John Hancock Funds
John Hancock
Financial Industries
Fund
SEMI-ANNUAL REPORT
April 30, 1996
<PAGE>
John Hancock Funds - Financial Industries Fund
Trustees
Edward J. Boudreau, Jr.
Chairman
William A. Barron, III *
Douglas M. Costle *
Leland O. Erdahl *
Richard A. Farrell *
William F. Glavin *
Patrick Grant *
Ralph Lowell, Jr. *
John A. Moore *
Patti McGill Peterson *
John W. Pratt *
* Members of the Audit Committee
Officers
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
Custodian
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02110
Transfer Agent
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
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
Legal Counsel
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
<PAGE>
John Hancock Funds - Financial Industries Fund
Statement of Assets and Liabilities
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks (cost - $555,856) $625,263
Short-term investments (cost - $100,000) 100,000
Corporate savings account 3,737
--------
729,000
Dividends and interest receivable 975
Receivable from John Hancock Advisers, Inc. - Note B 16,869
--------
Total Assets 746,844
--------------------------------------------------------
Liabilities:
Payable for investments purchased 28,883
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 1,389
Accounts payable and accrued expenses 16,443
--------
Total Liabilities 46,715
--------------------------------------------------------
Net Assets:
Capital paid-in 624,931
Accumulated net realized gain on investments 5,208
Net unrealized appreciation of investments 69,407
Undistributed net investment income 583
========
Net Assets $700,129
========================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial interest outstanding -
unlimited number of shares authorized with no par value)
Class A - $700,129 / 72,929 $ 9.60
================================================================================
Maximum Offering Price Per Share*:
Class A - ($9.60 x 105.26%) $ 10.11
================================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Financial Industries Fund
Statement of Operations
For the period March 14, 1996 (commencement of operations) to
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Interest 1,308
Dividends 238
---------
1,546
---------
Expenses:
Auditing fee 4,215
Custodian fee 2,273
Investment management fee - Note B 1,010
Distribution fee - Note B 379
Printing 3,109
Legal fees 1,041
Registration and filing fees 2,145
Trustees' fees 248
Transfer agent fee 1,649
Miscellaneous 1,763
---------
Total Expenses 17,832
-----------------------------------------------------------
Less Expenses Reduced by
John Hancock Advisers, Inc. - Note B (16,869)
---------
Net Expenses 963
-----------------------------------------------------------
Net Investment Income 583
-----------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 5,208
Change in net unrealized appreciation/
depreciation of investments 69,407
---------
Net Realized and Unrealized
Gain on Investments 74,615
-----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $ 75,198
===========================================================
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Financial Industries Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
FOR THE PERIOD
MARCH 14, 1996
(COMMENCEMENT OF
OPERATIONS) TO
APRIL 30, 1996
(UNAUDITED)
-----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $ 583
Net realized gain on investments sold 5,208
Change in net unrealized appreciation/depreciation of investments 69,407
--------
Net Increase in Net Assets from Operations 75,198
--------
From Fund Share Transactions - Net* 124,931
--------
Net Assets:
Initial Investment by John Hancock Advisers, Inc. - Note A 500,000
--------
End of period (including undistributed net investment income of $583) $700,129
========
*Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
FOR THE PERIOD MARCH 14, 1996
(COMMENCEMENT OF OPERATIONS) TO
APRIL 30, 1996
(UNAUDITED)
--------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares sold 14,217 $125,640
Less shares repurchased (112) (709)
--------------------------------
Net increase 14,105 124,931
Initial Investment by John Hancock Advisers, Inc. - Note A 58,824 500,000
--------------------------------
Net increase and shares outstanding end of period 72,929 $624,931
================================
</TABLE>
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Financial Industries Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are as
follows:
<TABLE>
<CAPTION>
FOR THE PERIOD MARCH 14, 1996
(COMMENCEMENT OF OPERATIONS)
TO APRIL 30, 1996
(UNAUDITED)
-----------------------------
<S> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50 (b)
------
Net Investment Income 0.01 (e)
Net Unrealized Gain on Investments 1.09
------
Total from Investment Operations 1.10
------
Net Asset Value, End of Period $ 9.60
======
Total Investment Return at Net Asset Value (f) 12.94%(c)
Total Adjusted Investment Return at Net Asset
Value (a) (f) 10.18%(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 700
Ratio of Expenses to Average Net Assets 1.20%*
Ratio of Adjusted Expenses to Average Net Assets (a) (d) 22.22%*
Ratio of Net Investment Income to Average Net Assets 0.73%*
Ratio of Adjusted Net Investment Loss to Average Net
Assets (a) (d) (20.29%)*
Portfolio Turnover Rate 4%
Average Brokerage Commission Rate $ 0.06 (g)
</TABLE>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets are expected to increase as the net assets of the Fund grow.
(e) On average month end shares outstanding.
(f) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(g) Per portfolio share traded.
