REGISTRATION NO. 2-90305
REGISTRATION NO. 811-3999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
---------
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 36 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 36
(check appropriate box or boxes)
---------
FREEDOM INVESTMENT TRUST
(Exact name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(address of Principal Executive Officers)
Registrant's Telephone Number, including Area Code (617) 375-1700
----------
THOMAS H. DROHAN
Senior Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Name and Address of Agent for Service)
---------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on September 3, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has registered an indefinite number of shares under the Securities Act of 1933.
The Registrant filed the notice required by Rule 24f-2 for its most recent
fiscal year on or about December 26, 1995.
<PAGE>
FREEDOM INVESTMENT TRUST
CROSS
REFERENCE SHEET
<TABLE>
<CAPTION>
Item Number Statement of Additional
Form N-1A Part A Prospectus Caption Information Caption
- ---------------- ------------------ -------------------
<S> <C> <C>
1 Front Cover Page *
2 Expense Information; *
The Fund's Expenses; Share Price
3 The Fund's Financial Highlights; *
Performance
4 Investment Objective and Policies; *
Organization and Management of the Fund
5 Organization and Management of the Fund; *
The Fund's Expenses; Back Cover Page
6 Organization and Management of the Fund; *
Dividends and Taxes;
How to Buy Shares; How to Redeem Shares;
Additional Services and Programs
7 How to Buy Shares; *
Share Price; Additional Services and
Programs; Alternative Purchase
Arrangements; The Fund's Expenses; Back
Cover
Page
8 How to Redeem Shares *
9 Not Applicable *
<PAGE>
Item Number Statement of Additional
Form N-1A Part A Prospectus Caption Information Caption
- ---------------- ------------------ -------------------
10 * Front Cover Page
11 * Table of Contents
12 * Organization of the Fund
13 * Investment Objectives and
Policies; Certain Investment
Practices; Investment
Restrictions
14 * Those Responsible for
Management
15 * Those Responsible for
Management
16 * Investment Advisory and Other
Services;
Distribution Contracts;
Transfer Agent Services;
Custody of Portfolio;
Independent Auditors
17 * Brokerage Allocation
18 * Description of the Fund's
Shares
19 * Net Asset Value; Additional
Services and Programs
20 * Tax Status
21 * Distribution Contract
22 * Calculation of Performance
23 * Financial Statements
</TABLE>
<PAGE>
John Hancock
Financial
Industries Fund
Class A and Class B Shares
Prospectus
September 3, 1996
TABLE OF CONTENTS
Page
-------
Expense Information 2
The Fund's Financial Highlights 3
Investment Objective and Policies 4
Organization and Management of the Fund 8
Alternative Purchase Arrangements 9
The Fund's Expenses 10
Dividends and Taxes 11
Performance 12
How to Buy Shares 13
Share Price 14
How to Redeem Shares 19
Additional Services and Programs 21
This Prospectus sets forth information about John Hancock Financial
Industries Fund (the "Fund"), a diversified series of Freedom Investment
Trust, that you should know before investing. Please read and retain it for
future reference.
Additional information about the Fund has been filed with the Securities
and Exchange Commission (the "SEC"). You can obtain a copy of the Fund's
Statement of Additional Information, dated September 3, 1996, free of charge
by writing or telephoning: John Hancock Investor Services Corporation, P.O.
Box 9116, Boston, Massachusetts 02205-9116, 1-800-225-5291, (1-800-544-6713
TDD).
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve board, or any
other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
The purpose of the following information is to help you to understand the
various fees and expenses that you will bear, directly or indirectly, when
you purchase Fund shares. Since the Fund has a limited operating history, the
cost and expenses included in the table and hypothetical example below are
based on estimated fees and expenses of Class A and Class B shares for the
fiscal year ending October 31, 1996 and should not be considered as
representative of future expenses. Actual fees and expenses may be greater or
less than those indicated.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
------- -------
<S> <C> <C>
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases (as a percentage of offering price) 5.00% None
Maximum sales charge imposed on reinvested dividends None None
Maximum deferred sales charge None* 5.00%
Redemption fee+ None None
Exchange fee None None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management fee (net of reduction) 0.00% 0.00%
12b-1 fee** 0.30% 1.00%
Other expenses (net of reduction) 0.90% 0.90%
----- -----
Total Fund operating expenses (net of reduction) 1.20% 1.90%
===== =====
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, a contingent deferred sales charge may be imposed but
for these investments, as described under the caption "Share Price," in
the event of certain redemption transactions within one year of purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of average daily net assets, and the remaining portion will be used
to cover distribution expenses.
*** Other expenses include transfer agent, legal, audit, custody and other
expenses.
(a) Expenses reflect a temporary agreement by the Fund's investment adviser
to limit expenses, not including Rule 12b-1 fees or any other class specific
expenses. Without such a limitation, the management fee would have been
estimated as 0.80% for each class, other expenses would be 7.80% for each
class, and total fund operating expenses would have been estimated at 8.90%
for Class A and 9.60% for Class B.
+ Redemption by wire fee (currently $4.00) not included.
<TABLE>
<CAPTION>
Example: 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return throughout the periods and
reinvestment of all dividends:
Class A Shares $62 $86 $113 $188
Class B Shares
--Assuming complete redemption at end of period $69 $90 $123 $204
--Assuming no redemption $19 $60 $103 $204
</TABLE>
(The example should not be considered as a representation of past or
future expenses or future investment returns. Actual expenses may be greater
or less than shown.)
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the
maximum front-end sales charge permitted under the National Association of
Securities Dealers Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully explained
in this Prospectus under the caption "The Fund's Expenses" and in the
Statement of Additional Information under the captions "Investment Advisory
and Other Services" and "Distribution Contract."
2
<PAGE>
The Fund's Financial Highlights
John Hancock Financial Industries Fund
The following table includes selected data for a Class A share outstanding
throughout the period indicated. No Class B shares were issued or outstanding
during the period. Total investment return, key ratios and supplemental data
are listed as follows:
<TABLE>
<CAPTION>
For the Period
March 14, 1996
(Commencement of
Operations) to
July 31, 1996
Class A (Unaudited)
------------------
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50(b)
-----------------
Net Investment Income 0.02(e)
Net Realized and Unrealized Gain on Investments 1.14
-----------------
Total from Investment Operations 1.16
-----------------
Net Asset Value, End of Period $ 9.66
-----------------
Total Investment Return at Net Asset Value (f) 13.65%(c)
Total Adjusted Investment Return at Net Asset Value (a)(f) 10.58%(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 750
Ratio of Expenses to Average Net Assets 1.20%*
Ratio of Adjusted Expenses to Average Net Assets (a)(d) 9.22%*
Ratio of Net Investment Income to Average Net Assets 0.50%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a)(d) (7.52)%*
Portfolio Turnover Rate 13%
Average Brokerage Commission Rate $0.0643(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 expected to
decrease and adjusted net investment income as a percentage of average
net assets is expected to increase as the net assets of the Fund grow.
(e) On average month end shares outstanding.
(f) Total investment return does not reflect the effect of sales charges.
(g) Per portfolio share traded.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
[sidebar] The Fund seeks capital appreciation primarily through investments
in equity securities of financial services companies throughout the world.
The Fund's investment objective is capital appreciation. The Fund seeks its
objective primarily through investments in financial services companies
(defined below) located in the U.S. and foreign countries. There is no
assurance that the Fund will achieve its investment objective.
Under ordinary circumstances, the Fund will invest at least 65% of its total
assets in equity securities of financial services companies. For this
purpose, equity securities include common and preferred stocks and their
equivalents (including warrants to purchase and securities convertible into
such stocks).
[sidebar] Financial services companies include various types of firms.
A financial services company is a firm that in its most recent fiscal year
either (i) derived at least 50% of its revenues or earnings from financial
services activities, or (ii) devoted at least 50% of its assets to such
activities. Financial services companies provide financial services to
consumers and businesses and include the following types of U.S. and foreign
firms: commercial banks, thrift institutions and their holding companies;
consumer and industrial finance companies; diversified financial services
companies; investment banks; securities brokerage and investment advisory
firms; real estate-related firms; leasing firms; insurance brokerages; and
various firms in all segments of the insurance industry such as multi-line,
property and casualty, and life insurance companies and insurance holding
companies.
[sidebar] The Fund may also invest in debt securities of financial services
companies and in debt and equity securities of certain other companies.
The Fund may invest in debt securities of financial services companies. The
Fund may also invest in equity and debt securities of companies outside of
the financial services sector if, in the Adviser's opinion, such nonfinancial
services companies will benefit from developments in the financial services
sector. The Fund may invest up to 5% of its net assets in a combination of
below-investment grade debt securities of banks and equities of non-financial
services companies.
To avoid the need to sell equity securities in the Fund's portfolio to meet
redemption requests, and to provide flexibility to the Fund to take advantage
of investment opportunities, the Fund may invest up to 15% of its net assets
in short-term, investment grade debt securities. Short-term debt securities
have a maturity of less than one year. Investment grade securities are rated
at the time of purchase BBB or higher by Standard & Poor's Rating Group
("S&P") or Baa or higher by Moody's Investors Service, Inc. ("Moody's"). Debt
securities include corporate obligations (such as commercial paper, notes,
bonds or debentures), certificates of deposit, deposit accounts, obligations
of the U.S. Government, its agencies and instrumentalities, and repurchase
agreements. When the Adviser believes that financial conditions warrant, it
may for temporary defensive purposes invest up to 80% of the Fund's assets in
these securities rated in the three highest categories of S&P or Moody's.
Medium grade obligations (i.e., those rated BBB or Baa) lack outstanding
investment characteristics and have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments on these
obligations. In the event a debt security is subsequently downgraded below
medium grade, the Adviser will consider this event in determining whether the
Fund should continue to hold the security. See Appendix A to the Statement of
Additional Information for a description of the various ratings of investment
grade debt securities.
4
<PAGE>
[sidebar] Risk Factors and Special Considerations
Since the Fund's investments will be concentrated in the financial services
sector, it will be subject to risks in addition to those that apply to the
general equity and debt markets. Events may occur which significantly affect
the sector as a whole or a particular segment in which the Fund invests.
Accordingly, the Fund may be subject to greater market volatility than a fund
that does not concentrate in a particular economic sector or industry. Thus,
it is recommended that an investment in the Fund be only a portion of your
overall investment portfolio.
In addition, most financial services companies are subject to extensive
governmental regulation which limits their activities and may (as with
insurance rate regulation) affect the ability to earn a profit from a given
line of business. Certain financial services businesses are subject to
intense competitive pressures, including market share and price competition.
The removal of regulatory barriers to participation in certain segments of
the financial services sector may also increase competitive pressures on
different types of firms. For example, legislative proposals to remove
traditional barriers between banking and investment banking activities would
allow large commercial banks to compete for business that previously was the
exclusive domain of securities firms. Similarly, the removal of regional
barriers in the banking industry has intensified competition within the
industry.
The availability and cost of funds to financial services firms is crucial to
their profitability. Consequently, volatile interest rates and general
economic conditions can adversely affect their financial performance.
Financial services companies in foreign countries are subject to similar
regulatory and interest rate concerns. In particular, government regulation
in certain foreign countries may include controls on interest rates, credit
availability, prices and currency movements. In some cases, foreign
governments have taken steps to nationalize the operations of banks and other
financial services companies. See "Foreign Issuers."
The market value of debt securities in the Fund's portfolio will tend to vary
in an inverse relationship with changes in interest rates. For example, as
interest rates rise, the market value of debt securities tends to decline.
[sidebar] The Fund may employ certain investment strategies to help achieve
its investment objective.
Options and Futures Transactions. The Fund may invest up to 5% of its assets
in purchased put and call options and may write (sell) covered call options
on up to 30% of its portfolio securities. The Fund may deal in exchange
listed or over-the-counter options.
The Fund's ability to use options to hedge or earn income successfully will
depend on the Adviser's ability accurately to predict market movements.
Successful hedging also depends on a strong correlation between the market
for the underlying security and the related options market. There is no
assurance that a liquid market for options will always exist. In addition,
the Fund could be prevented from opening or closing out an options position
on favorable terms because of exchange imposed limits on positions or on
daily price fluctuations.
The Fund may buy and sell options contracts on securities and stock indices,
stock index futures contracts and options on such futures contracts. Options
and futures contracts are bought and sold to manage the Fund's exposure to
changing interest
5
<PAGE>
rates and security prices. Some options and futures strategies, including
selling futures, buying puts and writing calls, tend to hedge a Fund's
investment against price fluctuations. Other strategies, including buying
futures, writing puts, and buying calls, tend to increase market exposure.
Options and futures may be combined with each other or with forward contracts
in order to adjust the risk and return characteristics of the overall
portfolio.
Options and futures can be volatile investments and involve certain risks. If
the Adviser applies a hedge at an inappropriate time or judges market
conditions incorrectly, options and futures strategies may lower the Fund's
return. The Fund could also experience losses if the prices of its options
and futures positions are poorly correlated with its other investments, or if
it can not close out its positions because of an illiquid secondary market.
The Fund will not engage in a transaction in futures or options on futures
if, immediately thereafter, the sum of initial margin deposits and premiums
required to establish speculative positions in futures contracts and options
on futures would exceed 5% of the Fund's net assets. The loss incurred by the
Fund from transactions in futures contracts and writing options on futures is
potentially unlimited and may exceed the amount of any premium received. The
Fund's transactions in options and futures contracts may be limited by the
requirements of the Internal Revenue Code of 1986, as amended (the "Code")
for qualification as a regulated investment company. See the Statement of
Additional Information for further discussion of options and futures
transactions, including tax effects and investment risks.
Restricted Securities. The Fund may purchase restricted securities eligible
for resale to "qualified institutional buyers" pursuant to Rule 144A under
the Securities Act of 1933 (the "Securities Act"). The Trustees will monitor
the Fund's investments in these securities, focusing on certain factors,
including valuation, liquidity and availability of information. Purchases of
other restricted securities are subject to an investment restriction limiting
the Fund's illiquid securities to not more than 15% of its net assets.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements.
The Fund may reinvest any cash collateral in short-term securities and money
market fund shares. When the Fund lends portfolio securities, there is a risk
that the borrower may fail to return the loaned securities. As a result, the
Fund may incur a loss or, in the event of the borrower's bankruptcy, the Fund
may be delayed in or prevented from liquidating the collateral. It is a
fundamental policy of the Fund not to lend portfolio securities having a
total value in excess of 33-1/3% of its total assets.
Repurchase Agreements, Forward Commitments and When-Issued Securities. The
Fund may enter into repurchase agreemens and may purchase securities on a
forward commitment or when-issued basis. In a repurchase agreement, the Fund
buys a security subject to the right and obligation to sell it back to the
seller at a higher price. These transactions must be fully collateralized at
all times, but involve some credit risk to the Fund if the other party
defaults on its obligation and the Fund is delayed in or prevented from
liquidating the collateral. The Fund will segregate in a
6
<PAGE>
separate account cash or liquid, high grade debt securities equal in value to
its forward commitments and when-issued securities. Purchasing securities for
future delivery or on a when-issued basis may increase the Fund's overall
investment exposure and involves a risk of loss if the value of the
securities declines before the settlement date.
Short Sales. The Fund may engage in short sales "against the box," as well as
short sales to hedge against or to profit from an anticipated decline in the
value of a security. When the Fund engages in a short sale, it will place in
a segregated account and mark to market daily cash or U.S. government
securities according to applicable regulatory requirements. See the Statement
of Additional Information.
Foreign Currencies. Due to its investments in foreign securities, the Fund
may hold a portion of its assets in foreign currencies. As a result, the Fund
may enter into forward foreign currency exchange contracts to protect against
changes in foreign currency exchange rates. A forward foreign currency
exchange contract involves an obligation to purchase a specific currency at a
future date at a price set at the time of the contract. Although these
contracts could reduce the risk of loss due to a decline in the value of the
hedged foreign currency, they could also limit any potential gain which might
result from an increase in the value of that currency.
[sidebar] The Fund follows certain policies which may help to reduce
investment risk.
The Fund has adopted certain investment restrictions which are enumerated in
detail in the Statement of Additional Information, where they are classified
as fundamental or nonfundamental. Those investment restrictions designated as
fundamental may not be changed without shareholder approval. The Fund's
investment objective and its nonfundamental investment policies and
restrictions, however, may be changed by a vote of the Trustees without
shareholder approval. Under normal market conditions, the Fund's portfolio
turnover rate for the current fiscal year is expected to be no more than
100%.
Depository Receipts. The Fund may invest in securities of foreign issuers in
the form of American Depository Receipts ("ADRs"), European Depository
Receipts ("EDRs") or other securities convertible into securities of
corporations in which the Fund is permitted to invest. ADRs (sponsored and
unsponsored) are receipts typically issued by an American bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation, and are designed for trading in the United States securities
markets. Issuers of the shares underlying unsponsored ADRs are not
contractually obligated to disclose material information in the United States
and, therefore, there may not be a correlation between such information and
the market value of the unsponsored ADR.
Global Risks. Investments in foreign securities may involve risks not present
in domestic securities due to exchange controls, less publicly available
information, more volatile or less liquid securities markets, and the
possibility of expropriation, confiscatory taxation or political, economic or
social instability. There may be difficulty in enforcing legal rights outside
the United States. Some foreign companies are not subject to the same uniform
financial reporting requirements, accounting standards and government
supervision as domestic companies, and foreign exchange markets are regulated
differently from the U.S. stock market. Additionally, because foreign
securities may be denominated in currencies other than the U.S. dollar,
7
<PAGE>
changes in foreign currency exchange rates will affect the Fund's net asset
value, the value of dividends and interest earned, gains and losses realized
on the sale of securities, and net investment income and gains, if any, that
the Fund distributes to shareholders. Securities transactions undertaken in
some foreign markets may not be settled promptly. Therefore, the Fund's
investments on foreign exchanges may be less liquid and subject to the risk
of fluctuating currency exchange rates pending settlement. The expense ratio
of the Fund can be expected to be higher than that of mutual funds investing
only in domestic securities since the expenses of the Fund, such as the cost
of maintaining custody of foreign securities and advisory fees, are higher.
[sidebar] Brokers are chosen based on best price and execution.
In choosing brokerage firms to carry out the Fund's transactions the Adviser
gives primary consideration to execution at the most favorable price, taking
into account the broker's professional ability and quality of service.
Consideration may also be given to the broker's sales of Fund shares.
Pursuant to procedures established by the Trustees, the Adviser may place
securities transactions with brokers affiliated with the Adviser. These
brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc.
and Sutro & Company, Inc., which are indirectly owned by John Hancock Mutual
Life Insurance Company, which in turn indirectly owns the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is a diversified series of Freedom Investment Trust, an open-end
management investment company organized as a Massachusetts business trust in
1984 (the "Trust"). The Trust reserves the right to create and issue a number
of series of shares, or funds or classes of shares of those series, which are
separately managed and have different investment objectives. The Trust is not
required and does not intend to hold annual meetings of shareholders,
although special meetings may be held for such purposes as electing or
removing Trustees, changing fundamental policies or approving a management
contract. The Trust, under certain circumstances, will assist in shareholder
communications with other shareholders.
[sidebar] John Hancock Advisers, Inc. advises investment companies having a
total asset value of more than $19 billion.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary
of John Hancock Mutual Life Insurance Company (the "Life Company"), a
financial services company. The Adviser provides the Fund, and other
investment companies in the John Hancock group of funds, with investment
research and portfolio management services. John Hancock Funds, Inc. ("John
Hancock Funds") distributes shares for all of the John Hancock funds directly
and through selected broker-dealers ("Selling Brokers"). Certain Trust
officers are also officers of the Adviser and John Hancock Funds. Pursuant to
an order granted by the Securities and Exchange Commission, the Trust has
adopted a deferred compensation plan for its independent Trustees, which
allows Trustees' fees to be invested by the Trust in other John Hancock
funds.
James K. Schmidt is primarily responsible for management of the Fund. He is
assisted by a team of co-portfolio managers and analysts in the day-to-day
management of the Fund. Mr. Schmidt is Senior Vice President and portfolio
manager of John Hancock Regional Bank Fund, John Hancock Bank and Thrift
Opportunity Fund and The Southeastern Thrift and Bank Fund, Inc., a
closed-end fund. He joined the Adviser in 1985.
In order to avoid conflicts with portfolio trades for the Fund, the Adviser
and the Fund have adopted extensive restrictions on personal securities
trading by personnel of the
8
<PAGE>
Adviser and its affiliates. Some of these restrictions are: pre-clearance for
all personal trades and a ban on the purchase of initial public offerings, as
well as contributions to specified charities of profits on securities held
for less than 91 days. These restrictions are a continuation of the basic
principle that the interests of the Fund and its shareholders come first.
ALTERNATIVE PURCHASE ARRANGEMENTS
You can purchase shares of the Fund at a price equal to their net asset value
per share, plus a sales charge. At your election this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge Alternative,"
Class A Shares) or on a contingent deferred basis (see "Contingent Deferred
Sales Charge Alternative," Class B Shares). If you do not specify on your
account application the class of shares you are purchasing, it will be
assumed that you are investing in Class A shares.
[sidebar] Investments in Class A shares are subject to an initial sales
charge.
Class A Shares. If you elect Class A shares, you will incur an initial sales
charge unless the amount you purchase is $1 million or more. If you purchase
$1 million or more of Class A shares, you will not be subject to an initial
sales charge, but you will incur a sales charge if you redeem your shares
within one year of purchase. Class A shares are subject to ongoing
distribution and service fees at a combined annual rate of up to 0.30% of the
Fund's average daily net assets attributable to the Class A shares. Certain
purchases of Class A shares qualify for reduced initial sales charges. See
"Share Price--Qualifying for a Reduced Sales Charge."
[sidebar] Investments in Class B Shares are subject to a contingent deferred
sales charge.
Class B Shares. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them
within six years of purchase (the "contingent deferred sales charge" or the
"CDSC"). Class B shares are subject to ongoing distribution and service fees
at a combined annual rate of up to 1.00% of the Fund's average daily net
assets attributable to the Class B shares. Investing in Class B shares
permits all of your dollars to work from the time you make your investment,
but the higher ongoing distribution fee will cause the shares to have higher
expenses than Class A shares. To the extent that any dividends are paid by
the Fund, these higher expenses will also result in lower dividends than
those paid on Class A shares.
Class B shares are not available to full-service defined contribution plans
administered by John Hancock Investor Services Corporation or the Life
Company that had more than 100 eligible employees at the inception of the
Fund account.
Factors to Consider in Choosing an Alternative
[sidebar] You should consider which class of shares would be more beneficial
for you.
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider
whether, during the anticipated life of your Fund investment, the CDSC and
accumulated fees on Class B shares would be less than the initial sales
charge and accumulated fees on Class A shares purchased at the same time; and
to what extent this differential would be offset by the Class A shares' lower
expenses. To help you make this determination, the table under the caption
"Expense Information" on the inside cover page of this Prospectus gives
examples of the charges applicable to each class of shares. Class
9
<PAGE>
A shares normally will be more beneficial if you qualify for reduced sales
charges. See "Share Price--Qualifying for a Reduced Sales Charge."
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent
that any dividends are paid. However, because initial sales charges are
deducted at the time of purchase, you would not have all of your funds
invested initially and, therefore, would initially own fewer shares. If you
do not qualify for reduced initial sales charges and expect to maintain your
investment for an extended period of time, you might consider purchasing
Class A shares. This is because the accumulated distribution and service
charges on Class B shares may exceed the initial sales charge and accumulated
distribution and service charges on Class A shares during the life of your
investment.
Alternatively, you might determine that it is more advantageous to purchase
Class B shares in order to have all your funds invested initially. However,
you will be subject to higher distribution fees and, for a six-year period, a
CDSC.
In the case of Class A shares, the distribution expenses that John Hancock
Funds incurs in connection with the sale of the shares will be paid from the
proceeds of the initial sales charge and the ongoing distribution and service
fees. In the case of Class B shares, the expenses will be paid from the
proceeds of the ongoing distribution and service fees, as well as from CDSC
incurred upon redemption within six years of purchase. The purpose and
function of the Class B shares' CDSC and ongoing distribution and service
fees are the same as those of the Class A shares' initial sales charge and
ongoing distribution and service fees. Sales personnel distributing the
Fund's shares may receive different compensation for selling each class of
shares.
Dividends, if any, on Class A and Class B shares will be calculated in the
same manner, at the same time, and on the same day. They will also be in the
same amount, except for differences resulting from each class bearing only
its own distribution and service fees, shareholder meeting expenses and any
incremental transfer agency costs. See "Dividends and Taxes."
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a monthly fee
to the Adviser which is based upon the average daily net asset value of the
Fund at the annual rate of 0.80% of first $500 million of average daily net
assets and 0.75% of average daily net assets in excess of $500 million.
The investment management fee is higher than the fees paid to most mutual
funds, but comparable to fees paid by funds that invest in similar
securities.
From time to time, the Adviser may reduce its fee or make other arrangements
to limit the Fund's expenses to not more than a specified percentage of
average daily net assets. The Adviser has voluntarily agreed to limit Fund
expenses including the management fee (but not including the 12b-1 fee or any
other class specific expenses) to 0.90% of the Fund's average daily net
assets. The Adviser retains the right to re-impose a fee and recover any
other payments to the extent that, at the end of any fiscal year, the Fund's
annual expenses fall below the limit.
10
<PAGE>
[sidebar] The Fund pays distribution and service fees for marketing and
sales-related shareholder servicing.
The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Under these Plans, the Fund will pay distribution and services fees at an
aggregate annual rate of 0.30% of the Class A shares' average daily net
assets and an aggregate annual rate of 1.00% of the Class B shares' average
daily net assets. In each case, up to 0.25% is for service expenses and the
remaining amount is for distribution expenses. The distribution fees are used
to reimburse John Hancock Funds for its distribution expenses including but
not limited to: (i) initial and ongoing sales compensation to Selling Brokers
and others (including affiliates of John Hancock Funds) engaged in the sale
of Fund shares; and (ii) with respect to Class B shares only, interest
expenses on unreimbursed distribution expenses. In the event John Hancock
Funds is not fully reimbursed for payments made or expenses incurred by it
under the Class A Plan, these expenses will not be carried beyond one year
from the date they were incurred. Unreimbursed expenses under the Class B
Plan will be carried forward together with interest on the balance of these
unreimbursed expenses.
The Fund compensates the Adviser for performing necessary tax and financial
management services. The compensation for 1996 is estimated to be at an
annual rate of 0.01875% of the average net assets of the Fund.
Information on the Fund's total expenses is in the Fund's Financial
Highlights section of this Prospectus.
DIVIDENDS AND TAXES
Dividends. Dividends from the Fund's net investment income and capital gains,
if any, are generally declared annually. Dividends are reinvested in
additional shares of your class unless you elect the option to receive them
in cash. If you elect the cash option and the U.S. Postal Service cannot
deliver your checks, your election will be converted to the reinvestment
option. Because of the higher expenses associated with Class B shares, any
dividends from the Fund's net investment income on these shares will be lower
than those of Class A shares. See "Share Price."
Taxation. Dividends from the Fund's net investment income, certain net
foreign currency gains, gains on certain foreign corporations and net
short-term capital gains are taxable to you as ordinary income. Dividends
from the Fund's net long-term capital gains are taxable as long-term capital
gains. These dividends are taxable whether received in cash or reinvested in
additional shares. Certain dividends may be paid by the Fund in January of a
given year but may be taxable to you as if you received them the prior
December. The Fund will send you a statement by January 31 showing the tax
status of the dividends you received for the prior year.
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code for each taxable year. As a regulated investment
company, the Fund will not be subject to Federal income tax on any net
investment income and net realized capital gains that are distributed to its
shareholders within the time period prescribed by the Code. When you redeem
(sell) or exchange shares, you may realize a taxable gain or loss.
On the account application, you must certify that the social security or
other taxpayer identification number you provide is your correct number and
that you are not subject
11
<PAGE>
to backup withholding of Federal income tax. If you do not provide this
information, or are otherwise subject to backup withholding, the Fund may be
required to withhold 31% of your dividends and proceeds of redemptions and
exchanges.
In addition to Federal taxes, you may be subject to state and local or
foreign taxes with respect to your investment in and distributions from the
Fund. In many states, any portion of the Fund's dividends that represents
interest received by the Fund on direct U.S. Government obligations may be
exempt from tax. You should consult your tax advisor for specific advice.
PERFORMANCE
[sidebar] The Fund may advertise its total return.
Total return is based on the overall change in value of a hypothetical
investment in the Fund. The Fund's total return shows the overall dollar or
percentage change in value, assuming the reinvestment of all dividends.
Cumulative total return shows the Fund's performance over a period of time.
Average annual total return shows the cumulative return divided over the
number of years included in the period. Because average annual total return
tends to smooth out variations in the Fund's performance, you should
recognize that it is not the same as actual year-to-year results.
Total return for Class A shares includes the effect of paying the maximum
sales charge (except as shown in "The Fund's Financial Highlights").
Investments at lower sales charges would result in higher performance
figures. Total return for the Class B shares reflects deduction of the
applicable contingent deferred sales charge imposed on a redemption of shares
held for the applicable period (except as shown in "The Fund's Financial
Highlights"). All calculations assume that all dividends are reinvested at
net asset value on the reinvestment dates during the periods. The total
return of Class A and Class B shares will be calculated separately and,
because each class is subject to certain different expenses, the total return
with respect to that class for the same period may differ. The relative
performance of the Class A and Class B shares will be affected by a variety
of factors, including the higher operating expenses attributable to the Class
B shares, whether the Fund's investment performance is better in the earlier
or later portions of the period measured, and the level of net assets of the
classes during the period. The Fund will include the total return of both
classes in any advertisement or promotional materials including Fund
performance data. Total return is an historical calculation and is not an
indication of future performance. The value of the Fund's shares, when
redeemed, may be more or less than their original cost. See "Factors to
Consider in Choosing an Alternative."
12
<PAGE>
HOW TO BUY SHARES
<TABLE>
<S> <C>
The minimum initial investment is $1,000 ($250 for group investments and retirement plans).
Complete the Account Application attached to this Prospectus. Indicate whether you are purchasing Class A or
Class B shares. If you do not specify which class of shares you are purchasing, Investor Services will
assume you are investing in Class A shares.
[sidebar] Opening an account.
By Check 1. Make your check payable to John Hancock Investor Services
Corporation.
2. Deliver the completed application and check to your registered
representative or, Selling Broker, or mail it directly to Investor
Services.
By Wire 1. Obtain an account number by contacting your registered
representative or Selling Broker, or by calling 1-800-225-5291.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For Credit To: John Hancock Financial Industries Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered representative
or Selling Broker or mail it directly to Investor Services.
[sidebar] Buying additional Class A and Class B shares.
Monthly Automatic Accumulation 1. Complete the "Automatic Investing" and "Bank Information" sections
Program (MAAP) on the Account Privileges Application, designating a bank account
from which your funds may be drawn.
2. The amount you elect to invest will be withdrawn automatically from
your bank or credit union account.
By Telephone 1. Complete the "Invest-By-Phone" and "Bank Information" section on the
Account Privileges Application, designating a bank account from
which your funds may be drawn. Note that in order to invest by
phone, your account must be in a bank or credit union that is a
member of the Automated Clearing House system (ACH).
2. After your authorization form has been processed, you may purchase
additional Class A or Class B shares by calling Investor Services
toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which your
account is registered, the Fund name, the class of shares you own,
your account number, and the amount you wish to invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
By Check 1. Either complete the detachable stub included on your account
statement or include a note with your investment listing the name of
the Fund, the class of shares you own, your account number and the
name(s) in which the account is registered.
2. Make your check payable to John Hancock Investor Services
Corporation.
3. Mail the account information and check to:
John Hancock Investor Services Corporation
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling Broker.
13
<PAGE>
By Wire Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Financial Industries Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
Other Requirements: All purchases must be made in U.S. dollars. Checks written on foreign banks will delay
purchases until U.S. funds are received, and a collection charge may be imposed. Shares of the Fund are
priced at the offering price listed or the net asset value computed after John Hancock Funds receives
notification of the dollar equivalent from the Fund's custodian bank. Wire purchases normally take two or
more hours to complete and, to be accepted the same day, must be received by 4:00 P.M., New York time. Your
bank may charge a fee to wire funds. Telephone transactions are recorded to verify information. Certificates
are not issued unless a request is made in writing to Investor Services.
</TABLE>
[sidebar] You will receive account statements, which you should keep to help
with your personal recordkeeping.
You will receive a statement of your account after any transaction that
affects your share balance or registration (statements related to
reinvestment of dividends and automatic investment/withdrawal plans will be
sent to you quarterly). A tax information statement will be mailed to you by
January 31 of each year.
SHARE PRICE
[sidebar] The offering price of your shares is their net asset value plus a
sales charge, if applicable, which will vary with the purchase alternative
you choose.
The net asset value per share (the "NAV") is the value of one share. The NAV
is calculated by dividing the net assets of each class by the number of
outstanding shares of that class. The NAV of each class can differ.
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services, or at fair
value as determined in good faith according to procedures approved by the
Trustees. Short-term debt investments maturing within 60 days are valued at
amortized cost, which approximates market value. Foreign securities are
valued on the basis of quotations from the primary market in which they are
traded, and are translated from the local currency into U.S. dollars using
current exchange rates. If quotations are not readily available, or the value
has been materially affected by events occurring after the closing of a
foreign market, assets are valued by a method that the Trustees believe
accurately reflects fair value. The NAV is calculated once daily as of the
close of regular trading on the New York Stock Exchange (generally at 4:00
p.m., New York time) on each day that the Exchange is open.
Shares of the Fund are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock
Funds. If you buy shares of the Fund through a Selling Broker, the Selling
Broker must receive your investment before the close of regular trading on
the New York Stock Exchange and transmit it to John Hancock Funds before its
close of business to receive that day's offering price.
Initial Sales Charge Alternative--Class A Shares. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge, as
follows:
14
<PAGE>
Combined
Reallowance
Sales Sales and Reallowance
Charge Charge Service to Selling
as a as a Fee as a Brokers as a
Percentage Percentage Percentage Percentage
Amount Invested of the of the of of the
(Including Sales Offering Amount Offering Offering
Charge) Price Invested Price(+) Price (*)
- --------------------- -------- -------- --------- ------------
Less than $50,000 5.00% 5.26% 4.25% 4.01%
$50,000 to $99,999 4.50% 4.71% 3.75% 3.51%
$100,000 to $249,999 3.50% 3.63% 2.85% 2.61%
$250,000 to $499,999 2.50% 2.56% 2.10% 1.86%
$500,000 to $999,999 2.00% 2.04% 1.60% 1.36%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(***)
(*) Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales
charge. A Selling Broker to whom substantially the entire sales charge
is reallowed may be deemed to be an underwriter under the Securities
Act of 1933.
(**) No sales charge is payable at the time of purchase of Class A shares of
$1 million or more, but a contingent deferred sales charge may be
imposed in the event of certain redemption transactions made within one
year of purchase.
(***) John Hancock Funds may pay a commission and first year's service fee
(as described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of Class A shares of $1 million or more in
the aggregate as follows: 1% on sales up to $4,999,999, 0.50% on the
next $5 million and 0.25% on $10 million and over.
(+) At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance, in an amount equal to 0.25% of the net
assets invested in the Fund. Thereafter, it pays the service fee
periodically in arrears in an amount up to 0.25% of the Fund's average
annual net assets. Selling Brokers receive the fee as compensation for
providing personal and account maintenance services to shareholders.
Sales charges ARE NOT APPLIED to any dividends that are reinvested in
additional shares of the Fund.
John Hancock Funds will pay certain affiliated Selling Brokers at an annual
rate of up to 0.05% of the daily net assets of the accounts attributable to
these brokers.
Under certain circumstances as described below, investors in Class A shares
may be entitled to pay reduced sales charges. See "Qualifying for a Reduced
Sales Charge."
Contingent Deferred Sales Charge--Investments of $1 million or more in Class
A Shares. Purchases of $1 million or more of the Fund's Class A shares will
be made at net asset value with no initial sales charge, but if the shares
are redeemed within 12 months after the end of the calendar month in which
the purchase was made (the contingent deferred sales charge period), a
contingent deferred sales charge will be imposed. The rate of the CDSC will
depend on the amount invested as follows:
Amount Invested CDSC Rate
- ---------------------------------- ----------
$1 Million to $4,999,999 1.00%
Next $5 Million to $9,999,999 0.50%
Amounts of $10 Million and over 0.25%
Existing full service clients of the Life Company who were group annuity
contract holders as of September 1, 1994, and participant directed defined
contribution plans
15
<PAGE>
with at least 100 eligible employees at the inception of the Fund account,
may purchase Class A shares with no initial sales charge. However, if the
shares are redeemed within 12 months after the end of the calendar year in
which the purchase was made, a CDSC will be imposed at the above rate.
The CDSC will be assessed on an amount equal to the lesser of the current
market value or the original purchase cost of the redeemed Class A shares.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any dividends which have been reinvested in
additional Class A shares.
In determining whether a CDSC is applicable to a redemption of Class A
shares, the calculation will be determined in a manner that results in the
lowest possible rate being charged. Therefore, it will be assumed that the
redemption is first made from any shares in the shareholder's account that
are not subject to the CDSC. The CDSC is waived on redemptions in certain
circumstances. See "Waiver of Contingent Deferred Sales Charge".
[sidebar] You may qualify for a reduced sales charge on your investment in
Class A Shares.
Qualifying for a Reduced Sales Charge--Class A Shares. If you invest more
than $50,000 in Class A shares of the Fund or a combination of John Hancock
funds (except money market funds), you may qualify for a reduced sales charge
on your investments in Class A shares through a LETTER OF INTENTION. You may
also be able to use the ACCUMULATION PRIVILEGE and COMBINATION PRIVILEGE to
take advantage of the value of your previous investments in shares of John
Hancock funds in meeting the breakpoints for a reduced sales charge. For the
ACCUMULATION PRIVILEGE and COMBINATION PRIVILEGE the applicable sales charge
will be based on the total of:
1. Your current purchase of Class A shares of the Fund;
2. The net asset value (at the close of business on the previous day) of (a)
all Class A shares of the Fund you hold, and (b) all Class A shares of any
other John Hancock mutual fund you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
Example:
If you hold Class A shares of a John Hancock mutual fund with a net asset
value of $20,000 and, subsequently, invested $30,000 in Class A shares of the
Fund, the sales charge on this subsequent investment would be 4.50% and not
5.00% . This rate is the rate that would otherwise be applicable to
investments of less than $50,000. See "Initial Sales Charge Alternative--
Class A Shares."
