<PAGE> 1
As Filed with the Securities and Exchange Commission on February 28, 1996
Registration No. 2-90305
Registration No. 811-3999
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 34 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1040 [X]
AMENDMENT NO. 34
(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
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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)
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It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on March 1, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
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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.
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<PAGE> 2
<TABLE>
CROSS REFERENCE SHEET
Pursuant to Rule 485(b) under the Securities Act of 1933
<CAPTION>
Item Number Statement of Additional
Form N-1A Part A Prospectus Caption Information Caption
---------------- ------------------ -------------------
<S> <C> <C>
1 Front Cover Page *
2 Expense Information; *
The Fund's Expenses;
Shares Price;
Additional Services and
Programs
3 The Fund's Financial *
History Performance
4 Investment Objectives and *
Policies; Organization and
Management of the Fund
5 Organization and Management *
of the Fund; The Fund's
Expenses
6 Organization and Management of *
Fund; Distribution and Taxes;
How to Redeem Shares;
Additional Services and Programs
7 Who Can Buy Shares; *
How to Buy Shares;
Shares Price; Additional
Services and Programs
8 How to Redeem Shares *
9 Not Applicable *
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Item Number Statement of Additional
Form N-1A Part A Prospectus Caption Information Caption
---------------- ------------------ -------------------
<S> <C> <C>
10 * Front Cover Page
11 * Table of Contents
12 * Organization of the Fund
13 * Investment Objective and
Policies; Investment
Restrictions
14 * Those Responsible for
Management
15 * Those Responsible for
Management
16 * Investment Advisory and
Other Services;
Distribution Contract;
Transfer Agent Services;
Custody of Portfolio;
Independent Auditors
17 * Brokerage Allocation
18 * Description of the Fund's
Shares
19 * Net Asset Value; Additional
Services and Programs
20 * Tax Status
21 * Distribution Contract
22 * Calculation of Performance
23 * Financial Statements
</TABLE>
<PAGE> 4
JOHN HANCOCK
SOVEREIGN U.S.
GOVERNMENT INCOME FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 1, 1996
<TABLE>
- ---------------------------------------------------------
TABLE OF CONTENTS
<CAPTION>
Page
-------
<S> <C>
Expense Information ........................ 2
The Fund's Financial Highlights ............ 3
Investment Objective and Policies .......... 4
Organization and Management of the Fund .... 7
Alternative Purchase Arrangements .......... 8
The Fund's Expenses ........................ 9
Dividends and Taxes ........................ 10
Performance ................................ 11
How to Buy Shares .......................... 12
Share Price ................................ 13
How to Redeem Shares ....................... 18
Additional Services and Programs ........... 21
</TABLE>
This Prospectus sets forth information about John Hancock Sovereign U.S.
Government Income Fund (the "Fund"), a diversified series of Freedom
Investment Trust (the "Trust"), that you should know before investing. Please
read and retain it for future reference.
Additional information about the Fund has been filed with the Securities
and Exchange Commission (the "SEC"). You can obtain a copy of the Statement
of Additional Information, dated March 1, 1996 and incorporated by reference
into this Prospectus, free of charge by writing or telephoning: John Hancock
Investor Services Corporation, P.O. Box 9116, Boston, Massachusetts
02205-9116, 1-800-225-5291 (1-800-554-6713 TDD).
SHARES OF FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
EXPENSE INFORMATION
The purpose of the following information is to help you understand the
various fees and expenses you will bear, directly or indirectly, when you
purchase Fund shares. The operating expenses included in the table and
hypothetical example below are based on actual fees and expenses for the
Class A and Class B shares of the Fund for the fiscal year ended October 31,
1995 adjusted to reflect certain current fees and 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) ...... 4.50% None
Maximum sales charge imposed on reinvested dividends ............................... None None
Maximum deferred sales charge ...................................................... None* 5.00%
Redemption fee+ .................................................................... None None
Exchange fee ....................................................................... None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fee ..................................................................... 0.50% 0.50%
12b-1 fee** ........................................................................ 0.30% 1.00%
Other expenses ..................................................................... 0.32% 0.32%
Total Fund operating expenses ...................................................... 1.12% 1.82%
<FN>
- ---------------
* No sales charge is payable at the time of purchase on investments in
Class A shares of $1 million or more, but for these investments a contingent
deferred sales charge may be imposed, as described under the caption "Share
Price," in the event of certain redemption transactions within one year of
purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of average daily net assets, and the remaining portion will be used to
cover distribution expenses.
+ Redemption by wire fee (currently $4.00) not included.
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a hypothetical
$1,000 investment assuming a 5% annual return:
Class A shares ........................................................................ $56 $79 $104 $175
Class B shares
--Assuming complete redemption at end of period ....................................... $68 $87 $119 $195
--Assuming no redemption .............................................................. $18 $57 $ 99 $195
You would pay the following expenses for the indicated period of years on a $1,000 investment in Class C shares, assuming a 5%
annual return: 1 year, $8; 3 years, $24; 5 years, $42; and 10 years, $94.
(The example should not be considered as a representation of past or future expenses. Actual expenses may be greater or less
than shown.)
</TABLE>
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the
maximum front-end sales charge permitted under the National Association of
Securities Dealers Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully explained
in this Prospectus under the caption "The Fund's Expenses" and in the
Statement of Additional Information under the captions "Investment Advisory
and Other Services" and "Distribution Contract."
<PAGE> 6
THE FUND'S FINANCIAL HIGHLIGHTS
<TABLE>
The following table of Financial Highlights has been audited by Price
Waterhouse LLP, the Fund's independent accountants, whose unqualified report
is included in the Fund's 1995 Annual Report and is included in the Statement
of Additional Information. Further information about the performance of the
Fund is contained in the Fund's Annual Report to shareholders which may be
obtained free of charge by writing or telephoning John Hancock Investor
Services Corporation ("Investor Services"), at the address or telephone
number listed on the front page of this Prospectus.
Selected data for each class of shares outstanding throughout each period
indicated is as follows:
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
1995 1994 1993 1992(a) 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 9.24 $ 10.89 $ 10.29 $ 10.51
-------- -------- -------- --------
Net Investment Income ........................ 0.65 0.65 0.68** 0.64
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures
Contracts ................................... 0.77 (1.34) 0.61 (0.22)
-------- -------- -------- --------
Total from Investment Operations ............ $ 1.42 (0.69) 1.29 0.42
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income ........ (0.65) (0.65) (0.68) (0.64)
Distributions from Net Realized Gain on
Investments Sold ........................... -- (0.31) (0.01) --
Total Distributions ........................ (0.65) (0.96) (0.69) (0.64)
-------- -------- -------- --------
Net Asset Value, End of Period .............. $ 10.01 $ 9.24 $ 10.89 $ 10.29
======== ======== ======== ========
Total Investment Return at Net Asset
Value (b) .................................. 15.90% (6.66%) 12.89% 5.33%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $370,966 $315,372 $375,416 $350,907
Ratio of Expenses to Average Net Assets ...... 1.17% 1.23% 1.30% 1.06%*
Ratio of Net Investment Income to Average
Net Assets ................................. 6.76% 6.62% 6.47% 7.11%*
Portfolio Turnover Rate ...................... 94% 127% 273% 140%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 9.23 $ 10.88 $ 10.28 $ 10.29 $ 9.83
-------- -------- -------- -------- --------
Net Investment Income ........................ 0.60 0.61 0.66** 0.76 0.85
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures
Contracts ................................... 0.77 (1.34) 0.61 -- 0.51
-------- -------- -------- -------- --------
Total from Investment Operations ............ 1.37 (0.73) 1.27 0.76 1.36
Less Distributions:
Dividends from Net Investment Income ........ (0.60) (0.61) (0.66) (0.77) (0.90)
Distributions from Net Realized Gain on
Investments Sold ........................... -- (0.31) (0.01) -- --
-------- -------- -------- -------- --------
Total Distributions ........................ (0.60) (0.92) (0.67) (0.77) (0.90)
-------- -------- -------- -------- --------
Net Asset Value, End of Period .............. $ 10.00 $ 9.23 $ 10.88 $ 10.28 $ 10.29
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value
(b)(f) ...................................... 15.27% (7.05%) 12.66% 7.58% 14.46%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $130,824 $196,899 $244,133 $197,032 $164,347
Ratio of Expenses to Average Net Assets ...... 1.72% 1.64% 1.51% 1.55% 1.51%
Ratio of Adjusted Expenses to Average Net
Assets (b) ................................. n/a n/a n/a n/a n/a
Ratio of Net Investment Income to Average
Net Assets ................................. 6.24% 6.19% 6.23% 7.35% 8.53%
Ratio of Adjusted Net Investment Income to
Average Net Assets (b) ..................... n/a n/a n/a n/a n/a
Portfolio Turnover Rate ...................... 94% 127% 273% 140% 62%
Expense Reimbursement Per Share ............... n/a n/a n/a n/a n/a
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
MARCH 31,
1990 1989 1988 1987(d) 1987(e)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .........
Net Investment Income ........................
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures
Contracts ...................................
Total from Investment Operations ............
Less Distributions:
Dividends from Net Investment Income ........
Distributions from Net Realized Gain on
Investments Sold ...........................
Total Distributions ........................
Net Asset Value, End of Period ..............
Total Investment Return at Net Asset
Value (b) ..................................
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ....
Ratio of Expenses to Average Net Assets ......
Ratio of Net Investment Income to Average
Net Assets .................................
Portfolio Turnover Rate ......................
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 10.01 $ 9.73 $ 9.45 $ 10.28 $ 10.00
-------- -------- -------- -------- --------
Net Investment Income ........................ 0.85(f) 0.81(f) 0.78(f) 0.48(f) 0.56
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures
Contracts ................................... (0.25) 0.25 0.28 (0.75) 0.36
-------- -------- -------- -------- --------
Total from Investment Operations ............ 0.60 1.06 1.06 (0.27) 0.92
Less Distributions:
Dividends from Net Investment Income ........ (0.78) (0.77) (0.77) (0.48) (0.57)
Distributions from Net Realized Gain on
Investments Sold .......................... -- (0.01) (0.01) (0.08) (0.07)
-------- -------- -------- -------- --------
Total Distributions ........................ (0.78) (0.78) (0.78) (0.56) (0.64)
-------- -------- -------- -------- --------
Net Asset Value, End of Period .............. $ 9.83 $ 10.01 $ 9.73 $ 9.45 $ 10.28
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value
(b)(f) ...................................... 6.24% 11.52% 11.53% 3.70% 2.61%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $133,778 $144,756 $161,163 $170,030 $164,001
Ratio of Expenses to Average Net Assets ...... 1.54% 1.35% 1.29% 1.24%* 1.26%*
Ratio of Adjusted Expenses to Average Net
Assets (b) ................................. 1.55% 1.58% 1.35% 1.32%* n/a
Ratio of Net Investment Income to Average
Net Assets ................................. 8.54% 8.34% 8.09% 7.94%* 7.56%*
Ratio of Adjusted Net Investment Income to
Average Net Assets (b) ..................... 8.53% 8.11% 8.03% 7.86%* n/a
Portfolio Turnover Rate ...................... 63% 45% 79% 83%* 108%*
Expense Reimbursement Per Share ............... $ 0.01 $ 0.02 $ 0.01 $ 0.01 n/a
<FN>
- ----------------------
* On an annualized basis.
** Net investment income per share has been calculated on average month end shares outstanding.
(a) Class A shares commenced operations on January 3, 1992.
(b) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(c) Not annualized.
(d) From April 1, 1987.
(e) From commencement of operations, June 5, 1986.
(f) Without reimbursement total return would have been lower.
</TABLE>
3
<PAGE> 7
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE AS HIGH A LEVEL OF INCOME AS IS
CONSISTENT WITH LONG-TERM TOTAL RETURN BY INVESTING IN GOVERNMENT SECURITIES.
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide as high a level of income as is
consistent with long-term total return by investing in securities issued,
guaranteed or otherwise backed by the United States government, its agencies
or instrumentalities ("Government Securities"). There are market fluctuations
and risks in any investment and therefore there is no assurance that the Fund
will achieve its investment objective.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in Government Securities. The Government Securities that may be
purchased by the Fund include, but are not limited to: (i) U.S. Treasury
obligations: Treasury Bills (maturities of one year or less), Treasury Notes
(maturities of one to ten years) and Treasury Bonds (generally maturities of
greater than ten years); and (ii) obligations issued, guaranteed or otherwise
backed by U.S. Government agencies and instrumentalities that are supported
by any of the following: (a) the full faith and credit of the U.S. Treasury
(such as obligations of the Government National Mortgage Association (GNMA),
the General Services Administration and the Federal Maritime Administration),
(b) the right of the issuer to borrow an amount limited to a specific line of
credit from the U.S. Treasury (such as obligations of Federal Home Loan
Banks, the Federal Home Loan Mortgage Corporation and the U.S. Postal
Service) or (c) the credit of the agency or instrumentality (such as
obligations of the Federal National Mortgage Association and Federal Farm
Credit System). Up to 5% of the Fund's net assets may be invested in
Government Securities denominated in foreign currencies.
The composition and weighted average maturity of the Fund's portfolio will
vary from time to time, based upon the determination of John Hancock
Advisers, Inc. (the "Adviser") of how best to further the Fund's investment
objective.
The Fund may invest in Government Securities of all maturities: short-term,
intermediate-term and long-term. The Fund may also enter into repurchase
agreements. The Fund may also, for temporary defensive purposes and without
limitation, hold cash and invest in short-term (less than one year)
instruments, including securities rated in the three highest categories by
Standard & Poor's Ratings Group or Moody's Investor's Service, Inc. (i.e.,
rated at the time of purchase AAA, AA or A by Standard & Poor's or Aaa, Aa or
A by Moody's), debt securities of corporations (such as commercial paper,
notes, bonds or debentures), certificates of deposit of domestic banks, or
repurchase agreements with respect to Government Securities, including
repurchase agreements that mature in more than seven days. In the event these
securities are subsequently downgraded below such ratings, the Adviser will
consider this event in its determination of whether the Fund should continue
to hold the securities. The Fund may also invest in collateralized
mortgage-backed obligations that are issued or sponsored by a governmental
agency. See Appendix A to the Statement of Additional Information for a
description of the various ratings of investment grade debt securities.
OPTIONS TRANSACTIONS. The Fund may also purchase put options on Government
Securities provided that no more than 5% of its assets may be invested in
these options. The Fund may write (sell) covered call and put options on all
or any part of the Fund's portfolio of Government Securities. The Fund may
deal in options on Government Securities listed for trading on a national
securities exchange and traded over-the-counter. The Fund will engage in
over-the-counter options only with member banks of the Federal Reserve Sys-
4
<PAGE> 8
tem and primary dealers in U.S. Government securities. The staff of the SEC
considers over-the-counter options to be illiquid except under prescribed
conditions, which are discussed in the Statement of Additional Information.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may buy and sell financial
futures contracts and options on futures to hedge against the effects of
fluctuations in securities prices, interest rates, currency exchange rates
and other market conditions and for speculative purposes. The potential loss
incurred by the Fund in writing options on futures is unlimited and may
exceed the amount of the premium received. The Fund's futures contracts and
options on futures will be traded on a U.S. commodity exchange or board of
trade. The Fund will not engage in a futures or options transaction for
speculative purposes, if immediately thereafter, the sum of initial margin
deposits on existing positions and premiums required to establish speculative
positions in futures contracts and options on futures would exceed 5% of the
Fund's net assets. The fund intends to comply with the CFTC regulations with
respect to its speculative transactions. These regulations are discussed
further in the Statement of Additional Information.
RESTRICTED SECURITIES. The Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to
Rule 144A under the Securities Act of 1933 (the "Securities Act"). The
Trustees will monitor the Fund's investments in 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 all the Fund's illiquid securities to not
more than 15% of the 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. When the
Fund lends portfolio securities, there is a risk that the borrower may fail
to return the loaned securities. As a result, the Fund may incur a loss or in
the event of the borrower's bankruptcy may be delayed in or prevented from
liquidating the collateral. It is a fundamental policy of the Fund not to
lend portfolio securities having a total value in excess of 30% of its total
assets.
BORROWING. The Fund may borrow from banks to increase its portfolio holdings
of Government Securities. These borrowings will be unsecured but the Fund
will be required to maintain continuous asset coverage of not less than 300%
with respect to them. If such asset coverage should decline to less than 300%
due to market fluctuations or other reasons, the Fund may be required to sell
some of its portfolio holdings within three days in order to reduce its debt
and restore the 300% asset coverage, even though it may be disadvantageous
from an investment standpoint to sell securities at that time. Leveraging
will exaggerate any increase or decrease in the net asset value of the Fund's
portfolio. The Fund may also borrow money for temporary extraordinary or
emergency purposes up to 5% of the value of the Fund's total assets when the
loan is made. The Fund may pledge up to 10% of the lesser of cost or value of
its total assets to secure these borrowings.
5
<PAGE> 9
REPURCHASE AGREEMENTS, FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. The
Fund may enter into repurchase agreements and may purchase securities on a
forward commitment or when-issued basis. In a repurchase agreement, the Fund
buys a security subject to the right and obligation to sell it back to the
seller at a higher price. These transactions must be fully collateralized at
all times, but involve some credit risk to the Fund if the other party
defaults on its obligation and the Fund is delayed in or prevented from
liquidating the collateral. The Fund will segregate, in a separate account,
cash or liquid high grade debt securities equal in value to its forward
commitments and when-issued securities. Purchasing 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.
INVESTMENT RESTRICTIONS. The Fund has adopted certain investment restrictions
which are detailed in the Statement of Additional Information, where they are
designated as fundamental or nonfundamental. The investment objectives and
fundamental restrictions may not be changed without shareholder approval. All
other investment policies and restrictions are nonfundamental and can be
changed by a vote of the Trustees without shareholder approval. Portfolio
turnover rates of the Fund for recent years are shown in the section "The
Fund's Financial Highlights."
RISK FACTORS AND SPECIAL CONSIDERATIONS. Government Securities of the type
included in the Fund's portfolio have historically involved minimal credit
risk. However, the prices of the securities are inversely affected by changes
in interest rate levels. A decrease in rates generally produces an increase
in the value of the Fund's investments, while an increase in rates generally
reduces the value of these investments.
Mortgage-backed securities have stated maturities of up to thirty years when
they are issued, depending upon the length of the mortgages underlying the
securities. In practice, however, unscheduled or early payments of principal
and interest on the underlying mortgages may make the securities' effective
maturity shorter than this, and the prevailing interest rates may be higher
or lower than the current yield of the Fund's portfolio at the time the Fund
receives these payments for reinvestment. Mortgage-backed securities may have
less potential for capital appreciation than comparable fixed-income
securities due to the likelihood of increased prepayments of mortgages as
interest rates decline. If the Fund buys mortgage-backed securities at a
premium, mortgage foreclosures and prepayments of principal by mortgagors
(which may be made at any time without penalty) may result in some loss of
the Fund's principal investment, to the extent of the premium paid.
In a rising interest rate environment, a declining prepayment rate will
extend the average life of many mortgage-backed securities. Extending the
average life of a mortgage-backed security increases the risk of depreciation
due to future increases in market interest rates.
The principal of and/or interest on certain Government Securities that the
Fund may purchase could be increased or diminished as a result of changes in
the value of the U.S. dollar relative to the value of foreign currencies. The
value of portfolio securities denominated in foreign currencies may be
affected favorably or unfavorably by changes in the exchange rate between
foreign currencies and the U.S. dollar. In order to limit the risk
6
<PAGE> 10
inherent in this type of security, it is the current policy of the Fund not
to purchase any such security if after the purchase more than 5% of its net
assets (taken at market value) would be invested in securities denominated in
foreign currencies.
If the Fund writes (sell) a substantial number of call options and the market
prices of the underlying securities appreciate, or if the Fund writes a
substantial number of put options and the market prices of the underlying
securities depreciate, there may be a very substantial turnover of the
portfolio. A high rate of portfolio turnover involves correspondingly higher
brokerage expense to the Fund and may, under certain circumstances, make it
more difficult for the Fund to qualify as a regulated investment company
under the Internal Revenue Code. See the Statement of Additional Information
for a further discussion of these special considerations.
- --------------------------------------------------------------------------------
BROKERS ARE CHOSEN BASED ON BEST PRICE AND EXECUTION.
- --------------------------------------------------------------------------------
When choosing brokerage firms to carry out the Fund's transactions, the
Adviser gives primary consideration to execution at the most favorable
prices, taking into account the broker's professional ability and quality of
service. Consideration may also be given to the broker's sales of Fund
shares. Pursuant to procedures established by the Trustees, the Advisers may
place securities transactions with brokers affiliated with the Advisers.
These brokers include Tucker Anthony Incorporated, John Hancock Distributors,
Inc. and Sutro & Company Inc. They are indirectly owned by John Hancock
Mutual Life Insurance Company, (the "Life Company") which in turn indirectly
owns the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
THE TRUSTEES ELECT OFFICERS AND RETAIN THE INVESTMENT ADVISER WHO IS
RESPONSIBLE FOR THE DAY- TO-DAY OPERATIONS OF THE FUND, SUBJECT TO THE
TRUSTEES' POLICIES AND SUPERVISION.
- --------------------------------------------------------------------------------
The Fund is a diversified series of Freedom Investment Trust (the "Trust"),
an open- end management investment company organized as a Massachusetts
business trust in 1984. The Trust reserves the right to create and issue a
number of series of shares, or funds or classes thereof, which are separately
managed and have different investment objectives. Accordingly, the Trustees
have authorized Class A and Class B shares, all of which shares have equal
rights as to voting, redemption, dividends and liquidation. The shares of
each class have exclusive voting rights with respect to their respective Rule
12b-1 distribution plans.
The Fund is not required to hold annual shareholder meetings, although
special meetings may be held for such purposes as electing or removing
Trustees, changing fundamental policies or approving a management contract.
The Fund, under certain circumstances, will assist in shareholder
communications with other shareholders.
- --------------------------------------------------------------------------------
JOHN HANCOCK ADVISERS, INC. ADVISES INVESTMENT COMPANIES HAVING A TOTAL ASSET
VALUE OF MORE THAN $16 BILLION.
- --------------------------------------------------------------------------------
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary
of 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").
Freedom Distributors Corporation, a co-distributor of the Fund, is, along
with John Hancock Funds, an indirect subsidiary of the Life Company (together
with John Hancock Funds, the "Distributors"). Certain Fund officers are also
officers of the Adviser and John Hancock Funds. Pursuant to an order granted
by the Securities and Exchange Commission, the Fund has adopted
7
<PAGE> 11
a deferred compensation plan for its independent Trustees which allows
Trustees' fees to be invested by the Fund in other John Hancock funds.
Barry Evans is portfolio manager of the Fund and also leads a team of
managers on several other John Hancock funds. Mr. Evans has managed bond
funds since he joined John Hancock in 1986.
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 Adviser and its affiliates. Some of these
restrictions are: pre-clearance for all personal trades and a ban on the
purchase of initial public offerings, as well as contributions to specified
charities of profits on securities held for less than 91 days. These
restrictions are a continuation of the basic principle that the interests of
the Fund and its shareholders come first.
ALTERNATIVE PURCHASE ARRANGEMENTS
- --------------------------------------------------------------------------------
AN ALTERNATIVE PURCHASE PLAN ALLOWS YOU TO CHOOSE THE METHOD OF PAYMENT THAT
IS BEST FOR YOU.
- --------------------------------------------------------------------------------
You can purchase shares of the Fund at a price equal to their net asset value
per share plus a sales charge. At your election, this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge
Alternative--Class A Shares") or on a contingent deferred basis (see
"Contingent Deferred Sales Charge Alternative--Class B Shares"). If you do
not specify on you account application the class of shares you are
purchasing, it will be assumed that you are investing in Class A shares.
- --------------------------------------------------------------------------------
INVESTMENTS IN CLASS A SHARES ARE SUBJECT TO AN INITIAL SALES CHARGE.
- --------------------------------------------------------------------------------
CLASS A SHARES. If you elect to purchase Class A shares, you will incur an
initial sales charge unless the amount you purchase is $1 million or more. If
you purchase $1 million or more of Class A shares, you will not be subject to
an initial sales charge, but you will incur a sales charge if you redeem your
shares within one year of purchase. Class A shares are subject to ongoing
distribution and service fees at a combined annual rate of up to 0.30% of the
Fund's average daily net assets attributable to the Class A shares. Certain
purchases of Class A shares qualify for reduced initial sales charges. See
"Share Price--Qualifying for a Reduced Sales Charge."
- --------------------------------------------------------------------------------
INVESTMENTS IN CLASS B SHARES ARE SUBJECT TO A CONTINGENT DEFERRED SALES
CHARGE.
- --------------------------------------------------------------------------------
CLASS B SHARES. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them
within six years of purchase (the "contingent deferred sales charge" or the
"CDSC"). Class B shares are subject to ongoing distribution and service fees
at a combined annual rate of up to 1.00% of the Fund's average daily net
assets attributable to the Class B shares. Investing in Class B shares
permits all your dollars to work from the time you make your investment, but
the higher ongoing distribution fee will cause these shares to have higher
expense ratios 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.
8
<PAGE> 12
Class B shares are not available to full-service defined contribution plans
administered by Investment Services or the Life Company that had more than
100 eligible employees at the inception of the Fund account.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE
- --------------------------------------------------------------------------------
YOU SHOULD CONSIDER WHICH CLASS OF SHARES WILL BE MORE BENEFICIAL FOR YOU.
- --------------------------------------------------------------------------------
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider
whether, during the anticipated life your Fund investments, the CDSC and
accumulated fees on Class B shares would be less than the initial sales
charge and accumulated fees on Class A shares purchased at the same time; and
to what extent this differential would be offset by the Class A shares' lower
expenses. To help you make this determination, the table under the caption
"Expense Information" on the inside cover page of this Prospectus shows
examples of the charges applicable to each class of shares. Class A shares
will normally be more beneficial if you qualify for reduced sales charges.
See "Share Price--Qualifying for a Reduced Sales Charge."
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent
any dividends are paid. However, because initial sales charges are deducted
at the time of purchase, you would not have all of your funds invested
initially and, therefore, would initially own fewer shares. If you do not
qualify for reduced initial sales charges and expect to maintain your
investment for an extended period of time, you might consider purchasing
Class A shares. 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 it is more advantageous to purchase Class
B shares to have all of 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 the
CDSC incurred upon redemption within six years of purchase. The purpose and
function of the Class B shares' CDSC and ongoing distribution and service
fees are the same as those of the Class A shares' initial sales charge and
ongoing distribution and service fees.
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 and shareholder meeting expenses. See
"Dividends and Taxes."
THE FUND'S EXPENSES
To assure acceptance of your redemption request, please follow these
procedures.
For managing its investment and business affairs, the Fund pays a monthly fee
to the Adviser which for the 1995 fiscal year was 0.50% of the Fund's average
net assets.
9
<PAGE> 13
- --------------------------------------------------------------------------------
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 "1940
Act." Under these Plans, the Fund will pay distribution and service fees at
an aggregate annual rate of up to 0.30% of the Class A shares' average daily
net assets and an aggregate annual rate of up to 1.00% of the Class B shares'
average daily net assets. In each case, up to 0.25% is for service expenses
and the remaining amount is for distribution expenses. The distribution fees
will be used to reimburse the Distributors for their distribution expenses,
including but not limited to: (i) initial and ongoing sales compensation to
Selling Brokers and others (including affiliates of the Distributors) engaged
in the sale of Fund shares; (ii) marketing, promotional and overhead expenses
incurred in connection with the distribution of Fund shares; and (iii) with
respect to Class B shares only, interest expenses on unreimbursed
distribution expenses. The service fees are paid to the Distributors to
compensate Selling Brokers and others providing personal and account
maintenance services to shareholders.
In the event the Distributors are not fully reimbursed for payments they make
or expenses they incur under the Class A Plan, these expenses will not be
carried beyond one year from the date they were incurred. These unreimbursed
expenses under the Class B Plan will be carried forward together with
interest on the balance of these unreimbursed expenses.
For the fiscal year ended October 31, 1995, an aggregate of $5,318,736 of
distribution expenses or 3.16%, of the average net assets of the Class B
shares of the Fund, was not reimbursed or recovered by the Distributors
through the receipt of deferred sales charges or 12b-1 fees in prior periods.
Information on the Fund's total expenses is in the Fund's Financial
Highlights section of this Prospectus.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund generally declares daily and distributes monthly
dividends representing all or substantially all net investment income. The
Fund may distribute net realized short-term capital gains and net long-term
capital gains, if any, at least annually.
Dividends are reinvested in additional shares of your class unless you elect
the option to receive cash. If you elect the cash option and the U.S. Postal
Service cannot deliver your checks, your election will be converted to the
reinvestment option. Because of the higher expenses associated with Class B
shares, any dividend on these shares will be lower than on the Class A
shares. See "Share Price."
TAXATION. Dividends from the Fund's net investment income, certain net
foreign exchange gains and net short-term capital gains are taxable to you as
ordinary income and dividends from the Fund's net long-term capital gains are
taxable as long-term capital gains. These dividends are taxable whether you
take them in cash or reinvest in additional shares. Certain dividends may be
paid in January of a given year but may be taxable as if you received them
the previous December. The Fund will send you a statement by January 31
showing the tax status of the dividends you received for the prior year.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended
10
<PAGE> 14
(the "Code"). As a regulated investment company, the Fund will not be subject
to Federal income tax on any net investment income or net realized capital
gains that are distributed to its shareholders within the time period
prescribed by the Code. When you redeem (sell) or exchange shares, you may
realize a taxable gain or loss.
On the account application you must certify that your social security or
other taxpayer identification number is correct and that you are not subject
to backup withholding of Federal income tax. If you do not provide this
information or are otherwise subject to this withholding, the Fund may be
required to withhold 31% of your dividends and the proceeds of redemptions or
exchanges.
In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respect to your investments in and distributions from the Fund.
Non-U.S. shareholders and tax-exempt shareholders are subject to a different
tax treatment not described above. In many states, a 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
adviser for specific advice.
PERFORMANCE
- --------------------------------------------------------------------------------
THE FUND MAY ADVERTISE ITS YIELD AND TOTAL RETURN.
- --------------------------------------------------------------------------------
Yield reflects the Fund's rate of income on portfolio investments as a
percentage of its share price. Yield is computed by annualizing the result of
dividing the net investment income per share over a 30 day period by the
maximum offering price per share on the last day of that period. Yield is
also calculated according to accounting methods that are standardized for all
stock and bond funds. Because yield accounting methods differ from the
methods used for other accounting purposes, the Fund's yield may not equal
the income paid on shares or the income reported in the Fund's financial
statements.
The Fund's total return shows the overall dollar or percentage change in
value of a hypothetical investment in the Fund, assuming the reinvestment of
all dividends. Cumulative total return shows the Fund's performance over a
period of time. Average annual total return shows the cumulative return of
the respective class of shares of the Fund divided by the number of years
included in the period. Because average annual total return tends to smooth
out variations in the Fund's performance, you should recognize that it is not
the same as actual year-to-year results.
Both total return and yield calculations for Class A shares generally include
the effect of paying the maximum sales charge (except as shown in "The Fund's
Financial Highlights"). Investments at lower sales charges would result in
higher performance figures. Yield and total return for the Class B shares
reflect deduction of the applicable CDSC 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 yield and
total return of Class A and Class B shares will be calculated separately and,
because each class is subject to certain different expenses, the yield and
total return may differ with respect to each class for the same period. The
relative performance of the Class A and Class B shares will be affected by a
variety of factors, including the higher operating expenses attributable to
the Class B shares, whether the Fund's investment performance is better in
the earlier or later portions of the period measured and the level of net
assets of the classes during the period. The Fund will include the total
return and yield of both classes in any advertisement or promotional
materials including the Fund's performance data. The value of the Fund's
shares, when
11
<PAGE> 15
redeemed, may be more or less than their original cost. Both yield and total
return are historical calculations and are not an indication of future
performance. See "Factors to Consider in Choosing an Alternative."
<TABLE>
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A AND CLASS B SHARES.
- --------------------------------------------------------------------------------
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 buying Class A or
Class B shares. If you do not specify which class of shares you are purchasing, Investor Services will
assume that you are investing in Class A shares.
- ----------------------------------------------------------------------------------------------------------
<S> <C>
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:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Sovereign U.S. Government Income Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered representative, Selling Broker
or mail it directly to Investor Services.
- ----------------------------------------------------------------------------------------------------------
MONTHLY 1. Complete the "Automatic Investing" and "Bank Information" sections on the Account
AUTOMATIC Privileges Application designating a bank account from which funds may be drawn.
ACCUMULATION 2. The amount you elect to invest will be withdrawn automatically from your bank or
PROGRAM credit union account.
(MAAP)
- ----------------------------------------------------------------------------------------------------------
BY TELEPHONE 1. Complete the "Invest-by-Phone" and "Bank Information" sections on the Account
Privileges Application designating a bank account from which your funds may be
drawn. Note that in order to invest by phone, your account must be in a bank or
credit union that is a member of the Automated Clearing House system (ACH).
2. After your authorization form has been processed, you may purchase shares by
calling Investor Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(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.
</TABLE>
12
<PAGE> 16
<TABLE>
<CAPTION>
<S> <C>
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.
- --------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A AND
B SHARES (CONTINUED)
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
<S> <C>
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA No. 211475000
For credit to: John Hancock Sovereign U.S. Government Income Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
- -----------------------------------------------------------------------------------------------------
Other Requirements. All purchases must be made in U.S. dollars. Checks
written on foreign banks will delay purchases until U.S. funds are received,
and a collection charge may be imposed. Shares of the Fund are priced at the
offering price based on the net asset value computed after John Hancock Funds
receives notification of the dollar equivalent from the Fund's custodian
bank. Wire purchases normally take two or more hours to complete and, to be
accepted the same day, must be received by 4:00 p.m., New York time. Your
bank may charge a fee to wire funds. Telephone transactions are recorded to
verify information. Certificates are not issued unless a request is made in
writing to Investor Services.
- -----------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT STATEMENTS THAT YOU SHOULD KEEP TO HELP WITH YOUR
PERSONAL RECORDKEEPING.
- --------------------------------------------------------------------------------
You will receive a statement of your account after any transaction that
affects your share balance or registration (statements related to
reinvestment of dividends and automatic investment/withdrawal plans will be
sent to you quarterly.) A tax information statement will be mailed to you by
January 31 of each year.
SHARE PRICE
- --------------------------------------------------------------------------------
THE OFFERING PRICE OF YOUR SHARES IS THEIR NET ASSET VALUE PLUS A SALES
CHARGE, IF APPLICABLE, WHICH WILL VARY WITH THE PURCHASE ALTERNATIVE YOU
CHOOSE.
- --------------------------------------------------------------------------------
The net asset value per share ("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 the Board of Trustees has determined to approximate
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.
13
<PAGE> 17
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge as follows:
<TABLE>
<CAPTION>
COMBINED
REALLOWANCE
SALES SALES AND
CHARGE CHARGE SERVICE REALLOWANCE
AS A AS A FEE AS A TO SELLING
PERCENTAGE PERCENTAGE PERCENTAGE BROKER AS A
AMOUNT INVESTED OF OF THE OF PERCENTAGE
(INCLUDING SALES OFFERING AMOUNT OFFERING OF OFFERING
CHARGE) PRICE INVESTED PRICE(+) PRICE (*)
- --------------------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
less than $100,000 4.50% 4.71% 4.00% 3.76%
$100,000 to $249,999 3.75% 3.90% 3.25% 3.01%
$250,000 to $499,999 2.75% 2.83% 2.30% 2.06%
$500,000 to $999,999 2.00% 2.04% 1.75% 1.51%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(**)
<FN>
(*) Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales charge.
(**) No sales charge is payable at the time of purchase of Class A shares of
$1 million or more, but a CDSC may be imposed, in the event of certain
redemption transactions made within one year of purchase.
(***) John Hancock Funds may pay a commission and first year's service fee
(as described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of $1 million or more in aggregate as follows: 1%
on sales to $4,999,999, 0.50% on the next $5 million and 0.25% on $10 million
and over.
(+) At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance, in an amount equal to 0.25% of the net assets
invested in the Fund. Thereafter, it pays the service fee periodically in
arrears in an amount up to 0.25% of the average annual net assets. Selling
Brokers receive the fee as compensation for providing personal and account
maintenance services to shareholders.
</TABLE>
Sales charges ARE NOT APPLIED to any dividends that are reinvested in
additional Class A 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 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 Class A shares will be made at
net asset value with no initial sales charge, but if shares are redeemed
within 12 months after the end of the calendar month in which the purchase
was made (the CDSC period), a CDSC will be imposed. The rate of CDSC will
depend on the amount invested as follows:
14
<PAGE> 18
<TABLE>
<CAPTION>
AMOUNT INVESTED CDSC RATE
- ------------------------------ ---------
<S> <C>
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and
over 0.25%
</TABLE>
Existing full service clients of the Life Company who were group annuity
contract holders as of September 1, 1994, and participant directed defined
contribution plans 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 applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the redemption is first made from
any shares in your account that are not subject to the CDSC. The CDSC is
waived on redemptions in certain circumstances. See "Waiver of Contingent
Deferred Sales Charge" below.
QUALIFYING FOR A REDUCED SALES CHARGE. If you invest more than $100,000 in Class
A shares of the Fund or combination of John Hancock funds (except money market
funds), you may qualify for a reduced sales charge on your investments in Class
A shares through a LETTER OF INTENTION. You may also be able to use the
ACCUMULATION PRIVILEGE and COMBINATION PRIVILEGE to take advantage of the value
of your previous investments in shares of the John Hancock funds in meeting the
breakpoints for a reduced sales charge. For the ACCUMULATION PRIVILEGE and
COMBINATION PRIVILEGE the applicable sales charge will be based on the total of:
- --------------------------------------------------------------------------------
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE ON YOUR INVESTMENT IN CLASS A
SHARES.
- --------------------------------------------------------------------------------
1. Your current purchase of Class A shares of the Fund;
2. The net asset value (at the close of business on the previous day) of (a)
all Class A shares of the Fund you hold, and (b) all Class A shares of any
other John Hancock funds you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
EXAMPLE:
If you hold Class A shares of a John Hancock fund with a net asset value of
$80,000 and, subsequently, invest $20,000 in Class A shares of the Fund, the
sales charge on this subsequent investment would be 3.75% and not 4.50%. This
is the rate that would otherwise be applicable to investments of less than
$100,000. See "Initial Sales Charge Alternative--Class A Shares."
If you are in one of the following categories, you may purchase Class A
shares of the Fund without paying a sales charge:
15
<PAGE> 19
- --------------------------------------------------------------------------------
CLASS A SHARES MAY BE AVAILABLE WITHOUT A SALES CHARGE TO CERTAIN INDIVIDUALS
AND ORGANIZATIONS.
- --------------------------------------------------------------------------------
- - A Trustee or officer of the Trust; a Director or officer of the Adviser
and its affiliates or Selling Brokers; employees or sales representatives of
any of the foregoing; retired officers, employees or Directors of any of the
foregoing; a member of the immediate family of any of the foregoing; or any
Fund, pension, profit sharing or other benefit plan for the individuals
described above.
- - Any state, county, city or any instrumentality, department, authority
or agency of these entities which is prohibited by applicable investment laws
from paying a sales charge or commission when it purchases shares of any
registered investment management company.*
- - A bank, trust company, credit union, savings institution or other
depository institution, its trust departments or common trust funds if it is
purchasing $1 million or more for non-discretionary customers or accounts.*
- - A broker, dealer, financial planner, consultant or registered
investment adviser that has entered into an agreement with John Hancock Funds
providing specifically for the use of Fund shares in fee-based investment
products or services made available to their clients.
- - 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 directly to the Fund.
- - A member of an approved affinity group financial services plan.*
[FN]
- ------------------
* For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A shares of the Fund may also be purchased without a sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES. Class B shares
are offered at net asset value per share without an initial sales charge, so
that your entire investment will go to work at the time of purchase. However,
Class B shares redeemed within six years of purchase will be subject to a
CDSC at the rates set forth below. The charge will be assessed on an amount
equal to the lesser of the current market value or the original purchase cost
of the shares being redeemed. Accordingly, you will not be assessed a CDSC on
increases in account value above the initial purchase price, including shares
derived from dividend reinvestment.
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. It will be assumed that your redemption comes first from shares you
have held beyond the six-year CDSC redemption period or those you acquired
through reinvestment of dividends, and next from the shares you have held the
longest during the six-year period. The CDSC is waived on redemptions in
certain circumstances. See the discussion "Waiver of Contingent Deferred
Sales Charges" below.
EXAMPLE:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and
16
<PAGE> 20
you have gained 10 additional shares through dividend reinvestment. If you
redeem 50 shares at this time, the CDSC will be calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
- - Proceeds of 50 shares redeemed at $12 per share $600
- - Minus proceeds of 10 shares not subject to CDSC because they
were acquired through dividend reinvestment (10 X $12) -120
- - Minus appreciation on remaining shares, also not subject to
CDSC (40 X $2) - 80
----
- - Amount subject to CDSC $400
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds
uses them to defray its expenses related to providing the Fund with
distribution services in connection with the sale of the Class B shares, such
as compensating Selling Brokers for selling these shares. The combination of
the CDSC and the distribution and service fees makes it possible for the Fund
to sell Class B shares without an initial sales charge.
The amount of the CDSC, if any, will vary depending on the number of years
from the time you purchase your Class B shares until the time you redeem
them. Solely for purposes of determining this holding period, any payments
you make during the month will be aggregated and deemed to have been made on
the last day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEAR IN WHICH CLASS B SHARES OF DOLLAR AMOUNT
REDEEMED FOLLOWING PURCHASE SUBJECT TO CDSC
- ---------------------------- -------------------------
<S> <C>
First ................................... 5.0%
Second .................................. 4.0%
Third ................................... 3.0%
Fourth .................................. 3.0%
Fifth ................................... 2.0%
Sixth ................................... 1.0%
Seventh and thereafter .................. None
</TABLE>
A commission equal to 3.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for the provision
of personal and account maintenance services to shareholders during the
twelve months following the sale, and thereafter the service fee is paid in
arrears.
If you purchased Class B shares during 1992 or 1993, the applicable CDSC as a
percentage of the amount redeemed will be: 4% for redemptions during the
first year after purchase, 3.5% for redemptions during the second year, 3%
for redemptions during the third year, 2.5% for redemptions during the fourth
year, 2% for redemptions during the fifth year, 1% for redemptions during the
sixth year, and no CDSC for redemptions during the seventh year and
thereafter. If you purchased Class B shares before 1992, the applicable CDSC
as a percentage of the amount redeemed will be: 1% for redemptions during the
third, fourth and fifth years after purchase and no CDSC for redemptions
during the sixth year and thereafter.
- --------------------------------------------------------------------------------
UNDER CERTAIN CIRCUMSTANCES, THE CDSC ON CLASS B AND CERTAIN CLASS A 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 CDSC,
unless indicated otherwise, in the circumstances defined below:
- -- Redemptions of Class B shares made under a Systematic Withdrawal
Plan (see "How To Redeem Shares"), as long as your annual redemptions do not
exceed 10% of your account value at the time you established your Systematic
Withdrawal Plan
17
<PAGE> 21
and 10% of the value of subsequent investments (less redemptions) in that
account at the time you notify Investor Services. This waiver does not apply
to Systematic Withdrawal Plan redemptions of Class A shares that are subject
to a CDSC.
- - Redemptions made to effect distributions from an Individual
Retirement Account either before or after age 59-1/2, as long as the
distributions are based on your life expectancy or the joint-and-last
survivor life expectancy of you and your beneficiary. These distributions
must be free from penalty under the Code.
- - Redemptions made to effect mandatory distributions under the Code
after age 70-1/2 from a tax-deferred retirement plan.
- - Redemptions made to effect distributions to participants or
beneficiaries from certain employer-sponsored retirement plans including
those qualified under Section 401(a) of the Code, custodial accounts under
Section 403(b)(7) of the Code and deferred compensation plans under Section
457 of the Code. The waiver also applies to certain returns of excess
contributions made to these plans. In all cases, the distributions must be
free from penalty under the Code.
- - Redemptions due to death or disability.
- - Redemptions made under the Reinvestment Privilege, as described in
"Additional Services and Programs" of this Prospectus.
- - Redemptions made pursuant to the Fund's right to liquidate your
account if you own fewer than 50 shares.
- - Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
- - Redemptions from certain IRA and retirement plans that purchased
shares prior to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you must
notify Investor Services either directly or through your Selling Broker at
the time you make your redemption. The waiver will be granted once Investor
Services has confirmed that you are entitled to the waiver.
CONVERSION OF CLASS B SHARES.
Your Class B shares and an appropriate portion of reinvested dividends on
those shares will be converted into Class A shares automatically. This will
occur no later than the month following eight years after the shares were
purchased, and will result in lower annual distribution fees. If you
exchanged Class B shares into this Fund from another John Hancock fund, the
calculation will be based on the time you purchased the shares in the
original fund. The Fund has been advised that the conversion of Class B
shares to Class A shares should not be taxable for Federal income tax
purposes and should not change your tax basis or tax holding period for the
converted shares.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION REQUEST, PLEASE FOLLOW THESE
PROCEDURES.
- --------------------------------------------------------------------------------
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next NAV calculated after your redemption
request is received in good order by Investor Services less any applicable
CDSC. The Fund may hold payment until reasonably satisfied that investments
recently made by check or Invest-by-Phone have been collected (which may take
up to 10 calendar days).
18
<PAGE> 22
Once your shares are redeemed, the Fund generally sends you payment on the
next business day. When you redeem your shares, you may realize a taxable
gain or loss, depending usually on the difference between what you paid for
them and what you receive for them, subject to certain tax rules. Under
unusual circumstances, the Fund may suspend redemptions or postpone payment
for up to three business days or longer, as permitted by Federal securities
laws.
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
BY TELEPHONE All Fund shareholders are eligible automatically for the telephone redemption privilege. Call
1-800-225-5291, from 8:00 A.M. to 4:00 P.M. (New York time), Monday through Friday, excluding
days on which the New York Stock Exchange is closed. Investor Services employs the following
procedures to confirm that instructions received by telephone are genuine. Your name, the
account number, taxpayer identification number applicable to the account and other relevant
information may be requested. In addition, telephone instructions are recorded.
You may redeem up to $100,000 by telephone, but the address on the account must not have
changed for the last 30 days. A check will be mailed to the exact name(s) and address shown on
the account.
If reasonable procedures, such as those described above, are not followed, the Fund may be
liable for any loss due to unauthorized or fraudulent telephone instructions. In all other
cases, neither the Fund nor Investor Services will be liable for any loss or expense for acting
upon telephone instructions made according to the telephone transaction procedures mentioned
above.
Telephone redemption is not available for IRAs or other tax-qualified retirement plans or
shares of the Fund that are in certificated form. During periods of extreme economic conditions
or market changes, telephone requests may be difficult to implement due to a large volume of
calls. During these times shareholders should consider placing redemption requests in writing
or using EASI-LINE. EASI-LINE's telephone number is 1-800-338-8080.
- -------------------------------------------------------------------------------------------------------------------
BY WIRE If you have a telephone redemption form on file with the Fund, redemption proceeds of $1,000 or
more can be wired on the next business day to your designated bank account and a fee (currently
$4.00) will be deducted. You may also use electronic funds transfer to your assigned bank
account and the funds are usually collectible after two business days. Your bank may or may not
charge a fee for this service. Redemptions of less than $1,000 will be sent by check or
electronic funds transfer.
This feature may be elected by completing the "Telephone Redemption" section on the Account
Privileges Application 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.
- -------------------------------------------------------------------------------------------------------------------
BY CHECK You may elect the checkwriting option on the account application, which allows you to write
(Class A checks in amounts from a minimum of $100. Checks may not be written against shares in your
shares only) account which have been purchased within the last 15 days, except for shares purchased by wire
transfer (which are immediately available), or for Fund shares that are in certificate form.
Expenses relating to checkwriting are borne by the Fund.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION REQUEST, PLEASE FOLLOW THESE
PROCEDURES.
- --------------------------------------------------------------------------------
19
<PAGE> 23
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
You should make sure that there are sufficient shares in the account to cover the amount of any
check drawn, since the net asset value of shares will fluctuate. If insufficient shares are in
the account, the check will be returned marked "insufficient funds" and no shares will be redeemed.
It is not possible to determine in advance the total value of your account so as to write a check
for the value of the entire account because dividends declared on shares held in the account or
prior redemptions and possible changes in net asset value may cause the account to change in amount.
Accordingly, you should not close your account by writing a check. Shareholders may not maintain a
Systematic Withdrawal Plan and utilize the checkwriting service at the same time.
- -------------------------------------------------------------------------------------------------------------------
TYPE OF REGISTRATION REQUIREMENTS
- -------------------- -------------
Individual, Joint Tenants, Sole
Proprietorship, Custodial A letter of instruction signed (with titles where applicable)
(Uniform Gifts or Transfer to by all persons authorized to sign for the account, exactly as
Minors Act), General Partners it is registered with the signature(s) guaranteed.
Corporation, Association A letter of instruction and a corporate resolution, signed by
person(s) authorized to act on the account, with the
signature(s) guaranteed.
Trusts A letter of instruction signed by the Trustee(s) with the
signature guaranteed. (If the Trustee's name is not
registered on your account, also provide a copy of the trust
document, certified within the last 60 days.)
If you do not fall into any of these registration categories please call 1-800-225-5291 for further instructions.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
YOU MAY GUARANTEE YOUR SIGNATURE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
A signature guarantee is a widely accepted way to protect you and the Fund by verifying the signature on your request.
It may not be provided by a notary public. If the net asset value of the shares redeemed is $100,000 or less, John
Hancock Funds may guarantee the signature. The following institutions may provide you with a signature guarantee,
provided that the institution meets credit standards established by Investor Services: (i) a bank; (ii) a securities
broker or dealer, including a government or municipal securities broker or dealer, that is a member of a clearing
corporation or meets certain net capital requirements; (iii) a credit union having authority to issue signature guarantees;
(iv) a savings and loan association, a building and loan association, a cooperative bank, a federal savings bank or
association; or (v) a national securities exchange, a registered securities exchange or a clearing agency.
- -------------------------------------------------------------------------------------------------------------------
THROUGH YOUR Your broker may be able to initiate the redemption. Contact your broker for instructions.
BROKER
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
If you have certificates for your shares, you must submit them with your stock power or a letter of instruction. Unless
You specify to the contrary, any outstanding Class A shares will be redeemed before Class B shares. You may not redeem
certificated shares by telephone.
Due to the proportionately high cost of maintaining smaller accounts, the Fund reserves the right to redeem at net asset
value all shares in an account which holds fewer than 50 shares (except accounts under retirement plans) and to mail
the proceeds to the shareholder, or the transfer agent may impose an annual fee of $10.00. No account will be involuntarily
redeemed or additional fee imposed, if the value of the account is in excess of the Fund's minimum initial investment.
No CDSC will be imposed on any involuntary redemption of shares.
Shareholders will be notified before these redemptions are to be made or this fee is imposed and will have 30 days to
purchase additional shares to bring their account balance up to the required minimum. Unless the number of shares acquired by
additional purchases and any dividend reinvestments exceeds the number of shares redeemed, repeated redemptions from a
smaller account may eventually trigger this policy.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 24
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
YOU MAY EXCHANGE SHARES OF THE FUND 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 funds that interest you. Read
the prospectus carefully before exchanging your shares. You can exchange
shares of each class of the Fund only for shares of the same class of another
John Hancock fund. For this purpose, John Hancock funds with only one class
of shares will be treated as Class A whether or not they have been so
designated.
Exchanges between funds which are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is
imposed. Class B shares of the Fund that are subject to a CDSC may be
exchanged into Class B shares of another John Hancock fund without incurring
the CDSC; however, these shares will be subject to the CDSC schedule of the
shares acquired (except that exchanges into John Hancock Short-Term Strategic
Income Fund, John Hancock Intermediate Maturity Government Fund 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. However, if you
exchange Class B shares purchased prior to January 1, 1994 for Class B shares
of any other John Hancock fund, you will continue to be subject to the CDSC
schedule in effect on your initial purchase date.
The Fund reserves the right to require you keep previously exchanged shares
(and reinvested dividends) in the Fund for 90 days before you are permitted a
new exchange. The Fund may also terminate or alter the terms of the exchange
privilege, upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and
the purchase of shares of another for Federal income tax purposes. An
exchange may result in a taxable gain or loss.
When you make an exchange, your account registration in both the existing
and new account must be identical. The exchange privilege is available only
in states where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers,
brokers and investment advisers may exchange their clients' Fund shares,
subject to the terms of those agreements and John Hancock Funds right to
reject or suspend those exchanges at any time. Because of the restrictions
and procedures under those agreements, the exchanges may be subject to timing
limitations and other restrictions that do not apply to exchanges requested
by shareholders directly, as described above.
Because Fund performance and shareholders can be hurt by excessive
trading, the Fund reserves the right to terminate the exchange privilege for
any person or group that, in John Hancock Funds' judgment, is involved in a
pattern of exchanges that coincide with a "market timing" strategy that may
disrupt the Fund's ability to invest effectively according to its investment
objective and policies, or might otherwise affect the Fund and its
shareholders adversely. The Fund may also temporarily or permanently
terminate the
21
<PAGE> 25
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 the telephone
representative.
3. Your name, the account number, taxpayer identification number applicable
to the account and other relevant information may be requested. In addition,
telephone instructions are recorded.
IN WRITING
1. In a letter request an exchange and list the following:
--the name and class of the Fund whose shares you currently own
--your account number
--the name(s) in which the account is registered
--the name of the fund in which you wish your exchange to be invested
--the number of shares, all shares or the dollar amount you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
REINVESTMENT PRIVILEGE
- --------------------------------------------------------------------------------
IF YOU REDEEM SHARES OF THE FUND, YOU MAY BE ABLE TO REINVEST THE PROCEEDS IN
THE FUND OR ANOTHER JOHN HANCOCK FUND WITHOUT PAYING AN ADDITIONAL SALES
CHARGE.
- --------------------------------------------------------------------------------
1. You will not be subject to a sales charge on Class A shares that you
reinvest in a John Hancock fund that is otherwise subject to a sales charge,
as long as you reinvest within 120 days from the redemption date. If you paid
a CDSC upon a redemption, you may reinvest at net asset value in the same
class of shares from which you redeemed within 120 days. Your account will be
credited with the amount of the CDSC previously charged, and the reinvested
shares will continue to be subject to a CDSC. The holding period of the
shares 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 your redemption may be reinvested in Fund shares or in
shares of any of the other John Hancock funds, subject to the minimum
investment limit of that fund.
3. To reinvest, you must notify Investor Services in writing. Include the
Fund's name, account number and class from which your shares were originally
redeemed.
22
<PAGE> 26
SYSTEMATIC WITHDRAWAL PLAN
- --------------------------------------------------------------------------------
YOU CAN PAY ROUTINE BILLS FROM YOUR ACCOUNT, OR MAKE PERIODIC DISBURSEMENTS
FROM YOUR RETIREMENT ACCOUNT TO COMPLY WITH IRS REGULATIONS.
- --------------------------------------------------------------------------------
1. You can elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You can
also obtain the application from your registered representative or by calling
1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semi-annually
or on a selected monthly basis to yourself or any other designated payee.
4. There is no limit on the number of payees you may authorize, but all
payments must be made at the same time or intervals.
5. It is not advantageous to maintain a Systematic Withdrawal Plan
concurrently with purchases of additional Class A or Class B shares, because
you may be subject to initial sales charge on your purchases of Class A
shares or to a CDSC on your redemptions of Class B shares. In addition, your
redemptions are taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks, or if deposits to a bank account are returned for any reason.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
- --------------------------------------------------------------------------------
YOU CAN MAKE AUTOMATIC INVESTMENTS AND SIMPLIFY YOUR INVESTING.
- --------------------------------------------------------------------------------
1. You can authorize an investment to be withdrawn automatically each month
on your bank, for investment in Fund shares, under the "Automatic Investing"
and "Bank Information" sections of 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 your 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, withdrawals will be discontinued.
GROUP INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
ORGANIZED GROUPS OF AT LEAST FOUR PERSONS MAY ESTABLISH ACCOUNTS.
- --------------------------------------------------------------------------------
1. An individual account will be established for each participant, but the
initial sales charge for Class A shares will be based on the aggregate dollar
amount of all participants' investments. To determine how to qualify for this
program, contact your registered representative or call 1-800-225-5291.
2. The initial aggregate investment of all participants in the group must be
at least $250.
3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum, and you may terminate the program at any
time.
RETIREMENT PLANS
1. You may use the Fund for various types of qualified retirement plans,
including Individual Retirement Accounts, Keogh plans (H.R.10), pension and
profit sharing plans (including 401(k) plans), Tax Sheltered Annuity
retirement plans (403(b) or TSA plans) and Section 457 plans.
2. The initial investment minimum or aggregate minimum for any of the above
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.
23
<PAGE> 27
<TABLE>
<CAPTION>
<S> <C>
JOHN HANCOCK SOVEREIGN JOHN HANCOCK
U.S. GOVERNMENT INCOME FUND SOVEREIGN U.S.
GOVERNMENT INCOME FUND
INVESTMENT ADVISER
John Hancock Advisers, Inc. CLASS A AND CLASS B SHARES
101 Huntington Avenue PROSPECTUS
Boston, Massachusetts 02199-7603 MARCH 1, 1996
PRINCIPAL DISTRIBUTOR A MUTUAL FUND SEEKING TO PROVIDE AS HIGH A
John Hancock Funds, Inc. LEVEL OF INCOME AS IS CONSISTENT WITH LONG-
10 Huntington Avenue TERM TOTAL RETURN BY INVESTING IN SECURITIES
Boston, Massachusetts 02199-7603 ISSUED, GUARANTEED OR OTHERWISE BACKED BY THE
UNITED STATES GOVERNMENT, ITS AGENCIES OR
CUSTODIAN INSTRUMENTALITIES.
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INDEPENDENT AUDITORS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchange call 1-800-225-5291 101 HUNTINGTON AVENUE
Invest-by-Phone BOSTON, MASSACHUSETTS 02199-7603
Telephone Redemption TELEPHONE 1-800-225-5291
For: TDD call 1-800-554-6713
</TABLE>
JHD-0200P 3/96 [Recycle Logo] Printed on recycled paper using soybean ink
<PAGE> 28
JOHN HANCOCK MANAGED
TAX-EXEMPT FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 1, 1996
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Expense Information................................................................... 2
The Fund's Financial Highlights....................................................... 3
Investment Objective and Policies..................................................... 5
Organization and Management of the Fund............................................... 9
Alternative Purchase Arrangements..................................................... 9
The Fund's Expenses................................................................... 11
Dividends and Taxes................................................................... 12
Performance........................................................................... 13
How to Buy Shares..................................................................... 14
Share Price........................................................................... 15
How to Redeem Shares.................................................................. 21
Additional Services and Programs...................................................... 23
</TABLE>
This Prospectus sets forth information about John Hancock Managed Tax-Exempt
Fund (the "Fund"), a diversified series of Freedom Investment Trust (the
"Trust"), that you should know before investing. Please read and retain it for
future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC"). You can obtain a copy of the Statement of
Additional Information, dated March 1, 1996, and incorporated by reference into
this Prospectus, free of charge by writing or telephoning: John Hancock Investor
Services Corporation, P.O. Box 9116, Boston, Massachusetts 02205-9116,
1-800-225-5291 (1-800-554-6713 TDD).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 29
EXPENSE INFORMATION
The purpose of the following information is to help you understand the various
fees and expenses you will bear, directly or indirectly, when you purchase Fund
shares. The operating expenses included in the table and hypothetical example
below are based on actual fees and expenses for the Class A and Class B shares
of the Fund for the fiscal year ended October 31, 1995 adjusted to reflect
certain current fees and 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)................................ 4.50% None
Maximum sales charge imposed on reinvested dividends......................................................... None None
Maximum deferred sales charge................................................................................ None* 5.00%
Redemption fee+.............................................................................................. None None
Exchange fee................................................................................................. None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fee (net of waiver by Adviser)(a)................................................................. 0.55% 0.55%
12b-1 fee**.................................................................................................. 0.30% 1.00%
Other expenses............................................................................................... 0.16% 0.16%
------- -------
Total Fund operating expenses................................................................................ 1.01% 1.71%
</TABLE>
- ---------------
* No sales charge is payable at the time of purchase on investments in Class A
shares of $1 million or more, but for these investments a contingent
deferred sales charge may be imposed, as described under the caption "Share
Price, " in the event of certain redemption transactions within one year of
purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of the Fund's average daily net assets, and the remaining portion will
be used to cover distribution expenses. See "The Fund's Expenses".
(a) Reflects a voluntary waiver by the Adviser of a portion of its management
fee which would normally be 0.60% of average daily net assets. In the
absence of a waiver by the Adviser, the total expenses would have been
1.06% and 1.76% of the Fund's average daily net assets for Class A and
Class B shares, respectively.
+ Redemption by wire fee (currently $4.00) not included.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a hypothetical
$1,000 investment
assuming a 5% annual return:
Class A shares........................................................................... $ 55 $76 $ 98 $163
Class B shares
--Assuming complete redemption at end of period.......................................... $ 67 $84 $ 113 $183
--Assuming no redemption................................................................. $ 17 $54 $ 93 $183
</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 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> 30
THE FUND'S FINANCIAL HIGHLIGHTS
The following table of Financial Highlights has been audited by Price
Waterhouse LLP, the Fund's independent accountants, whose unqualified report is
included in the Fund's 1995 Annual Report and is included in the Statement of
Additional Information. Further information about the performance of the Fund is
contained in the Fund's Annual Report to shareholders which may be obtained free
of charge by writing or telephoning John Hancock Investor Services Corporation
("Investor Services"), at the address or telephone number listed on the front
page of this Prospectus.
Selected data for each class of shares outstanding throughout each year
indicated is as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------
1995 1994 1993 1992(a)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING
PERFORMANCE
Net Asset Value, Beginning
of Period............... $ 10.79 $ 12.13 $ 11.12 $ 11.25
-------- -------- -------- --------
Net Investment Income..... 0.63 0.64 0.70 0.55
Net Realized and
Unrealized Gain (Loss)
on Investments and
Financial Futures
Contracts............... 0.77 (1.25) 1.05 (0.11)
-------- -------- -------- --------
Total from
Investment
Operations...... 1.40 (0.61) 1.75 0.44
-------- -------- -------- --------
Less Distributions:
Dividends from Net
Investment Income..... (0.63) (0.64) (0.70) (0.53)
Distributions from Net
Realized Gain on
Investments Sold and
Financial Futures
Contracts............. (0.09) (0.04) (0.04)
-------- -------- -------- --------
Total
Distributions... (0.63) (0.73) (0.74) (0.57)
-------- -------- -------- --------
Net Asset Value, End of
Period.................. $ 11.56 $ 10.79 $ 12.13 $ 11.12
======== ======== ======== ========
Total Investment Return at
Net Asset Value(c)...... 13.30% (5.22)% 16.10% 4.74%*
Total Adjusted Investment
Return at Net Asset
Value(b)(d)............. 13.28% (5.29)% 15.77% 4.51%*
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's omitted)......... $ 42,384 $ 20,968 $ 14,244 $ 9,589
Ratio of Expenses to
Average Net Assets**.... 1.06% 0.95% 0.70% 0.78%*
Ratio of Adjusted Expenses
to Average Net
Assets(b)............... 1.11% 1.02% 1.03% 1.01%*
Ratio of Net Investment
Income to Average Net
Assets**................ 5.53% 5.52% 5.98% 6.24%*
Ratio of Adjusted Net
Investment Income to
Average Net Assets(b)... 5.48% 5.42% 5.65% 6.01%*
Portfolio Turnover Rate... 104% 59% 23% 23%
**Expense Reimbursement
Per Share............... $ 0.01 $ 0.01 $ 0.04 $ 0.02
</TABLE>
3
<PAGE> 31
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987(e)
-------- -------- -------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING
PERFORMANCE
Net Asset Value, Beginning
of Period............... $ 10.79 $ 12.13 $ 11.12 $ 11.12 $ 10.61 $ 10.78 $ 10.73 $ 9.69 $10.00
-------- -------- -------- -------- -------- -------- -------- ------- ------
Net Investment Income..... 0.55 0.56 0.64 0.66 0.68 0.73 0.74 0.74 0.27
Net Realized and
Unrealized Gain (Loss)
on Investments and
Financial Futures
Contracts............... (0.78) (1.25) 1.05 0.04 0.61 (0.14) 0.12 1.04 (0.31)
-------- -------- -------- -------- -------- -------- -------- ------- ------
Total from
Investment
Operations...... 1.33 (0.69) 1.69 0.70 1.29 0.59 0.86 1.78 (0.04)
-------- -------- -------- -------- -------- -------- -------- ------- ------
Less Distributions:
Dividends from Net
Investment Income..... (0.55) (0.56) (0.64) (0.64) (0.72) (0.72) (0.74) (0.74) (0.27)
Distributions from Net
Realized Gain on
Investments Sold and
Financial Futures
Contracts............. -- (0.09) (0.04) (0.06) (0.06) (0.04) (0.07) 0.00 0.00
-------- -------- -------- -------- -------- -------- -------- ------- ------
Total
Distributions... (0.55) (0.65) (0.68) (0.70) (0.78) (0.76) (0.81) (0.74) (0.27)
-------- -------- -------- -------- -------- -------- -------- ------- ------
Net Asset Value, End of
Period.................. $ 11.57 $ 10.79 $ 12.13 $ 11.12 $ 11.12 $ 10.61 $ 10.78 $ 10.73 $ 9.69
======== ======== ======== ======== ======== ======== ======== ======= ======
Total Investment Return at
Net Asset Value(c)...... 12.63% (5.85)% 15.51% 6.39% 12.55% 5.66% 8.25% 18.98% (1.31)%*
Total Adjusted Investment
Return at Net Asset
Value(b)(d)............. 12.61% (5.92)% 15.18% 6.20% 12.24% 5.10% 7.66% 18.00% (2.49)%
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's omitted)......... $178,002 $217,066 $256,342 $226,943 $199,955 $140,803 $106,107 $46,329 $8,220
Ratio of Expenses to
Average Net Assets**.... 1.73% 1.62% 1.23% 1.35% 1.19% 0.95% 0.93% 0.74% 1.40%*
Ratio of Adjusted Expenses
to Average Net
Assets(b)............... 1.78% 1.69% 1.56% 1.54% 1.50% 1.51% 1.52% 1.72% 2.58%*
Ratio of Net Investment
Income to Average Net
Assets**................ 4.92% 4.84% 5.49% 5.74% 6.19% 6.74% 6.81% 6.90% 6.11%*
Ratio of Adjusted Net
Investment Income to
Average Net Assets(b)... 4.87% 4.77% 5.16% 5.55% 5.88% 6.18% 6.22% 5.92% 4.93%*
Portfolio Turnover Rate... 104% 59% 23% 23% 30% 54% 94% 186% 174%
**Expense Reimbursement
Per Share............... $ 0.01 $ 0.01 $ 0.04 $ 0.02 $ 0.04 $ 0.06 $ 0.06 $ 0.10 $ 0.05*
</TABLE>
- ---------------
* On an annualized basis.
(a) Class A shares commenced operations on January 3, 1992.
(b) On an unreimbursed basis.
(c) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(d) An estimated total return calculation which takes into consideration fees
and expenses waived or borne by The Adviser during the period.
(e) From commencement of operations April 22, 1987.
4
<PAGE> 32
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek as high a level of current income
exempt from Federal income tax as is consistent with preservation of capital, by
investing primarily in municipal securities. There are market risks in any
investment and therefore there can be no assurance that the Fund will achieve
its investment objectives.
The Fund will invest at least 80% of its total assets in municipal securities
with varying maturities, the interest from which is, in the opinion of bond
counsel for the issuer, exempt from Federal income tax. Municipal securities are
issued to obtain funds for various public purposes. The two principal
classifications of municipal securities are "general obligation" and "revenue"
bonds. General obligation bonds are secured by the issuer's pledge of its full
faith and credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or a specific revenue source, and generally are
not payable from the unlimited revenues of the issuer. Industrial development
bonds issued by or on behalf of public authorities to obtain funds for
privately-operated facilities are in most cases revenue bonds which do not
generally carry the pledge of the full faith and credit of the issuer of such
bonds, but depend for payment on the ability of the industrial user to meet its
obligations.
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK
AS HIGH A LEVEL OF CURRENT INCOME EXEMPT
FROM FEDERAL INCOME TAX AS IS CONSISTENT
WITH PRESERVATION OF CAPITAL, BY INVESTING
PRIMARILY IN MUNICIPAL SECURITIES.
- -------------------------------------------------------------------------------
At least 65% of the Fund's investments in municipal securities will be of
"investment grade" quality, that is securities rated within the four highest
rating categories of Standard & Poor's Ratings Group (AAA, AA, A, BBB), Moody's
Investors Service, Inc. (Aaa, Aa, A, Baa), or Fitch Investors Service, Inc.
(AAA, AA, A, BBB) (collectively, "investment grade securities"). While it is not
the present intention of the Fund to invest in below investment grade
securities, upon Trustee approval, the Fund may invest less than 35% of its
total assets in municipal securities that are rated BB or B by Standard &
Poor's, Ba or B by Moody's, or BB or B by Fitch. The Fund may purchase unrated
municipal securities that are determined to be of comparable quality to rated
investment grade securities by John Hancock Advisers, Inc. (the "Adviser").
There are no percentage limitations on the Fund's investments in municipal
securities within particular rating classifications of investment grade
securities. Therefore, it may invest its entire portfolio in securities rated as
"medium grade" obligations (i.e., BBB or Baa). Medium grade bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments. A description of the ratings of Standard & Poor's,
Moody's and Fitch is contained in the Statement of Additional Information.
The Fund will not generally invest more than 25% of its total assets in any
industry. Governmental issuers of municipal securities are not considered part
of any "industry." However, municipal securities backed only by the assets and
revenues of non-governmental users will be subject to this limitation. It is
possible that the Fund may from time to time invest more than 25% of its assets
in a particular segment of the municipal securities market, such as hospital
revenue obligations, housing agency obligations, or airport revenue obligations.
This would
5
<PAGE> 33
be the case only if the Adviser determined that the yields available from
obligations in a particular segment of the market justified the additional risks
associated with such concentration. Economic, business, political and other
developments generally affecting the revenues of issuers in such a market
segment (e.g. proposed legislation or pending court decisions affecting the
financing of such projects and market factors affecting the demand for their
services or products) may have a general adverse effect on all municipal
securities in such segment. The Fund reserves the right to invest more than 25%
of its assets in industrial development bonds or in issuers located in any
particular state. The Fund may also invest in variable rate and floating rate
municipal obligations which have interest rates that are adjusted at designated
intervals or whenever there are changes in the market rates of interest on which
the interest rates are based. The Fund's distributions of the interest on
certain tax exempt securities which the Fund may purchase may be treated as an
item of tax preference under the federal alternative minimum tax. The Fund's
present policy is to invest no more than 20% of its total assets in taxable
securities including those generating interest that is an item of tax preference
under the alternative minimum tax.
SHORT-TERM INVESTMENTS. Although the Fund's portfolio generally will consist
primarily of municipal bonds, for liquidity purposes and for maintaining a
defensive position, in anticipation of a market decline, all or a portion of the
Fund's assets may be held in cash or invested in short-term municipal securities
(i.e., those with less than one year remaining to maturity). Short-term
municipal securities consist of short-term municipal notes and short-term
municipal loans and obligations, including municipal paper, master demand notes
and variable rate demand notes. Investments in short-term municipal securities
will, at the time of purchase, be rated within the three highest rating
categories of Standard & Poor's, Fitch or Moody's, or if unrated determined to
be of comparable quality by the Adviser. The Fund's investments in short-term
municipal securities will represent less than 25% of its total assets except
when the Fund is in a temporary defensive investment position in anticipation of
a market decline.
The Fund may also invest for liquidity or temporary defensive purposes in
taxable short-term obligations of the U.S. Government, its agencies or
instrumentalities; commercial paper rated in the highest grade by the rating
services (A-1, Prime-1 or F-1+, respectively); certificates of deposit and
bankers' acceptances; and repurchase agreements with respect to any securities
eligible for investment by the Fund, including municipal securities. The Fund
may also borrow an amount equal to up to 10% of its total assets to meet
anticipated redemptions but will not make any additional investments so long as
such borrowings exceed 5% of the value of its total assets.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may buy and sell financial
futures contracts and options on futures to hedge against the effects of
fluctuations in securities prices, interest rates, currency exchange rates and
other market conditions and for speculative purposes. The potential loss
incurred by the Fund in writing options on futures is unlimited and may exceed
the amount of the premium received. The Fund's futures contracts and options on
futures will be traded on a U.S. commodity exchange or board of trade. The Fund
will not engage in a futures
6
<PAGE> 34
or options transaction for speculative purposes, if immediately thereafter, the
sum of initial margin deposits on existing positions and premiums required to
establish speculative positions in futures contracts and options on futures
would exceed 5% of the Fund's net assets. The Fund intends to comply with the
CFTC regulations with respect to its speculative transactions. These regulations
are discussed further in the Statement of Additional Information.
RESTRICTED SECURITIES. The Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to Rule
144A under the Securities Act of 1933 (the "Securities Act"). The Trustees will
monitor the Fund's investments in these securities, focusing on certain factors,
including valuation, liquidity and availability of information. Purchases of
other restricted securities are subject to an investment restriction limiting
all the Fund's illiquid securities to not more than 10% of its net assets.
REPURCHASE AGREEMENTS, FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. The Fund
may enter into repurchase agreements and may purchase securities on a forward
commitment or when-issued basis. In a repurchase agreement, the Fund buys a
security subject to the right and obligation to sell it back to the seller at a
higher price. These transactions must be fully collateralized at all times, but
involve some credit risk to the Fund if the other party defaults on its
obligation and the Fund is delayed in or prevented from liquidating the
7
<PAGE> 35
collateral. The Fund will segregate in a separate account cash or liquid, high
grade debt securities equal in value to its forward commitments and when-issued
securities. Purchasing debt securities for future delivery or on a when-issued
basis may increase the Fund's overall investment exposure and involves a risk of
loss if the value of the securities declines before the settlement date. The
Fund's distributions of income from repurchase agreements and any net gains
realized from the disposition of rights to when-issued securities or forward
commitments purchased prior to delivery will be taxable to shareholders.
STAND-BY COMMITMENTS. The Fund may acquire stand-by commitments from banks with
respect to municipal securities held by the Fund. Under a stand-by commitment, a
bank that acts as a municipal securities dealer agrees to purchase, at the
Fund's option, specified municipal securities at a specified price. The Fund's
right to exercise stand-by commitments is unconditional and unqualified. The
total amount paid for outstanding stand-by commitments is not expected to exceed
1/2 of 1% of the Fund's total asset value calculated immediately after each
stand-by commitment is acquired. The Fund uses stand-by commitments for
liquidity purposes (i.e., to provide a ready market for its municipal securities
to meet cash needs).
SHORT-TERM TRADING. The Fund may engage in short-term trading, if the Adviser
believes that these transactions will improve the overall return of the Fund's
portfolio and therefore may have higher portfolio turnover than that of other
funds with similar objectives. Portfolio turnover may involve higher transaction
costs and may result in the realization of net capital gains, which are not
tax-exempt when distributed to you.
INVESTMENT RESTRICTIONS. The Fund has adopted certain investment restrictions
which are detailed in the Statement of Additional Information, where they are
designated as fundamental or nonfundamental. The investment objective and
fundamental restrictions may not be changed without shareholder approval. All
other investment policies and restrictions are nonfundamental and can be changed
by a vote of the Trustees without shareholder approval. Portfolio turnover rates
of the Fund for recent years are shown in the section "The Fund's Financial
Highlights."
When choosing brokerage firms to carry out the Fund's transactions, the Adviser
gives primary consideration to execution at the most favorable prices, taking
into account the broker's professional ability and quality of service.
Consideration may also be given to the broker's sale of Fund shares. Pursuant to
procedures 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
(the "Life Company"), which in turn indirectly owns the Adviser.
- -------------------------------------------------------------------------------
BROKERS ARE CHOSEN ON BEST PRICE AND
EXECUTION.
- -------------------------------------------------------------------------------
8
<PAGE> 36
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is a diversified series of Freedom Investment Trust, an open-end
management investment company organized as a Massachusetts business trust in
1984 (the "Trust"). The Trust reserves the right to create and issue a number of
series of shares, or funds or classes thereof, which are separately managed and
have different investment objectives.
The Fund is not required to hold annual shareholder meetings, although special
meetings may be held for such purposes as electing or removing Trustees,
changing fundamental policies or approving a management contract. The Fund,
under certain circumstances, will assist in shareholder communications with
other shareholders.
- -------------------------------------------------------------------------------
THE TRUSTEES ELECT OFFICERS AND RETAIN THE
INVESTMENT ADVISER WHO IS RESPONSIBLE FOR
THE DAY-TO-DAY OPERATIONS OF THE FUND,
SUBJECT TO THE TRUSTEES' POLICIES AND
SUPERVISION.
- -------------------------------------------------------------------------------
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
the 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"). Freedom
Distributors Corporation, a co-distributor of the Fund, is, along with John
Hancock Funds (together with John Hancock Funds, the "Distributors"), an
indirect subsidiary of the Life Company. Certain Fund officers are also officers
of the Adviser and John Hancock Funds. Pursuant to an order granted by the
Securities and Exchange Commission, the Fund has adopted a deferred compensation
plan for its independent Trustees which allows Trustees' fees to be invested by
the Fund in other John Hancock funds.
- -------------------------------------------------------------------------------
JOHN HANCOCK ADVISERS, INC. ADVISES
INVESTMENT COMPANIES HAVING A TOTAL ASSET
VALUE OF MORE THAN $16 BILLION.
- -------------------------------------------------------------------------------
Frank A. Lucibella is portfolio manager of the Fund. Mr. Lucibella also manages
the John Hancock High Yield Tax-Free Fund and John Hancock Tax-Exempt Series --
9
New York Portfolio. He is assisted by a team of analysts in the management of
the Fund. He joined the Adviser in 1988 after six years of investment experience
with Eaton Vance and The Travelers Corporation.
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 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.
- -------------------------------------------------------------------------------
AN ALTERNATIVE PURCHASE PLAN ALLOWS YOU TO
CHOOSE THE METHOD OF PAYMENT THAT IS BEST
FOR YOU.
- -------------------------------------------------------------------------------
10
<PAGE> 37
CLASS A SHARES. If you elect to purchase Class A shares, you will incur an
initial sales charge unless the amount you purchase is $1 million or more. If
you purchase $1 million or more of Class A shares, you will not be subject to an
initial sales charge but you will incur a sales charge if you redeem your shares
within one year of purchase. Class A shares are subject to ongoing distribution
and service fees at a combined annual rate of up to 0.30% of the Fund's average
daily net assets attributable to the Class A shares. Certain purchases of Class
A shares qualify for a reduced initial sales charge. See "Share
Price--Qualifying for a Reduced Sales Charge."
- -------------------------------------------------------------------------------
INVESTMENTS IN CLASS A SHARES ARE SUBJECT
TO AN INITIAL SALES CHARGE.
- -------------------------------------------------------------------------------
CLASS B SHARES. You will not incur a sales charge when you purchase Class B
shares but the shares are subject to a sales charge if you redeem them within
six years of purchase (the "contingent deferred sales charge" or the "CDSC").
Class B shares are subject to ongoing distribution and service fees at a
combined annual rate of up to 1.00% of the Fund's average daily net assets
attributable to the Class B shares. Investing in Class B shares permits all your
dollars to work from the time you make your investment, but the higher ongoing
distribution fee will cause these shares to have 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.
- -------------------------------------------------------------------------------
INVESTMENTS IN CLASS B SHARES ARE SUBJECT
TO A CONTINGENT DEFERRED SALES CHARGE.
- -------------------------------------------------------------------------------
Class B shares are not available to full-service defined contribution plans
administered by Investor Services or the Life Company that had more than 100
eligible employees at the inception of the Fund account.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider whether,
during the anticipated life of your Fund investment, the CDSC and accumulated
fees on Class B shares would be less than the initial sales charge and
accumulated fees on Class A shares purchased at the same time, and to what
extent this
11
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 of this Prospectus shows examples of the charges applicable to
each class of shares. Class A shares will normally be more beneficial if you
qualify for a reduced sales charge. See "Share Price--Qualifying for a Reduced
Sales Charge."
- -------------------------------------------------------------------------------
YOU SHOULD CONSIDER WHICH CLASS OF SHARES
WILL BE MORE BENEFICIAL FOR YOU.
- -------------------------------------------------------------------------------
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent any
dividends are paid. However, because initial sales charges are deducted at the
time of purchase, you would not have all of your funds invested initially and,
therefore, would initially own fewer shares. If you do not qualify for reduced
initial sales charges and expect to maintain your investment for an extended
period of time, you might consider purchasing Class A shares. This is because
the accumulated distribution and service charges on Class B shares may exceed
the initial sales charge and accumulated distribution and service charges on
Class A shares during the life of your investment.
Alternatively, you might determine that it is more advantageous to purchase
Class B shares to have all of your funds invested initially. However, you will
be subject to higher distribution fees and, for a six-year period, a CDSC.
12
<PAGE> 38
In the case of Class A shares, distribution expenses that John Hancock Funds
incurs in connection with the sale of the shares will be paid from the proceeds
of the initial sales charge and the ongoing distribution and service fees. In
the case of Class B shares, the expenses will be paid from the proceeds of the
ongoing distribution and service fees as well as from the CDSC incurred upon
redemption within six years of purchase. The purpose and function of the Class B
shares' CDSC and ongoing distribution and service fees are the same as those of
the Class A shares' initial sales charge and ongoing distribution and service
fees.
Dividends, if any, on Class A and Class B shares will be calculated in the same
manner, at the same time, on the same day. They will also be in the same amount,
except for differences resulting from each class bearing only its own
distribution and service fees and shareholder meeting expenses. See "Dividends
and Taxes."
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a monthly fee to
the Adviser, which for the 1995 fiscal year was 0.55% of the Fund's average
daily net assets. The Adviser has voluntarily agreed to limit its management fee
to 0.55% of the Fund's average daily net assets.
The 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 (the
"1940 Act"). Under these Plans the Fund will pay distribution and service fees
at an aggregate annual rate of up to 0.30% of the Class A shares' average daily
net assets and an aggregate annual rate of up to 1.00% of the Class B shares'
average daily net assets. In each case, up to 0.25% is for service expenses and
the remaining amount is for distribution expenses. The distribution fees will be
used to reimburse the Distributors for their distribution expenses, including
but not limited to: (i) initial and ongoing sales compensation to Selling
Brokers and others (including affiliates of the Distributors) engaged in the
sale of Fund shares; (ii) marketing, promotional and overhead expenses incurred
in connection with the distribution of Fund shares; and (iii) with respect to
Class B shares only, interest expenses on unreimbursed distribution expenses.
