As filed with the Securities and Exchange Commission on February , 1995
Registration No. 33-4559
Registration No. 811-4630
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 28 [x]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 29
(Check appropriate box or boxes.)
Freedom Investment Trust II
(Exact Name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code
(617) 375-1700
THOMAS H. DROHAN
Senior Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[x] On March 1, 1995 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] On (date) pursuant to paragraph (a) of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant has registered an indefinite number of shares under the
Securities Act of 1933. The Registrant filed the notice required by Rule
24f-2 for its most recent fiscal year on or about December 23, 1994.
1
<PAGE>
<TABLE>
CROSS REFERENCE SHEET
Pursuant to Rule 495(a) under the Securities Act of 1933
<CAPTION>
Item Number Statement of Additional
Form N-1A Part A Prospectus Caption Information Caption
---------------- ------------------ -------------------
<S> <C> <C>
1 Front Cover Page *
2 Expense Information; *
The Fund's Expenses;
Shares Price;
Additional Services and
Programs
3 The Fund's Financial *
History Performance
4 Investment Objectives and *
Policies; Organization and
Management of the Fund
5 Organization and Management *
of the Fund; The Fund's
Expenses
6 Organization and Management of *
Fund; Distribution and Taxes;
How to Redeem Shares;
Additional Services and Programs
7 Who Can Buy Shares; *
How to Buy Shares;
Shares Price; Additional
Services and Programs
8 How to Redeem Shares *
9 Not Applicable *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item Number Statement of Additional
Form N-1A Part A Prospectus Caption Information Caption
---------------- ------------------ -------------------
<S> <C> <C>
10 * Front Cover Page
11 * Table of Contents
12 * Organization of the Fund
13 * Investment Objective and
Policies; Investment
Restrictions
14 * Those Responsible for
Management
15 * Those Responsible for
Management
16 * Investment Advisory and
Other Services;
Distribution Contract;
Transfer Agent Services;
Custody of Portfolio;
Independent Auditors
17 * Brokerage Allocation
18 * Description of the Fund's
Shares
19 * Net Asset Value; Additional
Services and Programs
20 * Tax Status
21 * Distribution Contract
22 * Calculation of Performance
23 * Financial Statements
</TABLE>
<PAGE>
John Hancock
Special Opportunities Fund
Class A and Class B Shares
Prospectus
March 1, 1995
TABLE OF CONTENTS Page
Expense Information 2
The Fund's Financial Highlights 3
Investment Objective and Policies and
Certain Risk Considerations 5
Organization and Management of the Fund 10
Alternative Purchase Arrangements 11
The Fund's Expenses 12
Dividends and Taxes 13
Performance 14
How to Buy Shares 15
Share Price 16
How to Redeem Shares 22
Additional Services and Programs 24
This Prospectus sets forth information about John Hancock Special
Opportunities Fund (the "Fund"), a non-diversified series of Freedom
Investment Trust II, (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, 1995, 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 (1-800-544-6713 TDD).
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
The purpose of the following information is to help you understand the
various fees and expenses that you will bear, directly or indirectly, when
you purchase Fund shares. The operating fees and expenses included in the
table and hypothetical example below are based on fees and expenses for the
Class A and Class B shares of the Fund for the fiscal year ended October 31,
1994, adjusted to reflect current fees and expenses. Actual fees and expenses
in the future may be greater or less than those indicated.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
<S> <C> <C>
Shareholder
Transaction
Expenses
Maximum sales charge imposed
on purchases (as a percentage
of offering price) 5.00% None
Maximum sales charge imposed
on reinvested dividends None None
Maximum deferred sales charge None* 5.00%
Redemption fee+ None None
Exchange fee None None
Annual Fund Operating Expenses
(as a percentage of average
net assets)
Management fee 0.80% 0.80%
12b-1 fee** 0.30% 1.00%
Other expenses 0.63% 0.63%
Total gross Fund operating
expenses 1.73% 2.43%
Management fee waiver and
expense reimbursement (0.12%) (0.12%)
Total net Fund operating expenses 1.61%(a) 2.31%(a)
<FN>
*No sales charge is payable at the time of purchase on investments of $1
million or more, but for these investments a contingent deferred sales charge
may 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 plan 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)Total net Fund operating expenses in the table reflect estimated expenses,
net of the Adviser's reimbursement or waiver of the management fee and other
expenses (but not including the transfer agent fee and the 12b-1 fee) in
excess of 0.90% of the Fund's average net assets.
+Redemption by wire fee (currently $4.00) not included.
</FN>
</TABLE>
<TABLE>
<CAPTION>
1 3 5 10
Example Year Years Years 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 5% annual
return:
Class A Shares $66 $ 98 $133 $232
Class B Shares
--Assuming complete redemption at
end of period $73 $102 $144 $247
--Assuming no redemption $23 $ 72 $124 $247
</TABLE>
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,
$10, 3 years $32, 5 years $55, and 10 years $122.
(The example should not be considered as a representation of past or future
investment returns. Actual expenses may be greater or less than shown.)
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the
maximum front-end sales charge permitted under the National Association of
Securities Dealers Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully explained in
this Prospectus under the caption "The Fund's Expenses" and in the Statement
of Additional Information under the captions "Investment Advisory and Other
Services" and "Distribution Contract."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following financial highlights have been audited by the Fund's
independent accountants. Price Waterhouse LLP's report on the Fund's
financial statements and financial highlights for the year ended October 31,
1994 is included in the Annual Report which 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:
<TABLE>
<CAPTION>
For the Period
November 1, 1993
(Commencement of
Operations) to
October 31, 1994
CLASS A
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50
Net Investment Loss (0.03)(b)
Net Realized and Unrealized Loss on Investments (0.54)
Total from Investment Operations (0.57)
Net Asset Value, End of Period $ 7.93
Total Investment Return at Net Asset Value (d) (6.71%)(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 92,325
Ratio of Expenses to Average Net Assets * * 1.50%
Ratio of Adjusted Expenses to Average Net Assets
(a) 1.62%
Ratio of Net Investment Loss to Average Net
Assets (0.41%)
Ratio of Adjusted Net Investment Loss to Average
Net Assets (a) (0.53%)
Portfolio Turnover Rate 57%
<FN>
* * Expense Reimbursement Per Share $ 0.01(b)
</FN>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50
Net Investment Loss (0.09)(b)
Net Realized and Unrealized Loss on Investments (0.54)
Total from Investment Operations (0.63)
Net Asset Value, End of Period $ 7.87
Total Investment Return at Net Asset Value (d) (7.41%)(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $131,983
Ratio of Expenses to Average Net Assets * * 2.22%
Ratio of Adjusted Expenses to Average Net Assets
(a) 2.34%
Ratio of Net Investment Loss to Average Net
Assets (1.13%)
Ratio of Adjusted Net Investment Loss to Average
Net Assets (a) (1.25%)
Portfolio Turnover Rate 57%
<FN>
* * Expense Reimbursement Per Share $ 0.01(b)
</FN>
<PAGE>
For the Period
July 6, 1994
(Commencement of
Operations) to
October 31, 1994
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 7.60
Net Realized and Unrealized Gain on Investments 0.34(e)
Net Asset Value, End of Period $ 7.94
Total Investment Return at Net Asset Value (d) (4.47%)(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 165
Ratio of Expenses to Average Net Assets * * 1.01%*
Ratio of Adjusted Expenses to Average Net Assets
(a) 1.39%*
Ratio of Net Investment Income to Average Net
Assets 0.03%*
Ratio of Adjusted Net Investment Income to
Average Net Assets (a) (0.35%)*
Portfolio Turnover Rate 57%
* * Expense Reimbursement Per Share $ 0.01(b)
<FN>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) On average month end shares outstanding.
(c) Not annualized.
(d) Without the reimbursement, total investment return would be lower.
(e) May not accord to amounts shown elsewhere in the financial statements.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
AND CERTAIN RISK CONSIDERATIONS
The investment objective of the
Fund is long-term capital
appreciation.
The investment objective of the Fund is long-term capital appreciation. The
Fund seeks to achieve its objective by emphasizing investments in equity
securities of issuers in various economic sectors. There are market
fluctuations and risks in any investment and therefore there is no assurance
that the Fund will realize its objective.
The Fund emphasizes issuers in
certain economic sectors.
The equity securities in which the Fund invests consist primarily of common
stocks of U.S. and foreign issuers but may also include preferred stocks,
convertible debt securities and warrants. The Fund seeks to achieve its
investment objective by varying the relative weighting of its portfolio
securities among various economic sectors based upon both macroeconomic
factors and the outlook for each particular sector. John Hancock Advisers,
Inc. (the "Adviser") selects equity securities for the Fund from various
economic sectors, including, but not limited to, the following: automotive
and housing, consumer goods and services, defense and aerospace, energy,
financial services, health care, heavy industry, leisure and entertainment,
machinery and equipment, precious metals, retailing, technology,
transportation, utilities, foreign and environmental. The Fund may modify
these sectors if the Adviser believes that they no longer represent
appropriate investments for the Fund, or if other sectors offer better
opportunities for investment. See the Appendix to the Statement of Additional
Information for a further description of the sectors in which the Fund
invests.
The Adviser will adjust the Fund's relative weighing among the sectors in
response to changes in economic and market conditions. The Fund may focus on
as many as five of the foregoing economic sectors at any time. Under normal
market conditions, at least 90% of the Fund's investments in equity
securities will be invested in the equity securities of issuers in five or
fewer of the sectors. Subject to the Fund's policy of investing not more than
25% of its total assets in any one industry, issuers in any one sector may
represent all of the Fund's net assets. Due to the Fund's emphasis on a few
sectors, the Fund may be subject to a greater degree of volatility than a
fund that is structured in a more diversified manner. However, the Fund
retains the flexibility to invest its assets in a broader group of sectors if
a narrower range of investments is not desirable. This flexibility may offer
greater diversification than a fund that is limited to investing in a single
sector or industry. The Fund may hold securities of issuers in fewer than all
of the sectors at any given time.
In selecting securities for the Fund's portfolio, the Adviser will determine
the allocation of assets among equity securities, fixed income securities and
cash, the sectors that will be emphasized at any given time, the distribution
of securities among the various sectors, the specific industries within each
sector and the specific securities within each industry. In making the sector
analysis, the Adviser considers the general economic environment, the outlook
for real economic growth in the United States and abroad, trends and
developments within specific sectors and the outlook for interest rates and
the securities markets. A sector is a "special opportunity" when, in the
opinion of the Adviser, the issuers in that sector have a high earnings
potential. In selecting particular issuers, the Adviser considers
price/earnings ratios, ratios of market to book value, earnings growth,
product innovation, market share, management quality and capitalization.
<PAGE>
The Fund's investments may include securities of both large, widely traded
companies and smaller, less well-known issuers. The Fund seeks growth
companies that either occupy a dominant position in an emerging or
established industry or have a significant and growing market share in a
large, fragmented industry. The Fund seeks to invest in those companies with
potential for high growth, stable earnings, ability to self-finance, a
position of industry leadership and strong visionary management. Higher risks
are often associated with investments in companies with smaller market
capitalizations. These companies may have limited product lines, market and
financial resources, or they may be dependent upon smaller or less
experienced management groups. In addition, trading volume for these
securities may be limited. Historically, the market price for these
securities has been more volatile than for securities of companies with
greater capitalization. However, securities of companies with smaller
capitalization may offer greater potential for capital appreciation, since
they may be overlooked and thus undervalued by investors.
The Fund may also invest in fixed
income securities in pursuing its
investment objective or for
temporary defensive purposes.
The Fund may also invest in the following fixed income securities: U.S.
Government securities and convertible and non-convertible corporate preferred
stocks and debt securities. The market value of fixed income securities
varies inversely with changes in the prevailing levels of interest rates. The
market value of convertible securities, while influenced by the prevailing
level of interest rates, is also affected by the changing value of the equity
securities into which they are convertible. The Fund may purchase fixed
income debt securities with stated maturities of up to thirty years. The
corporate fixed income securities in which the Fund may invest will be rated
at least BBB by Standard & Poors' Ratings Group ("S&P") or Baa by Moody's
Investors Service, Inc. ("Moody's") or, if unrated, determined to be of
comparable quality by the Adviser. Debt securities rated Baa or BBB are
considered medium grade obligations with speculative characteristics, and
adverse economic conditions or changing circumstances may weaken capacity to
pay interest and repay principal. If the rating of a debt security is reduced
below Baa or BBB, the Adviser will consider whatever action is appropriate
consistent with the Fund's investment objectives and policies.
The Fund is classified as a non-diversified fund. The Fund is classified as a
"non-diversified" fund to permit investment of more than 5% of its assets in
the obligations of any one issuer. Since a relatively high percentage of the
Fund's assets may be invested in the obligations of a limited number of
issuers, the value of the Fund's shares may be more susceptible to any single
economic, political or regulatory event, and to credit and market risks
associated with a single issuer, than would the shares of a diversified fund.
The Fund may employ certain
investment strategies to help
achieve its investment
objectives.
Foreign Securities. The Fund may invest in securities of foreign and United
States issuers which are issued in or outside of the U.S., including American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or other
securities convertible into securities of corporations in which the Fund is
permitted to invest. ADRs (sponsored and unsponsored) are receipts typically
issued by an American bank or trust company, ADR's evidence ownership of
underlying securities issued by a foreign corporation, and are designed for
trading in United States securities markets. Issuers of the shares underlying
unsponsored ADRs are not contractually
<PAGE>
obligated to disclose material information in the United States and,
therefore, there may not be a correlation between that information and the
market value of the unsponsored ADR.
Foreign Currencies. In connection with its investments in foreign securities,
the Fund may hold a portion of its assets in foreign currencies and may enter
into forward foreign currency exchange contracts to protect against changes
in foreign currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a price set at the time of the contract. Although hedging
strategies could reduce the risk of loss due to a decline in the value of the
hedged foreign currency, they could also limit any potential gain which might
result from an increase in the value of the currency.
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. or foreign 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.
Options Transactions. The Fund may write (sell) listed and over-the-counter
covered call and put options on securities in which it may invest, and on
indices composed of securities in which it may invest. The Fund may also
purchase put and call options on these securities and indices. All call
options written by the Fund are covered, which means that the Fund will own
the securities subject to the option as long as the option is outstanding.
All put options written by the Fund are also covered, which means that the
Fund will have deposited with its custodian cash, or liquid high grade debt
securities with a value at least equal to the exercise price of the put
option. Call and put options written by the Fund will also be considered to
be covered, to the extent that the Fund's liabilities under these options are
wholly or partially offset by its rights under call and put options purchased
by the Fund. The Fund will treat purchased over-the-counter options and
assets used to cover written over-the-counter options as illiquid securities.
However, with respect to options written with primary dealers in U.S.
Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount of illiquid securities may be
calculated with reference to the formula price.
While transactions in options and futures contracts may reduce certain risks,
they may entail other risks. Certain risks arise due to the imperfect
correlations between movements in the price of the contracts, and movements
in the prices of the securities or currency that underly the contract. In
addition, the Fund could be prevented from opening, or realizing the benefits
of closing out, a futures or options position because of position limits or
limits on daily price fluctuations imposed by an exchange. There can be no
assurance that a liquid secondary market will exist for any option or futures
<PAGE>
contract. The Fund's ability to hedge successfully will depend on the
Adviser's ability to predict accurately the future direction of securities
and currency markets and interest rates. Transactions in futures contracts
involve brokerage costs, require margin deposits, and require the Fund to
segregate liquid high grade debt securities in an amount equal to the value
of contracts that involve the purchase of the underlying asset or its
economic equivalent. The potential loss from writing options is potentially
unlimited and may exceed the amount of the premium received.
Short Sales. The Fund may engage in short sales "against the box", as well as
short sales to hedge against or profit from an anticipated decline in the
value of a security. When the Fund engages in a short sale, it will place in
a segregated account, cash or U.S. government securities in accordance with
applicable regulatory requirements. These will be marked to market daily. See
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 carefully monitor the Fund's investments in these securities,
focusing on certain factors, including valuation, liquidity and availability
of information. Purchases are subject to a nonfundamental investment
restriction limiting all illiquid securities held by the Fund to not more
than 15% of the Fund's 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 securities involved in the transaction. As a result, the Fund
may incur a loss or, in the event of the borrower's bankruptcy, the Fund may
be delayed in or prevented from liquidating the collateral. It is a
fundamental policy of the Fund not to lend portfolio securities having a
total value exceeding 33-1/3% of its total 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 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.
Short-Term Trading. Short-term trading means the purchasing and subsequent
sale of a security after it has been held for a relatively brief period of
time. The Fund engages in short-term trading in response to changes in
interest rates, securities
<PAGE>
prices or other economic trends and developments. Under normal market
conditions, the Fund's portfolio turnover rate for the current fiscal year is
expected to be no more than 200%.
Investment in foreign securities
may involve risks that are not
present in domestic investments.
Global Risks. Investments in foreign securities may involve risks not present
in domestic investments 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 American 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. Expense ratios of
international funds generally are higher than those of domestic funds because
there are greater costs associated with maintaining custody of foreign
securities and the increased research necessary for international investing
results in a higher advisory fee.
These risks may be intensified in the case of investments in emerging markets
or countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America
and Africa. Security prices in these markets can be significantly more
volatile than in more developed countries, reflecting the greater
uncertainties of investing in less established markets and economies.
Political, legal and economic structures in many of these emerging market
countries may be undergoing significant evolution and rapid development, and
they may lack the social, political, legal and economic stability
characteristic of more developed countries. Emerging market countries may
have failed in the past to recognize private property rights. They may have
relatively unstable governments, present the risk of nationalization of
businesses, restrictions on foreign ownership, or prohibitions on
repatriation of assets, and may have less protection of property rights than
more developed countries. Their economies may be predominately based on only
a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rate and currency exchange rates. Local securities markets may
trade a small number of securities and may be unable to respond effectively
to increases in trading volume, potentially making prompt liquidation of
substantial holdings difficult or impossible at times. The Fund may be
required to establish special custodial or other arrangements before making
certain investments in those countries. Securities of issuers located in
these countries may have limited marketability and may be subject to more
abrupt or erratic price movements.
The Fund has adopted investment restrictions which are detailed in the
Statement of Additional Information; where they are designated as fundamental
or nonfundamental. Fundamental investment 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. These changes may result in the Fund having an
investment objective different from the objective which you considered
appropriate at the time of your investment.
<PAGE>
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 is 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 shares of
the Fund. Pursuant to procedures determined 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, which in turn indirectly owns the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Trustees elect officers and
retain the investment adviser,
who are responsible for the
day-to-day operations of the
Fund, subject to the Trustees'
policies and supervision.
The Fund is a non-diversified series of Freedom Investment Trust II, an
open-end management investment company organized as a Massachusetts business
trust in 1986. The Fund has an unlimited number of authorized shares of
beneficial interest. The Trust's Declaration of Trust permits the Trustees to
classify and reclassify the shares into one or more classes. The Trustees
have authorized the issuance of three classes of the Fund, designated Class
A, Class B and Class C, although Class C is no longer offered for sale. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights as to voting, redemption,
dividends and liquidation. However, each class bears different distribution
and transfer agent fees and Class A and Class B shareholders have exclusive
voting rights with respect to their distribution plans. The Trust is not
required and does not intend 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 $13 billion.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary
of the John Hancock Mutual Life Insurance Company, a financial services
company. It 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" or the
"Distributor"), an indirect subsidiary of John Hancock Mutual Life Insurance
Company, distributes shares for all of the John Hancock funds through
selected broker-dealers ("Selling Brokers"). 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.
Day-to-day management of the Fund is carried out by Michael P. DiCarlo,
supported by an investment team of sector and global specialists from the
Adviser's equity group. Mr. DiCarlo also manages John Hancock Special
Equities Fund and oversees the Adviser's equity management operation. Mr.
DiCarlo is a Senior Vice President of the Adviser and has been associated
with the Adviser since 1984.
In order to avoid any conflict with portfolio trades for the Fund, the
Adviser and the Fund have adopted extensive restrictions on personal
securities trading by personnel
<PAGE>
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 purchase 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 your account application which 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 of your purchase is $1 million or
more. If you purchase $1 million or more of Class A shares you will not be
subject to an initial sales charge, but you will incur a sales charge if you
redeem your shares within one year of purchase. Class A shares are subject to
ongoing distribution and service fees at a combined annual rate of up to
0.30% of the Fund's average daily net assets attributable to the Class A
shares. Certain purchases of Class A shares qualify for reduced initial sales
charges. See "Share Price-Qualifying for a Reduced Sales Charge."
Investments in Class B shares are
subject to a contingent deferred
sales charge.
Class B Shares. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them
within six years of purchase (the "contingent deferred sales charge" or the
"CDSC"). Class B shares are subject to ongoing distribution and service fees
at a combined annual rate of up to 1.00% of the Fund's average daily net
assets attributable to the Class B shares. Investing in Class B shares
permits all of your dollars to work from the time you make your investment,
but the higher ongoing distribution fee will cause these shares to have a
higher expense ratio than that of 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 Investor Services or John Hancock Mutual Life Insurance
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 a more
beneficial investment 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 page 2 of this Prospectus gives 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."
<PAGE>
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 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 than it would be more advantageous to
purchase Class B shares in order to have all your funds invested initially.
However, you would be subject to higher distribution fees and, for a six-year
period, a CDSC.
In the case of Class A shares, distribution expenses that John Hancock Funds
incurs in connection with the sale of 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, expenses will be paid from the proceeds of the
ongoing distribution and service fees, as well as 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. Sales personnel distributing the Fund's shares may receive
different compensation for selling each class of shares.
Dividends, if any, on Class A and Class B shares will be calculated in the
same manner, at the same time and on the same day and will be in the same
amount, except for differences resulting from the fact that each class will
bear only its own distribution and service fees, shareholder meeting expenses
and incremental transfer agency costs. See "Dividends and Taxes."
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a monthly fee
to the Adviser which is based on a stated percentage of the Fund's average
daily net asset value as follows: 0.80% on the first $500 million of average
daily net assets of the Fund, 0.75% on the next $500 million of average net
assets and 0.70% of average net assets in excess of $1 billion. The
investment management fee paid by the Fund is higher than the fees paid by
most mutual funds but comparable to fees paid by those funds with a similar
investment objective.
The Adviser has voluntarily agreed to limit Fund expenses, including the
management fee (but not including the transfer agent fee and the 12b-1 fee),
to 0.90% of the Fund's average daily net assets. The Adviser reserves the
right to terminate this voluntary limitation in the future.
The Fund pays distribution fees
for marketing and sales-related
shareholder
servicing.
The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Under these Plans, the Fund will pay distribution and 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
<PAGE>
to 0.25% is for service expenses and the remaining amount is for distribution
expenses. Distribution fees are used to reimburse John Hancock Funds for its
distribution expenses, including but not limited to: (i) initial and ongoing
sales compensation to Selling Brokers and others (including affiliates of
John Hancock Funds) engaged in the sale of Fund shares; (ii) marketing,
promotional and overhead expenses incurred in connection with the
distribution of Fund shares; and (iii) with respect to Class B shares only,
interest expenses on unreimbursed distribution expenses.
In the event John Hancock Funds is not fully reimbursed for payments made or
expenses incurred by it under the Class A Plan, these expenses will not be
carried beyond one year from the date they were incurred. 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, 1994 the total expenses for Class A shares and Class B
shares, respectively, were 1.50% and 2.22% of average net assets and reflect
a limitation of expenses by the Adviser. Without this limitation, expenses
for the year for Class A and Class B shares were 1.62% and 2.34%,
respectively, of average daily net assets.
For the fiscal year ended October 31, 1994 an aggregate of $6,461,933 of
distribution expenses or 7%, of the average net assets of the Class B shares
of the Fund, was not reimbursed or recovered by John Hancock Funds through
the receipt of deferred sales charges or 12b-1 fees in prior periods.
DIVIDENDS AND TAXES
Dividends. The Fund generally declares and distributes dividends representing
all or substantially all net investment income, if any, at least annually.
The Fund will generally also distribute net short-term or long-term capital
gains, if any, annually after the close of the fiscal year (October 31).
Dividends are reinvested on the record date in additional shares of your
class unless you elect the option to receive them in cash. If you elect the
cash option and the U.S. Postal Service cannot deliver your checks, your
election will be converted to the reinvestment in additional shares option.
Taxation. Dividends from the Fund's net investment income, certain net
foreign currency gains and net short-term capital gains are taxable to you as
ordinary income. Dividends from the Fund's net long-term capital gains are
taxable as long-term capital gain. These dividends are taxable whether
received in cash or reinvested in additional shares. Certain dividends paid
by the Fund in January of a given year may be taxable to you as if you
received them the prior December. Corporate shareholders may be entitled to
take the corporate dividends received deduction for dividends received by the
Fund from U.S. domestic corporations, subject to certain restrictions under
the Internal Revenue Code. 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. As a
regulated investment company, the Fund will not be subject to the Federal
income taxes on any net
<PAGE>
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.
The 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 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 and local taxes or
foreign taxes with respect to your investment in and distributions from the
Fund. Non-U.S. shareholders and tax-exempt shareholders are subject to
different tax treatment not described above. A state income (and possibly
local income and/or intangible property) tax exemption is generally available
to the extent the Fund's distributions are derived from interest on (or, in
the case of intangible taxes, the value of its assets is attributable to)
certain U.S. Government obligations, provided in some states that certain
thresholds for holdings of such obligations and/or reporting requirements are
satisfied. You should consult your tax adviser for specific advice.
PERFORMANCE
The Fund may advertise its 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 Fund's respective class of shares 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.
Total return calculations for Class A shares generally include the effect of
paying the maximum sales charge of 5.00% (except as shown in "The Fund's
Financial Highlights"). Total return for the Class B shares reflect deduction
of the applicable contingent deferred sales charge imposed on a redemption of
shares held for the applicable period. All calculations assume that dividends
are reinvested at net asset value on the reinvestment dates during the
periods. Total return for Class A and Class B shares will be calculated
separately and, because each class is subject to different expenses, the
total return may differ with respect to that 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,
<PAGE>
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 Class A and
Class B 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. Total return is an historical calculation
and is not an indication of future performance. See "Factors to Consider in
Choosing an Alternative."
HOW TO BUY SHARES
Opening an account.
Buying additional Class A
and Class B shares
The minimum initial investment in Class A and Class B shares is $1,000 ($250
for group investments or $500 for retirement plans).
Complete the application attached to this Prospectus. Indicate whether you are
purchasing Class A or Class B shares. Indicate whether you are purchasing Class
A or Class B shares. If you do not specify which class of shares you are
purchasing, Investor Services will assume you are investing in Class A shares.
By Check: 1. Make your check payable to John Hancock Investor
Services Corporation ("Investor Services").
2. Deliver the completed application and check to your
registered representative or Selling Broker, or mail it
directly to Investor Services.
By Wire: 1. Obtain an account number by contacting your registered
representative or Selling Broker or by calling
1-800-225-5291.
2. Instruct your Bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to:
John Hancock Special Opportunities Fund
[Class A or Class B shares]
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative or Selling Broker or mail it directly to
Investor Services.
Monthly 1. Complete the "Automatic Investing" and "Bank
Automatic Information" sections on the Account Privileges
Accumulation Application, designating a bank account from which your
Program funds may be drawn.
(MAAP)
2. The amount you elect to invest will be automatically
withdrawn from your bank or credit union account.
By 1. Complete the "Invest-By-Phone" and "Bank Information"
Telephone: 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 and Class B shares by
calling Investor Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name 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.
<PAGE>
By Check: 1. Either fill out 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.
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 Special Opportunities 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 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, but the
Fund and Investor Services are not responsible for the authenticity of
telephone instructions relating to your account. Certificates are not issued
unless a request is made in writing to Investor Services.
Institutional Investors: Certain institutional investors may purchase Class C
shares of the Fund, which have no sales charge or 12b-1 fee. See
"Institutional Investors" for further information.
You will receive account
statements which you should keep
to help with your personal
recordkeeping.
You will receive a statement of your account after any transaction that
affects your share balance or registration (statements related to
reinvestment of dividends and automatic investment/withdrawal plans will be
sent to you quarterly). A tax information statement will be mailed to you by
January 31 of each year.
SHARE PRICE
The offering price of 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 per
share 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 in value.
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. 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.
<PAGE>
Shares of the Fund are sold at the offering price based on the NAV computed
after your investment 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 prior to its close of
business to receive that day's offering price.
Initial Sales Charge Alternative--Class A Shares. The offering price you pay
for Class A shares of the Fund equals the NAV plus an initial sales charge as
follows:
<TABLE>
<CAPTION>
Combined
Reallowance and Reallowance to
Amount Invested Sales Charge as a Sales Charge as a Service Fee as a Selling Broker as a
(Including Sales Percentage of Percentage of the Percentage of Percentage of
Charge) Offering Price Amount Invested Offering Price(+) Offering 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.
In addition to the reallowance allowed to all Selling Brokers, John Hancock
Funds will pay the following: round trip airfare to a resort will be offered
to each registered representative of a Selling Broker (if the Selling Broker
has agreed to participate) who sells certain amounts of shares of John
Hancock funds. John Hancock Funds will make these incentive payments out of
its own resources. Other than distribution fees, the Fund does not bear
distribution expenses. 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 contingent deferred sales charge may be imposed in
the event of certain redemption transactions made within one year of
purchase.
(***) John Hancock Funds may pay a commission and first year's service fee
(as described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of Class A shares of $1 million or more in the
aggregate as follows: 1% on sales to $4,999,999, plus 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.
[/FN]
</TABLE>
<PAGE>
Sales charges ARE NOT APPLIED to any dividends which 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
such 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 the Fund's Class A shares will
be made at net asset value with no initial sales charge, but if the shares
are redeemed within 12 months after the beginning of the calendar month in
which the purchase was made (the contingent deferred sales charge period), a
contingent deferred sales charge ("CDSC") will be imposed. The rate of the
CDSC will depend on the amount invested as follows:
Amount Invested CDSC Rate
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
Existing full service clients of John Hancock Mutual Life Insurance Company
group annuity contract holders as of September 1, 1994, may purchase Class A
shares with no initial sales charge, but if the shares are redeemed within 12
months after the end of the calendar year in which the purchase was made, a
contingent deferred sales charge will be imposed at the above rate.
The contingent deferred sales charge will be assessed on an amount equal to
the lesser of (1) the current market value or (2) 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 the discussion "Waiver of
Contingent Deferred Sales Charges" below.
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 combination of funds in the John Hancock family of
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 Class A shares of John
Hancock funds when 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
<PAGE>
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% (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.
* 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 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 made available to their clients.
* 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.
* A former participant in an employee benefit plan with John Hancock funds,
when he/she withdraws from his/her plan and transfers any or all of his/her
plan distributions directly to the Fund.
Class A shares of the Fund 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 a sales charge, so that your
entire initial 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. This 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
<PAGE>
will not be assessed a CDSC on increases in account value above the initial
purchase price, including shares derived from dividend reinvestments.
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. It will be assumed that your redemption comes first from shares you
have held beyond the six-year CDSC redemption period or those you acquired
through dividend reinvestment, and next from the shares you have held the
longest during the six-year period. The CDSC is waived on redemptions in
certain circumstances. See the discussion "Waiver of Contingent Deferred
Sales Charges" below.
Example:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time, your CDSC will be calculated as
follows:
* 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
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds
uses part of them to defray its expenses related to providing the Fund with
distribution services to the Fund 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 the Class B shares without deducting a sales
charge at the time of the purchase.
The amount of the CDSC, if any, will vary depending on the number of years
from the time you purchase your Class B shares until the time you redeem
them. Solely for purposes of determining this holding period, any payments
you make during the month will be aggregated and deemed to have been made on
the last day of the month.
Contingent Deferred Sales
Year in Which Class B Shares Charge As a Percentage of
Redeemed Following Purchase Amount Redeemed
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
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.
<PAGE>
Under certain circumstances, the
CDSC Class B and certain Class A
share redemptions will be waived.
Waiver of Contingent Deferred 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 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.
* 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 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 no later than the month following eight years after the shares
were purchased, resulting in lower annual distribution fees. If you exchanged
Class B shares into the Fund from another John Hancock fund, the calculation
will be based on the time the shares in the original fund were purchased. 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 a shareholder's tax basis or tax holding period for the converted
shares.
<PAGE>
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 for that class of shares 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 that were recently made by check or
Invest-by-Phone have been collected (which may take up to 10 calendar days).
Once your shares are redeemed, the Fund generally sends you payment on the
next business day. When you redeem your shares, you may realize a taxable
gain or loss depending usually on the difference between what you paid for
your shares 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 seven days or longer, as permitted by Federal securities
laws.
<PAGE>
To assure acceptance of your
redemption request, please
follow these procedures.
By All shareholders of the Fund are automatically eligible for the
Telephone: telephone redemption privilege. Call 1-800-225-5291 from 8:00
A.M. to 4:00 P.M. (Eastern 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, but the address on the account
must not have changed for the last thirty 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 in accordance with 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 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 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 that
is included with this Prospectus.
In Send a stock power or letter of instruction specifying the name
Writing: 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 A letter of instruction signed with titles by all
Tenants, Sole persons authorized to sign for the account, exactly
Proprietorship, as it is registered with the signature(s) guaranteed.
(Uniform Gifts or
Transfer to Minor
Act), General
Partners
Corporation, A letter of instruction and a corporate resolution,
Association 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
signature guarantees. (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, (i.e.,
Executors, Administrators, Conservators of Guardians) please call
1-800-225-5291 for further instructions.
<PAGE>
Who may guarantee your signature.
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.
Other information about
redemptions.
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.
Due to the proportionately high cost of maintaining small accounts, the Fund
reserves the right to redeem at net asset value all shares in an account
which holds fewer than 50 shares (except accounts under retirement plans) and
to mail the proceeds to the shareholder or the transfer agent may impose an
annual fee of $10.00. No account will be involuntarily redeemed or 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 further purchases and dividend reinvestments, if any,
exceeds the number of shares redeemed, repeated redemptions from a smaller
account may eventually trigger this redemption policy.
If you have certificates for your shares, you must submit them with your
stock power or a letter of instruction. Unless you specify to the contrary,
any outstanding Class A shares will be redeemed before Class B shares.
Redemptions of certificated shares may not be made by telephone.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege
You may exchange shares of the
Fund only for shares of the same
class in 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 fund that interests 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 Class A shares of the Fund and funds with shares subject to
any initial sales charge are based on the respective net asset values of the
funds. No sales charge or transaction charge is imposed. Class B shares of
the Fund which are subject to a CDSC may be exchanged for Class B shares of
any of the other John Hancock Funds without incurring the CDSC; however,
these shares will be subject to the CDSC schedule of the shares acquired
(except that exchange into John Hancock Short-Term Strategic Income Fund and
John Hancock Limited Term Government Fund which 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
<PAGE>
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 that was in effect at your initial purchase
date.
You may exchange Class B shares of the Fund into shares of John Hancock Cash
Management Fund at net asset value. However, you will continue to be subject
to a CDSC upon redemption. The rate of the CDSC will be the rate in effect on
the original fund at the time of the exchange.
The Fund reserves the right to require that you keep previously exchanged
shares (and reinvested dividends) in the Fund for 90 days before you are
permitted to execute a new exchange. The Fund may also alter the terms or
terminate the exchange privilege upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and
the purchase of shares in another for Federal income tax purposes, and 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 you 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 shares of
the Fund, you automatically authorize exchanges by telephone, unless you
check the box indicating that you do not wish to have 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 the telephone
representative.
<PAGE>
3. Investors Services employes 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.
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
--name(s) in which the account is registered
--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 reinvested in
any 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. For purposes of computing the CDSC
payable upon a subsequent redemption, the holding period of the shares
acquired through reinvestment will include the holding period of the redeemed
shares.
2. Any portion of the redemption may be reinvested in the Fund or in any of
the other John Hancock funds, subject to the minimum investment limit in any
fund.
3. To reinvest, you must notify Investor Services in writing. Include the
Fund(s) name, account number and class from which the shares were originally
redeemed.
Systematic Withdrawal Plan
You may pay routine bills from
your account or make periodic
disbursements of funds from your
retirement accounts to comply
with IRS regulations.
1. You may 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 by contacting your registered representative or
by calling 1-800-225-5291.
2. To be eligible, you must have shares in the Fund with a value of $5,000 or
more 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 will 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.
<PAGE>
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.
You can make automatic
investments and simplify your
investing.
Monthly Automatic Accumulation Program (MAAP)
1. You may authorize an investment to be automatically drawn each month from
your bank, for investment under the "Automatic Investing" and "Bank
Information" sections on the Account Privileges Application.
2. You may also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
3. You may 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 being withdrawn from a bank account and we are
notified that the account has been closed, your withdrawals will be
discontinued.
Group Investment Program (Class A only)
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 investments 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 any Fund as an investment vehicle for various types of
qualified retirement plans, including Individual Retirement Accounts, Keogh
Plans (H.R.10), Pension and Profit Sharing Plans, Tax Sheltered Annuity
Retirement Plans (403(b) Plans), and 401(k) Plans.
2. The initial investment minimum or aggregate minimum for any of these plans
is $500. However, accounts being established as group IRA, SEP, SARSEP, TSA,
and 401(k) Plans will be accepted without an initial minimum investment.
<PAGE>
(back cover)
JOHN HANCOCK
SPECIAL OPPORTUNITIES FUND
Investment Adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Principal Distributor
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Custodian
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
Transfer Agent
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
Independent Auditors
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchange call 1-800-225-5291
Investment-by-Phone
Telephone Redemption
For: TDD call 1-800-554-6713
JHD-3900P 3/95
(front cover)
JOHN HANCOCK
SPECIAL
OPPORTUNITIES
FUND
Prospectus
March 1, 1995
A mutual fund seeking long-term capital appreciation.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Telephone 1-800-225-5291
["Recycled" logo] Printed on Recycled Paper
<PAGE>
John Hancock
Special Opportunities Fund
Class C Shares
Prospectus
March 1, 1995
TABLE OF CONTENTS Page
Expense Information 2
The Fund's Financial Highlights 3
Investment Objective and Policies 5
Organization and Management of the Fund 9
The Fund's Expenses 10
Dividends and Taxes 10
Performance 12
Who Can Buy Class C Shares 12
How to Buy Class C Shares 13
Class C Share Price 14
How to Redeem Class C Shares 14
Additional Services and Programs 16
This Prospectus sets forth information about John Hancock Special
Opportunities Fund (the "Fund"), a non-diversified series of Freedom
Investment Trust II, that you should know before investing. It should be read
and retained 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, 1995, and incorporated by
reference into this Prospectus, free of charge by writing or telephoning:
John Hancock Investor Services Corporation, Attn: Institutional Services,
P.O. Box 9277, Boston, Massachusetts 02205-9277, 1-800-437-9312.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
The purpose of the following information is to help you understand the
various fees and expenses that you will bear, directly or indirectly, when
you purchase Fund shares. The operating fees and expenses included in the
table and hypothetical example below are based on fees and expenses for the
Class C shares of the Fund for the fiscal year ended October 31, 1994,
adjusted to reflect current fees and expenses. Actual fees and expenses in
the future may be greater or less than those indicated.
<TABLE>
<CAPTION>
Class C
Shares*
<S> <C>
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) None
Maximum sales charge imposed on reinvested dividends None
Maximum deferred sales charge None
Redemption fee+ None
Exchange fee None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fee 0.80%
Transfer agent fee 0.10%
Other expenses 0.22%
Total gross Fund operating expenses 1.12%
Management fee waiver and expense reimbursement (0.12%)
Total net Fund operating expenses 1.00%(a)
<FN>
*The information set forth in the foregoing table relates only to Class C
shares of the Fund. In addition, the Fund offers Class A and Class B shares.
+Redemption by wire fee (currently $4.00) not included.
(a) Estimated for the Fund based on expenses to have been incurred if the
Class C shares had been in existence for the entire fiscal year. Total net
Fund operating expenses reflect estimated expenses, net of the Adviser's
reimbursement or waiver of the management fee and other expenses in excess of
0.90% of the Fund's average net assets.
</FN>
</TABLE>
<TABLE>
<CAPTION>
1 3 5 10
Example: Class C Shares Year Years Years Years
<S> <C> <C> <C> <C>
You would pay the following
expenses for the indicated
period of years on a $1,000
investment, assuming a 5%
annual return $10 $32 $55 $122
<FN>
(This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.)
</FN>
</TABLE>
The management fee referenced above is more fully explained in this
Prospectus under the caption "The Fund's Expenses" and in the Statement of
Additional Information under the caption "The Investment Adviser." In
addition to Class C shares, the Fund also offers Class A and B shares. Class
A and B shares are available to individual investors at net asset value plus
a maximum initial sales charge of 5.00% for A shares and a maximum contingent
deferred sales charge of 5.00% for B shares. Class A and B shares are subject
to ongoing distribution and service fees of 0.30% and 1.00%, respectively, of
the Fund's average daily net assets in accordance with plans adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940. The minimum initial
investment in Class A or B shares is $1,000 ($250 for group investments or
$500 for retirement plans). If you are considering a purchase of Class A or B
shares, please call John Hancock Investor Services Corporation ("Investor
Services") at 1-800-437-9312 for more information about eligibility,
instructions for purchase by check or wire and an Account Application.
