the duty and obligation of JHFSI to perform such services
hereunder.
Article 2 Fees and Expenses
2.01 For performance by JHFSI pursuant to this Agreement, the Fund
agrees to pay JHFSI monthly a fee based on the average daily net assets of the
Fund 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 JHFSI.
2.02 In addition to the fee paid under Section 2.01 above the Fund
agrees to reimburse JHFSI for out-of-pocket expenses or advances incurred by
JHFSI for the items set out in the fee schedule attached hereto. In addition,
any other expenses incurred by JHFSI at the request or with the consent of the
Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
promptly following the mailing of the respective billing notice. Postage for
mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to JHFSI by the Fund at least seven (7)
days prior to the mailing date of such materials.
Article 3 Representations and Warranties of JHFSI
JHFSI represents and warrants to the Fund that:
3.01 It is a Delaware corporation duly organized and existing and
in good standing under the laws of the State of Delaware, and as a Foreign
Corporation under the Laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 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 Fund
<PAGE> 6
The Fund represents and warrants to JHFSI that:
4.01 It is a trust duly organized and existing and in good standing
under the laws of the state of Massachusetts.
4.02 It is empowered under applicable laws and by its declaration
of trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said 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 and diversified investment company registered
under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with respect to all
Shares of the Fund being offered for sale.
Article 5 Indemnification
5.01 JHFSI shall not be responsible for, and the Fund shall
indemnify and hold JHFSI 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 JHFSI or its agent or subcontractors required
to be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
(c) 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 such Shares be registered in such 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 such Shares in such
state unless such violation results from any action or omission by JHFSI or any
of its agents or sub-contractors which fails to comply with written
instructions of the Fund or any officer of the Fund that no offers or sales be
made in general or to the residents of a particular state.
5.02 JHFSI shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities
<PAGE> 7
arising out of or attributed to any action or failure or omission to act by
JHFSI as a result of JHFSI's lack of good faith, negligence or willful
misconduct.
5.03 At any time JHFSI may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by JHFSI under this
Agreement, and JHFSI and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. JHFSI, its
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, 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 JHFSI or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have
notice of any change of authority of any person, until receipt of written
notice thereof from the Fund. JHFSI, 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 Fund, 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.
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 Fund and JHFSI
6.01 The Fund shall promptly furnish to JHFSI the following:
<PAGE> 8
(a) A certified copy of the resolution of the Board of Trustees
authorizing both the appointment of JHFSI and the execution and delivery of
this Agreement.
(b) A copy of the Master Trust Agreement and By-Laws of the Fund
and all amendments thereto.
6.02 JHFSI hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 JHFSI 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 Investment Company Act of 1940, as
amended, and the Rules thereunder, JHFSI agrees that all such records prepared
or maintained by JHFSI relating to the services to be performed by JHFSI
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered to the Fund on and in accordance with its request.
6.04 JHFSI and the Fund 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 Fund, JHFSI will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
instruction. JHFSI 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.
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 Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material
will be borne by the Fund. Additionally, JHFSI reserves the right to charge
for any other reasonable expenses associated with such termination.
Article 8 Additional Funds
8.01 In the event that the Fund establishes one or more of series
of Shares in addition to the present series with respect to which it desires to
have JHFSI render
<PAGE> 9
services as a transfer agent under the terms hereof, it shall so notify JHFSI in
writing, and if JHFSI agrees in writing to provide such services, such series of
Shares shall become a Fund hereunder.
Article 9 Assignment
9.01 Except as provided in Section 9.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
9.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
9.03 JHFSI may, without further consent on the part of the Fund,
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)"), (ii) or any other entity JHFSI deems appropriate
in order to comply with the terms and conditions of this Agreement, provided,
however, that JHFSI shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
Article 10 Amendment
10.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution
of the Board of Trustees of the Fund.
Article 11 Massachusetts Law to Apply
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 12 Merger of Agreement
12.01 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.
Article 13 Limitation on Liability
13.01 The Master Trust Agreement establishing the Fund, dated March
29, 1984 as amended and restated through September 10, 1991, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides all persons extending credit to,
contracting with or having any claim against the Fund shall look only to the
assets of the Fund, and neither the
<PAGE> 10
shareholders nor the Trustees, nor any of the Fund's officers, employees,
or agents shall be personally liable therefore.
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.
ATTEST: FREEDOM INVESTMENT TRUST
/s/Thomas H. Connors BY: /s/Hugh A. Dunlap, Jr.
- -------------------- ----------------------
Thomas H. Connors Hugh A. Dunlap, Jr.
Assistant Secretary President
ATTEST: JOHN HANCOCK FUND SERVICES, INC.
/s/Thomas H. Connors BY: /s/David A. King
- -------------------- ----------------
Thomas H. Connors David A. King
Assistant Secretary President
<PAGE> 1
Exhibit 99.B9.1
SERVICE AGREEMENT
BETWEEN
JOHN HANCOCK ADVISERS, INC.
AND
* BERKELEY INVESTMENT PARTNERS, INC.
OCTOBER 2, 1992
* Berkeley Investment Partners, Inc. changed its name to TBFG Advisers, Inc.,
effective on October 23, 1992.
TBFG Advisers, Inc. changed its name to Sovereign Asset Management Corporation,
effective on November 16, 1993.
<PAGE> 2
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199
October 1, 1992
Berkeley Investment Partners, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Ladies and Gentlemen:
John Hancock Advisers, Inc. ("Advisers") is incorporated in Delaware
with its principal place of business at 101 Huntington Avenue, Boston,
Massachusetts to engage in the business of an investment adviser to investment
companies. Subject to the approval of the Board of Trustees of Freedom
Investors Trust - John Hancock Sovereign Achievers Fund (the "Fund"), Advisers
has selected Berkeley Investment Partners, Inc., a Delaware corporation under
common control with Advisers ("Berkeley"), to provide portfolio management
services for the Fund. You agree that you are willing to provide such services
for the Fund and, accordingly, Advisers, and you agree as follows:
1. DELIVERY OF DOCUMENTS. The Fund or Advisers has furnished you
with copies, properly certified or otherwise authenticated, of each of the
following Fund documents:
(a) Declaration of Trust dated September 10, 1991 (the
"Articles");
(b) By-laws of the Fund as in effect on the date hereof;
(c) resolutions of the Board of Trustees selecting Berkeley to
perform portfolio Management services for the Fund and
approving the form of this Agreement; and
(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.
