As filed with the Securities and Exchange Commission on December , 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. 33 [x]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 33
(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 Offices)
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)
[ ] On (date) pursuant to paragraph (b)
[x] 75 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 will file the notice required
by Rule 24f-2 for its most recent fiscal year on or about
December 26, 1995.
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<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>
<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>
John Hancock
Financial
Industries Fund
Class A and Class B Shares
Prospectus
March 6, 1996
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Expense Information 2
The Fund's Financial Highlights 3
Investment Objective and Policies 4
Organization and Management of the Fund 9
Alternative Purchase Arrangements 9
The Fund's Expenses 11
Dividends and Taxes 12
Performance 12
How to Buy Shares 14
Share Price 15
How to Redeem Shares 20
Additional Services and Programs 22
</TABLE>
This Prospectus sets forth information about John Hancock Financial
Industries Fund (the "Fund"), a diversified series of Freedom Investment
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 6, 1996, free of charge by
writing or telephon- ing: 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>
EXPENSE INFORMATION
The purpose of the following information is to help you to understand the
various fees and expenses that you will bear, directly or indirectly, when
you purchase Fund shares. Since the Fund does not yet have any operating
history, the cost and expenses included in the table and hypothetical example
below are based on estimated fees and expenses of Class A and Class B shares
for the fiscal year ended October 31, 1996 and should not be considered as
representative of future expenses. Actual fees and expenses may be greater or
less than those indicated.
<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) 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 (net of reduction) 0.00% 0.00%
12b-1 fee** 0.30% 1.00%
Other expenses (net of reduction) 0.90% 0.90%
----- -----
Total Fund operating expenses (net of reduction) 1.20% 1.90%
===== =====
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, a contingent deferred sales charge may be imposed but
for these investments, 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.
*** Other expenses include transfer agent, legal, audit, custody and other
expenses.
(a) Expenses reflect a temporary agreement by the Fund's investment adviser
to limit expenses, not including Rule 12B-1 fees or any other class
specific expenses. Without such a limitation, the management fee, other
expenses and total Fund operating expenses of the Class A and Class B
shares, respectively, would have been estimated as 0.80% and 0.80%; and
8.90% and 9.60%.
+ 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 on a $1,000 investment, assuming a 5%
annual return throughout the periods and reinvestment of all dividends:
Class A Shares $62 $86 $113 $188
Class B Shares
--Assuming complete redemption at end of period $69 $90 $123 $204
--Assuming no redemption $19 $60 $103 $204
</TABLE>
(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.)
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."
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INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks capital appreciation primarily through investments in equity
securities of financial services companies throughout the world.
The Fund's investment objective is capital appreciation. The Fund seeks its
objective primarily through investments in financial services companies
(defined below) located in the U.S. and foreign countries. There is no
assurance that the Fund will achieve its investment objective.
Under ordinary circumstances, the Fund will invest at least 65% of its total
assets in equity securities of financial services companies. For this
purpose, equity securities include common and preferred stocks and their
equivalents (including warrants to purchase and securities convertible into
such stocks).
Financial services companies include various types of firms.
A financial services company is a firm that in its most recent fiscal year
either (i) derived at least 50% of its revenues or earnings from financial
services activities, or (ii) devoted at least 50% of its assets to such
activities. Financial services companies provide financial services to
consumers and businesses and include the following types of U.S. and foreign
firms: commercial banks, thrift institutions and their holding companies;
consumer and industrial finance companies; diversified financial services
companies; investment banks; securities brokerage and investment advisory
firms; real estate-related firms; leasing firms; insurance brokerages; and
various firms in all segments of the insurance industry such as multi-line,
property and casualty, and life insurance companies and insurance holding
companies.
The Fund may also invest in debt securities of financial services companies
and in debt and equity securities of certain other companies.
The Fund may invest in debt securities of financial services companies. The
Fund may also invest in equity and debt securities of companies outside of
the financial services sector if, in the Adviser's opinion, such nonfinancial
services companies will benefit from developments in the financial services
sector. The Fund may invest up to 5% of its net assets in a combination of
below-investment grade debt securities of banks and equities of non-financial
services companies.
To avoid the need to sell equity securities in the Fund's portfolio to meet
redemption requests, 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 short-term, investment grade debt securities. Short-term debt securities
have a maturity of less than one year. Investment grade securities are rated
at the time of purchase BBB or higher by Standard & Poor's Rating Group
("S&P") or Baa or higher by Moody's Investors Service, Inc. ("Moody's"). Debt
securities include corporate obligations (such as commercial paper, notes,
bonds or debentures), certificates of deposit, deposit accounts, obligations
of the U.S. Government, its agencies and instrumentalities, and repurchase
agreements. When the Adviser believes that financial conditions warrant, it
may for temporary defensive purposes invest up to 80% of the Fund's assets in
these securities rated in the three highest categories of S&P or Moody's.
Medium grade obligations (i.e., those rated BBB or Baa) lack outstanding
investment characteristics and 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 on these
obligations. In the event a debt security is subsequently downgraded below
medium grade, the Adviser will consider this event in determining 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.
3
<PAGE>
Risk Factors and Special Considerations
Since the Fund's investments will be concentrated in the financial services
sector, it will be subject to risks in addition to those that apply to the
general equity and debt markets. Events may occur which significantly affect
the sector as a whole or a particular segment in which the Fund invests.
Accordingly, the Fund may be subject to greater market volatility than a fund
that does not concentrate in a particular economic sector or industry. Thus,
it is recommended that an investment in the Fund be only a portion of your
overall investment portfolio.
In addition, most financial services companies are subject to extensive
governmental regulation which limits their activities and may (as with
insurance rate regulation) affect the ability to earn a profit from a given
line of business. Certain financial services businesses are subject to
intense competitive pressures, including market share and price competition.
The removal of regulatory barriers to participation in certain segments of
the financial services sector may also increase competitive pressures on
different types of firms. For example, legislative proposals to remove
traditional barriers between banking and investment banking activities would
allow large commercial banks to compete for business that previously was the
exclusive domain of securities firms. Similarly, the removal of regional
barriers in the banking industry has intensified competition within the
industry.
The availability and cost of funds to financial services firms is crucial to
their profitability. Consequently, volatile interest rates and general
economic conditions can adversely affect their financial performance.
Financial services companies in foreign countries are subject to similar
regulatory and interest rate concerns. In particular, government regulation
in certain foreign countries may include controls on interest rates, credit
availability, prices and currency movements. In some cases, foreign
governments have taken steps to nationalize the operations of banks and other
financial services companies. See "Foreign Issuers."
The market value of debt securities in the Fund's portfolio will 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.
The Fund may employ certain investment strategies to help achieve its
investment objective.
Options and Futures Transactions. The Fund may invest up to 5% of its assets
in purchased put and call options and may write (sell) covered call options
on up to 30% of its portfolio securities. The Fund may deal in exchange
listed or over-the-counter options.
The Fund's ability to use options to hedge or earn income successfully will
depend on the Adviser's ability accurately to predict market movements.
Successful hedging also depends on a strong correlation between the market
for the underlying security and the related options market. There is no
assurance that a liquid market for options will always exist. In addition,
the Fund could be prevented from opening or closing out an options position
on favorable terms because of exchange imposed limits on positions or on
daily price fluctuations.
The Fund may buy and sell options contracts on securities and stock indices,
stock index futures contracts and options on such futures contracts. Options
and futures contracts are bought and sold to manage the Fund's exposure to
changing interest
4
<PAGE>
rates and security prices. Some options and futures strategies, including
selling futures, buying puts and writing calls, tend to hedge a Fund's
investment against price fluctuations. Other strategies, including buying
futures, writing puts, and buying calls, tend to increase market exposure.
Options and futures may be combined with each other or with forward contracts
in order to adjust the risk and return characteristics of the overall
portfolio.
Options and futures can be volatile investments and involve certain risks. If
the Adviser applies a hedge at an inappropriate time or judges market
conditions incorrectly, options and futures strategies may lower the Fund's
return. The Fund could also experience losses if the prices of its options
and futures positions are poorly correlated with its other investments, or if
it can not close out its positions because of an illiquid secondary market.
The Fund will not engage in a transaction in futures or options on futures
if, immediately thereafter, the sum of initial margin deposits and premiums
required to establish speculative positions in futures contracts and options
on futures would exceed 5% of the Fund's net assets. The loss incurred by the
Fund from transactions in futures contracts and writing options on futures is
potentially unlimited and may exceed the amount of any premium received. The
Fund's transactions in options and futures contracts may be limited by the
requirements of the Internal Revenue Code of 1986, as amended (the "Code")
for qualification as a regulated investment company. See the Statement of
Additional Information for further discussion of options and futures
transactions, including tax effects and investment risks.
Restricted Securities. The Fund may purchase restricted securities 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. Purchases of
other restricted securities are subject to an investment restriction limiting
the Fund's illiquid securities to not more than 15% of its 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
U.S. Government securities according to applicable regulatory requirements.
The Fund may reinvest any cash collateral in short-term securities and money
market fund shares. 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 33-1/3% of its total assets.
Repurchase Agreements, Forward Commitments and When-Issued Securities. The
Fund may enter into repurchase agreemens and may purchase securities on a
for- ward 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
5
<PAGE>
separate account cash or liquid, high grade debt securities equal in value to
its forward commitments and when-issued securities. Purchasing 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.
Short Sales. The Fund may engage in short sales "against the box," as well as
short sales to hedge against or to profit from an anticipated decline in the
value of a security. When the Fund engages in a short sale, it will place in
a segregated account and mark to market daily cash or U.S. government
securities according to applicable regulatory requirements. See the Statement
of Additional Information.
Foreign Currencies. Due to its investments in foreign securities, the Fund
may hold a portion of its assets in foreign currencies. As a result, the Fund
may enter into forward foreign currency exchange contracts to protect against
changes in foreign currency exchange rates. A forward foreign currency
exchange contract involves an obligation to purchase a specific currency at a
future date at a price set at the time of the contract. Although these
contracts could reduce the risk of loss due to a decline in the value of the
hedged foreign currency, they could also limit any potential gain which might
result from an increase in the value of that currency.
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 nonfundamental. Those investment restrictions designated as
fundamental may not be changed without shareholder approval. The Fund's
investment objective and its nonfundamental investment policies and
restrictions, however, may be changed by a vote of the Trustees without
shareholder approval. Under normal market conditions, the Fund's portfolio
turnover rate for the current fiscal year is expected to be no more than
100%.
Depository Receipts. The Fund may invest in securities of foreign issuers in
the form of American Depository Receipts ("ADRs"), European Depository
Receipts ("EDRs") or other securities convertible into securities of
corporations in which the Fund is permitted to invest. ADRs (sponsored and
unsponsored) are receipts typically issued by an American bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation, and are designed for trading in the United States securities
markets. Issuers of the shares underlying unsponsored ADRs are not
contractually obligated to disclose material information in the United States
and, therefore, there may not be a correlation between such information and
the market value of the unsponsored ADR.
Global Risks. Investments in foreign securities may involve risks not present
in domestic securities due to exchange controls, less publicly available
information, more volatile or less liquid securities markets, and the
possibility of expropriation, confiscatory taxation or political, economic or
social instability. There may be difficulty in enforcing legal rights outside
the United States. Some foreign companies are not 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. Additionally, because foreign
securities may be denominated in currencies other than the U.S. dollar,
6
<PAGE>
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, that
the Fund distributes to shareholders. Securities transactions undertaken in
some foreign markets may not be settled promptly. Therefore, the Fund's
investments on foreign exchanges may be less liquid and subject to the risk
of fluctuating currency exchange rates pending settlement. The expense ratio
of the Fund can be expected to be higher than that of mutual funds investing
only in domestic securities since the expenses of the Fund, such as the cost
of maintaining custody of foreign securities and advisory fees, are higher.
Brokers are chosen based on best price and execution.
In choosing brokerage firms to carry out the Fund's transactions the Adviser
gives primary consideration to execution at the most favorable price, taking
into account the broker's professional ability and quality of service.
Consideration may also be given to the broker's sales of Fund shares. Pursuant
to procedures established 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 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 of shares of those series, which are
separately managed and have different investment objectives. The Trust is not
required 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 $16 billion.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary
of John Hancock Mutual Life Insurance Company (the "Life Company"), a
financial services company. The Adviser provides the Fund, and other
investment companies in the John Hancock group of funds, with investment
research and portfolio management services. John Hancock Funds, Inc. ("John
Hancock Funds") distributes shares for all of the John Hancock funds directly
and through selected broker-dealers ("Selling Brokers"). Certain Trust
officers are also officers of the Adviser and John Hancock Funds. Pursuant to
an order granted by the Securities and Exchange Commission, the Trust has
adopted a deferred compensation plan for its independent Trustees, which
allows Trustees' fees to be invested by the Trust in other John Hancock
funds.
James K. Schmidt 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. Schmidt is Senior Vice President and portfolio
manager of John Hancock Regional Bank Fund, John Hancock Bank and Thrift
Opportunity Fund and The Southeastern Thrift and Bank Fund, Inc., a
closed-end fund. He joined the Adviser in 1985.
In order to avoid conflicts with portfolio trades for the Fund, the Adviser
and the Fund have adopted extensive restrictions on personal securities
trading by personnel of the
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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 the 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 you purchase is $1 million or more. If
you purchase $1 million or more of Class A shares, you will not be subject to
an initial sales charge, but you will incur a sales charge if you redeem your
shares within one year of purchase. Class A shares are subject to ongoing
distribution and service fees at a combined annual rate of up to 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 of your dollars to work from the time you make your investment,
but the higher ongoing distribution fee will cause the shares to have higher
expenses than 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 John Hancock Investor Services Corporation or the Life
Company that had more than 100 eligible employees at the inception of the
Fund account.
Factors to Consider in Choosing an Alternative
You should consider which class of shares would 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
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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. This is 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 is more advantageous to purchase
Class B shares in order to have all your funds invested initially. However,
you will 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 from 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. They will also be in the
same amount, except for differences resulting from each class bearing 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 is based upon the average daily net asset value of the
Fund at the annual rate of 0.80% of first $500 million of average daily net
assets and 0.75% of average daily net assets in excess of $500 million.
The investment management fee is higher than the fees paid to most mutual
funds, but comparable to fees paid by funds that invest in similar
securities.
From time to time, the Adviser may reduce its fee or make other arrangements
to limit the Fund's expenses to not more than a specified percentage of
average daily net assets. The Adviser retains the right to re-impose a fee
and recover any other payments to the extent that, at the end of any fiscal
year, the Fund's annual expenses fall below the limit.