Class A and B shares generally have operating expenses similar to Class C
shares, except for the sales charge and distribution and transfer agent fees.
Class A and B shareholders are eligible for a reinvestment privilege,
systematic withdrawal plan, monthly automatic accumulation program and use of
the Fund as a funding vehicle for a retirement plan. Investors wishing
information about any of these services and expenses should contact Fund
Services at 1-800-437-9312.
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following financial highlights have been audited by the Fund's
independent accountants. Price Waterhouse LLP's report on the Fund's
financial statements and financial highlights for the year ended October 31,
1994 is included in the Annual Report which 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 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:
<TABLE>
<CAPTION>
For the Period
November 1, 1993
(Commencement of
Operations) to
October 31, 1994
CLASS A
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50
Net Investment Loss (0.03)(b)
Net Realized and Unrealized Loss on
Investments (0.54)
Total from Investment Operations (0.57)
Net Asset Value, End of Period $ 7.93
Total Investment Return at Net Asset Value
(d) (6.71%)(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 92,325
Ratio of Expenses to Average Net Assets** 1.50%
Ratio of Adjusted Expenses to Average Net
Assets (a) 1.62%
Ratio of Net Investment Loss to Average Net
Assets (0.41%)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (a) (0.53%)
Portfolio Turnover Rate 57%
<FN>
**Expense Reimbursement Per Share $ 0.01(b)
</FN>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50
Net Investment Loss (0.09)(b)
Net Realized and Unrealized Loss on
Investments (0.54)
Total from Investment Operations (0.63)
Net Asset Value, End of Period $ 7.87
Total Investment Return at Net Asset Value
(d) (7.41%)(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $131,983
Ratio of Expenses to Average Net Assets** 2.22%
Ratio of Adjusted Expenses to Average Net
Assets (a) 2.34%
Ratio of Net Investment Loss to Average Net
Assets (1.13%)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (a) (1.25%)
Portfolio Turnover Rate 57%
<FN>
**Expense Reimbursement Per Share $ 0.01(b)
</FN>
<PAGE>
For the Period
July 6, 1994
(Commencement of
Operations) to
October 31, 1994
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 7.60
Net Realized and Unrealized Gain on
Investments 0.34(e)
Net Asset Value, End of Period $ 7.94
Total Investment Return at Net Asset Value
(d) (4.47%)(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 165
Ratio of Expenses to Average Net Assets** 1.01%*
Ratio of Adjusted Expenses to Average Net
Assets (a) 1.39%*
Ratio of Net Investment Income to Average
Net Assets 0.03%*
Ratio of Adjusted Net Investment Income to
Average Net Assets (a) (0.35%)*
Portfolio Turnover Rate 57%
<FN>
**Expense Reimbursement Per Share $ 0.01(b)
</FN>
<FN>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) On average month end shares outstanding.
(c) Not annualized.
(d) Without the reimbursement, total investment return would be lower.
(e) May not accord to amounts shown elsewhere in the financial statements.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES AND CERTAIN RISK
CONSIDERATIONS
The investment objective of the
Fund is long-term capital
appreciation.
The investment objective of the Fund is long-term capital appreciation. The
Fund seeks to achieve its objective by emphasizing investments in equity
securities of issuers in various economic sectors. There are market
fluctuations and risks in any investment and therefore there is no assurance
that the Fund will realize its objective.
The Fund emphasizes issuers in
certain economic sectors.
The equity securities in which the Fund invests consist primarily of common
stocks of U.S. and foreign issuers but may also include preferred stocks,
convertible debt securities and warrants. The Fund seeks to achieve its
investment objective by varying the relative weighting of its portfolio
securities among various economic sectors based upon both macroeconomic
factors and the outlook for each particular sector. John Hancock Advisers,
Inc. (the "Adviser") selects equity securities for the Fund from various
economic sectors, including, but not limited to, the following: automotive
and housing, consumer goods and services, defense and aerospace, energy,
financial services, health care, heavy industry, leisure and entertainment,
machinery and equipment, precious metals, retailing, technology,
transportation, utilities, foreign and environmental. The Fund may modify
these sectors if the Adviser believes that they no longer represent
appropriate investments for the Fund, or if other sectors offer better
opportunities for investment. See the Appendix to the Statement of Additional
Information for a further description of the sectors in which the Fund
invests.
The Adviser will adjust the Fund's relative weighting among the sectors in
response to changes in economic and market conditions. The Fund may focus on
as many as five of the foregoing economic sectors at any time. Under normal
market conditions, at least 90% of the Fund's investments in equity
securities will be invested in the equity securities of issuers in five or
fewer of the sectors. Subject to the Fund's policy of investing not more than
25% of its total assets in any one industry, issuers in any one sector may
represent all of the Fund's net assets. Due to the Fund's emphasis on a few
sectors, the Fund may be subject to a greater degree of volatility than a
fund that is structured in a more diversified manner. However, the Fund
retains the flexibility to invest its assets in a broader group of sectors if
a narrower range of investments is not desirable. This flexibility may offer
greater diversification than a Fund that is limited to investing in a single
sector or industry. The Fund may hold securities of issuers in fewer than all
of the sectors at any given time.
In selecting securities for the Fund's portfolio, the Adviser will determine
the allocation of assets among equity securities, fixed income securities and
cash, the sectors that will be emphasized at any given time, the distribution
of securities among the various sectors, the specific industries within each
sector and the specific securities within each industry. In making the sector
analysis, the Adviser considers the general economic environment, the outlook
for real economic growth in the United States and abroad, trends and
developments within specific sectors and the outlook for interest rates and
the securities markets. A sector is a "special opportunity" when in the
opinion of the Adviser, the issuers in that sector have a high earnings
potential. In selecting particular issuers, the Adviser considers
price/earnings ratios, ratios of market to book value, earnings growth,
product innovation, market share, management quality and capitalization.
<PAGE>
The Fund's investments may include securities of both large, widely traded
companies and smaller, less well-known issuers. The Fund seeks growth
companies that either occupy a dominant position in an emerging or
established industry or have a significant and growing market share in a
large, fragmented industry. The Fund seeks to invest in those companies with
potential for high growth, stable earnings, ability to self-finance, a
position of industry leadership and strong visionary management. Higher risks
are often associated with investments in companies with smaller market
capitalizations. These companies may have limited product lines, market and
financial resources, or they may be dependent upon smaller or less
experienced management groups. In addition, trading volume for these
securities may be limited. Historically, the market price for these
securities has been more volatile than the securities of companies with
greater capitalization. However, securities of companies with smaller
capitalization may offer greater potential for capital appreciation, since
they may be overlooked and thus undervalued by investors.
The Fund may also invest in fixed
income securities in pursuing its
investment objective or for
temporary defensive purposes.
The Fund may also invest in the following fixed income securities: U.S.
Government securities and convertible and non-convertible corporate preferred
stocks and debt securities. The market value of fixed income securities
varies inversely with changes in the prevailing levels of interest rates. The
market value of convertible securities, while influenced by the prevailing
level of interest rates, is also affected by the changing value of the equity
securities into which they are convertible. The Fund may purchase fixed
income debt securities with stated maturities of up to thirty years. The
corporated fixed income securities in which the Fund may invest will be rated
at least BBB by Standard & Poors' Ratings Group ("S&P") or Baa by Moody's
Investors Service, Inc. ("Moody's") or, if unrated, determined to be of
comparable quality by the Adviser. Debt securities rated Baa or BBB are
considered medium grade obligations with speculative characteristics, and
adverse economic conditions or changing circumstances may weaken capacity to
pay interest and repay principal. If the rating of a debt security is reduced
below Baa or BBB, the Adviser will consider whatever action is appropriate
consistent with the Fund's investment objectives and policies.
The Fund is classified as a non-diversified fund. The Fund is classified as a
"non-diversified" fund in order to permit investment of more than 5% of its
assets to be invested in the obligations of any one issuer. Since a
relatively high percentage of the Fund's assets may be invested in the
obligations of a limited number of issuers, the value of the Fund's shares
may be more susceptible to any single economic, political or regulatory
event, and to credit and market risks associated with a single issuer, than
would the shares of a diversified fund.
The Fund may employ certain
investment strategies to help
achieve its investment objective.
Foreign Securities. The Fund may invest in securities of foreign and United
States issuers, which are issued in or outside of the U.S. including American
Depositary Receipts ("ADRs") European Depositary Receipts ("EDRs") or other
securities convertible into securities of corporations in which the Fund is
permitted to invest. ADRs (sponsored and unsponsored) are receipts typically
issued by an American bank or trust company. ADRs evidence ownership of
underlying securities issued by a foreign corporation, and are designed for
trading in U.S. securities markets. Issuers of the shares underlying
unsponsored ADRs are not contractually obligated to disclose material
information in the U.S. and therefore there may not be a correlation between
that information and the market value of the unsponsored ADR.
<PAGE>
Foreign Currencies. In connection with its investments in foreign securities,
the Fund may hold a portion of its assets in foreign currencies and may enter
into forward foreign currency exchange contracts to protect against changes
in foreign currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a price set at the time of the contract. Although hedging
strategies could reduce the risk of loss due to a decline in the value of the
hedged foreign currency, they could also limit any potential gain which might
result from an increase in the value of the currency.
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. or foreign 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.
Short Sales. The Fund may engage in short sales "against the box", as well as
short sales to hedge against or profit from an anticipated decline in the
value of a security. When the Fund engages in a short sale, it will place
cash or U.S. Government securities in a segregated account cash or U.S.
Government securities in accordance with applicable regulatory requirements.
These will be marked to market daily. See 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 carefully 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 a
nonfundamental investment restriction limiting all illiquid securities held
by the Fund to not more than 15% of the Fund's 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 securities involved in the transaction. As a result, the Fund
may incur a loss or, in the event of the borrower's bankruptcy, the Fund may
be delayed in or prevented from liquidating the collateral. It is a
fundamental policy of the Fund not to lend portfolio securities having a
total value exceeding 331/3% of its total assets.
<PAGE>
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 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.
Short-Term Trading. Short-term trading means the purchasing and subsequent
sale of a security after it has been held for a relatively brief period of
time. The Fund engages in short-term trading in response to changes in
interest rates, securities prices or other economic trends and developments.
Under normal market conditions, the Fund's portfolio turnover rate for the
current fiscal year is expected to be no more than 200%.
Investments on foreign securities
may involve risks that are not
present in domestic investments.
Global Risks. Investments in foreign securities may involve risks not present
in domestic investments 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 American 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 the foreign exchange rate will
affect the value of the Fund's shares and dividends. Finally, you should be
aware that the expense ratios of international funds generally are higher
than those of domestic funds because there are greater costs associated with
maintaining custody of foreign securities and the increased research
necessary for international investing results in a higher advisory fee.
These risks may be intensified in the case of investments in emerging markets
or countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America
and Africa. Security prices in these markets can be significantly more
volatile than in more developed countries, reflecting the greater
uncertainties of investing in less established markets and economies.
Political, legal and economic structures in many of these emerging market
countries may be undergoing significant evolution and rapid development, and
they may lack the social, political, legal and economic stability
characteristic of more developed countries. Emerging market countries may
have failed in the past to recognize private property rights. They may have
relatively unstable governments, present the risk of nationalization of
businesses, restrictions on foreign ownership, or prohibitions on
repatriation of assets, and may have less protection of property rights than
more developed countries. Their economies may be predominately based
<PAGE>
on only a few industries, may be highly vulnerable to changes in local or
global trade conditions, and may suffer from extreme and volatile debt
burdens or inflation rates. Local securities markets may trade a small number
of securities and may be unable to respond effectively to increases in
trading volume, potentially making prompt liquidation of substantial holdings
difficult or impossible at times. The Fund may be required to establish
special custodial or other arrangements before making certain investments in
those countries. Securities of issuers located in these countries may have
limited marketability and may be subject to more abrupt or erratic price
movements.
The Fund has adopted investment restrictions which are detailed in the
Statement of Additional Information, where they are designed as fundamental
or nonfundamental. Fundamental investment 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. These changes may result in the Fund having an
investment objective different from the objective which you considered
appropriate at the time of your investment.
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 is 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 shares of
the Fund. Pursuant to procedures determined 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, which in turn indirectly owns the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Trustees elect officers and
retain the investment adviser,
who are responsible for the
day-to-day operations of the
Fund, subject to the Trustees'
policies and supervision.
The Fund is a non-diversified series of Freedom Investment Trust II, an
open-end management investment company organized as a Massachusetts business
trust in 1986. The Fund has an unlimited number of authorized shares of
beneficial interest. The Declaration of Trust permits the Trustees to
classify and reclassify the shares into one or more classes. Accordingly,
Trustees have authorized the issuance of three classes of shares of the Fund,
designated as Class A shares, Class B shares and Class C shares. The shares
of each class represent an interest in the same portfolio of investments of
the Fund and have equal rights as to voting, redemption, dividends and
liquidation, except that each class of shares bears different distribution
fees, transfer agent fees and other class expenses and Class A and Class B
shareholders have exclusive voting rights with respect to their distribution
plans. The Trust is not required to hold annual meetings of shareholders,
although special meetings may be held for such purposes as electing or
removing Trustees, changing fundamental policies or approving a management
contract. The Fund, under certain circumstances, will assist in shareholder
communications with other shareholders.
<PAGE>
John Hancock Advisers, Inc.
advises investment companies
having a total asset value of
more than
$13 billion.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary
of John Hancock Mutual Life Insurance Company, a financial services company.
It 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" or the "Distributor"), an
indirect subsidiary of John Hancock Mutual Life Insurance Company,
distributes shares for all of the John Hancock mutual funds through selected
broker-dealers ("Selling Brokers"). 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.
Day-to-day management of the Fund is carried out by Michael P. DiCarlo,
supported by an investment team of sector and global specialists from the
Adviser's equity group. Mr. DiCarlo also manages John Hancock Special
Equities Fund and oversees the Adviser's equity management operation. Mr.
DiCarlo is a Senior Vice President of the Adviser and has been associated
with the Adviser since 1984.
In order to avoid any conflict 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.
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a monthly fee
to the Adviser which is based on a stated percentage of the Fund's average
daily net asset value as follows: 0.80% on the first $500 million of average
daily net assets of the Fund, 0.75% on the next $500 million of average net
assets and 0.70% of average net assets in excess of $1 billion. The
investment management fee paid by the Fund is higher than the fees paid by
most mutual funds but comparable to fees paid by those funds with a similar
investment objective.
The Adviser has voluntarily agreed to limit Fund expenses, including the
management fee (but not including the transfer agent fee), to .90% of the
Fund's average daily net assets. The Adviser reserves the right to terminate
this voluntary limitation in the future.
The total expenses for the Fund's Class C shares for the period ended October
31, 1994 were 1.01% of average daily net asset value on an annualized basis.
DIVIDENDS AND TAXES
Dividends. The Fund generally declares and distributes dividends representing
all or substantially all net investment income, if any, at least annually.
The Fund will generally also distribute net short-term or long-term capital
gains, if any, annually after the close of the fiscal year (October 31).
<PAGE>
Dividends are reinvested in additional shares of your class unless you elect
the option to receive them in cash. If you elect the cash option and the U.S.
Postal Service cannot deliver your checks, your election will be converted to
the reinvestment in additional shares 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."
You should keep the account
statements that you receive from
the Fund for your personal tax
records.
Taxation. For investors who are not exempt from federal income taxes,
dividends from the Fund's net investment income, certain net foreign currency
gains and net short-term capital gains are taxable to you as ordinary income.
Dividends from the Fund's net long-term capital gains are taxable as
long-term capital gains. These dividends are taxable whether received in cash
or reinvested in additional Class C shares. Certain dividends paid by the
Fund in January of a given year may be taxable to you as if received the
prior December. Corporate shareholders may be entitled to take the corporate
dividends received deduction for dividends received by the Fund from U.S.
domestic corporations, subject to certain restrictions under the Internal
Revenue Code. 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. As a
regulated investment company, the Fund will not 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 Class C shares, you may realize a taxable
gain or loss.
The 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 the 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 and local or
foreign taxes with respect to your investment in and distributions from the
Fund. A state income (and possibly local income and/or intangible property)
tax exemption is generally available to the extent the Fund's distributions
are derived from interest on (or, in the case of intangibles taxes, the value
of its assets is attributable to) certain U.S. Government obligations,
provided in some states that certain thresholds for holdings of such
obligations and/or reporting requirements are satisfied. The foregoing
discus-
<PAGE>
sion relates to U.S. investors that are not exempt from U.S. Federal income
tax. Different tax consequences will apply to plan participants, tax-exempt
investors and investors that are subject to tax deferral. Non-U.S.
shareholders are also subject to different tax treatment not described above.
You should consult your tax adviser for specific advice. Under the Code, a
tax-exempt investor in the Fund will not generally recognize unrelated
business taxable income from its investment in the Fund unless the tax-exempt
investor incurred indebtedness to acquire or continue to hold Fund shares and
such indebtedness remains unpaid.
PERFORMANCE
The Fund may advertise its total
return on Class C shares.
Total return is based on the overall change in value of a hypothetical
investment in Class C shares of the Fund. The Fund's total return on Class C
shares shows the overall dollar or percentage change in value, assuming the
reinvestment of all dividends. Cumulative total return shows the performance
on Class C shares over a period of time. Average annual total return shows
the cumulative return of the Class C 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 performance of Class C shares of the Fund, you
should recognize that it is not the same as actual year-to-year results.
Total return calculations with respect to Class C shares do not reflect the
imposition of a sales charge. The total return of Class A, Class B and Class
C shares will be calculated separately, and, because each class of shares is
subject to different expenses, the total return with respect to each class of
the Fund for the same period may differ. Total return calculations for Class
A shares include the effect of paying the maximum sales charge. Investments
at a lower sales charge would result in higher performance figures. Total
return for Class B shares reflects deduction of the applicable CDSC imposed
on a redemption of shares held for the applicable period. The value of Class
C shares of the Fund, when redeemed, may be more or less than their original
cost. Total return is a historical calculation and is not an indication of
future performance.
WHO CAN BUY CLASS C SHARES
Class C shares are available to
certain institutional investors.
In order to qualify to buy Class C shares of the Fund, you must qualify as
one of the following types of institutional investors: (i) Benefits plans not
affiliated with the Adviser which have at least $25,000,000 in plan assets,
and either have a separate trustee vested with investment discretion and
certain limitations on the ability of the plan beneficiaries to access their
plan investments without incurring adverse tax consequences or allow their
participants to select among one or more investment options, including the
Fund ("participant-directed plans"); (ii) Banks and insurance companies which
are not affiliated with the Adviser purchasing shares for their own account;
(iii) Investment companies not affiliated with the Adviser; (iv) Tax exempt
retirement plans of the Adviser and its affiliates, including affiliated
brokers; (v) Unit investment trusts sponsored by John Hancock Funds and
certain other sponsors; and (vi) existing full-service clients of John
Hancock Mutual Life Insurance Company who were group annuity contract holders
as of September 1, 1994. Participant-directed plans include but are not
limited to 401(k), TSA and 457 plans.
If you qualify to purchase Class C shares of the Fund, you will not be
permitted to purchase shares of any other class of the Fund.
<PAGE>
Opening an account.
HOW TO BUY CLASS C SHARES
The minimum initial investment is $1,000,000, except that this requirement may
be waived at the discretion of the Fund's officers. You may qualify for the
minimum investment if you invest more than $1,000,000 in Class C shares of the
Fund and Class C shares of funds in the John Hancock family. This is discussed
in greater detail in the Statement of Additional Information.
Complete the application attached to this Prospectus.
By Check 1. Make your check payable to John Hancock Investor
Services Corporation. ("Investor Services").
2. Deliver the completed application and check to your
registered representative, Selling Broker or mail it
directly to Fund Services.
By Wire 1. Obtain an account number by contacting your registered
representative, Selling Broker or by calling
1-800-437-9312.
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 Special Opportunities Fund
Class C 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.
Buying additional Class C shares.
By 1. Complete the "Invest-By-Phone" and "Bank Information"
Telephone sections on the Account Privileges Application designating
a bank account from which 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 C shares by calling Investor
Services toll free at 1-800-437-9312.
3. Give the Investor Services representative the name in
which your account is registered, the Fund name and your
account number and the amount you wish to invest in Class C
shares.
4. Your investment normally will be credited to your
account the business day following your phone request.
By Check 1. Either fill out the detachable stub included on your
account statement or include a note with your investment
listing the name of the Fund and class of shares, 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.
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 Special Opportunities Fund
Class C Shares
Your Account Number
Name(s) under which account is registered
<PAGE>
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 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. Class C share certificates are not issued unless a request is
made in writing to Investor Services.
You will receive account
statements which you should keep
to help with your personal
recordkeeping.
You will receive a statement of your account after any transaction that
affects your share balance or registration (statements related to
reinvestment of dividends will be sent to you quarterly). A tax information
statement will be mailed to you by January 31 of each year. You will be
required to pay a fee to Fund Services to obtain copies of your account
statements for past periods.
CLASS C SHARE PRICE
The offering price of your Class
C shares is their net asset
value.
The net asset value per share ("NAV") of a Class C share is the value of one
Class C share. The NAV of each class can differ in value. 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. 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 of Class C shares 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.
Class C 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
prior to its close of business to receive that day's offering price. There is
no sales charge imposed on the purchase of Class C shares.
A one-time payment of up to 0.15% of the amount invested in Class C shares
may be made by John Hancock Funds to a Selling Broker for sales of Class C
shares made by that Selling Broker. A person entitled to receive compensation
for selling shares of the Fund may receive different compensation with
respect to sales of Class A shares, Class B shares and Class C shares of the
Fund. John Hancock Funds, out of its own resources, may pay to a Selling
Broker an annual service fee up to 0.20% of the amount invested in Class C
shares by these clients.
HOW TO REDEEM CLASS C SHARES
You may redeem all or a portion of your Class C shares on any business day.
Your Class C shares will be redeemed at the next NAV for Class C shares
calculated for Class C shares after your redemption request is received in
good order by Investor
<PAGE>
Services. The Fund may hold payment until reasonably satisfied that
investments that were recently made by check or Invest-by-Phone have been
collected (which may take up to 10 calendar days).
Once your Class C shares are redeemed, the Fund generally sends you payment
on the next business day. When you redeem your Class C shares, if you are
subject to tax, 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 seven days or longer, as
permitted by Federal securities laws.
To assure acceptance of your
redemption request, please follow
these procedures.
By All Fund shareholders are automatically eligible for the
Telephone: telephone redemption privilege. Call 1-800-437-9312, 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 thirty
days. A check will be mailed to the exact name(s) and
address 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 in accordance with the
telephone transaction procedures mentioned above.
Telephone redemption is not available for tax-qualified
retirement plans or Class C 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 such 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 collectable 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 Institutional Account
Application that is included with this Prospectus.
In Send a stock power or "letter of instruction" specifying the
Writing: name of the Fund, the dollar amount or the number of Class C
shares to be redeemed, your name, class of shares, your
account number and the additional requirements listed below
that apply to your particular account.
<PAGE>
Type of
Registration Requirements
Corporation, A letter of instruction and a corporate resolution, signed by
Association person(s) authorized to act on the account, with the
signature(s) guaranteed.
Trusts A letter of instruction signed by the Trustee(s) with the
signature(s) guaranteed. (If the Trustee's name is not
registered on your account, also provide a copy of the trust
document, certified within the last 60 days.)
If you do not fall into any of these registration categories please call
1-800-437-9312 for further instructions.
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 Class C 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 Broker: Your broker may be able to initiate the redemption.
Contact your broker for instructions.
Your broker will be responsible for the prompt transmittal of your redemption
request. If you have certificates for your shares, you must submit them with
your stock power or letter of instruction. Redemptions of certificated shares
may not be made by telephone.
Due to the proportionately high cost of maintaining smaller accounts, the
Fund reserves the right to redeem at net asset value all Class C shares in an
account which holds fewer than 100 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. Shareholders will be notified before these
redemptions are to be made or this charge is imposed and will have 30 days to
purchase additional Class C shares to bring their account balance up to the
required minimum. Unless the number of Class C shares acquired by further
purchases and dividend reinvestments, if any, exceeds the number of Class C
shares redeemed, repeated redemptions from a smaller account may eventually
trigger this policy.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege
You may exchange Class C shares
of the Fund only for Class C
shares in 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. Not all John Hancock funds offer Class C shares. Contact
your registered representative or Selling Broker and request a prospectus for
the John Hancock fund that interests you. Read the prospectus carefully
before exchanging your Class C shares. Exchanges may be made only into Class
C shares of other John Hancock funds.
Exchanges between funds are based on their respective net asset values. No
sales charge or transaction charge is imposed.
<PAGE>
The Fund reserves the right to require you to keep previously exchanged Class
C shares (and reinvested dividends) in the Fund for 90 days before you are
permitted to execute a new exchange. The Fund may also alter the terms or
terminate 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 old 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 you 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 purchase of Class C shares of
the Fund, you automatically authorize exchanges by telephone, unless you
check the box indicating that you do not wish to have the authorized
telephone exchange privilege.
2. Call 1-800-437-9312. Have the account number of your current fund and the
exact name in which it is registered available to give to the customer
service representative.
3. Investors 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.
<PAGE>
In Writing:
1. In a letter request an exchange and list the following:
- --the name of the fund whose Class C 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 Class C shares, all Class C 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
Attn: Institutional Services
P.O. Box 9277
Boston, Massachusetts 02205-9277
<PAGE>
(NOTES)
<PAGE>
(back cover)
JOHN HANCOCK SPECIAL
OPPORTUNITIES 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 and 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 1-800-437-9312
Telephone Redemption
Invest-by-Phone
JHD-390PC 3/95
<PAGE>
(front cover)
JOHN HANCOCK
SPECIAL
OPPORTUNITIES
FUND
Class C Shares
Prospectus
March 1, 1995
A mutual fund seeking long-term capital appreciation.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Telephone 1-800-437-9312
("Recycle" logo) Printed on recycled paper
<PAGE>
(front cover)
JOHN HANCOCK
SHORT-TERM STRATEGIC
INCOME FUND
A mutual fund seeking a high level of
current income.
Class A and Class B Shares
Prospectus
March 1, 1995
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Telephone 1-800-225-5291
<PAGE>
John Hancock
Short-Term Strategic
Income Fund
Class A and Class B Shares
Prospectus
March 1, 1995
TABLE OF CONTENTS
Page
Expense Information 2
The Fund's Financial Highlights 3
Investment Objective and Policies 4
Organization and Management of the Fund 9
Alternative Purchase Arrangements 10
The Fund's Expenses 12
Dividends and Taxes 12
Performance 13
How to Buy Shares 14
Share Price 15
How to Redeem Shares 21
Additional Services and Programs 23
This Prospectus sets forth information about John Hancock Short-Term
Strategic Income Fund (the "Fund"), a non-diversified series of Freedom
Investment Trust II (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, 1995, 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.
THE FUND MAY INVEST UP TO 67% OF ITS ASSETS IN LOWER RATED BONDS, COMMONLY
KNOWN AS "JUNK BONDS," THAT ENTAIL GREATER RISKS, INCLUDING DEFAULT RISKS,
THAN THOSE FOUND IN HIGHER RATED SECURITIES. INVESTORS SHOULD CAREFULLY
CONSIDER THESE RISKS BEFORE INVESTING. SEE "INVESTMENT OBJECTIVE AND
POLICIES, P. 4."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
The purpose of the following information is to help you understand the
various fees and expenses that 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 fees and expenses for the Fund's
fiscal year ended October 31, 1994 adjusted to reflect certain current
expenses. Actual fees and expenses in the future may be greater or less than
those shown.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
Maximum sales charge imposed on
purchases (as a percentage of None
offering price) 3.00%
Maximum sales charge imposed on
reinvested dividends None None
Maximum deferred sales charge None* 3.00%
Redemption fee+ None None
Exchange fee None None
Annual Fund Operating Expenses
(As a percentage of average net
assets)
Management fee 0.65% 0.65%
12b-1 fee** 0.30% 1.00%
Other expenses 0.41% 0.47%
Total Fund operating expenses 1.36% 2.12%
<FN>
*No sales charge is payable at the time of purchase on investments of $1
million or more, but for these investments a contingent deferred sales
charge of up to 1.00% 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."
+Redemption by wire fee (currently $4.00) not included.
</FN>
</TABLE>
<TABLE>
<CAPTION>
1 3 5 10
Example: Year Years Years 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 5% annual
return:
Class A shares $43 $72 $102 $189
Class B shares
--Assuming complete
redemption at end of
period $52 $86 $114 $199
--Assuming no redemption $22 $66 $114 $199
<FN>
(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 those shown.)
</FN>
</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 referenced 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 Contracts."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following table of Financial Highlights has been examined by Price
Waterhouse LLP, the Fund's independent accountants, whose unqualified report
is included in the Fund's 1994 Annual Report and is included in the Fund's
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 are as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
CLASS A 1994 1993 1992(a) 1991(b)
<S> <C> <C> <C> <C>
Per Share Operating
Performance
Net Asset Value, Beginning of
Period $ 9.12 $ 9.32 $ 9.86
Net Investment Income 0.76** 0.83** 0.65
Net Realized and Unrealized
Gain (Loss) on Investments,
and Foreign Currency
Transactions (0.53) (0.20) (0.55)
Total from Investment
Operations 0.23 0.63 0.10
Less Distributions:
Dividends from Net Investment
Income (0.62) (0.83) (0.64)
Distributions in Excess of
Net Investment Income (0.04) -- --
Distributions in Excess of
Net Realized Gain on
Investments Sold (0.12) -- --
Distribution from Capital
Paid-in (0.10) -- --
Total Distributions (0.88) (0.83) (0.64)
Net Asset Value, End of
Period $ 8.47 $ 9.12 $ 9.32
Total Investment Return at
Net Asset Value 2.64% 6.78% 1.16%*
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $13,091 $ 11,130 $ 20,468
Ratio of Expenses to Average
Net Assets 1.26% 1.21% 1.37%*
Ratio of Net Investment
Income to Average Net Assets 8.71% 8.59% 8.09%*
Portfolio Turnover Rate 150% 306% 86%
CLASS B
Per Share Operating
Performance
Net Asset Value, Beginning of
Period $ 9.11 $ 9.31 $ 10.01 $ 10.00
Net Investment Income 0.70** 0.75** 0.87 0.76+
Net Realized and Unrealized
Gain (Loss) on Investments,
and Foreign Currency
Transactions (0.53) (0.20) (0.80) 0.01
Total from Investment
Operations 0.17 0.55 0.07 0.77
Less Distributions:
Dividends from Net Investment
Income (0.56) (0.75) (0.77) (0.76)
Distribution in Excess of Net
Investment Income (0.04) -- -- --
Distributions in Excess of
Net Realized Gain on
Investments Sold (0.12) -- -- --
Distribution from Capital
Paid-in (0.10) -- -- --
Total Distributions (0.82) (0.75) (0.77) (0.76)
Net Asset Value, End of
Period $ 8.46 $ 9.11 $ 9.31 $ 10.01
Total Investment Return at
Net Asset Value 1.93% 5.98% 0.64% 8.85%*+
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $98,390 $142,873 $236,059 $218,562
Ratio of Expenses to Average
Net Assets 1.99% 2.01% 2.07% 1.89%*+
Ratio of Net Investment
Income to Average Net Assets 8.00% 7.81% 8.69% 8.72%*+
Portfolio Turnover Rate 150% 306% 86% 22%
<FN>
(a) Class A shares commenced operations on January 3, 1992.
(b) Class B shares commenced operations on December 28, 1990.
+ Reflects expense limitation in effect for the period ended October 31,
1991. As a result of such limitation expenses for Class B shares reflect
reduction of $0.0039 per share. Absent such reduction, for the year ended
October 31, 1991 the ratio of expenses to average net assets would have
been 1.93% and the ratio of net investment income to average net assets
would have been 8.68% without the reimbursement, total investment return
would have been lower.
* On an annualized basis.
** On average month end shares outstanding.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the
Fund is a high level of current
income.
The investment objective of the Fund is a high level of current income. The
Fund will seek to achieve this objective by investing primarily in: (i)
foreign government and corporate debt securities, (ii) U.S. Government
securities and (iii) corporate debt securities of U.S. issuers. There is no
fixed allocation among the types of securities listed above, and there can be
no assurance that the Fund will achieve its investment objective.
The Fund may invest in all types of debt securities. The maximum average
dollar weighted maturity of the Fund is three years. This maturity is
calculated by including average maturities, prepayments, refunds, redemptions
and call dates. The debt securities in which the Fund may invest include
bonds, debentures, notes (including variable and floating rate instruments),
preferred and preference stock, zero coupon bonds, payment-in-kind securities
or increasing rate note securities. Under normal circumstances, the Fund's
assets will be invested in each of the foregoing three sectors. This
diversification among sectors allows the Fund to limit its exposure to any
single sector. However, the Fund may invest up to 100% of its total assets in
any one sector.
The Fund may invest in debt obligations denominated in the U.S. dollar or in
non-U.S. currencies issued or guaranteed by foreign corporations, certain
supernational entities (such as the World Bank), and foreign governments
(including political subdivisions having taxing authority) or their agencies
or instrumentalities. The Fund may also invest in debt obligations issued by
U.S. corporations denominated in non-U.S. currencies. No more than 25% of the
Fund's total assets, at the time of purchase, will be invested in government
securities of any one foreign country.
The Fund may invest in Ginnie Mae, Fannie Mae and Freddie Mac mortgage-backed
securities and other U.S. Government securities, including REMICs and CMOs
representing ownership interests in mortgage pools. Certain U.S. Government
securities, including U.S. treasury bills, notes and bonds, and Government
National Mortgage Association certificates ("Ginnie Maes"), are supported by
the full faith and credit of the United States. Certain other U.S. Government
securities, issued or guaranteed by Federal agencies or government sponsored
enterprises, are not supported by the full faith and credit of the United
States, but may be supported by the right of the issuer to borrow from the
U.S. Treasury. These securities include obligations of the Federal Home Loan
Mortgage Corporation ("Freddie Macs"), and obligations supported by the
credit of the instrumentality, such as Federal National Mortgage Association
bonds ("Fannie Maes"). Ginnie Maes, Freddie Macs and Fannie Maes are
mortgage-backed securities which provide monthly payments which are, in
effect, a "pass-through" of the monthly interest and principal payments
(including any prepayments) made by the individual borrowers on the pooled
mortgage loans. Collateralized Mortgage Obligations ("CMOs") in which the
Fund may invest are securities issued by a U.S. Government instrumentality
that are collateralized by a portfolio of mortgages or mortgage-backed
securities. During periods of declining interest rates, principle and
interest on mortgage-backed securities may be prepaid at faster than expected
rates, with the proceeds of these prepayments being invested in
lower-yielding securities. In this situation, mortgage-backed securities may
be less effective at maintaining yields than traditional debt obligations of
similar maturity. Conversely, in a rising interest rate environment, a
declining prepayment rate will extend the average life of many
<PAGE>
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 Fund may invest in fixed
income securities that are in the
lower ratings categories or are
unrated.
The Fund may invest in securities rated as low as B by Moody's Investors
Service Inc. ("Moody's") or Standard & Poor's Ratings Group ("Standard &
Poor's") (collectively, the "Rating Agencies"), but will maintain a
dollar-weighted average portfolio quality rating of A by the Rating Agencies.
The Fund may invest in unrated securities which, in the opinion of the Fund's
investment adviser, John Hancock Advisers, Inc. (the "Adviser"), offer
comparable yields and risks to rated securities.
Risk Factors Associated With Lower Rated Securities. Lower rated securities
(rated lower than Baa by Moody's or BBB by Standard & Poor's), are sometimes
referred to as junk bonds. See the Appendix attached to this Prospectus which
describes the characteristics of the securities in the various ratings
categories. The Fund is not obligated to dispose of securities whose issuers
subsequently are in default or which are downgraded below the above-stated
ratings. The credit ratings of the Rating Agencies, such as those ratings
described here, may not be changed by the Rating Agencies in a timely fashion
to reflect subsequent economic events. The credit ratings of securities do
not reflect an evaluation of market risk. Debt obligations rated in the lower
ratings categories, or which are unrated, involve greater volatility of price
and risk of loss of principal and income. In addition, lower ratings reflect
a greater possibility of an adverse change in financial condition affecting
the issuer's ability to make payments of interest and principal. The market
price and liquidity of lower rated fixed income securities generally respond
more to short-term corporate and market developments than do those of higher
rated securities, because these developments are perceived to have a more
direct relationship to the ability of an issuer of lower rated securities to
meet its ongoing debt obligations. The market prices of zero coupon and
payment-in-kind bonds are affected to a greater extent by interest rate
changes, and thereby tend to be more volatile than securities which pay
interest periodically and in cash. Increasing rate note securities are
typically refinanced by the issuers within a short period of time.
Reduced volume and liquidity in the high yield high risk bond market, or the
reduced availability of market quotations, will make it more difficult to
dispose of the bonds and to value accurately the Fund's assets. The reduced
availability of reliable, objective data may increase the Fund's reliance on
management's judgment in valuing high yield high risk bonds. In addition, the
Fund's investments in high yield high risk securities may be susceptible to
adverse publicity and investor perceptions, whether or not justified by
fundamental factors. The Fund's investments, and consequently its net asset
value, will be subject to the market fluctuations and risk inherent in all
securities.
The Fund may employ certain
investment strategies to help
achieve its investment
objectives.
Securities of Foreign Issuers. Foreign companies may not be subject to
accounting standards and government supervision comparable to those
applicable to U.S. companies, and there is often less publicly available
information about their operations. Foreign markets generally provide less
liquidity than U.S. markets (and thus potentially greater price volatility),
and typically provide fewer regulatory protections for investors. Foreign
securities can also be affected by political or financial instability abroad.
Additional costs could be incurred in connection with the Fund's
international
<PAGE>
investment activities. Foreign brokerage commissions are generally higher
than in the U.S. Expenses may also be incurred on currency exchanges when the
Fund changes investments from one country to another. Increased custodian
costs as well as administrative difficulties (such as the need to use foreign
custodians) may be associated with the maintenance of assets in foreign
jurisdictions.
These risks may be intensified in the case of investments in emerging markets
or countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America
and Africa. Security prices in these markets can be significantly more
volatile than in more developed countries, reflecting the greater
uncertainties of investing in less established markets and economies.
Political, legal and economic structures in many of these emerging market
countries may be undergoing significant evolution and rapid development, and
they may lack the social, political, legal and economic stability
characteristic of more developed countries. Emerging market countries may
have failed in the past to recognize private property rights. They may have
relatively unstable governments, present the risk of nationalization of
business, restrictions of foreign ownership, or prohibitions or repatriation
of assets, and may have less protection of property rights than more
developed countries. Their economies may be predominately based on only a few
industries, may be highly vulnerable to changes in local or global trade
conditions, and may suffer from extreme and volatile debt burdens or
inflation rates or currency rates. Local securities markets may trade a small
number of securities and may be unable to respond effectively to increases in
trading volume, potentially making prompt liquidation of substantial holdings
difficult or impossible at times. The Fund may be required to establish
special custodial or other arrangements before making certain investments in
those countries. Securities of issuers located in these countries may have
limited marketability and may be subject to more abrupt or erratic price
movements.
Foreign Currencies. The Fund may hold a portion of its assets in foreign
currencies and enter into forward foreign currency exchange contracts to
protect against changes in foreign currency exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date at a price set at the time of entering
into the contract. Although certain strategies could minimize the risk of
loss due to a decline in the value of the hedged foreign currency, they could
also limit any potential gain which might result from an increase in the
value of that currency.
Participation Interests. The Fund may acquire participation interests in
senior floating rate loans that are made primarily to U.S. and foreign
companies. Participation interests, which may take the form of interests in,
or assignments of, the loans, are acquired from banks who have made loans or
are members of a lending syndicate. The Fund's investments in participation
interests are subject to its 10% limitation on investments in illiquid
securities. The Fund may purchase only those participation interests that
have a floating rate that is automatically adjusted at least once every 180
days.
Restricted Securities. The Fund may purchase restricted securities, which can
be offered and sold to "qualified institutional buyers" under Rule 144A under
the Secu-
<PAGE>
rities Act of 1933 (the "Securities Act"). The Trustees will carefully
monitor the Fund's investments in Rule 144A securities, focusing on certain
factors, including valuation, liquidity and availability of information.
Purchases of other restricted securities are subject to a restriction
limiting all illiquid securities held by the Fund to not more than 10% of the
Fund's net assets.
The Fund may invest in structured
debt obligations indexed to
various financial assets or
rates.