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Financial Industries Fund
Schedule of Investments
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NUMBER OF MARKET
ISSUER SHARES VALUE
------ -----
COMMON STOCKS
Banks - Foreign (0.27%)
Bank of Scotland 500 $ 1,872
--------
Banks - United States (18.71%)
American Bancshares, Inc. * 1,000 6,625
Atlantic Bank & Trust Co. * 1,500 10,875
Cupertino National Bancorp 900 12,150
Fleet Financial Group, Inc. 250 10,750
FNB Rochester Corp. * 750 7,172
Mercantile Bancorp 250 11,125
Mississippi Valley Bancshares, Inc. 400 12,250
Norwest Corp. 250 9,031
SJNB Financial Corp. 500 7,344
TransWorld Bancorp * 1,125 14,765
United Security Bancorp * 500 6,188
Vallicorp Holdings, Inc. 500 7,250
Ventura County National Bancorp * 1,500 6,000
West Coast Bancorp 500 9,438
--------
130,963
--------
Broker Services (6.79%)
Dean Witter Discover & Co. 200 10,900
Edwards (A.G.), Inc. 500 11,750
Lehman Brothers Holdings, Inc. 500 12,688
Salomon, Inc. 300 12,187
--------
47,525
--------
Computers (16.11%)
BISYS Group, Inc. (The) * 300 11,400
CFI Proservices, Inc. * 300 8,025
Continuum, Inc. * 200 11,400
Eagle River Interactive, Inc. * 600 12,975
First Data Corp. 200 15,200
First USA Paymentech, Inc. * 500 21,750
Intuit, Inc.* 300 15,675
Prism Solutions, Inc. * 500 16,375
--------
112,800
--------
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Financial Industries Fund
Schedule of Investments
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NUMBER OF MARKET
ISSUER SHARES VALUE
------ -----
Insurance (13.00%)
Ace, Ltd. 250 11,000
Aetna Life & Casualty Co. 200 14,250
Allmerica Financial Corp. 400 10,400
Enhance Financial Services Group, Inc. 500 13,562
General Re Corp. 75 10,716
Marsh & McLennan Cos., Inc. 100 9,400
St. Paul Cos., Inc. 200 10,625
Travelers/Aetna Property Casualty Corp. (Class A) * 400 11,050
--------
91,003
--------
Other Financial (22.75%)
Aames Financial Corp. 300 13,237
Affinity Technology Group * 1,300 30,550
Alliance Capital Management, L.P. 600 14,550
Beneficial Corp. 200 11,050
Capital One Financial Corp. 400 11,800
Cityscape Financial Corp. * 300 13,237
ContiFinancial Corp. * 400 12,750
First USA, Inc. 200 11,250
Imperial Credit Industries, Inc. * 400 10,500
Onyx Acceptance Corp. * 800 15,000
RAC Financial Group, Inc. * 500 15,375
--------
159,299
--------
Thrifts (11.68%)
American Federal Bank, FSB 500 7,844
Cal Fed Bancorp, Inc. * 500 8,938
Cardinal Bankshares, Inc. 200 15,550
Coast Savings Financial, Inc. * 450 14,006
First Colorado Bancorp, Inc. 700 8,575
PALFED, Inc. 800 10,200
Pamrapo Bancorp, Inc. 500 9,875
Sterling Financial Corp. * 500 6,813
--------
81,801
--------
TOTAL COMMON STOCKS
(Cost $555,856) 89.31% 625,263
--------
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Financial Industries Fund
Schedule of Investments
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
PAR VALUE MARKET
(000'S OMITTED) VALUE
--------------- -----
SHORT-TERM INVESTMENTS
Short-Term Note (14.28%)
Federal Home Loan Mortgage Corp.
5.30% 05-01-96 $100 $ 100,000
---------
Corporate Savings Account ( 0.53%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.75% 3,737
---------
TOTAL SHORT TERM INVESTMENTS 14.81% $ 103,737
------ ---------
TOTAL INVESTMENTS 104.12% $ 729,000
====== =========
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds- Financial Industries Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of six series portfolios: John Hancock Financial Industries Fund (the "Fund",
which commenced operations on March 14, 1996), John Hancock Regional Bank Fund ,
John Hancock Gold & Government Fund, John Hancock Sovereign U.S. Government
Income Fund, John Hancock Disciplined Growth Fund, and John Hancock Managed
Tax-Exempt Fund. Prior to April 1, 1996, John Hancock Disciplined Growth Fund
was known as John Hancock Sovereign Achievers Fund. The investment objective of
the Fund is to seek capital appreciation through investments in financial
services companies.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemptions, dividends, and liquidation, except that
certain expenses subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution/service expenses under terms of
a distribution plan, have exclusive voting rights to such distribution plan.