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<PAGE>
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 services 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. The distribution fees are used
to reimburse John Hancock Funds for its distribution expenses including but
not limited to: (i) initial and ongoing sales compensation to Selling Brokers
and others (including affiliates of John Hancock Funds) engaged in the sale
of Fund shares; (ii) marketing, promotional and overhead expenses incurred in
connection with the distribution of Fund shares; and (iii) with respect to
Class B shares only, interest expenses on unreimbursed distribution expenses.
In the event John Hancock Funds is not fully reimbursed for payments made or
expenses incurred by it under the Class A Plan, these expenses will not be
carried beyond one year from the date they were incurred. Unreimbursed
expenses under the Class B Plan will be carried forward together with
interest on the balance of these unreimbursed expenses.
DIVIDENDS AND TAXES
Dividends. Dividends from the Fund's net investment income and capital gains,
if any, are generally declared annually. 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 from the Fund's net investment income on these shares will be lower
than those of Class A shares. See "Share Price."
Taxation. Dividends from the Fund's net investment income, certain net
foreign currency gains, gains on certain foreign corporations and 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
gains. 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 taxable to you as if you received them the prior
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 intends to qualify as a regulated investment company under
Subchapter M of the Code for each taxable year. As a regulated investment
company, the Fund will not be subject to Federal income tax on any net
investment income and 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 the social security or
other taxpayer identification number you provide is your correct number 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 backup
withholding, the Fund may be required to withhold 31% of your dividends and
proceeds of redemptions and exchanges.
10
<PAGE>
The Fund anticipates it may be subject to foreign withholding 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 a Fund's total assets at the close of its taxable year
consists of securities of foreign corporations and if a 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.
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. In many states, any portion of the Fund's dividends that represents
interest received by the Fund on direct U.S. Government obligations may be
exempt from tax. You should consult your tax advisor for specific advice.
PERFORMANCE
The Fund may advertise its total return.
Total return is based on the overall change in value of a hypothetical
investment in the Fund. The Fund's total return shows the overall dollar or
percentage change in value, 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 divided over 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.
Total return for Class A shares includes 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. Total return for the Class B shares reflects 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. The total return of Class A and Class B shares will be calculated
separately and, because each class is subject to certain different expenses,
the total return with respect to that class for the same period may differ.
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 classes in any advertisement or promotional materials
including Fund performance data. Total return is an historical calculation
and is not an indication of future performance. The value of the Fund's
shares, when redeemed, may be more or less than their original cost. See
"Factors to Consider in Choosing an Alternative."
11
<PAGE>
HOW TO BUY SHARES
<TABLE>
<CAPTION>
<S> <C> <C>
The minimum initial investment in Class A or Class B shares is $1,000 ($250 for group investments and retirement plans).
Complete the Account Application attached to this Prospectus. Indicate whether you are purchasing Class A or Class B
shares. If you do not specify which class of shares you are purchasing, Investor Services will assume you are investing
in Class A shares.
Opening an account. By Check 1. Make your check payable to John Hancock Investor Services Corporation.
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 1-800-225-5291.
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 Financial Industries 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 or
Selling Broker or mail it directly to Investor Services.
Buying additional Class Monthly
A and Class B shares. Automatic 1. Complete the "Automatic Investing" and "Bank Information" sections on
Accumulation the Account Privileges Application, designating a bank account from which
Program (MAAP) your 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 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 of shares you own, 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.
12
<PAGE>
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 Financial Industries 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 listed or 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 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 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 (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 of each class can differ.
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 according to 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:
13
<PAGE>
<TABLE>
<CAPTION>
Combined
Reallowance
Sales Sales and Reallowance
Charge Charge Service to Selling
as a as a Fee as a Brokers as a
Percentage Percentage Percentage Percentage
Amount Invested of the of the of of the
(Including Sales Offering Amount Offering Offering
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. 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 Class A shares of $1 million or more in
the aggregate as follows: 1% on sales up 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 Fund's average
annual net assets. Selling Brokers receive the fee as compensation for
providing personal and account maintenance services to shareholders.
Sales charges ARE NOT APPLIED to any dividends that are reinvested in
additional shares of the 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 the accounts attributable to
these 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 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:
<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 the Life Company who were group annuity
contract holders as of September 1, 1994, and participant directed defined
contribution plans
14
<PAGE>
with at least 100 eligible employees at the inception of the Fund account,
may purchase Class A shares with no initial sales charge. However, if the
shares are redeemed within 12 months after the end of the calendar year in
which the purchase was made, a CDSC will be imposed at the above rate.
The CDSC will be assessed on an amount equal to the lesser of the current
market value or the original purchase cost of the redeemed Class A shares.
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 is applicable to a redemption of Class A
shares, 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 the shareholder's 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--Class A Shares. If you invest more
than $50,000 in Class A shares of the Fund or a 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 shares of 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 mutual fund with a net asset
value of $20,000 and, subsequently, invested $30,000 in Class A shares of the
Fund, the sales charge on this subsequent investment would be 4.50% and not
5.00% . This rate is 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 under one of the following categories, you may purchase Class A
shares of the Fund without paying a sales charge:
(bullet) A Trustee/Director or officer of the Trust/Company; 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
15
<PAGE>
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.
(bullet) 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.*
(bullet) A bank, trust company, credit union, savings institution or other
type of depository institution, its trust department or common trust funds if
it is purchasing $1 million or more for non-discretionary customers or
accounts.*
(bullet) A broker, dealer, financial planner, consultant 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 or services made available to their clients.
(bullet) A former participant in an employee benefit plan with John Hancock
funds, when he or she withdraws from his or her plan and transfers any or all
of his or her plan distributions 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 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 an initial sales charge, so
that your entire 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. The 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 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:
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(bullet) Proceeds of 50 shares redeemed at $12 per share $600
(bullet) Minus proceeds of 10 shares not subject to CDSC because they were acquired
through dividend reinvestment (10 x $12) -120
(bullet) Minus appreciation on remaining shares, also not subject to CDSC (40 x $2) -80
---
(bullet) Amount subject to CDSC $400
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds
will use 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 selected 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 an initial
sales charge.
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 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.
<TABLE>
<CAPTION>
Contingent Deferred Sales
Year in Which Class B Shares Charge As a Percentage of
Redeemed Following Purchase Dollar Amount 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>
John Hancock Funds pays to Selling Brokers 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. 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.
Under certain circumstances, the CDSC on Class B share redemptions will be
waived.
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 these circumstances:
(bullet) 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.
(bullet) 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 Internal Revenue Code (the "Code").
17
<PAGE>
(bullet) Redemptions made to effect mandatory distributions under the Code
after age 70-1/2 from a tax-deferred retirement plan.
(bullet) 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.
(bullet) Redemptions due to death or disability.
(bullet) Redemptions made under the Reinvestment Privilege, as described in
"Additional Services and Programs" of this Prospectus.
(bullet) Redemptions made pursuant to the Fund's right to liquidate your
account if you own fewer than 50 shares.
(bullet) Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
(bullet) 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. This will occur at the end of the month following eight years
after the shares were purchased, resulting in lower annual distribution fees.
If you exchanged Class B shares into this Fund from another John Hancock
fund, the conversion will be based on the time you purchase the shares in the
original fund. 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, nor should it change your 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
which were recently made by check or Invest-by-Phone have been collected
(which may take up to 10 calendar days).
18
<PAGE>
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 three business days or longer, as permitted by Federal securities
laws.
<TABLE>
<CAPTION>
<S> <C>
By Telephone All Fund shareholders are eligible automatically 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 according to 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 certificate
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.
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.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Type of Registration Requirements
Individual, Joint Tenants,
Sole Proprietorship,
Custodial (Uniform A letter of instruction signed (with titles where applicable) by all persons
Gifts or Transfer to Minors authorized to sign for the account, exactly as it is registered, with the
Act), General Partners. 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(s) 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>
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 any such
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 instructions.
Contact him or her 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.
Redemptions of certificated shares may not be made 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 any
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
redemptions 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 additional purchases and any dividend reinvestments exceeds the
number of shares redeemed, repeated redemptions from a smaller account may
eventually trigger this redemption policy.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege
You may exchange shares of the Fund only for shares of the same class of
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 mutual funds that interest you.
Please 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 mutual 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 that 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
20
<PAGE>
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 these shares
will be subject to the CDSC schedule of the shares acquired (except that
shares exchanged into John Hancock Short-Term Strategic Income Fund, John
Hancock Intermediate Maturity Government Trust and John Hancock Limited-Term
Government Fund, 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.
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 must be identical in both
the existing and new account. 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 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 initial 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.
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<PAGE>
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. 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 all or part of
the proceeds in shares of this 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 you
reinvested in John Hancock funds that is otherwise subject to a sales charge
as long as you invest 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 a CDSC. The holding period of the
shares you acquired through reinvestment for purposes of computing the CDSC
payable upon a subsequent redemption, will include the holding period of the
redeemed shares.
2. Any portion of the redemption may be reinvested in the Fund or in 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 can elect the Systematic Withdrawal Plan at any time by completing the
attached 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 and they can be sent to you or any other
designated payee.
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<PAGE>
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 shares, because you may be subject
to initial sales charges on purchases of Class A shares or you will be
subject to a CDSC imposed on 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 can authorize an investment to be withdrawn automatically drawn each
month from your bank for investment under the "Automatic Investing" and "Bank
Information" sections on the Account Privileges Application.
2. You can also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
3. You can 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 withdrawn from a bank account and we are notified
that the account has been closed, your 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 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 Section 457 Plans.
2. The initial investment minimum or aggregate minimum for any of these plans
is $250. However, accounts being established as group IRA, SEP, SARSEP, TSA,
401(k) and Section 457 plans will be accepted without an initial minimum
investment.
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<PAGE>
JOHN HANCOCK
FINANCIAL INDUSTRIES 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
Investment-by-Phone
Telephone Redemption
For: TDD call 1-800-544-6713
JHD-
[Recycled Logo] Printed on recycled paper using soybean ink
JOHN HANCOCK
FINANCIAL
INDUSTRIES
FUND
Class A and Class B Shares
Prospectus
March 6, 1996
A mutual fund seeking capital appreciation
primarily through investments in financial
services companies.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Telephone 1-800-225-5291
<PAGE>
<PAGE>
John Hancock Financial Industries Fund
Class A and Class B Shares
Statement of Additional Information
March 6, 1996
This Statement of Additional Information provides information about
John Hancock Financial Industries Fund (the "Fund") in addition to the
information that is contained in the Fund's Class A and Class B Shares
Prospectus dated March 6, 1996 (the "Prospectus"). The Fund is one of six
separate series of Freedom Investment Trust (the "Trust"). Information about
the other five series of the Trust is provided in separate prospectuses and a
statement of additional information covering all five series.
This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Fund's Prospectus, 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
<PAGE>
TABLE OF CONTENTS
Statement of
Additional
Information
Page
ORGANIZATION OF THE FUND .............................................. 3
INVESTMENT OBJECTIVE AND POLICIES....................................... 3
THE FUND'S OPTIONS TRADING ACTIVITIES................................ 7
THE FUND'S INVESTMENTS IN FUTURES CONTRACTS.......................... 11
CERTAIN INVESTMENT PRACTICES......................................... 15
INVESTMENT RESTRICTIONS.............................................. 19
THOSE RESPONSIBLE FOR MANAGEMENT..................................... 23
INVESTMENT ADVISORY AND OTHER SERVICES............................... 28
DISTRIBUTION CONTRACTS............................................... 30
NET ASSET VALUE...................................................... 31
INITIAL SALES CHARGE ON CLASS A SHARES............................... 32
DEFERRED SALES CHARGE ON CLASS B SHARES.............................. 34
SPECIAL REDEMPTIONS.................................................. 34
ADDITIONAL SERVICES AND PROGRAMS..................................... 35
DESCRIPTION OF THE FUND'S SHARES..................................... 36
TAX STATUS........................................................... 38
CALCULATION OF PERFORMANCE........................................... 43
BROKERAGE ALLOCATION................................................. 44
DISTRIBUTIONS........................................................ 46
TRANSFER AGENT SERVICES.............................................. 46
CUSTODY OF PORTFOLIO................................................. 46
INDEPENDENT AUDITORS ................................................ 46
- 2 -
<PAGE>
ORGANIZATION OF THE FUND
Freedom Investment Trust (the "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. The Fund was created as a separate series of the Trust on December [
], 1995. To date, five other 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, John Hancock Regional Bank Fund (formerly
John Hancock Freedom Regional Bank Fund), created on April 2, 1985, John
Hancock Sovereign U.S. Government Income Fund (formerly Freedom Government
Income Fund), created on January 16, 1986, John Hancock Sovereign Achievers
Fund (formerly Freedom Equity Value Fund), created on January 16, 1986, and
John Hancock Managed Tax-Exempt Fund (formerly John Hancock Freedom Managed
Tax Exempt Fund). As indicated above, each of these five other series of
the Trust is offered pursuant to a separate prospectus and Statement of
Information.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus. The Adviser for the Fund
is John Hancock Advisers, Inc. (the "Adviser").
The Adviser believes that the ongoing deregulation of many segments of the
financial services sector continues to provide new opportunities for issuers
in this sector. As deregulation of various financial services businesses
continues and new segments of the financial services sector are opened to
certain larger financial services firms formerly prohibited from doing
business in these segments, (such as national and money center banks) certain
established companies in these market segments (such as regional banks or
securities firms) may become attractive acquisition candidates for the larger
firm seeking entrance into the segment. Typically, acquisitions accelerate
the capital appreciation of the shares of the company to be acquired.
In addition, financial services companies in growth segments (such as
securities firms during times of stock market expansion) or geographically
linked to areas experiencing strong economic growth (such as certain regional
banks) are likely to participate in and benefit from such growth through
increased demand for their products and services. Many financial services
companies which are actively and aggressively managed and are expanding
services as deregulation opens up new opportunities also show potential for
capital appreciation, particularly in expanding into areas where
nonregulatory barriers to entry are low.
The Adviser will seek to invest in those financial services companies that it
believes are well positioned to take advantage of the ongoing changes in the
financial services sector. A financial services company may be well
positioned for a number of reasons. It may be an attractive acquisition for
another company wishing to strengthen its presence in a line of business or a
geographic region or to expand into new lines of business or geographic
regions, or it may be planning a merger to strengthen its position in a line
of business or a geographic area. The financial services company may be
engaged in a line or lines of business experiencing or likely to experience
strong economic growth; it be linked to a geographic region experiencing or
likely to experience strong economic growth and be actively seeking to
participate in such growth; or it may be expanding into financial services or
geographic regions previously unavailable to it (due to an easing of
regulatory constraints) in order to take advantage of new market
opportunities.
Risk Factors
Most financial services companies are subject to extensive governmental
regulations which limit their activities and may (such as insurance rate
regulation) affect the ability to earn a profit from a given line of
business. Certain financial services businesses are subject to intense
competitive pressures, including market share and price competition. The
removal of regulatory barriers to participation in certain segments of the
financial services sector may also increase competitive pressures on
different types of firms. The availability and cost of funds to financial
services firms is crucial to their profitability. Consequently, volatile
interest rates and general economic conditions can adversely affect their
financial performance.