The Fund or Advisers will furnish you from time to time with copies,
properly certified or otherwise authenticated, of all amendments of, or
supplements to, the foregoing, if any.
<PAGE> 3
Berkeley Investment Partners, Inc.
October 1, 1992
Page 2
2. PORTFOLIO MANAGEMENT SERVICES. You will use your best efforts to
provide to the Fund continuing and suitable portfolio management services,
consistent with the investment policies, objectives and restrictions of the
Fund. In the performance of your duties hereunder, subject always (x) to the
provisions contained in the documents delivered to you pursuant to Section 1
above, as each of the same may from time to time be amended or supplemented and
(y) to the limitations set forth in the registration statement of the Fund as
in effect from time to time under the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, you will, at your expense:
(a) furnish the Fund with advice and recommendations, consistent
with the investment policies, objectives and restrictions of
the Fund, with respect to the purchase, holding and
disposition of portfolio securities;
(b) assist the Fund in connection with policy decisions to be
made by the Board of 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) assist the Fund in any negotiations relating to its
investments with issuers, investment banking firms,
institutions and investors;
(d) consistent with the provisions of Section 5 of this
Agreement, place orders for the purchase, sale or exchange of
portfolio securities with brokers or dealers selected by you;
provided, that in connection with the placing of such orders
and the selection of such brokers or dealers you shall seek
to obtain execution and pricing within the policy guidelines
determined by the Board of Trustees and set forth in the
Prospectus and Statement of Additional Information of the
Fund as in effect from time to time; and provided, further,
that Advisers shall have final supervisory authority with
respect to investment decisions concerning the purchase, sale
or exchange of portfolio securities;
(e) from time to time and at any time requested by the Board of
Trustees of the Fund or Advisers, make reports to the Fund or
Advisers, as the case may be, of your performance of the
foregoing services;
(f) maintain and preserve on the Fund's behalf the records that
come to rest with you in your performance hereunder and that
are required by the Investment Company Act of 1940, as
amended, to be maintained and preserved by the Fund (you
agree that such records are the property of the Fund and
shall be surrendered to the Fund or Advisers promptly upon
request therefor); and
<PAGE> 4
Berkeley Investment Partners, Inc.
October 1, 1992
Page 3
(g) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as
you may deem necessary or useful in the discharge of your
duties hereunder.
3. EXPENSES. You will pay any expenses incurred by you in connection
with the performance of your duties hereunder.
4. COMPENSATION. For all services to be rendered and expenses paid
or assumed by you as herein provided, Advisers will pay you quarterly, out of
the advisory fee that Advisers receives from the Fund, a fee equal on an annual
basis to 40% of said advisory fee.
5. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases
or sales of portfolio securities for the account of the Fund, neither you nor
any of your directors, officers or employees shall act as principal or agent or
receive any commission. If any occasion shall arise in which you advise
persons concerning the shares of the Fund, you will act solely on your own
behalf and not in any way on behalf of the Fund.
6. NO PARTNERSHIP OR JOINT VENTURE. The Fund, Advisers and you, and
any subset of such parties, are not partners or joint venturers with each other
and nothing herein shall be construed so as to make any of them such a partner
or joint venturer or impose any liability on any of them as such.
7. LIMITATION OF LIABILITY. You shall not be liable for any error of
judgment or mistake of law or for any loss suffered by Advisers or 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 your part
in the performance of your duties under this Agreement or from reckless
disregard by you of your obligations and duties under this Agreement. Any
person, even though also employed by you, 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 your employee or agent.
8. RESPONSIBILITY OF ADVISERS. Notwithstanding this Agreement,
Advisers shall remain ultimately responsible for all of its obligations under
the Investment Management Contract between the Fund and Advisers.
9. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall
become effective on the date hereof and shall remain in force until July 1,
1993 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 of the Fund who are not interested persons of you, Advisers or (other
than as Trustees) the Fund, case in person at a meeting called for the purpose
of voting on such approval, and (b) either (i) the Board of Trustees of the
Fund 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
<PAGE> 5
Berkeley Investment Partners, Inc.
October 1, 1992
Page 4
without the payment of any penalty by the Fund (by vote of a majority of the
outstanding voting securities of the Fund or by the Board of Trustees), by
Advisers or by you. This Agreement shall terminate automatically in the event
of its assignment or in the event of the assignment or termination of the
Investment Management Contract between the Fund and Advisers.
10. AMENDMENTS. 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 whom 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
the Board of Trustees of the Fund, including a majority of the Trustees who are
not interested persons of you, Advisers or (other than as Trustees) the Fund,
cast in person at a meeting called for the purpose of voting on such approval.
In interpreting the provisions of Section 9 above and this Section 10, the
definitions contained in Section 2 (a) of the Investment Company Act of 1940,
as amended, shall be applied (particularly the definitions of "assignment,"
"interested person" and "voting security").
11. 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 ADVISERS, INC.
By: /s/Edward J. Boudreau, Jr.
--------------------------
Edward J. Boudreau, Jr.
Chairman of the Board
and Chief Executive Officer
The foregoing contract is hereby
agreed to as of the date hereof.
BERKELEY INVESTMENT PARTNERS, INC.