[sidebar] Class A Shares may be available without a sales charge to certain
individuals and organizations.
If you are in under one of the following categories, you may purchase Class A
shares of the Fund without paying a sales charge:
(bullet) A Trustee/Director or officer of the Trust/Company; a Director or
officer of the Adviser and its affiliates or Selling Brokers; employees or
sales representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a
16
<PAGE>
member of the immediate family of any of the foregoing; or any fund, pension,
profit sharing or other benefit plan for the individuals described above.
(bullet) Any state, county, city or any instrumentality, department,
authority or agency of these entities which is prohibited by applicable
investment laws from paying a sales charge or commission when it purchases
shares of any registered investment management company.*
(bullet) A bank, trust company, credit union, savings institution or other
type of depository institution, its trust department or common trust funds if
it is purchasing $1 million or more for non-discretionary customers or
accounts.*
(bullet) A Director or officer of the Corporation; a Director or officer of
the Adviser and its affiliates or Selling Brokers; employees or sales
representatives of any of the foregoing; retired officers employees or
Directors of any of the foregoing; a member of the immediate family (spouse,
children, mother, father, sister, brother, mother-in-law, father-in-law) of
any of the foregoing; or any fund, pension, profit sharing or other benefit
plan of the individuals described above.
(bullet) A broker, dealer, financial planner, consultant or registered
investment advisor that has entered into an agreement with John Hancock Funds
providing specifically for the use of Fund shares in fee-based investment
products or services made available to their clients.
(bullet) A former participant in an employee benefit plan with John Hancock
funds, when he or she withdraws from his or her plan and transfers any or all
of his or her plan distributions to the Fund.
(bullet) A member of an approved affinity group financial services plan.*
(bullet) A member of a class action lawsuit against insurance companies who
is investing settlement proceeds.
* For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A shares may also be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
Contingent Deferred Sales Charge Alternative--Class B Shares. Class B shares
are offered at net asset value per share without an initial sales charge, so
that your entire investment will go to work at the time of purchase. However,
Class B shares redeemed within six years of purchase will be subject to a
CDSC at the rates set forth below. The charge will be assessed on an amount
equal to the lesser of the current market value or the original purchase cost
of the shares being redeemed. Accordingly, you will not be assessed a CDSC on
increases in account value above the initial purchase price, including shares
derived from dividend reinvestment.
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. It will be assumed that your redemption comes first from shares you
have held beyond the
17
<PAGE>
six-year CDSC redemption period or those you acquired through reinvestment of
dividends, and next from the shares you have held the longest during the
six-year period. The CDSC is waived on redemptions in certain circumstances.
See the discussion "Waiver of Contingent Deferred Sales Charges" below.
Example:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time, your CDSC will be calculated as
follows:
<TABLE>
<S> <C>
(bullet) Proceeds of 50 shares redeemed at $12 per share $600
(bullet) Minus proceeds of 10 shares not subject to CDSC because they were acquired
through dividend reinvestment (10 x $12) -120
(bullet) Minus appreciation on remaining shares, also not subject to CDSC (40 x $2) -80
---
(bullet) Amount subject to CDSC $400
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds
will use all or part of them to defray its expenses related to providing the
Fund with distribution services in connection with the sale of the Class B
shares, such as compensating selected Selling Brokers for selling Class B
shares. The combination of the CDSC and the distribution and service fees
makes it possible for the Fund to sell the Class B shares without an initial
sales charge.
The amount of the CDSC, if any, will vary depending on the number of years
from the time you purchase your Class B shares until the time you redeem
them. Solely for purposes of determining this holding period, any payments
you make during the month will be aggregated and deemed to have been made on
the last day of the month.
Contingent Deferred Sales
Year in Which Class B Shares Charge As a Percentage of
Redeemed Following Purchase Dollar Amount Subject to CDSC
- ------------------------------ --------------------------------
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
John Hancock Funds pays to Selling Brokers a commission equal to 3.75% of the
amount invested and a first year's service fee equal to 0.25% of the amount
invested. The initial service fee is paid in advance at the time of sale for
the provision of personal and account maintenance services to shareholders
during the twelve months following the sale and thereafter the service fee is
paid in arrears.
[sidebar] Under certain circumstances, the CDSC on Class B share redemptions
will be waived.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to a
CDSC, unless indicated otherwise, in the circumstances defined below:
(bullet) Redemptions of Class B shares made under a Systematic Withdrawal
Plan (see "How to Redeem Shares"), as long as your annual
redemptions do not exceed 10%
18
<PAGE>
of your account value at the time you established your Systematic
Withdrawal Plan and 10% of the value of subsequent investments (less
redemptions) in that account at the time you notify Investor
Services. This waiver does not apply to Systematic Withdrawal Plan
redemptions of Class A shares that are subject to a CDSC.
(bullet) Redemptions made to effect distributions from an Individual
Retirement Account either before or after age 59-1/2, as long as the
distributions are based on your life expectancy or the
joint-and-last survivor life expectancy of you and your beneficiary.
These distributions must be free from penalty under the Internal
Revenue Code (the "Code").
(bullet) Redemptions made to effect mandatory distributions under the Code
after age 70-1/2 from a tax-deferred retirement plan.
(bullet) Redemptions made to effect distributions to participants or
beneficiaries from certain employer-sponsored retirement plans,
including those qualified under Section 401(a) of the Code,
custodial accounts under Section 403(b)(7) of the Code and deferred
compensation plans under Section 457 of the Code. The waiver also
applies to certain returns of excess contributions made to these
plans. In all cases, the distributions must be free from penalty
under the Code.
(bullet) Redemptions due to death or disability.
(bullet) Redemptions made under the Reinvestment Privilege, as described in
"Additional Services and Programs" of this Prospectus.
(bullet) Redemptions made pursuant to the Fund's right to liquidate your
account if you own fewer than 50 shares.
(bullet) Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal
holding companies.
(bullet) Redemptions from certain IRA and retirement plans that purchased
shares prior to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you must
notify Investor Services either directly or through your Selling Broker at
the time you make your redemption. The waiver will be granted once Investor
Services has confirmed that you are entitled to the waiver.
Conversion of Class B Shares. Your Class B shares and an appropriate portion
of reinvested dividends on those shares will be converted into Class A shares
automatically. This will occur at the end of the month following eight years
after the shares were purchased, resulting in lower annual distribution fees.
If you exchanged Class B shares into this Fund from another John Hancock
fund, the conversion will be based on the time you purchase the shares in the
original fund. The Fund has been advised that the conversion of Class B
shares to Class A shares of the Fund should not be taxable for Federal income
tax purposes, nor should it change your tax basis or tax holding period for
the converted shares.
HOW TO REDEEM SHARES
[sidebar] To assure acceptance of your redemption request, please follow
these procedures.
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next NAV calculated after your redemption
request is received in good order by Investor Services less any applicable
CDSC. The Fund may hold pay-
19
<PAGE>
ment until reasonably satisfied that investments which were recently made by
check or Invest-by-Phone have been collected (which may take up to 10
calendar days).
Once your shares are redeemed, the Fund generally sends you payment on the
next business day. When you redeem your shares, you may realize a taxable
gain or loss depending usually on the difference between what you paid for
them and what you receive for them, subject to certain tax rules. Under
unusual circumstances, the Fund may suspend redemptions or postpone payment
for up to three business days or longer, as permitted by Federal securities
laws.
<TABLE>
<S> <C>
By Telephone All Fund shareholders are eligible automatically for the telephone
redemption privilege. Call 1-800-225-5291, from 8:00 A.M. to 4:00 P.M.
(New York time), Monday through Friday, excluding days on which the New
York Stock Exchange is closed. Investor Services employs the following
procedures to confirm that instructions received by telephone are
genuine. Your name, the account number, taxpayer identification number
applicable to the account and other relevant information may be
requested. In addition, telephone instructions are recorded.
You may redeem up to $100,000 by telephone, but the address on the
account must not have changed for the last 30 days. A check will be
mailed to the exact name(s) and address shown on the account.
If reasonable procedures, such as those described above, are not
followed, the Fund may be liable for any loss due to unauthorized or
fraudulent telephone instructions. In all other cases, neither the Fund
nor Investor Services will be liable for any loss or expense for acting
upon telephone instructions made according to the telephone transaction
procedures mentioned above.
Telephone redemption is not available for IRAs or other tax-qualified
retirement plans or shares of the Fund that are in certificate form.
During periods of extreme economic conditions or market changes,
telephone requests may be difficult to implement due to a large volume
of calls. During these times you should consider placing redemption
requests in writing or using EASI-Line. EASI-Line's telephone number is
1-800-338-8080.
By Wire If you have a telephone redemption form on file with the Fund,
redemption proceeds of $1,000 or more can be wired on the next business
day to your designated bank account and a fee (currently $4.00) will be
deducted. You may also use electronic funds transfer to your assigned
bank account and the funds are usually collectable after two business
days. Your bank may or may not charge for this service. Redemptions of
less than $1,000 will be sent by check or electronic funds transfer.
This feature may be elected by completing the "Telephone Redemption"
section on the Account Privileges Application that is included with
this Prospectus.
In Writing Send a stock power or letter of instruction specifying the name of the
Fund, the dollar amount or the number of shares to be redeemed, your
name, class of shares, your account number, and the additional
requirements listed below that apply to your particular account.
20
<PAGE>
Type of Registration Requirements
Individual, Joint Tenants,
Sole Proprietorship,
Custodial (Uniform A letter of instruction signed (with titles where applicable) by all
Gifts or Transfer to Minors persons authorized to sign for the account, exactly as it is
Act), General Partners. registered, with the signature(s) guaranteed.
Corporation, Association A letter of instruction and a corporate resolution, signed by person(s)
authorized to act on the account with the signature(s) guaranteed.
Trusts A letter of instruction signed by the Trustee(s) with the signature(s)
guaranteed. (If the Trustee's name is not registered on your account,
also provide a copy of the trust document, certified within the last 60
days.)
If you do not fall into any of these registration categories, please call 1-800-225-5291 for further
instructions.
[sidebar] Who may guarantee your signature.
A signature guarantee is a widely accepted way to protect you and the Fund by verifying the signature on
your request. It may not be provided by a notary public. If the net asset value of the shares redeemed is
$100,000 or less, John Hancock Funds may guarantee the signature. The following institutions may provide you
with a signature guarantee, provided that any such institution meets credit standards established by
Investor Services: (i) a bank; (ii) a securities broker or dealer, including a government or municipal
securities broker or dealer, that is a member of a clearing corporation or meets certain net capital
requirements; (iii) a credit union having authority to issue signature guarantees; (iv) a savings and loan
association, a building and loan association, a cooperative bank, a federal savings bank or association; or
(v) a national securities exchange, a registered securities exchange or a clearing agency.
Through Your Broker. Your broker may be able to initiate instructions. Contact him or her for instructions.
[sidebar] Additional information about redemptions.
If you have certificates for your shares, you must submit them with your stock power or a letter of
instruction. Unless you specify to the contrary, any outstanding Class A shares will be redeemed before
Class B shares. Redemptions of certificated shares may not be made by telephone.
Due to the proportionately high cost of maintaining small accounts, the Fund reserves the right to redeem at
net asset value all shares in an account which holds fewer than 50 shares (except accounts under retirement
plans) and to mail the proceeds to the shareholder, or the transfer agent may impose an annual fee of
$10.00. No account will be involuntarily redeemed or any additional fee imposed, if the value of the account
is in excess of the Fund's minimum initial investment. No CDSC will be imposed on involuntary redemptions of
shares.
Shareholders will be notified before these redemptions are to be made or this fee is imposed, and will have
30 days to purchase additional shares to bring their account balance up to the required minimum. Unless the
number of shares acquired by additional purchases and any dividend reinvestments exceeds the number of
shares redeemed, repeated redemptions from a smaller account may eventually trigger this redemption policy.
</TABLE>
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege
[sidebar] You may exchange shares of the Fund only for shares of the same
class of another John Hancock fund.
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of
investment goals. Contact your registered representative or Selling Broker
and request a prospectus for the John Hancock mutual funds that interest you.
Please read the prospectus carefully before exchanging your shares. You can
exchange shares of each class of the Fund only for shares of the same class
of another John Hancock mutual fund. For this purpose, John Hancock funds
with only one class of shares will be treated as Class A whether or not they
have been so designated.
21
<PAGE>
Exchanges between funds that are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is
imposed. Class B shares of the Fund which are subject to a CDSC may be
exchanged for Class B shares of another John Hancock fund without incurring
the CDSC; however these shares will be subject to the CDSC schedule of the
shares acquired (except that shares exchanged into John Hancock Short-Term
Strategic Income Fund, John Hancock Intermediate Maturity Government Trust
and John Hancock Limited-Term Government Fund, will be subject to the initial
fund's CDSC). For purposes of computing the CDSC payable upon redemption of
shares acquired in an exchange, the holding period of the original shares is
added to the holding period of the shares acquired in an exchange.
The Fund reserves the right to require that you keep previously exchanged
shares (and reinvested dividends) in the Fund for 90 days before you are
permitted to execute a new exchange. The Fund may also terminate or alter the
terms of the exchange privilege upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and
the purchase of shares of another for Federal income tax purposes. An
exchange may result in a taxable gain or loss.
When you make an exchange your account registration must be identical in both
the existing and new account. The exchange privilege is available only in
states where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers
and investment advisers may exchange their clients' Fund shares, subject to
the terms of those agreements and John Hancock Funds' right to reject or
suspend those exchanges at any time. Because of the restrictions and
procedures under those agreements, the exchanges may be subject to timing
limitations and other restrictions that do not apply to exchanges requested
by shareholders directly, as described above.
Because Fund performance and shareholders can be hurt by excessive trading,
the Fund reserves the right to terminate the exchange privilege for any
person or group that, in John Hancock Funds' judgment, is involved in a
pattern of exchanges that coincide with a "market timing" strategy that may
disrupt the Fund's ability to invest effectively according to its investment
objective and policies, or might otherwise affect the Fund and its
shareholders adversely. The Fund may also temporarily or permanently
terminate the exchange privilege for any person who makes seven or more
exchanges out of the Fund per calendar year. Accounts under common control or
ownership will be aggregated for this purpose. Although the Fund will attempt
to give prior notice whenever it is reasonably able to do so, it may impose
these restrictions at any time.
By Telephone
1. When you complete the application for your initial purchase of Fund
shares, you authorize exchanges automatically by telephone unless you
check the box indicating that you do not wish to authorize telephone
exchanges.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.
22
<PAGE>
3. Your name, the account number, taxpayer identification number applicable
to the account and other relevant information may be requested. In
addition, telephone instructions are recorded.
In Writing
1. In a letter request an exchange and list the following:
-- the name and class of the fund whose shares you currently own
-- your account number
-- the name(s) in which the account is registered
-- the name of the fund in which you wish your exchange to be invested
-- the number of shares, all shares or the dollar amount you wish to
exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
Reinvestment Privilege
[sidebar] If you redeem shares of the Fund, you may be able to reinvest all
or part of the proceeds in shares of this or another John Hancock fund
without paying an additional sales charge.
1. You will not be subject to a sales charge on Class A shares that you
reinvested in John Hancock funds that is otherwise subject to a sales
charge as long as you invest within 120 days of the redemption date. If
you paid a CDSC upon a redemption, you may reinvest at net asset value in
the same class of shares from which you redeemed within 120 days. Your
account will be credited with the amount of the CDSC previously charged
and the reinvested shares will continue to be subject to a CDSC. The
holding period of the shares you acquired through reinvestment for
purposes of computing the CDSC payable upon a subsequent redemption, will
include the holding period of the redeemed shares.
2. Any portion of the redemption may be reinvested in the Fund or in any of
the other John Hancock funds, subject to the minimum investment limit of
that fund.
3. To reinvest, you must notify Investor Services in writing. Include the
Fund(s) name, account number and class from which your shares were
originally redeemed.
Systematic Withdrawal Plan
[sidebar] You can pay routine bills from your account, or make periodic
disbursements from your retirement accounts to comply with IRS regulations.
1. You can elect the Systematic Withdrawal Plan at any time by completing the
attached Account Privileges Application which is attached to this
Prospectus. You can also obtain the application from your registered
representative or by calling 1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semi-annually
or on a selected monthly basis and they can be sent to you or any other
designated payee.
23
<PAGE>
4. There is no limit on the number of payees you may authorize, but all
payments must be made at the same time or intervals.
5. It is not advantageous to maintain a Systematic Withdrawal Plan
concurrently with purchases of additional shares, because you may be
subject to initial sales charges on purchases of Class A shares or you
will be subject to a CDSC imposed on redemptions of Class B shares. In
addition, your redemptions are taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks, or if deposits to a bank account are returned for any reason.
Monthly Automatic Accumulation Program (MAAP)
[sidebar] You can make automatic investments and simplify your investing.
1. You can authorize an investment to be withdrawn automatically drawn each
month on your bank for investment under the "Automatic Investing" and
"Bank Information" sections on the Account Privileges Application.
2. You can also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account
Privileges Application.
3. You can terminate your Monthly Automatic Accumulation Program at any time.
4. There is no charge to you for this program, and there is no cost to the
Fund.
5. If you have payments withdrawn from a bank account and we are notified
that the account has been closed, your withdrawals will be discontinued.
Group Investment Program
[sidebar] Organized groups of at least four persons may establish accounts.
1. An individual account will be established for each participant, but the
sales charge for Class A shares will be based on the aggregate dollar
amount of all participants' investments. To determine how to qualify for
this program, contact your registered representative or call
1-800-225-5291.
2. The initial aggregate investment of all participants in the group must be
at least $250.
3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum, and you may terminate the program at
any time.
Retirement Plans
1. You may use the Fund for various types of qualified retirement plans, such
as Individual Retirement Accounts, Keogh Plans (H.R. 10), pension and
profit-sharing plans (including 401(k) Plans), Tax-Sheltered Annuity
retirement plans, (403(b) or TSA plans), and Section 457 plans.
2. The initial investment minimum or aggregate minimum for any of these plans
is $250. However, accounts being established as group IRA, SEP, SARSEP,
TSA, 401(k) and Section 457 plans will be accepted without an initial
minimum investment.
24
<PAGE>
JOHN HANCOCK
FINANCIAL INDUSTRIES FUND
Investment Adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Principal Distributor
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Custodian
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Transfer Agent
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
Independent Auditors
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchange call 1-800-225-5291
Investment-by-Phone
Telephone Redemption
For: TDD call 1-800-544-6713
7000P
JOHN HANCOCK
FINANCIAL
INDUSTRIES
FUND
Class A and Class B Shares
Prospectus
September 3, 1996
A mutual fund seeking capital appreciation
primarily through investments in financial
services companies.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Telephone 1-800-225-5291
[recycle symbol] Printed on recycled paper using soybean ink
<PAGE>
JOHN HANCOCK FINANCIAL INDUSTRIES FUND
Class A and Class B Shares
Statement of Additional Information
September 3, 1996
This Statement of Additional Information provides information about
John Hancock Financial Industries Fund (the "Fund") in addition to the
information that is contained in the Fund's Class A and Class B Shares
Prospectus dated September 3, 1996 (the "Prospectus"). The Fund is one of four
separate series of Freedom Investment Trust (the "Trust"). Information about the
other three series of the Trust is provided in separate prospectuses and a
statement of additional information.
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Fund's Prospectus, a copy of which can be
obtained free of charge by writing or telephoning:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
1-800-225-5291
TABLE OF CONTENTS
Statement of
Additional
Information Page
ORGANIZATION OF THE FUND 2
INVESTMENT OBJECTIVE AND POLICIES 2
THE FUND'S OPTIONS TRADING ACTIVITIES 6
THE FUND'S INVESTMENTS IN FUTURES CONTRACTS 9
CERTAIN INVESTMENT PRACTICES 12
INVESTMENT RESTRICTIONS 15
THOSE RESPONSIBLE FOR MANAGEMENT 19
INVESTMENT ADVISORY AND OTHER SERVICES 27
DISTRIBUTION CONTRACTS 29
NET ASSET VALUE 30
INITIAL SALES CHARGE ON CLASS A SHARES 31
DEFERRED SALES CHARGE ON CLASS B SHARES 32
SPECIAL REDEMPTIONS 35
ADDITIONAL SERVICES AND PROGRAMS 35
DESCRIPTION OF THE FUND'S SHARES 36
TAX STATUS 37
CALCULATION OF PERFORMANCE 41
BROKERAGE ALLOCATION 43
<PAGE>
DISTRIBUTIONS 44
TRANSFER AGENT SERVICES 44
CUSTODY OF PORTFOLIO 44
INDEPENDENT AUDITORS 44
ORGANIZATION OF THE FUND
Freedom Investment Trust (the "Trust") is a diversified open-end management
investment company organized as a Massachusetts business trust on March 29,
1984. Freedom Investment Trust was originally organized under the name Freedom
Gold & Government Trust. It changed its name to Freedom Investment Trust on July
22, 1985. The Trustees have authority to issue an unlimited number of shares of
beneficial interest of separate series without par value. The Fund was created
as a separate series of the Trust on December 11, 1995. To date, three other
series of Freedom Investment Trust have been authorized for sale to the public
by the Board of Trustees: John Hancock Regional Bank Fund (formerly John Hancock
Freedom Regional Bank Fund), created on April 2, 1985, John Hancock Disciplined
Growth Fund created on January 16, 1986, (formerly Sovereign Achievers Fund),
created on January 16, 1986, and John Hancock Managed Tax-Exempt Fund (formerly
John Hancock Freedom Managed Tax Exempt Fund). As indicated above, each of these
three other series of the Trust is offered pursuant to a separate prospectus and
Statement of Information.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus. The Adviser for the Fund is
John Hancock Advisers, Inc. (the "Adviser").
The Adviser believes that the ongoing deregulation of many segments of the
financial services sector continues to provide new opportunities for issuers in
this sector. As deregulation of various financial services businesses continues
and new segments of the financial services sector are opened to certain larger
financial services firms formerly prohibited from doing business in these
segments, (such as national and money center banks) certain established
companies in these market segments (such as regional banks or securities firms)
may become attractive acquisition candidates for the larger firm seeking
entrance into the segment. Typically, acquisitions accelerate the capital
appreciation of the shares of the company to be acquired.
In addition, financial services companies in growth segments (such as securities
firms during times of stock market expansion) or geographically linked to areas
experiencing strong economic growth (such as certain regional banks) are likely
to participate in and benefit from such growth through increased demand for
their products and services. Many financial services companies which are
actively and aggressively managed and are expanding services as deregulation
opens up new opportunities also show potential for capital appreciation,
particularly in expanding into areas where nonregulatory barriers to entry are
low.
The Adviser will seek to invest in those financial services companies that it
believes are well positioned to take advantage of the ongoing changes in the
financial services sector. A financial services company may be well positioned
for a number of reasons. It may be an attractive acquisition for another company
2
<PAGE>
wishing to strengthen its presence in a line of business or a geographic region
or to expand into new lines of business or geographic regions, or it may be
planning a merger to strengthen its position in a line of business or a
geographic area. The financial services company may be engaged in a line or
lines of business experiencing or likely to experience strong economic growth;
it be linked to a geographic region experiencing or likely to experience strong
economic growth and be actively seeking to participate in such growth; or it may
be expanding into financial services or geographic regions previously
unavailable to it (due to an easing of regulatory constraints) in order to take
advantage of new market opportunities.
RISK FACTORS
Most financial services companies are subject to extensive governmental
regulations which limit their activities and may (such as insurance rate
regulation) affect the ability to earn a profit from a given line of business.
Certain financial services businesses are subject to intense competitive
pressures, including market share and price competition. The removal of
regulatory barriers to participation in certain segments of the financial
services sector may also increase competitive pressures on different types of
firms. The availability and cost of funds to financial services firms is crucial
to their profitability. Consequently, volatile interest rates and general
economic conditions can adversely affect their financial performance.
Financial services companies in foreign countries are subject to similar
regulatory and interest rate concerns. In particular, government regulation in
certain foreign countries may include controls on interest rates, credit
availability, prices and currency movements. In some cases, foreign governments
have taken steps to nationalize the operations of banks and other financial
services companies.
AMERICAN DEPOSITORY RECEIPTS AND EUROPEAN DEPOSITORY RECEIPTS
In addition to purchasing equity securities of foreign issuers in foreign
markets, the Fund may invest in American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs") or other securities convertible into securities of
corporations domiciled in foreign countries. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. Generally, ADRs, in registered form, are designed for use
in the U.S. securities markets and EDRs, in bearer form, are designed for use in
European securities markets. ADRs are receipts typically issued by a United
States bank or trust company evidencing ownership of the underlying securities.
EDRs are European receipts evidencing a similar arrangement.
3
<PAGE>
FOREIGN CURRENCY TRANSACTIONS
The Fund will conduct its foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific amount of currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
usually traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for such trades.
The Fund may enter into forward foreign currency exchange contracts in two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, the Fund may desire to
"lock-in" the United States dollar price of the security. By entering into a
forward contract for a fixed amount of dollars for the purchase or sale of the
amount of foreign currency involved in the underlying transactions, the Fund
will be able to protect itself against a possible loss resulting from an adverse
change in the relationship between the United States dollar and such foreign
currency during the period between the date on which the security is purchased
or sold and the date on which payment is made or received.
Second, when the Adviser believes that the currency of a particular foreign
country may suffer or benefit from a substantial movement against another
currency, the Fund may enter into a forward contract to sell or buy the amount
of the former foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the value
of these securities between the date on which the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. The Fund will not enter into such forward
contracts or maintain a net exposure to such contracts if the consummation of
the contracts would obligate the Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency.
Under normal circumstances, consideration of the prospects for currency exchange
rates will be incorporated into the Fund's long-term investment decisions made
with regard to overall investment strategies. However, the Fund believes that it
is important to have the flexibility to enter into such forward contracts when
it determines that the best interests of the Fund will thereby be served.
Investors Bank & Trust Company, the Fund's custodian (the "Custodian"), will
place cash or liquid high grade debt securities into a segregated account of the
Fund in an amount equal to the value of the Fund's total assets committed to the
consummation of forward contracts to purchase foreign currency. If the value of
the securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with respect to such
contracts. The Fund will not enter into any forward contract with a term of
greater than one year. At the maturity of a forward contract to sell foreign
currency, the Fund may either sell the portfolio security and make delivery of
4
<PAGE>
the foreign currency, or it may retain the security and terminate its
contractual obligation to deliver the foreign currency by purchasing an
"offsetting" contract with the same currency trader obligating it to purchase,
on the same maturity date, the same amount of the foreign currency. There can be
no assurance, however, that the Fund will be able to effect such a closing
purchase transaction.
It is impossible to forecast the market value of a particular portfolio security
at the expiration of the contract. Accordingly, it may be necessary for the Fund
to purchase additional foreign currency on the spot market (and bear the expense
of such purchase) if the market value of the security is less than the amount of
foreign currency that the Fund is obligated to deliver and if a decision is made
to sell the security and make delivery of the foreign currency.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. Should forward
prices decline during the period between the Fund's entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Fund will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent that the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
The Fund's transactions in forward foreign currency exchange contracts will be
limited to those described above. The Fund is not required to enter into such
transactions with regard to its foreign currency-denominated securities. It also
should be realized that this method of protecting the value of the Fund's
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which one can achieve at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.
Although the Fund values its assets daily in terms of United States dollars, the
Fund does not intend to convert its holdings of foreign currencies into United
States dollars on a daily basis. The Fund will do so from time to time, which
will involve transaction costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate may vary widely from year to year and may be
higher than that of many other mutual funds with similar investment objectives.
For example, if the Fund writes a substantial number of call options and the
market prices of the underlying securities appreciate, there may be a very
substantial turnover of the portfolio. While the Fund will pay commissions in
connection with its options transactions, government securities are generally
traded on a "net" basis with dealers acting as principal for their own accounts
5
<PAGE>
without a stated commission. Nevertheless, high portfolio turnover may involve
correspondingly greater commissions and other transaction costs, which will be
borne directly by the Fund.
THE FUND'S OPTIONS ACTIVITIES
The following information supplements the discussion in the Prospectus regarding
options transactions in which the Fund may engage.
The Fund may purchase and write options, including purchasing puts and calls and
writing covered calls. A call option gives the purchaser of the option the right
to buy, and the writer the obligation to sell (if the option is exercised), the
underlying security or asset at the exercise price during the option period.
Conversely, a put option gives the purchaser the right to sell, and the writer
the obligation to buy, (if the option is exercised) the underlying security or
asset at the exercise price during the option period.
It is the policy of the Fund to meet the requirements of the Internal Revenue
Code to qualify as a regulated investment company to prevent double taxation of
the Fund and its investors. One of these requirements is that less than 30% of
the Fund's gross income for each taxable year must be derived from gross gains
from the sale or other disposition of certain financial assets, including
stocks, securities, and most options, futures and forward contracts, held for
less than three months. The extent to which the Fund may engage in options,
futures and forward transactions may be materially limited by this 30% test.
CALL OPTIONS
Call options ("calls") may be written (i.e., sold) by the Fund if (i) the calls
are listed on a domestic exchange or are traded over-the-counter; and (ii) the
calls are covered, i.e., the Fund owns the assets subject to the call (or other
assets acceptable for escrow arrangements) while the call is outstanding.
The Fund may write call options to obtain additional income. When the Fund
writes a call it receives a premium and agrees to sell the callable securities
to the purchaser of the call, if the option is exercised during the call period,
at a fixed exercise price (which may differ from the market price) regardless of
market price changes during the call period. Thus, in exchange for the premium
received, the Fund foregoes any possible profit from an increase in market price
over the exercise price.
When the Fund writes a call option, an amount equal to the premium received by
it is included in the Fund's Statement of Assets and Liabilities as an asset and
as an equivalent liability. The amount of the liability is subsequently marked
to market to reflect the current market value of the option written. The premium
paid by the Fund for the purchase of a call or put option is included in the
assets section of the Statement of Assets and Liabilities as an investment and
subsequently adjusted to the current market value of the option. The current
market value of a purchased or written option is the last sale price on the
principal exchange on which such option is traded or, in the absence of a sale
or in the case of an unlisted option, the mean between the last bid and offering
prices.
6
<PAGE>
To terminate its obligation on a call which it has written, the Fund may
purchase a call in a "closing purchase transaction." A profit or loss will be
realized depending on the amount of option transaction costs and whether the
premium previously received is more or less than the price of the call
purchased. A profit may also be realized if the call lapses unexercised, because
the Fund retains the underlying security and the premium received.
The Fund may purchase calls only if the calls are listed on a domestic exchange
or traded over-the-counter. The Fund will purchase call options to attempt to
obtain capital appreciation. When the Fund buys a call, it pays a premium and
has the right to buy the callable securities from the seller of a call during a
period at a fixed exercise price. The Fund benefits only if the market price of
the callable securities is above the call price during the call period and the
call is either exercised or sold at a profit. If the call is not exercised or
sold (whether or not at a profit), it will become worthless at its expiration
date and the Fund will lose its premium payment and the right to purchase the
underlying security.
PUT OPTIONS
The Fund may purchase put options ("puts") if they are listed on a domestic
exchange or traded over-the-counter. The Fund may not write (sell) puts, but may
resell puts previously purchased by it to third parties who are not
broker-dealers. When the Fund buys a put, it pays a premium and has the right to
sell the underlying assets to the seller of the put during the put period at a
fixed exercise price.
The Fund may buy puts related to securities it owns ("protective puts") or to
securities it does not own ("nonprotective puts"). Buying a protective put
permits the Fund to protect itself during the put period against a decline in
the value of the underlying securities below the exercise price by selling them
through the exercise of the put. Thus, protective puts will assist the Fund in
achieving its investment objective of capital appreciation by protecting it
against a decline in the market value of its portfolio securities.
Buying a non-protective put permits the Fund, if the market price of the
underlying securities is below the put price during the put period, either to
resell the put or to buy the underlying securities and sell them at the exercise
price. A non-protective put can enable the Fund to achieve appreciation during a
period when the price of securities underlying such put is declining. If the
market price of the underlying securities is above the exercise price and as a
result, the put is not exercised or resold (whether or not at a profit), the put
will become worthless at its expiration date.
7
<PAGE>
RISK FACTORS APPLICABLE TO OPTIONS
A call option may be closed out only on an exchange which provides a secondary
market for options of the same series or, in the case of an over-the-counter
option, only with the other party to the transaction. In general,
exchange-traded options are third-party contracts (i.e. performance of the
parties' obligations is guaranteed by an exchange or clearing corporation) with
standardized strike prices and expiration dates. Over-the-counter options are
two-party contracts with prices and terms negotiated by the buyer and seller.
There is no assurance that the Fund will be able to close out options acquired
or sold over-the-counter.
The Fund will acquire only those over-the-counter options for which management
believes the Fund can receive on each business day at least two separate bids or
offers (one of which will be from an entity other than a party to the option) or
those over-the-counter options valued by an independent pricing service. The
Fund will write and purchase over-the-counter options only with member banks of
the Federal Reserve System and primary dealers in U.S. Government securities or
their affiliates which have capital of at least $50 million or whose obligations
are guaranteed by an entity having capital of at least $50 million. The SEC has
taken the position that over-the-counter options are illiquid securities,
subject to the 15% restriction on illiquid investments. The SEC, however, allows
the Fund to exclude from the 15% limitation on illiquid investments a portion of
the value of the over-the-counter options written by the Fund, provided that
certain conditions are met. First, the other party to the over-the-counter
options must be a primary U.S. Government securities dealer designated as such
by the Federal Reserve Bank. Second, the Fund must have an absolute contractual
right to repurchase the over-the-counter options at a formula price. If the
above conditions are met, the Fund may treat as illiquid only that portion of
the over-the-counter option's value (and the value of its underlying securities)
which is equal to the formula price for repurchasing the over-the-counter
option, less the over-the-counter option's intrinsic value.
Although the Fund will generally purchase or write only those exchange-traded
options for which there appears to be an active secondary market, there can be
no assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time. In the event that no liquid
secondary market exists, it might not be possible to effect closing transactions
in particular options. If the Fund cannot close out a purchased exchange-traded
or over-the-counter option, it would have to exercise such option in order to
realize any profit and would incur transaction costs on the purchase or sale of
underlying assets.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) an exchange may impose restrictions on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the exchanges and the Options Clearing
Corporation have had only limited experience with the trading of certain options
and the facilities of an exchange or the Options Clearing Corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or in
that class or series of options) would cease to exist, although outstanding
8
<PAGE>
options that had been issued by the Options Clearing Corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms.
The options transactions of the Fund may affect its turnover rates and the
amount of brokerage commissions paid by it. The exercise of calls written by the
Fund may cause it to sell portfolio securities or other assets at times and
amounts controlled by the holder of a call, thus increasing the Fund's portfolio
turnover rates and brokerage commission payments. The exercise of puts purchased
by the Fund may also cause the sale of securities or other assets, also
increasing turnover. Although such exercise is within the Fund's control,
holding a protective put might cause the Fund to sell the underlying securities
or other assets for reasons which would not exist in the absence of the put.
Holding a non-protective put might cause the purchase of the underlying
securities or other assets to permit the Fund to exercise the put.
The Fund will pay a brokerage commission each time it buys or sells a put or
call or buys or sells a security in connection with the exercise of a put or
call. Such commissions may be higher than those which would apply to direct
purchases or sales of equity securities.
There is no limit on how many times the Fund's options positions may be
replaced. Therefore more than 5% of the Fund's assets may be at risk. The
successful use by the Fund of options on securities will depend upon the
Adviser's ability to anticipate movements of securities prices.
The Fund's Custodian, or a securities depository acting for it, will act as the
Fund's escrow agent for the securities underlying written calls, or for other
escrowed securities. Until the securities are released from escrow, they cannot
be sold by the Fund; this release will take place on the exercise, termination
or expiration of the call. For information on the valuation of the puts and
calls, see "Net Asset Value."
THE FUND'S INVESTMENTS IN FUTURES CONTRACTS
The following information supplements the discussion in the Prospectus regarding
investment by the Fund in futures contracts and related options.
Financial Futures Contracts. The Fund may buy and sell futures contracts (and
related options) on stocks and stock indices. The Fund may hedge its portfolio
by selling or purchasing financial futures contracts as an offset against
changes in security values. Although other techniques could be used to reduce
such exposure, the Fund may be able to hedge its exposure more effectively and
perhaps at a lower cost by using financial futures contracts. The Fund may enter
into financial futures contracts for hedging and speculative purposes to the
extent permitted by regulations of the Commodity Futures Trading Commission
("CFTC").
Financial futures contracts have been designed by boards of trade which have
been designated as "contract markets" by the CFTC. Futures contracts are traded
on these markets in a manner that is similar to the way a stock is traded on a
stock exchange. The boards of trade, though their clearing corporations,
guarantee that the contracts will be performed.
9
<PAGE>
Although some financial futures contracts by their terms call for actual
delivery or acceptance of a financial instrument, in most cases the contracts
are closed out prior to delivery by offsetting purchases or sales of matching
financial futures contracts (same exchange, underlying security and delivery
month). Most financial futures contracts on securities indices by their terms
call for cash settlement. If the offsetting purchase price is less than the
Fund's original sale price, the Fund realizes a gain, or if it is more, the Fund
realizes a loss. Conversely, if the offsetting sale price is more than the
Fund's original purchase price, the Fund realizes a gain, or if it is less, the
Fund realizes a loss. The transaction costs must also be included in these
calculations. The Fund will pay a commission in connection with each purchase or
sale of financial futures contracts, including a closing transaction. For a
discussion of the Federal income tax considerations in entering into financial
futures contracts, see the information under "Tax Status" below.
