<PAGE> 1
John Hancock Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Managed
Tax-Exempt
Fund
ANNUAL REPORT
October 31, 1995
<PAGE> 2
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 02111
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse llp
160 Federal Street
Boston, Massachusetts 02110
Chairman's Message
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" photo of Edward J. Boudreau Jr., Chairman and Chief Executive Officer,
flush right, next to second paragraph.]
Investors around the world have been watching Wall Street in awe for the better
part of 1995. Through October, the Standard & Poor's 500-Stock Index, a
widely-used barometer of stock performance, had grown by more than 25%.
Investors who stayed in the market after a disappointing 1994 have been
rewarded.
On another street, Pennsylvania Avenue, one of the hot topics many people are
watching is Medicare reform. While there's no clear-cut solution on the horizon,
today's Medicare debate should serve as another wake-up call to all Americans
about the need to have a financial plan and to save for retirement. Whether or
not the government changes the way health-care benefits are allotted to senior
citizens, the message is clear: your future security and well-being lies in your
own hands -- not Uncle Sam's.
We know you've heard it a hundred times. Pick up almost any financial
periodical today, and you'll see cover stories on retirement. Many of them will
perhaps scare you or make you think that the task of saving for retirement is
just too daunting. But take heart. We don't believe that and neither do many
financial experts.
Yet retirement planning is not to be taken lightly. To live the way you want
to -- the way you deserve to after all those years of hard work -- you need to
plan and save now, on a regular basis, no matter what your other costs, no
matter how small the amount, no matter what your current age. It may be easier
if you start earlier, but it's never too late.
Building a secure nest egg is indeed doable. Talk to your financial adviser
about establishing your retirement planning roadmap, if you haven't already. And
educate yourself by reading some of the many articles about how to save for
retirement. Take control of your future by saving today. That way, when it comes
time for retirement, you shouldn't have to think about any street but Easy
Street.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY FRANK LUCIBELLA, SECOND VICE PRESIDENT AND
PORTFOLIO MANAGER
JOHN HANCOCK
MANAGED
TAX-EXEMPT FUND
Falling interest rates, low supply buoy municipal
bond market; further decline in rates and
continued low supply could extend rally
[A 2 1/2" x 3 1/2" photo of Frank Lucibella, bottom right. Caption reads: "Frank
Lucibella, Portfolio Manager]
During the first eight months of 1995, municipal bonds made up most of the
ground they lost in 1994. In hindsight, it's evident that the municipal bond
market reached a bottom late last year after suffering from rising interest
rates and relatively weak demand. This year, the opposite held true. Falling
interest rates and a low supply of municipal bonds relative to demand ignited a
healthy rebound for the municipal bond market.
While municipals outperformed Treasury securities in the first quarter of
1995, a flurry of media coverage about various flat-tax proposals in the second
quarter gave the municipal market an excuse to consolidate. The market hit
another hurdle in late June, when Orange County, California voters failed to
approve a sales tax increase that would have helped to deal with the county's
substantial investment losses. And even though the Federal Reserve Board cut
interest rates in July, the euphoria was somewhat short-lived
[CAPTION]
"DURING THE FIRST EIGHT MONTHS OF 1995, MUNICIPAL BONDS MADE UP MOST OF THE
GROUND THEY LOST IN 1994."
3
<PAGE> 4
John Hancock Funds - Managed Tax-Exempt Fund
[Pie chart with the heading `Portfolio Diversification" at top of left hand
column. The chart is divided into 10 sections. Going from top left to right:
Transportation 11%, Pollution Control 15%, Education 11%, Housing 11%, Water &
Sewer 5%, Industrial Revenue 5%, Health 14%, General Obligation 5%, Electric 9%,
Other 14%. Footnote below reads: "As a percentage of net assets on October 31,
1995."]
because investors worried that there wouldn't be more of the same to come. All
in all, municipals gave up some ground against Treasuries in the summer. But the
overall environment continued to be positive for bonds, as evidence of a slowing
economy and muted inflation pushed fixed-income markets higher.
The municipal market's strong performance was reflected in John Hancock
Managed Tax-Exempt Fund's performance. For the year ended October 31, 1995, the
Fund's Class A and Class B shares posted total returns of 13.30% and 12.63%,
respectively, at net asset value. That compared to the average general municipal
bond fund's return of 13.35%, according to Lipper Analytical Services.1
The primary reason the Fund slightly lagged its competitors was its
shorter-than-average duration. Duration measures how sensitive a fund's share
price is to changes in interest rates. Generally speaking, the longer a fund's
duration, the more its share price will rise when interest rates fall, and
conversely, fall when interest rates rise. Coming out of 1994, the worst year
for bonds in recent memory, we deliberately took a conservative stance. We did
lengthen the duration later in the year, but not soon enough to benefit from the
market's strongest-performing period. But because we think that interest rates
can continue to fall over the long term, we've kept the Fund's duration on the
longer side.
PORTFOLIO CHANGES
In addition to modifying the Fund's duration, we also made other strategic
changes to the portfolio. During the past six months, market conditions allowed
us to place a greater emphasis on generating additional yield for the fund.
Prior to that, the difference in yield between high- and low-quality bonds was
quite small, so we emphasized higher-quality bonds. Since the yield spread -- or
difference in yields -- was so narrow, we were able to do that without
sacrificing a lot of the yield that lower-quality bonds normally offer. But as
the market's rally wore on, we found opportunities to sell some of our
higher-quality issues at relatively high prices, and replace them once again
with cheaper, lower-quality issues that offered higher yields. As a result of
this change in strategy, the Fund's stake in BBB-rated bonds, which are
lower-rated but still investment-grade, grew to 25% from 16% six months earlier.
It's important to note that we aren't just chasing yield when we buy these
lower-rated
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
performance ... and what's behind the numbers. The first listing is
Foothill/Eastern Transportation followed by an up arrow and the phrase "Fall in
interest rates provides gains." The second listing is Sacramento Co-Generation
Project followed by an up arrow and the phrase "Strong corporate sponsorship."
The third listing is De Soto Parish/International Paper followed by a down arrow
and the phrase "Acquisition put pressure on earnings." Footnote below reads:
"See "Schedule of Investments." Investment holdings are subject to change."]
[CAPTION]
"...MARKET CONDITIONS ALLOWED US TO PLACE A GREATER EMPHASIS ON GENERATING
ADDITIONAL YIELD..."
4
<PAGE> 5
John Hancock Funds - Managed Tax-Exempt Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended October 31, 1995." The chart is
scaled in increments of 5% from bottom to top, with 15% at the top and 0% at the
bottom. Within the chart there are three solid bars. The first represents the
13.30% total return for the John Hancock Managed Tax-Exempt Fund, Class A. The
second represents the 12.63% total return for the John Hancock Managed
Tax-Exempt Fund, Class B. The third represents the 13.35% total return for the
average general municipal bond fund. A footnote below reads: "Total returns for
the John Hancock Managed Tax-Exempt Fund are at net asset value with all
distributions reinvested. Total return for the average general municipal bond
fund is tracked by Lipper Analytical Services. (1) See following page for
historical performance information."]
securities. We buy BBB-rated bonds only when we think the issuing entity has
sound fundamentals. One example is the Foothill/Eastern Transportation Corridor
Agency, which will fund the construction of a toll road in California where the
projections for traffic and revenues are quite good. What's more, we bought them
at a time when their prices were cheap. These bonds appreciated during the
market's rally.