Structured Securities. The Fund may invest in structured notes, bonds or
debentures, the value of the principal of and/or interest on which is to be
determined by reference to changes in the value of specific currencies,
interest rates, commodities, indices or other financial indicators (the
"Reference") or the relative change in two or more References. The interest
rate or the principal amount payable upon maturity or redemption may be
increased or decreased depending upon changes in the applicable Reference.
The terms of the structured securities may provide that in certain
circumstances no principal is due at maturity and, therefore, may result in
the loss of the Fund's investment. Structured securities may be positively or
negatively indexed, so that appreciation of the Reference may produce an
increase or decrease in the interest rate or value of the security at
maturity. In addition, the change in interest rate or the value of the
security at maturity may be a multiple of the change in the value of the
Reference. Consequently, structured securities entail a greater degree of
market risk than other types of debt obligations. Structured securities may
also be more volatile, less liquid and more difficult to accurately price
than less complex fixed income investments.
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. or foreign 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.
Options Transactions. To earn income from the premiums received, the Fund may
write (sell) listed and over-the-counter covered call options and covered put
options on debt and equity securities and foreign currency. The Fund may
write listed and over-the-counter covered call and put options on up to 100%
of its net assets. In addition, the Fund may purchase listed and
over-the-counter call and put options on securities and currency with an
aggregate value not exceeding 5% of the Fund's total assets. The SEC
considers over-the-counter options to be illiquid except under prescribed
conditions, which are discussed in detail in the Statement of Additional
Information.
While transactions in options and futures contracts may reduce certain risks,
they may entail other risks. Certain risks arise due to the imperfect
correlations between
<PAGE>
movements in the price of options and futures contracts and movements in the
prices of the securities or currency underlying the contract. The Fund's
ability to use futures contracts and options to hedge or earn income
successfully will depend on the Adviser's ability to predict accurately the
future direction of interest rate changes, currency rate fluctuations and
other market factors. There is no assurance that a liquid market for futures
and options will always exist. In addition, the Fund could be prevented from
opening or realizing the benefits of closing out a futures or options
position because of position limits or limits on daily price fluctuations
imposed by an exchange. The potential loss from writing options on futures
transactions is potentially unlimited and may exceed the amount of the
premium received.
Repurchase Agreements, Forward Commitments or 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 certain risk to the Fund if the other party
defaults on its obligations 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 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.
Defensive Investments. When the Adviser believes unfavorable investment
conditions exist requiring the Fund to assume a temporary defensive
investment posture, the Fund may hold cash or invest all or a portion of its
assets in short-term instruments, including short-term U.S. Government
securities and repurchase agreements; bank certificates of deposit, bankers'
acceptances, time deposits and letters of credit; and commercial paper
(including so called Section 4(2) paper rated at least A-1 or A-2 by Standard
& Poor's or P-1 or P-2 by Moody's or if unrated considered by the Adviser to
be of comparable value). The Fund's temporary defensive investments may also
include: debt obligations of U.S. companies rated at least BBB or Baa by
Standard & Poor's or Moody's, respectively; or, if unrated, of comparable
quality in the opinion of the Adviser; commercial paper and corporate debt
obligations not satisfying the above credit standards if they are (a) subject
to demand features or puts or (b) guaranteed as to principal and interest by
a domestic or foreign bank having total assets in excess of $1 billion, by a
corporation whose commercial paper may be purchased by the Fund, or by a
foreign government having an existing debt security rated least BBB or Baa by
Standard & Poor's or Moody's, respectively; and other short-term investments
which the Trustees of the Trust determine present minimal credit risks and
which are of "high quality" as determined by any major rating service or in
the case of an instrument that is not rated, of comparable quality as
determined by the Trustees.
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 accordingly 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 securities. As a result, the Fund
<PAGE>
may incur a loss or, in the event of the borrower's bankruptcy, the Fund may
be delayed in or prevented from liquidating the collateral. It is a policy of
the Fund not to lend portfolio securities having a total value exceeding 30%
of its total assets.
Non-diversified. The Fund is a "non-diversified" fund in order to permit more
than 5% of its assets to be invested in the obligations of any one issuer.
Since a relatively high percentage of the assets or the Fund may be invested
in the obligations of a limited number of issuers, the value of the shares of
the Fund may be more susceptible to any single economic, political or
regulatory event and to credit and market risks associated with a single
issuer than would the shares of a diversified fund.
Management anticipates that the annual turnover in the Fund will not be in
excess of 400%. An annual turnover rate of 400% occurs, for example, when all
of the securities in the Fund's portfolio are replaced four times in a period
of one year. A high rate of portfolio turnover involves correspondingly
greater brokerage expenses 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. Portfolio
turnover rates of the Fund for recent periods are shown in the section "The
Fund's Financial Highlights".
The Fund follows certain
policies, which may help reduce
investment risk.
The Fund has adopted certain investment restrictions that are enumerated in
detail in the Statement of Additional Information where they are classified
as fundamental or nonfundamental. The Fund's investment objectives and those
investment restrictions designated as fundamental may not be changed without
shareholder approval. The Fund's non-fundamental investment policies and
restrictions, however, may be changed by a vote of the Trustees without
shareholder approval.
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 shares of
the Fund. Pursuant to procedures determined by the Trustees, the Adviser may
place securities transactions with brokers affiliated with the Adviser. These
brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc.
and Sutro & Company, Inc., which are indirectly owned by John Hancock Mutual
Life Insurance Company, which in turn indirectly owns the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
The 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 (formerly named John Hancock Freedom Short-Term World Income Fund)
is a non-diversified series of Freedom Investment Trust II (the "Trust"), an
open-end management investment company organized as a Massachusetts business
trust in 1986. The Trust's Declaration of Trust permits the Trustees, without
shareholder's approval, to create and classify shares of beneficial interest
into separate series of the Trust. The Trust is not required and does not
intend 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 Trust, under certain
circumstances, will assist in shareholder communications with other
shareholders.
<PAGE>
John Hancock Advisers, Inc.
advises investment companies
having a total asset value of
more than $13 billion.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary
of the John Hancock Mutual Life Insurance Company, a financial services
company. It 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
brokers-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 John
Hancock Mutual Life Insurance 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.
The Fund is managed by the Adviser's global fixed income team. All investment
decisions are made by the portfolio management team, and no single person is
primarily responsible for making recommendations to the team.
In order to avoid any conflict 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 your account application which 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 of your 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 four years of purchase (the "contingent deferred sales charge" or the
"CDSC"). Class B shares are subject to ongoing distribution and service fees
at a combined annual rate of up to 1.00% of the Fund's average daily net
assets attributable to the Class B shares. Investing in Class B shares
permits all of your dollars to work from the time you make your investment,
but
<PAGE>
the higher ongoing distribution fee will cause these shares to have a higher
expense ratio than that of 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 Investor Services or John Hancock Mutual Life Insurance
Company that had more than 100 eligible employees at the inception of the
Fund account.
Factors to Consider in Choosing an Alternative
You should consider which class
of shares would be more
beneficial for you.
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider
whether, during the anticipated life of your Fund investment, the CDSC and
accumulated fees on Class B shares would be less than the initial sales
charge and accumulated fees on Class A shares purchased at the same time, and
to what extent this differential would be offset by the Class A shares' lower
expenses. To help you make this determination, the table under the caption
"Expense Information" on the inside cover page of this Prospectus shows
examples of the charges applicable to each class of shares. Class A shares
will normally be more beneficial if you qualify for a reduced sales charge.
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 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 would be more advantageous to
purchase Class B shares in order to have all of your funds invested
initially. However, you would be subject to higher distribution fees and, for
a four-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 the CDSC
incurred upon redemption within four years of purchase. The purpose and
function of the Class B shares' CDSC and ongoing distribution and service
fees are the same as those of the Class A shares' initial sales charge and
ongoing distribution and service fees. Sales personnel distributing the
Fund's shares may receive different compensaton for each class of shares.
Dividends, if any, on Class A and Class B shares will be calculated in the
same manner, at the same time and on the same day and will be in the same
amount except for differences resulting from the fact that each class will
bear only its own distribution and service fees, shareholder meeting expenses
and any incremental transfer agency costs. See "Dividends and Taxes."
<PAGE>
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a monthly fee
to the Adviser which is based on a stated percentage of the Fund's average
daily net asset value as follows: 0.65% on the first $500 million of average
daily net assets and 0.60% on average daily net assets in excess of $500
million. For the 1994 fiscal year the fee was 0.63% of the Fund's average
daily net assets.
The Fund pays distribution and
service fees for marketing and
sales-related shareholder
servicing.
The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Under these Plans, the Fund will pay distribution and service fees at an
aggregate annual rate of 0.30% of the Class A shares' average daily net
assets and at 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. Distribution fees are
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. Service fees will be used to compensate Selling
Brokers for providing personal and account maintenance services to
shareholders. In the event the Distributors are not fully reimbursed for
payments made or expenses incurred by them 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, 1994, an aggregate of $2,802,666 of
distribution expenses or 2.49%, 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.
For the fiscal year ended October 31, 1994 the total expenses for Class A
shares and Class B shares, respectively, were 1.26% and 1.99% of average net
assets.
DIVIDENDS AND TAXES
Dividends. Dividends from the Fund's net investment income are generally
declared daily and distributed monthly. The Fund will distribute net realized
long-term and short-term capital gains, if any, annually after the close of
the Fund's fiscal year (October 31).
All dividends are reinvested in additional shares of the Fund unless you
elect the option to receive them entirely in cash. If you elect the cash
option and the U.S. Postal Service cannot deliver your checks, your election
will be converted to reinvestment in additional shares. 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.
Taxation. Dividends from the Fund's net investment income, certain net
foreign currency gains, and net short-term capital gains are taxable to you
as ordinary income. Dividends from the Fund's net long-term capital gains are
taxable as long-term capital gain. These dividends are taxable whether
received in cash or reinvested in additional shares. Certain dividends paid
by the Fund in January of a given year 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.
<PAGE>
The Fund has qualified and intends to continue to qualify each year 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 periods 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 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 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
and exchanges.
In addition to Federal taxes, you may be subject to state and local taxes or
foreign taxes with respect to your investment in and distributions from the
Fund. Non-U.S. shareholders and tax-exempt shareholders are subject to
different tax treatment not described above. A state income (and possibly
local income and/or intangible property) tax exemption is generally available
to the extent the Fund's distributions are derived from interest on (or, in
the case of intangibles taxes, the value of its assets is attributable to)
certain U.S. Government obligations, provided in some states that certain
thresholds for holdings of such obligations and/or reporting requirements are
satisfied. You should consult your tax adviser for specific advice.
PERFORMANCE
The Fund may advertise its yield
and total return.
Total return is based on the overall change in value of a hypothetical
investment in the Fund. Yield reflects the Fund's rate of income on portfolio
investments as a percentage of its share price. Yield is computed by
annualizing the results 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, 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 by the number of years included in
the period. Because average annual
<PAGE>
total return tends to smooth out variations in 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 of 3.00% (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 contingent deferred sales charge
imposed on a redemption of shares held for the applicable period. All
calculations assume that all dividends are reinvested at net asset value on
the reinvestment dates during the periods. Yield and total return of Class A
and Class B shares will be calculated separately and, because each such class
is subject to certain different expenses, the yield and total return with
respect to that class for the same period may differ. The relative
performance of the Class A and Class B shares will be affected by a variety
of factors, including the higher operating expenses attributable to the Class
B shares, whether the Fund's investment performance is better in the earlier
or later portions of the period measured and the level of net assets of the
Classes during the period. The Fund will include the total return of both
Class A and Class B shares in any advertisement or promotional materials
including Fund performance data. The value of the Fund 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
Opening an account.
The minimum initial investment in Class A and Class B shares is $1,000 ($250
for group investments and $500 for 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, it will be assumed you are investing in
Class A shares.
By 1. Make your check payable to John Hancock Investor Services
Check 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 Short-Term Strategic 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.
Buying additional Class A
and Class B shares.
Monthly
Automatic 1. Complete the "Automatic Investing" and "Bank Information"
Accumu- sections on the Account Privileges Application designating a bank
lation account from which funds may be drawn.
Program 2. The amount you elect to invest will be automatically withdrawn
(MAAP) from your bank or credit union account.
<PAGE>
By 1. Complete the "Invest-By-Phone" and "Bank Information" sections
Telephone on the Account Privileges Application designating a bank account
from which funds may be drawn. Note that in order to invest by
phone, your account must be in a bank or credit union that is a
member of the Automated Clearing House system (ACH).
2. After your authorization form has been processed, you may
purchase additional Class A or Class B shares by calling Investor
Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which
your account is registered, the Fund name, the class of shares you
own, your account number, and the amount you wish to invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
By 1. Either complete the detachable stub included on your account
Check statement or include a note with your investment listing the name
of the Fund, the class, 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 Routing No. 211475000
For credit to: John Hancock Short-Term Strategic 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.
You will receive account
statements which you should keep
to help with your personal
recordkeeping.
You will receive a statement of your account after any transaction that
affects your share balance or registration (statements related to
reinvestment of dividends and automatic investment/withdrawal plans will be
sent to you quarterly). A tax information statement will be mailed to you by
January 31 of each year.
SHARE PRICE
The offering price of your shares
is their net asset value plus a
sales charge, if applicable,
which will vary with the purchase
alternative you choose.
The net asset value ("NAV") is the value of one share. The NAV per share 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 in value.
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
<PAGE>
valued at amortized cost which approximates market value. Foreign securities
are valued on the basis of quotations from the primary market in which they
are traded, and are translated from the local currency into U.S. dollars
using current exchange rates. If quotations are not readily available or, the
value have been materially affected by events occurring after the closing of
a foreign market, assets are valued by a method that the Trustees believes
accurately reflects fair value. The NAV is calculated once daily as of the
close of regular trading on the New York Stock Exchange (generally at 4:00
p.m., New York time) on each day that the Exchange is open.
Shares of the Fund are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock
Funds. If you buy shares of the Fund through a Selling Broker, the Selling
Broker must receive your investment before the close of regular trading on
the New York Stock Exchange and transmit it to John Hancock Funds before its
close of business to receive that day's offering price.
Initial Sales Charge Alternative--Class A Shares. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge, as
follows.
<TABLE>
<CAPTION>
Amount Sales Charge Combined
Invested as a Reallowance and Reallowance to
(including Sales Charge as Percentage Service Fees as a Selling Broker as
Sales a Percentage of of the Amount Percentage of a Percentage of
Charge) Offering Price Invested Offering Price(+) Offering Price(*)
<S> <C> <C> <C> <C>
Less than
$100,000 3.00% 3.09% 2.50% 2.26%
$100,000 to
$499,999 2.50% 2.56% 2.25% 2.01%
$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
charges. In addition to the reallowance allowed to all Selling Brokers,
John Hancock Funds will pay the following: round trip airfare to a
resort will be offered to each registered representative of a Selling
Broker (if the Selling Broker has agreed to participate) who sells
certain amounts of shares of John Hancock funds. John Hancock Funds
will make these incentive payments out of its own resources. Other than
distribution fees, the Fund does not bear distribution expenses. A
Selling Broker to whom substantially the entire sales charge is
reallowed may be deemed to be an underwriter under the Securities Act
of 1933.
(**) No sales charge is payable at the time of purchase of Class A shares of
$1 million or more, but a contingent deferred sales charge may be
imposed in the event of certain redemption transactions made within one
year of purchase.
(***) John Hancock Funds may pay a commission and the 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.
[/FN]
</TABLE>
<PAGE>
Sales charges ARE NOT APPLIED to any dividends which are reinvested in
additional Class A shares of the Fund.
In addition, 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 the Fund's Class A shares will
be made at net asset value with no initial sales charge, but if the shares
are redeemed within 12 months after the end of the calendar month in which
the purchase was made (the contingent deferred sales charge period), a
contingent deferred sales charge will be imposed. The rate of the CDSC will
depend on the amount invested as follows:
<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>
The contingent deferred sales charge will be assessed on an amount equal to
the lesser of (1) the current market value or (2) the original purchase cost
of the Class A shares redeemed. 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.
Existing full service clients of John Hancock Mutual Life Insurance Company
group annuity contract holders as of September 1, 1994 may purchase Class A
shares with no initial sales charge, but if the shares are redeemed within 12
months after the end of the calendar month in which the purchase was made, a
contingent deferred sales charge will be imposed at the rate for Class A
shares above.
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.
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 $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
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 Class A shares of the John Hancock funds when meeting
the breakpoints for a reduced sales charge. For the ACCUMULATION and
COMBINATION PRIVILEGE, the applicable sales charge will be based on the total
of:
1. Your current purchase of Class A shares of the Fund.
2. The net asset value (at the close of business on the previous day) of (a)
all Class A shares of the Fund you hold, and (b) all Class A shares of any
other John Hancock mutual fund you hold; and
<PAGE>
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
Example:
If you hold Class A shares of a John Hancock mutual fund with a net asset
value of $80,000 and, subsequently, invest $20,000 in Class A shares of the
Fund, the sales charge on this subsequent investment would be 2.50% and not
3.00% (the rate that would otherwise be applicable to investments of less
than $100,000. See "Initial Sales Charge Alternative--Class A Shares.")
Class A shares may be available
without a sales charge to certain
individuals and organizations.
If you are in 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.
* 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 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 made available to their clients.
* A former participant in an employee benefit plan with John Hancock funds,
when he/she withdraws from his/her plan and transfers any or all of his/her
plan distributions directly to the Fund.
*For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A shares of the Fund 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 a sales charge, so that your
entire initial investment will go to work at the time of purchase. However
Class B shares redeemed within four years of purchase will be subject to a
contingent deferred sales charge ("CDSC") at the rates set forth below. This
charge will be assessed on an amount equal to the lesser of the current
market value or the original purchase cost of the
<PAGE>
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 four-year CDSC redemption period or those you acquired
through dividend reinvestment, and next from the shares you have held the
longest during the four-year period. The CDSC is waived on redemptions in
certain circumstances. See "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 all or part of them to defray its expenses related to providing the Fund
with distribution services in connection with the sale of 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 deducting a sales charge
at the time of the purchase.
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 payment 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 of
Year In Which Class B Shares Amount
Redeemed Following Purchase Redeemed
<S> <C>
First 3.0%
Second 2.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None
</TABLE>
A commission equal to 2.25% 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.
<PAGE>
If you purchased Class B shares prior to January 1, 1994, the applicable CDSC
as a percentage of the amount redeemed will be: 3% for redemptions during the
first year after purchase, 2% for redemptions during the second year, 1% for
redemptions during the third year, and no CDSC for the fourth 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 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 Internal Revenue Code (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 purchasing 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.
<PAGE>
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 no later than the month following five years after the shares
were purchased, resulting in lower annual distribution fees. If you exchanged
Class B shares into the Fund from another John Hancock fund, the calculation
will be based on the time the shares in the original fund. The Fund has been
advised that the conversion of Class B shares into Class A shares should not
be taxable for Federal income tax purposes and should not change a
shareholder's tax basis or tax holding period for the converted shares.
HOW TO REDEEM SHARES
To assure acceptance of your
redemption request, please follow
these procedures.
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next NAV calculated after your redemption
request is received in good order by Investor Services, less any applicable
CDSC. The Fund may hold payment until reasonably satisfied that investments
which were recently made by check or Invest-by-Phone have been collected
(which may take up to 10 calendar days).
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 seven days or longer, as permitted by Federal securities laws.
By All Fund shareholders are automatically eligible for the
Telephone 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, 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 in accordance with 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.
<PAGE>
By Wire If you have a telephone redemption form on file with the
Fund, redemption proceeds of $1,000 or more can be wired on
the next business day to your designated bank account and a
fee (currently $4.00) will be deducted. You may also use
electronic funds transfer to your assigned bank account and
the funds are usually collectable after two business days.
Your bank may or may not charge 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 Send a stock power or "letter of instruction" specifying the
Writing 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
(Class A application, which allows you to write checks in amounts from
shares a minimum of $100. Checks may not be written against shares
only) in your 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.
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 (Uniform A letter of instruction signed (with titles where
Gifts or Transfer to applicable) by all persons authorized to sign for
Minors Act), General the account, exactly as it is registered with the
Partners signature(s) guaranteed.
Corporation, A letter of instruction and a corporate
Association resolution, signed by person(s) authorized to act
on the account with the signature(s) guaranteed.
Trusts A letter of instruction signed by the Trustee(s)
with the signature(s) guaranteed. (If the
Trustee's name is not registered on your account,
also provide a copy of the trust document,
certified within the last 60 days.)
If you do not fall into any of these registration categories, please call
1-800-225-5291 for further instructions.
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.
<PAGE>
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 involuntary redemptions of shares.
Shareholders will be notified before these redemptions are to be made or
this fee is imposed and will have 30 days to purchase additional shares to
bring their account balance up to the required minimum. Unless the number
of shares acquired by further purchases and dividend reinvestments, if
any, exceeds the number of shares redeemed, repeated redemptions from a
smaller account may eventually trigger this policy.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege
You may exchange shares of the
Fund for shares of the same class
in 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 with shares 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 which are subject to a CDSC may be
exchanged for Class B shares of another John Hancock fund without incurring
the CDSC; however, the shares will be subject to the CDSC schedule of the
shares acquired (except exchanges into the Fund and John Hancock Limited Term
Government Fund which 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 be subject to the CDSC schedule that
was in effect at your initial purchase date.
You may exchange Class B shares of the Fund into shares of John Hancock Cash
Management Fund at net asset value. However, you will continue to be subject
to a CDSC upon redemption. The rate of the CDSC will be the rate in effect on
the original fund at the time of the exchange.
The Fund reserves the right to require that you keep previously exchanged
shares (and reinvested dividends) in the Fund for 90 days before you are
permitted to execute a new exchange. The Fund may also terminate or alter the
terms of the exchange privilege upon 60 days' notice to shareholders.
<PAGE>
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 you prior notice whenever it is reasonably able to do so, it may
impose these restrictions at any time.
By Telephone
1. When you fill out the application for your 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. Investors 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.
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.
<PAGE>
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 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 reinvested in
any 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. For purposes of computing any CDSC
payable upon a subsequent redemption, the holding period of the shares
acquired through reinvestment will include the holding period of the redeemed
shares.
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
account number and class from which your shares were originally redeemed.
Systematic Withdrawal Plan
You can pay routine bills from
your account or make periodic
disbursements from your
retirement account to comply with
IRS regulations.
1. You may elect the Systematic Withdrawal Plan at any time by completing the
Account Application, which is attached to this Prospectus. You can also
obtain this application by calling 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,
annually or on a selected monthly basis, to yourself or any other designated
payee.
4. There is no limit on the number of payments 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 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 may authorize an investment to be automatically drawn each month from
your bank for investment in Fund shares under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.
<PAGE>
2. You may also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
3. You may 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 being 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 as funding medium 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 457 Plans.
2. The initial investment minimum or aggregate minimum for any of these plans
is $500. However, accounts being established as group IRA, SEP, SARSEP, TSA,
401(k) and 457 Plans will be accepted without an initial minimum investment.
APPENDIX
As described in the Prospectus, the Fund may invest in debt securities in the
lower rating categories (that is, rated Baa, Ba or B by Moody's or BBB, BB or
B by Standard & Poor's, or are unrated).
Moody's describes its lower ratings for corporate bonds as follows:
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.
<PAGE>
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.
Standard & Poor's describes its lower ratings for corporate bonds as follows:
Debt rated BBB is regarded as having an 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, B, CCC, or CC is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations. 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
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Moody's describes its two highest ratings for commercial paper as follows:
Issuers rated P-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. P-1 repayment
capacity will normally be evidenced by the following characteristics: (1)
leading market positions in well-established industries; (2) high rates of
return on funds employed; (3) conservative capitalization structures with
moderate reliance on debt and ample asset protection; (4) broad margins in
earnings coverage of fixed financial charges and high internal cash
generation; and (5) well established access to a range of financial markets
and assured sources of alternate liquidity.
Issuers rated P-2 (or related supporting institutions) have a strong capacity
for repayment of short-term promissory obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is
maintained.
Standard & Poor's describes its two highest ratings for commercial paper as
follows:
A-1. This designation indicates that the degree of safety regarding timely
payment is very strong.
A-2. Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated A-1.
<PAGE>
Quality Distribution
The average weighted quality distribution of the portfolio for the fiscal
year ended October 31, 1994:
<TABLE>
<CAPTION>
Rating Rating
Average % of Assigned % of Assigned % of
Security Ratings Value Portfolio by Adviser Portfolio by Service Portfolio
<S> <C> <C> <C> <C> <C> <C>
AAA $ 50,565,616 43.3% $14,958,875 12.8% $35,606,741 30.5%
AA 12,361,438 10.6% 1,450,656 1.2% 10,910,782 9.4%
A 9,747,099 8.4% 3,826,547 3.3% 5,920,552 5.1%
BBB 1,977,197 1.7% 1,743,030 1.5% 234,167 0.2%
BB 9,861,585 8.4% 3,062,721 2.6% 6,798,864 5.8%
B 15,796,711 13.5% 6,748,080 5.8% 9,048,631 7.7%
CCC 6,140,558 5.3% 0 0.0% 6,140,558 5.3%
CC 0 0.0% 0 0.0% 0 0.0%
C 0 0.0% 0 0.0% 0 0.0%
D 0 0.0% 0 0.0% 0 0.0%
Debt Securities 106,450,204 91.2% $31,789,909 27.2% $74,660,295 64.0%
Equity Securities 0 0.0%
Short-Term Securities 10,307,096 8.8%
Total Portfolio 116,757,300 100.0%
Other Assets--Net 3,589,330
Net Assets $120,346,630
</TABLE>
<PAGE>
(Notes)
<PAGE>
(Notes)
<PAGE>
(Notes)
<PAGE>
(back cover)
JOHN HANCOCK
SHORT-TERM STRATEGIC INCOME 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 FUNDS
For: Service Information
Telephone Exchange call 1-800-225-5291
Invest-by-Phone
Telephone Redemption
For:TDD call 1-800-544-6713
JHD-3200P 3-95 ("Recycled" logo) Printed on Recycled Paper
<PAGE>
JOHN HANCOCK
GLOBAL FUND
JOHN HANCOCK
GLOBAL INCOME FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 1, 1995
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Expense Information................................................................... 2
The Funds' Financial Highlights....................................................... 3
Investment Objectives and Policies.................................................... 5
Global Fund...................................................................... 5
Global Income Fund............................................................... 6
Certain Investment Strategies......................................................... 7
Organization and Management of the Funds.............................................. 11
Alternative Purchase Arrangements..................................................... 12
The Funds' Expenses................................................................... 13
Dividends and Taxes................................................................... 14
Performance........................................................................... 15
How to Buy Shares..................................................................... 17
Share Price........................................................................... 19
How to Redeem Shares.................................................................. 25
Additional Services and Programs...................................................... 28
Institutional Investors............................................................... 31
</TABLE>
This Prospectus sets forth the information about John Hancock Global Fund
("Global Fund") a diversified fund and John Hancock Global Income Fund ("Global
Income Fund") a non-diversified fund, both series of Freedom Investment Trust II
(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, 1995, 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>
EXPENSE INFORMATION
The purpose of the following information is to help you understand the various
fees and expenses that 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 fees and expenses for the Funds' fiscal year ended
October 31, 1994 adjusted for certain current fees and expenses. Actual fees and
expenses in the future may be greater or less than those shown.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
-------- --------
<S> <C> <C>
GLOBAL 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).................................................................................... 0.96% 0.96%
12b-1 fee***......................................................................................... 0.30% 1.00%
Other expenses....................................................................................... 0.75% 0.72%
Total Fund operating expenses........................................................................ 2.01% 2.68%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
-------- --------
<S> <C> <C>
GLOBAL INCOME FUND
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(a).................................................................................... 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....................................................................................... 0.61% 0.56%
Total Fund operating expenses........................................................................ 1.66% 2.31%
</TABLE>
- ---------------
* No sales charge is payable at the time of purchase on investments of $1
million or more, but for such investments a contingent deferred sales charge
may be imposed, 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 at
October 31, 1994. See "The Fund's Expenses."
<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:
Global Fund
Class A shares....................................................................... $69 $110 $153 $272
Class B shares
--Assuming complete redemption at end of period...................................... $77 $113 $162 $285
--Assuming no redemption............................................................. $27 $ 83 $142 $285
Class C shares....................................................................... $14 $ 45 $ 78 $170
Global Income Fund
Class A shares....................................................................... $61 $ 95 $131 $233
Class B shares
--Assuming complete redemption at end of period...................................... $73 $102 $144 $248
--Assuming no redemption............................................................. $23 $ 72 $124 $248
</TABLE>
(The example should not be considered as a representation of past or future
expenses. Actual expenses may be greater or less than shown.)
The Fund's payment of a distribution fee may result in a long-term shareholder
indirectly paying more than the economic equivalent of the maximum front-end
sales charge permitted under the National Association of Securities Dealers
Rules of Fair Practice.
The management and 12b-1 fees referenced above are more fully explained in
this Prospectus under the caption "The Fund's Expenses" and in the Statement
of Additional Information under the captions "Investment Advisory and Other
Services" and "Distribution Contract."
2
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
The following table of Financial Highlights has been examined by Price
Waterhouse LLP, the Funds' independent accountants, whose unqualified reports
are included in the Global Fund and Global Income Fund 1994 Annual Reports and
the Funds' Statement of Additional Information. Further information about the
performance of each Fund 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 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1994 1993 1992 1991 1990
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
GLOBAL FUND
CLASS A(a)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............. $ 14.30 $ 10.55 $ 11.31
-------- ------- -------
Net Investment Loss............................... (0.07)** (0.10)** (0.04)**
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions.... 1.24 3.85 (0.72)
-------- ------- -------
Total from Investment Operations............... 1.17 3.75 (0.76)
-------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions..................................... (1.31) -- --
-------- ------- -------
Net Asset Value, End of Period.................... $ 14.16 $ 14.30 $ 10.55
======== ======= =======
Total Investment Return at Net Asset Value........ 8.64% 35.55% (6.72%)(e)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......... $100,973 $90,787 $76,980
Ratio of Expenses to Average Net Assets........... 1.98% 2.12% 2.47%*
Ratio of Net Investment Loss to Average Net
Assets........................................... (0.54%) (0.86%) (0.60%)*
Portfolio Turnover Rate........................... 61% 108% 69%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............. $ 14.17 $ 10.50 $ 10.92 $ 9.94 $ 13.58
-------- ------- ------- ------- --------
Net Investment Income (Loss)...................... (0.15)** (0.15)** (0.12)** (0.01)** (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions.... 1.22 3.82 (0.30) 1.35 (1.12)
-------- ------- ------- ------- --------
Total from Investment Operations............... 1.07 3.67 (0.42) 1.34 (1.14)
-------- ------- ------- ------- --------
Less Distributions:
Distributions from Net Investment Income.......... -- -- -- -- --
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions..................................... (1.31) -- -- (0.36) (2.50)
-------- ------- ------- ------- --------
Total Distributions............................ (1.31) -- -- (0.36) (2.50)
-------- ------- ------- ------- --------
Net Asset Value, End of Period.................... $ 13.93 $ 14.17 $ 10.50 $ 10.92 $ 9.94
======== ======= ======= ======= ========
Total Investment Return at Net Asset Value........ 7.97% 34.95% (3.85%) 14.04% (10.42%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......... $ 31,822 $19,340 $11,475 $28,686 $ 33,281
Ratio of Expenses to Average Net Assets........... 2.59% 2.49% 2.68% 2.60% 2.46%
Ratio of Net Investment Income (Loss) to Average
Net Assets....................................... (1.12%) (1.25%) (1.03%) (0.12%) (0.59%)
Portfolio Turnover Rate........................... 61% 108% 69% 106% 58%
<CAPTION>
1989 1988 1987(B) 1987(C)
------- ------- ------- -------
<S> <C> <C> <C> <C>
GLOBAL FUND
CLASS A(a)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period..............
Net Investment Loss...............................
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions....
Total from Investment Operations...............
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions.....................................
Net Asset Value, End of Period....................
Total Investment Return at Net Asset Value........
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).........
Ratio of Expenses to Average Net Assets...........
Ratio of Net Investment Loss to Average Net
Assets...........................................
Portfolio Turnover Rate...........................
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............. $ 10.67 $ 10.42 $13.00 $ 9.60
------- ------- ------- -------
Net Investment Income (Loss)...................... (0.10) 0.01 (0.05) 0.08
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions.... 3.25 0.69 (2.08) 3.32
------- ------- ------- -------
Total from Investment Operations............... 3.15 0.70 (2.13) 3.40
------- ------- ------- -------
Less Distributions:
Distributions from Net Investment Income.......... (0.01) -- (0.12) --
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions..................................... (0.23) (0.45) (0.33) --
------- ------- ------- -------
Total Distributions............................ (0.24) (0.45) (0.45) --
------- ------- ------- -------
Net Asset Value, End of Period.................... $ 13.58 $ 10.67 $10.42 $13.00
======= ======= ======= =======
Total Investment Return at Net Asset Value........ 30.22% 7.05% (16.97)(e) 35.42(e)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......... $35,596 $34,380 $50,883 $62,264
Ratio of Expenses to Average Net Assets........... 2.30% 2.55% 2.56% * 2.38% *
Ratio of Net Investment Income (Loss) to Average
Net Assets....................................... (0.47%) 0.09% (0.78%)* 0.99% *
Portfolio Turnover Rate........................... 138% 142% 81% 91%
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------
1994 1993
------ ------
<S> <C> <C> <C> <C> <C>
GLOBAL FUND
CLASS C(f)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.......................... $14.34 $11.75
------ ------
Net Investment Loss........................................... -- (0.02)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions................................ 1.24 2.61
------ ------
Total from Investment Operations........................... 1.24 2.59
------ ------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold and
Foreign Currency Transactions................................ (1.31) --
------ ------
Net Asset Value, End of Period................................ $14.27 $14.34
====== ======
Total Investment Return at Net Asset Value.................... 9.15% 22.04%(e)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)..................... $ 752 $ 406
Ratio of Expenses to Average Net Assets....................... 1.42% 1.43%*
Ratio of Net Investment Income (Loss) to Average Net Assets... 0.03% (0.35%)*
Portfolio Turnover Rate....................................... 61% 108%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
1994 1993 1992(A) 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
GLOBAL INCOME FUND
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period......................... $ 9.62 $ 9.76 $ 10.57
-------- -------- --------
Net Investment Income........................................ 0.64** 0.76 0.64
Net Realized and Unrealized Gain (Loss) on Investments,
Options, Financial Futures Contracts and Foreign Currency
Transactions................................................ (0.78) (0.10) (0.74)
-------- -------- --------
Total from Investment Operations.......................... (0.14) 0.66 (0.10)
-------- -------- --------
Less Distributions:
Dividends from Net Investment Income......................... (0.11) (0.38) (0.71)
Distributions in Excess of Net Investment Income............. -- (0.04) --
Distributions from Capital Paid-In........................... (0.52) (0.38) --
-------- -------- --------
Total Distributions....................................... (0.63) (0.80) (0.71)
-------- -------- --------
Net Asset Value, End of Period............................... $ 8.85 $ 9.62 $ 9.76
======== ======== ========
Total Investment Return at Net Asset Value................... (1.30%) 7.14% (0.88%)*
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).................... $ 8,949 $ 12,882 $ 12,880
Ratio of Expenses to Average Net Assets...................... 1.59% 1.46% 1.41%*
Ratio of Net Investment Income to Average Net Assets......... 7.00% 7.89% 7.64%*
Portfolio Turnover Rate...................................... 174% 363% 476%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period......................... $ 9.62 $ 9.74 $ 10.44 $ 10.38 $ 10.21
-------- -------- -------- -------- --------
Net Investment Income........................................ 0.59** 0.72 0.78 0.90 0.85
Net Realized and Unrealized Gain (Loss) on Investments
Options, Financial Futures Contracts and Foreign Currency
Transactions................................................ (0.78) (0.09) (0.59) 0.13 0.28
-------- -------- -------- -------- --------
Total from Investment Operations.......................... (0.19) 0.63 0.19 1.03 1.13
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income......................... (0.06) (0.33) (0.89) (0.73) (0.85)
Distributions from Net Realized Gain on Investments.......... -- -- -- (0.24) --
Distributions in Excess of Net Investment Income............. -- (0.04) -- -- --
Distributions from Capital Paid-In........................... (0.52) (0.38) -- -- (0.11)
-------- -------- -------- -------- --------
Total Distributions.......................................... (0.58) (0.75) (0.89) (0.97) (0.96)
-------- -------- -------- -------- --------
Net Asset Value, End of Period............................... $ 8.85 $ 9.62 $ 9.74 $ 10.44 $ 10.38
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value................... (1.88%) 6.77% 1.72% 10.44% 11.84%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).................... $114,656 $197,166 $199,102 $192,687 $186,524
Ratio of Expenses to Average Net Assets...................... 2.17% 1.91% 1.91% 1.90% 1.82%
Ratio of Net Investment Income to Average Net Assets......... 6.41% 7.45% 7.59% 8.74% 8.67%
Portfolio Turnover Rate...................................... 174% 363% 476% 159% 186%
<FN>
- ---------------
(a) From commencement of operations, January 3, 1992.
(b) From June 1, 1987.
(c) From commencement of operations, September 2, 1986.
(d) From commencement of operations, December 17, 1986.
(e) Not annualized.
(f) From commencement of operations on May 7, 1993.
* Annualized.
** Net investment income (loss) per share amount has been calculated based on
average monthly shares outstanding.
[/FN]
</TABLE>
4
<PAGE>
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.
GLOBAL FUND
Global Fund's investment objective is to achieve long-term growth of capital
primarily through investment in common stocks of companies domiciled in foreign
countries and in the United States. Any income received on the Fund's
investments
will be incidental to the Fund's objective of long-term growth of capital.
Normally,
the Fund will invest in the securities markets of at least three countries,
including
the United States.
Under normal circumstances, at least 65% of the Global Fund's total assets will
consist of common stocks and securities convertible into common stock. However,
if deemed advisable by John Hancock Advisers, Inc. (the "Adviser"), the Fund may
invest in any other type of security including preferred stocks, warrants,
bonds, notes and other debt securities (including Eurodollar securities) or
obligations of domestic or foreign governments and their political subdivisions.
As of the date of this Prospectus, it is the intention of the Fund generally to
invest no more than 5% of its assets in debt securities (other than short-term
securities). The Fund will only invest in investment grade debt securities,
which are securities rated within the four highest rating categories of Standard
& Poor's Rating Group (AAA, AA, A, BBB) or Moody's Investors Service, Inc. (Aaa,
Aa, A, Baa). Investments in the lowest investment grade rating category may have
speculative characteristics and therefore may involve higher risks. Investment
grade debt securities are subject to market fluctuations and changes in interest
rates; however, the risk of loss of income and principal is generally expected
to be less than with lower quality debt securities. In the event a debt security
is downgraded below investment 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.
- -------------------------------------------------------------------------------
GLOBAL FUND'S INVESTMENT OBJECTIVE IS TO
ACHIEVE
LONG-TERM GROWTH OF CAPITAL PRIMARILY
THROUGH INVESTMENT IN COMMON STOCKS OF
COMPANIES DOMICILED IN FOREIGN COUNTRIES
AND IN THE
UNITED STATES.
- -------------------------------------------------------------------------------
The global allocation of assets is not fixed, and will vary from time to time
based on the judgment of the Adviser and John Hancock Advisers International
Limited (the "Sub-Adviser"). Global Fund will maintain a flexible investment
policy and will invest in a diversified portfolio of securities of companies and
governments located throughout the world. In making the allocation of assets
among various countries and geographic regions, the Adviser and the Sub-Adviser
ordinarily consider such factors as prospects for relative economic growth
between foreign countries; expected levels of inflation and interest rates;
government policies influencing business conditions; and other pertinent
financial, tax, social, political, currency and national factors -- all in
relation to the prevailing prices of the securities in each country or region.
5
<PAGE>
When the Adviser believes that financial conditions warrant, for temporary
defensive purposes, the Fund may hold or invest all or part of its assets in
cash and in domestic and foreign money market instruments, including but not
limited to, governmental obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate debt securities and
repurchase agreements.
GLOBAL INCOME FUND
The Fund's investment objective is to achieve a high total investment return, a
combination of current income and capital appreciation, by investing in a global
portfolio of high quality, fixed income securities. Normally, the Fund will
invest in
fixed income securities denominated in at least three currencies or
multi-currency
units, including the U.S. Dollar.
Under normal circumstances, Global Income Fund will invest primarily (at least
65% of total assets) in fixed income securities issued or guaranteed by: (i) the
U.S. Government, its agencies or instrumentalities; (ii) foreign governments
(including foreign states, provinces and municipalities) or their political
subdivisions, authorities, agencies or instrumentalities; (iii) international
organizations backed or jointly owned by more than one national government, such
as the International Bank for Reconstruction and Development, European
Investment Bank, Asian Development Bank and European Coal and Steel Community;
and (iv) foreign corporations or financial institutions. The term "fixed income
securities" includes debt obligations of all types, including bonds, debentures,
notes and stocks, such as preferred stocks. A fixed income security may itself
be convertible into or exchangeable for equity securities, or may carry with it
the right to acquire equity securities evidenced by warrants attached to the
security or acquired as part of a unit with a security. The Fund has registered
as a "non-diversified" fund so that it will be able to invest more than 5% of
its assets in obligations of a single foreign government or other issuer. The
Fund will not invest more than 25% of its total assets in securities issued by
any one foreign government.