The service fees are paid to the Distributors to compensate Selling Brokers and
others providing personal and account maintenance services to shareholders.
- -------------------------------------------------------------------------------
THE FUND PAYS DISTRIBUTION AND SERVICE
FEES FOR MARKETING AND SALES-RELATED
SHAREHOLDER SERVICING.
- -------------------------------------------------------------------------------
In the event the Distributors are not fully reimbursed for payments they make or
expenses they incur under the Class A Plan, these expenses will not be carried
beyond one year from the date they were incurred. These unreimbursed expenses
under the Class B Plan will be carried forward together with interest on the
balance of these unreimbursed expenses.
For the fiscal year ended October 31, 1995 an aggregate of $6,993,452 of
distribution expenses or 3.51%, of the average net assets of the Class B shares
of the Fund, was not reimbursed or recovered by the Distributors through the
receipt of deferred sales charges or 12b-1 fees in prior periods.
Information on the Fund's total expenses is in the Fund's Financial Highlights
section of this Prospectus.
11
<PAGE> 39
DIVIDENDS AND TAXES
DIVIDENDS. The Fund generally declares daily and distributes monthly dividends
representing all or substantially all net investment income. The Fund will
distribute net realized long-term and short-term capital gains, if any, at least
annually.
Dividends are reinvested in additional shares of your class unless you elect the
option to receive cash. If you elect the cash option and the U.S. Postal Service
cannot deliver your checks, your election will be converted to the reinvestment
option. Because of the higher expenses associated with Class B shares, any
dividends on these shares will be lower than those on the Class A shares. See
"Share Price."
TAXATION. The Fund intends to meet certain federal tax requirements so that its
distributions of the tax-exempt interest it earns may be treated as
"exempt-interest dividends" which you are entitled to treat as tax-exempt
interest. That portion of exempt-interest dividends, if any, attributable to
interest on certain tax-exempt obligations that are "private activity bonds" may
increase certain shareholders' alternative minimum tax. Any exempt-interest
dividend may increase a corporate shareholder's alternative minimum tax. The
Fund will send you a statement by January 31 showing the tax status of the
dividends you received for the prior year.
Shareholders receiving social security benefits and certain railroad retirement
benefits may be subject to Federal income tax on up to 85 percent of such
benefits as a result of receiving investment income, including tax-exempt income
(such as exempt-interest dividends) and other dividends paid by the Fund. Shares
of the Fund may not be an appropriate investment for persons who are
"substantial users" of facilities financed by industrial development or private
activity bonds, or persons related to "substantial users." Consult your tax
advisor if you think this may apply to you.
Dividends from the Fund's net taxable income, if any, including any market
discount included in the Fund's income, and from the Fund's net short-term
capital gains are taxable to you as ordinary income. Dividends from the Fund's
net long-term capital gains are taxable as long-term capital gain. These
dividends are taxable, whether received in cash or reinvested in additional
shares. Certain dividends may be paid by the Fund in January of a given year but
may be taxable as if you received them the previous December.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code."). As a regulated investment company, the Fund will not be
subject to Federal income tax on any net investment income or net realized
capital gains that are distributed to its shareholders within the time period
prescribed by the Code. When you redeem (sell) or exchange shares, you may
realize a taxable gain or loss.
On the account application you must certify that your social security or other
tax-payer identification number is correct and that you are not subject to
backup withholding of Federal income tax. If you do not provide this information
or are otherwise subject to this withholding, the Fund may be required to
withhold 31% of your taxable dividends and the proceeds of redemptions and
exchanges.
12
<PAGE> 40
In addition to Federal taxes, you may be subject to state and local taxes with
respect to your investments in and distributions from the Fund. Non-U.S.
shareholders and tax-exempt shareholders are subject to a different tax
treatment not described above. In many states, a 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 adviser for
specific advice.
PERFORMANCE
Yield reflects the Fund's rate of income on portfolio investments as a
percentage of its share price. Yield is computed by annualizing the result of
dividing the net investment income per share over a 30 day period by the maximum
offering price per share on the last day of that period. Yield is also
calculated according to accounting methods that are standardized for all stock
and bond funds. Because yield accounting methods differ from the methods used
for other accounting purposes, the Fund's yield may not equal the income paid on
shares or the income reported in the Fund's financial statements. The Fund may
also utilize tax equivalent yields of its Class A and Class B shares computed in
the same manner, with adjustment for assumed Federal income tax rates. For a
comparison of yields on municipal securities and taxable securities, see the
Taxable Equivalent Yield Table in Appendix A.
- -------------------------------------------------------------------------------
THE FUND MAY ADVERTISE ITS YIELD AND TOTAL
RETURN.
- -------------------------------------------------------------------------------
The Fund's total return shows the overall dollar or percentage change in value
of a hypothetical investment in the Fund, assuming the reinvestment of all
dividends. Cumulative total return shows the Fund's performance over a period of
time. Average annual total return shows the cumulative return of the respective
class of shares of the Fund divided by the number of years included in the
period. Because average annual total return tends to smooth out variations in
the Fund's performance, you should recognize that it is not the same as actual
year-to-year results.
Both total return and yield calculations for Class A shares generally include
the effect of paying the maximum sales charge (except as shown in "The Fund's
Financial Highlights"). Investments at lower sales charges would result in
higher performance figures. Yield and total return for the Class B shares
reflect the deduction of the applicable CDSC 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. Yield and total return
of Class A and Class B shares will be calculated separately and, because each
class is subject to certain different expenses, the yield and total return may
differ with respect to each class for the same period. The relative performance
of the Class A and Class B shares will be affected by a variety of factors,
including the higher operating expenses attributable to the Class B shares,
whether the Fund's investment performance is better in the earlier or later
portions of the period measured and the level of net assets of the classes
during the period. The Fund will include the total return of both classes in any
advertisement or promotional materials including Fund performance data. The
value of the Fund's shares, when redeemed, may be more or less than their
original cost. Both yield and total return are historical calculations and are
not an indication of future performance. See "Factors to Consider in Choosing an
Alternative."
13
<PAGE> 41
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OPENING AN ACCOUNT.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
The minimum initial investment is $1,000 ($250 for group investments).
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 that you are investing in
Class A shares.
- ---------------------------------------------------------------------------------
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation.
2. Deliver the completed application and check to your registered
representative, Selling Broker or mail it directly to Investor
Services.
- ---------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by contacting your registered
representative, Selling Broker, or by calling 1-800-225-5291.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Managed Tax-Exempt Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative, Selling Broker or mail it directly to Investor
Services.
- ---------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A
AND CLASS B SHARES.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
1. Complete the "Automatic Investing" and "Bank Information"
MONTHLY sections on the Account Privileges Application designating a bank
AUTOMATIC account from which your funds may be drawn.
ACCUMULATION
PROGRAM 2. The amount you elect to invest will be withdrawn automatically
(MAAP) from your
bank or credit union account.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
BY TELEPHONE 1. Complete the "Invest-by-Phone" and "Bank Information" sections
on the Account Privileges Application designating a bank
account from which your funds may be drawn. Note that in order
to invest by phone, your account must be in a bank or credit
union that is a member of the Automated Clearing House system
(ACH).
2. After your authorization form has been processed, you may
purchase additional Class A or Class B shares by calling
Investor Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which
your account is registered, the Fund name, the class of shares
you own, your account number, and the amount you wish to
invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
BY CHECK 1. Either complete the detachable stub included on your account
statement or include a note with your investment listing the
name of the Fund, the class 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.
- ---------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 42
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Managed Tax-Exempt Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
</TABLE>
- -------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A
AND CLASS B SHARES.
(CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
Other Requirements. All purchases must be made in U.S. dollars. Checks written on
foreign banks will delay purchases until U.S. funds are received, and a collection
charge may be imposed. Shares of the Fund are priced at the offering price based
on the net asset value computed after John Hancock Funds receives notification of
the dollar equivalent from the Fund's custodian bank. Wire purchases normally take
two or more hours to complete and, to be accepted the same day, must be received
by 4:00 p.m., New York time. Your bank may charge a fee to wire funds. Telephone
transactions are recorded to verify information. Certificates are not issued
unless a request is made in writing to Investor Services.
- ---------------------------------------------------------------------------------
</TABLE>
You will receive a statement of your account after any transaction that affects
your share balance or registration (statements related to reinvestment of
dividends and automatic investment/withdrawal plans will be sent to you
quarterly). A tax information statement will be mailed to you by January 31 of
each year.
- -------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT STATEMENTS THAT
YOU SHOULD KEEP TO HELP WITH YOUR PERSONAL
RECORDKEEPING.
- -------------------------------------------------------------------------------
SHARE PRICE
The net asset value per share (the "NAV") is the value of one share. The NAV is
calculated by dividing the net assets of each class by the number of outstanding
shares of that class. The NAV 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 the Board of Trustees
has determined to approximate 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.
- -------------------------------------------------------------------------------
THE OFFERING PRICE OF YOUR SHARES IS THEIR
NET ASSET VALUE PLUS A SALES CHARGE, IF
APPLICABLE, WHICH WILL VARY WITH THE
PURCHASE ALTERNATIVE YOU CHOOSE.
- -------------------------------------------------------------------------------
Shares of the Fund are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock Funds.
If you buy shares of the Fund through a Selling Broker, the Selling Broker must
receive your investment before the close of regular trading on the New York
Stock Exchange and transmit it to John Hancock Funds before its close of
business to receive that day's offering price.
15
<PAGE> 43
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge, as follows:
<TABLE>
<CAPTION>
REALLOWANCE TO
COMBINED SELLING BROKER
REALLOWANCE AS
AMOUNT INVESTED SALES CHARGE AS SALES CHARGE AS AND SERVICE FEE A PERCENTAGE OF
(INCLUDING SALES A PERCENTAGE OF A PERCENTAGE OF AS A PERCENTAGE OFFERING
CHARGE) OFFERING PRICE THE AMOUNT INVESTED OF OFFERING PRICE(+) PRICE(*)
- ---------------------- --------------- ------------------- -------------------- ----------------
<S> <C> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00% 3.76%
$100,000 to $249,999 3.75% 3.90% 3.25% 3.01%
$250,000 to $499,999 3.00% 3.09% 2.50% 2.26%
$500,000 to $999,999 2.00% 2.04% 1.75% 1.51%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(***)
</TABLE>
- ---------------
(*) Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales
charge. A Selling Broker to whom substantially the entire sales charge is
reallowed may be deemed to be an underwriter under the Securities Act of
1933.
(**) No sales charge is payable at the time of purchase of Class A shares of $1
million or more, but a CDSC may be imposed in the event of certain
redemption transactions made within one year of purchase.
(***) John Hancock Funds may pay a commission and first year's service fee (as
described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of $1 million or more in the aggregate as
follows: 1% on sales to $4,999,999, 0.50% on the next $5 million and 0.25%
on $10 million and over.
(+) At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance, in an amount equal to 0.25% of the net
assets invested in the Fund. Thereafter, it pays the service fee
periodically in arrears in an amount up to 0.25% of the 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
Class A 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 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 Class A shares will be made at net
asset value with no initial sales charge, but if shares are redeemed within 12
months after the end of the calendar month in which the purchase was made (the
CDSC period), a CDSC will be imposed. The rate of the CDSC will depend on the
amount invested as follows:
<TABLE>
<CAPTION>
AMOUNT INVESTED CDSC RATE
- -------------------------------------------------------------- ---------
<S> <C>
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
</TABLE>
16
<PAGE> 44
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 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 applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
Therefore, it will be assumed that redemption is first made from any shares in
your account that are not subject to the CDSC. The CDSC is waived on redemptions
in certain circumstances. See "Waiver of Contingent Deferred Sales Charge"
below.
QUALIFYING FOR A REDUCED SALES CHARGE. If you invest more than $100,000 in
Class A shares of the Fund or combination of John Hancock funds (except money
market funds), you may qualify for a reduced sales charge on your investments in
Class A shares through a LETTER OF INTENTION. You may also be able to use the
ACCUMULATION PRIVILEGE and COMBINATION PRIVILEGE to take advantage of the value
of your previous investments in shares of the John Hancock funds in meeting the
breakpoints for a reduced sales charge. For the ACCUMULATION PRIVILEGE and
COMBINATION PRIVILEGE, the applicable sales charge will be based on the total
of:
- -------------------------------------------------------------------------------
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE
ON YOUR INVESTMENT IN CLASS A SHARES.
- -------------------------------------------------------------------------------
1. Your current purchase of Class A shares of the Fund;
2. The net asset value (at the close of business on the previous day) of (a)
all Class A shares of the Fund you hold, and (b) all Class A shares of any
other John Hancock funds you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
EXAMPLE:
If you hold Class A shares of a John Hancock fund with a net asset value of
$80,000 and, subsequently, invest $20,000 in Class A shares of the Fund, the
sales charge on this subsequent investment would be 3.75% and not 4.50%. This is
the rate that would otherwise be applicable to investments of less than
$100,000. See "Initial Sales Charge Alternative--Class A Shares."
17
<PAGE> 45
If you are in one of the following categories, you may purchase Class A shares
of the Fund without paying a sales charge:
- - A Trustee or officer of the Trust; a Director or officer of the Adviser and
its affiliates or Selling Brokers; employees or sales representatives of any
of the foregoing; retired officers, employees or Directors of any of the
foregoing; a member of the immediate family of any of the foregoing; or any
Fund, pension, profit sharing or other benefit plan for the individuals
described above.
- -------------------------------------------------------------------------------
CLASS A SHARES MAY BE AVAILABLE WITHOUT A
SALES CHARGE TO CERTAIN INDIVIDUALS AND
ORGANIZATIONS.
- -------------------------------------------------------------------------------
- - Any state, county, city or any instrumentality, department, authority, or
agency of these entities that is prohibited by applicable investment laws from
paying a sales charge or commission when it purchases shares of any registered
investment management company.*
- - A bank, trust company, credit union, savings institution or other depository
institution, its trust departments or common trust funds if it is purchasing
$1 million or more for non-discretionary customers or accounts.*
- - A broker, dealer, financial planner, consultant or registered investment
adviser that has entered into an agreement with John Hancock Funds providing
specifically for the use of Fund shares in fee-based investment products or
services made available to their clients.
- - 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 directly to the Fund.
- - A member of an approved affinity group financial services plan.*
- ---------------
* For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A shares of the Fund may also by purchased without an initial sales charge
in connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. Class B shares
are offered at net asset value per share without an initial sales charge, so
that your entire investment will go to work at the time of purchase. However,
Class B shares redeemed within six years of purchase will be subject to a CDSC
at the rates set forth below. The charge will be assessed on an amount equal to
the lesser of the current market value or the original purchase cost of the
shares being redeemed. Accordingly, you will not be assessed a CDSC on increases
in account value above the initial purchase price, including shares derived from
dividend reinvestment.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
reinvestment of dividends, and next from the shares you have held the longest
during the six-year period. The CDSC is waived on redemptions in certain
circumstances. See the discussion "Waiver of Contingent Deferred Sales Charges"
below.
18
<PAGE> 46
EXAMPLE:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time, your CDSC will be calculated as follows:
<TABLE>
<S> <C>
- - Proceeds of 50 shares redeemed at $12 per share $600
- - Minus proceeds of 10 shares not subject to CDSC because they were
acquired through dividend reinvestment (10 x $12) -120
- - Minus appreciation on remaining shares, also not subject to CDSC (40 x
$2) -80
-----
- - Amount subject to CDSC $400
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses
them to defray its expenses related to providing the Fund with distribution
services in connection with the sale of the Class B shares, such as compensating
Selling Brokers for selling these shares. The combination of the CDSC and the
distribution and service fees makes it possible for the Fund to sell Class B
shares without an initial sales charge.
The amount of the CDSC, if any, will vary depending on the number of years from
the time you purchase the Class B shares until the time you redeem them. Solely
for determining this holding period, any payments you make during the month will
be aggregated and deemed to have been made on the last day of the month.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
YEAR IN WHICH CLASS B SHARES AS A PERCENTAGE
REDEEMED FOLLOWING PURCHASE AMOUNT REDEEMED
- ------------------------------------------------------------- -------------------
<S> <C>
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
</TABLE>
A commission equal to 3.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for the provision of
personal and account maintenance services to shareholders during the twelve
months following the sale, and thereafter the service fee is paid in arrears.
If you purchased Class B shares during 1992 or 1993, the applicable CDSC as a
percentage of the amount redeemed will be: 4% for redemptions during the first
year after purchase, 3.5% for redemptions during the second year, 3% for
redemptions during the third year, 2.5% for redemptions during the fourth year,
2% for redemptions during the fifth year, 1% for redemption during the sixth
year, and no CDSC for redemptions during the seventh year and thereafter. If you
purchased Class B shares before 1992, the applicable CDSC as a percentage of the
amount redeemed will be: 1% for redemptions during the third, fourth and fifth
years after purchase and no CDSC for redemptions during the sixth year and
thereafter.
19
<PAGE> 47
WAIVER OF CONTINGENT SALES CHARGES. The CDSC will be waived on redemptions of
Class B shares and of Class A shares that are subject to a CDSC, unless
indicated otherwise, in the circumstances defined below:
- - Redemptions of Class B shares made under Systematic Withdrawal Plan (see "How
to Redeem Shares"), as long as your annual redemptions do not exceed 10% of
your account value at the time you established your Systematic Withdrawal Plan
and 10% of the value of subsequent investments (less redemptions) in that
account at the time you notify Investor Services. This waiver does not apply
to Systematic Withdrawal Plan redemptions of Class A shares that are subject
to a CDSC.
- -------------------------------------------------------------------------------
UNDER CERTAIN CIRCUMSTANCES, THE CDSC ON
CLASS B AND CERTAIN CLASS A SHARE
REDEMPTIONS WILL BE WAIVED.
- -------------------------------------------------------------------------------
- - Redemptions made to effect distributions from an Individual Retirement Account
either before or after age 59 1/2, as long as the distributions are based on
your life expectancy or the joint-and-last survivor life expectancy of you and
your beneficiary. These distributions must be free from penalty under the
Code.
- - Redemptions made to effect mandatory distributions under the Code after age
70 1/2 from a tax-deferred retirement plan.
- - Redemptions made to effect distributions to participants or beneficiaries from
certain employer-sponsored retirement plans including those qualified under
Section 401(a) of the Code, custodial accounts under Section 403(b)(7) of the
Code and deferred compensation plans under Section 457 of the Code. The waiver
also applies to certain returns of excess contributions made to these plans.
In all cases, the distributions must be free from penalty under the Code.
- - Redemptions due to death or disability.
- - Redemptions made under the Reinvestment Privilege, as describe in "Additional
Services and Programs" of this Prospectus.
- - Redemptions made pursuant to the Fund's right to liquidate your account if you
own fewer than 50 shares.
- - Redemptions made in connection with certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
- - Redemptions from certain IRA and retirement plans which purchased shares prior
to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you must notify
Investor Services either directly or through your Selling Broker at the time you
make your redemption. The waiver will be granted once Investor Services has
confirmed that you are entitled to the waiver.
CONVERSION OF CLASS B SHARES. Your Class B shares and an appropriate portion of
reinvested dividends on those shares will be converted into Class A shares
automatically. This will occur no later than the month following eight years
after the shares were purchased, and will result in lower annual distribution
fees. If you exchanged Class B shares into this Fund from another John Hancock
fund, the
20
<PAGE> 48
calculation will be based on the time you purchased the shares in the original
fund. The Fund has been advised that the conversion of Class B shares to Class A
shares of the Fund should not be taxable for Federal income tax purposes, and
should not change your tax basis or tax holding period for the converted shares.
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any business day. Your shares
will be redeemed at the next NAV calculated after your redemption request is
received in good order by Investor Services less any applicable CDSC. The Fund
may hold payment until reasonably satisfied that investments recently made by
check or Invest-by-Phone have been collected (which may take up to 10 calendar
days).
- -------------------------------------------------------------------------------
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION
REQUEST, PLEASE FOLLOW THESE PROCEDURES.
- -------------------------------------------------------------------------------
Once your shares are redeemed, the Fund generally sends you payment on the next
business day. When you redeem your shares, you may realize a taxable gain or
loss, depending usually on the difference between what you paid for them and
what you receive for them, subject to certain tax rules. Under unusual
circumstances, the Fund may suspend redemptions or postpone payment for up to
three business days or longer, as permitted by Federal securities laws.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <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 certificated form.
During periods of extreme economic conditions or market
changes, telephone requests may be difficult to implement
due to a large volume of calls. During these times you
should consider placing redemption requests in writing or
using EASI-Line. EASI-Line's telephone number is
1-800-338-8080.
- ---------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 49
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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 collectible 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
included with this Prospectus.
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
IN WRITING Send a stock power or "letter of instruction" specifying
the name of the Fund, the dollar amount or the number of
shares to be redeemed, your name, class of shares, your
account number, and the additional requirements listed
below that apply to your particular account.
- ---------------------------------------------------------------------------------
TYPE OF REGISTRATION REQUIREMENTS
Individual, Joint Tenants, Sole A letter of instruction signed (with titles
Proprietorship, Custodial where applicable) by all persons authorized
(Uniform Gifts or Transfer to to sign for the account, exactly as it is
Minors Act), General Partners registered with the signature(s) guaranteed
Corporation, Association A letter of instruction and a corporate
resolution, signed by person(s) authorized
to act on the account with the signature(s)
guaranteed
Trusts A letter of instruction signed by the
Trustee(s) with the signature guaranteed.
(If the Trustee's name is not registered on
your account, also provide a copy of the
trust document, certified within the last 60
days.)
If you do not fall into any of these registration categories, please call
1-800-225-5291 for further instructions.
- ---------------------------------------------------------------------------------
A signature guarantee is a widely accepted way to protect you and the Fund by
verifying the signature on your request. It may not be provided by a notary
public. If the net asset value of the shares redeemed is $100,000 or less,
John Hancock Funds may guarantee the signature. The following institutions may
provide you with a signature guarantee, provided that the institution meets
credit standards established by Investor Services: (i) a bank; (ii) a
securities broker or dealer, including a government or municipal securities
broker or dealer, that is a member of a clearing corporation or meets certain
net capital requirements; (iii) a credit union having authority to issue
signature guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association; or (v)
a national securities exchange, a registered securities exchange or a clearing
agency.
</TABLE>
- -------------------------------------------------------------------------------
WHO MAY GUARANTEE YOUR SIGNATURE.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------
THROUGH YOUR BROKER. Your broker may be able to initiate the redemption.
Contact your broker for instructions.
</TABLE>
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your stock
power or a letter of instruction. Unless you specify to the contrary, any
outstanding Class A shares will be redeemed before Class B shares. You may not
redeem certificated shares by telephone.
Due to the proportionately high cost of maintaining smaller accounts, the Fund
reserves the right to redeem at net asset value all shares in an account which
holds fewer than 50 shares (except accounts under retirement plans) and to
mail the proceeds to the shareholder or the transfer agent may impose an
annual fee of $10.00. No account will be involuntarily redeemed or additional
fee imposed, if the value of the account is in excess of the Fund's minimum
initial investment. No CDSC will be imposed on involuntary redemption of
shares.
Shareholders will be notified before these redemptions are to be made or this
fee is imposed and will have 30 days to purchase additional shares to bring
their account balance up to the required minimum. Unless the number of shares
acquired by additional purchases and any dividend reinvestments exceeds the
number of shares redeemed, repeated redemptions from a smaller account may
eventually trigger this policy.
</TABLE>
- --------------------------------------------------------------------------------
22
<PAGE> 50
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of investment
goals. Contact your registered representative or Selling Broker and request a
prospectus for the John Hancock funds that interest you. Read the prospectus
carefully before exchanging your shares. You can exchange shares of each class
of the Fund only for shares of the same class of another John Hancock fund. For
this purpose, John Hancock funds with only one class of shares will be treated
as Class A whether or not they have been so designated.
- -------------------------------------------------------------------------------
YOU MAY EXCHANGE SHARES OF THE FUND FOR
SHARES OF THE SAME CLASS OF ANOTHER JOHN
HANCOCK FUND.
- -------------------------------------------------------------------------------
Exchanges between funds which are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is imposed.
Class B shares of the Fund that 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
exchanges into John Hancock Short-Term Strategic Income Fund, John Hancock
Intermediate Maturity Government Fund 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. However, if you exchange Class B shares purchased prior
to January 1, 1994 for Class B shares of any other John Hancock fund, you will
continue to be subject to the CDSC schedule in effect on your initial purchase
date.
The Fund reserves the right to require that you keep previously exchanged shares
(and reinvested dividends) in the Fund for 90 days before you are permitted a
new exchange. The Fund may also terminate or alter the terms of the exchange
privilege, upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal income tax purposes. An exchange may
result in a taxable gain or loss.
When you make an exchange, your account registration in both the existing and
new account must be identical. The exchange privilege is available only in
states where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers and
investment advisers may exchange their clients' Fund shares, subject to the
terms of those agreements and John Hancock Funds' right to reject or suspend
those exchanges at any time. Because of the restrictions and procedures under
those agreements, the exchanges may be subject to timing limitations and other
restrictions that do not apply to exchanges requested by shareholders directly,
as described above.
23
<PAGE> 51
Because Fund performance and shareholders can be hurt by excessive trading, the
Fund reserves the right to terminate the exchange privilege for any person or
group that, in John Hancock Funds' judgment, is involved in a pattern of
exchanges that coincide with a "market timing" strategy that may disrupt the
Fund's ability to invest effectively according to its investment objective and
policies, or might otherwise affect the Fund and its shareholders adversely. The
Fund may also temporarily or permanently terminate the exchange privilege for
any person who makes seven or more exchanges out of the Fund per calendar year.
Accounts under common control or ownership will be aggregated for this purpose.
Although the Fund will attempt to give prior notice whenever it is reasonably
able to do so, it may impose these restrictions at any time.
BY TELEPHONE
1. When you complete the application for your initial purchase of Fund shares,
you automatically authorize exchanges by telephone unless you check the box
indicating that you do not wish to authorize telephone exchanges.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.
3. Your name, the account number, taxpayer identification number applicable to
the account and other relevant information may be requested. In addition,
telephone instructions are recorded.
IN WRITING
1. In a letter request an exchange and list the following:
- name and class of the Fund whose shares you currently own
- your account number
- the name(s) in which the account is registered
- the name of the fund in which you wish your exchange to be invested
- the number of shares, all shares or the dollar amount you wish to
exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
24
<PAGE> 52
REINVESTMENT PRIVILEGE
1. You will not be subject to a sales charge on Class A shares that you reinvest
in a John Hancock fund that is otherwise subject to a sales charge, as long
as you reinvest within 120 days of the redemption date. If you paid a CDSC
upon a redemption, you may reinvest at net asset value in the same class of
shares from which you redeemed within 120 days. Your account will be credited
with the amount of the CDSC previously charged, and the reinvested shares
will continue to be subject to a CDSC. The holding period of the shares
acquired through reinvestment for purposes of computing the CDSC payable upon
a subsequent redemption will include the holding period of the redeemed
shares.
- -------------------------------------------------------------------------------
IF YOU REDEEM SHARES OF THE FUND, YOU MAY
BE ABLE TO REINVEST ALL OR PART OF THE
PROCEEDS IN SHARES OF THIS FUND OR ANOTHER
JOHN HANCOCK FUND WITHOUT PAYING AN
ADDITIONAL SALES CHARGE.
- -------------------------------------------------------------------------------
2. Any portion of your redemption may be reinvested in Fund shares or in shares
of other John Hancock funds, subject to the minimum investment limit of that
fund.
3. To reinvest, you must notify Investor Services in writing. Include the Fund's
name, the account number and class from which your shares were originally
redeemed.
SYSTEMATIC WITHDRAWAL PLAN
1. You can elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You can
also obtain the application from your registered representative or by calling
1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semi-annually or
on a selected monthly basis to yourself or any other designated payee.
- -------------------------------------------------------------------------------
YOU CAN PAY ROUTINE BILLS FROM YOUR
ACCOUNT, OR MAKE PERIODIC DISBURSEMENTS
FROM YOUR RETIREMENT ACCOUNT TO COMPLY
WITH IRS REGULATIONS.
- -------------------------------------------------------------------------------
4. There is no limit on the number of payees you may authorize, but all payments
must be made at the same time or intervals.
5. It is not advantageous to maintain a Systematic Withdrawal Plan concurrently
with purchases of additional Class A or Class B shares, because you may be
subject to an initial sales charge on your purchases of Class A shares or to
a CDSC on your redemptions of Class B shares. In addition, your redemptions
are taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks, or if deposits to a bank account are returned for any reason.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
1. You can authorize an investment to be withdrawn automatically each month on
your bank, for investment in Fund shares, under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.
- -------------------------------------------------------------------------------
YOU CAN MAKE AUTOMATIC INVESTMENTS AND
SIMPLIFY YOUR INVESTING.
- -------------------------------------------------------------------------------
2. You can also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
25
<PAGE> 53
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
1. An individual account will be established for each participant, but the
initial sales charge for Class A shares will be based on the aggregate dollar
amount of all participants' investments. To determine how to qualify for this
program, contact your registered representative or call 1-800-225-5291.
- -------------------------------------------------------------------------------
ORGANIZED GROUPS OF AT LEAST FOUR PERSONS
MAY
ESTABLISH ACCOUNTS.
- -------------------------------------------------------------------------------
2. The initial aggregate investment of all participants in the group must be at
least $250.
3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum, and you may terminate the program at any
time.
26
<PAGE> 54
APPENDIX A
EQUIVALENT YIELDS:
TAX EXEMPT VS. TAXABLE YIELD
The table below shows the effect of the tax status of municipal obligations on
the yield received by their holders under the regular federal income tax laws
that apply to 1996. It gives the approximate yield a taxable security must earn
at various income brackets to produce after-tax yields.
TAX-FREE YIELDS 1996 TAX TABLE
<TABLE>
<CAPTION>
MARGINAL
SINGLE RETURN JOINT RETURN INCOME
- ----------------- ------------ TAX
BRACKET TAX-EXEMPT YIELD
-------- ----------------------------------------------------------------------
(TAXABLE INCOME) 4% 5% 6% 7% 8% 9% 10%
- -------------------------------------- ------ ------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-24,000 $0-40,100 15.0% 4.71% 5.88% 7.06% 8.24% 9.41% 10.59% 11.76%
$24,001-58,150 $40,101-96,900 28.0% 5.56% 6.94% 8.33% 9.72% 11.11% 12.50% 13.89%
$58,151-121,300 $96,901-147,700 31.0% 5.80% 7.25% 8.70% 10.14% 11.59% 13.04% 14.49%
$121,301-263,750 $147,701-263,750 36.0% 6.25% 7.81% 9.38% 10.94% 12.50% 14.06% 15.63%
Over $263,750 Over $263,750 39.6% 6.62% 8.28% 9.93% 11.59% 13.25% 14.90% 16.56%
</TABLE>
It is assumed that an investor filing a single return is not a "head of
household," a "married individual filing a separate return," or a "surviving
spouse." The table does not take into account the effects of reductions in the
deductibility of itemized deductions or the phaseout of personal exemptions for
taxpayers with adjusted gross incomes in excess of specified amounts. Further,
the table does not attempt to show any alternative minimum tax consequences,
which will depend on each shareholder's particular tax situation and may vary
according to what portion, if any, of the Fund's exempt-interest dividends is
attributable to interest on certain private activity bonds for any particular
taxable year. No assurance can be given that the Fund will achieve any specific
tax-exempt yield or that all of its income distributions will be tax-exempt.
Distributions attributable to any taxable income or capital gains realized by
the Fund will not be tax-exempt.
The information set forth above is as of the date of this Prospectus.
Subsequent tax law changes could result in prospective or retroactive changes in
the tax brackets, tax rates, and tax-equivalent yields set forth above.
This table is for illustrative purposes only and is not intended to imply or
guarantee any particular yield from the John Hancock Managed Tax-Exempt Fund.
While it is expected that a substantial portion of the interest income
distributed to the Fund's shareholders will be exempt from federal income taxes,
portions of such distributions from time to time may be subject to federal
income taxes.
27
<PAGE> 55
JOHN HANCOCK MANAGED
TAX-EXEMPT FUND
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services
Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INDEPENDENT AUDITOR
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchange call 1-800-225-5291
Invest-by-Phone
Telephone Redemption
For: TDD call 1-800-554-6713
JOHN HANCOCK
MANAGED
TAX-EXEMPT
FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 1, 1996
A MUTUAL FUND SEEKING
AS HIGH A LEVEL OF
CURRENT INCOME EXEMPT
FROM FEDERAL INCOME
TAX AS IS CONSISTENT
WITH PRESERVATION OF
CAPITAL BY INVESTING
PRIMARILY IN MUNICIPAL
SECURITIES.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
TELEPHONE 1-800-225-5291
JHD-0700P 3-96(LOGO) Printed on
Recycled Paper
<PAGE> 56
JOHN HANCOCK
REGIONAL BANK FUND
JOHN HANCOCK
GOLD & GOVERNMENT FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 1, 1996
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Expense Information................................................................... 2
The Funds' Financial Highlights....................................................... 4
Investment Objectives and Policies.................................................... 6
Regional Bank Fund............................................................... 6
Gold & Government Fund........................................................... 7
Certain Investment Strategies......................................................... 10
Organization and Management of the Funds.............................................. 11
Alternative Purchase Arrangements..................................................... 13
The Funds' Expenses................................................................... 14
Dividends and Taxes................................................................... 15
Performance........................................................................... 16
How to Buy Shares..................................................................... 18
Share Price........................................................................... 19
How to Redeem Shares.................................................................. 25
Additional Services and Programs...................................................... 27
</TABLE>
This Prospectus sets forth information about the John Hancock Regional Bank
Fund ("Regional Bank Fund" or the "Fund"), and John Hancock Gold & Government
Fund ("Gold & Government Fund" or the "Fund") each a diversified series of
Freedom Investment Trust (the "Trust"), that you should know before investing.
Please read and retain it for future reference.
Additional information about the Funds has been filed with the Securities and
Exchange Commission (the "SEC"). You can obtain a copy of the Funds' Statement
of Additional Information, dated March 1, 1996, and incorporated by reference
into this Prospectus, free of charge by writing or telephoning: John Hancock
Investor Services Corporation, P.O. Box 9116, Boston, Massachusetts 02205-9116,
1-800-225-5291 (1-800-554-6713 TDD).
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 57
EXPENSE INFORMATION
The purpose of the following information is to help you understand the various
fees and expenses you will bear, directly or indirectly, when you purchase
shares of either Fund. The operating expenses included in the table and the
hypothetical example below are based on actual fees and expenses for the Class A
and Class B shares of the Fund for the fiscal year ended October 31, 1995
adjusted to reflect certain current fees and expenses. Actual fees and expenses
may be greater or less than those shown.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
---------- --------
<S> <C> <C>
GOLD & GOVERNMENT FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of offering price).............................. 5.00% None
Maximum sales charge imposed on reinvested dividends....................................................... None None
Maximum deferred sales charge.............................................................................. None* 5.00%
Redemption fee(a).......................................................................................... None None
Exchange fee............................................................................................... None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fee............................................................................................. 0.80% 0.80%
12b-1 fee**................................................................................................ 0.30% 1.00%
Other expenses............................................................................................. 0.52% 0.52%
Total Fund operating expenses.............................................................................. 1.62% 2.32%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
---------- --------
<S> <C> <C>
REGIONAL BANK FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of offering price).............................. 5.00% None
Maximum sales charge imposed on reinvested dividends....................................................... None None
Maximum deferred sales charge.............................................................................. None* 5.00%
Redemption fee(a).......................................................................................... None None
Exchange fee............................................................................................... None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fee(b).......................................................................................... 0.78% 0.78%
12b-1 fee**................................................................................................ 0.30% 1.00%
Other expenses............................................................................................. 0.31% 0.31%
Total Fund operating expenses.............................................................................. 1.39% 2.09%
</TABLE>
- ---------------
<TABLE>
<S> <C>
* No sales charge is payable at the time of purchase on investments in Class A shares of $1 million or more, but for these
investments a contingent deferred sales charge may be imposed, as described under the caption "Share Price," in the event
of certain redemption transactions within one year of purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to 0.25% of average daily net assets, and the
remaining portion will be used to cover distribution expenses.
(a) Redemption by wire fee (currently $4.00) not included.
(b) The calculation of the management fee is based on average net assets for the fiscal year ended October 31, 1995. See "The
Fund's Expenses."
</TABLE>
2
<PAGE> 58
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a
hypothetical $1,000 investment assuming a 5% annual return:
GOLD & GOVERNMENT FUND
Class A shares.............................................................. $66 $ 99 $135 $235
Class B shares
--Assuming complete redemption at end of period............................. $74 $102 $144 $248
--Assuming no redemption.................................................... $24 $ 72 $124 $248
REGIONAL BANK FUND
Class A shares.............................................................. $63 $ 92 $122 $209
Class B shares
--Assuming complete redemption at end of period............................. $71 $ 95 $132 $224
--Assuming no redemption.................................................... $21 $ 65 $112 $224
</TABLE>
(The example should not be considered as a representation of past or future
expenses. Actual expenses may be greater or less than shown.)
Each Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the maximum
front-end sales charge permitted under the National Association of Securities
Dealers Rules of Fair Practice.
The management and 12b-1 fees referenced above are more fully explained in
this Prospectus under the caption "The Funds' Expenses" and in the Statement of
Additional Information under the captions "Investment Advisory and Other
Services" and "Distribution Contract."
3
<PAGE> 59
THE FUNDS' FINANCIAL HIGHLIGHTS
The following table of Financial Highlights has been audited by Price
Waterhouse LLP, the Funds' independent accountants, whose unqualified reports
are included in the Funds' 1995 Annual Reports and are included in the Funds'
Statement of Additional Information. Further information about the performance
of the Funds is contained in each Fund's Annual Report to shareholders which may
be obtained free of charge by writing or telephoning John Hancock Investor
Services Corporation ("Investor Services"), at the address or telephone number
listed on the front page of this Prospectus.
Selected data for each class of shares outstanding throughout each period
indicated is as follows:
REGIONAL BANK FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
---------- -------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A**
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of
Period.............................. $ 21.52 $ 21.62 $ 17.47 $ 13.47
---------- -------- -------- -------
Net Investment Income................ 0.52*** 0.39*** 0.26*** 0.21
Net Realized and Unrealized Gain on
Investments......................... 5.92 0.91 5.84 3.98
---------- -------- -------- -------
Total from Investment
Operations.................... 6.44 1.30 6.10 4.19
---------- -------- -------- -------
Less Distributions:
Dividends from Net Investment
Income............................ (0.48) (0.34) (0.26) (0.19)
Distributions from Net Realized Gain
on
Investments Sold.................. (0.34) (1.06) (1.69) --
---------- -------- -------- -------
Total Distributions............. (0.82) (1.40) (1.95) (0.19)
---------- -------- -------- -------
Net Asset Value, End of Period....... $ 27.14 $ 21.52 $ 21.62 $ 17.47
=========== ========= ========= ========
Total Investment Return at Net Asset
Value(a)............................ 31.00% 6.44% 37.45% 31.26%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's
omitted)............................ $ 486,631 $216,978 $ 94,158 $31,306
Ratio of Expenses to Average Net
Assets.............................. 1.39% 1.34% 1.35% 1.41%*
Ratio of Net Investment Income to
Average Net Assets.................. 2.23% 1.78% 1.29% 1.64%*
Portfolio Turnover Rate.............. 14% 13% 35% 53%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of
Period.............................. $ 21.43 $ 21.56 $ 17.44 $ 13.76 $ 8.13 $ 13.00 $ 11.89 $10.02
---------- -------- -------- ------- ------- ------- ------- -------
Net Investment Income................ 0.36*** 0.23*** 0.15*** 0.18 0.29 0.30 0.20 0.16
Net Realized and Unrealized Gain on
Investments......................... 5.89 0.91 5.83 4.56 5.68 (4.19) 2.02 3.12
---------- -------- -------- ------- ------- ------- ------- -------
Total from Investment
Operations.................... 6.25 1.14 5.98 4.74 5.97 (3.89) 2.22 3.28
---------- -------- -------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment
Income............................ (0.32) (0.21) (0.17) (0.28) (0.34) (0.19) (0.16) (0.15)
Distributions from Net Realized Gain
on
Investments Sold.................. (0.34) (1.06) (1.69) (0.78) -- (0.76) (0.95) (1.26)
Distributions from Capital
Paid-In........................... -- -- -- -- -- (0.03) -- --
---------- -------- -------- ------- ------- ------- ------- -------
Total Distributions............. (0.66) (1.27) (1.86) (1.06) (0.34) (0.98) (1.11) (1.41)
---------- -------- -------- ------- ------- ------- ------- -------
Net Asset Value, End of Period....... $ 27.02 $ 21.43 $ 21.56 $ 17.44 $ 13.76 $ 8.13 $ 13.00 $11.89
=========== ========= ========= ======== ======== ======== ======== ========
Total Investment Return at Net Asset
Value(a)............................ 30.11% 5.69% 36.71% 37.20% 75.35% (32.29%) 20.46% 36.89%
<CAPTION>
PERIOD ENDED
---------------------
MARCH 31, MARCH 31,
1987(C) 1987 1986(D)
------- --------- ---------
<S> <C> <C> <C>
CLASS A**
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of
Period..............................
Net Investment Income................
Net Realized and Unrealized Gain on
Investments.........................
Total from Investment
Operations....................
Less Distributions:
Dividends from Net Investment
Income............................
Distributions from Net Realized Gain
on
Investments Sold..................
Total Distributions.............
Net Asset Value, End of Period.......
Total Investment Return at Net Asset
Value(a)............................
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's
omitted)............................
Ratio of Expenses to Average Net
Assets..............................
Ratio of Net Investment Income to
Average Net Assets..................
Portfolio Turnover Rate..............
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of
Period.............................. $ 12.68 $ 12.51 $ 9.40
------- --------- ---------
Net Investment Income................ 0.05 0.20 0.17
Net Realized and Unrealized Gain on
Investments......................... (2.17) 1.74 3.02
------- --------- ---------
Total from Investment
Operations.................... (2.12) 1.94 3.19
------- --------- ---------
Less Distributions:
Dividends from Net Investment
Income............................ (0.04) (0.26) (0.08)
Distributions from Net Realized Gain
on
Investments Sold.................. (0.50) (1.51) --
Distributions from Capital
Paid-In........................... -- -- --
------- --------- ---------
Total Distributions............. (0.54) (1.77) (0.08)
------- --------- ---------
Net Asset Value, End of Period....... $ 10.02 $ 12.68 $ 12.51
======== ========== ==========
Total Investment Return at Net Asset
Value(a)............................ (17.36%)(b) 17.44% 34.08%(d)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's
omitted)............................ $1,236,447 $522,207 $171,808 $56,016 $52,098 $38,992 $81,167 $50,965
Ratio of Expenses to Average Net
Assets.............................. 2.09% 2.06% 1.88% 1.96% 2.04% 1.99% 1.99% 2.17%
Ratio of Net Investment Income to
Average Net Assets.................. 1.53% 1.07% 0.76% 1.21% 2.65% 2.51% 1.67% 1.50%
Portfolio Turnover Rate.............. 14% 13% 35% 53% 75% 56% 85% 87%
<CAPTION>
RATIOS AND SUPPLEMENTAL DATA
<S> <C> <C> <C>
Net Assets, End of Period (000's
omitted)............................ $38,721 $54,626 $48,602
Ratio of Expenses to Average Net
Assets.............................. 2.47%* 1.48% 1.33%*
Ratio of Net Investment Income to
Average Net Assets.................. 0.73%* 1.62% 3.13%*
Portfolio Turnover Rate.............. 58%* 89% 86%*
</TABLE>
- ---------------
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
*** On an average month-end shares outstanding.
(a) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Not annualized.
(c) From April 1, 1987.
(d) From commencement of operations, October 4, 1985.
4
<PAGE> 60
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------------
GOLD & GOVERNMENT FUND 1995 1994 1993 1992(A) 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of
Period.............................. $ 14.35 $ 16.91 $ 15.19 $ 15.31
------- ------- ------- -------
Net Investment Income................. 0.37 0.63 0.76** 0.72
Net Realized and Unrealized Gain
(Loss) on Investments, Financial
Futures Contracts and Written
Options............................. (1.17) (2.28) 1.76 (0.21)
------- ------- ------- -------
Total from Investment Operations.. (0.80) (1.65) 2.52 0.51
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income.. (0.35) (0.67) (0.80) (0.63)
------- ------- ------- -------
Distributions in Excess of Net
Realized Gains on Investments Sold,
Written Options and Financial
Futures Contracts................... -- (0.24)
------- -------
Total Distributions................... (0.35) (0.91) (0.80) (0.63)
========
Net Asset Value, End of Period........ $ 13.20 $ 14.35 $ 16.91 $ 15.19
======== ======== ======== ========
Total Investment Return at Net
Asset Value(c)...................... (5.66%) (10.10%) 17.10% 3.44%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted)..................... $18,300 $16,469 $20,385 $17,593
Ratio of Expenses to Average Net
Assets.............................. 1.60% 1.53% 1.59% 1.68%*
Ratio of Net Investment Income to
Average Net Assets.................. 2.72 4.02% 4.84% 5.49%*
Portfolio Turnover Rate............... 55% 147% 118% 209%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of
Period.............................. $ 14.33 $ 16.89 $ 15.17 $ 15.13 $ 14.51 $ 15.45 $ 14.96 $ 14.98
------- ------- ------- ------- ------- ------- ------- -------
Net Investment Income................. 0.25 0.53 0.69** 0.83 0.87+ 0.91+ 1.00 0.86
Net Realized and Unrealized Gain
(Loss) on Investments, Financial
Futures Contracts and Written
Options............................. (1.14) (2.28) 1.76 0.11 0.76 (0.81) 0.65 0.26
------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations.. (0.89) (1.75) 2.45 0.94 1.63 0.10 1.65 1.12
------- ------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income.. (0.26) (0.57) (0.73) (0.90) (1.01) (1.04) (0.92) (0.74)
Distributions in Excess of Net
Realized Gain on Investments
Sold, Written Options and
Financial Futures Contracts..... -- (0.24) -- -- -- -- (0.24) (0.40)
------- ------- ------- ------- ------- ------- ------- -------
Total Distributions............. (0.26) (0.81) (0.73) (0.90) (1.01) (1.04) (1.16) (1.14)
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period........ $ 13.18 $ 14.33 $ 16.89 $ 15.17 $ 15.13 $ 14.51 $ 15.45 $ 14.96
======== ======== ======== ======== ======== ======== ======== ========
Total Investment Return at Net
Asset Value(c)...................... (6.32%) (10.70%) 16.56% 6.42% 11.78%+ 0.55%+ 11.73% 7.82%
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's
omitted)............................ $16,919 $38,992 $51,872 $36,103 $56,928 $65,498 $63,569 $77,925
Ratio of Expenses to Average Net
Assets.............................. 2.32% 2.18% 2.11% 1.63% 1.82%+ 1.90%+ 1.59% 1.92%
Ratio of Net Investment Income to
Average Net Assets.................. 1.83% 3.41% 4.29% 5.56% 5.96%+ 6.03%+ 6.70% 5.69%
Portfolio Turnover Rate............... 55% 147% 118% 209% 134% 171% 124% 108%
<CAPTION>
PERIOD ENDED
-------------------
MARCH MARCH
31, 31,
1987(D) 1987 1986
-------- -------- --------
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of
Period..............................
Net Investment Income.................
Net Realized and Unrealized Gain
(Loss) on Investments, Financial
Futures Contracts and Written
Options.............................
Total from Investment Operations..
Less Distributions:
Dividends from Net Investment Income..
Distributions in Excess of Net
Realized Gains on Investments Sold,
Written Options and Financial
Futures Contracts...................
Total Distributions...................
Net Asset Value, End of Period........
Total Investment Return at Net
Asset Value(c)......................
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitt
Ratio of Expenses to Average Net Asset
Ratio of Net Investment Income to
Average Net Assets..................
Portfolio Turnover Rate...............
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of
Period.............................. $ 16.56 $ 16.20 $ 14.71
-------- -------- --------
Net Investment Income................. 0.39 1.01 1.12
Net Realized and Unrealized Gain
(Loss) on Investments, Financial
Futures Contracts and Written
Options............................. (1.02 ) 1.07 1.61
-------- -------- --------
Total from Investment Operations.. (0.63 ) 2.08 2.73
-------- -------- --------
Less Distributions:
Dividends from Net Investment Income.. (0.40 ) (1.06 ) (1.20 )
Distributions in Excess of Net
Realized Gain on Investments
Sold, Written Options and
Financial Futures Contracts..... (0.55 ) (0.66 ) (0.04 )
-------- -------- --------
Total Distributions............. (0.95 ) (1.72 ) (1.24 )
-------- -------- --------
Net Asset Value, End of Period........ $ 14.98 $ 16.56 $ 16.20
========= ========= =========
Total Investment Return at Net
Asset Value(c)...................... (6.00%*) 13.93% 19.69%
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitt $80,459 $70,833 $39,469
Ratio of Expenses to Average Net Asset 2.13%* 1.68% 1.45%
Ratio of Net Investment Income to
Average Net Assets.................. 4.22%* 6.06% 7.46%
Portfolio Turnover Rate............... 161% 159% 336%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* On an annualized basis.
** On average month end shares outstanding.
(a) Class A shares commenced operations on January 3, 1992.
(b) Not annualized.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
+ Reflects expense limitations in effect during the years indicated. As a result of such limitations expenses of Class B
shares for the years ended October 31, 1991 and 1990 reflect reductions of $0.01 and less than $0.01, per share,
respectively. Absent of such reductions, for the years ended October 31, 1991 and 1990, the ratio of expenses to average net
assets would have been 1.91% and 1.93%, respectively, and the ratio of net investment income to average net assets would
have been 5.87% and 6.00%, respectively. Without the reimbursement, total investment return would be lower.
(d) From April 1, 1987.
</TABLE>
5
<PAGE> 61
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has a fundamental investment objective with policies and restrictions
to guide its portfolio management. There are market fluctuations and risks in
any investment and therefore there is no assurance that either Fund will achieve
its investment objectives.
REGIONAL BANK FUND
The Fund's investment objective is to achieve capital appreciation from a
portfolio of equity securities of regional banks and lending institutions.
Moderate income is a secondary objective. Under ordinary circumstances, the Fund
will invest at least 65% of its total assets in equity securities, including
common stock and securities convertible into common stock (such as convertible
bonds, convertible preferred stock, and warrants), of regional commercial banks,
industrial banks, consumer banks, savings and loans and bank holding companies
that receive a substantial portion of their income from banks.
- -------------------------------------------------------------------------------
THE FUND INVESTS IN EQUITY
SECURITIES OF REGIONAL BANKS
AND LENDING INSTITUTIONS.
- -------------------------------------------------------------------------------
A regional bank is one that provides full service banking (i.e., savings
accounts, checking accounts, commercial lending and real estate lending), whose
assets are primarily of domestic origin, and which typically has a principal
office outside of New York City and Chicago. Regional Bank Fund may invest in
banks that are not members of the Federal Reserve System or whose deposits are
not insured by the Federal Deposit Insurance Corporation (including any state or
federally chartered savings and loan association). Although the Adviser will
primarily seek opportunities for capital appreciation, many of the regional
banks in which the Fund may invest pay regular dividends. Accordingly, the Fund
also expects to receive moderate income.
Regional Bank Fund may invest some or all of its assets that are not invested in
equity securities of regional banks in the equity securities of financial
services companies, companies with significant lending operations or "money
center" banks. A "money center" bank is one with a strong international banking
business and a significant percentage of international assets, which is
typically located in New York or Chicago. The Fund may invest up to 5% of its
net assets in a combination of below-investment grade debt securities of banks
and non-financial services equities.
To avoid the need to sell equity securities in the portfolio to provide funds
for redemption, and to provide flexibility to Regional Bank Fund to take
advantage of investment opportunities, the Fund may invest up to 15% of its net
assets in short-term (less than one year) investment grade (i.e., rated at the
time of purchase AAA, AA, A or BBB by Standard & Poor's Rating Group or Aaa, Aa,
A or Baa by Moody's Investors Service, Inc.) debt securities of corporations
(such as commercial paper, notes, bonds or debentures), certificates of deposit,
deposit accounts, obligations of the U.S. Government, its agencies and
instrumentalities, or repurchase agreements which are fully-collateralized by
U.S. Government obligations, including repurchase agreements that mature in more
than seven days. When the Adviser believes that financial conditions warrant, it
may invest up to 80% of the Fund's assets in these securities rated in the three
highest categories,
6
<PAGE> 62
for temporary defensive purposes. Medium grade obligations (i.e., those rated
BBB or Baa) lack outstanding investment characteristics and in fact have
speculative characteristics as well and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments. In the event a debt security is subsequently downgraded
below medium grade, the Adviser will consider this event in its determination of
whether the Fund should continue to hold the security. See Appendix A to the
Statement of Additional Information for a description of the various ratings of
investment grade debt securities.
The Fund may write (sell) covered call options and may purchase put and call
options. These investment techniques are discussed in more detail below under
"Certain Investment Strategies" and in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS. Since the Fund's investments will be
concentrated in the banking industry, it will be subject to risks in addition to
those that apply to the general equity market. Events may occur which
significantly affect the entire banking industry. Thus, the Fund's share value
may at times increase or decrease at a faster rate than the share value of a
mutual fund with investments in many industries. In addition, despite some
measure of deregulation, banks and other lending institutions are still subject
to extensive governmental regulation which limits their activities. The
availability and cost of funds to these entities is crucial to their
profitability. Consequently, volatile interest rates and general economic
conditions can adversely affect their financial performance and condition. The
market value of the debt securities in the Fund's portfolio will also tend to
vary in an inverse relationship with changes in interest rates. For example, as
interest rates rise, the market value of debt securities tends to decline.
Regional Bank Fund is not a complete investment program. Because the Fund's
investments are concentrated in the banking industry, an investment in the Fund
may be subject to greater market fluctuations than a fund that does not
concentrate in a particular industry. Thus, it is recommended that an investment
in this Fund be considered only one portion of your overall investment
portfolio.
GOLD & GOVERNMENT FUND
The Fund's investment objective is to achieve capital appreciation and
preservation of the purchasing power of your capital. Moderate income is a
secondary objective.
The Fund will at all times invest at least 65% of its total assets in some
combination of gold and gold mining securities and U.S. Government securities.
John Hancock Advisers, Inc. (the "Adviser") will seek to anticipate oncoming
inflationary and disinflationary economic cycles, and will attempt to achieve
Gold & Government Fund's investment objective of capital appreciation and
preservation of purchasing power, as follows:
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT
OBJECTIVE IS TO ACHIEVE
CAPITAL APPRECIATION AND
PRESERVATION OF THE
PURCHASING POWER OF
YOUR CAPITAL.
- -------------------------------------------------------------------------------
- During periods of actual or anticipated inflation, concentrate its
investments principally in gold or other precious metal mining shares as
described below.
7
<PAGE> 63
- During periods of actual or anticipated disinflation, move from investments
in gold or other precious metals mining shares to a concentration of
investments in U.S. Government and government agency fixed-income
securities.
The Adviser believes that this investment strategy enhances Gold & Government
Fund's potential to achieve its investment objective of capital appreciation
over that which could be achieved by remaining fully invested in gold (and other
precious metals) mining shares. The Adviser does so by seeking to avoid the
decline in the price of gold and other precious metal mining shares that
typically occurs during periods of disinflation, while at the same time,
obtaining the benefit of the increase in value of debt instruments that
typically occurs when interest rates decline during periods of disinflation. The
Adviser's determination as to whether the economy is in an inflationary or
disinflationary environment will be made based upon its evaluation of numerous
economic and monetary factors.
When, by reason of a rising rate of change in the CPI, rising interest rates,
and/or a decline in the value of the U.S. dollar, an inflationary cycle is
expected by the Adviser, Gold & Government Fund will invest at least 25% and up
to 80% of the value of its total assets in the equity securities (common stock,
preferred stock and securities convertible into common and preferred stock) of
companies engaged in the exploration for, mining and processing of, or dealing
in gold and other precious metals such as silver. The Fund may purchase
securities of mining companies located throughout the world, including in
particular the United States, Canada, South Africa and Australia. The Fund may
purchase sponsored or unsponsored American depositary receipts ("ADRs") rather
than the actual security of a foreign company. An ADR is a certificate issued by
a United States bank representing the right to receive securities of a foreign
issuer deposited in that bank or a correspondent bank. Although the Fund
anticipates purchasing most of its gold mining securities on United States
markets, it may from time to time purchase them on foreign markets. In addition,
the Fund may invest up to 10% of the value of its total assets directly in gold,
particularly gold bullion and gold coins.
- -------------------------------------------------------------------------------
HOW THE FUND INVESTS
DURING AN INFLATIONARY CYCLE.
- -------------------------------------------------------------------------------
When, by reason of a declining rate of change in the CPI, declining interest
rates, and/or an increase in the value of the U.S. dollar, a disinflationary
cycle is anticipated, the Fund may invest up to 90% of its assets in debt
instruments of the U.S. Government and its agencies having varied maturities
("U.S. Government securities"). These U.S. Government securities will be
obligations issued or guaranteed as to both principal and interest by the U.S.
Government or backed by the full faith and credit of the United States. In
addition to direct obligations of the U.S. Treasury such as Treasury bonds and
bills, U.S. Government securities include securities and mortgage-backed
securities issued or guaranteed by different agencies such as: Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association,
Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation. The Fund may also invest in securities issued by the U.S.
Government in the form of separately traded principal and interest components of
securities guaranteed by the U.S. Treasury. Because these obligations do not pay
current income, their value may experience more
- -------------------------------------------------------------------------------
HOW THE FUND
INVESTS DURING A
DISINFLATIONARY CYCLE.
- -------------------------------------------------------------------------------
8
<PAGE> 64
volatility when interest rates change than that of other U.S. Government
securities that have similar yields and maturities.
The Fund may invest up to 10% of its net assets in repurchase agreements, which
are fully collateralized by U.S. Government securities, including repurchase
agreements that mature in more than seven days. The Fund may write covered call
options and may purchase put and call options on gold bullion, U.S. Government
securities and equity securities. The Fund may also invest in futures contracts
in gold bullion, financial futures contracts with respect to U.S. Treasury
obligations and related options on such futures contracts. These investment
techniques are discussed in more detail below under "Certain Investment
Strategies" and in the Statement of Additional Information. RISK FACTORS AND
SPECIAL CONSIDERATIONS. The Fund's investment success will depend to a high
degree on the Adviser's ability to anticipate the onset and termination of
inflationary and disinflationary cycles. A failure to anticipate a
disinflationary cycle could result in the Fund's assets being disproportionately
invested in securities of gold or other mining companies. Conversely, a failure
to predict an inflationary cycle could result in the Fund's assets being
disproportionately invested in U.S. Government securities. The securities of
companies engaged in the exploration for, mining and processing of gold and
precious metals have been volatile historically. Mining and other related
securities tend to fluctuate as much as or more than gold during periods of
market instability because operating results will usually be positively or
negatively leveraged by considerable movements in the price of gold. These
securities are further affected by changes in the currency of the country of
domicile. Since the Fund may from time to time, as set forth above, invest up to
80% of its total assets in gold and precious metals mining stocks, the Fund may
be subject to greater risks and market fluctuations than other mutual funds with
portfolios having a broader range of investment alternatives. The Fund's
holdings of gold bullion, if any, will not generate any current income, and
appreciation in the market price of gold is the sole manner in which the Fund
will be able to realize gains on such investment. Investments in foreign
securities may involve certain risks. See "Certain Investment Strategies."
If Gold & Government Fund writes (sells) a substantial number of call options
and the market prices of the underlying securities appreciate, or if the Fund
writes a substantial number of put options and the market prices of the
underlying securities depreciate, there may be a very substantial turnover of
the portfolio. A high rate of portfolio turnover involves correspondingly
greater brokerage expense which will be borne by the Fund and may, under certain
circumstances, make it more difficult for the Fund to qualify as a regulated
investment company under the Internal Revenue Code. See the Statement of
Additional Information for a further discussion of these special considerations.
9
<PAGE> 65
CERTAIN INVESTMENT STRATEGIES
OPTIONS TRANSACTIONS. Gold & Government Fund may purchase call and put options
and write (sell) covered call options on gold bullion, U.S. Government
securities and equity securities in which it may invest. The Fund may not invest
more than 5% of its assets in purchased put and call options. The Fund may write
(sell) covered call options on all or part of its portfolio assets, without
limit. Regional Bank Fund may invest up to 5% of its assets may be invested in
purchased put and call options and may write (sell) covered call options on up
to 30% of its portfolio securities.
The Funds may deal in options listed for trading on a national securities
exchange or traded over-the-counter. The Funds will engage in over-the-counter
options only with member banks of the Federal Reserve System and primary dealers
in U.S. Government securities. The staff of the Securities and Exchange
Commission considers over-the-counter options to be illiquid except under
prescribed conditions, which are discussed in the Statement of Additional
Information.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. Gold & Government Fund may buy and
sell gold bullion and financial futures contracts and options on futures to
hedge against the effects of fluctuations in securities prices, interest rates,
currency exchange rates and other market conditions and for speculative
purposes. The potential loss incurred by the Fund in writing options on futures
is unlimited and may exceed the amount of the premium received. All of the
Fund's futures contracts and options on futures will be traded on a U.S.
commodity exchange or board of trade. The Gold & Government Fund will not engage
in a futures or options transaction for speculative purposes, if immediately
thereafter, the sum of initial margin deposits on existing positions and
premiums required to establish speculative positions in futures contracts and
options on futures would exceed 5% of the Fund's net assets. The Fund intends to
comply with the CFTC regulations with respect to its speculative transactions.
These regulations are discussed further in the Statement of Additional
Information.
REPURCHASE AGREEMENTS. In a repurchase agreement, a Fund buys a security
subject to the right and obligation to sell it back at a higher price. These
transactions must be fully collateralized at all times, but they involve some
credit risk to the Fund if the other party defaults on its obligations and the
Fund is delayed in or prevented from liquidating the collateral.
RESTRICTED SECURITIES. Each Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to Rule
144A under the Securities Act of 1933 (the "Securities Act"). The Trustees will
monitor the Funds' 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
all the Funds' illiquid securities to not more than 10% of each Fund's net
assets.
FOREIGN ISSUERS. Gold & Government Fund may purchase securities of foreign
issuers. Investments in foreign securities may involve a greater degree of risk
than investments in domestic securities due to exchange controls, less publicly
10
<PAGE> 66
available information, more volatile or less liquid securities markets, and the
possibility of expropriation, confiscatory taxation or political, economic or
social instability. Some foreign companies are not generally subject to the same
uniform accounting, auditing and financial reporting requirements as domestic
companies, and foreign regulation of stock exchanges, brokers and securities may
differ considerably from domestic regulation thereof. Additionally, because
foreign securities may be denominated in currencies other than the U.S. dollar,
changes in foreign currency exchange rates will affect the Fund's net asset
value, the value of dividends and interest earned, gains and losses realized on
the sale of securities, and net investment income and gains, if any, to be
distributed to shareholders by the Fund. Securities transactions effected in
some foreign markets may not be settled promptly. Therefore, the Fund's
investments in these markets may be less liquid and subject to the risk of
fluctuating currency exchange rates pending settlement.
INVESTMENT RESTRICTIONS. Each Fund has adopted certain investment restrictions
which are detailed in the Statement of Additional Information, where they are
designated as fundamental or nonfundamental. The Funds' investment objectives
and fundamental restrictions may not be changed without shareholder approval.
All other investment policies and restrictions are nonfundamental and can be
changed by a vote of the Trustees without shareholder approval. Portfolio
turnover rates for recent years are shown in the section "The Funds' Financial
Highlights."
When choosing brokerage firms to carry out the Funds' transactions, the Adviser
gives primary consideration to execution at the most favorable prices, taking
into account the broker's professional ability and quality of service.
Consideration may also be given to the broker's sales of the Funds' 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. They are indirectly owned by John Hancock Mutual Life Insurance
Company, (the "Life Company"), which in turn indirectly owns the Adviser.
- -------------------------------------------------------------------------------
BROKERS ARE CHOSEN BASED ON
BEST PRICE AND EXECUTION.
- -------------------------------------------------------------------------------
ORGANIZATION AND MANAGEMENT OF THE FUNDS
Each Fund is a diversified series of Freedom Investment Trust (the "Trust") an
open-end management investment company organized as a Massachusetts business
trust in 1984. The Trust reserves the right to create and issue a number of
series of shares, or funds or classes thereof, which are separately managed and
have different investment objectives. The Funds are not required to hold annual
shareholder meetings, although special meetings may be held for such purposes as
electing or removing Trustees, changing fundamental policies or approving a
management contract. Each Fund, under certain circumstances, will assist in
shareholder communications with other shareholders.
- -------------------------------------------------------------------------------
THE TRUSTEES ELECT OFFICERS
AND RETAIN THE INVESTMENT
ADVISER WHO IS RESPONSIBLE
FOR THE DAY-TO-DAY
OPERATIONS OF THE FUNDS,
SUBJECT TO THE TRUSTEES'
POLICIES AND SUPERVISION.
- -------------------------------------------------------------------------------
11
<PAGE> 67
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
the Life Company, a financial services company. The Adviser provides the Funds,
and other investment companies in the John Hancock group of funds, with
investment research and portfolio management services. John Hancock Funds, Inc.
("John Hancock Funds") distributes shares for all of the John Hancock funds
directly and through selected broker-dealers ("Selling Brokers"). Freedom
Distributors Corporation, a co-distributor of the Funds, is, along with John
Hancock Funds, (together with John Hancock Funds, the "Distributors") an
indirect subsidiary of the Life Company. Certain Fund officers are also officers
of the Adviser and John Hancock Funds. Pursuant to an order granted by the
Securities and Exchange Commission, each Fund has adopted a deferred
compensation plan for its independent Trustees which allows Trustees' fees to be
invested by the Fund in other John Hancock funds.
- -------------------------------------------------------------------------------
JOHN HANCOCK ADVISERS,
INC. ADVISES INVESTMENT
COMPANIES HAVING A
TOTAL ASSET VALUE OF MORE
THAN $16 BILLION.
- -------------------------------------------------------------------------------
Ann M. McDonley and Kevin R. Baker are co-portfolio managers of Gold &
Government Fund. Ms. McDonley joined the Adviser in 1992 as a fixed income
derivatives specialist. Prior to 1992, she was Vice President and Treasurer of
First Signature Bank & Trust Company, an indirect subsidiary of the Life
Company. Prior to joining the Adviser in 1994 Mr. Baker was President of Baker
Capital Management. He also worked as a registered representative for Kidder
Peabody.
James K. Schmidt is portfolio manager of Regional Bank Fund as well as two
closed-end funds, The Southeastern Thrift and Bank Fund, Inc. and John Hancock
Bank and Thrift Opportunity Fund. He has been portfolio manager of Regional Bank
Fund since its inception. He joined John Hancock in 1985.
In order to avoid conflicts with portfolio trades for the Funds, the Adviser and
each Fund have adopted extensive restrictions on personal securities trading by
personnel of the Adviser and its affiliates. Some of these restrictions are:
pre-clearance for all personal trades and a ban on the purchase of initial
public offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.
12
<PAGE> 68
ALTERNATIVE PURCHASE ARRANGEMENTS
You can purchase shares of each 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.
- -------------------------------------------------------------------------------
AN ALTERNATIVE PURCHASE PLAN ALLOWS YOU TO
CHOOSE THE METHOD OF PAYMENT THAT IS BEST
FOR YOU.
- -------------------------------------------------------------------------------
CLASS A SHARES. If you elect to purchase Class A shares, you will incur an
initial sales charge unless the amount 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 a
Fund's average daily net assets attributable to the Class A shares. Certain
purchases of Class A shares qualify for a reduced initial sales charge. See
"Share Price -- Qualifying for a Reduced Sales Charge."
- -------------------------------------------------------------------------------
INVESTMENTS IN CLASS A
SHARES ARE SUBJECT TO AN
INITIAL SALES CHARGE.
- -------------------------------------------------------------------------------
CLASS B SHARES. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them within
six years of purchase (the "contingent deferred sales charge" or the "CDSC").
Class B shares are subject to ongoing distribution and service fees at a
combined annual rate of up to 1.00% of a Fund's average daily net assets
attributable to the Class B shares. Investing in Class B shares permits all your
dollars to work from the time you make your investment, but the higher ongoing
distribution fee will cause these shares to have higher expenses than Class A
shares. To the extent that any dividends are paid, these higher expenses will
also result in lower dividends than those paid on Class A shares.
- -------------------------------------------------------------------------------
INVESTMENTS IN CLASS B
SHARES ARE SUBJECT TO A
CONTINGENT DEFERRED SALES
CHARGE.
- -------------------------------------------------------------------------------
Class B shares are not available to full-service defined contribution plans
administered by Investor Services or the Life Company that had more than 100
eligible employees at the inception of the Fund account.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider whether,
during the anticipated life of your Fund investment, the CDSC and accumulated
fees on Class B shares would be less than the initial sales charge and
accumulated fees on Class A shares purchased at the same time; and to what
extent this differential would be offset by the Class A shares' lower expenses.
To help you make this determination, the table under the caption "Expense
Information" on the inside cover page of this Prospectus shows examples of the
charges applicable to each class of shares. Class A shares will normally be more
beneficial if you qualify for reduced sales charges. See "Share
Price -- Qualifying for a Reduced Sales Charge."
- -------------------------------------------------------------------------------
YOU SHOULD CONSIDER WHICH
CLASS OF SHARES WILL BE MORE
BENEFICIAL FOR YOU.
- -------------------------------------------------------------------------------
13
<PAGE> 69
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent any
dividends are paid. However, because initial sales charges are deducted at the
time of purchase, you would not have all of your funds invested initially and,
therefore, would initially own fewer shares. If you do not qualify for reduced
initial sales charges and expect to maintain your investment for an extended
period of time, you might consider purchasing Class A shares. This is because
the accumulated distribution and service charges on Class B shares may exceed
the initial sales charge and accumulated distribution and service charges on
Class A shares during the life of your investment.
Alternatively, you might determine that it is more advantageous to purchase
Class B shares to have all of your funds invested initially. However, you will
be subject to higher distribution charges and, for a six-year period, a CDSC.
In the case of Class A shares, the distribution expenses that John Hancock Funds
incurs in connection with the sale of the shares will be paid from the proceeds
of the initial sales charge and the ongoing distribution and service fees. In
the case of Class B shares, the expenses will be paid from the proceeds of the
ongoing distribution and service fees, as well as from the CDSC incurred upon
redemption within six years of purchase. The purpose and function of the CDSC
and ongoing distribution and service fees are the same as those of the Class A
shares' initial sales charge and ongoing distribution and service fees.
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 and shareholder meeting expenses. See "Dividends
and Taxes."
THE FUNDS' EXPENSES
For managing its investment and business affairs, each Fund pays a monthly fee
to the Adviser based upon the average daily net asset value of such Fund at the
annual rate of 0.80% of each respective Fund's first $500 million of average
daily net assets and 0.75% of average daily net assets in excess of $500
million. For the 1995 fiscal year the fee was 0.80% of Gold and Government
Fund's average daily net assets and 0.78% of Regional Bank's average net assets.
The Class A and Class B shareholders of each Fund have adopted distribution
plans (each a "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "1940 Act"). Under these Plans, each Fund will pay distribution and
service fees at an aggregate annual rate of up to 0.30% of each Fund's Class A
shares' average daily net assets and at an aggregate annual rate of up to 1.00%
of each Fund's 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 will be used to reimburse the Distributors for
their distribution expenses, including but not limited to: (i) initial and
ongoing sales compensation to Selling Brokers and others (including affiliates
of the Distributors) engaged in
- -------------------------------------------------------------------------------
THE FUNDS PAY
DISTRIBUTION AND SERVICE
FEES FOR MARKETING AND
SALES RELATED SHAREHOLDER
SERVICING.
- -------------------------------------------------------------------------------
14
<PAGE> 70
the sale of each Funds' shares; (ii) marketing,
promotional and overhead expenses incurred in connection with the distribution
of each Funds' shares; and (iii) with respect to Class B shares only, interest
expenses on unreimbursed distribution expenses. The service fees are paid the
Distributors to compensate Selling Brokers and others providing personal and
account maintenance services to shareholders.
In the event the Distributors are not fully reimbursed for payments they make or
expenses they incur under the Class A Plan, these expenses will not be carried
beyond one year from the date they were incurred. These unreimbursed expenses
under the Class B Plan will be carried forward together with interest on the
balance of these unreimbursed expenses.
For the fiscal year ended October 31, 1995, for Gold & Government Fund and
Regional Bank Fund, respectively, an aggregate of $17,354 and $41,492,867 of
distribution expenses or 0.06% and 5.9% of the average net assets of the Class B
shares was not reimbursed or recovered by the Distributors through the receipt
of deferred sales charges or 12b-1 fees in prior periods.
Information on each Fund's total expenses is in the Financial Highlights section
of this Prospectus.
DIVIDENDS AND TAXES
DIVIDENDS. The Funds generally declare and distribute dividends representing
all or substantially all net investment income. Each Fund may distribute net
short-term capital gains, if any, quarterly, and will distribute net long-term
capital gains, if any, at least annually.
Dividends are reinvested in additional shares of your class unless you elect the
option to receive cash. If you elect the cash option and the U.S. Postal Service
cannot deliver your checks, your election will be converted to the reinvestment
option. Because of the higher expenses associated with Class B shares, any
dividends on these shares will be lower than those on the Class A shares. See
"Share Price."
TAXATION. Dividends from the Funds' net investment income, certain net foreign
exchange gains and net short-term capital gains are taxable to you as ordinary
income and dividends from the Funds' net long-term capital gains are taxable as
long-term capital gain. These dividends are taxable whether received in cash or
reinvested in additional shares. Corporate shareholders may be entitled to take
a corporate dividends received deduction for dividends paid by the Funds
attributable to the dividends they receive from U.S. domestic corporations,
subject to certain restrictions in the Internal Revenue Code of 1986, as amended
(the "Code"). Certain dividends may be paid in January of a given year but may
be taxable as if you received them the previous December. The Funds will send
you a statement by January 31 showing the tax status of the dividends you
received for the prior year.
Each Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. As a regulated investment
15
<PAGE> 71
company, neither Fund will be subject to Federal income taxes on any net
investment income or net realized capital gains that are distributed to its
shareholders within the time period prescribed by the Code. When you redeem
(sell) or exchange shares, you may realize a taxable gain or loss.
Gold & Government Fund anticipates that it will be subject to foreign
withholding taxes or other foreign taxes on income (possibly including capital
gains) on certain foreign investments which will reduce the yield on those
investments. However, if more than 50% of the Fund's total assets at the close
of its taxable year consists of securities of foreign corporations and if the
Fund so elects, shareholders will include in their gross incomes their pro-rata
shares of qualified foreign taxes paid by the Fund and may be entitled subject
to certain conditions and limitations under the Code, to claim a Federal income
tax credit or deduction for their share of these taxes.
On the account application you must certify that your social security or other
taxpayer identification number you provide is correct and that you are not
subject to backup withholding of Federal income tax. If you do not provide this
information or are otherwise subject to this withholding, a Fund may be required
to withhold 31% of your dividends and the proceeds of redemptions or exchanges.
In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respect to your investments in and distributions from a Fund.
Non-U.S. shareholders and tax-exempt shareholders are subject to a different tax
treatment not described above. In many states, a 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 adviser for
specific advice.
PERFORMANCE
Yield reflects a Fund's rate of income on portfolio investments as a percentage
of its share price. Yield is computed by annualizing the result of dividing the
net investment income per share over a 30 day period by the maximum offering
price per share on the last day of that period. Yield is also calculated
according to accounting methods that are standardized for all stock and bond
funds. Because yield accounting methods differ from the methods used for other
accounting purposes, a Fund's yield may not equal the income paid on your shares
or the income reported in the Fund's financial statements.
- -------------------------------------------------------------------------------
THE FUNDS MAY ADVERTISE
THEIR YIELD AND TOTAL RETURN.
- -------------------------------------------------------------------------------
A Fund's total return shows the overall dollar or percentage change in value, of
a hypothetical investment in a Fund, assuming the reinvestment of all dividends.
Cumulative total return shows a Fund's performance over a period of time.
Average annual total return shows the cumulative return of the respective class
of shares of a Fund divided over the number of years included in the period.
Because average annual total return tends to smooth out variations in a Fund's
performance, you should recognize that it is not the same as actual year-to-year
results.
Both total return and yield calculations for Class A shares generally include
the effect of paying the maximum sales charge (except as shown in the "The
Funds' Financial Highlights"). Investments at lower sales charges would result
in higher
16
<PAGE> 72
performance figures. Yield and total return for the Class B shares reflect
deduction of the applicable CDSC imposed on a redemption of shares held for the
applicable period (except as shown in "The Funds' Financial Highlights"). All
calculations assume that all dividends are reinvested at net asset value on the
reinvestment dates during the periods. Yield and total return of Class A and
Class B shares will be calculated separately and, because each class is subject
to certain different expenses, the yield and total return may differ with
respect to each class for the same period. The relative performance of the Class
A and Class B shares will be affected by a variety of factors, including the
higher operating expenses attributable to the Class B shares, whether the Fund's
investment performance is better in the earlier or later portions of the period
measured and the level of net assets of the classes during the period. Each Fund
will include the total return and yield of both classes in any advertisement or
promotional materials including Fund performance data. The value of a Fund's
shares, when redeemed, may be more or less than their original cost. Both yield
and total return are historical calculations and not an indication of future
performance. See "Factors to Consider in Choosing an Alternative."
17
<PAGE> 73
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------
OPENING AN ACCOUNT.
- -------------------------------------------------------------------------------
The minimum initial investment is $1,000 ($250 for group investments and
retirement plans).
Complete the Account Application attached to the Prospectus. Indicate whether you
are purchasing Class A or Class B shares. If you do not specify which class of
shares you are purchasing, Investor Services will assume that you are investing in
Class A shares.
- ---------------------------------------------------------------------------------
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation.
2. Deliver the completed application and check to your registered
representative, Selling Broker or mail it directly to Investor
Services.
- ---------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by contacting your registered
representative, Selling Broker, or by calling 1-800-225-5291.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: [NAME OF FUND]
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative, Selling Broker or mail it directly to Investor
Services.
- ---------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A
AND CLASS B SHARES.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Complete the "Automatic Investing" and "Bank Information"
sections on the Account Privileges Application designating
a bank account from which your funds may be drawn.
MONTHLY
AUTOMATIC 2. The amount you elect to invest will be withdrawn automatically
ACCUMULATION from your bank or credit union account.
PROGRAM
(MAAP)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY TELEPHONE 1. Complete the "Invest-by-Phone" and "Bank Information" sections
on the Account Privileges Application designating a bank
account from which your funds may be drawn. Note that in order
to invest by phone, your account must be in a bank or credit
union that is a member of the Automated Clearing House system
(ACH).
2. After your authorization form has been processed, you may
purchase additional Class A or Class B shares by calling
Investor Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which
your account is registered, the Fund name, the class of shares
you own, your account number, and the amount you wish to
invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
- ---------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 74
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY CHECK 1. Either complete the detachable stub included on your account
statement or include a note with your investment listing the
name of the Fund, the class of shares you own, your account
number and the name(s) in which the account is registered.
</TABLE>
- -------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A
AND CLASS B SHARES.
(CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
2. Make your check payable to John Hancock Investor Services
Corporation.
3. Mail the account information and check to
John Hancock Investor Services Corporation
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling
Broker.
</TABLE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: [NAME OF FUND]
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
- ---------------------------------------------------------------------------------
Other Requirements. All purchases must be made in U.S. dollars. Checks written on
foreign banks will delay purchases until U.S. funds are received, and a collection
charge may be imposed. Shares of the Fund are priced at the offering price based
on the net asset value computed after John Hancock Funds receives notification of
the dollar equivalent from the Fund's custodian bank. Wire purchases normally take
two or more hours to complete and, to be accepted the same day, must be received
by 4:00 p.m., New York time. Your bank may charge a fee to wire funds. Telephone
transactions are recorded to verify information. Certificates are not issued
unless a request is made in writing to Investor Services.
- ---------------------------------------------------------------------------------
</TABLE>
You will receive a statement of your account after any transaction that affects
your share balance or registration (statements related to reinvestment of
dividends and automatic investment/withdrawal plans will be sent to you
quarterly). A tax information statement will be mailed to you by January 31 of
each year.
- -------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT
STATEMENTS THAT YOU SHOULD
KEEP TO HELP WITH YOUR
PERSONAL RECORDKEEPING.
- -------------------------------------------------------------------------------
SHARE PRICE
The net asset value per share ("NAV") is the value of one share. The NAV is
calculated by dividing the net assets of each class by the number of outstanding
shares of that class. The NAV of each class can differ. Securities in the Funds'
portfolios are valued on the basis of market quotations, valuations provided by
independent pricing services or, at fair value as determined in good faith
according to procedures approved by the Trustees. Short-term debt investments
maturing within 60 days are valued at amortized cost which the Board of Trustees
has determined to approximate market value. Foreign securities are valued on the
basis of quotations from the primary market in which they are traded, and are
translated from the local currency into U.S. dollars using current exchange
rates. If quotations are not readily available, or the value have been
materially affected by events occurring after the closing of a foreign market,
assets are valued by a method that the Trustees 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.
- -------------------------------------------------------------------------------
THE OFFERING PRICE OF YOUR
SHARES IS THEIR NET ASSET
VALUE PLUS A SALES CHARGE,
IF APPLICABLE, WHICH WILL
VARY WITH THE PURCHASE
ALTERNATIVE YOU CHOOSE.
- -------------------------------------------------------------------------------
19
<PAGE> 75
Shares of the Funds are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock Funds.
If you buy shares of the Funds through a Selling Broker, the Selling Broker must
receive your investment before the close of regular trading on the New York
Stock Exchange and transmit it to John Hancock Funds before its close of
business to receive that day's offering price.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The offering price you pay
for Class A shares of each Fund equals the NAV plus a sales charge as follows.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE REALLOWANCE TO
AS AS COMBINED SELLING BROKER
A PERCENTAGE A PERCENTAGE REALLOWANCE AS A PERCENTAGE
AMOUNT INVESTED OF OF AND SERVICE FEE AS OF
(INCLUDING SALES OFFERING THE AMOUNT A PERCENTAGE OF OFFERING
CHARGE) PRICE INVESTED OFFERING PRICE(+) PRICE(*)
- ------------------- ------------- ------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Less than $50,000 5.00% 5.26% 4.25% 4.01%
$50,000 to $99,999 4.50% 4.71% 3.75% 3.51%
$100,000 to
$249,999 3.50% 3.63% 2.85% 2.61%
$250,000 to
$499,999 2.50% 2.56% 2.10% 1.86%
$500,000 to
$999,999 2.00% 2.04% 1.60% 1.36%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(***)
</TABLE>
- ---------------
(*) Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales
charge. A Selling Broker to whom substantially the entire sales charge is
reallowed or who receives these incentives may be deemed to be an
underwriter under the Securities Act of 1933.