Financial services companies in foreign countries are subject to similar
regulatory and interest rate concerns. In particular, government regulation
in certain foreign countries may include controls on interest rates, credit
availability, prices and currency movements. In some cases, foreign
governments have taken steps to nationalize the operations of banks and other
financial services companies.
American Depository Receipts and European Depository Receipts
In addition to purchasing equity securities of foreign issuers in foreign
markets, the 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.
Foreign Currency Transactions
The Fund will conduct its 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.
The Fund may enter into forward foreign currency exchange contracts in two
circumstances. First, when the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, the 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, the 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 believes that the currency of a particular foreign
country may suffer or benefit from a substantial movement against another
currency, the 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 the Fund's portfolio securities denominated in such foreign currency. 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.
The Fund will not enter into such forward contracts or maintain a net
exposure to such contracts if the consummation of the contracts would
obligate the 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 the Fund's long-term investment
decisions made with regard to overall investment strategies. However, the
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. Investors Bank & Trust Company, the Fund's custodian (the
"Custodian"), will place cash or liquid high grade debt securities into a
segregated account of the Fund in an amount equal to the value of the Fund's
total assets committed to the consummation of forward contracts to purchase
foreign currency. 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. The Fund will not
enter into any forward contract with a term of greater than one year. At the
maturity of a forward contract to sell foreign currency, the 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 the 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 the 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 the Fund retains the portfolio security and engages in an offsetting
transaction, the 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 the 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, the
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 Fund's transactions in forward foreign currency exchange contracts will
be limited to those described above. The Fund is not required to enter into
such transactions with regard to its foreign currency-denominated
securities. It also should be realized that this method of protecting the
value of the 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 Fund values its assets daily in terms of United States dollars,
the Fund does not intend to convert its holdings of foreign currencies into
United States dollars on a daily basis. The Fund will do so from time to
time, which will involve transaction costs. 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 the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.
Portfolio Turnover
The 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 Fund writes a substantial number of call
options and the market prices of the underlying securities appreciate, 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 FUND'S OPTIONS ACTIVITIES
The following information supplements the discussion in the Prospectus
regarding options transactions in which the Fund may engage.
The Fund may purchase and write options, including purchasing puts and calls
and writing covered calls. 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.
It is the policy of the 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 the 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 Fund may
engage in options, futures and forward transactions may be materially limited
by this 30% test.
Call Options
Call options ("calls") may be written (i.e., sold) by the 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.
The Fund may write call options to obtain additional income. When the 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 the Fund writes a call option, an amount equal to the premium received
by it is included in the 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 the 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, the Fund may
purchase a call in a "closing purchase transaction." 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.
The Fund may purchase calls only if the calls are listed on a domestic
exchange or traded over-the-counter. The Fund will purchase call options to
attempt to obtain capital appreciation. When the 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.
Put Options
The Fund may purchase put options ("puts") if they are listed on a domestic
exchange or traded over-the-counter. The Fund may not write (sell) puts, but
may resell puts previously purchased by it to third parties who are not
broker-dealers. When the 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.
The 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
Fund in achieving its investment objective of capital appreciation by
protecting it against a decline in the market value of its portfolio
securities.
Buying a non-protective put permits the 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 the 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.
Risk Factors Applicable to Options
A call option 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 options are two-party contracts with prices and terms
negotiated by the buyer and seller. There is no assurance that the Fund will
be able to close out options acquired or sold over-the-counter.
The Fund will acquire only those over-the-counter options for which
management believes the Fund can receive on each business day at least two
separate bids or offers (one of which will be from an entity other than a
party to the option) or those over-the-counter options valued by an
independent pricing service. The Fund 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 15% restriction on illiquid investments. The SEC, however, allows the
Fund to exclude from the 15% limitation on illiquid investments 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 must be a primary U.S. Government securities dealer designated as
such by the Federal Reserve Bank. Second, the Fund must have an absolute
contractual right to repurchase the over-the-counter options at a formula
price. If the above conditions are met, the Fund may 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 Fund 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 the Fund cannot close out a purchased
exchange-traded or over-the-counter option, 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.
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 options transactions of the Fund may affect its turnover rates and the
amount of brokerage commissions paid by it. The exercise of calls written by
the Fund may cause it to sell portfolio securities or other assets at times
and amounts controlled by the holder of a call, thus increasing the Fund's
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 the
Fund's control, holding a protective put might cause the Fund 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 Fund to
exercise the put.
The 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 on how many times the Fund's options positions may be
replaced. Therefore more than 5% of the Fund's assets may be at risk. The
successful use by the Fund of options on securities will depend upon the
Adviser's ability to anticipate movements of securities prices.
The Fund's Custodian, or a securities depository acting for it, will act as
the Fund's escrow agent for the securities underlying written calls, or for
other escrowed securities. Until the securities are released from escrow,
they cannot be sold by the Fund; this release will take place on the
exercise, termination or expiration of the call. For information on the
valuation of the puts and calls, see "Net Asset Value."
THE FUND'S INVESTMENTS IN FUTURES CONTRACTS
The following information supplements the discussion in the Prospectus
regarding investment by the Fund in futures contracts and related options.
Financial Futures Contracts. The Fund may buy and sell futures contracts
(and related options) on stocks and stock indices. The Fund may hedge its
portfolio by selling or purchasing financial futures contracts as an offset
against changes in security values. Although other techniques could be used
to reduce such exposure, the Fund may be able to hedge its exposure more
effectively and perhaps at a lower cost by using financial futures
contracts. The Fund may enter into financial futures contracts for hedging
and speculative purposes to the extent permitted by regulations of the
Commodity Futures Trading Commission ("CFTC").
Financial futures contracts have been designed by boards of trade which have
been designated as "contract markets" by the CFTC. Futures contracts are
traded on these markets in a manner that is similar to the way a stock is
traded on a stock exchange. The boards of trade, though their clearing
corporations, guarantee that the contracts will be performed.
Although some financial futures contracts by their terms call for actual
delivery or acceptance of a financial instrument, in most cases the contracts
are closed out prior to delivery by offsetting purchases or sales of matching
financial futures contracts (same exchange, underlying security and delivery
month). Most financial futures contracts on securities indices by their
terms call for cash settlement. If the offsetting purchase price is less
than the Fund's original sale price, the Fund realizes a gain, or if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is
more than the Fund's original purchase price, the Fund realizes a gain, or if
it is less, the Fund realizes a loss. The transaction costs must also be
included in these calculations. The Fund will pay a commission in connection
with each purchase or sale of financial futures contracts, including a
closing transaction. For a discussion of the Federal income tax
considerations in entering into financial futures contracts, see the
information under "Tax Status" below.
At the time the Fund enters into a financial futures contact, it is required
to deposit with the Custodian a specified amount of cash or U.S. Government
securities, known as "initial margin", ranging upward from 1.1% of the value
of the financial futures contract. The margin required for a financial
futures contract is set by the board of trade or exchange on which the
contract is traded and may be modified during the term of the contact. The
initial margin is in the nature of a performance bond or good faith deposit
on the financial futures contract which is returned to the Fund upon
termination of the contract, assuming all contractual obligations have been
satisfied. The Fund expects to earn interest income on its initial margin
deposits. Each day, the futures contract is valued at the official
settlement price of the board of trade or exchange on which it is traded.
Subsequent payments, known as "variation margin," to and from the broker are
made on a daily basis as the market price of the financial futures contract
fluctuates. This process is known as "mark to market". Variation margin
does not represent a borrowing or lending by the Fund but is instead a
settlement between the Fund and the broker of the amount one would owe the
other if the financial futures contract expired early. In computing its net
asset value, the Fund will mark to market its open financial futures
positions.
Successful hedging depends on a strong correlation between the market for the
underlying securities and the relevant futures market. There are several
factors that will probably prevent this correlation from being perfect, and
even a correct forecast of general interest rate trends may not result in a
successful hedging transaction. There are significant differences between
the securities and futures markets which could create an imperfect
correlation between the markets and which could affect the success of a given
hedge. For example, the degree of imperfection of correlation depends on
variations in speculative market demand for financial futures and debt
securities, including technical influences in futures trading, and
differences between the financial instruments being hedged and the
instruments underlying the standard financial futures contracts available for
trading.
A decision as to whether, when and how to hedge involves the exercise of
skill and judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of market behavior or unexpected interest rate trends.
The Fund will bear the risk that the price of the securities being hedged
will not move in complete correlation with the price of the futures contracts
used as a hedging instrument. Although the Adviser believes that the use of
financial futures contracts may benefit the Fund, an incorrect prediction
could result in a loss on both the hedged portfolio securities and the
futures contract so that the Fund's return might have been better had hedging
not been attempted. However, in the absence of the ability to hedge, the
Fund might have engaged in portfolio transactions in anticipation of the same
market movements with similar investment results but, presumably, at greater
transaction costs. The low margin deposits required for futures transactions
permit an extremely high degree of leverage. A relatively small movement in
a futures contract may result in losses or gains in excess of the amount
invested.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount the price of a futures contract may vary
either up or down from the previous day's settlement price, at the end of the
current trading session. Once the daily limit has been reached in a futures
contact subject to the limit, no more trades may be made on that day at a
price beyond that limit. The daily limit governs only price movements during
a particular trading day and, therefore, does not limit potential losses
because the limit may work to prevent the liquidation of unfavorable
positions. For example, futures prices have occasionally moved to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of positions and subjecting some holders of
futures contracts to substantial losses.
Finally, although the Fund engages in financial futures transactions only on
boards of trade or exchanges where there appears to be an adequate secondary
market, there is no assurance that a liquid market will exist for a
particular futures contact at any given time. The liquidity of the market
depends on participants closing out contracts rather than making or taking
delivery. In the event participants decide to make or take delivery,
liquidity in the market could be reduced. In addition, the Fund could be
prevented from executing a buy or sell order at a specified price or closing
out a position due to limits on open positions or daily price fluctuation
limits imposed by the exchanges or boards of trade. If a Fund cannot close
out a position, it will be required to continue to meet margin requirements
until the position is closed.
Options on Futures Contracts. The Fund may also buy and sell options on
futures contracts that it could trade directly. An option on a futures
contract give the purchaser the right, in return for the premium paid, to
assume a position in a futures contract at a specified exercise price at any
time during the period of the option. Upon exercise, the writer of the
option delivers the futures contract to the holder at the exercise price.
The Fund would be required to deposit with the Custodian initial margin with
respect to put and call options on futures contracts written by it. Options
on futures contracts involve risks similar to the risks relating to
transactions in financial futures contracts. Also, an option purchased by
the Fund may expire worthless, in which case the Fund would lose the premium
it paid for the option.
Other Considerations. The Fund will engage in futures and options
transactions for bona fide hedging or speculative purposes if consistent with
its investment policies, to the extent permitted by CFTC regulations. The
Fund will determine that the price fluctuations in the futures contracts and
options on futures used for hedging purposes are substantially related to
price fluctuations in securities held by the Fund or which it expects to
purchase. Except as stated below, the Fund's futures transactions will be
entered into for traditional hedging purposes -- i.e., futures contracts will
be sold to protect against a decline in the price of securities that the Fund
owns, or futures contracts will be purchased to protect the Fund against an
increase in the price of securities the Fund intends to purchase. As
evidence of this hedging intent, the Fund expects that on 75% or more of the
occasions on which it takes a long futures or option position (involving the
purchase of futures contracts), the Fund will have purchased, or will be in
the process of purchasing equivalent amounts of related securities at the
time when the futures contract or option position is closed out. However, in
particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
As an alternative to literal compliance with the bona fide hedging
definition, a CFTC regulation permits the Fund to elect to comply with a
different test, under which the aggregate initial margin and premiums
required to establish speculative positions in futures contracts and options
on futures will not exceed 5% of the net asset value of the Fund's portfolio,
after taking into account unrealized profits and losses on any such positions
and excluding the amount by which such options were in-the-money at the time
of purchase. The Fund will engage in transactions in futures contracts only
to the extent such transactions are consistent with the requirements of the
Internal Revenue Code for maintaining its qualification as a regulated
investment company for Federal income tax purposes.
When the Fund purchases financial futures contracts, or writes put options or
purchases call options thereon, cash or liquid, high grade debt securities
will be deposited in a segregated account with the Fund's custodian in an
amount that, together with the amount of initial and variation margin held in
the account of its broker, equals the market value of the purchased futures
contracts.
CERTAIN INVESTMENT PRACTICES
Investment in Foreign Securities
There is generally less publicly available information about foreign
companies and other issuers comparable to reports and ratings that are
published about issuers in the United States. 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 the Fund will endeavor to achieve the most favorable net results on
its portfolio transactions. There is generally less government supervision
and regulation of securities exchanges, brokers and listed issuers than in
the United States.
With respect to certain foreign countries, there is the possibility of
adverse changes in investment or exchange control regulations, expropriation
or confiscatory taxation, limitations on the removal of funds or other assets
of the Fund, political or social instability, or diplomatic developments
which could affect United States investments in those countries. Moreover,
individual foreign economies may differ favorably or unfavorably from the
United States' economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position.
The dividends, interest or capital gains from certain of the Fund's foreign
portfolio securities may be subject to foreign withholding or other foreign
taxes, thus reducing the net amount of income available for distribution to
the Fund's shareholders. See "Tax Status".
The expense ratio of the Fund can be expected to be higher than that of
investment companies investing exclusively in domestic securities since the
expenses of the Fund, such as the cost of maintaining custody of foreign
securities, are higher.
Repurchase Agreements
The Fund may enter into repurchase agreements with domestic broker-dealers,
banks and financial institutions, but may not invest more than 15% of its net
assets, together with other illiquid investments, in repurchase agreements
having maturities of greater than seven days.
A repurchase agreement is a contract pursuant to which the 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 the Fund to invest its cash reserves at fixed rates
of return. The Fund may enter into repurchase agreements with domestic
broker-dealers, banks and other financial institutions, provided the Fund's
Custodian always has possession of collateral whose market value at least
equals the amount of the institution's repurchase obligation. To minimize
the risk of loss the Fund will enter into repurchase agreements only with
institutions and dealers which the Board of Trustees of the Trust consider to
be creditworthy. If an institution enters an insolvency proceeding, the
resulting delay in liquidation of the collateral could cause losses to the
Fund, as well as legal expense, if the value of the collateral declines prior
to liquidation.
Forward Commitments and When-Issued Securities
As stated in the Prospectus, the Fund may purchase and sell securities on a
forward commitment or when-issued basis. Forward commitments or when-issued
transactions arise when securities are purchased or sold by the Fund with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price. When the Fund engages in these
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 considered to be advantageous. 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 the 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 asset value per
share than if the Fund set aside cash to satisfy its purchase commitment.