At the time the Fund enters into a financial futures contact, it is required to
deposit with the Custodian a specified amount of cash or U.S. Government
securities, known as "initial margin", ranging upward from 1.1% of the value of
the financial futures contract. The margin required for a financial futures
contract is set by the board of trade or exchange on which the contract is
traded and may be modified during the term of the contact. The initial margin is
in the nature of a performance bond or good faith deposit on the financial
futures contract which is returned to the Fund upon termination of the contract,
assuming all contractual obligations have been satisfied. The Fund expects to
earn interest income on its initial margin deposits. Each day, the futures
contract is valued at the official settlement price of the board of trade or
exchange on which it is traded. Subsequent payments, known as "variation
margin," to and from the broker are made on a daily basis as the market price of
the financial futures contract fluctuates. This process is known as "mark to
market". Variation margin does not represent a borrowing or lending by the Fund
but is instead a settlement between the Fund and the broker of the amount one
would owe the other if the financial futures contract expired early. In
computing its net asset value, the Fund will mark to market its open financial
futures positions.
Successful hedging depends on a strong correlation between the market for the
underlying securities and the relevant futures market. There are several factors
that will probably prevent this correlation from being perfect, and even a
correct forecast of general interest rate trends may not result in a successful
hedging transaction. There are significant differences between the securities
and futures markets which could create an imperfect correlation between the
markets and which could affect the success of a given hedge. For example, the
degree of imperfection of correlation depends on variations in speculative
market demand for financial futures and debt securities, including technical
influences in futures trading, and differences between the financial instruments
being hedged and the instruments underlying the standard financial futures
contracts available for trading.
A decision as to whether, when and how to hedge involves the exercise of skill
and judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected interest rate trends. The Fund will
bear the risk that the price of the securities being hedged will not move in
complete correlation with the price of the futures contracts used as a hedging
instrument. Although the Adviser believes that the use of financial futures
contracts may benefit the Fund, an incorrect prediction could result in a loss
on both the hedged portfolio securities and the futures contract so that the
Fund's return might have been better had hedging not been attempted. However, in
the absence of the ability to hedge, the Fund might have engaged in portfolio
10
<PAGE>
transactions in anticipation of the same market movements with similar
investment results but, presumably, at greater transaction costs. The low margin
deposits required for futures transactions permit an extremely high degree of
leverage. A relatively small movement in a futures contract may result in losses
or gains in excess of the amount invested.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount the price of a futures contract may vary either up or down
from the previous day's settlement price, at the end of the current trading
session. Once the daily limit has been reached in a futures contact subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day
and, therefore, does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example, futures prices
have occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of positions
and subjecting some holders of futures contracts to substantial losses.
Finally, although the Fund engages in financial futures transactions only on
boards of trade or exchanges where there appears to be an adequate secondary
market, there is no assurance that a liquid market will exist for a particular
futures contact at any given time. The liquidity of the market depends on
participants closing out contracts rather than making or taking delivery. In the
event participants decide to make or take delivery, liquidity in the market
could be reduced. In addition, the Fund could be prevented from executing a buy
or sell order at a specified price or closing out a position due to limits on
open positions or daily price fluctuation limits imposed by the exchanges or
boards of trade. If a Fund cannot close out a position, it will be required to
continue to meet margin requirements until the position is closed.
Options on Futures Contracts. The Fund may also buy and sell options on futures
contracts that it could trade directly. An option on a futures contract give the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time during the period of
the option. Upon exercise, the writer of the option delivers the futures
contract to the holder at the exercise price. The Fund would be required to
deposit with the Custodian initial margin with respect to put and call options
on futures contracts written by it. Options on futures contracts involve risks
similar to the risks relating to transactions in financial futures contracts.
Also, an option purchased by the Fund may expire worthless, in which case the
Fund would lose the premium it paid for the option.
Other Considerations. The Fund will engage in futures and options transactions
for bona fide hedging or speculative purposes if consistent with its investment
policies, to the extent permitted by CFTC regulations. The Fund will determine
that the price fluctuations in the futures contracts and options on futures used
for hedging purposes are substantially related to price fluctuations in
securities held by the Fund or which it expects to purchase. Except as stated
below, the Fund's futures transactions will be entered into for traditional
hedging purposes -- i.e., futures contracts will be sold to protect against a
decline in the price of securities that the Fund owns, or futures contracts will
be purchased to protect the Fund against an increase in the price of securities
the Fund intends to purchase. As evidence of this hedging intent, the Fund
expects that on 75% or more of the occasions on which it takes a long futures or
option position (involving the purchase of futures contracts), the Fund will
have purchased, or will be in the process of purchasing equivalent amounts of
11
<PAGE>
related securities at the time when the futures contract or option position is
closed out. However, in particular cases, when it is economically advantageous
for the Fund to do so, a long futures position may be terminated or an option
may expire without the corresponding purchase of securities or other assets.
As an alternative to literal compliance with the bona fide hedging definition, a
CFTC regulation permits the Fund to elect to comply with a different test, under
which the aggregate initial margin and premiums required to establish
speculative positions in futures contracts and options on futures will not
exceed 5% of the net asset value of the Fund's portfolio, after taking into
account unrealized profits and losses on any such positions and excluding the
amount by which such options were in-the-money at the time of purchase. The Fund
will engage in transactions in futures contracts only to the extent such
transactions are consistent with the requirements of the Internal Revenue Code
for maintaining its qualification as a regulated investment company for Federal
income tax purposes.
When the Fund purchases financial futures contracts, or writes put options or
purchases call options thereon, cash or liquid, high grade debt securities will
be deposited in a segregated account with the Fund's custodian in an amount
that, together with the amount of initial and variation margin held in the
account of its broker, equals the market value of the purchased futures
contracts.
CERTAIN INVESTMENT PRACTICES
Investment in Foreign Securities
There is generally less publicly available information about foreign companies
and other issuers comparable to reports and ratings that are published about
issuers in the United States. Foreign issuers are also generally not subject to
uniform accounting and auditing and financial reporting standards, practices and
requirements comparable to those applicable to United States issuers.
It is contemplated that most foreign securities will be purchased in
over-the-counter markets or on exchanges located in the countries in which the
respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Similarly, volume
and liquidity in most foreign bond markets is less than in the United States and
at times, volatility of price can be greater than in the United States. Fixed
commissions on foreign exchanges are generally higher than negotiated
commissions on United States exchanges, although the Fund will endeavor to
achieve the most favorable net results on its portfolio transactions. There is
generally less government supervision and regulation of securities exchanges,
brokers and listed issuers than in the United States.
With respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of
the Fund, political or social instability, or diplomatic developments which
could affect United States investments in those countries. Moreover, individual
12
<PAGE>
foreign economies may differ favorably or unfavorably from the United States'
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
The dividends, interest or capital gains from certain of the Fund's foreign
portfolio securities may be subject to foreign withholding or other foreign
taxes, thus reducing the net amount of income available for distribution to the
Fund's shareholders. See "Tax Status".
The expense ratio of the Fund can be expected to be higher than that of
investment companies investing exclusively in domestic securities since the
expenses of the Fund, such as the cost of maintaining custody of foreign
securities, are higher.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with domestic broker-dealers,
banks and financial institutions, but may not invest more than 15% of its net
assets, together with other illiquid investments, in repurchase agreements
having maturities of greater than seven days.
A repurchase agreement is a contract pursuant to which the Fund, against receipt
of securities of at least equal value including accrued interest, agrees to
advance a specified sum to a broker-dealer, bank or financial institution which
agrees to reacquire the securities at a mutually agreed upon time and price.
Repurchase agreements, which are usually for periods of one week or less, enable
the Fund to invest its cash reserves at fixed rates of return. The Fund may
enter into repurchase agreements with domestic broker-dealers, banks and other
financial institutions, provided the Fund's Custodian always has possession of
collateral whose market value at least equals the amount of the institution's
repurchase obligation. To minimize the risk of loss the Fund will enter into
repurchase agreements only with institutions and dealers which the Board of
Trustees of the Trust consider to be creditworthy. If an institution enters an
insolvency proceeding, the resulting delay in liquidation of the collateral
could cause losses to the Fund, as well as legal expense, if the value of the
collateral declines prior to liquidation.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
As stated in the Prospectus, the Fund may purchase and sell securities on a
forward commitment or when-issued basis. Forward commitments or when-issued
transactions arise when securities are purchased or sold by the Fund with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price. When the Fund engages in these
transactions, it relies on the seller or buyer, as the case may be, to
consummate the sale. Failure to do so may result in the Fund missing the
opportunity of obtaining a price considered to be advantageous. No payment or
delivery is made by the Fund until it receives delivery or payment from the
other party to the transaction.
To the extent that the Fund remains substantially fully invested at the same
time that it has purchased when-issued securities, as it would normally expect
to do, there may be greater fluctuations in its net asset value per share than
if the Fund set aside cash to satisfy its purchase commitment. When the Fund
purchases securities on a when-issued basis, it will maintain in a segregated
account with its Custodian cash or liquid high-grade debt obligations with an
13
<PAGE>
aggregate value equal to the amount of such purchase commitments until payment
is made. If necessary, additional assets will be placed in the account daily so
that the value of the account will equal or exceed the amount of the Fund's
purchase commitment.
SHORT SALES
The Fund may engage in short sales in order to profit from an anticipated
decline in the value of a security. The Fund may also engage in short sales to
attempt to limit its exposure to a possible market decline in the value of its
portfolio securities. The Fund may sell short securities that are not in the
Fund's portfolio, but which the Adviser believes possess volatility
characteristics similar to those being hedged. To effect such a transaction, the
Fund must borrow the security sold short to make delivery to the buyer. The Fund
is then obligated to replace the security borrowed by purchasing it at the
market price at the time of replacement. Until the security is replaced, the
Fund is required to pay to the lender any accrued interest or dividends and may
be required to pay a premium. The Fund will realize a gain if the security
declines in price between the date of the short sale and the date on which the
Fund replaces the borrowed security. On the other hand, the Fund will incur a
loss as a result of the short sale if the price of the security increases
between those dates. The amount of any gain will be decreased, and the amount of
any loss increased, by the amount of any premium or interest or dividends the
Fund may be required to pay in connection with a short sale. The successful use
of short selling as a hedging device may be impaired by imperfect correlation
between movements in the price of the security sold short and the securities
being hedged.
Under applicable guidelines of the staff of the SEC, if the Fund engages in
short sales of the type referred to in fundamental Investment Restriction No.
(2) below, it must put in a segregated account (not with the broker) an amount
of cash or U.S. Government securities equal to the difference between (a) the
market value of the securities sold short at the time they were sold short and
(b) any cash or U.S. Government securities required to be deposited as
collateral with the broker in connection with the short sale (not including the
proceeds from the short sale). In addition, until the Fund replaces the borrowed
security, it must daily maintain the segregated account at such a level that (1)
the amount deposited in it plus the amount deposited with the broker as
collateral will equal the current market valued of the securities sold short,
and (2) the amount deposited in it plus the amount deposited with the broker as
collateral will not be less than the market value of the securities at the time
they were sold short. Except for short sales against the box, the amount of the
Fund's net assets that may be committed to short sales and the securities in
which short sales are made must be listed on national securities exchange.
Short selling may produce higher than normal portfolio turnover which may result
in increased transaction costs to the Fund. In addition, short sales may result
in gains from the sales of securities deemed to have been held for three months,
which gains must be less than 30% of the Fund's gross income in order for the
Fund to qualify as a regulated investment company under the Internal Revenue
Code, as amended.
RULE 144A SECURITIES AND OTHER RESTRICTED SECURITIES
The Fund may purchase restricted securities eligible for resale to "qualified
institutional buyers" pursuant to Rule 144A under the Securities Act of 1933 if
14
<PAGE>
the Fund's Board of Trustees or the Adviser have determined under Board-approved
guidelines that such restricted securities are liquid. The Adviser will
determine the liquidity of Rule 144A securities in the Fund's portfolio using
the guidelines set forth below.
In its determination of liquidity, the Adviser will consider the following
factors, among others: (1) the frequency of trades and quotes for the security,
(2) the number of dealers willing to purchase or sell the security and the
number of other potential purchasers, (3) dealer undertakings to make a market
in the security, and (4) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer). In accordance with Rule
144A, the Board has delegated its responsibility to the Adviser to determine the
liquidity of each restricted security purchased by the Fund pursuant to Rule
144A, subject to the Board's oversight and review. Investing in Rule 144A
securities could have the effect of increasing the level of illiquidity in the
Fund to the extent that qualified institutional buyers become for a time
uninterested in purchasing the Rule 144A securities.
The Fund may acquire other restricted securities. These securities may be sold
only in privately negotiated transactions or in public offerings with respect to
which a registration statement is in effect under the Securities Act of 1933.
Where registration is required, the Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the time
of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than when it decided to sell. Restricted securities will be
priced at fair value as determined in good faith in accordance with procedures
adopted by the Fund's Board of Trustees.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The following investment restrictions will not be changed without approval of a
majority of the Fund's outstanding voting securities which, as used in the
Prospectus and this Statement of Additional Information, means approval of the
lesser of (1) the holders of 67% or more of the Fund's shares represented at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy or (2) the holders of more than 50% of the outstanding shares
of the Fund.
The Fund may not:
1. Issue senior securities, except as permitted by paragraph 3 below. For
purposes of this restriction, the issuance of shares of beneficial interest in
multiple classes or series, the deferral of Trustees' fees, the purchase or sale
of options, futures contracts, forward commitments and repurchase agreements
entered into in accordance with the Fund's investment policies or within the
meaning of paragraph 6 below, are not deemed to be senior securities.
2. Purchase securities on margin or make short sales, or unless, by virtue of
its ownership of other securities, the Fund has the right to obtain securities
15
<PAGE>
equivalent in kind and amount to the securities sold and, if the right is
conditional, the sale is made upon the same conditions, except (i) in connection
with arbitrage transactions, (ii) for hedging the Fund's exposure to an actual
or anticipated market decline in the value of its securities, (iii) to profit
from an anticipated decline in the value of a security, and (iv) obtaining such
short-term credits as may be necessary for the clearance of purchases and sales
of securities.
3. Borrow money, except for the following extraordinary or emergency purposes:
(i) from banks for temporary or short-term purposes or for the clearance of
transactions in amounts not to exceed 33 1/3% of the value of the Fund's total
assets (including the amount borrowed) taken at market value; (ii) in connection
with the redemption of Fund shares or to finance failed settlements of portfolio
trades without immediately liquidating portfolio securities or other assets; and
(iii) in order to fulfill commitments or plans to purchase additional securities
pending the anticipated sale of other portfolio securities or assets. For
purposes of this investment restriction, the deferral of Trustees' fees and
transactions in short sales, futures contracts, options on futures contracts,
securities or indices and forward commitment transactions shall not constitute
borrowing.
4. Act as an underwriter, except to the extent that in connection with the
disposition of portfolio securities, the Fund may be deemed to be an underwriter
for purposes of the 1933 Act.
5. Purchase or sell real estate except that the Fund may (i) acquire or lease
office space for its own use, (ii) invest in securities of issuers that invest
in real estate or interest therein, (iii) invest in securities that are secured
by real estate or interests therein, (iv) purchase and sell mortgage-related
securities and (v) hold and sell real estate acquired by the Fund as a result of
the ownership of securities.
6. Invest in commodities, except the Fund may purchase and sell options on
securities, securities indices and currency, futures contracts on securities,
securities indices and currency and options on such futures, forward foreign
currency exchange contracts, forward commitments, securities index put or call
warrants and repurchase agreements entered into in accordance with the Fund's
investment policies.
7. Make loans, except that the Fund (1) may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% of the Fund's total
assets taken at market value, (2) enter into repurchase agreements, and (3)
purchase all or a portion of an issue of debt securities, bank loan
participation interests, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the purchase is made upon the
original issuance of the securities.
8. Purchase the securities of issuers conducting their principal activity in the
same industry if, immediately after such purchase, the value of its investments
in such industry would exceed 25% of its total assets taken at market value at
the time of such investment; except that the Fund intends to invest more than
25% of its total assets in the banking industry and will ordinarily invest more
than 25% of its assets in the financial services sector, which includes the
banking industry. This limitation does not apply to investments in obligations
of the U.S. Government or any of its agencies, instrumentalities or authorities.
16
<PAGE>
9. With respect to 75% of the Fund's total assets, purchase securities of an
issuer (other than the U.S. Government, its agencies, instrumentalities or
authorities), if:
a. such purchase would cause more than 5% of the Fund's total assets
taken at market value to be invested in the securities of such issuer; or
b. such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund.
NONFUNDAMENTAL INVESTMENT RESTRICTIONS
The following restrictions are designated as nonfundamental and may be changed
by the Board of Trustees without shareholder approval.
The Fund may not:
10. Pledge, mortgage or hypothecate its assets, except to secure permitted
borrowings and then only if such pledging, mortgaging or hypothecating does not
exceed 33 1/3% of the Fund's total assets taken at market value. Collateral
arrangements with respect to margin, option, short sale and other risk
management and when-issued and forward commitment transactions are not deemed to
be pledges or other encumbrances for purposes of this restriction.
11. Participate on a joint-and-several basis in any securities trading account.
The "bunching" of orders for the sale or purchase of marketable portfolio
securities with other accounts under the management of the Adviser to save
commissions or to average prices among them is not deemed to result in a joint
securities trading account.
12. Purchase or retain securities of an issuer if one or more of the Trustees or
officers of the Trust or directors or officers of the Adviser, or any investment
management subsidiary of the Adviser individually owns beneficially more than
0.5% and together own beneficially more than 5% of the securities of such
issuer.
13. Purchase a security if, as a result, (i) more than 10% of the Fund's assets
would be invested in securities of other investment companies, (ii) such
purchase would result in more than 3% of the total outstanding voting securities
of any one such investment company being held by the Fund or (iii) more than 5%
of the Fund's assets would be invested in any one such investment company. The
Fund will not purchase the securities of any open-end investment company except
when such purchase is part of a plan of merger, consolidation, reorganization or
purchase of substantially all of the assets of any other investment company
except in the open market where no commission or profit to a sponsor or dealer
results from the purchase, other than customary brokerage fees. Notwithstanding
the foregoing, the Fund may, in connection with the John Hancock Group of Funds
Deferred Compensation Plan for Independent Trustees/Directors, purchase
securities of other investment companies within the John Hancock Group of Funds
provided that, as a result, (i) no more than 10% of the Fund's assets would be
invested in securities of all other investment companies; (ii) such purchase
would not result in more than 3% of the total outstanding voting securities of
17
<PAGE>
any one such investment company being held by the Fund and (iii) no more than 5%
of the Fund's assets would be invested in any one such investment company.
14. Invest more than 15% of its total assets in the aggregate in (1) securities
of any issuer which, together with its predecessors, has been in operation for
less than three years and (2) restricted securities, excluding securities
eligible for resale pursuant to Rule 144A under the 1933 Act or foreign
securities which are offered or sold outside the United States in accordance
with Regulation S under the 1933 Act; provided, however, that the Fund may not
invest more than 15% of its net assets in restricted securities including those
eligible for resale under Rule 144A.
15. Invest in securities which are illiquid if, as a result, more than 15% of
its net assets would consist of such securities, including repurchase agreements
maturing in more than seven days, securities that are not readily marketable,
restricted securities not eligible for resale pursuant to Rule 144A under the
1933 Act, purchased OTC options, certain assets under to cover written OTC
options, and privately issued stripped mortgage-backed securities.
16. Borrow money to purchase securities in excess of 5% of the Fund's total
assets.
17. Invest in real estate limited partnership interest.
18. Purchase warrants of any issuer, if, as a result of such purchase, more than
2% of the value of the Fund's total assets would be invested in warrants which
are not listed on the New York or American Stock Exchange or more than 5% of the
value of the total assets of the Fund would be invested in warrants generally,
whether or not so listed. For these purposes, warrants are to be valued at the
lesser of cost or market, but warrants acquired by the Fund in units with or
attached to debt securities shall be deemed to be without value.
19. Purchase interests in oil, gas, or other mineral exploration programs or
mineral leases; however, this policy will not prohibit the acquisition of
securities of companies engaged in the production or transmission of oil, gas,
or other minerals.
20. Write covered call or put options with respect to more than 25% of the value
of its total assets, invest more than 25% of its total assets in protective put
options or invest more than 5% of its total assets in puts, calls, spreads or
straddles, or any combination thereof, other than protective put options. The
aggregate value of premiums paid on all options, other than protective put
options, held by the Fund at any time will not exceed 20% of the Fund's total
assets.
21. Invest for the purpose of exercising control over or management of any
company.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amounts of net assets will not be considered a violation
of any of the foregoing restrictions. In order to permit the sale of shares of
the Fund in certain states, the Trustees may, in their sole discretion, adopt
restrictions on investment policy more restrictive than those described above.
Should the Trustees determine that any such more restrictive policy is no longer
in the best interest of the Fund and its shareholders, the Fund may cease
offering shares in the state involved and the Trustees may revoke such
18
<PAGE>
restrictive policy. Moreover, if the states involved shall no longer require any
such restrictive policy, the Trustees may, at their sole discretion, revoke such
policy.
The Fund agrees that, in accordance with Texas Blue Sky Regulations, until such
regulations no longer require, it will not engage in short sales (other than
short sales against the box) unless (i) the dollar amount of the short sales
does not exceed 25% of the net assets of the Fund; (ii) the value of the
securities of any one issuer in which the Fund maintains a short position does
not exceed the lesser of (a) 2% of the net asset value of the Fund or (b) 2% of
the securities of any class of any issuer; and (iii) the securities in which
short sales are made are listed on a national securities exchange.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by the Trustees, who elect officers who are
responsible for the day-to-day operations of the Fund and who execute policies
formulated by the Trustees. Several of the officers and Trustees of the Trust
are also officers and directors of the Adviser or directors of the Fund's
principal distributor, John Hancock Funds, Inc. ("John Hancock Funds").
19
<PAGE>
The following table sets forth the principal occupation of the Trustees and
principal officers of the Trust during the past five years:
<TABLE>
<CAPTION>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman and Chief Executive
101 Huntington Avenue Executive Officer (1)(2) Officer, the Adviser and The
Boston, MA 02199 Berkeley Financial Group ("Berkeley
October 1944 Group"); Chairman, NM Capital
Management, Inc. ("NM Capital") and
John Hancock Advisers International
Limited ("Advisers International");
Chairman, Chief Executive Officer
and President, John Hancock Funds,
Inc. ("John Hancock Funds"), John
Hancock Investor Services
Corporation ("Investor Services"),
First Signature Bank and Trust
Company and Sovereign Asset
Management Corporation
("SAMCorp."); Director, John
Hancock Freedom Securities
Corporation, John Hancock Capital
Corporation and New England/Canada
Business Council; Member,
Investment Company Institute Board
of Governors; Director, Asia
Strategic Growth Fund, Inc.;
Trustee, Museum of Science; Vice
Chairman and President, the Adviser
(until July 1992); Chairman, John
Hancock Distributors, Inc. (until
April, 1994).
- -------------------
* Trustee may be deemed to be an "interested person" of the Corporation as
defined in the Investment Company Act of 1940
(1) Member of the Executive Committee. Under the Corporation's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
20
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Dennis S. Aronowitz Trustee (3) Professor of Law, Boston University
Boston University School of Law; Trustee, Brookline
Boston, Massachusetts Savings Bank.
June 1931
Richard P. Chapman, Jr. Trustee (1)(2) President, Brookline Savings Bank;
160 Washington Street Director, Federal Home Loan Bank of
Brookline, MA 02147 Boston (lending); Director, Lumber
February 1935 Insurance Companies (fire and
casualty insurance); Trustee,
Northeastern University
(education); Director, Depositors
Insurance Fund, Inc. (insurance).
William J. Cosgrove Trustee (3) Vice President, Senior Banker and
20 Buttonwood Place Senior Credit Officer, Citibank,
Saddle River, NJ 07458 N.A. (retired September 1991);
January 1933 Executive Vice President, Citadel
Group Representatives, Inc.; EVP
Resource Evaluation, Inc.
(consulting) (until October 1993);
Trustee, the Hudson City Savings
Bank (since 1995).
- -------------------
* Trustee may be deemed to be an "interested person" of the Corporation as
defined in the Investment Company Act of 1940
(1) Member of the Executive Committee. Under the Corporation's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
21
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Douglas M. Costle Trustee (1)(3) Director, Chairman of the Board and
RR2 Box 480 Distinguished Senior Fellow,
Woodstock, VT 05091 Institute for Sustainable
July 1939 Communities, Montpelier, Vermont
(since 1991); Dean Vermont Law
School (until 1991); Director, Air
and Water Technologies Corporation
(environmental services and
equipment), Niagara Mohawk Power
Company (electric services) and
Mitretek Systems (governmental
consulting services).
Leland O. Erdahl Trustee (3) Director, Santa Fe Ingredients
8046 Mackenzie Court Company of California, Inc. and
Las Vegas, NV 89129 Santa Fe Ingredients Company, Inc.
December 1928 (private food processing
companies), Uranium Resources,
Inc.; President, Stolar, Inc.
(1987-1991); President, Albuquerque
Uranium Corporation (1985-1992);
Director, Freeport-McMoRan Copper &
Gold Company, Inc., Hecla Mining
Company, Canyon Resources
Corporation and Original Sixteen to
One Mines, Inc. (1984-1987 and
1991-1995) (management consultant).
- -------------------
* Trustee may be deemed to be an "interested person" of the Corporation as
defined in the Investment Company Act of 1940
(1) Member of the Executive Committee. Under the Corporation's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
22
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Richard A. Farrell Trustee(3) President of Farrell, Healer & Co.,
Venture Capital Partners (venture capital management firm)
160 Federal Street (since 1980); Prior to 1980, headed
23rd Floor the venture capital group at Bank
Boston, MA 02110 of Boston Corporation.
November 1932
Gail D. Fosler Trustee (3) Vice President and Chief Economist,
4104 Woodbine Street The Conference Board (non-profit
Chevy Chase, MD 20815 economic and business research).
December 1947
William F. Glavin Trustee (3) President, Babson College; Vice
Babson College Chairman, Xerox Corporation (until
Horn Library June 1989); Director, Caldor Inc.,
Babson Park, MA 02157 Reebok, Ltd. (since 1994) and Inco
March 1931 Ltd.
Anne C. Hodsdon * Trustee and President (1,2) President and Chief Operating
101 Huntington Avenue Officer, the Adviser; Executive
Boston, MA 02199 Vice President, the Adviser (until
April 1953 December 1994); Senior Vice
President, the Adviser (until
December 1993); Vice President, the
Adviser (until 1991).
Dr. John A. Moore Trustee (3) President and Chief Executive
Institute for Evaluating Officer, Institute for Evaluating
Health Risks Health Risks, (nonprofit
1629 K Street NW institution) (since September
Suite 402 1989).
Washington, DC 20006-1602
February 1939
- -------------------
* Trustee may be deemed to be an "interested person" of the Corporation as
defined in the Investment Company Act of 1940
(1) Member of the Executive Committee. Under the Corporation's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
23
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Patti McGill Peterson Trustee (3) Cornell Institute of Public
Institute of Public Affairs Affairs, (since August 1996);
364 Upson Hall President Emeritus of Wells College
Cornell University and St. Lawrence University;
Ithaca, NY 14853 Director, Niagara Mohawk Power
Corporation (electric utility) and
Security, Mutual Life (insurance).
John W. Pratt Trustee (3) Professor of Business
2 Gray Gardens East Administration at Harvard
Cambridge, MA 02138 University Graduate School of
September 1931 Business Administration (since
1961).
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John
Boston, MA 02117 Hancock Funds, Investor Services,
August 1937 John Hancock Distributors, Inc.,
John Hancock Subsidiaries, Inc.,
John Hancock Property and Casualty
Insurance and its affiliates (until
November, 1993), SAMCorp. and NM
Capital; Trustee, The Berkeley
Group; Director JH Networking
Insurance Agency, Inc.
Edward J. Spellman, CPA Trustee (3) Partner, KPMG Peat Marwick LLP
259C Commercial Bld. (retired June 1990).
Lauderdale, FL 33308
November 1932
- -------------------
* Trustee may be deemed to be an "interested person" of the Corporation as
defined in the Investment Company Act of 1940
(1) Member of the Executive Committee. Under the Corporation's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
24
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Robert G. Freedman * Vice Chairman and Chief Vice Chairman and Chief Investment
101 Huntington Avenue Investment Officer (2) Officer, the Adviser; President,
Boston, MA 02199 the Adviser (until December 1994);
July 1938 Director, the Adviser, Advisers
International, John Hancock Funds,
Investor Services, SAMCorp., and NM
Capital; Senior Vice President, The
Berkeley Group.
James B. Little * Senior Vice President and Senior Vice President, the Adviser,
101 Huntington Avenue Chief Financial Officer The Berkeley group, John Hancock
Boston, MA 02199 Funds and Investor Services.
February 1935
John A. Morin * Vice President Vice President, the Adviser,
101 Huntington Avenue Investor Services and John Hancock
Boston, MA 02199 Funds; Counsel, John Hancock Mutual
July 1950 Life Insurance Company; Vice
President and Assistant Secretary,
The Berkeley Group.
- -------------------
* Trustee may be deemed to be an "interested person" of the Corporation as
defined in the Investment Company Act of 1940
(1) Member of the Executive Committee. Under the Corporation's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
25
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Susan S. Newton * Vice President and Vice President and Assistant
101 Huntington Avenue Secretary Secretary, the Adviser; Vice
Boston, MA 02199 President and Secretary, John
March 1950 Hancock Funds, Investor Services
and John Hancock Distributors, Inc.
(until 1944); Secretary, SAMCorp;
Vice President, The Berkeley Group.
James J. Stokowski * Vice President and Vice President, the Adviser.
101 Huntington Avenue Treasurer
Boston, MA 02199
November 1946
</TABLE>
- -------------------
* Trustee may be deemed to be an "interested person" of the Corporation as
defined in the Investment Company Act of 1940
(1) Member of the Executive Committee. Under the Corporation's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
All of the officers listed are officers or employees of the Adviser or
affiliated companies. Some of the Trustees and officers may also be officers
and/or directors and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
The following table provides information regarding the compensation paid by the
other investment companies in the John Hancock Fund Complex to the Independent
Trustees for their services during the 1995 calendar year. The three
non-Independent Trustees, Ms. Hodsdon, Messrs. Boudreau, and Scipione, and each
of the officers of the Fund are interested persons of the Adviser, and/or
affiliates are compensated by the Adviser and receive no compensation from the
Fund for their services.
26
<PAGE>
Aggregate Compensation
Aggregate Total Compensation From
Compensation From All Funds in John Hancock
Independent Trustees Fund Complex to Trustees*
- -------------------- ---- --------------------
Dennis S. Aronowitz $ 61,050
Richard P. Chapman, Jr.+ 62,800
William J. Cosgrove 61,050
Gail D. Fosler 60,800
Bayard Henry 58,850
Edward J. Spellman 61,050
Douglas M. Costle 41,750
Leland O. Erdahl 41,750
Richard A. Farrell 43,250
William F. Glavin + 37,500
John A. Moore 41,750
Patti McGill Peterson 41,750
John W. Pratt 41,750
-------
Totals $655,100
* Total compensation paid by the John Hancock Fund Complex to the Independent
Trustees is for the calendar year ended December 31, 1995. On this date,
there went 61 funds in the John Hancock Funds Complex. Messrs, Aronowitz,
Chapman, Cosgrove, Henry, and Spellman, and Ms. Fosler served 16 and
Messrs. Costle, Erdahl, Farrell, Glavin, Moore, and Pratt and Ms. Peterson
served 12 of these funds.
** Mr. Henry retired from his position as a Trustee effective April 26, 1996.
+ On December 31, 1995, the value of the aggregate deferred compensation from
all funds in the John Hancock Fund Complex for Mr. Chapman was $54,681, for
Mr. Cosgrove was $54,243 and for Mr. Glavin was $32,061.
INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser for the Fund is the Adviser, a Massachusetts corporation,
with offices at 101 Huntington Avenue, Boston, Massachusetts 02199-7603. The
Adviser is a registered investment advisory firm which maintains a securities
research department, the efforts of which will be made available to the Fund.
The Adviser was organized in 1968 and presently has over $19 billion in assets
under management in its capacity as investment adviser to the Fund and the other
mutual funds and publicly traded investment companies in the John Hancock group
of funds having a combined total of over 1,080,000 shareholders. The Adviser is
an affiliate of John Hancock Mutual Life Insurance Company (the "Life Company"),
27
<PAGE>
one of the most recognized and respected financial institutions in the nation.
With total assets under management of approximately $80 billion, the Life
Company is one of the 10 largest life insurance companies in the United States,
and carries high ratings from Standard & Poor's and A.M. Best's. Founded in
1862, the Life Company has been serving clients for over 130 years.
The Trust, on behalf of the Fund, has entered into an investment advisory
agreement (the "Advisory Agreement") dated as of March 6, 1996 with the Adviser.
As the Fund's manager and investment adviser, the Adviser will: (a) furnish
continuously an investment program for the Fund and determine, subject to the
overall supervision and review of the Board of Trustees, which investments
should be purchased, held, sold or exchanged, (b) provide supervision over all
aspects of the Fund's operations except those which are delegated to a
custodian, transfer agent or other agent, and (c) provide the Fund with such
executive, administrative and clerical personnel, officers and equipment as are
deemed necessary for the conduct of the Fund's business.
As compensation for its services under the Advisory Agreement, the Adviser
receives from the Fund a fee computed and paid monthly at an annual rate of
0.80% of the Fund's average daily net assets and 0.75% of average daily net
assets in excess of that amount. The rates for the Fund are higher than those
for many other mutual funds because of the extensive amount of research required
to manage the Fund's portfolio in comparison to the portfolios of other funds.
All expenses which are not specifically paid by the Adviser and which are
incurred in the operation of the Fund (including fees of Trustees of the Fund
who are not "interested persons," as defined in the Investment Company Act of
1940 ("Investment Company Act"), but excluding certain distribution-related
activities required to be paid by the Adviser or John Hancock Funds) and the
continuous public offering of the shares of the Fund are borne by the Fund.
Class expenses properly allocable to Class A or Class B shares will be borne
exclusively by such class of shares, subject to certain conditions imposed by
the Internal Revenue Service in issuing rulings to funds with a multiple-class
structure.
The Adviser has agreed that if, in any fiscal year, the total expenses of the
Fund (excluding taxes, interest, brokerage commissions and extraordinary items,
but including the Adviser's fee) exceed the expense limitation applicable to the
Fund, the Adviser will reduce its fee for the Fund in the amount of that excess
up to the amount of its fee during that fiscal year. Although there is no
certainty that any limitations will be in effect in the future, the most
restrictive state expense limitation currently is 2.5% of the first $30 million
of average net assets, 2.0% of the next $70 million of net assets and 1.5% of
the remaining net assets.
The Advisory Agreement was approved on December 11, 1995 by all of the Trustees,
including all of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto. The sole initial shareholder of the
Fund also approved the Advisory Agreement on March 6, 1996. The Advisory
Agreement will continue in effect until June 30, 1997 and from year to year
thereafter, provided that its continuance is approved annually both (i) by the
holders of a majority of the outstanding voting securities of the Fund or by the
Board of Trustees, and (ii) by a majority of the Trustees who are not parties to
the Advisory Agreement or "interested persons" of any such party. The Advisory
Agreement may be terminated on 60 days' written notice by any party and will
terminate automatically if it is assigned.
28
<PAGE>
DISTRIBUTION CONTRACTS
The Trust has entered into a Distribution Agreement with John Hancock Funds.
Under the contract John Hancock Funds is obligated to use its best efforts to
sell shares of each class on behalf of the Fund. Shares of the Fund are also
sold by selected broker-dealers who have entered into dealer agreements with
John Hancock Funds (the "Selling Brokers").
John Hancock Funds accepts orders for the purchase of the shares of the Fund
which are continually offered at net asset value next determined plus any
applicable sales charge. In connection with the sale of Class A or Class B
shares of the Fund, John Hancock Funds and Selling Brokers receive compensation
in the form of a sales charge imposed, in the case of Class A shares, at the
time of sale or, in the case of Class B shares, on a deferred basis. The sales
charges are discussed further in the Prospectus.
The Trustees adopted Distribution Plans with respect to Class A and Class B
shares ("the Plans"), pursuant to Rule 12b-1 under the Investment Company Act of
1940. Under the Class A and Class B Plans, the Fund will pay distribution and
service fees at an aggregate annual rate of up to 0.30% and 1.00% respectively,
of each class' average daily net assets. However, the amount of the service fee
will not exceed 0.25% of the Fund's average daily net assets attributable to
each class of shares. The distribution fees reimburse John Hancock Funds for
distribution costs incurred in the promotion of sales of shares of the Fund, and
the service fees compensate Selling Brokers for providing personal and account
maintenance services to shareholders. In the event that John Hancock Funds is
not fully reimbursed for expenses incurred by it under the Class B Plan in any
fiscal year, the Distributors may carry these expenses forward, provided,
however, that the Trustees may terminate the Class B Plan and thus the Fund's
obligation to make further payments at any time. Accordingly, the Fund does not
treat unreimbursed expenses relating to the Class B shares as a liability. The
Plans were approved by the sole initial shareholder of the Fund. The Plans were
approved by the Trustees, including a majority of the Trustees who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plans (the "Independent Trustees"), by votes
cast in person at a meeting called for the purpose of voting on such Plans.
Pursuant to the Plans, at least quarterly, the Distributors provide the Fund
with a written report of the amounts expended under the Plans and the purpose
for which these expenditures were made. The Trustees review these reports on a
quarterly basis.
Each of the Plans provides that it will continue in effect only so long as its
continuance is approved at least annually by a majority of both the Trustees and
the Independent Trustees. Each of the Plans provides that it may be terminated
without penalty, (a) by vote of a majority of the Independent Trustees, (b) by a
vote of a majority of the applicable class of the Fund's outstanding shares upon
60 day's written notice to John Hancock Funds and (c) automatically in the event
of assignment. Each of the Plans further provides that it may not be amended to
increase the maximum amount of the fees for the services described therein
without the approval of a majority of the outstanding shares of the class of the
Fund which has voting rights with respect to the Plan. Finally, each of the
Plans provides that no material amendment to the Plan will be effective unless
29
<PAGE>
it is approved by a vote of the Trustees and the Independent Trustees of the
Trust. The holders of Class A and Class B shares have exclusive voting rights
with respect to the Plan applicable to their respective class of shares. In
adopting the Plans the Trustees concluded that, in their judgment, there is a
reasonable likelihood that the Plans will benefit the holders of the applicable
class of shares of the Fund.