(**) No sales charge is payable at the time of purchase of Class A shares of $1
million or more, but a CDSC may be imposed in the event of certain
redemption transactions made within one year of purchase.
(***) John Hancock Funds may pay a commission and first year's service fee (as
described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of Class A shares of $1 million or more in the
aggregate as follows: 1% on sales to $4,999,999, 0.50% on the next $5
million and 0.25% on $10 million and over.
(+) At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance, in an amount equal to 0.25% of the net
assets invested in the Fund. Thereafter, it pays the service fee
periodically in arrears in an amount up to 0.25% of the average annual net
assets of the Fund. Selling Brokers receive the fee as compensation for
providing personal and account maintenance services to shareholders.
Sales charges ARE NOT APPLIED to any dividends that are reinvested in additional
Class A shares of either Fund.
John Hancock Funds will pay certain affiliated Selling Brokers at an annual rate
of up to 0.05% of the daily net assets of accounts attributable to such brokers.
Under certain circumstances as described below, investors in Class A shares may
be entitled to pay reduced sales charges. See "Qualifying for a Reduced Sales
Charge."
CONTINGENT DEFERRED SALES CHARGE ON CLASS A SHARES -- INVESTMENTS OF $1 MILLION
OR MORE IN CLASS A SHARES. Purchases of $1 million or more of Class A shares
will be made at net asset value with no initial sales charge, but if the shares
are redeemed within 12 months after the end of the calendar month in
20
<PAGE> 76
which the purchase was made (the CDSC period), a CDSC will be imposed. The rate
of the CDSC will depend on the amount invested as follows:
<TABLE>
<CAPTION>
AMOUNT INVESTED CDSC RATE
- -------------------------------------------------------------- ---------
<S> <C>
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
</TABLE>
Existing full service clients of the Life Company who were group annuity
contract holders as of September 1, 1994 and participant directed defined
contribution plans 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 applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
Therefore, it will be assumed that the redemption is first made from any shares
in your account that are not subject to the CDSC. The CDSC is waived on
redemptions in certain circumstances. See "Waiver of Contingent Deferred Sales
Charge" below.
QUALIFYING FOR A REDUCED SALES CHARGE. If you invest more than $50,000 in Class
A shares of the Funds or combination of John Hancock funds (except money market
funds), you may qualify for a reduced sales charge on your investments 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 the John Hancock funds in meeting the
breakpoints for a reduced sales charge. For the ACCUMULATION PRIVILEGE and
COMBINATION PRIVILEGE, the applicable sales charge will be based on the total
of:
- -------------------------------------------------------------------------------
YOU MAY QUALIFY FOR A
REDUCED SALES CHARGE ON
YOUR INVESTMENT IN
CLASS A SHARES.
- -------------------------------------------------------------------------------
1. Your current purchase of Class A shares of the applicable Fund;
2. The net asset value (at the close of business on the previous day) of (a) all
Class A shares of that Fund you hold, and (b) all Class A shares of any other
John Hancock funds you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
EXAMPLE:
If you hold Class A shares of a John Hancock fund with a net asset value of
$20,000 and, subsequently, invest $30,000 in Class A shares of either Fund, the
sales charge on this subsequent investment would be 4.50% and not 5.00%. This
21
<PAGE> 77
is the rate that would otherwise be applicable to investments of less than
$50,000. See "Initial Sales Charge Alternative -- Class A Shares."
If you are in one of the following categories, you may purchase Class A shares
of the Funds without paying a sales charge:
- - A Trustee or officer of the Trust; a Director or officer of the Adviser and
its affiliates or Selling Brokers; employees or sales representatives of any
of the foregoing; retired officers, employees or Directors of any of the
foregoing; a member of the immediate family of any of the foregoing; or any
Fund, pension, profit sharing or other benefit plan for the individuals
described above.
- -------------------------------------------------------------------------------
CLASS A SHARES MAY BE
AVAILABLE WITHOUT A
SALES CHARGE TO
CERTAIN INDIVIDUALS
AND ORGANIZATIONS.
- -------------------------------------------------------------------------------
- - Any state, county, city or any instrumentality, department, authority, or
agency of these entities that is prohibited by applicable investment laws from
paying a sales charge or commission when it purchases shares of any registered
investment management company.*
- - A bank, trust company, credit union, savings institution or other depository
institution, its trust departments or common trust funds if it is purchasing
$1 million or more for non-discretionary customers or accounts.*
- - A broker, dealer, financial planner, consultant or registered investment
adviser that has entered into an agreement with John Hancock Funds providing
specifically for the use of Fund shares in fee-based investment products or
services made available to their clients.
- - 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 directly to the Fund.
- - A member of an approved affinity group financial services plan.*
- ---------------
* For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A shares of the Funds may also be purchased without an initial sales
charge in connection with certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding companies.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. Class B shares
are offered at net asset value per share without an initial sales charge so that
your entire investment will go to work at the time of purchase. However, Class B
shares redeemed within six years of purchase will be subject to a CDSC at the
rates set forth below. The charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the shares
being redeemed. Accordingly, you will not be assessed a CDSC on increases in
account value above the initial purchase price, including shares derived from
dividend reinvestment.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
reinvestment of dividends, and next from the shares you have held the longest
during the six-year period. The CDSC is waived on redemptions in certain
22
<PAGE> 78
circumstances. See the discussion "Waiver of Contingent Deferred Sales Charges"
below.
EXAMPLE:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time, your CDSC will be calculated as follows:
<TABLE>
<S> <C>
- - Proceeds of 50 shares redeemed at $12 per share $ 600
- - Minus proceeds of 10 shares not subject to CDSC because they were
acquired through dividend reinvestment (10 x $12) -120
- - Minus appreciation on remaining shares, also not subject to CDSC (40 x
$2) -80
------
- - Amount subject to CDSC $ 400
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses
them to defray its expenses related to providing the Funds with distribution
services in connection with the sale of the Class B shares, such as compensating
Selling Brokers for selling these shares. The combination of the CDSC and the
distribution and service fees makes it possible for the Funds to sell 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 redeemed them.
Solely for purposes of determining this holding period, any payments you make
during the month will be aggregated and deemed to have been made on the last day
of the month.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED SALES
CHARGE AS A
YEAR IN WHICH CLASS B SHARES PERCENTAGE
REDEEMED FOLLOWING PURCHASE OF AMOUNT REDEEMED
- ------------------------------------------------------------ ------------------
<S> <C>
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
</TABLE>
A commission equal to 3.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for the provision of
personal and account maintenance services to shareholders during the twelve
months following the sale, and thereafter the service fee is paid in arrears.
If you purchased Class B shares during 1992 or 1993, the applicable CDSC as a
percentage of the amount redeemed will be: 4% for redemptions during the first
year after purchase, 3.5% for redemptions during the second year, 3% for
redemptions during the third year, 2.5% for redemptions during the fourth year,
2% for redemptions during the fifth year, 1% for redemptions during the sixth
year, and
23
<PAGE> 79
no CDSC for redemptions during the seventh year and thereafter. If you purchased
Class B shares before 1992, the applicable CDSC as a percentage of the amount
redeemed will be: 1% for redemptions during the third, fourth and fifth year
after purchase and no CDSC for redemptions during the sixth year and thereafter.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to a CDSC
unless indicated otherwise, in the circumstances defined below:
- - Redemptions of Class B shares made under a Systematic Withdrawal Plan (see
"How to Redeem Shares"), as long as your annual redemptions do not exceed 10%
of your account value at the time you established your Systematic Withdrawal
Plan and 10% of the value of subsequent investments (less redemptions) in that
account at the time you notify Investor Services. This waiver does not apply
to Systematic Withdrawal Plan redemptions of Class A shares that are subject
to a CDSC.
- -------------------------------------------------------------------------------
UNDER CERTAIN
CIRCUMSTANCES, THE CDSC ON
CLASS B AND CLASS A SHARE
REDEMPTIONS WILL BE WAIVED.
- -------------------------------------------------------------------------------
- - Redemptions made to effect distributions from an Individual Retirement Account
either before or after age 59 1/2, as long as the distributions are based on
your life expectancy or the joint-and-last survivor life expectancy of you and
your beneficiary. These distributions must be free from penalty under the
Code.
- - Redemptions made to effect mandatory distributions under the Code after age
70 1/2 from a tax-deferred retirement plan.
- - Redemptions made to effect distributions to participants or beneficiaries from
certain employer-sponsored retirement plans including those qualified under
section 401(a) of the Code, custodial accounts under Section 403(b)(7) of the
Code and deferred compensation plans under Section 457 of the Code. The waiver
also applies to certain returns of excess contributions made to these plans.
In all cases, the distributions must be free from penalty under the Code.
- - Redemptions due to death or disability.
- - Redemptions made under the Reinvestment Privilege, as described in "Additional
Services and Programs" of this Prospectus.
- - Redemptions made pursuant to a Fund's right to liquidate your account if you
own fewer than 50 shares.
- - Redemptions made in connection with certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
- - Redemptions from certain IRA and retirement plans which purchased shares prior
to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you must notify
Investor Services either directly or through your Selling Broker at the time you
make your redemption. The waiver will be granted once Investor Services has
confirmed that you are entitled to the waiver.
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
24
<PAGE> 80
automatically. This will occur no later than the month following eight years
after the shares were purchased, and will result in lower annual distribution
fees. If you exchanged Class B shares into either Fund from another John Hancock
fund, the calculation will be based on the time you purchased the shares in the
original fund. The Funds have been advised that the conversion of Class B shares
to Class A shares of the Fund should not be taxable for Federal income tax
purposes and should not change your tax basis or holding period for the
converted shares.
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any business day. Your shares
will be redeemed at the next NAV calculated after your redemption request is
received in good order by Investor Services, less any applicable CDSC. A Fund
may hold payment until reasonably satisfied that investments recently made by
check or Invest-by-Phone have been collected (which may take up to 10 calendar
days).
Once your shares are redeemed, a Fund generally sends you payment on the next
business day. When you redeem your shares, you may realize a taxable gain or
loss, depending usually on the difference between what you paid for them and
what you receive for them, subject to certain tax rules. Under unusual
circumstances, a Fund may suspend redemptions or postpone payment for up to
three business days or longer, as permitted by Federal securities laws.
25
<PAGE> 81
- --------------------------------------------------------------------------------
<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.
</TABLE>
- -------------------------------------------------------------------------------
TO ASSURE ACCEPTANCE OF
YOUR REDEMPTION REQUEST,
PLEASE FOLLOW THESE
PROCEDURES.
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
If reasonable procedures, such as those described above,
are not followed, the Funds may be liable for any loss due
to unauthorized or fraudulent telephone instructions. In
all other cases, neither the Funds nor Investor Services
will be liable for any loss or expense for acting upon
telephone instructions made according to the telephone
transaction procedures mentioned above.
Telephone redemption is not available for IRAs or other
tax-qualified retirement plans or shares of a Fund that are
in certificated form.
During periods of extreme economic conditions or market
changes, telephone requests may be difficult to implement
due to a large volume of calls. During these times you
should consider placing redemption requests in writing or
use EASI-Line. EASI-Line's telephone number is
1-800-338-8080.
- ---------------------------------------------------------------------------------
BY WIRE If you have a telephone redemption form on file with a
Fund, redemption proceeds of $1,000 or more can be wired on
the next business day to your designated bank account and a
fee (currently $4.00) will be deducted. You may also use
electronic funds transfer to your assigned bank account and
the funds are usually collectible after two business days.
Your bank may or may not charge a fee for this service.
Redemptions of less than $1,000 will be sent by check or
electronic funds transfer.
This feature may be elected by completing the "Telephone
Redemption" section on the Account Privileges Application
that is included with this Prospectus.
- ---------------------------------------------------------------------------------
IN WRITING Send a stock power or "letter of instruction" specifying
the name of the Fund, the dollar amount or the number of
shares to be redeemed, your name, class of shares, your
account number, and the additional requirements listed
below that apply to your particular account.
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
TYPE OF REGISTRATION REQUIREMENTS
---------------- -----------
Individual, Joint Tenants, Sole A letter of instruction signed (with titles
Proprietorship, Custodial where applicable) by all persons authorized
(Uniform Gifts or Transfer to to sign for the account, exactly as it is
Minors Act), General Partners registered with the signature(s) guaranteed
Corporation, Association A letter of instruction and a corporate
resolution, signed by person(s) authorized
to act on the account with the signature(s)
guaranteed
Trusts A letter of instruction signed by the
Trustee(s) with the signature guaranteed.
(If the Trustee's name is not registered on
your account, also provide a copy of the
trust document, certified within the last 60
days.)
If you do not fall into any of these registration categories, please call
1-800-225-5291 for further instructions.
- ---------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 82
- -------------------------------------------------------------------------------
A signature guarantee is a widely accepted way to protect you and the
Funds by verifying the signature on your request. It may not be provided
by a notary public. If the net asset value of the shares redeemed is
$100,000 or less, John Hancock Funds may guarantee the signature. The
following institutions may provide you with a signature guarantee,
provided that the institution meets credit standards established by
Investor Services: (i) a bank; (ii) a securities broker or dealer,
including a government or municipal securities broker or dealer, that is
a member of a clearing corporation or meets certain net capital
requirements; (iii) a credit union having authority to issue signature
guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association;
or (v) a national securities exchange, a registered securities exchange
or a clearing agency.
- -------------------------------------------------------------------------------
WHO MAY GUARANTEE YOUR
SIGNATURE.
- -------------------------------------------------------------------------------
THROUGH YOUR BROKER. Your broker may be able to initiate the redemption.
Contact your broker for instructions.
- -------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your
stock power or a letter of instruction. Unless you specify to the
contrary, any outstanding Class A shares will be redeemed before Class B
shares. You may not redeem certificated shares by telephone.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT REDEMPTIONS.
- -------------------------------------------------------------------------------
Due to the proportionately high cost of maintaining smaller accounts, the
Fund reserves the right to redeem at net asset value all shares in an
account which holds fewer than 50 shares (except accounts under
retirement plans) and to mail the proceeds to the shareholder or the
transfer agent may impose an annual fee of $10.00. No account will be
involuntarily redeemed or additional fee imposed, if the value of the
account is in excess of the Fund's minimum investment. No CDSC will be
imposed on involuntary redemption of shares. Shareholders will be
notified before these redemptions are to be made or this fee is imposed
and will have 30 days to purchase additional shares to bring their
account balance up to the required minimum. Unless the number of shares
acquired by additional purchases and any dividend reinvestments exceeds
the number of shares redeemed, repeated redemptions from a smaller
account may eventually trigger this policy.
- -----------------------------------------------------------------------------
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of investment
goals. Contact your registered representative or Selling Broker and request a
prospectus for the John Hancock funds that interest you. Read the prospectus
carefully before exchanging your shares. You can exchange shares of each class
of a Fund only for shares of the same class of another John Hancock fund. For
this purpose, John Hancock funds with only one class of shares will be treated
as Class A whether or not they have been so designated.
- -------------------------------------------------------------------------------
YOU MAY EXCHANGE SHARES OF
EITHER FUNDS FOR SHARES OF
THE SAME CLASS OF ANOTHER
JOHN HANCOCK FUND.
- -------------------------------------------------------------------------------
Exchanges between funds which are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is imposed.
Class B shares of either Fund that are subject to a CDSC may be exchanged into
Class B shares of another John Hancock fund without incurring the CDSC; however,
these shares will be subject to the CDSC schedule of the shares acquired (except
that exchanges into John Hancock Short-Term Strategic Income Fund, John Hancock
Intermediate Maturity Government Fund 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. However, if you exchange Class B shares purchased prior
to January 1, 1994 for Class B shares of any other John Hancock fund, you will
continue to be subject to the CDSC schedule in effect on your initial purchase
date.
27
<PAGE> 83
Each Fund reserves the right to require you to keep previously exchanged shares
(and reinvested dividends) in the Fund for 90 days before you are permitted a
new exchange. The Funds may also terminate or alter the terms of the exchange
privilege to shareholders upon 60 days' notice.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal income tax purposes. An exchange may
result in a taxable gain or loss.
When you make an exchange, your account registration in both the existing and
new account must be identical. The exchange privilege is available only in
states where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers and
investment advisers may exchange their client's Fund shares, subject to the
terms of those agreements and John Hancock Funds' right to reject or suspend
those exchanges at any time. Because of the restrictions and procedures under
those agreements, the exchanges may be subject to timing limitations and other
restrictions that do not apply to exchanges requested by shareholders directly,
as described above.
Because Fund performance and shareholders can be hurt by excessive trading, each
Fund reserves the right to terminate the exchange privilege for any person or
group that, in John Hancock Funds' judgment, is involved in a pattern of
exchanges that coincide with a "market timing" strategy that may disrupt each
Fund's ability to invest effectively according to its investment objective and
policies, or might otherwise affect the Fund and its shareholders adversely. The
Funds may also temporarily or permanently terminate the exchange privilege for
any person who makes seven or more exchanges out of a Fund per calendar year.
Accounts under common control or ownership will be aggregated for this purpose.
Although the Funds will attempt to give prior notice whenever it is reasonably
able to do so, they 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 the telephone exchange
privilege.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.
3. Your name, the account number, taxpayer identification number applicable to
the account and other relevant information may be requested. In addition,
telephone instructions are recorded.
28
<PAGE> 84
IN WRITING
1. In a letter request an exchange and list the following:
-- the name and class of the Fund whose shares you currently own
-- your account number
-- the name(s) in which the account is registered
-- the name of the fund in which you wish your exchange to be invested
-- the number of shares, all shares or dollar amount
you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
REINVESTMENT PRIVILEGE
1. You will not be subject to a sales charge on Class A shares that you reinvest
in a John Hancock fund that is otherwise subject to a sales charge, as long
as you reinvest within 120 days from the redemption date. If you paid a CDSC
upon a redemption, you may reinvest at net asset value in the same class of
shares from which you redeemed within 120 days. Your account will be credited
with the amount of the CDSC previously charged, and the reinvested shares
will continue to be subject to a CDSC. The holding period of the shares
acquired through reinvestment for purposes of computing the CDSC payable upon
a subsequent redemption will include the holding period of the redeemed
shares.
- -------------------------------------------------------------------------------
IF YOU REDEEM SHARES OF EITHER FUND, YOU
MAY BE ABLE TO REINVEST ALL OR PART OF THE
PROCEEDS IN SHARES OF THAT FUND OR ANOTHER
JOHN HANCOCK FUND WITHOUT PAYING AN
ADDITIONAL SALES CHARGE.
- -------------------------------------------------------------------------------
2. Any portion of the redemption may be reinvested in Fund shares or in shares
of any of the other John Hancock funds, subject to the minimum investment
limit of that fund.
3. To reinvest, you must notify Investor Services in writing. Include the
Fund(s) name, the account number and class from which your shares were
originally redeemed.
SYSTEMATIC WITHDRAWAL PLAN
1. You can elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You can
also obtain the Application from your registered representative or by calling
1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semi-annually or
on a selected monthly basis to yourself or any other designated payee.
- -------------------------------------------------------------------------------
YOU CAN PAY ROUTINE BILLS
FROM YOUR ACCOUNT, OR MAKE
PERIODIC DISBURSEMENTS FROM
YOUR RETIREMENT ACCOUNT
TO COMPLY WITH IRS
REGULATIONS.
- -------------------------------------------------------------------------------
4. There is no limit on the number of payees you may authorize, but all payments
must be made at the same time or intervals.
29
<PAGE> 85
5. It is not advantageous to maintain a Systematic Withdrawal Plan concurrently
with purchases of additional Class A or Class B shares because you may be
subject to initial sales charges on purchases of Class A shares or to a CDSC
on your redemptions of Class B shares. In addition, your redemptions are
taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks, or if deposits to a bank account are returned for any reason.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
1. You can authorize an investment to be withdrawn automatically each month on
your bank, for investment in Fund shares, under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.
- -------------------------------------------------------------------------------
YOU CAN MAKE AUTOMATIC
INVESTMENTS AND SIMPLIFY
YOUR INVESTING.
- -------------------------------------------------------------------------------
2. You 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
Funds.
5. If you have payments withdrawn from a bank account and we are notified that
the account has been closed, withdrawals will be discontinued.
GROUP INVESTMENT PROGRAM
1. An individual account will be established for each participant, but the
initial sales charge for Class A shares will be based on the aggregate dollar
amount of all participants' investments. To determine how to qualify for this
program, contact your registered representative or call 1-800-225-5291.
- -------------------------------------------------------------------------------
ORGANIZED GROUPS OF AT
LEAST FOUR PERSONS MAY
ESTABLISH ACCOUNTS.
- -------------------------------------------------------------------------------
2. The initial aggregate investment of all participants in the group must be at
least $250.
3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum, and you may terminate the program at any
time.
RETIREMENT PLANS
1. You may use either Fund for various types of qualified retirement plans,
including Individual Retirement Accounts, Keogh plans (H.R.10), pension and
profit sharing plans (including 401(k) plans), Tax Sheltered Annuity
retirement plans (403(b) 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.
30
<PAGE> 86
(NOTES)
<PAGE> 87
JOHN HANCOCK GOLD
& GOVERNMENT FUND
JOHN HANCOCK
REGIONAL BANK FUND
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services
Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INDEPENDENT AUDITOR
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchange call 1-800-225-5291
Invest-by-Phone
Telephone Redemption
For: TDD call 1-800-554-6713
JHD-0104P 3/96 [RECYCLE LOGO]
Printed on Recycled Paper
JOHN HANCOCK GOLD
& GOVERNMENT FUND
A MUTUAL FUND SEEKING TO
ACHIEVE CAPITAL APPRECIATION
AND PRESERVATION OF THE
PURCHASING POWER OF THE
INVESTOR'S CAPITAL.
JOHN HANCOCK REGIONAL
BANK FUND
A MUTUAL FUND SEEKING TO
ACHIEVE CAPITAL APPRECIATION
FROM A PORTFOLIO OF EQUITY
SECURITIES OF REGIONAL BANKS
AND LENDING INSTITUTIONS.
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 1, 1996
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
TELEPHONE 1-800-225-5291
<PAGE> 88
JOHN HANCOCK
SOVEREIGN
ACHIEVERS FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 1, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Expense Information ....................... 2
The Fund's Financial Highlights ........... 3
Investment Objective and Policies ......... 4
Organization and Management of the Fund ... 6
Alternative Purchase Arrangements ......... 7
The Fund's Expenses ....................... 9
Dividends and Taxes ....................... 9
Performance ............................... 10
How to Buy Shares ......................... 11
Share Price ............................... 13
How to Redeem Shares ...................... 18
Additional Services and Programs .......... 20
</TABLE>
This Prospectus sets forth information about John Hancock Sovereign
Achievers Fund (the "Fund"), a diversified series of Freedom Investment Trust
(the "Trust"), that you should know before investing. Please read and retain
it for future reference.
Additional information about the Fund has been filed with the Securities
and Exchange Commission (the "SEC"). You can obtain a copy of the Fund's
Statement of Additional Information, dated March 1, 1996 and incorporated by
reference into this Prospectus, free of charge by writing or telephoning:
John Hancock Investor Services Corporation, P.O. Box 9116, Boston,
Massachusetts 02205-9116, 1-800-225-5291 (1-800-554-6713 TDD).
SHARES OF FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 89
EXPENSE INFORMATION
<TABLE>
The purpose of the following information is to help you understand the
various fees and expenses you will bear, directly or indirectly, when you
purchase Fund shares. The operating expenses included in the table and
hypothetical example below are based on actual fees and expenses for the
Class A and Class B shares of the Fund for the fiscal year ended October 31,
1995 adjusted to reflect certain current fees and expenses. Actual fees and
expenses may be greater or less than those indicated.
<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 .................................................................... 0.75% 0.75%
12b-1 fee** ........................................................................ 0.30% 1.00%
Other expenses ..................................................................... 0.40% 0.40%
Total Fund operating expenses ...................................................... 1.45% 2.15%
<FN>
- -------------
* No sales charge is payable at the time of purchase on investments in
Class A shares of $1 million or more, but for these investments a contingent
deferred sales charge may be imposed, as described under the caption "Share
Price," in the event of certain redemption transactions within one year of
purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of average daily net assets, and the remaining portion will be used to
cover distribution expenses.
+ Redemption by wire fee (currently $4.00) not included.
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a hypothetical
$1,000 investment assuming a 5% annual return:
Class A shares ........................................................................ $64 $94 $125 $215
Class B shares
--Assuming complete redemption at end of period ...................................... $72 $97 $135 $231
--Assuming no redemption .............................................................. $22 $67 $115 $231
<FN>
(The example should not be considered as a representation of past or future expenses. Actual expenses may be greater or less
than shown.)
</TABLE>
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the
maximum front-end sales charge permitted under 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> 90
THE FUND'S FINANCIAL HIGHLIGHTS
<TABLE>
The following table of Financial Highlights has been audited by Price
Waterhouse LLP, the Fund's independent accountants, whose unqualified report
is included in the Fund's 1995 Annual Report and is included in the Statement
of Additional Information. Further information about the performance of the
Fund is contained in the Fund's Annual Report to shareholders which may be
obtained free of charge by writing or telephoning John Hancock Investor
Services Corporation ("Investor Services"), at the address or telephone
number listed on the front page of this Prospectus.
Selected data for each class of shares outstanding throughout each period
indicated is as follows:
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 12.02 $ 12.39 $ 10.99 $ 12.81
------- ------- ------- -------
Net Investment Income ........................ 0.08(a) 0.10 0.08(a) 0.06(a)
Net Realized and Unrealized Gain (Loss) on
Investments ................................. 1.29 0.07 1.34 (0.06)
------- ------- ------- -------
Total from Investment Operations ............ 1.37 0.17 1.42 0.00
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ........ (0.10) (0.10) (0.02) (0.07)
Distributions from Net Realized Gain on
Investments Sold ........................... (0.52) (0.44) -- (1.74)
Distributions in Capital Paid In ............ -- -- -- (0.01)
------- ------- ------- -------
Total Distributions ........................ (0.62) (0.54) (0.02) (1.82)
------- ------- ------- -------
Net Asset Value, End of Period .............. $ 12.77 $ 12.02 $ 12.39 $ 10.99
======= ======= ======= =======
Total Investment Return at Net Asset
Value (C) .................................. 12.21% 1.35% 12.97% 0.19%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $27,692 $23,292 $23,372 $ 1,771
Ratio of Expenses to Average Net Assets ...... 1.46% 1.53% 1.60% 1.73%*
Ratio of Net Investment Income to Average
Net Assets ................................. 0.69% 0.83% 0.64% 0.62%*
Portfolio Turnover Rate ...................... 65% 60% 71% 246%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 11.95 $ 12.31 $ 10.97 $ 11.71 $ 9.22
------- ------- ------- ------- -------
Net Investment Income ........................ 0.01(a) 0.03 0.02(a) 0.01(a) 0.07
Net Realized and Unrealized Gain on
Investments .............................. 1.28 0.07 1.33 1.05 2.67
------- ------- ------- ------- -------
Total from Investment Operations ............ 1.29 0.10 1.35 1.06 2.74
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ........ (0.03) (0.02) (0.01) (0.03) (0.20)
Distributions from Net Realized Gain on
Investments Sold .......................... (0.52) (0.44) -- (1.76) (0.05)
Distributions from Capital Paid-In .......... -- -- -- (0.01) --
------- ------- ------- ------- -------
Total Distributions ........................ (0.55) (0.46) (0.01) (1.80) (0.25)
------- ------- ------- ------- -------
Net Asset Value, End of Period .............. $ 12.69 $ 11.95 $ 12.31 $ 10.97 $ 11.71
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value
(C) ......................................... 11.51% 0.78% 12.34% 7.22% 30.21%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $86,178 $94,431 $93,853 $23,525 $21,826
Ratio of Expenses to Average Net Assets ...... 2.11% 2.10% 2.09% 2.27% 2.24%
Ratio of Net Investment Income to Average
Net Assets ................................. 0.06% 0.25% 0.17% 0.10% 0.66%
Portfolio Turnover Rate ...................... 65% 60% 71% 246% 217%
</TABLE>
<TABLE>
<CAPTION>
1990 1989 1988 1987(D)
------- ------- ------- -------
<S> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 11.51 $ 10.29 $ 8.34 $ 10.00
------- ------- ------- -------
Net Investment Income ........................ 0.18 0.19 0.13 0.06
Net Realized and Unrealized Gain on
Investments ................................ (2.00) 1.25 2.05 (1.70)
------- ------- ------- -------
Total from Investment Operations ............ (1.82) 1.44 2.18 (1.64)
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ........ (0.20) (0.12) (0.09) (0.02)
Distributions from Net Realized Gain on
Investments Sold .......................... (0.28) (0.09) (0.14) --
Distributions from Capital Paid In .......... -- -- -- --
------- ------- ------- -------
Total Distributions ........................ (0.48) (0.21) (0.23) (0.02)
------- ------- ------- -------
Net Asset Value, End of Period .............. $ 9.22 $ 11.52 $ 10.29 $ 8.34
======= ======= ======= =======
Total Investment Return at Net Asset Value
(C) ......................................... (16.46%) 14.27% 26.69% (16.44%)(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $17,714 $23,813 $14,927 $14,016
Ratio of Expenses to Average Net Assets ...... 2.13% 2.30% 2.61%+ 2.56%*+
Ratio of Adjusted Expenses to Average Net
Assets ..................................... 1.64% 1.75% 1.46%+ 0.93%*+
Portfolio Turnover Rate ...................... 165% 94% 54% 40%*
<FN>
- ----------------------
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
(a) On average month end shares outstanding.
(b) Not annualized.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(d) From commencement of operations, April 22, 1987.
+ Net of advisory expense reimbursements per share of $0.01 for the fiscal year ended October 31, 1988 and less than $.01 for the
fiscal year ended October 31, 1987.
</TABLE>
3
<PAGE> 91
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO ACHIEVE LONG-TERM GROWTH OF CAPITAL
PRIMARILY FROM A PORTFOLIO OF COMMON STOCKS AND OTHER EQUITY INVESTMENTS.
- --------------------------------------------------------------------------------
The Fund's investment objective is to achieve long-term growth of capital
primarily from a portfolio of common stocks and other equity investments.
Moderate income is a secondary objective. There are market fluctuations and
risks in any investment and therefore there can be no assurance that the Fund
will achieve its investment, objective.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in equity securities, including common stock, preferred stock and debt
securities convertible into common stock. John Hancock Advisers, Inc. (the
"Adviser") will seek to invest the assets of the Fund in a diversified
portfolio consisting primarily of common stocks of high- quality,
growth-oriented companies which the Adviser believes will provide the Fund
with above-average value. Using a company's dividend history as a fundamental
indicator of its financial strength and growth prospects, the Adviser will
pursue a strategy of investing only in those companies which have increased
their dividends for a minimum of five successive years. In addition, the
Adviser will seek to invest in companies exhibiting one or more of the
following traits: a strong rate of growth in earnings per share, a low ratio
of debt to total capital, a seasoned, capable management, or a strong
industry position due to recognized brands or patent protection.
The Fund may purchase securities traded both on recognized securities
exchanges and in the over-the-counter market. While the Fund may invest in
some foreign securities these investments are expected to constitute less
than 10% of the Fund's portfolio. It is the Fund's current intention to
purchase sponsored or unsponsored American Depositary receipts ("ADRs")
rather than the actual securities of a foreign issuer. ADRs are receipts
typically issued by an American bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation, and are
designed for trading in United States securities markets. Issuers of
unsponsored ADRs are not contractually obligated to disclose material
information, including financial information, in the United States and,
therefore, there may not be a correlation between such information and the
market value of the unsponsored ADR.
To avoid the need to sell equity securities in the portfolio to provide funds
for redemption, and to provide flexibility to the Fund to take advantage of
investment opportunities, the Fund may invest up to 15% of its net assets in
long- and short-term debt instruments of varying maturities, including
investment grade (i.e., rated at the time of purchase AAA, AA, A or BBB by
Standard & Poor's Ratings Group or Aaa, Aa, A or Baa by Moody's Investors
Service, Inc.) debt securities of corporations (such as commercial paper,
notes, bonds or debentures), certificates of deposit, money market securities
and obligations of the U.S. Government, its agencies and instrumentalities.
When the Adviser believes that financial conditions present unusual risks
with respect to equity securities, the Fund may invest up to 80% of the
Fund's assets in these securities, rated in the three highest categories, for
temporary defensive purposes. Medium grade obligations (i.e., those rated BBB
or Baa) lack outstanding investment characteristics and in fact have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make
principal and interest payments due on medium grade securities. In the event
these securities are subsequently downgraded below such ratings, the Adviser
will consider
4
<PAGE> 92
this event in determining whether the Fund should continue to hold the
securities. See Appendix A to the Statement of Additional Information for a
description of the various ratings of investment grade debt securities. The
Fund may also enter into repurchase agreements that are fully collateralized
by U.S. Government obligations, including repurchase agreements that mature
in more than seven days.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may buy and sell financial
futures contracts and options on futures to hedge against the effects of
fluctuations in securities prices, interest rates, currency exchange rates
and other market conditions and for speculative purposes. The potential loss
incurred by the Fund in writing options on futures is unlimited and may
exceed the amount of the premium received. The Fund's futures contracts and
options on futures will be traded on a U.S. commodity exchange or board of
trade. The Fund will not engage in a futures or options transaction for
speculative purposes, if immediately thereafter, the sum of initial margin
deposits on existing positions and premiums required to establish speculative
positions in futures contracts and options on futures would exceed 5% of the
Fund's net assets. The fund intends to comply with the CFTC regulations with
respect to its speculative transactions. These regulations are discussed
further in the Statement of Additional Information.
RESTRICTED SECURITIES. The Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to
Rule 144A under the Securities Act of 1933 (the "Securities Act"). 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 all the Fund's illiquid securities to not
more than 10% 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. When the
Fund lends portfolio securities, there is a risk that the borrower may fail
to return the loaned securities. As a result, the Fund may incur a loss or in
the event of the borrower's bankruptcy may be delayed in or prevented from
liquidating the collateral. It is a fundamental policy of the Fund not to
lend portfolio securities having a total value in excess of 5% of its total
assets.
REPURCHASE AGREEMENT. In a repurchase agreement, the Fund buys a security
subject to the right and obligation to sell it back to the issuer at a higher
price. These transactions must be fully collateralized at all times, but they
involve some credit risk to the Fund if the other party defaults on its
obligations and the Fund is delayed in or prevented from liquidating the
collateral.
INVESTMENT RESTRICTIONS. The Fund has adopted certain investment restrictions
which are detailed in the Statement of Additional Information, where they are
designated as fundamental or nonfundamental. The investment objectives and
fundamental restrictions may not be changed without shareholder approval. All
other investment policies and restrictions are nonfundamental and can be
changed by a vote of the Trustees without shareholder approval. Portfolio
turnover rates of the Fund for recent years are shown in the section "The
Fund's Financial Highlights."
5
<PAGE> 93
- --------------------------------------------------------------------------------
INVESTMENTS IN FOREIGN SECURITIES MAY INVOLVE RISKS AND CONSIDERATIONS THAT ARE
NOT PRESENT IN DOMESTIC INVESTMENTS.
- --------------------------------------------------------------------------------
GLOBAL RISKS. Investments in foreign securities may involve certain 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. Security trading
practices abroad may offer less protection to investors such as the Fund. In
addition, foreign securities may be denominated in the currency of the
country in which the issuer is located. Consequently, changes in foreign
exchange rates will affect the value of the Fund's shares and dividends.
- --------------------------------------------------------------------------------
BROKERS ARE CHOSEN BASED ON BEST PRICE AND EXECUTION.
- --------------------------------------------------------------------------------
When choosing brokerage firms to carry out the Fund's transactions, the
Adviser gives primary consideration to execution at the most favorable
prices, taking into account the broker's professional ability and quality of
service. Consideration may also be given to the broker's sales of 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. They are indirectly owned by John Hancock Mutual
Life Insurance Company, (the "Life Company") which in turn indirectly owns
the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
THE TRUSTEES ELECT OFFICERS AND RETAIN THE INVESTMENT ADVISER WHO IS
RESPONSIBLE FOR THE DAY-TO-DAY OPERATIONS OF THE FUND, SUBJECT TO THE
TRUSTEES' POLICIES AND SUPERVISION.
- --------------------------------------------------------------------------------
The Fund is a diversified series of Freedom Investment Trust (the "Trust") an
open-end management investment company organized as a Massachusetts business
trust in 1984. The Trust reserves the right to create and issue a number of
series of shares, or funds or classes thereof, which are separately managed
and have different investment objectives. The Fund is not required to hold
annual shareholder meetings, although special meetings may be held for such
purposes as electing or removing Trustees, changing fundamental policies or
approving a management contract. The Fund, under certain circumstances, will
assist in shareholder communications with other shareholders.
- --------------------------------------------------------------------------------
JOHN HANCOCK ADVISERS, INC. ADVISES INVESTMENT COMPANIES HAVING A TOTAL ASSET
VALUE OF MORE THAN $16 BILLION.
- --------------------------------------------------------------------------------
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary
of 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. Sovereign Asset
Management Corporation ("SAMCorp"), an affiliate of the Adviser, provides
certain investment research and portfolio management services to the Fund.
John Hancock Funds, Inc. ("John Hancock Funds") distributes shares for all of
the John Hancock funds directly and through selected broker-dealers ("Selling
Brokers"). Freedom Distributors Corporation, a co-distributor of the Fund,
is, along with John Hancock Funds, an indirect subsidiary of the Life Company
(together with John Hancock Funds, the "Distributors"). Certain Fund officers
are also officers of the Adviser and John Hancock Funds. Pursuant to an order
granted by the Securities and Exchange Commission, the Fund has adopted a
deferred compensation plan for its independent Trustees which allows
Trustees' fees to be invested by the Fund in other John Hancock funds.
6
<PAGE> 94
John F. Snyder III is on the team of portfolio managers and analysts managing
the Fund. Mr. Snyder is Senior Vice President of SAMCorp and has been
associated with the Adviser since 1991. He is also on the teams managing John
Hancock Sovereign Investors Fund. Inc. and John Hancock Sovereign Balanced
Fund.
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 Adviser and its affiliates. Some of these
restrictions are: pre-clearance for all personal trades and a ban on the
purchase of initial public offerings, as well as contributions to specified
charities of profits on securities held for less than 91 days. These
restrictions are a continuation of the basic principle that the interests of
the Fund and its shareholders come first.
ALTERNATIVE PURCHASE ARRANGEMENTS
- --------------------------------------------------------------------------------
AN ALTERNATIVE PURCHASE PLAN ALLOWS YOU TO CHOOSE THE METHOD OF PAYMENT THAT
IS BEST FOR YOU.
- --------------------------------------------------------------------------------
You can purchase shares of the Fund at a price equal to their net asset value
per share plus a sales charge. At your election, this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge Alternative"
Class A Shares") or on a contingent deferred basis (see "Contingent Deferred
Sales Charge Alternative" Class B Shares"). If you do not specify on you
account application the class of shares you are purchasing, it will be
assumed that you are investing in Class A shares.
- --------------------------------------------------------------------------------
INVESTMENTS IN CLASS A SHARES ARE SUBJECT TO AN INITIAL SALES CHARGE.
- --------------------------------------------------------------------------------
CLASS A SHARES. If you elect to purchase Class A shares, you will incur an
initial sales charge unless the amount you purchase is $1 million or more. If
you purchase $1 million or more of Class A shares, you will not be subject to
an initial sales charge, but you will incur a sales charge if you redeem your
shares within one year of purchase. Class A shares are subject to ongoing
distribution and service fees at a combined annual rate of up to 0.30% of the
Fund's average daily net assets attributable to the Class A shares. Certain
purchases of Class A shares qualify for reduced initial sales charges. See
"Share Price--Qualifying for a Reduced Sales Charge."
- --------------------------------------------------------------------------------
INVESTMENTS IN CLASS B SHARES ARE SUBJECT TO A CONTINGENT DEFERRED SALES
CHARGE.
- --------------------------------------------------------------------------------
CLASS B SHARES. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them
within six years of purchase (the "contingent deferred sales charge" or the
"CDSC"). Class B shares are subject to ongoing distribution and service fees
at a combined annual rate of up to 1.00% of the Fund's average daily net
assets attributable to the Class B shares. Investing in Class B shares
permits all your dollars to work from the time you make your investment, but
the higher ongoing distribution fee will cause these 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 Investment Services or the Life Company that had more than
100 eligible employees at the inception of the Fund account.
7
<PAGE> 95
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE
- --------------------------------------------------------------------------------
YOU SHOULD CONSIDER WHICH CLASS OF SHARES WILL BE MORE BENEFICIAL FOR YOU.
- --------------------------------------------------------------------------------
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider
whether, during the anticipated life of your Fund investment, the CDSC and
accumulated fees on Class B shares would be less than the initial sales
charge and accumulated fees on Class A shares purchased at the same time; and
to what extent this differential would be offset by the Class A shares' lower
expenses. To help you make this determination, the table under the caption
"Expense Information" on the inside cover page of this Prospectus shows
examples of the charges applicable to each class of shares. Class A shares
will normally be more beneficial if you qualify for a reduced sales charges.
See "Share Price--Qualifying for a Reduced Sales Charge."
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent
any dividends are paid. However, because initial sales charges are deducted
at the time of purchase, you would not have all of your funds invested
initially and, therefore, would initially own fewer shares. If you do not
qualify for reduced initial sales charges and expect to maintain your
investment for an extended period of time, you might consider purchasing
Class A shares. This is because the accumulated distribution and service
charges on Class B shares may exceed the initial sales charge and accumulated
distribution and service charges on Class A shares during the life of your
investment.
Alternatively, you might determine that it is more advantageous to purchase
Class B shares to have all of 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 the
CDSC incurred upon redemption within six years of purchase. The purpose and
function of the Class B shares' CDSC and ongoing distribution and service
fees are the same as those of the Class A shares' initial sales charge and
ongoing distribution and service fees.
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 its own
distribution and service fees, and shareholder meeting expenses. See
"Dividends and Taxes."
8
<PAGE> 96
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a fee to the
Adviser, which for the 1995 fiscal year was 0.75% of the Fund's average daily
net assets. The Adviser pays Samcorp a portion of the fee received by the
Adviser from the Fund. There is no additional cost to the Fund. The
investment management fee paid by the Fund is higher than the fees paid by
most mutual funds but is comparable to fees paid by those funds with a
similar investment objective.
- --------------------------------------------------------------------------------
THE FUND PAYS DISTRIBUTION AND SERVICE FEES FOR MARKETING AND SALES-RELATED
SHAREHOLDER SERVICING.
- --------------------------------------------------------------------------------
The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). Under these Plans the Fund will pay distribution and service
fees at an aggregate annual rate of up to 0.30% of the Class A shares'
average daily net assets and an aggregate annual rate of up to 1.00% of the
Class B shares' average daily net assets. In each case, up to 0.25% is for
service expenses and the remaining amount is for distribution expenses. The
distribution fees will be used to reimburse the Distributors for their
distribution expenses, including but not limited to: (i) initial and ongoing
sales compensation to Selling Brokers and others (including affiliates of the
Distributors) engaged in the sale of Fund shares; (ii) marketing, promotional
and overhead expenses incurred in connection with the distribution of Fund
shares; and (iii) with respect to Class B shares only, interest expenses on
unreimbursed distribution expenses. The service fees are paid to the
Distributors to compensate Selling Brokers and others providing personal and
account maintenance services to shareholders.
In the event the Distributors are not fully reimbursed for payments they make
or expenses they incur under the Class A Plan, these expenses will not be
carried beyond one year from the date they were incurred. These unreimbursed
expenses under the Class B Plan will be carried forward together with
interest on the balance of these unreimbursed expenses.
For the fiscal year ended October 31, 1995, an aggregate of $3,620,687 of
distribution expenses or 3.99%, of the average net assets of the Class B
shares of the Fund, was not reimbursed or recovered by the Distributors
through the receipt of deferred sales charges or 12b-1 fees in prior periods.
Information on the Fund's total expenses is in the Fund's Financial
Highlights section of this Prospectus.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund generally declares and distributes dividends representing
all or substantially all net investment income semi-annually. The Fund may
distribute net short-term capital gains, if any, semi-annually, and will
distribute net long-term capital gains, if any, at least annually.
Dividends are reinvested in additional shares of your class unless you elect
the option to receive cash. If you elect the cash option and the U.S. Postal
Service cannot deliver your checks, your election will be converted to the
reinvestment option. Because of the higher expenses associated with Class B
shares, any dividend on these shares will be lower than those on the Class A
shares. See "Share Price."
TAXATION. Dividends from the Fund's net investment income, certain net
foreign exchange gains, and net short-term capital gains are taxable to you
as ordinary
9
<PAGE> 97
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. Corporate shareholders may be
entitled to take a corporate dividends received deduction for dividends paid
by the Fund attributable to the dividends it receives from U.S. domestic
corporations, subject to certain restrictions in the Internal Revenue Code of
1986, as amended (the "Code"). Certain dividends may be paid in January of a
given year but may be taxable as if you received them the previous December.
The Fund will send you a statement by January 31 showing the tax status of
the dividends you received for the prior year.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. As a regulated investment
company, the Fund will not be subject to Federal income tax on any net
investment income or net realized capital gains distributed to its
shareholders within the time period prescribed by the Code. When you redeem
(sell) or exchange shares, you may realize a taxable gain or loss.
The Fund anticipates that it will be subject to foreign withholdings taxes or
other foreign taxes on income (possibly including capital gains) on certain
foreign investments, which will reduce the yield on those investments. The
Fund does not expect to qualify to pass such taxes and any associated tax
deductions or credits through to its shareholders.
On the account application you must certify that your social security or
other taxpayer identification number you provide is correct and that you are
not subject to backup withholding of Federal income tax. If you do not
provide this information or are otherwise subject to this withholding, the
Fund may be required to withhold 31% of your dividends and the proceeds of
redemptions or exchanges.
In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respect to your investments in and distributions from the Fund.
Non-U.S. shareholders and tax-exempt shareholders are subject to a different
tax treatment not described above. In many states, a 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
adviser for specific advice.
PERFORMANCE
- --------------------------------------------------------------------------------
THE FUND MAY ADVERTISE ITS YIELD AND TOTAL RETURN.
- --------------------------------------------------------------------------------
Yield reflects the Fund's rate of income on portfolio investments as a
percentage of its share price. Yield is computed by annualizing the result of
dividing the net investment income per share over a 30 day period by the
maximum offering price per share on the last day of that period. Yield is
also calculated according to accounting methods that are standardized for all
stock and bond funds. Because yield accounting methods differ from the
methods used for other accounting purposes, the Fund's yield may not equal
the income paid on your shares or the income reported in the Fund's financial
statements.
The Fund's total return shows the overall dollar or percentage change in
value of a hypothetical investment in the Fund, assuming the reinvestment of
all dividends. 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.
10
<PAGE> 98
Both total return and yield calculations for Class A shares generally include
the effect of paying the maximum sales charge (except as shown in "The Fund's
Financial Highlights"). Investments at lower sales charges would result in
higher performance figures. Yield and total return for the Class B shares
reflect deduction of the applicable CDSC 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. Yield and total
return of Class A and Class B shares will be calculated separately and,
because each class is subject to different expenses, the yield and total
return may differ with respect to each class for the same period. The
relative performance of the Class A and Class B shares will be affected by a
variety of factors, including the higher operating expenses attributable to
the Class B shares, whether the Fund's investment performance is better in
the earlier or later portions of the period measured and the level of net
assets of the classes during the period. The Fund will include the total
return of both classes in any advertisement or promotional materials
including the Fund's performance data. The value of the Fund's shares, when
redeemed, may be more or less than their original cost. Both yield and total
return are historical calculations and are not an indication of future
performance. See "Factors to Consider in Choosing an Alternative."
HOW TO BUY SHARES
<TABLE>
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT.
- --------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
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 that you are investing in Class A shares.
- ----------------------------------------------------------------------------------------------------------
<S> <C>
BY CHECK 1. Make your check payable to John Hancock Investor Services Corporation.
2. Deliver the completed application and check to your registered representative,
Selling Broker, or mail it directly to Investor Services.
- ----------------------------------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by contacting your registered representative, Selling
Broker or by calling 1-800-225-5291.
2. Instruct your bank to wire funds:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Sovereign Achievers Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered representative, Selling Broker
or mail it directly to Investor Services.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 99
<TABLE>
- --------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A AND CLASS B SHARES.
- --------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
<S> <C>
MONTHLY 1. Complete the "Automatic Investing" and "Bank Information" sections on the Account
AUTOMATIC Privileges Application designating a bank account from which funds may be drawn.
ACCUMULATION 2. The amount you elect to invest will be withdrawn automatically from your bank or
PROGRAM credit union account.
(MAAP)
- ----------------------------------------------------------------------------------------------------------
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 and Class B shares by calling Investor Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which your account is
registered, the Fund name, the class of shares you own, your account number and the
amount you wish to invest.
4. Your investment normally will be credited to your account the business day
following your phone request.
- ----------------------------------------------------------------------------------------------------------
BY CHECK 1. Either complete the detachable stub included on your account statement or include a
note with your investment listing the name of the Fund, the class 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, Inc.
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling Broker.
- ----------------------------------------------------------------------------------------------------------
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA No. 211475000
For credit to: John Hancock Sovereign Achievers Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
- ----------------------------------------------------------------------------------------------------------
Other Requirements. All purchases must be made in U.S. dollars. Checks written on foreign banks will delay
purchases until U.S. funds are received, and a collection charge may be imposed. Shares of the Fund are
priced at the offering price based on the net asset value computed after John Hancock Funds receives
notification of the dollar equivalent from the Fund's custodian bank. Wire purchases normally take two or
more hours to complete and, to be accepted the same day, must be received by 4:00 p.m., New York time.
Your bank may charge a fee to wire funds. Telephone transactions are recorded to verify information.
Certificates are not issued unless a request is made in writing to Investor Services.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT STATEMENTS THAT 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.
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<PAGE> 100
SHARE PRICE
- --------------------------------------------------------------------------------
THE OFFERING PRICE OF YOUR SHARES IS THEIR NET ASSET VALUE PLUS A SALES
CHARGE, IF APPLICABLE, WHICH WILL VARY WITH THE PURCHASE ALTERNATIVE YOU
CHOOSE.
- --------------------------------------------------------------------------------
The net asset value per share ("NAV") is the value of one share. The NAV is
calculated by dividing the net assets of each class by the number of
outstanding shares of that class. The NAV of each class can differ.
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 the Board of Trustees has determined to approximate
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.
<TABLE>
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge as follows:
<CAPTION>
COMBINED
REALLOWANCE
SALES SALES AND REALLOWANCE
CHARGE CHARGE SERVICE TO SELLING
AS A AS A FEE AS A BROKER AS A
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT INVESTED OF OF THE OF OF THE
(INCLUDING SALES OFFERING AMOUNT OFFERING OFFERING
CHARGE) PRICE INVESTED PRICE(+) PRICE (*)
- --------------------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Less than $50,000 5.00% 5.26% 4.25% 4.01%
$50,000 to $99,999 4.50% 4.71% 3.75% 3.51%
$100,000 to $249,999 3.50% 3.63% 2.85% 2.61%
$250,000 to $499,999 2.50% 2.56% 2.10% 1.86%
$500,000 to $999,999 2.00% 2.04% 1.60% 1.36%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(***)
<FN>
==================
(*) Upon notice to Selling Brokers with whom it has sales agreements,
John Hancock Funds may reallow an amount up to the full applicable sales
charge. 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 CDSC 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 $1 million or more in aggregate as follows: 1%
on sales to $4,999,999, 0.50% on the next $5 million and 0.25% on $10
million and over.
</TABLE>
13
<PAGE> 101
(+) 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 Class A 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 described below, investors in Class A shares may
be entitled to pay reduced sales charges. See "Qualifying for a Reduced Sales
Charge."
<TABLE>
CONTINGENT DEFERRED SALES CHARGE ON CLASS A SHARES--INVESTMENTS OF $1 MILLION
OR MORE IN CLASS A SHARES. Purchases of $1 million or more of Class A shares
will be made at net asset value with no initial sales charge, but if shares
are redeemed within 12 months after the end of the calendar month in which
the purchase was made (the CDSC period), a CDSC will be imposed. The rate of
the CDSC will depend on the amount invested as follows:
<CAPTION>
AMOUNT INVESTED CDSC RATE
- ------------------------------ ----------
<S> <C>
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
</TABLE>
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 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 applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the redemption is first made from
any shares in your account that are not subject to the CDSC. The CDSC is
waived on redemptions in certain circumstances. See "Waiver of Contingent
Deferred Sales Charges" below.
14
<PAGE> 102
- --------------------------------------------------------------------------------
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE ON YOUR INVESTMENT IN CLASS A
SHARES.
- --------------------------------------------------------------------------------
QUALIFYING FOR A REDUCED SALES CHARGE. If you invest more than $50,000 in Class
A shares of the Fund or a combination of 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 the John Hancock funds in meeting the
breakpoints for a reduced sales charge. For the ACCUMULATION PRIVILEGE and
COMBINATION PRIVILEGE, the applicable sales charge will be based on the total
of:
1. Your current purchase of Class A shares of the Fund;
2. The net asset value (at the close of business on the previous day) of (a)
all Class A shares of the Fund you hold, and (b) all Class A shares of any
other John Hancock funds you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
EXAMPLE:
If you hold Class A shares of a John Hancock fund with a net asset value of
$20,000 and, subsequently, invest $30,000 in Class A shares of the Fund, the
sales charge on this subsequent investment would be 4.50% and not 5.00%. This
is the rate that would otherwise be applicable to investments of less than
$50,000. See "Initial Sales Charge Alternative--Class A Shares."
If you are in one of the following categories, you may purchase Class A
shares of the Fund without paying a sales charge:
- --------------------------------------------------------------------------------
CLASS A SHARES MAY BE AVAILABLE WITHOUT A SALES CHARGE TO CERTAIN INDIVIDUALS
AND ORGANIZATIONS.
- --------------------------------------------------------------------------------
o A Trustee or officer of the Trust; a Director or officer of the
Adviser and its affiliates or Selling Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family of any of
the foregoing; or any Fund, pension, profit sharing or other benefit plan for
the individuals described above.
o Any state, county, city or any instrumentality, department,
authority or agency of these entities that is prohibited by applicable
investment laws from paying a sales charge or commission when it purchases
shares of any registered investment management company.*
o A bank, trust company, credit union, savings institution or other
depository institution, its trust departments or common trust funds if it is
purchasing $1 million or more for non-discretionary customers or accounts.*
o A broker, dealer, financial planner, consultant or registered
investment adviser that has entered into an agreement with John Hancock Funds
providing specifically for the use of Fund shares in fee-based investment
products or services made available to their clients.
o 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 directly to the Fund.
o A member of an approved affinity group financial services plan.*
- ------------------
* 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.
15
<PAGE> 103
Class A shares of the Fund may also be purchased without a sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES. Class B shares
are offered at net asset value per share without an initial sales charge, so
that your entire investment will go to work at the time of purchase. However,
Class B shares redeemed within six years of purchase will be subject to a
CDSC at the rates set forth below. The charge will be assessed on an amount
equal to the lesser of the current market value or the original purchase cost
of the shares being redeemed. Accordingly, you will not be assessed a CDSC on
increases in account value above the initial purchase price, including shares
derived from dividend reinvestment.
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. It will be assumed that your redemption comes first from shares you
have held beyond the six-year CDSC redemption period or those you acquired
through reinvestment of dividends, and next from the shares you have held the
longest during the six-year period. The CDSC is waived on redemptions in
certain circumstances. See the discussion "Waiver of Contingent Deferred
Sales Charges" below.
EXAMPLE:
<TABLE>
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time, the CDSC will be calculated as follows:
<CAPTION>
<S> <C>
o Proceeds of 50 shares redeemed at $12 per share $600
o Minus proceeds of 10 shares not subject to CDSC because they were
acquired through dividend reinvestment (10 X $12) -120
o Minus appreciation on remaining shares, also not subject to CDSC (40 X $2 - 80
----
o Amount subject to CDSC $400
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds
uses them to defray its expenses related to providing the Fund with
distribution services in connection with the sale of the Class B shares, such
as compensating Selling Brokers for selling these shares. The combination of
the CDSC and the distribution and service fees makes it possible for the Fund
to sell Class B shares without 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.
16
<PAGE> 104
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
YEAR IN WHICH CLASS B SHARES PERCENTAGE
REDEEMED FOLLOWING PURCHASE OF AMOUNT REDEEMED
- ------------------------------- ---------------------
<S> <C>
First ............................. 5.0%
Second ............................ 4.0%
Third ............................. 3.0%
Fourth ............................ 3.0%
Fifth ............................. 2.0%
Sixth ............................. 1.0%
Seventh and thereafter ............ None
</TABLE>
A commission equal to 3.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for the provision
of personal and account maintenance services to shareholders during the
twelve months following the sale, and thereafter the service fee is paid in
arrears.
If you purchased Class B shares during 1992 or 1993, the applicable CDSC as a
percentage of the amount redeemed will be: 4% for redemptions during the
first year after purchase, 3.5% for redemptions during the second year, 3%
for redemptions during the third year, 2.5% for redemptions during the fourth
year, 2% for redemptions during the fifth year, 1% for redemptions during the
sixth year, and no CDSC for redemptions during the seventh year and
thereafter. If you purchased Class B shares before 1992, the applicable CDSC
as a percentage of the amount redeemed will be: 1% for redemptions during the
third, fourth and fifth years after purchase and no CDSC for redemptions
during the sixth year and thereafter.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to CDSC,
unless indicated otherwise, in the circumstances defined below:
- --------------------------------------------------------------------------------
UNDER CERTAIN CIRCUMSTANCES, THE CDSC ON CLASS B AND CERTAIN CLASS A SHARE
REDEMPTIONS WILL BE WAIVED
- --------------------------------------------------------------------------------
o Redemptions of Class B shares made under a Systematic Withdrawal
Plan (see "How To Redeem Shares"), as long as your annual redemptions do not
exceed 10% of your account value at the time you established your Systematic
Withdrawal Plan and 10% of the value of subsequent investments (less
redemptions) in that account at the time you notify Investor Services. This
waiver does not apply to Systematic Withdrawal Plan redemptions of Class A
shares that are subject to a CDSC.
o Redemptions made to effect distributions from an Individual
Retirement Account either before or after age 59-1/2, as long as the
distributions are based on your life expectancy or the joint-and-last
survivor life expectancy of you and your beneficiary. These distributions
must be free from penalty under the Code.
o Redemptions made to effect mandatory distributions under the Code
after age 70-1/2 from a tax-deferred retirement plan.
o 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.
17
<PAGE> 105
o Redemptions due to death or disability.
o Redemptions made under the Reinvestment Privilege, as described in
"Additional Services and Programs" of this Prospectus.
o Redemptions made pursuant to the Fund's right to liquidate your
account if you own fewer than 50 shares.
o Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
o 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 no later than the month following eight years
after the shares were purchased, and will result in lower annual distribution
fees. If you exchanged Class B shares into this Fund from another John
Hancock fund, the calculation will be based on the time you purchased the
shares in the original fund. The Fund has been advised that the conversion of
Class B shares to Class A shares should not be taxable for Federal income tax
purposes, and should not change your tax basis or tax holding period for the
converted shares.
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next NAV calculated after your redemption
request is received in good order by Investor Services less any applicable
CDSC. The Fund may hold payment until reasonably satisfied that investments
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.
18
<PAGE> 106
<TABLE>
- --------------------------------------------------------------------------------
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION REQUEST, PLEASE FOLLOW THESE PROCEDURES.
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<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 certificated form.
During periods of extreme economic conditions or market changes, telephone requests may be
difficult to implement due to a large volume of calls. During these times you should consider
placing redemption requests in writing or using EASI Line. EASI Line's 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 collectible 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 included with this Prospectus.
- ---------------------------------------------------------------------------------------------------------------------
IN WRITING Send a stock power or "letter of instruction" specifying the name of the Fund, the dollar
amount or the number of shares to be redeemed, your name, class of shares, your account number,
and the additional requirements listed below that apply to your particular account.
- ---------------------------------------------------------------------------------------------------------------------
TYPE OF REGISTRATION REQUIREMENTS
- -------------------- ------------
Individual, Joint Tenants, Sole Pro- A letter of instruction signed (with titles where applicable)
prietorship, Custodial (Uniform by all persons authorized to sign for the account, exactly as
Gifts or Transfer to Minors Act), it is registered with the signature(s) guaranteed.
General Partners
Corporation, Association A letter of instruction and a corporate resolution, signed by
person(s) authorized to act on the account, with the
signature(s) guaranteed.
Trusts A letter of instruction signed by the Trustee(s) with the
signature guaranteed. (If the Trustee's name is not
registered on your account, also provide a copy of the trust
document, certified within the last 60 days.)
If you do not fall into any of these registration categories please call 1-800-225-5291 for further instructions.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 107
- --------------------------------------------------------------------------------
WHO MAY GUARANTEE YOUR SIGNATURE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A signature guarantee is a widely accepted way to protect you and the Fund by
verifying the signature on your request. It may not be provided by a notary
public. If the net asset value of the shares redeemed is $100,000 or less, John
Hancock Funds may guarantee the signature. The following institutions may
provide you with a signature guarantee, provided that the institution meets
credit standards established by Investor Services: (i) a bank; (ii) a securities
broker or dealer, including a government or municipal securities broker or
dealer, that is a member of a clearing corporation or meets certain net capital
requirements; (iii) a credit union having authority to issue signature
guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association; or (v) a
national securities exchange, a registered securities exchange or a clearing
agency.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THROUGH YOUR Your broker may be able to initiate the redemption. Contact
BROKER your broker for instructions.
- --------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your stock
power or a letter of instruction. Unless you specify to the contrary, any
outstanding Class A shares will be redeemed before Class B shares. You may not
redeem certificated shares by telephone. Due to the proportionately high cost of
maintaining smaller accounts, the Fund reserves the right to redeem at net asset
value all shares in an account which holds fewer than 50 shares (except accounts
under retirement plans) and to mail the proceeds to the shareholder, or the
transfer agent may impose an annual fee of $10.00. No account will be
involuntarily redeemed or additional fee imposed, if the value of the account is
in excess of the Fund's minimum initial investment. No CDSC will be imposed on
any involuntary redemption of shares.
Shareholders will be notified before these redemptions are to be made or this
fee is imposed and will have 30 days to purchase additional shares to bring
their account balance up to the required minimum. Unless the number of shares
acquired by additional purchases and any dividend reinvestments, exceeds the
number of shares redeemed, repeated redemptions from a smaller account may
eventually trigger this policy.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOU MAY EXCHANGE SHARES OF THE FUND FOR SHARES OF THE SAME CLASS OF ANOTHER
JOHN HANCOCK FUND.
- --------------------------------------------------------------------------------
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of
investment goals. Contact your registered representative or Selling Broker
and request a prospectus for the John Hancock funds that interest you. Read
the prospectus carefully before exchanging your shares. You can exchange
shares of each class of the Fund only for shares of the same class of another
John Hancock fund. For this purpose, John Hancock funds with only one class
of shares will be treated as Class A, whether or not they have been so
designated.
Exchanges between funds which are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is
imposed. Class B shares of the Fund that are subject to a CDSC may be
exchanged into Class B shares of another John Hancock fund without incurring
the CDSC; however, these shares will be subject to the CDSC schedule of the
shares acquired (except that exchanges into John Hancock Short-Term Strategic
Income Fund, John Hancock Intermediate Matur- ity Government Fund 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. However, if you
exchange Class B shares purchased prior to January 1, 1994 for Class B shares
of any other John Hancock fund, you will continue to be subject to the CDSC
schedule in effect on your initial purchase date.
20
<PAGE> 108
The Fund reserves the right to require you to keep previously exchanged
shares (and reinvested dividends) in the Fund for 90 days before you are
permitted a new exchange. The Fund may also terminate or alter the terms of
the exchange privilege, upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and
the purchase of shares of another for Federal income tax purposes. An
exchange may result in a taxable gain or loss.
When you make an exchange, your account registration in both the existing
and new account must be identical. The exchange privilege is available only
in states where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers,
brokers and investment advisers may exchange their clients' Fund shares,
subject to the terms of those agreements and John Hancock Funds' right to
reject or suspend those exchanges at any time. Because of the restrictions
and procedures under those agreements, the exchanges may be subject to timing
limitations and other restrictions that do not apply to exchanges requested
by shareholders directly, as described above.
Because Fund performance and shareholders can be hurt by excessive
trading, the Fund reserves the right to terminate the exchange privilege for
any person or group that, in John Hancock Funds' judgment, is involved in a
pattern of exchanges that coincide with a "market timing" strategy that may
disrupt the Fund's ability to invest effectively according to its investment
objective and policies, or might otherwise affect the Fund and its
shareholders adversely. The Fund may also temporarily or permanently
terminate the exchange privilege for any person who makes seven or more
exchanges out of the Fund per calendar year. Accounts under common control or
ownership will be aggregated for this purpose. Although the Fund will attempt
to give prior notice whenever it is reasonably able to do so, it may impose
these restrictions at any time.
BY TELEPHONE
1. When you complete the application for your initial purchase of Fund
shares, you automatically authorize exchanges by telephone unless you check
the box indicating that you do not wish to authorize telephone exchanges.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give the telephone
representative.
3. 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
21
<PAGE> 109
-- the name(s) in which the account is registered
-- the name of the fund in which you wish your exchange to be invested
-- the number of shares, all shares or the dollar amount you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
REINVESTMENT PRIVILEGE
- --------------------------------------------------------------------------------
IF YOU REDEEM SHARES OF THE FUND, YOU MAY BE ABLE TO REINVEST ALL OR PART OF THE
PROCEEDS IN SHARES OF THIS FUND OR ANOTHER JOHN HANCOCK FUND WITHOUT PAYING AN
ADDITIONAL SALES CHARGE.
- --------------------------------------------------------------------------------
1. You will not be subject to a sales charge on Class A shares that you
reinvest in a John Hancock fund that is otherwise subject to a sales charge,
as long as you reinvest within 120 days from the redemption date. If you paid
a CDSC upon a redemption, you may reinvest at net asset value in the same
class of shares from which you redeemed within 120 days. Your account will be
credited with the amount of the CDSC previously charged, and the reinvested
shares will continue to be subject to a CDSC. The holding period of the
shares acquired through reinvestment for purposes of computing the CDSC
payable upon a subsequent redemption will include the holding period of the
redeemed shares.
[/R]
2. Any portion of your redemption may be reinvested in Fund shares or in
shares of other John Hancock funds, subject to the minimum investment limit
of that fund.
[/R]
3. To reinvest, you must notify Investor Services in writing. Include the
Fund's name, account number and class from which your shares were originally
redeemed.
SYSTEMATIC WITHDRAWAL PLAN
- --------------------------------------------------------------------------------
YOU CAN PAY ROUTINE BILLS FROM YOUR ACCOUNT, OR MAKE PERIODIC DISBURSEMENTS
FROM YOUR RETIRMEMENT ACCOUNT TO COMPLY WITH IRS REGULATIONS.
- --------------------------------------------------------------------------------
1. You can elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You can
also obtain the application from your registered representative or by calling
1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semiannually or
on a selected monthly basis to yourself or any other designated payee.
4. There is no limit on the number of payees you may authorize, but all
payments must be made at the same time or intervals.
5. It is not advantageous to maintain a Systematic Withdrawal Plan
concurrently with purchases of additional Class A or Class B shares, because
you may be subject to an initial sales charge on your purchases of Class A
shares or to a CDSC on your redemptions of Class B shares. In addition, your
redemptions are taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks, or if deposits to a bank account are returned for any reason.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
- --------------------------------------------------------------------------------
YOU CAN MAKE AUTOMATIC INVESTMENTS AND SIMPLIFY YOUR INVESTING.
- --------------------------------------------------------------------------------
1. You can authorize an investment to be withdrawn automatically each month
on your bank, for investment in Fund shares, under the "Automatic Investing"
and "Bank Information" sections of the Account Privileges Application.
22
<PAGE> 110
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, withdrawals will be discontinued.
GROUP INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
ORGANIZED GROUPS OF AT LEAST FOUR PERSONS MAY ESTABLISH ACCOUNTS.
- --------------------------------------------------------------------------------
1. An individual account will be established for each participant, but the
sales charge for Class A shares will be based on the aggregate dollar amount
of all participants' investments. To determine how to qualify for this
program, contact your registered representative or call 1-800-225-5291.
2. The initial aggregate investment of all participants in the group must be
at least $250.
3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum and you may terminate the program at any
time.
RETIREMENT PLANS
1. You may use the Fund for various types of qualified retirement plans,
including Individual Retirement Accounts, Keogh plans (H.R.10), pension and
profit sharing plans (including 401(k) Plans), Tax Sheltered Annuity
retirement plans (403(b) 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.
23
<PAGE> 111
<TABLE>
<CAPTION>
<S> <C>
JOHN HANCOCK SOVEREIGN
ACHIEVERS FUND JOHN HANCOCK
SOVEREIGN
INVESTMENT ADVISER ACHIEVERS
John Hancock Advisers, Inc. FUND
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR Class A and Class B Shares
John Hancock Funds, Inc. Prospectus
101 Huntington Avenue March 1, 1996
Boston, Massachusetts 02199-7603
CUSTODIAN
Investors Bank & Trust Company A MUTUAL FUND SEEKING LONG-TERM GROWTH OF
24 Federal Street CAPITAL PRIMARILY FROM A PORTFOLIO OF COMMON
Boston, Massachusetts 02110 STOCKS AND OTHER EQUITY INVESTMENTS.
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 101 Huntington Avenue
Telephone Exchange call 1-800-225-5291 Boston, Massachusetts 02199-7603
Invest-by-Phone Telephone 1-800-225-5291
Telephone Redemption
For: TDD call 1-800-554-6713 Printed on recycled paper using soybean ink
JHD-3500P 3/96
</TABLE>
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FREEDOM INVESTMENT TRUST
consisting of five series
which are included herein:
- John Hancock Sovereign U.S. Government Income Fund
- John Hancock Managed Tax-Exempt Fund
- John Hancock Gold & Government Fund
- John Hancock Sovereign Achievers Fund
- John Hancock Regional Bank Fund
and
FREEDOM INVESTMENT TRUST II
consisting of five series,
two of which are included herein:
- John Hancock Global Fund
- John Hancock Global Income Fund
CLASS A AND CLASS B SHARES
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1996
This Statement of Additional Information provides information about
John Hancock Sovereign U.S. Government Income Fund, John Hancock Managed
Tax-Exempt Fund, John Hancock Gold & Government Fund, John Hancock Sovereign
Achievers Fund, John Hancock Regional Bank Fund, John Hancock Global Fund and
John Hancock Global Income Fund in addition to the information that is contained
in the Funds' Class A and Class B Shares Prospectus dated March 1, 1996
(together, the "Prospectuses").
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Funds' Prospectuses, a copy of which can be
obtained free of charge by writing or telephoning:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
1-800-225-5291
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TABLE OF CONTENTS
-----------------
Statement of
Additional
Information
Page
ORGANIZATION OF THE FUNDS 3
INVESTMENT OBJECTIVES AND POLICIES 3
- ---John Hancock Sovereign U.S. Government Income Fund
- ---John Hancock Managed Tax-Exempt Fund
- ---John Hancock Gold & Government Fund
- ---John Hancock Sovereign Achievers Fund
- ---John Hancock Regional Bank Fund
- ---John Hancock Global Fund
- ---John Hancock Global Income Fund
THE FUNDS' OPTIONS TRADING ACTIVITIES 19
THE FUNDS' INVESTMENTS IN FUTURES CONTRACTS 26
CERTAIN INVESTMENT PRACTICES. 31
INVESTMENT RESTRICTIONS 36
TAX STATUS 40
THOSE RESPONSIBLE FOR MANAGEMENT 46
INVESTMENT ADVISORY AND OTHER SERVICES 53
DISTRIBUTION CONTRACTS 56
NET ASSET VALUE 59
INITIAL SALES CHARGE ON CLASS A SHARES 60
DEFERRED SALES CHARGE ON CLASS B SHARES 61
SPECIAL REDEMPTIONS 62
ADDITIONAL SERVICES AND PROGRAMS 62
DESCRIPTION OF THE FUNDS' SHARES 64
CALCULATION OF PERFORMANCE 65
BROKERAGE ALLOCATION 70
DISTRIBUTIONS 73
TRANSFER AGENT SERVICES 75
CUSTODY OF PORTFOLIO 75
INDEPENDENT ACCOUNTANTS 75
APPENDIX A - BOND AND COMMERCIAL 76
PAPER RATINGS 77
FINANCIAL STATEMENTS --
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ORGANIZATION OF THE FUNDS
Freedom Investment Trust is a diversified open-end management
investment company organized as a Massachusetts business trust on March 29,
1984. Freedom Investment Trust was originally organized under the name Freedom
Gold & Government Trust. It changed its name to Freedom Investment Trust on July
22, 1985. The Trustees have authority to issue an unlimited number of shares of
beneficial interest of separate series without par value. To date, five series
of Freedom Investment Trust have been authorized for sale to the public by the
Board of Trustees: John Hancock Gold & Government Fund (formerly John Hancock
Freedom Gold & Government Trust), created on March 29, 1984 ("Gold & Government
Fund"), John Hancock Regional Bank Fund (formerly John Hancock Freedom Regional
Bank Fund), created on April 2, 1985 ("Regional Bank Fund"), John Hancock
Sovereign U.S. Government Income Fund (formerly Freedom Government Income Fund),
created on January 16, 1986 ("Government Fund"), John Hancock Sovereign
Achievers Fund (formerly Freedom Equity Value Fund), created on January 16, 1986
("Sovereign Achievers Fund"), and John Hancock Managed Tax-Exempt Fund (formerly
John Hancock Freedom Managed Tax Exempt Fund).
Freedom Investment Trust II (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on March 31,
1986. The Trust currently has five series of shares, John Hancock Global Fund
(formerly John Hancock Freedom Global Fund), created on March 31, 1986 ("Global
Fund"), John Hancock Global Income Fund (formerly John Hancock Freedom Global
Income Fund), created on July 30, 1986 ("Global Income Fund") and John Hancock
Short-Term Strategic Income Fund (formerly John Hancock Freedom Short-Term World
Income Fund), created on July 31, 1990; John Hancock Special Opportunities Fund,
created on November 1, 1993 ("Special Opportunities Fund"), and John Hancock
International Fund (formerly John Hancock Freedom International Fund), created
on January 3, 1994 ("International Fund").
Freedom Investment Trust and Freedom Investment Trust II may be
referred to individually as a "Trust" and collectively as the "Trusts". Gold &
Government Fund, Regional Bank Fund, Government Fund, Sovereign Achievers Fund,
Managed Tax-Exempt Fund, Global Fund and Global Income Fund may be referred to
individually as a "Fund" and collectively as the "Funds."
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of each Fund's
investment objectives and policies discussed in each Fund's respective
Prospectus. The Adviser for all the Funds is John Hancock Advisers, Inc. (the
"Adviser"). John Hancock Advisers International Limited ("JH Advisers
International") is the Sub-Adviser for the Global Fund.
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John Hancock Sovereign U.S. Government Income Fund
--------------------------------------------------
The Adviser believes that a high current income consistent with
long-term total return may be derived from: (i) interest income from Government
Securities; (ii) income from premiums from expired put and call options on
Government Securities written by the Government Fund; (iii) net gains from
closing purchase and sale transactions with respect to options on Government
Securities; and (iv) net gains from sales of portfolio securities on exercise of
options or otherwise.
Since interest yields on Government Securities and opportunities to
realize net gains from options transactions may vary from time to time because
of general economic and market conditions and many other factors, it is
anticipated that the Government Fund's share price and yield will fluctuate, and
there can be no assurance that the Government Fund's objective will be achieved.
Government Securities
- ---------------------
U.S. TREASURY SECURITIES. The Government Fund may invest in U.S. Treasury
securities, including Bills, Notes, Bonds and other debt securities issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
Government and differ primarily in their interest rates, the lengths of their
maturities and the times of their issuance.
SECURITIES ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES. The Government Fund may also invest in securities issued by
agencies of the U.S. Government or instrumentalities established or sponsored by
the U.S. Government. The obligations, including those which are guaranteed by
Federal agencies or instrumentalities, may or may not be backed by the "full
faith and credit" of the United States. In the case of securities not backed by
the full faith and credit of the United States, the Government Fund must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment and may not be able to assert a claim against the United States itself
in the event the agency or instrumentality does not meet its commitments.
Securities in which the Government Fund may invest but which are not backed by
the full faith and credit of the United States include but are not limited to
obligations of the Tennessee Valley Authority, the Federal Home Loan Mortgage
Corporation ("FHLMC") and the United States Postal Service, each of which has
the right to borrow from the United States Treasury to meet its obligations, and
obligations of the Federal Farm Credit System, the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Banks, the obligations of which
may only be satisfied by the individual credit of the issuing agency.
Obligations of the Government National Mortgage Association ("GNMA"), the
Farmers Home Administration and the Export-Import Bank are backed by the full
faith and credit of the United States.
Securities of International Bank for Reconstruction and Development
- -------------------------------------------------------------------
The Government Fund may also purchase obligations of the International
Bank for Reconstruction and Development ("World Bank"), which, while technically
not a U.S. Government agency or instrumentality, has the right to borrow from
the participating countries, including the United States.
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Mortgage-Related Securities
- ---------------------------
The Government Fund may invest in mortgage-backed securities, including
those representing an undivided ownership interest in a pool of mortgage loans,
e.g., securities of the GNMA and pass-through securities issued by the FHLMC and
FNMA.
GNMA CERTIFICATES. Certificates of the Government National Mortgage Association
("GNMA Certificates") are mortgage-backed securities, which evidence an
undivided interest in a pool of mortgage loans. GNMA Certificates differ from
bonds in that the principal is paid back monthly by the borrower over the term
of the loan rather than returned in a lump sum at maturity. GNMA Certificates
that the Government Fund purchases are the "modified pass-through" type.
"Modified pass-through" GNMA Certificates entitle the holder to receive a share
of all interest and principal payments paid and owed on the mortgage pool, net
of fees paid to the "issuer" and GNMA, regardless of whether or not the
mortgagor actually makes the payment.
GNMA GUARANTEE. The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of mortgages
insured by the Federal Housing Administration ("FHA") or the Farmers' Home
Administration ("FMHA"), or guaranteed by the Veterans Administration ("VA").
The GNMA guarantee is backed by the full faith and credit of the United States.
The GNMA is also empowered to borrow without limit from the U.S. Treasury if
necessary to make any payments required under its guarantee.
LIFE OF GNMA CERTIFICATES. The average life of a GNMA Certificate is likely to
be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of principal
investment long before the contractual maturity of the mortgages in the pool.
Foreclosures impose no risk to principal investment because of the GNMA
guarantee. Because they represent the underlying mortgages, GNMA Certificates
may not be an effective means of locking in long-term interest rates due to the
need for the Government Fund to reinvest scheduled and unscheduled principal
payments. At the time principal payments or prepayments are received by the
Government Fund, prevailing interest rates may be higher or lower than the
current yield of the Fund's portfolio.
Statistics published by the FHA indicate that the average life of
single-family dwelling mortgages with 25- to 30-year maturities, the type of
mortgages backing the vast majority of GNMA Certificates, is approximately 12
years. However, because prepayment rates of individual mortgage pools vary
widely, it is not possible to predict accurately the average life of a
particular issue of GNMA Certificates.
YIELD CHARACTERISTICS OF GNMA CERTIFICATES. The coupon rate of interest on GNMA
Certificates is lower than the interest rate paid on the VA-guaranteed or
FHA-insured mortgages underlying the Certificates, by the amount of the fees
paid to GNMA and the issuer.
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The coupon rate by itself, however, does not indicate the yield which
will be earned on GNMA Certificates. First, GNMA Certificates may be issued at a
premium or discount, rather than at par, and, after issuance, GNMA Certificates
may trade in the secondary market at a premium or discount. Second, interest is
earned monthly, rather than semi-annually as with traditional bonds; monthly
compounding raises the effective yield earned. Finally, the actual yield of a
GNMA Certificate is influenced by the prepayment experience of the mortgage pool
underlying it. For example, if the higher-yielding mortgages from the pool are
prepaid, the yield on the remaining pool will be reduced. Prepayments of
principal by mortgagors (which can be made at any time without penalty) may
increase during periods when interest rates are falling.
FHLMC SECURITIES. The Federal Home Loan Mortgage Corporation was created in 1970
through enactment of Title III of the Emergency Home Finance Act of 1970. Its
purpose is to promote development of a nationwide secondary market in
conventional residential mortgages.
The FHLMC issues two types of mortgage pass-through securities,
mortgage participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro rata
share of all interest and principal payments made and owed on the underlying
pool. The FHLMC guarantees timely payment of interest on PCs and the full return
of principal.
GMC's also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return principal once
a year in guaranteed minimum payments.
FNMA SECURITIES. The Federal National Mortgage Association was established in
1938 to create a secondary market in mortgages insured by the FHA.
FNMA ISSUED GUARANTEED MORTGAGE PASS-THROUGH CERTIFICATES ("FNMA CERTIFICATES").
FNMA Certificates resemble GNMA Certificates in that each FNMA Certificate
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. FNMA guarantees timely payment of interest on FNMA
Certificates and the full return of principal.
COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS ("CMO'S"). CMOs are
fully-collateralized bonds which are the general obligations of the issuer
thereof, either the U.S. Government or a U.S. Government instrumentality. Such
bonds generally are secured by an assignment to a trustee (under the indenture
pursuant to which the bonds are issued) of collateral consisting of a pool of
mortgages. Payments with respect to the underlying mortgages generally are made
to the trustee under the indenture. Payments of principal and interest on the
underlying mortgages are not passed through to the holders of the CMOs as such
(i.e. the character of payments of principal and interest is not passed through,
and therefore payments to holders of CMOs attributable to interest paid and
principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such payments
are dedicated to payment of interest on and repayment of principal of the CMOs.