- -------------------------------------------------------------------------------
GLOBAL INCOME FUND'S INVESTMENT OBJECTIVE
IS TO ACHIEVE A HIGH TOTAL INVESTMENT
RETURN, A COMBINATION OF CURRENT INCOME
AND CAPITAL APPRECIATION, BY INVESTING IN
A GLOBAL PORTFOLIO OF
HIGH QUALITY, FIXED
INCOME SECURITIES.
- -------------------------------------------------------------------------------
Global Income Fund will invest only in fixed income securities which are rated
either A or better by Standard & Poor's Rating Group or A or better by Moody's
Investors Service, Inc. or securities that the Adviser has determined to be of
similar creditworthiness. In the event a fixed income security is subsequently
downgraded below these ratings, the Adviser will consider this event in its
determination of whether the Fund should continue to hold such securities. See
Appendix A to the Statement of Additional Information for a description of the
various ratings of investment grade debt securities.
Global Income Fund may invest in fixed income securities denominated in any
currency or a multi-national currency unit. The European Currency Unit ("ECU")
is a composite currency consisting of specified amounts of each of the
currencies of ten member countries of the European Economic Community. The Fund
may also invest in fixed income securities denominated in the currency of one
country although issued by a governmental entity, corporation or financial
institution of another country. For example, the Fund may invest in a Japanese
yen-denominated fixed income security issued by a United States corporation.
This type of
6
<PAGE>
investment involves credit risks associated with the issuer and currency risks
associated with the currency in which the obligation is denominated.
Global Income Fund will maintain a flexible investment policy and its portfolio
assets may be shifted among fixed income securities denominated in various
foreign currencies that the Adviser expects to provide relatively high rates of
income or potential capital appreciation in U.S. Dollars. As with all debt
securities, the prices of the Fund's portfolio securities will generally
increase when interest rates decline and decrease when interest rates rise.
Similarly, if the foreign currency in which a portfolio security is denominated
appreciates against the U.S. Dollar, the total investment return from security
will be enhanced further. Conversely, if the foreign currency in which a
portfolio security is denominated depreciates against the U.S. Dollar, total
investment return from that security would be adversely affected.
In selecting fixed income securities for Global Income Fund's portfolio, the
Adviser ordinarily considers such factors as the strengths and weaknesses of the
currencies in which the securities are denominated; expected levels of inflation
and interest rates; government policies influencing business conditions; the
financial condition of the issuer; and other pertinent financial, tax, social,
political and national factors. The average maturity of the Fund's portfolio
securities will vary based upon the Adviser's assessment of economic and market
conditions.
When the Adviser determines that adverse market conditions are present, for
temporary defensive purposes, the Fund may hold or invest all or part of its
assets in cash and in domestic and foreign money market instruments, including
but not limited to governmental obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate debt securities and
repurchase agreements.
Global Income Fund is a "non-diversified" fund in order to permit more than 5%
of its assets to be invested in the obligations of any one issuer. Since a
relatively high percentage of the Fund's assets may be invested in the
obligations of a limited number of issuers, the value of the Fund's shares may
be more susceptible to any single economic, political or regulatory event, and
to the credit and market risks associated with a single issuer, than would the
shares of a diversified fund.
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 total return as an
investment objective. A high rate of portfolio turnover involves correspondingly
higher expenses than a lower rate, which expenses must be borne by the Fund.
CERTAIN INVESTMENT STRATEGIES
OPTIONS TRANSACTIONS. Each Fund may invest up to 5% of its assets, taken at
market value at the time of investment, in call and put options on domestic and
foreign securities and foreign currencies. Global Income Fund may also write
(sell) covered call options with respect to all or part of its portfolio
securities and covered put options, to the extent that cover for these options
does not exceed 25% of the Fund's net assets.
7
<PAGE>
The Funds may deal in options listed for trading on national securities or
foreign exchanges 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 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. Both Funds 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 Funds in writing options on futures is unlimited and may exceed
the amount of the premium received. The Funds' futures contracts and options on
futures will be traded on a U.S. or foreign commodity exchange or board of
trade. The Funds 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
Funds' net assets. The Funds intends to comply with the CFTC regulations with
respect to its speculative transactions. These regulations are discussed further
in the Statement of Additional Information.
STRUCTURED SECURITIES. Global Income Fund may invest in structured notes, bonds
or debentures, the value of the principal of and/or interest on which is to be
determined by reference to changes in the value of specific currencies, interest
rates, commodities, indices or other financial indicators (the "Reference") or
the relative change in two or more References. The interest rate or the
principal amount payable upon maturity or redemption may be increased or
decreased depending upon changes in the applicable Reference. The terms of the
structured securities may provide that in certain circumstances no principal is
due at maturity and, therefore, may result in the loss of the Fund's investment.
Structured securities may be positively or negatively indexed, so that
appreciation of the Reference may produce an increase or decrease in the
interest rate or value of the security at maturity. In addition, the change in
interest rate or the value of the security at maturity may be a multiple of the
change in the value of the Reference. Consequently, structured securities entail
a greater degree of market risk than other types of debt obligations. Structured
securities may also be more volatile, less liquid and more difficult to
accurately price than less complex fixed income investments.
- -------------------------------------------------------------------------------
THE FUND MAY INVEST IN
STRUCTURED DEBT OBLIGATIONS
INDEXED TO VARIOUS FINANCIAL
ASSETS OR RATES.
- -------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSACTIONS. The Funds may enter into forward foreign
currency exchange contracts to protect against changes in foreign currency
exchange rates. The Funds will not speculate in foreign currencies or in forward
foreign currency exchange contracts, but will enter into these transactions only
in connection with their hedging strategies. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a price set at the time of the contract. Neither Fund will commit
more than 50% of the value of its total assets to the consummation of these
contracts, nor will either Fund enter into a forward contract with a term
greater than one year.
8
<PAGE>
Although certain strategies could minimize the risk of loss due to a decline in
the value of the hedged foreign currency, they could also limit any potential
gain which might result from an increase in the value of the currency. See the
Statement of Additional Information for further discussion of the uses and risks
of forward foreign currency exchange contracts.
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
carefully monitor the Funds' investments in these securities, focusing on
certain factors, including valuation, liquidity and availability of information.
Purchase of other restriction limiting all illiquid securities held by either
Fund to not more than 10% of the Fund's net assets.
LENDING OF SECURITIES. The Funds 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
Funds may reinvest any cash collateral in short-term securities. When the Funds
lend portfolio securities, there is a risk that the borrower may fail to return
the loaned securities. As a result, the Funds may incur a loss or, in the event
of the borrower's bankruptcy, the Funds may be delayed in or prevented from
liquidating the collateral. It is a fundamental policy of Global Fund not to
lend portfolio securities having a total value in excess of 10% of its total
assets. It is a fundamental policy of Global Income Fund not to lend portfolio
securities having a total value in excess of 30% of its total assets.
REPURCHASE AGREEMENTS AND FORWARD COMMITMENT OR WHEN-ISSUED SECURITIES. The
Funds may enter into repurchase agreements and may purchase securities on a
forward commitment or when-issued basis. In a repurchase agreement, the Funds
buy a security subject to the right and obligation to sell it back to the seller
at the same price plus accrued interest. These transactions must be fully
collateralized at all times, but they involve some credit risk to the Funds if
the other party defaults on its obligations and a Fund is delayed in or
prevented from liquidating the collateral. Each Fund will segregate in a
separate account cash or liquid, high grade debt securities equal in value to
its forward commitment and when-issued securities. Purchasing debt securities
for future delivery or on a when-issued basis may increase the Funds' overall
investment exposure and involves a risk of loss if the value of the securities
declines before the settlement date.
GLOBAL RISKS. Investments in foreign securities may involve risks not present
in domestic investments 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 markets. Security trading practices abroad may
offer less protection to investors such as the Funds. In addition, foreign
securities may be denominated in the currency of the country in which the issuer
is located. Consequently, changes in the foreign exchange rate will affect the
value of the Funds' shares and dividends. Finally, the expense ratios of
international funds generally are higher than those of domestic funds because
there are greater costs associated with maintaining custody of foreign
securities, and the increased research necessary for international investing
results in a higher advisory fee.
- -------------------------------------------------------------------------------
INVESTMENTS IN FOREIGN SECURITIES MAY
INVOLVE RISKS AND CONSIDERATIONS THAT ARE
NOT PRESENT IN DOMESTIC INVESTMENTS.
- -------------------------------------------------------------------------------
9
<PAGE>
These risks may be intensified in the case of investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominately based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens,
inflation rates or currency exchange rates. Local securities markets may trade a
small number of securities and may be unable to respond effectively to increases
in trading volume, potentially making prompt liquidation of substantial holdings
difficult or impossible at times. The Funds may be required to establish special
custodial or other arrangements before making certain investments in those
countries. Securities of issuers located in these countries may have limited
marketability and may be subject to more abrupt or erratic price movements.
INVESTMENT RESTRICTIONS. Each Fund has adopted certain investment restrictions
which are enumerated in detail in the Statement of Additional Information where
they are classified as fundamental or non-fundamental. The Funds' investment
objectives and those investment restrictions designated as fundamental may not
be changed without shareholder approval. Each Fund's non-fundamental investment
policies and restrictions, however, may be changed by a vote of the Trustees
without shareholder approval. The Funds' portfolio turnover rates for recent
periods are shown in the section "The Funds' Financial Highlights."
- -------------------------------------------------------------------------------
EACH FUND FOLLOWS CERTAIN POLICIES WHICH
MAY HELP REDUCE INVESTMENT RISK.
- -------------------------------------------------------------------------------
When choosing brokerage firms to carry out the Funds' transactions, the Adviser
gives primary consideration is 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 shares of the Funds.
Pursuant to procedures determined by the Trustees, the Adviser or Sub-Adviser
may place securities transactions with brokers affiliated with the Adviser.
These brokers include Tucker Anthony Incorporated, John Hancock Distributors,
Inc. and Sutro & Company Inc., which are indirectly owned by John Hancock Mutual
Life Insurance Company, which in turn indirectly owns the Adviser and
Sub-Adviser.
- -------------------------------------------------------------------------------
BROKERS ARE CHOSEN BASED ON
BEST PRICE AND EXECUTION.
- -------------------------------------------------------------------------------
10
<PAGE>
ORGANIZATION AND MANAGEMENT OF THE FUNDS
Global Fund is a diversified series and Global Income Fund is a non-diversified
series of Freedom Investment Trust II, an open-end management investment company
organized as a Massachusetts business trust in 1986. The Trust reserves the
right to create and issue a number of series of shares, or funds or classes of
those series, which are separately managed and have different investment
objectives. The Trust is not required and does not intend 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 Trust, 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.
- -------------------------------------------------------------------------------
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
the John Hancock Mutual Life Insurance Company, a financial services company. It
provides the Funds, and other investment companies in the John Hancock group of
funds, with investment research and portfolio management services. Formed in
1987, the Sub-Adviser to Global Fund is a wholly-owned subsidiary of the
Adviser, and provides international investment research and advisory services to
institutional clients. 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 John Hancock
Mutual Life Insurance 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 TOTAL
ASSETS OF MORE THAN
$13 BILLION.
- -------------------------------------------------------------------------------
The Global Fund and Global Income Fund are managed by the Adviser's
international equities and global fixed income teams, respectively, and no
single person is primarily responsible for making recommendations to the teams.
In order to avoid any conflict 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.
11
<PAGE>
ALTERNATIVE PURCHASE ARRANGEMENTS
You can purchase shares of the Funds 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 which 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 of your 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
applicable 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 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 applicable 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 a higher expense ratio
than that of Class A shares. To the extent that any dividends are paid by a
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 John Hancock Mutual Life Insurance 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 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.
- -------------------------------------------------------------------------------
12
<PAGE>
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 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 would be more advantageous to
purchase Class B shares in order to have all of your funds invested initially.
However, you would 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 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. Sales
personnel distributing the Funds' shares may receive different compensation for
each class of shares.
Dividends, if any, on Class A and Class B shares will be calculated in the same
manner, at the same time and on the same day and will be in the same amount,
except for differences resulting from the fact that each class will bear only
its own distribution and service fees, shareholder meeting expenses and any
incremental transfer agency costs. See "Dividends and Taxes."
THE FUNDS' EXPENSES
For managing its investment and business affairs, each Fund pays a fee to the
Adviser which is based on a stated percentage of each Fund's average daily net
asset value as follows: (a) for Global Fund, 1% on the first $100 million of
average daily net assets, 0.80% on the next $200 million of average daily net
assets, 0.75% on the next $200 million of average daily net assets and 0.625% of
average daily net assets in excess of $500 million; and (b) for Global Income
Fund, 0.75% on the first $250 million of average daily net assets and 0.70% of
average daily net assets in excess of $250 million. For the 1994 fiscal year the
fee was 0.96% and 0.75% of the average daily net asset value of Global Fund and
Global Income Fund, respectively. With respect to Global Fund, the Adviser pays
the Sub-Adviser a portion of its fee.
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. Under these Plans, each Fund pays 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.
Distribution fees are 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. Service fees are paid to the Distributors to
compensate Selling Brokers for providing personal and account maintenance
services to shareholders.
- -------------------------------------------------------------------------------
THE FUNDS PAY DISTRIBUTION AND SERVICE
FEES FOR MARKETING AND SALES-RELATED
SHAREHOLDER SERVICING.
- -------------------------------------------------------------------------------
13
<PAGE>
In the event the Distributors are not fully reimbursed for payments made or
expenses incurred by them 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, 1994 an aggregate of $734,082 and $5,079,959 of distribution expenses or 3%
and 3%, respectively, of the average net assets of the Class B shares of each of
Global Fund and Global Income Fund were not reimbursed or recovered by the
Distributors through the receipt of deferred sales charges or 12b-1 fees in
prior periods.
For the fiscal year ended October 31, 1994, the total expenses for Global Fund
Class A shares and Class B shares, respectively, were 1.98% and 2.59% of average
net assets; and for Global Income Class A shares and Class B shares,
respectively, were 1.59% and 2.17% of average net assets.
DIVIDENDS AND TAXES
DIVIDENDS. The Funds generally declare and distribute dividends representing
all or substantially all net investment income, if any, as follows:
<TABLE>
<CAPTION>
DIVIDENDS DIVIDENDS
DECLARED PAID
---------- ----------
<S> <C> <C>
Global Fund................................................. Annually Annually
Global Income Fund.......................................... Daily Monthly
</TABLE>
Global Fund will distribute all of its taxable income, including both net
realized short-term or long-term capital gains, if any, annually shortly after
the close of the Fund's fiscal year (October 31). Global Income Fund may
distribute net realized short-term capital gains, if any, quarterly and will
distribute net realized long-term capital gains, if any, annually after the
close of the Fund's fiscal year (October 31).
All dividends are reinvested in additional shares of your class unless you elect
the option to receive them entirely in cash. If you elect the cash option and
the U.S. Postal Service cannot deliver your checks, your election will be
converted to the reinvestment option. Because of the higher expenses associated
with Class B shares, any dividends on these shares will be lower than those on
the Class A shares. See "Share Price."
14
<PAGE>
TAXATION. Dividends from the Funds' net investment income, certain net foreign
exchange gain, 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 gains. These dividends are taxable whether received in cash or
reinvested 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
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 Internal Revenue Code of 1986, as
amended (the "Code"). As regulated investment companies, the Funds will not be
subject to Federal income tax on any net investment income or net realized
capital gains that are distributed to shareholders within the time periods
prescribed by the Code.
When you redeem (sell) or exchange shares, you may realize a taxable gain or
loss.
Each Fund anticipates that it will be subject to foreign withholding or other
foreign taxes on income (possibly including capital gains) on certain foreign
investments which will reduce the yield on those investments. However, if more
than 50% of a Fund's total assets at the close of its taxable year consists of
securities of foreign corporations and if a Fund so elects, shareholders will
include in their gross incomes their pro-rata shares of qualified foreign taxes
paid by the Fund and may be entitled, subject to certain conditions and
limitations under the Code, to claim a Federal income tax credit or deduction
for their share of these taxes.
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 and exchanges.
In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respects to your investments in and distributions from the Funds.
Non-U.S. shareholders and tax-exempt shareholders are subject to different tax
rules not described above. A state income (and possibly local income and/or
intangible property) tax exemption is generally available to the extent a Fund's
distributions are derived from interest on (or, in the case of intangibles
taxes, the value of its assets is attributable to) certain U.S. Government
obligations, provided in some states that certain thresholds for holdings of
such obligations and/or reporting requirements are satisfied. 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 the Fund's 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
shares or the income reported in the Fund's financial statements.
- -------------------------------------------------------------------------------
EACH FUND MAY ADVERTISE
ITS YIELD AND TOTAL
RETURN.
- -------------------------------------------------------------------------------
15
<PAGE>
A 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 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 by 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 Funds'
Financial Highlights"). Investments at a lower sales charge 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. All calculations assume that all dividends are
reinvested at net asset value on the reinvestment dates during the periods.
Total return and yield of Class A and Class B shares will be calculated
separately and, because each class is subject to certain different expenses, the
yield or total return may differ with respect to that 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 applicable 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 Funds will include the total return
of Class A and Class B shares in any advertisement or promotional materials
including Fund performance data. The value of Fund 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."
16
<PAGE>
HOW TO BUY SHARES
<TABLE>
- ----------------------------------------------------------------------------------------
<S> <C> <C>
The minimum initial investment in Class A or Class B shares is $1,000 ($250 for
group investments and $500 for 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, Fund Services will assume you are investing in Class A
shares.
- ----------------------------------------------------------------------------------------
OPENING AN ACCOUNT.
- ----------------------------------------------------------------------------------------
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation ("Investor Services").
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 Global Fund
John Hancock Global 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"
AUTOMATIC sections on the Account Privileges Application designating a
ACCUMULATION bank account from which funds may be drawn.
PROGRAM 2. The amount you elect to invest will be automatically withdrawn
(MAAP) from your bank or credit union account.
- ----------------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A
AND CLASS B SHARES.
- ----------------------------------------------------------------------------------------
17
<PAGE>
- ----------------------------------------------------------------------------------------
<S> <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).
- ----------------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A AND CLASS B
SHARES.
(CONTINUED)
- ----------------------------------------------------------------------------------------
2. After your authorization form has been processed, you may
purchase additional Class A or Class B shares by calling
Investor Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which
your account is registered, the Fund name, the class of shares
you own, your account number, and the amount you wish to
invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
- ----------------------------------------------------------------------------------------
BY CHECK 1. Either complete the detachable stub included on your account
statement or include a note with your investment listing the
name of the Fund, the class, 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.
- ----------------------------------------------------------------------------------------
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 Global Fund
John Hancock Global 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.
- ----------------------------------------------------------------------------------------
Institutional Investors. Certain institutional investors may purchase Class C
shares of Global Fund, which have no sales charge or 12b-1 fee. See "Institutional
Investors" for further information.
- ----------------------------------------------------------------------------------------
</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 WHICH
YOU SHOULD KEEP TO HELP WITH YOUR PERSONAL
RECORDKEEPING.
- -------------------------------------------------------------------------------
18
<PAGE>
SHARE PRICE
The net asset value per share ("NAV") is the value of one share. The NAV per
share 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 in value.
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. 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 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.
With respect to GLOBAL FUND, the initial sales charge is paid at the following
rates:
<TABLE>
<CAPTION>
REALLOWANCE
TO
SALES SALES COMBINED SELLING
CHARGE AS CHARGE AS REALLOWANCE BROKER
A A AND SERVICE FEE AS A
PERCENTAGE PERCENTAGE AS PERCENTAGE
OF OF A PERCENTAGE OF O
AMOUNT INVESTED OFFERING THE AMOUNT OFFERING OFFERING
(INCLUDING SALES CHARGE) PRICE INVESTED PRICE(+) PRICE(*)
- ------------------------ ------------ ----------- --------------- ------------
<S> <C> <C> <C> <C>
Less than $50,000 5.00% 5.26% 4.25% 4.01%
$50,000 to $99,999 4.50% 4.71% 3.75% 3.51%
$100,000 to $249,999 3.50% 3.63% 2.85% 2.61%
$250,000 to $499,999 2.50% 2.56% 2.10% 1.86%
$500,000 to $999,999 2.00% 2.04% 1.60% 1.36%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(***)
</TABLE>
19
<PAGE>
With respect to GLOBAL INCOME FUND the initial sales charge is paid at the
following rates:
<TABLE>
<CAPTION>
REALLOWANCE
TO
SALES SALES COMBINED SELLING
CHARGE AS CHARGE AS REALLOWANCE BROKER
A A AND SERVICE FEE AS A
PERCENTAGE PERCENTAGE AS PERCENTAGE
OF OF A PERCENTAGE OF OF
AMOUNT INVESTED OFFERING THE AMOUNT OFFERING OFFERING
(INCLUDING SALES 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%(***)
</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. In addition to the reallowance allowed to all Selling Brokers,
John Hancock Funds will pay the following: round trip airfare to a resort
will be offered to each registered representative of a Selling Broker (if
the Selling Broker has agreed to participate) who sells certain amounts of
shares of John Hancock Funds. John Hancock Funds will make these incentive
payments out of its own resources. Other than distribution fees, each Fund
does not bear distribution expenses. 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 contingent deferred sales charge may be imposed in
the event of certain redemption transactions made within one year of
purchase.
(***) John Hancock Funds may pay a commission and first year's service fee (as
described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of Class A shares of $1 million or more in the
aggregate as follows: 1% on sales 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 applicable Fund. Thereafter it pays the service fee
periodically in arrears in an amount up to 0.25% of that 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 which 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 the accounts attributable to those
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 either Fund's Class A shares will be
made at net asset value with no initial sales charge, but if the shares are
redeemed within 12 months after the end of the calendar month in which the
purchase was made (the contingent deferred sales charge period), a contingent
20
<PAGE>
deferred sales charge will be imposed. The rate of the CDSC will depend on the
amount invested as follows:
<TABLE>
<CAPTION>
AMOUNT INVESTED CDSC RATE
- --------------- ---------
<S> <C>
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
</TABLE>
Existing full service clients of John Hancock Mutual Life Insurance Company who
were group annuity contract holders as of September 1, 1994 may purchase Class A
shares with no initial sales charge, but if the shares are redeemed within 12
months after the end of the calendar month in which the purchase was made, a
contingent deferred sales charge will be imposed at the above rate.
The charge 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 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
redemption 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 of
Global Income Fund or $50,000 in Class A shares the case of Global Fund, or a
combination of funds in the John Hancock family of 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 Class A shares of the John Hancock funds when
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 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 fund you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
21
<PAGE>
EXAMPLES:
GLOBAL FUND
If you hold Class A shares of a John Hancock mutual 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% (the
rate that would otherwise be applicable to investments of less than $50,000. See
"Initial Sales Charge Alternative -- Class A Shares.")
GLOBAL INCOME
If you hold Class A shares of a John Hancock mutual 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% (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 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 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 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 made available to their clients.
- - A former participant in an employee benefit plan with John Hancock Mutual
Funds, when he/she withdraws from his/her plan and transfers any or all of
his/her plan distributions directly to the Fund.
- ---------------
* For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A shares of the Fund 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 a sales charge, so that your
entire initial investment will go to work at the time of purchase. However,
Class B shares so redeemed within six years of purchase will be subject to a
CDSC at the
22
<PAGE>
rates set forth below. This 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
dividend reinvestment, and next from the shares you have held the longest during
the six-year period. The CDSC is waived on redemptions in certain circumstances.
See the discussion "Waiver of Contingent Deferred Sales Charges" below.
EXAMPLE:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time, your CDSC will be calculated as follows:
- - 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
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses
all or part of them to defray its expenses related to providing the Funds with
distribution services in connection with the sale of Class B shares, such as
compensating Selling Brokers for selling these shares. The combination of the
CDSC and the distribution and service fees make it possible for the Funds to
sell Class B shares without deducting a sales charge at the time of the
purchase.
The amount of the CDSC, if any, will vary depending on the number of years from
the time you purchase Class B shares of a Fund 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
23
<PAGE>
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 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 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
the 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 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.
24
<PAGE>
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 no later than the month following eight years after the shares
were purchased, resulting in lower annual distribution fees. If you exchanged
Class B shares into a 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
each Fund should not be taxable for Federal income tax purposes and should not
change a shareholder's 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 that were 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, 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 seven days or
longer, as permitted by Federal securities laws.
<TABLE>
- -----------------------------------------------------------------------------------------
<S> <C>
BY TELEPHONE All Fund shareholders are automatically eligible 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 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 in accordance with the
telephone transaction procedures mentioned above.
Telephone redemption is not available for IRAs or other
tax-qualified retirement plans or shares of the Funds 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
1-800-538-8080.
- -----------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------
<S> <C>
BY WIRE If you have a telephone redemption form on file with the
Funds, redemption proceeds of $1,000 or more can be wired
on the next business day to your designated bank account
and a fee (currently $4.00) will be deducted. You may also
use electronic funds transfer to your assigned bank account
and the funds are usually collectable after two business
days. Your bank may or may not charge 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.
- --------------------------------------------------------------------------------------
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 signature guarantees. (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 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.
- --------------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT REDEMPTIONS.
- -------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your stock
power or a letter of instruction. Unless you specify to the contrary, any
outstanding Class A shares will be redeemed before Class B shares. You may
not redeem certificated shares by telephone.
Due to the proportionately high cost of maintaining smaller accounts, the Funds
reserve 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
charge 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 further purchases and dividend reinvestments,
if any, exceeds the number of shares redeemed, repeated redemptions
from a smaller account may eventually trigger this policy.
- --------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
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 THE FUNDS FOR SHARES OF
THE SAME CLASS IN 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 a Fund which are subject to a CDSC may be exchanged for Class
B shares of another John Hancock fund without incurring the CDSC; however, the
shares will be subject to the CDSC schedule of the shares acquired (except
exchanges into John Hancock Short-Term Strategic Income Fund and John Hancock
Limited Term Government Fund which 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 that was in
effect at your initial purchase date.
You may exchange Class B shares of the Funds into shares of John Hancock Cash
Management Fund at net asset value. However, you will continue to be subject to
a CDSC upon redemption. The rate of the CDSC will be the rate in effect on the
original fund at the time of the exchange.
The Funds reserve the right to require you to keep previously exchanged shares
(and reinvested dividends) in a Fund for 90 days before you are permitted to
execute 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 in another for Federal income tax purposes. An exchange may
result in a taxable gain or loss.
When you make an exchange, your account registration in both the existing and
new account must be identical. The exchange privilege is available only in
states where exchanges 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
27
<PAGE>
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 the
Fund's ability to invest effectively according to its investment objective and
policies, or might otherwise affect the Fund and its shareholders adversely.
Each 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 a Fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
BY TELEPHONE
1. When you fill out the application for your 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. Investors 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.
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
28
<PAGE>
REINVESTMENT PRIVILEGE
1. You will not be subject to a sales charge on Class A shares reinvested in any
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. For purposes of computing the CDSC payable
upon a subsequent redemption, the holding period of the shares acquired
through reinvestment will include the holding period of the redeemed shares.
- -------------------------------------------------------------------------------
IF YOU REDEEM SHARES OF A FUND, YOU MAY BE
ABLE TO REINVEST THE PROCEEDS IN SHARES OF
THAT FUND OR ANOTHER JOHN HANCOCK FUND
WITHOUT PAYING AN ADDITIONAL SALES CHARGE.
- -------------------------------------------------------------------------------
2. Any portion of your redemption may be reinvested in a Fund's 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
account number and class from which your shares were originally redeemed.
SYSTEMATIC WITHDRAWAL PLAN
1. You may 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 OF
FUNDS FROM YOUR RETIREMENT ACCOUNTS 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 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 may authorize an investment to be automatically drawn each month from
your bank for investment under the "Automatic Investing" and "Bank
Information" sections of the Account Privileges Application.
- -------------------------------------------------------------------------------
YOU CAN MAKE AUTOMATIC INVESTMENTS AND
SIMPLIFY YOUR INVESTING.
- -------------------------------------------------------------------------------
2. You may also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
3. You may terminate your Monthly Automatic Accumulation Program at any time.
29
<PAGE>
4. There is no charge to you for this program, and there is no cost to the
Funds.
5. If you have payments being 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 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 as a funding medium 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 457 Plans.
2. The initial investment minimum or aggregate minimum for any of these plans is
$500. However, accounts being established as group IRA, SEP, SARSEP, TSA,
401(k) and 457 Plans will be accepted without an initial minimum investment.
30
<PAGE>
(NOTES)
<PAGE>
JOHN HANCOCK
JOHN HANCOCK GLOBAL FUND
GLOBAL FUND
A MUTUAL FUND SEEKING TO
JOHN HANCOCK ACHIEVE LONG-TERM GROWTH
GLOBAL INCOME FUND OF CAPITAL PRIMARILY THROUGH
INVESTMENT IN COMMON STOCKS OF
INVESTMENT ADVISER COMPANIES DOMICILED IN FOREIGN
John Hancock Advisers, Inc. COUNTRIES AND IN THE UNITED
101 Huntington Avenue STATES.
Boston, Massachusetts 02199-7603
INVESTMENT SUB-ADVISER (ForGlobal Fund)
John Hancock Advisers JOHN HANCOCK
International Limited GLOBAL INCOME FUND
34 Dover Street
London, England W1X 3RA A MUTUAL FUND SEEKING TO ACHIEVE
A HIGH TOTAL INVESTMENT RETURN,
PRINCIPAL DISTRIBUTOR A COMBINATION OF CURRENT INCOME
John Hancock Funds, Inc. AND CAPITAL APPRECIATION BY
101 Huntington Avenue INVESTING IN A GLOBAL PORTFOLIO
Boston, Massachusetts 02199-7603 OF HIGH-QUALITY, FIXED INCOME
SECURITIES.
CUSTODIAN
State Street Bank and Trust
Company
225 Franklin Street
Boston, Massachusetts 02110 CLASS A AND CLASS B SHARES
TRANSFER AGENT
John Hancock Investor Services PROSPECTUS
Corporation MARCH 1, 1995
P.O. Box 9116
Boston, Massachusetts 02205-9116
INDEPENDENT AUDITORS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
TELEPHONE 1-800-225-5291
HOW TO OBTAIN INFORMATION
ABOUT THE FUNDS
For: Service Information
Telephone Exchange
call 1-800-225-5291
Invest-by-Phone
Telephone Redemption
For: TDD
call 1-800-544-6713
JHD-0309P 3-95 (LOGO) Printed on
Recycled Paper
<PAGE>
JOHN HANCOCK
GLOBAL FUND
CLASS C SHARES
PROSPECTUS
MARCH 1, 1995
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Expense Information................................................................... 2
The Fund's Financial Highlights....................................................... 3
Investment Objectives and Policies.................................................... 4
Organization and Management of the Fund............................................... 7
The Fund's Expenses................................................................... 8
Dividends and Taxes................................................................... 8
Performance........................................................................... 9
Who Can Buy Class C Shares............................................................ 10
How to Buy Class C Shares............................................................. 11
Class C Share Price................................................................... 12
How to Redeem Class C Shares.......................................................... 13
Additional Services and Programs...................................................... 15
</TABLE>
This Prospectus sets forth information about John Hancock Global Fund (the
"Fund"), a diversified series of Freedom Investment Trust II (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, 1995, and incorporated by reference
into this Prospectus, free of charge by writing or telephoning: John Hancock
Investor Services Corporation, Attention: Institutional Services, P.O. Box 9277,
Boston, Massachusetts 02205-9116, 1-800-437-9312.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
The purpose of the following information is to help you understand the various
fees and expenses that 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 fees and expenses for the Fund's fiscal year ended
October 31, 1994. Actual fees and expenses of Class C shares in the future may
be greater or less than those shown.
<TABLE>
<CAPTION>
CLASS C
SHARES*
-------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of offering price).................................... None
Maximum sales charge imposed on reinvested dividends............................................................. None
Maximum deferred sales charge.................................................................................... None
Redemption fee(a)................................................................................................ None
Exchange fee..................................................................................................... None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fee(b)................................................................................................ 0.96%
Other expenses................................................................................................... 0.46%
Total Fund operating expenses.................................................................................... 1.42%
</TABLE>
- ---------------
* The information set forth in this table relates only to Class C shares of
the Fund.
(a) Redemption by wire fee (currently $4.00) not included.
(b) The calculation of the management fee is based on average net assets at
October 31, 1994. See "The Fund's Expenses."
<TABLE>
<CAPTION>
EXAMPLE: CLASS C SHARES 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:.......................................... $ 14 $45 $78 $170
</TABLE>
(The example should not be considered as a representation of past or future
expenses. Actual expenses of Class C shares may be greater or less than shown.)
The management fee referred to above is more fully explained in this Prospectus
under the caption "The Fund's Expenses" and in the Statement of Additional
Information under the caption "Investment Advisory and Other Services."
In addition to Class C shares, the Fund also offers Class A and B shares. Class
A and B shares are available to individual investors at net asset value plus a
maximum initial sales charge of 5.00% for A shares and a maximum contingent
deferred sales charge of 5.00% for B shares. Class A and B shares are subject to
ongoing distribution and service fees of up to 0.30% and 1.00%, respectively, of
the Fund's average daily net assets in accordance with plans adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940. The minimum initial
investment in Class A or B shares is $1,000 ($250 for group investments or $500
for retirement plans). Generally, investors who are eligible to purchase Class C
shares are permitted to purchase A or B shares. If you are considering a
purchase of Class A or B shares, please call John Hancock Investor Services
Corporation ("Investor Services") at 1-800-437-9312 for more information about
eligibility, instructions for purchase by check or wire and an Account
Application.
Class A and B shares generally have operating expenses similar to Class C
shares, except for the sales charge and distribution and transfer agent fees.
Unlike Class C shares, Class A and B shareholders are eligible for a
reinvestment privilege, systematic withdrawal plan, monthly automatic
accumulation program, group investment program and use of the Fund as a funding
vehicle for a retirement plan. Investors wishing information about any of these
services and expenses should contact Investor Services at 1-800-437-9312.
2
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following table of Financial Highlights has been examined by Price
Waterhouse LLP, the Fund's independent accountants, whose unqualified report is
included in the Annual Report and the Fund's 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:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
1994 1993 1992 1991 1990
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
GLOBAL FUND
CLASS A(a)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.......................... $ 14.30 $ 10.55 $ 11.31
-------- ------- -------
Net Investment Loss........................................... (0.07)** (0.10)** (0.04)**
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions................................ 1.24 3.85 (0.72)
-------- ------- -------
Total from Investment Operations........................... 1.17 3.75 (0.76)
-------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold and
Foreign Currency Transactions................................ (1.31) -- --
-------- ------- -------
Net Asset Value, End of Period................................ $ 14.16 $ 14.30 $ 10.55
======== ======= =======
Total Investment Return at Net Asset Value.................... 8.64% 35.55% (6.72%)(e)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)..................... $100,973 $90,787 $76,980
Ratio of Expenses to Average Net Assets....................... 1.98% 2.12% 2.47%*
Ratio of Net Investment Loss to Average Net Assets............ (0.54%) (0.86%) (0.60%)*
Portfolio Turnover Rate....................................... 61% 108% 69%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.......................... $ 14.17 $ 10.50 $ 10.92 $ 9.94 $ 13.58
-------- ------- ------- ------- --------
Net Investment Income (Loss).................................. (0.15)** (0.15)** (0.12)** (0.01)** (0.02)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions................................ 1.22 3.82 (0.30) 1.35 (1.12)
-------- ------- ------- ------- --------
Total from Investment Operations........................... 1.07 3.67 (0.42) 1.34 (1.14)
-------- ------- ------- ------- --------
Less Distributions:
Distributions from Net Investment Income...................... -- -- -- -- --
Distributions from Net Realized Gain on Investments Sold and
Foreign Currency Transactions................................ (1.31) -- -- (0.36) (2.50)
-------- ------- ------- ------- --------
Total Distributions........................................ (1.31) -- -- (0.36) (2.50)
Net Asset Value, End of Period................................ $ 13.93 $ 14.17 $ 10.50 $ 10.92 $ 9.94
======== ======= ======= ======= ========
Total Investment Return at Net Asset Value.................... 7.97% 34.95% (3.85%) 14.04% (10.42%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)..................... $ 31,822 $19,340 $11,475 $28,686 $ 33,281
Ratio of Expenses to Average Net Assets....................... 2.59% 2.49% 2.68% 2.60% 2.46%
Ratio of Net Investment Income (Loss) to Average Net Assets... (1.12%) (1.25%) (1.03%) (0.12%) (0.59%)
Portfolio Turnover Rate....................................... 61% 108% 69% 106% 58%
<CAPTION>
1989 1988 1987(B) 1987(C)
------- ------- ------- -------
<S> <C> <C> <C> <C>
GLOBAL FUND
CLASS A(a)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period..........................
Net Investment Loss...........................................
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions................................
Total from Investment Operations...........................
Less Distributions:
Distributions from Net Realized Gain on Investments Sold and
Foreign Currency Transactions................................
Net Asset Value, End of Period................................
Total Investment Return at Net Asset Value....................
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).....................
Ratio of Expenses to Average Net Assets.......................
Ratio of Net Investment Loss to Average Net Assets............
Portfolio Turnover Rate.......................................
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.......................... $ 10.67 $ 10.42 $13.00 $ 9.60
------- ------- ------ ------
Net Investment Income (Loss).................................. (0.10) 0.01 (0.05) 0.08
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions................................ 3.25 0.69 (2.08) 3.32
------- ------- ------ ------
Total from Investment Operations........................... 3.15 0.70 (2.13) 3.40
------- ------- ------ ------
Less Distributions:
Distributions from Net Investment Income...................... (0.01) -- (0.12) --
Distributions from Net Realized Gain on Investments Sold and
Foreign Currency Transactions................................ (0.23) (0.45) (0.33) 0.00
------- ------- ------ ------
Total Distributions........................................ (0.24) (0.45) (0.45) 0**
Net Asset Value, End of Period................................ $ 13.58 $ 10.67 $10.42 $13.00
======= ======= ====== ======
Total Investment Return at Net Asset Value.................... 30.22% 7.05% (16.97)(e) 35.42(e)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)..................... $35,596 $34,380 $50,883 $62,264
Ratio of Expenses to Average Net Assets....................... 2.30% 2.55% 2.56%* 2.38%*
Ratio of Net Investment Income (Loss) to Average Net Assets... (0.47%) 0.09% (0.78%)* 0.99%*
Portfolio Turnover Rate....................................... 138% 142% 81%* 91%
</TABLE>
<TABLE>
<CAPTION>
CLASS C(d)
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period.............................. $ 14.34 $ 11.75
Net Investment Loss............................................... -- (0.02)
Net Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Transactions............................................ 1.24 2.61
Total from Investment Operations............................... 1.24 2.59
Less Distributions:
Distributions from Net Realized Gain on Investments Sold and
Foreign Currency Transactions.................................... (1.31) --
Net Asset Value, End of Period.................................... $ 14.27 $ 14.34
======== =======
Total Investment Return at Net Asset Value........................ 9.15% 22.04%(e)
Rates and Supplemental Data
Net Assets, End of Period (000's omitted)......................... $ 752 $ 406
Ratio of Expenses to Average Net Assets........................... 1.42% 1.43%*
Ratio of Net Investment Income (Loss) to Average Net Assets....... 0.03% (0.35%)*
Portfolio Turnover Rate........................................... 61% 108%
<CAPTION>
CLASS C(d)
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period..............................
Net Investment Loss...............................................
Net Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Transactions............................................
Total from Investment Operations...............................
Less Distributions:
Distributions from Net Realized Gain on Investments Sold and
Foreign Currency Transactions....................................
Net Asset Value, End of Period....................................
Total Investment Return at Net Asset Value........................
Rates and Supplemental Data
Net Assets, End of Period (000's omitted).........................
Ratio of Expenses to Average Net Assets...........................
Ratio of Net Investment Income (Loss) to Average Net Assets.......
Portfolio Turnover Rate...........................................
</TABLE>
- ---------------
(a) From commencement of operations, January 3, 1992.
(b) From June 1, 1987.
(c) From commencement of operations, September 2, 1986.
(d) From commencement of operations on May 7, 1993.
(e) Not annualized.
* Annualized.
** Net investment income (loss) per share amount has been calculated based on
average monthly shares outstanding.
3
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is to achieve long-term growth of capital
primarily through investment in common stocks of companies domiciled in foreign
countries and in the United States. Any income received on the Fund's
investments will be incidental to this objective. Normally, the Fund will invest
in the securities markets of at least three countries, including the United
States.