When the Trust seeks an Independent Trustee to fill a vacancy or as a nominee
for election by shareholders, the selection or nomination of the Independent
Trustee is, under resolutions adopted by the Trustees contemporaneously with
their adoption of the Plan, committed to the discretion of the Committee on
Administration of the Trustees. The members of the Committee on Administration
are all Independent Trustees and identified in this Statement of Additional
Information under the heading "Those Responsible for Management".
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.
Debt securities are valued on the basis of valuations furnished by a principal
market maker or a pricing service, both of which generally utilize electronic
data processing techniques to determine valuations for normal institutional size
trading units of debt securities without exclusive reliance upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National Market
issues are generally valued at last sale price on the day of valuation.
Securities for which no sales are reported and other securities traded
over-the-counter are generally valued at the mean between the current closing
bid and asked prices.
Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of market value, the fair value of
the security may be determined in good faith in accordance with procedures
approved by the Trustees.
Any assets or liabilities denominated or quoted in foreign currencies are
translated into U.S. dollars by the Custodian based on London currency exchange
quotations as of 5:00 p.m., London time (12:00 noon, New York time) on the
valuation date.
The Fund will not price its securities on the following national holidays: New
Year's Day; Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor
Day; Thanksgiving Day; and Christmas Day. On any day an international market is
closed and the New York Stock Exchange is open, any foreign securities will be
valued at the prior day's close with the current day's exchange rate. Trading of
foreign securities may take place on Saturdays and U.S. business holidays on
which the Fund's NAV is not calculated. Consequently, the Fund's portfolio
securities may trade and the NAV of the Fund's shares may be significantly
affected on days when a shareholder has no access to the Fund.
30
<PAGE>
INITIAL SALES CHARGE ON CLASS A SHARES
The sales charge applicable to purchases of Class A shares of the Fund is
described in the Prospectus. Methods of obtaining reduced sales charges referred
to generally in the Prospectus are described in detail below. In calculating the
sales charge applicable to current purchases of Class A shares, the investor is
entitled to cumulate current purchases with the greater of the current value (at
offering price) of the Class A shares of the Fund, or if Investor Services is
notified by the investor's dealer or the investor at the time of the purchase,
the cost of the Class A shares owned.
Combined Purchases. In calculating the sales charge applicable to purchases of
Class A shares made at one time, the purchases will be combined if made by (a)
an individual, his or her spouse and their children under the age of 21,
purchasing securities for his, her or their own account, (b) a trustee or other
fiduciary purchasing for a single trust, estate or fiduciary account and (c)
certain groups of four or more individuals making use of salary deductions or
similar group methods of payment whose funds are combined for the purchase of
mutual fund shares. Further information about combined purchases, including
certain restrictions on combined group purchases, is available from Investor
Services or a Selling Broker's representative.
Without Sales Charges. As described in the Prospectus, Class A shares of the
Fund may be sold without a sales charge to certain persons described in the
Prospectus.
Accumulation Privilege. Investors (including investors combining purchases) who
are already Class A shareholders may also obtain the benefit of the reduced
sales charge by taking into account not only the amount then being invested but
also the purchase price of the Class A shares already held by such person.
Combination Privilege. Reduced sales charges (according to the schedule set
forth in the Prospectus) are also available to an investor based on the
aggregate amount of his concurrent and prior investments in Class A shares of
the Fund and shares of all other John Hancock funds which carry a sales charge.
Letter of Intention. The reduced sales charges are also applicable to
investments made over a specified period pursuant to a Letter of Intention (the
"LOI"), which should be read carefully prior to its execution by an investor.
The Fund offers two options regarding the specified period for making
investments under the LOI. All investors have the option of making their
investments over a specified period of thirteen (13) months. Investors who are
using the Fund as a funding medium for a qualified retirement plan, however, may
opt to make the necessary investments called for by the LOI over a forty-eight
(48) month period. These qualified retirement plans include group IRA, SEP,
SARSEP, TSA, 401(k), ISA and 457 plans. Such an investment (including
accumulations and combinations) must aggregate $50,000 or more during the
specified period from the date of the LOI or from a date within ninety (90) days
prior thereto, upon written request to Investor Services. The sales charge
applicable to all amounts invested under the LOI is computed as if the aggregate
amount intended to be invested had been invested immediately. If such aggregate
amount is not actually invested, the difference in the sales charge actually
paid and the sales charge payable had the LOI not been in effect is due from the
31
<PAGE>
investor. However, for purchases actually made within the specified period the
applicable sales charge will not be higher than that which would have applied
(including accumulations and combinations) had the LOI been for the amount
actually invested.
The LOI authorizes Investor Services to hold in escrow a number of Class A
shares (approximately 5% of the aggregate) sufficient to make up any difference
in sales charges on the amount intended to be invested and the amount actually
invested, until such investment is completed within the specified period, at
which time the escrow shares will be released. If the total investment specified
in the LOI is not completed, the Class A shares held in escrow may be redeemed
and the proceeds used as required to pay such sales charge as may be due. By
signing the LOI, the investor authorizes Investor Services to act as his or her
attorney-in-fact to redeem any escrowed shares and adjust the sales charge, if
necessary. A LOI does not constitute a binding commitment by an investor to
purchase, or by the Fund to sell, any additional Class A shares and may be
terminated at any time.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per share without
the imposition of an initial sales charge so that the Fund will receive the full
amount of the purchase payment.
Contingent Deferred Sales Charge. Class B shares which are redeemed within six
years of purchase will be subject to a contingent deferred sales charge ("CDSC")
at the rates set forth in the Prospectus as a percentage of the dollar amount
subject to the CDSC. The charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the Class B
shares being redeemed. No CDSC will be imposed on increases in account value
above the initial purchase prices, including increases in account value derived
from reinvestment of dividends or capital gains distributions. No CDSC will be
imposed on shares derived from reinvestment of dividends or capital gain
distributions.
Class B shares are not available to full-service defined contribution plans
adminstered by Investor Services or the Life Company that had more than 100
eligible employees at the inception of the Fund account.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining this number of
years, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
dividend and capital gain reinvestment, and next from the shares you have held
the longest during the six-year period. For this purpose, the amount of any
increase in a share's value above its initial purchase price is not regarded as
a share exempt from CDSC. Thus, when a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial purchase
price. Upon redemption, appreciation is effective only on a per share basis for
those shares being redeemed. Appreciation of shares cannot be redeemed CDSC free
at the account level.
When requesting a redemption for a specific dollar amount please indicate if you
require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.
32
<PAGE>
Example:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time your CDSC will be calculated as follows:
* Proceeds of 50 shares redeemed at $12 per share $600
* Minus proceeds of 10 shares not subject to CDSC
(dividend reinvestment) -120
* Minus appreciation on remaining shares
(40 shares X $2) -80
----
* Amount subject to CDSC $400
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole or
in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B shares, such as the payment of compensation to select Selling Brokers
for selling Class B shares. The combination of the CDSC and the distribution and
service fees facilitates the ability of the Fund to sell the Class B shares
without a sales charge being deducted at the time of the purchase. See the
Prospectus for additional information regarding the CDSC.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to CDSCs,
unless indicated otherwise, in the circumstances defined below:
For all account types:
* Redemptions made pursuant to the Fund's right to liquidate your account if
you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability.
* Redemptions made under the Reinstatement Privilege, as described in "Sales
Charge Reductions and Waivers" in the Prospectus.
* Redemptions of Class B shares made under a periodic withdrawal plan, as
long as your annual redemptions do not exceed 10% of your account value,
including reinvested dividends, at the time you established your periodic
withdrawal plan and 10% of the value of subsequent investments (less
redemptions) in that account at the time you notify Investor Services.
(Please note, this waiver does not apply to periodic withdrawal plan
redemptions of Class A shares that are subject to a CDSC.)
For Retirement Accounts (such as IRA, Rollover IRA, TSA, 457, 403(b), 401(k),
Money Purchase Pension Plan, Profit-Sharing Plan and other plans as described in
the Internal Revenue Code) unless otherwise noted.
* Redemptions made to effect mandatory or life expectancy distributions under
the Internal Revenue Code.
33
<PAGE>
* Returns of excess contributions made to these plans.
* Redemptions made to effect distributions to participants or beneficiaries
from employer sponsored retirement plans under section 401(a) of the Code
(such as 401(k), Money Purchase Pension Plan, Profit-Sharing Plan).
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares prior
to May 15, 1995.
Please see matrix for reference.
CDSC Waiver Matrix
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Type of 401(a) Plan 403(b) 457 IRA, IRA Non-Retirement
Distribution (401(k), MPP, PSP) Rollover
- ---------------------------------------------------------------------------------------------------------------
Death or Waived Waived Waived Waived Waived
Disability
- ---------------------------------------------------------------------------------------------------------------
Over 70 1/2 Waived Waived Waived Waived for 12% of
mandatory account value
distributions annually in
or 12% of acct periodic
value annually payments
in periodic
payments
- ---------------------------------------------------------------------------------------------------------------
Between 59 1/2 Waived Waived Waived Waived for 12% of
and 70 1/2 Expectancy or account value
12% of acct annually in
value annually periodic
in periodic payments
payments
- ---------------------------------------------------------------------------------------------------------------
Under 59 1/2 Waived Waived for Waived for Waived for 12% of
annuity annuity annuity account value
payments (72t) payments (72t) payments (72t) annually in
or 12% of acct or 12% of acct or 12% of acct periodic
value annually value annually value annually payments
in periodic in periodic in periodic
payments. payments. payments.
- ---------------------------------------------------------------------------------------------------------------
Loans Waived Waived N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Termination of Not Waived Not Waived Not Waived Not Waived N/A
Plan
- ---------------------------------------------------------------------------------------------------------------
Hardships Waived Waived Waived N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Return of Waived Waived Waived Waived N/A
Excess
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
If you qualify for a CDSC waiver under one of these situations, you must notify
Investor Services at the time you make your redemption. The waiver will be
granted once Investor Services has confirmed that you are entitled to the
waiver.
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. If the shareholder were to sell
portfolio securities received in this fashion, he would incur a brokerage
charge. Any such securities would be valued for the purposes of making such
payment at the same value as used in determining net asset value. The Fund has,
however, elected to be governed by Rule 18f-1 under the Investment Company Act.
Under that rule, the Fund must redeem its shares for cash except to the extent
that the redemption payments to any shareholder during any 90-day period would
exceed the lesser of $250,000 or 1% of the Fund's net asset value at the
beginning of such period.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. As described more fully in the Prospectus, the Fund permits
exchanges of shares of any class of the Fund for shares of the same class in any
other John Hancock fund offering that class.
Systematic Withdrawal Plan. As described briefly in the Prospectus, the Fund
permits the establishment of a Systematic Withdrawal Plan. Payments under this
plan represent proceeds from the redemption of shares of the Fund. Since the
redemption price of the shares of the Fund may be more or less than the
shareholder's cost, depending upon the market value of the securities owned by
the Fund at the time of redemption, the distribution of cash pursuant to this
plan may result in realization of gain or loss for purposes of Federal, state
and local income taxes. The maintenance of a Systematic Withdrawal Plan
concurrently with purchases of additional Class A or Class B shares of the Fund
could be disadvantageous to a shareholder because of the initial sales charge
payable on such purchases of Class A shares and the CDSC imposed on redemptions
of Class B shares and because redemptions are taxable events. Therefore, a
shareholder should not purchase Class A or Class B shares of the Fund at the
same time a Systematic Withdrawal Plan is in effect. The Fund reserves the right
to modify or discontinue the Systematic Withdrawal Plan of any shareholder on 30
days' prior written notice to such shareholder, or to discontinue the
availability of such plan in the future. The shareholder may terminate the plan
at any time by giving proper notice to Investor Services.
Monthly Automatic Accumulation Program ("MAAP"). This program is explained more
fully in the Fund's Prospectus and the Account Privileges Application. The
program, as it relates to automatic investment checks, is subject to the
following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the Monthly Automatic Accumulation
Program may be revoked by Investor Services without prior notice if any
investment is not honored by the shareholder's bank. The bank shall be under no
obligation to notify the shareholder as to the non-payment of any check.
35
<PAGE>
The program may be discontinued by the shareholder either by calling Investor
Services or upon written notice to Investor Services which is received at least
five (5) business days prior to the processing date of any investment.
Reinvestment Privilege. A shareholder who has redeemed Fund shares may, within
120 days after the date of redemption, reinvest without payment of a sales
charge any part of the redemption proceeds in shares of the same class of the
Fund or in any other John Hancock fund, subject to the minimum investment limit
of that fund. The proceeds from the redemption of Class A shares may be
reinvested at net asset value without paying a sales charge in Class A shares of
the Fund or in Class A shares of another John Hancock fund. If a CDSC was paid
upon a redemption, a shareholder may reinvest the proceeds from this redemption
at net asset value in additional shares of the class from which the redemption
was made. The shareholder's account will be credited with the amount of any CDSC
charged upon the prior redemption and the new shares will continue to be subject
to the CDSC. The holding period of the shares acquired through reinvestment
will, for purposes of computing the CDSC payable upon a subsequent redemption,
include the holding period of the redeemed shares. The Fund may modify or
terminate the reinvestment privilege at any time.
A redemption or exchange of Fund shares is a taxable transaction for Federal
income tax purposes even if the reinvestment privilege is exercised, and any
gain or loss realized by a shareholder on the redemption or other disposition of
Fund shares will be treated for tax purposes as described under the caption "Tax
Status."
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Trust are responsible for the management and supervision of
the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Trust,
without par value. Under the Declaration of Trust, the Trustees have the
authority to create and classify shares of beneficial interest in separate
series, without further action by shareholders. As of the date of this Statement
of Additional Information, the Trustees have authorized the issuance of two
classes of shares of the Fund, designated as Class A and Class B.
The shares of each class of the Fund represent an equal proportionate interest
in the aggregate net assets attributable to the classes of the Fund. Class A
shares and Class B shares of the Fund will be sold exclusively to members of the
public at net asset value. A sales charge will be imposed either at the time of
the purchase, for Class A shares, or on a contingent deferred basis, for Class B
shares. For Class A shares, no sales charge is payable at the time of purchase
on investments of $1 million or more, but for such investments a contingent
deferred sales charge may be imposed in the event of certain redemption
transactions within one year of purchase.
Holders of Class A shares and Class B shares have certain exclusive voting
rights on matters relating to their respective distribution plans. The different
classes of the Fund may bear different expenses relating to the cost of holding
shareholder meetings necessitated by the exclusive voting rights of any class of
shares.
36
<PAGE>
Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and will be in the same amount,
except that (i) the distribution and service fees relating to the Class A and
Class B shares will be borne exclusively by that class; (ii) Class B shares will
pay higher distribution and service fees than Class A shares; and (iii) Class A
shares and Class B shares will bear any other class expenses properly allocable
to such class of shares, subject to the conditions that the Internal Revenue
Service imposes in issuing rulings to funds that have a multiple-class
structure. The net asset value per share may vary depending on whether Class A
shares or Class B shares are purchased. In the event of liquidation,
shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to such shareholders. Shares entitle their holders to
one vote per share, are freely transferable and have no preemptive, subscription
or conversion rights. When issued, shares are fully paid and non-assessable
except as set forth in the Prospectus.
Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Trust has no intention of holding annual meetings of shareholders.
Trust shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares, and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with a request for a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Fund. The Declaration of Trust also provides for indemnification out of the
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. Liability is therefor
limited to circumstances in which the Fund itself would be unable to meet its
obligations, and the possibility of this occurrence is remote.
TAX STATUS
The Fund is treated as a separate entity for accounting and tax purposes. The
Fund intends to elect to be treated and qualify each year as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As such and by complying with the applicable provisions of
the Code regarding the sources of its income, the timing of its distributions,
and the diversification if its assets, the Fund will not be subject to Federal
income tax on taxable income (including net short-term and long-term capital
gains) which is distributed to shareholders in accordance with the timing
requirements of the Code.
The Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to avoid liability for such tax by satisfying
such distribution requirements.
37
<PAGE>
Distributions from the Fund's current or accumulated earnings and profits
("E&P"), as computed for Federal income tax purposes, will be taxable as
described in the Fund's Prospectus whether taken in shares or in cash.
Distributions, if any, in excess of E & P will constitute a return of capital,
which will first reduce an investor's tax basis in Fund shares and thereafter
(after such basis is reduced to zero) will generally give rise to capital gains.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for Federal income tax purposes in each share so received
equal to the amount of cash they would have received had they elected to receive
the distributions in cash, divided by the number of shares received.
If the Fund acquires stock in certain non-U.S. corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, rents, royalties or capital gain) or hold at least 50% of their
assets in investments producing such passive income ("passive foreign investment
companies"), the Fund could be subject to Federal income tax and additional
interest charges on "excess distributions" received from such companies or gain
from the sale of stock in such companies, even if all income or gain actually
received by the Fund is timely distributed to its shareholders. The Fund would
not be able to pass through to its shareholders any credit or deduction for such
a tax. Certain elections may, if available, ameliorate these adverse tax
consequences, but any such election could require the Fund to recognize taxable
income or gain without the concurrent receipt of cash. The Fund may limit and/or
manage its holdings in passive foreign investment companies to minimize its tax
liability or maximize its return from these investments.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
foreign currency forward contracts, foreign currencies, or payables or
receivables denominated in a foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders. Any such transactions that are not directly
related to the Fund's investment in stock or securities, possibly including
speculative currency positions or currency derivatives not used for hedging
purposes, may increase the amount of gain it is deemed to recognize from the
sale of certain investments held for less than three months, which gain is
limited under the Code to less than 30% of its annual gross income, and could
under future Treasury regulations produce income not among the types of
"qualifying income" from which the Fund must derive at least 90% of its annual
gross income. If the net foreign exchange loss for a year treated as ordinary
loss under Section 988 were to exceed the Fund's investment company taxable
income (i.e., all of the Fund's net income other than any excess of net
long-term capital gain over net short-term capital loss) computed without regard
to such loss after taking into account Treasury regulations resulting in
deferral of certain post-October losses, the resulting overall ordinary loss for
such year would not be deductible by the Fund or its shareholders in future
years.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes.
Investors may be entitled to claim U.S. foreign tax credits or deductions with
respect to such taxes, subject to certain provisions and limitations contained
in the Code. Specifically, if more than 50% of the value of the Fund's total
assets at the close of any taxable year consists of stock or securities of
foreign corporations, the Fund may file an election with the Internal Revenue
Service pursuant to which shareholders of the Fund will be required to (i)
38
<PAGE>
include in ordinary gross income (in addition to taxable dividends actually
received) their pro rata shares of foreign income taxes paid by the Fund even
though not actually received by them, and (ii) treat such respective pro rata
portions as foreign income taxes paid by them.
If the Fund makes this election, shareholders may then deduct such pro rata
portions of foreign income taxes in computing their taxable incomes, or
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of foreign income taxes paid by the Fund, although
such shareholders will be required to include their share of such taxes in gross
income. Shareholders who claim a foreign tax credit for such foreign taxes may
be required to treat a portion of dividends received from the Fund as a separate
category of income for purposes of computing the limitations on the foreign tax
credit. Tax-exempt shareholders will ordinarily not benefit from this election.
Each year that the Fund files the election described above, its shareholders
will be notified of the amount of (i) each shareholder's pro rata share of
foreign income taxes paid by the Fund and (ii) the portion of Fund dividends
which represents income from each foreign country. If the Fund cannot or does
not make this election it may deduct such taxes in computing its taxable income.
The amount of the Fund's net short-term and long-term capital gains, if any, in
any given year will vary depending upon the Adviser's current investment
strategy and whether the Adviser believes it to be in the best interest of the
Fund to dispose of portfolio securities or enter into options or futures
transactions that will generate capital gains. At the time of an investor's
purchase of Fund shares, a portion of the purchase price is often attributable
to realized or unrealized appreciation in the Fund's portfolio or undistributed
taxable income of the Fund. Consequently, subsequent distributions from such
appreciation or income may be taxable to such investor even if the net asset
value of the investor's shares is, as a result of the distributions, reduced
below the investor's cost for such shares, and the distributions in reality
represent a return of a portion of the purchase price.
Upon a redemption of shares of the Fund (including by exercise of the exchange
privilege) a shareholder may realize a taxable gain or loss depending upon his
basis in his shares. Such gain or loss will be treated as capital gain or loss
if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, depending upon the shareholder's tax holding period for
the shares. A sales charge paid in purchasing Class A shares of the Fund cannot
be taken into account for purposes of determining gain or loss on the redemption
or exchange of such shares within 90 days after their purchase to the extent
shares of the Fund or another John Hancock fund are subsequently acquired
without payment of a sales charge pursuant to the reinvestment or exchange
privilege. Such disregarded load will result in an increase in the shareholder's
tax basis in the shares subsequently acquired. Also, any loss realized on a
redemption or exchange may be disallowed to the extent the shares disposed of
are replaced with other shares of the Fund within a period of 61 days beginning
30 days before and ending 30 days after the shares are disposed of, such as
pursuant to automatic dividend reinvestments. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized upon the redemption of shares with a tax holding period of six months
or less will be treated as a long-term capital loss to the extent of any amounts
treated as distributions of long-term capital gain with respect to such shares.
39
<PAGE>
Although its present intention is to distribute all net short-term and long-term
capital gains, if any, the Fund reserves the right to retain and reinvest all or
any portion of its "net capital gain", which is the excess, as computed for
Federal income tax purposes, of net long-term capital gain over net short-term
capital loss in any year. The Fund will not in any event distribute net
long-term capital gains realized in any year to the extent that a capital loss
is carried forward from prior years against such gain. To the extent such excess
was retained and not exhausted by the carryforward of prior years' capital
losses, it would be subject to Federal income tax in the hands of the Fund. Each
shareholder would be treated for Federal income tax purposes as if the Fund had
distributed to him on the last day of its taxable year his pro rata share of
such excess, and he had paid his pro rata share of the taxes paid by the Fund
and reinvested the remainder in the Fund. Accordingly, each shareholder would
(a) include his pro rata share of such excess as long-term capital gain in his
return for his taxable year in which the last day of the Fund's taxable year
falls, (b) be entitled either to a tax credit on his return for, or a refund of,
his pro rata share of the taxes paid by the Fund, and (c) be entitled to
increase the adjusted tax basis for his shares in the Fund by the difference
between his pro rata share of such excess and his pro rata share of such taxes.
For Federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset its own net capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent net capital
gains are offset by such losses, they would not result in Federal income tax
liability to the Fund, as noted above, and would not be distributed as such to
shareholders. As a newly formed series of the Trust, the Fund has no capital
loss carryforwards.
For purposes of the dividends received deduction available to corporations,
dividends received by the Fund, if any, from U.S. domestic corporations in
respect of the stock of such corporations held by the Fund, for U.S. Federal
income tax purposes, for at least 46 days (91 days in the case of certain
preferred stock) and distributed and designated by the Fund may be treated as
qualifying dividends. The Fund expects that a portion of its income
distributions will generally be treated as qualifying dividends. Corporate
shareholders must meet the minimum holding period requirement stated above (46
or 91 days) with respect to their shares of the Fund in order to qualify for the
deduction and, if they borrow to acquire such shares, may be denied a portion of
the dividends received deduction. The entire qualifying dividend, including the
otherwise deductible amount, will be included in determining the excess (if any)
of a corporate shareholder's adjusted current earnings over its alternative
minimum taxable income, which may increase its alternative minimum tax
liability. Additionally, any corporate shareholder should consult its tax
adviser regarding the possibility that its basis in its shares may be reduced,
for Federal income tax purposes, by reason of "extraordinary dividends" received
with respect to the shares, for the purpose of computing its gain or loss on
redemption or other disposition of the shares.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
Limitations imposed by the Code on regulated investment companies like the Fund
may restrict the Fund's ability to enter into futures, options, and forward
transactions.
40
<PAGE>
Certain options, futures and forward foreign currency transactions undertaken by
the Fund may cause the Fund to recognize gains or losses from marking to market
even though its positions have not been sold or terminated and affect the
character as long-term or short-term (or, in the case of certain currency
forward, options and futures, as ordinary income or loss) and timing of some
capital gains and losses realized by the Fund. Also, certain of the Fund's
losses on its transactions involving options, futures or forward contracts
and/or offsetting portfolio positions may be deferred rather than being taken
into account currently in calculating the Fund's taxable income. Certain of the
applicable tax rules may be modified if the Fund is eligible and chooses to make
one or more of certain tax elections that may be available. These transactions
may therefore affect the amount, timing and character of the Fund's
distributions to shareholders. The Fund will take into account the special tax
rules (including consideration of available elections) applicable to options,
futures or forward contracts in order to minimize any potential adverse tax
consequences.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may also be
subject to state and local taxes. Shareholders should consult their own tax
advisers as to the Federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Fund in their particular
circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8 or authorized
substitute is on file, to 31% backup withholding on certain other payments from
the Fund. Non-U.S. investors should consult their tax advisers regarding such
treatment and the application of foreign taxes to an investment in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
Provided that the Fund qualifies as a regulated investment company under the
Code, it will also not be required to pay any Massachusetts income tax.
CALCULATION OF PERFORMANCE
The following information supplements the discussion in the Prospectus regarding
performance information.
Total Return. Average annual total return is determined separately for each
class of shares. Total return is computed by finding the average annual
compounded rates of return over the designated periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
41
<PAGE>
n _____
T = \ /ERV/P - 1
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment made at the
beginning of the 1 year and life-of-fund periods.
The calculation of total return assumes that the maximum sales charge for Class
A shares of 5% is included in the initial investment or, for Class B shares, the
applicable CDSC is applied at the end of the period. This calculation also
assumes that all dividends and distributions are reinvested at net asset value
on the reinvestment dates during the period.
In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total returns may be quoted as a percentage or
as a dollar amount, and may be calculated for a single investment, a series of
investments, and/or a series of redemptions, over any time period. Total returns
may be quoted with or without taking the Fund's sales charge on Class A shares
or the CDSC on Class B shares into account. Excluding the Fund's sales charge on
Class A shares and the CDSC on Class B shares from a total return calculation
produces a higher total return figure.
Performance Comparisons. From time to time, in reports and promotional
literature, the Fund's total return will be ranked or compared to indices of
mutual funds such as Lipper Analytical Services, Inc.'s "Lipper Mutual
Performance Analysis," a monthly publication which tracks net assets, total
return, and yield on mutual funds in the United States. Ibottson and Associates,
CDA Weisenberger and F.C. Towers are also used for comparison purposes, as well
as the Russell and Wilshire indices.
Performance rankings and ratings reported periodically in national financial
publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK, THE WALL STREET
JOURNAL, MORNINGSTAR, STANGER'S and BARRON'S will also be utilized.
The performance of the Fund is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of the Fund for
any period in the future. The performance of the Fund is a function of many
factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales, and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performances.
42
<PAGE>
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the officers of the Trust
pursuant to recommendations made by an investment committee of the Adviser,
which consists of officers and directors of the Adviser and affiliates and
officers and Trustees who are interested persons of the Fund. Orders for
purchases and sales of securities are placed in a manner which, in the opinion
of the officers of the Trust, will offer the best price and market for the
execution of each such transaction. Purchases from underwriters of portfolio
securities may include a commission or commissions paid by the issuer and
transactions with dealers serving as market makers reflect a "spread". Debt
securities are generally traded on a net basis through dealers acting for their
own account as principals and not as brokers; no brokerages commissions are
payable on such transactions.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and other policies that the Trustees may determine, the Adviser may consider
sales of shares of the Fund as a factor in the selection of broker-dealers to
execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of services, including
primarily the availability and value of research information and to a lesser
extent statistical assistance furnished to the Adviser of the Fund, and their
value and expected contribution to the performance of the Fund. It is not
possible to place a dollar value on information and services to be received from
brokers and dealers, since it is only supplementary to the research efforts of
the Adviser. The receipt of research information is not expected to reduce
significantly the expenses of the Adviser. The research information and
statistical assistance furnished by brokers and dealers may benefit the Life
Company or other advisory clients of the Adviser, and, conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser may result
in research information and statistical assistance beneficial to the Fund. The
Fund will not make commitments to allocate portfolio transactions upon any
prescribed basis. While the Trust's officers will be primarily responsible for
the allocation of the Fund's brokerage business, their policies and practices in
this regard must be consistent with the foregoing and will at all times be
subject to review by the Trustees.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay a broker which provides brokerage and research services to the Fund an
amount of disclosed commission in excess of the commission which another broker
would have charged for effecting that transaction. This practice is subject to
good faith determination by the Trustees that the commission is reasonable in
light of the services provided and to policies that the Trustees may adopt from
time to time.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Distributors, Inc. (Distributors), a broker-dealer
subsidiaries, Tucker Anthony Incorporated ("Tucker Anthony") and Sutro & Company
("Sutro"), (each, are "Affiliated Brokers"). Pursuant to procedures determined
43
<PAGE>
by the Trustees and consistent with the above policy of obtaining best net
results, the Fund may execute portfolio transactions with or through Tucker
Anthony, Sutro or Distributors.
Any of the Affiliated Brokers may act as broker for the Fund on exchange
transactions, subject, however, to the general policy of the Fund set forth
above and the procedures adopted by the trustees pursuant to the Investment
Company Act. Commissions paid to an Affiliated Broker must be at least as
favorable as those which the Trustees believe to be contemporaneously charged by
other brokers in connection with comparable transactions involving similar
securities being purchased or sold. A transaction would not be placed with an
Affiliated Broker if the Fund would have to pay a commission rate less favorable
than the Affiliated Broker's contemporaneous charges for comparable transactions
for its other most favored, but unaffiliated, customers except for accounts for
which the Affiliated Broker acts as clearing broker for another brokerage firm,
and any customers of the Affiliated Broker not comparable to the Fund as
determined by the majority of the Trustees who are not "interested persons" (as
defined in the Investment Company Act) of the Fund, the Adviser or the
Affiliated Broker. Because the Adviser, which is affiliated with the Affiliated
Brokers, has, as an investment adviser to the Fund, the obligation to provide
investment management services, which include elements of research and related
investment skills, such research and related skills will not be used by the
Affiliated Broker as a basis for negotiating commissions at a rate higher than
that determined in accordance with the above criteria. The Fund will not effect
principal transactions with Affiliated Brokers.
DISTRIBUTIONS
The per share dividends from the Fund's net investment income on the Class B
shares will be lower than the per share dividends on the Class A shares of the
Fund as a result of the higher distribution fee applicable with respect to the
Class B shares.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation, P.O. Box 9116, Boston, MA
02205-9116, a wholly-owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays an annual fee of
$19.00 for each Class A shareholder and $21.50 for each Class B shareholder plus
certain out-of-pocket expenses. These expenses are aggregated and charged to the
Fund and allocated to each class on the basis of the relative net asset values.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Trust and Investors Bank & Trust Company, 89 South Street, Boston,
Massachusetts 02111. Under the custodian agreement, Investors Bank & Trust
Company performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts serves as the
Fund's independent auditors, providing services including (1) examination of
annual financial statements, (2) assistance and consultation in connection with
Securities and Exchange Commission filings, and (3) preparation of the annual
Federal income tax returns filed on behalf of the Fund.
44
<PAGE>
John Hancock Funds
John Hancock
Financial Industries
Fund
JULY 31, 1996
<PAGE>
John Hancock Funds - Financial Industries Fund
Trustees
Edward J. Boudreau, Jr.
Chairman
Douglas M. Costle *
Leland O. Erdahl *
Richard A. Farrell *
William F. Glavin *
Anne C. Hodsdon
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
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and
Compliance Officer
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
<PAGE>
John Hancock Funds - Financial Industries Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
July 31, 1996 (Unaudited)
- ----------------------------------------------------------------------------------------
<S>
Assets: <C> <C>
Investments at value - Note C:
Common stocks (cost - $655,366) $717,930
Corporate savings account 34,451
--------
752,381
Dividends and interest receivable 627
Receivable from John Hancock Advisers, Inc. - Note B 21,756
Deferred organization expenses - Note A 24,534
--------
Total Assets 799,298
--------------------------------------------------------------
Liabilities:
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 30,282
Accounts payable and accrued expenses 19,303
--------
Total Liabilities 49,585
--------------------------------------------------------------
Net Assets:
Capital paid-in 673,923
Accumulated net realized gain on investments 11,876
Net unrealized appreciation of investments 62,564
Undistributed net investment income 1,350
========
Net Assets $749,713
==============================================================
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 - $749,713 / 77,629 $ 9.66
========================================================================================
Maximum Offering Price Per Share*:
Class A - ($9.66 x 105.26%) $ 10.17
========================================================================================
</TABLE>
* On single retail sales of less than $50, 000. On sales of $50,000 or more
and on group sales the offering price is reduced.
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Financial Industries Fund
<TABLE>
<CAPTION>
Statement of Operations
For the period March 14, 1996 (commencement of operations) to
July 31, 1996 (Unaudited)
- ---------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $5) $ 2,561
Interest 2,053
-------
4,614
Expenses:
Investment management fee - Note B 2,176
Distribution fee - Note B 816
Auditing fee 5,129
Printing 3,784
Custodian fee 3,442
Miscellaneous 2,727
Registration and filing fees 2,622
Organization expense - Note A 2,037
Legal fees 1,267
Transfer agent fee 718
Trustees' fees 302
-------
Total Expenses 25,020
-------------------------------------------------------------
Less Expenses Reimbursed by
John Hancock Advisers, Inc. - Note B 21,756
-------
Net Expenses 3,264
-------------------------------------------------------------
Net Investment Income 1,350
-------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 11,876
Change in net unrealized appreciation/
depreciation of investments 62,564
-------
Net Realized and Unrealized
Gain on Investments 74,440
-------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $75,790
=============================================================
</TABLE>
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Financial Industries Fund
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------
FOR THE PERIOD
MARCH 14, 1996
(COMMENCEMENT OF
OPERATIONS) TO
JULY 31, 1996
(UNAUDITED)
-----------
<S> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $ 1,350
Net realized gain on investments sold 11,876
Change in net unrealized appreciation/depreciation of investments 62,564
--------
Net Increase in Net Assets from Operations 75,790
--------
From Fund Share Transactions - Net* 173,923
--------
Net Assets:
Initial Investment by John Hancock Advisers, Inc. - Note A 500,000
--------
End of period (including undistributed net investment income of $1,350) $749,713
========
* Analysis of Fund Share Transactions:
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD MARCH 14, 1996
(COMMENCEMENT OF OPERATIONS) TO
JULY 31, 1996
(UNAUDITED)
-----------
SHARES AMOUNT
<S> <C> <C>
Shares sold 26,110 $244,356
Less shares repurchased -7,305 -70,433
------------------------
Net increase 18,805 173,923
Initial Investment by John Hancock Advisers, Inc. - Note A 58,824 500,000
------------------------
Net increase and shares outstanding end of period 77,629 $673,923
========================
</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 JULY 31, 1996
(UNAUDITED)
-----------------------------
<S> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50 (b)
-------
Net Investment Income 0.02 (e)
Net Realized and Unrealized Gain on Investments 1.14
-------
Total from Investment Operations 1.16
-------
Net Asset Value, End of Period $ 9.66
=======
Total Investment Return at Net Asset Value (f) 13.65% (c)
Total Adjusted Investment Return at Net Asset Value (a) (f) 10.58% (c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 750
Ratio of Expenses to Average Net Assets 1.20% *
Ratio of Adjusted Expenses to Average Net Assets (a) (d) 9.22% *
Ratio of Net Investment Income to Average Net Assets 0.50% *
Ratio of Adjusted Net Investment Loss to Average Net Assets (a) (d) ( 7.52%) *
Portfolio Turnover Rate 13%
Average Brokerage Commission Rate $0.0643 (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 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
July 31, 1996 (Unaudited)
- --------------------------------------
NUMBER OF MARKET
ISSUER SHARES VALUE
- ------ ------ -----
COMMON STOCKS
Banks - Foreign (0.78%)
Bank of Scotland 509 $ 1,807
National Bank of Canada 500 4,038
--------
5,845
--------
Banks - United States (17.95%)
American Bancshares, Inc. * 1,000 7,875
Atlantic Bank & Trust Co. * 1,500 10,125
Cupertino National Bancorp. 900 13,387
Fleet Financial Group, Inc. 250 10,125
FNB Rochester Corp. * 750 6,797
Mercantile Bancorp. 250 11,469
Mississippi Valley Bancshares, Inc. 400 13,050
Norwest Corp. 250 8,875
SJNB Financial Corp. 500 9,000
TransWorld Bancorp. * 1,125 15,469
United Security Bancorp. * 500 6,250
Vallicorp Holdings, Inc. 500 7,688
Ventura County National Bancorp. * 1,500 5,063
West Coast Bancorp. 500 9,438
--------
134,611
--------
Broker Services ( 5.08%)
Edwards (A.G.), Inc. 500 13,688
Lehman Brothers Holdings, Inc. 500 11,562
Salomon, Inc. 300 12,825
--------
38,075
--------
Computers (13.89%)
BISYS Group, Inc. (The) * 300 9,113
CFI Proservices, Inc. * 300 6,225
Continuum, Inc. * 200 10,750
Eagle River Interactive, Inc. * 600 10,050
First USA Paymentech, Inc. * 500 20,437
Fiserv, Inc. * 500 16,750
Intuit, Inc.* 300 10,538
Prism Solutions, Inc. * 500 6,750
Registry, Inc. (The) * 500 13,500
--------
104,113
--------
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Financial Industries Fund
Schedule of Investments
July 31, 1996 (Unaudited)
- --------------------------------------
NUMBER OF MARKET
ISSUER SHARES VALUE
- ------ ------ -----
Insurance (12.03%)
Ace, Ltd. 250 $ 11,000
Aetna Life & Casualty Co. 200 11,625
Allmerica Financial Corp. 400 11,850
Enhance Financial Services Group, Inc. 500 14,562
General Re Corp. 75 11,006
Marsh & McLennan Cos., Inc. 100 9,063
St. Paul Cos., Inc. 200 10,350
Travelers/Aetna Property Casualty Corp. (Class A) * 400 10,750
--------
90,206
--------
Other Financial (32.87%)
Aames Financial Corp. 450 17,662
Advanta Corp. (Class A) 250 11,875
Alliance Capital Management, L.P. 600 15,075
Associates First Capital Corp. * 500 19,187
Beneficial Corp. 200 10,800
Capital One Financial Corp. 400 11,550
Cityscape Financial Corp. * 300 19,575
ContiFinancial Corp. * 400 11,550
Dean Witter Discover & Co. 200 10,175
Financial Federal Corp. * 600 7,800
First Data Corp. 200 15,525
First USA, Inc. 200 9,775
IMC Mortgage Co. 700 16,800
Imperial Credit Industries, Inc. * 400 11,650
Medallion Financial Corp. * 700 7,569
Onyx Acceptance Corp. * 800 8,800
RAC Financial Group, Inc. * 500 12,937
Sirrom Capital Corp. 400 10,600
Southern Pacific Funding Corp. * 900 17,550
--------
246,455
--------
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Financial Industries Fund
Schedule of Investments
July 31, 1996 (Unaudited)
- --------------------------------------
NUMBER OF MARKET
ISSUER SHARES VALUE
- ------ ------ -----
Thrifts (13.16%)
American Federal Bank, FSB 500 $ 7,906
Cal Fed Bancorp., Inc. * 500 11,312
Cardinal Bankshares, Inc. 200 7,950
Coast Savings Financial, Inc. * 450 14,456
First Colorado Bancorp., Inc. 700 9,713
PALFED, Inc. 800 10,100
Pamrapo Bancorp., Inc. 500 9,313
Security First Network Bank * 800 21,000
Sterling Financial Corp. * 500 6,875
--------
98,625
--------
TOTAL COMMON STOCKS
(Cost $655,366) 95.76% 717,930
--------
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Financial Industries Fund
Schedule of Investments
July 31, 1996 (Unaudited)
- ----------------------------------------
MARKET
VALUE
SHORT-TERM INVESTMENTS
Corporate Savings Account ( 4.60%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.75% $ 34,451
--------
TOTAL SHORT TERM INVESTMENTS 4.60% 34,451
------- --------
TOTAL INVESTMENTS 100.36% $752,381
======= ========
* 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 a diversified, 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 July 31, 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 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Financial Industries Fund
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 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 July 31, 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 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Financial Industries Fund
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
July 31, 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 July 31,
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 $21,756 for the period ended
July 31, 1996. The Adviser reserves the right to terminate this limit in the
future.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended July 31,
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
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Financial Industries Fund
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.