Finally, we modified our holdings across states over the past year,
concentrating on buying those with upside potential. While New York remained our
top state concentration, we traded in and out of these bonds as market
conditions warranted. In some cases, we sold New York bonds to buy California
insured bonds when they were cheap. Throughout the past 12 months, we increased
our holdings in Florida when supply was heavy and prices were cheap.
OUTLOOK
Over the longer term, we believe that interest rates can fall even further from
today's levels. Inflation remains in check, economic growth is slow but steady,
and Congress appears to be making a serious attempt to cut the federal budget
deficit. The Federal Reserve Board has indicated its willingness to cut interest
rates if Congress is successful in that effort.
Over the short term, however, worry about the future of tax reform and its
potential effect on municipal bonds could cause some volatility in the market,
as it did briefly in the spring when the idea was first introduced. But we don't
believe that any major tax reform will be enacted before 1997. By the end of
October, municipal bond prices looked relatively cheap compared to U.S. Treasury
securities. The municipal market has done quite well so far this year. In light
of that, it's not unreasonable to believe that eventually the market will pause
and decide what it will do from here. That depends on the economy's strength
over the next several months. Also, demand for municipals is relatively stable
and supply is limited. That should bode well for municipal bond prices over the
next six months.
- --------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and
do not take into account sales charges. Actual load-adjusted performance
is lower.
5
[CAPTION]
"...DEMAND FOR MUNICIPALS IS RELATIVELY STABLE AND SUPPLY IS LIMITED."
<PAGE> 6
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Managed Tax-Exempt Fund. Total return is a
performance measure that equals the sum of all dividends and capital gains,
assuming reinvestment of these distributions and the change in the price of the
Fund's shares, expressed as a percentage of the Fund's average net assets.
Performance figures include the maximum applicable sales charge of 4.50% for
Class A shares. The effect of the maximum contingent deferred sales charge for
Class B shares (maximum 5% and declining to 0% over six years) is included in
Class B performance. Remember that all figures represent past performance and
are no guarantee of how the Fund will perform in the future. Also, keep in mind
that the total return and share price of the Fund's investments will fluctuate.
As a result, your Fund's shares may be worth more or less than their original
cost, depending on when you sell them. Please note that a portion of the Fund's
income may be subject to federal, state, or local taxes.
CUMULATIVE TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
LIFE
ONE FIVE OF
YEAR YEARS FUND
---- ----- ----
<S> <C> <C> <C>
John Hancock Managed Tax-Exempt
Fund: Class A 4.44% 22.21%(1) N/A
John Hancock Managed Tax-Exempt
Fund: Class B 3.61% 45.62% 94.40%(2)
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995(3)
<TABLE>
<CAPTION>
LIFE
ONE FIVE OF
YEAR YEARS FUND
---- ----- ----
<S> <C> <C> <C>
John Hancock Managed Tax-Exempt
Fund: Class A 4.44% 5.51%(1) N/A
John Hancock Managed Tax-Exempt
Fund: Class B 3.61% 7.81% 8.28%(2)
</TABLE>
YIELDS
AS OF OCTOBER 31, 1995
<TABLE>
<CAPTION>
SEC 30-DAY
YIELD
-----
<S> <C>
John Hancock Managed Tax-Exempt Fund: Class A 4.74%
John Hancock Managed Tax-Exempt Fund: Class B 4.32%
</TABLE>
NOTES TO PERFORMANCE
(1) Class A shares started on January 3, 1992.
(2) Class B shares started on April 22, 1987.
(3) The Adviser voluntarily waived a portion of the management fee and
reduced a portion of the custodian fees during the period. Without the
waiver of expenses, the average annualized total return for the one-year
period and since inception for Class A shares would have been 4.37% and
5.34%, respectively. The average annualized total returns for the one-year
and five-year periods and since inception for Class B shares would have been
3.54%, 7.61%, and 7.92%, respectively.
Note: Participant-directed defined-contribution plans with at least 100 eligible
employees at inception of the Fund account may purchase Class A shares without
an initial sales charge as of March 15, 1995. If those shares are redeemed,
however, during the year following the calendar year end during which they were
purchased, a contingent deferred sales charge will be assessed.
6
<PAGE> 7
The charts on the right show how much a $10,000 investment in the John Hancock
Managed Tax-Exempt Fund would be worth on October 31, 1995, assuming you had
invested on the day each class of shares started and reinvested all
distributions. For comparison, we've shown the same $10,000 investment in the
Lehman Municipal Bond Index -- an unmanaged index that includes approximately
15,000 bonds and is commonly used as a measure of municipal bond performance.
[Line chart with the heading Managed Tax-Exempt Fund: Class A, representing the
growth of a hypothetical $10,000 investment over the life of the fund. Within
the chart are three lines.]
[The first line represents the value of the Lehman Municipal Bond Index and is
equal to $13,259 as of October 31, 1995. The second line represents the value of
the hypothetical $10,000 investment made in the Managed Tax-Exempt Fund on
January 3, 1992, before sales charge, and is equal to $13,000 as of October 31,
1995. The third line represents the Managed Tax-Exempt Fund after sales charge
and is equal to $12,415 as of October 31, 1995.]
[Line chart with the heading Managed Tax-Exempt Fund: Class B, representing the
growth of a hypothetical $10,000 investment over the life of the fund. Within
the chart are two lines.]
[The first line represents the value of the hypothetical $10,000 investment made
in the Managed Tax-Exempt Fund on April 22, 1987, before contingent deferred
sales charge, and is equal to $19,758 as of October 31, 995. The second line
represents the value of the Lehman Municipal Bond Index and is equal to $19,296
as of October 31, 1995..]
*No contingent deferred sales charge applicable.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Tax-exempt long-term bonds (cost - $205,317,165) ..... $218,037,090
Joint repurchase agreement (cost - $1,831,000) ....... 1,831,000
Corporate savings account............................. 6,384
------------
219,874,474
Receivable for shares sold............................. 76,327
Receivable for investments sold........................ 6,599,793
Interest receivable.................................... 4,467,268
Other assets........................................... 29,126
------------
Total Assets.................... 231,046,988
-------------------------------------------------
LIABILITIES:
Dividend payable....................................... 30,668
Payable for shares repurchased......................... 119,581
Payable for investments purchased...................... 10,315,544
Payable to John Hancock Advisers, Inc. and
affiliates - Note B................................... 132,394
Accounts payable and accrued expenses.................. 62,813
------------
Total Liabilities............... 10,661,000
-------------------------------------------------
NET ASSETS:
Capital paid-in........................................ 206,137,501
Accumulated net realized gain on investments and
financial futures contracts........................... 1,458,033
Net unrealized appreciation of investments 12,719,925
Undistributed net investment income.................... 70,529
------------
Net Assets...................... $220,385,988
=================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value, respectively)
Class A - $42,383,912/3,665,817........................ $ 11.56
========================================================================
Class B - $178,002,076/15,391,245...................... $ 11.57
========================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($11.56 x 104.71%)........................... $ 12.10
========================================================================
* On single retail sales of less than $100,000. On sales of $100,000 or more and
on group sales the offering price is reduced.