There were no Class B shares outstanding during the period ended April 30, 1996.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing sources
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days or
less are valued at amortized cost, which approximates market value. All
portfolio transactions initially expressed in terms of foreign currencies have
been translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund intends to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. For Federal income tax purposes, net currency exchange gains and
losses from sales of foreign debt securities may be treated as ordinary income
even though such items are gains and losses for accounting purposes.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment securities
is recorded on the ex-dividend date, or, in the case of some foreign securities,
on the date thereafter when the Fund is made aware of the dividend. Interest
income on investment securities is recorded on the accrual basis. Foreign income
may be subject to foreign withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principals. Dividends paid by the Fund with respect to each
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds- Financial Industries Fund
class of shares will be calculated in the same manner, at the same time and will
be in the same amount, except for the effect of expenses that may be applied
differently to each class as explained previously.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues,
and expenses of the Fund.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not identifiable to a specific Fund are
allocated in such a manner as deemed equitable, taking into consideration, among
other things, the nature and type of expense and the relative sizes of the
Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense rate(s )applicable
to each class.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked-to-market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities. The
Fund may also purchase and sell forward contracts to facilitate the settlement
of foreign currency denominated portfolio transactions transactions, under which
it intends to take delivery of the foreign currency. Such contracts normally
involve no market risk other than the offset by the currency amount of the
underlying transaction.
There were no open forward foreign currency contracts at April 30, 1996.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund enters into a financial futures contract, it is
required to deposit with its custodian a specified amount of cash or U.S.
government securities, known as "initial margin", equal to a certain percentage
of the value of the financial futures contract being traded. Each day, the
futures contract is valued at the official settlement price of the board of
trade or U.S. commodities exchange. Subsequent payments, known as "variation
margin", to and from the broker are made on a daily basis as the market price of
the financial futures contract fluctuates. Daily variation
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds- Financial Industries Fund
margin adjustments, arising from this "mark to market", are recorded by the Fund
as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At April 30, 1996, there were no open positions in financial futures
contracts. OPTIONS Listed options are valued at the last quoted sales price on
the exchange on which they are primarily traded. Over-the-counter options are
valued at the mean between the last bid and asked prices. Upon the writing of a
call or put option, an amount equal to the premium received by the Fund is
included in the Statement of Assets and Liabilities as an asset and
corresponding liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the written option.
The Fund may use options contracts to manage its exposure to the stock
market. Writing puts and buying calls tend to increase the Fund's exposure to
the underlying instrument and buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options will be limited to
the premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value reflects the maximum exposure of
the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contacts'
terms, or if the Fund is unable to offset a contract with a counterparty on a
timely basis ("liquidity risk"). Exchange-traded options have minimal credit
risk as the exchanges act as counterparties to each transaction, and only
present liquidity risk in highly unusual market conditions. To minimize credit
risk and liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit risk
may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
There were no written option transactions for the period ended April 30,
1996.
ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged to the
Fund's operations ratably over a five year period that commenced with the
investment operations of the Fund.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of (a) 0.80% of the first $500,000,000 of the Fund's
average daily net asset value, and (b) 0.75% of the Fund's average daily net
asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
The Adviser has agreed to limit Fund expenses, including the management fee
(but not including the 12b-1 fee), to 0.90% of the Fund's daily net assets.
Accordingly, the reduction in expenses amounted to $16,869 for the period ended
April 30, 1996. The Adviser reserves the right to terminate this limit in the
future.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds- Financial Industries Fund
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended April
30, 1996, there were no sales charges received with regard to Class A shares.
In addition, to compensate JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plans
with respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund will make payments to JH Funds, for
distribution and service expenses at an annual rate not to exceed 0.30% of Class
A average daily net assets and 1.00% of Class B average daily net assets to
reimburse JH Funds for its distribution/service costs. Up to a maximum of 0.25%
of these payments may be service fees as defined by the amended Rules of Fair
Practice of the National Association of Securities Dealers. Under the amended
Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1 payments
could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor
Services, Corp. ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. The Fund pays transfer agent fees based on the number of
shareholder accounts and certain out-of-pocket expenses.
Messrs. Edward J. Boudreau, Jr. and Richard S. Scipione are directors
and/or officers of the Adviser, and/or its affiliates, as well as Trustees of
the Fund. The Adviser owns 58,824 shares of beneficial interest of the Fund. The
compensation of unaffiliated Trustees is borne by the Fund. The unaffiliated
Trustees may elect to defer for tax purposes their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan. The Fund makes
investments into other John Hancock funds, as applicable, to cover its liability
for the deferred compensation. Investments to cover the Fund's deferred
compensation liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always equal and
are marked to market on a periodic basis to reflect any income earned by the
investment as well as any unrealized gains or losses.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the period ended April 30, 1996, aggregated $569,156 and
$18,494, respectively. There were no purchases or sales of obligations of the
U.S. government and its agencies during the period ended April 30, 1996.
The cost of investments owned at February 29, 1996 (excluding the corporate
savings account) for federal income tax purposes was $655,856. Gross unrealized
appreciation and depreciation of investments aggregated $72,976 and $3,569,
respectively, resulting in net unrealized appreciation of $69,407.