Under normal circumstances, at least 65% of the Fund's total assets will consist
of common stocks and securities convertible into common stock. However, if
deemed advisable by John Hancock Advisers, Inc. (the "Adviser"), the Fund may
invest in any other type of security including preferred stocks, warrants,
bonds, notes and other debt securities (including Eurodollar securities) or
obligations of domestic or foreign governments and their political subdivisions.
As of the date of this Prospectus, it is the intention of the Fund generally to
invest no more than 5% of its assets in debt securities (other than short-term
securities). The Fund will only invest in investment grade debt securities, that
is securities rated within the four highest rating categories of Standard &
Poor's Rating Group (AAA, AA, A, BBB) or Moody's Investors Service, Inc. (Aaa,
Aa, A, Baa). Investments in the lowest investment grade rating category may have
speculative characteristics and therefore may involve higher risks. Investment
grade debt securities are subject to market fluctuations and changes in interest
rates; however, the risk of loss of income and principal is generally expected
to be less than with lower quality debt securities. In the event a debt security
is downgraded below investment grade, the Adviser will consider this event when
it determines 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 INVESTMENT OBJECTIVE OF THE FUND IS TO
ACHIEVE LONG-TERM GROWTH OF CAPITAL
PRIMARILY THROUGH INVESTMENT IN COMMON
STOCKS OF COMPANIES DOMICILED IN FOREIGN
COUNTRIES AND IN THE UNITED STATES.
- -------------------------------------------------------------------------------
The global allocation of assets is not fixed, and will vary from time to time
based on the judgment of the Adviser and John Hancock Advisers International
Limited (the "Sub-Adviser"). The Fund will maintain a flexible investment policy
and will invest in a diversified portfolio of securities of companies and
governments located throughout the world. In making the allocation of assets
among various countries and geographic regions, the Adviser and the Sub-Adviser
ordinarily consider such factors as prospects for relative economic growth
between foreign countries; expected levels of inflation and interest rates;
government policies influencing business conditions; and other pertinent
financial, tax, social, political, currency and national factors -- all in
relation to the prevailing prices of the securities in each country or region.
When the Adviser believes that financial conditions warrant, for temporary
defensive purposes, the Fund may hold or invest all or part of its assets in
cash and in domestic and foreign money market instruments, including but not
limited to, governmental obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate debt securities and
repurchase agreements.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. Both Funds may buy and sell financial
futures contracts and options on futures to hedge against the effects of
4
<PAGE>
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. or foreign 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.
FOREIGN CURRENCY TRANSACTIONS. The Fund may enter into forward foreign currency
exchange contracts to protect against changes in foreign currency exchange
rates. The Fund will not speculate in foreign currencies or in forward foreign
currency exchange contracts, but will enter into such transactions only in
connection with hedging strategies. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future date
at a price set at the time of the contract. The Fund will not commit more than
50% of the value of its total assets to the consummation of such contracts, nor
will the Fund enter into a forward contract with a term greater than one year.
Although certain strategies could minimize the risk of loss due to a decline in
the value of the hedged foreign currency, they could also limit any potential
gain which might result from an increase in the value of the currency. See the
Statement of Additional Information for further discussion of the uses and risks
of forward foreign currency exchange contracts.
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
carefully monitor the Fund's investments in these securities, focusing on
certain factors, including valuation, liquidity and availability of information.
Purchases are subject to a nonfundamental investment restriction limiting all
illiquid securities held by the Fund to not more than 10% of the Fund's 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, the Fund may be delayed in or prevented from
liquidating the collateral. It is a fundamental policy of the Fund not to lend
portfolio securities, having a total value in excess of 10% of its total assets.
REPURCHASE AGREEMENTS, FORWARD COMMITMENTS OR WHEN-ISSUED SECURITIES. The Fund
may enter into repurchase agreements and may purchase securities on a forward
commitments or, when-issued basis. In a repurchase agreement, the Fund buys a
security subject to the right and obligation to sell it
5
<PAGE>
back to the seller at the same price plus accrued interest. 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 a Fund is delayed in
or prevented from liquidating the collateral. Each 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.
GLOBAL RISKS. Investments in foreign securities may involve risks not present
in domestic investment 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 Funds. In addition, foreign
securities may be denominated in the currency of the country in which the issuer
is located. Consequently, changes in the foreign exchange rate will affect the
value of the Fund's shares and dividends. Finally, the expense ratios of
international funds generally are higher than those of domestic funds because
there are greater costs associated with maintaining custody of foreign
securities, and the increased research necessary for international investing
results in a higher advisory fee.
- -------------------------------------------------------------------------------
INVESTMENTS IN FOREIGN SECURITIES MAY
INVOLVE RISKS AND CONSIDERATIONS THAT ARE
NOT PRESENT IN DOMESTIC INVESTMENTS.
- -------------------------------------------------------------------------------
These risks may be intensified in the case of investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of business, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominately based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rates. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of substantial holdings difficult or
impossible at times. The Fund may be required to establish special custodial or
other arrangements before making certain investments in those countries.
Securities of issuers located in these countries may have limited
6
<PAGE>
marketability and may be subject to more abrupt or erratic price movements.
The Fund has adopted certain investment restrictions which are detailed in the
Statement of Additional Information where they are classified as fundamental or
non-fundamental. The Fund's investment objective and those investment
restrictions designated as fundamental may not be changed without shareholder
approval. The Fund's non-fundamental investment policies and restrictions,
however, may be changed by a vote of the Trustees without shareholder approval.
The Fund's portfolio turnover rates for recent periods are shown in the section
"The Fund's Financial Highlights."
- -------------------------------------------------------------------------------
THE FUND FOLLOWS CERTAIN POLICIES, WHICH
MAY HELP REDUCE INVESTMENT RISK.
- -------------------------------------------------------------------------------
When choosing brokerage firms to carry out the Fund's transactions, the Adviser
gives primary consideration is 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 shares of the Fund.
Pursuant to procedures determined by the Trustees, the Adviser or Sub-Adviser
may place securities transactions with brokers affiliated with the Adviser.
These brokers include Tucker Anthony Incorporated, John Hancock Distributors,
Inc. and Sutro & Company Inc., which are indirectly owned by John Hancock Mutual
Life Insurance Company, which in turn indirectly owns the Adviser and
Sub-Adviser.
- -------------------------------------------------------------------------------
BROKERS ARE CHOSEN BASED ON BEST PRICE AND
EXECUTION.
- -------------------------------------------------------------------------------
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is a diversified series of Freedom Investment Trust II, an open-end
management investment company organized as a Massachusetts business trust in
1986. The Trust reserves the right to create and issue a number of series of
shares, or funds or classes of those series, which are separately managed and
have different investment objectives. As of the date of this Prospectus, the
Fund has authorized Class A shares, Class B shares and Class C shares. All of
these shares have equal rights as to voting, redemption, dividends and
liquidation, except that Class A and Class B shares have exclusive voting rights
with respect to their respective Rule 12b-1 distribution plans and each class
bears different distribution fees and certain other expenses. The Trust is not
required and does not intend to hold annual meetings of shareholders, although
special meetings may be held for such purposes as electing or removing Trustees,
changing fundamental policies or approving a management contract. The 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 John Hancock Mutual Life Insurance Company, a financial services company. It
provides the Fund, and other investment companies in the John Hancock group of
funds, with investment research and portfolio management services. Formed in
1987, the Sub-Adviser is a wholly-owned subsidiary of the Adviser, and provides
international investment research and advisory services to institutional
clients. 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 Investor Services, an indirect subsidiary of John Hancock
Mutual Life Insurance 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 $13 BILLION.
- -------------------------------------------------------------------------------
7
<PAGE>
The Global Fund is managed by the Adviser's international equities team, and no
single person is primarily responsible for making recommendations to the team.
In order to avoid any conflict 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.
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a fee to the
Adviser. For the 1994 fiscal year, the Fund paid investment advisory fees to the
Adviser equaling 0.96% of the Fund's average daily net assets. The fee is higher
than those charged to many other mutual funds but is comparable to fees paid by
those funds with a similar investment objective. The Adviser pays the
Sub-Adviser a portion of its fee.
The Fund's total expenses for the fiscal year ended October 31, 1994 for Class C
shares were 1.42% (annualized) of average daily net asset value.
DIVIDENDS AND TAXES
DIVIDENDS. Dividends from the Fund's net investment income and capital gains
are generally declared annually. All dividends are reinvested on the record date
in additional shares of your class unless you elect the option to receive them
entirely in cash. If you elect the cash option and the U.S. Postal Service
cannot deliver your checks, your election will be converted to the reinvestment
option.
TAXATION. For investors who are not exempt from federal income taxes, 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
gain. These dividends are taxable whether you received cash in or reinvested in
additional Class C shares. Certain dividends may be paid by the Fund in January
of a given year will 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 (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.
8
<PAGE>
The 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.
When you redeem (sell) or exchange shares, you may realize a taxable gain or
loss.
On the account application you must certify that the social security or other
tax-payer 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 and local or foreign
taxes with respect to your investment in and distributions from the Fund. A
state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent the Fund's distributions are
derived from interest on (or, in the case of intangibles taxes, the value of its
assets is attributable to) certain U.S. Government obligations, provided in some
states that certain thresholds for holdings of such obligations and/or reporting
requirements are satisfied. The foregoing discussion relates to U.S. investors
that are not exempt from U.S. Federal income tax. Different tax consequences
will apply to plan participants, tax-exempt investors and investors that are
subject to tax deferral. Non-U.S. shareholders are also subject to different tax
treatment not described above. You should consult your tax adviser for specific
advice. Under the Code, a tax-exempt investor in the Fund will not generally
recognize unrelated business taxable income from its investment in the Fund
unless the tax-exempt investor incurred indebtedness to acquire or continue to
hold Fund shares and such indebtedness remains unpaid.
PERFORMANCE
Total return is based on the overall change in value of a hypothetical
investment in Class C shares of the Fund. The Fund's total return on Class C
shares shows the overall dollar or percentage change in value, assuming the
reinvestment of all dividends and distributions in Class C shares. Cumulative
total return shows the Fund's performance on Class C shares over a period of
time. Average annual total return shows the cumulative return of the Class C
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
performance of the Class C shares of the Fund, you should recognize that it is
not the same as actual year-to-year results.
- -------------------------------------------------------------------------------
THE FUND MAY ADVERTISE ITS TOTAL RETURN.
- -------------------------------------------------------------------------------
Total return with respect to Class C shares does not reflect the imposition of a
sales charge. The total return of Class A, Class B and Class C shares will be
calculated separately, and, because each class of shares is subject to different
expenses, the total return with respect to each class of the Fund for the same
period may differ. The value of the Class C shares of the Fund, when redeemed,
9
<PAGE>
may be more or less than their original cost. Total return is a historical
calculation and is not an indication of future performance.
WHO CAN BUY CLASS C SHARES
In order to qualify to buy Class C shares of the Fund, you must qualify as one
of the following types of institutional investors: (i) Benefit plans not
affiliated with the Adviser which have at least $25,000,000 in plan assets,
either have a separate trustee vested with investment discretion and certain
limitations on the ability of the plan beneficiaries to access their plan
investments without incurring adverse tax consequences, or allow their
participants to select among one or more investment options
("participant-directed plans"); (ii) Banks and insurance companies which are not
affiliated with the Adviser purchasing shares for their own account; (iii)
Investment companies not affiliated with the Adviser; (iv) Tax exempt retirement
plans of the Adviser and its affiliates, including affiliated brokers; (v) Unit
investment trusts sponsored by John Hancock Funds and certain other sponsors;
and (vi) existing full-service clients of John Hancock Mutual Life Insurance
Company who were group annuity contract holders as of September 1, 1994, are not
limited to 401(k), TSA and 457 plans. Participant-directed plans include but are
not limited to 401(k), TSA and 457 plans.
- -------------------------------------------------------------------------------
CLASS C SHARES ARE AVAILABLE TO CERTAIN
INSTITUTIONAL INVESTORS.
- -------------------------------------------------------------------------------
10
<PAGE>
HOW TO BUY CLASS C SHARES
<TABLE>
<S> <C>
The minimum initial investment is $1,000,000, except that this requirement may be
waived at the discretion of the Fund's officers. You may qualify for the minimum
investment if you invest more than $1,000,000 in Class C shares of the Fund, and
Class C shares of other funds in the John Hancock family. This is discussed in
greater detail in the Statement of Additional Information.
- ---------------------------------------------------------------------------------------
OPENING AN ACCOUNT.
- ---------------------------------------------------------------------------------------
Complete the application attached to the Prospectus.
- ---------------------------------------------------------------------------------------
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation ("Investor Services").
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, Selling Broker or by calling 1-800-437-9312.
2. 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 Global Fund
Class C shares
Your account number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative or Selling Broker, or mail it directly to
Investor Services.
- ---------------------------------------------------------------------------------------
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).
- ---------------------------------------------------------------------------------------
BUYING ADDITIONAL
CLASS C SHARES.
- ---------------------------------------------------------------------------------------
2. After your authorization form has been processed, you may
purchase additional Class C shares by calling Investor Services
toll free at 1-800-437-9312.
3. Give the Investor Services representative the name of the
person(s) in which the account is registered, the Fund name and
your account number and the amount you wish to invest in Class
C shares.
4. Your investment normally will be credited to your account the
business day following your phone request.
- ---------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------
<S> <C> <C>
BY CHECK 1. Either fill out the detachable stub included on your account
statement or include a note with your investment listing the
name of the Fund and class of shares, your account number and
the name(s) in which the account is registered.
- -----------------------------------------------------------------------------------------
BUYING ADDITIONAL
CLASS C SHARES.
CONTINUED
- -----------------------------------------------------------------------------------------
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.
- -----------------------------------------------------------------------------------------
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 Global Fund
Class C 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 to be accepted the same day. Your bank may charge a
fee to wire funds. Telephone transactions are recorded to verify information.
Class C share certificates are not issued unless a request is made 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 WHICH
YOU SHOULD KEEP TO HELP WITH YOUR PERSONAL
RECORDKEEPING.
- -------------------------------------------------------------------------------
CLASS C SHARE PRICE
The net asset value per share ("NAV") of a Class C share is the value of one
Class C share. The NAV per share 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 in value. 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. 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 believes accurately
reflects fair value.
- -------------------------------------------------------------------------------
THE OFFERING PRICE OF YOUR CLASS C SHARES
IS THEIR NET ASSET VALUE.
- -------------------------------------------------------------------------------
Class C 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 Broker
Services. 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 prior to its close
of
12
<PAGE>
business to receive that day's offering price. There is no sales charge imposed
on the purchase of Class C shares.
A one-time payment of up to 0.15% of the amount invested in Class C shares may
be made by John Hancock Funds to a Selling Broker for sales of Class C shares
made by that Selling Broker. A person entitled to receive compensation for
selling shares of the Fund may receive different compensation with respect to
sales of Class A shares, Class B shares or Class C shares or any additional
future class of shares of the Fund.
Class C shares are also available to existing full-service clients of John
Hancock Mutual Life Insurance Company who have group annuity contract holders as
of September 1, 1994, John Hancock Funds, out of its own resources, may pay to a
Selling Broker an annual service fee of up to 0.20% of the amount invested in
Class C shares by these clients.
HOW TO REDEEM CLASS C SHARES
You may redeem all or a portion of your Class C shares on any business day. Your
Class C shares will be redeemed at the next NAV for Class C shares calculated
after your redemption request is received in good order by Investor Services.
The Fund may hold payment until reasonably satisfied that investments that were
made recently 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 Class C shares are redeemed, the Fund generally sends you payment on
the next business day. When you redeem your Class C shares, if you are subject
to tax, 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 seven days or longer, as permitted by
Federal securities laws.
13
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------
<S> <C>
BY TELEPHONE All shareholders of the Fund are automatically eligible for
the telephone redemption privilege. Call 1-800-437-9312,
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, the
class of shares, 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, but the address on the
account must not have changed for the last thirty 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 in accordance with the telephone
transaction procedures mentioned above.
Telephone redemption is not available for tax-qualified
retirement plans or Class C 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.
- ---------------------------------------------------------------------------------------
BY WIRE If you have a telephone redemption form on file with the
Fund, redemption proceeds of $1,000 or more can be wired on
the next business day to your designated bank account and a
fee (currently $4.00) will be deducted. You may also use
electronic funds transfer to your assigned bank account and
the funds are usually collectable after two business days.
Your bank may or may not charge 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 Institutional Account
Application that is included with the Prospectus.
- ---------------------------------------------------------------------------------------
IN WRITING Send a stock power or "letter of instruction" specifying
the name of the Fund, the dollar amount or the number of
Class C shares to be redeemed, your name, your account
number, and the additional requirements listed below that
apply to your particular account.
- ---------------------------------------------------------------------------------------
TYPE OF REGISTRATION REQUIREMENTS
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 signature guarantees. (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
1-800-437-9312 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 Class C 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.
=======================================================================================
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
THROUGH YOUR BROKER. Your broker may be able to initiate the redemption.
Contact him or her for instructions. Your broker will be responsible for
the prompt transmittal of your redemption request.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT REDEMPTIONS.
- -------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your
stockpower or a letter of instruction. You may not redeem certificated
shares by telephone.
Due to the proportionately high cost of maintaining small accounts, the Fund
reserves the right to redeem all Class C 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. Shareholders will be notified before these redemptions
are to be made or this charge is imposed and will have 30 days to purchase
additional Class C shares to bring their account balance up to the required
minimum. Unless the number of Class C shares acquired by further purchases
and dividend reinvestments, if any, exceeds the number of Class C shares
redeemed, repeated redemptions from a smaller account may eventually
trigger this redemption 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. Not all John Hancock funds offer Class C shares. Contact your registered
representative or Selling Broker and request a prospectus for the John Hancock
fund that interests you. Read the prospectus carefully before exchanging your
Class C shares. Exchanges may only be made into Class C shares of other John
Hancock funds that offer Class C shares.
- -------------------------------------------------------------------------------
YOU MAY EXCHANGE CLASS C SHARES OF THE
FUND ONLY FOR CLASS C SHARES IN ANY OTHER
JOHN HANCOCK FUND.
- -------------------------------------------------------------------------------
Exchanges between funds are based on their respective net asset values. No sales
charge or transaction charge is imposed.
The Fund reserves the right to require you to keep previously exchanged Class C
shares (and reinvested dividends) in the Fund for 90 days before you are
permitted to execute a new exchange. The Fund may also terminate or alter the
terms of the exchange privilege upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal income tax purposes. An exchange may
result in a gain or loss.
When you make an exchange, your account registration in both the old 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, the
Fund reserves the right to terminate the exchange privilege for any person or
group
15
<PAGE>
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 you 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 purchase of Class C shares of the
Fund, you automatically authorize exchanges by telephone unless you check the
box indicating that you do not wish to have the telephone exchange privilege.
2. Call 1-800-437-9312. Have the account number of your current fund and the
exact name in which it is registered available to give the customer service
representative.
3. Investors 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.
IN WRITING
1. In a letter request an exchange and list the following:
- the name of the fund whose Class C 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
- specify the number of Class C shares, all Class C 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
Att.: Institutional Services
P.O. Box 9277
Boston, Massachusetts 02205-9277
16
<PAGE>
JOHN HANCOCK
JOHN HANCOCK GLOBAL FUND
GLOBAL FUND
CLASS C SHARES
INVESTMENT ADVISER PROSPECTUS
John Hancock Advisers, Inc. MARCH 1, 1995
101 Huntington Avenue
Boston, Massachusetts 02199-7603
INVESTMENT SUB-ADVISER
John Hancock Advisers A MUTUAL FUND SEEKING TO
International Limited ACHIEVE LONG-TERM GROWTH OF
34 Dover Street CAPITAL PRIMARILY THROUGH
London, England W1X 3RA INVESTMENT IN COMMON STOCKS
OF COMPANIES DOMICILED IN FOREIGN
PRINCIPAL DISTRIBUTOR COUNTRIES AND IN THE UNITED STATES.
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services
Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchange call
1-800-437-9312
Invest-by-Phone
Telephone Redemption
101 HUNTINGTON AVENUE
JHD-030PC 3-95 (LOGO) Printed on BOSTON, MASSACHUSETTS 02199-7603
Recycled Paper TELEPHONE 1-800-437-9312
<PAGE>
JOHN HANCOCK
INTERNATIONAL FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 1, 1995
TABLE OF CONTENTS
Page
Expense Information ....................................................... 2
The Fund's Financial Highlights ........................................... 3
Investment Objective and Policies ......................................... 4
Organization and Management of the Fund ................................... 8
Alternative Purchase Arrangements ......................................... 9
The Fund's Expenses ....................................................... 10
Dividends and Taxes ....................................................... 11
Performance ............................................................... 12
How to Buy Shares ......................................................... 13
Share Price ............................................................... 15
How to Redeem Shares ...................................................... 20
Additional Services and Programs .......................................... 22
This Prospectus sets forth information about John Hancock International
Fund (the "Fund"), a diversified series of Freedom Investment Trust II (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, 1995, 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>
EXPENSE INFORMATION
The purpose of the following information is to help you understand the
various fees and expenses that you will bear, directly or indirectly, when you
purchase Fund shares. The fees and expenses included in the table and
hypothetical example below are based on fees and expenses for the Class A and
Class B shares of the Fund for the fiscal year ended October 31, 1994,
adjusted to reflect current fees and expenses, and should not be considered as
representative of future expenses. Actual fees and expenses may be greater or
less than those shown.
CLASS A CLASS B
SHARES SHARES
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 .......................................... 1.00% 1.00%
12b-1 fee** ............................................. 0.30% 1.00%
Other expenses .......................................... 2.61% 2.70%
Total gross Fund operating expenses ..................... 3.91% 4.70%
Management fee waiver and expense reimbursement ......... (2.29%) (2.29%)
Total net Fund operating expenses ....................... 1.62%(a) 2.41%(a)
* With respect to Class A shares, no sales charge is payable at the time of
purchase on investments 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."
+ Redemption by wire fee (currently $4.00) not included.
(a) Estimated for the Fund based on expenses to have been incurred if the Class
A and Class B shares had been in existence for the entire fiscal year. Total
net Fund operating expenses in the table reflect estimated expenses, net of
the Adviser's reimbursement or waiver of the management fee and other
expenses (but not including the transfer agent fee and the 12b-1 fee) in
excess of 0.90% of the Fund's average daily net assets.
<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 5% annual return:
Class A Shares ............................................................ $ 66 $ 99 $134 $233
Class B Shares
--Assuming complete redemption at end of period ......................... $ 74 $105 $149 $255
--Assuming no redemption
$ 24 $ 75 $129 $255
</TABLE>
You would pay the following expenses for the indicated period of years on a
hypothetical $1,000 investment in Class C shares, assuming a 5% annual return: 1
year, $10; 3 years, $32, 5 years $55, and 10 years $122.
(This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.)
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the maximum
front-end sales charge permitted under the National Association of Securities
Dealers Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully explained in
this Prospectus under the caption "The Fund's Expenses" and in the Statement of
Additional Information under the captions "Investment Advisory and Other
Services" and "Distribution Contract."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following audited table of Financial Highlights is for the period
January 3, 1994 (commencement of operations) to October 31, 1994 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 the period
indicated is as follows:
FOR THE PERIOD JANUARY 3, 1994
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1994
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......................... $ 8.50
Net Investment Income ........................................ 0.07(b)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions .............................. 0.08
Total from Investment Operations ........................... 0.15
Net Asset Value, End of Period ............................... $ 8.65
Total Investment Return at Net Asset Value (d) ........... 1.77%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .................... $4,426
Ratio of Expenses to Average Net Assets** .................... 1.50%*
Ratio of Adjusted Expenses to Average Net Assets (a) ......... 3.79%*
Ratio of Net Investment Income to Average Net Assets ......... 1.02%*
Ratio of Adjusted Net Investment Income to
Average Net Assets (a) ..................................... (1.27%)*
Portfolio Turnover Rate ...................................... 50%
**Expense Reimbursement Per Share ............................ $ 0.16(b)
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......................... $ 8.50
Net Investment Income ........................................ 0.02(b)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions .............................. 0.09
Total from Investment Operations ........................... 0.11
Net Asset Value, End of Period ............................... $ 8.61
Total Investment Return at Net Asset Value (d) ........... 1.29%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .................... $3,948
Ratio of Expenses to Average Net Assets** .................... 2.22%*
Ratio of Adjusted Expenses to Average Net Assets (a) ......... 4.51%*
Ratio of Net Investment Income to Average Net Assets ......... 0.31%*
Ratio of Adjusted Net Investment Income to
Average Net Assets (a) .................................... (1.98%)*
Portfolio Turnover Rate ...................................... 50%
**Expense Reimbursement Per Share ............................ $ 0.16(b)
*On an annualized basis.
(a)On an unreimbursed basis.
(b)On average month end shares outstanding.
(c)Not annualized.
(d)Without the reimbursement, total investment return would have been lower.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES AND
CERTAIN RISK CONSIDERATIONS
THE INVESTMENT OBJECTIVE OF THE FUND IS LONG-TERM GROWTH OF CAPITAL THROUGH
INVESTMENT PRIMARILY IN FOREIGN EQUITY SECURITIES.
The Fund's investment objective is long-term growth of capital. The Fund seeks
to achieve its investment objective by investing primarily in foreign equity
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, at least 65% of the Fund's total assets will be
invested in equity securities of issuers located in various countries around the
world. Generally, the Fund's portfolio will contain securities of issuers from
at least three countries other than the United States. The Fund normally will
invest substantially all of its assets in equity securities, such as common
stock, preferred stock and securities convertible into common and preferred
stock. However, if deemed advisable by John Hancock Advisers, Inc. (the
"Adviser"), the Fund may invest in any other type of security including
warrants, bonds, notes and other debt securities (including Eurodollar
securities) or obligations of domestic or foreign governments and their
political subdivisions, or domestic or foreign corporations.
THE GLOBAL ALLOCATION OF ASSETS IS NOT FIXED, AND WILL VARY FROM TIME TO TIME
BASED ON THE JUDGMENT OF THE FUND'S ADVISER AND SUB-ADVISER.
The Fund will maintain a flexible investment policy and will invest in a
diversified portfolio of securities of companies and governments located
throughout the world. In making the allocation of assets among various countries
and geographic regions, the Adviser and John Hancock Advisers International
Limited (the "Sub-Adviser") ordinarily consider such factors as prospects for
relative economic growth between foreign countries; expected levels of inflation
and interest rates; government policies influencing business conditions; and
other pertinent financial, tax, social, political, currency, and national
factors -- all in relation to the prevailing prices of the securities in each
country or region.
In choosing investments for the Fund, the Adviser generally looks for companies
whose earnings show a strong growth trend or companies whose current market
value per share is undervalued. The Fund will not restrict its investments to
any particular size company and, consequently, the portfolio may include the
securities of small and relatively less well-known companies. The securities of
small and medium-sized companies may be subject to more volatile market
movements than the securities of larger, more established companies or the stock
market averages in general.
It is the intention of the Fund generally to invest in debt securities only for
temporary defensive purposes. Accordingly, when the Adviser believes unfavorable
investment conditions exist requiring the Fund to assume a temporary defensive
investment posture, the Fund may hold cash or invest all or a portion of its
assets in short-term domestic as well as foreign instruments, including:
short-term U.S. Government securities and repurchase agreements in connection
with such instruments; bank certificates of deposit, bankers' acceptances, time
deposits and letters of credit; and commercial paper (including so called
Section 4(2) paper rated at least A-1 or A-2 by Standard & Poor's Ratings Group
("S&P") or P-1 or P-2 by Moody's Investors Service, Inc. ("Moody's") or if
unrated considered by the Adviser to be of comparable value). The Fund's
temporary defensive investments may also include: debt obligations of U.S.
companies rated at least BBB or Baa by S&P or Moody's, respectively, or, if
unrated, of comparable quality in the opinion of the Adviser; commercial paper
and corporate debt obligations not satisfying the above credit standards if they
are (a) subject to demand features or puts or (b) guaranteed as to principal and
interest by a domestic or foreign bank having total assets in excess of $1
billion, by a corporation whose commercial paper may be purchased by the Fund,
or by a foreign government having an existing debt security rated at least BBB
or Baa by S&P or Moody's, respectively; and other short-term investments which
the Trustees of the Trust determine present minimal credit risks and which are
of "high quality" as determined by any major rating service or, in the case of
an instrument that is not rated, of comparable quality as determined by the
Adviser. Securities which are convertible may be rated as low as BBB or Baa by
S&P or Moody's, respectively. Debt securities and convertible securities rated
Baa or BBB are considered medium grade obligations with speculative
characteristics, and adverse economic conditions or changing circumstances may
weaken capacity to pay interest and repay principal. If the rating of a debt
security or a convertible security is reduced below Baa or BBB, the Adviser will
consider whatever action is appropriate consistent with the Fund's investment
objectives and policies.
THE FUND MAY EMPLOY CERTAIN INVESTMENT STRATEGIES TO HELP ACHIEVE ITS INVESTMENT
OBJECTIVES.
FOREIGN SECURITIES. The Fund may invest in securities of foreign and United
States issuers which are issued in or outside of the U.S., including American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or other
securities convertible into securities of corporations in which the Fund is
permitted to invest. ADRs (sponsored and unsponsored) are receipts typically
issued by an American bank or trust company. ADR's evidence ownership of
underlying securities issued by a foreign corporation, and are designed for
trading in United States securities markets. Issuers of the shares underlying
unsponsored ADRs are not contractually obligated to disclose material
information in the United States and, therefore, there may not be a correlation
between that information and the market value of the unsponsored ADR.
THE FUND MAY EMPLOY CERTAIN INVESTMENT STRATEGIES TO HELP ACHIEVE ITS INVESTMENT
OBJECTIVES.
FOREIGN CURRENCIES. The Fund will not speculate in foreign currencies or in
forward foreign currency exchange contracts, but will enter into such
transactions only in connection with its hedging strategy, to protect against
changes in foreign currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a price set at the time of the contract. Although certain
strategies could minimize the risk of loss due to a decline in the value of the
hedged foreign currency, they could also limit any potential gain that might
result from an increase in the value of the currency.
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. or foreign 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.
SHORT SALES. The Fund may engage in short sales "against the box", as well as
short sales to hedge against or profit from an anticipated decline in the value
of a security. When the Fund engages in a short sale, it will place in a
segregated account, cash or U.S. Government securities in accordance with
applicable regulatory requirements. These will be marked to market daily. See
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
carefully 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 a nonfundamental
investment restriction limiting all illiquid securities held by the Fund to not
more than 15% of the Fund's 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, the Fund may be delayed in or prevented from
liquidating the collateral. It is a fundamental policy of the Fund not to lend
portfolio securities having a total value exceeding 33 1/3% of its total 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
obligations 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 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.
SHORT-TERM TRADING. Short-term trading means the purchase and subsequent sale of
a security after it has been held for a relatively brief period of time. The
Fund engages in short-term trading in response to changes in interest rates or
other economic trends and developments. Under normal market conditions, the
Fund's portfolio turnover rate for the current fiscal year is expected to be no
more than 100%.
The Fund does not generally consider the length of time it has held a particular
security in making its investment decisions. Under certain market conditions,
the Fund's portfolio turnover rate may be higher than that of other mutual
funds. A high portfolio turnover rate 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.
INVESTMENT RESTRICTIONS. The Fund has adopted investment restrictions which are
detailed in the Statement of Additional Information where they are designated as
fundamental or nonfundamental. Fundamental investment 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. These changes may result in the Fund having an
investment objective different from the objective which you considered
appropriate at the time of your investment.
INVESTMENTS ON FOREIGN SECURITIES MAY INVOLVE RISKS THAT ARE NOT PRESENT IN
DOMESTIC INVESTMENTS.
GLOBAL RISKS. Investments in foreign securities may involve risks not present in
domestic investments 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 American 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. Finally, you should be aware that the
expense ratios of international funds generally are higher than those of
domestic funds because there are greater costs associated with maintaining
custody of foreign securities and the increased research necessary for
international investing results in a higher advisory fee.
These risks may be intensified in the case of investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominately based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens,
unstable currencies or inflation rates. Local securities markets may trade a
small number of securities and may be unable to respond effectively to increases
in trading volume, potentially making prompt liquidation of substantial holdings
difficult or impossible at times. The Fund may be required to establish special
custodial or other arrangements before making certain investments in those
countries. Securities of issuers located in these countries may have limited
marketability and may be subject to more abrupt or erratic price movements.
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 is 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 determined by the Trustees, the Adviser or Sub-Adviser may place
securities transactions with brokers affiliated with the Adviser. These brokers
include Tucker Anthony Incorporated, John Hancock Distributors, Inc. and Sutro &
Company, Inc., which are indirectly owned by John Hancock Mutual Life Insurance
Company, which in turn indirectly owns the Adviser and Sub-Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
THE TRUSTEES ELECT OFFICERS AND RETAIN THE INVESTMENT ADVISER WHO IS RESPONSIBLE
FOR THE FUND'S DAY-TO-DAY OPERATIONS, SUBJECT TO THE TRUSTEES' POLICIES AND
SUPERVISION.
The Fund is a diversified series of Freedom Investment Trust II, an open-end
management investment company organized as a Massachusetts business trust in
1986. The Fund has an unlimited number of authorized shares of beneficial
interest. The Trust's Declaration of Trust permits the Trustees to classify and
reclassify the shares into one or more classes. The Trustees have authorized the
issuance of three classes of the Fund, designated Class A, Class B and Class C,
although Class C is no longer offered for sale. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights as to voting, redemption, dividends and liquidation. However, each
class bears different distribution and transfer agent fees and Class A and Class
B shareholders have exclusive voting rights with respect to their distribution
plans. The Trust is not required and does not intend to hold annual shareholder
meetings, although special meetings may be called for such purposes as electing
or removing Trustees, changing fundamental investment restrictions or approving
a management contract. The Trust, under certain circumstances, will assist in
shareholder communication with other shareholders.
JOHN HANCOCK ADVISERS, INC. ADVISES INVESTMENT COMPANIES HAVING TOTAL ASSETS OF
MORE THAN $13 BILLION.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
John Hancock Mutual Life Insurance 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.
Formed in 1987, the Sub-Adviser to the Fund is a wholly-owned subsidiary of the
Adviser, and provides international investment research and advisory services to
institutional clients. John Hancock Funds, Inc. ("John Hancock Funds")
distributes shares for all of the John Hancock funds through selected
broker-dealers ("Selling Brokers"). 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.
The Fund is managed by John Hancock's international equities team. All
investment decisions are made by the portfolio management team, and no single
person is primarily responsible for making recommendations to the team.
In order to avoid any conflict 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:
preclearance 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 your
account application which 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 of your 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 a higher expense ratio than
that of 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.
Class B shares are not available to full service defined contribution plans
administered by Investor Services or John Hancock Mutual Life Insurance 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 of your Fund investment, the CDSC and accumulated
fees on Class B shares would be less than the initial sales charge and
accumulated fees on Class A shares purchased at the same time; and to what
extent this differential would be offset by the Class A shares' lower expenses.
To help you make this determination, the table under the caption "Expense
Information" on the inside cover page of this Prospectus gives examples of the
charges applicable to each class of shares. Class 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 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 would be more advantageous to
purchase Class B shares in order to have all of your funds invested initially.
However, you would 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 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. Sales personnel distributing the Fund's shares may receive different
compensation for selling each class of shares.
Dividends, if any, on Class A and Class B shares will be calculated in the same
manner, at the same time and on the same day and will be in the same amount,
except for differences resulting from the fact that each class will bear only
its own distribution and service fees, shareholder meeting expenses and any
incremental transfer agency costs. See "Dividends and Taxes."
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a monthly fee to
the Adviser which is based on a percentage of the Fund's average daily net asset
value, as follows: 1.00% on the first $250 million of average daily net assets,
0.80% on the next $250 million of average net assets, 0.75% on the next $250
million of average net assets and 0.625% of average net assets in excess of $750
million. The investment management fee paid by the Fund is higher than the fees
paid by most mutual funds but comparable to fees paid by those funds with a
similar investment objective.
The Adviser pays the Sub-Adviser a portion of its fee at the annual rate of
0.70% of the first $200 million of the Fund's average daily net assets and
0.6375% of any amount over $200 million. The Fund is not responsible for payment
of the Sub-Adviser's fee.
The Adviser has voluntarily agreed to limit Fund expenses, including the
management fee (but not including the transfer agent fee and the 12b-1 fee), to
0.90% of the Fund's average daily net assets. The Adviser reserves the right to
terminate this voluntary limitation in the future.
THE FUND PAYS DISTRIBUTION AND SERVICE FEES FOR MARKETING AND SALES-RELATED
SHAREHOLDER SERVICING.
The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
these Plans, the Fund will pay distribution and service fees at an aggregate
annual rate of up to 0.30% of the Class A shares' average daily net assets and
at 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. Distribution fees are used to reimburse
John Hancock Funds for its distribution expenses, including but not limited to:
(i) initial and ongoing sales compensation to Selling Brokers and others
(including affiliates of John Hancock Funds) engaged in the sale of Fund shares;
(ii) marketing, promotional and overhead expenses incurred in connection with
the distribution of Fund shares and (iii) with respect to Class B shares only,
interest expenses on unreimbursed distribution expenses. The Plan provides that
John Hancock Funds will use the distribution fees to promote sales of shares,
and will use the service fees to compensate Selling Brokers for providing
personal and account maintenance services to shareholders. In the event John
Hancock Funds is not fully reimbursed for payments made or expenses incurred by
it under the Class A Plan, these expenses will not be carried beyond one year
from the date they were incurred. 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, 1994 an aggregate
of $311,039 of distribution expenses or 13%, of the average net assets of the
Class B shares of the Fund, was not reimbursed or recovered by John Hancock
Funds through the receipt of deferred sales charges or 12b-1 fees in prior
periods.
The total annualized expenses of the Fund's Class A and Class B shares for the
period ended October 31, 1994, were 1.50% and 2.22%, respectively of average
daily net assets and reflects a limitation of expenses by the Adviser. Without
this limitation, annualized expenses for the period ended October 31, 1994 for
Class A and Class B shares were 3.79% and 4.51%, respectively of average daily
net assets.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund generally declares and distributes dividends representing
all or substantially all net investment income, if any, at least annually. The
Fund will also distribute net short-term or long-term capital gains annually
after the close of the fiscal year (October 31).
Dividends are reinvested in additional shares of your class unless you elect the
option to receive them in cash. If you elect the cash option and the U.S. Postal
Service cannot deliver your checks, your election will be converted to the
reinvestment option. Because of the higher expenses associated with Class B
shares, any 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. 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 in January of a
given year but may be taxable as if you received them the prior December. The
Fund will send you a statement by January 31 showing the tax status of the
dividends you received for the prior year.
The Fund 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 and net realized
capital gains that are distributed to its shareholders within the time period
prescribed by the Code.
The 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.
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 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 prodeeds of redemptions and
exchanges.
In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respect to your investment in and distributions from the Fund. Non-
U.S. shareholders and tax-exempt shareholders are subject to different tax
treatment not described above. A state income (and possibly local income and/ or
intangible property) tax exemption is generally available to the extent the
Fund's distributions are derived from interest on (or, in the case of
intangibles taxes, the value of its assets is attributable to) certain U.S.
Government obligations, provided in some states that certain thresholds for
holdings of such obligations and/or reporting requirements are satisfied. You
should consult your tax adviser for specific advice.
PERFORMANCE
THE FUND MAY ADVERTISE ITS 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 divided by the
number of years included in the period. Because average annual total return
tends to smooth out variations in performance, you should recognize that it is
not the same as actual year-to-year results.
Total return 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. Total return calculations for the Class B shares reflect
deduction of the applicable CDSC imposed on a redemption of shares held for the
applicable period. All calculations assume that all dividends are reinvested at
net asset value on the reinvestment dates during the periods. Total return of
Class A and Class B shares will be calculated separately, and, because each
class of shares is subject to different expenses, total return may differ with
respect to classes of the Fund 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 Class A and
Class B shares in any advertisement or promotional materials including Fund
performance data. The value of Fund shares, when redeemed, may be more or less
than their original cost. Total returns are historical calculations and are not
an indication of future performance. See "Factors to Consider in Choosing an
Alternative".
HOW TO BUY SHARES
OPENING AN ACCOUNT.
The minimum initial investment in Class A or Class B shares is $1,000 ($250 for
group investmentsor $500 for 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 you are investing in Class A shares.
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation ("Investor Services").
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 International 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.
BUYING ADDITIONAL CLASS A AND CLASS B SHARES.
MONTHLY AUTOMATIC 1. Complete the "Automatic Investing" and "Bank Information"
ACCUMULATION sections on the Account Privileges Application
PROGRAM (MAAP) designating a bank account from which funds may be drawn.
2. The amount you elect to invest will be automatically
withdrawn from your bank or credit union account.
BY TELEPHONE 1. Complete the "Invest-By-Phone" and "Bank Information"
sections on the Account Privileges Application
designating a bank account from which funds may be drawn.