</TABLE>
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest............................................... $ 15,060,119
------------
Expenses:
Distribution/service fee - Note B
Class A............................................. 83,379
Class B............................................. 1,967,708
Investment management fee - Note B.................... 1,360,930
Transfer agent fee - Note B........................... 178,923
Trustees' fees........................................ 50,267
Auditing fee.......................................... 41,800
Registration and filing fees.......................... 34,829
Printing.............................................. 29,725
Custodian fee......................................... 74,206
Legal fees............................................ 15,127
Miscellaneous......................................... 11,736
Less Management Fee Reduction - Note B (113,411)
------------
Total Expenses.................. 3,735,219
Less Expense Reductions -
Note B.......................... (47,982)
-------------------------------------------------
Net Expenses.................... 3,687,237
-------------------------------------------------
Net Investment Income........... 11,372,882
-------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FINANCIAL FUTURES CONTRACTS:
Net realized gain on investments sold.................. 4,782,526
Net realized loss on financial futures contracts....... (2,363,744)
Change in net unrealized appreciation/depreciation
of investments........................................ 13,312,666
Change in net unrealized appreciation/depreciation of
financial futures contracts........................... (153,531)
------------
Net Realized and Unrealized
Gain on Investments and
Financial Futures Contracts..... 15,577,917
-------------------------------------------------
Net Increase in Net Assets
Resulting from Operations....... $ 26,950,799
=================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................................................ $ 11,372,882 $ 12,831,192
Net realized gain (loss) on investments sold and financial futures contracts......... 2,418,782 (739,886)
Change in net unrealized appreciation (depreciation) of investments and financial
futures contracts ................................................................... 13,159,135 (27,862,425)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations..................... 26,950,799 (15,771,119)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.6282 and $0.6387 per share, respectively)............................. (1,545,018) (1,070,853)
Class B - ($0.5516 and $0.5610 per share, respectively)............................. (9,827,864) (11,760,339)
Distributions from net realized gain on investments sold and financial futures
contracts
Class A - (none and $0.0898 per share, respectively)................................ --- (120,420)
Class A - (none and $0.0898 per share, respectively)................................ --- (1,901,276)
------------ ------------
Total Distributions to Shareholders............................................... (11,372,882) (14,852,888)
------------ ------------
FROM FUND SHARE TRANSACTIONS-- NET*.................................................... (33,226,056) (1,927,851)
------------ ------------
NET ASSETS:
Beginning of period.................................................................. 238,034,127 270,585,985
------------ ------------
End of period (including undistributed net investment income of $70,529 and none,
respectively) ....................................................................... $220,385,988 $238,034,127
============ ============
</TABLE>
<TABLE>
<CAPTION>
* ANALYSIS OF FUND SHARE TRANSACTIONS: YEAR ENDED OCTOBER 31,
--------------------------------------------------------
1995 1994
--------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold.................................................. 2,334,618 $ 26,534,395 1,179,686 $13,702,193
Shares issued to shareholders in reinvestment of
distributions ............................................... 84,320 947,287 60,754 696,640
--------- ------------ --------- -----------
2,418,938 27,481,682 1,240,440 14,398,833
Less shares repurchased...................................... (695,912) (7,619,563) (472,296) (5,404,052)
--------- ------------ --------- -----------
Net increase................................................. 1,723,026 $ 19,862,119 768,144 $ 8,994,781
========= ============ ========= ===========
CLASS B
Shares sold.................................................. 1,012,904 $ 11,296,871 2,722,911 $31,724,838
Shares issued to shareholders in reinvestment of
distributions ............................................... 444,432 4,959,344 586,954 6,775,123
--------- ------------ --------- -----------
1,457,336 16,256,215 3,309,865 38,499,961
Less shares repurchased...................................... (6,179,061) (69,344,390) (4,333,843) (49,422,593)
--------- ------------ --------- -----------
Net decrease................................................. (4,721,725) $(53,088,175) (1,023,978) ($10,922,632)
========= ============ ========= ===========
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS FISCAL PERIOD. THE DIFFERENCE
REFLECTS EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS
PAID TO SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY SHAREHOLDERS
INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND SHARES SOLD,
REINVESTED AND REDEEMED DURING THE LAST TWO PERIODS, ALONG WITH THE
CORRESPONDING DOLLAR VALUES.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------
1995 1994 1993 1992(a)
---------- --------- -------- -----------
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.................................... $ 10.79 $ 12.13 $ 11.12 $ 11.25
------- ------- ------- -------
Net Investment Income................................................... 0.63 0.64 0.70 0.55
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts........................................ 0.77 ( 1.25) 1.05 ( 0.11)
------- ------- ------- -------
Total from Investment Operations..................................... 1.40 ( 0.61) 1.75 0.44
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income.................................... ( 0.63) ( 0.64) ( 0.70) ( 0.53)
Distributions from Net Realized Gain on Investments Sold
and Financial Futures Contracts........................................ --- ( 0.09) ( 0.04) ( 0.04)
------- ------- ------- -------
Total Distributions.................................................. ( 0.63) ( 0.73) ( 0.74) ( 0.57)
------- ------- ------- -------
Net Asset Value, End of Period.......................................... $ 11.56 $ 10.79 $ 12.13 $ 11.12
======= ======= ======= =======
Total Investment Return at Net Asset Value (c).......................... 13.30% ( 5.22%) 16.10% 4.74%*
Total Adjusted Investment Return at Net Asset Value (b)(d).............. 13.28% ( 5.29%) 15.77% 4.51%*
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)............................... $42,384 $20,968 $14,244 $ 9,589
Ratio of Expenses to Average Net Assets**............................... 1.06% 0.95% 0.70% 0.78%*
Ratio of Adjusted Expenses to Average Net Assets (b).................... 1.11% 1.02% 1.03% 1.01%*
Ratio of Net Investment Income to Average Net Assets**.................. 5.53% 5.52% 5.98% 6.24%*
Ratio of Adjusted Net Investment Income to Average Net Assets (b)....... 5.48% 5.42% 5.65% 6.01%*
Portfolio Turnover Rate................................................. 104% 59% 23% 23%
** Expense Reimbursement Per Share...................................... $ 0.01 $ 0.01 $ 0.04 $ 0.02
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIODS INDICATED: THE NET INVESTMENT INCOME, GAINS
(LOSSES), DISTRIBUTIONS AND TOTAL INVESTMENT RETURNS OF THE FUND. IT SHOWS HOW
THE FUND'S NET ASSET VALUE FOR A SHARE HAS CHANGED SINCE THE END OF THE PREVIOUS
PERIOD. ADDITIONALLY, IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS
PRESENTED IN THE FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period......................... $ 10.79 $ 12.13 $ 11.12 $ 11.12 $ 10.61
-------- -------- -------- -------- --------
Net Investment Income........................................ 0.55 0.56 0.64 0.66 0.68
Net Realized and Unrealized Gain (Loss) on Investments and
Financial Futures Contracts................................. 0.78 ( 1.25) 1.05 0.04 0.61
-------- -------- -------- -------- --------
Total from Investment Operations.......................... 1.33 ( 0.69) 1.69 0.70 1.29
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income......................... ( 0.55) ( 0.56) ( 0.64) ( 0.64) ( 0.72)
Distributions from Net Realized Gain on Investments Sold and
Financial Futures Contracts................................. --- ( 0.09) ( 0.04) ( 0.06) ( 0.06)
-------- -------- -------- -------- --------
Total Distributions....................................... ( 0.55) ( 0.65) ( 0.68) ( 0.70) ( 0.78)
-------- -------- -------- -------- --------
Net Asset Value, End of Period............................... $ 11.57 $ 10.79 $ 12.13 $ 11.12 $ 11.12
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value (c)............... 12.63% ( 5.85%) 15.51% 6.39% 12.55%
Total Adjusted Investment Return at Net Asset Value (b)(d)... 12.61% ( 5.92%) 15.18% 6.20% 12.24%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).................... $178,002 $217,066 $256,342 $226,943 $199,955
Ratio of Expenses to Average Net Assets**.................... 1.73% 1.62% 1.23% 1.35% 1.19%
Ratio of Adjusted Expenses to Average Net Assets (b)......... 1.78% 1.69% 1.56% 1.54% 1.50%
Ratio of Net Investment Income to Average Net Assets**....... 4.92% 4.84% 5.49% 5.74% 6.19%
Ratio of Adjusted Net Investment Income to Average Net Assets
(b) ......................................................... 4.87% 4.77% 5.16% 5.55% 5.88%
Portfolio Turnover Rate...................................... 104% 59% 23% 23% 30%
** Expense Reimbursement Per Share........................... $ 0.01 $ 0.01 $ 0.04 $ 0.02 $ 0.04
</TABLE>
* On an annualized basis.