Mr. Edward J. Boudreau, Jr. and Ms. Anne C. Hodsdon 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 July 31, 1996, aggregated $713,116 and
$69,612, respectively. There were no purchases or sales of obligations of the
U.S. government and its agencies during the period ended July 31, 1996.
The cost of investments owned at July 31, 1996 (excluding the corporate
savings account) for federal income tax purposes was $655,366. Gross unrealized
appreciation and depreciation of investments aggregated $84,382 and $21,818,
respectively, resulting in net unrealized appreciation of $62,564.
<PAGE>
PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Freedom Investment Trust
John Hancock Financial Industries Fund
Satement of Assets and Liabilities as of July 31, 1996.
Statement of Operations for the year ended July 31, 1996.
Statement of Changes in Net Assets for the period ended July 31, 1996.
Financial Highlights for the period ended July 31, 1996.
Schedule of Investments as of July 31, 1996.
Notes to Financial Statements.
(b) Exhibits:
The exhibits to this Registration Statement are listed in the Exhibit Index
hereto and are incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant
No person is directly or indirectly controlled by or under common control
with Registrant.
Item 26. Number of Holders of Securities
As of August 12, 1996 the number of record holders of shares of Registrant
was as follows:
Title of Class Number of Record Holders
-------------- ------------------------
Class A Class B
------- -------
John Hancock Gold & Government Fund 3,152 4,379
John Hancock Regional Bank Fund 73,217 145,731
John Hancock Managed Tax-Exempt Fund 1,749 7,287
John Hancock Disciplined Growth Fund 4,671 12,195
John Hancock Financial Services Fund 78 0
C-1
<PAGE>
Item 27. Indemnification
(a) Under Article VI of the Registrant's Master Trust Agreement each of its
Trustees and Officers or person serving in such capacity with another entity at
the request of the Registrant ("Covered Person") shall be indemnified against
all liabilities, including, but not limited to, amounts paid in satisfaction of
judgments, in compromises or as fines or penalties, and expenses, including
reasonable legal and accounting fees, in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or otherwise or with which
such person may be or may have been threatened, while in office or thereafter,
by reason of being or having been such a Trustee or officer, director or
trustee, except with respect to any matter as to which it has been determined
that such Covered Person (i) did not act in good faith in the reasonable belief
that such Covered Person's action was in or not opposed to the best interests of
the Trust or (ii) had acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office (either and both of the conduct described in (i) and
(ii) being referred to hereafter as "Disabling Conduct"). A determination that
the Covered Person is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an administrative proceeding
against a Covered Person for insufficiency of evidence of Disabling Conduct, or
(iii) a reasonable determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by (a) a vote of a
majority of a quorum of Trustees who are neither "interested persons" of the
Trust as defined in section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion.
(b) Under the Distribution Agreement. Under Section 12 of the Distribution
Agreement, John Hancock Funds, Inc. ("John Hancock Funds" ) has agreed to
indemnify the Registrant and its Trustees, officers and controlling persons
against claims arising out of certain acts and statements of John Hancock Funds.
Section 9(a) of the By-Laws of the Insurance Company provides, in effect,
that the Insurance Company will, subject to limitations of law, indemnify each
present and former director, officer and employee of the of the Insurance
Company who serves as a Trustee or officer of the Registrant at the direction or
request of the Insurance Company against litigation expenses and liabilities
incurred while acting as such, except that such indemnification does not cover
any expense or liability incurred or imposed in connection with any matter as to
which such person shall be finally adjudicated not to have acted in good faith
in the reasonable belief that his action was in the best interests of the
Insurance Company. In addition, no such person will be indemnified by the
Insurance Company in respect of any liability or expense incurred in connection
with any matter settled without final adjudication unless such settlement shall
have been approved as in the best interests of the Insurance Company either by
vote of the Board of Directors at a meeting composed of directors who have no
interest in the outcome of such vote, or by vote of the policyholders. The
Insurance Company may pay expenses incurred in defending an action or claim in
advance of its final disposition, but only upon receipt of an undertaking by the
person indemnified to repay such payment if he should be determined to be
entitled to indemnification.
C-2
<PAGE>
Article IX of the respective By-Laws of John Hancock Funds and the Adviser
provide as follows:
"Section 9.01. Indemnity: Any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the Corporation serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by the Corporation
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and the liability was not
incurred by reason of gross negligence or reckless disregard of the duties
involved in the conduct of his office, and expenses in connection therewith may
be advanced by the Corporation, all to the full extent authorized by the law."
"Section 9.02. Not Exclusive; Survival of Rights: The indemnification provided
by Section 9.01 shall not be deemed exclusive of any other right to which those
indemnified may be entitled, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such as person."
Insofar as indemnification for liabilities under the Securities Act of 1933 (the
"Act") may be permitted to Trustees, officers and controlling persons of
Registrant pursuant to the Registrant's Amended and Restated Articles of
Incorporation, Article 10.1 of the Registrant's By-Laws, The underwriting
Agreement, the By-Laws of Distributors, the Adviser, or the Insurance Company or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and other Connections of Investment Adviser
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and Directors of the Investment
Adviser, reference is made to Forms ADV filed (801-8124) under the Investment
Advisers Act of 1940, herein incorporated by reference.
Item 29. Principal Underwriters
(a) The Funds have two distributors. One distributor, Freedom Distributors
Corporation ("Freedom") also acts as co-distributor with Tucker Anthony
Incorporated for two other registered investment companies; Freedom Group of Tax
Exempt Funds and Freedom Mutual Fund. John Hancock Funds acts as principal
underwriter for the Registrant and also serves as principal underwriter or
distributor of shares for John Hancock Cash Reserve, Inc., John Hancock Bond
Trust, John Hancock Current Interest, John Hancock Series, Inc., John Hancock
Tax-Free Bond Trust, John Hancock California Tax-Free Income Fund, John
C-3
<PAGE>
Hancock Capital Series, John Hancock Limited-Term Government Fund, John Hancock
Sovereign Investors Fund, Inc., John Hancock Special Equities Fund, John Hancock
Sovereign Bond Fund, John Hancock Tax-Exempt Series, John Hancock Strategic
Series, John Hancock Technology Series, Inc., John Hancock World Fund, John
Hancock Investment Trust, John Hancock Institutional Series Trust, Freedom
Investment Trust, Freedom Investment Trust II and Freedom Investment Trust III.
(b) The following table lists, for each director and officer of John
Hancock Funds, the information indicated.
C-4
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Edward J. Boudreau, Jr. Chairman, President and Chief Chairman
101 Huntington Avenue Executive Officer
Boston, Massachusetts
Robert H. Watts Director, Executive Vice None
John Hancock Place President and Chief Compliance
P.O. Box 111 Officer
Boston, Massachusetts
James V. Bowhers Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
Robert G. Freedman Director Vice Chairman, Chief
101 Huntington Avenue Investment Officer
Boston, Massachusetts
Stephen M. Blair Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
James W. McLaughlin Senior Vice President None
101 Huntington Avenue and
Boston, Massachusetts Chief Financial Officer
David A. King Director and Senior Vice None
101 Huntington Avenue President
Boston, Massachusetts
James B. Little Senior Vice President Senior Vice President and
101 Huntington Avenue Chief Financial Officer
Boston, Massachusetts
C-5
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Charles H. Womack Senior Vice President None
6501 Americas Parkway
Suite 950
Albuquerque, New Mexico
Anthony P. Petrucci Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
John A. Morin Vice President and Secretary Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President Vice President and
101 Huntington Avenue Assistant Secretary
Boston, Massachusetts
Keith Harstein Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Griselda Lyman Vice President None
101 Huntington Avenue
Boston, Massachusetts
Karen Walsh Vice President None
101 Huntington Avenue
Boston, Massachusetts
Christopher M. Meyer Treasurer None
101 Huntington Avenue
Boston, Massachusetts
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
C-6
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John Goldsmith Director None
One Beacon Street
Boston, Massachusetts
Richard O. Hansen Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
David F. D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
</TABLE>
C-7
<PAGE>
(b) The name of each director and officer of Freedom, together with the
offices held by such person with Freedom and the Registrant, are set forth
below.
<TABLE>
<CAPTION>
Name and Principal Business Positions and Offices Positions and Offices
Address with Underwriter with Registrant
------- ---------------- ---------------
<S> <C> <C>
John J. Danello President, Director None
One Beacon Street and Clerk
Boston, Massachusetts
Thomas J. Brown Treasurer and Director None
One Beacon Street
Boston, Massachusetts
Dexter A. Dodge Vice President None
One Beacon Street
Boston, Massachusetts
</TABLE>
(b) None
(c) None.
Item 30. Location of Accounts and Records
Registrant maintains the records required to be maintained by it under Rules
31a-1 (a), 31a-a(b), and 31a-2(a) under the Investment Company Act of 1940 as
its principal executive offices at 101 Huntington Avenue, Boston Massachusetts
02199-7603. Certain records, including records relating to Registrant's
shareholders and the physical possession of its securities, may be maintained
pursuant to Rule 31a-3 at the main office of Registrant's Transfer Agent and
Custodian.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus with respect to a series of the Registrant is delivered with a copy
of the latest annual report to shareholders with respect to that series upon
request and without charge.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485 (b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts on the
30th day of August, 1996.
FREEDOM INVESTMENT TRUST
By: *
-----------------------
Edward J. Boudreau, Jr.
Chairman
Pursuant to the requirements of the Securities Act of 1933, the
Registration has been signed below by the following persons in the capacities
and on the dates indicated.
Signature Title Date
--------- ----- ----
*
- ------------------------ Chairman
Edward J. Boudreau, Jr. (Principal Executive Officer)
/s/James B. Little
- ------------------------ Senior Vice President and Chief August 30, 1996
James B. Little Financial Officer (Principal
Financial and Accounting Officer)
*
- ------------------------ Trustee
Dennis S. Aronowitz
*
- ------------------------ Trustee
Richard P. Chapman, Jr.
*
- ------------------------ Trustee
William J. Cosgrove
*
- ------------------------ Trustee
Douglas M. Costle
C-9
<PAGE>
Signature Title Date
--------- ----- ----
*
- ------------------------ Trustee
Leland O. Erdahl
*
- ------------------------ Trustee
Richard A. Farrell
*
- ------------------------ Trustee
Gail D. Fosler
*
- ------------------------ Trustee
William F. Glavin
*
- ------------------------ Trustee
Anne C. Hodsdon
*
- ------------------------ Trustee
John A. Moore
*
- ------------------------ Trustee
Patti McGill Peterson
*
- ------------------------ Trustee
John W. Pratt
*
- ------------------------ Trustee
Richard S. Scipione
*
- ------------------------ Trustee
Edward J. Spellman
*By: /s/Susan S. Newton August 30, 1996
-------------------
Susan S. Newton
Attorney-in-Fact under
Powers of Attorney dated
May 21, 1996 and August
27, 1996, filed herewith
C-10
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of each of the above listed Trusts, each a
Massachusetts business trust, does hereby severally constitute and appoint
EDWARD J. BOUDREAU, JR., SUSAN S. NEWTON, AND JAMES B. LITTLE, and each acting
singly, to be my true, sufficient and lawful attorneys, with full power to each
of them, and each acting singly, to sign for me, in my name and in the capacity
indicated below, any Registration Statement on Form N-1A and any Registration
Statement on Form N-14 to be filed by the Trust under the Investment Company Act
of 1940, as amended (the "1940 Act"), and under the Securities Act of 1933, as
amended (the "1933 Act"), and any and all amendments to said Registration
Statements, with respect to the offering of shares and any and all other
documents and papers relating thereto, and generally to do all such things in my
name and on my behalf in the capacity indicated to enable the Trust to comply
with the 1940 Act and the 1933 Act, and all requirements of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by said attorneys or each of them to any such Registration
Statements and any and all amendments thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as of
the 21st day of May, 1996.
/s/Dennis S. Aronowitz /s/William F. Glavin
- ----------------------------- ------------------------------
Dennis S. Aronowitz William F. Glavin
/s/Edward J. Boudreau, Jr. /s/ Anne C. Hodsdon
- ----------------------------- ------------------------------
Edward J. Boudreau, Jr. Anne C. Hodsdon
/s/Richard P. Champman, Jr. /s/Patti McGill Peterson
- ----------------------------- ------------------------------
Richard P. Chapman, Jr. Patti McGill Peterson
/s/William J. Cosgrove
- ----------------------------- ------------------------------
William J. Cosgrove John A. Moore
/s/Douglas M. Costle /s/John W. Pratt
- ----------------------------- ------------------------------
Douglas M. Costle John W. Pratt
/s/Leland O. Erdahl /s/Richard S. Scipione
- ----------------------------- ------------------------------
Leland O. Erdahl Richard S. Scipione
/s/Richard A. Farrell /s/Edward J. Spellman
- ----------------------------- ------------------------------
Richard A. Farrell Edward J. Spellman
/s/Gail D. Fosler
- -----------------------------
Gail D. Fosler
C-11
<PAGE>
John Hancock Capital Series John Hancock Strategic Series
John Hancock Declaration Trust John Hancock Tax-Exempt Series Fund
John Hancock Income Securities Trust John Hancock World Fund
John Hancock Investors Trust Freedom Investment Trust
John Hancock Limited Term Government Fund Freedom Investment Trust II
John Hancock Sovereign Bond Fund Freedom Investment Trust III
John Hancock Special Equities Fund
POWER OF ATTORNEY
The undersigned Trustee of each of the above listed Trusts, each a
Massachusetts business trust, does hereby severally constitute and appoint
EDWARD J. BOUDREAU, JR., SUSAN S. NEWTON, AND JAMES B. LITTLE, and each acting
singly, to be my true, sufficient and lawful attorneys, with full power to each
of them, and each acting singly, to sign for me, in my name and in the capacity
indicated below, any Registration Statement on Form N-1A and any Registration
Statement on Form N-14 to be filed by the Trust under the Investment Company Act
of 1940, as amended (the "1940 Act"), and under the Securities Act of 1933, as
amended (the "1933 Act"), and any and all amendments to said Registration
Statements, with respect to the offering of shares and any and all other
documents and papers relating thereto, and generally to do all such things in my
name and on my behalf in the capacity indicated to enable the Trust to comply
with the 1940 Act and the 1933 Act, and all requirements of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by said attorneys or each of them to any such Registration
Statements and any and all amendments thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as of
the 27th day of August, 1996.
/s/ John A. Moore
John A. Moore
C-12
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.B1 Amended and Restated Declaration of Trust dated July 1, 1996.+
99.B2 Amended and Restated By-Laws dated March 6, 1996.+
99.B3 None.
99.B4 Designation of Classes dated December 14, 1992.*
99.B4.1 Specimen share certificate for Regional Bank Fund (Classes A
and B).*
.
99.B4.2 Specimen shares certificate for Managed Tax Exempt Fund
(Classes A and B).*
99.B4.3 Specimen shares certificate for Gold & Government Fund (Classes
A and B).*
99.B4.4 Specimen Shares certificate for Sovereign Achievers Fund
(Classes A and B).*
99.B5 Investment Management Contract between the Registrant on behalf
of John Hancock Financial Industries Fund and John Hancock
Advisers, Inc. dated July 1, 1996.+
99.B5.1 Investment Management Contract between the Registrant on behalf
of John hancock Disciplined Growth Fund and John Hancock
Advisers, Inc. dated July 1, 1996.+
99.B5.2 Investment Management Contract between the Registrant on behalf
of John Hancock Regional Bank Fund and John Hancock Advisers,
Inc. dated July 1, 1996.+
99.B5.3 Investment Management Contract between the Registrant on behalf
of John Hancock Managed Tax-Exempt Fund and John Hancock
Advisers, Inc. dated July 1, 1996.+
99.B6 Distribution Agreement with John Hancock Broker Distribution
Services, Inc. and Freedom Distributors Corporation.*
99.B6.1 Amendment to Distribution Agreement dated March 6, 1996.+
99.B6.2 Form of Financial Institution Sales and Service Agreement.*
99.B6.3 Form of Soliciting Dealer Agreement between John Hancock Broker
Distribution Services, Inc. and Selected Dealers.*
99.B6.4 Form of Amendment to Distribution Agreement between John
Hancock Funds.*
C-13
<PAGE>
Exhibit No. Description
- ----------- -----------
99.B7 None.
99.B8 Custodian Contract with Investors Bank and Trust Company Bank,
dated December 15, 1992.*
99.B8.1 Amendment to Custodian Contract dated March 6, 1996.+
99.B9 Transfer Agency and Service Agreement with John Hancock Fund
Services, Inc.*
99.B9.1 Amendment to Transfer Agency and Service Agreement dated March
6, 1996.+
99.B9.2 Service Agreement between John Hancock Advisers, Inc. and
Berkeley Investment Partners (now TBFG Advisers, Inc.) dated
October 1, 1992.*
99.B10 Not applicable.
99.B11 Not applicable.
99.B11.1 Consent of Morningstar Mutual Fund Values.*
99.B12 Not applicable
99.B13 None
99.B15 Plan of Distribution pursuant to Rule 12b-1 as amended and
restated January 1, 1994.*
99.B15.1 Class A Distribution Plan between Registrant and John Hancock
Funds, Inc.***
99.B15.2 Class B Distribution Plan between Registrant and John Hancock
Funds, Inc.***
99.B16 Working papers showing yield calculation for yield and total
return.***
99.27 John Hancock Financial Industries Fund+
* Previously filed electronically with post-effective amendment number 32
(file nos. 811-3999 and 2-90305) on February 27, 1995, accession number
0000950135-95-000311.
** Previously filed electronically with post-effective amendment number 33
(file nos. 811-3999 and 2-90305) on December 21, 1995, accession number
0000950146-95-000814.
*** Previously filed electronically with post-effective amendment number 34
(file nos. 811-3999 and 2-90305) on February 28, 1996, accession number
0000950135-96-001219.
+ Filed herewith.
C-14
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
FREEDOM INVESTMENT TRUST
101 Huntington Avenue
Boston, Massachusetts 02199
Dated July 1, 1996
AMENDED AND RESTATED DECLARATION OF TRUST made this 1st day of July, 1996
by the undersigned (together with all other persons from time to time duly
elected, qualified and serving as Trustees in accordance with the provisions of
Article II hereof, the "Trustees");
WHEREAS, pursuant to a declaration of trust executed and delivered on March
30, 1984 (the "Original Declaration"), the Trustees established a trust for the
investment and reinvestment of funds contributed thereto;
WHEREAS, the Trustees divided the beneficial interest in the trust assets
into transferable shares of beneficial interest, as provided therein;
WHEREAS, the Trustees declared that all money and property contributed to
the trust established thereunder be held and managed in trust for the benefit of
the holders, from time to time, of the shares of beneficial interest issued
thereunder and subject to the provisions thereof;
WHEREAS, the Trustees desire to amend and restate the Original Declaration;
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements contained herein, the undersigned, being all of the Trustees of the
trust, hereby amend and restate the Original Declaration as follows:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is "Freedom
Investment Trust" (the "Trust").
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "Administrator" means the party, other than the Trust, to the contract
described in Section 3.3 hereof.
(b) "By-laws" means the By-laws referred to in Section 2.8 hereof, as
amended from time to time.
<PAGE>
(c) "Class" means any division of shares within a Series in accordance with
the provisions of Article V.
(d) The terms "Commission" and "Interested Person" have the meanings given
them in the 1940 Act. Except as such term may be otherwise defined by the
Trustees in conjunction with the establishment of any Series, the term "vote of
a majority of the Outstanding Shares entitled to vote" shall have the same
meaning as is assigned to the term "vote of a majority of the outstanding voting
securities" in the 1940 Act.
(e) "Custodian" means any Person other than the Trust who has custody of
any Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(f) "Declaration" means this Declaration of Trust as amended from time to
time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein," and "hereunder" shall be deemed to refer to this Declaration rather
than exclusively to the article or section in which such words appear.
(g) "Distributor" means the party, other than the Trust, to the contract
described in Section 3.1 hereof.
(h) "Fund" or "Funds" individually or collectively, means the separate
Series of the Trust, together with the assets and liabilities assigned thereto.
(i) "Fundamental Restrictions" means the investment restrictions set forth
in the Prospectus and Statement of Additional Information for any Series and
designated as fundamental restrictions therein with respect to such Series.
(j) "His" shall include the feminine and neuter, as well as the masculine,
genders.
(k) "Investment Adviser" means the party, other than the Trust, to the
contract described in Section 3.2 hereof.
(l) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
(m) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(n) "Prospectus" means the Prospectuses and Statements of Additional
Information included in the Registration Statement of the Trust under the
Securities Act of 1933, as amended, as such Prospectuses and Statements of
Additional Information may be amended or supplemented and filed with the
Commission from time to time.
(o) "Series" individually or collectively means the separately managed
component(s) of the Trust (or, if the Trust shall have only one such component,
then that one) as may be established and designated from time to time by the
Trustees pursuant to Section 5.11 hereof.
2
<PAGE>
(p) "Shareholder" means a record owner of Outstanding Shares.
(q) "Shares" means the equal proportionate units of interest into which the
beneficial interest in the Trust shall be divided from time to time, including
the Shares of any and all Series or of any Class within any Series (as the
context may require) which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares. "Outstanding" Shares means those
Shares shown from time to time on the books of the Trust or its Transfer Agent
as then issued and outstanding, but shall not include Shares which have been
redeemed or repurchased by the Trust and which are at the time held in the
treasury of the Trust.
(r) "Transfer Agent" means any Person other than the Trust who maintains
the Shareholder records of the Trust, such as the list of Shareholders, the
number of Shares credited to each account, and the like.
(s) "Trust" means Freedom Investment Trust.
(t) "Trustees" means the persons who have signed this Declaration, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who now serve or may from time to time be duly elected, qualified
and serving as Trustees in accordance with the provisions of Article II hereof,
and reference herein to a Trustee or the Trustees shall refer to such person or
persons in this capacity or their capacities as trustees hereunder.
(u) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is owned or held by or for the account of the Trust or the
Trustees, including any and all assets of or allocated to any Series or Class,
as the context may require.
ARTICLE II
TRUSTEES
Section 2.1. General Powers. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without The Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid powers. Such powers of the Trustees may be exercised
without order of or resort to any court.
3
<PAGE>
Section 2.2. Investments. The Trustees shall have the power:
(a) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest in, cash; securities,
including common, preferred and preference stocks; warrants; subscription
rights; profit-sharing interests or participations and all other contracts for
or evidence of equity interests; bonds, debentures, bills, time notes and all
other evidences of indebtedness; negotiable or non-negotiable instruments;
government securities, including securities of any state, municipality or other
political subdivision thereof, or any governmental or quasi-governmental agency
or instrumentality; and money market instruments including bank certificates of
deposit, finance paper, commercial paper, bankers' acceptances and all kinds of
repurchase agreements, of any corporation, company, trust, association, firm or
other business organization however established, and of any country, state,
municipality or other political subdivision, or any governmental or
quasi-governmental agency or instrumentality; any other security, instrument or
contract the acquisition or execution of which is not prohibited by any
Fundamental Restriction; and the Trustees shall be deemed to have the foregoing
powers with respect to any additional securities in which the Trust may invest
should the Fundamental Restrictions be amended.
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade
in and deal in, to acquire any rights or options to purchase or sell, to sell or
otherwise dispose of, to lend and to pledge any such securities, to enter into
repurchase agreements, reverse repurchase agreements, firm commitment
agreements, forward foreign currency exchange contracts, interest rate, mortgage
or currency swaps, and interest rate caps, floors and collars, to purchase and
sell options on securities, indices, currency, swaps or other financial assets,
futures contracts and options on futures contracts of all descriptions and to
engage in all types of hedging, risk management or income enhancement
transactions.
(d) To exercise all rights, powers and privileges of ownership or interest
in all securities and repurchase agreements included in the Trust Property,
including the right to vote thereon and otherwise act with respect thereto and
to do all acts for the preservation, protection, improvement and enhancement in
value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash or foreign currency, and any interest therein.
(f) To borrow money and in this connection issue notes or other evidence of
indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; and to endorse, guarantee, or
undertake the performance of any obligation or engagement of any other Person
and to lend Trust Property.
4
<PAGE>
(g) To aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included in the
Trust Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest; and to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) To enter into a plan of distribution and any related agreements whereby
the Trust may finance directly or indirectly any activity which is primarily
intended to result in the distribution and/or servicing of Shares.
(i) To adopt on behalf of the Trust or any Series thereof an alternative
purchase plan providing for the issuance of multiple Classes of Shares (as
authorized herein at Section 5.11).
(j) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or arising out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
Notwithstanding any other provision herein, the Trustees shall have full
power in their discretion as contemplated in Section 8.5, without any
requirement of approval by Shareholders, to invest part or all of the Trust
Property (or part or all of the assets of any Series), or to dispose of part or
all of the Trust Property (or part or all of the assets of any Series) and
invest the proceeds of such disposition, in securities issued by one or more
other investment companies registered under the 1940 Act. Any such other
investment company may (but need not) be a trust (formed under the laws of any
state) which is classified as a partnership or corporation for federal income
tax purposes.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
Section 2.3. Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust or any Series of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine, provided that the interest of the Trust therein is
deemed appropriately protected. The right, title and interest of the Trustees in
the Trust Property and the Property of each Series of the Trust shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office, resignation, removal or death of a Trustee he
5
<PAGE>
shall automatically cease to have any right, title or interest in any of the
Trust Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
Section 2.4. Issuance and Repurchase of Shares. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in Shares and, subject to the
provisions set forth in Articles VI and VII and Section 5.11 hereof, to apply to
any such repurchase, redemption, retirement, cancellation or acquisition of
Shares any funds or property of the Trust or of the particular Series with
respect to which such Shares are issued, whether capital or surplus or
otherwise, to the full extent now or hereafter permitted by the laws of The
Commonwealth of Massachusetts governing business corporations.
Section 2.5. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or any
Series of the Trust or the names of the Trustees or otherwise as the Trustees
may deem expedient, to the same extent as such delegation is permitted by the
1940 Act.
Section 2.6. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 2.7. Expenses. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees.
Section 2.8. Manner of Acting; By-laws. Except as otherwise provided herein
or in the By-laws, any action to be taken by the Trustees may be taken by a
majority of the Trustees present at a meeting of Trustees, including any meeting
held by means of a conference telephone circuit or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, or by written consents of a majority of Trustees then in office. The
Trustees may adopt By-laws not inconsistent with this Declaration to provide for
the conduct of the business of the Trust and may amend or repeal such By-laws to
the extent such power is not reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
6
<PAGE>
Section 2.9. Miscellaneous Powers. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust or any Series thereof; (b) enter
into joint ventures, partnerships and any other combinations or associations;
(c) remove Trustees, fill vacancies in, add to or subtract from their number,
elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine; (d) purchase,
and pay for out of Trust Property or the property of the appropriate Series of
the Trust, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers, administrators, distributors, selected
dealers or independent contractors of the Trust against all claims arising by
reason of holding any such position or by reason of any action taken or omitted
by any such Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such Person against
such liability; (e) establish pension, profit-sharing, share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust; (f) to the extent permitted by law, indemnify any
person with whom the Trust or any Series thereof has dealings, including the
Investment Adviser, Administrator, Distributor, Transfer Agent and selected
dealers, to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine and change the
fiscal year and taxable year of the Trust or any Series thereof and the method
by which its or their accounts shall be kept; and (i) adopt a seal for the
Trust, but the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust.
Section 2.10. Principal Transactions. Except for transactions not permitted
by the 1940 Act or rules and regulations adopted, or orders issued, by the
Commission thereunder, the Trustees may, on behalf of the Trust, buy any
securities from or sell any securities to, or lend any assets of the Trust or
any Series thereof to any Trustee or officer of the Trust or any firm of which
any such Trustee or officer is a member acting as principal, or have any such
dealings with the Investment Adviser, Distributor or Transfer Agent or with any
Interested Person of such Person; and the Trust or a Series thereof may employ
any such Person, or firm or company in which such Person is an Interested
Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
Section 2.11. Litigation. The Trustees shall have the power to engage in
and to prosecute, defend, compromise, abandon, or adjust by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series thereof
to pay or to satisfy any debts, claims or expenses incurred in connection
therewith, including those of litigation, and such power shall include without
limitation the power of the Trustees or any appropriate committee thereof, in
the exercise of their or its good faith business judgment, to dismiss any
action, suit, proceeding, dispute, claim, or demand, derivative or otherwise,
brought by any person, including a Shareholder in its own name or the name of
the Trust, whether or not the Trust or any of the Trustees may be named
individually therein or the subject matter arises by reason of business for or
on behalf of the Trust.
Section 2.12. Number of Trustees. The initial Trustees shall be the persons
initially signing the Original Declaration. The number of Trustees (other than
the initial Trustees) shall be such number as shall be fixed from time to time
by vote of a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be less than one (1).
7
<PAGE>
Section 2.13. Election and Term. Except for the Trustees named herein or
appointed to fill vacancies pursuant to Section 2.15 hereof, the Trustees may
succeed themselves and shall be elected by the Shareholders owning of record a
plurality of the Shares voting at a meeting of Shareholders on a date fixed by
the Trustees. Except in the event of resignations or removals pursuant to
Section 2.14 hereof, each Trustee shall hold office until such time as less than
a majority of the Trustees holding office has been elected by Shareholders. In
such event the Trustees then in office shall call a Shareholders' meeting for
the election of Trustees. Except for the foregoing circumstances, the Trustees
shall continue to hold office and may appoint successor Trustees.
Section 2.14. Resignation and Removal. Any Trustee may resign his trust
(without the need for any prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than one) with cause, by
the action of two-thirds of the remaining Trustees or by action of two-thirds of
the outstanding Shares of the Trust (for purposes of determining the
circumstances and procedures under which any such removal by the Shareholders
may take place, the provisions of Section 16(c) of the 1940 Act (or any
successor provisions) shall be applicable to the same extent as if the Trust
were subject to the provisions of that Section). Upon the resignation or removal
of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the incapacity or death of
any Trustee, his legal representative shall execute and deliver on his behalf
such documents as the remaining Trustees shall require as provided in the
preceding sentence.
Section 2.15. Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of his death, retirement, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees shall fill
such vacancy by the appointment of such other person as they in their discretion
shall see fit, made by vote of a majority of the Trustees then in office. Any
such appointment shall not become effective, however, until the person named in
the vote approving the appointment shall have accepted in writing such
appointment and agreed in writing to be bound by the terms of the Declaration.
An appointment of a Trustee may be made in anticipation of a vacancy to occur at
a later date by reason of retirement, resignation or increase in the number of
Trustees, provided that such appointment shall not become effective prior to
such retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.15, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by the Declaration. The vote by a
majority of the Trustees in office, fixing the number of Trustees shall be
conclusive evidence of the existence of such vacancy.
8
<PAGE>
Section 2.16. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
fewer than two (2) Trustees personally exercise the powers granted to the
Trustees under this Declaration except as herein otherwise expressly provided.
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may in their discretion
from time to time enter into an exclusive or non-exclusive distribution contract
or contracts providing for the sale of the Shares to net the Trust or the
applicable Series of the Trust not less than the amount provided for in Section
7.1 of Article VII hereof, whereby the Trustees may either agree to sell the
Shares to the other party to the contract or appoint such other party as their
sales agent for the Shares, and in either case on such terms and conditions, if
any, as may be prescribed in the By-laws, and such further terms and conditions
as the Trustees may in their discretion determine not inconsistent with the
provisions of this Article III or of the By-laws; and such contract may also
provide for the repurchase of the Shares by such other party as agent of the
Trustees.
Section 3.2. Advisory or Management Contract. The Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts or, if the Trustees establish multiple Series, separate
investment advisory or management contracts with respect to one or more Series
whereby the other party or parties to any such contracts shall undertake to
furnish the Trust or such Series management, investment advisory,
administration, accounting, legal, statistical and research facilities and
services, promotional or marketing activities, and such other facilities and
services, if any, as the Trustees shall from time to time consider desirable and
all upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of the Declaration, the Trustees may
authorize the Investment Advisers, or any of them, under any such contracts
(subject to such general or specific instructions as the Trustees may from time
to time adopt) to effect purchases, sales, loans or exchanges of portfolio
securities and other investments of the Trust on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of such Investment Advisers, or
any of them (and all without further action by the Trustees). Any such
purchases, sales, loans and exchanges shall be deemed to have been authorized by
all of the Trustees. The Trustees may, in their sole discretion, call a meeting
of Shareholders in order to submit to a vote of Shareholders at such meeting the
approval or continuance of any such investment advisory or management contract.
If the Shareholders of any one or more of the Series of the Trust should fail to
approve any such investment advisory or management contract, the Investment
Adviser may nonetheless serve as Investment Adviser with respect to any Series
whose Shareholders approve such contract.
Section 3.3. Administration Agreement. The Trustees may in their discretion
from time to time enter into an administration agreement or, if the Trustees
establish multiple Series or Classes, separate administration agreements with
respect to each Series or Class, whereby the other party to such agreement shall
undertake to manage the business affairs of the Trust or of a
9
<PAGE>
Series or Class thereof and furnish the Trust or a Series or a Class thereof
with office facilities, and shall be responsible for the ordinary clerical,
bookkeeping and recordkeeping services at such office facilities, and other
facilities and services, if any, and all upon such terms and conditions as the
Trustees may in their discretion determine.
Section 3.4. Service Agreement. The Trustees may in their discretion from
time to time enter into Service Agreements with respect to one or more Series or
Classes thereof whereby the other parties to such Service Agreements will
provide administration and/or support services pursuant to administration plans
and service plans, and all upon such terms and conditions as the Trustees in
their discretion may determine.
Section 3.5. Transfer Agent. The Trustees may in their discretion from time
to time enter into a transfer agency and shareholder service contract whereby
the other party to such contract shall undertake to furnish transfer agency and
shareholder services to the Trust. The contract shall have such terms and
conditions as the Trustees may in their discretion determine not inconsistent
with the Declaration. Such services may be provided by one or more Persons.
Section 3.6. Custodian. The Trustees may appoint or otherwise engage one or
more banks or trust companies, each having an aggregate capital, surplus and
undivided profits (as shown in its last published report) of at least two
million dollars ($2,000,000) to serve as Custodian with authority as its agent,
but subject to such restrictions, limitations and other requirements, if any, as
may be contained in the By-laws of the Trust. The Trustees may also authorize
the Custodian to employ one or more sub-custodians, including such foreign banks
and securities depositories as meet the requirements of applicable provisions of
the 1940 Act, and upon such terms and conditions as may be agreed upon between
the Custodian and such sub-custodian, to hold securities and other assets of the
Trust and to perform the acts and services of the Custodian, subject to
applicable provisions of law and resolutions adopted by the Trustees.
Section 3.7. Affiliations of Trustees or Officers, Etc. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust or any
Series thereof is a shareholder, director, officer, partner, trustee,
employee, manager, adviser or distributor of or for any partnership,
corporation, trust, association or other organization or of or for any
parent or affiliate of any organization, with which a contract of the
character described in Sections 3.1, 3.2, 3.3 or 3.4 above or for services
as Custodian, Transfer Agent or disbursing agent or for providing
accounting, legal and printing services or for related services may have
been or may hereafter be made, or that any such organization, or any parent
or affiliate thereof, is a Shareholder of or has an interest in the Trust,
or that
(ii) any partnership, corporation, trust, association or other
organization with which a contract of the character described in Sections
3.1, 3.2, 3.3 or 3.4 above or for services as Custodian, Transfer Agent or
disbursing agent or for related services may have been or may hereafter be
made also has any one or more of such contracts with one or more other
partnerships, corporations, trusts, associations or other organizations, or
has other business or interests,
10
<PAGE>
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing
the same or create any liability or accountability to the Trust or its
Shareholders.