When the Fund purchases securities on a when-issued basis, it will maintain
in a segregated account with its Custodian cash or liquid high-grade debt
obligations with 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.
Short Sales
The Fund may engage in short sales in order to profit from an anticipated
decline in the value of a security. The Fund may also engage in short sales
to attempt to limit its exposure to a possible market decline in the value of
its portfolio securities. The Fund may sell short securities that are not
in the Fund's portfolio, but which the Adviser believes possess volatility
characteristics similar to those being hedged. To effect such a transaction,
the Fund must borrow the security sold short to make delivery to the buyer.
The Fund is then obligated to replace the security borrowed by purchasing it
at the market price at the time of replacement. Until the security is
replaced, the Fund is required to pay to the lender any accrued interest or
dividends and may be required to pay a premium. The Fund will realize a gain
if the security declines in price between the date of the short sale and the
date on which the Fund replaces the borrowed security. On the other hand,
the Fund will incur a loss as a result of the short sale if the price of the
security increases between those dates. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium
or interest or dividends the Fund may be required to pay in connection with a
short sale. The successful use of short selling as a hedging device may be
impaired by imperfect correlation between movements in the price of the
security sold short and the securities being hedged.
Under applicable guidelines of the staff of the SEC, if the Fund engages in
short sales of the type referred to in fundamental Investment Restriction No.
(2) below, it must put in a segregated account (not with the broker) an
amount of cash or U.S. Government securities equal to the difference between
(a) the market value of the securities sold short at the time they were sold
short and (b) any cash or U.S. Government securities required to be deposited
as collateral with the broker in connection with the short sale (not
including the proceeds from the short sale). In addition, until the Fund
replaces the borrowed security, it must daily maintain the segregated account
at such a level that (1) the amount deposited in it plus the amount deposited
with the broker as collateral will equal the current market valued of the
securities sold short, and (2) the amount deposited in it plus the amount
deposited with the broker as collateral will not be less than the market
value of the securities at the time they were sold short. Except for short
sales against the box, the amount of the Fund's net assets that may be
committed to short sales and the securities in which short sales are made
must be listed on national securities exchange.
Short selling may produce higher than normal portfolio turnover which may
result in increased transaction costs to the Fund. In addition, short sales
may result in gains from the sales of securities deemed to have been held for
three months, which gains must be less than 30% of the Fund's gross income in
order for the Fund to qualify as a regulated investment company under the
Internal Revenue Code, as amended.
Rule 144A Securities and Other Restricted Securities
The Fund may purchase restricted securities eligible for resale to "qualified
institutional buyers" pursuant to Rule 144A under the Securities Act of 1933
if the Fund's Board of Trustees or the Adviser have determined under
Board-approved guidelines that such restricted securities are liquid. The
Adviser will determine the liquidity of Rule 144A securities in the Fund's
portfolio using the guidelines set forth below.
In its determination of liquidity, the Adviser 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, the Board has delegated its responsibility to the
Adviser to determine the liquidity of each restricted security purchased by
the Fund pursuant to Rule 144A, subject to the Board's oversight and review.
Investing in Rule 144A securities 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 Fund may acquire other restricted securities. 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, the 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, the Fund
might obtain a less favorable price than when it decided to sell. Restricted
securities will be priced at fair value as determined in good faith in
accordance with procedures adopted by the Fund's Board of Trustees.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The following investment restrictions will not be changed without approval of
a majority of the Fund's outstanding voting securities which, as used in the
Prospectus and this Statement of Additional Information, means approval of
the lesser of (1) the holders of 67% or more of the Fund's 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 of the Fund.
The Fund may not:
1. Issue senior securities, except as permitted by paragraphs 3, 6 and 7
below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the deferral of
Trustees' fees, the purchase or sale of options, futures contracts,
forward commitments and repurchase agreements entered into in
accordance with the Fund's investment policies or within the meaning
of paragraph 6 below, are not deemed to be senior securities.
2. Purchase securities on margin or make short sales, or unless, by
virtue of its ownership of other securities, the Fund has the right
to obtain securities equivalent in kind and amount to the securities
sold and, if the right is conditional, the sale is made upon the same
conditions, except (i) in connection with arbitrage transactions,
(ii) for hedging the Fund's exposure to an actual or anticipated
market decline in the value of its securities, (iii) to profit from
an anticipated decline in the value of a security, and (iv) obtaining
such short-term credits as may be necessary for the clearance of
purchases and sales of securities.
3. Borrow money, except for the following extraordinary or emergency
purposes: (i) from banks for temporary or short-term purposes or for
the clearance of transactions in amounts not to exceed 33 1/3% of the
value of the Fund's total assets (including the amount borrowed)
taken at market value; (ii) in connection with the redemption of Fund
shares or to finance failed settlements of portfolio trades without
immediately liquidating portfolio securities or other assets; and
(iii) in order to fulfill commitments or plans to purchase additional
securities pending the anticipated sale of other portfolio securities
or assets. For purposes of this investment restriction, the deferral
of Trustees' fees and transactions in short sales, futures contracts,
options on futures contracts, securities or indices and forward
commitment transactions shall not constitute borrowing.
4. Act as an underwriter, except to the extent that in connection with
the disposition of portfolio securities, the Fund may be deemed to be
an underwriter for purposes of the 1933 Act.
5. Purchase or sell real estate except that the Fund may (i) acquire or
lease office space for its own use, (ii) invest in securities of
issuers that invest in real estate or interest therein, (iii) invest
in securities that are secured by real estate or interests therein,
(iv) purchase and sell mortgage-related securities and (v) hold and
sell real estate acquired by the Fund as a result of the ownership of
securities.
6. Invest in commodities, except the Fund may purchase and sell options
on securities, securities indices and currency, futures contracts on
securities, securities indices and currency and options on such
futures, forward foreign currency exchange contracts, forward
commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Fund's investment
policies.
7. Make loans, except that the Fund (1) may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% of the
Fund's total assets taken at market value, (2) enter into repurchase
agreements, and (3) purchase all or a portion of an issue of debt
securities, bank loan participation interests, bank certificates of
deposit, bankers' acceptances, debentures or other securities,
whether or not the purchase is made upon the original issuance of the
securities.
8. Purchase the securities of issuers conducting their principal
activity in the same industry if, immediately after such purchase,
the value of its investments in such industry would exceed 25% of its
total assets taken at market value at the time of such investment.
This limitation does not apply to investments in obligations of the
U.S. Government or any of its agencies, instrumentalities or
authorities.
9. With respect to 75% of the Fund's total assets, purchase securities
of an issuer (other than the U.S. Government, its agencies,
instrumentalities or authorities), if:
a. such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities
of such issuer; or
b. such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by
the Fund.
Nonfundamental Investment Restrictions
The following restrictions are designated as nonfundamental and may be
changed by the Board of Trustees without shareholder approval.
The Fund may not:
10. Pledge, mortgage or hypothecate its assets, except to secure permitted
borrowings and then only if such pledging, mortgaging or hypothecating
does not exceed 33 1/3% of the Fund's total assets taken at market
value. Collateral arrangements with respect to margin, option, short
sale and other risk management and when-issued and forward commitment
transactions are not deemed to be pledges or other encumbrances for
purposes of this restriction.
11. Participate on a joint-and-several basis in any securities trading
account. The "bunching" of orders for the sale or purchase of
marketable portfolio securities with other accounts under the
management of the Adviser to save commissions or to average prices
among them is not deemed to result in a joint securities trading
account.
12. Purchase or retain securities of an issuer if one or more of the
Trustees or officers of the Trust or directors or officers of the
Adviser, or any investment management subsidiary of the Adviser
individually owns beneficially more than 0.5% and together own
beneficially more than 5% of the securities of such issuer.
13. Purchase a security if, as a result, (i) more than 10% of the Fund's
assets would be invested in securities of other investment companies,
(ii) such purchase would result in more than 3% of the total
outstanding voting securities of any one such investment company being
held by the Fund or (iii) more than 5% of the Fund's assets would be
invested in any one such investment company. The Fund will not
purchase the securities of any open-end investment company except when
such purchase is part of a plan of merger, consolidation,
reorganization or purchase of substantially all of the assets of any
other investment company except in the open market where no commission
or profit to a sponsor or dealer results from the purchase, other than
customary brokerage fees. Notwithstanding the foregoing, 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.
14. Invest more than 15% of its total assets in the aggregate in (1)
securities of any issuer which, together with its predecessors, has
been in operation for less than three years and (2) restricted
securities, excluding securities eligible for resale pursuant to Rule
144A under the 1933 Act or foreign securities which are offered or
sold outside the United States in accordance with Regulation S under
the 1933 Act; provided, however, that the Fund may not invest more
than 15% of its net assets in restricted securities including those
eligible for resale under Rule 144A.
15. Invest in securities which are illiquid if, as a result, more than 15%
of its net assets would consist of such securities, including
repurchase agreements maturing in more than seven days, securities
that are not readily marketable, restricted securities not eligible
for resale pursuant to Rule 144A under the 1933 Act, purchased OTC
options, certain assets under to cover written OTC options, and
privately issued stripped mortgage-backed securities.
16. Borrow money to purchase securities in excess of 5% of the Fund's
total assets.
17. Invest in real estate limited partnership interest.
18. Purchase warrants of any issuer, if, as a result of such purchase,
more than 2% of the value of the Fund's total assets would be invested
in warrants which are not listed on the New York or American Stock
Exchange or more than 5% of the value of the total assets of the Fund
would be invested in warrants generally, whether or not so listed.
For these purposes, warrants are to be valued at the lesser of cost or
market, but warrants acquired by the Fund in units with or attached to
debt securities shall be deemed to be without value.
19. Purchase interests in oil, gas, or other mineral exploration programs
or mineral leases; however, this policy will not prohibit the
acquisition of securities of companies engaged in the production or
transmission of oil, gas, or other minerals.
20. Write covered call or put options with respect to more than 25% of the
value of its total assets, invest more than 25% of its total
assets in protective put options or invest more than 5% of its total
assets in puts, calls, spreads or straddles, or any combination
thereof, other than protective put options. The aggregate value of
premiums paid on all options, other than protective put options, held
by the Fund at any time will not exceed 20% of the Fund's total assets.
21. Invest for the purpose of exercising control over or management of any
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. In order to permit the sale
of shares of the 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 Fund and its
shareholders, the Fund may cease offering 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.
The Fund agrees that, in accordance with Texas Blue Sky Regulations, until
such regulations no longer require, it will not engage in short sales (other
than short sales against the box) unless (i) the dollar amount of the short
sales does not exceed 25% of the net assets of the Fund; (ii) the value of
the securities of any one issuer in which the Fund maintains a short position
does not exceed the lesser of (a) 2% of the net asset value of the Fund or
(b) 2% of the securities of any class of any issuer; and (iii) the securities
in which short sales are made are listed on a national securities exchange.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the 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 Trust are also officers and directors of the Adviser or directors of the
Fund's principal distributor, John Hancock Funds, Inc. ("John Hancock Funds").
The following table sets forth the principal occupation of the Trustees and
principal officers of the Trust during the past five years:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Position(s) Principal Occupation(s)
Held With Trust During Past 5 Years
*Edward J. Boudreau, Jr. Chairman (3) 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
RR 1 since 1991.
325 Sea Meadows Lane
Yarmouth, Maine 04096
____________
*An "interested person" of the Fund as defined in the Investment Company Act
of 1940.
(1) Member of the Audit Committee.
(2) Member of the Committee on Administration.
(3) Member of the Executive Committee. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
<PAGE>
Name and Address Position(s) Principal Occupation(s)
Held With Trust During Past 5 Years
Douglas M. Costle Trustee (1,2) Distinguished Senior Fellow,
RR2 Box 480 Institute for Sustainable
Woodstock, Vermont Communities, Vermont Law School,
05091 until 1991. Director, Air and
Water Technologies Corporation
(environmental services and
equipment), Niagara Mohawk Power
Company (electric services) and
MITRE Corporation (governmental
consulting services).
Leland O. Erdahl Trustee (1,2) President of Stolar, Inc. from
161 Camino Barranca 1987 to 1991 and President of
Placitas, New Mexico Albuquerque Uranium Corporation
87043 for 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 &
Farrell, Healer & Co., a venture capital
Company, Inc. management firm, since 1980.
160 Federal Street Prior to that date, Mr. Farrell
23rd Floor headed the venture capital group
Boston, MA 02110 at Bank of Boston Corporation.
William F. Glavin Trustee (1,2) President, Babson College; Vice
Babson College Chairman, Xerox Corporation
Horn Libarary until June 1989. Director,
Babson Park, MA 02157 Caldor, Inc. and Inco Ltd.
___________
*An "interested person" of the Fund as defined in the Investment Company Act
of 1940.
(1) Member of the Audit Committee.
(2) Member of the Committee on Administration.
(3) Member of the Executive Committee. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
<PAGE>
Name and Address Position(s) Principal Occupation(s)
Held With Trust During Past 5 Years
Patrick Grant Trustee (1,2,3) President, Financial Management
5 Haven Street Incorporated, a professional
Dedham, MA 02026 treasurer, since 1978. Prior 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
45 Mill Street Associates, a registered
Edgartown, MA 02539 investment adviser since 1978.
Mr. Lowell was Vice President of
that company from 1978 to 1985.
Dr. John A. Moore Trustee (1,2) President and Chief Executive
Institute for Officer, Institute for
Evaluating Health Risks Evaluating Health Risks, a
1101 Vermont Avenue N.W. nonprofit institution, since
Suite 608 1989. Assistant Administrator
Washington, DC 20005 of the Office of Pesticides and
Toxic Substances at the
Environmental Protection Agency
from December 1983 to July 1989.
Patti McGill Peterson Trustee (1,2) President, St. Lawrence
St. Lawrence University University; Director, Niagara
110 Vilas Hall Mohawk Power Corporation and
Canton, NY 13617 Secretary, Mutual Life.
John W. Pratt Trustee (1,2) Since 1961, Professor of
2 Gray Gardens East Business Administration at
Cambridge, MA 02138 Harvard University Graduate
School of Business
Administration.
____________
*An "interested person" of the Fund as defined in the Investment Company Act
of 1940.
(1) Member of the Audit Committee.
(2) Member of the Committee on Administration.
(3) Member of the Executive Committee. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
<PAGE>
Name and Address Position(s) Principal Occupation(s)
Held With Trust During Past 5 Years
*Robert G. Freedman Vice Chairman and Vice Chairman and Chief
Chief Investment Investment Officer, the Adviser;
Officer President (until December 1994).