CMOs often are issued in two or more classes with varying maturities and stated
rates of interest. Because interest and principal payments on the underlying
mortgages are not passed through to holders of CMOs, CMOs of
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varying maturities may be secured by the same pool of mortgages, the payments on
which are used to pay interest on each class and to retire successive maturities
in sequence. Unlike other mortgage-backed securities (discussed above), CMOs are
designed to be retired as the underlying mortgages are repaid. In the event of
prepayment on such mortgages, the class of CMO first to mature generally will be
paid down. Therefore, although in most cases the issuer of CMOs will not supply
additional collateral in the event of such prepayment, there will be sufficient
collateral to secure CMOs that remain outstanding.
INVERSE FLOATING RATE SECURITIES. The Government Fund may invest in inverse
floating rate securities. It is the current intention of the Fund to invest no
more than 5% of its net assets in inverse floating rate securities. The interest
rate on an inverse floating rate security resets in the opposite direction from
the market rate of interest to which the inverse floating rate security is
indexed. An inverse floating rate security may be considered to be leveraged to
the extent that its interest rate varies by a multiple of the index rate of
interest. A higher degree of leverage in the inverse floating rate security is
associated with greater volatility in the market value of such security.
The inverse floating rate securities that the Government Fund may
invest in include but are not limited to, an inverse floating rate class of a
government agency issued CMO and a government agency issued yield curve note.
Typically, an inverse floating rate class of a CMO is one of two components
created from the cash flows from a pool of fixed rate mortgages. The other
component is a floating rate security in which the amount of interest payable
varies directly with a market interest rate index. A yield curve note is a fixed
income security that bears interest at a floating rate that is reset
periodically based on an interest rate benchmark. The interest rate resets on a
yield curve note in the opposite direction from the interest rate benchmark.
Portfolio Turnover
- ------------------
If the Government Fund writes a number of call options and the market
prices of the underlying securities appreciate, or if the Fund writes a number
of put options and the market prices of the underlying securities depreciate,
there may be a substantial turnover of the portfolio. While the Government Fund
will pay commissions in connection with its options transactions, Government
Securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission. Nevertheless, high
portfolio turnover may involve correspondingly greater commissions and other
transaction costs, which will be borne directly by the Fund.
John Hancock Managed Tax-Exempt Fund
------------------------------------
Municipal Securities
- --------------------
Municipal securities are issued by or on behalf of states, territories
and possessions of the United States and their political subdivisions, agencies
and instrumentalities to obtain funds for various public purposes. The interest
on these obligations is generally exempt from federal income tax in the hands of
most investors. The two principal classifications of municipal securities are
"Notes" and "Bonds".
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MUNICIPAL NOTES. Municipal Notes are generally used to provide for short-term
capital needs and generally have maturities of one year or less. Municipal Notes
include: Project Notes (which carry a U.S. Government guarantee), Tax
Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes and
Construction Loan Notes.
Project Notes are issued by public bodies (called "Local Issuing
Agencies") created under the laws of a state, territory, or U.S. possession.
They have maturities that range up to one year from the date of issuance.
Project Notes are backed by an agreement between the Local Issuing Agency and
the U.S. Department of Housing and Urban Development to provide financing for a
range of programs of financial assistance for housing, redevelopment, and
related needs such as low-income housing programs and urban renewal programs.
While they are the primary obligations of the local public housing agencies or
the local urban renewal agencies, the agreement provides for the additional
security of the full faith and credit of the U.S. Government.
Tax Anticipation Notes are sold to finance working capital needs of
municipalities. They are generally payable from specific tax revenues expected
to be received at a future date. Revenue Anticipation Notes are issued in
expectation of receipt of other types of revenue such as federal revenues
available under the Federal Revenue Sharing Program. Tax Anticipation Notes and
Revenue Anticipation Notes are generally issued in anticipation of various
seasonal revenues such as income, sales, use, and business taxes. Bond
Anticipation Notes are sold to provide interim financing. These notes are
generally issued in anticipation of long-term financing in the market. In most
cases, these monies provide for the repayment of the notes. Construction Loan
Notes are sold to provide construction financing. After the projects are
successfully completed and accepted, many projects receive permanent financing
through the Federal Housing Administration under "Fannie Mae" (the Federal
National Mortgage Association) or "Ginnie Mae" (the Government National Mortgage
Association). There are, of course, a number of other types of notes issued for
different purposes and secured differently from those described above.
MUNICIPAL BONDS. Municipal Bonds, which meet longer term capital needs and
generally have maturities of more than one year when issued, have two principal
classifications: "General Obligation" Bonds and "Revenue" Bonds.
Issuers of General Obligation Bonds include states, counties, cities,
towns and regional districts. The proceeds of these obligations are used to fund
a wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of General Obligation Bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate or amount of special assessments.
The principal security for a Revenue Bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
Bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water and sewer systems; highways, bridges and tunnels; port and
airport facilities; colleges and universities; and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service
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reserve fund whose monies may also be used to make principal and interest
payments on the issuer's obligations. Housing finance authorities have a wide
range of security including partially or fully insured, rent subsidized and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. In addition to a debt service reserve fund, some authorities provide
further security in the form of a state's ability (without obligation) to make
up deficiencies in the debt service reserve fund. Lease rental revenue bonds
issued by a state or local authority for capital projects are secured by annual
lease rental payments from the state or locality to the authority sufficient to
cover debt service on the authority's obligations.
Industrial Development and Pollution Control Bonds, although nominally
issued by municipal authorities, are generally not secured by the taxing power
of the municipality but are secured by the revenues of the authority derived
from payments by the industrial user.
VARIABLE AND FLOATING RATE MUNICIPAL OBLIGATIONS. Variable and floating rate
municipal obligations are tax-exempt obligations that provide for a periodic
adjustment in the interest rate paid on the obligations. Certain of these
obligations also permit the holder to demand payment of the unpaid principal
balance plus accrued interest upon a specified number of days' notice either
from the issuer or by drawing on a bank letter of credit or comparable guarantee
issued with respect to such obligations. The issuer of such an obligation may
have a corresponding right to prepay in its discretion the outstanding principal
of the obligation plus accrued interest upon notice comparable to that required
for the holder to demand payment.
The principal and accrued interest payable to the Managed Tax-Exempt
Fund on certain floating rate demand obligations is frequently supported by an
irrevocable letter of credit or comparable guarantee of a financial institution
(generally a commercial bank).
The terms of such variable and floating rate municipal obligations
provide that interest rates are adjustable at intervals ranging from weekly up
to annually. Interest rate adjustments on floating rate obligations are based
upon the prime rate of a bank or other appropriate interest rate adjustment
index. Variable and floating rate obligations are subject to the quality
characteristics for municipal obligations described in the Appendix to this
Statement of Additional Information.
OTHER MUNICIPAL SECURITIES. There is, in addition, a variety of hybrid and
special types of municipal securities as well as numerous differences in the
security of municipal securities both within and between the two principal
classifications above.
For the purpose of certain requirements of various of the Fund's
investment restrictions, identification of the "issuer" of a municipal security
depends on the terms and conditions of the security. When the assets and
revenues of a political subdivision are separate from those of the government
which created the subdivision and the security is backed only by the assets and
revenues of the subdivision, the subdivision would be deemed to be the sole
issuer. Similarly, in the case of an industrial development bond, if that bond
is backed only by the assets and revenues of the nongovernmental user, then the
nongovernmental user would be deemed to be the sole issuer. If, however, in
either case, the creating government or some other entity guarantees the
security, the guarantee would be considered a separate security and would be
treated as an issue of the government or other agency.
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Ratings as Investment Criteria
- ------------------------------
(See Appendix A.) In general, the ratings of Moody's Investors Service,
Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P") represent the
opinions of these agencies as to the quality of the municipal securities which
they rate. It should be emphasized, however, that such ratings are relative and
subjective and are not absolute standards of quality. These ratings will be used
by the Managed Tax-Exempt Fund as initial criteria for the selection of
portfolio securities, but the Fund will also rely upon the independent advice of
the Adviser to evaluate potential investments. Among the factors which will be
considered are the long-term ability of the issuer to pay principal and interest
and general economic trends. Appendix A contains further information concerning
the ratings of Moody's and S&P and their significance.
Subsequent to its purchase by the Managed Tax-Exempt Fund, an issue of
municipal securities may cease to be rated or its rating may be reduced below
the minimum required for purchase by the Managed Tax-Exempt Fund. Neither event
will require the sale of such municipal securities by the Fund, but the Adviser
will consider such event in its determination of whether the Fund should
continue to hold the securities.
Risk Factors
- ------------
The yields on municipal securities are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions of the municipal securities market, size of a particular
offering, maturity of the obligation, and rating of the issue.
Municipal securities are also subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Code, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. There is also
the possibility that as a result of litigation or other conditions the power or
ability of any one or more issuers to pay, when due, principal of and interest
on certain municipal securities may be materially affected.
From time to time, proposals to restrict or eliminate the Federal
income tax-exemption for interest on municipal securities have been introduced
before Congress. If such a proposal were enacted, the availability of municipal
securities for investment by the Managed Tax-Exempt Fund would be adversely
affected. In such event, the Fund would re-evaluate its investment objective and
policies and submit possible changes in its structure for the consideration of
shareholders.
John Hancock Gold & Government Fund
-----------------------------------
The Adviser believes that during periods of increasing inflation or
economic or monetary instability, gold and related assets have served as a
storehouse of value and their prices have tended to increase at least as rapidly
as the rate of inflation. During such periods, interest rates
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<PAGE> 122
have tended to increase, causing the market value of debt instruments to
decline. Conversely, during periods of disinflation (when inflationary pressures
are being reversed), the price of high grade debt instruments has tended to
increase while the value of precious metals and related instruments has tended
to decline.
The Adviser's determination as to whether the economy is in an
inflationary or disinflationary environment will be made based upon its
evaluation of numerous economic and monetary factors. These factors will
include, but not necessarily be limited to, the actual and anticipated rate of
change of the Consumer Price Index ("CPI") over specified periods of time,
actual and anticipated changes and rate of changes in the value of the U.S.
dollar in relation to other key foreign currencies (e.g., the German mark, the
British pound and the Japanese yen), actual and anticipated changes, and rate of
changes, in short and long term interest rates and real interest rates (i.e.,
inflation adjusted interest rates), actual and anticipated changes in the money
supply, and actual and anticipated governmental fiscal and monetary policy. It
should be emphasized that the Adviser will not apply a rigid, mechanical
determination in assessing whether the economy is in an inflationary or
disinflationary environment. Rather, its determination will be the result of its
subjective judgment of all factors it deems relevant.
Additional Information on Investments
- -------------------------------------
Precious metal and mining securities and currencies can be extremely
volatile at times. Gold mining securities and other precious metal and mining
securities likewise fluctuate with gold, but generally even more so. Mining and
other related securities tend to fluctuate more than gold in a major cycle price
change because operating results will usually be positively or negatively
leveraged by considerable upward or downward movements of the gold price. This
is due to the fact that the costs of mining gold remain relatively fixed, so
that an increase or decrease in the price of gold has a direct effect on the
profits of the company. Also, the prices of precious metals-related securities
are likely to be further affected by changes in the currency value of the
country of domicile relative to the dollar. Additionally, precious metal mining
and other related securities generally will be more volatile than gold in a
major cycle of price change either because of a greater or lesser supply of such
securities relative to gold, or because of economic, speculative or other
factors.
Gold Bullion and Coins
- ----------------------
The Gold & Government Fund's gold holdings ordinarily will consist of
gold bullion and bullion-type coins, such as South African Krugerrands and
Canadian Maple Leaf coins. The Fund does not expect to acquire coins for their
numismatic value. The Gold & Government Fund may purchase and sell gold coins
through the American Gold Coin Exchange or other appropriate gold coin and
bullion dealers and may purchase gold bullion through any appropriate gold
bullion dealer. No more than 10% of the Fund's portfolio may be invested in gold
bullion or coins. Unlike investments in gold or precious metals securities,
which may produce income in addition to offering potential for capital
appreciation, gold bullion or coins earn no investment income. Furthermore, the
Fund will incur storage or extra costs which may be higher than costs associated
with more traditional forms of investments.
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U.S. Government Securities
- --------------------------
The Gold & Government Fund may invest up to 5% of its total assets in
securities issued or guaranteed as to principal and interest by the U.S.
Government in the form of separately traded principal and interest components of
securities issued or guaranteed by the U.S. Treasury. The principal and interest
components of selected securities are traded independently under the Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") program.
Under the STRIPS program, the principal and interest components are individually
numbered and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Risk Factors
- ------------
Because of the following considerations, an investment in the Gold &
Government Fund should not be considered a complete investment program.
1. FAILURE TO ANTICIPATE CHANGES IN ECONOMIC CYCLES. The Gold &
Government Fund's investment success will be dependent to a high
degree on the Adviser's ability to anticipate the onset and
termination of inflationary and disinflationary cycles. A failure to
anticipate a disinflationary cycle could result in the Fund's assets
being disproportionately invested in securities of gold or other
mining companies. Conversely, a failure to predict an inflationary
cycle could result in the Fund's assets being disproportionately
invested in U.S. Government securities.
2. UNANTICIPATED ECONOMIC ACTIVITY. The Gold & Government Fund's
investment success will depend to a high degree on the validity of the
premise that the values of securities of gold and precious metals
companies will move in a different direction than the values of U.S.
Government securities during periods of inflation or disinflation. If
the values of both types of securities move down during the same
period of time the value of the shareholder's investment will decline
rather than stabilize or increase, as anticipated, regardless of
whether the Fund is primarily invested in gold or government
securities.
3. CONCENTRATION IN AND VOLATILITY OF MINING STOCKS. The securities of
companies engaged in the exploration for and/or mining and processing
of gold and precious metals have been volatile historically. Mining
and other related securities tend to fluctuate as much as or more than
gold during periods of market instability because operating results
will usually be positively or negatively leveraged by considerable
movements in the price of gold. Such securities are further affected
by changes in value of the currency of the country of domicile. Since
the Gold & Government Fund may from time to time, as set forth in the
Prospectus, invest up to 80% of its total assets in gold and precious
metals mining stocks, its shares may be subject to greater risks and
market fluctuations than other investment companies with investment
portfolios having a broader range of investment alternatives.
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4. INVESTMENT IN GOLD BULLION AND COINS. Precious metals prices are
affected by various factors such as economic conditions, political
events and monetary policies. In addition, gold bullion and coins do
not generate income and may subject the Gold & Government Fund to
taxes and insurance, shipping and storage costs. The sole source of
return to the Fund from such investments would be gains realized on
sales; a negative return would be realized if gold is sold at a loss.
The price of gold has historically been subject to dramatic upward and
downward price movements over short periods of time. In the event of a
substantial decrease in the price of gold, the Gold & Government Fund
would incur realized or unrealized losses on its investment in gold
bullion. In the event of a substantial increase in the price of gold,
the Fund may be forced to liquidate a portion of its holdings of gold
bullion to ensure that the value thereof does not increase to the
extent that, at the close of any fiscal quarter, more than 25% of the
value of the Fund's total assets are invested in securities of any one
issuer or more than 50% of its total assets are invested in gold
bullion in order to remain qualified under the Internal Revenue Code
as a regulated investment company. Therefore, the Fund may be forced
to partially liquidate its holdings of gold bullion even if the
Adviser anticipates further increases in the price of gold.
Furthermore, Gold & Government Fund may derive no more than 10% of its
gross income in any taxable year from gross gains from transactions in
gold bullion to remain so qualified and therefore may be required
either to dispose of or continue to hold gold bullion when it would
not otherwise do so for investment reasons.
5. TAX OR CURRENCY LAWS. Changes in the tax or currency laws of the
U.S. and of foreign countries, such as imposition of withholding or
other taxes or exchange controls on foreign currencies may increase
the cost of, or inhibit the Gold & Government Fund's ability to
pursue, its investment program.
6. UNPREDICTABLE INTERNATIONAL MONETARY POLICIES, ECONOMIC AND
POLITICAL CONDITIONS. There is the possibility that under unusual
international monetary or political conditions the Gold & Government
Fund's assets might be less liquid or that the change in value of its
assets might be more volatile than would be the case with other
investments. In particular, because the price of gold may be affected
by unpredictable international monetary policies and economic
conditions there may be greater likelihood of a more dramatic impact
upon the market prices of securities of companies mining, processing
or dealing in gold than changes which would occur in other industries.
Although Gold & Government Fund expects to take delivery of its
investments in the United States, any investment where delivery takes place
outside of the United States will be conducted in compliance with any applicable
United States and foreign currency restrictions and other laws limiting the
amount and types of foreign investments. Since the Adviser expects to make
substantially all of the Fund's purchases and sales of securities and gold
bullion in the U.S. markets and in U.S. dollars, the Adviser does not believe
that it will be materially affected by changes in exchange rates, currency
convertibility and repatriation except to the extent the Fund holds foreign
currencies, including gold coins, as part of its cash position. However, changes
in governmental administrations or of economic or monetary policies, in the
United States or abroad, or changed circumstances in dealings between nations
could result in investment losses to the Fund and otherwise affect the Fund's
operations adversely.
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7. FOREIGN SECURITIES. Although the Adviser does not believe the risk
to be substantial, foreign issuers of securities in many countries are
subject to less stringent standards of disclosure and regulatory
controls than are found in the United States which may result in less
reliable and less detailed information being available to the Gold &
Government Fund than would be the case with United States companies.
In addition, investments in foreign issuers may be affected by
fluctuating exchange rates and adverse changes in foreign investment
or exchange control regulation. However, the Fund's policy of
generally investing in American depository receipts ("ADRs") or other
securities which can be sold for United States dollars and for which
market quotations are readily available in New York may minimize some
of these risks. (ADRs are certificates issued by United States banks
representing the right to receive securities of a foreign issuer
deposited in that bank or a correspondent bank.)
Portfolio Turnover
- ------------------
Gold & Government Fund's rate of portfolio turnover may vary widely
from year to year, and may be higher than many other mutual funds with similar
investment objectives. Nevertheless, high portfolio turnover in any given year
will result in the Fund's payment of above-average amounts of commissions and
other transaction costs and may result in the realization of greater amounts of
net short-term capital gains, distributions from which will be taxable to
shareholders as ordinary income.
John Hancock Sovereign Achievers Fund
-------------------------------------
Foreign Investments
- -------------------
While Sovereign Achievers Fund may invest in some foreign securities,
such investments are expected to constitute less than 10% of the Fund's
portfolio. Although the Adviser does not believe the risk to be substantial,
foreign issuers of securities in many countries are subject to less stringent
standards of disclosure and regulatory controls than are found in the United
States which may result in less reliable and less detailed information being
available to the Fund than would be the case with United States companies. In
addition, investments in foreign issuers may be affected by fluctuating exchange
rates and adverse changes in foreign investment or exchange control regulation.
However, Sovereign Achievers Fund's policy of generally investing in American
depository receipts ("ADRs") or other securities which can be sold for United
States dollars and for which market quotations are readily available in New York
may minimize some of these risks. ADRs are certificates issued by United States
banks representing the right to receive securities of a foreign issuer deposited
in that bank or a correspondent bank.
John Hancock Regional Bank Fund
-------------------------------
The Adviser believes that the ongoing deregulation of the banking
industry continues to provide new opportunities for banks. As deregulation
continues and interstate banking becomes more likely, some Regional Banks may
become attractive acquisition candidates for large money center banks or other
Regional Banks. Typically, acquisitions accelerate the capital appreciation of
the shares of the company to be acquired.
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<PAGE> 126
In addition, Regional Banks located in sections of the country
experiencing strong economic growth are likely to participate in and benefit
from such growth through increased deposits and earnings. Many banks which are
actively and aggressively managed and are expanding services as deregulation
opens up new opportunities also show potential for capital appreciation.
The Adviser will seek to invest in those Regional Banks it believes are
well positioned to take advantage of the changes in the banking industry. A
Regional Bank may be well positioned for a number of reasons. It may be an
attractive acquisition for a bank wishing to strengthen its presence in the
geographic region or to expand into interstate activities, or it may be planning
on a regional merger to strengthen its position in the geographic area. The
Regional Bank may be located in a geographic region with strong economic growth
and be actively seeking to participate in such growth, or it may be expanding
into financial services previously unavailable to it (due to an easing of
regulatory constraints) in order to become a full service financial center.
Risk Factors
- ------------
Banks, finance companies and other financial services organizations are
subject to extensive governmental regulations which may limit both the amounts
and types of loans and other financial commitments which may be made and the
interest rates and fees which may be charged. The profitability of these
concerns is largely dependent upon the availability and cost of capital funds,
and has shown significant recent fluctuation as a result of volatile interest
rate levels. Volatile interest rates will also affect the market value of debt
securities held by the Regional Bank Fund. In addition, general economic
conditions are important to the operations of these concerns, with exposure to
credit losses resulting from possible financial difficulties of borrowers
potentially having an adverse effect.
John Hancock Global Fund and
----------------------------
John Hancock Global Income Fund
-------------------------------
Today, more than two-thirds of the world's stock market value is traded
on stock exchanges located outside of the United States. Europe is poised for
economic change. The European Economic Commission has ratified the economic
directives which will essentially create a single, unified market amongst the
European nations allowing the free movement of goods and services within a
population which is larger than that of the USA. Europe also intends to
participate in the restructuring of the social and economic policies of the
former Soviet Union and other Eastern bloc countries. The Pacific Region, which
includes Japan, Hong Kong, Korea, Taiwan, Thailand, Singapore, Malaysia and
Australia, has experienced substantial economic growth in recent years. The
Global Fund provides you with access to the stock markets of the world, enabling
you to diversify your investments among a variety of countries, companies and
industrial sectors.
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<PAGE> 127
In general, the securities in which Global Income Fund may invest
include debt obligations issued or guaranteed by United States or foreign
governments, political subdivisions thereof (including states, provinces and
municipalities) or their agencies and instrumentalities ("governmental
entities"), or issued or guaranteed by international organizations designated or
supported by governmental entities to promote economic reconstruction or
development ("supranational entities"), or issued by corporations or financial
institutions. Examples of supranational entities include the International Bank
for Reconstruction and Development (the "World Bank"), the European Steel and
Coal Community, the Asian Development Bank and the Inter-American Development
Bank. The governmental members, or "stockholders", usually make initial capital
contributions to the supranational entity and in many cases are committed to
make additional capital contributions if the supranational entity is unable to
repay its borrowings. Securities issued by supranational entities may be
denominated in U.S. dollars, a foreign currency or a multi-national currency
unit such as the European Currency Unit ("ECU"). The ECU is a composite currency
consisting of specified amounts of each of the currencies of the member
countries of the European Economic Community. Securities of corporations and
financial institutions in which the Fund may invest include corporate and
commercial obligations, such as medium-term notes and commercial paper, which
may be indexed to foreign currency exchange rates. In accordance with guidelines
promulgated by the Staff of the Securities and Exchange Commission, the Fund
will consider as an industry any category of such supranational entities which
may have been designated by the Commission.
American Depository Receipts and European Depository Receipts
- -------------------------------------------------------------
In addition to purchasing equity securities of foreign issuers in
foreign markets, Global Fund and the Global Income Fund may invest in American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs") or other
securities convertible into securities of corporations domiciled in foreign
countries. These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. Generally, ADRs, in
registered form, are designed for use in the U.S. securities markets and EDRs,
in bearer form, are designed for use in European securities markets. ADRs are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying securities. EDRs are European receipts evidencing a
similar arrangement. It is the current intention of JH Advisers International
that no more than 5% of the Global Fund's assets will be invested in ADRs and
EDRs.
Foreign Currency Transactions
- -----------------------------
Global Fund and Global Income Fund will conduct their foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
forward contracts to purchase or sell foreign currencies. A forward foreign
currency exchange contract involves an obligation to purchase or sell a specific
amount of currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are usually traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for such trades.
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<PAGE> 128
The Global Fund and the Global Income Fund may enter into forward
foreign currency exchange contracts to enhance return, as a substitute for the
purchase or sale of currency or to hedge against fluctuations in currency
exchange rates. The Funds' hedging transactions in forward contracts may include
the following. A Fund may enter into a contract for the purchase or sale of a
security denominated in a foreign currency to "lock-in" the United States dollar
price of the security. By entering into a forward contract for a fixed amount of
dollars for the purchase or sale of the amount of foreign currency involved in
the underlying transactions, a Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
United States dollar and that 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.
When the Adviser or JH Advisers International believes that the
currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, a Fund may enter into a forward contract to
sell or buy the amount of the former foreign currency approximating the value of
some or all of that Fund's portfolio securities denominated in such foreign
currency. This second investment practice is generally referred to as
"cross-hedging". The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible since the future
value of securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date on which the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain.
In addition, the Funds may enter into forward contracts for non-hedging
purposes. For example, if a portfolio security with an attractive rate of return
is denominated in a currency (including the U.S. dollar) that is not expected to
perform well, a Fund may use forward contracts to offset its exposure to the
non-performing currency while retaining the security.
Under normal circumstances, consideration of the prospects for currency
exchange rates will be incorporated into a Fund's long-term investment decisions
made with regard to overall investment strategies. However, each Fund believes
that it is important to have the flexibility to enter into forward contracts
when it determines that the best interests of the Fund will thereby be served.
State Street Bank and Trust Company, the Funds' custodian, will place cash or
liquid debt securities into a segregated account of each Fund in an amount equal
to the value of that Fund's total assets committed to the consummation of
forward foreign currency exchange contracts involving the purchase of 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.
At the maturity of a forward contract, a Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. There can be no assurance, however, that either Fund will be
able to effect such a closing purchase transaction.
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<PAGE> 129
It is impossible to forecast the market value of a particular portfolio
security at the expiration of the contract. Accordingly, it may be necessary for
a Fund to purchase additional foreign currency on the spot market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency that the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
If either the Global Fund or the Global Income Fund retains the
portfolio security and engages in an offsetting transaction, that Fund will
incur a gain or a loss (as described below) to the extent that there has been
movement in forward contract prices. Should forward prices decline during the
period between a Fund's entering into a forward contract for the sale of a
foreign currency and the date it enters into an offsetting contract for the
purchase of the foreign currency, such Fund will realize a gain to the extent
that the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent that the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
The Funds are not required to enter into forward contracts with regard
to their foreign currency-denominated securities. It also should be realized
that this method of protecting the value of a Fund's portfolio securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange which one can achieve at some future point in time. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, at the same time, they tend to limit any
potential gain which might result should the value of such currency increase.
Although the Global Fund and the Global Income Fund value their assets
daily in terms of United States dollars, neither Fund intends to convert its
holdings of foreign currencies into United States dollars on a daily basis. A
Fund will do so from time to time, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to a Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to resell the currency
to the dealer.
Portfolio Turnover
- ------------------
The Global Income Fund's portfolio turnover rate may vary widely from
year to year and may be higher than that of many other mutual funds with similar
investment objectives. For example, if the Global Income Fund writes a
substantial number of call options and the market prices of the underlying
securities appreciate, or if it writes a substantial number of put options and
the market prices of the underlying securities depreciate, there may be a very
substantial turnover of the portfolio. While the Fund will pay commissions in
connection with its options transactions, government securities are generally
traded on a "net" basis with dealers acting as principal for their own accounts
without a stated commission. Nevertheless, high portfolio turnover may involve
correspondingly greater commissions and other transaction costs, which will be
borne directly by the Fund.
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<PAGE> 130
THE FUNDS' OPTIONS TRADING ACTIVITIES
The following information supplements the discussion in the
Prospectuses regarding options transactions in which the Funds may engage.
A call option gives the purchaser of the option the right to buy, and
the writer the obligation to sell (if the option is exercised), the underlying
security or asset at the exercise price during the option period. Conversely, a
put option gives the purchaser the right to sell, and the writer the obligation
to buy, (if the option is exercised) the underlying security or asset at the
exercise price during the option period.
The principal reason for writing covered call options on a portfolio
security or foreign currency is to attempt to realize through the receipt of
premiums a greater return than would be realized on the security or foreign
currency alone. A covered call option writer, in return for the premium, has
given up the opportunity for profit from a price increase in the underlying
security or currency above the exercise price so long as its obligation
continues, but has retained the risk of loss should the price of the security
decline. The call option writer has no control over when it may be required to
sell its securities, since it may be assigned an exercise notice at any time
prior to the termination of its obligation as a writer. If an option expires,
the writer realizes a gain in the amount of the premium. Such a gain, of course,
may be offset by a decline in the market value of the underlying security during
the option period. If a call option is exercised, the writer realizes a gain or
loss from the sale of the underlying security or currency.
It is the policy of each Fund to meet the requirements of the Internal
Revenue Code to qualify as a regulated investment company to prevent double
taxation of the Fund and its investors. One of these requirements is that less
than 30% of a Fund's gross income for each taxable year must be derived from
gross gains from the sale or other disposition of certain financial assets,
including stocks, securities, and most options, futures and forward contracts,
held for less than three months. The extent to which the Funds may engage in
options, futures and forward transactions may be materially limited by this 30%
test.
Gold & Government Fund, Global Income Fund, Sovereign Achievers Fund, and
- -------------------------------------------------------------------------
Regional Bank Fund
- ------------------
Call Options
------------
Each Fund may trade in options, including purchasing calls and writing
covered calls. Gold & Government Fund may write covered call options and
purchase put and call options on gold bullion, U.S. Government securities and
equity securities in which it may invest. Call options ("calls") may be written
(i.e., sold) by each Fund if (i) the calls are listed on a domestic exchange or
are traded over-the-counter; and (ii) the calls are covered, i.e., the Fund owns
the assets subject to the call (or other assets acceptable for escrow
arrangements) while the call is outstanding.
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<PAGE> 131
Each Fund may write call options to obtain additional income. When a
Fund writes a call it receives a premium and agrees to sell the callable
securities to the purchaser of the call, if the option is exercised during the
call period, at a fixed exercise price (which may differ from the market price)
regardless of market price changes during the call period. Thus, in exchange for
the premium received, the Fund foregoes any possible profit from an increase in
market price over the exercise price.
When a Fund writes a call option, an amount equal to the premium
received by it is included in that Fund's Statement of Assets and Liabilities as
an asset and as an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of the option
written. The premium paid by a Fund for the purchase of a call or put option is
included in the assets section of the Statement of Assets and Liabilities as an
investment and subsequently adjusted to the current market value of the option.
The current market value of a purchased or written option is the last sale price
on the principal exchange on which such option is traded or, in the absence of a
sale or in the case of an unlisted option, the mean between the last bid and
offering prices.
To terminate its obligation on a call which it has written, each Fund
may purchase a call in a "closing purchase transaction." (As discussed below,
each Fund may also purchase calls other than as part of such transactions.) A
profit or loss will be realized depending on the amount of option transaction
costs and whether the premium previously received is more or less than the price
of the call purchased. A profit may also be realized if the call lapses
unexercised, because the Fund retains the underlying security and the premium
received. Any such profits are considered short-term gains for federal tax
purposes and, when distributed by the Fund, are taxable as ordinary income.
Each Fund may purchase calls only if the calls are listed on a domestic
exchange or traded over-the-counter. Each Fund will purchase call options to
attempt to obtain capital appreciation. When a Fund buys a call, it pays a
premium and has the right to buy the callable securities from the seller of a
call during a period at a fixed exercise price. The Fund benefits only if the
market price of the callable securities is above the call price during the call
period and the call is either exercised or sold at a profit. If the call is not
exercised or sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payment and the right to
purchase the underlying security.
In the case of Gold & Government Fund, hedging by writing covered call
options on gold bullion is similar to hedging through the use of similar options
on securities as described above. In addition, Gold & Government Fund may
purchase call options on gold bullion if it desires to achieve a more rapid
exposure to anticipated increases in the price of gold mining shares or gold
bullion than is practical by buying such assets.
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<PAGE> 132
Put Options
-----------
Any of the Funds may purchase put options ("puts") if they are listed
on a domestic exchange or traded over-the-counter. None of the Funds may write
(sell) puts, but may resell puts previously purchased by it to third parties who
are not broker-dealers. When a Fund buys a put, it pays a premium and has the
right to sell the underlying assets to the seller of the put during the put
period at a fixed exercise price.
Each Fund may buy puts related to securities it owns ("protective
puts") or to securities it does not own ("nonprotective puts"). Buying a
protective put permits the Fund to protect itself during the put period against
a decline in the value of the underlying securities below the exercise price by
selling them through the exercise of the put. Thus, protective puts will assist
the Funds in achieving their investment objectives of capital appreciation by
protecting them against a decline in the market value of their portfolio
securities.
Buying a non-protective put permits each Fund, if the market price of
the underlying securities is below the put price during the put period, either
to resell the put or to buy the underlying securities and sell them at the
exercise price. A non-protective put can enable each Fund to achieve
appreciation during a period when the price of securities underlying such put is
declining. If the market price of the underlying securities is above the
exercise price and as a result, the put is not exercised or resold (whether or
not at a profit), the put will become worthless at its expiration date.
In the case of the Gold & Government Fund, hedging by purchasing put
options on gold bullion is similar to hedging through the use of similar options
on securities as described above.
Government Fund
- ---------------
Writing Covered Options on Government Securities
------------------------------------------------
The Government Fund may write (sell) covered call options and covered
put options on all or any part of the Fund's portfolio of Government Securities.
The Government Fund may write (i.e., sell) options which are traded on
registered securities exchanges ("Exchanges") and may also write options on
Government Securities which are traded over-the-counter. A call option gives the
purchaser of the option the right to buy, and the writer the obligation to sell,
the underlying security at the exercise price if the option is exercised during
the option period. Conversely, a put option gives the purchaser the right to
sell, and the writer the obligation to buy (if the option is exercised) the
underlying security at the exercise price during the option period. The Fund may
also write straddles (combinations of covered puts and calls on the same
underlying security).
The Government Fund writes only "covered" options. This means that as
long as the Fund is obligated as the writer of a call option, it will own the
underlying securities subject to the option, except that, in the case of call
options on U.S. Treasury Bills, the Fund might own U.S. Treasury Bills of a
different series from those underlying the call option, but with a principal
amount corresponding to the option contract amount and a maturity date no later
than that of the securities deliverable under the call option. See "Risk Factors
Applicable to Options" below.
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<PAGE> 133
The Government Fund will be considered "covered" with respect to a put
option it writes if, as long as it is obligated as the writer of a put option,
it deposits and maintains with its Custodian, cash, Government Securities or
other high-grade debt obligations having a value equal to or greater than the
exercise price of the option.
So long as the obligation of the writer continues, the writer may be
assigned an exercise notice by the broker-dealer through whom the option was
sold. The exercise notice would require the writer to deliver, in the case of a
call, or take delivery of, in the case of a put, the underlying security against
payment of the exercise price. This obligation terminates upon expiration of the
option, or at such earlier time that the writer effects a closing purchase
transaction by purchasing an option covering the same underlying security and
having the same exercise price and expiration date ("of the same series") as the
one previously sold. Once an option has been exercised, the writer may not
execute a closing purchase transaction. To secure the obligation to deliver the
underlying security in the case of a call option, the writer of the option is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing Corporation (the "OCC"), an
institution created to interpose itself between buyers and sellers of options.
Technically, the OCC assumes the other side of every purchase and sale
transaction on an Exchange and, by doing so, gives its guarantee to the
transaction.
The principal reason for writing options on a securities portfolio is
to attempt to realize, through the receipt of premiums, a greater return than
would be realized on the underlying securities alone. In return for the premium,
the covered call option writer has given up the opportunity for profit from a
price increase in the underlying security above the exercise price as so long as
the option remains open, but retains the risk of loss should the price of the
security decline. Conversely, the put option writer gains a profit, in the form
of the premium, so long as the price of the underlying security remains above
the exercise price, but assumes an obligation to purchase the underlying
security from the buyer of the put option at the exercise price, even though the
security may fall below the exercise price, at any time during the option
period. If an option expires, the writer realizes a gain in the amount of the
premium. Such a gain may, in the case of a covered call option, be offset by a
decline in the market value of the underlying security during the option period.
If a call option is exercised, the writer realizes a gain or loss from the sale
of the underlying security. If a put option is exercised, the writer must
fulfill his obligation to purchase the underlying security at the exercise
price, which will usually exceed the then-market value of the underlying
security.
Because the Government Fund can write only covered options, it may at
times be unable to write additional options unless it sells a portion of its
portfolio holdings to obtain new debt securities against which it can write
options. This may result in higher portfolio turnover and correspondingly
greater brokerage commissions and other transaction costs.
To the extent that a secondary market is available on the Exchanges,
the covered option writer may close out options it has written prior to the
assignment of an exercise notice by purchasing, in a closing purchase
transaction, an option of the same series as the option previously written. If
the cost of such a closing purchase, plus transaction costs, is greater than the
premium received upon writing the original option, the writer will incur a loss
in the transaction.
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<PAGE> 134
The extent to which the Government Fund may write covered call and put
options and enter into so-called "straddle" transactions may be limited by the
Code's requirements for qualification as a regulated investment company and the
Fund's intention to qualify as such.
Purchasing Put Options on Government Securities
-----------------------------------------------
The Government Fund may purchase put options on optionable Government
Securities in anticipation of a price decline in the underlying security. This
contemplates the purchase of put options at a time when the Fund does not own
the underlying security and it seeks to benefit from an anticipated decline in
the market price of the underlying security. If the put option is not sold when
it has remaining value, and if the market price of the underlying security
remains equal to or greater than the exercise price during the life of the put
option, the Fund will lose its entire investment in the put option. Further,
unless the put option is sold in a closing sale transaction, in order for the
purchase of a put option to be profitable, the market price of the underlying
security must decline sufficiently below the exercise price to cover the premium
and transaction costs.
The Government Fund may also purchase put options ("protective puts")
to protect its holdings in an underlying security against a substantial decline
in market value. Such hedge protection is provided only during the life of the
put option when the Fund as the holder of the put option is able to sell the
underlying security at the exercise price regardless of any decline in the
underlying security's market price. By using put options in this manner, the
Fund will reduce any profit it might otherwise have realized in its underlying
security by the premium paid for the put option and by transaction costs.
The Government Fund will not invest more than 5% of its net assets in
put options.
Risk Factors Applicable to Options (Government Fund, Gold & Government Fund and
- -------------------------------------------------------------------------------
Global Income Fund Only)
- ------------------------
ON TREASURY BONDS AND NOTES. Because trading interest in Treasury Bonds
and Notes tends to center on the most recently auctioned issues, the Exchanges
will not indefinitely continue to introduce new series of options with
expirations to replace expiring options on particular issues. Instead, the
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run their course, with the possible addition of a
limited number of new expirations as the original ones expire. Options trading
on each series of Bonds or Notes will thus be phased out as new options are
listed on the more recent issues, and a full range of expiration dates will not
ordinarily be available for every series on which options are traded.
ON TREASURY BILLS. Because the deliverable Treasury Bill changes from
week to week, writers of Treasury Bill call options cannot provide in advance
for their potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Government Fund or the Gold & Government
Fund holds a long position in Treasury Bills with a principal amount
corresponding to the option contract size, such Fund may be hedged from a risk
standpoint. In addition, each Fund will maintain in a segregated account with
its custodian Treasury Bills maturing no later than those which would be
deliverable in the event of an assignment of an exercise notice to ensure that
it can meet its open options obligations.
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ADDITIONAL RISKS OF OPTIONS ON GOVERNMENT SECURITIES. The Gold &
Government Fund, the Government Fund and the Global Income Fund may purchase and
sell options on Government Securities including securities issued by the
Government National Mortgage Association. Certain options on Government
Securities are traded "over-the-counter" rather than on an exchange. This means
that each of these Funds will enter into such options with particular
broker-dealers who make markets in these options. With respect to options not
traded on an exchange, there is the additional risk that a Fund may not be able
to enter into a closing transaction with the other party to the option on
satisfactory terms or that such other party may be unable to fulfill its
contractual obligations. However, the Adviser or JH Advisers International, as
the case may be, will enter into transactions in non-listed options only with
responsible dealers where it does not believe that the foregoing factors present
a material risk. There is no assurance that the Funds will be able to effect
closing transactions at any particular time or at an acceptable price. A Fund's
ability to terminate options positions in Government Securities may involve the
risk that broker-dealers participating in such transactions will fail to meet
their obligations to the Fund. The Funds will purchase options on Government
Securities only from broker-dealers whose debt securities are investment grade
(as determined by the Boards of Trustees).
All Funds
- ---------
Put and Call Options: General
--------------------- -------
A call option position may be closed out only on an exchange which
provides a secondary market for options of the same series or, in the case of an
over-the-counter option, only with the other party to the transaction. In
general, exchange-traded options are third-party contracts (i.e. performance of
the parties' obligations is guaranteed by an exchange or clearing corporation)
with standardized strike prices and expiration dates. Over-the-counter
transactions are two-party contracts with price and terms negotiated by the
buyer and seller. There is no assurance that the Funds will be able to close out
options acquired or sold over-the-counter.
The Funds will acquire only those over-the-counter options for which
management believes the Funds can receive on each business day at least two
separate bids or offers (one of which will be from an entity other than a party
to the option) or those over-the-counter options valued by an independent
pricing service. The Funds will write and purchase over-the-counter options only
with member banks of the Federal Reserve System and primary dealers in U.S.
Government securities or their affiliates which have capital of at least $50
million or whose obligations are guaranteed by an entity having capital of at
least $50 million. The SEC has taken the position that over-the-counter options
are illiquid securities, subject to the restriction that illiquid securities are
limited to not more than 10% of a Fund's assets. The SEC, however, has a partial
exemption from the above restrictions on transactions in over-the-counter
options. The SEC allows a Fund to exclude from the 10% limitation on illiquid
securities a portion of the value of the over-the-counter options written by the
fund, provided that certain conditions are met. First, the other party to the
over-the-counter options has to be a primary U.S. Government securities dealer
designated as such by the Federal Reserve Bank. Second, the Funds would have
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an absolute contractual right to repurchase the over-the-counter options at a
formula price. If the above conditions are met, a Fund must treat as illiquid
only that portion of the over-the-counter option's value (and the value of its
underlying securities) which is equal to the formula price for repurchasing the
over-the-counter option, less the over-the-counter option's intrinsic value.
Although the Funds will generally purchase or write only those
exchange-traded options for which there appears to be an active secondary
market, there can be no assurance that a liquid secondary market on an exchange
will exist for any particular option, or at any particular time. In the event
that no liquid secondary market exists, it might not be possible to effect
closing transactions in particular options. If Fund cannot close out an
exchange-traded or over-the-counter option which it holds, it would have to
exercise such option in order to realize any profit and would incur transaction
costs on the purchase or sale of underlying assets. If the Government Fund, Gold
& Government Fund, Sovereign Achievers Fund, Regional Bank Fund, Global Fund or
Global Income Fund, as covered call option writers, are unable to effect a
closing purchase transaction, they will not be able to sell the underlying
assets until the option expires or they deliver the underlying asset upon
exercise. Accordingly, these Funds may run the risk of either foregoing the
opportunity to sell the underlying asset at a profit or being unable to sell the
underlying asset as its price declines.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) an exchange may impose restrictions on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the exchanges and the Options
Clearing Corporation have had only limited experience with the trading of
certain options and the facilities of an exchange or the Options Clearing
Corporation may not at all times be adequate to handle current trading volume;
or (vi) one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in that class or series of options) would cease to exist,
although outstanding options that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
The put and call options activities of Government Fund, Gold &
Government Fund, Sovereign Achievers Fund, Regional Bank Fund, Global Fund and
Global Income Fund may affect their turnover rates and the amount of brokerage
commissions paid by them. The exercise of calls written by these Funds may cause
them to sell portfolio securities or other assets at times and amounts
controlled by the holder of a call, thus increasing the Funds' portfolio
turnover rates and brokerage commission payments. The exercise of puts purchased
by the Fund may also cause the sale of securities or other assets, also
increasing turnover. Although such exercise is within the Funds' control,
holding a protective put might cause the Funds to sell the underlying securities
or other assets for reasons which would not exist in the absence of the put.
Holding a non-protective put might cause the purchase of the underlying
securities or other assets to permit the Funds to exercise the put. The put and
call activities of Gold & Government Fund will be restricted by the limited
availability of options relating to mining securities and foreign investments
that are listed on domestic exchanges or quoted at some future date on NASDAQ.
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A Fund will pay a brokerage commission each time it buys or sells a put
or call or buys or sells a security in connection with the exercise of a put or
call. Such commissions may be higher than those which would apply to direct
purchases or sales of equity securities.
There is no limit as to how many times either the Global Fund's or the
Global Income Fund's options positions may be replaced and therefore the
potential risks to each Fund may be greater than 5% of its net assets.
Successful use by the Adviser or JH Advisers International of options on
securities, foreign currencies and/or forward foreign currency exchange
contracts will be based upon predictions by the Adviser or JH Advisers
International as to anticipated movements of foreign currency exchange rates
and/or interest rates.
The Funds' Custodian, or a securities depository acting for it, will
act as the Funds' escrow agent as to the securities on which they have written
calls, or as to other securities acceptable for such escrow, so that pursuant to
the rules of the Options Clearing Corporation and certain exchanges, no margin
deposit will be required of the Funds. Until the securities are released from
escrow, they cannot be sold by the Funds; this release will take place on the
expiration of the call or the Funds' entering into a closing purchase
transaction. For information on the valuation of the puts and calls, see "Net
Asset Value."
Managed-Tax Exempt Fund
- -----------------------
The Managed Tax-Exempt Fund does not engage in any options related
transactions except options on interest rate futures contracts and municipal
bond index futures contracts as described in "The Funds' Investments in Futures
Contracts" below.
THE FUNDS' INVESTMENTS IN FUTURES CONTRACTS
The following information supplements the discussion in the
Prospectuses regarding investment by certain Funds in futures contracts and
related options.
INTEREST RATE FUTURES CONTRACTS. The Government Fund, Managed Tax-Exempt Fund,
Gold & Government Fund and Global Income Fund may invest in interest rate
futures contracts and related options that are traded on a United States or
foreign exchange or board of trade.
Currently, interest rate futures contracts can be purchased and sold with
respect to U.S. Treasury bonds, U.S. Treasury notes, Government National
Mortgage Association mortgage-backed certificates, U.S. Treasury bills and
ninety-day commercial paper.
The purpose of the purchase or sale of interest rate futures contracts
by the Funds will be to protect the Funds from fluctuations in interest rates
without necessarily buying or selling fixed income securities. For example, if a
Fund owns bonds and interest rates are expected to increase, that Fund might
sell futures contracts on debt securities having characteristics similar to
those held in the portfolio. Such a sale would have much the effect as selling
an equivalent value of the
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bonds owned by the Fund. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of the futures
contracts to the Fund would increase at approximately the same rate, thereby
keeping the net asset value of the Fund from declining as much as it otherwise
would have.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against having to make an
anticipated purchase of bonds at the higher prices subsequently expected to
prevail. Since the fluctuations in the value of appropriately selected futures
contracts should be similar to that of the bonds that will be purchased, a Fund
could take advantage of the anticipated rise in the cost of the bonds without
actually buying them until the market has stabilized. At this time, that Fund
could make the intended purchase of the bonds in the cash market and the futures
contracts could be liquidated. To the extent a Fund enters into futures
contracts for this purpose, it will maintain in a segregated account assets
sufficient to cover its obligations with respect to such futures contracts,
which will consist of cash or U.S. Government or other high quality debt
securities from its portfolio in an amount equal to the difference between the
fluctuating market value of such futures contracts and the aggregate value of
the initial and variation margin payments made by the Fund with respect to such
futures contracts.
MUNICIPAL BOND INDEX FUTURES CONTRACTS. The Managed Tax-Exempt Fund may invest
in municipal bond index futures contracts that are traded on a United States
exchange or board of trade. Such investments may be made by the Fund solely for
the purposes of hedging against changes in the value of its portfolio securities
due to anticipated changes in interest rates and market conditions, and not for
purposes of speculation.
A municipal bond index futures contract is an agreement pursuant to
which two parties agree to take or make delivery of an amount of cash equal to
the difference between the value of the index at the close of the last trading
day of the contract and the price at which the index contract was originally
written. No physical delivery of the underlying municipal bonds in the index is
made.
The purpose of the acquisition or sale of a municipal bond index
futures contract by the Managed Tax-Exempt Fund, as the holder of long-term
municipal securities, is to protect the Fund from fluctuations in interest rates
on municipal securities without actually buying or selling long-term municipal
securities. For example, if the Fund owns long-term bonds and interest rates are
expected to increase, it might sell municipal bond index futures contracts. Such
a sale would have much the same effect as selling some of the long-term bonds in
the Fund's portfolio. If interest rates increase as anticipated by the Adviser,
the value of certain long-term municipal securities in the portfolio would
decline, but the value of the Fund's futures contracts would increase at
approximately the same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have. Of course, since the value of
the municipal securities in the Managed Tax-Exempt Fund's portfolio may exceed
the value of the futures contracts sold by the Fund, an increase in the value of
the futures contracts might only mitigate - but not totally offset - the decline
in the value of the portfolio.
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Similarly, when it is expected that interest rates may decline,
municipal bond index futures contracts could be purchased to hedge against the
Managed Tax-Exempt Fund's anticipated purchases of long-term municipal
securities at higher prices. Since the rate of fluctuation in the value of
municipal bond index futures contracts should be similar to that of long-term
bonds, the Fund could take advantage of the anticipated rise in the value of
long-term bonds without actually buying them until the market had stabilized. At
that time, the futures contracts could be liquidated and the Fund's cash could
be used to buy long-term bonds in the cash market. The Managed Tax-Exempt Fund
could accomplish similar results by selling municipal securities with long
maturities and investing in municipal securities with short maturities when
interest rates are expected to increase or buying municipal securities with long
maturities and selling municipal securities with short maturities when interest
rates are expected to decline. However, in circumstances when the market for
municipal securities may not be as liquid as that for the municipal bond index
futures contracts, the ability to invest in such contracts could enable the Fund
to react more quickly to anticipated changes in market conditions or interest
rates.
GOLD BULLION FUTURES CONTRACTS. The Gold & Government Fund may invest in gold
bullion futures contracts and related options that are traded on a United States
exchange or board of trade. Such investments may be made by the Gold &
Government Fund solely for the purpose of hedging against changes in the value
of its portfolio securities due to anticipated changes in gold prices, interest
rates or market conditions, and not for the purposes of speculation.
Generally, futures contracts on gold bullion are similar to the
interest rate futures contracts discussed above. By entering into gold bullion
futures contracts, the Fund will be able to establish the rate at which it will
be entitled to purchase set amounts of gold bullion in a future month. By
selling such futures, the Fund can establish the price it will receive in the
delivery month for a specified amount of gold bullion, or the Fund can attempt
to "lock in" the value of some or all of the gold bullion held in its portfolio
at a particular time.
FOREIGN CURRENCY FUTURES CONTRACTS. The Global Income Fund may invest in foreign
currency futures contracts and related options that are traded on a United
States foreign exchange or board of trade.
Foreign currency futures contracts can be purchased and sold with
respect to the British Pound, Deutsche Mark, Japanese Yen and other currencies
or groups of currencies in which securities held by the Global Income Fund are
denominated or which are sufficiently correlated with such currencies as to
constitute an appropriate vehicle for hedging.
Generally, foreign currency futures contracts are similar to the
interest rate futures contracts discussed above. By entering into foreign
currency futures contracts, the Global Income Fund will be able to establish the
rate at which it will be entitled to exchange U.S. dollars (or another foreign
currency) for another currency in a future month. By selling currency futures,
the Fund can establish the number of dollars (or another foreign currency) it
will receive in the delivery month for a certain amount of a foreign currency
against the U.S. dollar (or another foreign currency), or the Fund can attempt
to "lock in" the U.S. dollar value (or other foreign currency value) of some or
all of the securities held in its portfolio and denominated in that
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currency. By purchasing currency futures, the Fund can establish the number of
dollars it will be required to pay for a specified amount of a foreign currency
in the delivery month. For example, if the Fund intends to buy securities in the
future and expects the U.S. dollar to decline against the relevant foreign
currency during the period before the purchase is effected, the Fund can attempt
to "lock in" the price in U.S. dollars of the securities it intends to acquire.
FOREIGN DEBT SECURITIES FUTURES CONTRACTS. The Global Income Fund may also
invest in foreign debt futures contracts that are traded on a U.S. exchange or
board of trade or, consistent with U.S. Commodity Futures Trading Commission
regulations, traded on foreign exchanges. Such investments may be made solely
for the purpose of hedging against changes in the value of its portfolio
securities due to anticipated changes in interest rates, foreign currency
exchange rates or market conditions, and not for the purpose of speculation.
Foreign debt futures contracts are similar to the interest rate futures
contracts discussed above. By purchasing a futures contract, the Global Income
Fund will legally obligate itself to accept delivery of the underlying foreign
debt security and pay the agreed price; by selling a foreign debt futures
contract, it will legally obligate itself to make delivery of the security
against payment of the agreement price. Futures contracts for the purchase and
sale of foreign debt futures contracts currently are actively traded on the
London International Financial Futures Exchange, the Tokyo Stock Exchange and
the Paris Stock Exchange.
RISK FACTORS. Unlike the purchase or sale of a security, no consideration is
paid or received by a Fund upon the purchase or sale of a futures contract.
Initially, a Fund will be required to deposit with the broker an amount of cash
or cash equivalents, known as "initial margin", as a type of performance bond or
good faith deposit which is returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied. The required
amount of initial margin is subject to change by the board of trade or exchange
on which the contract is traded and members of such board of trade or exchange
may charge a higher amount. Subsequent payments, known as "variation margin", to
and from the broker, will be made on a daily basis as the price of the futures
contract fluctuates making long and short positions in the contract more or less
valuable, a process known as marking-to-market. At any time prior to the
expiration of the contract, a Fund may elect to close the position, which will
operate to terminate the Fund's existing position in the futures contract.
There are several risks in connection with the use of futures contracts
as a hedging device. Successful use of futures contracts by the Funds is subject
to the Adviser's ability to predict correctly movements in the direction of
interest rates, gold prices or foreign currency exchange rates, as the case may
be. A decision of whether, when and how to hedge involves the exercise of skill
and judgment and even a well-conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected trends in such rates and prices. In
addition, there can be no assurance that there will be a correlation between
movements in the price of the futures contracts and movements in the price of
the related securities, gold or foreign currencies which are the subject of the
hedge. The degree of imperfection or correlation depends upon various
circumstances such as, for example, variations in speculative market demand for
futures contracts and the specific securities, gold or foreign currencies being
hedged and upon the securities, gold or foreign currencies, as the case may be,
underlying the futures contracts.
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Although the Funds intend to purchase or sell futures contracts only if
there is an active market for such contracts, there is no assurance that a
liquid market will exist for the contract at any particular time. Most domestic
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular contract,
no trades may be made that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses because the limit may prevent the liquidation of
unfavorable positions. It is possible that futures contract prices could move to
the daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of the futures position and subjecting
some futures traders to substantial losses. In such event, it will not be
possible to close a futures position, and in the event of adverse price
movements, a Fund would be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may partially or completely offset losses on the
futures contract. However, as described above, there is no guarantee that the
price of the securities, gold or foreign currencies, as the case may be, will,
in fact, correlate with the price movements in the respective futures contracts
and thus provide an offset to losses on such futures contracts.
If a Fund has hedged against the possibility of an increase in interest
rates, gold prices or foreign currency rates adversely affecting the value of
the securities, gold bullion or foreign currencies held in its portfolio and
rates decrease instead, the Fund will lose part or all of the benefit of the
increased value of the respective securities, gold bullion or foreign currencies
which it has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if a Fund has insufficient cash, it
may have to sell securities to meet daily variation margin requirements. Such
sales of securities may, but will not necessarily, be at increased prices which
reflect the decline in interest rates, gold prices or foreign currency exchange
rates, as the case may be. The Funds may have to sell securities at a time when
it may be disadvantageous to do so.
OPTIONS ON INTEREST RATE, GOLD BULLION AND FOREIGN CURRENCY FUTURES CONTRACTS.
An option on a futures contract, as contrasted with the direct investment in
such a contract, gives the purchaser the right, in return for the premium paid,
to assume a position in the futures contract at a specified exercise price at
any time prior to the expiration of the option. The potential loss related to
the purchase of an option on a futures contract is limited to the premium paid
for the option (plus transaction costs).
The Funds may purchase and write put and call options on interest rate,
gold bullion and foreign currency futures contracts, as the case may be, that
are traded on a United States exchange or board of trade as a hedge against the
value of their portfolio securities due to anticipated changes in interest
rates, gold prices, foreign currency exchange rates or market conditions, and
may enter into closing transactions with respect to such options to terminate
existing positions.
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In addition to the risks which apply to futures transactions generally
as described above, there are additional risks relating to options on futures
contracts. The ability to establish and close out positions on such options will
be subject to the existence of a liquid market. In addition, the purchase or
sale of put or call options will be based upon predictions as to anticipated
interest rate trends, gold bullion or foreign currency valuation trends, as the
case may be, by the Adviser which could prove to be incorrect. Even if the
expectations of the Adviser are correct, there may be an imperfect correlation
between the change in the value of the options and of the portfolio securities
hedged. In addition, the ability of the Funds to trade in futures contracts may
be materially limited by the requirements of the Internal Revenue Code.
When a Fund writes a call option or put option it will be required to
deposit initial margin and variation margin pursuant to broker's requirements
similar to those applicable to futures contracts. In addition, net option
premiums received for writing options will be included as initial margin
deposits.
There is no limit as to how many times the Gold & Government Fund's or
the Global Income Fund's options positions may be replaced, and, therefore, the
potential risks to those Funds may be greater than 5% of their net assets.
Successful use by the Adviser of options will be based upon predictions by the
Adviser as to anticipated movements of interest rates, gold prices and/or
foreign currency exchange rates.
CERTAIN INVESTMENT PRACTICES
The following information supplements the discussion of the Funds'
investment strategies and techniques in the Prospectuses.
Investment in Foreign Securities
- --------------------------------
Because of the following considerations, shares of the Global Fund and
the Global Income Fund should not be considered a complete investment program.
There is generally less publicly available information about foreign companies
and other issuers comparable to reports and ratings that are published about
issuers in the United States. Foreign issuers are also generally not subject to
uniform accounting and auditing and financial reporting standards, practices and
requirements comparable to those applicable to United States issuers.
It is contemplated that most foreign securities will be purchased in
over-the-counter markets or on exchanges located in the countries in which the
respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Similarly, volume
and liquidity in most foreign bond markets is less than in the United States and
at times, volatility of price can be greater than in the United States. Fixed
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commissions on foreign exchanges are generally higher than negotiated
commissions on United States exchanges, although each Fund will endeavor to
achieve the most favorable net results on its portfolio transactions. There is
generally less government supervision and regulation of securities exchanges,
brokers and listed issuers than in the United States.
With respect to certain foreign countries, there is the possibility of
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of a
Fund, political or social instability, or diplomatic developments which could
affect United States investments in those countries. Moreover, individual
foreign economies may differ favorably or unfavorably from the United States'
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
The dividends and interest payable on certain of the Global Fund's and
the Global Income Fund's foreign portfolio securities may be subject to foreign
withholding taxes, thus reducing the net amount of income available for
distribution to each Fund's shareholders. See "Tax Status".
Investors should understand that the expense ratio of each of the
Global Fund and the Global Income Fund can be expected to be higher than that of
investment companies investing in domestic securities since the expenses of the
Funds, such as the cost of maintaining the custody of foreign securities and the
rate of advisory fees paid by the Funds, are higher.
Repurchase Agreements
- ---------------------
The Funds may also enter into repurchase agreements with domestic
broker-dealers, banks and financial institutions, but Government Fund, Managed
Tax-Exempt Fund, Gold & Government Fund, Sovereign Achievers Fund, Global Fund
and Global Income Fund may not invest more than 10% and Regional Bank Fund may
not invest more than 5% of their respective net assets in repurchase agreements
having maturities of greater than seven days.
A repurchase agreement is a contract pursuant to which a Fund, against
receipt of securities of at least equal value including accrued interest, agrees
to advance a specified sum to a broker-dealer, bank or financial institution
which agrees to reacquire the securities at a mutually agreed upon time and
price. Repurchase agreements, which are usually for periods of one week or less,
enable a Fund to invest its cash reserves at fixed rates of return. A Fund may
enter into repurchase agreements with domestic broker-dealers, banks and other
financial institutions, provided the Fund's custodian always has possession of
securities serving as collateral whose market value at least equals the amount
of the institution's repurchase obligation. The Global Fund and the Global
Income Fund will only enter into repurchase agreements which are collateralized
at all times by U.S. Government obligations. To minimize the risk of loss the
Funds will enter into repurchase agreements only with institutions and dealers
which the Boards of Trustees of the Trusts consider to be creditworthy. If an
institution enters an insolvency proceeding, the resulting delay in liquidation
of the securities serving as collateral could cause the relevant Fund some loss,
as well as legal expense, if the value of the securities declined prior to
liquidation.
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When-Issued and Delayed Delivery Securities
- -------------------------------------------
As stated in the Prospectus, the Managed Tax-Exempt Fund may purchase
and sell municipal securities and the Gold & Government Fund and the Global
Income Fund may purchase and sell fixed income securities (including GNMA, FHLMC
and FNMA Certificates) on a when-issued or delayed delivery basis. When-issued
or delayed delivery transactions arise when securities are purchased or sold by
a Fund with payment and delivery taking place in the future in order to secure
what is considered to be an advantageous price and yield. However, the yield on
a comparable security available when delivery takes place may vary from the
yield on the security at the time that the when-issued or delayed delivery
transaction was entered into. When a Fund engages in when-issued and delayed
delivery transactions, it relies on the seller or buyer, as the case may be, to
consummate the sale. Failure to do so may result in the Fund missing the
opportunity of obtaining a price or yield considered to be advantageous.
When-issued and delayed delivery transactions may be expected to settle within
three months from the date the transactions are entered into. However, no
payment or delivery is made by the Fund until it receives delivery or payment
from the other party to the transaction.
To the extent that a Fund remains substantially fully invested at the
same time that it has purchased when-issued securities, as it would normally
expect to do, there may be greater fluctuations in its net assets than if the
Fund set aside cash to satisfy its purchase commitment.
When a Fund purchases securities on a when-issued basis, it will
maintain in a segregated account with its Custodian cash, Government Securities
or other high-grade debt obligations readily convertible into cash having an
aggregate value equal to the amount of such purchase commitments until payment
is made. If necessary, additional assets will be placed in the account daily so
that the value of the account will equal or exceed the amount of the Fund's
purchase commitment. The Government Fund, the Global Income Fund and the Managed
Tax-Exempt Fund will likewise segregate securities they sell on a delayed
delivery basis.
The Managed Tax-Exempt Fund expects that commitments to purchase
when-issued securities will not normally exceed 25% of its net asset value.
Stand-By Commitments
- --------------------
When the Managed Tax-Exempt Fund exercises a stand-by commitment that
it has acquired from a dealer with respect to a municipal security held in its
portfolio, the dealer will normally pay to the Managed Tax-Exempt Fund an amount
equal to: (1) the Fund's acquisition cost of the municipal securities (excluding
any accrued interest which the Fund paid on their acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (2) all interest accrued
on the securities since the last interest payment date or the date the
securities were purchased by the Fund, whichever is later. The Fund's right to
exercise stand-by commitments would be unconditional and unqualified. A stand-by
commitment would not be transferable by the Managed Tax-Exempt Fund, although it
could sell the underlying municipal securities to a third party at any time.
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The Managed Tax-Exempt Fund intends to enter into stand-by commitments
only with those banks which, in the opinion of the Adviser, present minimal
credit risk. The Managed Tax-Exempt Fund may pay for stand-by commitments either
separately, in cash or by paying a higher price for portfolio securities which
are acquired subject to such a commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid for
outstanding stand-by commitments held by the Managed Tax-Exempt Fund is not
expected to exceed 1/2 of 1% of the Fund's total asset value calculated
immediately after each stand-by commitment is acquired. The Fund intends to
acquire stand-by commitments solely to facilitate portfolio liquidity and does
not intend to exercise its rights thereunder for trading purposes. The
acquisition of a stand-by commitment would not ordinarily affect the valuation
or maturity of the underlying municipal securities. Stand-by commitments
acquired by the Managed Tax-Exempt Fund would be valued at zero in determining
net asset value. Where the Fund paid directly or indirectly for a stand-by
commitment, its cost would be amortized over the period the commitment is held
by the Fund. Although Federal income tax law may not be entirely clear in
certain cases, the Fund intends to take the position that it is the owner of
municipal securities it holds subject to stand-by commitments.
Leverage Through Borrowing
- --------------------------
The Government Fund may borrow from banks to increase its portfolio
holdings of Government Securities. Such borrowings will be unsecured. The 1940
Act requires the Fund to maintain continuous asset coverage of not less than
300% with respect to such borrowings. This allows the Fund to borrow for such
purposes an amount (when taken together with any borrowings for temporary
extraordinary or emergency purposes as described below) equal to as much as 50%
of the value of its net assets (not including such borrowings). If such asset
coverage should decline to less than 300% due to market fluctuations or other
reasons, the Fund may be required to sell some of its portfolio holdings within
three days in order to reduce the Fund's debt and restore the 300% asset
coverage, even though it may be disadvantageous from an investment standpoint to
sell securities at that time. Leveraging will exaggerate any increase or
decrease in the net asset value of the Fund's portfolio, and in that respect may
be considered a speculative practice. Money borrowed for leveraging will be
subject to interest costs which may or may not exceed the investment return
received from the securities purchased.
The Fund may also borrow money for temporary extraordinary or emergency
purposes. Such borrowings may not exceed 5% of the value of the Fund's total
assets when the loan is made. The Fund may pledge up to 10% of the lesser of
cost or value of its total assets to secure such borrowings.
Trading of Securities
- ---------------------
The Government Fund may trade those Government Securities which are not
covering outstanding options positions and are not on loan to broker-dealers if
the Fund's Adviser believes that there are opportunities to exploit
differentials in prices and yields or fluctuations in interest rates, consistent
with its investment objective.
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Investment in Rule 144A Securities and Other Restricted Securities
- ------------------------------------------------------------------
The Funds may purchase restricted securities eligible for resale to
"qualified institutional buyers" pursuant to Rule 144A under the Securities Act
of 1933 and other securities for which market quotations are not readily
available if the Funds' Boards of Trustees or the Adviser have determined under
Board-approved guidelines that such restricted securities are liquid. The Boards
of Trustees will determine as a question of fact the liquidity of Rule 144A
securities in each Fund's portfolio using the guidelines set forth below.
In their determination of liquidity, the Boards of Trustees will
consider the following factors, among others: (1) the frequency of trades and
quotes for the security, (2) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers, (3) dealer
undertakings to make a market in the security, and (4) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
transfer). In accordance with Rule 144A, each Board intends to delegate its
responsibility to the Adviser to determine the liquidity of each restricted
security purchased by the Funds pursuant to Rule 144A, subject to the Board's
oversight and review. The foregoing investment practice could have the effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing the Rule 144A
securities. The Funds will not invest more than 5% of their total assets in Rule
144A securities without first supplementing the prospectuses and providing
additional information to shareholders.
The Funds may acquire other restricted securities including securities
for which market quotations are not readily available. These securities may be
sold only in privately negotiated transactions or in public offerings with
respect to which a registration statement is in effect under the Securities Act
of 1933. Where registration is required, a Fund may be obligated to pay all or
part of the registration expenses and a considerable period may elapse between
the time of the decision to sell and the time the Fund may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, a Fund might obtain a less favorable
price than prevailed when it decided to sell. Restricted securities will be
priced at fair value as determined in good faith by the Funds' Boards of
Trustees. If through the appreciation of restricted securities or the
depreciation of unrestricted securities, a Fund should be in a position where
more than 10% of the value of its assets is invested in illiquid securities
(including repurchase agreements which mature in more than seven days and
options which are traded over-the-counter and their underlying securities), the
Fund will bring its holdings of illiquid securities below the 10% limitation.
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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 Prospectuses and this Statement of Additional Information, means
approval by the lesser of (1) 67% or more of the Fund's shares represented at a
meeting if at least 50% of the Fund's outstanding shares are present in person
or by proxy at the meeting or (2) 50% of the Fund's outstanding shares.
A Fund may not:
1. PURCHASES ON MARGIN AND SHORT SALES. Purchase securities on margin
or sell short, except that a Fund may obtain such short term credits
as are necessary for the clearance of securities transactions. The
deposit or payment by a Fund of initial or maintenance margin in
connection with futures contracts or related options transactions is
not considered the purchase of a security on margin.
2. BORROWING. Borrow money, except from banks temporarily for
extraordinary or emergency purposes (not for leveraging or investment)
and then in an aggregate amount not in excess of (a) 5% of the value
of the Fund's net assets at the time of such borrowing with respect to
the Gold & Government Fund, Regional Bank Fund and Sovereign Achievers
Fund; (b) 10% of the value of the Fund's total assets at the time of
such borrowing with respect to the Managed Tax-Exempt Fund, Global
Fund and Global Income Fund, provided that the Fund will not purchase
securities for investment while borrowings equaling 5% or more of the
Fund's total assets are outstanding; and (c) with respect to the
Government Fund, 33 1/3% of the value of the Fund's total assets
(including the amount borrowed) less liabilities (not including the
amount borrowed).
3. UNDERWRITING SECURITIES. Act as an underwriter of securities of
other issuers, except to the extent that it may be deemed to act as an
underwriter in certain cases when disposing of restricted securities.
(See also Restriction 14.)
4. SENIOR SECURITIES. Issue senior securities except as appropriate to
evidence indebtedness which a Fund is permitted to incur, provided
that, to the extent applicable, (i) the purchase and sale of futures
contracts or related options, (ii) collateral arrangements with
respect to futures contracts, related options, forward foreign
currency exchange contracts or other permitted investments of a Fund
as described in the Prospectus, including deposits of initial and
variation margin, and (iii) the establishment of separate classes of
shares of a Fund for providing alternative distribution methods are
not considered to be the issuance of senior securities for purposes of
this restriction.
5. WARRANTS. With respect to the Managed Tax-Exempt Fund and
Government Fund, invest in marketable warrants to purchase common
stock; with respect to the Gold & Government Fund, Regional Bank Fund
and Sovereign Achievers Fund, invest more than 5% of the value of the
Fund's net assets in marketable warrants to purchase common
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stock; and with respect to the Global Fund and the Global Income Fund,
invest more than 5% of the Fund's total assets in warrants, whether or
not the warrants are listed on the New York or American Stock
Exchanges, or more than 2% of the value of the Fund's total assets in
warrants which are not listed on those exchanges. Warrants acquired in
units or attached to securities are not included in this restriction.
6. SINGLE ISSUER LIMITATION/DIVERSIFICATION. Purchase securities of
any one issuer, except securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, if immediately after
such purchase more than 5% of the value of a Fund's total assets would
be invested in such issuer or the Fund would own or hold more than 10%
of the outstanding voting securities of such issuer; provided,
however, that with respect to all Funds, up to 25% of the value of a
Fund's total assets may be invested without regard to these
limitations. This restriction does not apply to Global Income Fund,
which is a non-diversified fund under the 1940 Act.
7. SINGLE CLASS OF ISSUER LIMITATION. Acquire more than 5% of any
class of securities of an issuer, except securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities. For this purpose, all outstanding bonds, preferred
stocks, and other evidences of indebtedness shall be deemed a single
class regardless of maturities, priorities, coupon rates, series,
designations, conversion rights, security or other differences. This
Restriction does not apply to the Managed Tax-Exempt Fund or Global
Income Fund.
8. REAL ESTATE. Purchase or sell real estate although a Fund may
purchase and sell securities which are secured by real estate,
mortgages or interests therein, or issued by companies which invest in
real estate or interests therein; provided, however, that no Fund will
purchase real estate limited partnership interests.
9. COMMODITIES; COMMODITY FUTURES; OIL AND GAS EXPLORATION AND
DEVELOPMENT PROGRAMS. Purchase or sell commodities or commodity
futures contracts or interests in oil, gas or other mineral
exploration or development programs, except a Fund (other than the
Regional Bank Fund) may engage in such forward foreign currency
contracts and/or purchase or sell such futures contracts and options
thereon as described in the Prospectus.
10. MAKING LOANS. Make loans, except that a Fund may purchase or hold
debt instruments and may enter into repurchase agreements (subject to
Restriction 14) in accordance with its investment objectives and
policies and, with respect to the Sovereign Achievers Fund, Government
Fund, Global Fund and Global Income Fund, make loans of portfolio
securities provided that as a result, no more than 5% of the Sovereign
Achievers Fund's total assets, 10% of the Global Fund's total assets
and 30% of the total assets of the Government Fund or Global Income
Fund, taken at current value would be so loaned.
11. SECURITIES OF OTHER INVESTMENT COMPANIES. Purchase securities of
other open-end investment companies, except in connection with a
merger, consolidation, acquisition or reorganization; or purchase more
than 3% of the total outstanding voting stock of any closed-end
investment company if more than 5% of a Fund's total assets would be
invested
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in securities of any closed-end investment company, or more than 10%
of the Fund's total assets would be invested in securities of any
closed-end investment companies in general. In addition, a Fund may
not invest in the securities of closed-end investment companies except
by purchase in the open market involving only customary broker's
commissions.
12. INDUSTRY CONCENTRATION. Purchase any securities which would cause
more than 25% of the market value of a Fund's total assets at the time
of such purchase to be invested in the securities of one or more
issuers having their principal business activities in the same
industry, provided that there is no limitation with respect to
investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; provided that,
notwithstanding the foregoing, (A) the Gold & Government Fund will
invest more than 25% of its total assets in gold and gold mining
industries, and will not at any time have less than 65% of its total
assets invested in some combination of gold and gold mining securities
and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; and (B) the Regional Bank Fund will
invest more than 25% of its total assets in issuers in the banking
industry; all as more fully set forth in the Prospectus. For purposes
of this Restriction, with respect to the Managed Tax-Exempt Fund,
state and municipal governments and their political subdivisions are
not considered members of any industry. With respect to Managed
Tax-Exempt Fund, this limitation shall not be applicable to
investments in Tax-Exempt securities issued by any state and municipal
governments and their political subdivisions. With respect to Global
Income Fund, this restriction will apply to obligations of a foreign
government unless the Securities and Exchange Commission permits their
exclusion.
Nonfundamental Investment Restrictions
- --------------------------------------
The following restrictions are designated as nonfundamental and may be
changed by the Board of Trustees without shareholder approval.
A Fund may not:
13. OPTIONS TRANSACTIONS. Write, purchase, or sell puts, calls or
combinations thereof except that a Fund may write, purchase or sell
puts and calls on securities as described in the Prospectuses, and the
Global Income Fund may purchase or sell puts and calls on foreign
currencies as described in the Prospectus.
14. ILLIQUID SECURITIES. Purchase or otherwise acquire any security
if, as a result, more than 10% of a Fund's net assets (taken at
current value) would be invested in securities that are illiquid by
virtue of the absence of a readily available market or legal or
contractual restrictions on resale. This policy includes repurchase
agreements maturing in more than seven days. This policy does not
include restricted securities eligible for resale pursuant to Rule
144A under the Securities Act of l933 which the Board of Trustees or
the Adviser has determined under Board-approved guidelines are liquid.
15. ACQUISITION FOR CONTROL PURPOSES. Purchase securities of any
issuer for the purpose of exercising control or management, except in
connection with a merger, consolidation, acquisition or
reorganization.
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16. UNSEASONED ISSUERS. Purchase securities of any issuer with a
record of less than three years continuous operations, including
predecessors, if such purchase would cause the investments of a Fund
in all such issuers to exceed 5% of the total assets of the Fund taken
at market value, except this restriction shall not apply to (i)
obligations of the U.S. Government, its agencies or instrumentalities
and (ii) securities of such issuers which are rated by at least one
nationally recognized statistical rating organization. With respect to
Managed Tax-Exempt Fund, this restriction shall not apply to municipal
obligations for the payment of which is pledged the faith, credit and
taxing power of any person authorized to issue such securities. With
respect to the Global Income Fund, this restriction shall not apply to
obligations issued or guaranteed by any foreign government or its
agencies or instrumentalities.
17. BENEFICIAL OWNERSHIP OF OFFICERS AND DIRECTORS OF FUND AND
ADVISEr. Purchase or retain the securities of any issuer if those
officers or trustees of a Fund or officers or directors of the Adviser
who each own beneficially more than 1/2 of 1% of the securities of
that issuer together own more than 5% of the securities of such
issuer.
18. HYPOTHECATING, MORTGAGING AND PLEDGING ASSETS. Hypothecate,
mortgage or pledge any of its assets except (a) with respect to the
Gold & Government Fund, Regional Bank Fund, Sovereign Achievers Fund
and Managed Tax-Exempt Fund, to secure loans as a temporary measure
for extraordinary purposes and (b) with respect to Government Fund,
Global Fund and Global Income Fund, as may be necessary in connection
with permitted borrowings and then not in excess of 5% of the Fund's
total assets, taken at cost. For the purpose of this restriction, (i)
forward foreign currency exchange contracts are not deemed to be a
pledge of assets, (ii) the purchase or sale of securities by a Fund on
a when-issued or delayed delivery basis and collateral arrangements
with respect to the writing of options on debt securities or on
futures contracts are not deemed to be a pledge of assets; and (iii)
the deposit in escrow of underlying securities in connection with the
writing of call options is not deemed to be a pledge of assets.
19. JOINT TRADING ACCOUNTS. Participate on a joint or joint and
several basis in any trading account in securities (except for a joint
account with other funds managed by the Adviser for repurchase
agreements permitted by the Securities and Exchange Commission
pursuant to an exemptive order).
20. Notwithstanding any investment restriction to the contrary, the
Fund may, in connection with the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees/Directors, purchase
securities of other investment companies within the John Hancock Group
of Funds provided that, as a result, (i) no more than 10% of the
Fund's assets would be invested in securities of all other investment
companies, (ii) such purchase would not result in more than 3% of the
total outstanding voting securities of any one such investment company
being held by the Fund and (iii) no more than 5% of the Fund's assets
would be invested in any one such investment company.
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If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amounts of net assets will not be considered a violation
of any of the foregoing restrictions (with the exception of Restriction 2
permitting Government Fund to borrow up to 33 1/3%, and Sovereign Achievers Fund
to borrow up to 5% of the value of their total assets).
The Global Income Fund has registered as a "non-diversified" investment
company under the Investment Company Act of 1940. However, the Fund intends to
limit its investments to the extent required by the diversification requirements
of the Internal Revenue Code. See "Taxes".
In addition, it is a fundamental policy of the Managed Tax-Exempt Fund
that the Managed Tax-Exempt Fund will invest at least 80% of its total assets in
municipal securities with varying maturities, the interest from which is, in the
opinion of bond counsel for the issuer, exempt from federal income tax.
TAX STATUS
Each Fund is treated as a separate entity for accounting and tax
purposes. Each Fund has qualified and elected to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and intends to continue to so qualify for each taxable
year. As such and by complying with the applicable provisions of the Code
regarding the sources of its income, the timing of its distributions, and the
diversification if its assets, each Fund will not be subject to Federal income
tax on taxable income (including net short-term and long-term capital gains from
the disposition of portfolio securities or the right to when-issued securities
prior to issuance or the lapse, exercise, delivery under or closing out of
certain options, futures and forward contracts, income from repurchase
agreements and other taxable securities, income attributable to accrued market
discount, and a portion of the discount from certain stripped tax-exempt
obligations or their coupons) which is distributed to shareholders at least
annually in accordance with the timing requirements of the Code.
Each Fund will be subject to a 4% 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. Each
Fund intends under normal circumstances to avoid liability for such tax by
satisfying such distribution requirements.
Distributions from a Fund's current or accumulated earnings and profits
("E&P"), as computed for Federal income tax purposes, will be taxable as
described in the Funds' Prospectuses whether taken in shares or in cash. Amounts
that are not allowable as a deduction in computing taxable income, including
expenses associated with earning tax-exempt interest income, do not reduce
current E&P for this purpose. Distributions, if any, in excess of an investor's
tax basis in Fund shares and thereafter (after such basis is reduced to zero)
will generally give rise to capital gains. Shareholders electing to receive
distributions in the form of additional shares will have a cost basis for
Federal income tax purposes in each share so received equal to the amount of
cash they would have received had they elected to receive the distributions in
cash, divided by the number of shares received.
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Distributions of tax-exempt interest ("exempt-interest dividend")
timely designated as such by the Managed Tax-Exempt Fund to its shareholders
will be treated as tax-exempt interest under the Code, provided that such Fund
qualifies as a regulated investment company and at least 50% of the value of its
assets at the end of each quarter of its taxable year is invested in tax-exempt
obligations. Shareholders are required to report their receipt of tax-exempt
interest, including such distributions, on their Federal income tax returns. The
portion of the Managed Tax-Exempt Fund's distributions designated as
exempt-interest dividends may differ from the actual percentage that its
tax-exempt income comprised of its total income during the period of any
particular shareholder's investment. This Fund will report to Shareholders the
amount designated as exempt-interest dividends for each year.
Interest income from certain types of tax-exempt bonds that are private
activity bonds in which the Managed Tax-Exempt Fund may invest is treated as an
item of tax preference for purposes of the Federal alternative minimum tax. To
the extent that the Managed Tax-Exempt Fund invests in these types of tax-exempt
bonds, shareholders will be required to treat as an item of tax preference for
Federal alternative minimum purposes that part of such Fund's exempt-interest
dividends which is derived from interest on these tax-exempt bonds.
Exempt-interest dividends derived from interest income from all tax-exempt bonds
may be included in corporate "adjusted current earnings" for purposes of
computing the alternative minimum tax liability, if any, of corporate
shareholders of the Managed Tax-Exempt Fund.
If a Fund invests in stock of certain non-U.S. corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest producing investments, dividends, rents, royalties or capital gain) or
hold at least 50% of their assets in investments producing such passive income
("passive foreign investment companies"), that Fund could be subject to Federal
income tax and additional interest charges on "excess distributions" received
from these passive foreign investment 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 would require the applicable
Fund to recognize taxable income or gain without concurrent receipt of cash. Any
Fund that is permitted to acquire stock in foreign corporations may limit and/or
manage its holdings in passive foreign investment companies to minimize its tax
liability or maximize its return from these investments.
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Foreign exchange gains and losses realized by a Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
certain foreign currency futures and options, foreign currency forward
contracts, foreign currencies, or payables or receivables denominated in a
foreign currency are subject to Section 988 of the Code, which generally causes
such gains and losses to be treated as ordinary income and losses and may affect
the amount, timing and character of distributions to shareholders. Any such
transactions that are not directly related to a Fund's investment in stock or
securities, possibly including speculative currency positions or currency
derivatives not used for hedging purposes, may increase the amount of gain it is
deemed to recognize from the sale of certain investments held for less than
three months, which gain is limited under the Code to less than 30% of its
annual gross income, and could under future Treasury regulations produce income
not among the types of "qualifying income" from which the Fund must derive at
least 90% of its annual gross income. Income from investments in commodities,
such as gold and certain related derivative instruments, is also not treated as
qualifying income under this test. If the net foreign exchange loss for a year
treated as ordinary loss under Section 988 were to exceed a Fund's investment
company taxable income computed without regard to such loss (i.e., all of the
Fund's net income other than any excess of net long-term capital gain over net
short-term capital loss) the resulting overall ordinary loss for such year would
not be deductible by the Fund or its shareholders in future years.