Section 3.8. Compliance with 1940 Act. Any contract entered into pursuant
to Sections 3.1 or 3.2 shall be consistent with and subject to the requirements
of Section 15 of the 1940 Act (including any amendment thereof or other
applicable Act of Congress hereafter enacted), as modified by any applicable
order or orders of the Commission, with respect to its continuance in effect,
its termination and the method of authorization and approval of such contract or
renewal thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust or any Series thereof. No Trustee, officer, employee or agent of the Trust
or any Series thereof shall be subject to any personal liability whatsoever to
any Person, other than to the Trust or its Shareholders, in connection with
Trust Property or the affairs of the Trust, except to the extent arising from
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties with respect to such Person; and all such Persons shall look solely to
the Trust Property, or to the Property of one or more specific Series of the
Trust if the claim arises from the conduct of such Trustee, officer, employee or
agent with respect to only such Series, for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any Shareholder,
Trustee, officer, employee, or agent, as such, of the Trust or any Series
thereof, is made a party to any suit or proceeding to enforce any such liability
of the Trust or any Series thereof, he shall not, on account thereof, be held to
any personal liability. The Trust shall indemnify and hold each Shareholder
harmless from and against all claims and liabilities, to which such Shareholder
may become subject by reason of his being or having been a Shareholder, and
shall reimburse such Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) out of
the Trust Property for all legal and other expenses reasonably incurred by him
in connection with any such claim or liability. The indemnification and
reimbursement required by the preceding sentence shall be made only out of
assets of the one or more Series whose Shares were held by said Shareholder at
the time the act or event occurred which gave rise to the claim against or
liability of said Shareholder. The rights accruing to a Shareholder under this
Section 4.1 shall not impair any other right to which such Shareholder may be
lawfully entitled, nor shall anything herein contained restrict the right of the
Trust or any Series thereof to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer, employee
or agent of the Trust or any Series thereof shall be liable to the Trust, its
Shareholders, or to any Shareholder, Trustee, officer, employee, or agent
thereof for any action or failure to act (including without
11
<PAGE>
limitation the failure to compel in any way any former or acting Trustee to
redress any breach of trust) except for his own bad faith, willful misfeasance,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the exceptions and
limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee, officer, employee or
agent of the Trust (including any individual who serves at its request as
director, officer, partner, trustee or the like of another organization in
which it has any interest as a shareholder, creditor or otherwise) shall be
indemnified by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series, to the
fullest extent permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer and
against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal, or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust, a Series thereof or the
Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interest of the Trust or a Series thereof;
(iii) in the event of a settlement or other disposition not involving
a final adjudication as provided in paragraph (b)(ii) resulting in a
payment by a Trustee or officer, unless there has been a determination that
such Trustee or officer did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office:
(A) by the court or other body approving the settlement or other
disposition;
(B) based upon a review of readily available facts (as opposed to
a full trial-type inquiry) by (x) vote of a majority of the
Non-interested Trustees acting on the matter (provided that a majority
of the Non-interested Trustees then in office act on the matter) or
(y) written opinion of independent legal counsel; or
12
<PAGE>
(C) by a vote of a majority of the Shares outstanding and
entitled to vote (excluding Shares owned of record or beneficially by
such individual).
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or officer and shall
inure to the benefit of the heirs, executors, administrators and assigns of such
a person. Nothing contained herein shall affect any rights to indemnification to
which personnel of the Trust or any Series thereof other than Trustees and
officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced by the Trust or a Series thereof prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust or Series
thereof shall be insured against losses arising out of any such advances;
or
(ii) a majority of the Non-interested Trustees acting on the matter
(provided that a majority of the Non-interested Trustees act on the matter)
or an independent legal counsel in a written opinion shall determine, based
upon a review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient ultimately
will be found entitled to indemnification.
As used in this Section 4.3, a "Non-interested Trustee" is one who (i) is
not an "Interested Person" of the Trust (including anyone who has been exempted
from being an "Interested Person" by any rule, regulation or order of the
Commission), and (ii) is not involved in the claim, action, suit or proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee shall be obligated to
give any bond or other security for the performance of any of his duties
hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust Instruments, Etc. No
purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer, employee or agent of the Trust or a Series thereof shall be bound
to make any inquiry concerning the validity of any transaction purporting to be
made by the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking, and every other act or thing whatsoever executed
in connection with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity as Trustees
under this Declaration or in their capacity as officers, employees or agents of
the Trust or a Series thereof. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or a Series thereof or
undertaking made or issued by the Trustees may recite that the same is executed
or made by them not individually, but as Trustees under the Declaration, and
that the obligations
13
<PAGE>
of the Trust or a Series thereof under any such instrument are not binding upon
any of the Trustees or Shareholders individually, but bind only the Trust
Property or the Trust Property of the applicable Series, and may contain any
further recital which they may deem appropriate, but the omission of such
recital shall not operate to bind the Trustees individually. The Trustees shall
at all times maintain insurance for the protection of the Trust Property or the
Trust Property of the applicable Series, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee, officer or employee of
the Trust or a Series thereof shall, in the performance of his duties, be fully
and completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or other
records of the Trust or a Series thereof, upon an opinion of counsel, or upon
reports made to the Trust or a Series thereof by any of its officers or
employees or by the Investment Adviser, the Administrator, the Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest
without par value. The number of such Shares of beneficial interest authorized
hereunder is unlimited. The Trustees shall have the exclusive authority without
the requirement of Shareholder approval to establish and designate one or more
Series of shares and one or more Classes thereof as the Trustees deem necessary
or desirable. Each Share of any Series shall represent an equal proportionate
Share in the assets of that Series with each other Share in that Series. Subject
to the provisions of Section 5.11 hereof, the Trustees may also authorize the
creation of additional Series of Shares (the proceeds of which may be invested
in separate, independently managed portfolios) and additional Classes of Shares
within any Series. All Shares issued hereunder including, without limitation,
Shares issued in connection with a dividend in Shares or a split in Shares,
shall be fully paid and nonassessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust Property of
every description and the right to conduct any business hereinbefore described
are vested exclusively in the Trustees, and the Shareholders shall have no
interest therein other than the beneficial interest conferred by their Shares,
and they shall have no right to call for any partition or division of any
property, profits, rights or interests of the Trust nor can they be called upon
to share or assume any losses of the Trust or suffer an assessment of any kind
by virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights specifically set forth in this Declaration. The Shares
shall not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights, except as the Trustees may determine with respect to any Series
or Class of Shares.
14
<PAGE>
Section 5.3. Trust Only. It is the intention of the Trustees to create only
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their discretion may, from
time to time without a vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times and on such terms as the Trustees may deem
best, except that only Shares previously contracted to be sold may be issued
during any period when the right of redemption is suspended pursuant to Section
6.9 hereof, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and Shares held in the treasury. The
Trustees may from time to time divide or combine the Shares of the Trust or, if
the Shares be divided into Series or Classes, of any Series or any Class thereof
of the Trust, into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust or in the Trust Property
allocated or belonging to such Series or Class. Contributions to the Trust or
Series thereof may be accepted for, and Shares shall be redeemed as, whole
Shares and/or 1/1000ths of a Share or integral multiples thereof.
Section 5.5. Register of Shares. A register shall be kept at the principal
office of the Trust or an office of the Transfer Agent which shall contain the
names and addresses of the Shareholders and the number of Shares held by them
respectively and a record of all transfers thereof. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as provided herein or
in the By-laws, until he has given his address to the Transfer Agent or such
other officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of share
certificates and promulgate appropriate rules and regulations as to their use.
Section 5.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to
15
<PAGE>
the Trustees or the Transfer Agent, but until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer Agent or registrar
nor any officer or agent of the Trust shall be affected by any notice of such
death, bankruptcy or incompetence, or other operation of law.
Section 5.7. Notices. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
Section 5.8. Treasury Shares. Shares held in the treasury shall, until
resold pursuant to Section 5.4, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.13; (ii) with respect
to any investment advisory contract entered into pursuant to Section 3.2; (iii)
with respect to termination of the Trust or a Series or Class thereof as
provided in Section 8.2; (iv) with respect to any amendment of this Declaration
to the limited extent and as provided in Section 8.3; (v) with respect to a
merger, consolidation or sale of assets as provided in Section 8.4; (vi) with
respect to incorporation of the Trust to the extent and as provided in Section
8.5; (vii) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or a Series thereof or the Shareholders of either; (viii) with
respect to any plan adopted pursuant to Rule 12b-1 (or any successor rule) under
the 1940 Act, and related matters; and (ix) with respect to such additional
matters relating to the Trust as may be required by this Declaration, the
By-laws or any registration of the Trust as an investment company under the 1940
Act with the Commission (or any successor agency) or as the Trustees may
consider necessary or desirable. As determined by the Trustees without the vote
or consent of shareholders, on any matter submitted to a vote of Shareholders
either (i) each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote or (ii) each dollar of net asset value (number of
Shares owned times net asset value per share of such Series or Class, as
applicable) shall be entitled to one vote on any matter on which such Shares are
entitled to vote and each fractional dollar amount shall be entitled to a
proportionate fractional vote. The Trustees may, in conjunction with the
establishment of any further Series or any Classes of Shares, establish
conditions under which the several Series or Classes of Shares shall have
separate voting rights or no voting rights. There shall be no cumulative voting
in the election of Trustees. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration or the By-laws to be taken by Shareholders. The By-laws may include
further provisions for Shareholders' votes and meetings and related matters.
Section 5.10. Meetings of Shareholders. No annual or regular meetings of
Shareholders are required. Special meetings of the Shareholders, including
meetings involving only the holders of Shares of one or more but less than all
Series or Classes thereof, may be called at any time by the Chairman of the
Board, President, or any Vice-President of the Trust, and shall be called by the
President or the Secretary at the request, in writing or by resolution, of a
majority of the Trustees, or at the written request of the holder or holders of
ten percent (10%) or more of the
16
<PAGE>
total number of Outstanding Shares of the Trust entitled to vote at such
meeting. Meetings of the Shareholders of any Series shall be called by the
President or the Secretary at the written request of the holder or holders of
ten percent (10%) or more of the total number of Outstanding Shares of such
Series of the Trust entitled to vote at such meeting. Any such request shall
state the purpose of the proposed meeting.
Section 5.11. Series or Class Designation. (a) Without limiting the
authority of the Trustees set forth in Section 5.1 to establish and designate
any further Series or Classes, the Trustees hereby establish the following
Series, each of which consists of two Classes of Shares: John Hancock Sovereign
U.S. Government Income Fund, John Hancock Managed Tax-Exempt Fund, John Hancock
Gold and Government Fund, John Hancock Financial Industries Fund, John Hancock
Disciplined Growth Fund and John Hancock Regional Bank Fund (the "Existing
Series").
(b) The Shares of the Existing Series and Class thereof herein established
and designated and any Shares of any further Series and Classes thereof that may
from time to time be established and designated by the Trustees shall be
established and designated, and the variations in the relative rights and
preferences as between the different Series shall be fixed and determined, by
the Trustees (unless the Trustees otherwise determine with respect to further
Series or Classes at the time of establishing and designating the same);
provided, that all Shares shall be identical except that there may be variations
so fixed and determined between different Series or Classes thereof as to
investment objective, policies and restrictions, purchase price, payment
obligations, distribution expenses, right of redemption, special and relative
rights as to dividends and on liquidation, conversion rights, exchange rights,
and conditions under which the several Series or Classes shall have separate
voting rights, all of which are subject to the limitations set forth below. All
references to Shares in this Declaration shall be deemed to be Shares of any or
all Series or Classes as the context may require.
(c) As to any Existing Series and Classes herein established and designated
and any further division of Shares of the Trust into additional Series or
Classes, the following provisions shall be applicable:
(i) The number of authorized Shares and the number of Shares of each
Series or Class thereof that may be issued shall be unlimited. The Trustees
may classify or reclassify any unissued Shares or any Shares previously
issued and reacquired of any Series or Class into one or more Series or one
or more Classes that may be established and designated from time to time.
The Trustees may hold as treasury shares (of the same or some other Series
or Class), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any Series or Class reacquired by the
Trust at their discretion from time to time.
(ii) All consideration received by the Trust for the issue or sale of
Shares of a particular Series or Class, together with all assets in which
such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that Series for all purposes, subject
only to the rights of creditors of such Series and except as may otherwise
be required by applicable tax laws, and shall be so recorded upon the books
of account of the Trust. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Series,
17
<PAGE>
the Trustees shall allocate them among any one or more of the Series
established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes. No holder of Shares of any
Series shall have any claim on or right to any assets allocated or
belonging to any other Series.
(iii) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series or the
appropriate Class or Classes thereof and all expenses, costs, charges and
reserves attributable to that Series or Class or Classes thereof, and any
general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular Series
shall be allocated and charged by the Trustees to and among any one or more
of the Series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the
Shareholders of all Series and Classes for all purposes. The Trustees shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items are capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders. The
assets of a particular Series of the Trust shall under no circumstances be
charged with liabilities attributable to any other Series or Class thereof
of the Trust. All persons extending credit to, or contracting with or
having any claim against a particular Series or Class of the Trust shall
look only to the assets of that particular Series for payment of such
credit, contract or claim.
(iv) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 7.2 of this Declaration. With respect to any
Series or Class, dividends and distributions on Shares of a particular
Series or Class may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise, pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may determine, to the holders of Shares of that Series or Class,
from such of the income and capital gains, accrued or realized, from the
assets belonging to that Series, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that Series or
Class. All dividends and distributions on Shares of a particular Series or
Class shall be distributed pro rata to the Shareholders of that Series or
Class in proportion to the number of Shares of that Series or Class held by
such Shareholders at the time of record established for the payment of such
dividends or distribution.
(v) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a
Series or Class thereof shall be entitled to receive his pro rata share of
distributions of income and capital gains made with respect to such Series
or Class net of expenses. Upon redemption of his Shares or indemnification
for liabilities incurred by reason of his being or having been a
Shareholder of a Series or Class, such Shareholder shall be paid solely out
of the funds and property of such Series of the Trust. Upon liquidation or
termination of a Series or Class thereof of the Trust, Shareholders of such
Series or Class thereof shall be entitled to receive a pro rata share of
the net assets of such Series. A Shareholder of a particular Series of the
Trust shall not be entitled to participate in a derivative or class action
on behalf of any other Series or the Shareholders of any other Series of
the Trust.
(vi) On each matter submitted to a vote of Shareholders, all Shares of
all Series and Classes shall vote as a single class; provided, however,
that (1) as to any matter with respect to which a separate vote of any
Series or Class is required by the 1940 Act or is required by
18
<PAGE>
attributes applicable to any Series or Class or is required by any Rule
12b-1 plan, such requirements as to a separate vote by that Series or Class
shall apply, (2) to the extent that a matter referred to in clause (1)
above, affects more than one Class or Series and the interests of each such
Class or Series in the matter are identical, then, subject to clause (3)
below, the Shares of all such affected Classes or Series shall vote as a
single Class; (3) as to any matter which does not affect the interests of a
particular Series or Class, only the holders of Shares of the one or more
affected Series or Classes shall be entitled to vote; and (4) the
provisions of the following sentence shall apply. On any matter that
pertains to any particular Class of a particular Series or to any Class
expenses with respect to any Series which matter may be submitted to a vote
of Shareholders, only Shares of the affected Class or that Series, as the
case may be, shall be entitled to vote except that: (i) to the extent said
matter affects Shares of another Class or Series, such other Shares shall
also be entitled to vote, and in such cases Shares of the affected Class,
as the case may be, of such Series shall be voted in the aggregate together
with such other Shares; and (ii) to the extent that said matter does not
affect Shares of a particular Class of such Series, said Shares shall not
be entitled to vote (except where otherwise required by law or permitted by
the Trustees acting in their sole discretion) even though the matter is
submitted to a vote of the Shareholders of any other Class or Series.
(vii) Except as otherwise provided in this Article V, the Trustees
shall have the power to determine the designations, preferences,
privileges, payment obligations, limitations and rights, including voting
and dividend rights, of each Class and Series of Shares. Subject to
compliance with the requirements of the 1940 Act, the Trustees shall have
the authority to provide that the holders of Shares of any Series or Class
shall have the right to convert or exchange said Shares into Shares of one
or more Series or Classes of Shares in accordance with such requirements,
conditions and procedures as may be established by the Trustees.
(viii) The establishment and designation of any Series or Classes of
Shares shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation
and the relative rights and preferences of such Series or Classes, or as
otherwise provided in such instrument. At any time that there are no Shares
outstanding of any particular Series or Class previously established and
designated, the Trustees may by an instrument executed by a majority of
their number abolish that Series or Class and the establishment and
designation thereof. Each instrument referred to in this section shall have
the status of an amendment to this Declaration.
Section 5.12. Assent to Declaration of Trust. Every Shareholder, by virtue
of having become a Shareholder, shall be held to have expressly assented and
agreed to the terms hereof and to have become a party hereto.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. (a) All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed or repurchased Shares may be resold by the Trust. The
Trust may require any Shareholder to pay a sales charge
19
<PAGE>
to the Trust, the underwriter, or any other person designated by the Trustees
upon redemption or repurchase of Shares in such amount and upon such conditions
as shall be determined from time to time by the Trustees.
(b) The Trust shall redeem the Shares of the Trust or any Series or Class
thereof at the price determined as hereinafter set forth, upon the appropriately
verified written application of the record holder thereof (or upon such other
form of request as the Trustees may determine) at such office or agency as may
be designated from time to time for that purpose by the Trustees. The Trustees
may from time to time specify additional conditions, not inconsistent with the
1940 Act, regarding the redemption of Shares in the Trust's then effective
Prospectus.
Section 6.2. Price. Shares shall be redeemed at a price based on their net
asset value determined as set forth in Section 7.1 hereof as of such time as the
Trustees shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be based on the net
asset value of such Shares next determined as set forth in Section 7.1 hereof
after receipt of such application. The amount of any contingent deferred sales
charge or redemption fee payable upon redemption of Shares may be deducted from
the proceeds of such redemption.
Section 6.3. Payment. Payment of the redemption price of Shares of the
Trust or any Series or Class thereof shall be made in cash or in property to the
Shareholder at such time and in the manner, not inconsistent with the 1940 Act
or other applicable laws, as may be specified from time to time in the Trust's
then effective Prospectus(es), subject to the provisions of Section 6.4 hereof.
Notwithstanding the foregoing, the Trustees may withhold from such redemption
proceeds any amount arising (i) from a liability of the redeeming Shareholder to
the Trust or (ii) in connection with any Federal or state tax withholding
requirements.
Section 6.4. Effect of Suspension of Determination of Net Asset Value. If,
pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of the
determination of net asset value with respect to Shares of the Trust or of any
Series or Class thereof, the rights of Shareholders (including those who shall
have applied for redemption pursuant to Section 6.1 hereof but who shall not yet
have received payment) to have Shares redeemed and paid for by the Trust or a
Series or Class thereof shall be suspended until the termination of such
suspension is declared. Any record holder who shall have his redemption right so
suspended may, during the period of such suspension, by appropriate written
notice of revocation at the office or agency where application was made, revoke
any application for redemption not honored and withdraw any Share certificates
on deposit. The redemption price of Shares for which redemption applications
have not been revoked shall be based on the net asset value of such Shares next
determined as set forth in Section 7.1 after the termination of such suspension,
and payment shall be made within seven (7) days after the date upon which the
application was made plus the period after such application during which the
determination of net asset value was suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
20
<PAGE>
Section 6.6. Redemption of Shareholder's Interest. The Trustees, in their
sole discretion, may cause the Trust to redeem all of the Shares of one or more
Series or Class thereof held by any Shareholder if the value of such Shares held
by such Shareholder is less than the minimum amount established from time to
time by the Trustees.
Section 6.7. Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. (a) If the Trustees shall, at any
time and in good faith, be of the opinion that direct or indirect ownership of
Shares or other securities of the Trust has or may become concentrated in any
Person to an extent which would disqualify the Trust or any Series of the Trust
as a regulated investment company under the Internal Revenue Code of 1986, then
the Trustees shall have the power by lot or other means deemed equitable by them
(i) to call for redemption by any such Person a number, or principal amount, of
Shares or other securities of the Trust or any Series of the Trust sufficient to
maintain or bring the direct or indirect ownership of Shares or other securities
of the Trust or any Series of the Trust into conformity with the requirements
for such qualification and (ii) to refuse to transfer or issue Shares or other
securities of the Trust or any Series of the Trust to any Person whose
acquisition of the Shares or other securities of the Trust or any Series of the
Trust in question would result in such disqualification. The redemption shall be
effected at the redemption price and in the manner provided in Section 6.1.
(b) The holders of Shares or other securities of the Trust or any Series of
the Trust shall upon demand disclose to the Trustees in writing such information
with respect to direct and indirect ownership of Shares or other securities of
the Trust or any Series of the Trust as the Trustees deem necessary to comply
with the provisions of the Internal Revenue Code of 1986, as amended, or to
comply with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may also reduce the number of outstanding Shares
of the Trust or of any Series of the Trust pursuant to the provisions of Section
7.3.
Section 6.9. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust or a Series
thereof of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Trust or a Series thereof fairly to determine the
value of its net assets, or (iv) during any other period when the Commission may
for the protection of Shareholders of the Trust by order permit suspension of
the right of redemption or postponement of the date of payment or redemption;
provided that applicable rules and regulations of the Commission shall govern as
to whether the conditions prescribed in clauses (ii), (iii), or (iv) exist. Such
suspension shall take effect at such time as the Trust shall specify but not
later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which
21
<PAGE>
in the absence of an official ruling by the Commission, the determination of the
Trust shall be conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination of
the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The net asset value of each outstanding Share
of the Trust or of each Series or Class thereof shall be determined on such days
and at such time or times as the Trustees may determine. The value of the assets
of the Trust or any Series thereof may be determined (i) by a pricing service
which utilizes electronic pricing techniques based on general institutional
trading, (ii) by appraisal of the securities owned by the Trust or any Series of
the Trust, (iii) in certain cases, at amortized cost, or (iv) by such other
method as shall be deemed to reflect the fair value thereof, determined in good
faith by or under the direction of the Trustees. From the total value of said
assets, there shall be deducted all indebtedness, interest, taxes, payable or
accrued, including estimated taxes on unrealized book profits, expenses and
management charges accrued to the appraisal date, net income determined and
declared as a distribution and all other items in the nature of liabilities
which shall be deemed appropriate, as incurred by or allocated to the Trust or
any Series or Class of the Trust. The resulting amount which shall represent the
total net assets of the Trust or Series or Class thereof shall be divided by the
number of Shares of the Trust or Series or Class thereof outstanding at the time
and the quotient so obtained shall be deemed to be the net asset value of the
Shares of the Trust or Series or Class thereof. The net asset value of the
Shares shall be determined at least once on each business day, as of the close
of regular trading on the New York Stock Exchange or as of such other time or
times as the Trustees shall determine. The power and duty to make the daily
calculations may be delegated by the Trustees to the Investment Adviser, the
Administrator, the Custodian, the Transfer Agent or such other Person as the
Trustees by resolution may determine. The Trustees may suspend the daily
determination of net asset value to the extent permitted by the 1940 Act. It
shall not be a violation of any provision of this Declaration if Shares are
sold, redeemed or repurchased by the Trust at a price other than one based on
net asset value if the net asset value is affected by one or more errors
inadvertently made in the pricing of portfolio securities or in accruing income,
expenses or liabilities.
Section 7.2. Distributions to Shareholders. (a) The Trustees shall from
time to time distribute ratably among the Shareholders of the Trust or of a
Series or Class thereof such proportion of the net profits, surplus (including
paid-in surplus), capital, or assets of the Trust or such Series held by the
Trustees as they may deem proper. Such distributions may be made in cash or
property (including without limitation any type of obligations of the Trust or
Series or Class or any assets thereof), and the Trustees may distribute ratably
among the Shareholders of the Trust or Series or Class thereof additional Shares
of the Trust or Series or Class thereof issuable hereunder in such manner, at
such times, and on such terms as the Trustees may deem proper. Such
distributions may be among the Shareholders of the Trust or Series or Class
thereof at the time of declaring a distribution or among the Shareholders of the
Trust or Series or Class thereof at such other date or time or dates or times as
the Trustees shall determine. The Trustees may in their discretion determine
that, solely for the purposes of such distributions, Outstanding
22
<PAGE>
Shares shall exclude Shares for which orders have been placed subsequent to a
specified time on the date the distribution is declared or on the next preceding
day if the distribution is declared as of a day on which Boston banks are not
open for business, all as described in the then effective Prospectus under the
Securities Act of 1933. The Trustees may always retain from the net profits such
amount as they may deem necessary to pay the debts or expenses of the Trust or a
Series or Class thereof or to meet obligations of the Trust or a Series or Class
thereof, or as they may deem desirable to use in the conduct of its affairs or
to retain for future requirements or extensions of the business. The Trustees
may adopt and offer to Shareholders such dividend reinvestment plans, cash
dividend payout plans or related plans as the Trustees shall deem appropriate.
The Trustees may in their discretion determine that an account administration
fee or other similar charge may be deducted directly from the income and other
distributions paid on Shares to a Shareholder's account in each Series or Class.
(b) Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or a Series or Class thereof to avoid or reduce liability for
taxes.
Section 7.3. Determination of Net Income; Constant Net Asset Value;
Reduction of Outstanding Shares. Subject to Section 5.11 hereof, the net income
of the Series and Classes thereof of the Trust shall be determined in such
manner as the Trustees shall provide by resolution. Expenses of the Trust or of
a Series or Class thereof, including the advisory or management fee, shall be
accrued each day. Each Class shall bear only expenses relating to its Shares and
an allocable share of Series expenses in accordance with such policies as may be
established by the Trustees from time to time and as are not inconsistent with
the provisions of this Declaration or of any applicable document filed by the
Trust with the Commission or of the Internal Revenue Code of 1986, as amended.
Such net income may be determined by or under the direction of the Trustees as
of the close of regular trading on the New York Stock Exchange on each day on
which such market is open or as of such other time or times as the Trustees
shall determine, and, except as provided herein, all the net income of any
Series or Class, as so determined, may be declared as a dividend on the
Outstanding Shares of such Series or Class. If, for any reason, the net income
of any Series or Class determined at any time is a negative amount, or for any
other reason, the Trustees shall have the power with respect to such Series or
Class (i) to offset each Shareholder's pro rata share of such negative amount
from the accrued dividend account of such Shareholder, or (ii) to reduce the
number of Outstanding Shares of such Series or Class by reducing the number of
Shares in the account of such Shareholder by that number of full and fractional
Shares which represents the amount of such excess negative net income, or (iii)
to cause to be recorded on the books of the Trust an asset account in the amount
of such negative net income, which account may be reduced by the amount,
provided that the same shall thereupon become the property of the Trust with
respect to such Series or Class and shall not be paid to any Shareholder, of
dividends declared thereafter upon the Outstanding Shares of such Series or
Class on the day such negative net income is experienced, until such asset
account is reduced to zero. The Trustees shall have full discretion to determine
whether any cash or property received shall be treated as income or as principal
and whether any item of expense shall be charged to the income or the principal
account, and their determination made in good faith shall be conclusive upon the
Shareholders. In the case of stock dividends received, the Trustees shall have
full discretion to determine, in the light of the particular circumstances, how
much if any of the value thereof shall be treated as income, the balance, if
any, to be treated as principal.
23
<PAGE>
Section 7.4. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VII, but subject to Section 5.11
hereof, the Trustees may prescribe, in their absolute discretion, such other
bases and times for determining the per Share net asset value of the Shares of
the Trust or a Series or Class thereof or net income of the Trust or a Series or
Class thereof, or the declaration and payment of dividends and distributions as
they may deem necessary or desirable. Without limiting the generality of the
foregoing, the Trustees may establish several Series or Classes of Shares in
accordance with Section 5.11, and declare dividends thereon in accordance with
Section 5.11(d)(iv).
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A SERIES OR CLASS;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article VIII.
Section 8.2. Termination of the Trust or a Series or a Class. The Trust or
any Series or Class thereof may be terminated by (i) the affirmative vote of the
holders of not less than two-thirds of the Outstanding Shares entitled to vote
and present in person or by proxy at any meeting of Shareholders of the Trust or
the appropriate Series or Class thereof, (ii) by an instrument or instruments in
writing without a meeting, consented to by the holders of two-thirds of the
Outstanding Shares of the Trust or a Series or Class thereof; provided, however,
that, if such termination as described in clauses (i) and (ii) is recommended by
the Trustees, the vote or written consent of the holders of a majority of the
Outstanding Shares of the Trust or a Series or Class thereof entitled to vote
shall be sufficient authorization, or (iii) notice to Shareholders by means of
an instrument in writing signed by a majority of the Trustees, stating that a
majority of the Trustees has determined that the continuation of the Trust or a
Series or a Class thereof is not in the best interest of such Series or a Class,
the Trust or their respective shareholders as a result of factors or events
adversely affecting the ability of such Series or a Class or the Trust to
conduct its business and operations in an economically viable manner. Such
factors and events may include (but are not limited to) the inability of a
Series or Class or the Trust to maintain its assets at an appropriate size,
changes in laws or regulations governing the Series or Class or the Trust or
affecting assets of the type in which such Series or Class or the Trust invests
or economic developments or trends having a significant adverse impact on the
business or operations of such Series or Class or the Trust. Upon the
termination of the Trust or the Series or Class,
(i) The Trust, Series or Class shall carry on no business except for
the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust,
Series or Class and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust, Series or Class
shall have been wound up, including the power to fulfill or discharge the
contracts of the Trust, Series or Class, collect its assets, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property or Trust Property allocated or belonging to such
Series or Class to one or more persons at public or private sale for
consideration which may consist in whole or in
24
<PAGE>
part of cash, securities or other property of any kind, discharge or pay
its liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
Property or Trust Property allocated or belonging to such Series or Class
that requires Shareholder approval in accordance with Section 8.4 hereof
shall receive the approval so required.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or the remaining property of the
terminated Series or Class, in cash or in kind or partly each, among the
Shareholders of the Trust or the Series or Class according to their
respective rights.
(b) After termination of the Trust, Series or Class and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust and file with the Office of the Secretary
of The Commonwealth of Massachusetts an instrument in writing setting forth the
fact of such termination, and the Trustees shall thereupon be discharged from
all further liabilities and duties with respect to the Trust or the terminated
Series or Class, and the rights and interests of all Shareholders of the Trust
or the terminated Series or Class shall thereupon cease.
Section 8.3. Amendment Procedure. (a) This Declaration may be amended by a
vote of the holders of a majority of the Shares outstanding and entitled to vote
or by any instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of a majority of the Shares outstanding
and entitled to vote.
(b) This Declaration may be amended by a vote of a majority of Trustees,
without approval or consent of the Shareholders, except that no amendment can be
made by the Trustees to impair any voting or other rights of shareholders
prescribed by Federal or state law. Without limiting the foregoing, the Trustees
may amend this Declaration without the approval or consent of Shareholders (i)
to change the name of the Trust or any Series, (ii) to add to their duties or
obligations or surrender any rights or powers granted to them herein; (iii) to
cure any ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein or to make any other provisions
with respect to matters or questions arising under this Declaration which will
not be inconsistent with the provisions of this Declaration; and (iv) to
eliminate or modify any provision of this Declaration which (a) incorporates,
memorializes or sets forth an existing requirement imposed by or under any
Federal or state statute or any rule, regulation or interpretation thereof or
thereunder or (b) any rule, regulation, interpretation or guideline of any
Federal or state agency, now or hereafter in effect, including without
limitation, requirements set forth in the 1940 Act and the rules and regulations
thereunder (and interpretations thereof), to the extent any change in applicable
law liberalizes, eliminates or modifies any such requirements, but the Trustees
shall not be liable for failure to do so.
(c) The Trustees may also amend this Declaration without the approval or
consent of Shareholders if they deem it necessary to conform this Declaration to
the requirements of applicable Federal or state laws or regulations or the
requirements of the regulated investment
25
<PAGE>
company provisions of the Internal Revenue Code of 1986, as amended, or if
requested or required to do so by any Federal agency or by a state Blue Sky
commissioner or similar official, but the Trustees shall not be liable for
failing so to do.
(d) Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(e) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Trustees or by the
Shareholders as aforesaid or a copy of the Declaration, as amended, and executed
by a majority of the Trustees, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
Section 8.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series may merge or consolidate into any other corporation, association, trust
or other organization or may sell, lease or exchange all or substantially all of
the Trust Property or Trust Property allocated or belonging to such Series,
including its good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Shareholders called for
the purpose by the affirmative vote of the holders of two-thirds of the Shares
of the Trust or such Series outstanding and entitled to vote and present in
person or by proxy at a meeting of Shareholders, or by an instrument or
instruments in writing without a meeting, consented to by the holders of
two-thirds of the Shares of the Trust or such Series; provided, however, that,
if such merger, consolidation, sale, lease or exchange is recommended by the
Trustees, the vote or written consent of the holders of a majority of the
Outstanding Shares of the Trust or such Series entitled to vote shall be
sufficient authorization; and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to Massachusetts law.
Section 8.5. Incorporation. The Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other organization
to take over all or any portion of the Trust Property or the Trust Property
allocated or belonging to such Series or to carry on any business in which the
Trust shall directly or indirectly have any interest, and to sell, convey and
transfer all or any portion of the Trust Property or the Trust Property
allocated or belonging to such Series to any such corporation, trust,
association or organization in exchange for the shares or securities thereof or
otherwise, and to lend money to, subscribe for the shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust or such Series holds or is about to acquire
shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring all or a portion of the Trust Property to such organization or
entities.
26
<PAGE>
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders of
each Series a written financial report of the transactions of the Trust and
Series thereof, including financial statements which shall at least annually be
certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
Section 10.1. Execution and Filing. This Declaration and any amendment
hereto shall be filed in the office of the Secretary of The Commonwealth of
Massachusetts and in such other places as may be required under the laws of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustee stating that such action was
duly taken in a manner provided herein, and unless such amendment or such
certificate sets forth some later time for the effectiveness of such amendment,
such amendment shall be effective upon its execution. A restated Declaration,
integrating into a single instrument all of the provisions of the Declaration
which are then in effect and operative, may be executed from time to time by a
majority of the Trustees and filed with the Secretary of The Commonwealth of
Massachusetts. A restated Declaration shall, upon execution, be conclusive
evidence of all amendments contained therein and may thereafter be referred to
in lieu of the original Declaration and the various amendments thereto.
Section 10.2. Governing Law. This Declaration is executed by the Trustees
and delivered in The Commonwealth of Massachusetts and with reference to the
laws thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said Commonwealth.
Section 10.3. Counterparts. This Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 10.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying (a) the number or identity of Trustees or Shareholders,
(b) the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Shareholders, (d) the fact
that the number of Trustees or Shareholders present at any meeting or executing
any written instrument satisfies the requirements of this Declaration, (e) the
form of any By-laws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
27
<PAGE>
Section 10.5. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986 or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of the
1st of July, 1996.
/s/ Edward J. Boudreau, Jr.
Edward J. Boudreau, Jr.
as Trustee and not individually,
34 Swan Road
Winchester, Massachusetts 01890
/s/ Dennis S. Aronowitz
Dennis S. Aronowitz
as Trustee and not individually,
1216 Falls Boulevard
Fort Lauderdale, Florida 33327
/s/ Richard P. Chapman, Jr.
Richard P. Chapman, Jr.
as Trustee and not individually,
107 Upland Road
Brookline, Massachusetts 02146
/s/ William J. Cosgrove
William J. Cosgrove
as Trustee and not individually,
20 Buttonwood Place
Saddle River, New Jersey 07458
28
<PAGE>
/s/ Gail D. Fosler
Gail D. Fosler
as Trustee and not individually,
4104 Woodbine Street
Chevy Chase, Maryland 20815
/s/ Anne C. Hodsdon
Anne C. Hodsdon
as Trustee and not individually,
135 Woodland Road
Hampton, New Hampshire 03842
/s/ Richard S. Scipione
Richard S. Scipione
as Trustee and not individually,
4 Sentinel Road
Hingham, Massachusetts 02043
/s/ Edward J. Spellman
Edward J. Spellman
as Trustee and not individually,
259C Commercial Boulevard
Suite 200
Lauderdale by the Sea, Florida 33308
/s/ Douglas M. Costle
Douglas M. Costle
as Trustee and not individually,
RR2 Box 480
Woodstock, Vermont 05091
/s/ Leland O. Erdahl
Leland O. Erdahl
as Trustee and not individually,
8046 MacKenzie Court
Las Vegas, Nevada 89129
29
<PAGE>
/s/ Richard A. Farrell
Richard A. Farrell
as Trustee and not individually,
50 Beacon Street
Marblehead, Massachusetts 01945
Dr. John A. Moore
Dr. John A. Moore
as Trustee and not individually,
P.O. Box 474
Wicomico, Virginia 22579
/s/ William F. Glavin
William F. Glavin
as Trustee and not individually,
56 Whiting Road
Wellesley, Massachusetts 02181
/s/ Patti McGill Peterson
Patti McGill Peterson
as Trustee and not individually,
54 E. Main Street
Canton, New York 13617
/s/ John W. Pratt
John W. Pratt
as Trustee and not individually,
2 Gray Gardens East
Cambridge, Massachusetts 02138
30
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
SUFFOLK COUNTY, MASSACHUSETTS
May 21, 1996
Then personally appeared the above-named persons, Edward J. Boudreau, Jr.,
Dennis S. Aronowitz, Richard P. Chapman, Jr., William J. Cosgrove, Gail D.
Fosler, Anne C. Hodsdon, Edward J. Spellman, Douglas M. Costle, Leland O.
Erdahl, Richard A. Farrell, William F. Glavin, Patti McGill Peterson and John W.