(a) Class A shares commenced operations on January 3, 1992.
(b) On an unreimbursed basis.
(c) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(d) An estimated total return calculation which takes into consideration fees
and expenses waived or borne by the Adviser during the periods shown.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
MANAGED TAX-EXEMPT FUND ON OCTOBER 31, 1995. IT HAS TWO MAIN CATEGORIES:
TAX-EXEMPT LONG-TERM BONDS AND SHORT-TERM INVESTMENTS. THE TAX-EXEMPT BONDS ARE
FURTHER BROKEN DOWN BY STATE. UNDER EACH STATE IS A LIST OF THE SECURITIES OWNED
BY THE FUND. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION,
ARE LISTED LAST.
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
TAX-EXEMPT LONG-TERM BONDS
ALABAMA (2.27%)
Birmingham, City of,
GO Iss of 1989.......................................... 7.350% 03-01-14 A1** $ 750 $ 824,235 6.69%
Citronelle Industrial Development Board,
Stauffer Chemical Co Proj 1982.......................... 8.000 12-01-12 NR** 500 563,435 7.10
Mobile Industrial Development Board,
Mobile Energy Serv Co Proj 1995......................... 6.950 01-01-20 BBB- 3,500* 3,623,270 6.71
----------
5,010,940
----------
ALASKA (1.86%)
Alaska Housing Finance Corp,
Coll Home Mtg Ser A-3 GNMA/FNMA Coll.................... 7.700 12-01-13 AAA 495 522,997 7.29
Coll Home Mtg Ser B-1 GNMA Coll......................... 7.650 06-01-24 AAA 2,000 2,153,560 7.1
Coll Home Mtg Ser B-2 GNMA Coll......................... 7.875 06-01-24 AAA 305 322,196 7.45
Valdez Alaska Marine Terminal,
Rev Ref Sohio Pipe Line Co. Proj Ser 1985............... 7.125 12-01-25 AA- 1,000 1,089,850 6.54
----------
4,088,603
----------
ARIZONA (3.23%)
Arizona Municipal Financing Program,
Cert of Part Ser 25..................................... 7.875 08-01-14 AAA 1,000 1,275,560 6.17
Navajo, County of,
Poll Control Corp Rev Ref Arizona Pub Serv Co Ser A..... 5.875 08-15-28 BBB 5,000 4,739,350 6.20
Pima, County of,
Swr Rev Ref Ser 1991.................................... 6.750 07-01-15 AAA 460 516,028 6.02
Pima, County of,
Swr Rev Ref Ser 1991.................................... 6.750 07-01-15 AAA 540 588,217 6.20
----------
7,119,155
----------
ARKANSAS (0.33%)
Arkansas Development Finance Auth,
Single Family Mtg Rev Ref Ser 1991 A.................... 8.000 08-15-11 AA 660 721,710 7.32
----------
CALIFORNIA (9.50%)
Central Valley Finance Agency,
California Cogeneration Proj Rev Carson Ice Gen Proj.... 6.100 07-01-13 BBB- 2,900 2,884,224 6.13
California Cogeneration Proj Rev Carson Ice Gen Proj.... 6.200 07-01-20 BBB- 2,000 1,989,780 6.23
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
Foothill/Eastern Transportation Corridor Agency,
Toll Road Rev Ser A................................. 6.000% 01-01-34 BBB- $6,025* $ 5,690,010 6.35%
Sacramento Cogeneration Auth,
Cogeneration Proj Rev Procter & Gamble Proj......... 6.500 07-01-21 BBB- 4,500* 4,580,505 6.39
Sacramento Municipal Utilities District,
Elec Rev Ref Ser 1992 A Inflos...................... 8.615# 08-15-18 AAA 1,000 1,078,750 7.99
Santa Ana Financing Auth,
Lease Rev Police Administration & Holding Facil
Ser A............................................... 6.250 07-01-19 AAA 2,000* 2,160,860 5.78
University of California,
Cert of Part Rev Ref UCLA Central Chiller/
Cogeneration Project................................ 5.600 11-01-20 Aa** 2,700* 2,541,132 5.95
-----------
20,925,261
-----------
COLORADO (4.33%)
Arapahoe County Cap Imp Trust Fund
Highway Revenue Ser. E-470.......................... 6.950 08-31-20 Baa** 6,000* 6,322,860 6.60
Colorado Housing Finance Auth,
Single Family Prog Sr Iss A-2....................... 7.625 08-01-17 AA 1,035 1,095,237 7.21
Single Family Residential Rev Ser C................. 8.750 09-01-17 Aa** 465 497,764 8.17
Douglas County School District No. Re. 1,
Douglas and Elbert Counties CO, GO Improvement Ser
1994A............................................... 6.400 12-15-11 AAA 1,500 1,626,195 5.90
-----------
9,542,056
-----------
CONNECTICUT (0.78%)
Connecticut Health & Educational Facilities Auth,
Rev Quinnipiac College Ser D......................... 6.000 07-01-23 BBB- 1,890 1,728,632 6.56
-----------
DELAWARE (0.98%)
Delaware State Economic Development Auth,
Rev Ref Poll Control Delmarva Pwr Ser B.............. 6.750 05-01-19 AAA 2,000* 2,160,920 6.25
-----------
FLORIDA (7.75%)
Broward, County of,
Resource Recovery SES Broward Co., L.P. South Proj... 7.950 12-01-08 A 4,580 5,143,706 7.08
Citrus, County of,
Poll Control Rev Ref Ser 199A Florida Pwr Corp
Crystal River Pwr Plant Proj......................... 6.625 01-01-27 A+ 1,250* 1,315,375 6.30
Dade, County of,
Water & Swr Sys Rev Ser 1995......................... 5.500 10-01-18 AAA 3,000* 2,942,400 5.61
Hernando, County of,
Criminal Justice Complex Rev Ser 1986................ 7.650 07-01-16 AAA 500 634,615 6.03
Lee, County of,
Hosp Board of Directors Hosp Rev Inflos.............. 9.144# 04-01-20 AAA 2,000 2,215,000 8.26
Orange County Health Facilities Auth,
Hosp Rev Orlando Regional Medical Center............. 8.688# 10-29-21 AAA 1,000 1,085,000 8.01
Tampa, City of,
Cap Imp Prog Rev Ser B Iss of 1988................... 8.375 10-01-18 BBB 3,500 3,733,555 7.85
-----------
17,069,651
-----------