By: /s/Robert G. Freedman
---------------------
President
<PAGE> 1
Exhibit 99.B10
GOODWIN, PROCTER & HOAR
(A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS)
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
May 16, 1986
Freedom Investment Trust
Three Center Plaza
Boston, Massachusetts 02108
Gentlemen:
Reference is made to the Post-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (Registration No. 2- 90305) to be filed
with the Securities and Exchange Commission with respect to the proposed sale
of an indefinite number of shares of beneficial interest, without par value
(the "Shares"), of the Freedom Regional Bank Fund series of Freedom Gold &
Government Trust (the "Trust"). We wish to advise you that we have examined
the proceedings taken to form the Trust, including its Master Trust Agreement
dated March 29, 1984, as amended, its By-laws, and the record of proceedings of
its Trustees and shareholders from the date of formation until the present
time. We have also examined the applicable provisions of the laws of the
Commonwealth of Massachusetts under which the Trust was formed and such other
documents and questions of law as we have deemed necessary to this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Trust is a duly formed and existing business trust under the
laws of the Commonwealth of Massachusetts , with authority to issue the Shares;
and
2. The Shares, when issued pursuant to the terms, provision and
conditions set forth in the Master Trust Agreement and in the above referenced
Registration Statement relating to the Shares, will be validly issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 10 to said
Registration Statement.
Very truly yours.
GOODWIN, PROCTER & HOAR
<PAGE> 1
Exhibit 99.B10.1
GOODWIN, PROCTER & HOAR
(A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS)
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
February 3, 1986
Freedom Investment Trust
Three Center Plaza
Boston, Massachusetts 02108
Gentlemen:
Reference is made to the Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A (Registration No. 2- 90305) as filed with
the Securities and Exchange Commission with respect to the proposed sale of an
indefinite number of shares of beneficial interest, without par value (the
"Shares"), of the Freedom Government/Index Option Fund series of Freedom
Investment Trust (the "Trust"). We wish to advise you that we have examined
the proceedings taken to form the Trust, including its Master Trust Agreement
dated March 29, 1984, as amended, its By-laws, and the record of proceedings of
its Trustees and shareholders from the date of formation until the present
time. We have also examined the applicable provisions of the laws of the
Commonwealth of Massachusetts under which the Trust was formed and such other
documents and questions of law as we have deemed necessary to this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Trust is a duly formed and existing business trust under the
laws of the Commonwealth of Massachusetts , with authority to issue the Shares;
and
2. The Shares, when issued pursuant to the terms, provision and
conditions set forth in the Master Trust Agreement and in the above referenced
Registration Statement relating to the Shares, will be validly issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 10 to said
Registration Statement.
Very truly yours.
GOODWIN, PROCTER & HOAR
<PAGE> 1
Exhibit 99.B10.2
GOODWIN, PROCTER & HOAR
(A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS)
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
March 13, 1987
Freedom Investment Trust
One Beacon Street
Boston, Massachusetts 02108
Gentlemen:
Reference is made to the Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A (Registration No. 2- 90305) filed with the
Securities and Exchange Commission with respect to the proposed sale of an
indefinite number of shares of beneficial interest, without par value (the
"Shares"), of the Freedom Managed Tax Exempt Fund series of Freedom Investment
Trust (the "Trust"). We wish to advise you that we have examined the
proceedings taken to form the Trust and establish such series, including the
Trust's Master Trust Agreement dated March 29, 1984, as amended, its By-laws,
and the record of proceedings of its Trustees and shareholders from the date of
formation until the present time. We have also examined the applicable
provisions of the laws of the Commonwealth of Massachusetts under which the
Trust was formed and such other documents and questions of law as we have
deemed necessary to this opinion. Based upon the foregoing, we are of the
opinion that:
1. The Trust is a duly formed and existing business trust under the
laws of the Commonwealth of Massachusetts , with authority to issue the Shares;
and
2. The Shares, when issued pursuant to the terms, provisions and
conditions set forth in the Master Trust Agreement and in the above referenced
Registration Statement relating to the Shares, will be validly issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as an Exhibit to said
Registration Statement.
Respectfully submitted,
GOODWIN, PROCTER & HOAR
<PAGE> 1
Exhibit 99.B10.3
GOODWIN, PROCTER & HOAR
(A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS)
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
December 20, 1991
Freedom Investment Trust
One Beacon Street
Boston, Massachusetts 02108
Gentlemen:
As counsel to Freedom Investment Trust, a voluntary association of the
type commonly known as a business trust (the "Trust"), we have been asked to
render our opinion in connection with the proposed issuance by the Trust of
Class A shares of Freedom Money Market Fund, Freedom Government Income Fund,
Freedom Managed Tax Exempt Fund, Freedom Gold & Government Trust, Freedom
Equity Value Fund and Freedom Regional Bank Fund and Class B Shares of Freedom
Money Market Fund, all of which are series of the Trust which have been
established and designated in Section 4.2 of Article IV of the Trust's Amended
and Restated Agreement and Declaration of Trust (also referred to as the Master
Trust Agreement) dated September 10, 1991 (the "Declaration") as more fully
described in the Prospectus and Statement of Additional Information contained
in the Registration Statement on Form N-1A (Registration No. 2-90305) filed by
the Trust, as amended (the "Registration Statement").
We have examined the Declaration and By-Laws of the Trust, the records
of the meetings and written consents of the Board of Trustees and shareholders
of the Trust, the Prospectus and Statement of Additional Information contained
in the Registration Statement and such other documents, records and
certificates as we deemed necessary for purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Trust has
been duly organized and is validly existing pursuant to the laws of the
Commonwealth of Massachusetts, and that the shares of beneficial interest of
the Trust which are the subject of the foregoing Registration Statement will,
when sold in accordance with the terms of such Registration Statement in effect
at the time of the sale and assuming full payment is received by the Trust
therefore, be legally issued, fully paid and non-assessable by the Trust.
<PAGE> 2
GOODWIN, PROCTER & HOAR
Freedom Investment Trust
December 20, 1991
Page 2
We consent to being named in the Statement of Additional Information
and to a copy of this opinion being filed as an exhibit to the foregoing
Registration Statement.
Very truly yours.