*Anne C. Hodsdon President President and Chief Operations
Officer, the Adviser; Executive
Vice President, the Adviser
(until December 1994).
*James B. Little Senior Vice Senior Vice President, the
President, Chief Adviser.
Financial Officer
*Thomas H. Drohan Senior Vice Senior Vice President and
President and Secretary, the Adviser.
Secretary
*John A. Morin Vice President Vice President, the Adviser.
*Susan S. Newton Vice President, Vice President and Assistant
Assistant Secretary Secretary, the Adviser.
and Compliance
Officer
*James J. Stokowski Vice President and Vice President, the Adviser.
Treasurer
____________
*An "interested person" of the Fund as defined in the Investment Company Act
of 1940.
(1) Member of the Audit Committee.
(2) Member of the Committee on Administration.
(3) Member of the Executive Committee. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
</TABLE>
<PAGE>
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 expected
to be paid by the Fund in its 1996 fiscal year as well as the aggregate
compensation paid by the other investment companies in the John Hancock Fund
Complex to the Independent Trustees for their services during the 1995
calendar year. Mr. Boudreau, a non-independent Trustee, and each of the
officers of the Fund who are interested persons of the Adviser, are
compensated by the Adviser and receive no compensation from the Fund for
their services.
Aggregate Compensation
<TABLE>
<CAPTION>
Independent Estimated Aggregate Pension or Total Compensation
Trustees Compensation From Retirement Benefits From All John Hancock
Fund During its Accrued as Part of Funds (2)
Current Fiscal Year(1) the Fund's Expenses (Total of 11 Funds)
<S> <C> <C> <C>
William A. Barron, III - $ 41,750
Douglas M. Costle - 41,750
Leland O. Erdahl - 41,750
Richard A. Farrell - 43,250
William F. Glavin - 37,500
Patrick Grant - 43,750
Ralph Lowell, Jr. - 41,750
Dr. John A. Moore - 41,750
Patti McGill Peterson - 41,750
John W. Pratt - 41,750
--------
Totals $416,750
</TABLE>
(1) Based upon the Fund's fiscal year ending October 31, 1996.
(2) The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of the calendar year ended December 31, 1995.
INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser for the Fund is the Adviser, a Massachusetts
corporation, 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 Fund.
The Adviser was organized in 1968 and presently has over $16 billion in
assets under management in its capacity as investment adviser to the Fund and
the other mutual funds and publicly traded investment companies in the John
Hancock group of funds having a combined total of over 1,060,000
shareholders. The Adviser is an affiliate of John Hancock Mutual Life
Insurance Company (the "Life Company"), one of the most recognized and
respected financial institutions in the nation. With total assets under
management of approximately $80 billion, the Life Company is one of the 10
largest life insurance companies in the United States, and carries high
ratings from Standard & Poor's and A.M. Best's. Founded in 1862, the Life
Company has been serving clients for over 130 years.
The Trust, on behalf of the Fund, has entered into an investment advisory
agreement (the "Advisory Agreement") dated as of March 6, 1996 with the
Adviser. As the Fund's manager and investment adviser, the Adviser will:
(a) furnish continuously an investment program for the Fund and determine,
subject to the overall supervision and review of the Board of Trustees, which
investments should be purchased, held, sold or exchanged, (b) provide
supervision over all aspects of the Fund's operations except those which are
delegated to a custodian, transfer agent or other agent, and (c) provide the
Fund with such executive, administrative and clerical personnel, officers and
equipment as are deemed necessary for the conduct of the Fund's business.
As compensation for its services under the Advisory Agreement, the Adviser
receives from the Fund a fee computed and paid monthly at an annual rate of
0.80% of the Fund's average daily net assets. The rates for the Fund are
higher than those for many other mutual funds because of the extensive amount
of research required to manage the Fund's portfolio in comparison to the
portfolios of other funds.
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 defined in the Investment Company Act of
1940 ("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.
The Adviser has agreed that if, in any fiscal year, the total expenses of the
Fund (excluding taxes, interest, brokerage commissions and extraordinary
items, but including the Adviser's fee) exceed the expense limitation
applicable to the Fund, the Adviser will reduce its fee for the 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 most restrictive state expense limitation 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 Advisory Agreement was approved on December 11, 1995 by all of the
Trustees, including all of the Trustees who are not parties to the Advisory
Agreement or "interested persons" of any party thereto. The sole initial
shareholder of the Fund also approved the Advisory Agreement on March 6,
1996. The Advisory Agreement will continue in effect until June 30, 1997 and
from year to year thereafter, provided that its continuance is approved
annually both (i) by the holders of a majority of the outstanding voting
securities of the Fund 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.
DISTRIBUTION CONTRACT
The Trust has entered into a Distribution Agreement with John Hancock Funds.
Under the contract John Hancock Funds is obligated to use its best efforts to
sell shares of each class on behalf of the Fund. Shares of the Fund are also
sold by selected broker-dealers who have entered into dealer agreements with
John Hancock Funds (the "Selling Brokers").
John Hancock Funds accepts orders for the purchase of the shares of the Fund
which are continually offered at net asset value next determined plus any
applicable sales charge. In connection with the sale of Class A or Class B
shares of the Fund, John Hancock Funds 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, on a deferred
basis. The sales charges are discussed further in the Prospectus.
The Trustees 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 Class A and Class B Plans, the Fund will pay distribution
and service fees at an aggregate annual rate of up to 0.30% and 1.00%
respectively, of each class' average daily net assets. However, the amount
of the service fee will not exceed 0.25% of the Fund's average daily net
assets attributable to each class of shares. The distribution fees reimburse
John Hancock Funds for distribution costs incurred in the promotion of sales
of shares of the Fund, and the service fees compensate Selling Brokers for
providing personal and account maintenance services to shareholders. In the
event that John Hancock Funds is not fully reimbursed for expenses incurred
by it 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 the Fund's obligation to make further payments at
any time. Accordingly, the Fund does not treat unreimbursed expenses
relating to the Class B shares as a liability. The Plans were approved by
the sole initial shareholder of the Fund. The Plans were approved by the
Trustees, including a majority of the Trustees who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plans (the "Independent Trustees"), by votes cast in person
at a meeting called for the purpose of voting on such Plans.
Pursuant to the Plans, at least quarterly, the Distributors provide the Fund
with a written report of the amounts expended under the Plans and the purpose
for which these expenditures were made. The Trustees review these reports on
a quarterly basis.
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 class of
the Fund's outstanding shares upon 60 day's written notice to John Hancock
Funds 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 the approval of a
majority of the outstanding shares of the class of the Fund which has voting
rights with respect to the Plan. Finally, each of the Plans provides that no
material amendment to the Plan will be effective unless it is approved by a
vote of the Trustees and the Independent Trustees of the Trust. 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 class of
shares of the Fund.
When the Trust seeks an Independent Trustee to fill a vancancy or as a
nominee for election by shareholders, the selection or nomination of the
Independent Trustee is, under resolutions adopted by the Trustees
contemporaneously with their adoption of the Plan, committed to the
discretion of the Committee on Administration of the Trustees. The members
of the Committee on Administration are all Independent Trustees and
identified in this Statement of Additional Information under the heading
"Those Responsible for Management".
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.
Debt 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 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 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 denominated or quoted in foreign currencies are
translated into U.S. dollars by the Custodian based on London currency
exchange quotations as of 5:00 p.m., London time (12:00 noon, New York time)
on the valuation date.
The 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 the Fund's NAV is not calculated.
Consequently, the Fund's portfolio securities may trade and the NAV of the
Fund's shares may be significantly affected on days when a shareholder has no
access to the Fund.
INITIAL SALES CHARGE ON CLASS A SHARES
The sales charge applicable to purchases of Class A shares of the Fund is
described in the Prospectus. Methods of obtaining reduced sales charges
referred to generally in the Prospectus are described in detail below. In
calculating the sales charge applicable to current purchases of Class A
shares, 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
Fund, 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 Prospectus, Class A shares of the
Fund 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 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 $50,000 or more
during the specified period from the date of the LOI or from a date within
ninety (90) days prior thereto, upon written request to 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. However, for purchases
actually made within the specified period the applicable sales charge 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 Fund 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 Fund 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 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.
Proceeds from the CDSC are paid to John Hancock Funds (not Freedom
Distributors Corporation) and are used in whole or in part by John Hancock
Funds to defray its expenses related to providing distribution-related
services to the Fund in connection with the sale of the Class - B 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 Fund to sell the Class B shares without a
sales charge being deducted at the time of the purchase. See the Prospectus
for additional information regarding the CDSC.
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. 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 Fund
has, however, elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund must redeem its shares for cash
except to the extent that the redemption payments to any shareholder during
any 90-day period would exceed the lesser of $250,000 or 1% of the Fund's net
asset value at the beginning of such period.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. As described more fully in the Prospectus, the Fund
permits exchanges of shares of any class of the Fund for shares of the same
class in any other John Hancock fund offering that class.
Systematic Withdrawal Plan. As described briefly in the Prospectus, the Fund
permits the establishment of a Systematic Withdrawal Plan. Payments under
this plan represent proceeds from the redemption of shares of the Fund. Since
the redemption price of the shares of the 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
the Fund could be disadvantageous to a shareholder because of the initial
sales charge payable on such purchases of Class A shares and the CDSC imposed
on redemptions of Class B shares and because redemptions are taxable events.
Therefore, a shareholder should not purchase Class A or Class B shares of the
Fund at the same time a Systematic Withdrawal Plan is in effect. The Fund
reserves the right to modify or discontinue the Systematic Withdrawal Plan of
any shareholder on 30 days' prior written notice to such shareholder, or to
discontinue the availability 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 Fund's 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.
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 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 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 Fund 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 FUND'S SHARES
The Trustees of the Trust are responsible for the management and supervision
of the Fund. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest of the
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 Fund, designated as Class A and
Class B.
The shares of each class of the 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 Fund will be sold exclusively
to members of the public 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 the Fund may bear different expenses relating to the
cost of holding shareholder meetings necessitated by the exclusive voting
rights of any class of shares.
Dividends paid by the Fund, if any, with respect to each class of shares will
be calculated in the same manner, at the same time and will be in the same
amount, except that (i) the distribution and service fees relating to 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 that the Internal Revenue Service imposes in issuing rulings to
funds that have a 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 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
Prospectus.
Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Trust has no intention of holding annual meetings of
shareholders. Trust shareholders may remove a Trustee by the affirmative
vote of at least two-thirds of the Trust's outstanding shares, and the
Trustees shall promptly call a meeting for such purpose when requested to do
so in writing by the record holders of not less than 10% of the outstanding
shares of the Trust. Shareholders may, under certain circumstances,
communicate with other shareholders in connection with 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 Fund's assets for all losses and expenses of any
shareholder held personally liable by reason of being or having been a
shareholder. Liability is therefor limited to circumstances in which the
Fund itself would be unable to meet its obligations, and the possibility of
this occurrence is remote.
TAX STATUS
The Fund is treated as a separate entity for accounting and tax purposes.
The Fund intends to elect to be treated and qualify each year as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). As such and by complying with the applicable
provisions of the Code regarding the sources of its income, the timing of its
distributions, and the diversification if its assets, the Fund will not be
subject to Federal income tax on taxable income (including net short-term and
long-term capital gains) which is distributed to shareholders in accordance
with the timing requirements of the Code.
The Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a
timely basis in accordance with annual minimum distribution requirements.
The Fund intends under normal circumstances to avoid liability for such tax
by satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and profits
("E&P"), as computed for Federal income tax purposes, will be taxable as
described in the Fund's Prospectus whether taken in shares or in cash.
Distributions, if any, in excess of E & P will constitute a return of
capital, which will first reduce 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.
If the Fund acquires stock in certain non-U.S. corporations that receive at
least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at least 50%
of their assets in investments producing such passive income ("passive
foreign investment companies"), the Fund could be subject to Federal income
tax and additional interest charges on "excess distributions" received from
such companies or gain from the sale of stock in such companies, even if all
income or gain actually received by the Fund is timely distributed to its
shareholders. The Fund would not be able to pass through to its shareholders
any credit or deduction for such a tax. Certain elections may, if available,
ameliorate these adverse tax consequences, but any such election could
require the Fund to recognize taxable income or gain without the concurrent
receipt of cash. The Fund may limit and/or manage its holdings in passive
foreign investment companies to minimize its tax liability or maximize its
return from these investments.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
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 the 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. If the net foreign exchange loss for a year treated as
ordinary loss under Section 988 were to exceed the Fund's investment company
taxable income (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) computed without
regard to such loss after taking into account Treasury regulations resulting
in deferral of certain post-October losses, the resulting overall ordinary
loss for such year would not be deductible by the Fund or its shareholders in
future years.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate
such taxes. Investors may be entitled to claim U.S. foreign tax credits or
deductions with respect to such taxes, subject to certain provisions and
limitations contained in the Code. Specifically, if more than 50% of the
value of the Fund's total assets at the close of any taxable year consists of
stock or securities of foreign corporations, the Fund may file an election
with the Internal Revenue Service pursuant to which shareholders of the Fund
will be required to (i) include in ordinary gross income (in addition to
taxable dividends 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 the 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 credit. Tax-exempt shareholders will
ordinarily not benefit from this election. Each year that the Fund files the
election described above, its shareholders will be notified of the amount of
(i) each shareholder's pro rata share of foreign income taxes paid by the
Fund and (ii) the portion of Fund dividends which represents income from each
foreign country. If the Fund cannot or does not make this election it may
deduct such taxes in computing its taxable income.
The amount of the Fund's 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.
Upon a redemption of shares of the 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 the Fund cannot be taken into account for purposes of determining
gain or loss on the redemption or exchange of such shares within 90 days
after their purchase to the extent shares of the Fund or another John Hancock
fund are subsequently acquired without payment of a sales charge pursuant to
the reinvestment or exchange privilege. 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 may be
disallowed to the extent the shares disposed of are replaced with other
shares of the Fund within a period of 61 days beginning 30 days before and
ending 30 days after the shares are disposed of, such as pursuant to
automatic dividend reinvestments. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any loss realized
upon the redemption of shares with a tax holding period of six months or less
will be treated as a long-term capital loss to the extent of any amounts
treated as distributions of long-term capital gain with respect to such
shares.
Although its present intention is to distribute all net short-term and
long-term capital gains, if any, the Fund reserves the right to retain and
reinvest all or any portion of its "net capital gain", which is the excess,
as computed for Federal income tax purposes, of net long-term capital gain
over net short-term capital loss in any year. The Fund will not in any event
distribute net long-term capital gains realized in any year to the extent
that a capital loss is carried forward from prior years against such gain.