Some Funds may be subject to withholding and other taxes imposed by
foreign countries with respect to their investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. Investors may be entitled to claim U.S. foreign tax credits with respect
to such taxes, subject to certain provisions and limitations contained in the
Code. Specifically, if more than 50% of the value of a Fund's total assets at
the close of any taxable year consists of stock or securities of foreign
corporations, the Fund may file an election with the Internal Revenue Service
Pursuant to which shareholders of the Fund will be required to (i) include in
ordinary gross income (in addition to taxable dividends actually received) their
pro rata shares of foreign income taxes paid by the Fund even though not
actually received by them, and (ii) treat such respective pro rata portions as
foreign income taxes paid by them.
If a Fund makes this election, shareholders may then deduct such pro
rata portions of foreign income taxes in computing their taxable incomes, or
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of foreign income taxes paid by the Fund, although
such shareholders will be required to include their share of such taxes in gross
income. Shareholders who claim a foreign tax credit for such foreign taxes may
be required to treat a portion of dividends received from the Fund as a separate
category of income for purposes of computing the limitations on the foreign tax
credits. Tax-exempt shareholders will ordinarily not benefit from this
elections. Each year that a Fund files the election described above, its
shareholders will be notified of the amount of (i) each shareholder's pro rata
share of foreign income taxes paid by the Fund and (ii) the portion of Fund
dividends which represents income from each foreign country. A Fund that cannot
or does not make this election may deduct such taxes in computing its taxable
income.
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For each Fund, the amount of net realized 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
on those shares 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 a Fund (including by exercise of the
exchange privilege) a shareholder may realize a taxable gain or loss depending
upon his basis in his shares. Such gain or loss will be treated as capital gain
or loss if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, depending upon the shareholder's tax holding period for
the shares. A sales charge paid in purchasing Class A shares of a Fund cannot be
taken into account for purposes of determining gain or loss on the redemption or
exchange of such shares of the Fund or another John Hancock Fund are
subsequently acquired without payment of a sales charge pursuant to the
reinvestment or exchange privilege. This disregarded charge 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 the Automatic Dividend Reinvestment Plan.
In such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized upon the redemption of shares with a tax
holding period of six months or less will be disallowed to the extent of all
exempt-interest dividends paid with respect to such shares and will be treated
as a long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gain with respect to such shares.
Although its present intention is to distribute all net short-term and
long-term capital gains, if any, each Fund reserves the right to retain and
reinvest all or any portion of its "net capital gain", which is the excess, as
computer for Federal income tax purposes, of net long-term capital gain over net
short-term capital loss in any year. The Funds will not in any event distribute
net long-term capital gains realized in any year to the extend that a capital
loss is carried forward from prior years against such gain. To the extent such
excess was retained and not exhausted by the carryforward of prior years'
capital losses, it would be subject to Federal income tax in the hands of a
Fund. Each shareholder would be treated for Federal income tax purposes as if
such Fund had distributed to him on the last day of its taxable year his pro
rata share of such excess, and he had paid his pro rata share of the taxes paid
by the Fund and reinvested the remainder of the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain income in his return for his taxable year in which the last day of
the Fund's taxable year falls, (b) be entitled either to a tax credit on his
return for, or a refund of, his pro rata share of the taxes paid by the Fund,
and (c) be entitled to increase the adjusted tax basis for his shares in the
Fund by the difference between his pro rata share of such excess and his pro
rata share of such taxes.
43
<PAGE> 155
For Federal income tax purposes, each Fund is permitted to carryforward
a net capital loss in any year to offset its own net capital gains, if any,
during the eight years following the year of the loss. To the extent subsequent
net capital gains are offset by such losses, they would not result in Federal
income tax liability to the applicable Fund, as noted above, would not be
distributed as such to shareholders. The capital loss carryforwards for each of
the Funds are as follows: John Hancock Sovereign U.S. Government Income Fund has
$43,025,223 of capital loss carryforwards which will expire October 31, 1997 --
$282,637, October 31, 2002-- $16,549,431 and October 31, 2003 -- $26,193,155.
John Hancock Managed Tax Exempt Fund has no capital loss carryforwards. John
Hancock Gold & Government Fund has $11,789,591 of capital loss carryforwards
which will expire October 31, 2002 -- $8,066,420 and October 31, 2003 --
$3,723,171. John Hancock Sovereign Achievers Fund has no capital loss
carryforwards. John Hancock Regional Bank Fund has no capital loss
carryforwards. John Hancock Global Fund has no capital loss carryforwards. John
Hancock Global Income Fund has $3,413,372 which will expire October 31, 2002.
Interest on indebtedness incurred by a shareholder to purchase or carry
shares of the Managed Tax-Exempt Fund will not be deductible for Federal income
tax purposes to the extent it is deemed related to exempt-interest dividends
paid by such Fund. Pursuant to published guidelines, the Internal Revenue
Service may deem indebtedness to have been incurred for the purpose of
purchasing or carrying shares of this Fund even though the borrowed funds may
not be directly traceable to the purchase of shares.
For purposes of the dividends received deduction available to
corporations, dividends received by a Fund, if any, from U.S. domestic
corporations in respect of any share of stock held by the Fund, for U.S. Federal
income tax purposes, for at least 46 days (91 days in the case of certain
preferred stock) and distributed and designated by the Fund may be treated as
qualifying dividends. Only Sovereign Achievers Fund and Regional Bank Fund would
generally have any significant portion of its distributions treated as
qualifying dividends. Corporate shareholders must meet the minimum holding
period requirement stated above (46 or 91 days) with respect to their shares of
the applicable Fund in order to qualify for the deduction and, if they borrow to
acquire such shares, may be denied a portion of the dividends received
deduction. The entire qualifying dividend, including the otherwise deductible
amount, will be included in determining the excess (if any) of a corporate
shareholder's adjusted current earnings over its alternative minimum taxable
income, which may increase its alternative minimum tax liability, if any.
Additionally, any corporate shareholder should consult its tax adviser regarding
the possibility that its tax 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.
44
<PAGE> 156
Investment in debt obligations that are at risk of or in default
presents special tax issues for any Fund that may hold such obligations. Tax
rules are not entirely clear about issues such as when the Fund may cease to
accrue interest, original issue discount, or market discount, when and to what
extent deductions may be taken for bad debts or worthless securities, how
payments received on obligations in default should be allocated between
principal and income, and whether exchanges of debt obligations in a workout
context are taxable. These and other issues will be addressed by any Fund that
may hold such obligations in order to reduce the risk of distributing
insufficient income to preserve its status as a regulated investment company and
seek to avoid becoming subject to Federal income or excise tax.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.
Limitations imposed by the Code on regulated investment companies like
the Funds may restrict each Fund's ability to enter into futures, options, and
forward transactions.
Certain options, futures and forward foreign currency transactions
undertaken by a fund may cause the Fund to recognize gains or losses from
marking to market even though its positions have not been sold or terminated and
affect the character as long-term or short-term (or, in the case of certain
currency forward, options and futures, as ordinary income or loss) and timing of
some capital gains and losses realized by the Fund. Also, certain of a Fund's
losses on its transactions involving options, futures or forward contracts
and/or offsetting portfolio positions may be deferred rather than being taken
into account currently in calculating the Fund's taxable income. Certain of the
applicable tax rules may be modified if a Fund is eligible and chooses to make
one or more of certain tax elections that may be available. These transactions
may therefore affect the amount, timing and character of a Fund's distributions
to shareholders. The Funds will take into account the special tax rules
(including consideration of available elections) applicable to options, futures
or forward contracts in order to minimize any potential adverse tax
consequences.
The foregoing discussion relates solely to U.S. Federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions. Dividends, capital gain distributions, and ownership
of or gains realized on the redemption (including an exchange) of Fund shares
may also be subject to state and local taxes. Shareholders should consult their
own tax advisers as to the Federal, state or local tax consequences of ownership
of shares of, and receipt of distributions from, the Funds in their particular
circumstances.
45
<PAGE> 157
Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in a Fund is effectively connected will be subject to U.S.
Federal income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable a tax treaty) on amounts treated as
ordinary dividends from a Fund and, unless an effective IRS Form W-8 or
authorized substitute is on file, to 31% backup withholding on certain other
payments from the Fund. Non-U.S. investors should consult their tax advisers
regarding such treatment and the application of foreign taxes to an investment
in any Fund.
The Funds are not subject to Massachusetts corporate excise or
franchise taxes, provided that a fund qualifies as a regulated investment
company under the Code, it will also not be required to pay any Massachusetts
income tax.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of each Fund is managed by its Trustees, who elect
officers who are responsible for the day-to-day operations of the Trust 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 officers
and Directors of the Funds' principal distributor, John Hancock Funds, Inc.
("John Hancock Funds").
The following table sets forth the principal occupation of employment
of the Trustees and principal officers of the Funds during the past five years:
46
<PAGE> 158
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
---------------- WITH REGISTRANTS DURING PAST 5 YEARS
---------------- -------------------
<S> <C> <C>
*Edward J. Boudreau, Jr. Chairman (3,4) Chairman and Chief Executive Officer, the
Adviser and The Berkeley Financial Group
("The Berkeley Group"); Chairman, NM
Capital Management, Inc. ("NM Capital");
John Hancock Advisers International
Limited ("Advisers International"); John
Hancock Funds, Inc., ("John Hancock
Funds"); John Hancock Investor Services
Corporation ("Investor Services") and
Sovereign Asset Management Corporation
("SAMCorp") (herein after the Adviser,
The Berkeley Group, NM Capital, Advisers
International, John Hancock Funds,
Investor Services and SAMCorp are
collectively referred to as the
"Affiliated Companies"); Chairman, First
Signature Bank & Trust; Director, John
Hancock Freedom Securities Corp., John
Hancock Capital Corp., New England/Canada
Business Council; Member, Investment
Company Institute Board of Governors;
Director, Asia Strategic Growth Fund,
Inc.; Trustee, Museum of Science;
President, the Adviser (until July 1992);
Chairman, John Hancock Distributors, Inc.
until April 1994.
<FN>
- ------------
*Trustee may be deemed to be an "interested person" of the Trust as defined in the Investment Company Act of 1940.
(1) Member of the Audit Committees of the Trusts.
(2) Member of the Committees on Administration of the Trusts.
(3) Member of the Executive Committee of each Trust. The Executive Committee
may generally exercise most powers of the Trustees between regularly
scheduled meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
</TABLE>
47
<PAGE> 159
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
---------------- WITH REGISTRANTS DURING PAST 5 YEARS
---------------- -------------------
<S> <C> <C>
Douglas M. Costle Trustee (1, 2) Director, Chairman of the Board and
RR2 Box 480 Distinguished Senior Fellow, Institute
Woodstock, Vermont 05091 for Sustainable 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 MITRE Corporation
(governmental consulting services).
Leland O. Erdahl Trustee (1, 2) President and Director of Nature Quality
8046 Mackenzie Court Ingredients Company, Inc. and Sante Fe
Las Vegas, NV 89129 Ingredients Company, Inc. , private food
processing companies. Director of Uranium
Resources, Inc. President of Stolar, Inc.
from 1987 to 1991 and President of
Albuquerque Uranium Corporation from 1985
to 1992. Director of Freeport-McMoRan
Copper & Gold Company, Inc., Hecla Mining
Company, Canyon Resources Corporation and
Original Sixteen to One Mines, Inc. From
1984 to 1987 and 1991, management
consultant.
<FN>
- -----------
*Trustee may be deemed to be an "interested person" of the Trust as defined in the Investment Company Act of 1940.
(1) Member of the Audit Committees of the Trusts.
(2) Member of the Committees on Administration of the Trusts.
(3) Member of the Executive Committee of each Trust. The Executive Committee
may generally exercise most powers of the Trustees between regularly
scheduled meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
</TABLE>
48
<PAGE> 160
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
---------------- WITH REGISTRANTS DURING PAST 5 YEARS
---------------- -------------------
<S> <C> <C>
Richard A. Farrell Trustee(1, 2) President of Farrell, Healer & Co., a venture
Venture Capital Partners capital management firm, since 1980. Prior to
160 Federal Street that date, Mr. Farrell headed the venture
23rd Floor capital group at Bank of Boston Corporation.
Boston, MA 02110
William F. Glavin Trustee (1, 2) President, Babson College; Vice Chairman, Xerox
Babson College Corporation until June 1989. Director, Caldor
Horn Library Inc. and Inco Ltd.
Babson Park, MA 02157
Dr. John A. Moore Trustee (1, 2) President and Chief Executive Officer, Institute
Institute for Evaluating for Evaluating Health Risks, a nonprofit
Health Risks institution, since September 1989. Assistant
1629 K Street NW Administrator of the Office of Pesticides and
Suite 402 Toxic Substances at the Environmental Protection
Washington, DC 20006 Agency from December 1983 to July 1989.
Patti McGill Peterson Trustee (1, 2) President, St. Lawrence University; Director,
St. Lawrence University Niagara Mohawk Power Corporation and Security
110 Vilas Hall Mutual Life.
Canton, NY 13617
John W. Pratt Trustee (1, 2) Professor of Business Administration at Harvard
2 Gray Gardens East University Graduate School of Business
Cambridge, MA 02138 Administration (Since 1961).
Robert G. Freedman Vice Chairman and Chief Vice Chairman and Chief Investment Officer, the
Investment Officer (4) Adviser; President (until December 1994).
<FN>
- -----------
*Trustee may be deemed to be an "interested person" of the Trust as defined in the Investment Company Act of 1940.
(1) Member of the Audit Committees of the Trusts.
(2) Member of the Committees on Administration of the Trusts.
(3) Member of the Executive Committee of each Trust. The Executive Committee
may generally exercise most powers of the Trustees between regularly
scheduled meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
</TABLE>
49
<PAGE> 161
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
- ---------------- WITH REGISTRANTS DURING PAST 5 YEARS
---------------- -------------------
<S> <C> <C>
Anne C. Hodsdon President (4) President and Chief Operating Officer,
the Adviser; Executive Vice President,
the Adviser (until December 1994); Senior
Vice President; the Adviser (until
December 1993).
James B. Little Senior Vice President, Senior Vice President, the Adviser.
Chief Financial Officer
Thomas H. Drohan Senior Vice President and Senior Vice President and Secretary, the
Secretary Adviser.
John A. Morin Vice President Vice President, the Adviser.
Susan S. Newton Vice President, Assistant Vice President and Assistant Secretary,
Secretary and Compliance the Adviser.
Officer
James J. Stokowski Vice President and Vice President, the Adviser.
Treasurer
<FN>
- -----------
*Trustee may be deemed to be an "interested person" of the Trust as defined in the Investment Company Act of 1940.
(1) Member of the Audit Committees of the Trusts.
(2) Member of the Committees on Administration of the Trusts.
(3) Member of the Executive Committee of each Trust. The Executive Committee
may generally exercise most powers of the Trustees between regularly
scheduled meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
</TABLE>
50
<PAGE> 162
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.
<TABLE>
The following table provides information regarding the compensation
paid by the Funds and the other investment companies in the John Hancock Fund
Complex to the Independent Trustees for their services. Mr. Boudreau, and each
of the officers of the Funds are interested persons of the Adviser, are
compensated by the Adviser and receive no compensation from the Funds for their
services.
<CAPTION>
AGGREGATE COMPENSATION
----------------------
SOVEREIGN U.S.
--------------
INDEPENDENT TRUSTEES GOVERNMENT* MANAGED TAX- EXEMPT* GOLD & GOVERNMENT*
- -------------------- ----------- -------------------- ------------------
<S> <C> <C> <C>
William A. Barron, III** $ 9,344 $ 4,232 $ 704
Douglas M. Costle 9,344 4,232 704
Leland O. Erdahl 9,344 4,232 704
Richard A. Farrell 9,690 4,388 731
William F. Glavin 2,774 1,275 84
Patrick Grant** 9,805 4,440 740
Ralph Lowell, Jr.** 9,344 4,232 704
Dr. John A. Moore 9,344 4,232 704
Patti McGill Peterson 9,344 4,232 704
John W. Pratt 9,344 4,232 704
------- ------- ------
Totals $87,677 $39,727 $6,483
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION
----------------------
SOVEREIGN
---------
INDEPENDENT TRUSTEES ACHIEVERS* REGIONAL BANK* GLOBAL* GLOBAL INCOME*
- -------------------- ---------- -------------- ------- --------------
<S> <C> <C> <C> <C>
William A. Barron, III** $ 2,105 $ 13,754 $ 2,283 $ 2,190
Douglas M. Costle 2,105 13,754 2,283 2,190
Leland O. Erdahl 2,105 13,754 2,283 2,190
Richard A. Farrell 2,183 14,218 2,367 2,271
William F. Glavin 630 4,214 670 651
Patrick Grant** 2,208 14,372 2,395 2,299
Ralph Lowell, Jr.** 2,105 13,754 2,283 2,190
Dr. John A. Moore 2,105 13,754 2,283 2,190
Patti McGill Peterson 2,105 13,754 2,283 2,190
John W. Pratt 2,105 13,754 2,283 2,190
------- -------- ------- -------
Totals $19,756 $129,082 $21,413 $20,551
</TABLE>
51
<PAGE> 163
<TABLE>
<CAPTION>
PENSION OR RETIREMENT BENEFITS TOTAL COMPENSATION FROM FUNDS AND
ACCRUED AS PART OF EACH FUND'S JOHN HANCOCK FUND COMPLEX TO
INDEPENDENT TRUSTEES EXPENSES* TRUSTEES(1)
- -------------------- --------- -----------
(TOTAL OF 12 FUNDS)
<S> <C> <C>
William A. Barron, III* $ $ 41,750
Douglas M. Costle - 41,750
Leland O. Erdahl - 41,750
Richard A. Farrell - 43,250
William F. Glavin 20,715 37,500
Patrick Grant** - 43,750
Ralph Lowell, Jr.** - 41,750
Dr. John A. Moore - 41,750
Patti McGill Peterson - 41,750
John W. Pratt - 41,750
------- --------
Totals $20,715 $416,750
<FN>
(1)The total compensation paid the John Hancock Fund Complex to the Independent
Trustees is as of calendar year ended December 31, 1995.
*Compensation made for the fiscal year ended October 31, 1995.
**As of January 1, 1996, Messrs. Barron, Grant and Lowell resigned as Trustees.
</TABLE>
The nominees of the Funds may at times be the record holders of in
excess of 5% of shares of any one or more Funds by virtue of holding shares in
"street name." As of January 31, 1996 the officers and trustees of the Trusts as
a group owned less than 1% of the outstanding shares of each class of each of
the Funds.
As of January 31, 1996, the following shareholders beneficially owned
5% of or more of the outstanding shares of the Funds listed below:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
NUMBER OF SHARES OF OUTSTANDING SHARES OF THE
NAME AND ADDRESS OF SHAREHOLDER FUND AND CLASS OF SHARES BENEFICIAL INTEREST OWNED CLASS OF THE FUND
- ------------------------------- ------------------------ ------------------------- -------------------------
<S> <C> <C> <C>
Merrill Lynch Pierce Fenner & Smith Regional Bank Fund 2,631,321 13.19%
Inc. Class A
Attn: Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
Merrill Lynch Pierce Fenner & Regional Bank Fund 16,653,759 31.16%
Smith Inc. Class B
Attn: Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
</TABLE>
52
<PAGE> 164
INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser for each of the Funds is John Hancock Advisers,
Inc., a Massachusetts corporation (the "Adviser"), with offices at 101
Huntington Avenue, Boston, Massachusetts 02199-7603. The Adviser is a registered
investment advisory firm which maintains a securities research department, the
efforts of which will be made available to the Funds.
The Adviser was organized in 1968 and presently has more than $16
billion in assets under management in its capacity as investment adviser to the
Funds and the other mutual funds and publicly traded investment companies in the
John Hancock group of funds having a combined total of approximately 1,080,000
shareholders. The Adviser is an affiliate of John Hancock Mutual Life Insurance
Company (the "Life Company"), one of the most recognized and respected financial
institutions in the nation. With total assets under management of more than $80
billion, the Life Company is one of the ten 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 Trusts have entered into investment advisory agreements (the
"Advisory Agreements") dated as of November 6, 1986 as amended and restated
January 1, 1994 between Freedom Investment Trust and the Adviser, and dated as
of June 26, 1986 as amended and restated January 1, 1994 between Freedom
Investment Trust II and the Adviser. Pursuant to the Advisory Agreements, the
Adviser agreed to act as investment adviser and manager to the Funds. As manager
and investment adviser, the Adviser will: (a) furnish continuously an investment
program for each of the Funds and determine, subject to the overall supervision
and review of the Boards of Trustees, which investments should be purchased,
held, sold or exchanged, (b) provide supervision over all aspects of each Fund's
operations except those which are delegated to a custodian, transfer agent or
other agent, and (c) provide each of the Funds with such executive,
administrative and clerical personnel, officers and equipment as are deemed
necessary for the conduct of their business.
As compensation for its services under the Advisory Agreements, the
Adviser receives from each Fund a fee computed and paid monthly based upon the
following annual rates: (a) for each of Regional Bank Fund and Gold & Government
Fund, 0.80% of each respective Fund's first $500 million of average daily net
assets, and 0.75% of average daily net assets over $500 million; (b) for the
Sovereign Achievers Fund, 0.75% of the Fund's first $500 million of average
daily net assets, and 0.65% of average daily net assets in excess of that
amount; (c) for Government Fund, 0.50% of the Fund's first $500 million of
average daily net assets, and 0.45% of average daily net assets in excess of
that amount; (d) for Managed Tax-Exempt Fund, 0.60% of the Fund's first $250
million of average daily net assets, 0.50% of the next $500 million of average
daily net assets, and 0.45% of average daily net assets in excess of that
amount; (e) for Global Fund, 1% on the first $100 million of average daily net
assets of the Fund, 0.80% on the next $200 million of average net assets, 0.75%
on the next $200 million of average net assets and 0.625% of average net assets
in excess of $500 million; and (f) for the Global Income Fund 0.75% on the first
$250 million of average daily net assets, and 0.70% of average net assets in
excess of $250 million. The rates for some Funds are higher than those for
others because of the extensive amount of research required to manage such
portfolios in comparison to the portfolios of other Funds.
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<PAGE> 165
The Global Fund and the Adviser have entered into a sub-investment
management contract with John Hancock Advisers International Limited under which
John Hancock Advisers International, subject to the review of the Trustees and
the overall supervision of the Adviser, is responsible for providing the Fund
with advice with respect to that portion of the assets invested in countries
other than the United States and Canada. As compensation for its services under
the Sub-Advisory Agreement, JH Advisers International receives from the Adviser
a monthly fee equal to 0.70% on an annual basis of the average daily net asset
value of the Global Fund for each calendar month up to $200 million of average
daily net assets; and 0.6375% on an annual basis of the average daily net asset
value over $200 million. The Sub-Adviser, with offices located at 34 Dover
Street, London, England W1X 3RA, is a wholly-owned subsidiary of the Adviser
formed in 1987 to provide international investment research and advisory
services to U.S. institutional clients.
The Adviser has entered into a service agreement with Sovereign Asset
Management Corporation ("SAMCorp"), which is an indirect wholly-owned subsidiary
of the Life Company. The service agreement provides that SAMCorp will provide to
the Adviser certain portfolio management services with respect to the equity
securities held in the portfolio of the Sovereign Achievers Fund. The service
agreement further provides that the Adviser will remain ultimately responsible
for all of its obligations under the investment management contract between the
Adviser and the Sovereign Achievers Fund. Subject to the supervision of the
Adviser, SAMCorp furnishes the Sovereign Achievers Fund with recommendations
with respect to the purchase, holding and disposition of equity securities in
the Sovereign Achievers Fund's portfolio; furnishes the Sovereign Achievers Fund
with research, economic and statistical data in connection with the Sovereign
Achievers Fund's equity investments; and places orders for transactions in
equity securities. The Adviser pays to SAMCorp 40% of the monthly investment
management fee received by the Adviser with respect to the equity securities
held in the portfolio of the Sovereign Achievers Fund during such month. The
fees paid by the Sovereign Achievers Fund to the Adviser under the investment
management contract are not affected by this arrangement.
All expenses which are not specifically paid by the Adviser and which
are incurred in the operation of the Fund (including fees of Trustees of the
Fund who are not "interested persons," as such term is defined in the Investment
Company Act, but excluding certain distribution-related activities required to
be paid by the Adviser or John Hancock Funds) and the continuous public offering
of the shares of the Fund are borne by the Fund. Class expenses properly
allocable to either 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 with respect to multiple-class structures.
The State of California imposes a limitation on the expenses of the
Funds. The Advisory Agreement provides that if, in any fiscal year, the total
expenses of a Fund (excluding taxes, interest, brokerage commissions and
extraordinary items, but including the management fee) exceed the expense
limitations applicable to a Fund imposed by the securities regulations of any
state in which it is then registered to sell shares, the Adviser will reduce
it's fee for that Fund in the amount of that excess up to the amount of its
management fee during that fiscal year. The Adviser and JH Advisers
International have agreed that if, in any fiscal year, the total expenses of the
Global Fund (excluding taxes, interest, brokerage commissions and extraordinary
items, but
54
<PAGE> 166
including the Adviser's fee and the portion thereof paid to JH Advisers
International) exceed the expense limitations applicable to such Fund, the
Adviser and JH Advisers International will each reduce it's fee for that Fund in
the amount of that excess up to the amount of its fee during that fiscal year.
Although there is no certainty that any limitations will be in effect in the
future, the California limitation on an annual basis currently is 2.5% of the
first $30 million of average net assets, 2.0% of the next $70 million of net
assets and 1.5% of the remaining net assets.
The continuation of the Advisory Agreement for Freedom Investment Trust
was last approved on May 1, 1995 by all of the Trustees, including all of the
Trustees who are not parties to the Advisory Agreement or "interested persons"
of any such party. The shareholders of Gold & Government Fund, Regional Bank
Fund and Government Fund also approved the Advisory Agreement on November 6,
1986. The Advisory Agreement was approved by the respective shareholders of the
Sovereign Achievers Fund and the Managed Tax-Exempt Fund on February 26, 1988.
An amendment to the Advisory Agreement to increase the fee payable thereunder
effective January 1, 1994, was approved by the respective shareholders of Gold &
Government Fund and Regional Bank Fund on October 28, 1993. The Advisory
Agreement will continue in effect from year to year, provided that its
continuance is approved annually both (i) by the holders of a majority of the
outstanding voting securities of the Trust or by the Board of Trustees, and (ii)
by a majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any such party. The Advisory Agreement may be terminated
on 60 days written notice by any party and will terminate automatically if it is
assigned.
For the fiscal year ended October 31, 1993, Freedom Investment Trust
paid the Adviser an investment advisory fee of $6,061,838 pursuant to the
Advisory Agreement. Of this amount, $451,050 was attributable to the Gold &
Government Fund, $1,354,664 was attributable to the Regional Bank Fund,
$2,862,505 was attributable to the Government Fund, $583,838 was attributable to
the Sovereign Achievers Fund and $809,781 was attributable to the Managed
Tax-Exempt Fund. Under the terms of the Advisory Agreement the Adviser may
voluntarily not impose all or part of its management fees. During the year ended
October 31, 1993, for the Managed Tax-Exempt Fund, the Adviser agreed not to
impose management fees in the amount of $733,749.
For the fiscal year ended October 31, 1994, Freedom Investment Trust
paid the Adviser, the Funds' previous Adviser, an investment advisory fee of
$9,390,998 pursuant to the Advisory Agreement. Of this amount, $530,798 was
attributable to the Gold & Government Fund, $3,686,366 was attributable to the
Regional Bank Fund, $2,839,185 was attributable to the Government Fund, $902,465
was attributable to the Sovereign Achievers Fund and $1,432,184 was attributable
to the Managed Tax-Exempt Fund. During the year ended October 31, 1994, for the
Managed Tax-Exempt Fund, the Adviser agreed not to impose management fees in the
amount of $131,878. The Adviser's expense limitation may be discontinued at any
time.
For the fiscal year ended October 31, 1995, Freedom Investment Trust
paid the Adviser and Freedom Capital, the Funds' previous Adviser, an investment
advisory fee of $12,627,864 pursuant to the Advisory Agreement. Of this amount,
$354,905 was attributable to the Gold & Government Fund, $7,644,892 was
attributable to the Regional Bank Fund, $2,514,147 was
55
<PAGE> 167
attributable to the Government Fund, $1,247,519 was attributable to the Managed
Tax-Exempt Fund, and $866,401 was attributable to the Sovereign Achievers Fund.
Under the terms of the Advisory Agreement the Adviser may voluntarily not impose
all or part of its management fees. During the year ended October 31, 1995, for
the Managed Tax-Exempt Fund the Adviser and Freedom Capital agreed not to impose
management fees in the amount of $113,411.
The continuation of the Advisory Agreement for the Global Fund and for
the Global Income Fund were approved on May 1, 1995 by all of the Trustees of
Freedom Investment Trust II, including all of the Trustees who are not parties
to the Agreements or "interested persons" of any such party. The current
Sub-Advisory Agreement between the Adviser and JH Advisers International was
approved by all of the Trustees of Freedom Investment Trust II on June 25, 1992
and became effective on August 1, 1992. The shareholders of each Fund approved
the Advisory Agreement with respect to each Fund on May 8, 1987 and the
shareholders of the Global Fund approved the Sub-Advisory Agreement on September
25, 1992. An amendment to the Advisory Agreement to increase the fee payable
thereunder effective January 1, 1994 was approved by the shareholders of Global
Income Fund on October 28, 1993. The Agreements will continue in effect for a
period of two years from the date of their execution and thereafter from year to
year, provided that their continuance is approved annually both (i) by the
holders of a majority of the outstanding voting securities of each Fund or by
the Board of Trustees of Freedom Investment Trust II, and (ii) by a majority of
the Trustees who are not parties to the Agreements or "interested persons" of
any such party. The Agreements may be terminated on 60 days' written notice by
either party and will terminate automatically if they are assigned.
For the fiscal year ended October 31, 1993, Freedom Investment Trust II
paid the Adviser investment advisory fees of $922,722 with respect to the Global
Fund and $1,441,163 with respect to the Global Income Fund. For the fiscal year
ended October 31, 1994, Freedom Investment Trust II the Adviser investment
advisory fees of $1,175,313 with respect to the Global Fund and $1,207,673 with
respect to the Global Income Fund. For the fiscal year ended October 31, 1995,
Freedom Investment Trust II paid the Adviser and Freedom Capital, the Funds'
previous Adviser, investment advisory fees of $1,169,884 with respect to the
Global Fund and $840,527 with respect to the Global Income Fund.
DISTRIBUTION CONTRACT
Freedom Investment Trust and Freedom Investment Trust II have entered
into Distribution Agreements with John Hancock Funds, Inc. and Freedom
Distributors Corporation (together the "Distributors") whereby the Distributors
act as exclusive selling agent of the Funds, selling shares of each class of
each Fund on a "best efforts" basis. Shares of each class of each Fund are sold
to selected broker-dealers (the "Selling Brokers") who have entered into selling
agency agreements with the Distributors.
56
<PAGE> 168
The Distributors accept orders for the purchase of the shares of the
Funds which are continually offered at net asset value next determined, plus an
applicable sales charge, if any. In connection with the sale of Class A or Class
B shares of the Funds, the Distributors and Selling Brokers receive compensation
in the form of a sales charge imposed, in the case of Class A shares at the time
of sale or, in the case of Class B shares, on a deferred basis. The sales
charges are discussed further in the Prospectuses.
The Trustees have adopted Distribution Plans with respect to Class A
and Class B shares ("the Plans"), pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Under the Plans, each Fund will pay distribution and
service fees at an aggregate annual rate of up to 0.30% and 1.00% respectively,
of the Fund's daily net assets attributable to shares of that class. However,
the service fee will not exceed 0.25% of the applicable Fund's average daily net
assets attributable to each class of shares. The distribution fees reimburse the
Distributors for their distribution costs incurred in the promotion of sales of
the Funds'shares, and the service fees compensate Selling Brokers for providing
personal and account maintenance services to shareholders. In the event that the
Distributors are not fully reimbursed for expenses they incur under the Class B
Plan in any fiscal year, the Distributors may carry these expenses forward,
provided, however, that the Trustees may terminate the Class B Plan and thus any
Fund's obligation to make further payments at any time. Accordingly, the Funds
do not treat unreimbursed expenses relating to the Class B shares as a
liability. The Plans were approved by a majority of the voting securities of
each Fund. The Plans and all amendments were approved by the Trustees, including
a majority of the Trustees who are not interested persons of the applicable Fund
and who have no direct or indirect financial interest in the operation of the
Plans (the "Independent Trustees"), by votes cast in person at meetings called
for the purpose of voting on such Plans.
Pursuant to the Plans, at least quarterly, the Distributors provide the
Funds with a written report of the amounts expended under the Plans and the
purpose for which these expenditures were made. The Trustees review these
reports on a quarterly basis.
Each of the Plans provides that it will continue in effect only so long
as its continuance is approved at least annually by a majority of both the
Trustees and the Independent Trustees. Each of the Plans provides that it may be
terminated without penalty, (a) by vote of a majority of the Independent
Trustees, (b) by a vote of a majority of the applicable Fund's outstanding
shares of the applicable class in each case upon 60 day's written notice to the
Distributors and (c) automatically in the event of assignment. Each of the Plans
further provides that it may not be amended to increase the maximum amount of
the fees for the services described therein without the approval of a majority
of the outstanding shares of the class of the applicable Fund which has
57
<PAGE> 169
voting rights with respect to the Plan. And finally, each of the Plans provides
that no material amendment tot he Plan will, in any event, be effective unless
it is approved by a vote of the Trustees and the Independent Trustees of the
applicable Fund. The holders of Class A and Class B shares have exclusive voting
rights with respect to the Plan applicable to their respective class of shares.
In adopting the Plans the Trustees concluded that, in their judgment, there is a
reasonable likelihood that the plans will benefit the holders of the applicable
of shares of each Fund.
<TABLE>
During the fiscal year ended October 31, 1995, the Funds paid the
Distributors the following amounts of expenses with respect to the Class A
shares and Class B shares of each of the Funds:
<CAPTION>
Expense Items
-------------
Printing and Interest,
Mailing of Carrying or
Prospectuses to Expense of Compensation to Other Finance
Advertising New Shareholders Distributors Selling Brokers Charges
----------- ---------------- ------------ --------------- -------
<S> <C> <C> <C> <C> <C>
Government Fund
---------------
Class A Shares $ 63,551 $ 4,397 $ 182,706 $ 754,114 NONE
Class B Shares $ 63,450 $ 2,609 $ 190,722 $ 822,022 $ 598,399
Managed Tax-Exempt Fund
-----------------------
Class A Shares
Class B Shares $ 11,757 $ 515 $ 32,699 $ 38,407 NONE
$ 72,409 $ 0 $ 184,775 $ 981,260 $ 731,696
Gold & Government Fund
----------------------
Class A Shares $ 10,961 $ 0 $ 10,149 $ 28,882 NONE
Class B Shares $ 27,231 $ 0 $ 36,262 $ 202,288 $ 10,819
Sovereign Achievers Fund
------------------------
Class A Shares $ 10,326 $ 1,951 $ 24,700 $ 37,502 NONE
Class B Shares $ 40,251 $ 6,420 $ 93,473 $ 370,936 $ 361,952
Regional Bank Fund
------------------
Class A Shares $151,794 $ 9,160 $ 599,005 $ 89,574 NONE
Class B Shares $904,125 $54,026 $3,220,715 $1,018,102 $1,831,112
</TABLE>
58
<PAGE> 170
<TABLE>
<S> <C> <C> <C> <C> <C>
Global Fund
-----------
Class A Shares $50,361 $9,469 $75,361 $145,419 NONE
Class B Shares $47,508 $2,409 $70,676 $ 80,744 $ 69,530
Global Income Fund
------------------
Class A Shares $10,013 $3,810 $20,681 $ 23,930 NONE
Class B Shares $59,062 $1,035 $70,074 $270,650 $516,687
</TABLE>
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of a Fund's
shares, the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations
furnished by a principal market maker or a pricing service, both of which
generally utilize electronic data processing techniques to determine valuations
for normal institutional size trading units of debt securities without exclusive
reliance upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National
Market Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned categories for which no sales are reported and
other securities traded over-the-counter are generally valued at the mean
between the current closing bid and asked prices.
Short-term debt investments which have a remaining maturity of 60 days
or less are generally valued at amortized cost which approximates market value.
If market quotations are not readily available or if in the opinion of the
Adviser any quotation or price is not representative of true market value, the
fair value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Any assets or liabilities expressed in terms of foreign currencies are
translated into U.S. dollars by the custodian bank based on London currency
exchange quotations as of 5:00 p.m., London time ( 12:00 noon, New York time) on
the date of any determination of a Fund's NAV.
A Fund will not price its securities on the following national
holidays: New Year's Day; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; and Christmas Day. On any day an
international market is closed and the New York Stock Exchange is open, any
foreign securities will be valued at the prior day's close with the current
day's exchange rate. Trading of foreign securities may take place on Saturdays
and U.S. business holidays on which a Fund's NAV is not calculated.
Consequently, a Fund's portfolio securities may trade and the NAV of the Fund's
redeemable securities may be significantly affected on days when a shareholder
has no access to the Fund.
59
<PAGE> 171
INITIAL SALES CHARGE ON CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the
Funds are described in the Funds' Prospectuses. Methods of obtaining reduced
sales charges referred to generally in the Prospectuses are described in detail
below. In calculating the sales charge applicable to current purchases of Class
A shares, the investor is entitled to cumulate current purchases with the
greater of the current value (at offering price) of the Class A shares of the
Funds, owned by the investor, 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 Prospectuses, Class A shares of the
Funds may be sold without a sales charge to certain persons described in the
Prospectuses.
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 or current account value of the Class A shares already
held by such person.
COMBINATION PRIVILEGE. Reduced sales charges (according to the schedule set
forth in the Prospectuses) are also available to an investor based on the
aggregate amount of his concurrent and prior investments in Class A shares 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 Section 457 plans. Such an investment (including
accumulations and combinations) must aggregate $100,000 or more invested during
the specified period from the date of the LOI or from a date within ninety (90)
days prior thereto, upon written request to Investor Services. The sales charge
applicable to all amounts invested under the LOI is computed as if the aggregate
amount intended to be invested had been invested immediately. If such aggregate
amount is not actually invested, the difference in the sales charge actually
paid and the sales charge payable had the LOI not been in effect is due
60
<PAGE> 172
from the investor. However, for the purchases actually made within the specified
period the sales charge applicable will not be higher than that which would have
applied (including accumulations and combinations) had the LOI been for the
amount actually invested.
The LOI authorizes Investor Services to hold in escrow a number of
Class A shares (approximately 5% of the aggregate) sufficient to make up any
difference in sales charges on the amount intended to be invested and the amount
actually invested, until such investment is completed within the specified
period, at which time the escrow shares will be released. If the total
investment specified in the LOI is not completed, the Class A shares held in
escrow may be redeemed and the proceeds used as required to pay such sales
charge as may be due. By signing the LOI, the investor authorizes Investor
Services to act as his or her attorney-in-fact to redeem any escrowed shares and
adjust the sales charge, if necessary. A LOI does not constitute a binding
commitment by an investor to purchase, or by the Funds to sell, any additional
Class A shares and may be terminated at any time.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per
share without the imposition of an initial sales charge so that the Funds will
receive the full amount of the purchase price.
CONTINGENT DEFERRED SALES CHARGE. Class B shares which are redeemed within six
years of purchase will be subject to a contingent deferred sales charge ("CDSC")
at the rates set forth in the Prospectuses as a percentage of the dollar amount
subject to the CDSC. The charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the Class B
shares being redeemed. Accordingly, no CDSC will be imposed on increases in
account value above the initial purchase prices, including Class B shares
derived from reinvestment of dividends or capital gains distributions.
The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares. Solely for purposes of determining this number all
payments during a month will be aggregated and deemed to have been made on the
last day of the month.
Proceeds from the CDSC are paid to John Hancock Funds not "the
Distributors" and are used in whole or in part by John Hancock Funds to defray
its expenses related to providing distribution-related services to the Funds in
connection with the sale of the Class B shares, such as the payment of
compensation to select Selling Brokers for selling Class B shares. The
combination of the CDSC and the distribution and service fees facilitates the
ability of the Funds to sell the Class B shares without a sales charge being
deducted at the time of the purchase. See the Prospectuses for additional
information regarding the CDSC.
61
<PAGE> 173
SPECIAL REDEMPTIONS
Although they would not normally do so, the Funds have the right to pay the
redemption price of shares of the Funds in whole or in part in portfolio
securities as prescribed by the Trustees. If the shareholder were to sell
portfolio securities received in this fashion, he would incur a brokerage
charge. Any such securities would be valued for the purposes of making such
payment at the same value as used in determining net asset value. The Funds
have, however, elected to be governed by Rule 18f-1 under the Investment Company
Act. Under that rule, the Funds must redeem their shares for cash except to the
extent that the redemption payments to any shareholder during any 90-day period
would exceed the lesser of $250,000 or 1% of the applicable Fund's net asset
value at the beginning of such period.
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE. As described more fully in the Prospectuses, the Funds
permit exchanges of shares of any class of a Fund for shares of the same class
in any other John Hancock fund offering that class.
Exchanges between funds with shares that are not subject to a CDSC are
based on their respective net asset values. No sales charge or transaction
charge is imposed. Shares of the Funds which are subject to a CDSC may be
exchanged into shares of any of the other John Hancock funds that are subject to
a CDSC without incurring the CDSC; however, the shares acquired in an exchange
will be subject to the CDSC schedule of the shares acquired if and when such
shares are redeemed (except that shares exchanged into John Hancock Short-Term
Strategic Income Fund, John Hancock Intermediate Maturity Government Fund and
John Hancock Limited-Term Government Fund will retain the exchanged fund's CDSC
schedule). For purposes of computing the CDSC payable upon redemption of shares
acquired in an exchange, the holding period of the original shares is added to
the holding period of the shares acquired in an exchange.
Shares of each class may be exchanged only for shares of the same class in
another John Hancock fund.
If a shareholder exchanges Class B shares purchased prior to January 1,
1994 (except John Hancock Short-Term Strategic Income Fund) for Class B shares
of any other John Hancock fund, the acquired shares will continue to be subject
to the CDSC schedule that was in effect when the exchanged shares were
purchased.
Each Fund reserves the right to require that previously exchanged shares
(and reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange. The Funds may also terminate or alter the terms of the
exchange privilege upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and
the purchase of shares of another for Federal income tax purposes. An exchange
may result in a taxable gain or loss. See "Tax Status."
62
<PAGE> 174
To make an exchange, the account registration in both the existing and
new account, must be identical. The exchange privilege is available only in
states where the exchange can be made legally.
SYSTEMATIC WITHDRAWAL PLAN. As described briefly in the Prospectuses, each Fund
permits the establishment of a Systematic Withdrawal Plan. Payments under this
plan represent proceeds from the redemption of shares of the applicable Fund.
Since the redemption price of the shares of a Fund may be more or less than the
shareholder's cost, depending upon the market value of the securities owned by
the Fund at the time of redemption, the distribution of cash pursuant to this
plan may result in realization of gain or loss for purposes of Federal, state
and local income taxes. The maintenance of a Systematic Withdrawal Plan
concurrently with purchases of additional Class A or Class B shares 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 at the same time a Systematic
Withdrawal Plan is in effect. The Funds reserve the right to modify or
discontinue the Systematic Withdrawal Plan of any shareholder on 30 days' prior
written notice to such shareholder, or to discontinue the availability of such
plan in the future. The shareholder may terminate the plan at any time by giving
proper notice to Investor Services.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM ("MAAP"). This program is explained in
the Prospectuses. 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 checks.
The program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is received
at least five (5) business days prior to the processing date of any investment.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed Fund shares may, within
120 days after the date of redemption, reinvest without payment of a sales
charge any part of the redemption proceeds in shares of the same class of the
same Fund or in any other John Hancock funds, subject to the minimum investment
limit in that fund. The proceeds from the redemption of Class A shares may be
reinvested at net asset value without paying a sales charge in Class A shares of
the same Fund or in Class A shares of another John Hancock fund. If a CDSC was
paid upon a redemption, a shareholder may reinvest the proceeds from this
redemption at net asset value in additional shares of the class from which the
redemption was made. The shareholder's account
63
<PAGE> 175
will be credited with the amount of any CDSC charged upon the prior redemption
and the new shares will continue to be subject to the CDSC. The holding period
of the shares acquired through reinvestment will, for purposes of computing the
CDSC payable upon a subsequent redemption, include the holding period of the
redeemed shares. The Funds may modify or terminate the reinvestment privilege at
any time.
A redemption or exchange of Fund shares is a taxable transaction for
Federal income tax purposes even if the reinvestment privilege is exercised, and
any gain or loss realized by a shareholder on the redemption or other
disposition of Fund shares will be treated for tax purposes as described under
the caption "Tax Status."
DESCRIPTION OF THE FUNDS' SHARES
The Trustees of the Trust are responsible for the management and
supervision of the Funds. The Declaration of Trust permits the Trustees to issue
an unlimited number of full and fractional shares of beneficial interest of the
Fund, 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 a new
Fund named, John Hancock Financial Industries Fund, Class A and Class B, under
Freedom Investment Trust.
The shares of each class of a Fund represent an equal proportionate
interest in the aggregate net assets attributable to the classes of the Fund.
Class A and Class B shares of the Funds will be sold exclusively to members of
the public (other than the institutional investors described in the
Prospectuses) at net asset value. A sales charge will be imposed either at the
time of the purchase, for Class A shares, or on a contingent deferred basis, for
Class B shares. For Class A shares, no sales charge is payable at the time of
purchase on investments of $1 million or more, but for such investments a CDSC
may be imposed in the event of certain redemption transactions within one year
of purchase.
Class A and Class B shares have certain exclusive voting rights on
matters relating to their respective distribution plans. The different classes
of a Fund may bear different expenses relating to the cost of holding
shareholder meetings necessitated by the exclusive voting rights of any class of
shares.
Dividends paid by the Fund, if any, with respect to each class of
shares will be calculated in the same manner, at the same time and will be in
the same amount, except that (i) the distribution and service fees relating the
Class A and Class B shares will be borne exclusively by that class (ii) Class B
shares will pay higher distribution and service fees than Class A shares and
(iii) Class A and Class B shares will bear any other class expenses properly
allocable to such class of shares, subject to the conditions set forth in a
private letter ruling that each Fund has received from the Internal Revenue
Service relating to its multiple-class structure. Similarly, the net asset value
per share may vary depending on whether Class A or Class B shares are purchased.
64
<PAGE> 176
In the event of liquidation, shareholders are entitled to share pro rata in
the net assets of the applicable Fund available for distribution to such
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable, by the Trusts, except as set
forth below.
Unless otherwise required by the Investment Company Act or the Declaration
of Trust, each Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares, and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with a request for a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for acts or
obligations of the Trust. However, each Fund's Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations or affairs of
the Fund. The Declaration of Trust also provides for indemnification out of the
Funds' assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. Liability is therefore
limited to circumstances in which a Fund itself would be unable to meet its
obligations, and the possibility of this occurrence is remote.
CALCULATION OF PERFORMANCE
The following information supplements the discussion in the Prospectuses
regarding performance information.
TOTAL RETURN. Average annual total return is determined separately for each
class of shares.
Set forth below are tables showing the performance on a total return basis
(i.e., with all dividends and distributions reinvested) of a hypothetical $1,000
investment in the Class A and Class B shares of the Gold & Government Fund,
Regional Bank Fund, Government Fund, Managed Tax-Exempt Fund, Sovereign
Achievers Fund, Global Fund and Global Income Fund. The performance information
for each Fund is stated for the fiscal year ended October 31, 1995 and for the
five year period ended October 31, 1995 with respect to the Class B shares of
each Fund for the one year period of Class A shares of each Fund and for the
period from the commencement of operations (indicated by an asterisk), or the
ten year period, of the Class A and Class B shares of each Fund to October 31,
1995.
65
<PAGE> 177
<TABLE>
<CAPTION>
Gold & Government Fund
----------------------
<S> <C> <C> <C> <C>
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 9/26/84* to
10/31/95 10/31/95 10/31/95 10/31/95 10/31/95
-------- -------- -------- -------- --------
(10.40%) (0.64%) (11.02%) 2.65% 5.59%
Regional Bank Fund
------------------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 9/26/84* to
10/31/95 10/31/95 10/31/95 10/31/95 10/31/95
-------- -------- -------- -------- --------
24.46% 25.58% 25.11% 35.11% 19.97%
Government Income Fund
----------------------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 9/26/84* to
10/31/95 10/31/95 10/31/95 10/31/95 10/31/95
-------- -------- -------- -------- --------
11.05% 5.29% 9.34% 8.03% 8.20%
Managed Tax-Exempt Fund
-----------------------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 9/26/84* to
10/31/95 10/31/95 10/31/95 10/31/95 10/31/95
-------- -------- -------- -------- --------
8.56% 5.82% 7.96% 6.22% 8.31%
Sovereign Achievers Fund
------------------------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 9/26/84* to
10/31/95 10/31/95 10/31/95 10/31/95 10/31/95
-------- -------- -------- -------- --------
6.62% 5.40% 6.51% 12.17% 7.23%
</TABLE>
66
<PAGE> 178
<TABLE>
<CAPTION>
Global Fund
-----------
<S> <C> <C> <C> <C>
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 9/26/84* to
10/31/95 10/31/95 10/31/95 10/31/95 10/31/95
-------- -------- -------- -------- --------
(5.38%) 7.09% (5.96%) 9.30% 9.31%
Global Income Fund
------------------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 9/26/84* to
10/31/95 10/31/95 10/31/95 10/31/95 10/31/95
-------- -------- -------- -------- --------
7.15% 3.13% 6.61% 5.34% 9.14%
<FN>
* Commencement of operations.
</TABLE>
The "distribution rate" is determined by annualizing the result of
dividing the declared dividends of a Fund during the period stated by the
maximum offering price and net asset value at the end of the period. Excluding a
Fund's sales load from the distribution rate produces a higher rate.
Total return is computed by finding the average annual compounded rates
of return over the designated periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
[GRAPHIC OMITTED]
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, 5 years, and life-of-fund
periods.
67
<PAGE> 179
This calculation assumes that the maximum sales charge for Class A
shares of 5% for Gold & Government Fund, Sovereign Achievers Fund, Regional Bank
Fund and Global Fund and 4.5% for Government Income Fund, Managed Tax-Exempt
Fund, and Global Income Fund is included in the initial investment or, for Class
B shares, the applicable CDSC is applied at the end of the period. This
calculation also assumes that all dividends and distributions are reinvested at
net asset value on the reinvestment dates during the period.
In addition to average annual total returns, the Funds may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Cumulative total returns may be quoted as a
percentage or as a dollar amount, and may be calculated for a single investment,
a series of investments, and/or a series of redemptions, over any time period.
Total returns may be quoted with or without taking the Funds' sales charge on
Class A shares or the CDSC on Class B shares into account. Excluding the Funds'
sales charge on Class A shares and the CDSC on Class B shares from a total
return calculation produces a higher total return figure.
Yield. Yield is determined separately for Class A and Class B shares. The yields
for the Class A shares of the Gold & Government Fund, Government Fund, Managed
Tax-Exempt Fund and Global Income Fund for the thirty days ended October 31,
1995 were 1.42%, 5.62%, 4.74% and 5.80%, respectively. The yields for the Class
B shares of the Gold & Government Fund, Government Fund, Managed Tax-Exempt Fund
and Global Income Fund for the thirty days ended October 31, 1995 were 0.87%,
5.24%, 4.32% and 5.21%, respectively.
Yield is computed by dividing the net investment income per share
earned during a specified 30 day period by the maximum offering price per share
on the last day of such period, according to the following formula:
[GRAPHIC OMITTED]
Where: a= dividends and interest earned during the period
b= net expenses accrued for the period
c= the average daily number of share outstanding during the period
that were entitled to receive dividends
d= the maximum offering price per share on the last day of the
period.
To calculate interest earned (for the purpose of "a" above) on debt
obligations, a Fund computes the yield to maturity of each obligation held by
the Fund based on the market value of the obligation (including actual accrued
interest) at the close of last business day of the period, or, with respect to
obligations purchased during the period, the purchase price (plus actual accrued
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<PAGE> 180
interest). The yield to maturity is then divided by 360 and the quotient is
multiplied by the market value of the obligation (including actual accrued
interest) to determine the interest income on the obligation for each day of the
subsequent period that the obligation is in the portfolio.
Managed Tax-Exempt Fund only. In the case of a tax-exempt obligation
issued without original issue discount and having a current market discount, the
coupon rate of interest is used in lieu of the yield to maturity. Where, in the
case of a tax-exempt obligation with original issue discount, the discount based
on the current market value exceeds the then-remaining portion of original issue
discount (market discount), the yield to maturity is the imputed rate based on
the original issue discount calculation. Where, in the case of a tax-exempt
obligation with original issue discount, the discount based on the current
market value is less than the then-remaining portion of original issue discount
(market premium), the yield to maturity is based on the market value.
Government Fund and Gold & Government Fund only. With respect to the
treatment of discount and premium on mortgage or other receivables-backed
obligations which are expected to be subject to monthly payments of principal
and interest ("paydowns") each Fund accounts for gain or loss attributable to
actual monthly paydowns as an increase or decrease to interest income during the
period.
Global Income Fund only. To calculate interest earned (for the purpose
of "a" above) on foreign debt obligations, the Fund computes the yield to
maturity of each obligation based on the local foreign currency market value of
the obligation (including actual accrued interest) at the beginning of the
period, or, with respect to obligations purchased during the period, the
purchase price plus accrued interest. The yield to maturity is then divided by
360 and the quotient is multiplied by the current market value of the obligation
(including actual accrued interest in local currency denomination), then
converted to U.S. dollars using exchange rates from the close of the last
business day of the period to determine the interest income on the obligation
for each day of the subsequent period that the obligation is in the portfolio.
Applicable foreign withholding taxes, net of reclaim, are included in the "b"
expense component.
Solely for the purpose of computing yield, each Fund recognizes
dividend income by accruing 1/360 of the stated dividend rate of a security each
day that a security is in the portfolio.
Undeclared earned income, computed in accordance with generally
accepted accounting principles, may be subtracted from the maximum offering
price. Undeclared earned income is the net investment income which, at the end
of the base period, has not been declared as a dividend, but is reasonably
expected to be declared as a dividend shortly thereafter.
All accrued expenses are taken to account as described later herein.
From time to time, in reports and promotional literature, the Funds'
total return and yield will be compared to indices of mutual funds such as
Lipper Analytical Services, Inc.'s "Lipper-Mutual Performance Analysis," a
monthly publication which tracks net assets, total return, and yield on mutual
funds in the United States. Ibottson and Associates, CDA Weisenberger and F.C.
Towers are also used for comparison purposes, as well as Russell and Wilshire
indices.
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<PAGE> 181
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, etc. may also be utilized.
The performance of the Funds is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of the
Funds for any period in the future. The performance of any Fund is a function of
many factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales, and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Funds' performances.
BROKERAGE ALLOCATION
Each Advisory Agreement authorizes the Adviser (subject to the control
of the Boards of Trustees) to select brokers and dealers to execute purchases
and sales of portfolio securities and gold bullion and coins. It directs the
Adviser to use its best efforts to obtain the best overall terms for the Funds,
taking into account such factors as price (including dealer spread), the size,
type and difficulty of the transaction involved, and the financial condition and
execution capability of the broker or dealer.
The Sub-Advisory Agreement between the Adviser and JH Advisers
International authorizes JH Advisers International (subject to the control of
the Board of Trustees of Freedom Investment Trust II) to provide the Global Fund
with a continuing and suitable investment program with respect to investments by
the Fund in countries other than the United States and Canada.
To the extent that the execution and price offered by more than one
dealer are comparable, the Adviser or JH Advisers International, as the case may
be, may, in their discretion, decide to effect transactions in portfolio
securities with dealers on the basis of the dealer's sales of shares of the
Funds or with dealers who provide the Funds, the Adviser or JH Advisers
International with services such as research and the provision of statistical or
pricing information. In addition, the Funds may pay brokerage commissions to
brokers or dealers in excess of those otherwise available upon a determination
that the commission is reasonable in relation to the value of the brokerage
services provided, viewed in terms of either a specific transaction or overall
brokerage services provided with respect to the Funds' portfolio transactions by
such broker or dealer. Any such research services would be available for use on
all investment advisory accounts of the Adviser or JH Advisers International.
The Funds may from time to time allocate brokerage on the basis of sales of
their shares. Review of compliance with these policies, including evaluation of
the overall reasonableness of brokerage commissions paid, is made by the Board
of Trustees.
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<PAGE> 182
The Adviser places all orders for purchases and sales of portfolio
securities of the Funds. In selecting broker-dealers, the Adviser may consider
research and brokerage services furnished to them. The Adviser may use this
research information in managing the Funds' assets, as well as assets of other
clients.
Municipal securities, foreign debt securities and Government Securities
are generally traded on the over-the-counter market on a "net" basis without a
stated commission, through dealers acting for their own account and not as
brokers. The Managed Tax-Exempt Fund, Global Income Fund, Sovereign Government
Fund and Gold & Government Fund (with respect to Government Securities in its
portfolio) will primarily engage in transactions with these dealers or deal
directly with the issuer. Prices paid to the dealer will generally include a
"spread", which is the difference between the prices at which the dealer is
willing to purchase and sell the specific security at that time.
During the fiscal year ended October 31, 1993, Freedom Investment Trust
paid $161,459 in negotiated brokerage commissions on behalf of the Funds of
which $22,233 was attributable to the Gold & Government Fund, $3,000 was
attributable to Sovereign Government Fund, $49,951 was attributable to the
Regional Bank Fund and $86,275 was attributable to the Sovereign Achievers Fund.
During the fiscal year ended October 31, 1994, Freedom Investment Trust paid
$833,722 in brokerage commissions on behalf of the Funds, of which $10,051 was
attributable to the Managed Tax-Exempt Fund, $512,936 was attributed to the
Regional Bank Fund, $232,625 was attributable to the Sovereign Achievers Fund,
$48,650 was attributable to the Gold & Government Fund and $29,450 was
attributable to Sovereign Government Fund. During the fiscal year ended October
31, 1995, Freedom Investment Trust paid $1,043,663 in negotiated brokerage
commissions on behalf of the Funds of which $109,757 was attributable to the
Gold & Government Fund, $589,066 was attributable to the Regional Bank Fund and
$237,015 was attributable to the Sovereign Achievers Fund and $107,825 was
attributable to Sovereign U.S. Government Income Fund.
During the fiscal year ended October 31, 1993, Freedom Investment Trust
II paid $806,269 in brokerage commissions on behalf of the Global Fund and none
on behalf of the Global Income Fund. During the fiscal year ended October 31,
1994, Freedom Investment Trust II paid $509,845 in brokerage commissions on
behalf of the Global Fund and no brokerage commissions on behalf of the Global
Income Fund. During the fiscal year ended October 31, 1995, Freedom Investment
Trust II paid $525,839 in negotiated brokerage commissions on behalf of the
Global Fund and $24,400 on behalf of the Global Income Fund.
When a Fund engages in an option transaction, ordinarily the same
broker will be used for the purchase or sale of the option and any transactions
in the securities to which the option relates. The writing of calls and the
purchase of puts and calls by a Fund will be subject to limitations established
(and changed from time to time) by each of the Exchanges governing the maximum
number of puts and calls covering the same underlying security which may be
written or purchased by a single investor or group of investors acting in
concert, regardless of whether the options are written or purchased on the same
or different Exchanges, held or written in one or more accounts or through one
or more brokers. Thus, the number of options which a Fund may
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<PAGE> 183
write or purchase may be affected by options written or purchased by other
investment companies and other investment advisory clients of the Adviser and
its affiliates or JH Advisers International. An Exchange may order the
liquidation of positions found to be in violation of these limits, and it may
impose certain other sanctions.
In the U.S. Government securities market, securities are generally
traded on a "net" basis with dealers acting as principal for their own account
without a stated commission, although the price of the security usually includes
a profit to the dealer. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or premiums are paid.
Municipal securities are generally traded on the over-the-counter
market on a "net" basis without a stated commission, through dealers acting for
their own account and not as brokers. The Managed Tax-Exempt Fund will primarily
engage in transactions with these dealers or deal directly with the issuer.
Prices paid to a municipal securities dealer will generally include a "spread",
which is the difference between the prices at which the dealer is willing to
purchase and sell the specific security at that time.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Freedom Securities Corporation and its subsidiaries,
two of which, Tucker Anthony Incorporated ("Tucker Anthony"), John Hancock
Distributors, Inc. and Sutro & Company, Inc. ("Sutro"), are broker dealers
(together, "Affiliated Brokers"). The Trusts' Boards of Trustees have
established that any portfolio transaction for the Funds may be executed through
Affiliated Brokers if, in the judgment of the Adviser or JH Advisers
International, as the case may be, the use of Affiliated Brokers is likely to
result in price and execution at least as favorable as those of other qualified
brokers, and if, in the transaction, Affiliated Brokers charges the Funds a
commission rate consistent with those charged by Affiliated Brokers to
comparable unaffiliated customers in similar transactions. Affiliated Brokers
will not participate in commissions in brokerage given by a Fund to other
brokers or dealers and neither will receive any reciprocal brokerage business
resulting therefrom. Over-the-counter purchases and sales are transacted
directly with principal market makers except in those cases in which better
prices and executions may be obtained elsewhere. Affiliated Brokers will not
receive any brokerage commissions for orders they execute for a Fund in the
over-the-counter market. A Fund will in no event effect principal transactions
with Affiliated Brokers in the over-the-counter securities in which Affiliated
Brokers makes a market.
Approximately 0.5% of Freedom Investment Trust's aggregate dollar
amount of transactions involving the payment of commissions were effected
through Tucker Anthony for the fiscal year ended October 31, 1993. During the
fiscal year ended October 31, 1993, Freedom Investment Trust paid $7,303 in
brokerage commissions to Tucker Anthony, $6,620 of which was attributable to
Gold & Government Trust and $683 of which was attributable to Regional Bank
Fund. Commissions paid to Tucker Anthony represent approximately 3.5% of the
total brokerage commissions paid by Freedom Investment Trust for the fiscal year
ended October 31, 1993. During the fiscal year ended October 31, 1994, Freedom
Investment Trust paid $3,962 in brokerage commissions to Tucker Anthony, $1,750
of which was attributable to Gold & Government Fund. Commissions paid to Tucker
Anthony represent approximately 0.5% of the total brokerage commissions paid by
Freedom Investment Trust for the fiscal year ended October
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<PAGE> 184
31, 1994. Approximately 2% of Freedom Investment Trust's aggregate dollar amount
of transactions involving the payment of commissions were effected through
Tucker Anthony for the fiscal year ended October 31, 1994. During the fiscal
year ended October 31, 1995, Freedom Investment Trust paid $2,800 in brokerage
commissions to Tucker Anthony which was attributable to Regional Bank Fund.
Commissions paid to Tucker Anthony represent less than 1% of the total brokerage
commissions paid by Freedom Investment Trust for the fiscal year ended October
31, 1995.
During the fiscal periods ended October 31, 1993, 1994 and 1995 no
brokerage commissions were paid to Affiliated Brokers in connection with the
portfolio transactions of either the Global Fund or the Global Income Fund.
Other investment advisory clients advised by the Adviser or JH Advisers
International, as the case may be, may also invest in the same securities as a
Fund. When these clients buy or sell the same securities at substantially the
same time, the Adviser or JH Advisers International may average the transactions
as to price and allocate the amount of available investments in a manner which
the Adviser or JH Advisers International believes to be equitable to each
client, including the Funds. In some instances, this investment procedure may
adversely affect the price paid or received by a Fund or the size of the
position obtainable for it. On the other hand, to the extent permitted by law,
the Adviser or JH Advisers International may aggregate the securities to be sold
as permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the trustees that such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time. During the fiscal year ended October 31,
1995, Regional Bank paid $159,705, Sovereign Achievers paid $36,176, Gold &
Government paid $16,150, Global paid $4,704 and Special Opportunities paid
$70,270.
DISTRIBUTIONS
Government Fund, Managed Tax-Exempt Fund and Global Income Fund declare
dividends from net investment income daily and pay dividends monthly.
Distribution of net long-term capital gains, if any, recognized on other
portfolio investments for the fiscal year, which ends October 31, will be made
at least annually.
Quarterly each shareholder of Government Fund, Managed Tax-Exempt Fund
and Global Income Fund will receive a statement setting forth the amount of the
monthly or daily dividends, as the case may be, paid that month from net
investment income for the preceding period. If any of such monthly or daily
dividends were made from sources other than (i) net income for the current or
preceding fiscal year, or accumulated undistributed net income, or both (not
including in either case profits or losses from the sale of securities or other
assets) or (ii) accumulated
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undistributed net profits from the sale of securities or other assets (in each
case determined in accordance with generally accepted accounting principles),
such statement will indicate what portion of the distribution per share was made
from the sources referred to in (i) and (ii) above and from paid-in surplus or
other capital sources.
A shareholder of Government Fund, Managed Tax-Exempt Fund and/or Global
Income Fund will not be credited with a monthly or daily dividend, as the case
may be, until payment for shares purchased is received by the Funds' transfer
agent. Dividends normally will be paid in the form of additional full and
fractional shares at the net asset value determined on the payment date, unless
the shareholder elects to receive dividends in cash as described in the
respective Prospectus. If a shareholder redeems the entire value of his account
in any of these Funds, the amount of dividends declared but unpaid on his shares
through the date preceding the date of redemption will be paid on the next
succeeding dividend payment date.
Gold & Government Fund and Regional Bank Fund. Each Fund will
distribute net short-term capital gains, if any, quarterly, and net long-term
capital gains, if any, at least annually after the close of their fiscal year
(October 31). Sovereign Achievers Fund will distribute net short-term capital
gains, if any, semi-annually, and net long-term capital gains, if any, at least
annually after the close of their fiscal year (October 31).
MANAGED TAX-EXEMPT FUND. Dividends from net investment income are
declared daily and paid monthly. You will not be credited with a daily dividend
or become a shareholder until payment for shares of a Fund is received by Fund
Services, the Funds' transfer agent. The net investment income of the Fund for
dividend purposes consists of interest earned on portfolio securities, less
expenses, in each case computed since the most recent determination of the net
asset value. If you redeem the entire value of your account in a Fund, you will
receive a separate amount by check or wire representing all dividends declared
but unpaid, in addition to the net asset value of the shares redeemed. The Funds
will distribute net realized short-term capital gains, if any, quarterly and the
Fund will distribute net realized long-term capital gains, if any, at least
annually after the close of our fiscal year (October 31).
Certain realized gains or losses on the sale or retirement of
international bonds held by the Global Income Fund, to the extent attributable
to fluctuations in currency exchange rates, as well as certain other gains or
losses attributable to exchange rate fluctuations, must be treated as ordinary
income or loss for federal income tax purposes. Such income or loss may increase
or decrease (or possibly eliminate) the Fund's investment income available for
distribution. If, under rules governing the tax treatment of foreign currency
gains and losses, the Fund's investment income available for distribution is
decreased or eliminated, all or a portion of the dividends declared by the Fund
may be treated for federal income tax purposes as a return of capital or, in
some circumstances, as capital gain. Your tax basis in your Global Income Fund
shares will be reduced to the extent that an amount distributed to you is
treated as a return of capital and distributions after your basis has been
reduced on zero will generally be treated as capital gains.
The per share dividends on the Class B shares will be lower than the
per share dividends on the Class A shares of the Funds as a result of the higher
distribution fee applicable with respect to the Class B shares.
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TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation ("Investor Services"), 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 Funds. The Gold &
Government Fund, Regional Bank Fund, Sovereign Achievers Fund and Global Fund
pays Investor Services an annual fee of $16.00 for each Class A shareholder and
of $18.50 for each Class B shareholder. The Government Fund and Global Income
Fund pay Investor Services an annual fee of $20.00 for each Class A shareholder
and $22.50 for each Class B shareholder. The Managed Tax Exempt Fund pays
Investor Services an annual fee of $19.00 for each Class A shareholder and
$21.50 for each Class B shareholder. Each Fund also pays certain out-of-pocket
expenses and these expenses are aggregated and charged to each Fund and
allocated to each class on the basis of the relative net asset values.
CUSTODY OF PORTFOLIO
Portfolio securities of the Funds are held pursuant to a custodian
agreement between the Trust and Investors Bank & Trust Company, 24 Federal
Street, Boston, Massachusetts 02110. Under the custodian agreement, Investors
Bank & Trust Company performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Funds are Price Waterhouse LLP, 160
Federal Street, Boston, Massachusetts, 02110. Price Waterhouse LLP audits and
renders an opinion on each Fund's annual financial statements and reviews each
Fund's annual Federal income tax return.
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APPENDIX A
DESCRIPTION OF BOND RATINGS*
Moody's Bond ratings
- --------------------
Bonds. "Bonds which are rated 'Aaa' are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge.' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most likely to impair
the fundamentally strong position of such issues.
"Bonds which are rated 'Aa' are judged to be of high quality by all standards.
Together with the 'Aaa' group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in 'Aaa' securities or fluctuation of
protective elements may be of grater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in 'Aaa'
securities . "Bonds which are rated 'A' possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
"Bonds which are rated 'Baa' are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Bonds which are rated 'Ba' are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position,
characterizes bonds in this class.
"Bonds which are rated 'B' generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue. Should
no rating be assigned, the reason may be one of the following: (i) an
application for rating was not received or accepted; (ii) the issue or issuer
belongs to a group of securities that are not rated as a matter of policy; (iii)
there is a lack of essential data pertaining to the issue or issuer; or (iv) the
issue was privately placed, in which case the rating is not published in Moody's
publications.
- ------------
*As described by the rating companies themselves.
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Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Standard & Poor's Bond ratings
- ------------------------------
"AAA. Debt rated 'AAA' has the highest rating by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
"AA. Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
"A. Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
"BBB. Debt rated 'BBB' is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
Debt rated "BB," OR "B," is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and pay principal in
accordance with the terms of the obligation. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major risk exposures to adverse conditions.
UNRATED. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper Ratings
- --------------------------------
Moody's ratings for commercial paper are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's two highest commercial paper rating categories
are as follows:
"P-1 -- "Prime-1" indicates the highest quality repayment capacity of the rated
issues.
"P-2 -- "Prime-2" indicates that the issuer has a strong capacity for repayment
of short-term promissory obligations. Earnings trends and coverage ratios, while
sound, will be more subjective to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained."
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Standard & Poor's Commercial Paper Ratings
- ------------------------------------------
Standard & Poor's commercial paper ratings are current assessments of the
likelihood of timely payment of debts having an original maturity of no more
than 365 days. Standard & Poor's two highest commercial paper rating categories
are as follows:
"A-1 -- This designation indicates that the degree of safety regarding timely
payment is very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus (+) sign designation.
"A-2 -- Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1."
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FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies obligations
(cost - $476,569,236) ............................... $495,332,079
Short-term investments (cost - $304,000) ............. 304,000
Corporate savings account ............................ 42,424
-------------
495,678,503
Receivable for shares sold ............................ 290,925
Interest receivable ................................... 6,510,777
Other assets .......................................... 23,327
-------------
Total Assets ........................ 502,503,532
-----------------------------------------------------------
LIABILITIES:
Dividend payable ...................................... 82,189
Payable for shares repurchased ........................ 129,833
Payable for variation margin .......................... 68,594
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ................................. 340,459
Accounts payable and accrued expenses ................. 92,725
-------------
Total Liabilities ................... 713,800
-----------------------------------------------------------
NET ASSETS:
Capital paid-in ....................................... 531,489,254
Accumulated net realized loss on investments
and financial futures contracts ..................... ( 47,749,863)
Net unrealized appreciation of investments
and financial futures contracts ..................... 18,132,530
Distributions in excess of net investment income ...... ( 82,189)
-------------
Net Assets .......................... $501,789,732
===========================================================
NET ASSET VALUE PER SHARE:
(Based on net assets and shares of beneficial
interest outstanding - unlimited number of
shares authorized with no par value,
respectively)
Class A - $370,965,771 / 37,049,269 ................... $ 10.01
=============================================================================
Class B - $130,823,961 / 13,080,320 ................... $ 10.00
=============================================================================
MAXIMUM OFFERING PRICE PER SHARE:*
Class A - $(10.01 x 104.71%) .......................... $ 10.48
=============================================================================
</TABLE>
* On single retail sales of less than $100,000. On sales of $100,000 or more
and on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest ................................................. $ 39,948,407
------------
Expenses:
Investment management fee - Note B ...................... 2,514,147
Distribution/service fee - Note B
Class A ............................................... 1,004,768
Class B ............................................... 1,677,203
Transfer agent fee - Note B ............................. 1,230,861
Custodian fee ........................................... 114,796
Trustees' fees .......................................... 99,134
Printing ................................................ 48,744
Auditing fee ............................................ 41,500
Registration and filing fees ............................ 38,551
Miscellaneous ........................................... 19,571
Legal fees .............................................. 12,254
------------
Total Expenses ......................... 6,801,529
-----------------------------------------------------------
Net Investment Income .................. 33,146,878
-----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FINANCIAL FUTURES CONTRACTS:
Net realized loss on investments sold .................... ( 24,497,814)
Net realized loss on financial futures contracts ......... ( 6,419,981)
Change in net unrealized appreciation/depreciation of
investments ............................................ 71,940,175
Change in net unrealized appreciation/depreciation of
financial futures contracts ............................ ( 630,313)
------------
Net Realized and Unrealized
Gain on Investments and
Financial Futures Contracts ............ 40,392,067
-----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations .............. $ 73,538,945
===========================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 191
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income .............................................................. $ 33,146,878 $ 36,554,449
Net realized loss on investments sold and financial futures contracts .............. ( 30,917,795) ( 16,408,904)
Change in net unrealized appreciation/depreciation of
investments and financial futures contracts ...................................... 71,309,862 ( 60,739,209)
------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations ................... 73,538,945 ( 40,593,664)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - $(0.6504 and $0.6544 per share, respectively) ........................... ( 22,638,537) ( 22,812,484)
Class B - $(0.5970 and $0.6130 per share, respectively) ........................... ( 10,503,561) ( 13,741,965)
Distributions from net realized gain on investments sold
Class A - (none and $0.3080 per share, respectively) .............................. -- ( 10,604,649)
Class B - (none and $0.3080 per share, respectively) .............................. -- ( 6,971,522)
------------- -------------
Total Distributions to Shareholders ............................................... ( 33,142,098) ( 54,130,620)
------------- -------------
FROM FUND SHARE TRANSACTIONS -- NET* ................................................. ( 50,878,110) ( 12,554,565)
------------- -------------
NET ASSETS:
Beginning of period ................................................................ 512,270,995 619,549,844
------------- -------------
End of period (including distributions in excess
of net investment income of $82,189 and none, respectively) ...................... $ 501,789,732 $ 512,270,995
============= =============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
1995 1994
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold .......................................... 7,317,218 $ 72,500,554 3,159,870 $ 31,833,752
Shares issued to shareholders in reinvestment
of distributions ................................... 2,046,427 19,655,465 2,873,408 28,806,391
------------- ------------- ------------- -------------
9,363,645 92,156,019 6,033,278 60,640,143
Less shares repurchased .............................. ( 6,449,531) ( 62,018,777) (6,370,807) ( 63,185,012)
------------- ------------- ------------- -------------
Net increase (decrease) .............................. 2,914,114 $ 30,137,242 ( 337,529) ($ 2,544,869)
============= ============= ============= =============
CLASS B
Shares sold .......................................... 1,566,023 $ 15,058,524 3,469,697 $ 34,758,586
Shares issued to shareholders in reinvestment
of distributions ................................... 622,218 5,939,906 1,168,067 11,734,449
------------- ------------- ------------- -------------
2,188,241 20,998,430 4,637,764 46,493,035
Less shares repurchased .............................. (10,444,168) ( 102,013,782) (5,742,895) ( 56,502,731)
------------- ------------- ------------- -------------
Net decrease ......................................... ( 8,255,927) ($ 81,015,352) (1,105,131) $ (10,009,696)
============= ============= ============= =============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS YEAR. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS PAID TO
SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE
FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND SHARES SOLD, REINVESTED AND
REDEEMED DURING THE LAST TWO PERIODS, ALONG WITH THE CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 192
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding
throughout the period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------
1995 1994 1993 1992(a) 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 9.24 $ 10.89 $ 10.29 $ 10.51
-------- -------- ------- --------
Net Investment Income ........................ 0.65 0.65 0.68** 0.64
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures Contracts . 0.77 ( 1.34) 0.61 ( 0.22)
-------- -------- ------- --------
Total from Investment Operations .......... 1.42 (0.69) 1.29 0.42
-------- -------- ------- --------
Less Distributions:
Dividends from Net Investment Income ......... ( 0.65) ( 0.65) ( 0.68) ( 0.64)
Distributions from Net Realized
Gain on Investments Sold .................... -- ( 0.31) ( 0.01) --
-------- -------- ------- --------
Total Distributions ....................... ( 0.65) ( 0.96) ( 0.69) ( 0.64)
-------- -------- ------- --------
Net Asset Value, End of Period ............... $ 10.01 $ 9.24 $ 10.89 $ 10.29
======== ======== ========= ========
Total Investment Return at Net Asset Value (b) 15.90% ( 6.66)% 12.89% 5.33%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $370,966 $315,372 $375,416 $350,907
Ratio of Expenses to Average Net Assets ...... 1.17% 1.23% 1.30% 1.06%*
Ratio of Net Investment Income
to Average Net Assets ....................... 6.76% 6.62% 6.47% 7.11%*
Portfolio Turnover Rate ...................... 94% 127% 273% 140%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 9.23 $ 10.88 $ 10.28 $ 10.29 $ 9.83
-------- -------- -------- -------- --------
Net Investment Income ........................ 0.60 0.61 0.66** 0.76 0.85
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures Contracts... 0.77 ( 1.34) 0.61 -- 0.51
-------- -------- -------- -------- --------
Total from Investment Operations .......... 1.37 ( 0.73) 1.27 0.76 1.36
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income ......... ( 0.60) ( 0.61) ( 0.66) ( 0.77) ( 0.90)
Distributions from Net Realized Gain
on Investments Sold ......................... -- ( 0.31) ( 0.01) -- --
-------- -------- -------- -------- --------
Total Distributions ....................... ( 0.60) ( 0.92) ( 0.67) ( 0.77) ( 0.90)
--------- -------- -------- -------- --------
Net Asset Value, End of Period ............... $ 10.00 $ 9.23 $ 10.88 $ 10.28 $ 10.29
======== ======== ======== ======== ========
Total Investment Return at Net
Asset Value (b).............................. 15.27% ( 7.05)% 12.66% 7.58% 14.46%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $130,824 $196,899 $244,133 $197,032 $164,347
Ratio of Expenses to Average Net Assets ...... 1.72% 1.64% 1.51% 1.55% 1.51%
Ratio of Net Investment Income to
Average Net Assets .......................... 6.24% 6.19% 6.23% 7.35% 8.53%
Portfolio Turnover Rate ...................... 94% 127% 273% 140% 62%
</TABLE>
* On an annualized basis
** On average month end shares outstanding.
(a) Class A shares commenced operations on January 3, 1992.
(b) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 193
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
SOVEREIGN U.S. GOVERNMENT INCOME FUND ON OCTOBER 31, 1995. THE SCHEDULE CONSISTS
OF TWO MAIN CATEGORIES: U.S. GOVERNMENT AND AGENCIES OBLIGATIONS AND SHORT-TERM
INVESTMENTS. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION,
ARE LISTED LAST.
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- ---- ---- -------- -----
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS
GOVERNMENTAL - U.S. (59.88%)
United States Treasury, Note........................................... 8.500% 11-15-95 $ 4,560* $ 4,564,286
United States Treasury, Note........................................... 9.375 04-15-96 16,000* 16,264,960
United States Treasury, Note........................................... 9.125 05-15-99 12,000* 13,269,360
United States Treasury, Bond........................................... 10.750 08-15-05 89,885 120,445,900
United States Treasury, Bond **........................................ 9.250 02-15-16 63,000 83,356,560
United States Treasury, Bond........................................... 8.125 08-15-19 52,000* 62,595,000
------------
300,496,066
------------
GOVERNMENTAL - U.S. AGENCIES (38.83%)
Federal Home Loan Mortgage Corp,
CMO REMIC 1064-D...................................................... 8.250 08-15-19 3,299 3,325,442
CMO REMIC 1122-E...................................................... 8.000 05-15-20 7,114 7,229,767
CMO REMIC 1142-H...................................................... 7.950 12-15-20 10,000 10,359,300
CMO REMIC 1442-S...................................................... 5.070# 12-15-97 42 38,848
Federal National Mortgage Association,
30 Yr Pass Thru Ctf................................................... 9.000 02-01-10 10,756* 11,267,124
30 Yr Pass Thru Ctf................................................... 7.000 05-01-24 19,808* 19,640,580
30 Yr Pass Thru Ctf................................................... 8.000 10-01-24 9,592* 9,829,145
GTD REMIC Pass Thru Ctf 1990-42-E..................................... 9.800 05-25-19 10,083 10,231,316
GTD REMIC Pass Thru Ctf 1991-76-M..................................... 9.000 07-25-06 5,000 5,212,500
GTD REMIC Pass Thru Ctf 1991-159-C.................................... 7.000 10-25-04 16,858 17,042,380
GTD REMIC Pass Thru Ctf 1991-G8-E..................................... 9.000 04-25-21 6,000 6,375,938
GTD REMIC Pass Thru Ctf G 17-B........................................ 8.750 09-25-19 1,291 1,302,489
Multicurrency PERLS+.................................................. 11.450 07-10-96 1,000 190,000
Financing Corp.,
Bond Ser C............................................................ 9.800 11-30-17 7,000 9,415,000
Government National Mortgage Association,
30 Yr Pass Thru Ctf................................................... 7.000 06-15-23 9,190* 9,126,862
30 Yr Pass Thru Ctf................................................... 7.500 01-15-23to 21,692* 21,976,939
01-15-24
30 Yr Pass Thru Ctf................................................... 8.000 01-15-25 10,099* 10,392,869
30 Yr Pass Thru Ctf................................................... 8.500 01-15-25 40,100* 41,754,514
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 194
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- ---- ---- -------- -----
<S> <C> <C> <C> <C>
GOVERNMENTAL - U.S. AGENCIES (CONTINUED)
Student Loan Marketing Association,
Multicurrency PERLS+.................................................. 10.000% 11-19-96 $1,000 $ 96,250
Multicurrency PERLS+.................................................. 11.100 04-07-97 200 28,750
-------------
194,836,013
-------------
TOTAL U.S. GOVERNMENT AND
AGENCIES OBLIGATIONS
(Cost $476,569,236) (98.71)% 495,332,079
------ -------------
SHORT TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.06%)
Investment in a joint repurchase agreement transaction with
SBC Capital Markets Inc., Dated 10-31-95, Due
11-01-95 (secured by U.S. Treasury Bond, 8.75% Due 05-15-17,
U.S. Treasury Note, 5.75% Due 09-30-97) Note A ........................ 5.890 11-01-95 304 304,000
-------------
CORPORATE SAVINGS ACCOUNT (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account Current Rate 3.00% ..................... 42,424
-------------
TOTAL SHORT-TERM INVESTMENTS ( 0.07)% 346,424
-------------
TOTAL INVESTMENTS (98.78)% $ 495,678,503
====== =============
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended October 31, 1995.