GOODWIN, PROCTER & HOAR
<PAGE> 1
Exhibit 99.B10.4
GOODWIN, PROCTER & HOAR
(A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS)
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
December 22, 1992
Freedom Investment Trust
101 Huntington Avenue
Boston, Massachusetts 02108
Gentlemen:
As counsel to Freedom Investment Trust, a voluntary association of the
type commonly known as a business trust (the "Trust"), we have been asked to
render our opinion in connection with the proposed issuance by the Trust of
Class C shares of John Hancock Freedom Sovereign U.S. Government Income Fund,
which is a series of the Trust which has been established and designated in
Section 4.2 of Article IV of the Trust's Amended and Restated Agreement and
Declaration of Trust (also referred to as the Master Trust Agreement) dated
September 10, 1991 (the "Declaration") as more fully described in the
Prospectus and Statement of Additional Information contained in the
Registration Statement on Form N-1A (Registration No. 2-90305) filed by the
Trust, as amended (the "Registration Statement").
We have examined the Declaration and By-Laws of the Trust, the records
of the meetings and written consents of the Board of Trustees and shareholders
of the Trust, the Prospectus and Statement of Additional Information contained
in the Registration Statement and such other documents, records and
certificates as we deemed necessary for purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Trust has
been duly organized and is validly existing pursuant to the laws of the
Commonwealth of Massachusetts, and that the shares of beneficial interest of
the Trust which are the subject of the foregoing Registration Statement will,
when sold in accordance with the terms of such Registration Statement in effect
at the time of the sale and assuming full payment is received by the Trust
therefor, be legally issued, fully paid and non-assessable by the Trust.
<PAGE> 2
GOODWIN, PROCTER & HOAR
Freedom Investment Trust
December 22, 1992
Page 2
We consent to being named in the Statement of Additional Information
and to a copy of this opinion being filed as an exhibit to the foregoing
Registration Statement.
Very truly yours.
GOODWIN, PROCTER & HOAR
<PAGE> 1
Exhibit 99.B11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statements of Additional Information
constituting part of this Post Effective Amendment No. 32 to the registration
statement on Form N-1A (The "Registration Statement") of our report dated
December 16, 1994, relating to the financial statements and financial
highlights appearing in the October 31, 1994 Annual Reports to Shareholders of
John Hancock Freedom Gold & Government Fund, John Hancock Freedom Regional Bank
Fund, John Hancock Managed Tax-Exempt Fund, John Hancock Sovereign U.S.
Government Income Fund and John Hancock Sovereign Achievers Fund, which appears
in such Statement of Additional Information, and to the incorporation by
reference of our report into the prospectuses which constitute part of this
Registration Statement. We further consent to the references to us under the
headings "Independent Auditors" in the Statement of Additional Information and
"The Fund's Financial Highlights" in the Prospectuses.
PRICE WATERHOUSE
BOSTON, Massachusetts
February 21, 1995
<PAGE> 1
Exhibit 99.B11.1
MORNINGSTAR
53 West Jackson Boulevard
Chicago, Illinois 60604
312-427-1985 FAX: 312-427-9215
September 21, 1992
Freedom Investment Trust
c/o John Hancock Advisers, Inc.
101 Huntington Avenue, 7th Floor
Boston, Massachusetts 02199-7603
Gentlemen:
We hereby consent to the use of the name MORNINGSTAR in the
registration statement of Freedom Investment Trust (the "Trust") on Form N-1A,
File No. 2-90305 filed under the Securities Act of 1933, as amended, and to the
inclusion of or reference to any Morningstar mutual fund ratings, ranking
and/or other Morningstar information in advertising and sales literature with
respect to the series of the Trust.
Sincerely,
/s/Susan Newsoe
<PAGE> 1
Exhibit 99.B15
Effective January 1, 1994
FREEDOM INVESTMENT TRUST
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1
WHEREAS, FREEDOM INVESTMENT TRUST, an unincorporated business trust
organized under the laws of The Commonwealth of Massachusetts (the "Trust"),
engages in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust is authorized (i) to issue shares of beneficial
interest (the "Shares") in separate series, with the Shares of each such series
representing the interests in a separate portfolio of securities and other
assets and (ii) to issue or divide the Shares within each such series into two
or more classes;
WHEREAS, the Trust has established nine portfolio series, six of which
have adopted this Plan of Distribution; John Hancock Freedom Gold & Government
Fund, John Hancock Freedom Regional Bank Fund, John Hancock Sovereign U.S.
Government Income Fund, John Hancock Sovereign Achievers Fund, John Hancock
Freedom Money Market Fund and John Hancock Managed Tax-Exempt Fund, (the
"Existing Funds" - such series, together with all other series subsequently
established by the Trust that have adopted this Plan of Distribution, being
referred to herein individually as a "Fund" and collectively as the "Funds");
WHEREAS, the Trust employs John Hancock Broker Distribution Services,
Inc. ("John Hancock") and Freedom Distributors Corporation ("Freedom") as the
distributors of the Shares pursuant to a Distribution Agreement (the
"Agreement") (Freedom and John Hancock shall herein be collectively referred to
as the "Distributor");
WHEREAS, the Board of Trustees as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the Act) and who have no
direct or indirect financial interest in the operation of this Plan of
Distribution pursuant to Rule 12b-1 under the Act (the "Plan") or the Agreement
(the "Qualified Trustees"), have determined, in the exercise of their
reasonable business judgement and in light of their fiduciary duties under
state law and under Section 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan and the Agreement will benefit the Funds
and their shareholders, and have accordingly approved this Plan and the
Agreement by votes cast in person at a meeting called for the purpose of voting
on this Plan and the Agreement.
NOW, THEREFORE, the Trust hereby amends and restates the Plan in
accordance with Rule 12b-1 under the Act, on the following terms and
conditions:
SECTION 1. DISTRIBUTION ACTIVITIES
Subject to the supervision of the Trustees, the Trust and the Funds
are authorized to engage in any activities and in financing any activities
primarily intended to result in the sale of Class A and/or Class B Shares of
the Funds, either directly or indirectly through other persons (including the
Distributor) with which the Trust has entered into agreements pursuant to the
Plan, including, without limitation, the payment of Distribution Expenses (as
defined below) and Service Expenses (as defined below).