Note that in order to invest by phone, your account must
be in a bank or credit union that is a member of the
Automated Clearing House system (ACH).
2. After your authorization form has been processed, you may
purchase additional Class A or Class B shares by calling
Investor Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(s) in
which your account is registered, the Fund name, the
class of shares you own, your account number, and the
amount you wish to invest.
4. Your investment normally will be credited to your account
the business day following your phone request.
BY CHECK 1. Either complete the detachable stub included on your
account statement or include a note with your investment
listing the name of the Fund, the class of shares you
own, your account number and the name(s) in which the
account is registered.
2. Make your check payable to John Hancock Investor Services
Corporation
3. Mail the account information and check to:
John Hancock Investor Services Corporation
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or
Selling Broker.
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260ABA
Routing No. 211475000
For credit To: John Hancock International 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 at 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.
INSTITUTIONAL INVESTORS: Certain institutional investors may purchase Class C
shares of the Fund, which have no sales charge or 12b-1 fee. See "Institutional
Investors" for further information.
YOU WILL RECEIVE ACCOUNT STATEMENTS WHICH YOU SHOULD KEEP TO HELP WITH YOUR
PERSONAL RECORDKEEPING.
You will receive a statement of your account after any transaction that affects
your share balance or registration (statements related to reinvestment of
dividends and automatic investment/withdrawal plans will be sent to you
quarterly). A tax information statement will be mailed to you by January 31 of
each year.
SHARE PRICE
THE OFFERING PRICE OF 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 per
share is calculated by dividing the net asset value of each class by the number
of outstanding shares of that class. The NAV of each class can differ in value.
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. Foreign securities are valued on the basis of
quotations from the primary market in which they are traded, and are translated
from the local currency into U.S. dollars using current exchange rates. If
quotations are not readily available or, the value has been materially affected
by events occurring after the closing of a foreign market, assets are valued by
a method that the Trustees believe accurately reflects fair value. The NAV is
calculated once daily as of the close of regular trading on the New York Stock
Exchange (generally at 4:00 p.m., New York time) on each day that the Exchange
is open.
Shares of the Fund are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock Funds.
If you buy shares of the Fund through a Selling Broker, the Selling Broker must
receive your investment before the close of regular trading on the New York
Stock Exchange and transmit it to John Hancock Funds before its close of
business to receive that day's offering price.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge as follows:
<TABLE>
<CAPTION>
COMBINED
SALES CHARGE REALLOWANCE REALLOWANCE TO
SALES CHARGE AS A PERCENTAGE AND SERVICE FEE SELLING BROKER AS
AMOUNT INVESTED AS A PERCENTAGE OF THE AS A PERCENTAGE A PERCENTAGE OF
(INCLUDING SALES CHARGE) OF OFFERING PRICE AMOUNT INVESTED OF OFFERING PRICE<F4> OFFERING PRICE<F1>
<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%<F2> 0.00%<F2> <F3> 0.00%<F3>
<FN>
<F1> 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. In addition to the reallowance allowed to all Selling Brokers,
John Hancock Funds will pay the following: round trip airfare to a resort
will be offered to each registered representative of a Selling Broker (if
the Selling Broker has agreed to participate) who sells certain amounts of
shares of John Hancock funds. John Hancock Funds will make these incentive
payments out of its own resources. Other than distribution fees, the Fund
does not bear distribution expenses. 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.
<F2> No sales charge is payable at the time of purchase of Class A shares of $1
million or more, but a contingent deferred sales charge may be imposed in
the event of certain redemption transactions made within one year of
purchase.
<F3> John Hancock Funds may pay a commission and first year's service fee (as
described in <F4> below) to Selling Brokers who initiate and are
responsible for purchases of $1 million or more in aggregate as follows:
1% on sales up to $4,999,999, 0.50% on the next $5 million and 0.25% on
$10 million and over.
At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance, in an amount equal to 0.25% of the net
assets invested in the Fund. Thereafter, it pays the service fee
periodically in arrears in an amount up to 0.25% of the Fund's average
annual net assets. Selling Brokers receive the fee as compensation for
providing personal and account maintenance services to shareholders.
[/FN]
</TABLE>
Sales charges ARE NOT APPLIED to any dividends which 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 as described below, investors in Class A shares may
be entitled to pay reduced sales charges. See "Qualifying for a Reduced Sales
Charge".
CONTINGENT DEFERRED SALES CHARGE -- INVESTMENTS OF $1 MILLION OR MORE IN CLASS A
SHARES. Purchases of $1 million or more in Class A shares (or any combination of
John Hancock Funds' Class A shares, except money market funds) will be made at
net asset value with no initial sales charge, but if the shares are redeemed
within 12 months after the end of the calendar month in which the purchase was
made (the contingent deferred sales charge period), a contingent deferred sales
charge ("CDSC") will be imposed. The rate of the CDSC will depend on the amount
invested as follows:
AMOUNT INVESTED CDSC RATE
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
Existing full service clients of John Hancock Mutual Life Insurance Company who
were group annuity contract holders as of September 1, 1994 may purchase Class A
shares with no initial sales charge, but if the shares are redeemed within 12
months after the end of the calendar year in which the purchase was made, a
contingent deferred sales charge will be imposed at the above rate.
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 A shares redeemed.
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 redemption
in certain circumstances. See "Waiver of Contingent Deferred Sales Charge."
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE ON YOUR INVESTMENT IN CLASS A SHARES.
QUALIFYING FOR A REDUCED SALES CHARGE. 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 Class A shares of John Hancock funds when
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% (the
rate that would otherwise be applicable to investments of less than $50,000. See
"Initial Sales Charge Alternative -- Class A Shares.")
CLASS A SHARES MAY BE AVAILABLE WITHOUT A SALES CHARGE TO CERTAIN INDIVIDUALS
AND ORGANIZATIONS.
If you are in 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.
* 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 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 made available to their clients.
* A former participant in an employee benefit plan with John Hancock funds, when
he/she withdraws from his/her plan and transfers any or all of his/her plan
distributions directly to the Fund.
- -------------
+ For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A shares of the Fund 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 a sales charge, so that your
entire initial 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. This 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
reinvested dividends.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
dividend reinvestment, and next from the shares you have held the longest during
the six-year period. The CDSC is waived on redemptions in certain circumstances.
See the discussion "Waiver of Contingent Deferred Sales Charges" below.
EXAMPLE:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time, the CDSC will be calculated as follows:
* Proceeds of 50 shares redeemed at $12 per share $600
* Minus proceeds of 10 shares not subject to CDSC 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
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses
all or part of them to defray its expenses related to providing the Fund with
distribution services in connection with the sale of the Class B shares, such as
compensating 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 deducting a sales charge at the time of the
purchase.
The amount of the CDSC, if any, will vary depending on the number of years from
the time you purchase the Class B shares of the Fund until the time you redeem
them. Solely for determining this holding period, any payment you make during
the month will be aggregated and deemed to have been made on the last day of the
month.
CONTINGENT DEFERRED SALES
YEAR IN WHICH CLASS B SHARES CHARGE AS A PERCENTAGE OF
REDEEMED FOLLOWING PURCHASE AMOUNT REDEEMED
- ---------------------------- -------------------------
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
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.
UNDER CERTAIN CIRCUMSTANCES, THE CDSC ON CLASS B AND CLASS A SHARE REDEMPTIONS
WILL BE WAIVED.
WAIVER OF CONTINGENT DEFERRED 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 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.
* 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 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 at the end of the month eight years after the shares were
purchased, resulting in lower annual distribution fees. If you exchanged Class B
shares into the Fund from another John Hancock fund, the conversion 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 a
shareholder's 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 that were recently
made by check or Invest-by-Phone have been collected (which may take up to 10
calendar days).
Once your shares are redeemed, the Fund generally sends you payment on the next
business day. When you redeem your shares, you may realize a taxable gain or
loss depending usually on the difference between what you paid for them and what
you receive for them, subject to certain tax rules. Under unusual circumstances,
the Fund may suspend redemptions or postpone payment for up to seven days or
longer, as permitted by Federal securities laws.
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION REQUEST, PLEASE FOLLOW THESE PROCEDURES.
BY TELEPHONE All Fund shareholders are automatically eligible for the
telephone redemptionprivilege. 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
thirty days. A check will be mailed to the exact name(s)
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 in accordance with 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.
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
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.
TYPE OF REGISTRATION REQUIREMENTS
Individual, Joint Tenant, Sole A letter of instruction signed
Proprietorship, Custodial (Uniform (with titles, where applicable) by
Gifts or Transfer to Minors Act), all person (s) authorized to sign
General Partner. for the account, exactly as it is
registered, with thesignature(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 a signature
guarantee. (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.
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 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.
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 redemptions of shares.
Shareholders will be notified before these redemptions are to be made or this
fee is imposed and will have 30 days to purchase additional shares to bring
their account balance up to the required minimum. Unless the number of shares
acquired by further purchases and dividend reinvestments, if any, exceeds the
number of shares redeemed, repeated redemptions from a smaller account may
eventually trigger this policy.
ADDITIONAL SERVICES AND PROGRAMS
YOU MAY EXCHANGE SHARES OF THE FUND ONLY FOR SHARES OF THE SAME CLASS IN
ANOTHER JOHN HANCOCK FUND.
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 with shares 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 which are subject to a CDSC may be exchanged
for Class B shares of another John Hancock fund without incurring the CDSC;
however the shares will be subject to the CDSC schedule of the shares acquired
(except exchanges into John Hancock Short-Term Strategic Income Fund and John
Hancock Limited Term Government Fund which 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 that was in effect at your initial purchase date.
You may exchange Class B shares of the Fund into shares of John Hancock Cash
Management Fund at net asset value. However, you will continue to be subject to
a CDSC upon redemption. The rate of the CDSC will be the rate in effect on the
original fund at the time of the exchange.
The Fund reserves the right to require that you keep previously exchanged shares
(and reinvested dividends) in the Fund for 90 days before you are permitted to
execute a new exchange. The Fund may also terminate or alter the terms of the
exchange privilege upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares in another for Federal income tax purposes. An exchange may
result in a taxable gain or loss.
When you make an exchange, your account registration 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 you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
BY TELEPHONE
1. When you fill out the application for your 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. Investors 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.
IN WRITING
1. In a letter request an exchange and list the following:
-- the name and class of the fund whose shares you currently own
-- your account number
-- the name(s) in which the account is registered
-- the name of the fund in which you wish your exchange to be invested
-- the number of shares, all shares or the dollar amount you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
REINVESTMENT PRIVILEGE
IF YOU REDEEM SHARES OF THE FUND, YOU MAY BE ABLE TO REINVEST ALL OR PART OF THE
PROCEEDS IN 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 are
reinvested in any 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. For purposes of
computing the CDSC payable upon a subsequent redemption, the holding period
of the shares acquired through reinvestment will include the holding period
of the redeemed shares.
2. Any portion of your redemption may be reinvested in Fund shares or in any
other John Hancock fund, subject to the minimum investment limit of that
fund.
3. To reinvest, you must notify Investor Services in writing. Include the
Fund(s) name, account number and class from which your shares were originally
redeemed.
SYSTEMATIC WITHDRAWAL PLAN
YOU CAN PAY ROUTINE BILLS FROM YOUR ACCOUNT OR MAKE PERIODIC DISBURSEMENTS
FROM YOUR RETIREMENT ACCOUNT TO COMPLY WITH IRS REGULATIONS.
1. You may 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 by calling 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
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 Class A or Class B shares, because you may be subject to an
initial sales charges 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 may authorize an investment to be drawn automatically each month from
your bank, for investment in Fund shares, under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.
2. You may also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
3. You may 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 being withdrawn from a bank account and we are notified
that the account has been closed, your withdrawals will be discontinued.
GROUP INVESTMENT PROGRAM
ORGANIZED GROUPS OF AT LEAST FOUR PERSONS MAY ESTABLISH ACCOUNTS.
1. An individual account will be established for each participant, but the
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 as a funding medium for various types of qualified
retirement plans, such as Individual Retirement Accounts, Keogh Plans (H.R.
10), Pension and Profit Sharing Plans (including 401(k) Plans), Tax-
Sheltered Annuity Retirement Plans (403(b) Plans), and 457 Plans.
2. The initial investment minimum or aggregate minimum for any of these plans is
$500. However, accounts being established as group IRA, SEP, SARSEP, TSA,
401(k) and 457 Plans will be accepted without an initial minimum investment.
<PAGE>
JOHN HANCOCK
INTERNATIONAL FUND
CLASS C SHARES
PROSPECTUS
MARCH 1, 1995
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
---
Expense Information .................................................... 2
The Fund's Financial Highlights ........................................ 3
Investment Objective and Policies and Certain Risk Considerations ...... 4
Organization and Management of the Fund ................................ 8
The Fund's Expenses .................................................... 9
Dividends and Taxes .................................................... 9
Performance ............................................................ 10
Who Can Buy Class C Shares ............................................. 11
How to Buy Class C Shares .............................................. 11
Class C Share Price .................................................... 13
How to Redeem Class C Shares ........................................... 13
Additional Services and Programs ....................................... 15
This Prospectus sets forth information about John Hancock International Fund
(the "Fund"), a diversified series of Freedom Investment Trust II (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, 1995, and incorporated by reference
into this Prospectus, free of charge by writing or telephoning: John Hancock
Investor Services Corporation, Attn: Institutional Services, P.O. Box 9277,
Boston, Massachusetts 02205-9277, 1-800-437-9312.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
The purpose of the following information is to help you 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 estimated fees and expenses (excluding
12b-1 fees) for the Class A and Class B shares of the Fund for the fiscal year
ended October 31, 1994. Actual fees and expenses of Class C shares may be
greater or less than those shown.
CLASS C
SHARES*
-------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage
of offering price) .............................................. None
Maximum sales charge imposed on reinvested dividends .............. None
Maximum deferred sales charge ..................................... None
Redemption fee+ ................................................... None
Exchange fee ...................................................... None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average
net assets)
Management fee .................................................... 1.00%
Transfer agent fee ................................................ 0.10%
Other expenses .................................................... 2.19%
-----
Total gross Fund operating expenses ............................... 3.29%
Management fee waiver and expense reimbursement ................... (2.29)
-----
Total net Fund operating expenses (net of reimbursement) .......... 1.00%(a)
-----
-----
- ---------
* The information set forth in the foregoing table relates only to Class C
shares of the Fund. In addition, the Fund offers Class A and Class B shares.
+ Redemption by wire fee (currently $4.00) not included.
(a) Estimated for the Fund based on expenses to have been incurred if the Class
C shares had been in existence for the entire fiscal year. Total net Fund
operating expenses reflect estimated expenses, net of the Adviser's
reimbursement or waiver of the management fee and other expenses in excess
of 0.90% of the Fund's average daily net assets of Class C shares.
<TABLE>
<CAPTION>
EXAMPLE: CLASS C SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------- ------ ------- ------- --------
<S> <C> <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: ...................................... $10 $32 $55 $122
(This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.)
</TABLE>
The management fee referenced above is more fully explained in this
Prospectus under the caption "The Fund's Expenses" and in the Statement of
Additional Information under the caption "Investment Advisory and Other
Services." In addition to Class C shares, the Fund also offers Class A and B
shares. Class A and B shares are available to individual investors at net asset
value plus a maximum initial sales charge of 5.00% for A shares and a maximum
contingent deferred sales charge of 5.00% for B shares. Class A and B shares are
subject to ongoing distribution and service fees of 0.30% and 1.00%,
respectively, of the Fund's average daily net assets in accordance with plans
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940. The
minimum initial investment in Class A or B shares is $1,000 ($250 for group
investments or $500 for retirement plans). If you are considering a purchase of
Class A or B shares, please call John Hancock Investor Services Corporation
("Investor Services") at 1-800-437-9312 for more information about eligibility,
instructions for purchase by check or wire and an Account Application.
Class A and B shares generally have operating expenses similar to Class C
shares, except for the sales charge and distribution and transfer agent fees.
Class A and B shareholders are eligible for a reinvestment privilege, systematic
withdrawal plan, monthly automatic accumulation program and use of the Fund as a
funding vehicle for a retirement plan. Investors wishing information about any
of these services and expenses should contact Investor Services at
1-800-437-9312.
THE FUND'S FINANCIAL HIGHLIGHTS
The following financial highlights have been audited by the Fund's
independent accountants. Price Waterhouse LLP's report on the Fund's financial
statements and financial highlights for the year ended October 31, 1994 is
included in the Annual Report which 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 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 the period
indicated is as follows:
FOR THE PERIOD
JANUARY 3, 1994
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1994
----------------------------
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................. $8.50
-----
Net Investment Income ................................. 0.07(b)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions ....................... 0.08
-----
Total from Investment Operations .................... 0.15
-----
Net Asset Value, End of Period ........................ $8.65
-----
Total Investment Return at Net Asset Value (d) .... 1.77%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ............. $4,426
Ratio of Expenses to Average Net Assets** ............. 1.50%*
Ratio of Adjusted Expenses to Average Net Assets (a) .. 3.79%*
Ratio of Net Investment Income to Average Net Assets .. 1.02%*
Ratio of Adjusted Net Investment Income to Average Net
Assets (a) .......................................... (1.27%)*
Portfolio Turnover Rate ............................... 50%
** Expense Reimbursement Per Share .................... $0.16(b)
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................. $8.50
-----
Net Investment Income ................................. 0.02(b)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions ....................... 0.09
-----
Total from Investment Operations .................... 0.11
-----
Net Asset Value, End of Period ........................ $8.61
-----
Total Investment Return at Net Asset Value (d)..... 1.29%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ............. $3,948
Ratio of Expenses to Average Net Assets ** ............ 2.22%*
Ratio of Adjusted Expenses to Average Net Assets (a) .. 4.51%*
Ratio of Net Investment Income to Average Net Assets .. 0.31%*
Ratio of Adjusted Net Investment Income to Average Net
Assets (a) .......................................... (1.98%)*
Portfolio Turnover Rate ............................... 50%
** Expense Reimbursement Per Share .................... $0.16(b)
* On an annualized basis.
(a) On an unreimbursed basis.
(b) On average month end shares outstanding.
(c) Not annualized.
(d) Without the reimbursement, total investment return would have been lower.
INVESTMENT OBJECTIVE AND POLICIES
AND CERTAIN RISK CONSIDERATIONS
THE INVESTMENT OBJECTIVE OF THE FUND IS LONG-TERM GROWTH OF CAPITAL THROUGH
INVESTMENT PRIMARILY IN FOREIGN EQUITY SECURITIES.
The Fund's investment objective is long-term growth of capital. The Fund seeks
to achieve its investment objective by investing primarily in foreign equity
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, at least 65% of the Fund's total assets will be
invested in equity securities of issuers located in various countries around the
world. Generally, the Fund's portfolio will contain securities of issuers from
at least three countries other than the United States. The Fund normally will
invest substantially all of its assets in equity securities, such as common
stock, preferred stock and securities convertible into common and preferred
stock. However, if deemed advisable by John Hancock Advisers, Inc. (the
"Adviser"), the Fund may invest in any other type of security including
warrants, bonds, notes and other debt securities (including Eurodollar
securities) or obligations of domestic or foreign governments and their
political subdivisions, or domestic or foreign corporations.
THE GLOBAL ALLOCATION OF ASSETS IS NOT FIXED, AND WILL VARY FROM TIME TO TIME
BASED ON THE JUDGMENT OF THE FUND'S ADVISER AND SUB-ADVISER.
The Fund will maintain a flexible investment policy and will invest in a
diversified portfolio of securities of companies and governments located
throughout the world. In making the allocation of assets among various countries
and geographic regions, the Adviser and John Hancock Advisers International
Limited (the "Sub-Adviser") ordinarily consider such factors as prospects for
relative economic growth between foreign countries; expected levels of inflation
and interest rates; government policies influencing business conditions; and
other pertinent financial, tax, social, political, currency, and national
factors -- all in relation to the prevailing prices of the securities in each
country or region.
In choosing investments for the Fund, the Adviser generally looks for companies
whose earnings show a strong growth trend or companies whose current market
value per share is undervalued. The Fund will not restrict its investments to
any particular size company and, consequently, the portfolio may include the
securities of small and relatively less well-known companies. The securities of
small and medium-sized companies may be subject to more volatile market
movements than the securities of larger, more established companies or the stock
market averages in general.
It is the intention of the Fund generally to invest in debt securities only for
temporary defensive purposes. Accordingly, when the Adviser believes unfavorable
investment conditions exist requiring the Fund to assume a temporary defensive
investment posture, the Fund may hold cash or invest all or a portion of its
assets in short-term domestic as well as foreign instruments, including:
short-term U.S. Government securities and repurchase agreements in connection
with such instruments; bank certificates of deposit, bankers' acceptances, time
deposits and letters of credit; and commercial paper (including so called
Section 4(2) paper rated at least A-1 or A-2 by Standard & Poor's Ratings Group
("S&P") or P-1 or P-2 by Moody's Investors Service, Inc. ("Moody's") or, if
unrated, determined to be of comparable value by the Adviser). The Fund's
temporary defensive investments may also include: debt obligations of U.S.
companies rated at least BBB or Baa by S&P or Moody's, respectively, or, if
unrated, determined to be of comparable quality by the Adviser; commercial paper
and corporate debt obligations not satisfying the above credit standards if they
are (a) subject to demand features or puts or (b) guaranteed as to principal and
interest by a domestic or foreign bank having total assets in excess of $1
billion, by a corporation whose commercial paper may be purchased by the Fund,
or by a foreign government having an existing debt security rated least BBB or
Baa by S&P or Moody's, respectively; and other short-term investments which the
Trustees of the Trust determine present minimal credit risks and which are of
"high quality" as determined by any major rating service or, in the case of an
instrument that is not rated, of comparable quality as determined by the
Trustees. Securities which are convertible may be rated as low as BBB or Baa by
S&P Moody's, respectively. Debt securities and convertible securities rated Baa
or BBB are considered medium grade obligations with speculative characteristics,
and adverse economic conditions or changing circumstances may weaken capacity to
pay interest and repay principal. If the rating of a debt security or a
convertible security is reduced below Baa or BBB, the Adviser will consider
whatever action is appropriate consistent with the Fund's investment objectives
and policies.
THE FUND MAY EMPLOY CERTAIN INVESTMENT STRATEGIES TO HELP ACHIEVE ITS INVESTMENT
OBJECTIVE.
FOREIGN SECURITIES. The Fund may invest in securities of foreign and United
States issuers which are issued in or outside of the U.S., including American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or other
securities convertible into securities of corporations in which the Fund is
permitted to invest. ADRs (sponsored and unsponsored) are receipts typically
issued by an American bank or trust company, ADR's evidence ownership of
underlying securities issued by a foreign corporation, and are designed for
trading in United States securities markets. Issuers of the shares underlying
unsponsored ADRs are not contractually obligated to disclose material
information in the United States and, therefore, there may not be a correlation
between that information and the market value of the unsponsored ADR.
THE FUND MAY EMPLOY CERTAIN INVESTMENT STRATEGIES TO HELP ACHIEVE ITS INVESTMENT
OBJECTIVES.
FOREIGN CURRENCIES. The Fund will not speculate in foreign currencies or in
forward foreign currency exchange contracts, but will enter into such
transactions only in connection with its hedging strategy, to protect against
changes in foreign currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a price set at the time of the contract. Although certain
strategies could minimize the risk of loss due to a decline in the value of the
hedged foreign currency, they could also limit any potential gain that might
result from an increase in the value of the currency.
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. or foreign 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.
SHORT SALES. The Fund may engage in short sales "against the box", as well as
short sales to hedge against or profit from an anticipated decline in the value
of a security. When the Fund engages in a short sale, it will place in a
segregated account, cash or U.S. Government securities in accordance with
applicable regulatory requirements. These will be marked to market daily.
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
carefully 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 a nonfundamental
investment restriction limiting all illiquid securities held by the Fund to not
more than 15% of the Fund's 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, the Fund may be delayed in or prevented from
liquidating the collateral. It is a fundamental policy of the Fund not to lend
portfolio securities having a total value exceeding of 33 1/3% of its total
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
obligations 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 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.
SHORT-TERM TRADING. Short-term trading means the purchase and subsequent sale of
a security after it has been held for a relatively brief period of time. The
Fund engages in short-term trading in response to changes in interest rates or
other economic trends and developments. Under normal market conditions, the
Fund's portfolio turnover rate for the current fiscal year is expected to be no
more than 100%.
The Fund does not generally consider the length of time it has held a particular
security in making its investment decisions. Under certain market conditions,
the Fund's portfolio turnover rate may be higher than that of other mutual
funds. A high portfolio turnover rate 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.
INVESTMENT RESTRICTIONS. The Fund has adopted investment restrictions which are
detailed in the Statement of Additional Information where they are designated as
fundamental or nonfundamental. Fundamental investment 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. These changes may result in the Fund having an
investment objective different from the objective which a shareholder considered
appropriate at the time of your investment.
INVESTMENTS ON FOREIGN SECURITIES MAY INVOLVE RISKS THAT ARE NOT PRESENT IN
DOMESTIC INVESTMENTS.
GLOBAL RISKS. Investments in foreign securities may involve certain risks that
are not present in domestic investments, 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 some 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 American 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 the foreign exchange rate will affect the
value of the Fund's shares and dividends. Finally, you should be aware that the
expense ratios of international funds generally are higher than those of
domestic funds because there are greater costs associated with maintaining
custody of foreign securities and the increased research necessary for
international investing results in a higher advisory fee.
These risks may be intensified in the case of investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominately based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens,
unstable currencies or inflation rates. Local securities markets may trade a
small number of securities and may be unable to respond effectively to increases
in trading volume, potentially making prompt liquidation of substantial holdings
difficult or impossible at times. The Fund may be required to establish special
custodial or other arrangements before making certain investments in those
countries. Securities of issuers located in these countries may have limited
marketability and may be subject to more abrupt or erratic price movements.
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 is 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 determined by the Trustees, the Adviser or Sub-Adviser may place
securities transactions with brokers affiliated with the Adviser. These brokers
include Tucker Anthony Incorporated, John Hancock Distributors, Inc. and Sutro &
Company, Inc., which are indirectly owned by John Hancock Mutual Life Insurance
Company, which in turn indirectly owns the Adviser and Sub- Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
THE TRUSTEES ELECT OFFICERS AND RETAIN THE INVESTMENT ADVISER WHO IS RESPONSIBLE
FOR THE FUND'S DAY-TO-DAY OPERATIONS, SUBJECT TO THE TRUSTEES' POLICIES AND
SUPERVISION.
The Fund is a diversified series of Freedom Investment Trust II, an open-end
management investment company organized as a Massachusetts business trust in
1986 (the "Trust"). The Fund has an unlimited number of authorized shares of
beneficial interest. The Trust's Declaration of Trust permits the Trustees to
classify and reclassify shares into one or more classes. Accordingly, the
Trustees have authorized the issuance of three classes of the Fund, designated
Class A, Class B and Class C. The shares of each class represent an interest in
the same portfolio of investments of the Fund and have equal rights as to
voting, redemption, dividends and liquidation, however, each class bears
different distribution fees and transfer agent fees. Class A and Class B
shareholders have exclusive voting rights with respect to their distribution
plans. The Trust is not required and does not intend to hold annual shareholder
meetings, although special meetings may be called for such purposes as electing
or removing Trustees, changing fundamental investment restrictions or approving
a management contract. The Fund, under certain circumstances, will assist in
shareholders communication with other shareholders.
JOHN HANCOCK ADVISERS, INC. ADVISES INVESTMENT COMPANIES HAVING TOTAL ASSETS OF
MORE THAN $13 BILLION.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
John Hancock Mutual Life Insurance 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.
Formed in 1987, the Sub-Adviser to the Fund is a wholly-owned subsidiary of the
Adviser, and provides international investment research and advisory services to
institutional clients. John Hancock Funds, Inc. ("John Hancock Funds")
distributes shares for all of the John Hancock funds through selected
broker-dealers ("Selling Brokers"). 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.
The Fund is managed by John Hancock's international equities team. All
investment decisions are made by the portfolio management team, and no single
person is primarily responsible for making recommendations to the team.
In order to avoid any conflict 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.
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a monthly fee to
the Adviser which is based on a stated percentage of the Fund's average daily
net asset value, as follows: 1.00% on the first $250 million of average daily
net assets, 0.80% on the next $250 million of average net assets, 0.75% on the
next $250 million of average net assets and 0.625% of average net assets in
excess of $750 million. The investment management fee paid by the Fund is higher
than the fees paid by most mutual funds but comparable to fees paid by those
funds with a similar invesment objective.
The Adviser pays the Sub-Adviser a portion of its fee at the annual rate of
0.70% of the first $200 million of the Fund's average daily net assets and
0.6375% of any amount over $200 million.
The Adviser has voluntarily agreed to limit Fund expenses, including the
management fee (but not including the transfer agent fee) to 0.90% of the Fund's
average daily net assets. The Adviser reserves the right to terminate this
voluntary limitation in the future.
No Class C shares were issued as of October 31, 1994.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund generally declares and distributes dividends representing
all or substantially all net investment income, if any, annually. The Fund will
generally also distribute net short-term or long-term capital gains annually,
after the close of the fiscal year. All dividends are reinvested on the record
date unless you elect the option to receive them entirely in cash. If you elect
the cash option and the U.S. Postal Service cannot deliver your checks, your
election will be converted to the reinvestment option.
TAXATION. For investors who are not exempt from federal income taxes, 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
gain. These dividends are taxable whether received in cash or reinvested in
additional Class C shares. Certain dividends may be paid in January of a given
year but may be taxable as if you received them the prior December. Corporate
shareholders may be entitled to take the Corporate dividends received deduction
for dividends received by the Fund from U.S. domestic corporations, subject to
certain restrictions under the Internal Revenue Code. 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 (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.
The 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 those taxes.
When you redeem (sell) or exchange Class C 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 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 and local taxes with
respect to your investment in and distributions from the Fund. A state income
(and possibly local income and/or intangible property) tax exemption is
generally available to the extent the Fund's distributions are derived from
interest on (or, in the case of intangibles taxes, the value of its assets is
attributable to) certain U.S. Government obligations, provided in some states
that certain thresholds for holdings of such obligations and/or reporting
requirements are satisfied. The foregoing discussion relates to U.S. investors
that are not exempt from U.S. Federal income tax. Different tax consequences
will apply to plan participants, tax-exempt investors and investors that are
subject to tax deferral. Non-U.S. shareholders are also subject to different tax
treatment not described above. You should consult your tax adviser for specific
advice. Under the Code, a tax-exempt investor in the Fund will not generally
recognize unrelated business taxable income from its investment in the Fund
unless the tax-exempt investor incurred indebtedness to acquire or continue to
hold Fund shares and such indebtedness remains unpaid.
PERFORMANCE
THE FUND MAY ADVERTISE ITS TOTAL RETURN ON CLASS C SHARES.
The Fund's total return on Class C shares 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 performance of
Class C shares over a period of time. Average annual total return shows the
cumulative return of the Class C 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 performance of Class C shares of the Fund, you
should recognize that it is not the same as actual year-to-year results.
Total return calculations with respect to Class C shares do not reflect the
imposition of a sales charge. Total return of Class A, Class B and Class C
shares will be calculated separately, and, because each class of shares is
subject to different expenses, the total return with respect to classes of the
Fund for the same period may differ. The Fund will include the total return of
Class A, Class B and Class C shares in any advertisement or promotional
materials including Fund performance data. The value of Class C shares of the
Fund, when redeemed, may be more or less than their original cost. Total return
is a historical calculation and is not an indication of future performance.
WHO CAN BUY CLASS C SHARES
CLASS C SHARES ARE AVAILABLE TO CERTAIN INSTITUTIONAL INVESTORS.
In order to buy Class C shares of the Fund, you must qualify as one of the
following types of institutional investors: (i) Benefit plans not affiliated
with the Adviser which have at least $25,000,000 in plan assets, and either have
a separate trustee vested with investment discretion and certain limitations on
the ability of the plan beneficiaries to access their plan investments without
incurring adverse tax consequences or allow their participants to select among
one or more investment options, including the Fund ("participant-directed
plans"); (ii) Banks and insurance companies which are not affiliated with the
Adviser purchasing shares for their own account; (iii) Investment companies not
affiliated with the Adviser; (iv) Tax exempt retirement plans of the Adviser and
its affiliates, including affiliated brokers; (v) Unit investment trusts
sponsored by John Hancock Funds and certain other sponsors and (vi) existing
full-service clients of John Hancock Mutual Life Insurance Company who were
group annuity contract holders as of September 1, 1994. Participant-directed
plans include but are not limited to 401(k), TSA and 457 plans.
If you qualify to purchase Class C shares of the Fund, you will not be permitted
to purchase shares of any other class of the Fund.
HOW TO BUY CLASS C SHARES
- ------------------------------------------------------------------------------
OPENING AN ACCOUNT.
The minimum initial investment is $1,000,000, except that this requirement may
be waived at the discretion of the Fund's officers. You may qualify for the
minimum investment if you invest more than $1,000,000 in Class C shares of the
Fund and Class C shares of other funds in the John Hancock family of funds. This
is discussed in greater detail in the Statement of Additional Information.
Complete the application attached to this Prospectus.
- ------------------------------------------------------------------------------
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation ("Investor Services").
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
1-800-437-9312.
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 International Fund
Class C 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.
- ------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS C SHARES.
BY TELEPHONE 1. Complete the "Invest-By-Phone" and "Bank Information"
sections on the Account Privileges Application
designating a bank account from which 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 C shares by calling Investor
Services toll free at 1-800-437-9312.
3. Give the Fund Services representative the name in which
your account is registered, the Fund name and your
account number and the amount you wish to invest in Class
C shares.
4. Your investment normally will be credited to your account
the business day following your phone request.
- ------------------------------------------------------------------------------
BY CHECK 1. Either fill out the detachable stub included on your
account statement or include a note with your investment
listing the name of the Fund and class of shares, 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.
- ------------------------------------------------------------------------------
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 International Fund
Class C 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 must be received by
4:00 p.m., New York time to be accepted the same day. Your bank may charge a fee
to wire funds. Telephone transactions are recorded to verify information. Class
C share certificates are not issued unless a request is made in writing to
Investor Services.
- ------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT STATEMENTS WHICH YOU SHOULD KEEP TO HELP WITH YOUR
PERSONAL RECORDKEEPING.
You will receive a statement of your account after any transaction that affects
your share balance or registration (statements related to reinvestment of
dividends will be sent to you quarterly). A tax information statement will be
mailed to you by January 31 of each year.
CLASS C SHARE PRICE
THE OFFERING PRICE OF YOUR CLASS C SHARES IS THEIR NET ASSET VALUE.
The net asset value per share ("NAV") of a Class C share is the value of one
Class C share. The NAV per share 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 in value. 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. 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 believes accurately
reflects fair value. The NAV of Class C shares 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.
Class C 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 prior to its close
of business to receive that day's offering price. There is no sales charge
imposed on the purchase of Class C shares.
A one-time payment of up to 0.15% of the amount invested in Class C shares may
be made by John Hancock Funds to a Selling Broker for sales of Class C shares
made by that Selling Broker. A person entitled to receive compensation for
selling shares of the Fund may receive different compensation with respect to
sales of Class A shares, Class B shares and Class C shares of the Fund. John
Hancock Funds, out of its own resources, may pay to a selling Broker an annual
service fee up to 0.20% of the amount invested in Class C shares by these
clients.
HOW TO REDEEM CLASS C SHARES
You may redeem all or a portion of your Class C shares on any business day. Your
Class C shares will be redeemed at the next NAV for Class C shares calculated
after your redemption request is received in good order by Investor Services.
The Fund may hold payment until reasonably satisfied that investments which were
made recently by check or Invest-by-Phone have been collected (which may take up
to 10 calendar days).
Once your Class C shares are redeemed, the Fund generally sends you payment on
the next business day. When you redeem your Class C shares, if you are subject
to tax, 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 seven days or longer, as permitted by
Federal securities laws.
- ------------------------------------------------------------------------------
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION REQUEST, PLEASE FOLLOW THESE PROCEDURES.
BY TELEPHONE All Fund shareholders are automatically eligible for the
telephone redemption privilege. Call 1-800-437-9312, 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 thirty
days. A check will be mailed to the exact name(s) and
address 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 in accordance with the
telephone transaction procedures mentioned above.
Telephone redemption is not available for Class C 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 such times you
should consider placing redemption requests in writing or
using EASI-Line. EASI-Line's telephone number,
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 Institutional Account
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
Class C 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 Tenant, A letter of instruction signed with
Sole Proprietorship, (Uniform titles by all person(s) authorized to
Gifts or Transfer to Minors sign for the account, exactly as it is
Act), General Partner registered with the signature(s)
guaranteed.
Corporation, Association A letter of instruction and a corporate
resolution, signed by person(s)
authorized to act on the account, with
the signature(s) guaranteed.
Trusts A letter of instruction signed by the
Trustee(s) with the signature(s)
guaranteed. (If the Trustee's name is
not registered on your account, also
provide a copy of the trust document,
certified within the last 60 days.)
If you do not fall into any of these registration categories please call
1-800-437-9312 for further instructions.
- ------------------------------------------------------------------------------
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 Class C 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 BROKER Your broker may be able to initiate the redemption.
Contact your instructions. Your broker will be
responsible for the prompt transmittal of your redemption
request.
- ------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your stock
power or a letter of instruction. 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 Class C shares in an account
which holds fewer than 100 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.
Shareholders will be notified before these redemptions are to be made or this
charge is imposed and will have 30 days to purchase additional Class C shares to
bring their balance account up to the required minimum. Unless the number of
Class C shares acquired by further purchases and dividend reinvestments, if any,
exceeds the number of Class C shares redeemed, repeated redemptions from a
smaller account may eventually trigger this policy.
- ------------------------------------------------------------------------------
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE
YOU MAY EXCHANGE CLASS C SHARES OF THE FUND ONLY FOR CLASS C SHARES IN 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. Not all John Hancock funds offer Class C. Contact your registered
representative or Selling Broker and request a prospectus for the John Hancock
fund that interests you. Read the prospectus carefully before exchanging your
Class C shares. Exchanges may be made only into Class C shares of other John
Hancock funds.
Exchanges between funds are based on their respective net asset values. No sales
charge or transaction charge is imposed.
The Fund reserves the right to require you to keep previously exchanged Class C
shares (and reinvested dividends) in the Fund for 90 days before you are
permitted to execute a new exchange. The Fund may also alter the terms or
terminate 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 old 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 you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
BY TELEPHONE
1. When you fill out the application for your purchase of Class C shares of the
Fund you automatically authorize exchanges by telephone, unless you check the
box indicating that you do not wish to authorize the telephone exchange
privilege.
2. Call 1-800-437-9312. Have the account number of your current fund and the
exact name in which it is registered available to give to the customer
service representative.
3. Investors 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.
IN WRITING
1. In a letter request an exchange and list the following:
-- name of the fund whose Class C 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 Class C shares, all Class C shares or dollar amount you wish
to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
Attn: Institutional Services
John Hancock Investor Services Corporation
P.O. Box 9277
Boston, Massachusetts 02205-9277
<PAGE>
JOHN HANCOCK
INTERNATIONAL 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
State Street Bank and Trust
Company
225 Franklin 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 1-800-437-9312
Telephone Redemption
Invest-by-Phone
JHD-400PC 3/95
JOHN HANCOCK
INTERNATIONAL
FUND
CLASS C SHARES
PROSPECTUS
MARCH 1, 1995
A MUTUAL FUND SEEKING
LONG-TERM GROWTH OF
CAPITAL.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS
02199-7603
TELEPHONE 1-800-437-9312
Printed on Recycled Paper
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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, 1995
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, 1995
(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
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<CAPTION>
STATEMENT OF
ADDITIONAL
INFORMATION
PAGE
<S> <C>
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 41
THOSE RESPONSIBLE FOR MANAGEMENT 46
INVESTMENT ADVISORY AND OTHER SERVICES 54
DISTRIBUTION CONTRACTS 58
NET ASSET VALUE 60
INITIAL SALES CHARGE ON CLASS A SHARES 61
DEFERRED SALES CHARGE ON CLASS B SHARES 62
SPECIAL REDEMPTIONS 63
ADDITIONAL SERVICES AND PROGRAMS 63
DESCRIPTION OF THE FUNDS' SHARES 65
CALCULATION OF PERFORMANCE 66
BROKERAGE ALLOCATION 71
DISTRIBUTIONS 75
TRANSFER AGENT SERVICES 76
CUSTODY OF PORTFOLIO 76
INDEPENDENT ACCOUNTANTS 77
APPENDIX A - BOND AND COMMERCIAL 78
PAPER RATINGS 79
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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 varying maturities
may be secured by the same pool of mortgages, the payments on which are
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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 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.
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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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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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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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The Global Fund and the Global Income Fund may enter into forward
foreign currency exchange contracts in two circumstances. First, when a Fund
enters into a contract for the purchase or sale of a security denominated in a
foreign currency, a Fund may desire to "lock-in" the United States dollar price
of the security. By entering into a forward contract for a fixed amount of
dollars for the purchase or sale of the amount of foreign currency involved in
the underlying transactions, 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 such foreign currency during the period between the
date on which the security is purchased or sold and the date on which payment is
made or received.