** U.S. Treasury Bonds with a value of $674,791 owned by the Fund were
designated as margin deposits for future contracts at October 31, 1995.
# Represents rate in effect on October 31, 1995.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
+ Principal Exchange Rate Linked Securities (PERLS). PERLS are debt instruments
that are denominated in U.S. dollars and pay interest in U.S. dollars, but
whose principal repayments are linked to the performance of the U.S. dollar
versus a foreign currency. If the foreign currency gains value against the
U.S. dollar when the PERL matures, redemption will be at a premium. The
redemption will be at a discount if the foreign dollar loses value against
the U.S. dollar. As of 10/31/95, the Fund has PERLS with a total cost of
$2,244,963 and a total value of $315,000, or 0.06% of the Fund's total net
assets.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 195
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end management investment
company registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Sovereign U.S. Government Income Fund
(the "Fund"), John Hancock Gold & Government Fund, John Hancock Regional Bank
Fund, John Hancock Sovereign Achievers Fund and John Hancock Managed Tax-Exempt
Fund. Prior to January 1, 1995, John Hancock Gold & Government Fund was known as
John Hancock Freedom Gold & Government Fund and John Hancock Regional Bank Fund
was known as John Hancock Freedom Regional Bank Fund.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, dividends, and liquidation, except that certain expenses,
subject to the approval of the Trustees, may be applied differently to each
class of shares in accordance with current regulations of the Securities and
Exchange Commission. Shareholders of a class which bears distribution/service
expenses under the terms of a distribution plan, have exclusive voting rights
regarding such distribution plan. Significant accounting policies of the Fund
are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $43,025,223 of capital
loss carryforwards available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the Fund,
no capital gain distribution will be made. The carryforwards expire as follows:
October 31, 1998 -- $282,637, October 31, 2002 -- $16,549,431 and October 31,
2003 -- $26,193,155.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and will be in
the same amount, except for the effect of expenses that may be applied
differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trusts are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
13
<PAGE> 196
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts 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
will be 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," will be recorded by the
Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contract may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuation imposed by an exchange.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1995, open positions in financial futures contracts were as
follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION DEPRECIATION
- ---------- -------------- -------- ------------
<S> <C> <C> <C>
DEC 1995 255 TREASURY BOND SHORT $630,313
========
</TABLE>
At October 31, 1995, the Fund has deposited in a segregated account $510,000
par value of U.S. Treasury Bond, 9.250%, 02-15-16, to cover margin requirements
on open financial futures contracts.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITHAFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of (a) 0.50% of the first $500,000,000 of the Fund's
average daily net asset value, and (b) 0.45% of the Fund's average daily net
asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended October 31, 1995, net
sales charges received on sales of Class A shares of the Fund amounted to
$318,650. Out of this amount, $36,205 was retained and used for printing
prospectuses, advertising, sales literature, and other purposes, $32,541 was
paid as
14
<PAGE> 197
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
sales commissions to unrelated broker-dealers and $249,904 was paid as sales
commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"), all of which are broker-dealers. The Adviser's indirect
parent, John Hancock Mutual Life Insurance Company, is the indirect sole
shareholder of Distributors and John Hancock Freedom Securities Corporation and
its subsidiaries, which include FDC, Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the period ended October 31,
1995 the contingent deferred sales charges received by JH Funds amounted to
$401,486.
In addition, to reimburse the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted Distribution Plans
with respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors for distribution and service expenses, at an annual rate not to
exceed 0.30% of Class A average daily net assets and 1.00% of Class B average
daily net assets to reimburse the Co-Distributors for their distribution/service
costs. Up to a maximum of 0.25% of such payments may be service fees as defined
by the amended Rules of Fair Practice of the National Association of Securities
Dealers. Under the amended Rules of Fair Practice, curtailment of a portion of
the Fund's 12b-1 payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services,
Inc. ("Investor Services"), a wholly-owned subsidiary of The Berkeley Financial
Group. Prior to January 1, 1995, Investor Services was known as John Hancock
Fund Services, Inc. Prior to January 1, 1995, the Fund paid Investor Services a
monthly transfer agent fee equivalent, on an annual basis, to 0.34% and 0.12% of
the average daily net asset value of Class A and Class B shares of the Fund,
respectively, plus out of pocket expenses incurred by Investor Services on
behalf of the Fund.
For the period January 1, 1995 and through September 30, 1995 Class A and
Class B shares paid transfer agent fees based on the number of shareholder
accounts and certain out-of-pocket expenses. For the eleven months ended
September 30, 1995 the transfer agent expense, calculated as a class specific
expense was $955,090 for Class A and $236,223 for Class B, respectively.
Effective October 1, 1995 transfer agent expense is being treated as a fund
expense based on the number of shareholder accounts in the Fund and certain
out-of-pocket expenses.
Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates, as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as an other asset. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of obligations of the U.S.
government and its agencies, other than short-term securities, during the period
ended October 31, 1995 aggregated $517,280,371 and $515,295,631, respectively.
The cost of investments owned at October 31, 1995 for federal income tax
purposes was $478,159,173. Gross unrealized appreciation and depreciation of
investments aggregated $21,577,131 and $4,100,225, respectively, resulting in
net unrealized appreciation of $17,476,906.
15
<PAGE> 198
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1995, the Fund has reclassified amounts to
reflect an increase in distributions in excess of net investment income of
$86,969, an increase in accumulated net realized loss on investments and
financial futures contracts of $34,334 and an increase in capital paid-in of
$121,303. This represents the cumulative amounts necessary to report these
balances on a tax basis, excluding certain temporary differences, as of October
31, 1995. Additional adjustments may be needed in subsequent reporting periods.
These reclassifications, which have no impact on the net asset value of the
Fund, are primarily attributable to certain differences in the computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles.
16
<PAGE> 199
John Hancock Funds - Sovereign U.S. Government Income Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Sovereign U.S. Government Income Fund and
the Trustees of Freedom Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Sovereign U.S.
Government Income Fund (the "Fund") (a portfolio of Freedom Investment Trust) at
October 31, 1995, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during its fiscal year ended October
31, 1995.
None of the distributions qualify for the dividends received deduction
available to corporations.
Shareholders will receive a 1995 U.S. Treasury Department Form 1099-DIV in
January of 1996. This will reflect the total of all distributions which are
taxable for the calendar year 1995.
17
<PAGE> 200
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Tax-exempt long-term bonds (cost - $205,317,165) ..... $218,037,090
Joint repurchase agreement (cost - $1,831,000) ....... 1,831,000
Corporate savings account............................. 6,384
------------
219,874,474
Receivable for shares sold............................. 76,327
Receivable for investments sold........................ 6,599,793
Interest receivable.................................... 4,467,268
Other assets........................................... 29,126
------------
Total Assets.................... 231,046,988
-------------------------------------------------
LIABILITIES:
Dividend payable....................................... 30,668
Payable for shares repurchased......................... 119,581
Payable for investments purchased...................... 10,315,544
Payable to John Hancock Advisers, Inc. and
affiliates - Note B................................... 132,394
Accounts payable and accrued expenses.................. 62,813
------------
Total Liabilities............... 10,661,000
-------------------------------------------------
NET ASSETS:
Capital paid-in........................................ 206,137,501
Accumulated net realized gain on investments and
financial futures contracts........................... 1,458,033
Net unrealized appreciation of investments 12,719,925
Undistributed net investment income.................... 70,529
------------
Net Assets...................... $220,385,988
=================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value, respectively)
Class A - $42,383,912/3,665,817........................ $ 11.56
========================================================================
Class B - $178,002,076/15,391,245...................... $ 11.57
========================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($11.56 x 104.71%)........................... $ 12.10
========================================================================
* On single retail sales of less than $100,000. On sales of $100,000 or more and
on group sales the offering price is reduced.
</TABLE>
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest............................................... $ 15,060,119
------------
Expenses:
Distribution/service fee - Note B
Class A............................................. 83,379
Class B............................................. 1,967,708
Investment management fee - Note B.................... 1,360,930
Transfer agent fee - Note B........................... 178,923
Trustees' fees........................................ 50,267
Auditing fee.......................................... 41,800
Registration and filing fees.......................... 34,829
Printing.............................................. 29,725
Custodian fee......................................... 74,206
Legal fees............................................ 15,127
Miscellaneous......................................... 11,736
Less Management Fee Reduction - Note B (113,411)
------------
Total Expenses.................. 3,735,219
Less Expense Reductions -
Note B.......................... (47,982)
-------------------------------------------------
Net Expenses.................... 3,687,237
-------------------------------------------------
Net Investment Income........... 11,372,882
-------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FINANCIAL FUTURES CONTRACTS:
Net realized gain on investments sold.................. 4,782,526
Net realized loss on financial futures contracts....... (2,363,744)
Change in net unrealized appreciation/depreciation
of investments........................................ 13,312,666
Change in net unrealized appreciation/depreciation of
financial futures contracts........................... (153,531)
------------
Net Realized and Unrealized
Gain on Investments and
Financial Futures Contracts..... 15,577,917
-------------------------------------------------
Net Increase in Net Assets
Resulting from Operations....... $ 26,950,799
=================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 201
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................................................ $ 11,372,882 $ 12,831,192
Net realized gain (loss) on investments sold and financial futures contracts......... 2,418,782 (739,886)
Change in net unrealized appreciation (depreciation) of investments and financial
futures contracts ................................................................... 13,159,135 (27,862,425)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations..................... 26,950,799 (15,771,119)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.6282 and $0.6387 per share, respectively)............................. (1,545,018) (1,070,853)
Class B - ($0.5516 and $0.5610 per share, respectively)............................. (9,827,864) (11,760,339)
Distributions from net realized gain on investments sold and financial futures
contracts
Class A - (none and $0.0898 per share, respectively)................................ --- (120,420)
Class A - (none and $0.0898 per share, respectively)................................ --- (1,901,276)
------------ ------------
Total Distributions to Shareholders............................................... (11,372,882) (14,852,888)
------------ ------------
FROM FUND SHARE TRANSACTIONS-- NET*.................................................... (33,226,056) (1,927,851)
------------ ------------
NET ASSETS:
Beginning of period.................................................................. 238,034,127 270,585,985
------------ ------------
End of period (including undistributed net investment income of $70,529 and none,
respectively) ....................................................................... $220,385,988 $238,034,127
============ ============
</TABLE>
<TABLE>
<CAPTION>
* ANALYSIS OF FUND SHARE TRANSACTIONS: YEAR ENDED OCTOBER 31,
--------------------------------------------------------
1995 1994
--------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold.................................................. 2,334,618 $ 26,534,395 1,179,686 $13,702,193
Shares issued to shareholders in reinvestment of
distributions ............................................... 84,320 947,287 60,754 696,640
--------- ------------ --------- -----------
2,418,938 27,481,682 1,240,440 14,398,833
Less shares repurchased...................................... (695,912) (7,619,563) (472,296) (5,404,052)
--------- ------------ --------- -----------
Net increase................................................. 1,723,026 $ 19,862,119 768,144 $ 8,994,781
========= ============ ========= ===========
CLASS B
Shares sold.................................................. 1,012,904 $ 11,296,871 2,722,911 $31,724,838
Shares issued to shareholders in reinvestment of
distributions ............................................... 444,432 4,959,344 586,954 6,775,123
--------- ------------ --------- -----------
1,457,336 16,256,215 3,309,865 38,499,961
Less shares repurchased...................................... (6,179,061) (69,344,390) (4,333,843) (49,422,593)
--------- ------------ --------- -----------
Net decrease................................................. (4,721,725) $(53,088,175) (1,023,978) ($10,922,632)
========= ============ ========= ===========
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS FISCAL PERIOD. THE DIFFERENCE
REFLECTS EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS
PAID TO SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY SHAREHOLDERS
INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND SHARES SOLD,
REINVESTED AND REDEEMED DURING THE LAST TWO PERIODS, ALONG WITH THE
CORRESPONDING DOLLAR VALUES.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 202
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------
1995 1994 1993 1992(a)
---------- --------- -------- -----------
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.................................... $ 10.79 $ 12.13 $ 11.12 $ 11.25
------- ------- ------- -------
Net Investment Income................................................... 0.63 0.64 0.70 0.55
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts........................................ 0.77 ( 1.25) 1.05 ( 0.11)
------- ------- ------- -------
Total from Investment Operations..................................... 1.40 ( 0.61) 1.75 0.44
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income.................................... ( 0.63) ( 0.64) ( 0.70) ( 0.53)
Distributions from Net Realized Gain on Investments Sold
and Financial Futures Contracts........................................ --- ( 0.09) ( 0.04) ( 0.04)
------- ------- ------- -------
Total Distributions.................................................. ( 0.63) ( 0.73) ( 0.74) ( 0.57)
------- ------- ------- -------
Net Asset Value, End of Period.......................................... $ 11.56 $ 10.79 $ 12.13 $ 11.12
======= ======= ======= =======
Total Investment Return at Net Asset Value (c).......................... 13.30% ( 5.22%) 16.10% 4.74%*
Total Adjusted Investment Return at Net Asset Value (b)(d).............. 13.28% ( 5.29%) 15.77% 4.51%*
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)............................... $42,384 $20,968 $14,244 $ 9,589
Ratio of Expenses to Average Net Assets**............................... 1.06% 0.95% 0.70% 0.78%*
Ratio of Adjusted Expenses to Average Net Assets (b).................... 1.11% 1.02% 1.03% 1.01%*
Ratio of Net Investment Income to Average Net Assets**.................. 5.53% 5.52% 5.98% 6.24%*
Ratio of Adjusted Net Investment Income to Average Net Assets (b)....... 5.48% 5.42% 5.65% 6.01%*
Portfolio Turnover Rate................................................. 104% 59% 23% 23%
** Expense Reimbursement Per Share...................................... $ 0.01 $ 0.01 $ 0.04 $ 0.02
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIODS INDICATED: THE NET INVESTMENT INCOME, GAINS
(LOSSES), DISTRIBUTIONS AND TOTAL INVESTMENT RETURNS OF THE FUND. IT SHOWS HOW
THE FUND'S NET ASSET VALUE FOR A SHARE HAS CHANGED SINCE THE END OF THE PREVIOUS
PERIOD. ADDITIONALLY, IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS
PRESENTED IN THE FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 203
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period......................... $ 10.79 $ 12.13 $ 11.12 $ 11.12 $ 10.61
-------- -------- -------- -------- --------
Net Investment Income........................................ 0.55 0.56 0.64 0.66 0.68
Net Realized and Unrealized Gain (Loss) on Investments and
Financial Futures Contracts................................. 0.78 ( 1.25) 1.05 0.04 0.61
-------- -------- -------- -------- --------
Total from Investment Operations.......................... 1.33 ( 0.69) 1.69 0.70 1.29
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income......................... ( 0.55) ( 0.56) ( 0.64) ( 0.64) ( 0.72)
Distributions from Net Realized Gain on Investments Sold and
Financial Futures Contracts................................. --- ( 0.09) ( 0.04) ( 0.06) ( 0.06)
-------- -------- -------- -------- --------
Total Distributions....................................... ( 0.55) ( 0.65) ( 0.68) ( 0.70) ( 0.78)
-------- -------- -------- -------- --------
Net Asset Value, End of Period............................... $ 11.57 $ 10.79 $ 12.13 $ 11.12 $ 11.12
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value (c)............... 12.63% ( 5.85%) 15.51% 6.39% 12.55%
Total Adjusted Investment Return at Net Asset Value (b)(d)... 12.61% ( 5.92%) 15.18% 6.20% 12.24%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).................... $178,002 $217,066 $256,342 $226,943 $199,955
Ratio of Expenses to Average Net Assets**.................... 1.73% 1.62% 1.23% 1.35% 1.19%
Ratio of Adjusted Expenses to Average Net Assets (b)......... 1.78% 1.69% 1.56% 1.54% 1.50%
Ratio of Net Investment Income to Average Net Assets**....... 4.92% 4.84% 5.49% 5.74% 6.19%
Ratio of Adjusted Net Investment Income to Average Net Assets
(b) ......................................................... 4.87% 4.77% 5.16% 5.55% 5.88%
Portfolio Turnover Rate...................................... 104% 59% 23% 23% 30%
** Expense Reimbursement Per Share........................... $ 0.01 $ 0.01 $ 0.04 $ 0.02 $ 0.04
</TABLE>
* On an annualized basis.
(a) Class A shares commenced operations on January 3, 1992.
(b) On an unreimbursed basis.
(c) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(d) An estimated total return calculation which takes into consideration fees
and expenses waived or borne by the Adviser during the periods shown.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 204
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
MANAGED TAX-EXEMPT FUND ON OCTOBER 31, 1995. IT HAS TWO MAIN CATEGORIES:
TAX-EXEMPT LONG-TERM BONDS AND SHORT-TERM INVESTMENTS. THE TAX-EXEMPT BONDS ARE
FURTHER BROKEN DOWN BY STATE. UNDER EACH STATE IS A LIST OF THE SECURITIES OWNED
BY THE FUND. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION,
ARE LISTED LAST.
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
TAX-EXEMPT LONG-TERM BONDS
ALABAMA (2.27%)
Birmingham, City of,
GO Iss of 1989.......................................... 7.350% 03-01-14 A1** $ 750 $ 824,235 6.69%
Citronelle Industrial Development Board,
Stauffer Chemical Co Proj 1982.......................... 8.000 12-01-12 NR** 500 563,435 7.10
Mobile Industrial Development Board,
Mobile Energy Serv Co Proj 1995......................... 6.950 01-01-20 BBB- 3,500* 3,623,270 6.71
----------
5,010,940
----------
ALASKA (1.86%)
Alaska Housing Finance Corp,
Coll Home Mtg Ser A-3 GNMA/FNMA Coll.................... 7.700 12-01-13 AAA 495 522,997 7.29
Coll Home Mtg Ser B-1 GNMA Coll......................... 7.650 06-01-24 AAA 2,000 2,153,560 7.1
Coll Home Mtg Ser B-2 GNMA Coll......................... 7.875 06-01-24 AAA 305 322,196 7.45
Valdez Alaska Marine Terminal,
Rev Ref Sohio Pipe Line Co. Proj Ser 1985............... 7.125 12-01-25 AA- 1,000 1,089,850 6.54
----------
4,088,603
----------
ARIZONA (3.23%)
Arizona Municipal Financing Program,
Cert of Part Ser 25..................................... 7.875 08-01-14 AAA 1,000 1,275,560 6.17
Navajo, County of,
Poll Control Corp Rev Ref Arizona Pub Serv Co Ser A..... 5.875 08-15-28 BBB 5,000 4,739,350 6.20
Pima, County of,
Swr Rev Ref Ser 1991.................................... 6.750 07-01-15 AAA 460 516,028 6.02
Pima, County of,
Swr Rev Ref Ser 1991.................................... 6.750 07-01-15 AAA 540 588,217 6.20
----------
7,119,155
----------
ARKANSAS (0.33%)
Arkansas Development Finance Auth,
Single Family Mtg Rev Ref Ser 1991 A.................... 8.000 08-15-11 AA 660 721,710 7.32
----------
CALIFORNIA (9.50%)
Central Valley Finance Agency,
California Cogeneration Proj Rev Carson Ice Gen Proj.... 6.100 07-01-13 BBB- 2,900 2,884,224 6.13
California Cogeneration Proj Rev Carson Ice Gen Proj.... 6.200 07-01-20 BBB- 2,000 1,989,780 6.23
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 205
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
Foothill/Eastern Transportation Corridor Agency,
Toll Road Rev Ser A................................. 6.000% 01-01-34 BBB- $6,025* $ 5,690,010 6.35%
Sacramento Cogeneration Auth,
Cogeneration Proj Rev Procter & Gamble Proj......... 6.500 07-01-21 BBB- 4,500* 4,580,505 6.39
Sacramento Municipal Utilities District,
Elec Rev Ref Ser 1992 A Inflos...................... 8.615# 08-15-18 AAA 1,000 1,078,750 7.99
Santa Ana Financing Auth,
Lease Rev Police Administration & Holding Facil
Ser A............................................... 6.250 07-01-19 AAA 2,000* 2,160,860 5.78
University of California,
Cert of Part Rev Ref UCLA Central Chiller/
Cogeneration Project................................ 5.600 11-01-20 Aa** 2,700* 2,541,132 5.95
-----------
20,925,261
-----------
COLORADO (4.33%)
Arapahoe County Cap Imp Trust Fund
Highway Revenue Ser. E-470.......................... 6.950 08-31-20 Baa** 6,000* 6,322,860 6.60
Colorado Housing Finance Auth,
Single Family Prog Sr Iss A-2....................... 7.625 08-01-17 AA 1,035 1,095,237 7.21
Single Family Residential Rev Ser C................. 8.750 09-01-17 Aa** 465 497,764 8.17
Douglas County School District No. Re. 1,
Douglas and Elbert Counties CO, GO Improvement Ser
1994A............................................... 6.400 12-15-11 AAA 1,500 1,626,195 5.90
-----------
9,542,056
-----------
CONNECTICUT (0.78%)
Connecticut Health & Educational Facilities Auth,
Rev Quinnipiac College Ser D......................... 6.000 07-01-23 BBB- 1,890 1,728,632 6.56
-----------
DELAWARE (0.98%)
Delaware State Economic Development Auth,
Rev Ref Poll Control Delmarva Pwr Ser B.............. 6.750 05-01-19 AAA 2,000* 2,160,920 6.25
-----------
FLORIDA (7.75%)
Broward, County of,
Resource Recovery SES Broward Co., L.P. South Proj... 7.950 12-01-08 A 4,580 5,143,706 7.08
Citrus, County of,
Poll Control Rev Ref Ser 199A Florida Pwr Corp
Crystal River Pwr Plant Proj......................... 6.625 01-01-27 A+ 1,250* 1,315,375 6.30
Dade, County of,
Water & Swr Sys Rev Ser 1995......................... 5.500 10-01-18 AAA 3,000* 2,942,400 5.61
Hernando, County of,
Criminal Justice Complex Rev Ser 1986................ 7.650 07-01-16 AAA 500 634,615 6.03
Lee, County of,
Hosp Board of Directors Hosp Rev Inflos.............. 9.144# 04-01-20 AAA 2,000 2,215,000 8.26
Orange County Health Facilities Auth,
Hosp Rev Orlando Regional Medical Center............. 8.688# 10-29-21 AAA 1,000 1,085,000 8.01
Tampa, City of,
Cap Imp Prog Rev Ser B Iss of 1988................... 8.375 10-01-18 BBB 3,500 3,733,555 7.85
-----------
17,069,651
-----------
</TABLE>
See notes to financial statements.
13
<PAGE> 206
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
ILLINOIS (1.37%)
Illinois Health Facilities Auth,
Rev Methodist Hlth Serv Corp Ser 1991 B.............. 9.538%# 05-01-21 AAA $1,000 $ 1,161,250 8.21%
Rev Methodist Medical Center Illinois Ref A.......... 8.000 10-01-14 BBB 1,000 1,002,720 7.98
Rev Swedish-American Hosp............................ 7.400 04-01-20 AAA 750 852,412 6.51
-----------
3,016,382
-----------
INDIANA (0.37%)
Hammond Local Public Improvement,
Bond Bank Ser A Township of Schererville
Multi-Financing Prog................................. 7.000 03-15-09 AAA 750 821,663 6.39
-----------
KANSAS (1.13%)
Sedgwick, County of,
GNMA Coll Mtg Ln Rev Ser C........................... 8.625 11-01-18 AAA 2,295 2,483,098 7.97
-----------
LOUISIANA (2.83%)
Calcasieu Parish Public Trust Auth,
Mtg Rev Ref 1991 Ser A............................... 7.750 06-01-12 A** 540 589,939 7.09
De Soto, Parish of,
Environ Imp Rev Int'l Paper Co Proj Ser A............ 7.700 11-01-18 A- 2,750* 3,091,495 6.85
De Soto, Parish of,
Environ Imp Rev Int'l Paper Co Proj Ser B............ 6.550 04-01-19 A- 2,500* 2,563,275 6.39
-----------
6,244,709
-----------
MAINE (0.61%)
Maine State Housing Auth,
Mtg Purchase Ser A-3................................. 7.800 11-15-15 AA- 1,250 1,332,325 7.32
-----------
MASSACHUSETTS (10.44%)
Greater New Bedford Regional Refuse Management
District, Mass GO Landfill........................... 5.875 05-01-13 Baa** 750 708,150 6.22
Massachusetts Health & Educational Facilities Auth,
Rev St. Elizabeth's Hosp of Boston Ser E............. 9.746# 08-15-21 AAA 1,000 1,140,000 8.55
Rev Ref Worcester Polytech Institute Ser E........... 6.750 09-01-11 A+ 1,840* 2,023,540 6.14
Massachusetts Housing Finance Agency,
Insured Rental Ser A................................. 6.650 07-01-19 AAA 5,500 5,690,465 6.43
Single Family Hsg Ser 8.............................. 7.700 06-01-17 A+ 1,000 1,075,930 7.16
Massachusetts Municipal Wholesale Electric Co.,
Pwr Supply Rev Ser A................................. 5.000 07-01-14 AAA 3,000* 2,792,970 5.37
Massachusetts Municipal Wholesale Electric Co.,
Pwr Supply Rev Ser B................................. 5.000 07-01-13 AAA 2,390* 2,215,076 5.39
Massachusetts Turnpike Authority,
Turnpike Rev Ser A................................... 5.000 01-01-20 A+ 7,000* 6,326,880 5.53
Massachusetts Water Pollution Abatement Trust,
Wtr Poll Abatement Rev (SESD Ln Prog) 1994 Ser A..... 6.375 02-01-15 AA- 1,000 1,044,640 6.10
-----------
23,017,651
-----------
</TABLE>
See notes to financial statements.
14
<PAGE> 207
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
MICHIGAN (1.93%)
Detroit, City of,
GO UnLtd Ser A 1995.................................. 6.800% 04-01-15 BBB $1,315* $ 1,383,722 6.46%
Michigan Housing Development Auth,
Single Family Mtg Rev Ser A.......................... 7.500 06-01-15 AA+ 1,415 1,515,140 7.00
Michigan State Hospital Financing Auth,
Rev Ref Hosp Genesys Hlth Sys Ser A.................. 8.100 10-01-13 BBB 1,250* 1,357,675 7.46
-----------
4,256,537
-----------
MINNESOTA (0.13%)
Minnesota Housing Finance Agency
Single Family Mtg 1990 Ser C......................... 7.700 07-01-14 AA 265 282,736 7.22
-----------
NEVADA (1.73%)
Nevada Housing Division,
Single Family Proj Sr Rev Ser 1989 Iss A-1........... 7.350 04-01-16 AA 940 982,450 7.03
Single Family Proj Sr Rev Ser 1990 Iss C-1........... 7.850 10-01-15 AA 355 376,641 7.40
Nevada, State of,
GO Ltd Tax Municipal Bond Bank Proj No. 38........... 6.750 07-01-09 NR 975 1,101,906 5.97
GO Ltd Tax Municipal Bond Bank Proj No. 38........... 6.750 07-01-09 AA 25 27,056 6.24
Reno Hospital,
Rev St. Mary's Regional Medical Center Ser A......... 7.750 07-01-07 AAA 720 798,804 6.99
Rev St. Mary's Regional Medical Center Ser A......... 7.750 07-01-07 AAA 480 528,293 7.04
-----------
3,815,150
-----------
NEW JERSEY (0.51%)
New Jersey Turnpike Auth,
Turnpike Rev 1991 Ser C.............................. 6.500 01-01-16 AAA 1,000* 1,126,100 5.77
-----------
NEW YORK (12.44%)
Metropolitan Transportation Auth,
Transit Rev Ser J.................................... 6.500 07-01-18 AAA 1,000* 1,063,860 6.11
New York, State of
GO UnLtd. 1995....................................... 5.800 10-01-12 A- 1,365* 1,392,000 5.69
New York Local Assistance Corp.,
Ser C, 1991.......................................... 7.000 04-01-10 A 2,000* 2,217,260 6.31
New York Local Government Assistance Corp.,
Ser A, 1992.......................................... 6.875 04-01-19 A 2,000* 2,180,800 6.31
New York State Dormitory Authority,
City Univ Sys 2nd Gen Rev Ser A...................... 5.750 07-01-09 BBB 1,000 991,510 5.80
State Univ Ed Facil Rev Ser 1990B.................... 7.000 05-15-16 BBB+ 5,000 5,342,350 6.55
State Univ Ed Facil Rev Ser 1993A.................... 5.500 05-15-19 BBB+ 2,000* 1,877,120 5.86
New York State Environmental Facilities Corp,
State Wtr Poll Control Revolving Fund Rev Ser 1990 A,
NYC Municipal Wtr Fin Auth Proj...................... 7.500 06-15-12 A 600 672,846 6.69
New York State Mortgage Agency,
Rev Homeownership Ser BB-2........................... 7.950 10-01-15 Aa** 560 591,646 7.52
New York Urban Development Auth.
Ref Correctional Cap Facil Ser A..................... 5.250 01-01-21 BBB 3,000* 2,684,460 5.87
</TABLE>
See notes to financial statements.
15
<PAGE> 208
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
Port Authority of New York and New Jersey,
Cons Seventy Second Ser 1992......................... 7.350% 10-01-27 AA- $2,000* $ 2,289,860 6.42%
Triborough Bridge & Tunnel Auth,
Rev Ref Ser 1987 L................................... 8.000 01-01-07 A+ 500 548,710 7.29
Rev Gen Purpose Ser X................................ 6.500 01-01-19 A+ 1,250 1,325,638 6.13
Rev Gen Purpose Ser Y................................ 6.125 01-01-21 A+ 4,000* 4,242,000 5.78
-----------
27,420,060
-----------
OHIO (3.80%)
Cleveland, City of,
Pub Pwr Sys First Mtg Ser 1994A...................... 7.000 11-15-16 AAA 5,860* 6,704,895 6.12
Cuyahoga, County of,
Hosp Imp Rev Deaconess Hosp of Cleveland Proj
Ser 1985 B........................................... 7.450 10-01-18 A1** 750 867,547 6.44
Hosp Rev Meridia Hlth Sys Ser 1991................... 7.000 08-15-23 A 750 793,642 6.62
-----------
8,366,084
-----------
OKLAHOMA (0.77%)
Tulsa County Industrial Auth,
Hlth Care Rev St. Francis Hosp Inc................... 6.900 12-15-05 AA 1,500 1,701,135 6.08
-----------
PENNSYLVANIA (6.65%)
Northumberland County Auth,
Commonwealth Lease Rev Ser 1991...................... 6.250 10-15-09 AAA 1,000 1,060,500 5.89
Pennsylvania Economic Development Financing Auth,
Colver Proj. Ser D................................... 7.150 12-01-18 BBB- 5,000* 5,217,400 6.85
Pennsylvania Turnpike Commission,
Turnpike Rev Ser K................................. 7.625 12-01-09 AAA 500 571,250 6.67
Philadelphia Hospital & Higher Education Facilities
Auth, Hosp Rev Children's Hosp Philadelphia Proj
Ser A.............................................. 7.875 07-01-08 AA 500 538,005 7.32
Hosp Rev Temple Univ Hosp Ser A.................... 6.625 11-15-23 A- 3,375 3,409,324 6.56
Philadelphia School District,
GO UnLtd. Ser. B................................... 5.500 09-01-25 AAA 4,000* 3,863,320 5.69
-----------
14,659,799
-----------
SOUTH CAROLINA (2.86%)
James Island Public Service District,
Charleston County Swr Sys Ref...................... 7.500 06-01-18 AAA 1,250 1,405,600 6.67
Lexington County School District No. 1,
Cert of Part 1989 Ser B Pelion High School Proj.... 7.650 09-01-09 AAA 1,145 1,284,999 6.82
Richland, County of,
Poll Control Rev Union Camp Corp Proj Ser 1992 B... 6.625 05-01-22 A 2,460 2,572,865 6.33
Poll Control Rev Union Camp Corp Proj Ser C........ 6.550 11-01-20 A 1,000 1,042,760 6.28
-----------
6,306,224
-----------
</TABLE>
See notes to financial statements.
16
<PAGE> 209
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
SOUTH DAKOTA (0.50%)
South Dakota Health & Educational Facilities Auth,
Rev Ser 1989 Sioux Valley Hosp Iss................... 7.625% 11-01-13 AA- $ 925 $ 1,030,321 6.85%
Rev Ser 1989 Sioux Valley Hosp Iss................... 7.625 11-01-13 AA- 75 78,809 7.26
-----------
1,109,130
-----------
TENNESSEE (4.92%)
Eastside Utility District of Hamilton,
Waterworks Rev Iss................................... 6.750 11-01-11 BBB+ 1,000 1,051,640 6.42
Humphreys, County of,
Indl Devel Board Solid Waste Disp Rev (E.I.
DuPont DeNemours & Co.).............................. 6.700 05-01-24 AA 6,500 6,788,925 6.41
Metropolitan Nashville & Davidson County Health &
Education Facility Board, Rev Ref Vanderbilt
Univ Ser A........................................... 7.625 05-01-16 AA 1,750 1,939,175 6.88
Tennessee Housing Development Agency,
Homeownership Prog Proj J............................ 7.750 07-01-17 A+ 1,000 1,068,040 7.26
-----------
10,847,780
-----------
TEXAS (4.93%)
Austin, City of,
Utility Sys Rev Ref Ser B............................ 7.800 11-15-12 A 1,000 1,109,900 7.03
Corpus Christi Housing Finance Corp,
Single Family Mtg Sr Rev Ref Ser 1991 A.............. 7.700 07-01-11 AAA 730 793,495 7.08
El Paso Housing Finance Corp,
Single Family Mtg Rev Ref Bonds 1991 Ser A........... 8.750 10-01-11 A** 665 739,300 7.87
Harris County Health Facilities Development Corp,
Hospital Rev Saint Luke's Episcopal.................. 8.250 02-15-08 AAA 1,475 1,695,041 7.18
Harris, County of,
Toll Road Unltd Tax & Sub Lien Rev Ref............... 8.100 08-01-08 AA+ 250 279,890 7.23
Toll Road Unltd Tax & Sub Lien Rev Ref............... 8.125 08-01-15 AA+ 250 280,045 7.25
Houston Water & Sewer System,
Rev Ref Prior Lien Ser B............................. 6.750 12-01-08 A 1,500 1,652,535 6.13
North Central Texas Health Facility Development Corp,
Hospital Rev Baylor Univ Medical Center Ser 1991 A... 9.614# 05-15-16 AA 1,000 1,114,560 8.63
Texas Housing Agency,
Mtg Rev Single Family Ser A.......................... 8.250 03-01-17 A+ 990 1,025,145 7.97
Texas, State of,
Veterans' Land Board GO.............................. 7.125 12-01-09 AA 1,000 1,078,490 6.61
Veterans' Land Board GO.............................. 8.250 12-01-10 AA 390 399,894 8.05
Veterans' Land Board GO Prerefunded.................. 8.250 12-01-10 AAA 610 700,506 7.18
-----------
10,868,801
-----------
UTAH (3.48%)
Intermountain Power Agency,
Pwr Supply Rev Ref Ser A............................. 5.000 07-01-21 AA- 2,000 1,756,180 5.69
Pwr Supply Spec Oblig-Registered-1st Crossover Ser... 5.000 07-01-16 AA- 1,935 1,732,676 5.58
</TABLE>
See notes to financial statements.
17
<PAGE> 210
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING*** OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
UTAH (CONTINUED)
Salt Lake City Hospital,
Rev Ref IHC Hosp Inc Ser B........................... 8.000% 05-15-07 AA $ 350 $ 386,215 7.25%
Rev Ref IHC Hosp Inc VRDN/RIBS....................... 9.287# 05-15-20 AAA 1,500 1,708,125 8.16
Rev Ref Ser A........................................ 8.125 05-15-15 AAA 1,000 1,212,390 6.70
Utah Housing Finance Agency,
Single Family Mtg Sr Bonds 1990 Iss B-2.............. 7.700 07-01-15 AA 425 444,941 7.35
Single Family Mtg Sr Bonds 1991 Iss B-1.............. 7.500 07-01-16 AA 405 434,205 7.00
------------
7,674,732
------------
VIRGINIA (1.59%)
Arlington County Industrial Development Auth,
Hosp Facil Rev Arlington Hosp Ser 1991 A............. 7.125 09-01-21 AAA** 500 575,750 6.19
Fairfax County Industrial Development Auth,
Rev RITES............................................ 9.528# 08-29-23 AA- 1,000 1,266,250 7.52
Fredericksburg Industrial Auth,
Hosp Facil Rev....................................... 9.144# 08-15-23 AAA 1,500 1,659,375 8.27
------------
3,501,375
------------
WASHINGTON (1.89%)
Tacoma Electric System,
Rev Iss of 1989...................................... 7.375 01-01-08 AAA 1,000 1,118,510 6.59
Rev VRDN/RIBS Iss of 1991............................ 8.790# 01-02-15 AAA 1,000 1,095,000 8.03
University of Washington,
Housing & Dining Sys Rev Ser 1991.................... 7.000 12-01-21 AAA 750 832,230 6.31
Washington, State of,
GO Ser A of 1990..................................... 6.750 02-01-15 AA 1,000 1,125,430 6.00
------------
4,171,170
------------
WISCONSIN (0.52%)
Sturgeon Bay, City of,
Door County Combined Util Mtg Rev Ser 1990........... 7.500 01-01-10 AAA 770 884,283 6.53
Door County Combined Util Mtg Rev Ser 1990........... 7.500 01-01-10 AAA 230 258,653 6.67
------------
1,142,936
------------
WYOMING (1.20%)
Sweetwater County Pollution Control,
Rev Idaho Pwr Co. Ser A.............................. 7.625 12-01-14 A- 500 525,165 7.26
Rev Idaho Pwr Co. Ser B.............................. 7.625 12-01-13 A- 1,000 1,050,330 7.26
Rev Idaho Pwr Co. Ser B MBIA......................... 7.625 12-01-13 AAA 1,000 1,063,490 7.17
------------
2,638,985
------------
OTHER - PUERTO RICO (1.30%)
University of Puerto Rico,
Univ Rev Ser M....................................... 5.250 06-01-25 AAA 3,000* 2,865,600 5.50
------------
TOTAL TAX-EXEMPT LONG-TERM BONDS
(Cost $205,317,165) (98.93%) 218,037,090
------ ------------
</TABLE>
See notes to financial statements.
18
<PAGE> 211
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000'S MARKET
STATE, ISSUER, DESCRIPTION RATE OMITTED) VALUE
- -------------------------- ---- -------- -----
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.83%)
Investment in a joint repurchase
agreement with SBC Capital
Markets Dated 10-31-95,
Due 11-01-95 (secured by
U.S. Treasury Bonds 8.75%
Due 05-15-17 and U.S. Treasury
Note 5.75% Due 09-30-97).................................... 5.890% $1,831 $ 1,831,000
CORPORATE SAVINGS ACCOUNT (0.0%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.0%........................................... 6,384
------------
TOTAL SHORT-TERM INVESTMENTS ( 0.83%) 1,837,384
------ ------------
TOTAL INVESTMENTS (99.76%) $219,874,474
====== ============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
* Securities, other than short-term investments, newly added to the portfolio
during the period ended October 31, 1995.
** Rated by Moody's Investors Services or John Hancock Advisers, Inc. where
Standard & Poor's ratings are not available. NR Security is not rated.
*** Credit ratings are unaudited.
+ The yield is unaudited and not calculated in accordance with guidelines
established by the U.S. Securities and Exchange Commission.
# Represents rate in effect on October 31, 1995.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 212
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
PORTFOLIO CONCENTRATION (UNAUDITED)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE JOHN HANCOCK MANAGED TAX-EXEMPT FUND INVESTS PRIMARILY IN SECURITIES ISSUED
BY VARIOUS STATES AND THEIR VARIOUS POLITICAL SUBDIVISIONS. THE PERFORMANCE OF
THE FUND IS CLOSELY TIED TO THE ECONOMIC CONDITIONS WITHIN THE APPLICABLE STATES
AND THE FINANCIAL CONDITION OF THE STATES AND THEIR AGENCIES AND MUNICIPALITIES.
THE CONCENTRATION OF INVESTMENTS BY STATES AND CREDIT RATINGS FOR INDIVIDUAL
SECURITIES HELD BY THE FUND IS SHOWN IN THE SCHEDULE OF INVESTMENTS. IN
ADDITION, THE CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS SECTOR
CATEGORIES.
<TABLE>
THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS AT OCTOBER 31,
1995 ASSIGNED TO THE VARIOUS SECTOR CATEGORIES.
<CAPTION>
MARKET VALUE AS A PERCENTAGE OF
SECTOR DISTRIBUTION THE FUND'S NET ASSETS:
------------------- -------------------------------
<S> <C>
General Obligation .......................................... 4.42%
Revenue Bonds - Electric .................................... 8.90
Revenue Bonds - Health/Education ............................ 25.00
Revenue Bonds - Housing ..................................... 11.23
Revenue Bonds - Industrial .................................. 5.32
Revenue Bonds - Pollution Control ........................... 14.45
Revenue Bonds - Transportation .............................. 10.65
Revenue Bonds - Water & Sewer ............................... 4.69
Revenue Bonds - Other ....................................... 14.27
-----
TOTAL TAX-EXEMPT LONG-TERM BONDS 98.93%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 213
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is a an open-end investment management
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Managed Tax-Exempt Fund (the "Fund"),
John Hancock Gold & Government Fund, John Hancock Regional Bank Fund, John
Hancock Sovereign U.S. Government Income Fund and John Hancock Sovereign
Achievers Fund. Prior to January 1, 1995, John Hancock Gold & Government Fund
was known as John Hancock Freedom Gold & Government Fund and John Hancock
Regional Bank Fund was known as John Hancock Freedom Regional Bank Fund.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B.The shares of each class represent an interest
in the same portfolio of investments of the Fund and have equal rights to
voting, redemption, dividends, and liquidation, except that certain expenses,
subject to the approval of the Trustees, may be applied differently to each
class of shares in accordance with current regulations of the Securities and
Exchange Commission. Shareholders of a class which bears distribution/service
expenses under the terms of a distribution plan, have exclusive voting rights
regarding such distribution plan. Significant accounting policies of the Fund
are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
is recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes. Transfer
agent expenses and distribution/service fees if any, are calculated daily at the
class level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.
21
<PAGE> 214
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
PREMIUM AND DISCOUNT For tax-exempt issues, the Fund amortizes the amount paid
in excess of par value on securities purchased from either the date of purchase
or date of issue to date of sale, maturity or to next call date, if applicable.
The premium amortization reduces interest income. The Fund accretes original
issue discount from par value on securities purchased from either the date of
issue or the date of purchase over the life of the security, as required by the
Internal Revenue Code. The Fund records market discount on bonds purchased after
April 30, 1993 at time of disposition.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates and
other market conditions. At the time the Fund enters into a financial futures
contract, it is required to deposit with its custodian a specified amount of
cash or U.S. government securities, known as "initial margin," equal to a
certain percentage of the value of the financial futures contract being traded.
Each day, the futures contract is valued at the official settlement price of the
board of trade or U.S. commodities exchange. Subsequent payments, known as
"variation margin," to and from the broker are made on a daily basis as the
market price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market," are recorded by the Fund
as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1995 there were no open positions in financial futures
contracts.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned
subsidiary of The Berkeley Financial Group, for a continuous investment program
equivalent, on an annual basis, to the sum of (a) 0.60% of the first
$250,000,000 of the Fund's average daily net asset value, (b) 0.50% of the next
$500,000,000, and (c) 0.45% of the Fund's average daily net asset value in
excess of $750,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value. Additionally, the Adviser may
reduce part or all of its management fee for a period under the terms of the
Advisory Agreement. For the period ended October 31, 1995 the Adviser reduced
the Fund's management fee by $113,411. This reduction may be discontinued at any
time. Furthermore, $47,982 of custodian fees have been reduced by balance
credits applied during the period ended October 31, 1995.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended October 31, 1995, net
sales charges received on sales of Class A shares of the Fund amounted to
$96,495. Out of this amount, $11,759 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $22,654 was paid
as sales commissions to unrelated broker-dealers and
22
<PAGE> 215
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
$62,082 was paid as sales commissions to sales personnel of John Hancock
Distributors, Inc. ("Distributors"), Tucker Anthony, Incorporated ("Tucker
Anthony") and Sutro & Co., Inc. ("Sutro"), all of which are broker-dealers. The
Adviser's indirect parent, John Hancock Mutual Life Insurance Company, is the
indirect sole shareholder of Distributors and John Hancock Freedom Securities
Corporation and its subsidiaries, which include FDC, Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase are subject
to a contingent deferred sales charge ("CDSC") at declining rates beginning at
5.0% of the lesser of the current market value at the time of redemption or the
original purchase cost of the shares being redeemed. Proceeds from the CDSC are
paid to JH Funds and are used in whole or in part to defray its expenses related
to providing distribution related services to the Fund in connection with the
sales of Class B shares. For the period ended October 31, 1995 the contingent
deferred sales charges received by JH Funds amounted to $308,083.
In addition, to reimburse the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted Distribution Plans
with respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors for distribution and service expenses, at an annual rate not to
exceed 0.30% of Class A average daily net assets and 1.00% of Class B average
daily net assets to reimburse the Co-Distributors for their distribution/
service costs. Up to a maximum of 0.25% of such payments may be service fees as
defined by the amended Rules of Fair Practice of the National Association of
Securities Dealers. Under the amended Rules of Fair Practice, curtailment of a
portion of the Fund's 12b-1 payments could occur under certain circumstances. In
order to comply with this rule, the 12b-1 fee on Class B shares was decreased to
0.90% effective August 1, 1995, increased to 1.00% effective September 1, 1995
and decreased to 0.95% effective October 1, 1995.
The Fund has a transfer agent agreement with John Hancock Investor
Services, Corp. ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Prior to January 1, 1995, the Fund paid Investor
Services a monthly transfer agent fee equivalent, on an annual basis, to 0.03%
and 0.06% of the average daily net asset value of Class A and Class B shares of
the Fund, respectively, plus out of pocket expenses incurred by Investor
Services on behalf of the Fund. For the period January 1, 1995 and through
September 30, 1995 Class A and Class B shares paid transfer agent fees based on
the number of shareholder accounts and certain out-of-pocket expenses. For the
eleven months ended September 30, 1995 the transfer agent expense, calculated as
a class specific expense was $20,596 for Class A and $140,680 for Class B,
respectively. Effective October 1, 1995 transfer agent expense is being treated
as a fund expense based on the number of shareholder accounts in the Fund and
certain out-of-pocket expenses.
Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates, as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund.
Effective with the fees paid for 1995, the unaffiliated Trustees may elect
to defer for tax purposes their receipt of this compensation under the John
Hancock Group of Funds Deferred Compensation Plan. The Fund will make
investments into other John Hancock funds, as applicable, to cover its liability
with regard to the deferred compensation. Investments to cover the Fund's
deferred compensation liability will be recorded on the Fund's books as an other
asset. The deferred compensation liability will be marked to market on a
periodic basis and income earned by the investment will be recorded on the
Fund's books.
23
<PAGE> 216
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other then obligations of the
U.S. government and its agencies and short-term securities, during the period
ended October 31, 1995, aggregated $231,092,265 and $262,789,315, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended October 31, 1995.
The cost of investments owned at October 31, 1995 (including the joint
repurchase agreement) for Federal income tax purposes was $207,148,165. Gross
unrealized appreciation and depreciation of investments aggregated $13,077,991
and $358,066, respectively, resulting in net unrealized appreciation of
$12,719,925.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1995, the Fund has reclassified amounts to
reflect an increase in undistributed net investment income of $70,529, a
decrease in accumulated net realized gain on investments and financial futures
contracts of $67,819 and a decrease to capital paid-in of $2,710. This
represents the cumulative amount necessary to report these balances on a tax
basis, excluding certain temporary differences, as of October 31, 1995.
Additional adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the Fund, are
primarily attributable to certain differences in the computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles.
24
<PAGE> 217
John Hancock Funds - Managed Tax-Exempt Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Managed Tax-Exempt Fund and the Trustees of
Freedom Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Managed Tax-Exempt
Fund (the "Fund") (a portfolio of Freedom Investment Trust) at October 31, 1995,
and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 18, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the taxable distributions of the Fund during its fiscal year ended
October 31, 1995.
It is anticipated that there will be a distribution from net realized gains
from sales of securities and financial futures contracts to shareholders of
record on December 22, 1995 and payable on December 28, 1995. Shareholders will
receive a 1995 U.S. Treasury Department Form 1099-DIV in January 1996
representing their proportionate share.
Income dividends for the Fund are 100% tax-exempt.
25
<PAGE> 218
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $100,826,204) ....................... $111,913,000
Joint repurchase agreement (cost - $3,126,000) ............ 3,126,000
Corporate savings account ................................. 11,466
------------
115,050,466
Receivable for shares sold ................................. 74,422
Interest receivable ........................................ 508
Dividends receivable ....................................... 71,250
Other assets ............................................... 1,328
------------
Total Assets ............................. 115,197,974
------------------------------------------------------------
LIABILITIES:
Payable for shares repurchased ............................. 91,346
Payable for investments purchased .......................... 1,077,100
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ....................................... 113,854
Accounts payable and accrued expenses ...................... 46,009
------------
Total Liabilities ........................ 1,328,309
------------------------------------------------------------
NET ASSETS:
Capital paid-in ............................................ 101,872,756
Accumulated net realized gain on investments ............... 910,113
Net unrealized appreciation of investments ................. 11,086,796
------------
Net Assets ............................... $113,869,665
============================================================
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 - $27,691,989 / 2,168,607 .......................... $ 12.77
================================================================================
Class B - $86,177,676 / 6,790,262 .......................... $ 12.69
================================================================================
MAXIMUM OFFERING PRICE *
Class - A ($12.77 x 105.26%) ............................... $ 13.44
================================================================================
<FN>
* On a single retail sale of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
</TABLE>
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS FOR THE PERIOD
STATED.
<TABLE>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $2,000) ....... $ 1,979,608
Interest ..................................................... 526,784
-----------
2,506,392
-----------
Expenses:
Distribution/service fee - Note B
Class A ................................................... 74,479
Class B ................................................... 873,032
Investment management fee - Note B .......................... 866,401
Transfer agent fee - Note B ................................. 323,804
Custodian fee ............................................... 40,301
Printing .................................................... 29,877
Trustees' fees .............................................. 22,566
Auditing fee ................................................ 22,500
Registration and filing fees ................................ 13,675
Miscellaneous ............................................... 7,889
Legal ....................................................... 1,172
-----------
Total Expenses ............................. 2,275,696
------------
Net Investment Income ...................... 230,696
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold ........................ 890,733
Change in net unrealized appreciation/depreciation
of investments .............................................. 11,617,034
-----------
Net Realized and Unrealized
Gain on Investments ........................ 12,507,767
------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations .................. $12,738,463
============================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 219
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............................................................................ $ 230,696 $ 439,388
Net realized gain on investments sold ............................................................ 890,733 5,079,274
Change in net unrealized appreciation/depreciation of investments ................................ 11,617,034 (4,547,665)
------------ ------------
Net Increase in Net Assets Resulting from Operations ........................................... 12,738,463 970,997
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.1015 and $0.0985 per share, respectively) ......................................... (213,064) (192,364)
Class B - ($0.0287 and $0.0196 per share, respectively) ......................................... (216,094) (155,215)
Distributions from net realized gain on investments sold
Class A - ($0.5222 and $0.4437 per share, respectively) ......................................... (999,954) (865,748)
Class B - ($0.5222 and $0.4437 per share, respectively) ......................................... (4,061,492) (3,478,874)
------------ ------------
Total Distributions to Shareholders .............................................................. (5,490,604) (4,692,201)
------------ ------------
FROM FUND SHARE TRANSACTIONS-- NET* ................................................................ (11,101,562) 4,219,619
------------ ------------
NET ASSETS:
Beginning of period .............................................................................. 117,723,368 117,224,953
------------ ------------
End of period (including undistributed net investment income of none and $198,462, respectively).. $113,869,665 $117,723,368
============ ============
</TABLE>
<TABLE>
<CAPTION>
* ANALYSIS OF FUND SHARE TRANSACTIONS: YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1995 1994
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold...................................................... 665,977 $ 8,286,634 2,105,977 $ 25,842,725
Shares issued to shareholders in reinvestment of distributions... 106,291 1,186,137 85,071 1,034,292
---------- ------------ ---------- ------------
772,268 9,472,771 2,191,048 26,877,017
Less shares repurchased.......................................... (542,110) (6,600,356) (2,139,424) (26,191,185)
---------- ------------ ---------- ------------
Net increase..................................................... 230,158 $ 2,872,415 51,624 $ 685,832
========== ============ ========== ============
CLASS B
Shares sold...................................................... 531,328 $ 6,390,883 1,454,076 $ 17,601,685
Shares issued to shareholders in reinvestment of distributions... 360,515 3,973,464 281,030 3,417,866
---------- ------------ ---------- ------------
891,843 10,364,347 1,735,106 21,019,551
Less shares repurchased.......................................... (2,003,631) (24,338,324) (1,456,639) (17,485,764)
---------- ------------ ---------- ------------
Net increase (decrease).......................................... (1,111,788) $(13,973,977) 278,467 $ 3,533,787
========== ============ ========== ============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS PAID TO
SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE
FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND SHARES SOLD DURING THE PERIOD,
ALONG WITH THE CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 220
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
CLASS A**
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............................. $ 12.02 $ 12.39 $ 10.99 $ 12.81
------- ------- ------- -------
Net Investment Income ............................................ 0.08(a) 0.10 0.08(a) 0.06(a)
Net Realized and Unrealized Gain (Loss) on Investments............ 1.29 0.07 1.34 (0.06)
------- ------- ------- -------
Total from Investment Operations.................................. 1.37 0.17 1.42 0.00
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income.............................. (0.10) (0.10) (0.02) (0.07)
Distributions from Net Realized Gain on Investments Sold.......... (0.52) (0.44) -- (1.74)
Distributions from Capital Paid-In................................ -- -- -- (0.01)
------- ------- ------- -------
Total Distributions............................................... (0.62) (0.54) (0.02) (1.82)
------- ------- ------- -------
Net Asset Value, End of Period.................................... $ 12.77 $ 12.02 $ 12.39 $ 10.99
======= ======= ======= =======
Total Investment Return at Net Asset Value (c).................... 12.21% 1.35% 12.97% 0.19%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......................... $27,692 $23,292 $23,372 $ 1,771
Ratio of Expenses to Average Net Assets........................... 1.46% 1.53% 1.60% 1.73%*
Ratio of Net Investment Income to Average Net Assets.............. 0.69% 0.83% 0.64% 0.62%*
Portfolio Turnover Rate........................................... 65% 60% 71% 246%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............................. $ 11.95 $ 12.31 $ 10.97 $ 11.71 $ 9.22
------- ------- ------- ------- -------
Net Investment Income ............................................ 0.01(a) 0.03 0.02(a) 0.01(a) 0.07
Net Realized and Unrealized Gain on Investments................... 1.28 0.07 1.33 1.05 2.67
------- ------- ------- ------- -------
Total from Investment Operations.................................. 1.29 0.10 1.35 1.06 2.74
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income.............................. (0.03) (0.02) (0.01) (0.03) (0.20)
Distributions from Net Realized Gain on Investments Sold.......... (0.52) (0.44) -- (1.76) (0.05)
Distributions from Capital Paid-In................................ -- -- -- (0.01) --
------- ------- ------- ------- -------
Total Distributions............................................... (0.55) (0.46) (0.01) (1.80) (0.25)
------- ------- ------- ------- -------
Net Asset Value, End of Period.................................... $ 12.69 $ 11.95 $ 12.31 $ 10.97 $ 11.71
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (c).................... 11.51% 0.78% 12.34% 7.22% 30.21%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......................... $86,178 $94,431 $93,853 $23,525 $21,826
Ratio of Expenses to Average Net Assets........................... 2.11% 2.10% 2.09% 2.27% 2.24%
Ratio of Net Investment Income to Average Net Assets.............. 0.06% 0.25% 0.17% 0.10% 0.66%
Portfolio Turnover Rate........................................... 65% 60% 71% 246% 217%
<FN>
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
(a) On average month end shares outstanding.
(b) Not annualized.
(c) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 221
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
SOVEREIGN ACHIEVERS FUND ON OCTOBER 31, 1995. IT'S DIVIDED INTO TWO MAIN
CATEGORIES: COMMON STOCKS AND SHORT-TERM INVESTMENTS. THE MAIN CATEGORY OF
COMMON STOCKS IS FURTHER BROKEN DOWN BY INDUSTRY GROUPS. SHORT-TERM INVESTMENTS,
WHICH REPRESENT THE FUND'S "CASH" POSITION, ARE LISTED LAST.
SCHEDULE OF INVESTMENTS
October 31, 1995
Per share earnings and dividends and their compound growth rates as well as
price/earnings ratios are shown for the most recently reported five year periods
on common stocks, but are not audited.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS (98.28%) RATE VALUE
<S> <C> <C>
ADVERTISING (3.40%)
100,000 Interpublic Group of Cos., Inc. (The) ............................... $3,875,000
----------
One of the largest advertising agencies in the world.
Earnings P/S ......................... $1.23, 1.43, 1.49, 1.79, 2.04 13.5%
Dividends P/S ........................ $.41, .45, .49, .55, .61 10.4%
Price/Earnings Ratio.................. 18.6
Banks (5.76%)
50,000* BankAmerica Corp..................................................... 2,875,000
Provides retail and wholesale banking services in the Western United
States and other select markets.
Earnings P/S ......................... $4.55, 4.27, 4.77, 5.17, 6.15 7.8%
Dividends P/S ........................ $1.20, 1.30, 1.40, 1.60, 1.84 11.3%
Price/Earnings Ratio.................. 9.6
125,000 Norwest Corp. ....................................................... 3,687,500
Minneapolis-based superregional bank.
Earnings P/S ......................... $.94, 1.58, 1.75, 2.16, 2.67 29.8%
Dividends P/S ........................ $.47, .54, .64, .77, .90 17.6%
Price/Earnings Ratio.................. 11.9
----------
6,562,500
----------
CAPITAL GOODS (7.82%)
35,000* Emerson Electric Co.................................................. 2,493,750
Long-established manufacturer of electrical and electronic products.
Earnings P/S ......................... $2.83, 2.96, 3.15, 4.04, 4.16 10.1%
Dividends P/S ........................ $1.34, 1.40, 1.47, 1.60, 1.84 8.3%
Price/Earnings Ratio.................. 17.7
40,000* Illinois Tool Works, Inc............................................. 2,325,000
Manufacturer of industrial components and other specialty products
and equipment for high-volume manufacturing.
Earnings P/S ......................... $1.63, 1.68, 1.78, 2.22, 3.17 18.1%
Dividends P/S ........................ $.40, .45, .49, .54, .62 11.6%
Price/Earnings Ratio.................. 18.7
150,000 Myers Industries, Inc. .............................................. 2,156,250
Manufacturer of polymer and metal products for the transportation
industries.
Earnings P/S ......................... $.65, .80, .84, 1.02, 1.00 11.4%
Dividends P/S ........................ $.09, .10, .11, .13, .14 11.7%
Price/Earnings Ratio.................. 13.9
85,000 Stewart & Stevenson Services, Inc. .................................. 1,933,750
Leading manufacturer of custom diesel and gas turbine power systems.
Earnings P/S ......................... $1.03, 1.23, 1.54, 1.90, 2.09 19.4%
Dividends P/S ........................ $.14, .18, .22, .26, .30 21.0%
Price/Earnings Ratio.................. 10.8
----------
8,908,750
----------
CHEMICALS - DIVERSIFIED (7.32%)
50,000* Air Products & Chemicals, Inc. ...................................... 2,581,250
Produces and distributes industrial gases.
Earnings P/S ......................... $2.23, 2.45, 1.76, 2.05, 3.29 10.2%
Dividends P/S ........................ $.75, .83, .89, .95, 1.01 7.7%
Price/Earnings Ratio.................. 16.7
100,000 Ecolab Inc. ......................................................... 2,900,000
Leading developer/marketer of cleaning products.
Earnings P/S ......................... $.93, .95, 1.17, 1.35, 1.34 9.6%
Dividends P/S ........................ $ .35, .36, .38, .44, .50 9.3%
Price/Earnings Ratio.................. 21.7
60,000* Sigma-Aldrich Corporation............................................ 2,850,000
Manufactures and distributes biochemical and organic products for
research and diagnostic purposes.
Earnings P/S ......................... $1.25, 1.85, 2.08, 2.21, 2.52 19.2%
Dividends P/S ........................ $.20, .23, .26, .30, .34 14.2%
Price/Earnings Ratio.................. 18.1
----------
8,331,250
----------
COMMERCIAL SERVICES (8.33%)
50,000* Alco Standard Corporation ........................................... 4,425,000
Distributes office products and paper products.
Earnings P/S ........................ $1.95, 2.22, (.05), 1.12, 3.63 16.8%
Dividends P/S ....................... $.85, .89, .93, .97, 1.01 4.4%
Price/Earnings Ratio................. 24.8
30,000* Cintas Corporation................................................... 1,260,000
Designs, plans and implements corporate-identity uniform rentals and
sales throughout the U.S.
Earnings P/S ........................ $.69, .85, .99, 1.18, 1.40 19.4%
Dividends P/S ....................... $.095, .11, .14, .17, .20 20.5%
Price/Earnings Ratio................. 32.1
125,000 Sysco Corp. ......................................................... 3,796,875
Largest distributor of foodservice products.
Earnings P/S ........................ $.86, .95, 1.10, 1.24, 1.42 13.4%
Dividends P/S ....................... $.14, .22, .28, .36, .44 33.2%
Price/Earnings Ratio................. 21.2
----------
9,481,875
----------
CONSUMER DURABLES (1.27%)
100,000 Juno Lighting, Inc. ................................................. 1,450,000
----------
Manufactures/markets full line of recessed and track lighting
fixtures.
Earnings P/S ........................ $.70, .80, .95, 1.18, 1.13 12.7%
Dividends P/S ....................... $.14, .19, .23, .26, .30 21.0%
Price/Earnings Ratio................. 13.1
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 222
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS RATE VALUE
<S> <C> <C>
CONSUMER NON-DURABLES (14.66%)
35,000* Kimberly-Clark Corporation........................................... $ 2,541,875
Leading producer of consumer and personal care products.
Earnings P/S ........................ $3.01, 3.37, 1.95, 3.55, 3.66 5.0%
Dividends P/S ....................... $1.45, 1.64, 1.70, 1.75, 1.79 5.4%
Price/Earnings Ratio................. 20.3
100,000 McCormick & Co., Inc. ............................................... 2,475,000
Manufacturer of spices, mixes, teas, and other food related products.
Earnings P/S ........................ $.92, 1.09, 1.15, 1.30, 1.23 7.5%
Dividends P/S ....................... $.28, .38, .44, .48, .52 16.7%
Price/Earnings Ratio................. 20.9
75,000 PepsiCo Inc. ........................................................ 3,956,250
Second largest soft drink company.
Earnings P/S ........................ $1.35, 1.63, 1.73, 2.13, 2.42 15.7%
Dividends P/S ....................... $.46, .51, .61, .68, .76 13.4%
Price/Earnings Ratio................. 21.6
50,000 Procter & Gamble Co. (The)........................................... 4,050,000
Produces laundry and cleaning products, personal care items, food,
beverages, etc.
Earnings P/S ........................ $2.43, 2.43, .63, 2.07, 3.93 12.8%
Dividends P/S ....................... $1.00, 1.08, 1.17, 1.32, 1.50 10.7%
Price/Earnings Ratio................. 20.8
125,000 Sara Lee Corp. ...................................................... 3,671,875
Manufactures brand name packaged foods and consumer products.
Earnings P/S ........................ $1.41, 1.28, 1.43, .46, 1.66 4.2%
Dividends P/S ....................... $.47, .50, .58, .64, .68 9.7%
Price/Earnings Ratio................. 17.9
-----------
16,695,000
-----------
DIVERSIFIED OPERATIONS (7.04%)
100,000* Corning Inc. ........................................................ 2,612,500
Worldwide technology and healthcare services company.
Earnings P/S ........................ $1.60, 1.69, .72, .54, (.46) NMF
Dividends P/S ....................... $.45, .53, .62, .68, .69 11.3%
Price/Earnings Ratio................. 15.2
100,000* Federal Signal Corporation........................................... 2,237,500
Manufactures fire trucks and street sweepers, as well as public
safety equipment.
Earnings P/S ........................ $.65, .73, .74, .97, 1.18 16.1%
Dividends P/S ....................... $.27, .32, .36,.42, .50 16.7%
Price/Earnings Ratio................. 19.5
50,000 General Electric Co. ................................................ 3,162,500
Dominant force in home appliances, electrical power, and financial
services.
Earnings P/S ........................ $2.54, 2.54, 2.33, 3.31, 3.78 10.5%
Dividends P/S ....................... $1.02, 1.12, 1.26, 1.44, 1.64 12.6%
Price/Earnings Ratio................. 16.7
-----------
8,012,500
-----------
ELECTRONICS (2.60%)
75,000* AMP Incorporated .................................................... $ 2,943,750
-----------
World's largest producer of electronic and electrical connection
devices.
Earnings P/S ........................ $1.24, 1.34, 1.41, 1.62, 1.94 11.8%
Dividends P/S ....................... $.72, .76, .80, .84, .92 6.3%
Price/Earnings Ratio................. 20.2
HEALTHCARE (9.40%)
80,000 Abbott Laboratories ................................................. 3,180,000
Major pharmaceutical and healthcare firm.
Earnings P/S ........................ $1.22, 1.41, 1.63, 1.82, 2.06 14.0%
Dividends P/S ....................... $.48, .58, .66, .74, .82 14.3%
Price/Earnings Ratio................. 19.1
75,000* Pfizer, Inc.......................................................... 4,303,125
Leading ethical pharmaceutical producer.
Earnings P/S ........................ $1.30, 1.21, .99, 2.01, 2.39 16.4%
Dividends P/S ....................... $.66, .74, .84, .94, 1.04 12.0%
Price/Earnings Ratio................. 24.6
60,000 Schering-Plough Corp. ............................................... 3,217,500
Major pharmaceutical corporation.
Earnings P/S ........................ $1.44, 1.74, 2.05, 2.34, 2.72 17.2%
Dividends P/S ....................... $.64, .75, .87, .99, 1.13 15.3%
Price/Earnings Ratio................. 20.0
-----------
10,700,625
-----------
INFORMATION PROCESSING (3.95%)
30,000* Automatic Data Processing, Inc. ..................................... 2,145,000
Largest independent computing services firm in the U.S.
Earnings P/S ........................ $1.67, 1.88, 2.13, 2.44, 2.85 14.3%
Dividends P/S ....................... $.375, .43, .49, .56, .65 14.7%
Price/Earnings Ratio................. 24.9
50,000* General Motors Class E Stock......................................... 2,356,250
Class E stock represents GM's wholly-owned subsidiary Electronic Data
Systems, a major computer services firm.
Earnings P/S ........................ $1.10, 1.29, 1.46, 1.64, 1.89 14.5%
Dividends P/S ....................... $.28, .32, .36, .40, .48 14.4%
Price/Earnings Ratio................. 25.4
-----------
4,501,250
-----------
INSURANCE (4.75%)
50,000* AFLAC Incorporated.................................................. 2,037,500
Large holding company with insurance and broadcasting interests.
Earnings P/S ........................ $1.38, 1.72, 2.16, 2.72, 3.40 25.3%
Dividends P/S ....................... $.30, .34, .39, .45, .51 14.2%
Price/Earnings Ratio...... .......... 12.4
40,000 American International Group, Inc ................................... 3,375,000
Leading global insurance company.
Earnings P/S ........................ $3.20, 3.28, 3.92, 4.43, 5.10 12.4%
Dividends P/S ....................... $.21, .24, .26, .29, .32 11.1%
Price/Earnings Ratio................. 16.9
-----------
5,412,500
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 223
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS RATE VALUE
<S> <C> <C>
PACKAGING (2.80%)
75,000* Bemis Company, Inc................................................... $ 1,950,000
Producer of a broad range of flexible packaging and equipment and
pressure sensitive materials.
Earnings P/S ........................ $.98, 1.14, .84, 1.33, 1.55 12.1%
Dividends P/S ....................... $.42, .46, .50, .54, .64 11.1%
Price/Earnings Ratio................. 16.7
50,000* Sonoco Products, Co.................................................. 1,237,500
Manufactures packaging products for consumer and industrial markets
worldwide.
Earnings P/S ........................ $1.07, 1.13, .99, 1.26, 1.65 11.4%
Dividends P/S ....................... $.43, .44, .48, .50, .53 5.4%
Price/Earnings Ratio................. 14.9
------------
3,187,500
------------
PUBLISHING (5.23%)
92,000 A.H. Belo Corp. ..................................................... 3,185,500
Publishes 8 newspapers and operates 6 TV stations.
Earnings P/S ........................ $.51, .82, 1.06, 1.44, 1.74 35.9%
Dividends P/S ....................... $.26, .27, .28, .30, .32 5.3%
Price/Earnings Ratio................. 20.4
50,000* Reuters Holdings PLC, American
Depository Receipts (ADR)............................................ 2,775,000
International news and information organization.
Earnings P/S ........................ $1.18, 1.47, 1.60, 2.04, 2.41 19.6%
Dividends P/S ....................... $.53, .64, .66, .78, 1.00 17.2%
Price/Earnings Ratio................. 23.0
------------
5,960,500
------------
RECREATION (2.02%)
40,000* Walt Disney Co. (The)................................................ 2,305,000
------------
Diversified international, family entertainment company.
Earnings P/S ........................ $1.30, 1.44, 1.79, 1.47, 2.53 18.1%
Dividends P/S ....................... $.17, .20, .24, .29, .35 19.8%
Price/Earnings Ratio................. 22.8
RETAIL (6.41%)
50,000* Home Depot, Inc. (The)............................................... 1,862,500
Operates retail warehouse-type stores selling building and home
improvement products.
Earnings P/S ........................ $.52, .71, .95, 1.18, 1.42 28.5%
Dividends P/S ....................... $.04, .06, .08, .11, .15 39.2%
Price/Earnings Ratio................. 28.4
125,000* Pep Boys-Manny, Moe & Jack .......................................... 2,734,375
Retailer of automotive parts and accessories, automotive maintenance,
and service and installation of parts.
Earnings P/S ........................ $.60, .82, .97, 1.21, 1.32 21.8%
Dividends P/S ....................... $.13, .14, .15, .17, .19 10.0%
Price/Earnings Ratio................. 18.1
125,000 Wal-Mart Stores, Inc. ............................................... 2,703,125
Operates a chain of discount department stores.
Earnings P/S ........................ $.62, .77, .93, 1.08, 1.23 18.7%
Dividends P/S ....................... $.09, .11, .13, .16, .19 20.5%
Price/Earnings Ratio................. 19.3
------------
7,300,000
------------
TELECOMMUNICATIONS (5.52%)
100,000* Century Telephone Enterprises, Inc. ................................. $ 2,900,000
Holding company provides local telephone services in designated areas
in 15 states.
Earnings P/S ........................ $.72, 1.09, 1.39, 1.59, 2.12 31.0%
Dividends P/S ....................... $.28, .2868, .2932,.31, .32 3.4%
Price/Earnings Ratio................. 13.9
80,000* Frontier Corporation................................................. 2,160,000
Holding company providing long distance telecommunication services
nationally.
Earnings P/S ........................ $1.14, 1.01, 1.15, 1.50, 1.02 NMF
Dividends P/S ....................... $.75, .77, .79, .81, .83 2.6%
Price/Earnings Ratio................. 26.2
35,000* Royal PTT Nederland NV (ADR).. ...................................... 1,225,000
Provides postal and telecommunications throughout the Netherlands.
Earnings P/S ........................ $3.42, 3.49, 3.59, 3.86, 4.42 6.6%
Dividends P/S ....................... $1.36, 1.40, 1.45, 1.95, 2.30 14.0%
Price/Earnings Ratio................. 8.0
------------
6,285,000
------------
TOTAL COMMON STOCKS
(Cost $100,826,204) 111,913,000
------------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
(000's SHORT-TERM INTEREST
OMITTED) INVESTMENTS (2.76%) RATE
-------- --------
<S> <C> <C> <C>
$3,126 JOINT REPURCHASE AGREEMENT (2.75%)
Investment in a joint repurchase agreement transaction with SBC
Capital Markets - Dated 10-31-95, Due 11-01-95 (secured by U.S.
Treasury Bond, 8.750% Due 05-15-17, and by U.S. Treasury Note, 5.75%
Due 09-30-97) Note A ................................................ 5.89% 3,126,000
------------
CORPORATE SAVINGS ACCOUNT (0.01%)
Investors Bank & Trust Company Daily Interest Savings Account Current
Rate 3.00%........................................................... 11,466
------------
TOTAL SHORT-TERM INVESTMENTS 3,137,466
------------
TOTAL INVESTMENTS (101.04%) $115,050,466
======= ============
<FN>
* Securities, other than short-term investments, newly added to the portfolio
during the year ended October 31, 1995.
NMF No Meaningful Figure
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 224
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Sovereign Achievers Fund (the "Fund"),
John Hancock Gold & Government Fund, John Hancock Regional Bank Fund, John
Hancock Sovereign U.S. Government Income Fund and John Hancock Managed
Tax-Exempt Fund. Prior to January 1, 1995, John Hancock Gold & Government Fund
was known as John Hancock Freedom Gold & Government Fund and John Hancock
Regional Bank Fund was known as John Hancock Freedom Regional Bank Fund.
The Trustees have authorized the issuance of two classes of 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. Shareholders of a class which bears
distribution/service expenses under terms of a distribution plan, have exclusive
voting rights to such distribution plan. Significant accounting policies of the
Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more 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's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are 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, if any, are calculated daily at the
15
<PAGE> 225
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
class level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of (a) 0.75% of the first $500,000,000 of the Fund's
average daily net asset value and (b) 0.65% of the Fund's average daily net
asset value in excess of $500,000,000. The Adviser has entered into a service
agreement with Sovereign Asset Management Corporation ("SAMCORP") an affiliate
of the Adviser, to provide certain investment research and portfolio management
services to the Fund, for which the Adviser pays SAMCORP 40% of its management
fee.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995 JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended October 31, 1995, net
sales charges received with regard to sales of Class A shares amounted to
$62,799. Out of this amount, $9,734 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $24,390 was paid
as sales commissions to unrelated brokers-dealers, and $28,675 was paid as sales
commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., ("Sutro"), all of which are broker dealers. The Adviser's indirect parent,
John Hancock Mutual Life Insurance Company, is the indirect sole shareholder of
Distributors and John Hancock Freedom Securities Corporation and its
subsidiaries which include FDC, Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from CDSC are paid to JH Funds and are used in whole or in part to defray its
expenses related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the period ended October 31,
1995, contingent deferred sales charges paid to JH Funds amounted to $251,285.
In addition, to reimburse the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted Distribution Plans
with respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors for their distribution and service expenses, at an annual rate
not to exceed 0.30% of Class A average daily net assets and 1.00% of Class B
average daily net assets to reimburse the Co-Distributors for their
distribution/service costs. Up to a maximum of 0.25% of such payments may be
service fees as defined by the amended Rules of Fair Practice of the National
Association of Securities Dealers. Under the amended Rules of Fair Practice,
curtailment of a portion of the Fund's 12b-1 payments could occur under certain
circumstances. In order to comply with this rule, the 12b-1 fee on Class B
shares was decreased to 0.85% during the period from November 1, 1994 through
January 31, 1995.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc.
Prior to January 1, 1995, the Fund paid Investor Services a monthly
transfer agent fee equivalent, on an annual basis, to 0.30% and 0.27%
16
<PAGE> 226
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
of the average daily net asset value of Class A and Class B shares of the Fund,
respectively, plus out-of-pocket expenses incurred by Fund Services on behalf of
the Fund. For the period January 1, 1995 through September 30, 1995 Class A and
Class B shares paid transfer agent fees based on the number of shareholder
accounts and certain out-of-pocket expenses. For the eleven months ended
September 30, 1995 the transfer agent expense, calculated as a class specific
expense was $70,404 for Class A and $252,765 for Class B, respectively.
Effective October 1, 1995 transfer agent expense is being treated as a fund
expense based on the number of shareholder accounts in the Fund and certain
out-of-pocket expenses.
Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates, as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock funds, as applicable, to
cover its liability for the deferred compensation. Investments to cover the
Fund's deferred compensation liability will be recorded on the Fund's books as
an other asset. The deferred compensation liability will be marked to market on
a periodic basis and income earned by the investment will be recorded on the
Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS:
Purchases and proceeds from sales of securities, other than short-term
securities, during the period ended October 31, 1995, aggregated $70,174,317 and
$80,539,940, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the period ended October 31, 1995.
The cost of investments owned at October 31, 1995 (including the joint
repurchase agreement) for Federal income tax purposes was $103,952,204. Gross
unrealized appreciation and depreciation of investments aggregated $15,561,474
and $4,474,678, respectively, resulting in net unrealized appreciation of
$11,086,796.
17
<PAGE> 227
John Hancock Funds - Sovereign Achievers Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock
Sovereign Achievers Fund and the
Board of Trustees of Freedom Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments (except for the per share earnings and dividends,
their compound growth rates and price/earnings ratios), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
John Hancock Sovereign Achievers Fund (the "Fund") (a portfolio of Freedom
Investment Trust) at October 31, 1995, the results of its operations, and the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1995 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income purposes, the following information is furnished with respect
to the distributions of the Fund during its fiscal year ended October 31, 1995.
The Fund designated distributions to shareholders of $3,279,085 as a
long-term capital gain. These amounts were reported on the 1994 U.S. Treasury
Department form 1099-DIV. It is anticipated that there will be a distribution
from net realized gains from sales of securities to shareholders of record on
December 22, 1995 and payable December 28,1995. Shareholders will receive a 1995
U.S. Treasury Department Form 1099-DIV in January 1996 representing their
proportionate share.
For the fiscal year ended October 31, 1995, 100% of the ordinary income
distributions qualify for the corporate dividends received deduction.
18
<PAGE> 228
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- -------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks, warrants and other
(cost - $1,029,904,626)................................... $1,304,825,527
Preferred stocks (cost - $21,532,181)....................... 24,301,819
Bonds (cost - $2,689,560)................................... 3,228,780
Joint repurchase agreement
(cost - $262,117,000)..................................... 262,117,000
Short-term investments (cost - $138,725,952) 138,725,952
Corporate savings account................................... 1,058,728
--------------
1,734,257,806
Receivable for investments sold.............................. 4,405,000
Receivable for shares sold................................... 16,984,325
Dividends receivable......................................... 2,178,774
Interest receivable.......................................... 288,424
Other assets................................................. 3,662
--------------
Total Assets........ ...................... 1,758,117,991
-----------------------------------------------------------
LIABILITIES:
Payable for investments purchased............................ 30,954,539
Payable for shares repurchased............................... 2,434,013
Payable to John Hancock Advisers, Inc. and
affiliates - Note B......................................... 1,424,050
Accounts payable and accrued expenses........................ 227,013
--------------
Total Liabilities.......................... 35,039,615
-----------------------------------------------------------
NET ASSETS:
Capital paid-in.............................................. 1,428,161,434
Accumulated net realized gain on investments................. 14,650,722
Net unrealized appreciation of investments................... 278,229,759
Undistributed net investment income.......................... 2,036,461
--------------
Net Assets................................. $1,723,078,376
===========================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value, respectively)
Class A - $486,630,887 / 17,931,218.......................... $ 27.14
===============================================================================
Class B - $1,236,447,489 / 45,761,124........................ $ 27.02
===============================================================================
Maximum Offering Price Per Share*
Class A - ($27.14 x 105.26%)................................. $ 28.57
===============================================================================
<FN>
* 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.
</TABLE>
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED
AND EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS FOR THE
PERIOD STATED.