Distribution Expenses include, but are not limited to: (a) initial and
ongoing sales compensation to selected broker-dealers and others (including
affiliates of the Distributor) engaged in the sale of Shares of
<PAGE> 2
the Funds; (b) direct out-of-pocket expenses incurred in connection with the
distribution of Shares of the Funds, including expenses relating to the
formulation and implementation of marketing strategies and promotional
activities such as direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising, the preparation, printing and
distribution of sales literature, the preparation, printing and distribution of
Prospectuses of the Trust and reports for recipients other than existing
shareholders of the Funds, and obtaining such information, analyses and reports
with respect to marketing and promotional activities and investor accounts
as the Trust may, from time to time, deem advisable; (c) an allocation of
overhead and other office expenses of the Distributor related to the
distribution of Shares of the Funds; and (d) interest expenses on unreimbursed
distribution expenses related to Class B Shares, as described in Section 3(c).
Service Expenses include, but are not limited to, payments made to, or
on account of, account executives of selected broker-dealers (including
affiliates of the Distributor) and others for the furnishing of personal
service to shareholders of the Funds and/or the maintenance of shareholder
accounts.
SECTION 2. MAXIMUM EXPENDITURES
The expenditures to be made pursuant to this Plan, and the basis upon
which payment of such expenditures will be made, shall be determined by the
Trust, but in no event shall such expenditures exceed the following:
(i) John Hancock Freedom Gold & Government Fund:
(a) with respect to Class A Shares, an annual rate of 0.30 of 1%
of the average daily value of the net assets of the Fund attributable to that
class of Shares to cover Distribution Expenses and Service Expenses, provided
that the portion of such fee used to cover Service Expenses shall not exceed an
annual rate of 0.25 of 1% of the average daily net asset value of the Fund
attributable to that class of Shares.
(b) with respect to Class B Shares, an annual rate of 1% of the
average daily value of the net assets of the Fund attributable to that class of
Shares to cover Distribution Expenses and Service Expenses, provided that the
portion of such fee used to cover Service Expenses shall not exceed an annual
rate of 0.25 of 1% of the average daily net asset value of the Fund
attributable to that class of Shares.
(ii) John Hancock Freedom Regional Bank Fund:
(a) with respect to Class A Shares, an annual rate of 0.30 of 1%
of the average daily value of the net assets of the Fund attributable to that
class of Shares to cover Distribution Expenses and Service Expenses, provided
that the portion of such fee used to cover Service Expenses shall not exceed an
annual rate of 0.25 of 1% of the average daily net asset value of the Fund
attributable to that class of Shares.
(b) with respect to Class B Shares, an annual rate of 1% of the
average daily value of the net assets of the Fund attributable to that class of
Shares to cover Distribution Expenses and Service Expenses, provided that the
portion of such fee used to cover Service Expenses shall not exceed an annual
rate of 0.25 of 1% of the average daily net asset value of the Fund
attributable to that class of Shares.
(iii) John Hancock Sovereign U.S. Government Income Fund:
(a) with respect to Class A Shares, an annual rate of 0.30 of 1%
of the average daily value of the net assets of the Fund attributable to that
class of Shares to cover Distribution Expenses and Service Expenses, provided
that the portion of such fee used to cover Service Expenses shall not exceed an
annual rate of 0.25 of 1% of the average daily net asset value of the Fund
attributable to that class of Shares.
(b) with respect to Class B Shares, an annual rate of 1% of the
average daily value of the net assets of the Fund attributable to that class of
Shares to cover Distribution Expenses and Service Expenses,
2
<PAGE> 3
provided that the portion of such fee used to cover Service Expenses shall not
exceed an annual rate of 0.25 of 1% of the average daily net asset value
of the Fund attributable to that class of Shares.
(iv) John Hancock Sovereign Achievers Fund:
(a) with respect to Class A shares, an annual rate of 0.30 of 1%
of the average daily value of the net assets of the Fund attributable to that
class of Shares to cover Distribution Expenses and Service Expenses, provided
that the portion of such fee used to cover Service Expenses shall not exceed an
annual rate of 0.25 of 1% of the average daily net asset value of the Fund
attributable to that class of Shares.
(b) with respect to Class B Shares, an annual rate of 1% of the
average daily value of the net assets of the Fund attributable to that class of
Shares to cover Distribution Expenses and Service Expenses, provided that the
portion of such fee used to cover Service Expenses shall not exceed an annual
rate of 0.25 of 1% of the average daily net asset value of the Fund
attributable to that class of Shares.
(v) John Hancock Managed Tax-Exempt Fund:
(a) with respect to Class A shares, an annual rate of 0.30 of 1%
of the average daily value of the net assets of the Fund attributable to that
class of Shares to cover Distribution Expenses and Service Expenses; , provided
that the portion of such fee used to cover Service Expenses shall not exceed an
annual rate of 0.25 of 1% of the average daily net asset value of the Fund
attributable to that class of Shares.
(b) with respect to Class B Shares, an annual rate of 1% of the
average daily value of the net assets of the Fund attributable to that class of
Shares to cover Distribution Expenses and Service Expenses, provided that the
portion of such fee used to cover Service Expenses shall not exceed an annual
rate of 0.25 of 1% of the average daily net asset value of the Fund
attributable to that class of Shares.
(vi) John Hancock Freedom Money Market Fund:
(a) with respect to Class B Shares, an annual rate of 0.75 of 1%
of the average daily value of the net assets of the Fund attributable to that
class of Shares to cover Distribution Expenses and Service Expenses, provided
that the portion of such fee used to cover Service Expenses shall not exceed an
annual rate of 0.25% of 1% of the average daily net asset value of the Fund
attributable to that class of Shares.
(vii) All Funds subsequently established by the Trust, at the annual
rate or rates as agreed upon and specified in an addendum hereto.