</TABLE>
See notes to financial statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
ILLINOIS (1.37%)
Illinois Health Facilities Auth,
Rev Methodist Hlth Serv Corp Ser 1991 B.............. 9.538%# 05-01-21 AAA $1,000 $ 1,161,250 8.21%
Rev Methodist Medical Center Illinois Ref A.......... 8.000 10-01-14 BBB 1,000 1,002,720 7.98
Rev Swedish-American Hosp............................ 7.400 04-01-20 AAA 750 852,412 6.51
-----------
3,016,382
-----------
INDIANA (0.37%)
Hammond Local Public Improvement,
Bond Bank Ser A Township of Schererville
Multi-Financing Prog................................. 7.000 03-15-09 AAA 750 821,663 6.39
-----------
KANSAS (1.13%)
Sedgwick, County of,
GNMA Coll Mtg Ln Rev Ser C........................... 8.625 11-01-18 AAA 2,295 2,483,098 7.97
-----------
LOUISIANA (2.83%)
Calcasieu Parish Public Trust Auth,
Mtg Rev Ref 1991 Ser A............................... 7.750 06-01-12 A** 540 589,939 7.09
De Soto, Parish of,
Environ Imp Rev Int'l Paper Co Proj Ser A............ 7.700 11-01-18 A- 2,750* 3,091,495 6.85
De Soto, Parish of,
Environ Imp Rev Int'l Paper Co Proj Ser B............ 6.550 04-01-19 A- 2,500* 2,563,275 6.39
-----------
6,244,709
-----------
MAINE (0.61%)
Maine State Housing Auth,
Mtg Purchase Ser A-3................................. 7.800 11-15-15 AA- 1,250 1,332,325 7.32
-----------
MASSACHUSETTS (10.44%)
Greater New Bedford Regional Refuse Management
District, Mass GO Landfill........................... 5.875 05-01-13 Baa** 750 708,150 6.22
Massachusetts Health & Educational Facilities Auth,
Rev St. Elizabeth's Hosp of Boston Ser E............. 9.746# 08-15-21 AAA 1,000 1,140,000 8.55
Rev Ref Worcester Polytech Institute Ser E........... 6.750 09-01-11 A+ 1,840* 2,023,540 6.14
Massachusetts Housing Finance Agency,
Insured Rental Ser A................................. 6.650 07-01-19 AAA 5,500 5,690,465 6.43
Single Family Hsg Ser 8.............................. 7.700 06-01-17 A+ 1,000 1,075,930 7.16
Massachusetts Municipal Wholesale Electric Co.,
Pwr Supply Rev Ser A................................. 5.000 07-01-14 AAA 3,000* 2,792,970 5.37
Massachusetts Municipal Wholesale Electric Co.,
Pwr Supply Rev Ser B................................. 5.000 07-01-13 AAA 2,390* 2,215,076 5.39
Massachusetts Turnpike Authority,
Turnpike Rev Ser A................................... 5.000 01-01-20 A+ 7,000* 6,326,880 5.53
Massachusetts Water Pollution Abatement Trust,
Wtr Poll Abatement Rev (SESD Ln Prog) 1994 Ser A..... 6.375 02-01-15 AA- 1,000 1,044,640 6.10
-----------
23,017,651
-----------
</TABLE>
See notes to financial statements.
14
<PAGE> 15
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
MICHIGAN (1.93%)
Detroit, City of,
GO UnLtd Ser A 1995.................................. 6.800% 04-01-15 BBB $1,315* $ 1,383,722 6.46%
Michigan Housing Development Auth,
Single Family Mtg Rev Ser A.......................... 7.500 06-01-15 AA+ 1,415 1,515,140 7.00
Michigan State Hospital Financing Auth,
Rev Ref Hosp Genesys Hlth Sys Ser A.................. 8.100 10-01-13 BBB 1,250* 1,357,675 7.46
-----------
4,256,537
-----------
MINNESOTA (0.13%)
Minnesota Housing Finance Agency
Single Family Mtg 1990 Ser C......................... 7.700 07-01-14 AA 265 282,736 7.22
-----------
NEVADA (1.73%)
Nevada Housing Division,
Single Family Proj Sr Rev Ser 1989 Iss A-1........... 7.350 04-01-16 AA 940 982,450 7.03
Single Family Proj Sr Rev Ser 1990 Iss C-1........... 7.850 10-01-15 AA 355 376,641 7.40
Nevada, State of,
GO Ltd Tax Municipal Bond Bank Proj No. 38........... 6.750 07-01-09 NR 975 1,101,906 5.97
GO Ltd Tax Municipal Bond Bank Proj No. 38........... 6.750 07-01-09 AA 25 27,056 6.24
Reno Hospital,
Rev St. Mary's Regional Medical Center Ser A......... 7.750 07-01-07 AAA 720 798,804 6.99
Rev St. Mary's Regional Medical Center Ser A......... 7.750 07-01-07 AAA 480 528,293 7.04
-----------
3,815,150
-----------
NEW JERSEY (0.51%)
New Jersey Turnpike Auth,
Turnpike Rev 1991 Ser C.............................. 6.500 01-01-16 AAA 1,000* 1,126,100 5.77
-----------
NEW YORK (12.44%)
Metropolitan Transportation Auth,
Transit Rev Ser J.................................... 6.500 07-01-18 AAA 1,000* 1,063,860 6.11
New York, State of
GO UnLtd. 1995....................................... 5.800 10-01-12 A- 1,365* 1,392,000 5.69
New York Local Assistance Corp.,
Ser C, 1991.......................................... 7.000 04-01-10 A 2,000* 2,217,260 6.31
New York Local Government Assistance Corp.,
Ser A, 1992.......................................... 6.875 04-01-19 A 2,000* 2,180,800 6.31
New York State Dormitory Authority,
City Univ Sys 2nd Gen Rev Ser A...................... 5.750 07-01-09 BBB 1,000 991,510 5.80
State Univ Ed Facil Rev Ser 1990B.................... 7.000 05-15-16 BBB+ 5,000 5,342,350 6.55
State Univ Ed Facil Rev Ser 1993A.................... 5.500 05-15-19 BBB+ 2,000* 1,877,120 5.86
New York State Environmental Facilities Corp,
State Wtr Poll Control Revolving Fund Rev Ser 1990 A,
NYC Municipal Wtr Fin Auth Proj...................... 7.500 06-15-12 A 600 672,846 6.69
New York State Mortgage Agency,
Rev Homeownership Ser BB-2........................... 7.950 10-01-15 Aa** 560 591,646 7.52
New York Urban Development Auth.