Pratt, who acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ Carmen M. Pelissier
----------------------------
Notary Public
My commission expires: July 28, 2000
31
AMENDED AND RESTATED
BY-LAWS
OF
JOHN HANCOCK TAX-EXEMPT SERIES FUND
MARCH 6, 1996
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
-----------------
Page
----
<S> <C> <C>
ARTICLE I -- Definitions 1
ARTICLE II -- Offices and Seal .........................................................................1
Section 2.1 Principal Office.........................................................1
Section 2.2 Other Offices............................................................1
Section 2.3 Seal.....................................................................1
ARTICLE III -- Shareholders .........................................................................2
Section 3.1 Meetings.................................................................2
Section 3.2 Place of Meeting.........................................................2
Section 3.3 Notice of Meetings.......................................................2
Section 3.4 Shareholders Entitled to Vote............................................2
Section 3.5 Quorum...................................................................2
Section 3.6 Treatment of Abstentions.................................................3
Section 3.7 Voting of Shares Held in Street Name.....................................3
Section 3.8 Adjournment..............................................................3
Section 3.9 Proxies..................................................................3
Section 3.10 Inspection of Records....................................................3
Section 3.11 Record Dates.............................................................3
ARTICLE IV -- Meetings of Trustees.........................................................................4
Section 4.1 Regular Meetings.........................................................4
Section 4.2 Special Meetings.........................................................4
Section 4.3 Notice...................................................................4
Section 4.4 Waiver of Notice.........................................................4
Section 4.5 Quorum, Adjournment and Voting...........................................4
Section 4.6 Compensation.............................................................4
ARTICLE V -- Executive Committee and Other
Committees......................................................................... 5
Section 5.1 How Constituted..........................................................5
Section 5.2 Powers of the Executive
Committee..............................................................5
Section 5.3 Other Committees of Trustees.............................................5
-i-
<PAGE>
Section 5.4 Proceedings, Quorum and Manner of
Acting.................................................................5
Section 5.5 Other Committees.........................................................5
ARTICLE VI -- Officers.................................................................6
Section 6.1 General..................................................................6
Section 6.2 Election, Term of Office and
Qualifications.........................................................6
Section 6.3 Resignations and Removals................................................6
Section 6.4 Vacancies and Newly Created
Offices................................................................6
Section 6.5 Chairman of the Board....................................................6
Section 6.5A Powers and Duties of the Vice Chairman...................................7
Section 6.6 President................................................................7
Section 6.7 Vice President...........................................................7
Section 6.8 Chief Financial Officer, Treasurer
and Assistant Treasurers...............................................7
Section 6.9 Secretary and Assistant
Secretaries............................................................8
Section 6.10 Subordinate Officers.....................................................8
Section 6.11 Remuneration.............................................................8
Section 6.12 Surety Bonds.............................................................8
ARTICLE VII -- Execution of Instruments; Voting of
Securities...............................................................9
Section 7.1 Execution of Instruments.................................................9
Section 7.2 Voting of Securities.....................................................9
ARTICLE VIII -- Fiscal Year, Accountants...................................................................9
Section 8.1 Fiscal Year..............................................................9
Section 8.2 Accountants..............................................................9
ARTICLE IX -- Amendments..................................................................................10
Section 9.1 General.................................................................10
-ii-
</TABLE>
<PAGE>
BY-LAWS
OF
JOHN HANCOCK TAX-EXEMPT SERIES FUND
ARTICLE I
Definitions
The terms "Class," "Commission," "Declaration," "Interested Person," "1940
Act," "Series," "Shareholder," "Shares," "Trust," "Trust Property" and
"Trustees" have the meanings given them in the Declaration of Trust of John
Hancock Tax-Exempt Series Fund dated March 24, 1987, as amended from time to
time.
ARTICLE II
Offices and Seal
Section 2.1. Principal Office. The principal office of the Trust shall be
located in the City of Boston, The Commonwealth of Massachusetts.
Section 2.2. Other Offices. The Trust may establish and maintain such other
offices and places of business within or without The Commonwealth of
Massachusetts as the Trustees may from time to time determine.
Section 2.3. Seal. The seal of the Trust shall be circular in form and
shall bear the name of the Trust, the year of its organization, and the word
"Massachusetts". The form of the seal shall be subject to alteration by the
Trustees and the seal may be used by causing it or a facsimile to be impressed
or affixed or printed or otherwise reproduced. Any officer or Trustee of the
Trust shall have authority to affix the seal of the Trust to any document
requiring the same but, unless otherwise required by the Trustees, the seal
shall not be necessary to be placed on, and its absence shall not impair the
validity of, any document, instrument or other paper executed and delivered by
or on behalf of the Trust.
1
<PAGE>
ARTICLE III
Shareholders
Section 3.1. Meetings. A Shareholders' meeting for the election of Trustees
and the transaction of other proper business shall be held when authorized or
required by the Declaration.
Section 3.2. Place of Meeting. All Shareholders' meetings shall be held at
such place within or without The Commonwealth of Massachusetts as the Trustees
shall designate.
Section 3.3. Notice of Meetings. Notice of all Shareholders' meetings,
stating the time, place and purpose of the meeting, shall be given by the
Secretary or an Assistant Secretary of the Trust by mail to each Shareholder
entitled to notice of and to vote at such meeting at his address as recorded on
the register of the Trust. Such notice shall be mailed at least 10 days and not
more than 60 days before the meeting. Such notice shall be deemed to be given
when deposited in the United States mail, with postage thereon prepaid. Any
adjourned meeting may be held as adjourned without further notice. No notice
need be given (A) to any Shareholder if a written waiver of notice, executed
before or after the meeting by such Shareholder or his attorney thereunto duly
authorized, is filed with the records of the meeting, or (B) to any Shareholder
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. A waiver of notice need not specify the purposes of
the meeting.
Section 3.4. Shareholders Entitled to Vote. If, pursuant to Section 3.11
hereof, a record date has been fixed for the determination of Shareholders
entitled to notice of and to vote at any Shareholders' meeting, each Shareholder
of the Trust shall be entitled to vote, in accordance with the applicable
provisions of the Declaration, in person or by proxy, each Share or fraction
thereof standing in his name on the register of the Trust at the time of
determining net asset value on such record date. If the Declaration or the 1940
Act requires that Shares be voted by Series or Class, each Shareholder shall
only be entitled to vote, in person or by proxy, each Share or fraction thereof
of such Series or Class standing in his name on the register of the Trust at the
time of determining net asset value on such record date. If no record date has
been fixed for the determination of Shareholders so entitled, the record date
for the determination of Shareholders entitled to notice of and to vote at a
Shareholders' meeting shall be at the close of business on the day on which
notice of the meeting is mailed or, if notice is waived by all Shareholders, at
the close of business on the tenth day next preceding the day on which the
meeting is held.
Section 3.5. Quorum. The presence at any Shareholders' meeting in person or
by proxy, of Shareholders entitled to cast a majority of the votes thereat shall
be a quorum for the transaction of business.
2
<PAGE>
Section 3.6. Treatment of Abstentions. Shares represented in person or by
proxy, including Shares which abstain or do not vote with respect to one or more
proposals presented for shareholder approval, will be counted for purposes of
determining whether a quorum is present. Abstentions will be treated as Shares
that are present and entitled to vote with respect to any particular proposal,
but will not be counted as a vote in favor of such proposal. An abstention from
voting on a proposal will have the same effect as a vote against such proposal.
Section 3.7. Voting of Shares Held in Street Name. If a broker or nominee
holding Shares in "street name" indicates on a proxy that it does not have
discretionary authority to vote those Shares as to a particular proposal
presented for shareholder approval, those Shares will be considered to be
outstanding, but will not be considered as present and entitled to vote with
respect to such proposal.
Section 3.8. Adjournment. The holders of a majority of the Shares entitled
to vote at the meeting and present thereat, in person or by proxy, whether or
not constituting a quorum, or, if no Shareholder entitled to vote is present
thereat, in person or by proxy, any Trustee or officer present thereat entitled
to preside or act as Secretary of such meeting, may adjourn the meeting sine die
or from time to time. Any business that might have been transacted at the
meeting originally called may be transacted at any such adjourned meeting at
which a quorum is present.
Section 3.9. Proxies. Shares may be voted in person or by proxy. When any
Share is held jointly by several persons, any one of them may vote at any
meeting, in person or by proxy in respect of such Share unless at or prior to
exercise of the vote the Trustees receive a specific written notice to the
contrary from any one of them. If more than one such joint owner shall be
present at such meeting, in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote cast, such vote shall not be received
in respect of such Share. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger.
Section 3.10. Inspection of Records. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted shareholders of
a Massachusetts business corporation.
Section 3.11. Record Dates. The Trustees may fix in advance a date as a
record date for the purpose of determining the Shareholders who are entitled to
notice of and to vote at any meeting or any adjournment thereof, or to express
consent in writing without a meeting to any action of the Trustees, or who shall
receive payment of any dividend or of any other distribution, or for the purpose
of any other lawful action, provided that such record date shall be not more
than 60 days before the date on which the particular action requiring such
determination of Shareholders is to be taken. In such case, subject to the
provisions of Section 3.4, each eligible Shareholder of record on such record
date shall be entitled to notice of, and to vote at, such meeting or
adjournment, or to express such consent, or to receive payment of such dividend
or distribution or to take such other action, as the case may be,
notwithstanding any transfer of Shares on the register of the Trust after the
record date.
3
<PAGE>
ARTICLE IV
Meetings of Trustees
Section 4.1. Regular Meetings. The Trustees from time to time shall provide
by resolution for the holding of regular meetings for the election of officers
and the transaction of other proper business and shall fix the place and time
for such meetings to be held within or without The Commonwealth of
Massachusetts.
Section 4.2. Special Meetings. Special meetings of the Trustees shall be
held whenever called by the Chairman of the Board, the President (or, in the
absence or disability of the President, by any Vice President), the Treasurer,
the Secretary or two or more Trustees, at the time and place within or without
The Commonwealth of Massachusetts specified in the respective notices or waivers
of notice of such meetings.
Section 4.3. Notice. Notice of regular and special meetings, stating the
time and place, shall be (a) mailed to each Trustee at his residence or regular
place of business at least five days before the day on which the meeting is to
be held or (b) caused to be delivered to him personally or to be transmitted to
him by telegraph, cable or wireless at least two days before the day on which
the meeting is to be held. Unless otherwise required by law, such notice need
not include a statement of the business to be transacted at, or the purpose of,
the meeting. No notice of adjournment of a meeting of the Trustees to another
time or place need be given if such time and place are announced at such
meeting.
Section 4.4. Waiver of Notice. Notice of a meeting need not be given to any
Trustee if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting, or to any Trustee who attends
the meeting without protesting prior thereto or at its commencement the lack of
notice to him. A waiver of notice need not specify the purposes of the meeting.
Section 4.5. Quorum, Adjournment and Voting. At all meetings of the
Trustees, the presence of a majority of the total number of Trustees authorized,
but not less than two, shall constitute a quorum for the transaction of
business. A majority of the Trustees present, whether or not constituting a
quorum, may adjourn the meeting, from time to time. The action of a majority of
the Trustees present at a meeting at which a quorum is present shall be the
action of the Trustees unless the concurrence of a greater proportion is
required for such action by law, by the Declaration or by these By-Laws.
Section 4.6. Compensation. Each Trustee may receive such remuneration for
his services as such as shall be fixed from time to time by resolution of the
Trustees.
4
<PAGE>
ARTICLE V
Executive Committee and Other Committees
Section 5.1. How Constituted. The Trustees may, by resolution, designate
one or more committees, including an Executive Committee, an Audit Committee and
an Administration Committee, each consisting of at least two Trustees. The
Trustees may, by resolution, designate one or more alternate members of any
committee to serve in the absence of any member or other alternate member of
such committee. Each member and alternate member of a committee shall be a
Trustee and shall hold office at the pleasure of the Trustees. The Chairman of
the Board shall be a member of the Executive Committee.
Section 5.2. Powers of the Executive Committee. Unless otherwise provided
by resolution of the Trustees, the Executive Committee shall have and may
exercise all of the power and authority of the Trustees, provided that the power
and authority of the Executive Committee shall be subject to the limitations
contained in the Declaration.
Section 5.3. Other Committees of Trustees. To the extent provided by
resolution of the Trustees, other committees shall have and may exercise any of
the power and authority that may lawfully be granted to the Executive Committee.
Section 5.4. Proceedings, Quorum and Manner of Acting. In the absence of
appropriate resolution of the Trustees, each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable, provided that the quorum shall not be less than two
Trustees. In the absence of any member or alternate member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a Trustee to act in the place of such absent
member or alternate member. Members and alternate members of a committee may
participate in a meeting of such committee by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 5.5. Other Committees. The Trustees may appoint other committees,
each consisting of one or more persons who need not be Trustees. Each such
committee shall have such powers and perform such duties as may be assigned to
it from time to time by the Trustees, but shall not exercise any power which may
lawfully be exercised only by the Trustees or a committee thereof.
5
<PAGE>
ARTICLE VI
Officers
Section 6.1. General. The officers of the Trust shall be a Chairman of the
Board, a President, a Secretary, and a Treasurer, and may include one or more
Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 6.10 of this Article VI.
Section 6.2. Election, Term of Office and Qualifications. The officers of
the Trust and any Series thereof (except those appointed pursuant to Section
6.10) shall be elected by the Trustees. Except as provided in Sections 6.3 and
6.4 of this Article VI, each officer elected by the Trustees shall hold office
at the pleasure of the Trustees. Any two or more offices may be held by the same
person. The Chairman of the Board shall be selected from among the Trustees and
may hold such office only so long as he/she continues to be a Trustee. Any
Trustee or officer may be but need not be a Shareholder of the Trust.
Section 6.3. Resignations and Removals. Any officer may resign his office
at any time by delivering a written resignation to the Trustees, the President,
the Secretary or any Assistant Secretary. Unless otherwise specified therein,
such resignation shall take effect upon delivery. Any officer may be removed
from office with or without cause by the vote of a majority of the Trustees at
any regular meeting or any special meeting. Except to the extent expressly
provided in a written agreement with the Trust, no officer resigning and no
officer removed shall have any right to any compensation for any period
following his resignation or removal or any right to damages on account of such
removal.
Section 6.4. Vacancies and Newly Created Offices. If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification
or other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Trustees at any regular or special meeting
or, in the case of any office created pursuant to Section 6.10 of this Article
VI, by any officer upon whom such power shall have been conferred by the
Trustees.
Section 6.5. Chairman of the Board. The Chairman of the Board shall be the
chief executive officer of the Trust and each Series thereof, shall preside at
all Shareholders' meetings and at all meetings of the Trustees and shall be ex
officio a member of all committees of the Trustees and each Series thereof,
except the Audit Committee. Subject to the supervision of the Trustees, he shall
have general charge of the business of the Trust and each Series thereof, the
Trust Property and the officers, employees and agents of the Trust and each
Series thereof. He shall have such other powers and perform such other duties as
may be assigned to him from time to time by the Trustees.
6
<PAGE>
Section 6.5A. Powers and Duties of the Vice Chairman. The Trustees may, but
need not, appoint one or more Vice Chairmen of the Trust. A Vice Chairman shall
be an executive officer of the Trust and shall have the powers and duties of a
Vice President of the Trust, as provided in Section 6.7 of this Article VI. The
Vice Chairman shall perform such duties as may be assigned to him or her from
time to time by the Trustees or the Chairman.
Section 6.6. President. The President shall be the chief operating officer
of the Trust and each Series thereof and, at the request of or in the absence or
disability of the Chairman of the Board, he shall preside at all Shareholders'
meetings and at all meetings of the Trustees and shall in general exercise the
powers and perform the duties of the Chairman of the Board. Subject to the
supervision of the Trustees and such direction and control as the Chairman of
the Board may exercise, he shall have general charge of the operations of the
Trust and each Series and Class thereof and its officers, employees and agents.
He shall exercise such other powers and perform such other duties as from time
to time may be assigned to him by the Trustees.
Section 6.7. Vice President. The Trustees may, from time to time, designate
and elect one or more Vice Presidents who shall have such powers and perform
such duties as from time to time may be assigned to them by the Trustees or the
President. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior in
length of time in office of the Vice Presidents present and able to act) may
perform all the duties of the President and, when so acting, shall have all the
powers of and be subject to all the restrictions upon the President.
Section 6.8 Chief Financial Officer, Treasurer and Assistant Treasurers.
The Chief Financial Officer shall be the principal financial and accounting
officer of the Trust and each Series thereof and shall have general charge of
the finances and books of account of the Trust and each Series and Class
thereof. Except as otherwise provided by the Trustees, he shall have general
supervision of the funds and property of the Trust and each Series thereof and
of the performance by the Custodian, appointed pursuant to Section 3.6 of the
Declaration of its duties with respect thereto. The Chief Financial Officer
shall render a statement of condition of the finances of the Trust and each
Series and Class thereof to the Trustees as often as they shall require the same
and he shall in general perform all the duties incident to the office of the
Chief Financial Officer and such other duties as from time to time may be
assigned to him by the Trustees.
The Treasurer or any Assistant Treasurer may perform such duties of the
Chief Financial Officer as the Chief Financial Officer or the Trustees may
assign. In the absence of the Chief Financial Officer, the Treasurer may perform
all duties of the Chief Financial Officer. In the absence of the Chief Financial
Officer and the Treasurer, any Assistant Treasurer may perform all duties of the
Chief Financial Officer.
7
<PAGE>
Section 6.9. Secretary and Assistant Secretaries. The Secretary shall
attend to the giving and serving of all notices of the Trust and each Series and
Class thereof and shall record all proceedings of the meetings of the
Shareholders and Trustees in one or more books to be kept for that purpose. He
shall keep in safe custody the seal of the Trust, and shall have charge of the
records of the Trust and each Series and Class thereof, including the register
of shares and such other books and papers as the Trustees may direct and such
books, reports, certificates and other documents required by law to be kept, all
of which shall at all reasonable times be open to inspection by any Trustee. He
shall perform such other duties as appertain to his office or as may be required
by the Trustees.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Trustees may assign, and, in the absence of the Secretary, he
may perform all the duties of the Secretary.
Section 6.10. Subordinate Officers. The Trustees from time to time may
appoint such other subordinate officers or agents as they may deem advisable,
each of whom shall have such title, hold office for such period, have such
authority and perform such duties as the Trustees may determine. The Trustees
from time to time may delegate to one or more officers or agents the power to
appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
Section 6.11. Remuneration. The salaries or other compensation of the
officers of the Trust and any Series thereof shall be fixed from time to time by
resolution of the Trustees, except that the Trustees may by resolution delegate
to any person or group of persons the power to fix the salaries or other
compensation of any subordinate officers or agents appointed in accordance with
the provisions of Section 6.10 hereof.
Section 6.12. Surety Bonds. The Trustees may require any officer or agent
of the Trust or any Series thereof to execute a bond (including, without
limitation, any bond required by the 1940 Act and the rules and regulations of
the Commission) to the Trustees in such sum and with such surety or sureties as
the Trustees may determine, conditioned upon the faithful performance of his
duties to the Trust, including responsibility for negligence and for the
accounting of any of the Trust Property that may come into his hands. In any
such case, a new bond of like character shall be given at least every six years,
so that the date of the new bond shall not be more than six years subsequent to
the date of the bond immediately preceding.
8
<PAGE>
ARTICLE VII
Execution of Instruments, Voting of Securities
Section 7.1. Execution of Instruments. All deeds, documents, transfers,
contracts, agreements, requisitions or orders, promissory notes, assignments,
endorsements, checks and drafts for the payment of money by the Trust or any
Series thereof, and other instruments requiring execution either in the name of
the Trust or the names of the Trustees or otherwise may be signed by the
Chairman, the President, a Vice President or the Secretary and by the Chief
Financial Officer, Treasurer or an Assistant Treasurer, or as the Trustees may
otherwise, from time to time, authorize, provided that instructions in
connection with the execution of portfolio securities actions may be signed by
one such officer. Any such authorization may be general or confined to specific
instances.
Section 7.2. Voting of Securities. Unless otherwise ordered by the
Trustees, the Chairman, the President or any Vice President shall have full
power and authority on behalf of the Trustees to attend and to act and to vote,
or in the name of the Trustees to execute proxies to vote, at any meeting of
stockholders of any company in which the Trust or any Series thereof may hold
stock. At any such meeting such officer shall possess and may exercise (in
person or by proxy) any and all rights, powers, and privileges incident to the
ownership of such stock. The Trustees may by resolution from time to time confer
like powers upon any other person or persons.
ARTICLE VIII
Fiscal Year; Accountants
Section 8.1. Fiscal Year. The fiscal year of the Trust and any Series
thereof shall be established by resolution of the Trustees.
Section 8.2. Accountants.
(a) The Trustees shall employ a public accountant or firm of independent
public accountants as their accountant to examine the accounts of the Trust and
to sign and certify at least annually financial statements filed by the Trust.
The accountant's certificates and reports shall be addressed both to the
Trustees and to the Shareholders.
(b) A majority of the Trustees who are not Interested Persons of the Trust
shall select the accountant at any meeting held before the initial registration
statement of the Trust becomes effective, and thereafter shall select the
accountant annually by votes, cast in person, at a meeting held within 30 days
before or after the beginning of the fiscal year of the Trust.
9
<PAGE>
(c) Any vacancy occurring due to the death or resignation of the
accountant, may be filled at a meeting called for the purpose by the vote, cast
in person, of a majority of those Trustees who are not Interested Persons of the
Trust.
ARTICLE IX
Amendments
Section 9.1. General. These By-Laws may be amended or repealed, in whole or
in part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
10
JOHN HANCOCK FINANCIAL INDUSTRIES FUND
(a series of Freedom Investment Trust)
101 Huntington Avenue
Boston, Massachusetts 02199
July 1, 1996
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
Freedom Investment Trust (the "Trust"), of which John Hancock Financial
Industries Fund (the "Fund") is a series, has been organized as a business trust
under the laws of The Commonwealth of Massachusetts to engage in the business of
an investment company. The Trust's shares of beneficial interest, no par value,
may be divided into series, each series representing the entire undivided
interest in a separate portfolio of assets. This Agreement relates solely to the
Fund.
The Board of Trustees of the Trust (the "Trustees") has selected John
Hancock Advisers, Inc. (the "Adviser") to provide overall investment advice and
management for the Fund, and to provide certain other services, as more fully
set forth below, and the Adviser is willing to provide such advice, management
and services under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund, agree as
follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser with copies,
properly certified or otherwise authenticated, of each of the following:
(a) Amended and Restated Declaration of Trust dated July 1, 1996, as
amended from time to time (the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as investment
adviser for the Fund and approving the form of this Agreement;
(d) Commitments, limitations and undertakings made by the Fund to state
securities or "blue sky" authorities for the purpose of qualifying
shares of the Fund for sale in such states; and
(e) The Trust's Code of Ethics.
<PAGE>
The Trust will furnish to the Adviser from time to time copies, properly
certified or otherwise authenticated, of all amendments of or supplements to the
foregoing, if any.
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use its best
efforts to provide to the Fund continuing and suitable investment programs with
respect to investments, consistent with the investment objectives, policies and
restrictions of the Fund. In the performance of the Adviser's duties hereunder,
subject always (x) to the provisions contained in the documents delivered to the
Adviser pursuant to Section 1, as each of the same may from time to time be
amended or supplemented, and (y) to the limitations set forth in the Fund's
then-current Prospectus and Statement of Additional Information included in the
registration statement of the Trust as in effect from time to time under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended (the "1940 Act"), the Adviser will, at its own expense:
(a) furnish the Fund with advice and recommendations, consistent with the
investment objectives, policies and restrictions of the Fund, with
respect to the purchase, holding and disposition of portfolio
securities, alone or in consultation with any subadviser or
subadvisers appointed pursuant to this Agreement and subject to the
provisions of any sub-investment management contract respecting the
responsibilities of such subadviser or subadvisers;
(b) advise the Fund in connection with policy decisions to be made by the
Trustees or any committee thereof with respect to the Fund's
investments and, as requested, furnish the Fund with research,
economic and statistical data in connection with the Fund's
investments and investment policies;
(c) provide administration of the day-to-day investment operations of the
Fund;
(d) submit such reports relating to the valuation of the Fund's securities
as the Trustees may reasonably request;
(e) assist the Fund in any negotiations relating to the Fund's investments
with issuers, investment banking firms, securities brokers or dealers
and other institutions or investors;
(f) consistent with the provisions of Section 7 of this Agreement, place
orders for the purchase, sale or exchange of portfolio securities with
brokers or dealers selected by the Adviser, PROVIDED that in
connection with the placing of such orders and the selection of such
brokers or dealers the Adviser shall seek to obtain execution and
pricing within the policy guidelines determined by the Trustees and
set forth in the Prospectus and Statement of Additional Information of
the Fund as in effect from time to time;
(g) provide office space and office equipment and supplies, the use of
accounting equipment when required, and necessary executive, clerical
and secretarial personnel for the administration of the affairs of the
Fund;
2
<PAGE>
(h) from time to time or at any time requested by the Trustees, make
reports to the Fund of the Adviser's performance of the foregoing
services and furnish advice and recommendations with respect to other
aspects of the business and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's securities
transactions required by the 1940 Act, including subparagraphs (b)(5),
(6), (9) and (10) and paragraph (f) of Rule 31a-1 thereunder (other
than those records being maintained by the Fund's custodian or
transfer agent) and preserve such records for the periods prescribed
therefor by Rule 31a-2 of the 1940 Act (the Adviser agrees that such
records are the property of the Fund and will be surrendered to the
Fund promptly upon request therefor);
(j) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as the
Adviser may deem necessary or useful in the discharge of the Adviser's
duties hereunder;
(k) oversee, and use the Adviser's best efforts to assure the performance
of the activities and services of the custodian, transfer agent or
other similar agents retained by the Fund;
(l) give instructions to the Fund's custodian as to deliveries of
securities to and from such custodian and transfer of payment of cash
for the account of the Fund; and
(m) appoint and employ one or more sub-advisors satisfactory to the Fund
under sub-investment management agreements.
3. EXPENSES PAID BY THE ADVISER. The Adviser will pay:
(a) the compensation and expenses of all officers and employees of the
Trust;
(b) the expenses of office rent, telephone and other utilities, office
furniture, equipment, supplies and other expenses of the Fund; and
(c) any other expenses incurred by the Adviser in connection with the
performance of its duties hereunder.
4. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser will not be
required to pay any expenses which this Agreement does not expressly make
payable by it. In particular, and without limiting the generality of the
foregoing but subject to the provisions of Section 3, the Adviser will not be
required to pay under this Agreement:
(a) any and all expenses, taxes and governmental fees incurred by the
Trust or the Fund prior to the effective date of this Agreement;
3
<PAGE>
(b) without limiting the generality of the foregoing clause (a), the
expenses of organizing the Trust and the Fund (including without
limitation, legal, accounting and auditing fees and expenses incurred
in connection with the matters referred to in this clause (b)), of
initially registering shares of the Trust under the Securities Act of
1933, as amended, and of qualifying the shares for sale under state
securities laws for the initial offering and sale of shares;
(c) the compensation and expenses of Trustees who are not interested
persons (as used in this Agreement, such term shall have the meaning
specified in the 1940 Act) of the Adviser and of independent advisers,
independent contractors, consultants, managers and other unaffiliated
agents employed by the Fund other than through the Adviser;
(d) legal, accounting, financial management, tax and auditing fees and
expenses of the Fund (including an allocable portion of the cost of
its employees rendering such services to the Fund);
(e) the fees and disbursements of custodians and depositories of the
Fund's assets, transfer agents, disbursing agents, plan agents and
registrars;
(f) taxes and governmental fees assessed against the Fund's assets and
payable by the Fund;
(g) the cost of preparing and mailing dividends, distributions, reports,
notices and proxy materials to shareholders of the Fund;
(h) brokers' commissions and underwriting fees;
(i) the expense of periodic calculations of the net asset value of the
shares of the Fund; and
(j) insurance premiums on fidelity, errors and omissions and other
coverages.
5. COMPENSATION OF THE ADVISER. For all services to be rendered, facilities
furnished and expenses paid or assumed by the Adviser as herein provided, the
Adviser shall be entitled to a fee, paid monthly in arrears, at an annual rate
equal to (i) 0.80% of the average daily net asset value of the Fund up to
$500,000,000 of average daily net assets and (ii) 0.75% of the average daily net
asset value of the Fund in excess of $500,000,000.
The "average daily net assets" of the Fund shall be determined on the basis
set forth in the Fund's Prospectus or otherwise consistent with the 1940 Act and
4
<PAGE>
the regulations promulgated thereunder. The Adviser will receive a pro rata
portion of such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On any day that the
net asset value calculation is suspended as specified in the Fund's Prospectus,
the net asset value for purposes of calculating the advisory fee shall be
calculated as of the date last determined.
In the event that normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of any limitation
imposed by the law of a state where the Fund has registered its shares of
beneficial interest, the fee payable to the Adviser will be reduced to the
extent required by law, and the Adviser will make any additional arrangements
that the Adviser is required by law to make.
In addition, the Adviser may agree not to impose all or a portion of its
fee (in advance of the time its fee would otherwise accrue) and/or undertake to
make any other payments or arrangements necessary to limit the Fund's expenses
to any level the Adviser may specify. Any fee reduction or undertaking shall
constitute a binding modification of this Agreement while it is in effect but
may be discontinued or modified prospectively by the Adviser at any time.
6. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES. Nothing herein
contained shall prevent the Adviser or any affiliate or associate of the Adviser
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or portfolios similar to the Fund's; and it is specifically
understood that officers, directors and employees of the Adviser and those of
its parent company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio management services and
advice to other investment companies, whether or not registered, to other
investment advisory clients of the Adviser or of its affiliates and to said
affiliates themselves.
The Adviser shall have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers, affiliates or
employees may acquire for its or their own accounts or for the account of
another client, if, in the sole discretion of the Adviser, it is not feasible or
desirable to acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from purchasing or
recommending the purchase of a particular security for one or more funds or
clients while other funds or clients may be selling the same security.
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither the Adviser
nor any of its investment management subsidiaries, nor any of the Adviser's or
such investment management subsidiaries' directors, officers or employees will
act as principal or agent or receive any commission, except as may be permitted
by the 1940 Act and rules and regulations promulgated thereunder. If any
occasions shall arise in which the Adviser advises persons concerning the shares
of the Fund, the Adviser will act solely on its own behalf and not in any way on
behalf of the Fund. Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying, selling or trading
in any securities for its or their own account or accounts.
5
<PAGE>
8. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the Fund nor the
Adviser are partners of or joint venturers with each other and nothing herein
shall be construed so as to make them such partners or joint venturers or impose
any liability as such on any of them.
9. NAME OF THE TRUST AND THE FUND. The Trust and the Fund may use the name
"John Hancock" or any name or names derived from or similar to the names "John
Hancock Advisers, Inc." or "John Hancock Mutual Life Insurance Company" only for
so long as this Agreement remains in effect. At such time as this Agreement
shall no longer be in effect, the Trust and the Fund will (to the extent that
they lawfully can) cease to use such a name or any other name indicating that
the Fund is advised by or otherwise connected with the Adviser. The Fund
acknowledges that it has adopted the name John Hancock Financial Industries Fund
through permission of John Hancock Mutual Life Insurance Company, a
Massachusetts insurance company, and agrees that John Hancock Mutual Life
Insurance Company reserves to itself and any successor to its business the right
to grant the nonexclusive right to use the name "John Hancock" or any similar
name or names to any other corporation or entity, including but not limited to
any investment company of which John Hancock Mutual Life Insurance Company or
any subsidiary or affiliate thereof shall be the investment adviser.
10. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Agreement. Any person, even
though also employed by the Adviser, who may be or become an employee of and
paid by the Trust shall be deemed, when acting within the scope of his
employment by the Fund, to be acting in such employment solely for the Trust and
not as the Adviser's employee or agent.
11. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall remain
in force until June 30, 1998, and from year to year thereafter, but only so long
as such continuance is specifically approved at least annually by (a) a majority
of the Trustees who are not interested persons of the Adviser or (other than as
Board members) of the Fund, cast in person at a meeting called for the purpose
of voting on such approval, and (b) either (i) the Trustees or (ii) a majority
of the outstanding voting securities of the Fund. This Agreement may, on 60
days' written notice, be terminated at any time without the payment of any
penalty by the vote of a majority of the outstanding voting securities of the
Fund, by the Trustees or by the Adviser. Termination of this Agreement shall not
be deemed to terminate or otherwise invalidate any provisions of any contract
between the Adviser and any other series of the Trust. This Agreement shall
automatically terminate in the event of its assignment. In interpreting the
provisions of this Section 11, the definitions contained in Section 2(a) of the
1940 Act (particularly the definitions of "assignment," "interested person" and
"voting security") shall be applied.
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be effective until
approved by (a) the Trustees, including a majority of the Trustees who are not
interested persons of the Adviser or (other than as Trustees) of the Fund, cast
6
<PAGE>
in person at a meeting called for the purpose of voting on such approval, and
(b) a majority of the outstanding voting securities of the Fund, as defined in
the 1940 Act.
13. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts.
14. SEVERABILITY. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be deemed invalid or unenforceable in whole or in part.
15. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The name John Hancock Financial Industries Fund is
a series designation of the Trustees under the Trust's Declaration of Trust. The
Declaration of Trust has been filed with the Secretary of State of The
Commonwealth of Massachusetts. The obligations of the Fund are not personally
binding upon, nor shall resort be had to the private property of, any of the
Trustees, shareholders, officers, employees or agents of the Trust, but only
upon the Fund and its property. The Fund shall not be liable for the obligations
of any other series of the Trust and no other series shall be liable for the
Fund's obligations hereunder.
Yours very truly,
FREEDOM INVESTMENT TRUST
on behalf of John Hancock Financial Industries Fund
By: /s/ Anne C. Hodsdon
--------------------------------
Title: President
The foregoing contract
is hereby agreed to as
of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Robert G. Freedman
------------------------------------------
Title: Vice Chairman and Chief Investment Officer
7
JOHN HANCOCK DISCIPLINED GROWTH FUND
(a series of Freedom Investment Trust)
101 Huntington Avenue
Boston, Massachusetts 02199
July 1, 1996
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
Freedom Investment Trust (the "Trust"), of which John Hancock Disciplined
Growth Fund (the "Fund") is a series, has been organized as a business trust
under the laws of The Commonwealth of Massachusetts to engage in the business of
an investment company. The Trust's shares of beneficial interest, no par value,
may be divided into series, each series representing the entire undivided
interest in a separate portfolio of assets. This Agreement relates solely to the
Fund.
The Board of Trustees of the Trust (the "Trustees") has selected John
Hancock Advisers, Inc. (the "Adviser") to provide overall investment advice and
management for the Fund, and to provide certain other services, as more fully
set forth below, and the Adviser is willing to provide such advice, management
and services under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund, agree as
follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser with copies,
properly certified or otherwise authenticated, of each of the following:
(a) Amended and Restated Declaration of Trust dated July 1, 1996, as
amended from time to time (the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as investment
adviser for the Fund and approving the form of this Agreement;
(d) Commitments, limitations and undertakings made by the Fund to state
securities or "blue sky" authorities for the purpose of qualifying
shares of the Fund for sale in such states; and
(e) The Trust's Code of Ethics.
<PAGE>
The Trust will furnish to the Adviser from time to time copies, properly
certified or otherwise authenticated, of all amendments of or supplements to the
foregoing, if any.
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use its best
efforts to provide to the Fund continuing and suitable investment programs with
respect to investments, consistent with the investment objectives, policies and
restrictions of the Fund. In the performance of the Adviser's duties hereunder,
subject always (x) to the provisions contained in the documents delivered to the
Adviser pursuant to Section 1, as each of the same may from time to time be
amended or supplemented, and (y) to the limitations set forth in the Fund's
then-current Prospectus and Statement of Additional Information included in the
registration statement of the Trust as in effect from time to time under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended (the "1940 Act"), the Adviser will, at its own expense:
(a) furnish the Fund with advice and recommendations, consistent with the
investment objectives, policies and restrictions of the Fund, with
respect to the purchase, holding and disposition of portfolio
securities, alone or in consultation with any subadviser or
subadvisers appointed pursuant to this Agreement and subject to the
provisions of any sub-investment management contract respecting the
responsibilities of such subadviser or subadvisers;
(b) advise the Fund in connection with policy decisions to be made by the
Trustees or any committee thereof with respect to the Fund's
investments and, as requested, furnish the Fund with research,
economic and statistical data in connection with the Fund's
investments and investment policies;
(c) provide administration of the day-to-day investment operations of the
Fund;
(d) submit such reports relating to the valuation of the Fund's securities
as the Trustees may reasonably request;
(e) assist the Fund in any negotiations relating to the Fund's investments
with issuers, investment banking firms, securities brokers or dealers
and other institutions or investors;
(f) consistent with the provisions of Section 7 of this Agreement, place
orders for the purchase, sale or exchange of portfolio securities with
brokers or dealers selected by the Adviser, PROVIDED that in
connection with the placing of such orders and the selection of such
brokers or dealers the Adviser shall seek to obtain execution and
pricing within the policy guidelines determined by the Trustees and
set forth in the Prospectus and Statement of Additional Information of
the Fund as in effect from time to time;
(g) provide office space and office equipment and supplies, the use of
accounting equipment when required, and necessary executive, clerical
and secretarial personnel for the administration of the affairs of the
Fund;
2
<PAGE>
(h) from time to time or at any time requested by the Trustees, make
reports to the Fund of the Adviser's performance of the foregoing
services and furnish advice and recommendations with respect to other
aspects of the business and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's securities
transactions required by the 1940 Act, including subparagraphs (b)(5),
(6), (9) and (10) and paragraph (f) of Rule 31a-1 thereunder (other
than those records being maintained by the Fund's custodian or
transfer agent) and preserve such records for the periods prescribed
therefor by Rule 31a-2 of the 1940 Act (the Adviser agrees that such
records are the property of the Fund and will be surrendered to the
Fund promptly upon request therefor);
(j) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as the
Adviser may deem necessary or useful in the discharge of the Adviser's
duties hereunder;
(k) oversee, and use the Adviser's best efforts to assure the performance
of the activities and services of the custodian, transfer agent or
other similar agents retained by the Fund;
(l) give instructions to the Fund's custodian as to deliveries of
securities to and from such custodian and transfer of payment of cash
for the account of the Fund; and
(m) appoint and employ one or more sub-advisors satisfactory to the Fund
under sub-investment management agreements.
3. EXPENSES PAID BY THE ADVISER. The Adviser will pay:
(a) the compensation and expenses of all officers and employees of the
Trust;
(b) the expenses of office rent, telephone and other utilities, office
furniture, equipment, supplies and other expenses of the Fund; and
(c) any other expenses incurred by the Adviser in connection with the
performance of its duties hereunder.
4. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser will not be
required to pay any expenses which this Agreement does not expressly make
payable by it. In particular, and without limiting the generality of the
foregoing but subject to the provisions of Section 3, the Adviser will not be
required to pay under this Agreement:
(a) any and all expenses, taxes and governmental fees incurred by the
Trust or the Fund prior to the effective date of this Agreement;
3
<PAGE>
(b) without limiting the generality of the foregoing clause (a), the
expenses of organizing the Trust and the Fund (including without
limitation, legal, accounting and auditing fees and expenses incurred
in connection with the matters referred to in this clause (b)), of
initially registering shares of the Trust under the Securities Act of
1933, as amended, and of qualifying the shares for sale under state
securities laws for the initial offering and sale of shares;
(c) the compensation and expenses of Trustees who are not interested
persons (as used in this Agreement, such term shall have the meaning
specified in the 1940 Act) of the Adviser and of independent advisers,
independent contractors, consultants, managers and other unaffiliated
agents employed by the Fund other than through the Adviser;
(d) legal, accounting, financial management, tax and auditing fees and
expenses of the Fund (including an allocable portion of the cost of
its employees rendering such services to the Fund);
(e) the fees and disbursements of custodians and depositories of the
Fund's assets, transfer agents, disbursing agents, plan agents and
registrars;
(f) taxes and governmental fees assessed against the Fund's assets and
payable by the Fund;
(g) the cost of preparing and mailing dividends, distributions, reports,
notices and proxy materials to shareholders of the Fund;
(h) brokers' commissions and underwriting fees;
(i) the expense of periodic calculations of the net asset value of the
shares of the Fund; and
(j) insurance premiums on fidelity, errors and omissions and other
coverages.
5. COMPENSATION OF THE ADVISER. For all services to be rendered, facilities
furnished and expenses paid or assumed by the Adviser as herein provided, the
Adviser shall be entitled to a fee, paid monthly in arrears, at an annual rate
equal to (i) 0.75% of the average daily net asset value of the Fund up to
$500,000,000 of average daily net assets and (ii) 0.65% of the average daily net
asset value of the Fund in excess of $500,000,000.
The "average daily net assets" of the Fund shall be determined on the basis
set forth in the Fund's Prospectus or otherwise consistent with the 1940 Act and
4
<PAGE>
the regulations promulgated thereunder. The Adviser will receive a pro rata
portion of such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On any day that the
net asset value calculation is suspended as specified in the Fund's Prospectus,
the net asset value for purposes of calculating the advisory fee shall be
calculated as of the date last determined.
In the event that normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of any limitation
imposed by the law of a state where the Fund has registered its shares of
beneficial interest, the fee payable to the Adviser will be reduced to the
extent required by law, and the Adviser will make any additional arrangements
that the Adviser is required by law to make.
In addition, the Adviser may agree not to impose all or a portion of its
fee (in advance of the time its fee would otherwise accrue) and/or undertake to
make any other payments or arrangements necessary to limit the Fund's expenses
to any level the Adviser may specify. Any fee reduction or undertaking shall
constitute a binding modification of this Agreement while it is in effect but
may be discontinued or modified prospectively by the Adviser at any time.
6. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES. Nothing herein
contained shall prevent the Adviser or any affiliate or associate of the Adviser
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or portfolios similar to the Fund's; and it is specifically
understood that officers, directors and employees of the Adviser and those of
its parent company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio management services and
advice to other investment companies, whether or not registered, to other
investment advisory clients of the Adviser or of its affiliates and to said
affiliates themselves.
The Adviser shall have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers, affiliates or
employees may acquire for its or their own accounts or for the account of
another client, if, in the sole discretion of the Adviser, it is not feasible or
desirable to acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from purchasing or
recommending the purchase of a particular security for one or more funds or
clients while other funds or clients may be selling the same security.
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither the Adviser
nor any of its investment management subsidiaries, nor any of the Adviser's or
such investment management subsidiaries' directors, officers or employees will
act as principal or agent or receive any commission, except as may be permitted
by the 1940 Act and rules and regulations promulgated thereunder. If any
occasions shall arise in which the Adviser advises persons concerning the shares
of the Fund, the Adviser will act solely on its own behalf and not in any way on
behalf of the Fund. Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying, selling or trading
in any securities for its or their own account or accounts.
5
<PAGE>
8. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the Fund nor the
Adviser are partners of or joint venturers with each other and nothing herein
shall be construed so as to make them such partners or joint venturers or impose
any liability as such on any of them.
9. NAME OF THE TRUST AND THE FUND. The Trust and the Fund may use the name
"John Hancock" or any name or names derived from or similar to the names "John
Hancock Advisers, Inc." or "John Hancock Mutual Life Insurance Company" only for
so long as this Agreement remains in effect. At such time as this Agreement
shall no longer be in effect, the Trust and the Fund will (to the extent that
they lawfully can) cease to use such a name or any other name indicating that
the Fund is advised by or otherwise connected with the Adviser. The Fund
acknowledges that it has adopted the name John Hancock Disciplined Growth Fund
through permission of John Hancock Mutual Life Insurance Company, a
Massachusetts insurance company, and agrees that John Hancock Mutual Life
Insurance Company reserves to itself and any successor to its business the right
to grant the nonexclusive right to use the name "John Hancock" or any similar
name or names to any other corporation or entity, including but not limited to
any investment company of which John Hancock Mutual Life Insurance Company or
any subsidiary or affiliate thereof shall be the investment adviser.
10. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Agreement. Any person, even
though also employed by the Adviser, who may be or become an employee of and
paid by the Trust shall be deemed, when acting within the scope of his
employment by the Fund, to be acting in such employment solely for the Trust and
not as the Adviser's employee or agent.
11. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall remain
in force until June 30, 1998, and from year to year thereafter, but only so long
as such continuance is specifically approved at least annually by (a) a majority
of the Trustees who are not interested persons of the Adviser or (other than as
Board members) of the Fund, cast in person at a meeting called for the purpose
of voting on such approval, and (b) either (i) the Trustees or (ii) a majority
of the outstanding voting securities of the Fund. This Agreement may, on 60
days' written notice, be terminated at any time without the payment of any
penalty by the vote of a majority of the outstanding voting securities of the
Fund, by the Trustees or by the Adviser. Termination of this Agreement shall not
be deemed to terminate or otherwise invalidate any provisions of any contract
between the Adviser and any other series of the Trust. This Agreement shall
automatically terminate in the event of its assignment. In interpreting the
provisions of this Section 11, the definitions contained in Section 2(a) of the
1940 Act (particularly the definitions of "assignment," "interested person" and
"voting security") shall be applied.
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be effective until
approved by (a) the Trustees, including a majority of the Trustees who are not
interested persons of the Adviser or (other than as Trustees) of the Fund, cast
6
<PAGE>
in person at a meeting called for the purpose of voting on such approval, and
(b) a majority of the outstanding voting securities of the Fund, as defined in
the 1940 Act.
13. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts.
14. SEVERABILITY. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be deemed invalid or unenforceable in whole or in part.
15. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The name John Hancock Disciplined Growth Fund is a
series designation of the Trustees under the Trust's Declaration of Trust. The
Declaration of Trust has been filed with the Secretary of State of The
Commonwealth of Massachusetts. The obligations of the Fund are not personally
binding upon, nor shall resort be had to the private property of, any of the
Trustees, shareholders, officers, employees or agents of the Trust, but only
upon the Fund and its property. The Fund shall not be liable for the obligations
of any other series of the Trust and no other series shall be liable for the
Fund's obligations hereunder.
Yours very truly,
FREEDOM INVESTMENT TRUST
on behalf of John Hancock Disciplined Growth Fund
By: /s/ Anne C. Hodsdon
-------------------------------
Title: President
The foregoing contract
is hereby agreed to as
of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Robert G. Freedman
------------------------------------------
Title: Vice Chairman and Chief Investment Officer
7
JOHN HANCOCK REGIONAL BANK FUND
(a series of Freedom Investment Trust)
101 Huntington Avenue
Boston, Massachusetts 02199
July 1, 1996
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
Freedom Investment Trust (the "Trust"), of which John Hancock Regional Bank
Fund (the "Fund") is a series, has been organized as a business trust under the
laws of The Commonwealth of Massachusetts to engage in the business of an
investment company. The Trust's shares of beneficial interest, no par value, may
be divided into series, each series representing the entire undivided interest
in a separate portfolio of assets. This Agreement relates solely to the Fund.
The Board of Trustees of the Trust (the "Trustees") has selected John
Hancock Advisers, Inc. (the "Adviser") to provide overall investment advice and
management for the Fund, and to provide certain other services, as more fully
set forth below, and the Adviser is willing to provide such advice, management
and services under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund, agree as
follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser with copies,
properly certified or otherwise authenticated, of each of the following:
(a) Amended and Restated Declaration of Trust dated July 1, 1996, as
amended from time to time (the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as investment
adviser for the Fund and approving the form of this Agreement;
(d) Commitments, limitations and undertakings made by the Fund to state
securities or "blue sky" authorities for the purpose of qualifying
shares of the Fund for sale in such states; and
(e) The Trust's Code of Ethics.
<PAGE>
The Trust will furnish to the Adviser from time to time copies, properly
certified or otherwise authenticated, of all amendments of or supplements to the
foregoing, if any.
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use its best
efforts to provide to the Fund continuing and suitable investment programs with
respect to investments, consistent with the investment objectives, policies and
restrictions of the Fund. In the performance of the Adviser's duties hereunder,
subject always (x) to the provisions contained in the documents delivered to the
Adviser pursuant to Section 1, as each of the same may from time to time be
amended or supplemented, and (y) to the limitations set forth in the Fund's
then-current Prospectus and Statement of Additional Information included in the
registration statement of the Trust as in effect from time to time under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended (the "1940 Act"), the Adviser will, at its own expense:
(a) furnish the Fund with advice and recommendations, consistent with the
investment objectives, policies and restrictions of the Fund, with
respect to the purchase, holding and disposition of portfolio
securities, alone or in consultation with any subadviser or
subadvisers appointed pursuant to this Agreement and subject to the
provisions of any sub-investment management contract respecting the
responsibilities of such subadviser or subadvisers;
(b) advise the Fund in connection with policy decisions to be made by the
Trustees or any committee thereof with respect to the Fund's
investments and, as requested, furnish the Fund with research,
economic and statistical data in connection with the Fund's
investments and investment policies;
(c) provide administration of the day-to-day investment operations of the
Fund;
(d) submit such reports relating to the valuation of the Fund's securities
as the Trustees may reasonably request;
(e) assist the Fund in any negotiations relating to the Fund's investments
with issuers, investment banking firms, securities brokers or dealers
and other institutions or investors;
(f) consistent with the provisions of Section 7 of this Agreement, place
orders for the purchase, sale or exchange of portfolio securities with
brokers or dealers selected by the Adviser, PROVIDED that in
connection with the placing of such orders and the selection of such
brokers or dealers the Adviser shall seek to obtain execution and
pricing within the policy guidelines determined by the Trustees and
set forth in the Prospectus and Statement of Additional Information of
the Fund as in effect from time to time;
(g) provide office space and office equipment and supplies, the use of
accounting equipment when required, and necessary executive, clerical
and secretarial personnel for the administration of the affairs of the
Fund;
2
<PAGE>
(h) from time to time or at any time requested by the Trustees, make
reports to the Fund of the Adviser's performance of the foregoing
services and furnish advice and recommendations with respect to other
aspects of the business and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's securities
transactions required by the 1940 Act, including subparagraphs (b)(5),
(6), (9) and (10) and paragraph (f) of Rule 31a-1 thereunder (other
than those records being maintained by the Fund's custodian or
transfer agent) and preserve such records for the periods prescribed
therefor by Rule 31a-2 of the 1940 Act (the Adviser agrees that such
records are the property of the Fund and will be surrendered to the
Fund promptly upon request therefor);
(j) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as the
Adviser may deem necessary or useful in the discharge of the Adviser's
duties hereunder;
(k) oversee, and use the Adviser's best efforts to assure the performance
of the activities and services of the custodian, transfer agent or
other similar agents retained by the Fund;
(l) give instructions to the Fund's custodian as to deliveries of
securities to and from such custodian and transfer of payment of cash
for the account of the Fund; and
(m) appoint and employ one or more sub-advisors satisfactory to the Fund
under sub-investment management agreements.
3. EXPENSES PAID BY THE ADVISER. The Adviser will pay:
(a) the compensation and expenses of all officers and employees of the
Trust;
(b) the expenses of office rent, telephone and other utilities, office
furniture, equipment, supplies and other expenses of the Fund; and
(c) any other expenses incurred by the Adviser in connection with the
performance of its duties hereunder.
4. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser will not be
required to pay any expenses which this Agreement does not expressly make
payable by it. In particular, and without limiting the generality of the
foregoing but subject to the provisions of Section 3, the Adviser will not be
required to pay under this Agreement:
(a) any and all expenses, taxes and governmental fees incurred by the
Trust or the Fund prior to the effective date of this Agreement;
3
<PAGE>
(b) without limiting the generality of the foregoing clause (a), the
expenses of organizing the Trust and the Fund (including without
limitation, legal, accounting and auditing fees and expenses incurred
in connection with the matters referred to in this clause (b)), of
initially registering shares of the Trust under the Securities Act of
1933, as amended, and of qualifying the shares for sale under state
securities laws for the initial offering and sale of shares;
(c) the compensation and expenses of Trustees who are not interested
persons (as used in this Agreement, such term shall have the meaning
specified in the 1940 Act) of the Adviser and of independent advisers,
independent contractors, consultants, managers and other unaffiliated
agents employed by the Fund other than through the Adviser;
(d) legal, accounting, financial management, tax and auditing fees and
expenses of the Fund (including an allocable portion of the cost of
its employees rendering such services to the Fund);
(e) the fees and disbursements of custodians and depositories of the
Fund's assets, transfer agents, disbursing agents, plan agents and
registrars;
(f) taxes and governmental fees assessed against the Fund's assets and
payable by the Fund;
(g) the cost of preparing and mailing dividends, distributions, reports,
notices and proxy materials to shareholders of the Fund;
(h) brokers' commissions and underwriting fees;
(i) the expense of periodic calculations of the net asset value of the
shares of the Fund; and
(j) insurance premiums on fidelity, errors and omissions and other
coverages.
5. COMPENSATION OF THE ADVISER. For all services to be rendered, facilities
furnished and expenses paid or assumed by the Adviser as herein provided, the
Adviser shall be entitled to a fee, paid monthly in arrears, at an annual rate
equal to (i) 0.80% of the average daily net asset value of the Fund up to
$500,000,000 of average daily net assets and (ii) 0.75% of the average daily net
asset value of the Fund in excess of $500,000,000.
The "average daily net assets" of the Fund shall be determined on the basis
set forth in the Fund's Prospectus or otherwise consistent with the 1940 Act and
4
<PAGE>
the regulations promulgated thereunder. The Adviser will receive a pro rata
portion of such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On any day that the
net asset value calculation is suspended as specified in the Fund's Prospectus,
the net asset value for purposes of calculating the advisory fee shall be
calculated as of the date last determined.
In the event that normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of any limitation
imposed by the law of a state where the Fund has registered its shares of
beneficial interest, the fee payable to the Adviser will be reduced to the
extent required by law, and the Adviser will make any additional arrangements
that the Adviser is required by law to make.
In addition, the Adviser may agree not to impose all or a portion of its
fee (in advance of the time its fee would otherwise accrue) and/or undertake to
make any other payments or arrangements necessary to limit the Fund's expenses
to any level the Adviser may specify. Any fee reduction or undertaking shall
constitute a binding modification of this Agreement while it is in effect but
may be discontinued or modified prospectively by the Adviser at any time.
6. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES. Nothing herein
contained shall prevent the Adviser or any affiliate or associate of the Adviser
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or portfolios similar to the Fund's; and it is specifically
understood that officers, directors and employees of the Adviser and those of
its parent company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio management services and
advice to other investment companies, whether or not registered, to other
investment advisory clients of the Adviser or of its affiliates and to said
affiliates themselves.
The Adviser shall have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers, affiliates or
employees may acquire for its or their own accounts or for the account of
another client, if, in the sole discretion of the Adviser, it is not feasible or
desirable to acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from purchasing or
recommending the purchase of a particular security for one or more funds or
clients while other funds or clients may be selling the same security.
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither the Adviser
nor any of its investment management subsidiaries, nor any of the Adviser's or
such investment management subsidiaries' directors, officers or employees will
act as principal or agent or receive any commission, except as may be permitted
by the 1940 Act and rules and regulations promulgated thereunder. If any
occasions shall arise in which the Adviser advises persons concerning the shares
of the Fund, the Adviser will act solely on its own behalf and not in any way on
behalf of the Fund. Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying, selling or trading
in any securities for its or their own account or accounts.
5
<PAGE>
8. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the Fund nor the
Adviser are partners of or joint venturers with each other and nothing herein
shall be construed so as to make them such partners or joint venturers or impose
any liability as such on any of them.
9. NAME OF THE TRUST AND THE FUND. The Trust and the Fund may use the name
"John Hancock" or any name or names derived from or similar to the names "John
Hancock Advisers, Inc." or "John Hancock Mutual Life Insurance Company" only for
so long as this Agreement remains in effect. At such time as this Agreement
shall no longer be in effect, the Trust and the Fund will (to the extent that
they lawfully can) cease to use such a name or any other name indicating that
the Fund is advised by or otherwise connected with the Adviser. The Fund
acknowledges that it has adopted the name John Hancock Regional Bank Fund
through permission of John Hancock Mutual Life Insurance Company, a
Massachusetts insurance company, and agrees that John Hancock Mutual Life
Insurance Company reserves to itself and any successor to its business the right
to grant the nonexclusive right to use the name "John Hancock" or any similar
name or names to any other corporation or entity, including but not limited to
any investment company of which John Hancock Mutual Life Insurance Company or
any subsidiary or affiliate thereof shall be the investment adviser.
10. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Agreement. Any person, even
though also employed by the Adviser, who may be or become an employee of and
paid by the Trust shall be deemed, when acting within the scope of his
employment by the Fund, to be acting in such employment solely for the Trust and
not as the Adviser's employee or agent.
11. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall remain
in force until June 30, 1998, and from year to year thereafter, but only so long
as such continuance is specifically approved at least annually by (a) a majority
of the Trustees who are not interested persons of the Adviser or (other than as
Board members) of the Fund, cast in person at a meeting called for the purpose
of voting on such approval, and (b) either (i) the Trustees or (ii) a majority
of the outstanding voting securities of the Fund. This Agreement may, on 60
days' written notice, be terminated at any time without the payment of any
penalty by the vote of a majority of the outstanding voting securities of the
Fund, by the Trustees or by the Adviser. Termination of this Agreement shall not
be deemed to terminate or otherwise invalidate any provisions of any contract
between the Adviser and any other series of the Trust. This Agreement shall
automatically terminate in the event of its assignment. In interpreting the
provisions of this Section 11, the definitions contained in Section 2(a) of the
1940 Act (particularly the definitions of "assignment," "interested person" and
"voting security") shall be applied.
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be effective until
approved by (a) the Trustees, including a majority of the Trustees who are not
interested persons of the Adviser or (other than as Trustees) of the Fund, cast
6
<PAGE>
in person at a meeting called for the purpose of voting on such approval, and
(b) a majority of the outstanding voting securities of the Fund, as defined in
the 1940 Act.
13. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts.
14. SEVERABILITY. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be deemed invalid or unenforceable in whole or in part.
15. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The name John Hancock Regional Bank Fund is a
series designation of the Trustees under the Trust's Declaration of Trust. The
Declaration of Trust has been filed with the Secretary of State of The
Commonwealth of Massachusetts. The obligations of the Fund are not personally
binding upon, nor shall resort be had to the private property of, any of the
Trustees, shareholders, officers, employees or agents of the Trust, but only
upon the Fund and its property. The Fund shall not be liable for the obligations
of any other series of the Trust and no other series shall be liable for the
Fund's obligations hereunder.
Yours very truly,
FREEDOM INVESTMENT TRUST
on behalf of John Hancock Regional Bank Fund
By: /s/ Anne C. Hodsdon
---------------------------
Title: President
The foregoing contract
is hereby agreed to as
of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Robert G. Freedman
------------------------------------------
Title: Vice Chairman and Chief Investment Officer
7
JOHN HANCOCK MANAGED TAX-EXEMPT FUND
(a series of Freedom Investment Trust)
101 Huntington Avenue
Boston, Massachusetts 02199
July 1, 1996
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
Freedom Investment Trust (the "Trust"), of which John Hancock Managed
Tax-Exempt Fund (the "Fund") is a series, has been organized as a business trust
under the laws of The Commonwealth of Massachusetts to engage in the business of
an investment company. The Trust's shares of beneficial interest, no par value,
may be divided into series, each series representing the entire undivided
interest in a separate portfolio of assets. This Agreement relates solely to the
Fund.
The Board of Trustees of the Trust (the "Trustees") has selected John
Hancock Advisers, Inc. (the "Adviser") to provide overall investment advice and
management for the Fund, and to provide certain other services, as more fully
set forth below, and the Adviser is willing to provide such advice, management
and services under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund, agree as
follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser with copies,
properly certified or otherwise authenticated, of each of the following:
(a) Amended and Restated Declaration of Trust dated July 1, 1996, as
amended from time to time (the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as investment
adviser for the Fund and approving the form of this Agreement;
(d) Commitments, limitations and undertakings made by the Fund to state
securities or "blue sky" authorities for the purpose of qualifying
shares of the Fund for sale in such states; and
(e) The Trust's Code of Ethics.
<PAGE>
The Trust will furnish to the Adviser from time to time copies, properly
certified or otherwise authenticated, of all amendments of or supplements to the
foregoing, if any.
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use its best
efforts to provide to the Fund continuing and suitable investment programs with
respect to investments, consistent with the investment objectives, policies and
restrictions of the Fund. In the performance of the Adviser's duties hereunder,
subject always (x) to the provisions contained in the documents delivered to the
Adviser pursuant to Section 1, as each of the same may from time to time be
amended or supplemented, and (y) to the limitations set forth in the Fund's
then-current Prospectus and Statement of Additional Information included in the
registration statement of the Trust as in effect from time to time under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended (the "1940 Act"), the Adviser will, at its own expense:
(a) furnish the Fund with advice and recommendations, consistent with the
investment objectives, policies and restrictions of the Fund, with
respect to the purchase, holding and disposition of portfolio
securities, alone or in consultation with any subadviser or
subadvisers appointed pursuant to this Agreement and subject to the
provisions of any sub-investment management contract respecting the
responsibilities of such subadviser or subadvisers;
(b) advise the Fund in connection with policy decisions to be made by the
Trustees or any committee thereof with respect to the Fund's
investments and, as requested, furnish the Fund with research,
economic and statistical data in connection with the Fund's
investments and investment policies;
(c) provide administration of the day-to-day investment operations of the
Fund;
(d) submit such reports relating to the valuation of the Fund's securities
as the Trustees may reasonably request;
(e) assist the Fund in any negotiations relating to the Fund's investments
with issuers, investment banking firms, securities brokers or dealers
and other institutions or investors;
(f) consistent with the provisions of Section 7 of this Agreement, place
orders for the purchase, sale or exchange of portfolio securities with
brokers or dealers selected by the Adviser, PROVIDED that in
connection with the placing of such orders and the selection of such
brokers or dealers the Adviser shall seek to obtain execution and
pricing within the policy guidelines determined by the Trustees and
set forth in the Prospectus and Statement of Additional Information of
the Fund as in effect from time to time;
(g) provide office space and office equipment and supplies, the use of
accounting equipment when required, and necessary executive, clerical
and secretarial personnel for the administration of the affairs of the
Fund;
2
<PAGE>
(h) from time to time or at any time requested by the Trustees, make
reports to the Fund of the Adviser's performance of the foregoing
services and furnish advice and recommendations with respect to other
aspects of the business and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's securities
transactions required by the 1940 Act, including subparagraphs (b)(5),
(6), (9) and (10) and paragraph (f) of Rule 31a-1 thereunder (other
than those records being maintained by the Fund's custodian or
transfer agent) and preserve such records for the periods prescribed
therefor by Rule 31a-2 of the 1940 Act (the Adviser agrees that such
records are the property of the Fund and will be surrendered to the
Fund promptly upon request therefor);
(j) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as the
Adviser may deem necessary or useful in the discharge of the Adviser's
duties hereunder;
(k) oversee, and use the Adviser's best efforts to assure the performance
of the activities and services of the custodian, transfer agent or
other similar agents retained by the Fund;
(l) give instructions to the Fund's custodian as to deliveries of
securities to and from such custodian and transfer of payment of cash
for the account of the Fund; and
(m) appoint and employ one or more sub-advisors satisfactory to the Fund
under sub-investment management agreements.
3. EXPENSES PAID BY THE ADVISER. The Adviser will pay:
(a) the compensation and expenses of all officers and employees of the
Trust;
(b) the expenses of office rent, telephone and other utilities, office
furniture, equipment, supplies and other expenses of the Fund; and
(c) any other expenses incurred by the Adviser in connection with the
performance of its duties hereunder.
4. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser will not be
required to pay any expenses which this Agreement does not expressly make
payable by it. In particular, and without limiting the generality of the
foregoing but subject to the provisions of Section 3, the Adviser will not be
required to pay under this Agreement:
(a) any and all expenses, taxes and governmental fees incurred by the
Trust or the Fund prior to the effective date of this Agreement;
3
<PAGE>
(b) without limiting the generality of the foregoing clause (a), the
expenses of organizing the Trust and the Fund (including without
limitation, legal, accounting and auditing fees and expenses incurred
in connection with the matters referred to in this clause (b)), of
initially registering shares of the Trust under the Securities Act of
1933, as amended, and of qualifying the shares for sale under state
securities laws for the initial offering and sale of shares;
(c) the compensation and expenses of Trustees who are not interested
persons (as used in this Agreement, such term shall have the meaning
specified in the 1940 Act) of the Adviser and of independent advisers,
independent contractors, consultants, managers and other unaffiliated
agents employed by the Fund other than through the Adviser;
(d) legal, accounting, financial management, tax and auditing fees and
expenses of the Fund (including an allocable portion of the cost of
its employees rendering such services to the Fund);
(e) the fees and disbursements of custodians and depositories of the
Fund's assets, transfer agents, disbursing agents, plan agents and
registrars;
(f) taxes and governmental fees assessed against the Fund's assets and
payable by the Fund;
(g) the cost of preparing and mailing dividends, distributions, reports,
notices and proxy materials to shareholders of the Fund;
(h) brokers' commissions and underwriting fees;
(i) the expense of periodic calculations of the net asset value of the
shares of the Fund; and
(j) insurance premiums on fidelity, errors and omissions and other
coverages.
5. COMPENSATION OF THE ADVISER. For all services to be rendered, facilities
furnished and expenses paid or assumed by the Adviser as herein provided, the
Adviser shall be entitled to a fee, paid monthly in arrears, at an annual rate
equal to (i) 0.60% of the average daily net asset value of the Fund up to
$250,000,000 of average daily net assets, (ii) 0.50% of the next $500,000,000 of
the average daily net asset value of the Fund and (iii) 0.45% of the average
daily net asset value of the Fund in excess of $750,000,000.
The "average daily net assets" of the Fund shall be determined on the basis
set forth in the Fund's Prospectus or otherwise consistent with the 1940 Act and
4
<PAGE>
the regulations promulgated thereunder. The Adviser will receive a pro rata
portion of such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On any day that the
net asset value calculation is suspended as specified in the Fund's Prospectus,
the net asset value for purposes of calculating the advisory fee shall be
calculated as of the date last determined.
In the event that normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of any limitation
imposed by the law of a state where the Fund has registered its shares of
beneficial interest, the fee payable to the Adviser will be reduced to the
extent required by law, and the Adviser will make any additional arrangements
that the Adviser is required by law to make.
In addition, the Adviser may agree not to impose all or a portion of its
fee (in advance of the time its fee would otherwise accrue) and/or undertake to
make any other payments or arrangements necessary to limit the Fund's expenses
to any level the Adviser may specify. Any fee reduction or undertaking shall
constitute a binding modification of this Agreement while it is in effect but
may be discontinued or modified prospectively by the Adviser at any time.
6. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES. Nothing herein
contained shall prevent the Adviser or any affiliate or associate of the Adviser
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or portfolios similar to the Fund's; and it is specifically
understood that officers, directors and employees of the Adviser and those of
its parent company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio management services and
advice to other investment companies, whether or not registered, to other
investment advisory clients of the Adviser or of its affiliates and to said
affiliates themselves.
The Adviser shall have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers, affiliates or
employees may acquire for its or their own accounts or for the account of
another client, if, in the sole discretion of the Adviser, it is not feasible or
desirable to acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from purchasing or
recommending the purchase of a particular security for one or more funds or
clients while other funds or clients may be selling the same security.
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither the Adviser
nor any of its investment management subsidiaries, nor any of the Adviser's or
such investment management subsidiaries' directors, officers or employees will
act as principal or agent or receive any commission, except as may be permitted
by the 1940 Act and rules and regulations promulgated thereunder. If any
occasions shall arise in which the Adviser advises persons concerning the shares
of the Fund, the Adviser will act solely on its own behalf and not in any way on
behalf of the Fund. Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying, selling or trading
in any securities for its or their own account or accounts.
5
<PAGE>
8. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the Fund nor the
Adviser are partners of or joint venturers with each other and nothing herein
shall be construed so as to make them such partners or joint venturers or impose
any liability as such on any of them.
9. NAME OF THE TRUST AND THE FUND. The Trust and the Fund may use the name
"John Hancock" or any name or names derived from or similar to the names "John
Hancock Advisers, Inc." or "John Hancock Mutual Life Insurance Company" only for
so long as this Agreement remains in effect. At such time as this Agreement
shall no longer be in effect, the Trust and the Fund will (to the extent that
they lawfully can) cease to use such a name or any other name indicating that
the Fund is advised by or otherwise connected with the Adviser. The Fund
acknowledges that it has adopted the name John Hancock Managed Tax-Exempt Fund
through permission of John Hancock Mutual Life Insurance Company, a
Massachusetts insurance company, and agrees that John Hancock Mutual Life
Insurance Company reserves to itself and any successor to its business the right
to grant the nonexclusive right to use the name "John Hancock" or any similar
name or names to any other corporation or entity, including but not limited to
any investment company of which John Hancock Mutual Life Insurance Company or
any subsidiary or affiliate thereof shall be the investment adviser.
10. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Agreement. Any person, even
though also employed by the Adviser, who may be or become an employee of and
paid by the Trust shall be deemed, when acting within the scope of his
employment by the Fund, to be acting in such employment solely for the Trust and
not as the Adviser's employee or agent.
11. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall remain
in force until June 30, 1998, and from year to year thereafter, but only so long
as such continuance is specifically approved at least annually by (a) a majority
of the Trustees who are not interested persons of the Adviser or (other than as
Board members) of the Fund, cast in person at a meeting called for the purpose
of voting on such approval, and (b) either (i) the Trustees or (ii) a majority
of the outstanding voting securities of the Fund. This Agreement may, on 60
days' written notice, be terminated at any time without the payment of any
penalty by the vote of a majority of the outstanding voting securities of the
Fund, by the Trustees or by the Adviser. Termination of this Agreement shall not
be deemed to terminate or otherwise invalidate any provisions of any contract
between the Adviser and any other series of the Trust. This Agreement shall
automatically terminate in the event of its assignment. In interpreting the
provisions of this Section 11, the definitions contained in Section 2(a) of the
1940 Act (particularly the definitions of "assignment," "interested person" and
"voting security") shall be applied.
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be effective until
approved by (a) the Trustees, including a majority of the Trustees who are not
interested persons of the Adviser or (other than as Trustees) of the Fund, cast
6
<PAGE>
in person at a meeting called for the purpose of voting on such approval, and
(b) a majority of the outstanding voting securities of the Fund, as defined in
the 1940 Act.
13. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts.
14. SEVERABILITY. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be deemed invalid or unenforceable in whole or in part.
15. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The name John Hancock Managed Tax-Exempt Fund is a
series designation of the Trustees under the Trust's Declaration of Trust. The
Declaration of Trust has been filed with the Secretary of State of The
Commonwealth of Massachusetts. The obligations of the Fund are not personally
binding upon, nor shall resort be had to the private property of, any of the
Trustees, shareholders, officers, employees or agents of the Trust, but only
upon the Fund and its property. The Fund shall not be liable for the obligations
of any other series of the Trust and no other series shall be liable for the
Fund's obligations hereunder.
Yours very truly,
FREEDOM INVESTMENT TRUST
on behalf of John Hancock Managed Tax-Exempt Fund
By: /s/ Anne C. Hodsdon
------------------------------
Title: President
The foregoing contract
is hereby agreed to as
of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Robert G. Freedman
------------------------------------------
Title: Vice Chairman and Chief Investment Officer
7
FREEDOM INVESTMENT TRUST
- JOHN HANCOCK FINANCIAL INDUSTRIES FUND
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, the Freedom Investment Trust, a Massachusetts business trust (the
"Trust"), has entered into a Distribution Agreement, dated as of July 1, 1992
(the "Agreement") with John Hancock Funds, Inc. ("JHF") with respect to its
existing series of shares;
WHEREAS, the Board of Trustees of the Trust have determined to establish a
new series of shares of the Trust designated as John Hancock Financial
Industries Fund ("Financial Industries Fund");
NOW THEREFORE, in consideration of the mutual covenants below, the parties
hereto agree as follows:
1. Reference in the Agreement to the Trust and shares of beneficial
interest of the Trust shall be deemed to refer to all existing series and
Financial Industries Fund.
2. In the event that the Trust establishes one or more series of shares in
addition to all existing series and Financial Industries Fund with respect to
which it intends to have JHF be the principal underwriter under the terms of the
Agreement, it shall so notify JHF in writing, and if JHF agrees in writing to
provide principal underwriting services, references in the Agreement to the
Trust shall be deemed to include the additional series of shares.
3. The obligations of the Trust are not personally binding upon, nor shall
resort be had to the property of, any of the Trustees, shareholders, officers,
employees or agents of the Trust, but the Trust's property only shall be bound.
IN WITNESS WHEREOF, the parties hereto have executed this amendment on the
6th day of March, 1996.
FREEDOM INVESTMENT TRUST
- John Hancock Financial Industries Fund
By: /s/ Anne C. Hodsdon
---------------------------------
JOHN HANCOCK FUNDS, INC.
By: /s/ Edward J. Boudreau, Jr.
---------------------------------
March 6, 1996
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
RE: FREEDOM INVESTMENT TRUST
- JOHN HANCOCK FINANCIAL INDUSTRIES FUND
Dear Sirs:
Freedom Investment Trust (the "Trust"), a Massachusetts business trust on
behalf of John Hancock Financial Industries Fund (the "Fund") hereby notifies
Investors Bank & Trust Company (the "Bank") that it desires to place and
maintain the Fund's securities and cash in the custody of the Bank pursuant to
the Master Custodian Agreement between John Hancock Mutual Funds and the Bank
dated December 15, 1992.
If the Bank agrees to provide such services, please sign below and return a
signed copy of this letter to the undersigned.
INVESTORS BANK & TRUST COMPANY FREEDOM INVESTMENT TRUST
on behalf of John Hancock
Financial Industries Fund
By: /s/ David F. Flynn By: /s/ Anne C. Hodsdon
-------------------------- -------------------------
Name: Name: Anne C. Hodsdon
Title: Title: President & COO
Attest: /s/ G.M. Keena Attest: /s/ Avery P. Maher
---------------------- ---------------------
FREEDOM INVESTMENT TRUST
- JOHN HANCOCK FINANCIAL INDUSTRIES FUND
AMENDMENT TO TRANSFER AGENCY AND SERVICE AGREEMENT
WHEREAS, Freedom Investment Trust, a Massachusetts business trust (the
"Trust"), has entered into a Transfer Agency and Service Agreement, dated as of
August 10, 1992 (the "Agreement") with John Hancock Investor Services
Corporation ("Investor Services") with respect to its existing series of shares;
WHEREAS, the Board of Trustees of the Trust have determined to establish a
new series of shares of the Trust designated as John Hancock Financial
Industries Fund ("Financial Industries Fund");
NOW THEREFORE, in consideration of the mutual covenants below, the parties
hereto agree as follows:
1. Reference in the Agreement to the Trust and shares of beneficial
interest of the Trust shall be deemed to refer to all existing series and
Financial Industries Fund.
2. In the event that the Trust establishes one or more series of shares in
addition to the existing series and Financial Industries Fund with respect to
which it intends to have transfer agency services provided by Investor Services
under the terms of the Agreement, the Trust shall notify Investor Services in
writing, and if Investor Services agrees in writing to provide transfer agency
services, references in the Agreement to the Trust shall be deemed to include
the additional series of shares.
3. The obligations of the Trust are not personally binding upon, nor shall
resort be had to the property of, any of the Trustees, shareholders, officers,
employees or agents of the Trust, the Trust's property only shall be bound.
IN WITNESS WHEREOF, the parties hereto have executed this amendment on the
1st day of March, 1996.
FREEDOM INVESTMENT TRUST
on behalf of John Hancock Financial Industries Fund
By: /s/ Anne C. Hodsdon
-----------------------------------------------
John Hancock Investor Services Corporation
By: /s/ David A. King
-----------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> MAR-14-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 655,366
<INVESTMENTS-AT-VALUE> 717,930
<RECEIVABLES> 22,383
<ASSETS-OTHER> 34,451
<OTHER-ITEMS-ASSETS> 24,534
<TOTAL-ASSETS> 799,298
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49,585
<TOTAL-LIABILITIES> 49,585
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 673,923
<SHARES-COMMON-STOCK> 77,629
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,350
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,876
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 62,564
<NET-ASSETS> 749,713
<DIVIDEND-INCOME> 2,561
<INTEREST-INCOME> 2,053
<OTHER-INCOME> 0
<EXPENSES-NET> 3,264
<NET-INVESTMENT-INCOME> 1,350
<REALIZED-GAINS-CURRENT> 11,876
<APPREC-INCREASE-CURRENT> 62,564
<NET-CHANGE-FROM-OPS> 75,790
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 84,934
<NUMBER-OF-SHARES-REDEEMED> 7,305
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 749,713
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,176
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25,020
<AVERAGE-NET-ASSETS> 709,256
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 1.14
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.66
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