The expenditures to be made pursuant to this Plan shall commence with respect
to each Fund or class of Shares thereof as of the date on which this Plan
becomes effective with respect to such Fund or class of Shares thereof.
SECTION 3. PAYMENTS
Pursuant to this Plan, the Trust shall make monthly payments to the
Distributor at the annual rates provided for in Section 2 with respect to each
Fund, or class of Shares thereof, as the case may be, as more fully described
below. Notwithstanding anything to the contrary herein, the aggregate of all
payments to the Distributor shall not exceed at any time the aggregate of all
payments made or expenses incurred by the Distributor pursuant to this Section
3 and to the extent that such payments and expenses have not previously been
reimbursed by the Distributor's receipt of deferred sales charges as set forth
in the Agreement and Prospectus.
(a) CLASS A SHARES. The Distributor shall apply all monthly
payments received pursuant to this Plan as provided in Section 2 to the payment
and/or reimbursement of Distribution Expenses and Service Expenses as
contemplated by Section 1 hereof.
3
<PAGE> 4
(b) CLASS B SHARES. The Distributor shall apply all monthly
payments received pursuant to this Plan to the payment and/or reimbursement of
Distribution Expenses and Service Expenses as contemplated by Section 1 hereof.
(c) UNREIMBURSED DISTRIBUTION EXPENSES. In the event that the
Distributor is not fully reimbursed for payments made or expenses incurred by
it as contemplated by Section 1 hereof, in any fiscal year, the Distributor
shall be entitled to carry forward such expenses to subsequent fiscal years for
submission to the Shares of the applicable Fund for payment, provided that any
such carry-forward for Class A Shares shall not exceed twelve months from the
date the expense was incurred and subject always to the annual maximum
expenditures for Shares of each Fund set forth in Section 2 hereof; provided
further, however, that nothing herein shall prohibit or limit the Trustees from
terminating this Plan and all payments hereunder with respect to the Class B
Shares (or Class A Shares) of any Fund at any time pursuant to Section 4(e)
hereof.
(d) ALLOCATION OF DISTRIBUTION EXPENSES BETWEEN CLASSES. Amounts
paid to the Distributor by any class of Shares of any Fund will not be used to
pay the distribution expenses incurred with respect to any other class of
Shares of any Fund; provided, however, that distribution expenses attributable
to any Fund as a whole will be allocated, to the extent permitted by law,
according to a formula based upon gross sales dollars and/or average daily net
assets of each such Class or upon such other method as may be approved from
time to time by vote of a majority of the Board of Trustees, including the
Qualified Trustees.
SECTION 4. TERM AND TERMINATION
(a) EXISTING FUNDS. This Plan shall continue in effect with
respect to the Class A and Class B Shares of each Existing Fund (subject to
Section 4(c) hereof) until May 31, 1994, unless the continuation of this Plan
shall have been approved with respect to that class of Shares of each Existing
Fund in accordance with the provisions of Section 4(c) hereof.
(b) ADDITIONAL FUNDS. This Plan shall become effective with
respect to each additional Fund and each class of Shares thereof upon
commencement of the initial public offering thereof; provided that the Plan has
previously been approved for continuation by votes of a majority of both (i)
the Board of Trustees of the Trust, and (ii) the Qualified Trustees, cast in
person at a meeting held before the initial public offering of each such
additional Fund and each class of Shares thereof and called for the purpose of
voting on such approval. This Plan shall continue in effect with respect to
each such additional Fund and each class of Shares thereof (subject to Section
4(c) hereof) for one year after the date of such initial public offering,
unless the continuation of this Plan shall have been approved with respect to
such additional Fund and each class of Shares thereof in accordance with the
provisions of Section 4(c) hereof. The Distributor and the Trust on behalf of
each such additional Fund and each class of Shares thereof shall each sign an
addendum hereto agreeing to be bound hereby and setting forth such specific and
different terms as the parties may agree upon, including, without implied
limitation, the amount and purpose of payments to be made hereunder.
(c) CONTINUATION. This Plan shall continue in effect with respect
to each Fund and each class of Shares thereof subsequent to the initial term
specified in Section 4(a) and (b) for so long as such continuance is
specifically approved at least annually by votes of a majority of both (i) the
Board of Trustees of the Trust, and (ii) the Qualified Trustees, cast in person
at a meeting called for the purpose of voting on this Plan and related
agreements.
(d) SHAREHOLDER APPROVAL. Notwithstanding the foregoing
provisions of this Section 4, the continuance of this Plan with respect to any
additional Fund and each class of Shares thereof subsequently established by
the Trust is subject to the approval of this Plan by a majority of the
outstanding voting securities (as defined in the Act) of such Fund and each
class of Shares thereof.
4
<PAGE> 5
(e) Termination.
------------
(i) This Plan may be terminated at any time with respect to any
Fund or class of Shares thereof by vote of a majority of the Qualified
Trustees, or by vote of a majority of the outstanding voting securities of that
Fund or class of Shares thereof, as the case may be. The Plan may remain in
effect with respect to a Fund or class of shares thereof even if it has been
terminated in accordance with this Section 4(e) with respect to one or more
other Funds or classes of Shares thereof.
(ii) The Agreement may be terminated at any time, without penalty,
with respect to any Fund or class of Shares thereof by a vote of a majority of
the Qualified Trustees or by vote of a majority of the outstanding voting
securities of that Fund or class of Shares thereof on sixty days' written
notice to the Distributor. In addition, the Agreement provides for automatic
termination in the event of its assignment.
SECTION 5. AMENDMENTS
This Plan may not be amended to increase materially the amount of
distribution expenditures provided for herein unless such amendment is approved
by a vote of a majority of the outstanding voting securities of each Fund or
class of Shares thereof, as the case may be, with respect to which a material
increase in the amount of distribution expenditures is proposed, and no
material amendment to the Plan shall be made unless approved in the manner
provided for annual renewal in Section 4(c) hereof. Otherwise, the Plan may be
amended with respect to any Fund or class of Shares thereof by vote of a
majority of the Qualified Trustees or the outstanding voting securities of that
Fund or class of Shares thereof.