Second, when the Adviser 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. Neither the Global Fund nor
the Global Income Fund intends to enter into forward contracts under this second
circumstance on a regular or continuous basis, and neither Fund will do so, if,
as a result, it will have more than 50% of the value of its total assets,
computed at market value, at the time of commitment, committed to the
consummation of such contracts. A Fund will also not enter into such forward
contracts or maintain a net exposure to such contracts where the consummation of
the contracts would obligate that Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency.
Under normal circumstances, consideration of the prospects for currency
exchange rates will be incorporated into 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 such 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. 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.
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Neither the Global Fund nor the Global Income Fund will enter into any
forward contract with a term of greater than one year. 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.
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 dealing in forward foreign currency exchange contracts by the
Global Fund and the Global Income Fund will be limited to the transactions
described above. The Funds are not required to enter into such transactions 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 that
currency to the dealer.
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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.
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.
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Gold & Government 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.
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.
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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.
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).
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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.
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.
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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.
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.
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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.
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
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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 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
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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.
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
exchange or board of trade. Such investments may be made by the Funds solely for
the purpose of hedging against changes in the value of their portfolio
securities due to anticipated changes in interest rates or market conditions,
and not for the purpose of speculation.
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.
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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 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
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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.
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 exchange or board of trade. Such investments may be made by the Global
Income Fund 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 purposes of
speculation.
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.
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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 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.
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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.
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.
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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.
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.
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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
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.
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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.
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.
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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.
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
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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.
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
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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.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The following investment restrictions (as well as the Fund's investment
objective) will not be changed without approval of a majority of outstanding
voting securities which, as used in the Prospectuses and this Statement of
Additional Information, means approval of the lesser of (1) the holders of 67%
or more of the shares represented at a meeting if the holders of more than 50%
of the outstanding shares are present in person or by proxy or (2) the holders
of more than 50% of the outstanding shares.
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
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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 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.
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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 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.
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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.
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
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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.
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.
In order to permit the sale of Class C shares of the Government Fund,
the Global Fund, and Global Income Fund in certain states, the Trustees may, in
their sole discretion, adopt restrictions on investment policy more restrictive
than those described above. Should the Trustees determine that any such more
restrictive policy is no longer in the best interest of the Government Fund, the
Global Fund, or Global Income Fund and their Class C shareholders, the
Government Fund, the Global Fund , or Global Income Fund may cease offering
Class C shares in the state involved and the Trustees may revoke such
restrictive policy. Moreover, if the states involved shall no longer require any
such restrictive policy, the Trustees may, at their sole discretion, revoke such
policy.
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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 in the future. 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% non-deductible 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.
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.
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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 acquires stock in certain non-U.S. corporations that receive
at least 75% of their annual gross income from passive sources (such as
interest, dividend, 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 such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its shareholders
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 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.
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.
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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.
For each Fund, the amount of net short-term and long-term capital
gains, if any, in any given year will vary depending upon the Adviser's current
investment strategy and whether the Adviser believes it to be in the best
interest of the Fund to dispose of portfolio securities or enter into options or
futures transactions that will generate capital gains. At the time of an
investor's purchase of Fund shares, a portion of the purchase price is often
attributable to realized or unrealized appreciation in the Fund's portfolio or
undistributed taxable income of the Fund. Consequently, subsequent distributions
from such appreciation or income may be taxable to such investor even if the net
asset value of the investor's shares is, as a result of the distributions,
reduced below the investor's cost for such shares, and the distributions in
reality represent a return of a portion of the purchase price.
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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. Such disregarded load will result in an
increase in the shareholder's tax basis in the shares subsequently acquired.
Also, any loss realized on a redemption or exchange will be disallowed to the
extent the shares disposed of are replaced 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 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 will 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, if not thus disallowed, 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.
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
$16,832,068 of capital loss carryforwards which will expire October 31, 1997 --
$282,637 and October 31, 2002-- $16,549,431. John Hancock Managed Tax Exempt
Fund has $792,869 of capital loss carryforwards which will expire October 31,
2002. John Hancock Gold & Government Fund has $8,066,420 of capital loss
carryforwards which will expire October 31,2002. John Hancock Sovereign
Achievers Fund has no capital loss carryforwards. John Hancock Regional Bank
Fund
44
<PAGE>
has no capital loss carryforwards. John Hancock Global Fund has no capital loss
carryforwards. John Hancock Global Income Fund has $4,488,199 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 the stock of such corporations held by the Fund, for
U.S. Federal income tax purposes, for at least 46 days (91 days in the case of
certain preferred stock) and distributed and designated by the Fund may be
treated as qualifying dividends. 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. Additionally,
any corporate shareholder should consult its tax adviser regarding the
possibility that its basis in its shares may be reduced, for Federal income tax
purposes, by reason of "extraordinary dividends" received with respect to the
shares, for the purpose of computing its gain or loss on redemption or other
disposition of the shares.
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.
45
<PAGE>
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.
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 the Trustees, who elect
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Funds are also officers and directors of the Adviser or
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>
<TABLE>
<S> <C> <C>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH REGISTRANTS DURING PAST 5 YEARS
*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"); (hereinafter the Adviser,
the Berkeley Group, NM Capital,
Advisers International, John Hancock
Funds, Investor Services and SAMCorp
are collectively referred to as the
"Affiliated Companies"); Chairman,
First Signature Bank & Trust; Director,
John Hancock Freedom Securities Corp.,
John Hancock Capital Corp., New
England/Canada Business Council;
Member, Investment Company Institute
Board of Governors; Director, Asia
Strategic Growth Fund, Inc.; Trustee,
Museum of Science; President, the
Adviser (until July 1992); Chairman,
John Hancock Distributors, Inc.
("Distributors") until April 1994.
William A. Barron, III Trustee (1, 2) Trustee, H.M. Payson & Company since 1991.
RR 1
325 Sea Meadows Lane
Yarmouth, Maine 04096
</TABLE>
- ------------
*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.
47
<PAGE>
<TABLE>
<S> <C> <C>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH REGISTRANTS DURING PAST 5 YEARS
Douglas M. Costle Trustee (1, 2) Distinguished Senior Fellow, Institute
RR2 Box 480 for Sustainable Communities, Vermont Law
Woodstock, Vermont 05091 School, 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).
*Hugh A. Dunlap, Jr. Trustee and Vice Chairman of the Adviser; President of
President (3, 4) Freedom Capital Management Corporation from
1983 to 1992.
Leland O. Erdahl Trustee (1, 2) President of Stolar, Inc. from 1987 to
161 Camino Barranca 1991 and President of Albuquerque Uranium
Placitas, New Mexico 87043 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.
Richard A. Farrell Trustee(1, 2) President of Farrell, Healer & Co., a venture
Farrell, Healer & Company, Inc. capital management firm, since 1980. Prior to
160 Federal Street -- 23rd Floor hat date, Mr. Farrell headed the venture
Boston, MA 02110 capital group at Bank of Boston Corporation.
William F. Glavin Trustee (1, 2) President, Babson College; Vice Chairman,
Babson College Xerox Corporation until June 1989. Director,
Horn Library Caldor Inc. and Inco Ltd.
Babson Park, MA 02157
</TABLE>
- -----------
*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.
48
<PAGE>
<TABLE>
<S> <C> <C>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH REGISTRANTS DURING PAST 5 YEARS
Patrick Grant Trustee (1, 2, 3) President, Financial Management Incorporated,
5 Haven Street a professional treasurer, since 1978. Prior
Dedham, MA 02026 to that date Mr. Grant was Treasurer of
Endowment Management & Research Corp., an
investment advisory firm, and Omega Fund,
Inc., an open-end investment company.
Ralph Lowell, Jr. Trustee (1, 2) Director, Lowell Blake and Associates, a
45 Mill Street registered investment adviser since 1978.
Edgartown, MA 02539 Mr. Lowell was Vice President of that
company from 1978 to 1985.
Dr. John A. Moore Trustee (1, 2) President and Chief Executive Officer,
Institute for Evaluating Health Institute for Evaluating Health Risks, a
Risks nonprofit institution, since September 1989.
1101 Vermont Avenue N.W. Assistant Administrator of the Office of
Suite 608 Pesticides and Toxic Substances at the
Washington, DC 20005 Environmental Protection Agency from December
1983 to July 1989.
Patti McGill Peterson Trustee (1, 2) President, St. Lawrence University;
St. Lawrence University Director, Niagara Mohawk Power Corporation
110 Vilas Hall and Secretary, Mutual Life.
Canton, NY 13617
John W. Pratt Trustee (1, 2) Since 1961, Professor of Business
2 Gray Gardens East Administration at Harvard University
Cambridge, MA 02138 Graduate School of Business Administration.
</TABLE>
- ------------
*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.
49
<PAGE>
<TABLE>
<S> <C> <C>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH REGISTRANTS DURING PAST 5 YEARS
Robert G. Freedman Vice Chairman and Chief Vice Chairman and Chief Investment Officer, the
Investment Officer Adviser; President (until December 1994).
Anne C. Hodsdon President President and Chief Operations Officer; Executive
Vice President, the Adviser (until December 1994).
James B. Little Senior Vice President, Senior Vice President, the Adviser.
Chief Financial Officer
Thomas H. Drohan Senior Vice President Senior Vice President and Secretary, the Adviser.
and Secretary
James K. Ho Senior Vice President Senior Vice President, the Adviser.
Michael P. DiCarlo Senior Vice President Senior Vice President, the Adviser.
Lawrence J. Daly Senior Vice President Senior Vice President, the Adviser; Senior Vice
President, Putman Investment Management, Inc.
Anthony A. Goodchild Senior Vice President Senior Vice President, the Adviser; Senior Vice
President, Putman Investment Management, Inc.
Andrew St. Pierre Senior Vice President Senior Vice President, the Adviser; President,
John Hancock Closed-End Funds; Portfolio Manager,
Harvard Management Corp. (until October, 1991).
</TABLE>
- ------------
*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.
50
<PAGE>
<TABLE>
<S> <C> <C>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH REGISTRANTS DURING PAST 5 YEARS
James K. Schmidt Senior Vice President Senior Vice President, the Adviser.
John A. Morin Vice President Vice President, the Adviser.
Susan S. Newton Vice President, Vice President and Assistant Secretary,
Assistant Secretary the and Adviser.
Compliance Officer
James J. Stokowski Vice President and Vice President, the Adviser.
Treasurer
David S. Beckwith Vice President Vice President, the Adviser.
Anne McDonley Vice President Vice President, the Adviser.
</TABLE>
- ------------
*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.
51
<PAGE>
All of the officers listed are officers or employees of the Adviser or
affiliated companies. Some of the Trustees and officers may also be officers
and/or directors and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
The following table provides information regarding the compensation
paid by the Funds and the other investment companies in the John Hancock Fund
Complex to the Independent Trustees for their services for each Fund's 1994
fiscal year. The two non-Independent Trustees, Messrs. Boudreau and Dunlap, 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.
AGGREGATE COMPENSATION
----------------------
<TABLE>
<CAPTION>
SOVEREIGN U.S.
INDEPENDENT TRUSTEES GOVERNMENT MANAGED TAX EXEMPT GOLD & GOVERNMENT
- -------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
William A. Barron, III $ 12,096 $ 5,288 $ 1,601
Douglas M. Costle 12,096 5,288 1,601
Leland O. Erdahl 12,096 5,288 1,601
Richard A. Farrell 12,558 5,491 1,664
William F. Glavin 12,096 5,288 1,601
Patrick Grant 12,713 5,558 1,685
Ralph Lowell, Jr. 12,096 5,288 1,601
Dr. John A. Moore 12,096 5,288 1,601
Patti McGill Peterson 12,096 5,288 1,601
John W. Pratt 12,096 5,288 1,601
-------- ------- -------
Totals $122,039 $53,353 $16,157
</TABLE>
AGGREGATE COMPENSATION
----------------------
<TABLE>
<CAPTION>
SOVEREIGN
INDEPENDENT TRUSTEES ACHIEVERS REGIONAL BANK GLOBAL GLOBAL INCOME
- -------------------- --------- ------------- ------- -------------
<S> <C> <C> <C> <C>
William A. Barron, III $ 2,567 $ 6,753 $ 2,501 $ 4,021
Douglas M. Costle 2,567 6,753 2,501 4,021
Leland O. Erdahl 2,567 6,753 2,501 4,021
Richard A. Farrell 2,646 6,927 2,578 4,151
William F. Glavin 2,568 6,755 2,501 4,023
Patrick Grant 2,673 6,985 2,603 4,021
Ralph Lowell, Jr. 2,567 6,753 2,501 4,021
Dr. John A. Moore 2,567 6,753 2,501 4,021
Patti McGill Peterson 2,567 6,753 2,501 4,021
John W. Pratt 2,567 6,753 2,501 4,021
------- ------- ------- -------
Totals $25,856 $67,938 $25,189 $40,342
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION FROM
ACCRUED AS PART OF BENEFITS UPON FUNDS AND JOHN HANCOCK
INDEPENDENT TRUSTEES EACH FUND'S EXPENSES RETIREMENT FUND COMPLEX TO TRUSTEES(1)
- -------------------- -------------------- ---------------- ---------------------------
(TOTAL OF 11 FUNDS)
<S> <C> <C> <C>
William A. Barron, III - - $ 42,000
Douglas M. Costle - - 42,000
Leland O. Erdahl - - 42,000
Richard A. Farrell - - 43,500
William F. Glavin - - 41,750
Patrick Grant - - 44,000
Ralph Lowell, Jr. - - 42,000
Dr. John A. Moore - - 41,750
Patti McGill Peterson - - 42,000
John W. Pratt - - 42,000
- - --------
Totals $423,000
</TABLE>
(1)The total compensation paid the John Hancock Fund Complex to the Independent
Trustees is as of calendar year ended December 31, 1994.
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 19, 1995 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 19, 1995 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
NAME AND ADDRESS OF SHAREHOLDER FUND AND CLASS OF SHARES BENEFICIAL INTEREST OWNED THE CLASS OF THE FUND
- ------------------------------- ------------------------ ------------------------- ---------------------
<S> <C> <C> <C>
Francesca M. Dodd Global Income 109,602.000 10.18%
1989 Rev. Tr. DTD 12/8/89 Class A shares
Richard S. Dodd, Francesca M.
Dodd
and Michael L. Fay
TTEES
One White Path
Dodd Realty
South Yarmouth, MA 02664
Merrill Lynch Pierce Fenner & Regional Bank Fund 571,336 5.71%
Smith Inc. Class A shares
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
</TABLE>
53
<PAGE>
<TABLE>
<S> <C> <C> <C>
Elwood Insurance Limited Managed Tax-Exempt Fund 92,224 5.32%
P.O. Box HM 1022 Class A shares
c/o Cummings & L
Church Street West
Hamilton HM DX
Bermuda
James J. McDonough Managed Tax-Exempt Fund 104,715 6.04%
10355 South California Avenue Class A shares
Chicago, IL 60655-16110
</TABLE>
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 over $13 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 over 1,600,000 shareholders.
The Adviser is an affiliate of John Hancock Mutual Life Insurance Company, one
of the most recognized and respected financial institutions in the nation. With
total assets under management of approximately $80 billion, John Hancock Mutual
Life Insurance Company is one of the 10 largest life insurance companies in the
United States, and carries Standard & Poor's and A.M. Best's highest ratings.
Founded in 1862, John Hancock Mutual Life Insurance Company has been serving
clients for over 125 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
54
<PAGE>
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.
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 Insurance 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 Class A or Class B shares will be borne exclusively by such class
of shares, subject to certain conditions imposed by the Internal Revenue Service
in issuing rulings to funds with a multiple-class structure.
55
<PAGE>
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 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 18, 1993 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, 1992, Freedom Investment Trust
paid the Adviser and Freedom Capital, the Funds' previous Adviser, an investment
advisory fee of $3,084,161 pursuant to the Advisory Agreement. Of this amount,
$407,350 was attributable to the Gold & Government Fund, $496,112 was
attributable to the Regional Bank Fund, $1,108,589 was attributable to the
Government Fund, $909,184 was attributable to the Managed Tax-Exempt Fund, and
$162,926 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, 1992, for the Managed
Tax-Exempt Fund the Adviser and Freedom Capital agreed not to impose management
fees in the amount of $437,271.
56
<PAGE>
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 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.
The continuation of the Advisory Agreement for the Global Fund and for
the Global Income Fund were approved on May 18, 1993 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, 1992, Freedom Investment Trust II
paid the Adviser and Freedom Capital, the Funds' previous Adviser, investment
advisory fees of $332,648 with respect to the Global Fund and $1,411,692 with
respect to the Global Income Fund. 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.
57
<PAGE>
DISTRIBUTION CONTRACT
Freedom Investment Trust and Freedom Investment Trust II have entered
into Distribution Agreements with John Hancock Broker Distribution Services,
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 who have entered into dealer agreements
with the Distributors (the "Selling Brokers").
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, or on a deferred basis. The sales
charges are discussed further in the Class A and Class B Shares Prospectus.
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 Class A and Class B shares,
respectively. However, the amount of 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 shares of the Funds, 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 a meeting 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
58
<PAGE>
the approval of a majority of the outstanding shares of the class of the
applicable Fund which has 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.
During the fiscal year ended October 31, 1994, 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:
<TABLE>
<CAPTION>
Expense Items
-------------
Printing and Interest,
Mailing of Carrying or
Prospectuses to Expense of Compensation to Other Finance
Advertising New Distributors Selling Brokers Charges Other
----------- Shareholders ------------ --------------- -------------
---------------
<S> <C> <C> <C> <C> <C>
Government Fund
Class A Shares $ 73,002 $ 9,097 $185,811 $ 740,304 NONE
Class B Shares $ 66,771 $ 7,896 $172,327 $1,631,682 $ 185,790
Managed Tax-Exempt Fund
Class A Shares
Class B Shares $ 8,795 $ 1,275 $ 22,073 $ 24,692 NONE
$ 88,369 $12,687 $205,743 $1,694,748 $ 270,961
Gold & Government Fund
Class A Shares $ 5,186 $ 4,667 $ 12,527 $ 32,242 NONE
Class B Shares $ 17,015 $ 9,744 $ 40,719 $ 364,100 $ 9,163
Sovereign Achievers Fund
Class A Shares $ 12,145 $ 3,040 $ 22,564 $ 31,331 NONE
Class B Shares $ 45,576 $10,709 $ 85,937 $ 614,800 $ 116,923
Regional Bank Fund
Class A Shares $109,242 $ 6,249 $226,525 $ 101,747 NONE
Class B Shares $138,568 $ 8,085 $308,751 $2,559,512 $ 48,525
</TABLE>
59
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Global Fund
Class A Shares $75,923 $ 8,116 $ 93,399 $ 106,624 NONE
Class B Shares $34,941 $ 3,506 $ 43,794 $ 164,524 $4,206
Global Income Fund
Class A Shares $ 6,680 $ 1,861 $ 10,271 $ 11,991 NONE
Class B Shares $71,797 $19,847 $103,045 $1,034,749 $193,006
</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 category 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.
60
<PAGE>
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' Class A and Class B Prospectuses. Methods of
obtaining reduced sales charges referred to generally in the Class A and Class B
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, 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 Class A and Class B Prospectuses,
Class A shares of the Funds may be sold without a sales charge to certain
persons described in the Prospectus.
Accumulation Privilege. Investors (including investors combining purchases) who
are already Class A shareholders may also obtain the benefit of the reduced
sales charge by taking into account not only the amount then being invested but
also the purchase price of the Class A shares already held by such person.
Combination Privilege. Reduced sales charges (according to the schedule set
forth in the Class A and Class B Prospectus) are also available to an investor
based on the aggregate amount of his concurrent and prior investments in Class A
shares of the Fund and shares of all other John Hancock funds which carry a
sales charge.
Letter of Intention. The reduced sales charges are also applicable to
investments made over a specified period pursuant to a Letter of Intention (the
"LOI"), which should be read carefully prior to its execution by an investor.
The Fund offers two options regarding the specified period for making
investments under the LOI. All investors have the option of making their
investments over a specified period of thirteen (13) months. Investors who are
using the Fund as a funding medium for a qualified retirement plan, however, may
opt to make the necessary investments called for by the LOI over a forty-eight
(48) month period. These qualified retirement plans include group IRA, SEP,
SARSEP, TSA, 401(k), ISA and 457 plans. Such an investment (including
accumulations and combinations) must aggregate $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 from the
investor.
61
<PAGE>
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 Class A and Class B Prospectus as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the current market value or the original purchase cost of
the Class B shares being redeemed. Accordingly, no CDSC will be imposed on
increases in account value above the initial purchase prices, including
increases in account value derived from reinvestment of dividends or capital
gains distributions.
The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares. Solely for purposes of determining this number all
payments during a month will be aggregated and deemed to have been made on the
last day of the month.
62
<PAGE>
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 Class A and Class B Prospectuses
for additional information regarding the CDSC.
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 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 and for shares of John Hancock Cash Management
Fund, a money market fund. A shareholder may exchange Class B shares of a Fund
into shares of John Hancock Cash Management Fund at net asset value. Shares so
acquired will continue to be subject to a CDSC upon redemption. The rate of the
CDSC will be the rate in effect on the original fund at the time of the
exchange.
63
<PAGE>
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."
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 Class A and Class B
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 of a Fund could be disadvantageous to a shareholder because of
the initial sales charge payable on such purchases of Class A shares and the
CDSC imposed on redemptions of Class B shares and because redemptions are
taxable events. Therefore, a shareholder should not purchase Class A or Class B
shares of a Fund 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 more
fully in the Funds' Class A and Class B Prospectus and the Account Privileges
Application. The program, as it relates to automatic investment checks, is
subject to the following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by Investor Services without prior notice if
any investment is not honored by the shareholder's bank. The bank shall be under
no obligation to notify the shareholder as to the non-payment of any check.
64
<PAGE>
The program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is received
at least five (5) business days prior to the processing date of any investment.
Reinvestment Privilege. A shareholder who has redeemed Fund shares may, within
120 days after the date of redemption, reinvest without payment of a sales
charge any part of the redemption proceeds in shares of the same class of the
same Fund or in any other John Hancock fund, subject to the minimum investment
limit of that fund. The proceeds from the redemption of Class A shares may be
reinvested at net asset value without paying a sales charge in Class A shares of
the 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 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
Trust, without par value. Under the Declaration of Trust, the Trustees have the
authority to create and classify shares of beneficial interest in separate
series, without further action by shareholders. As of the date of this Statement
of Additional Information, the Trustees have authorized the issuance of two
classes of shares of the Funds, designated as Class A and Class B.
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 shares and Class B shares of the Funds will be sold exclusively to
members of the public (other than the institutional investors described in the
Class A and Class B 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 contingent deferred sales charge may be imposed in
the event of certain redemption transactions within one year of purchase.
Holders of Class A shares and Class B shares have certain exclusive
voting rights on matters relating to their respective distribution plans. The
different classes of 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.
65
<PAGE>
Dividends paid by the Fund, if any, with respect to each class of
shares will be calculated in the same manner, at the same time and will be in
the same amount, except that (i) the distribution and service fees relating the
Class A and Class B shares will be borne exclusively by that class (ii) Class B
shares will pay higher distribution and service fees than Class A shares and
(iii) Class A shares and Class B shares will bear any other class expenses
properly allocable to such class of shares, subject to the conditions set forth
in a private letter ruling that each Fund has received from the Internal Revenue
Service relating to its multiple-class structure. The net asset value per share
may vary depending on whether Class A shares or Class B shares are purchased.
In the event of liquidation, shareholders are entitled to share pro
rata in the net assets of the 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 except as set forth in the
Prospectuses.
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, the Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations or affairs of
the Fund. The Declaration of Trust also provides for indemnification out of the
Funds' assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. Liability is therefor
limited to circumstances in which 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.
66
<PAGE>
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, 1994, for the five
year period ended October 31, 1994 with respect to the Class B shares of each
Funds 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) of the Class A
shares and Class B shares of each Fund to October 31, 1994.
<TABLE>
<CAPTION>
Gold & Government 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
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
--------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
(14.59)% 1.20% (15.16)% 4.14% 7.41%
</TABLE>
<TABLE>
<CAPTION>
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 10/4/85* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
--------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
1.11% 23.71% 0.69% 18.47% 19.53%
</TABLE>
<TABLE>
<CAPTION>
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 6/5/86* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
-------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
(10.84)% 1.25% (11.69)% 6.04% 7.39%
</TABLE>
<TABLE>
<CAPTION>
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 4/22/87* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
-------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
(9.47)% 3.29% (10.56)% 6.28% 7.75%
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
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 4/22/87* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
-------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
3.70% 3.10% (4.23)% 5.39% 6.42%
</TABLE>
<TABLE>
<CAPTION>
Global Fund
-----------
Class A Shares Class A Shares Class B Shares Class B Shares Class B Shares Class C Shares Class C Shares
One Year Ended 1/3/92* to One Year Ended Five Years Ended 9/2/86* to One year ended 5/7/93* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
-------------- -------------- -------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
3.23% 9.86% 2.97% 7.15% 10.41% 9.15% 21.33%
</TABLE>
<TABLE>
<CAPTION>
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 12/17/86* to
10/31/94 10/31/94 10/31/94 10/31/94 10/31/94
-------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
(5.71)% 0.09% (6.79)% 5.32% 8.84%
</TABLE>
* Commencement of operations.
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 OMMITTED]
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV= ending redeemable value of a hypothetical $1,000 investment made
at the beginning of the 1 year and life-of-fund periods.
68
<PAGE>
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,
1994 were 1.46%, 6.22%, 5.40% and 7.22%, 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, 1994 were 0.91%,
6.03%, 4.91% and 6.90%, 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 OMMITTED]
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.
69
<PAGE>
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
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.
70
<PAGE>
From time to time, in reports and promotional literature, the Funds'
total return and yield will be ranked or compared to indices of mutual funds
such as Lipper Analytical Services, Inc.'s "Lipper Mutual Performance Analysis,"
a monthly publication which tracks net assets, total return, and yield on mutual
funds in the United States. Ibottson and Associates, CDA Weisenberger and F.C.
Towers are also used for comparison purposes, as well as Russell and Wilshire
indices.
Performance rankings and ratings reported periodically in national
financial publications such as MONEY Magazine, FORBES, BUSINESS WEEK, THE WALL
STREET JOURNAL, MORNINGSTAR, STANGER'S and BARRON'S will also be utilized.
The performance of the 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
71
<PAGE>
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.
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, 1992, Freedom Investment Trust
paid $183,983 in negotiated brokerage commissions on behalf of the Funds of
which $8,460 was attributable to the Gold & Government Fund, $49,951 was
attributable to the Regional Bank Fund and $125,572 was attributable to the
Sovereign Achievers Fund. 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, 1992, Freedom Investment Trust
II paid $148,084 in negotiated brokerage commissions on behalf of the Global
Fund and none on behalf of the Global 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.
72
<PAGE>
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 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, John Hancock Mutual Life Insurance
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 determined 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.
73
<PAGE>
During the fiscal year ended October 31, 1992, Freedom Investment Trust
paid $8,160 in brokerage commissions to Tucker Anthony, $3,760 of which was
attributable to Gold & Government Fund and $4,400 of which was attributable to
Regional Bank Fund. Commissions paid to Tucker Anthony represent approximately
3.7% of the total brokerage commissions paid by Freedom Investment Trust for the
fiscal year ended October 31, 1992. 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, $7,750 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 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 periods ended October 31, 1992, 1993 and 1994 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,
1994, Regional Bank paid $15,168, Sovereign Achievers paid $37,254, Gold &
Government paid $14,4000, Global Paid $5,054 or purchased for a Fund with those
to be sold or purchased for other clients managed by it in order to obtain best
execution.
74
<PAGE>
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 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 on or about the tenth day of the following month
by each Fund. 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).
75
<PAGE>
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. The per share
dividends of the Class B shares of the Government Fund and the Global Fund will
also be lower than the per share dividends of the Class C shares of the
Government Fund, the Global Fund, and Global Income Fund.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation ("Investor Services"), P.O.
Box 9116, Boston, MA 02205-9116 a wholly-owned indirect subsidiary of John
Hancock Mutual Life Insurance Co., 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 for Class A shares of
$16.00 per shareholder account and for Class B shares of $18.50 per shareholder
account. The Government Fund and Global Income Fund pay Investor Services an
annual fee for Class A shares of $20.00 per shareholder account and for Class B
shares of $22.50 per account. The Managed Tax Exempt Fund pays Investor Services
an annual fee for Class A shares of $19.00 per shareholder account and for Class
B shares of $21.50 per shareholder account.
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.
The Trustees have determined that, except as otherwise permitted under
applicable Securities and Exchange Commission "no-action" letters or exemptive
orders, it is in the best interests of the Funds to hold foreign assets of the
Funds in qualified foreign banks and depositories meeting the requirements of
Rule 17f-5 under the Investment Company Act.
76
<PAGE>
INDEPENDENT AUDITORS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts serves
as the Trusts' independent auditors, providing services including (1)
examination of annual financial statements, (2) assistance and consultation in
connection with Securities and Exchange Commission filings, and (3) preparation
of the annual Federal income tax returns filed on behalf of the Funds.
77
<PAGE>
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.
78
<PAGE>
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."
79
<PAGE>
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 - Freedom Global 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, 1994. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks and rights (cost - $99,742,005) .......... $128,568,913
Bonds (cost - $450,000)................................. 434,250
Joint repurchase agreement (cost - $1,416,000).......... 1,416,000
------------
130,419,163
Cash..................................................... 122
Foreign currency, at value (cost - $2,853,707)............ 2,852,137
Receivable for shares sold............................... 80,028
Receivable for investments sold.......................... 2,633,981
Interest receivable...................................... 2,260
Dividends receivable..................................... 160,653
Foreign taxes receivable................................. 104,199
Prepaid expenses......................................... 4,902
------------
Total Assets....................... 136,257,445
----------------------------------------------------
LIABILITIES:
Payable for foreign currency purchased................... 3,522
Payable for investments purchased........................ 2,261,177
Foreign taxes payable.................................... 186,386
Payable to John Hancock Advisers, Inc.
and affiliates - Note B................................ 143,707
Accounts payable and accrued expenses ................... 115,600
------------
Total Liabilities.................. 2,710,392
----------------------------------------------------
NET ASSETS:
Capital paid-in.......................................... 92,308,006
Accumulated net realized gain on investments and.........
foreign currency transactions.......................... 12,558,308
Net unrealized appreciation of investments and...........
foreign currency transactions.......................... 28,680,739
------------
Net Assets......................... $133,547,053
====================================================
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 - $100,973,009/7,131,436......................... $ 14.16
==========================================================================
Class B - $31,821,664/2,283,610........................... $ 13.93
==========================================================================
Class C - $752,380/52,719................................. $ 14.27
==========================================================================
MAXIMUM OFFERING PRICE PER SHARE *
Class A - ($14.16 x 105.26%)............................. $ 14.90
==========================================================================
</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 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.
STATEMENT OF OPERATIONS
Year ended October 31, 1994
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $171,916) $ 1,640,883
Interest................................................. 127,285
------------
1,768,168
------------
Expenses:
Investment management fee - Note B...................... 1,175,313
Distribution/service fee - Note B
Class A.............................................. 284,062
Class B.............................................. 250,971
Transfer agent fee - Note B
Class A.............................................. 337,452
Class B.............................................. 79,674
Class C.............................................. 543
Custodian fee.......................................... 256,949
Registration and filing fees........................... 75,304
Auditing fee........................................... 37,972
Trustees' fees......................................... 22,968
Legal fees............................................. 22,833
Printing............................................... 20,868
Miscellaneous.......................................... 7,477
------------
Total Expenses..................... 2,572,386
----------------------------------------------------
Net Investment Loss................ ( 804,218)
----------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments sold.................... 13,526,717
Net realized loss on foreign currency transactions....... ( 164,288)
Change in net unrealized appreciation/
depreciation of investments............................ ( 2,564,833)
Change in net unrealized appreciation/
depreciation of foreign currency transactions.......... ( 120,361)
------------
Net Realized and Unrealized
Gain on Investments and
Foreign Currency Transactions...... 10,677,235
----------------------------------------------------
Net Increase in Net Assets
Resulting from Operations.......... $ 9,873,017
====================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Fund
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
1994 1993
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss......................................................................... ($ 804,218) ($ 840,132)
Net realized gain on investments sold and foreign currency transactions..................... 13,362,429 14,036,927
Change in net unrealized appreciation/depreciation of investments
and foreign currency transactions......................................................... ( 2,685,194) 15,673,639
------------ ------------
Net Increase in Net Assets Resulting from Operations...................................... 9,873,017 28,870,434
INCOME EQUALIZATION* ------------ ------------
Amount transferred to capital paid-in....................................................... -- ( 25,778)
DISTRIBUTIONS TO SHAREHOLDERS: ------------ ------------
Distributions from net realized gain on investments sold and foreign
currency transactions
Class A - ($1.3069 and none per share, respectively).................................... ( 8,324,136) --
Class B - ($1.3069 and none per share, respectively).................................... ( 1,992,338) --
Class C - ($1.3069 and none per share, respectively).................................... ( 39,722) --
------------ ------------
Total Distributions to Shareholders................................................... ( 10,356,196) --
FROM FUND SHARE TRANSACTIONS - NET** ------------ ------------
Net increase (decrease) in net assets from Fund share transactions.......................... 23,496,918 ( 6,791,894)
Amount transferred from accumulated net investment loss to capital paid-in.................. -- 25,778
------------ ------------
Total from Fund Share Transactions - Net.................................................. 23,496,918 ( 6,766,116)
NET ASSETS: ------------ ------------
Beginning of period......................................................................... 110,533,314 88,454,774
------------ ------------
End of period .............................................................................. $133,547,053 $110,533,314
============ ============
<FN>
* Equalization accounting was discontinued November 1, 1992.
** ANALYSIS OF FUND SHARE TRANSACTIONS:
</FN>
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1994 1993
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold................................................... 1,101,077 $15,133,189 571,717 $ 6,953,685
Shares issued to shareholders in reinvestment of
distributions............................................... 600,746 8,080,042 -- --
---------- ----------- ------------ ------------
1,701,823 23,213,231 571,717 6,953,685
Less shares repurchased....................................... ( 917,934) ( 12,478,014) ( 1,522,896) ( 17,659,645)
---------- ----------- ------------ ------------
Net increase (decrease)....................................... 783,889 $10,735,217 ( 951,179) ($ 10,705,960)
========== =========== ============ ============
CLASS B
Shares sold................................................... 1,382,515 $18,646,101 550,099 $ 6,792,802
Shares issued to shareholders in reinvestment of
distributions............................................... 126,915 1,687,968 -- --
---------- ----------- ------------ ------------
1,509,430 20,334,069 550,099 6,792,802
Less shares repurchased....................................... ( 590,659) ( 7,901,948) ( 277,734) ( 3,213,251)
---------- ----------- ------------ ------------
Net increase.................................................. 918,771 $12,432,121 272,365 $ 3,579,551
========== =========== ============ ============
CLASS C***
Shares sold................................................... 21,769 $ 293,927 28,497 $ 336,804
Shares issued to shareholders in reinvestment of
distributions............................................... 2,938 39,640 -- --
---------- ----------- ------------ ------------
24,707 333,567 28,497 336,804
Less shares repurchased....................................... ( 303) ( 3,987) ( 182) ( 2,289)
---------- ----------- ------------ ------------
Net increase.................................................. 24,404 $ 329,580 28,315 $ 334,515
========== =========== ============ ============
*** Class C shares commenced operations on May 7, 1993.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global 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,
-------------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
CLASS A(a)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period....................... $ 14.30 $ 10.55 $ 11.31
-------- -------- --------
Net Investment Loss........................................ ( 0.07)(b) ( 0.10)(b) ( 0.04)(b)
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions........................ 1.24 3.85 ( 0.72)
-------- -------- --------
Total from Investment Operaltions........................ 1.17 3.75 ( 0.76)
-------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold
and Foreign Currency Transactions...................... ( 1.31) -- --
-------- -------- --------
Net Asset Value, End of Period........................... $ 14.16 $ 14.30 $ 10.55
======== ======== ========
Total Investment Return at Net Asset Value............... 8.64% 35.55% ( 6.72%)(c)
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).................. $100,973 $ 90,787 $ 76,980
Ratio of Expenses to Average Net Assets.................... 1.98% 2.12% 2.47%*
Ratio of Net Investment Loss to Average Net Assets......... ( 0.54%) ( 0.86%) ( 0.60%)*
Portfolio Turnover Rate.................................... 61% 108% .69%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period....................... $ 14.17 $ 10.50 $ 10.92 $ 9.94 $ 13.58
-------- -------- -------- -------- -------
Net Investment Loss........................................ ( 0.15)(b) ( 0.15)(b) ( 0.12)(b) ( 0.01)(b) ( 0.02)
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions........................ 1.22 3.82 ( 0.30) 1.35 ( 1.12)
-------- -------- -------- -------- -------
Total from Investment Operations......................... 1.07 3.67 ( 0.42) 1.34 ( 1.14)
-------- -------- -------- -------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold
and Foreign Currency Transactions........................ ( 1.31) -- -- ( 0.36) ( 2.50)
-------- -------- -------- -------- -------
Net Asset Value, End of Period............................. $ 13.93 $ 14.17 $ 10.50 $ 10.92 $ 9.94
======== ======== ======== ======== =======
Total Investment Return at Net Asset Value................. 7.97% 34.95% ( 3.85%) 14.04% ( 10.42%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).................. $ 31,822 $ 19,340 $ 11,475 $28,686 $33,281
Ratio of Expenses to Average Net Assets.................... 2.59% 2.49% 2.68% 2.60% 2.46%
Ratio of Net Investment Loss to Average Net Assets......... ( 1.12%) ( 1.25%) ( 1.03%) ( 0.12%) ( 0.59%)
Portfolio Turnover Rate.................................... 61% 108% 69% 106% 58%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Fund
FINANCIAL HIGHLIGHTS (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------
1994 1993
-------- --------
<S> <C> <C>
CLASS C(d)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period....................... $ 14.34 $ 11.75
------- --------
Net Investment Loss........................................ -- ( 0.02)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions.............................. 1.24 2.61
------- --------
Total from Investment Operations......................... 1.24 2.59
------- --------
Less Distribulltions:
Distributions from Net Realized Gain on Investments Sold
and Foreign Currency Transactions.......................... ( 1.31) --
------- --------
Net Asset Value, End of Period............................. $ 14.27 $ 14.34
======= =========
Total Investment Return at Net Asset Value................. 9.15% 22.04%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).................. $ 752 $ 406
Ratio of Expenses to Average Net Assets.................... 1.42% 1.43%*
Ratio of Net Investment Income (Loss) to Average Net
Assets................................................... 0.03% ( 0.35%)*
Portfolio Turnover Rate.................................... 61% 108%
<FN>
* On an annualized basis.
(a) Class A shares commenced operations on January 3, 1992.
(b) On average month end shares outstanding.
(c) Not annualized.
(d) Class C shares commenced operations on May 7, 1993.
</FN>
</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 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.
10
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Fund
SCHEDULE OF INVESTMENTS
October 31, 1994
- -------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
FREEDOM GLOBAL FUND ON OCTOBER 31, 1994. IT'S DIVIDED INTO FOUR MAIN CATEGORIES:
COMMON STOCKS, RIGHTS, BONDS AND SHORT-TERM INVESTMENTS. COMMON STOCKS AND BONDS
ARE FURTHER BROKEN DOWN BY COUNTRY. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE
FUND'S "CASH" POSITION, ARE LISTED LAST.
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
COMMON STOCKS
AUSTRALIA (6.44%)
Amcor Ltd. (Paper)............................ 150,000 $ 998,292
Australian National Industries Ltd.
(Diversified Operations).................... 930,000 1,001,633
Broken Hill Proprietary Co., Ltd.
(Diversified Operations).................... 135,000* 2,069,672
News Corp. Ltd. (The) (Publishing)............ 225,000 1,387,135
Renison Goldfields Consolidated Ltd.
(Metal Processing & Products)**............. 320,000* 1,247,864
Western Mining Corp. Holdings Ltd.