<TABLE>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- -------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends (including $168,400 received from
affiliated issuers)........................................... $ 27,706,275
Interest....................................................... 7,993,341
------------
35,699,616
------------
Expenses:
Investment management fee - Note B............................ 7,644,892
Distribution/service fee - Note B
Class A..................................................... 849,533
Class B..................................................... 7,028,080
Transfer agent fee - Note B................................... 2,298,130
Registration and filing fees.................................. 339,298
Custodian fee................................................. 180,577
Trustees' fees................................................ 150,112
Printing...................................................... 64,001
Miscellaneous................................................. 39,878
Auditing fee.................................................. 34,589
Legal fees.................................................... 26,856
------------
Total Expenses............................... 18,655,946
-----------------------------------------------------------
Net Investment Income........................ 17,043,670
-----------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold.......................... 14,650,736
Change in net unrealized appreciation/depreciation
of investments................................................ 235,518,324
Net Realized and Unrealized ------------
Gain on Investments......................... 250,169,060
-----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations................... $267,212,730
===========================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 229
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------
1995 1994
------------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income............................................................... $ 17,043,670 $ 6,043,134
Net realized gain on investments sold............................................... 14,650,736 11,428,717
Change in net unrealized appreciation/depreciation of investments................... 235,518,324 ( 7,116,756)
-------------- ------------
Net Increase in Net Assets Resulting from Operations............................... 267,212,730 10,355,095
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.4773 and $0.3356 per share, respectively)............................ ( 5,715,567) ( 2,449,060)
Class B - ($0.3215 and $0.2112 per share, respectively)............................ ( 9,516,354) ( 3,373,113)
Distributions from net realized gain on investments sold
Class A - ($0.3413 and $1.0644 per share, respectively)............................ ( 3,288,461) ( 4,773,906)
Class B - ($0.3413 and $1.0644 per share, respectively)............................ ( 8,137,395) ( 8,743,106)
--------------- ------------
Total Distributions to Shareholders.............................................. ( 26,657,777) ( 19,339,185)
-------------- ------------
FROM FUND SHARE TRANSACTIONS -- NET*................................................... 743,338,429 482,203,467
-------------- ------------
NET ASSETS:
Beginning of period................................................................. 739,184,994 265,965,617
-------------- ------------
End of period (including undistributed net investment income of
$2,036,461 and $224,712, respectively)......................................... $1,723,078,376 $739,184,994
============== ============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------
1995 1994
------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold............................................... 14,505,492 $363,725,341 7,852,429 $170,793,204
Shares issued to shareholders in reinvestment of distributions 359,736 7,817,904 323,274 6,649,805
---------- ------------ ---------- ------------
14,865,228 371,543,245 8,175,703 177,443,009
Less shares repurchased................................... (7,018,102) (171,254,724) (2,446,139) (52,952,434)
---------- ------------ ---------- ------------
Net increase.............................................. 7,847,126 $200,288,521 5,729,564 $124,490,575
========== ============ ========== ============
CLASS B
Shares sold............................................... 26,194,033 $658,793,433 17,745,423 $386,853,695
Shares issued to shareholders in reinvestment of distributions 593,436 12,598,000 519,637 10,621,844
---------- ------------ ---------- ------------
26,787,469 671,391,433 18,265,060 397,475,539
Less shares repurchased................................... (5,396,234) (128,341,525) (1,862,961) (39,762,647)
---------- ------------ ---------- ------------
Net increase.............................................. 21,391,235 $543,049,908 16,402,099 $357,712,892
========== ============ ========== ============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, AND ANY INCREASE OR
DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES
THE NUMBER OF FUND SHARES SOLD, REINVESTED AND REDEEMED DURING THE PERIOD, ALONG
WITH THE CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 230
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CLASS A**
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........................ $ 21.52 $ 21.62 $ 17.47 $ 13.47
-------- -------- ------- -------
Net Investment Income....................................... 0.52*** 0.39*** 0.26*** 0.21
Net Realized and Unrealized Gain on Investments............. 5.92 0.91 5.84 3.98
-------- -------- ------- -------
Total from Investment Operations........................... 6.44 1.30 6.10 4.19
-------- -------- ------- -------
Less Distributions:
Dividends from Net Investment Income........................ (0.48) (0.34) (0.26) (0.19)
Distributions from Net Realized Gain on Investments Sold.... (0.34) (1.06) (1.69) --
-------- -------- ------- -------
Total Distributions........................................ (0.82) (1.40) (1.95) (0.19)
-------- -------- ------- -------
Net Asset Value, End of Period.............................. $ 27.14 $ 21.52 $ 21.62 $ 17.47
======== ======== ======= =======
Total Investment Return at Net Asset Value (a).............. 31.00% 6.44% 37.45% 31.26%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................... $486,631 $216,978 $94,158 $31,306
Ratio of Expenses to Average Net Assets..................... 1.39% 1.34% 1.35% 1.41%*
Ratio of Net Investment Income to Average Net Assets........ 2.23% 1.78% 1.29% 1.64%*
Portfolio Turnover Rate..................................... 14% 13% 35% 53%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT INCOME, AND TOTAL
INVESTMENT RETURN OF THE FUND. IT SHOWS HOW THE FUND'S NET ASSET VALUE FOR A
SHARE HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. ADDITIONALLY, IMPORTANT
RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE FINANCIAL STATEMENTS ARE
EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 231
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........................ $ 21.43 $ 21.56 $ 17.44 $ 13.76 $ 8.13
---------- -------- -------- ------- -------
Net Investment Income....................................... 0.36*** 0.23*** 0.15*** 0.18 0.29
Net Realized and Unrealized Gain on Investments............. 5.89 0.91 5.83 4.56 5.68
---------- -------- -------- ------- -------
Total from Investment Operations........................... 6.25 1.14 5.98 4.74 5.97
---------- -------- -------- ------- -------
Less Distributions:
Dividends from Net Investment Income........................ (0.32) (0.21) (0.17) (0.28) (0.34)
Distributions from Net Realized Gain on Investments Sold.... (0.34) (1.06) (1.69) (0.78) --
---------- -------- -------- ------- -------
Total Distributions........................................ (0.66) (1.27) (1.86) (1.06) (0.34)
---------- -------- -------- ------- -------
Net Asset Value, End of Period.............................. $ 27.02 $ 21.43 $ 21.56 $ 17.44 $ 13.76
========== ======== ====== ====== =====
Total Investment Return at Net Asset Value (a).............. 30.11% 5.69% 36.71% 37.20% 75.35%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................... $1,236,447 $522,207 $171,808 $56,016 $52,098
Ratio of Expenses to Average Net Assets..................... 2.09% 2.06% 1.88% 1.96% 2.04%
Ratio of Net Investment Income to Average Net Assets........ 1.53% 1.07% 0.76% 1.21% 2.65%
Portfolio Turnover Rate..................................... 14% 13% 35% 53% 75%
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
*** On average month end shares outstanding.
(a) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
13
<PAGE> 232
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
ISSUER, STATE, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- ------
<S> <C> <C>
COMMON STOCKS, WARRANTS AND OTHER
MONEY CENTER BANKS (2.29%)
Bankers Trust New York Corp. (NY)....... 50,000* $ 3,187,500
Chase Manhattan Corp. (NY).............. 430,700 24,549,900
First Chicago Corp. (IL)................ 23,700* 1,608,637
Morgan (J.P.) & Co., Inc. (NY).......... 131,000 10,103,375
------------
39,449,412
------------
SUPER REGIONAL BANKS (11.14%)
Banc One Corp. (OH)..................... 345,250 11,652,187
BankAmerica Corp. (CA).................. 420,987 24,206,752
Bank of Boston Corp. (MA)............... 386,250 17,188,125
Bank of New York, Inc. (NY)............. 547,000 22,974,000
Barnett Banks, Inc. (FL)................ 320,000 17,680,000
First Bank Systems, Inc. (MN)........... 160,730 7,996,317
First Fidelity Bancorp. (NJ)............ 158,000 10,329,250
First Interstate Bancorp. (CA).......... 400,500 51,664,500
First Union Corp. (NC).................. 26,500 1,315,062
KeyCorp. (OH)........................... 174,905 5,903,044
Mellon Bank Corp. (PA).................. 68,201 3,418,575
NationsBank Corp. (NC).................. 72,000 4,734,000
NBD Bancorp., Inc. (MI)................. 43,916 1,668,808
Norwest Corp. (MN)...................... 275,500 8,127,250
Wachovia Corp. (NC)..................... 70,000 3,088,750
------------
191,946,620
------------
REGIONAL BANKS (43.62%)
ABC Bancorp. (GA)....................... 130,000 1,755,000
ANB Corp. (IN).......................... 41,500 1,203,500
American Bancorp. (WV).................. 74,000 1,591,000
AmSouth Bancorp. (AL)................... 237,293 9,462,058
Bancfirst Corp. (OK).................... 143,000 3,181,750
Bancorp. Hawaii, Inc. (HI).............. 618,200 20,709,700
Bank of New Hampshire Corp. (NH)........ 191,800 6,904,800
Bank South Corp. (GA)................... 225,000 6,285,937
Banknorth Group, Inc. (VT).............. 291,500 9,255,125
Banponce Corp. (PR)..................... 276,000* 10,660,500
B M J Financial Corp. (NJ).............. 132,632 2,006,059
BNH Bancshares, Inc. **(CT)............. 545,000 1,021,875
Boatmens' Bancshares, Inc. (MO)......... 344,734 13,099,892
Brenton Banks, Inc. (IA)................ 176,600 3,421,625
Bryn Mawr Bank Corp. (PA)............... 27,600 1,297,200
BT Financial Corp. (PA)................. 19,950 718,200
</TABLE>
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
REGIONAL BANK FUND ON OCTOBER 31, 1995. IT'S DIVIDED INTO FOUR MAIN CATEGORIES:
COMMON STOCKS, WARRANTS AND OTHER, PREFERRED STOCKS, BONDS, AND SHORT-TERM
INVESTMENTS. COMMON STOCKS ARE FURTHER BROKEN DOWN BY INDUSTRY GROUPS.
SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION, ARE LAST.
<TABLE>
<CAPTION>
MARKET
ISSUER, STATE, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- ------
<S> <C> <C>
REGIONAL BANKS (CONTINUED)
California Commercial
Bankshares **(CA)...................... 52,747 $ 395,602
California State Bank (CA).............. 64,600* 904,400
Capital Bancorp., Inc. (MO)............. 97,000 3,419,250
Carnegie Bancorp. (NJ).................. 47,250 797,344
CB Bancshares, Inc. (HI)................ 60,000 1,762,500
CCB Financial Corp. (NC)................ 56,000 2,772,000
Central Fidelity Banks, Inc. (VA)....... 25,000* 775,000
Centura Banks, Inc. (NC)................ 288,325 9,730,969
Citizens Banking Corp. ( MI)............ 38,400* 1,161,600
CM Bank Holding Co. (LA)................ 8,000 560,000
CNB Bancshares, Inc. (IN)............... 61,245* 1,638,293
Colonial BancGroup, Inc. (AL)........... 196,500 5,673,937
Comerica, Inc. (MI)..................... 267,798 9,004,708
Commerce Bancshares, Inc. (MO).......... 117,763 4,416,094
Commercial Bancshares, Inc. ** (FL)..... 159,000 2,206,125
Compass Bancshares, Inc. (AL)........... 446,500 13,841,500
Continental Pacific Bank **(CA)......... 35,020 536,244
CoreStates Financial Corp. (PA)......... 221,708 8,064,628
Crestar Financial Corp. (VA)............ 161,800 9,222,600
CU Bancorp. (CA)........................ 46,211 439,004
Cupertino National Bancorp. (CA)........ 27,277 320,504
Dauphin Deposit Corp. (PA).............. 38,000 1,102,000
Deposit Guaranty Corp. (MS)............. 128,100 5,700,450
Evergreen Bancorp., Inc. (NY)........... 95,350 2,002,350
F & M National Corp. (VA)............... 83,250 1,488,094
First American Corp. (TN)............... 512,500 22,485,937
First of America Bank Corp. (MI)........ 530,105 22,595,726
First Citizens Bancshares, Inc.
(Class A) (NC)......................... 5,000 263,750
First Colonial Group, Inc. (PA)......... 23,000 422,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 233
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, STATE, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- -----------
<S> <C> <C>
REGIONAL BANKS (CONTINUED)
First Commerce Corp. (LA)..................... 544,887 $16,891,497
First Commercial Corp.(AR).................... 106,653 3,199,590
First Merchants Corp. (IN).................... 22,500 579,375
First National Bancorp. (GA).................. 199,000 5,547,125
First Patriot Bankshares (VA)................. 81,100 790,725
First Security Corp. (UT)..................... 170,000 5,567,500
First Source Corp. (IN)....................... 57,144 1,314,322
First State Bancorp. (NM)..................... 62,000 992,000
First Tennesse National Corp.(TN)............. 467,250 24,997,875
Firstar Corp. (WI)............................ 325,376 11,510,176
FirstBanc Corp. (MI).......................... 45,203 1,141,363
FirstMerit Corp. (OH)......................... 50,000* 1,350,000
Firstbank of Illinois Co. (IL)................ 52,275 1,542,112
FirsTier Financial, Inc. (NE)................. 33,000 1,404,562
FNB Corp. (PA)................................ 50,308 1,056,459
FNB Rochester Corp. **(NY).................... 153,737 1,210,679
Fourth Financial Corp. (Dep Shares) (KS)...... 65,000 2,080,000
Fourth Financial Corp. (KS)................... 192,500 7,098,437
Franklin Bank, NA (MI)........................ 75,125 892,109
Fulton Financial Corp. (PA)................... 179,114 3,895,732
Gateway Bancorp., Inc. (KY)................... 42,500* 653,437
Hancock Holdings Co. (MS)..................... 233,000 8,329,750
Hawkeye Bancorp. (IA)......................... 151,400 3,652,525
Hibernia Corp. (Class A) (LA)................. 584,000* 5,767,000
Hubco, Inc. (NJ).............................. 112,500 2,250,000
Huntington Bancshares, Inc. (OH).............. 47,250 1,128,094
Independent Bank Corp. (MA)................... 210,000 1,417,500
Integra Financial Corp. (PA).................. 343,280 20,167,700
Interchange Financial Services Corp.(NJ)...... 90,000 1,867,500
Intercontinental Bank (FL).................... 60,000 1,762,500
Lafayette American Bancorp., Inc. (CT)........ 306,513 2,758,617
Liberty Bancorp., Inc. (OK)................... 15,000 543,750
LSB Bancshares, Inc. (NC)..................... 10,727 209,177
Magna Group, Inc. (MO)........................ 67,000 1,649,875
Mark Twain Bancshares, Inc. (MO).............. 15,000* 528,750
Marshall and Ilsley Corp. (WI)................ 311,480 7,553,390
Mercantile Bancorp., Inc. (MO)................ 553,393 24,349,292
Mercantile Bankshares Corp. (MD).............. 340,000 9,350,000
Merchants Bancorp., Inc. (IL)................. 30,800 823,900
Meridian Bancorp., Inc. (PA).................. 355,493 15,197,326
MetroBanCorp (IN)............................. 75,000 487,500
Michigan Financial Corp. (MI)................. 61,552 1,584,964
Michigan National Corp. (MI).................. 54,051 5,932,097
Midlantic Corp., Inc. (NJ).................... 618,000 32,754,000
Mississippi Valley Bancshares (MO)............ 75,500 1,887,500
Mountain Parks Financial Corp. **(Co)......... 65,000 1,511,250
National City Bancshares, Inc. (IN)........... 21,270* 983,738
North Fork Bancorp., Inc. (NY)................ 166,209 3,635,822
North Valley Bancorp (CA)..................... 51,067 1,353,276
Old Kent Financial Corp. (MI)................. 232,451 8,891,255
One Valley Bancorp. of
West Virginia, Inc. (WV).................... 29,000 964,250
Pacific Bank N.A. **(CA)..................... 66,923 1,154,422
Peoples Bank Corp. of Indianapolis (IN)...... 22,500 551,250
Piedmont BankGroup, Inc. (VA)................ 51,850 1,348,100
Premier Bancorp., Inc. (LA).................. 540,800 11,289,200
Premier Bankshares Corp. (VA)................ 85,000 1,540,625
Premier Financial Services, Inc. (IL)........ 160,500 1,324,125
Princeton National Bancorp., Inc. (IL)....... 64,500 1,072,313
Provident Bancorp., Inc. (OH)................ 97,500 4,119,375
Regions Financial Corp. (AL)................. 15,000 598,125
Republic Bancorp., Inc. (MI)................. 79,910 1,018,863
Republic New York Corp. (NY)................. 358,800 21,034,650
Riggs National Corp. **(DC).................. 335,000 4,396,875
SC Bancorp. **(CA)........................... 219,051 1,273,234
Seacoast Banking Corp. of Florida
(Class A) (FL).............................. 98,500 2,413,250
Shawmut National Corp. (MA).................. 889,541 30,133,201
Signet Banking Corp. (VA).................... 351,000 8,336,250
Simmons First National Corp. (AR) +.......... 192,000 5,568,000
Southern National Corp. (NC)................. 636,228 16,382,871
SouthTrust Corp. (AL)........................ 640,500 16,092,563
Southwest Bancorp., Inc. (OK)................ 140,500 2,397,281
State Financial Services Corp................
(Class A) (WI)............................. 48,000 798,000
State Street Boston Corp. (MA).............. 25,000* 971,875
Sterling Bancshares (TX).................... 107,150 1,848,338
Summit Bancorp., Inc. (NJ).................. 265,500 7,533,563
Susquehanna Bancshares, Inc. (PA)........... 152,175 4,375,031
Texas Regional Bancshares, Inc.
(Class A) (TX)............................ 152,500 2,611,563
Today's Bancorp., Inc. (IL)................ 102,200 2,197,300
Trico Bancshares (CA)...................... 73,750 1,124,688
Trustmark Corp. (MS)....................... 72,000 1,404,000
UJB Financial Corp. (NJ)................... 422,800 13,476,750
Union Bank (CA)............................ 132,300 6,631,538
Union Planters Corp. (TN).................. 791,119 24,228,019
US Bancorp. (OR)........................... 275,305 8,155,911
USBANCORP, Inc. (PA)....................... 48,000 1,548,000
Vectra Banking Corp. **(CO)................ 35,000 385,000
Vermont Financial Services (VT)............ 204,500 6,492,875
Westamerica Bancorp. (CA).................. 67,800 2,712,000
West Coast Bancorp., Inc. (FL)............. 30,000 472,500
West Coast Bancorp. (OR)................... 12,750* 213,563
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 234
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, STATE, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- ------
<S> <C> <C>
REGIONAL BANKS (CONTINUED)
West One Bancorp., Inc. (ID)............ 522,600* $ 22,210,500
Whitney Holding Corp. (LA).............. 307,500 9,532,500
Wilmington Trust Corp. (DE)............. 59,000* 1,740,500
Zions Bancorp. (UT)..................... 137,500 9,521,875
------------
751,515,290
------------
THRIFTS (17.36%)
ALBANK Financial Corp. (NY)............. 20,000 577,500
Allied Bank Capital, Inc. (NC).......... 91,000 2,138,500
Ahmanson [H.F] & Co. (CA)............... 785,000* 19,625,000
American Federal Bank FSB (SC).......... 185,000 2,728,750
American National Savings Bank (MD)..... 115,000 1,106,875
AMFED Financial, Inc. (NV) +............ 312,500 9,140,625
Astoria Financial Corp. (NY)............ 315,000 13,505,625
Avondale Financial Corp. **(IL)......... 210,000* 3,045,000
BankUnited Financial Corp.
(Class A) ** (FL)...................... 20,000 160,000
Bedford Bancshares, Inc. (VA)........... 30,000 540,000
BostonFed Bancorp, Inc. ** (MA)......... 34,600* 415,200
Brooklyn Bancorp., Inc. **(NY).......... 466,200 18,356,625
California Federal Bank **(CA).......... 58,334 860,427
California Financial Holding Co. (CA)... 191,000 3,915,500
Calumet Bancorp., Inc. **(IL) +......... 155,000 4,281,875
Cameron Financial Corp. (MO)............ 95,000* 1,306,250
CB Bancorp., Inc. **(IN)................ 57,870 1,012,725
CCF Holding Co. ** (GA) +............... 75,000* 871,875
Cenfed Financial Corp. (CA)............. 30,000 697,500
Center Banks, Inc. (NY)................. 23,000 322,000
CFX Corp. (NH).......................... 40,329 685,601
Coast Savings Financial, Inc. **(CA).... 115,000 3,033,125
Coastal Bancorp., Inc. (TX)............. 45,000* 742,500
Collective Bancorp., Inc. (NJ).......... 290,000* 6,851,250
Commercial Federal Corp. (NE)........... 181,000* 5,950,375
Community Financial Corp. ** (IL)....... 15,000* 195,000
CSB Financial Group, Inc. ** (IL)....... 40,000* 370,000
Damen Financial Corp. ** (IL)........... 25,000* 293,750
Dime Bancorp Inc.**(NY)................. 887,700 9,431,813
Eagle Bancshares (GA)................... 52,000 1,807,000
East Texas Financial
Services, Inc. ** (TX)................. 44,000* 704,000
Elmira Savings Bank (NY)................ 34,950 598,519
Farmers & Mechanics Bank **(CT)......... 41,300 836,325
FFW Corp. (IN).......................... 20,000 350,000
Fidelity Federal Bank **(CA)............ 740,500* 1,481,000
First Ashland Financial Corp. ** (KY)... 30,000* 420,000
First Bankshares, Inc. (MO)............. 40,000 670,000
First Bell Bancorp, Inc. ** (PA)........ 392,500* 5,151,563
First Defiance Financial Corp. (OH) +... 575,500* 5,750,000
Firstfed Michigan Corp. (MI)............ 42,500 1,434,375
First Federal Bancorp. **(MN)........... 42,000* 582,750
First Federal Capital Corp. (WI)........ 39,945 709,024
First Financial Corp. (WI).............. 115,151 2,461,344
First Financial Corp. of
Western Maryland (MD).................. 65,500 1,416,438
First Independence Corp. (KS)........... 35,500 665,625
First Indiana Corp. (IN)................ 41,166 1,029,150
First Keystone Financial Inc. **(PA).... 43,000* 827,750
First Mutual Bancorp, Inc. (IL)......... 235,000* 2,878,750
First Republic Bancorp., Inc. **(CA).... 229,162 2,835,880
First Southern Bancshares, (AL)......... 35,000* 516,250
FMS Financial Corp. (NJ)................ 12,000 399,000
Fort Bend Holdings Corp. (TX) +......... 44,000 814,000
Frankfort First Bancorp. (KY)........... 115,000* 1,437,500
Glendale Federal Bank **(CA)............ 691,900 11,070,400
Golden West Financial Corp.(CA)......... 30,000 1,503,750
Great American Bancorp., Inc. ** (IL)... 35,000* 472,500
Great Southern Bancorp., Inc. (MO)...... 14,900 346,425
Greenpoint Financial Corp. (NY)
(formerly GP Financial Corp)........... 1,027,000* 27,729,000
Harbor Federal Bancorp., Inc. (MD)...... 80,000 1,180,000
Haven Bancorp. (NY)..................... 137,500 2,947,656
HF Financial Corp. (SD)................. 75,000 2,287,500
HMN Financial, Inc. **(MN).............. 125,000 1,906,250
Home Federal Bancorp. (IN).............. 7,500 181,875
Home Financial Corp. (FL)............... 10,000* 152,500
ISB Financial Corp. (NJ)................ 110,000* 1,842,500
Imperial Thrift & Loan Assn. ** (CA).... 285,000* 3,277,500
Industrial Bancorp., Inc. (OH).......... 60,000* 798,750
Kentucky First Bancorp., Inc. ** (KY)... 50,000* 612,500
Klamath First Bancorp., Inc. ** (OR).... 100,000* 1,275,000
Lakeview Financial Corp. (NJ)........... 33,000 589,875
Landmark Bancshares, Inc. (KS).......... 110,000 1,512,500
Leader Financial Corp. (TN)............. 55,000* 1,959,375
Logansport Financial Corp. (IN)......... 50,000* 643,750
Long Island Bancorp., Inc. (NY)......... 330,000 7,548,750
MAF Bancorp., Inc. (IL)................. 168,850 4,179,038
Marble Financial Corp. (VT)............. 15,000 262,500
Marion Capital Holdings, Inc. (IN)...... 72,500 1,413,750
Marshalltown Financial Corp. **(IA)..... 20,000 295,000
MassBank Corp. (MA)..................... 35,000 1,098,125
MFB Corp. **(IN)........................ 100,000 1,525,000
MLF Bancorp., Inc. (PA)................. 55,000 1,237,500
Mississippi View Holding Co. ** (MN).... 50,000* 575,000
Morgan Financial Corp. (CO) +........... 21,000 456,750
Monterey Bay Bancorp., Inc. **(CA)...... 100,000* 1,200,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 235
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, STATE, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- ------
<S> <C> <C>
THRIFTS (CONTINUED)
MSB Bancorp., Inc. (NY)................... 20,000 $ 370,000
Northeast Indiana Bancorp., Inc. (IN)..... 37,000* 462,500
Palfed, Inc. **(SC)....................... 208,000 2,704,000
Pennfirst Bancorp., Inc. (PA)............. 81,290 1,056,775
Permanent Bancorp., Inc. (IN)............. 108,500 1,763,125
Potters Savings & Loan Co. (OH)........... 25,000* 428,125
PVF Capital Corp. ** (OH)................. 18,150* 279,056
QCF Bancorp., Inc. ** (MN)................ 50,000* 731,250
River Bank America, Inc. **(NY)........... 150,000 1,087,500
Roosevelt Financial Group, Inc. (MO)...... 1,044,623 16,844,546
SFS Bancorp., Inc. ** (NY)................ 45,000* 556,875
Sobieski Bancorp., Inc. ** (IN)........... 40,000* 490,000
Southern Banc Co, Inc. ** (AL)............ 30,000* 375,000
Southern Financial Federal
Savings Bank (VA) +...................... 68,272 1,041,140
Southern Missouri Bancorp., Inc.(MO)...... 70,000 1,172,500
Sovereign Bancorp. (PA)................... 26,772 264,373
Springfield Institution For
Savings **(MA)........................... 102,500* 1,575,937
Standard Financial., Inc. ** (IL)......... 170,000* 2,337,500
Sterling Financial Corp. **(WA)........... 150,378 2,030,096
Tappan Zee Financial., Inc. ** (NY)....... 12,500* 150,000
TCF Financial Corp. (MN).................. 63,413 3,725,514
Teche Holding Co. (LA).................... 35,000* 472,500
TeleBanc Financial Corp. **(VA)........... 100,000 650,000
Texarkana First Financial Corp. ** (AR)... 96,800* 1,331,000
Virginia First Financial Corp.(VA)........ 130,000 2,957,500
Washington Federal., Inc, (WA)............ 153,500* 3,511,312
Washington Mutual Savings Bank (WA)....... 615,000 15,836,250
WesterFed Financial Corp. (MT)............ 230,000 3,766,250
WSFS Financial Corp. **(DE)............... 129,400 1,132,250
-------------
299,121,402
-------------
OTHER - FINANCIAL (1.15%)
Allmerica Financial Corp. **.............. 20,000* 502,500
Capital One Financial Corp................ 332,000* 8,134,000
Donaldson Lufkin & Jenrette., Inc. **..... 20,000* 595,000
Financial Security Assurance
Holdings Ltd............................. 10,000 260,000
First Merchants Acceptance Corp. **....... 159,000* 3,279,375
First Washington Realty Trust............. 79,470 1,390,725
KBK Capital Corp. **...................... 19,000 114,000
Lomas Financial Corp. **.................. 180,000 2,808
PMC Capital, Inc.......................... 25,000 309,375
Prime Residential, Inc.................... 70,000 1,225,000
Prime Retail, Inc......................... 15,000 186,562
Union Acceptance Corp. **................. 165,000* 2,598,750
WFS Financial, Inc. **.................... 74,500* 1,238,562
-------------
19,836,657
-------------
WARRANTS (0.17%)
Carnegie Bancorp. **(NJ).................. 29,000 108,750
Glendale Federal Bank **(CA).............. 400,000 2,800,000
-------------
2,908,750
-------------
OTHER (0.00%)
California Federal Bank **(CA)
Goodwill Litigation Security............. 10,833* 47,396
-------------
TOTAL COMMON STOCKS,
WARRANTS AND OTHER
(Cost $1,029,904,626) (75.73%) 1,304,825,527
--------- -------------
PREFERRED STOCKS
California Federal Bank, Ser B,
10.625% (CA)............................. 13,333 1,439,964
Chevy Chase Savings, 13.00% (MD).......... 50,000 1,562,500
Community Bank, Ser B, 13.00% (CA)........ 40,000 1,000,000
FirstFederal Financial Corp., Ser A,
7.00% (OH)............................... 10,000 513,750
First Nationwide Bank, 11.50% (CA)........ 30,000 3,405,000
First Washington Realty Trust, Ser A,
9.75% (MD)............................... 113,498 2,553,705
Glendale Federal Bank, Ser E,
8.75% (CA)............................... 100,000 4,212,500
National City Corp., 8.00% (OH)........... 7,000 516,250
Prime Retail Inc., Ser B, 8.50% (MD)...... 150,000 2,868,750
Riggs National Corp., Ser B,
10.75% (DC).............................. 64,300 1,800,400
River Bank America Inc., Ser A,
15.00% (NY).............................. 10,000 225,000
Roosevelt Financial Group, Inc.,
Ser F, 6.50% (MO)........................ 16,000 952,000
Southern National Corp., Ser A,
6.75% (NC)............................... 50,000 1,912,500
Southwest Bancorp., Inc. Ser A,
9.20% (OK)............................... 20,000* 540,000
Suncoast Savings and Loan Assn.,
Ser A, 8.00% (FL)........................ 28,000 374,500
Washington Mutual Savings Bank,
Ser D, 6.00% (WA)........................ 4,000 425,000
-------------
TOTAL PREFERRED STOCKS
(Cost $21,532,181) (1.41%) 24,301,819
--------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 236
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
<TABLE>
INTEREST PAR VALUE MARKET
ISSUER, STATE, DESCRIPTION RATE (000'S OMITTED) VALUE
- -------------------------- -------- --------------- ------
<S> <C> <C> <C>
BONDS
Bank of New York, Inc.
Conv Note 08-15-01................ 7.50% 200 $ 438,000
Susquehanna Bancshares, Inc.
Conv Sub Deb 02-01-05............. 9.00 2000* 2,230,780
Sierra Tahoe Bancorp.
Conv Sub Deb 02-01-04............. 8.50 500 560,000
--------------
TOTAL BONDS
(Cost $2,689,560) (0.19%) 3,228,780
---- --------------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (15.21%)
Investment in a joint repurchase
transaction agreement with
SBC Capital Markets Inc.,
Dated 10-31-95, Due 11-01-95
(secured by U.S. Treasury Bond,
8.75%, due 05-15-17 and
U.S. Treasury Note, 5.75%
due 9-30-97)...................... 5.89 262,117 262,117,000
--------------
SHORT-TERM NOTES (8.05%)
American Telephone & Telegraph Co.
due 11-21-95...................... 5.73 10,000 9,968,167
Federal Farm Credit Bank
due 11-1-95....................... 5.73 13,000 13,000,000
GTE North Inc.
due 11-8-95....................... 5.79 795 794,105
GTE North Inc.
due 11-9-95....................... 5.79 495 494,363
GTE Northwest Inc.
due 11-14-95...................... 5.73 141 140,708
International Business Machines
due 11-6-95....................... 5.70 10,000 9,992,083
Melville Corp.
due 11-7-95....................... 5.75 2,200 2,197,892
Melville Corp.
due 11-13-95...................... 5.75 10,000 9,980,833
Melville Corp.
due 11-27-95...................... 5.73 5,000 4,979,308
Merrill Lynch & Co., Inc.
due 11-3-95....................... 5.73 5,000 4,998,408
Merrill Lynch & Co., Inc.
due 11-20-95...................... 5.73 20,000 19,939,517
Merrill Lynch & Co., Inc.
due 11-22-95...................... 5.73 10,000 9,966,575
Merrill Lynch & Co., Inc.
due 11-29-95...................... 5.75 15,000 14,932,917
Merrill Lynch & Co., Inc.
due 11-30-95...................... 5.73 15,000 14,930,763
Merrill Lynch & Co., Inc.
due 12-1-95....................... 5.74 5,000 4,976,083
Merrill Lynch & Co., Inc.
due 12-8-95....................... 5.70 10,000 9,941,417
Pacific Gas & Electric Co.
due 11-7-95....................... 5.75 7,500 7,492,813
--------------
138,725,952
--------------
CORPORATE SAVINGS ACCOUNT (0.06%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%................ 1,058,728
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $401,901,680) (23.32%) 401,901,680
------- -------------
TOTAL INVESTMENTS (100.65%) $1,734,257,806
======= ==============
<FN>
* Securities, other than short-term investments, newly added to the
portfolio during the year ended October 31, 1995.
** 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.
+ Denotes an affiliated company in which the Fund has ownership of at least 5%
of the voting securities. Investments in affiliates at October 31, 1995 were
as follows:
</TABLE>
<TABLE>
<CAPTION>
AFFILIATE COST DIVIDEND INCOME
--------- ---- ---------------
<S> <C> <C>
AMFED Financial, Inc. (NV).............. $7,145,000 $57,050
CCF Holding Co. (GA).................... 858,750 --
Calumet Bancorp., Inc. (IL)............. 3,544,063 --
First Defiance Financial Corp. (OH)..... 5,995,000 --
Fort Bend Holdings Corp. (TX)........... 493,225 12,320
Morgan Financial Corp. (CO)............. 333,500 46,200
Simmons First National Corp. (AR)....... 4,989,500 35,700
Southern Financial Federal Savings
Bank (VA)............................. 686,598 17,130
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 237
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Regional Bank Fund (the "Fund"), John
Hancock Gold & Government Fund, John Hancock Sovereign U.S. Government Income
Fund, John Hancock Sovereign Achievers Fund, and John Hancock Managed Tax-Exempt
Fund. Prior to January 1, 1995, John Hancock Regional Bank Fund was known as
John Hancock Freedom Regional Bank Fund and John Hancock Gold & Government Fund
was known as John Hancock Freedom Gold & Government Fund.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, dividends, and liquidation, except that certain expenses,
subject to the approval of the Trustees, may be applied differently to each
class of shares in accordance with current regulations of the Securities and
Exchange Commission. Shareholders of a class which bears distribution/service
expenses under the terms of a distribution plan, have exclusive voting rights
regarding such distribution plan. After the close of business on July 22, 1994,
the Fund was closed to new shareholders. The Fund was re-opened to new
shareholders on December 27, 1994. Significant policies of the Fund are as
follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt instruments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal tax provision is
required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities
is recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and will be in
the same amount, except for the effect of expenses that may be applied
differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees, if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
19
<PAGE> 238
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
purchased from either the date of issue or the date of purchase over the life
of the security, as required by the Internal Revenue Code.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.80% of the first $500,000,000 of the
Fund's average daily net asset value and (b) 0.75% of the Fund's average daily
net asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended October 31, 1995, JH
Funds received net sales of $8,366,103 with regard to sales of Class A shares.
Out of this amount, $1,308,517 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $6,381,071 was paid as sales
commissions to unrelated broker-dealers, and $676,425 was paid as sales
commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"), all of which are broker-dealers. The Adviser's indirect
parent, John Hancock Mutual Life Insurance Company, is the indirect sole
shareholder of Distributors and John Hancock Freedom Securities Corporation and
its subsidiaries, which include FDC, Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase are subject to
a contingent deferred sales charge ("CDSC") at declining rates beginning at 5.0%
of the lesser of the current market value at the time of redemption or the
original purchase cost of the shares being redeemed. Proceeds from the CDSC are
paid to JH Funds and are used in whole or in part to defray its expenses related
to providing distribution related services to the Fund in connection with the
sale of Class B shares. For the period ended October 31, 1995 the contingent
deferred sales charges received by JH Funds amounted to $1,931,207.
In addition, to reimburse the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted Distribution Plans
with respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund makes payments to the Co-Distributors
for distribution and service expenses, at an annual rate not to exceed 0.30% of
Class A average daily net assets and 1.00% of Class B average daily net assets
to reimburse the Co-Distributors for their distribution/service costs. Up to a
maximum of 0.25% of such payments may be service fees as defined by the amended
Rules of Fair Practice of the National Association of Securities Dealers. Under
the amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Prior to January 1, 1995, the Fund paid Investor
Services a monthly transfer agent fee equivalent, on an annual basis, to 0.15%
and 0.18% of the average daily net asset value of Class A and Class B shares of
the Fund, respectively, plus out of pocket expenses incurred by Fund Services
on behalf of the Fund. For the period January 1, 1995 and through September 30,
1995 Class A and Class B shares paid
20
<PAGE> 239
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds-- Regional Bank Fund
transfer agent fees based on the number of shareholder accounts and certain
out-of-pocket expenses. For the eleven months ended September 30, 1995 the
transfer agent expense, calculated as a class specific expense was $508,692 for
Class A and $1,348,550 for Class B, respectively. Effective October 1, 1995
transfer agent expense is being treated as a fund expense based on the number
of shareholder accounts in the Fund and certain out-of-pocket expenses.
Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates, as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund.
Effective with the fees paid for 1995, the unaffiliated Trustees may elect to
defer for tax purposes their receipt of this compensation under the John Hancock
Group of Funds Deferred Compensation Plan. The Fund will make investments into
other John Hancock funds, as applicable, to cover its liability with regard to
the deferred compensation. Investments to cover the Fund's deferred compensation
liability will be recorded on the Fund's books as an other asset. The deferred
compensation liability will be marked to market on a periodic basis and income
earned by the investment will be recorded on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended October 31, 1995, aggregated $523,319,885 and $117,639,958, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended October 31, 1995.
The cost of investments owned at October 31, 1995 (including the joint
repurchase agreement) for Federal income tax purposes was $1,455,217,203. Gross
unrealized appreciation and depreciation of investments aggregated $285,811,043
and $7,829,168, respectively, resulting in net unrealized appreciation of
$277,981,875.
21
<PAGE> 240
John Hancock Funds - Regional Bank Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Regional Bank Fund and the
Trustees of Freedom Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Regional Bank Fund
(the "Fund") (formerly known as John Hancock Freedom Regional Bank Fund) (a
portfolio of Freedom Investment Trust) at October 31, 1995, and the results of
its operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is furnished with
respect to the taxable distributions of the Fund during its fiscal year ended
October 31, 1995.
The Fund designated distributions to shareholders of $7,449,114 as a long
term capital gain dividend. These amounts were reported on the 1994 U.S.
Treasury Department Form 1099-DIV. It is anticipated that there will be a
distribution from net realized gains from sales of securities to shareholders of
record on December 22, 1995 and payable December 28, 1995. Shareholders will
receive a 1995 U.S. Treasury Department Form 1099-DIV in January 1996
representing their proportionate share.
For the fiscal year ended October 31, 1995, 100% of the ordinary income
distributions qualify for the corporate dividends received deduction.
22
<PAGE> 241
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies
obligations (cost - $16,415,727) ........................ $ 16,199,018
Common stocks (cost - $12,705,916) ........................ 13,954,615
Preferred stocks (cost - $2,521,200) ...................... 2,520,000
Short-term investments (cost - $334,000) .................. 334,000
Corporate savings account ................................. 745
-----------
33,008,378
Receivable for shares sold ................................. 977
Receivable for investments sold ............................ 1,810,885
Interest receivable ........................................ 472,857
Dividends receivable ....................................... 26,880
Other assets ............................................... 7,553
-----------
Total Assets ............................. 35,327,530
-----------------------------------------------------------
LIABILITIES:
Payable for shares repurchased ............................. 19,743
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ....................................... 35,150
Accounts payable and accrued expenses ...................... 54,038
-----------
Total Liabilities ........................ 108,931
-----------------------------------------------------------
NET ASSETS:
Capital paid-in ............................................ 46,354,966
Accumulated net realized loss on investments,
financial futures contracts and foreign
currency transactions ..................................... (12,267,172)
Net unrealized appreciation of investments ................. 1,030,790
Undistributed net investment income ........................ 100,015
----------
Net Assets ............................... $ 35,218,599
===========================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value, respectively)
Class A - $18,299,704 / 1,386,291 .......................... $ 13.20
=============================================================================
Class B - $16,918,895 / 1,284,093 .......................... $ 13.18
=============================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($13.20 x 105.26%) ............................... $ 13.89
=============================================================================
</TABLE>
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET LOSSES FOR THE PERIOD
STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- -------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest ...................................................... $ 1,669,566
Dividends (net of foreign withholding taxes
of $9,576) ................................................... 202,310
---------
1,871,876
---------
Expenses:
Investment management fee - Note B ........................... 354,905
Distribution/service fee - Note B
Class A .................................................... 49,874
Class B .................................................... 274,154
Transfer agent fee - Note B .................................. 112,262
Custodian fee ................................................ 42,500
Auditing fee ................................................. 37,003
Printing ..................................................... 19,830
Registration and filing fees ................................. 9,605
Trustees' fees ............................................... 7,397
Miscellaneous ................................................ 1,828
Legal fees ................................................... 1,051
---------
Total Expenses .............................. 910,409
-----------------------------------------------------------
Net Investment Income ....................... 961,467
-----------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS, FINANCIAL FUTURES CONTRACTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments sold ......................... ( 3,599,702)
Net realized loss on financial futures contracts .............. ( 139,109)
Net realized loss on foreign currency transactions ............ ( 1,590)
Change in net unrealized appreciation/depreciation
of investments and financial futures contracts ............... ( 277,671)
---------
Net Realized and Unrealized
Loss on Investments, Financial
Futures Contracts and
Foreign Currency Transactions ............... ( 4,018,072)
------------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ................... ($3,056,605)
===========================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 242
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------
1995 1994
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............................................................................. $ 961,467 $ 2,406,590
Net realized loss on investments sold, financial futures contracts
and foreign currency transactions ................................................................ (3,740,401) (7,084,743)
Change in net unrealized appreciation/depreciation of investments
and financial futures contracts .................................................................. (277,671) (3,014,455)
------------ -----------
Net Decrease in Net Assets Resulting from Operations ............................................. (3,056,605) (7,692,608)
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.3546 and $0.6674 per share, respectively) .......................................... (461,398) (803,396)
Class B - ($0.2571 and $0.5659 per share, respectively) .......................................... (471,583) (1,761,166)
Distributions from net realized gain on investments sold and financial futures contracts
Class A - (none and $0.2390 per share, respectively) ............................................. ----- (291,352)
Class B - (none and $0.2390 per share, respectively) ............................................. ----- (753,474)
------------ -----------
Total Distributions to Shareholders ............................................................ (932,981) (3,609,388)
------------ -----------
FROM FUND SHARE TRANSACTIONS -- NET* ................................................................ (16,252,479) (5,494,834)
------------ -----------
NET ASSETS:
Beginning of period ............................................................................... 55,460,664 72,257,494
------------ -----------
End of period (including undistributed net investment
income of $100,015 and $73,119, respectively) .................................................... $ 35,218,599 $55,460,664
============ ===========
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
1995 1994
--------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold ........................................................ 910,305 12,990,091 310,979 $ 4,916,203
Shares issued to shareholders in reinvestment of distributions ..... 26,761 375,618 57,814 900,802
---------- ------------ ---------- -----------
937,066 13,365,709 368,793 5,817,005
Less shares repurchased ............................................ (698,341) (9,602,941) (426,433) (6,603,119)
---------- ------------ ---------- -----------
Net increase (decrease) ............................................ 238,725 $ 3,762,768 (57,640) $ (786,114)
========== ============ ========== ===========
CLASS B
Shares sold ........................................................ 985,367 $ 13,372,127 557,733 $ 8,893,162
Shares issued to shareholders in reinvestment of distributions ..... 24,145 334,553 117,910 1,843,490
---------- ------------ ---------- -----------
1,009,512 13,706,680 675,643 10,736,652
Less shares repurchased ............................................ (2,446,361) (33,721,927) (1,026,605) (15,445,372)
---------- ------------ ---------- -----------
Net decrease ....................................................... (1,436,849) $(20,015,247) (350,962) $(4,708,720)
========== ============ ========== ===========
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS YEAR. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS PAID TO
SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE
FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND SHARES SOLD, REINVESTED AND
REDEEMED DURING THE LAST TWO PERIODS, ALONG WITH THE CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 243
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------
1995 1994 1993 1992(a)
------- ------- ------- -------
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period..................................... $ 14.35 $ 16.91 $ 15.19 $ 15.31
------- ------- ------- -------
Net Investment Income.................................................... 0.37 0.63 0.76** 0.72
Net Realized and Unrealized Gain (Loss) on Investments, Financial
Futures Contracts, Foreign Currency
Transactions and Written Options.... ( 1.17) ( 2.28) 1.76 ( 0.21)
------- ------- ------- -------
Total from Investment Operations...................................... ( 0.80) ( 1.65) 2.52 0.51
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income..................................... ( 0.35) ( 0.67) ( 0.80) ( 0.63)
Distributions in excess of Net Realized Gains
on Investments Sold, Written Options and
Financial Futures Contracts............................................ ----- (0.24) ----- -----
------- ------- ------- -------
Total Distributions................................................... ( 0.35) ( 0.91) ( 0.80) ( 0.63)
------- ------- ------- -------
Net Asset Value, End of Period........................................... $ 13.20 $ 14.35 $ 16.91 $ 15.19
======= ======= ======= =======
Total Investment Return at Net Asset Value (c)........................... (5.66%) (10.10%) 17.10% 3.44%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................................ $18,300 $16,469 $20,385 $17,593
Ratio of Expenses to Average Net Assets.................................. 1.60% 1.53% 1.59% 1.68%*
Ratio of Net Investment Income to Average Net Assets..................... 2.72% 4.02% 4.84% 5.49%*
Portfolio Turnover Rate.................................................. 55% 147% 118% 209%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT INCOME, GAINS
(LOSSES), DIVIDENDS AND TOTAL INVESTMENT RETURNS OF THE FUND. IT SHOWS HOW THE
FUND'S NET ASSET VALUE FOR A SHARE HAS CHANGED SINCE THE END OF THE PREVIOUS
PERIOD. ADDITIONALLY, IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN
THE FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 244
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................... $ 14.33 $ 16.89 $ 15.17 $ 15.13 $ 14.51
------- ------- ------- ------- -------
Net Investment Income.............................................. 0.25 0.53 0.69** 0.83 0.87+
Net Realized and Unrealized Gain (Loss) on Investments, Financial
Futures Contracts, Foreign Currency Transactions and
Written Options.................................................. ( 1.14) ( 2.28) 1.76 0.11 0.76
------- ------- ------- ------- -------
Total from Investment Operations................................ ( 0.89) ( 1.75) 2.45 0.94 1.63
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income............................... ( 0.26) ( 0.57) ( 0.73) ( 0.90) ( 1.01)
Distributions in excess of Net Realized
Gain on Investments Sold, Written
Options and Financial Futures Contracts........................... ----- ( 0.24) ----- ----- -----
------- ------- ------- ------- -------
Total Distributions................................................ ( 0.26) ( 0.81) ( 0.73) ( 0.90) ( 1.01)
------- ------- ------- ------- -------
Net Asset Value, End of Period..................................... $ 13.18 $ 14.33 $ 16.89 $15.17 $ 15.13
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (c)..................... ( 6.32%) (10.70%) 16.56% 6.42% 11.78%+
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted).......................... $16,919 $38,992 $51,872 $36,103 $56,928
Ratio of Expenses to Average Net Assets............................ 2.32% 2.18% 2.11% 1.63% 1.82%+
Ratio of Net Investment Income to Average Net Assets............... 1.83% 3.41% 4.29% 5.56% 5.96%+
Portfolio Turnover Rate............................................ 55% 147% 118% 209% 134%
</TABLE>
* On an annualized basis.
** On average month end shares outstanding.
(a) Class A shares commenced operations on January 3, 1992.
(b) Not annualized.
(c) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
+ Reflects expense limitations in effect during the year indicated (see Note
B). As a result of such limitations, expenses of Class B shares for the year
ended, October 31, 1991 reflect reductions of $0.01 per share. Absent of
such reductions, for the year ended October 31, 1991, the ratio of expenses
to average net assets would have been 1.91% and the ratio of net investment
income to average net assets would have been 5.87%. Without the
reimbursement, total investment return would be lower.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 245
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY GOLD
& GOVERNMENT FUND ON OCTOBER 31, 1995. IT'S DIVIDED INTO FOUR MAIN CATEGORIES:
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS, COMMON STOCKS, PREFERRED STOCKS AND
SHORT-TERM INVESTMENTS. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S
"CASH" POSITION, ARE LISTED LAST.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- ---- ---- ------- -----
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS
GOVERNMENTAL--U.S. (46.00%)
United States Treasury, Note................................... 9.375% 04-15-96 $3,000 $3,049,680
United States Treasury, Note................................... 9.000 05-15-98 6,300 6,787,242
United States Treasury, Bond................................... 13.125 05-15-01 2,000 2,681,240
United States Treasury, Bond................................... 13.375 08-15-01 2,700 3,680,856
----------
TOTAL U.S. GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $16,415,727) (46.00)% 16,199,018
------ ----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
------ -- ------
<S> <C> <C>
COMMON STOCKS
GOLD AND MINING PRODUCTS (39.62%)
Battle Mountain Gold Co......................................... 55,000 419,375
Hecla Mining Co.**.............................................. 200,000 1,475,000
Hemlo Gold Mines, Inc. (Canada)................................. 50,000 412,500
Kinross Gold Corp. (Canada)**................................... 500,000 3,625,000
Newmont Gold Co................................................. 35,000* 1,260,000
Pan American Silver Corp. (Canada)**............................ 100,000* 662,500
Placer Dome, Inc. (Canada) ..................................... 32,000 700,000
Prime Resource Group Inc. (Canada)**............................ 281,800 2,042,740
Santa Fe Pacific Gold Corp...................................... 100,000 987,500
Stillwater Mining Co.**......................................... 100,000* 1,687,500
TVX Gold, Inc. (Canada)**....................................... 105,000 682,500
----------
TOTAL COMMON STOCKS
(Cost $ 12,705,916) (39.62)% 13,954,615
------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 246
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS
GOLD AND MINING PRODUCTS (7.16%)
Freeport-McMoRan Copper & Gold, Inc., Ser SILV**.......................................... 120,000 $2,520,000
----------
TOTAL PREFERRED STOCKS
(Cost $ 2,521,200) (7.16%) 2,520,000
------ ----------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S
RATE DATE OMITTED)
---- ---- --------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.95%)
Investment in a joint repurchase agreement
transaction with SBC Capital Markets Inc.--
Dated 10-31-95, Due 11-01-95
(secured by U.S. Treasury Bond, 8.75%
Due 05-15-17, U.S. Treasury Note, 5.750%
Due 09-30-97) Note A............................................ 5.890% 11-01-95 $ 334 334,000
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%.............................................. 745
-----------
TOTAL SHORT-TERM INVESTMENTS (00.95)% 334,745
------ -----------
TOTAL INVESTMENTS (93.73)% $33,008,378
====== ===========
<FN>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended October 31, 1995.
** Non-income producing security.
</TABLE>
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.
13
<PAGE> 247
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end investment management
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Gold & Government Fund (the "Fund"),
John Hancock Regional Bank Fund, John Hancock Sovereign U.S. Government Income
Fund, John Hancock Sovereign Achievers Fund and John Hancock Managed Tax-Exempt
Fund. Prior to January 1, 1995, John Hancock Gold & Government Fund was known as
John Hancock Freedom Gold & Government Fund and John Hancock Regional Bank Fund
was known as John Hancock Freedom Regional Bank Fund.
The Trustees have authorized the issuance of two classes of shares of the
Fund, designated as Class A and Class B. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, dividends, and liquidation, except that certain expenses,
subject to the approval of the Trustees, may be applied differently to each
class of shares in accordance with current regulations of the Securities and
Exchange Commission. Shareholders of a class which bears distribution/service
expenses under the terms of a distribution plan, have exclusive voting rights
regarding such distribution plan. Significant accounting policies of the Fund
are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $11,789,591 of capital
loss carryforwards available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the Fund,
no capital gain distribution will be made. The carryforwards expire as follows:
October 31, 2002 -- $8,066,420, and October 31, 2003 -- $3,723,171
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis. 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 principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and will be in
the same amount, except for the effect of expenses that may be applied
differently to each class as explained previously. EXPENSES The majority of the
expenses of the Trust are directly identifiable to an individual Fund. Expenses
which are not readily identifiable to a specific Fund are allocated in such a
manner as deemed
14
<PAGE> 248
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
equitable, taking into consideration, among other things the nature and type of
expense and the relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
FOREIGN CURRENCY TRANSLATION All assets and 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 or 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.
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
will be 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 on 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", will be 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. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuation imposed by an exchange.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1995, there were no open position in financial futures
contracts.
OPTIONS Listed options will be valued at the last quoted sales price on the
exchange on which they are primarily traded. Purchased put or call
over-the-counter options will be valued at the average of the "bid" prices
obtained from two independent brokers. Written put or call over-the-counter
options will be valued at the average of the "asked" prices obtained from two
independent brokers. Upon the writing of a call or put option, an amount equal
to the premium received by the Fund will be included in the Statement of Assets
and Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked-to-market to reflect the current market
value of the written option.
The Fund may use option contracts to manage its exposure to the stock market.
Writing puts and buying calls will tend to increase the
15
<PAGE> 249
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
Fund's exposure to the underlying instrument and buying puts and writing calls
will 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 will reflect 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 contract's
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
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 October 31,
1995.
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.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended October 31, 1995, net
sales charges received on sales of Class A shares amounted to $3,733. Out of
this amount, $557 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $1,128 was paid as sales commissions to
unrelated broker-dealers and $2,048 was paid as sales commissions to sales
personnel of John Hancock Distributors, Inc. ("Distributors"), Tucker Anthony
Incorporated ("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"), all of which
are broker dealers. The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company, is the indirect sole shareholder of Distributors and John
Hancock Freedom Securities Corporation and its subsidiaries, which include FDC,
Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the period ended October 31,
1995 the contingent deferred sales charges paid to JH Funds amounted to $66,652.
In addition, to reimburse the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted Distribution Plans
with respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors for distribution and service expenses, at an annual rate not
exceed 0.30% of Class A
16
<PAGE> 250
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
average daily net assets and 1.00% of Class B average daily net assets to
reimburse the Co-Distributors for their distribution/service costs. Up to a
maximum of 0.25% of such payments may be service fees as defined by the amended
Rules of Fair Practice of the National Association of Securities Dealers. Under
the amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances. In order to comply with this
rule, the 12b-1 fee on Class B shares was decreased to 0.95% effective August 1,
1995 and decreased to 0.90% effective October 1, 1995.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Prior to January 1, 1995, the Fund paid a monthly
transfer agent fee equivalent, on an annual basis, to 0.23% and 0.25% of the
average daily net asset value of Class A and Class B shares of the Fund,
respectively, plus out of pocket expenses incurred by Investor Services on
behalf of the Fund.
For the period January 1, 1995 and through September 30, 1995 Class A and
Class B shares paid transfer agent fees based on the number of shareholder
accounts and certain out-of-pocket expenses. For the eleven months ended
September 30, 1995 the transfer agent expense, calculated as a class specific
expense was $34,231 for Class A and $70,396 for Class B, respectively. Effective
October 1, 1995 transfer agent expense is being treated as a fund expense based
on the number of shareholder accounts in the Fund and certain out-of-pocket
expenses.
Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates, as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as an other asset. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other then obligations of the
U.S. government and its agencies and short-term securities, during the period
ended October 31, 1995, aggregated $4,466,153 and $17,809,838, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies aggregated $19,566,429 and $17,879,328, respectively, during the period
ended October 31, 1995.
The cost of investments owned at October 31, 1995 for Federal Income Tax
purposes was $32,438,784. Gross unrealized appreciation and depreciation of
investments aggregated $2,191,951 and $1,623,102, respectively, resulting in net
unrealized appreciation of $568,849.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1995, the Fund has reclassified $1,590 from
accumulated net realized loss on investments sold to undistributed net
investment income. This represents the amount necessary to report these balances
on a tax basis, excluding certain temporary differences, as of October 31, 1995.
Additional adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the Fund, are
primarily attributable to certain differences in the computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles.
17
<PAGE> 251
John Hancock Funds - Gold & Government Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Gold & Government Fund and the Trustees of
Freedom Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Gold & Government Fund
(the "Fund") (formerly known as John Hancock Freedom Gold & Government Fund) (a
portfolio of Freedom Investment Trust) at October 31, 1995, and the results of
its operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is furnished with
respect to the distributions of the Fund during its fiscal year ended October
31, 1995.
Shareholders will receive a 1995 U.S. Treasury Department Form 1099-DIV in
January of 1996. This will reflect the total of all distributions which are
taxable for the calendar year 1995.
For the fiscal year ending October 31, 1995, 15.95% of the ordinary income
distributions qualify for the dividends received deduction.
18
<PAGE> 252
PART C.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements included in the Registration Statement:
Freedom Investment Trust
John Hancock Gold & Government Fund
John Hancock Regional Bank Fund
John Hancock Sovereign Achievers Fund
John Hancock U.S. Government Income Fund
John Hancock Managed Tax-Exempt Fund
Satement of Assets and Liabilities as of October 31, 1995
Statement of Operations for the year ended October 31, 1995
Statement of Changes in Net Assets for each of the two years
in the period ended October 31, 1995 Financial Highlights for
each of the 10 years ended October 31, 1995 Schedule of
Investments as of October 31, 1995 Notes to Financial
Statements Schedule of Investment as of October 31, 1995
(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 January 31, 1996 the number of record holders of shares of
Registrant was as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
Class A Class B
------- -------
<S> <C> <C>
John Hancock Gold & Government Fund 1,927 1,646
John Hancock Regional Bank Fund 46,888 91,991
John Hancock Managed Tax-Exempt Fund 1,282 4,375
John Hancock Sovereign Achievers Fund 3,362 8,095
John Hancock Sovereign U.S. Government Income Fund 39,015 6,247
John Hancock Financial Services Fund 0 0
</TABLE>
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<PAGE> 253
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.
C-2
<PAGE> 254
Section 9(a) of the By-Laws of the Insurance Company provides, in effect,
that the Insurance Company will, subject to limitations of law, indemnify each
present and former director, officer and employee of the of the Insurance
Company who serves as a Trustee or officer of the Registrant at the direction or
request of the Insurance Company against litigation expenses and liabilities
incurred while acting as such, except that such indemnification does not cover
any expense or liability incurred or imposed in connection with any matter as to
which such person shall be finally adjudicated not to have acted in good faith
in the reasonable belief that his action was in the best interests of the
Insurance Company. In addition, no such person will be indemnified by the
Insurance Company in respect of any liability or expense incurred in connection
with any matter settled without final adjudication unless such settlement shall
have been approved as in the best interests of the Insurance Company either by
vote of the Board of Directors at a meeting composed of directors who have no
interest in the outcome of such vote, or by vote of the policyholders. The
Insurance Company may pay expenses incurred in defending an action or claim in
advance of its final disposition, but only upon receipt of an undertaking by the
person indemnified to repay such payment if he should be determined to be
entitled to indemnification.
Article IX of the respective By-Laws of John Hancock Funds and the
Adviser provide as follows:
"Section 9.01. Indemnity: Any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the Corporation a serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by the Corporation
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and the liability was not
incurred by reason of gross negligence or reckless disregard of the duties
involved in the conduct of his office, and expenses in connection therewith may
be advanced by the Corporation, all to the full extent authorized by the law."
"Section 9.02. Not Exclusive; Survival of Rights: The indemnification provided
by Section 9.01 shall not be deemed exclusive of any other right to which those
indemnified may be entitled, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such as person."
Insofar as indemnification for liabilities under the Securities Act of 1933 (the
"Act") may be permitted to Trustees, officers and controlling persons of
Registrant pursuant to the Registrant's Amended and Restated Articles of
Incorporation, Article 10.1 of the Registrant's By-Laws, The underwriting
Agreement, the By-Laws of Distributors, the Adviser, or the Insurance Company or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether indemnification by it
C-3
<PAGE> 255
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 (except Special Opportunities Fund and
International Fund, which have one, John Hancock Funds). 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 Fund, John Hancock Current Interest, John Hancock Series, Inc.,
John Hancock Tax-Free Bond Fund, John Hancock California Tax-Free Income Fund,
John Hancock Capital Series, John Hancock Limited-Term Government Fund, John
Hancock Tax-Exempt Income Fund, John Hancock Sovereign Investors Fund, Inc.,
John Hancock Special Equities Fund, John Hancock Sovereign Bond Fund, John
Hancock Tax-Exempt Series, John 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.
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<PAGE> 256
<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
Thomas H. Drohan Senior Vice President Senior Vice President and
101 Huntington Avenue Secretary
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
</TABLE>
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<PAGE> 257
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
------------------ --------------------- ---------------------
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
---------------- ---------------- ---------------
<S> <C> <C>
Michael T. Carpenter 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 Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President and Secretary Vice President,
101 Huntington Avenue Assistant Secretary
Boston, Massachusetts and Compliance Officer
Christopher M. Meyer Treasurer None
101 Huntington Avenue
Boston, Massachusetts
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John Goldsmith Director None
One Beacon Street
Boston, Massachusetts
</TABLE>
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<PAGE> 258
<TABLE>
<S> <C> <C>
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
<FN>
(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>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
------------------ --------------------- ---------------------
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
---------------- ---------------- ---------------
<S> <C> <C>
John J. Danello President, Director None
One Beacon Street and Clerk
Boston, Massachusetts
Thomas J. Brown Treasurer and Director None
One Beacon Street
Boston, Massachusetts
Dexter A. Dodge Vice President None
One Beacon Street
Boston, Massachusetts
<FN>
(b) None
(c) None.
</TABLE>
C-7
<PAGE> 259
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> 260
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 of 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, thereto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts on the
28rd day of February, 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman
- -------------------------------
Edward J. Boudreau, Jr. (Principal Executive Officer)
/s/ James B. Little
- ------------------------------- Senior Vice President and Chief February 28, 1996
James B. Little Financial Officer (Principal Financial
and Accounting Officer)
* Trustee
- -------------------------------
Douglas M. Costle
* Trustee
- -------------------------------
Leland O. Erdahl
* Trustee
- -------------------------------
Richard A. Farrell
* Trustee
- -------------------------------
William F. Glavin
</TABLE>
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<PAGE> 261
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Trustee
- -------------------------------
John A. Moore
* Trustee
- -------------------------------
Patti McGill Peterson
* Trustee
- -------------------------------
John W. Pratt
*By: /s/ Thomas H. Drohan February 28, 1996
---------------------
Thomas H. Drohan, Attorney-in-Fact
under Powers of Attorney dated June 25, 1992,
December 14, 1992, and August 17, 1993.
</TABLE>
C-10
<PAGE> 262
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NUMBER
----------- ----------- -----------
<S> <C> <C>
99.B1 Master Trust Agreement (Agreement and Declaration of Trust)
amended and restated dated September 10, 1991; Amendment
No. 1 to the Master Trust Agreement dated June 25, 1992;
Amendment No.2 to the Master Trust Agreement dated June 25,
1992; Amendment No. 3 to the Master Trust Agreement dated
September 16, 1992; Amendment to the Master Trust Agreement
dated August 3, 1993; Amendment to the Master Trust
Agreement dated September 2, 1994; Amendment to the Master
Trust Agreement dated September 27, 1994. *
99.B1.1 Amendment to the Master Trust Agreement Abolition of Class C Shares of Beneficial
Interest of John Hancock U.S. Government Income Fund dated May 1, 1995.+
99.B1.2 Amendment to the Master Trust Agreement dated December
11, 1995.*
99.B2 By-Laws as amended September 16, 1992.*
99.B3 None.
99.B4 Designation of Classes dated December 14, 1992.*
99.B4.1 Specimen share certificate for Regional Bank Fund (Classes A
and B).*
.
99.B4.2 Specimen share certificate for Sovereign U.S. Government Income Fund (Classes A, B
and C).*
99.B4.3 Specimen shares certificate for Managed Tax Exempt Fund (Classes A and B).*
99.B4.4 Specimen shares certificate for Gold & Government Fund (Classes A and B).*
99.B4.5 Specimen Shares certificate for Sovereign Achievers Fund (Classes A and B).*
99.B5 Advisory Agreement restated January 1, 1994.*
</TABLE>
C-11
<PAGE> 263
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NUMBER
----------- ----------- -----------
<S> <C> <C>
99.B5.1 Investment Management Contract between the Registrant on behalf of John Hancock
Financial Services Fund and John Hancock Advisers, Inc.*
99.B6 Distribution Agreement with John Hancock Broker Distribution Services, Inc. and
Freedom Distributors Corporation.*
99.B6.1 Form of Financial Institution Sales and Service Agreement.*
99.B6.2 Form of Soliciting Dealer Agreement between John Hancock Broker Distribution
Services, Inc. and Selected Dealers.*
99.B6.3 Form of Amendment to Distribution Agreement between John Hancock Funds.*
99.B7 None.
99.B8 Custodian Contract with Investors Bank and Trust Company Bank, dated December 15,
1992.*
99.B9 Transfer Agency and Service Agreement with John Hancock Fund Services, Inc.*
99.B9.1 Service Agreement between John Hancock Advisers, Inc. and Berkeley Investment
Partners (now TBFG Advisers, Inc.) dated October 1, 1992.*
99.B10 Legal opinion and consent of Goodwin, Procter & Hoar dated May 16, 1986.*
99.B10.1 Legal opinion and consent of Goodwin, Procter & Hoar dated February 3, 1986.*
99.B10.2 Legal opinion and consent of Goodwin, Procter & Hoar dated March 27, 1987.*
99.B10.3 Legal opinion and consent of Goodwin, Procter & Hoar dated December 20, 1991.*
99.B10.4 Legal opinion and consent of Goodwin, Procter & Hoar dated December 27, 1992.*
99.B11 Consent of Price Waterhouse LLP+
99.B11.1 Consent of Morningstar Mutual Fund Values.*
</TABLE>
C-12
<PAGE> 264
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NUMBER
----------- ----------- -----------
<S> <C> <C>
99.B12 Financial Statement of the Gold & Government Fund for the
year ended October 31, 1995 filed herewith in Part A and
Part B.+
99.B12.1 Financial Statement of the Regional Bank Fund for the year
ended October 31, 1995 filed herewith in Part A and Part
B.+
99.B12.2 Financial Statement of the Sovereign U.S. Government Income Fund for the year
ended October 31, 1995 filed herewith in Part A and Part B.+
99.B12.3 Financial Statement of the Sovereign Achievers Fund for the
year ended October 31, 1995 filed herewith in Part A and
Part B.+
99.B12.4 Financial Statement of the Managed Tax-Exempt Fund for the
year ended October 31, 1995 filed herewith in Part A and
Part B.+
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.B17 Power of Attorney dated June 25, 1992; Power of Attorney
date December 14, 1992 and Power of Attorney dated August
17, 1993.*
27.1A John Hancock Regional Bank Fund
27.1B John Hancock Regional Bank Fund
27.2A John Hancock Gold & Government Fund
27.2B John Hancock Gold & Government Fund
27.3A John Hancock Sovereign U.S. Government Income Fund
27.3B John Hancock Sovereign U.S. Government Income Fund
27.4A John Hancock Sovereign Achievers Fund
27.4B John Hancock Sovereign Achievers Fund
27.5A John Hancock Managed Tax-Exempt Fund
27.5B John Hancock Managed Tax-Exempt Fund
<FN>
*Previously filed with Registration Statement and/or post-effective amendment
and incorporated by reference herein.
+Filed herewith.
</TABLE>
C-13
<PAGE> 1
Exhibit 99.B1.1
FREEDOM INVESTMENT TRUST
Abolition of Class C Shares
of Beneficial Interest of
John Hancock U.S. Government Income Fund (the "Fund"),
a Series of Freedom Investment Trust
The undersigned, being a majority of the Trustees of Freedom Investment
Trust, a Massachusetts business Trust (the "Trust"), acting pursuant to the
Amended and Restated Declaration of Trust dated September 10, 1991 of the Trust,
as amended from time to time (the "Declaration of Trust"), do hereby abolish the
class of shares of beneficial interest of the Funds previously established and
designated as "Class C Shares" and in connection therewith do hereby extinguish
any and all rights and preferences of such Class C Shares as set forth in the
Declaration of Trust and the Trust's Registration Statement on Form N-1A. The
abolition of the Class C shares of the Fund is effective as of May 1, 1995.
The Declaration of Trust is hereby amended to the extent necessary to
reflect the abolition of Class C Shares.
Capitalized terms not otherwise defined herein shall have the meaning
set forth in the Declaration of Trust.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have executed this instrument the
1st day of May, 1995.
/s/ Edward J.Boudreau, Jr.
- ---------------------------- ------------------------------
Edward J. Boudreau, Jr. Hugh A. Dunlap, Jr.
as Trustee, not individually as Trustee, not individually
34 Swan Road 101 Huntington Avenue
Winchester, MA 01890 Boston, MA 02199
/s/William A. Barron, III /s/Patrick Grant
- ---------------------------- ------------------------------
William A. Barron III Patrick Grant
as Trustee, not individually as Trustee, not individually
RRI, 325 Sea Meadows Lane 5 Polo Field Lane
Yarmouth, ME 04096 Dedham, MA 02026
/s/ Douglas M. Costle /s/ Ralph Lowell, Jr.
- ---------------------------- ------------------------------
Douglas M. Costle Ralph Lowell, Jr.
as Trustee, not individually as Trustee, not individually
RR2 Box 480 45 Mill Street
Woodstock, VT 05091 Edgartown, MA 02539
/s/ Leland O. Erdahl /s/ Dr. John A. Moore
- ---------------------------- ------------------------------
Leland O. Erdahl Dr. John A. Moore
as Trustee, not individually as Trustee, not individually
161 Camino Barranca Institute of Evaluating Health
Placitas, NM 87043 Risks, Suite 608
1101 Vermont Ave., N.W.
Washington, DC 20005
/s/ Richard A. Farrell /s/ Patti McGill Peterson
- ---------------------------- ------------------------------
Richard A. Farrell Patti McGill Peterson
as Trustee, not individually as Trustee, not individually
Farrell, Healer & Company, Inc. St. Lawrence University
160 Federal St., 23rd Floor 110 Vilas Hall
Boston, MA 02110 Canton, NY 136117
/s/ William F. Glavin /s/ John W. Pratt
- ---------------------------- ------------------------------
William F. Glavin John W. Pratt
as Trustee, not individually as Trustee, not individually
Babson College 2 Gray Gardens East
Horn Library Cambridge, MA 02138
Babson Park, MA 02157
<PAGE> 3
The Declaration, a copy of which, together with all amendments thereto,
is on file in the office of the Secretary of State of The Commonwealth of
Massachusetts, provides that no Trustee, officer, employee or agent of the Trust
or any Series thereof shall be subject to any personal liability whatsoever to
any Person, other than to the Trust or its shareholders, in connection with
Trust Property or the affairs of the Trust, save only that arising from bad
faith, willful misfeasance, gross negligence or reckless disregard of his duties
with respect to such Person; and all such Persons shall look solely to the Trust
Property, or to the Trust Property of one or more specific Series of the trust
if the claim arises from the conduct of such Trustee, officer, employee or agent
with respect to only such Series, for satisfaction of claims of any nature
arising in connection with the affairs of the Trust.