SECTION 6. QUALIFIED TRUSTEES
While this Plan is in effect with respect to any Fund or class of
Shares thereof, the selection and nomination of the Qualified Trustees of the
Trust shall be committed to the discretion of the Qualified Trustees.
SECTION 7. QUARTERLY REPORTS
The Treasurer of the Trust and the Treasurer of the Distributor shall
provide to the Trustees of the Trust and the Trustees shall review, at least
quarterly, a written report of the amounts expended for distribution pursuant
to this Plan and the purposes for which such expenditures were made.
SECTION 8. RECORDKEEPING
The Trust shall preserve copies of this Plan, the Agreement and any
related agreements and all reports made pursuant to Section 7 hereof, for a
period of not less than six years from the date of this Plan and the Agreement,
with the agreements or such reports, as the case may be, for the first two
years to be kept in an easily accessible place.
SECTION 9. LIMITATION OF LIABILITY
The term "Freedom Investment Trust" means and refers to the Trustees
from time to time serving under the Declaration of Trust dated March 29, 1984,
as amended and restated September 10, 1991, as the same may subsequently
thereto have been, or subsequently hereto be, amended. It is expressly agreed
that the obligations of the Trust hereunder shall not be binding upon any of
the Trustees, shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Trust, as provided
in the Master Trust Agreement of the Trust. The execution and delivery of this
Plan and the Plan have been authorized by the Trustees of the Trust and signed
by an authorized officer of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such
5
<PAGE> 6
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Master Trust Agreement. The Master
Trust Agreement of the Trust further provides, and it is expressly agreed, that
each Fund of the Trust shall be solely and exclusively responsible for the
payment of its debts, liabilities and obligations and that no other Fund shall
be responsible or liable for the same.
SECTION 10. MISCELLANEOUS
For purposes of this Plan, references to the Prospectus of the Trust
shall be deemed to include all Prospectuses and Statements of Additional
Information of any of the Funds and of the Trust, all as from time to time
amended and in effect.
IN WITNESS WHEREOF, the Trust has executed this Plan of Distribution
dated as of January 16, 1986, as amended and restated effective as of the day
and year set forth below in Boston, Massachusetts.
FREEDOM INVESTMENT TRUST
By: /s/ Hugh A. Dunlap, Jr.
-----------------------
President
ATTEST:
/s/ Thomas H. Drohan
- --------------------
Secretary
Date: January 1, 1994
6
<PAGE> 1
Exhibit 99.B17
POWER OF ATTORNEY
-----------------
We, the undersigned officers and Trustees of Freedom Investment Trust
I (the "Trust"), do hereby severally constitute and appoint Edward J. Boudreau,
Jr., Hugh A. Dunlap, Jr., James B. Little and Thomas H. Drohan, and each of
them acting singly, as our true and lawful attorneys, with full powers to them
and each of them to sign for us, in our names in the capacities indicated
below, any and all Registration Statements of the Trust on Form N-1A or N-14
and any and all amendments thereto filed with the Securities and Exchange
Commission to enable the Trust to comply with the provisions of the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended and
the Investment Company Act of 1940, as amended, and all requirements and
regulations of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys to any
and all said amendments to the Registration Statement.
IN WITNESS WHEREOF, we have hereunto set our hands on the date
indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE AS OF:
- --------- ----- -----------
<S> <C> <C>
/s/Edward J. Boudreau, Jr. Chairman, Trustee June 25, 1992
- ------------------------- and Principal
Edward J. Boudreau, Jr. Executive Officer
/s/James B. Little Treasurer, June 25, 1992
- ------------------ Principal Accounting
James B. Little Officer and Principal
Financial Officer
/s/William Barron, III Trustee June 25, 1992
- ----------------------
William Barron, III
/s/Douglas M. Costle Trustee June 25, 1992
- --------------------
Douglas M. Costle
/s/Hugh A. Dunlap, Jr. Trustee June 25, 1992
- ----------------------
Hugh A. Dunlap, Jr.
/s/Leland O. Erdahl Trustee June 25, 1992
- -------------------
Leland O. Erdahl
/s/Richard A. Farrell Trustee June 25, 1992
- ---------------------
Richard A. Farrell
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
/s/Patrick Grant Trustee June 25, 1992
- ----------------
Patrick Grant
/s/Ralph Lowell, Jr. Trustee June 25, 1992
- --------------------
Ralph Lowell, Jr.