Ref Correctional Cap Facil Ser A..................... 5.250 01-01-21 BBB 3,000* 2,684,460 5.87
</TABLE>
See notes to financial statements.
15
<PAGE> 16
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
Port Authority of New York and New Jersey,
Cons Seventy Second Ser 1992......................... 7.350% 10-01-27 AA- $2,000* $ 2,289,860 6.42%
Triborough Bridge & Tunnel Auth,
Rev Ref Ser 1987 L................................... 8.000 01-01-07 A+ 500 548,710 7.29
Rev Gen Purpose Ser X................................ 6.500 01-01-19 A+ 1,250 1,325,638 6.13
Rev Gen Purpose Ser Y................................ 6.125 01-01-21 A+ 4,000* 4,242,000 5.78
-----------
27,420,060
-----------
OHIO (3.80%)
Cleveland, City of,
Pub Pwr Sys First Mtg Ser 1994A...................... 7.000 11-15-16 AAA 5,860* 6,704,895 6.12
Cuyahoga, County of,
Hosp Imp Rev Deaconess Hosp of Cleveland Proj
Ser 1985 B........................................... 7.450 10-01-18 A1** 750 867,547 6.44
Hosp Rev Meridia Hlth Sys Ser 1991................... 7.000 08-15-23 A 750 793,642 6.62
-----------
8,366,084
-----------
OKLAHOMA (0.77%)
Tulsa County Industrial Auth,
Hlth Care Rev St. Francis Hosp Inc................... 6.900 12-15-05 AA 1,500 1,701,135 6.08
-----------
PENNSYLVANIA (6.65%)
Northumberland County Auth,
Commonwealth Lease Rev Ser 1991...................... 6.250 10-15-09 AAA 1,000 1,060,500 5.89
Pennsylvania Economic Development Financing Auth,
Colver Proj. Ser D................................... 7.150 12-01-18 BBB- 5,000* 5,217,400 6.85
Pennsylvania Turnpike Commission,
Turnpike Rev Ser K................................. 7.625 12-01-09 AAA 500 571,250 6.67
Philadelphia Hospital & Higher Education Facilities
Auth, Hosp Rev Children's Hosp Philadelphia Proj
Ser A.............................................. 7.875 07-01-08 AA 500 538,005 7.32
Hosp Rev Temple Univ Hosp Ser A.................... 6.625 11-15-23 A- 3,375 3,409,324 6.56
Philadelphia School District,
GO UnLtd. Ser. B................................... 5.500 09-01-25 AAA 4,000* 3,863,320 5.69
-----------
14,659,799
-----------
SOUTH CAROLINA (2.86%)
James Island Public Service District,
Charleston County Swr Sys Ref...................... 7.500 06-01-18 AAA 1,250 1,405,600 6.67
Lexington County School District No. 1,
Cert of Part 1989 Ser B Pelion High School Proj.... 7.650 09-01-09 AAA 1,145 1,284,999 6.82
Richland, County of,
Poll Control Rev Union Camp Corp Proj Ser 1992 B... 6.625 05-01-22 A 2,460 2,572,865 6.33
Poll Control Rev Union Camp Corp Proj Ser C........ 6.550 11-01-20 A 1,000 1,042,760 6.28
-----------
6,306,224
-----------
</TABLE>
See notes to financial statements.
16
<PAGE> 17
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
SOUTH DAKOTA (0.50%)
South Dakota Health & Educational Facilities Auth,
Rev Ser 1989 Sioux Valley Hosp Iss................... 7.625% 11-01-13 AA- $ 925 $ 1,030,321 6.85%
Rev Ser 1989 Sioux Valley Hosp Iss................... 7.625 11-01-13 AA- 75 78,809 7.26
-----------
1,109,130
-----------
TENNESSEE (4.92%)
Eastside Utility District of Hamilton,
Waterworks Rev Iss................................... 6.750 11-01-11 BBB+ 1,000 1,051,640 6.42
Humphreys, County of,
Indl Devel Board Solid Waste Disp Rev (E.I.
DuPont DeNemours & Co.).............................. 6.700 05-01-24 AA 6,500 6,788,925 6.41
Metropolitan Nashville & Davidson County Health &
Education Facility Board, Rev Ref Vanderbilt
Univ Ser A........................................... 7.625 05-01-16 AA 1,750 1,939,175 6.88
Tennessee Housing Development Agency,
Homeownership Prog Proj J............................ 7.750 07-01-17 A+ 1,000 1,068,040 7.26
-----------
10,847,780
-----------
TEXAS (4.93%)
Austin, City of,
Utility Sys Rev Ref Ser B............................ 7.800 11-15-12 A 1,000 1,109,900 7.03
Corpus Christi Housing Finance Corp,
Single Family Mtg Sr Rev Ref Ser 1991 A.............. 7.700 07-01-11 AAA 730 793,495 7.08
El Paso Housing Finance Corp,
Single Family Mtg Rev Ref Bonds 1991 Ser A........... 8.750 10-01-11 A** 665 739,300 7.87
Harris County Health Facilities Development Corp,
Hospital Rev Saint Luke's Episcopal.................. 8.250 02-15-08 AAA 1,475 1,695,041 7.18
Harris, County of,
Toll Road Unltd Tax & Sub Lien Rev Ref............... 8.100 08-01-08 AA+ 250 279,890 7.23
Toll Road Unltd Tax & Sub Lien Rev Ref............... 8.125 08-01-15 AA+ 250 280,045 7.25
Houston Water & Sewer System,
Rev Ref Prior Lien Ser B............................. 6.750 12-01-08 A 1,500 1,652,535 6.13
North Central Texas Health Facility Development Corp,
Hospital Rev Baylor Univ Medical Center Ser 1991 A... 9.614# 05-15-16 AA 1,000 1,114,560 8.63
Texas Housing Agency,
Mtg Rev Single Family Ser A.......................... 8.250 03-01-17 A+ 990 1,025,145 7.97
Texas, State of,
Veterans' Land Board GO.............................. 7.125 12-01-09 AA 1,000 1,078,490 6.61
Veterans' Land Board GO.............................. 8.250 12-01-10 AA 390 399,894 8.05
Veterans' Land Board GO Prerefunded.................. 8.250 12-01-10 AAA 610 700,506 7.18
-----------
10,868,801
-----------
UTAH (3.48%)
Intermountain Power Agency,
Pwr Supply Rev Ref Ser A............................. 5.000 07-01-21 AA- 2,000 1,756,180 5.69
Pwr Supply Spec Oblig-Registered-1st Crossover Ser... 5.000 07-01-16 AA- 1,935 1,732,676 5.58
</TABLE>
See notes to financial statements.