<PAGE> 1
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statements of Additional Information
constituting part of this Post Effective Amendment No. 34 to the registration
statement on Form N-1A (the "Registration Statement") of our reports dated
December 14, 1995, relating to the financial statements and financial
highlights appearing in the October 31, 1995 Annual Reports to Shareholders of
John Hancock Sovereign U.S. Government Income Fund, John Hancock Regional Bank
Fund, John Hancock Gold & Government Fund and John Hancock Sovereign
Achievers Fund, and our report dated December 18, 1995 relating to the
financial statements and financial highlights appearing in the October 31, 1995
Annual Report to Shareholders of John Hancock Managed Tax-Exempt Fund which
appear in such Statement of Additional Information, and to the incorporation by
reference of our reports into the Prospectuses which constitute parts of this
Registration Statement. We also consent to the references to us under the
headings "Independent Auditors" in such Statement of Additional Information and
to the references to us under the headings "The Fund's Financial Highlights" in
the such Prospectuses.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 21, 1996
<PAGE> 1
Exhibit 16
<TABLE>
FUND# 99962 INVESTORS BANK & TRUST FUND ACCOUNTING AND CUSTODY TRACKING SYSTEM 11/1/95
JH GOLD & GOVT. CLS A DAILY SUMMARY AND DETAIL REPORT
<CAPTION>
DETAIL INFORMATION: INCOME,EXPENSES,SHARES OUTSTANDING & MAX OFFERING PRICE
DAY DATE INCOME EXPENSES SHARES MAX OFFERING PRICE YIELD
<S> <C> <C> <C> <C> <C> <C>
01 10/02/95 1,610.0713 933.22 1,421,939.034
02 10/03/95 1,598.9771 931.64 1,420,026.389
03 10/04/95 1,588.6992 925.54 1,419,670.308
04 10/05/95 1,581.6882 924.60 1,419,100.042
05 10/06/95 1,580.8494 922.42 1,416,117.704
06 10/07/95 1,580.8494 925.15 1,416,117.704
07 10/08/95 1,580.8494 925.15 1,416,117.704
08 10/09/95 1,578.0529 925.15 1,414,627.433
09 10/10/95 1,761.3959 924.69 1,426,731.942
10 10/11/95 1,765.0148 927.23 1,426,417.556
11 10/12/95 1,734.3383 925.01 1,416,621.450
12 10/13/95 1,722.0967 919.05 1,416,245.262
13 10/14/95 1,722.0967 918.10 1,416,245.262
14 10/15/95 1,722.0967 918.10 1,416,245.262
15 10/16/95 1,719.2092 918.10 1,414,146.925
16 10/17/95 1,711.2478 914.17 1,414,201.735
17 10/18/95 1,708.8529 908.98 1,411,847.831
18 10/19/95 1,697.9400 896.90 1,406,135.138
19 10/20/95 1,706.2709 890.53 1,401,463.109
20 10/21/95 1,706.2709 887.30 1,401,463.109
21 10/22/95 1,706.2709 887.30 1,401,463.109
22 10/23/95 1,703.4366 887.30 1,397,540.792
23 10/24/95 1,688.2181 875.20 1,395,884.096
24 10/25/95 1,677.0145 875.49 1,392,630.528
25 10/26/95 1,687.8144 875.85 1,399,779.349
26 10/27/95 1,671.6430 864.78 1,390,735.437
27 10/28/95 1,671.6430 850.46 1,390,735.437
28 10/29/95 1,671.6430 850.46 1,390,735.437
29 10/30/95 1,663.1604 850.46 1,387,147.912
30 10/31/95 1,625.7043 854.58 1,386,291.114
TOTAL: 50,143.4159 27,032.91 42,244,424.110 13.90 1.42105%
AVERAGE SHARES: 1,408,147.470
</TABLE>
<PAGE> 2
<TABLE>
FUND# 99963 11/1/95
JH GOLD & GOVT. CLS B DAILY SUMMARY AND DETAIL REPORT
<CAPTION>
DETAIL INFORMATION: INCOME,EXPENSES,SHARES OUTSTANDING & MAX OFFERING PRICE
DAY DATE INCOME EXPENSES SHARES MAX OFFERING PRICE YIELD
<S> <C> <C> <C> <C> <C> <C>
01 10/02/95 1,487.5921 1,190.78 1,315,211.626
02 10/03/95 1,477.7590 1,170.51 1,313,880.507
03 10/04/95 1,468.6066 1,162.74 1,313,882.800
04 10/05/95 1,460.4050 1,160.57 1,311,831.438
05 10/06/95 1,462.6870 1,159.05 1,311,836.807
06 10/07/95 1,462.6870 1,163.43 1,311,836.807
07 10/08/95 1,462.6870 1,163.43 1,311,836.807
08 10/09/95 1,460.1616 1,163.43 1,310,534.616
09 10/10/95 1,629.4700 1,162.66 1,321,539.895
10 10/11/95 1,638.6113 1,168.96 1,325,960.977
11 10/12/95 1,607.8883 1,166.06 1,315,040.898
12 10/13/95 1,596.4135 1,157.57 1,314,608.549
13 10/14/95 1,596.4135 1,156.56 1,314,608.549
14 10/15/95 1,596.4135 1,156.56 1,314,608.549
15 10/16/95 1,594.2381 1,156.56 1,313,095.549
16 10/17/95 1,577.4169 1,146.41 1,305,401.494
17 10/18/95 1,573.0653 1,136.32 1,301,805.773
18 10/19/95 1,568.7486 1,122.99 1,301,311.042
19 10/20/95 1,579.6951 1,117.46 1,299,682.894
20 10/21/95 1,579.6951 1,113.42 1,299,682.894
21 10/22/95 1,579.6951 1,113.42 1,299,682.894
22 10/23/95 1,576.2496 1,113.42 1,295,393.931
23 10/24/95 1,562.3348 1,097.24 1,294,062.027
24 10/25/95 1,554.2777 1,098.89 1,292,989.090
25 10/26/95 1,564.4879 1,099.96 1,299,813.728
26 10/27/95 1,543.9815 1,082.43 1,286,837.139
27 10/28/95 1,543.9815 1,063.30 1,286,837.139
28 10/29/95 1,543.9815 1,063.30 1,286,837.139
29 10/30/95 1,538.0785 1,063.30 1,285,149.047
30 10/31/95 1,503.0621 1,068.95 1,284,093.314
TOTAL: 46,390.7847 33,959.68 39,139,893.919 13.18 0.86908%
AVERAGE SHARES: 1,304,663.131
</TABLE>
<PAGE> 3
<TABLE>
JOHN HANCOCK GOLD GOV'T FUND (CLASS A) - SEC TOTAL RETURN
Initial Investment: $1,000.00
<CAPTION>
- -------------------------------------------------------------------------------------------------
Average Annual Total Return Rate Investment Value at End of Period Cumulative
<S> <C> <C> <C> <C>
10 Year Return: N/A 10 Year Value: N/A N/A
3.91 Year Return: -0.63% 5 Year Value: $975.77 -2.42%
1 Year Return: -10.40% 1 Year Value: $895.96 -10.40%
- -------------------------------------------------------------------------------------------------
Constant Sales Charge: 5.00%
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
----- --- -------- ------ ------ -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 /3/92 $15.31 $16.12 5.00%
1 / 92 $15.08 $15.87 5.00%
2 / 92 $15.16 $15.96 5.00%
3 / 92 $14.73 $15.51 5.00% 03/11/92 $0.2100 $14.78
4 / 92 $14.69 $15.46 5.00%
5 / 92 $15.04 $15.83 5.00%
6 / 92 $15.11 $15.91 5.00% 06/10/92 $0.2100 $14.89
7 / 92 $15.47 $16.28 5.00%
8 / 92 $15.52 $16.34 5.00%
9 / 92 $15.47 $16.28 5.00% 09/23/92 $0.2100 $15.35
10 / 92 $15.19 $15.99 5.00%
11 / 92 $14.99 $15.78 5.00%
12 / 92 $15.02 $15.81 5.00% 12/23/92 $0.2480 $14.99
1 / 93 $15.29 $16.09 5.00%
2 / 93 $15.59 $16.41 5.00%
3 / 93 $15.83 $16.66 5.00%
4 / 93 $15.89 $16.73 5.00% 04/01/93 $0.1878 $15.60
5 / 93 $16.14 $16.99 5.00%
6 / 93 $16.51 $17.38 5.00%
7 / 93 $16.66 $17.54 5.00% 07/02/93 $0.1871 $16.44
8 / 93 $16.91 $17.80 5.00%
9 / 93 $16.68 $17.56 5.00%
10 / 93 $16.91 $17.80 5.00% 10/01/93 $0.1814 $16.53
11 / 93 $16.66 $17.54 5.00%
12 / 93 $16.51 $17.38 5.00% 12/23/93 $0.4079 $16.60 $0.2390
1 / 94 $16.78 $17.66 5.00%
2 / 94 $16.08 $16.93 5.00%
3 / 94 $15.63 $16.45 5.00%
4 / 94 $15.04 $15.83 5.00% 04/04/94 $0.1876 $14.99
5 / 94 $15.04 $15.83 5.00%
6 / 94 $14.67 $15.44 5.00%
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year 1-Year
----------------------------------- ------------------------------------ --------------------------------------
Month Dividend # of Shares Shares Dividend # of Shares Shares Dividend # of Shares Shares
Ended Received Reinv. Outstanding Received Reinv. Outstanding Received Reinv. Outstanding
----- -------- ----------- ----------- -------- ----------- ----------- -------- ----------- -----------
<S> <C> <C> <C>
1 /3/92 62.035
1 / 92 $0.0000 0.000 62.035
2 / 92 $0.0000 0.000 62.035
3 / 92 $13.0274 0.881 62.916
4 / 92 $0.0000 0.000 62.916
5 / 92 $0.0000 0.000 62.916
6 / 92 $13.2124 0.887 63.803
7 / 92 $0.0000 0.000 63.803
8 / 92 $0.0000 0.000 63.803
9 / 92 $13.3986 0.873 64.676
10 / 92 $0.0000 0.000 64.676
11 / 92 $0.0000 0.000 64.676
12 / 92 $16.0396 1.070 65.746
1 / 93 $0.0000 0.000 65.746
2 / 93 $0.0000 0.000 65.746
3 / 93 $0.0000 0.000 65.746
4 / 93 $12.3471 0.791 66.537
5 / 93 $0.0000 0.000 66.537
6 / 93 $0.0000 0.000 66.537
7 / 93 $12.4491 0.757 67.294
8 / 93 $0.0000 0.000 67.294
9 / 93 $0.0000 0.000 67.294
10 / 93 $12.2071 0.738 68.032
11 / 93 $0.0000 0.000 68.032
12 / 93 $27.7503 1.672 69.704
1 / 94 $0.0000 0.000 69.704
2 / 94 $0.0000 0.000 69.704
3 / 94 $0.0000 0.000 69.704
4 / 94 $13.0765 0.872 70.576
5 / 94 $0.0000 0.000 70.576
6 / 94 $0.0000 0.000 70.576
</TABLE>
<PAGE> 4
<TABLE>
Initial Investment: $1,000.00
<CAPTION>
- -------------------------------------------------------------------------------------------------
Cummulative
Average Annual Total Return Rate Investment Value at End of Period
<S> <C> <C> <C> <C>
10 Year Return: N/A 10 Year Value: N/A N/A
3.91 Year Return: -0.63% 5 Year Value: $975.77 -2.42%
1 Year Return: -10.40% 1 Year Value: $895.96 -10.40%
- -------------------------------------------------------------------------------------------------
Constant Sales Charge: 5.00%
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
----- --- -------- ------ ------ -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
7 / 94 $14.74 $15.52 5.00% 07/08/94 $0.1913 $14.47
8 / 94 $14.96 $15.75 5.00%
9 / 94 $15.26 $16.06 5.00%
10 / 94 $14.35 $15.11 5.00% 10/03/94 $0.1196 $15.10
11 / 94 $13.20 $13.89 5.00%
12 / 94 $13.51 $14.22 5.00% 12/23/94 $0.0706 $13.31
1 / 95 $12.68 $13.35 5.00%
2 / 95 $12.82 $13.49 5.00%
3 / 95 $13.61 $14.33 5.00%
4 / 95 $13.69 $14.41 5.00% 04/03/95 $0.0819 $13.54
5 / 95 $14.01 $14.75 5.00%
6 / 95 $14.13 $14.87 5.00% 06/29/95 $0.0900 $14.37
7 / 95 $14.12 $14.86 5.00%
8 / 95 $14.38 $15.14 5.00%
9 / 95 $14.39 $15.15 5.00% 09/22/95 $0.1121 $14.43
10 / 95 $13.20 $13.89 5.00%
- ----------- ------ ------ ----- -------- ------- ------ -------------
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year 1-Year
----------------------------------- ------------------------------------ --------------------------------------
Month Dividend # of Shares Shares Dividend # of Shares Shares Dividend # of Shares Shares
Ended Received Reinv. Outstanding Received Reinv. Outstanding Received Reinv. Outstanding
----- -------- ----------- ----------- -------- ----------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
7 / 94 $13.5012 0.933 71.509
8 / 94 $0.0000 0.000 71.509
9 / 94 $0.0000 0.000 71.509
10 / 94 $8.5525 0.566 72.075 66.181
11 / 94 $0.0000 0.000 72.075 $0.0000 0.000 66.181
12 / 94 $5.0885 0.382 72.457 $4.6724 0.351 66.532
1 / 95 $0.0000 0.000 72.457 $0.0000 0.000 66.532
2 / 95 $0.0000 0.000 72.457 $0.0000 0.000 66.532
3 / 95 $0.0000 0.000 72.457 $0.0000 0.000 66.532
4 / 95 $5.9342 0.438 72.895 $5.4490 0.402 66.934
5 / 95 $0.0000 0.000 72.895 $0.0000 0.000 66.934
6 / 95 $6.5606 0.457 73.352 $6.0241 0.419 67.353
7 / 95 $0.0000 0.000 73.352 $0.0000 0.000 67.353
8 / 95 $0.0000 0.000 73.352 $0.0000 0.000 67.353
9 / 95 $8.2228 0.570 73.922 $7.5503 0.523 67.876
10 / 95 $0.0000 0.000 73.922 $0.0000 0.000 67.876
- ---------- -------- ----------- ----------- ------- ----- ------ ------- ----- ------
</TABLE>
<PAGE> 5
<TABLE>
JOHN HANCOCK GOLD GOVERNMENT FUND (CLASS B) - SEC TOTAL RETURN
Initial Investment: $1,000.00
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Investment Value at End of Period Cummulative Cummulative
CDSC CDSC
Excluding With Excluding % CDSC Ending Excluding Ending
CDSC CDSC CDSC CDSC Amount Value CDSC Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Year Return: 5.59% 5.59% $1,722.67 $0.00 $0.00 $1,722.67 72.27% 72.27%
5 Year Return: 3.01% 2.65% $1,159.75 2.00% $20.00 $1,139.75 15.98% 13.98%
1 Year Return: -6.34% -11.02% $936.62 5.00% $46.83 $889.79 -6.34% -11.02%
- ---------------------------------------------------------------------------------------------------------------------
Constant Sales Charge: N/A
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
----- --- -------- ------ ------ -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
10 / 85 $14.73 $14.73 N/A
11 / 85 $15.04 $15.04 N/A
12 / 85 $15.41 $15.41 N/A
1 / 86 $15.25 $15.25 N/A 01/17/86 $0.3000 $15.16
2 / 86 $15.72 $15.72 N/A
3 / 86 $16.20 $16.20 N/A
4 / 86 $15.41 $15.41 N/A 04/24/86 $0.8200 $15.42 $0.5200 CAP. GAIN
5 / 86 $15.27 $15.27 N/A
6 / 86 $10.00 $10.00 N/A
7 / 86 $10.00 $10.00 N/A 07/17/86 $0.3000 $15.39 $0.0400 CAP. GAIN
8 / 86 $10.00 $10.00 N/A
9 / 86 $10.00 $10.00 N/A
10 / 86 $15.75 $15.75 N/A 10/24/86 $0.3000 $15.75 $0.0500 CAP. GAIN
11 / 86 $15.91 $15.91 N/A
12 / 86 $10.00 $10.00 N/A
1 / 87 $16.15 $16.15 N/A 1/16/87 $0.3000 $16.08 $0.0500 CAP. GAIN
2 / 87 $10.00 $10.00 N/A
3 / 87 $16.57 $16.57 N/A
4 / 87 $15.91 $15.91 N/A 04/27/87 $0.6700 $15.76 $0.4500 CAP. GAIN
5 / 87 $15.43 $15.43 N/A
6 / 87 $15.44 $15.44 N/A
7 / 87 $16.17 $16.17 N/A
8 / 87 $15.60 $15.60 N/A 08/06/87 $0.2800 $15.85 $0.1000 CAP. GAIN
9 / 87 $15.48 $15.48 N/A
10 / 87 $14.98 $14.98 N/A
11 / 87 $15.40 $15.40 N/A 11/05/87 $0.2800 $14.70 $0.1000 CAP. GAIN
12 / 87 $15.38 $15.38 N/A
1 / 88 $15.40 $15.40 N/A
2 / 88 $15.52 $15.52 N/A
3 / 88 $15.25 $15.25 N/A 03/01/88 $0.2800 $15.26 $0.1000 CAP. GAIN
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year 1-Year
----------------------------------- ------------------------------------ --------------------------------------
Month Dividend # of Shares Shares Dividend # of Shares Shares Dividend # of Shares Shares
Ended Received Reinv. Outstanding Received Reinv. Outstanding Received Reinv. Outstanding
----- -------- ----------- ----------- -------- ----------- ----------- -------- ----------- -----------
<S> <C> <C> <C>
10 / 85 67.889
11 / 85 $0.0000 0.000 67.889
12 / 85 $0.0000 0.000 67.889
1 / 86 $20.3667 1.343 69.232
2 / 86 $0.0000 0.000 69.232
3 / 86 $0.0000 0.000 69.232
4 / 86 $56.7702 3.682 72.914
5 / 86 $0.0000 0.000 72.914
6 / 86 $0.0000 0.000 72.914
7 / 86 $21.8742 1.421 74.335
8 / 86 $0.0000 0.000 74.335
9 / 86 $0.0000 0.000 74.335
10 / 86 $22.3005 1.416 75.751
11 / 86 $0.0000 0.000 75.751
12 / 86 $0.0000 0.000 75.751
1 / 87 $22.7253 1.413 77.164
2 / 87 $0.0000 0.000 77.164
3 / 87 $0.0000 0.000 77.164
4 / 87 $51.6999 3.280 80.444
5 / 87 $0.0000 0.000 80.444
6 / 87 $0.0000 0.000 80.444
7 / 87 $0.0000 0.000 80.444
8 / 87 $22.5243 1.421 81.865
9 / 87 $0.0000 0.000 81.865
10 / 87 $0.0000 0.000 81.865
11 / 87 $22.9222 1.559 83.424
12 / 87 $0.0000 0.000 83.424
1 / 88 $0.0000 0.000 83.424
2 / 88 $0.0000 0.000 83.424
3 / 88 $23.3587 1.531 84.955
</TABLE>
<PAGE> 6
JOHN HANCOCK GOLD GOVERNMENT FUND (CLASS B) - SEC TOTAL RETURN
<TABLE>
Initial Investment: $1,000.00
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Investment Value at End of Period Cummulative Cummulative
CDSC CDSC
Excluding With Excluding % CDSC Ending Excluding Ending
CDSC CDSC CDSC CDSC Amount Value CDSC Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Year Return: 5.59% 5.59% $1,722.67 $0.00 $0.00 $1,722.67 72.27% 72.27%
5 Year Return: 3.01% 2.65% $1,159.75 2.00% $20.00 $1,139.75 15.98% 13.98%
1 Year Return: -6.34% -11.02% $936.62 5.00% $46.83 $889.79 -6.34% -11.02%
- ---------------------------------------------------------------------------------------------------------------------
Constant Sales Charge: N/A
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
----- --- -------- ------ ------ -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
4 / 88 $15.18 $15.18 N/A
5 / 88 $14.69 $14.69 N/A 05/11/88 $0.2900 $14.68 $0.1000 CAP. GAIN
6 / 88 $15.05 $15.05 N/A
7 / 88 $14.90 $14.90 N/A
8 / 88 $14.46 $14.46 N/A 08/12/88 $0.2900 $14.39 $0.1000 CAP. GAIN
9 / 88 $14.64 $14.64 N/A
10 / 88 $14.96 $14.96 N/A
11 / 88 $14.49 $14.49 N/A 11/11/88 $0.2900 $14.55 $0.1000 CAP. GAIN
12 / 88 $14.45 $14.45 N/A
1 / 89 $14.78 $14.78 N/A
2 / 89 $14.48 $14.48 N/A 02/08/89 $0.2900 $14.67 $0.0700 CAP. GAIN
3 / 89 $14.40 $14.40 N/A
4 / 89 $14.53 $14.53 N/A
5 / 89 $14.53 $14.53 N/A 05/10/89 $0.2900 $14.13 $0.0700 CAP. GAIN
6 / 89 $15.07 $15.07 N/A
7 / 89 $15.34 $15.34 N/A
8 / 89 $15.06 $15.06 N/A 08/09/89 $0.2900 $15.07
9 / 89 $15.14 $15.14 N/A
10 / 89 $15.45 $15.45 N/A
11 / 89 $15.66 $15.66 N/A 11/08/89 $0.2900 $15.49
12 / 89 $15.72 $15.72 N/A
1 / 90 $15.51 $15.51 N/A
2 / 90 $15.23 $15.23 N/A 02/07/90 $0.2500 $15.27
3 / 90 $15.09 $15.09 N/A
4 / 90 $14.64 $14.64 N/A
5 / 90 $14.89 $14.89 N/A 05/09/90 $0.2500 $14.57
6 / 90 $14.99 $14.99 N/A
7 / 90 $15.24 $15.24 N/A
8 / 90 $14.61 $14.61 N/A 08/01/90 $0.2500 $15.08
9 / 90 $14.81 $14.81 N/A
10 / 90 $14.51 $14.51 N/A
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year 1-Year
----------------------------------- ------------------------------------ --------------------------------------
Month Dividend # of Shares Shares Dividend # of Shares Shares Dividend # of Shares Shares
Ended Received Reinv. Outstanding Received Reinv. Outstanding Received Reinv. Outstanding
----- -------- ----------- ----------- -------- ----------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C>
4 / 88 $0.0000 0.000 84.955
5 / 88 $24.6370 1.678 86.633
6 / 88 $0.0000 0.000 86.633
7 / 88 $0.0000 0.000 86.633
8 / 88 $25.1236 1.746 88.379
9 / 88 $0.0000 0.000 88.379
10 / 88 $0.0000 0.000 88.379
11 / 88 $25.6299 1.762 90.141
12 / 88 $0.0000 0.000 90.141
1 / 89 $0.0000 0.000 90.141
2 / 89 $26.1409 1.782 91.923
3 / 89 $0.0000 0.000 91.923
4 / 89 $0.0000 0.000 91.923
5 / 89 $26.6577 1.887 93.810
6 / 89 $0.0000 0.000 93.810
7 / 89 $0.0000 0.000 93.810
8 / 89 $27.2049 1.805 95.615
9 / 89 $0.0000 0.000 95.615
10 / 89 $0.0000 0.000 95.615
11 / 89 $27.7284 1.790 97.405
12 / 89 $0.0000 0.000 97.405
1 / 90 $0.0000 0.000 97.405
2 / 90 $24.3513 1.595 99.000
3 / 90 $0.0000 0.000 99.000
4 / 90 $0.0000 0.000 99.000
5 / 90 $24.7500 1.699 100.699
6 / 90 $0.0000 0.000 100.699
7 / 90 $0.0000 0.000 100.699
8 / 90 $25.1748 1.669 102.368
9 / 90 $0.0000 0.000 102.368
10 / 90 $0.0000 0.000 102.368 68.918
</TABLE>
<PAGE> 7
<TABLE>
JOHN HANCOCK GOLD GOVERNMENT FUND (CLASS B) - SEC TOTAL RETURN
Initial Investment: $1,000.00
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Investment Value at End of Period Cummulative Cummulative
CDSC CDSC
Excluding With Excluding % CDSC Ending Excluding Ending
CDSC CDSC CDSC CDSC Amount Value CDSC Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Year Return: 5.59% 5.59% $1,722.67 $0.00 $0.00 $1,722.67 72.27% 72.27%
5 Year Return: 3.01% 2.65% $1,159.75 2.00% $20.00 $1,139.75 15.98% 13.98%
1 Year Return: -6.34% -11.02% $936.62 5.00% $46.83 $889.79 -6.34% -11.02%
- ---------------------------------------------------------------------------------------------------------------------
Constant Sales Charge: N/A
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
----- --- -------- ------ ------ -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
11 / 90 $14.45 $14.45 N/A 11/07/90 $0.2500 $14.31
12 / 90 $14.60 $14.60 N/A 12/04/90 $0.1600 $14.32
1 / 91 $14.50 $14.50 N/A
2 / 91 $14.63 $14.63 N/A
3 / 91 $14.45 $14.45 N/A 03/06/91 $0.2000 $14.38
4 / 91 $14.57 $14.57 N/A
5 / 91 $14.63 $14.63 N/A
6 / 91 $14.44 $14.44 N/A 06/05/91 $0.2000 $14.33
7 / 91 $14.58 $14.58 N/A
8 / 91 $14.87 $14.87 N/A
9 / 91 $15.02 $15.02 N/A 09/11/91 $0.2000 $14.74
10 / 91 $15.13 $15.13 N/A
11 / 91 $15.21 $15.21 N/A
12 / 91 $15.41 $15.41 N/A 12/04/91 $0.3000 $15.02
1 / 92 $15.06 $15.06 N/A
2 / 92 $15.14 $15.14 N/A
3 / 92 $14.72 $14.72 N/A 03/11/92 $0.2000 $14.78
4 / 92 $14.67 $14.67 N/A
5 / 92 $15.02 $15.02 N/A
6 / 92 $15.09 $15.09 N/A 06/10/92 $0.2000 $14.88
7 / 92 $15.45 $15.45 N/A
8 / 92 $15.49 $15.49 N/A
9 / 92 $15.44 $15.44 N/A 09/23/92 $0.2000 $15.32
10 / 92 $15.17 $15.17 N/A
11 / 92 $14.97 $14.97 N/A
12 / 92 $15.01 $15.01 N/A 12/23/92 $0.2280 $14.98
1 / 93 $15.27 $15.27 N/A
2 / 93 $15.57 $15.57 N/A
3 / 93 $15.80 $15.80 N/A
4 / 93 $15.87 $15.87 N/A 04/01/93 $0.1680 $15.59
5 / 93 $16.12 $16.12 N/A
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year 1-Year
----------------------------------- ------------------------------------ --------------------------------------
Month Dividend # of Shares Shares Dividend # of Shares Shares Dividend # of Shares Shares
Ended Received Reinv. Outstanding Received Reinv. Outstanding Received Reinv. Outstanding
----- -------- ----------- ----------- -------- ----------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
11 / 90 $25.5920 1.788 104.156 $17.2295 1.204 70.122
12 / 90 $16.6650 1.164 105.320 $11.2195 0.783 70.905
1 / 91 $0.0000 0.000 105.320 $0.0000 0.000 70.905
2 / 91 $0.0000 0.000 105.320 $0.0000 0.000 70.905
3 / 91 $21.0640 1.465 106.785 $14.1810 0.986 71.891
4 / 91 $0.0000 0.000 106.785 $0.0000 0.000 71.891
5 / 91 $0.0000 0.000 106.785 $0.0000 0.000 71.891
6 / 91 $21.3570 1.490 108.275 $14.3782 1.003 72.894
7 / 91 $0.0000 0.000 108.275 $0.0000 0.000 72.894
8 / 91 $0.0000 0.000 108.275 $0.0000 0.000 72.894
9 / 91 $21.6550 1.469 109.744 $14.5788 0.989 73.883
10 / 91 $0.0000 0.000 109.744 $0.0000 0.000 73.883
11 / 91 $0.0000 0.000 109.744 $0.0000 0.000 73.883
12 / 91 $32.9232 2.192 111.936 $22.1649 1.476 75.359
1 / 92 $0.0000 0.000 111.936 $0.0000 0.000 75.359
2 / 92 $0.0000 0.000 111.936 $0.0000 0.000 75.359
3 / 92 $22.3872 1.515 113.451 $15.0718 1.020 76.379
4 / 92 $0.0000 0.000 113.451 $0.0000 0.000 76.379
5 / 92 $0.0000 0.000 113.451 $0.0000 0.000 76.379
6 / 92 $22.6902 1.525 114.976 $15.2758 1.027 77.406
7 / 92 $0.0000 0.000 114.976 $0.0000 0.000 77.406
8 / 92 $0.0000 0.000 114.976 $0.0000 0.000 77.406
9 / 92 $22.9952 1.501 116.477 $15.4812 1.011 78.417
10 / 92 $0.0000 0.000 116.477 $0.0000 0.000 78.417
11 / 92 $0.0000 0.000 116.477 $0.0000 0.000 78.417
12 / 92 $26.5568 1.773 118.250 $17.8791 1.194 79.611
1 / 93 $0.0000 0.000 118.250 $0.0000 0.000 79.611
2 / 93 $0.0000 0.000 118.250 $0.0000 0.000 79.611
3 / 93 $0.0000 0.000 118.250 $0.0000 0.000 79.611
4 / 93 $19.8660 1.274 119.524 $13.3746 0.858 80.469
5 / 93 $0.0000 0.000 119.524 $0.0000 0.000 80.469
</TABLE>
<PAGE> 8
<TABLE>
JOHN HANCOCK GOLD GOVERNMENT FUND (CLASS B) - SEC TOTAL RETURN
Initial Investment: $1,000.00
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Investment Value at End of Period Cummulative Cummulative
CDSC CDSC
Excluding With Excluding % CDSC Ending Excluding Ending
CDSC CDSC CDSC CDSC Amount Value CDSC Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Year Return: 5.59% 5.59% $1,722.67 $0.00 $0.00 $1,722.67 72.27% 72.27%
5 Year Return: 3.01% 2.65% $1,159.75 2.00% $20.00 $1,139.75 15.98% 13.98%
1 Year Return: -6.34% -11.02% $936.62 5.00% $46.83 $889.79 -6.34% -11.02%
- ---------------------------------------------------------------------------------------------------------------------
Constant Sales Charge: N/A
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
----- --- -------- ------ ------ -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
6 / 93 $16.48 $16.48 N/A
7 / 93 $16.63 $16.63 N/A 07/02/93 $0.1696 $16.42
8 / 93 $16.88 $16.88 N/A
9 / 93 $16.64 $16.64 N/A
10 / 93 $16.89 $16.89 N/A 10/01/93 $0.1617 $16.51
11 / 93 $16.62 $16.62 N/A
12 / 93 $16.49 $16.49 N/A 12/23/93 $0.3864 $16.58 $0.2390 CAP. GAIN
1 / 94 $16.75 $16.75 N/A
2 / 94 $16.04 $16.04 N/A
3 / 94 $15.58 $15.58 N/A
4 / 94 $15.01 $15.01 N/A 04/04/94 $0.1590 $14.97
5 / 94 $15.01 $15.01 N/A
6 / 94 $14.63 $14.63 N/A
7 / 94 $14.72 $14.72 N/A 07/08/94 $0.1661 $14.45
8 / 94 $14.93 $14.93 N/A
9 / 94 $15.22 $15.22 N/A
10 / 94 $14.33 $14.33 N/A 10/03/94 $0.0934 $15.08
11 / 94 $13.18 $13.18 N/A
12 / 94 $13.50 $13.50 N/A 12/23/94 $0.0442 $14.00
1 / 95 $12.67 $12.67 N/A
2 / 95 $12.80 $12.80 N/A
3 / 95 $13.58 $13.58 N/A
4 / 95 $13.67 $13.67 N/A 04/03/95 $0.0596 $13.52
5 / 95 $13.99 $13.99 N/A
6 / 95 $14.12 $14.12 N/A 06/29/95 $0.0652 $14.36
7 / 95 $14.09 $14.09 N/A
8 / 95 $14.35 $14.35 N/A
9 / 95 $14.37 $14.37 N/A 09/22/95 $0.0881 $14.42
10 / 95 $13.18 $13.18 N/A
- ----------- ------ ------ --- -------- ------- ------
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year 1-Year
----------------------------------- ------------------------------------ --------------------------------------
Month Dividend # of Shares Shares Dividend # of Shares Shares Dividend # of Shares Shares
Ended Received Reinv. Outstanding Received Reinv. Outstanding Received Reinv. Outstanding
----- -------- ----------- ----------- -------- ----------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 / 93 $0.0000 0.000 119.524 $0.0000 0.000 80.469
7 / 93 $20.2713 1.235 120.759 $13.6475 0.831 81.300
8 / 93 $0.0000 0.000 120.759 $0.0000 0.000 81.300
9 / 93 $0.0000 0.000 120.759 $0.0000 0.000 81.300
10 / 93 $19.5267 1.183 121.942 $13.1462 0.796 82.096
11 / 93 $0.0000 0.000 121.942 $0.0000 0.000 82.096
12 / 93 $47.1220 2.842 124.784 $31.7244 1.913 84.009
1 / 94 $0.0000 0.000 124.784 $0.0000 0.000 84.009
2 / 94 $0.0000 0.000 124.784 $0.0000 0.000 84.009
3 / 94 $0.0000 0.000 124.784 $0.0000 0.000 84.009
4 / 94 $19.8407 1.325 126.109 $13.3574 0.892 84.901
5 / 94 $0.0000 0.000 126.109 $0.0000 0.000 84.901
6 / 94 $0.0000 0.000 126.109 $0.0000 0.000 84.901
7 / 94 $20.9467 1.450 127.559 $14.1021 0.976 85.877
8 / 94 $0.0000 0.000 127.559 $0.0000 0.000 85.877
9 / 94 $0.0000 0.000 127.559 $0.0000 0.000 85.877
10 / 94 $11.9140 0.790 128.349 $8.0209 0.532 86.409 69.784
11 / 94 $0.0000 0.000 128.349 $0.0000 0.000 86.409 $0.0000 0.000 69.784
12 / 94 $5.6730 0.405 128.754 $3.8193 0.273 86.682 $3.0845 0.220 70.004
1 / 95 $0.0000 0.000 128.754 $0.0000 0.000 86.682 $0.0000 0.000 70.004
2 / 95 $0.0000 0.000 128.754 $0.0000 0.000 86.682 $0.0000 0.000 70.004
3 / 95 $0.0000 0.000 128.754 $0.0000 0.000 86.682 $0.0000 0.000 70.004
4 / 95 $7.6737 0.568 129.322 $5.1662 0.382 87.064 $4.1722 0.309 70.313
5 / 95 $0.0000 0.000 129.322 $0.0000 0.000 87.064 $0.0000 0.000 70.313
6 / 95 $8.4318 0.587 129.909 $5.6766 0.395 87.459 $4.5844 0.319 70.632
7 / 95 $0.0000 0.000 129.909 $0.0000 0.000 87.459 $0.0000 0.000 70.632
8 / 95 $0.0000 0.000 129.909 $0.0000 0.000 87.459 $0.0000 0.000 70.632
9 / 95 $11.4450 0.794 130.703 $7.7051 0.534 87.993 $6.2227 0.432 71.064
10 / 95 $0.0000 0.000 130.703 $0.0000 0.000 87.993 $0.0000 0.000 71.064
- ----------- -------- ----- ------- ------- ----- ------ ------- ----- ------
</TABLE>
<PAGE> 9
<TABLE>
JOHN HANCOCK MANAGED TAX-EXEMPT FUND
SEC TOTAL RETURN - CLASS A
Initial Investment: $1,000.00 Accrued Dividend 10/11 - 10/31/94
0.000000000
<CAPTION>
- ---------------------------------- --------------------------------------------- -----------------------------
AVERAGE ANNUAL TOTAL RETURN RATE INVESTMENT VALUE AT END OF PERIOD CUMULATIVE $10,000.00
RETURN INITIAL
------ INVESTMENT
<S> <C> <C> <C> <C> <C>
10 Year Return: N/A 10 Year Value: $0.00 N/A
3.83 Year Return: 5.82% # 5 Year Value: $1,241.71 24.17%
$12,417.10
Since Inception
---------------
1 Year Return: 8.56% 1 Year Value: $1,085.55 8.56%
- ---------------------------------- --------------------------------------------- -----------------------------
# Since Inception NOTE: YTD includes Ex-dividend for the period Monthly Declared Div
$0.0016 $0.0515
Constant Sales Charge: 4.50%
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
----- --- -------- ------ ------ -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1/3/92 $11.25 $11.78 4.50%
1 / 92 $11.13 $11.65 4.50% 01/15/92 $0.02730 $11.24 $0.0025 Cap Gain
2 / 92 $11.10 $11.62 4.50% 02/15/92 $0.06000 $11.05 $0.0040 Cap Gain
3 / 92 $11.03 $11.55 4.50% 03/15/92 $0.06000 $11.02 $0.0040 Cap Gain
4 / 92 $11.07 $11.59 4.50% 04/15/92 $0.06000 $11.14 $0.0040 Cap Gain
5 / 92 $11.18 $11.71 4.50% 05/15/92 $0.06000 $11.18 $0.0040 Cap Gain
6 / 92 $11.34 $11.87 4.50% 06/15/92 $0.06000 $11.21 $0.040 Cap Gain
7 / 92 $11.69 $12.24 4.50% 07/15/92 $0.06000 $11.50 $0.0040 Cap Gain
8 / 92 $11.43 $11.97 4.50% 08/15/92 $0.06000 $11.58 $0.0040 Cap Gain
9 / 92 $11.41 $11.95 4.50% 09/15/92 $0.06000 $11.45 $0.0040 Cap Gain
10 / 92 $11.12 $11.64 4.50% 10/15/92 $0.06000 $11.34 $0.0040 Cap Gain
11 / 92 $11.38 $11.92 4.50% 11/15/92 $0.06000 $11.33 $0.0050 Cap Gain
12 / 92 $11.42 $11.96 4.50% 12/15/92 $0.06000 $11.42
12 / 92 $11.42 $11.96 4.50% 12/23/92 $0.03811 $11.41 $0.0381 Cap Gain
12 / 92 $11.42 $11.96 4.50% 12/30/92 $0.02890 $11.42
1 / 93 $11.47 $12.01 4.50% 01/18/93 $0.03010 $11.42
2 / 93 $11.88 $12.44 4.50% 02/10/93 $0.05180 $11.58
3 / 93 $11.65 $12.20 4.50% 03/10/93 $0.05680 $11.84
4 / 93 $11.73 $12.28 4.50% 04/08/93 $0.05550 $11.71
5 / 93 $11.75 $12.30 4.50% 05/10/93 $0.06230 $11.79
6 / 93 $11.90 $12.46 4.50% 06/10/93 $0.05950 $11.77
7 / 93 $11.84 $12.40 4.50% 07/09/93 $0.05640 $11.92
8 / 93 $12.07 $12.64 4.50% 08/10/93 $0.06110 $11.91
9 / 93 $12.14 $12.71 4.50% 09/10/93 $0.05900 $12.18
10 / 93 $12.13 $12.70 4.50% 10/08/93 $0.05300 $12.19
11 / 93 $11.94 $12.50 4.50% 11/10/93 $0.06370 $11.96
12 / 93 $12.01 $12.58 4.50% 12/03/93 $0.08980 $11.90
12 / 93 $12.01 $12.58 4.50% 12/10/93 $0.05471 $12.03
12 / 93 $12.01 $12.58 4.50% 12/30/93 $0.03447 $12.01
1 / 94 $12.11 $12.68 4.50% $0.00 $0.00000 $0.00
2 / 94 $11.74 $12.29 4.50% 02/10/94 $0.07200 $11.98
3 / 94 $11.21 $11.74 4.50% 03/10/94 $0.04980 $11.49
4 / 94 $11.21 $11.74 4.50% 04/08/94 $0.04836 $11.17
5 / 94 $11.28 $11.81 4.50% 05/10/94 $0.05514 $11.12
6 / 94 $11.17 $11.70 4.50% 06/10/94 $0.05332 $11.44
7 / 94 $11.31 $11.84 4.50% 07/08/94 $0.04909 $11.15
8 / 94 $11.27 $11.80 4.50% 08/10/94 $0.05633 $11.20
9 / 94 $11.06 $11.58 4.50% 09/09/94 $0.05172 $11.17
10 / 94 $10.79 $11.30 4.50% 10/10/94 $0.05494 $10.94
11 / 94 $10.51 $11.01 4.50% 11/10/94 $0.05420 $10.50
12 / 94 $10.76 $11.27 4.50% 12/09/94 $0.05149 $10.65
12 / 94 $10.76 $11.27 4.50% 12/29/94 $0.03451 $10.75
1 / 95 $11.01 $11.53 4.50% 1/10/95 $0.02043 $10.80
</TABLE>
<TABLE>
<CAPTION>
Marketing
10-Year 5-Year 1-Year Plot Points
---------------------------------- ---------------------------------- ---------------------------------- $10,000.00
Dividend # of Shares Shares Dividend # of Shares Shares Dividend # of Shares Shares Intial
Received Reinv. Outstanding Received Reinv. Outstanding Received Reinv. Outstanding Investment
-------- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$84.89 $9,550.08
$2.3175 0.206 85.096 $9,471.15
$5.1057 0.462 85.558 $9,496.90
$5.1335 0.466 86.024 $9,488.41
$5.1614 0.463 86.487 $9,574.07
$5.1892 0.464 86.951 $9,721.08
$5.2170 0.465 87.416 $9,912.93
$5.2449 0.456 87.872 $10,272.20
$5.2723 0.455 88.327 $10,095.74
$5.2996 0.463 88.790 $10,130.90
$5.3274 0.470 89.260 $9,925.67
$5.3556 0.473 89.733 $10,211.57
$5.3840 0.471 90.204 $10,301.26
$3.4377 0.301 90.505 $10,335.63
$2.6156 0.229 90.734 $10,361.78
$2.7311 0.239 90.973 $10,434.56
$4.7124 0.407 91.380 $10,855.90
$5.1904 0.438 91.818 $10,969.76
$5.0959 0.435 92.253 $10,821.24
$5.7473 0.487 92.740 $10,896.91
$5.5180 0.469 93.209 $11,091.83
$5.2570 0.441 93.650 $11,088.12
$5.7220 0.480 94.130 $11,361.45
$5.5536 0.456 94.586 $11,482.70
$5.0130 0.411 94.997 $11,523.09
$6.0513 0.506 95.503 $11,403.02
$8.5761 0.721 96.224 $11,556.46
$5.2644 0.438 96.662 $11,609.06
$3.3319 0.277 96.939 $11,642.33
$0.0000 0.000 96.939 $11,739.27
$6.9796 0.583 97.522 $11,449.04
$4.8566 0.423 97.945 $10,979.59
$4.7366 0.424 98.369 $11,027.12
$5.4240 0.488 98.857 $11,151.03
$5.2710 0.461 99.318 $11,093.78
$4.8755 0.437 99.755 $11,282.25
$5.6192 0.502 100.257 $11,298.92
$5.1853 0.464 100.721 $11,139.70
$5.5336 0.506 101.227 88.496 $10,922.35
$5.4865 0.523 101.750 $4.7965 0.457 88.953 $10,693.89
$5.2391 0.492 102.242 $4.5802 0.430 89.383 $11,001.20
$3.5284 0.328 102.570 $3.0846 0.287 89.670 $11,036.49
$2.0955 0.194 102.764 $1.8320 0.170 89.840 $11,314.28
</TABLE>
<PAGE> 10
JOHN HANCOCK MANAGED TAX-EXEMPT FUND
SEC TOTAL RETURN - CLASS A
<TABLE>
Initial Investment: $1,000.00 Accrued Dividend 10/11 - 10/31/94
0.000000000
<CAPTION>
- ---------------------------------- --------------------------------------------- -----------------------------
AVERAGE ANNUAL TOTAL RETURN RATE INVESTMENT VALUE AT END OF PERIOD CUMULATIVE $10,000.00
RETURN INITIAL
------ INVESTMENT
<S> <C> <C> <C> <C> <C>
10 Year Return: N/A 10 Year Value: $0.00 N/A
3.83 Year Return: 5.82% # 5 Year Value: $1,241.71 24.17%
$12,417.10
Since Inception
---------------
1 Year Return: 8.56% 1 Year Value: $1,085.55 8.56%
- ---------------------------------- --------------------------------------------- -----------------------------
# Since Inception NOTE: YTD includes Ex-dividend for the period Monthly Declared Div
$0.0016 $0.0515
Constant Sales Charge: 4.50%
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
----- --- -------- ------ ------ -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
2/ 95 $11.27 $11.80 4.50% 2/10/95 $0.05533 $11.15
3/ 95 $11.31 $11.84 4.50% 3/10/95 $0.05066 $11.22
4/ 95 $11.27 $11.80 4.50% 4/10/95 $0.05248 $11.37
5/ 95 $11.56 $12.10 4.50% 5/10/95 $0.05137 $11.40
6/ 95 $11.34 $11.87 4.50% 6/9/95 $0.05009 $11.54
6/ 95 $11.34 $11.87 4.50% 6/29/95 $0.03519 $11.33
7/ 95 $11.35 $11.88 4.50% 7/28/95 $0.04856 $11.34
8/ 95 $11.42 $11.96 4.50% 8/30/95 $0.05509 $11.38
9/ 95 $11.43 $11.97 4.50% 9/28/95 $0.05029 $11.37
10/ 95 $11.56 $12.10 4.50% 10/30/95 $0.05335 $11.55
- ---------------------------------------------------------------------------------------
End of Period (update for formulas above):
11.560
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Marketing
10-Year 5-Year 1-Year Plot Points
---------------------------------- ---------------------------------- ---------------------------------- $10,000.00
Dividend # of Shares Shares Dividend # of Shares Shares Dividend # of Shares Shares Intial
Received Reinv. Outstanding Received Reinv. Outstanding Received Reinv. Outstanding Investment
-------- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$5.6859 0.510 103.274 $4.9708 0.446 90.286 $11,638.94
$5.2318 0.466 103.740 $4.5739 0.408 90.694 $11,732.95
$5.4443 0.479 104.219 $4.7596 0.419 91.113 $11,745.44
$5.3537 0.470 104.689 $4.6805 0.411 91.524 $12,102.01
$5.2439 0.454 105.143 $4.5844 0.397 91.921 $11,923.18
$3.7000 0.327 105.470 $3.2347 0.285 92.206 $11,960.26
$5.1216 0.452 105.922 $4.4775 0.395 92.601 $12,022.11
$5.8352 0.513 106.435 $5.1014 0.448 93.049 $12,154.84
$5.3526 0.471 106.906 $4.6794 0.412 93.461 $12,219.32
$5.7034 0.494 107.400 $4.9861 0.432 93.893 $12,415.40
- ---------------------------------------------------------------------------------------------------------------------------------
End of Period (update for formulas above):
107.400 93.893
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
<TABLE>
JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND (CLASS A) - SEC TOTAL RETURN FORMULA
Initial Investment: $1,000.00
<CAPTION>
- ------------------------------------- -------------------------------------- ------------- -----------------------------------
Average Annual Total Return Rate Investment Value at End of Period Cumulative Investment Value at End of Period
<S> <C> <C> <C> <C> <C>
10 Year Return: N/A 10 Year Value: $0.00 -100.00% Given $10,000 Investment on
Inception
3.83 Year Return: 5.28% # 5 Year Value: $1,217.90 21.79% $12,178.97
- ------------------------------------- -------------------------------------- ------------- -----------------------------------
<FN>
# Since Inception NOTE: YTD Includes Ex-dividend for the period
$0.0000
Constant Sales Charge: 4.50% Monthly Dividend Declared
$0.0567
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1/3/92 $10.51 $11.01 4.50%
1 / 92 $10.33 $10.82 4.50% 01/15/92 $0.0306 $10.42
2 / 92 $10.32 $10.81 4.50% 02/15/92 $0.0730 $10.29
3 / 92 $10.21 $10.69 4.50% 03/15/93 $0.0730 $10.16
4 / 92 $10.21 $10.69 4.50% 04/15/93 $0.0730 $10.31
5 / 92 $10.30 $10.79 4.50% 05/15/93 $0.0670 $10.33
6 / 92 $10.38 $10.87 4.50% 06/15/93 $0.0670 $10.34
7 / 92 $10.50 $10.99 4.50% 07/15/93 $0.0670 $10.48
8 / 92 $10.49 $10.98 4.50% 08/15/93 $0.0670 $10.54
9 / 92 $10.50 $10.99 4.50% 09/15/93 $0.0600 $10.53
10 / 92 $10.29 $10.77 4.50% 10/15/93 $0.0600 $10.42
11 / 92 $10.22 $10.70 4.50% 11/15/93 $0.0600 $10.28
12 / 92 $10.30 $10.79 4.50% 12/15/93 $0.0600 $10.26
12 / 92 $10.30 $10.79 4.50% 12/23/93 $0.0064 $10.30 $0.0064 Cap Gain
12 / 92 $10.30 $10.79 4.50% 12/30/93 $0.0308 $10.31
1 / 93 $10.46 $10.95 4.50% 01/18/93 $0.0292 $10.36
2 / 93 $10.62 $11.12 4.50% 02/10/93 $0.0490 $10.43
3 / 93 $10.66 $11.16 4.50% 03/10/93 $0.0531 $10.67
4 / 93 $10.65 $11.15 4.50% 04/08/93 $0.0554 $10.68
5 / 93 $10.58 $11.08 4.50% 05/10/93 $0.0607 $10.71
6 / 93 $10.76 $11.27 4.50% 06/10/93 $0.0588 $10.62
7 / 93 $10.74 $11.25 4.50% 07/09/93 $0.0562 $10.78
8 / 93 $10.92 $11.43 4.50% 08/10/93 $0.0603 $10.74
9 / 93 $10.91 $11.42 4.50% 09/10/93 $0.0564 $11.03
10 / 93 $10.89 $11.40 4.50% 10/08/93 $0.0510 $11.01
11 / 93 $10.60 $11.10 4.50% 11/10/93 $0.0577 $10.66
12 / 93 $10.28 $10.76 4.50% 12/10/93 $0.0559 $10.67
12 / 93 $10.28 $10.76 4.50% 12/23/93 $0.3080 $10.36 $0.3080 Cap Gain
12 / 93 $10.28 $10.76 4.50% 12/30/93 $0.0372 $10.28
1 / 94 $10.42 $10.91 4.50% $0.0000
2 / 94 $10.07 $10.54 4.50% 02/10/94 $0.0755 $10.22
3 / 94 $9.88 $10.35 4.50% 03/10/94 $0.0512 $9.96
4 / 94 $9.71 $10.17 4.50% 04/08/94 $0.0513 $9.83
5 / 94 $9.63 $10.08 4.50% 05/10/94 $0.0565 $9.60
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year
- ------------------------------------------------------------------------------
Dividend # of Shares Shares Dividend # of Shares Shares PLOT POINTS
Received Reinv. Outstanding Received Reinv. Outstanding FOR GRAPH
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
90.827 $10,000.05
$0.00
$2.7793 0.267 91.094 $9,410.01
$6.6499 0.646 91.740 $9,467.57
$6.6970 0.659 92.399 $9,433.94
$6.7451 0.654 93.053 $9,500.71
$6.2346 0.604 93.657 $9,646.67
$6.2750 0.607 94.264 $9,784.60
$6.3157 0.603 94.867 $9,961.04
$6.3561 0.603 95.470 $10,014.80
$5.7282 0.544 96.014 $10,081.47
$5.7608 0.553 96.567 $9,936.74
$5.7940 0.564 97.131 $9,926.79
$5.8279 0.568 97.699 $10,063.00
$0.6263 0.061 97.760 $10,069.28
$3.0110 0.292 98.052 $10,099.36
$2.8631 0.276 98.328 $10,285.11
$4.8181 0.462 98.790 $10,491.50
$5.2457 0.492 99.282 $10,583.46
$5.5002 0.515 99.797 $10,628.38
$6.0566 0.566 100.363 $10,618.41
$5.9044 0.556 100.919 $10,858.88
$5.6716 0.526 101.445 $10,895.19
$6.1171 0.570 102.015 $11,140.04
$5.7536 0.522 102.537 $11,186.79
$5.2294 0.475 103.012 $11,218.01
$5.9438 0.558 103.570 $10,978.42
$5.7885 0.543 104.113 $10,702.82
$32.0710 3.096 107.209 $11,021.09
$3.9903 0.388 107.597 $11,060.97
$0.0000 0.000 107.597 $11,211.61
$8.1236 0.795 108.392 $10,915.07
$5.5497 0.557 108.949 $10,764.16
$5.5891 0.569 109.518 $10,634.20
$6.1878 0.645 110.163 $10,608.70
</TABLE>
<PAGE> 12
<TABLE>
JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND (CLASS A) - SEC TOTAL RETURN FORMULA
Initial Investment: $1,000.00
<CAPTION>
- ------------------------------------- -------------------------------------- ------------- -----------------------------------
Average Annual Total Return Rate Investment Value at End of Period Cumulative Investment Value at End of Period
<S> <C> <C> <C> <C> <C>
10 Year Return: N/A 10 Year Value: $0.00 -100.00% Given $10,000 Investment on
Inception
3.83 Year Return: 5.28% # 5 Year Value: $1,217.90 21.79% $12,178.97
- ------------------------------------- -------------------------------------- ------------- -----------------------------------
<FN>
# Since Inception NOTE: YTD Includes Ex-dividend for the period
$0.0000
Constant Sales Charge: 4.50% Monthly Dividend Declared
$0.0567
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6 / 94 $9.52 $9.97 4.50% 06/10/94 $0.0558 $9.71
7 / 94 $9.66 $10.12 4.50% 07/08/94 $0.0495 $9.46
8 / 94 $9.58 $10.03 4.50% 08/10/94 $0.0583 $9.54
9 / 94 $9.32 $9.76 4.50% 09/09/94 $0.0516 $9.41
10 / 94 $9.24 $9.68 4.50% 10/10/94 $0.0534 $9.27
11 / 94 $9.19 $9.62 4.50% 11/10/94 $0.0533 $9.13
12 / 94 $9.22 $9.65 4.50% 12/09/94 $0.0503 $9.26
12 / 94 $9.22 $9.65 4.50% 12/29/94 $0.0340 $9.23
1 / 95 $9.34 $9.78 4.50% 01/10/95 $0.0206 $9.22
2 / 95 $9.50 $9.95 4.50% 02/10/95 $0.0542 $9.33
3 / 95 $9.47 $9.92 4.50% 03/10/95 $0.0517 $9.47
4 / 95 $9.54 $9.99 4.50% 04/10/95 $0.0561 $9.51
5 / 95 $9.92 $10.39 4.50% 05/10/95 $0.0544 $9.76
6 / 95 $9.94 $10.41 4.50% 06/09/95 $0.0535 $9.85
6 / 95 $9.94 $10.41 4.50% 06/29/95 $0.0353 $9.92
7 / 95 $9.82 $10.28 4.50% 07/28/95 $0.0505 $9.80
8 / 95 $9.89 $10.36 4.50% 08/30/95 $0.0594 $9.87
9 / 95 $9.92 $10.39 4.50% 09/28/95 $0.0529 $9.87
10 / 95 $10.01 $10.48 4.50% 10/30/95 $0.0584 $10.00
- -----------------------------------------------------------------------------------------------------------------------------------
End of Period (update for formulas above):
$10.01
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year
- ------------------------------------------------------------------------------
Dividend # of Shares Shares Dividend # of Shares Shares PLOT POINTS
Received Reinv. Outstanding Received Reinv. Outstanding FOR GRAPH
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$6.1504 0.633 110.796 $10,547.78
$5.4855 0.580 111.376 $10,758.92
$6.4877 0.680 112.056 $10,734.96
$5.7821 0.614 112.670 $10,500.84
$6.0155 0.649 113.319 $10,470.68
$6.0433 0.662 113.981 $10,474.85
$5.7344 0.619 114.600 $10,566.12
$3.8998 0.423 115.023 $10,605.12
$2.3637 0.256 115.279 $10,767.06
$6.2481 0.670 115.949 $11,015.16
$5.9946 0.633 116.582 $11,040.32
$6.5379 0.687 117.269 $11,187.46
$6.3794 0.654 117.923 $11,697.96
$6.3124 0.641 118.564 $11,785.26
$4.1797 0.421 118.985 $11,827.11
$6.0087 0.613 119.598 $11,744.52
$7.1041 0.720 120.318 $11,899.45
$6.3588 0.644 120.962 $11,999.43
$7.0606 0.706 121.668 $12,178.97
- -----------------------------------------------------------------------------------------------------------------------------------
0.000 121.668 $12,178.97
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
<TABLE>
JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND (CLASS A) - SEC TOTAL RETURN FORMULA
Initial Investment: $1,000.00
- ---------------------------------------------- ---------------------------------------------- --------------------
<CAPTION>
Average Annual Total Return Rate Investment Value at End of Period Cumulative
<S> <C> <C> <C> <C>
1 Year Return: 10.59% 1 Year Value: $1,105.94 10.59%
- ---------------------------------------------- ---------------------------------------------- --------------------
<FN>
# Since Inception NOTE: YTD Includes Ex-dividend for the period
$0.0000
Constant Sales Charge: 4.50% Monthly Dividend Declared
$0.0567
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 / 94 $9.24 $9.68 4.50% 10/10/94 $0.0534 $9.27
11 / 94 $9.19 $9.62 4.50% 11/10/94 $0.0173 $9.13
12 / 94 $9.22 $9.65 4.50% 12/09/94 $0.0503 $9.26
12 / 94 $9.22 $9.65 4.50% 12/29/94 $0.0340 $9.23
1 / 95 $9.34 $9.78 4.50% 01/10/95 $0.0206 $9.22
2 / 95 $9.50 $9.95 4.50% 02/10/95 $0.0542 $9.33
3 / 95 $9.47 $9.92 4.50% 03/10/95 $0.0517 $9.47
4 / 95 $9.54 $9.99 4.50% 04/10/95 $0.0561 $9.51
5 / 95 $9.92 $10.39 4.50% 05/10/95 $0.0544 $9.76
6 / 95 $9.94 $10.41 4.50% 06/09/95 $0.0535 $9.85
6 / 95 $9.94 $10.41 4.50% 06/29/95 $0.0353 $9.92
7 / 95 $9.82 $10.28 4.50% 07/28/95 $0.0505 $9.80
8 / 95 $9.89 $10.36 4.50% 08/30/95 $0.0594 $9.87
9 / 95 $9.92 $10.39 4.50% 09/28/95 $0.0529 $9.87
10 / 95 $10.01 $10.48 4.50% 10/30/95 $0.0584 $10.00
- -----------------------------------------------------------------------------------------------------------------------------------
End of Period (update for formulas above):
$10.01
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
10-Year 1-Year
- ------------------------------------------------------------------------------------
Dividend # of Shares Shares Dividend # of Shares Shares
Received Reinv. Outstanding Received Reinv. Outstanding
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
103.306
$1.7903 0.196 103.502
$5.2072 0.562 104.064
$3.5413 0.384 104.448
$2.1464 0.233 104.681
$5.6737 0.608 105.289
$5.4434 0.575 105.864
$5.9369 0.624 106.488
$5.7929 0.594 107.082
$5.7321 0.582 107.664
$3.7955 0.383 108.047
$5.4564 0.557 108.604
$6.4511 0.654 109.258
$5.7743 0.585 109.843
$6.4115 0.641 110.484
- ------------------------------------------------------------------------------------
0.000 110.484
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
<TABLE>
JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND (CLASS B) - SEC TOTAL RETURN FORMULA
Initial Investment: $1,000.00
<CAPTION>
- ----------------------------------- --------------------------------- ----------------- ---------------------------------------
Average Annual Total Return Investment Value at End of Period Cumulative Investment Value at End of Period Given
CDSC CDSC
Excluding With Excluding % CDSC Ending Excluding Ending Investment Value at End of Period Given
CDSC CDSC CDSC CDSC Amount Value CDSC Value $10,000 investment on inception date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.40 Year Return: # 8.20% 8.20% $2,097.37 0.00% $ 0.00 $2,097.37 109.74% 109.74% $0.00
5 Year Return: 8.33% 8.03% $1,491.59 2.00% $20.00 $1,471.59 49.16% 47.16%
- ----------------------------------- --------------------------------- ----------------- ---------------------------------------
<FN>
# Since Inception NOTE: YTD includes Ex-dividend for the period
$0.0000
Constant Sales Charge: N/A Monthly Declared Div
$0.0511
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/5/86 $10.00 $10.00 N/A
6 / 86 $10.00 $10.00 N/A
7 / 86 $10.00 $10.00 N/A 07/15/86 $0.0576 $10.23
8 / 86 $10.00 $10.00 N/A 08/15/86 $0.0626 $10.29
9 / 86 $10.00 $10.00 N/A 09/15/86 $0.0600 $10.20
10 / 86 $10.00 $10.00 N/A 10/10/86 $0.0200 $10.14 $0.0200 ST Cap Gain
10 / 86 $10.00 $10.00 N/A 10/15/86 $0.0644 $10.21
11 / 86 $10.00 $10.00 N/A 11/15/86 $0.0765 $10.32 $0.0100 ST Cap Gain
12 / 86 $10.00 $10.00 N/A 12/15/86 $0.0765 $10.41 $0.0072 ST Cap Gain
1 / 87 $10.00 $10.00 N/A 01/15/87 $0.0765 $10.44 $0.0110 ST Cap Gain
2 / 87 $10.00 $10.00 N/A 02/15/87 $0.0765 $10.44 $0.0121 ST Cap Gain
3 / 87 $10.00 $10.00 N/A 03/15/87 $0.0765 $10.44 $0.0135 ST Cap Gain
4 / 87 $10.00 $10.00 N/A 04/15/87 $0.0800 $ 9.93 $0.0127 ST Cap Gain
5 / 87 $10.00 $10.00 N/A 05/08/87 $0.0060 $ 9.76 $0.0060 Cap Gain
5 / 87 $10.00 $10.00 N/A 05/15/87 $0.0800 $ 9.64 $0.0177 ST Cap Gain
6 / 87 $ 9.80 $ 9.80 N/A 06/15/87 $0.0800 $ 9.83 $0.0175 ST Cap Gain
7 / 87 $ 9.67 $ 9.67 N/A 07/15/87 $0.0800 $ 9.77 $0.0016 ST Cap Gain
8 / 87 $ 9.49 $ 9.49 N/A 08/15/87 $0.0750 $ 9.71 $0.0071 ST Cap Gain
9 / 87 $ 9.07 $ 9.07 N/A 09/15/87 $0.0650 $ 9.19 $0.0020 ST Cap Gain
10 / 87 $ 9.46 $ 9.46 N/A 10/15/87 $0.0650 $ 8.79
11 / 87 $ 9.48 $ 9.48 N/A 11/15/87 $0.0650 $ 9.60
12 / 87 $ 9.56 $ 9.56 N/A 12/15/87 $0.0650 $ 9.39
12 / 87 $ 9.56 $ 9.56 N/A 12/31/87 $0.0340 $ 9.56
1 / 88 $ 9.90 $ 9.90 N/A 01/15/88 $0.0310 $ 9.68
2 / 88 $ 9.97 $ 9.97 N/A 02/15/88 $0.0650 $ 9.89
3 / 88 $ 9.73 $ 9.73 N/A 03/15/88 $0.0650 $ 9.89 $0.0029 ST Cap Gain
4 / 88 $ 9.56 $ 9.56 N/A 04/15/88 $0.0650 $ 9.63
5 / 88 $ 9.39 $ 9.39 N/A 05/15/88 $0.0650 $ 9.54 $0.0017 ST Cap Gain
6 / 88 $ 9.61 $ 9.61 N/A 06/15/88 $0.0650 $ 9.66
7 / 88 $ 9.46 $ 9.46 N/A 07/15/88 $0.0650 $ 9.50 $0.0024 ST Cap Gain
8 / 88 $ 9.39 $ 9.39 N/A 08/15/88 $0.0650 $ 9.32 $0.0016 ST Cap Gain
9 / 88 $ 9.59 $ 9.59 N/A 09/15/88 $0.0650 $ 9.59 $0.0019 ST Cap Gain
10 / 88 $ 9.73 $ 9.73 N/A 10/15/88 $0.0650 $ 9.64 $0.0014 ST Cap Gain
11 / 88 $ 9.53 $ 9.53 N/A 11/15/88 $0.0650 $ 9.60 $0.0021 ST Cap Gain
12 / 88 $ 9.48 $ 9.48 N/A 12/15/88 $0.0650 $ 9.42 $0.0026 ST Cap Gain
12 / 88 $ 9.48 $ 9.48 N/A 12/31/88 $0.0335 $ 9.48 $0.0005 ST Cap Gain
1 / 89 $ 9.57 $ 9.57 N/A 01/15/89 $0.0315 $ 9.57 $0.0005 ST Cap Gain
2 / 89 $ 9.40 $ 9.40 N/A 02/15/89 $0.0650 $ 9.45
3 / 89 $ 9.36 $ 9.36 N/A 03/15/89 $0.0650 $ 9.38 $0.0008 ST Cap Gain
4 / 89 $ 9.46 $ 9.46 N/A 04/15/89 $0.0650 $ 9.40
5 / 89 $ 9.66 $ 9.66 N/A 05/15/89 $0.0650 $ 9.57
6 / 89 $ 9.92 $ 9.92 N/A 06/15/89 $0.0650 $ 9.83
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year
- --------------------------------------------------------------------------------------- PLOT POINTS
Dividend # of Shares Shares Dividend # of Shares Shares VALUE
Received Reinv. Outstanding Received Reinv. Outstanding W/O CDSC
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
100.000 $10,000.00
$ 0.00
$0.0000 0.000 100.000 $10,000.00
$5.7600 0.563 100.563 $10,056.30
$6.2952 0.612 101.175 $10,117.50
$6.0705 0.595 101.770 $10,177.00
$2.0354 0.201 101.971 $10,197.10
$6.5669 0.643 102.614 $10,261.40
$7.8500 0.761 103.375 $10,337.50
$7.9082 0.760 104.135 $10,413.50
$7.9663 0.763 104.898 $10,489.80
$8.0247 0.769 105.667 $10,566.70
$8.0835 0.774 106.441 $10,644.10
$8.5153 0.858 107.299 $10,729.90
$0.6438 0.066 107.365 $10,736.50
$8.5892 0.891 108.256 $10,825.60
$8.6605 0.881 109.137 $10,695.43
$8.7310 0.894 110.031 $10,640.00
$8.2523 0.850 110.881 $10,522.61
$7.2073 0.784 111.665 $10,128.02
$7.2582 0.826 112.491 $10,641.65
$7.3119 0.762 113.253 $10,736.38
$7.3614 0.784 114.037 $10,901.94
$3.8773 0.406 114.443 $10,940.75
$3.5477 0.366 114.809 $11,366.09
$7.4626 0.755 115.564 $11,521.73
$7.5117 0.760 116.324 $11,318.33
$7.5611 0.785 117.109 $11,195.62
$7.6121 0.798 117.907 $11,071.47
$7.6640 0.793 118.700 $11,407.07
$7.7155 0.812 119.512 $11,305.84
$7.7683 0.834 120.346 $11,300.49
$7.8225 0.816 121.162 $11,619.44
$7.8755 0.817 121.979 $11,868.56
$7.9286 0.826 122.805 $11,703.32
$7.9823 0.847 123.652 $11,722.21
$4.1423 0.437 124.089 $11,763.64
$3.9088 0.408 124.497 $11,914.36
$8.0923 0.856 125.353 $11,783.18
$8.1479 0.869 126.222 $11,814.38
$8.2044 0.873 127.095 $12,023.19
$8.2612 0.863 127.958 $12,360.74
$8.3173 0.846 128.804 $12,777.36
</TABLE>
<PAGE> 15
<TABLE>
JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND (CLASS B) - SEC TOTAL RETURN FORMULA
Initial Investment: $1,000.00
<CAPTION>
- ----------------------------------- ----------------------------------- ---------------- ---------------------------------------
Average Annual Total Return Investment Value at End of Period Cumulative Investment Value at End of Period Given
CDSC CDSC
Excluding With Excluding % CDSC Ending Excluding Ending Investment Value at End of Period Given
CDSC CDSC CDSC CDSC Amount Value CDSC Value $10,000 investment on inception date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.40 Year Return: # 8.20% 8.20% $2,097.37 0.00% $ 0.00 $2,097.37 109.74% 109.74% $0.00
5 Year Return: 8.33% 8.03% $1,491.59 2.00% $20.00 $1,471.59 49.16% 47.16%
- ----------------------------------- ----------------------------------- ---------------- ---------------------------------------
<FN>
# Since Inception NOTE: YTD includes Ex-dividend for the period
$0.0000
Constant Sales Charge: N/A Monthly Declared Div
$0.0511
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
7 / 89 $10.03 $10.03 N/A 07/15/89 $0.0663 $ 9.96 $0.0013 Cap Gain
8 / 89 $ 9.85 $ 9.85 N/A 08/15/89 $0.0650 $ 9.83
9 / 89 $ 9.81 $ 9.81 N/A 09/15/89 $0.0650 $ 9.95
10 / 89 $10.01 $10.01 N/A 10/15/89 $0.0650 $10.03
11 / 89 $10.06 $10.06 N/A 11/15/89 $0.0650 $10.09
12 / 89 $10.06 $10.06 N/A 12/15/89 $0.0650 $10.10
12 / 89 $10.06 $10.06 N/A 12/31/89 $0.0335 $10.06
1 / 90 $ 9.83 $ 9.83 N/A 01/15/90 $0.0315 $10.02
2 / 90 $ 9.79 $ 9.79 N/A 02/15/90 $0.0650 $ 9.80
3 / 90 $ 9.77 $ 9.77 N/A 03/15/90 $0.0650 $ 9.75
4 / 90 $ 9.59 $ 9.59 N/A 04/15/90 $0.0650 $ 9.80
5 / 90 $ 9.80 $ 9.80 N/A 05/15/90 $0.0650 $ 9.76
6 / 90 $ 9.91 $ 9.91 N/A 06/15/90 $0.0650 $ 9.89
7 / 90 $ 9.99 $ 9.99 N/A 07/15/90 $0.0650 $ 9.91
8 / 90 $ 9.80 $ 9.80 N/A 08/15/90 $0.0650 $ 9.91
9 / 90 $ 9.81 $ 9.81 N/A 09/15/90 $0.0650 $ 9.80
10 / 90 $ 9.83 $ 9.83 N/A 10/15/90 $0.0650 $ 9.78
11 / 90 $ 9.88 $ 9.88 N/A 11/15/90 $0.0680 $ 9.84
11 / 90 $ 9.88 $ 9.88 N/A 11/16/90 $0.0800 $ 9.77
12 / 90 $ 9.96 $ 9.96 N/A 12/15/90 $0.0680 $ 9.96
12 / 90 $ 9.96 $ 9.96 N/A 12/31/90 $0.0351 $ 9.96
1 / 91 $10.01 $10.01 N/A 01/15/91 $0.0329 $ 9.92
2 / 91 $10.02 $10.02 N/A 02/15/91 $0.0680 $10.12
3 / 91 $10.01 $10.01 N/A 03/15/91 $0.0680 $ 9.99
4 / 91 $10.03 $10.03 N/A 04/15/91 $0.0680 $10.04
5 / 91 $10.00 $10.00 N/A 05/15/91 $0.0680 $ 9.97
6 / 91 $ 9.92 $ 9.92 N/A 06/15/91 $0.0680 $ 9.88
7 / 91 $ 9.98 $ 9.98 N/A 07/15/91 $0.0680 $ 9.93
8 / 91 $10.13 $10.13 N/A 08/15/91 $0.0680 $10.10
9 / 91 $10.25 $10.25 N/A 09/15/91 $0.0680 $10.19
10 / 91 $10.29 $10.29 N/A 10/15/91 $0.0680 $10.25
11 / 91 $10.31 $10.31 N/A 11/15/91 $0.0680 $10.32
12 / 91 $10.52 $10.52 N/A 12/15/91 $0.0680 $10.39
12 / 91 $10.52 $10.52 N/A 12/31/91 $0.0329 $10.51
1 / 92 $10.33 $10.33 N/A 01/15/92 $0.0351 $10.42
2 / 92 $10.31 $10.31 N/A 02/15/92 $0.0680 $10.29
3 / 92 $10.20 $10.20 N/A 03/15/92 $0.0680 $10.15
4 / 92 $10.20 $10.20 N/A 04/15/92 $0.0680 $10.30
5 / 92 $10.29 $10.29 N/A 05/15/92 $0.0620 $10.33
6 / 92 $10.37 $10.37 N/A 06/15/92 $0.0620 $10.33
7 / 92 $10.50 $10.50 N/A 07/15/92 $0.0620 $10.47
8 / 92 $10.48 $10.48 N/A 08/15/92 $0.0620 $10.54
9 / 92 $10.49 $10.49 N/A 09/15/92 $0.0570 $10.52
10 / 92 $10.28 $10.28 N/A 10/15/92 $0.0570 $10.41
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year
- ------------------------------------------------------------------------------------------ PLOT POINTS
Dividend # of Shares Shares Dividend # of Shares Shares VALUE
Received Reinv. Outstanding Received Reinv. Outstanding W/O CDSC
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 8.5397 0.857 129.661 $13,005.00
$ 8.4280 0.857 130.518 $12,856.02
$ 8.4837 0.853 131.371 $12,887.50
$ 8.5391 0.851 132.222 $13,235.42
$ 8.5944 0.852 133.074 $13,387.24
$ 8.6498 0.856 133.930 $13,473.36
$ 4.4867 0.446 134.376 $13,518.23
$ 4.2328 0.422 134.798 $13,250.64
$ 8.7619 0.894 135.692 $13,284.25
$ 8.8200 0.905 136.597 $13,345.53
$ 8.8788 0.906 137.503 $13,186.54
$ 8.9377 0.916 138.419 $13,565.06
$ 8.9972 0.910 139.329 $13,807.50
$ 9.0564 0.914 140.243 $14,010.28
$ 9.1158 0.920 141.163 $13,833.97
$ 9.1756 0.936 142.099 $13,939.91
$ 9.2364 0.944 143.043 101.729 $14,061.13
$ 9.7269 0.989 144.032 $6.9176 0.703 102.432 $14,230.36
$11.5226 1.179 145.211 $8.1946 0.839 103.271 $14,346.85
$ 9.8743 0.991 146.202 $7.0224 0.705 103.976 $14,561.72
$ 5.1317 0.515 146.717 $3.6496 0.366 104.342 $14,613.01
$ 4.8270 0.487 147.204 $3.4329 0.346 104.688 $14,735.12
$10.0099 0.989 148.193 $7.1188 0.703 105.391 $14,848.94
$10.0771 1.009 149.202 $7.1666 0.717 106.108 $14,935.12
$10.1457 1.011 150.213 $7.2153 0.719 106.827 $15,066.36
$10.2145 1.025 151.238 $7.2642 0.729 107.556 $15,123.80
$10.2842 1.041 152.279 $7.3138 0.740 108.296 $15,106.08
$10.3550 1.043 153.322 $7.3641 0.742 109.038 $15,301.54
$10.4259 1.032 154.354 $7.4146 0.734 109.772 $15,636.06
$10.4961 1.030 155.384 $7.4645 0.733 110.505 $15,926.86
$10.5661 1.031 156.415 $7.5143 0.733 111.238 $16,095.10
$10.6362 1.031 157.446 $7.5642 0.733 111.971 $16,232.68
$10.7063 1.030 158.476 $7.6140 0.733 112.704 $16,671.68
$ 5.2139 0.496 158.972 $3.7080 0.353 113.057 $16,723.85
$ 5.5799 0.535 159.507 $3.9683 0.381 113.438 $16,477.07
$10.8465 1.054 160.561 $7.7138 0.750 114.188 $16,553.84
$10.9181 1.076 161.637 $7.7648 0.765 114.953 $16,486.97
$10.9913 1.067 162.704 $7.8168 0.759 115.712 $16,595.81
$10.0876 0.977 163.681 $7.1741 0.694 116.406 $16,842.77
$10.1482 0.982 164.663 $7.2172 0.699 117.105 $17,075.55
$10.2091 0.975 165.638 $7.2605 0.693 117.798 $17,391.99
$10.2696 0.974 166.612 $7.3035 0.693 118.491 $17,460.94
$ 9.4969 0.903 167.515 $6.7540 0.642 119.133 $17,572.32
$ 9.5484 0.917 168.432 $6.7906 0.652 119.785 $17,314.81
</TABLE>
<PAGE> 16
<TABLE>
JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND (CLASS B) - SEC TOTAL RETURN FORMULA
Initial Investment: $1,000.00
- ----------------------------------- --------------------------------- ----------------- ---------------------------------------
<CAPTION>
Average Annual Total Return Investment Value at End of Period Cumulative Investment Value at End of Period Given
CDSC CDSC
Excluding With Excluding % CDSC Ending Excluding Ending Investment Value at End of Period Given
CDSC CDSC CDSC CDSC Amount Value CDSC Value $10,000 investment on inception date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.40 Year Return: # 8.20% 8.20% $2,097.37 0.00% $ 0.00 $2,097.37 109.74% 109.74% $0.00
5 Year Return: 8.33% 8.03% $1,491.59 2.00% $20.00 $1,471.59 49.16% 47.16%
- ----------------------------------- --------------------------------- ----------------- ---------------------------------------
<FN>
# Since Inception NOTE: YTD includes Ex-dividend for the period
$0.0000
</TABLE>
<TABLE>
Constant Sales Charge: N/A Monthly Declared Div
$0.0511
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11 / 92 $10.21 $10.21 N/A 11/15/92 $0.0570 $10.27
12 / 92 $10.29 $10.29 N/A 12/15/92 $0.0570 $10.25
12 / 92 $10.29 $10.29 N/A 12/30/92 $0.0064 $10.29 $0.0064 Cap Gain
12 / 92 $10.29 $10.29 N/A 12/30/92 $0.0293 $10.29
1 / 93 $10.45 $10.45 N/A 01/18/93 $0.0277 $10.35
2 / 93 $10.61 $10.61 N/A 02/10/93 $0.0476 $10.42
3 / 93 $10.65 $10.65 N/A 03/10/93 $0.0517 $10.66
4 / 93 $10.64 $10.64 N/A 04/08/93 $0.0538 $10.66
5 / 93 $10.57 $10.57 N/A 05/10/93 $0.0590 $10.70
6 / 93 $10.75 $10.75 N/A 06/10/93 $0.0573 $10.61
7 / 93 $10.73 $10.73 N/A 07/09/93 $0.0548 $10.77
8 / 93 $10.90 $10.90 N/A 08/10/93 $0.0586 $10.73
9 / 93 $10.90 $10.90 N/A 09/10/93 $0.0548 $11.02
10 / 93 $10.88 $10.88 N/A 10/08/93 $0.0496 $10.99
11 / 93 $10.59 $10.59 N/A 11/10/93 $0.0558 $10.65
12 / 93 $10.27 $10.27 N/A 12/10/93 $0.0540 $10.66
12 / 93 $10.27 $10.27 N/A 12/23/93 $0.3080 $10.35 $0.3080 Cap Gain
12 / 93 $10.27 $10.27 N/A 12/23/93 $0.0351 $10.27
1 / 94 $10.41 $10.41 N/A $0.0000
2 / 94 $10.06 $10.06 N/A 02/10/94 $0.0697 $10.21
3 / 94 $ 9.87 $ 9.87 N/A 03/10/94 $0.0474 $ 9.95
4 / 94 $ 9.70 $ 9.70 N/A 04/08/94 $0.0475 $ 9.82
5 / 94 $ 9.62 $ 9.62 N/A 05/10/94 $0.0526 $ 9.59
6 / 94 $ 9.51 $ 9.51 N/A 06/10/94 $0.0524 $ 9.70
7 / 94 $ 9.65 $ 9.65 N/A 07/08/94 $0.0467 $ 9.45
8 / 94 $ 9.57 $ 9.57 N/A 08/10/94 $0.0549 $ 9.53
9 / 94 $ 9.31 $ 9.31 N/A 09/09/94 $0.0483 $ 9.40
10 / 94 $ 9.23 $ 9.23 N/A 10/10/94 $0.0496 $ 9.26
11 / 94 $ 9.18 $ 9.18 N/A 11/10/94 $0.0495 $ 9.12
12 / 94 $ 9.21 $ 9.21 N/A 12/09/94 $0.0468 $ 9.25
12 / 94 $ 9.21 $ 9.21 N/A 12/29/94 $0.0316 $ 9.22
1 / 95 $ 9.33 $ 9.33 N/A 01/10/95 $0.0190 $ 9.21
2 / 95 $ 9.49 $ 9.49 N/A 02/10/95 $0.0502 $ 9.32
3 / 95 $ 9.46 $ 9.46 N/A 03/10/95 $0.0480 $ 9.46
4 / 95 $ 9.53 $ 9.53 N/A 04/10/95 $0.0520 $ 9.50
5 / 95 $ 9.91 $ 9.91 N/A 05/10/95 $0.0505 $ 9.75
6 / 95 $ 9.93 $ 9.93 N/A 06/09/95 $0.0495 $ 9.84
6 / 95 $ 9.93 $ 9.93 N/A 06/29/95 $0.0324 $ 9.91
7 / 95 $ 9.81 $ 9.81 N/A 07/28/95 $0.0466 $ 9.79
8 / 95 $ 9.88 $ 9.88 N/A 08/30/95 $0.0534 $ 9.86
9 / 95 $ 9.91 $ 9.91 N/A 09/28/95 $0.0467 $ 9.86
10 / 95 $10.00 $10.00 N/A 10/30/95 $0.0526 $ 9.99
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year
- ------------------------------------------------------------------------------------------ PLOT POINTS
Dividend # of Shares Shares Dividend # of Shares Shares VALUE
Received Reinv. Outstanding Received Reinv. Outstanding W/O CDSC
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 9.6006 0.935 169.367 $ 6.8277 0.665 120.450 $17,292.37
$ 9.6539 0.942 170.309 $ 6.8657 0.670 121.120 $17,524.80
$ 1.0917 0.106 170.415 $ 0.7764 0.075 121.195 $17,535.70
$ 4.9932 0.485 170.900 $ 3.5510 0.345 121.540 $17,585.61
$ 4.7339 0.457 171.357 $ 3.3667 0.325 121.865 $17,906.81
$ 8.1566 0.783 172.140 $ 5.8008 0.557 122.422 $18,264.05
$ 8.8996 0.835 172.975 $ 6.3292 0.594 123.016 $18,421.84
$ 9.3061 0.873 173.848 $ 6.6183 0.621 123.637 $18,497.43
$10.2513 0.958 174.806 $ 7.2905 0.681 124.318 $18,476.99
$10.0171 0.944 175.750 $ 7.1240 0.671 124.989 $18,893.13
$ 9.6258 0.894 176.644 $ 6.8456 0.636 125.625 $18,953.90
$10.3513 0.965 177.609 $ 7.3616 0.686 126.311 $19,359.38
$ 9.7330 0.883 178.492 $ 6.9218 0.628 126.939 $19,455.63
$ 8.8532 0.806 179.298 $ 6.2962 0.573 127.512 $19,507.62
$10.0048 0.939 180.237 $ 7.1152 0.668 128.180 $19,087.10
$ 9.7364 0.913 181.150 $ 6.9243 0.650 128.830 $18,604.11
$55.8014 5.391 186.541 $39.6848 3.834 132.664 $19,157.76
$ 6.5495 0.638 187.179 $ 4.6578 0.454 133.118 $19,223.28
$ 0.0000 0.000 187.179 $ 0.0000 0.000 133.118 $19,485.33
$13.0464 1.278 188.457 $ 9.2783 0.909 134.027 $18,958.77
$ 8.9329 0.898 189.355 $ 6.3529 0.638 134.665 $18,689.34
$ 8.9944 0.916 190.271 $ 6.3966 0.651 135.316 $18,456.29
$10.0083 1.044 191.315 $ 7.1176 0.742 136.058 $18,404.50
$10.0211 1.033 192.348 $ 7.1267 0.735 136.793 $18,292.29
$ 8.9827 0.951 193.299 $ 6.3882 0.676 137.469 $18,653.35
$10.6140 1.114 194.413 $ 7.5484 0.792 138.261 $18,605.32
$ 9.3940 0.999 195.412 $ 6.6808 0.711 138.972 $18,192.86
$ 9.6885 1.046 196.458 $ 6.8902 0.744 139.716 $18,133.07
$ 9.7266 1.067 197.525 $ 6.9173 0.758 140.474 $18,132.80
$ 9.2461 1.000 198.525 $ 6.5756 0.711 141.185 $18,284.15
$ 6.2734 0.680 199.205 $ 4.4614 0.484 141.669 $18,346.78
$ 3.7809 0.411 199.616 $ 2.6889 0.292 141.961 $18,624.17
$10.0207 1.075 200.691 $ 7.1264 0.765 142.726 $19,045.58
$ 9.6332 1.018 201.709 $ 6.8508 0.724 143.450 $19,081.67
$10.4869 1.104 202.813 $ 7.4580 0.785 144.235 $19,328.08
$10.2319 1.049 203.862 $ 7.2767 0.746 144.981 $20,202.72
$10.0810 1.024 204.886 $ 7.1693 0.729 145.710 $20,345.18
$ 6.6383 0.670 205.556 $ 4.7210 0.476 146.186 $20,411.71
$ 9.5871 0.979 206.535 $ 6.8181 0.696 146.882 $20,261.08
$11.0331 1.119 207.654 $ 7.8464 0.796 147.678 $20,516.22
$ 9.6974 0.984 208.638 $ 6.8966 0.699 148.377 $20,676.03
$10.9806 1.099 209.737 $ 7.8091 0.782 149.159 $20,973.70
</TABLE>
<PAGE> 17
<TABLE>
JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND (CLASS B) - SEC TOTAL RETURN FORMULA
Initial Investment: $1,000.00
<CAPTION>
- ----------------------------------- ----------------------------------- ---------------- ---------------------------------------
Average Annual Total Return Investment Value at End of Period Cumulative Investment Value at End of Period Given
CDSC CDSC
Excluding With Excluding % CDSC Ending Excluding Ending Investment Value at End of Period Given
CDSC CDSC CDSC CDSC Amount Value CDSC Value $10,000 investment on inception date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.40 Year Return: # 8.20% 8.20% $2,097.37 0.00% $ 0.00 $2,097.37 109.74% 109.74% $0.00
5 Year Return: 8.33% 8.03% $1,491.59 2.00% $20.00 $1,471.59 49.16% 47.16%
- ----------------------------------- ----------------------------------- ---------------- ---------------------------------------
<FN>
# Since Inception NOTE: YTD includes Ex-dividend for the period
$0.0000
Constant Sales Charge: N/A Monthly Declared Div
$0.0511
</TABLE>
<TABLE>
<CAPTION>
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
- ------------------------------------------------------------------------------------------------------------------------
End of Period (update for formulas above):
<S> <C>
$10.00
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
10-Year 5-Year
- ------------------------------------------- --------------------------------------------- PLOT POINTS
Dividend # of Shares Shares Dividend # of Shares Shares VALUE
Received Reinv. Outstanding Received Reinv. Outstanding W/O CDSC
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
209.737 149.159 $0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> JOHN HANCOCK REGIONAL BANK FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 1,454,969,319
<INVESTMENTS-AT-VALUE> 1,733,199,078
<RECEIVABLES> 23,856,523
<ASSETS-OTHER> 1,062,390
<OTHER-ITEMS-ASSETS> 278,229,759
<TOTAL-ASSETS> 1,758,117,991
<PAYABLE-FOR-SECURITIES> 30,954,539
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,085,076
<TOTAL-LIABILITIES> 35,039,615
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,428,161,434
<SHARES-COMMON-STOCK> 17,931,218
<SHARES-COMMON-PRIOR> 10,084,092
<ACCUMULATED-NII-CURRENT> 2,036,461
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,650,722
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 278,229,759
<NET-ASSETS> 1,723,078,376
<DIVIDEND-INCOME> 27,706,275
<INTEREST-INCOME> 7,993,341
<OTHER-INCOME> 0
<EXPENSES-NET> 18,655,946
<NET-INVESTMENT-INCOME> 17,043,670
<REALIZED-GAINS-CURRENT> 14,650,736
<APPREC-INCREASE-CURRENT> 235,518,324
<NET-CHANGE-FROM-OPS> 267,212,730
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,715,567
<DISTRIBUTIONS-OF-GAINS> 11,425,856
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,405,492
<NUMBER-OF-SHARES-REDEEMED> 7,018,102
<SHARES-REINVESTED> 359,736
<NET-CHANGE-IN-ASSETS> 983,893,382
<ACCUMULATED-NII-PRIOR> 224,712
<ACCUMULATED-GAINS-PRIOR> 11,425,842
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,644,892
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,655,946
<AVERAGE-NET-ASSETS> 283,177,798
<PER-SHARE-NAV-BEGIN> 21.52
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 5.92
<PER-SHARE-DIVIDEND> 0.48
<PER-SHARE-DISTRIBUTIONS> 0.34
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.14
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 022
<NAME> JOHN HANCOCK REGIONAL BANK FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 1,454,969,319
<INVESTMENTS-AT-VALUE> 1,733,199,078
<RECEIVABLES> 23,856,523
<ASSETS-OTHER> 1,062,390
<OTHER-ITEMS-ASSETS> 278,229,759
<TOTAL-ASSETS> 1,758,117,991
<PAYABLE-FOR-SECURITIES> 30,954,539
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,085,076
<TOTAL-LIABILITIES> 35,039,615
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,428,161,434
<SHARES-COMMON-STOCK> 45,761,124
<SHARES-COMMON-PRIOR> 24,369,889
<ACCUMULATED-NII-CURRENT> 2,036,461
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,650,722
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 278,229,759
<NET-ASSETS> 1,723,078,376
<DIVIDEND-INCOME> 27,706,275
<INTEREST-INCOME> 7,993,341
<OTHER-INCOME> 0
<EXPENSES-NET> 18,655,946
<NET-INVESTMENT-INCOME> 17,043,670
<REALIZED-GAINS-CURRENT> 14,650,736
<APPREC-INCREASE-CURRENT> 235,518,324
<NET-CHANGE-FROM-OPS> 267,212,730
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,516,354
<DISTRIBUTIONS-OF-GAINS> 11,425,856
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,194,033
<NUMBER-OF-SHARES-REDEEMED> 5,396,234
<SHARES-REINVESTED> 593,436
<NET-CHANGE-IN-ASSETS> 983,893,382
<ACCUMULATED-NII-PRIOR> 224,712
<ACCUMULATED-GAINS-PRIOR> 11,425,842
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,644,892
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,655,946
<AVERAGE-NET-ASSETS> 702,808,025
<PER-SHARE-NAV-BEGIN> 21.43
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 5.89
<PER-SHARE-DIVIDEND> 0.32
<PER-SHARE-DISTRIBUTIONS> 0.34
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.02
<EXPENSE-RATIO> 2.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> JOHN HANCOCK GOLD AND GOVERNMENT FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 31,976,843
<INVESTMENTS-AT-VALUE> 33,007,633
<RECEIVABLES> 2,311,599
<ASSETS-OTHER> 8,278
<OTHER-ITEMS-ASSETS> 1,030,810
<TOTAL-ASSETS> 35,327,530
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 108,931
<TOTAL-LIABILITIES> 108,931
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,354,966
<SHARES-COMMON-STOCK> 1,386,291
<SHARES-COMMON-PRIOR> 1,147,566
<ACCUMULATED-NII-CURRENT> 100,015
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12,267,172)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,030,790
<NET-ASSETS> 35,218,599
<DIVIDEND-INCOME> 202,310
<INTEREST-INCOME> 1,669,566
<OTHER-INCOME> 0
<EXPENSES-NET> 910,409
<NET-INVESTMENT-INCOME> 961,467
<REALIZED-GAINS-CURRENT> (3,740,401)
<APPREC-INCREASE-CURRENT> (277,671)
<NET-CHANGE-FROM-OPS> (3,056,605)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 461,398
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 910,305
<NUMBER-OF-SHARES-REDEEMED> 698,341
<SHARES-REINVESTED> 26,761
<NET-CHANGE-IN-ASSETS> (20,242,065)
<ACCUMULATED-NII-PRIOR> 73,119
<ACCUMULATED-GAINS-PRIOR> (8,528,361)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 354,905
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 910,409
<AVERAGE-NET-ASSETS> 16,620,182
<PER-SHARE-NAV-BEGIN> 14.35
<PER-SHARE-NII> 0.37
<PER-SHARE-GAIN-APPREC> (1.17)
<PER-SHARE-DIVIDEND> 0.35
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.20
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> JOHN HANCOCK GOLD AND GOVERNMENT FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 31,976,843
<INVESTMENTS-AT-VALUE> 33,007,633
<RECEIVABLES> 2,311,599
<ASSETS-OTHER> 8,278
<OTHER-ITEMS-ASSETS> 1,030,810
<TOTAL-ASSETS> 35,327,530
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 108,931
<TOTAL-LIABILITIES> 108,931
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,354,966
<SHARES-COMMON-STOCK> 1,284,093
<SHARES-COMMON-PRIOR> 2,720,942
<ACCUMULATED-NII-CURRENT> 100,015
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12,267,172)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,030,790
<NET-ASSETS> 35,218,599
<DIVIDEND-INCOME> 202,310
<INTEREST-INCOME> 1,669,566
<OTHER-INCOME> 0
<EXPENSES-NET> 910,409
<NET-INVESTMENT-INCOME> 961,467
<REALIZED-GAINS-CURRENT> (3,740,401)
<APPREC-INCREASE-CURRENT> (277,671)
<NET-CHANGE-FROM-OPS> (3,056,605)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 471,583
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 985,367
<NUMBER-OF-SHARES-REDEEMED> 2,446,361
<SHARES-REINVESTED> 24,145
<NET-CHANGE-IN-ASSETS> (20,242,065)
<ACCUMULATED-NII-PRIOR> 73,119
<ACCUMULATED-GAINS-PRIOR> (8,528,361)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 354,905
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 910,409
<AVERAGE-NET-ASSETS> 27,742,921
<PER-SHARE-NAV-BEGIN> 14.33
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> (1.14)
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.18
<EXPENSE-RATIO> 2.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 041
<NAME> JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND, CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 476,873,236
<INVESTMENTS-AT-VALUE> 495,636,079
<RECEIVABLES> 6,801,702
<ASSETS-OTHER> 65,751
<OTHER-ITEMS-ASSETS> 18,762,843
<TOTAL-ASSETS> 502,503,532
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 713,800
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<NAME> JOHN HANCOCK SOVEREIGN U.S. GOVERNMENT INCOME FUND, CLASS B
<S> <C>
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<TABLE> <S> <C>
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<NUMBER> 061
<NAME> JOHN HANCOCK SOVEREIGN ACHIEVERS FUND - CLASS A
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<TABLE> <S> <C>
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<NUMBER> 062
<NAME> JOHN HANCOCK SOVEREIGN ACHIEVERS FUND - CLASS B
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 071
<NAME> JOHN HANCOCK MANAGED TAX-EXEMPT FUND - CLASS A
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<NUMBER> 072
<NAME> JOHN HANCOCK MANAGED TAX-EXEMPT FUND - CLASS B
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1995
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