/s/John A. Moore Trustee June 25, 1992
- ----------------
John A. Moore
/s/John W. Pratt Trustee June 25, 1992
- ----------------
John W. Pratt
/s/William F. Glavin Trustee December 14, 1992
- --------------------
William F. Glavin
/s/Patti McGill Peterson Trustee August 17, 1993
- ------------------------
Patti McGill Peterson
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> JOHN HANCOCK FREEDOM REGIONAL BANK FUND, CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 698,782,859
<INVESTMENTS-AT-VALUE> 741,494,294
<RECEIVABLES> 3,006,104
<ASSETS-OTHER> 15,882
<OTHER-ITEMS-ASSETS> 42,711,435
<TOTAL-ASSETS> 744,516,280
<PAYABLE-FOR-SECURITIES> 4,297,950
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,033,336
<TOTAL-LIABILITIES> 5,331,286
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 684,823,005
<SHARES-COMMON-STOCK> 10,084,092
<SHARES-COMMON-PRIOR> 4,354,528
<ACCUMULATED-NII-CURRENT> 224,712
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,425,842
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,711,435
<NET-ASSETS> 739,184,994
<DIVIDEND-INCOME> 11,382,944
<INTEREST-INCOME> 3,142,298
<OTHER-INCOME> 0
<EXPENSES-NET> 8,482,108
<NET-INVESTMENT-INCOME> 6,043,134
<REALIZED-GAINS-CURRENT> 11,428,717
<APPREC-INCREASE-CURRENT> (7,116,756)
<NET-CHANGE-FROM-OPS> 10,355,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,449,060
<DISTRIBUTIONS-OF-GAINS> 4,773,906
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,852,429
<NUMBER-OF-SHARES-REDEEMED> 2,446,139
<SHARES-REINVESTED> 323,274
<NET-CHANGE-IN-ASSETS> 473,219,377
<ACCUMULATED-NII-PRIOR> 49,020
<ACCUMULATED-GAINS-PRIOR> 13,469,085
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,686,366
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,482,108
<AVERAGE-NET-ASSETS> 150,524,995
<PER-SHARE-NAV-BEGIN> 21.62
<PER-SHARE-NII> 0.39
<PER-SHARE-GAIN-APPREC> 0.91
<PER-SHARE-DIVIDEND> (0.34)
<PER-SHARE-DISTRIBUTIONS> (1.06)
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<PER-SHARE-NAV-END> 21.52
<EXPENSE-RATIO> 1.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> JOHN HANCOCK FREEDOM REGIONAL BANK FUND, CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 698,782,859
<INVESTMENTS-AT-VALUE> 741,494,294
<RECEIVABLES> 3,006,104
<ASSETS-OTHER> 15,882
<OTHER-ITEMS-ASSETS> 42,711,435
<TOTAL-ASSETS> 744,516,280
<PAYABLE-FOR-SECURITIES> 4,297,950
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,033,336
<TOTAL-LIABILITIES> 5,331,286
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 684,823,005
<SHARES-COMMON-STOCK> 24,369,889
<SHARES-COMMON-PRIOR> 7,967,790
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<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 739,184,994
<DIVIDEND-INCOME> 11,382,944
<INTEREST-INCOME> 3,142,298
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<EXPENSES-NET> 8,482,108
<NET-INVESTMENT-INCOME> 6,043,134
<REALIZED-GAINS-CURRENT> 11,428,717
<APPREC-INCREASE-CURRENT> (7,116,756)
<NET-CHANGE-FROM-OPS> 10,355,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,373,113
<DISTRIBUTIONS-OF-GAINS> 8,743,106
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17,745,423
<NUMBER-OF-SHARES-REDEEMED> 1,862,961
<SHARES-REINVESTED> 519,637
<NET-CHANGE-IN-ASSETS> 473,219,377
<ACCUMULATED-NII-PRIOR> 49,020
<ACCUMULATED-GAINS-PRIOR> 13,469,085
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,686,366
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,482,108
<AVERAGE-NET-ASSETS> 313,480,228
<PER-SHARE-NAV-BEGIN> 21.56
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> 0.91
<PER-SHARE-DIVIDEND> (0.21)
<PER-SHARE-DISTRIBUTIONS> (1.06)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.43
<EXPENSE-RATIO> 2.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> JOHN HANCOCK FREEDOM GOLD & GOVERNMENT FUND, CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 56,190,094
<INVESTMENTS-AT-VALUE> 57,498,555
<RECEIVABLES> 523,451
<ASSETS-OTHER> 7,605
<OTHER-ITEMS-ASSETS> 1,308,461
<TOTAL-ASSETS> 58,029,611
<PAYABLE-FOR-SECURITIES> 2,319,109
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 249,838
<TOTAL-LIABILITIES> 2,568,947
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,063,491
<SHARES-COMMON-STOCK> 1,147,566
<SHARES-COMMON-PRIOR> 1,235,206
<ACCUMULATED-NII-CURRENT> 73,119
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,528,361)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,308,461
<NET-ASSETS> 55,460,664
<DIVIDEND-INCOME> 114,940
<INTEREST-INCOME> 3,631,919
<OTHER-INCOME> 0
<EXPENSES-NET> 1,340,269
<NET-INVESTMENT-INCOME> 2,406,590
<REALIZED-GAINS-CURRENT> (7,084,743)
<APPREC-INCREASE-CURRENT> (3,014,455)
<NET-CHANGE-FROM-OPS> (7,692,608)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 803,396
<DISTRIBUTIONS-OF-GAINS> 291,352
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 310,979
<NUMBER-OF-SHARES-REDEEMED> 426,433
<SHARES-REINVESTED> 57,814
<NET-CHANGE-IN-ASSETS> (16,796,830)
<ACCUMULATED-NII-PRIOR> 215,873
<ACCUMULATED-GAINS-PRIOR> (383,574)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 530,798
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,340,269
<AVERAGE-NET-ASSETS> 18,783,303
<PER-SHARE-NAV-BEGIN> 16.91
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> (2.28)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> JOHN HANCOCK FREEDOM GOLD & GOVERNMENT FUND, CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
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<EXPENSES-NET> 1,340,269
<NET-INVESTMENT-INCOME> 2,406,590
<REALIZED-GAINS-CURRENT> (7,084,743)
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<DISTRIBUTIONS-OF-GAINS> 753,474
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND, CLASS A
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<PERIOD-START> NOV-01-1993
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</TABLE>
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<SERIES>
<NUMBER> 4
<NAME> JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND, CLASS B
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1994
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<INTEREST-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 10.88
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> (1.34)
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<RETURNS-OF-CAPITAL> 0
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<EXPENSE-RATIO> 1.64
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> JOHN HANCOCK SOVEREIGN ACHIEVERS FUND, CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 118,321,613
<INVESTMENTS-AT-VALUE> 117,791,375
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<PER-SHARE-NAV-BEGIN> 12.39
<PER-SHARE-NII> 0.10
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<PER-SHARE-DIVIDEND> (0.10)
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 6
<NAME> JOHN HANCOCK SOVEREIGN ACHIEVERS FUND, CLASS B
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> JOHN HANCOCK MANAGED TAX-EXEMPT FUND, CLASS A
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<NUMBER> 7
<NAME> JOHN HANCOCK MANAGED TAX-EXEMPT FUND, CLASS B
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