17
<PAGE> 18
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
UTAH (CONTINUED)
Salt Lake City Hospital,
Rev Ref IHC Hosp Inc Ser B........................... 8.000% 05-15-07 AA $ 350 $ 386,215 7.25%
Rev Ref IHC Hosp Inc VRDN/RIBS....................... 9.287# 05-15-20 AAA 1,500 1,708,125 8.16
Rev Ref Ser A........................................ 8.125 05-15-15 AAA 1,000 1,212,390 6.70
Utah Housing Finance Agency,
Single Family Mtg Sr Bonds 1990 Iss B-2.............. 7.700 07-01-15 AA 425 444,941 7.35
Single Family Mtg Sr Bonds 1991 Iss B-1.............. 7.500 07-01-16 AA 405 434,205 7.00
------------
7,674,732
------------
VIRGINIA (1.59%)
Arlington County Industrial Development Auth,
Hosp Facil Rev Arlington Hosp Ser 1991 A............. 7.125 09-01-21 AAA** 500 575,750 6.19
Fairfax County Industrial Development Auth,
Rev RITES............................................ 9.528# 08-29-23 AA- 1,000 1,266,250 7.52
Fredericksburg Industrial Auth,
Hosp Facil Rev....................................... 9.144# 08-15-23 AAA 1,500 1,659,375 8.27
------------
3,501,375
------------
WASHINGTON (1.89%)
Tacoma Electric System,
Rev Iss of 1989...................................... 7.375 01-01-08 AAA 1,000 1,118,510 6.59
Rev VRDN/RIBS Iss of 1991............................ 8.790# 01-02-15 AAA 1,000 1,095,000 8.03
University of Washington,
Housing & Dining Sys Rev Ser 1991.................... 7.000 12-01-21 AAA 750 832,230 6.31
Washington, State of,
GO Ser A of 1990..................................... 6.750 02-01-15 AA 1,000 1,125,430 6.00
------------
4,171,170
------------
WISCONSIN (0.52%)
Sturgeon Bay, City of,
Door County Combined Util Mtg Rev Ser 1990........... 7.500 01-01-10 AAA 770 884,283 6.53
Door County Combined Util Mtg Rev Ser 1990........... 7.500 01-01-10 AAA 230 258,653 6.67
------------
1,142,936
------------
WYOMING (1.20%)
Sweetwater County Pollution Control,
Rev Idaho Pwr Co. Ser A.............................. 7.625 12-01-14 A- 500 525,165 7.26
Rev Idaho Pwr Co. Ser B.............................. 7.625 12-01-13 A- 1,000 1,050,330 7.26
Rev Idaho Pwr Co. Ser B MBIA......................... 7.625 12-01-13 AAA 1,000 1,063,490 7.17
------------
2,638,985
------------
OTHER - PUERTO RICO (1.30%)
University of Puerto Rico,
Univ Rev Ser M....................................... 5.250 06-01-25 AAA 3,000* 2,865,600 5.50
------------
TOTAL TAX-EXEMPT LONG-TERM BONDS
(Cost $205,317,165) (98.93%) 218,037,090
------ ------------
</TABLE>
See notes to financial statements.
18
<PAGE> 19
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000'S MARKET
STATE, ISSUER, DESCRIPTION RATE OMITTED) VALUE
- -------------------------- ---- -------- -----
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.83%)
Investment in a joint repurchase
agreement with SBC Capital
Markets Dated 10-31-95,
Due 11-01-95 (secured by
U.S. Treasury Bonds 8.75%
Due 05-15-17 and U.S. Treasury
Note 5.75% Due 09-30-97).................................... 5.890% $1,831 $ 1,831,000
CORPORATE SAVINGS ACCOUNT (0.0%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.0%........................................... 6,384
------------
TOTAL SHORT-TERM INVESTMENTS ( 0.83%) 1,837,384
------ ------------
TOTAL INVESTMENTS (99.76%) $219,874,474
====== ============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
* Securities, other than short-term investments, newly added to the portfolio
during the period ended October 31, 1995.
** Rated by Moody's Investors Services or John Hancock Advisers, Inc. where
Standard & Poor's ratings are not available. NR Security is not rated.
*** Credit ratings are unaudited.
+ The yield is unaudited and not calculated in accordance with guidelines
established by the U.S. Securities and Exchange Commission.
# Represents rate in effect on October 31, 1995.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 20
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
PORTFOLIO CONCENTRATION (UNAUDITED)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE JOHN HANCOCK MANAGED TAX-EXEMPT FUND INVESTS PRIMARILY IN SECURITIES ISSUED
BY VARIOUS STATES AND THEIR VARIOUS POLITICAL SUBDIVISIONS. THE PERFORMANCE OF
THE FUND IS CLOSELY TIED TO THE ECONOMIC CONDITIONS WITHIN THE APPLICABLE STATES
AND THE FINANCIAL CONDITION OF THE STATES AND THEIR AGENCIES AND MUNICIPALITIES.
THE CONCENTRATION OF INVESTMENTS BY STATES AND CREDIT RATINGS FOR INDIVIDUAL
SECURITIES HELD BY THE FUND IS SHOWN IN THE SCHEDULE OF INVESTMENTS. IN
ADDITION, THE CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS SECTOR
CATEGORIES.
THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS AT OCTOBER 31,
1995 ASSIGNED TO THE VARIOUS SECTOR CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE AS A PERCENTAGE OF
SECTOR DISTRIBUTION THE FUND'S NET ASSETS:
------------------- -------------------------------
<S> <C>
General Obligation .......................................... 4.42%
Revenue Bonds - Electric .................................... 8.90
Revenue Bonds - Health/Education ............................ 25.00
Revenue Bonds - Housing ..................................... 11.23
Revenue Bonds - Industrial .................................. 5.32
Revenue Bonds - Pollution Control ........................... 14.45
Revenue Bonds - Transportation .............................. 10.65
Revenue Bonds - Water & Sewer ............................... 4.69
Revenue Bonds - Other ....................................... 14.27
-----
TOTAL TAX-EXEMPT LONG-TERM BONDS 98.93%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is a an open-end investment management
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Managed Tax-Exempt Fund (the "Fund"),
John Hancock Gold & Government Fund, John Hancock Regional Bank Fund, John
Hancock Sovereign U.S. Government Income Fund and John Hancock Sovereign
Achievers Fund. Prior to January 1, 1995, John Hancock Gold & Government Fund
was known as John Hancock Freedom Gold & Government Fund and John Hancock
Regional Bank Fund was known as John Hancock Freedom Regional Bank Fund.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B.The shares of each class represent an interest
in the same portfolio of investments of the Fund and have equal rights to
voting, redemption, dividends, and liquidation, except that certain expenses,
subject to the approval of the Trustees, may be applied differently to each
class of shares in accordance with current regulations of the Securities and
Exchange Commission. Shareholders of a class which bears distribution/service
expenses under the terms of a distribution plan, have exclusive voting rights
regarding such distribution plan. Significant accounting policies of the Fund
are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
is recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes. Transfer
agent expenses and distribution/service fees if any, are calculated daily at the
class level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
PREMIUM AND DISCOUNT For tax-exempt issues, the Fund amortizes the amount paid
in excess of par value on securities purchased from either the date of purchase
or date of issue to date of sale, maturity or to next call date, if applicable.