To the extent such excess was retained and not exhausted by the carryforward
of prior years' capital losses, it would be subject to Federal income tax in
the hands of the Fund. Each shareholder would be treated for Federal income
tax purposes as if the Fund had distributed to him on the last day of its
taxable year his pro rata share of such excess, and he had paid his pro rata
share of the taxes paid by the Fund and reinvested the remainder in the
Fund. Accordingly, each shareholder would (a) include his pro rata share of
such excess as long-term capital gain in his return for his taxable year in
which the last day of the Fund's taxable year falls, (b) be entitled either
to a tax credit on his return for, or a refund of, his pro rata share of the
taxes paid by the Fund, and (c) be entitled to increase the adjusted tax
basis for his shares in the Fund by the difference between his pro rata share
of such excess and his pro rata share of such taxes.
For Federal income tax purposes, the Fund is permitted to carry forward a net
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 Fund, as noted above, and would not be
distributed as such to shareholders. As a newly formed series of the Trust,
the Fund has no capital loss carryforwards.
For purposes of the dividends received deduction available to corporations,
dividends received by the Fund, if any, from U.S. domestic corporations in
respect of 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. The Fund expects that a portion of its income
distributions will generally be 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 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.
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
Fund may restrict the Fund's ability to enter into futures, options, and
forward transactions.
Certain options, futures and forward foreign currency transactions undertaken
by the Fund may cause the Fund to recognize gains or losses from marking to
market even though its positions have not been sold or terminated and affect
the character as long-term or short-term (or, in the case of 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 the 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 the 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 the
Fund's distributions to shareholders. The Fund will take into account the
special tax rules (including consideration of available elections) applicable
to options, futures or forward contracts in order to minimize any potential
adverse tax consequences.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain 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 Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the Fund is effectively connected will be subject to U.S.
Federal income tax treatment that is different from that described above.
These investors may be subject to nonresident alien withholding tax at the
rate of 30% (or a lower rate under an applicable tax treaty) on amounts
treated as ordinary dividends from the Fund and, unless an effective IRS Form
W-8 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 the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Fund qualifies as a regulated investment company
under the Code, it will also not be required to pay any Massachusetts income
tax.
CALCULATION OF PERFORMANCE
The following information supplements the discussion in the Prospectus
regarding performance information.
Total Return. Average annual total return is determined separately for each
class of shares. 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:
_______
T = \n/ ERV/P-1
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.
The calculation of total return assumes that the maximum sales charge for
Class A shares of 5% 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 Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Cumulative total returns may be quoted as a
percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, and/or a series of redemptions, over any
time period. Total returns may be quoted with or without taking the Fund's
sales charge on Class A shares or the CDSC on Class B shares into account.
Excluding the Fund's sales charge on Class A shares and the CDSC on Class B
shares from a total return calculation produces a higher total return figure.
Performance Comparisons. From time to time, in reports and promotional
literature, the Fund's total return 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 the Russell and Wilshire indices.
Performance rankings and ratings reported periodically in national financial
publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK, THE WALL STREET
JOURNAL, MORNINGSTAR, STANGER'S and BARRON'S will also be utilized.
The performance of the Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of
the Fund for any period in the future. The performance of the Fund is a
function of many factors including its earnings, expenses and number of
outstanding shares. Fluctuating market conditions; purchases, sales, and
maturities of portfolio securities; sales and redemptions of shares of
beneficial interest; and changes in operating expenses are all examples of
items that can increase or decrease the Fund's performances.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the officers of the Trust
pursuant to recommendations made by an investment committee of the Adviser,
which consists of officers and directors of the Adviser and affiliates and
officers and Trustees who are interested persons of the Fund. Orders for
purchases and sales of securities are placed in a manner which, in the
opinion of the officers of the Trust, will offer the best price and market
for the execution of each such transaction. Purchases from underwriters of
portfolio securities may include a commission or commissions paid by the
issuer and transactions with dealers serving as market makers reflect a
"spread". Debt securities are generally traded on a net basis through
dealers acting for their own account as principals and not as brokers; no
brokerages commissions are payable on such transactions.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and
the market in which a transaction is executed. Consistent with the foregoing
primary policy, the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and other policies that the Trustees may determine,
the Adviser may consider sales of shares of the Fund as a factor in the
selection of broker-dealers to execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of services,
including primarily the availability and value of research information and to
a lesser extent statistical assistance furnished to the Adviser of the Fund,
and their value and expected contribution to the performance of the Fund. It
is not possible to place a dollar value on information and services to be
received from brokers and dealers, since it is only supplementary to the
research efforts of the Adviser. The receipt of research information is not
expected to reduce significantly the expenses of the Adviser. The research
information and statistical assistance furnished by brokers and dealers may
benefit the Life Company or other advisory clients of the Adviser, and,
conversely, brokerage commissions and spreads paid by other advisory clients
of the Adviser may result in research information and statistical assistance
beneficial to the Fund. The Fund will not make commitments to allocate
portfolio transactions upon any prescribed basis. While the Trust's officers
will be primarily responsible for the allocation of the Fund's brokerage
business, their policies and practices in this regard must be consistent with
the foregoing and will at all times be subject to review by the Trustees.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Fund may pay 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 good faith determination by the Trustees that the
commission is reasonable in light of the services provided and to policies
that the Trustees may adopt from time to time.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Distributors, Inc. (Distributors), a
broker-dealer subsidiaries, Tucker Anthoy Incorporated ("Tucker Anthony") and
Sutro & Company ("Sutro"), (each, are "Affiliated Brokers"). Pursuant to
procedures determined by the Trustees and consistent with the above policy of
obtaining best net results, the Fund may execute portfolio transactions with
or through Tucker Anthony, Sutro or Distributors.
Any of the Affiliated Brokers may act as broker for the Fund on exchange
transactions, subject, however, to the general policy of the Fund set forth
above and the procedures adopted by the trustees pursuant to the Investment
Company Act. Commissions paid to an Affiliated Broker must be at least as
favorable as those which the Trustees believe to be contemporaneously charged
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold. A transaction would not be placed with
an Affiliated Broker if the Fund would have to pay a commission rate less
favorable than the Affiliated Broker's contemporaneous charges for comparable
transactions for its other most favored, but unaffiliated, customers except
for accounts for which the Affiliated Broker acts as clearing broker for
another brokerage firm, and any customers of the Affiliated Broker not
comparable to the Fund as determined by the majority of the Trustees who are
not "interested persons" (as defined in the Investment Company Act) of the
Fund, the Adviser or the Affiliated Broker. Because the Adviser, which is
affiliated with the Affiliated Brokers, has, as an investment adviser to the
Fund, the obligation to provide investment management services, which include
elements of research and related investment skills, such research and related
skills will not be used by the Affiliated Broker as a basis for negotiating
commissions at a rate higher than that determined in accordance with the
above criteria. The Fund will not effect principal transactions with
Affiliated Brokers.
DISTRIBUTIONS
The per share dividends from the Fund's net investment income [on the Class B
shares will be lower than the per share dividends on the Class A shares of
the Fund as a result of the higher distribution fee applicable with respect
to the Class B shares.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation, P.O. Box 9116, Boston, MA
02205-9116, a wholly-owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays an annual fee
of $16.00 for each Class A shareholder and $18.50 for each Class B
shareholder plus certain out-of-pocket expenses. These expenses are
aggregated and charged to the Fund and allocated to each class on the basis
of the relative net asset values.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund 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.
INDEPENDENT AUDITORS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts serves as the
Fund's 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 Fund.
<PAGE>
PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Not Applicable
(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 December 1, 1995 the number of record holders of shares of Registrant
was as follows:
Title of Class Number of Record Holders
-------------- ------------------------
Class A Class B
--------- ----------
John Hancock Gold & Government Fund 2,014 1,716
John Hancock Regional Bank Fund 42,942 82,017
John Hancock Managed Tax Exempt Fund 1,313 4,454
John Hancock Sovereign Achievers Fund 3,375 8,273
John Hancock Sovereign U.S. Government Fund 39,560 6,357
John Hancock Financial Industries Fund 0 0
C-1
<PAGE>
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.
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.
C-2
<PAGE>
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 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 (801-8124) 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 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 Income Fund, John Hancock Sovereign
Investors Fund, Inc., John Hancock Special Equities Fund, John Hancock Sovereign
Bond Fund, John Hancock Tax-Exempt Series, John
C-3
<PAGE>
Hancock Strategic Series, John Hancock Technology Series, Inc., John Hancock
World Fund, John Hancock Investment Trust, John Hancock Institutional Series
Trust, Freedom Investment Trust, Freedom Investment Trust II and Freedom
Investment Trust III.
(b) The following table lists, for each director and officer of John Hancock
Funds, the information indicated.
C-4
<PAGE>
Name and Principal Positions and Offices Positions and Offices
------------------ --------------------- ---------------------
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Edward J. Boudreau, Jr. Chairman Chairman
101 Huntington Avenue
Boston, Massachusetts
Robert H. Watts Director and Senior None
John Hancock Place Vice President
P.O. Box 111
Boston, Massachusetts
C. Troy Shaver, Jr. President, Chief None
101 Huntington Avenue Executive Officer and
Boston, Massachusetts Director
Robert G. Freedman Director Vice President, Chief
101 Huntington Avenue Investment Officer
Boston, Massachusetts
Stephen M. Blair Executive Vice None
101 Huntington Avenue President-
Boston, Massachusetts Sales
Thomas H. Drohan Senior Vice President Senior Vice President
101 Huntington Avenue and
Boston, Massachusetts Secretary
James W. McLaughlin Senior Vice President None
101 Huntington Avenue and
Boston, Massachusetts Chief Financial Officer
David A. King Senior Vice President None
101 Huntington Avenue and Director
Boston, Massachusetts
James B. Little Senior Vice President Senior Vice President
101 Huntington Avenue and
Boston, Massachusetts Chief Financial Officer
C-5
<PAGE>
Name and Principal Positions and Offices Positions and Offices
------------------ --------------------- ---------------------
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
John A. Morin Vice President Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President and Vice President,
101 Huntington Avenue Secretary Assistant Secretary
Boston, Massachusetts and Compliance 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
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
C-6
<PAGE>
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
Foster Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
James V. Bowhers Executive Vice None
101 Huntington avenue President
Boston, Massachusetts
Michael T. Carpenter Senior Vice President None
1000 Louisiana Street
Houston, Texas
(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.
Name and Principal Positions and Offices Positions and Offices
----------------- --------------------- ---------------------
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
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
(b) Subadviser
C-7
<PAGE>
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) 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-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly, in the
City of Boston, and the Commonwealth of Massachusetts on the 21st day of
December, 1995.
FREEDOM INVESTMENT TRUST
By: *
------------------
Edward J.Boudreau, Jr.
Chairman
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman
- ------------------------
Edward J. Boudreau, Jr. (Principal Executive Officer)
James B. Little
- ---------------
James B. Little Senior Vice President and Chief December 21, 1995
Financial Officer (Principal Financial
and Accounting Officer)
* Trustee
- ----------------------
William A. Barron III
* Trustee
- ----------------------
Douglas M. Costle
* Trustee
- ----------------------
Leland O. Erdahl
* Trustee
- ----------------------
Richard A. Farrell
* Trustee
- ----------------------
William F. Glavin
* Trustee
- ----------------------
Patrick Grant
C-9
<PAGE>
Signature Title Date
* Trustee
- ----------------------
Ralph Lowell, Jr.
* Trustee
- ----------------------
John A. Moore
* Trustee
- ----------------------
Patti McGill Peterson
* Trustee
- ----------------------
John W. Pratt
*By: Thomas H. Drohan December 21, 1995
----------------
Thomas H. Drohan, Attorney-in-Fact under Powers of Attorney dated June 25,
1992, December 14, 1992, and August 17, 1993.
C-10
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page Number
---------- ----------- -----------
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.B1.1 Amendment to the Master Trust Agreement dated December
11, 1995.+
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.B5.1 Form of Investment Management Contract between the
Registrant on behalf of John Hancock Financial Industries
Fund and John Hancock Advisers, Inc.+
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.*
99.B6.3 Form of Amendment to Distribution Agreement between
John Hancock Funds.+
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 27, 1987.*
99.B10.3 Legal opinion and consent of Goodwin, Procter & Hoar
dated December 20, 1991.*
99.B10.4 Legal opinion and consent of Goodwin, Procter & Hoar
dated December 27, 1992.*
99.B11 Consent of Price Waterhouse LLP dated December 20, 1995+
99.B11.1 Consent of Morningstar Mutual Fund Values.*
99.B12 Not applicable
99.B13 None
99.B15 Plan of Distribution pursuant to Rule 12b-1 as amended
and restated January 1, 1994.*
99.B15.1 Form of Class A Distribution Plan between Registrant
and John Hancock Funds, Inc.+
99.B15.2 Form of Class B Distribution Plan between Registrant
and John Hancock Funds, Inc.+
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 Not applicable
*Previously filed with Registration Statement and/or post-effective amendment
and incorporated by reference herein.
+Filed herewith.
C-12
FREEDOM INVESTMENT TRUST
John Hancock Financial Industries Fund
Establishment and Designation
of
Class A Shares and Class B Shares
of Beneficial Interest of
John Hancock Financial Industries Fund, a Series of
Freedom Investment Trust
The undersigned, being a majority of the Trustees of Freedom Investment
Trust, a Massachusetts business trust (the "Trust"), acting pursuant to the
Amended and Restated Master Trust Agreement dated September 10, 1991 of the
Trust, as amended from time to time, do hereby establish an additional series of
shares of the Trust (the "Shares"), having rights and preferences set forth in
the Master Trust Agreement and in the Trust's Registration Statement on Form
N-1A, which Shares shall represent undivided beneficial interests in a separate
portfolio of assets of the Trust (the "Fund") designated "John Hancock Financial
Services Fund." The Shares are divided to create two classes of Shares of the
Fund as follows:
1.The two classes of Shares of the Fund established and designated hereby
are "Class A Shares" and "Class B Shares," respectively.
2.Class A Shares and Class B Shares shall each be entitled to all of the
rights and preferences accorded to Shares under the Master Trust
Agreement.
3.The purchase price of Class A Shares and of Class B Shares, the method of
determining the net asset value of Class A Shares and of Class B Shares,
and the relative dividend rights of holders of Class A Shares and of
holders of Class B Shares shall be established by the Trustees of the
Trust in accordance with the provisions of the Master Trust Agreement and
shall be as set forth in the Prospectus and Statement of Additional
Information of the Fund included in the Trust's Registration Statement, as
amended from time to time, under the Securities Act of 1933, as amended
and/or the Investment Company Act of 1940, as amended.
The Master Trust Agreement is hereby amended to the extent necessary to
reflect the establishment of such additional series and classes of Shares,
effective March 1, 1996.
Capitalized terms not otherwise defined herein shall have the meanings set
forth in the Master Trust Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument this
11th day of December, 1995.