The premium amortization reduces interest income. The Fund accretes original
issue discount from par value on securities purchased from either the date of
issue or the date of purchase over the life of the security, as required by the
Internal Revenue Code. The Fund records market discount on bonds purchased after
April 30, 1993 at time of disposition.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates and
other market conditions. At the time the Fund enters into a financial futures
contract, it is required to deposit with its custodian a specified amount of
cash or U.S. government securities, known as "initial margin," equal to a
certain percentage of the value of the financial futures contract being traded.
Each day, the futures contract is valued at the official settlement price of the
board of trade or U.S. commodities exchange. Subsequent payments, known as
"variation margin," to and from the broker are made on a daily basis as the
market price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market," are recorded by the Fund
as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1995 there were no open positions in financial futures
contracts.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned
subsidiary of The Berkeley Financial Group, for a continuous investment program
equivalent, on an annual basis, to the sum of (a) 0.60% of the first
$250,000,000 of the Fund's average daily net asset value, (b) 0.50% of the next
$500,000,000, and (c) 0.45% of the Fund's average daily net asset value in
excess of $750,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value. Additionally, the Adviser may
reduce part or all of its management fee for a period under the terms of the
Advisory Agreement. For the period ended October 31, 1995 the Adviser reduced
the Fund's management fee by $113,411. This reduction may be discontinued at any
time. Furthermore, $47,982 of custodian fees have been reduced by balance
credits applied during the period ended October 31, 1995.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended October 31, 1995, net
sales charges received on sales of Class A shares of the Fund amounted to
$96,495. Out of this amount, $11,759 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $22,654 was paid
as sales commissions to unrelated broker-dealers and
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
$62,082 was paid as sales commissions to sales personnel of John Hancock
Distributors, Inc. ("Distributors"), Tucker Anthony, Incorporated ("Tucker
Anthony") and Sutro & Co., Inc. ("Sutro"), all of which are broker-dealers. The
Adviser's indirect parent, John Hancock Mutual Life Insurance Company, is the
indirect sole shareholder of Distributors and John Hancock Freedom Securities
Corporation and its subsidiaries, which include FDC, Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase are subject
to a contingent deferred sales charge ("CDSC") at declining rates beginning at
5.0% of the lesser of the current market value at the time of redemption or the
original purchase cost of the shares being redeemed. Proceeds from the CDSC are
paid to JH Funds and are used in whole or in part to defray its expenses related
to providing distribution related services to the Fund in connection with the
sales of Class B shares. For the period ended October 31, 1995 the contingent
deferred sales charges received by JH Funds amounted to $308,083.
In addition, to reimburse the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted 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 the
Co-Distributors 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 the Co-Distributors for their distribution/
service costs. Up to a maximum of 0.25% of such payments may be service fees as
defined by the amended Rules of Fair Practice of the National Association of
Securities Dealers. Under the amended Rules of Fair Practice, curtailment of a
portion of the Fund's 12b-1 payments could occur under certain circumstances. In
order to comply with this rule, the 12b-1 fee on Class B shares was decreased to
0.90% effective August 1, 1995, increased to 1.00% effective September 1, 1995
and decreased to 0.95% effective October 1, 1995.
The Fund has a transfer agent agreement with John Hancock Investor
Services, Corp. ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Prior to January 1, 1995, the Fund paid Investor
Services a monthly transfer agent fee equivalent, on an annual basis, to 0.03%
and 0.06% of the average daily net asset value of Class A and Class B shares of
the Fund, respectively, plus out of pocket expenses incurred by Investor
Services on behalf of the Fund. For the period January 1, 1995 and through
September 30, 1995 Class A and Class B shares paid transfer agent fees based on
the number of shareholder accounts and certain out-of-pocket expenses. For the
eleven months ended September 30, 1995 the transfer agent expense, calculated as
a class specific expense was $20,596 for Class A and $140,680 for Class B,
respectively. Effective October 1, 1995 transfer agent expense is being treated
as a fund expense based on the number of shareholder accounts in the Fund and
certain out-of-pocket expenses.
Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates, as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund.
Effective with the fees paid for 1995, 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 will make
investments into other John Hancock funds, as applicable, to cover its liability
with regard to the deferred compensation. Investments to cover the Fund's
deferred compensation liability will be recorded on the Fund's books as an other
asset. The deferred compensation liability will be marked to market on a
periodic basis and income earned by the investment will be recorded on the
Fund's books.
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other then obligations of the
U.S. government and its agencies and short-term securities, during the period
ended October 31, 1995, aggregated $231,092,265 and $262,789,315, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended October 31, 1995.
The cost of investments owned at October 31, 1995 (including the joint
repurchase agreement) for Federal income tax purposes was $207,148,165. Gross
unrealized appreciation and depreciation of investments aggregated $13,077,991
and $358,066, respectively, resulting in net unrealized appreciation of
$12,719,925.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1995, the Fund has reclassified amounts to
reflect an increase in undistributed net investment income of $70,529, a
decrease in accumulated net realized gain on investments and financial futures
contracts of $67,819 and a decrease to capital paid-in of $2,710. This
represents the cumulative amount necessary to report these balances on a tax
basis, excluding certain temporary differences, as of October 31, 1995.
Additional adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the Fund, are
primarily attributable to certain differences in the computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles.
24
<PAGE> 25
John Hancock Funds - Managed Tax-Exempt Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Managed Tax-Exempt Fund and the Trustees of
Freedom Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Managed Tax-Exempt
Fund (the "Fund") (a portfolio of Freedom Investment Trust) at October 31, 1995,
and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 18, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the taxable distributions of the Fund during its fiscal year ended
October 31, 1995.
It is anticipated that there will be a distribution from net realized gains
from sales of securities and financial futures contracts to shareholders of
record on December 22, 1995 and payable on December 28, 1995. Shareholders will
receive a 1995 U.S. Treasury Department Form 1099-DIV in January 1996
representing their proportionate share.
Income dividends for the Fund are 100% tax-exempt.
25
<PAGE> 26
NOTES
John Hancock Funds - Managed Tax-Exempt Fund
26
<PAGE> 27
NOTES
John Hancock Funds - Managed Tax-Exempt Fund
27
<PAGE> 28
Bulk Rate
[LOGO] JOHN HANCOCK FUNDS U.S. Postage
A GLOBAL INVESTMENT MANAGEMENT FIRM PAID
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603 Brockton, MA
Permit No. 582
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."]
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Managed Tax-Exempt Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on Recycled
Paper."]
JHD 0700A 10/95