/s/Edward J. Boudreau, Jr. /s/Douglas M. Costle
- -------------------------- --------------------
Edward J. Boudreau, Jr. Douglas M. Costle
/s/Leland O. Erdahl /s/Richard A. Farrell
- -------------------------- --------------------
Leland O. Erdahl Richard A. Farrell
/s/William F. Glavin /s/ John A. Moore
- -------------------------- --------------------
William F. Glavin John A. Moore
/s/Patti McGill Peterson /s/ John W. Pratt
- -------------------------- --------------------
Patti McGill Peterson John W. Pratt
The Master Trust Agreement, a copy of which, together with all amendments
thereto, is on file in the office of the Secretary of State of The Commonwealth
of Massachusetts, provides that no Trustee, officer, employee or agent of the
Trust or any Series thereof shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its shareholders, in
connection with Trust Property or the affairs of the Trust, save only that
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties with respect to such Person; and all such Persons shall
look solely to the Trust Property, or to the Trust Property of one or more
specific Series of the Trust if the claim arises from the conduct of such
Trustee, officer, employee or agent with respect to only such Series, for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust.
y:\corpsec\dectrust\95finsrv.doc
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
)ss
COUNTY OF SUFFOLK )
Then personally appeared the above-named Edward J. Boudreau, Jr.,
Douglas M. Costle, Leland O. Erdahl, Richard A. Farrell, William F. Glavin,
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
11th day of December 1995.
/s/ AnneMarie Kalapinski
------------------------
Notary Public
My commission expires: 10/20/00
JOHN HANCOCK FINANCIAL INDUSTRIES FUND
(a series of Freedom Investment Trust)
101 Huntington Avenue
Boston, Massachusetts 02199
, 1996
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
Ladies and Gentlemen:
Freedom Investment Trust (the "Trust"), of which John Hancock Financial
Industries Fund (the "Fund") is a series, has been organized as a business trust
under the laws of The Commonwealth of Massachusetts to engage in the business of
an investment company. The Trust's shares of beneficial interest, no par value,
may be divided into series, each series representing the entire undivided
interest in a separate portfolio of assets. This Agreement relates solely to the
Fund.
The Board of Trustees of the Trust (the "Trustees") has selected John
Hancock Advisers, Inc. (the "Adviser") to provide overall investment advice and
management for the Fund, and to provide certain other services, as more fully
set forth below, and the Adviser is willing to provide such advice, management
and services under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund, agree as
follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser with
copies, properly certified or otherwise authenticated, of each of the
following:
(a) Amended and Restated Master Trust Agreement of the Trust, dated
September 10, 1991, as amended from time to time (the "Declaration
of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as investment
adviser for the Fund and approving the form of this Agreement;
1
<PAGE>
(d) Commitments, limitations and undertakings made by the Fund to state
securities or "blue sky" authorities for the purpose of qualifying
shares of the Fund for sale in such states; and
(e) The Trust's Code of Ethics.
The Trust will furnish to the Adviser from time to time copies, properly
certified or otherwise authenticated, of all amendments of or supplements to the
foregoing, if any.
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use its best
efforts to provide to the Fund continuing and suitable investment programs with
respect to investments, consistent with the investment objectives, policies and
restrictions of the Fund. In the performance of the Adviser's duties hereunder,
subject always (x) to the provisions contained in the documents delivered to the
Adviser pursuant to Section 1, as each of the same may from time to time be
amended or supplemented, and (y) to the limitations set forth in the Fund's
then-current Prospectus and Statement of Additional Information included in the
registration statement of the Trust as in effect from time to time under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended (the "1940 Act"), the Adviser will, at its own expense:
(a) furnish the Fund with advice and recommendations, consistent with
the investment objectives, policies and restrictions of the Fund,
with respect to the purchase, holding and disposition of
portfolio securities, alone or in consultation with any
subadviser or subadvisers appointed pursuant to this Agreement
and subject to the provisions of any sub-investment management
contract respecting the responsibilities of such subadviser or
subadvisers;
(b) advise the Fund in connection with policy decisions to be made by
the Trustees or any committee thereof with respect to the Fund's
investments and, as requested, furnish the Fund with research,
economic and statistical data in connection with the Fund's
investments and investment policies;
(c) provide administration of the day-to-day investment operations of
the Fund;
(d) submit such reports relating to the valuation of the Fund's
securities as the Trustees may reasonably request;
(e) assist the Fund in any negotiations relating to the Fund's
investments with issuers, investment banking firms, securities
brokers or dealers and other institutions or investors;
2
<PAGE>
(f) consistent with the provisions of Section 7 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities with brokers or dealers selected by the Adviser,
PROVIDED that in connection with the placing of such orders and
the selection of such brokers or dealers the Adviser shall seek
to obtain execution and pricing within the policy guidelines
determined by the Trustees and set forth in the Prospectus and
Statement of Additional Information of the Fund as in effect from
time to time;
(g) provide office space and office equipment and supplies, the use of
accounting equipment when required, and necessary executive,
clerical and secretarial personnel for the administration of the
affairs of the Fund;
(h) from time to time or at any time requested by the Trustees, make
reports to the Fund of the Adviser's performance of the foregoing
services and furnish advice and recommendations with respect to
other aspects of the business and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's
securities transactions required by the 1940 Act, including
subparagraphs (b)(5), (6), (9) and (10) and paragraph (f) of Rule
31a-1 thereunder (other than those records being maintained by
the Fund's custodian or transfer agent) and preserve such records
for the periods prescribed therefor by Rule 31a-2 of the 1940 Act
(the Adviser agrees that such records are the property of the
Fund and will be surrendered to the Fund promptly upon request
therefor);
(j) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as the
Adviser may deem necessary or useful in the discharge of the
Adviser's duties hereunder;
(k) oversee, and use the Adviser's best efforts to assure the
performance of the activities and services of the custodian,
transfer agent or other similar agents retained by the Fund;
(l) give instructions to the Fund's custodian as to deliveries of
securities to and from such custodian and transfer of payment of
cash for the account of the Fund; and
(m) appoint and employ one or more sub-advisors satisfactory to the Fund
under sub-investment management agreements.
3. EXPENSES PAID BY THE ADVISER. The Adviser will pay:
(a) the compensation and expenses of all officers and employees of
the Trust;
3
<PAGE>
(b) the expenses of office rent, telephone and other utilities,
office furniture, equipment, supplies and other expenses of the
Fund; and
(c) any other expenses incurred by the Adviser in connection with the
performance of its duties hereunder.
4. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser will not be
required to pay any expenses which this Agreement does not expressly make
payable by it. In particular, and without limiting the generality of the
foregoing but subject to the provisions of Section 3, the Adviser will not be
required to pay under this Agreement:
(a) any and all expenses, taxes and governmental fees incurred by the
Trust or the Fund prior to the effective date of this Agreement;
(b) without limiting the generality of the foregoing clause (a), the
expenses of organizing the Trust and the Fund (including without
limitation, legal, accounting and auditing fees and expenses
incurred in connection with the matters referred to in this
clause (b)), of initially registering shares of the Trust under
the Securities Act of 1933, as amended, and of qualifying the
shares for sale under state securities laws for the initial
offering and sale of shares;
(c) the compensation and expenses of Trustees who are not interested
persons (as used in this Agreement, such term shall have the meaning
specified in the 1940 Act) of the Adviser and of independent
advisers, independent contractors, consultants, managers and other
unaffiliated agents employed by the Fund other than through the
Adviser;
(d) legal (including an allocable portion of the cost of its employees
rendering legal services to the Fund), accounting and auditing fees
and expenses of the Fund;
(e) the fees and disbursements of custodians and depositories of the
Fund's assets, transfer agents, disbursing agents, plan agents
and registrars;
(f) taxes and governmental fees assessed against the Fund's assets
and payable by the Fund;
(g) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the Fund;
(h) brokers' commissions and underwriting fees;
(i) the expense of periodic calculations of the net asset value of
the shares of the Fund; and
4
<PAGE>
(j) insurance premiums on fidelity, errors and omissions and other
coverages.
5. COMPENSATION OF THE ADVISER. For all services to be rendered,
facilities furnished and expenses paid or assumed by the Adviser as herein
provided, the Adviser shall be entitled to a fee, paid monthly in arrears, at
the annual rate of 0.80% of the average daily net assets of the Fund for the
preceding month.
The "average daily net assets" of the Fund shall be determined on the
basis set forth in the Fund's Prospectus or otherwise consistent with the 1940
Act and the regulations promulgated thereunder. The Adviser will receive a pro
rata portion of such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On any day that the
net asset value calculation is suspended as specified in the Fund's Prospectus,
the net asset value for purposes of calculating the advisory fee shall be
calculated as of the date last determined.
In the event that normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of any limitation
imposed by the law of a state where the Fund has registered its shares of
beneficial interest, the fee payable to the Adviser will be reduced to the
extent required by law, and the Adviser will make any additional arrangements
that the Adviser is required by law to make.
In addition, the Adviser may agree not to impose all or a portion of its
fee (in advance of the time its fee would otherwise accrue) and/or undertake to
make any other payments or arrangements necessary to limit the Fund's expenses
to any level the Adviser may specify. Any fee reduction or undertaking shall
constitute a binding modification of this Agreement while it is in effect but
may be discontinued or modified prospectively by the Adviser at any time.
6. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES. Nothing herein
contained shall prevent the Adviser or any affiliate or associate of the Adviser
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or portfolios similar to the Fund's; and it is specifically
understood that officers, directors and employees of the Adviser and those of
its parent company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio management services and
advice to other investment companies, whether or not registered, to other
investment advisory clients of the Adviser or of its affiliates and to said
affiliates themselves.
The Adviser shall have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers, affiliates or
employees may acquire for its or their own accounts or for the account of
another client, if, in the sole discretion of the Adviser, it is not feasible or
desirable to acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from purchasing or
recommending the purchase of a particular
5
<PAGE>
security for one or more funds or clients while other funds or clients may be
selling the same security.
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither the Adviser
nor any of its investment management subsidiaries, nor any of the Adviser's or
such investment management subsidiaries' directors, officers or employees will
act as principal or agent or receive any commission, except as may be permitted
by the 1940 Act and rules and regulations promulgated thereunder. If any
occasions shall arise in which the Adviser advises persons concerning the shares
of the Fund, the Adviser will act solely on its own behalf and not in any way on
behalf of the Fund. Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying, selling or trading
in any securities for its or their own account or accounts.
8. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the Fund nor the
Adviser are partners of or joint venturers with each other and nothing herein
shall be construed so as to make them such partners or joint venturers or impose
any liability as such on any of them.
9. NAME OF THE TRUST AND THE FUND. The Trust and the Fund may use the name
"John Hancock" or any name or names derived from or similar to the names "John
Hancock Advisers, Inc." or "John Hancock Mutual Life Insurance Company" only for
so long as this Agreement remains in effect. At such time as this Agreement
shall no longer be in effect, the Trust and the Fund will (to the extent that
they lawfully can) cease to use such a name or any other name indicating that
the Fund is advised by or otherwise connected with the Adviser. The Fund
acknowledges that it has adopted the name "John Hancock Financial Industries
Fund" through permission of John Hancock Mutual Life Insurance Company, a
Massachusetts insurance company, and agrees that John Hancock Mutual Life
Insurance Company reserves to itself and any successor to its business the right
to grant the nonexclusive right to use the name "John Hancock" or any similar
name or names to any other corporation or entity, including but not limited to
any investment company of which John Hancock Mutual Life Insurance Company or
any subsidiary or affiliate thereof shall be the investment adviser.
10. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with the matters to which this Agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Agreement. Any person, even
though also employed by the Adviser, who may be or become an employee of and
paid by the Trust shall be deemed, when acting within the scope of his
employment by the Fund, to be acting in such employment solely for the Trust and
not as the Adviser's employee or agent.
11. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall
remain in force until [June 30], 1997, and from year to year thereafter, but
only so long as
6
<PAGE>
such continuance is specifically approved at least annually by
(a) a majority of the Trustees who are not interested persons of the Adviser or
(other than as Board members) of the Fund, cast in person at a meeting called
for the purpose of voting on such approval, and (b) either (i) the Trustees or
(ii) a majority of the outstanding voting securities of the Fund. This Agreement
may, on 60 days' written notice, be terminated at any time without the payment
of any penalty by the vote of a majority of the outstanding voting securities of
the Fund, by the Trustees or by the Adviser. Termination of this Agreement shall
not be deemed to terminate or otherwise invalidate any provisions of any
contract between the Adviser and any other series of the Trust. This Agreement
shall automatically terminate in the event of its assignment. In interpreting
the provisions of this Section 11, the definitions contained in Section 2(a) of
the 1940 Act (particularly the definitions of "assignment," "interested person"
and "voting security") shall be applied.
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be effective until
approved by (a) the Trustees, including a majority of the Trustees who are not
interested persons of the Adviser or (other than as Trustees) of the Fund, cast
in person at a meeting called for the purpose of voting on such approval, and
(b) a majority of the outstanding voting securities of the Fund, as defined in
the 1940 Act.
13. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts.
14. SEVERABILITY. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be deemed invalid or unenforceable in whole or in part.
15. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The name John Hancock Financial Industries Fund is
a series designation of the Trustees under the Trust's Declaration of Trust. The
Declaration of Trust has been filed with the Secretary of State of The
Commonwealth of Massachusetts. The obligations of the Fund are not personally
binding upon, nor shall resort be had to the private property of, any of the
Trustees, shareholders, officers, employees or agents of the Trust, but only
upon the Fund and its property. The Fund shall not be liable for the obligations
of any other series of the Trust and no other series shall be liable for the
Fund's obligations hereunder.
7
<PAGE>
Yours very truly,
FREEDOM INVESTMENT TRUST
on behalf of John Hancock
Financial Industries Fund
By:
Title:
The foregoing contract is hereby agreed to as of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By:
Title:
s:\agrcont\contract\95finsrv.doc
8
FREEDOM INVESTMENT TRUST
- JOHN HANCOCK FINANCIAL INDUSTRIES FUND
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, the Freedom Investment Trust, a Massachusetts business trust (the
"Trust"), has entered into a Distribution Agreement, dated as of July 1, 1992
(the "Agreement") with John Hancock Funds, Inc. ("JHF") with respect to its
existing series of shares;
WHEREAS, the Board of Trustees of the Trust have determined to establish a
new series of shares of the Trust designated as John Hancock Financial
Industries Fund ("Financial Industries Fund");
NOW THEREFORE, in consideration of the mutual covenants below, the parties
hereto agree as follows:
1. Reference in the Agreement to the Trust and shares of beneficial
interest of the Trust shall be deemed to refer to all existing series and
Financial Industries Fund.
2. In the event that the Trust establishes one or more series of shares in
addition to all existing series and Financial Industries Fund with respect to
which it intends to have JHF be the principal underwriter under the terms of the
Agreement, it shall so notify JHF in writing, and if JHF agrees in writing to
provide principal underwriting services, references in the Agreement to the
Trust shall be deemed to include the additional series of shares.
3. The obligations of the Trust are not personally binding upon, nor shall
resort be had to the property of, any of the Trustees, shareholders, officers,
employees or agents of the Trust, but the Trust's property only shall be bound.
IN WITNESS WHEREOF, the parties hereto have executed this amendment on the
1st day of March, 1996.
FREEDOM INVESTMENT TRUST
- John Hancock Financial Industries Fund
By: _____________________________________
JOHN HANCOCK FUNDS, INC.
By: _____________________________________
s:\agrcont\agreemnt\finserv.doc
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to us under the heading "Independent
Auditors" in the Statement of Additional Information constituting part of this
Post Effective Amendment No. 33 to the registration statement on Form N-1A (the
"Registration Statement") of John Hancock Financial Industries Fund (a series
of Freedom Investment Trust).
/s/Price Waterhouse LLP.
PRICE WATERHOUSE LLP.
Boston, Massachusetts
December 20, 1995
FREEDOM INVESTMENT TRUST
JOHN HANCOCK FINANCIAL INDUSTRIES FUND
Distribution Plan
Class A Shares
March 1, 1996
Article I. This Plan
This amended and restated Distribution Plan (the "Plan") sets forth the
terms and conditions on which Freedom Investment Trust (the "Trust"), on behalf
of John Hancock Financial Industries Fund (the "Fund"), a series portfolio of
the Trust, on behalf of its Class A shares, will, after the effective date
hereof, pay certain amounts to John Hancock Funds, Inc. ("JH Funds") in
connection with the provision by JH Funds of certain services to the Fund and
its Class A shareholders, as set forth herein. Certain of such payments by the
Fund may, under Rule 12b-1 of the Securities and Exchange Commission, as from
time to time amended (the "Rule"), under the Investment Company Act of 1940,
as amended (the "Act"), be deemed to constitute the financing of distribution
by the Fund of its shares. This Plan describes all material aspects of such
financing as contemplated by the Rule and shall be administered and
interpreted, and implemented and continued, in a manner consistent with the
Rule. The Trust and JH Funds heretofore entered into a Distribution Agreement,
dated July 1, 1992 (the "Agreement"), the terms of which, as heretofore and
from time to time continued, are incorporated herein by reference.
Article II. Distribution and Service Expenses
The Fund shall pay to JH Funds a fee in the amount specified in Article
III hereof. Such fee may be spent by JH Funds on any activities or expenses
primarily intended to result in the sale of Class A shares of the Fund,
including, but not limited to 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 out of such
fee as it is received by Broker Services of the Fund or other broker-dealers
("Selling Brokers") that have entered into an agreement with JH Funds for the
sale of Class A shares of the Fund, (b) direct out-of-pocket expenses incurred
in connection with the distribution of Class A shares of the Fund, including
expenses related to printing of prospectuses and reports to other than existing
Class A shareholders of the Fund, and preparation, printing and distribution of
sales literature and advertising materials, and (c) an allocation of overhead
and other branch office expenses of JH Funds related to the distribution of
Class A shares of the Fund.
<PAGE>
Service Expenses include payments made to, or on account of, account
executives of selected broker-dealers (including affiliates of JH Funds) and
others who furnish personal and shareholder account maintenance services to
Class A shareholders of the Fund.
Article III. Maximum Expenditures
The expenditures to be made by the Fund pursuant to this Plan, and the
basis upon which such expenditures will be made, shall be determined by the
Fund, and in no event shall such expenditures exceed 0.30% of the average daily
net asset value of the Class A shares of the Fund (determined in accordance with
the Fund's prospectus as from time to time in effect) on an annual basis 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 up to
0.25% of the average daily net asset value of the Class A shares of the Fund.
Such expenditures shall be calculated and accrued daily and paid monthly or at
such other intervals as the Trustees shall determine. In the event JH Funds is
not fully reimbursed for payments made or other expenses incurred by it under
this Plan, such expenses will not be carried beyond one year from the date such
expenses were incurred. Any fees paid to JH Funds under this Plan during any
fiscal year of the Fund and not expended or allocated by JH Funds for actual or
budgeted Distribution Expenses and Service Expenses during such fiscal year will
be promptly returned to the Fund.
Article IV. Expenses Borne by the Fund
Notwithstanding any other provision of this Plan, the Trust, the Fund and
its investment adviser, John Hancock Advisers, Inc. (the "Adviser"), shall bear
the respective expenses to be borne by them under the Investment Management
Contract, dated March 1, 1996, (the "Management Contract"), and under the Fund's
current prospectus as it is from time to time in effect. Except as otherwise
contemplated by this Plan, the Trust and the Fund shall not, directly or
indirectly, engage in financing any activity which is primarily intended to or
should reasonably result in the sale of shares of the Fund.
Article V. Approval by Trustees, etc.
This Plan shall not take effect until it has been approved, together with
any related agreements, by votes, cast in person at a meeting called for the
purpose of voting on this Plan or such agreements, of a majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
Act or the rules and regulations thereunder) of (a) all of the Trustees of the
Fund and (b) those Trustees of the Fund who are not "interested persons" of the
Fund, as such term may be from time to time defined under the Act, and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related to it (the "Independent Trustees").
2
<PAGE>
Article VI. Continuance
This Plan and any related agreements shall continue in effect for so long
as such continuance is specifically approved at least annually in advance in the
manner provided for the approval of this Plan in Article V.
Article VII. Information
JH Funds shall furnish the Fund and its Trustees quarterly, or at such
other intervals as the Fund shall specify, a written report of amounts expended
or incurred for Distribution Expenses and Service Expenses pursuant to this Plan
and the purposes for which such expenditures were made and such other
information as the Trustees may request.
Article VIII. Termination
This Plan may be terminated (a) at any time by vote of a majority of the
Trustees, a majority of the Independent Trustees, or a majority of the Fund's
outstanding voting Class A shares, or (b) by JH Funds on 60 days' notice in
writing to the Fund.
Article IX. Agreements
Each agreement with any person relating to implementation of this Plan
shall be in writing, and each agreement related to this Plan shall provide:
(a) That, with respect to the Fund, such agreement may be terminated at
any time, without payment of any penalty, by vote of a majority of the
Independent Trustees or by vote of a majority of the Fund's then outstanding
voting Class A shares.
(b) That such agreement shall terminate automatically in the event of
its assignment.
Article X. Amendments
This Plan may not be amended to increase the maximum amount of the fees
payable by the Fund hereunder without the approval of a majority of the
outstanding voting Class A shares of the Fund. No material amendment to the Plan
shall, in any event, be effective unless it is approved in the same manner as is
provided for approval of this Plan in Article V.
3
<PAGE>
Article XI. Limitation of Liability
The names "Freedom Investment Trust" and "John Hancock Financial Industries
Fund" are the designations of the Trustees under the Master Trust Agreement as
amended and restated September 10, 1991, as amended from time to time. The
Master Trust Agreement has been filed with the Secretary of State of the
Commonwealth of Massachusetts. The obligations of the Trust and the Fund are not
personally binding upon, nor shall resort be had to the private property of, any
of the Trustees, shareholders, officers, employees or agents of the Fund, but
only the Fund's property shall be bound. No series of the Trust shall be
responsible for the obligations of any other series of the Trust.
IN WITNESS WHEREOF, the Fund has executed this Distribution Plan effective
as of the 1st day of March, 1996 in Boston, Massachusetts.
FREEDOM INVESTMENT TRUST --
JOHN HANCOCK FINANCIAL INDUSTRIES FUND
By____________________________________
President
JOHN HANCOCK FUNDS, INC.
By____________________________________
President
s:\agrcont\plans\distrib\financa.doc
4
FREEDOM INVESTMENT TRUST --
JOHN HANCOCK FINANCIAL INDUSTRIES FUND
Distribution Plan
Class B Shares
March 1, 1996
Article I. This Plan
This amended and restated Distribution Plan (the "Plan") sets forth the
terms and conditions under which Freedom Investment Trust (the "Trust"), on
behalf of John Hancock Financial Industries Fund (the "Fund"), a series
portfolio of the Trust, on behalf of its Class B shareholders, will, after the
effective date hereof, pay certain amounts to John Hancock Funds, Inc. ("JH
Funds") in connection with the provision by Broker Services of certain services
to the Fund and its Class B shareholders, as set forth herein. Certain of such
payments by the Fund may, under Rule 12b-1 of the Securities and Exchange
Commission, as from time to time amended (the "Rule"), under the Investment
Company Act of 1940, as amended (the "Act"), be deemed to constitute the
financing of distribution by the Fund of its shares. This Plan describes all
material aspects of such financing as contemplated by the Rule and shall be
administered and interpreted, and implemented and continued, in a manner
consistent with the Rule. The Trust and JH Funds heretofore entered into a
Distribution Agreement, dated July 1, 1992 (the "Agreement"), the terms of
which, as heretofore and from time to time continued, are incorporated herein
by reference.
Article II. Distribution and Service Expenses
The Fund shall pay to JH Funds a fee in the amount specified in Article
III hereof. Such fee may be spent by JH Funds on any activities or expenses
primarily intended to result in the sale of Class B shares of the Fund,
including, but not limited to 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 out of such
fee as it is received by JH Funds or other broker-dealers ("Selling Brokers")
that have entered into an agreement with JH Funds for the sale of Class B shares
of the Fund, (b) direct out-of pocket expenses incurred in connection with the
distribution of Class B shares of the Fund, including expenses related to
printing of prospectuses and reports to other than existing Class B shareholders
of the Fund, and preparation, printing and distribution of sales literature and
advertising materials, (c) an allocation of overhead and other branch office
expenses of JH Funds related to the distribution of Class B shares of the Fund,
and (d) interest expenses on unreimbursed distribution expenses related to Class
B shares, as described in Article IV.
Service Expenses include payments made to, or on account of account
executives of selected broker-dealers (including affiliates of JH Funds) and
others who furnish personal and shareholder account maintenance services to
Class B shareholders of the Fund.
Article III. Maximum Expenditures
The expenditures to be made by the Fund pursuant to this Plan, and the
basis upon which such expenditures will be made, shall be determined by the
Fund, and in no event shall such expenditures exceed 1.00% of the average daily
net asset value of the Class B shares of the Fund (determined in accordance with
the Fund's prospectus as from time to time in effect) on an annual basis to
cover Distribution Expenses and Service Expenses, provided that the portion of
such fee
<PAGE>
used to cover Service Expenses, shall not exceed an annual rate of up
to 0.25% of the average daily net asset value of the Class B shares of the Fund.
Such expenditures shall be calculated and accrued daily and paid monthly or at
such other intervals as the Trustees shall determine.
Article IV. Unreimbursed Distribution Expenses
In the event that JH Funds is not fully reimbursed for payments made or
expenses incurred by it as contemplated hereunder, in any fiscal year, JH Funds
shall be entitled to carry forward such expenses to subsequent fiscal years for
submission to the Class B shares of the Fund for payment, subject always to the
annual maximum expenditures set forth in Article III hereof; provided, however,
that nothing herein shall prohibit or limit the Trustees from terminating this
Plan and all payments hereunder at any time pursuant to Article IX hereof.
Article V. Expenses Borne by the Fund
Notwithstanding any other provision of this Plan, the Trust, the Fund and
its investment adviser, John Hancock Advisers, Inc. (the "Adviser"), shall bear
the respective expenses to be borne by them under the Investment Management
Contract between them, dated March 1, 1996 (the "Management Contract"), and
under the Fund's current prospectus as it is from time to time in effect. Except
as otherwise contemplated by this Plan, the Trust and the Fund shall not,
directly or indirectly, engage in financing any activity which is primarily
intended to or should reasonably result in the sale of shares of the Fund.
Article VI. Approval by Trustees, etc.
This Plan shall not take effect until it has been approved, together with
any related agreements, by votes, cast in person at a meeting called for the
purpose of voting on this Plan or such agreements, of a majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
Act or the rules and regulations thereunder) of (a) all of the Trustees of the
Fund and (b) those Trustees of the Fund who are not "interested persons" of the
Fund, as such term may be from time to time defined under the Act, and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related to it (the "Independent Trustees").
Article VII. Continuance
This Plan and any related agreements shall continue in effect for so long
as such continuance is specifically approved at least annually in advance in the
manner provided for the approval of this Plan in Article VI.
Article VIII. Information
JH Funds shall furnish the Fund and its Trustees quarterly, or at such
other intervals as the Fund shall specify, a written report of amounts expended
or incurred for Distribution Expenses and Services Expenses pursuant to this
Plan and the purposes for which such expenditures were made and such other
information as the Trustees may request.
Article IX. Termination
This Plan may be terminated (a) at any time by vote of a majority of the
Trustees, a majority of the Independent Trustees, or a majority of the Fund's
outstanding voting Class B shares, or (b) by JH Funds on 60 days' notice in
writing to the Fund.
2
<PAGE>
Article X. Agreements
Each Agreement with any person relating to implementation of this Plan
shall be in writing, and each agreement related to this Plan shall provide:
(a) That, with respect to the Fund, such agreement may be terminated at
any time, without payment of any penalty, by vote of a majority of
the Independent Trustees or by vote of a majority of the Fund's then
outstanding Class B shares.
(b) That such agreement shall terminate automatically in the event of
its assignment.
Article XI. Amendments
This Plan may not be amended to increase the maximum amount of the fees
payable by the Fund hereunder without the approval of a majority of the
outstanding voting Class B shares of the Fund. No material amendment to the Plan
shall, in any event, be effective unless it is approved in the same manner as is
provided for approval of this Plan in Article VII.
Article XII. Limitation of Liability
The names "Freedom Investment Trust" and "John Hancock Financial Industries
Fund" are the designations of the Trustees under the Master Trust Agreement as
amended and restated September 10, 1991, as amended from time to time. The
Master Trust Agreement has been filed with the Secretary of State of the
Commonwealth of Massachusetts. The obligations of the Trust and the Fund are not
personally binding upon, nor shall resort be had to the private property of, any
of the Trustees, shareholders, officers, employees or agents of the Fund, but
only the Fund's property shall be bound. No series of the Trust shall be
responsible for the obligations of any other series of the Trust.
IN WITNESS WHEREOF, the Fund has executed this Distribution Plan effective
as of the 1st day of March, 1996 in Boston, Massachusetts.
FREEDOM INVESTMENT TRUST --
JOHN HANCOCK FINANCIAL INDUSTRIES FUND
By____________________________________
President
JOHN HANCOCK FUNDS, INC.
By____________________________________
President
s:\agrcont\plans\distrib\financb.doc
3