(Metal Processing & Products)............... 303,750 1,892,938
-----------
8,597,534
-----------
CHINA (0.21%)
Huaneng Power International, Inc.,
American Depositary Receipts
(ADR) (Utilities)**......................... 15,000* 277,500
-----------
COLUMBIA (0.09%)
Cementos Paz del Rio, S.A. (ADR)
(Building Products)**....................... 5,000* 122,500
-----------
FRANCE (3.88%)
Banque Nationale de Paris (Banks)............. 31,309 1,550,547
LVMH Moet Henessey Louis Vuitton
(Beverages)................................. 9,250* 1,491,646
Lyonnaise Des Eaux Dumez
(Diversified Operations).................... 13,000* 1,182,048
Societe Nationale Elf Aquitaine
(Oil & Gas)................................. 13,000* 961,045
-----------
5,185,286
-----------
GERMANY (2.49%)
Bayer AG (Chemicals).......................... 4,000* 936,278
Bayerische Hypotheken-Und Wechsel-Bank
Aktiengesellschaft (Banks).................. 4,000 1,052,281
Bayerische Hypotheken-Und Wechsel-Bank
Aktiengesellschaft (New Shares)
(Banks)**................................... 400* 102,434
RWE Aktiengesellschaft (Diversified
Operations)................................. 4,000 1,226,553
-----------
3,317,546
-----------
HONG KONG (7.44%)
Cheung Kong (Holdings) Ltd.
(Real Estate)................................ 320,000 1,540,472
CITIC Pacific Ltd. (Diversified Operations).... 350,000* 1,053,057
Hongkong Electric Holdings Ltd.
(Utilities).................................. 400,000* 1,257,845
HSBC Holdings Ltd. (Banks)..................... 125,200 1,482,472
Shun Tak Holdings Ltd. (Transportation)........ 1,150,000* 1,011,970
Sun Hung Kai Properties Ltd.
(Real Estate)................................ 200,000 1,527,014
Swire Pacific Ltd. (Diversified
Operations).................................. 200,000 1,527,014
Yizheng Chemical Fibre Co., Ltd.
(Chemicals).................................. 1,350,000* 537,204
-----------
9,937,048
-----------
INDONESIA (1.78%)
PT Bank International Indonesia
(Banks)...................................... 498,600 1,687,931
PT Indonesia Satellite (ADR)
(Telecommunications)**....................... 10,000* 392,500
PT Tri Polyta Indonesia (ADR)
(Chemicals)**................................ 10,000* 297,500
-----------
2,377,931
-----------
ITALY (0.17%)
Banca Commerciale Italiana S.P.A.
(ADR) (Banks)................................ 10,000* 230,000
-----------
JAPAN (14.48%)
Daido Steel Co., Ltd. (Steel).................. 215,000* 1,301,213
Denki Kagaku Kogyo K.K. (Chemicals)**.......... 300,000* 1,341,596
Fanuc Ltd. (Machinery)......................... 15,000* 728,118
Itochu Corp. (Diversified Operations).......... 250,000* 1,946,811
Jusco Co., Ltd (Retail)........................ 60,000* 1,350,891
Kamigumi Co., Ltd. (Transportation)............ 100,000 1,094,759
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
JAPAN (CONTINUED)
Marui Co., Ltd. (Retail)....................... 70,000* $ 1,279,628
Matsushita Electric Industrial Co., Ltd.
(Electronics)................................ 120,000* 1,995,352
NKK Corp. (Steel)**............................ 500,000* 1,544,023
Seino Transportation Co., Ltd.
(Transportation)............................. 100,000* 1,972,631
Sony Corp. (Electronics)....................... 32,000* 1,953,215
Sumitomo Cement Co., Ltd.
(Building Products).......................... 230,000* 1,173,457
Toshiba Corp. (Electronics).................... 210,000 1,657,010
------------
19,338,704
------------
Luxembourg (1.00%)
Scandinavian Broadcasting System
(Broadcasting)**............................. 55,000 1,333,750
------------
Malaysia (3.84%)
Aokam Perdana Berhad
(Building Products).......................... 175,000 1,445,205
Aokam Perdana Berhad (A Shares)
(Building Products)**........................ 60,000* 469,667
Land & General Berhad
(Diversified Operations)..................... 420,000* 2,071,233
Malaysian Helicopter Services Berhad
(Transportation)............................. 400* 986
Resorts World Berhad (Leisure &
Recreation).................................. 180,000* 1,141,291
Technology Resources Industries Berhad
(Telecommunications)**....................... 1,000 3,894
------------
5,132,276
------------
Mexico (4.16%)
Cemex S.A. (Ser A) (Building Products)......... 168,750 1,509,765
Grupo Sidek S.A. de C.V. (Diversified
Operations)**................................ 500,000 2,138,493
Grupo Televisa, S.A. de C.V. (ADR)
(Broadcasting)............................... 18,000* 798,750
Telefonos de Mexico S.A. de C.V. (ADR)
(Telecommunications)......................... 20,000 1,102,500
------------
5,549,508
------------
Netherlands (2.59%)
ABN Amro Holdings N.V. (Banks)................. 30,000 1,065,836
Koninklijke P.T.T. Nederland (Utilities)....... 30,800* 980,996
Polygram N.V. (Audio/Video).................... 32,000 1,408,000
------------
3,454,832
------------
New Zealand (2.05%)
Carter Holt Harvey Ltd.
(Building Products).......................... 700,000 1,697,544
Telecom Corporation of New Zealand
(Utilities).................................. 300,000* 1,045,116
------------
2,742,660
------------
Pakistan (0.28%)
Crescent Textile Mills (Textile)**............. 214,500* 378,289
------------
Singapore (5.27%)
Fraser & Neave Ltd. (Diversified
Operations).................................. 130,000* 1,540,347
Keppel Corp. (Diversified Operations).......... 220,000 2,022,472
Overseas Union Bank Ltd. (Banks)............... 370,500 2,119,305
Singapore Press Holdings Ltd.
(Publishing)................................. 74,000 1,355,533
------------
7,037,657
------------
Spain (2.47%)
Banco Popular Espanol SA (Banks)............... 10,000* 1,255,137
Fomento de Construcciones y Contratas
SA (Construction)............................ 6,000* 604,000
Repsol SA (Oil & Gas).......................... 45,000* 1,439,892
------------
3,299,029
------------
Sweden (2.44%)
Atlas Copco AB (Machinery)..................... 127,500* 1,740,008
Telefonaktiebolaget (LM) Ericsson
(Telecommunications)......................... 25,000* 1,523,117
------------
3,263,125
------------
Switzerland (2.98%)
BBC Brown Boveri AG (Engineering).............. 8,000* 1,313,671
CibaGeigy AG (Drugs)........................... 2,000* 1,166,999
Nestle S.A. (Food)............................. 1,600 1,497,330
------------
3,978,000
------------
Thailand (2.54%)
Bangkok Bank (Banks)........................... 150,000* 1,625,005
Thai Farmers Bank Ltd. (Banks)................. 200,000* 1,765,437
------------
3,390,442
------------
United Kingdom (8.33%)
Cable & Wireless PLC
(Telecommunications)......................... 225,000 1,545,633
Carlton Communications PLC
(Broadcasting)............................... 80,000* 1,154,073
Grand Metropolitan PLC (Diversified
Operations).................................. 210,000 1,425,417
Sainsbury (J) PLC (Retail)..................... 250,000* 1,631,501
Smithkline Beecham (Drugs)..................... 250,000* 1,664,213
Thorn EMI PLC (Leisure & Recreation)........... 120,000* 1,907,753
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Vodafone Group PLC
(Telecommunications)......................... 520,000* $ 1,800,948
-----------
11,129,538
-----------
UNITED STATES (21.29%)
Adaptec, Inc. (Computers)**.................... 40,000 930,000
AnnTaylor Stores Corp. (Retail)**.............. 10,000 415,000
Bell Sports Corp. (Leisure &
Recreation)**................................ 32,000 664,000
cisco Systems, Inc. (Computers)**.............. 24,000 723,000
Cobra Golf, Inc. (Leisure &
Recreation)**................................ 15,000* 558,750
Coca-Cola Co. (The) (Beverages)................ 60,000 3,015,000
CUC International Inc. (Retail)**.............. 43,750 1,405,469
Disney (Walt) Co. (The) (Leisure &
Recreation).................................. 21,600 850,500
ERO Inc. (Toys/Games/Hobby
Products)**.................................. 46,000 437,000
Gaylord Entertainment Co. (Class A)
(Diversified Operations)..................... 54,000 1,059,750
Heilig-Meyers Co. (Retail)..................... 22,500 672,188
Home Depot, Inc. (The) (Retail)................ 35,000 1,592,500
International CableTel, Inc.
(Telecommunications)**....................... 40,000 1,240,000
Johnson & Johnson (Drugs)...................... 40,000 2,185,000
Jones Apparel Group, Inc. (Retail)**........... 15,000 410,625
LDDS Communications Inc.
(Telecommunications)**....................... 64,766 1,522,001
Office Depot, Inc. (Retail)**.................. 102,600 2,539,350
Scientific-Atlanta, Inc.
(Telecommunications)......................... 40,000 865,000
Tele-Communications, Inc. (Class A)
(Broadcasting)**............................. 30,000 678,750
Tommy Hilfiger Corp. (Retail)**................ 37,200 1,641,450
Toys "R" Us, Inc. (Retail)**................... 17,500 673,750
Viacom, Inc. (Class A) (Broadcasting)**........ 4,000* 160,500
Viacom, Inc. (Class B) (Broadcasting)**........ 30,307* 1,189,550
Viking Office Products, Inc. (Office
Equipment & Supplies)**...................... 68,000 2,108,000
Wal-Mart Stores, Inc. (Retail)................. 38,000 893,000
-----------
28,430,133
TOTAL COMMON STOCKS -----------
(Cost $99,673,255) ( 96.22%) 128,503,288
---------- -----------
RIGHTS
UNITED STATES (0.05%)
Viacom, Inc. (Broadcasting)**.................. 50,000* 65,625
TOTAL RIGHTS -----------
(Cost $68,750) ( 0.05%) 65,625
TOTAL COMMON STOCKS AND RIGHTS ---------- -----------
(Cost $99,742,005) ( 96.27%) 128,568,913
---------- -----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE
RATE (000'S OMITTED)
-------- ---------------
<S> <C> <C> <C>
BONDS
PERU (0.33%)
Tele 2000 S.A. (Telecommunications)
Conv. Note 04-14-97................ 9.750% $ 450* 434,250
TOTAL BONDS -----------
(Cost $450,000) ( 0.33%) 434,250
-----------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (1.06%)
Investment in a joint repurchase
agreement transaction with Kidder
Peabody & Co., Inc. - Dated 10-31-94,
Due 11-01-94 (secured by U.S.
Treasury Bond, 9.00% Due 11-15-18,
and by U.S. Treasury Notes, 6.375%
Due 08-15-02) Note A................ 4.770 1,416 1,416,000
-----------
TOTAL SHORT-TERM INVESTMENTS ( 1.06%) 1,416,000
---------- -----------
TOTAL INVESTMENTS ( 97.66%) $130,419,163
========== ===========
</TABLE>
*Securities, other than short-term investments, newly added to the portfolio
during the year ended October 31, 1994.
**Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Fund
INDUSTRY DIVERSIFICATION (UNAUDITED)
- -------------------------------------------------------------------------------
THE FUND PRIMARILY INVESTS IN SECURITIES ISSUED BY COMPANIES OF OTHER
COUNTRIES. THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE ECONOMIC
CONDITIONS WITHIN THE COUNTRIES IT INVESTS. THE CONCENTRATION OF INVESTMENTS BY
COUNTRY 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 INDUSTRY GROUPS. THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S
INVESTMENTS AT OCTOBER 31, 1994 ASSIGNED TO THE VARIOUS INVESTMENT CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE OF SECURITIES AS A
INVESTMENT CATEGORIES % OF FUNDS NET ASSETS
- --------------------- -------------------------------
<S> <C>
Audio/Video............................... 1.05%
Banks..................................... 10.44
Beverages................................. 3.37
Broadcasting.............................. 4.03
Building Products......................... 4.81
Chemicals................................. 2.33
Computers................................. 1.24
Construction.............................. 0.45
Diversified Operations.................... 15.17
Drugs..................................... 3.76
Electronics............................... 4.20
Engineering............................... 0.98
Food...................................... 1.12
Leisure & Recreation...................... 3.84
Machinery................................. 1.85
Metal Processing & Products............... 2.35
Office Equipment & Supplies............... 1.58
Oil & Gas................................. 1.80
Paper..................................... 0.75
Publishing................................ 2.05
Real Estate............................... 2.30
Retail.................................... 10.86
Steel..................................... 2.13
Telecommunications........................ 7.81
Textile................................... 0.28
Toys/Games/Hobby Products................. 0.33
Transportation............................ 3.05
Utilities................................. 2.67
Short-Term Investments.................... 1.06
-----
TOTAL INVESTMENTS 97.66%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Fund
NOTE A -
ACCOUNTING POLICIES
Freedom Investment Trust II (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 Freedom Global Fund (the "Fund"), John
Hancock Freedom Global Income Fund, John Hancock Special Opportunities Fund,
John Hancock Short-Term Strategic Income Fund and John Hancock Freedom
International Fund.
The Trustees have authorized the issuance of three classes of shares
of the Fund, designated as Class A, Class B, and Class C shares. 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 Trustess, may be
applied differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission and the Internal Revenue
Service. Shareholders of a class which bears distribution/service expenses under
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 Investments in equity securities traded on national
securities exchanges in the United States or on equivalent foreign exchanges are
normally valued at the last quoted sales price on the day of valuation.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on valuation date are valued at the mean between the
current closing bid and asked prices. Debt securities having an over-the-counter
primary market, are valued on the basis of valuations furnished by a pricing
service which determines valuations for normal institutional size trading units
of debt securities, without exclusive reliance upon quoted prices. Short-term
debt investments which have a remaining maturity of 60 days or less are valued
at amortized cost, which generally approximates market value. Investment
securities for which no current market quotations are available, are valued at
fair value based on procedures approved by the Trustees. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more 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. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
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. It
will not be subject to Federal income tax on taxable earnings which are
distributed to shareholders. For Federal income tax purposes, net currency
exchange gains and losses from sales of foreign debt securities must be treated
as ordinary income even though such items are capital gains and losses for
accounting purposes.
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,
15
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Fund
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.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/loss on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investmen ts in securities, resulting
from changes in the exchange rate.
NOTE B -
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
The Adviser is solely responsible for advising the Fund with respect to
investments in the United States and Canada. The Fund and the Adviser also have
a sub-investment management contract with John Hancock Advisers International
Limited (the "Sub-Adviser"), a wholly-owned subsidiary of the Adviser, under
which the Sub-Adviser, subject to the review of the Trustees and overall
supervision of the Adviser, provides the Fund with investment management
services and advice with respect to that portion of the Fund's assets invested
in countries other than the United States and Canada.
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) 1% of the first $100,000,000
of the Fund's average daily net asset value, (b) 0.80% of the next
$200,000,000, (c) 0.75% of the next $200,000,000 and (d) 0.625% of the Fund's
average daily net asset value in excess of $500,000,000. The Adviser pays the
Sub-Adviser a fee equivalent, on an annual basis to the sum of (a) 0.70% of
the first $200,000,000 of the Fund's average daily net asset value and (b)
0.6375% of the Fund's average daily net asset value in excess of
$200,000,000.
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.
16
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Fund
John Hancock Broker Distribution Services, Inc. ("Broker Services"),
a wholly-owned subsidiary of the Adviser, and Freedom Distributors Corporation
("FDC") act as Co-Distributors for shares of the Fund. For the year ended
October 31, 1994 net sales charges received on the sales of Class A shares
amounted to $252,309. Out of this amount, $37,096 was retained and used for
printing prospectuses, advertising, sales literature and other purposes,
$63,917 was paid as sales commissions to unrelated broker-dealers and $151,296
was paid as sales commissions to sales personnel of John Hancock Distributors,
Inc. ("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and
Sutro & Co., Inc. ("Sutro"). 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, all of which are broker-dealers.
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% (4.0% on purchases made prior to January 1, 1994) 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
Broker Services 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 year ended October 31, 1994 contingent deferred
sales charges received by Broker Services amounted to $81,649.
In addition, to compensate the Co-Distributors for the services they
provide as distributors of shares of the Fund, the Fund has adopted a
Distribution Plan 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 the Fund's average daily net assets
attributable to Class A shares and 1.00% of the Fund's average daily net assets
attributable to Class B shares (0.75% prior to January 1, 1994), to reimburse
the Co-Distributors for their distribution/service costs. Up to a maximum of
0.25% of these payments may be service fees as defined by the amended Rules of
Fair Practice of the National Association of Securities Dealers which became
effective July 7, 1993. 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 Fund
Services, Inc. ("Fund Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. The Fund pays Fund Services a monthly transfer agent fee
equivalent, on an annual basis, to 0.36%, 0.30% and 0.10% of the average daily
net asset value of Class A, Class B and Class C shares of the Fund,
respectively, plus out of pocket expenses incurred by Fund Services on behalf of
the Fund for proxy mailings.
Messers Edward J. Boudreau, Jr. and Hugh A. Dunlap, Jr. are directors
and officers of the Adviser, and its affiliates, as well as Trustees of the
Fund. The compensation of unaffiliated Trustees is borne by the Fund.
17
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Fund
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 year
ended October 31, 1994, aggregated $84,069,027 and $72,478,637, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the year ended October 31, 1994.
The cost of investments owned at October 31, 1994 (including the joint
repurchase agreement) for federal income tax purposes was $101,608,005. Gross
unrealized appreciation and depreciation of investments aggregated $30,638,072
and $1,826,914 respectively, resulting in net unrealized appreciation of
$28,811,158.
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified $804,218 from
accumulated net investment loss to accumulated net realized gain on investments.
This represents the amount necessary to report these balances on a tax basis,
excluding certain temporary differences, as of October 31, 1994. 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.
18
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Freedom Investment Trust II and to the
Shareholders of John Hancock Freedom Global Fund
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 Freedom Global Fund
("the Fund") (a portfolio of Freedom Investment Trust II) at October 31, 1994,
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 owned at October 31, 1994 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 16, 1994
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, 1994.
The Fund designated distributions to shareholders of $8,028,526 as a
long-term capital gain dividend. These amounts were reported on a 1993 U.S.
Treasury Department Form 1099-DIV in January 1994 representing their
proportionate share. It is anticipated that there will be a distribution from
net realized gains from sales of securities to shareholders of record on
December 23, 1994 and payable December 29, 1994. Shareholders will receive a
1994 U.S. Treasury Department Form 1099-DIV in January 1995 representing their
proportionate share.
None of the distributions qualify for the dividends received
deduction available to corporations.
19
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
<TABLE>
...............................................................................
<S> <C>
ASSETS:
Investments at value - Note C:
Bonds (cost - $121,405,242)............................................ $115,712,509
Options (premium paid - $400,000)...................................... 410,000
Short-term investments (cost - $3,329,657)............................. 3,512,500
------------
119,635,009
Cash..................................................................... 994
Foreign currency, at value (cost - $12,149).............................. 12,224
Receivable for variation margin - Note A................................. 87
Receivable for forward foreign currency exchange contracts sold.......... 53,414
Receivable for shares sold............................................... 5,285
Receivable for investments sold.......................................... 5,461,146
Interest receivable...................................................... 4,782,455
Foreign tax receivable................................................... 7,360
Other assets............................................................. 5,547
------------
Total Assets...................................... 129,963,521
------------------------------------------------------------------
LIABILITIES:
Payable for foreign currency purchased................................... 55,765
Dividend payable......................................................... 455,936
Payable for shares repurchased........................................... 13,701
Payable for investments purchased........................................ 5,573,781
Payable to John Hancock Advisers, Inc. and affiliates - Note B........... 96,909
Accounts payable and accrued expenses.................................... 162,320
------------
Total Liabilities................................. 6,358,412
------------------------------------------------------------------
NET ASSETS:
Capital paid-in.......................................................... 132,742,813
Accumulated net realized loss on investments, options, foreign currency
transactions, and financial futures contracts ......................... ( 4,631,525)
Net unrealized depreciation of investments, options, foreign currency
transactions, and financial futures contracts ......................... ( 5,012,854)
Undistributed net investment income...................................... 506,675
------------
Net Assets........................................ $123,605,109
==================================================================
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 - $8,948,945/1,010,968........................................... $ 8.85
=========================================================================================
Class B - $114,656,164/12,959,426........................................ $ 8.85
=========================================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($8.85 x 104.71%).............................................. $ 9.27
=========================================================================================
</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 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, 1994. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income Fund
STATEMENT OF OPERATIONS
Year ended October 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $74,849)................................. $14,029,591
-----------
Expenses:
Distribution/service fee - Note B
Class A.................................................................................. 30,804
Class B.................................................................................. 1,422,444
Investment management fee - Note B......................................................... 1,207,673
Transfer agent fee - Note B
Class A.................................................................................. 22,187
Class B.................................................................................. 244,269
Custodian fee.............................................................................. 326,309
Auditing fee............................................................................... 81,393
Trustees' fees............................................................................. 41,818
Registration and filing fees............................................................... 33,945
Printing................................................................................... 30,074
Miscellaneous.............................................................................. 26,387
Legal fees................................................................................. 19,759
-----------
Total Expenses...................................................... 3,487,062
-----------------------------------------------------------------------------------
Net Investment Income............................................... 10,542,529
-----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FINANCIAL FUTURES CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investments sold...................................................... ( 10,786,006)
Net realized gain on foreign currency transactions......................................... 865,911
Net realized gain on financial futures contracts........................................... 1,001,624
Change in net unrealized appreciation/depreciation of investments.......................... ( 5,781,065)
Change in net unrealized appreciation/depreciation of foreign currency transactions........ ( 611,246)
Change in net unrealized appreciation/depreciation of financial futures contracts.......... 211,785
-----------
Net Realized and Unrealized Loss on Investments, Financial
Futures Contracts and Foreign Currency Transactions................. ( 15,098,997)
-----------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations................ ($ 4,556,468)
===================================================================================
</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.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income Fund
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
1994 1993
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............................................................................ $ 10,542,529 $ 15,509,572
Net realized loss on investments sold, financial futures contracts and foreign currency
transactions................................................................................... ( 8,918,471) ( 7,792,775)
Change in net unrealized appreciation/depreciation of investments, financial futures contracts
and foreign currency transactions.............................................................. ( 6,180,526) 5,681,960
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations................................ ( 4,556,468) 13,398,757
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.1140 and $0.38 per share, respectively).......................................... ( 133,439) ( 472,975)
Class B - ($0.0605 and $0.33 per share, respectively).......................................... ( 1,025,278) ( 6,917,259)
Distributions in excess of net investment income
Class A - (none and $0.04 per share, respectively)............................................. -- ( 53,887)
Class B - (none and $0.04 per share, respectively)............................................. -- ( 788,100)
Distributions from capital paid-in
Class A - ($0.52 and $0.38 per share, respectively)............................................ ( 607,771) ( 507,168)
Class B - ($0.52 and $0.38 per share, respectively)............................................ ( 8,776,041) ( 7,417,329)
------------ ------------
Total Distributions to Shareholders.......................................................... ( 10,542,529) ( 16,156,718)
------------ ------------
FROM FUND SHARE TRANSACTIONS - NET*
Net (increase) decrease in net assets from Fund share transactions............................... ( 71,343,632) 824,389
------------ ------------
NET ASSETS:
Beginning of period.............................................................................. 210,047,738 211,981,310
------------ ------------
End of period (including undistributed net investment income and distributions in excess of net
investment income of $506,675 and ($1,381,848), respectively).................................. $123,605,109 $210,047,738
============ ============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1994 1993
------------------------ ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold......................................................... 224,553 $ 2,054,490 379,688 $ 3,635,838
Shares issued to shareholders in reinvestment of distributions...... 48,398 440,545 69,300 662,387
--------- ----------- ------------ ------------
272,951 2,495,035 448,988 4,298,225
Less shares repurchased............................................. ( 600,757) ( 5,483,405) ( 430,452) ( 4,103,807)
--------- ----------- ------------ ------------
Net increase (decrease)............................................. ( 327,806) ($ 2,988,370) 18,536 $ 194,418
========= =========== ============ ============
CLASS B
Shares sold......................................................... 912,315 $ 8,546,729 4,045,134 $ 38,615,179
Shares issued to shareholders in reinvestment of distributions...... 520,773 4,747,762 775,185 7,404,415
--------- ----------- ------------ ------------
1,433,088 13,294,491 4,820,319 46,019,594
Less shares repurchased............................................. (8,973,138) ( 81,649,753) ( 4,756,370) ( 45,389,623)
--------- ----------- ------------ ------------
Net increase (decrease)............................................. (7,540,050) ($68,355,262) 63,949 $ 629,971
========= =========== ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income 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,
----------------------------------------------------------
1994 1993 1992(a) 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............................. $ 9.62 $ 9.76 $ 10.57
-------- -------- --------
Net Investment Income............................................. 0.64** 0.76 0.64
Net Realized and Unrealized Gain (Loss) on Investments, Options
Financial Futures Contracts and Foreign Currency Transactions... ( 0.78) ( 0.10) ( 0.74)
-------- -------- --------
Total from Investment Operations.............................. ( 0.14) 0.66 ( 0.10)
-------- -------- --------
Less Distributions:
Dividends from Net Investment Income.............................. ( 0.11) ( 0.38) ( 0.71)
Distributions in Excess of Net Investment Income.................. -- ( 0.04) --
Distributions from Capital Paid-In................................ ( 0.52) ( 0.38) --
-------- -------- --------
Total Distributions........................................... ( 0.63) ( 0.80) ( 0.71)
-------- -------- --------
Net Asset Value, End of Period.................................. $ 8.85 $ 9.62 $ 9.76
======== ======== ========
Total Investment Return at Net Asset Value...................... ( 1.30%) 7.14% ( 0.88%)*
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......................... $ 8,949 $ 12,882 $ 12,880
Ratio of Expenses to Average Net Assets........................... 1.59% 1.46% 1.41%*
Ratio of Net Investment Income to Average Net Assets 7.00% 7.89% 7.64%*
Portfolio Turnover Rate........................................... 174% 363% 476%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............................. $ 9.62 $ 9.74 $ 10.44 $ 10.38 $ 10.21
-------- -------- -------- -------- --------
Net Investment Income............................................. 0.59** 0.72 0.78 0.90 0.85
Net Realized and Unrealized Gain (Loss) on Investments, Options
Financial Futures Contracts and Foreign Currency Transactions... ( 0.78) ( 0.09) ( 0.59) 0.13 0.28
-------- -------- -------- -------- --------
Total from Investment Operations.............................. ( 0.19) 0.63 0.19 1.03 1.13
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income.............................. ( 0.06) ( 0.33) ( 0.89) ( 0.73) ( 0.85)
Distributions from Net Realized Gain on Investments............... -- -- -- ( 0.24) --
Distributions in Excess of Net Investment Income.................. -- ( 0.04) -- -- --
Distributions from Capital Paid-In................................ ( 0.52) ( 0.38) -- -- ( 0.11)
-------- -------- -------- -------- --------
Total Distributions........................................... ( 0.58) ( 0.75) ( 0.89) ( 0.97) ( 0.96)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.................................... $ 8.85 $ 9.62 $ 9.74 $ 10.44 $ 10.38
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value........................ ( 1.88%) 6.77% 1.72% 10.44% 11.84%
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)........................... $114,656 $197,166 $199,102 $192,687 $186,524
Ratio of Expenses to Average Net Assets............................. 2.17% 1.91% 1.91% 1.90% 1.82%
Ratio of Net Investment Income to Average Net Assets................ 6.41% 7.45% 7.59% 8.74% 8.67%
Portfolio Turnover Rate............................................. 174% 363% 476% 159% 186%
</TABLE>
* On an annualized basis.
** On average month end shares outstanding.
(a) Class A shares commenced operations on January 3, 1992.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income Fund
SCHEDULE OF INVESTMENTS
October 31, 1994
- -------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
FREEDOM GLOBAL INCOME FUND ON OCTOBER 31, 1994. IT'S DIVIDED INTO TWO MAIN
CATEGORIES: BONDS AND SHORT-TERM INVESTMENTS. THE BONDS ARE FURTHER BROKEN
DOWN BY CURRENCY DENOMINATION.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000's MARKET
ISSUER RATE OMITTED)# VALUE
- ------ -------- --------- -----------
<S> <C> <C> <C>
BONDS
AUSTRALIA (4.41%)
New South Wales Treasury Corp., 07-01-99...... 11.500% 7,000* $ 5,453,428
-----------
CANADA (6.84%)
Canadian Utilities Ltd.,6-01-04............... 8.730 7,000* 4,949,709
Trans Mountain Pipeline Ltd., 02-18-02........ 9.750 4,750 3,499,362
-----------
8,449,071
-----------
DENMARK (4.87%)
Kingdom of Denmark, 11-15-98.................. 9.000 35,000* 6,020,321
-----------
EUROPEAN CURRENCY UNIT (8.42%)
United Kingdom Treasury Bonds, 02-21-01....... 9.125 8,000* 10,411,115
-----------
FRANCE (7.22%)
Government of France, 10-25-25................ 6.000 65,000* 8,919,043
-----------
GERMANY (14.13%)
Federal Republic of Germany,
07-22-02.................................... 8.000 10,000* 6,776,307
Federal Republic of Germany,
01-04-24.................................... 6.250 20,000* 10,687,774
-----------
17,464,081
-----------
GREAT BRITAIN (13.52%)
Barclays Bank, 05-12-08....................... 9.875 4,000 6,357,540
Halifax Building Society, 01-17-14............ 11.000 2,000 3,604,024
United Kingdom Treasury Bonds, 10-13-08....... 9.000 4,000 6,744,769
-----------
16,706,333
-----------
IRELAND (3.92%)
Republic of Ireland,
09-30-12.................................... 8.750 3,000* 4,850,242
-----------
NETHERLANDS (8.13%)
Dutch Government of,
01-15-23.................................... 7.500 18,000 10,055,872
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000's MARKET
ISSUER RATE OMITTED)# VALUE
- ------ -------- ---------- ------------
<S> <C> <C> <C>
SPAIN (4.61%)
Government of Spain,
11-30-96.............................................................. 10.550% 709,000 $ 5,692,816
------------
UNITED STATES (17.55%)
Barclays North American Capital Corp, 05-15-21........................ 9.750 5,000 5,256,495
Norsk Hydro, 04-15-12................................................. 9.000 6,000 6,085,986
Royal Bank of Scotland Capital Corp. ,03-01-04........................ 10.125 5,000* 5,523,330
United States Treasury Bonds, 08-15-05##.............................. 10.750 4,000* 4,824,376
------------
21,690,187
------------
TOTAL BONDS
(Cost $121,405,242) ( 93.62%) 115,712,509
------- ------------
</TABLE>
OPTIONS
<TABLE>
<CAPTION>
EXPIRATION
CURRENCY CURRENCY DATE/STRIKE
PURCHASED SOLD PRICE
-------------- -------------- ----------------------
<S> <C> <C> <C> <C>
USD 50,000,000 DEM 75,125,000 NOVEMBER 94/ 1.5025 410,000
------------
TOTAL OPTIONS
(Premium paid $400,000) ( 0.33%) 410,000
------- ------------
</TABLE>
<TABLE>
<CAPTION>
ISSUER
- ------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
SHORT-TERM FOREIGN GOVERNMENT INVESTMENTS (2.01%)
Banque Paribas, Grand Cayman Branch 09-30-95,
(Yankee CD linked to Bulgaria discount Brady
bond floating rate note due 07-28-24)**............................. 6.062 5,000 2,487,500
------------
SHORT-TERM GOVERNMENT INVESTMENTS (0.83%)
Federal Home Loan Mortage Co., 11-01-94............................... 4.650 1,025 1,025,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,329,657) ( 2.84%) 3,512,500
------- ------------
TOTAL INVESTMENTS ( 96.79%) $119,635,009
======= ============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
* Securities other than short-term investments, newly added to the
portfolio during the year ended October 31, 1994.
** An indexed security's value is linked to changes in foreign currencies,
interest rates or other reference instruments. Indexed securities amounted
to $2,487,500 or 2.01% of net assets as of October 31, 1994.
# Par value of foreign bonds is expressed in local currency.
## A portion of this security is segregated as collateral for open futures.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
DEM Deutch Mark
USD US Dollar
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income Fund
PORTFOLIO CONCENTRATION (UNAUDITED)
- -------------------------------------------------------------------------------
THE FUND PRIMARILY INVESTS IN BONDS ISSUED BY COMPANIES AND GOVERNMENTS OF
OTHER COUNTRIES. THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE ECONOMIC
CONDITIONS WITHIN THE COUNTRIES IN WHICH IT INVESTS. THE CONCENTRATION OF
INVESTMENT BY COUNTRY OF DENOMINATION 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 INVESTMENT CATEGORIES. THE TABLE
BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS AT OCTOBER 31, 1994
ASSIGNED TO THE VARIOUS INVESTMENT CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE OF SECURITIES
INVESTMENT CATEGORIES AS A % OF NET ASSETS
- --------------------- --------------------------
<S> <C>
Governmental - foreign......................... 61.18%
Governmental - United States................... 3.90
Banking........................................ 16.78
Utilities...................................... 11.76
Options........................................ 0.33
Short-term investments......................... 2.84
-----
TOTAL INVESTMENTS 96.79%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income Fund
NOTE A -
ACCOUNTING POLICIES
Freedom Investment Trust II (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 Freedom Global Income
Fund (the "Fund"), John Hancock Special Opportunities Fund, John Hancock
Freedom Global Fund, John Hancock Short-Term Strategic Income Fund and John
Hancock Freedom International Fund.
The Trustees have authorized the issuance of two classes 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, 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 and the Internal Revenue Service.
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 Debt securities having an over-the-counter primary
market are valued on the basis of valuations furnished by a pricing service
which determines valuations for normal institutional size trading units,
without exclusive reliance upon quoted prices. Investments in equity
securities traded on national exchanges in the United States or on equivalent
foreign exchanges are normally valued at the last quoted sales price on the
day of valuation. Securities traded in the over-the-counter market and listed
securities for which no sale was reported on the valuation date are valued at
the mean between the current closing bid and asked prices. Short-term debt
investments with a remaining maturity of 60 days or less are valued at
amortized cost, which generally approximates market value. Investment
securities for which no current market quotations are available are valued at
fair value based on procedures approved by the Trustees. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below. The Fund may invest in indexed securities whose value is linked either
directly or inversely to changes in foreign currencies, interest rates,
commodities, indices or other reference instruments. Indexed securities may
be more volatile than the reference instrument itself, but any loss is
limited to the amount of the original investment.
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. Capital gains
realized on some foreign securities are subject to foreign taxes and are
accrued, as applicable.
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. It will not be subject to Federal income tax on taxable earnings
which are distributed to shareholders. For Federal income tax purposes, net
currency exchange gains and losses from sales of foreign debt securities may
be treated as ordinary income even though such items are capital gains and
losses for accounting purposes. The Fund has $4,488,199 of a capital loss
carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the
Fund, no capital gains distributions will be made. The carryforward expires
October 31, 2002.
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income Fund
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 calculated 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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts
are marked-to-market daily at the applicable foreign currency exchange rates.
Any resulting unrealized gains and losses are included in the determination
of the Fund's daily net assets. The Fund records realized gains and losses at
the time the forward foreign currency contract is closed out or offset by a
matching contract. Risks may arise upon entering these contracts from
potential inability of counterparties to meet the terms of the contract and
from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
Open foreign currency forward sell contracts at October 31, 1994 are
as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT DATE APPRECIATION
- -------- ------------------- ---------- ------------
<S> <C> <C> <C>
Deutsche Mark 35,000,000 NOV 94 $53,414
=======
</TABLE>
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments
are translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of the
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, interests, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities resulting
from changes in the exchange rate.
OPTIONS Listed options are valued at the last quoted sales price on the
exchange on which they are primarily traded. Over-the-counter options are
valued at the mean between the last bid and asked prices. Upon the writing of
a call or put option, an amount equal to the premium received by the Fund is
included in the Statement of Assets and Liabilities as an asset and
corresponding liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the written option.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income Fund
There were no written option transactions for the year ended October
31, 1994.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates,
currency exchange rates and other market conditions. At the time the Fund
enters into a financial futures contract, it is required to deposit with its
custodian a specified amount of cash or U.S. government securities, known as
"initial margin," equal to a certain percentage of the value of the financial
futures contract being traded. Each day, the futures contract is valued at
the official settlement price of the board of trade or U.S. commodities
exchange. Subsequent payments, known as "variation margin," to and from the
broker are made on a daily basis as the market price of the financial futures
contract fluctuates. Daily variation margin adjustments, arising from this
"mark to market," are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss.
Risks of entering into futures contracts include the possibility that there
may be an illiquid market and/or that a change in the value of the contracts
may not correlate with changes in the value of the underlying securities.
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, 1994, open positions in financial futures contracts
were as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION APPRECIATION
- ---------- ---------------------- -------- ------------
<S> <C> <C> <C>
DECEMBER 94 50 French Government SHORT $ 10,223
DECEMBER 94 100 U.S. Treasury Bond SHORT 201,562
---------
$ 211,785
=========
</TABLE>
At October 31, 1994, the Fund has deposited in a segregated account
$2,110,000 par value of U.S. Treasury Bond, 10.75%, 08-15-05, to cover margin
requirements on open financial futures contracts.
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) 0.75% of the first
$250,000,000 of the Fund's average daily net asset value and (b) 0.70% of the
Fund's average daily net asset value in excess of $250,000,000. Prior to
January 1, 1994 the Fund paid a monthly management fee to the Adviser
equivalent on an annual basis, to the sum of (a) 0.75% of the first $100,000,000
of the Fund's average daily net asset value, (b) 0.65% of the next $400,000,000
and (c) 0.50% 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 Broker Distribution Services, Inc. ("Broker Services"),
a wholly-owned subsidiary of the Adviser, and Freedom Distributors
Corporation ("FDC") act as Co-Distributors for shares of the Fund. For the
year ended October 31, 1994, net sales charges received on the sales of Class
A shares amounted to $33,044. Out of this amount, $4,389 was retained and
used for printing prospectuses, advertising, sales literature and other
purposes, $8,411 was paid as sales commissions to unrelated broker-dealers
and $20,244 was paid as sales commissions to sales personnel of John Hancock
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income Fund
Distributors, Inc. ("Distributors"), Tucker Anthony, Incorporated ("Tucker
Anthony") and Sutro & Co., Inc. ("Sutro"). 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, all of which are
broker-dealers.
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% (4.0% on purchases made prior to January 1, 1994) 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
Broker Services 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 year ended October 31, 1994 contingent deferred
sales charges received by Broker Services amounted to $497,083.
In addition, to compensate the Co-Distributors for the services they
provide as distributors of shares of the Fund, the Fund has adopted a
Distribution Plan 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 services expenses at an
annual rate not to exceed 0.30% of the Fund's average daily net assets
attributable to Class A shares (0.25% prior to January 1, 1994) and 1.00% of
the Fund's average daily net assets attributable to Class B shares (0.75% prior
to January 1, 1994), to reimburse the Co-Distributors for their
distribution/service costs. Up to a maximum of 0.25% of these payments may be
service fees as defined by the amended Rules of Fair Practice of the National
Association of Securities Dealers, which became effective July 7, 1993. Under
the amended Rules of Fair Practice, curtailment of a portion of the Fund's
12b-1 payments could occur under certain circumstances. During the fiscal year,
Class B 12b-1 fees were reduced to 0.95% on May 1, 1994 and 0.90% on July 1,
1994 in order to comply with the above. On September 1, 1994, the 12b-1 fee
was increased to 1.00%.
The Fund has a transfer agent agreement with John Hancock Fund
Services, Inc. ("Fund Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. The Fund pays Fund Services a monthly transfer agent fee
equivalent, on an annual basis, to 0.21% and 0.16% 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 proxy
mailings.
Messers Edward J. Boudreau, Jr. and Hugh A. Dunlap, Jr. are directors
and officers of the Adviser, and its affiliates, as well as Trustees of the
Fund. The Adviser owns 10,772 Class A shares of beneficial interest of the
Fund. The compensation of unaffiliated Trustees is borne by the Fund.
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 year
ended October 31, 1994, aggregated $229,597,384 and $290,158,475, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies during the year ended October 31, 1994, aggregated $24,031,094 and
$17,695,000, respectively.
The cost of investments owned at October 31, 1994 for Federal income tax
purposes was $122,981,107. Gross unrealized appreciation and depreciation of
investments aggregated $208,275 and $3,554,373, respectively, resulting in net
unrealized depreciation of $3,346,098.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Freedom Global Income Fund
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified amounts to
reflect a decrease in capital paid-in of $487,432, a decrease in accumulated
net investment loss of $7,982,721 and a decrease in accumulated net
investment income of $7,495,289. This represents the cumulative amount
necessary to report these balances on a tax basis, excluding certain
temporary differences, as of October 31, 1994. 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.
18
<PAGE>
John Hancock Funds - Freedom Global Income Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Freedom Investment Trust II and to the
Shareholders of John Hancock Freedom Global Income Fund
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 Freedom Global Income
Fund (the "Fund") (a portfolio of Freedom Investment Trust II) at October 31,
1994, the results of its operations, the changes in its net assets and the
financial highlights for the periods indicat ed, 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 o
pinion 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, 1994 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 16, 1994
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is
furnished with respect to the distributions of the Fund during the
fiscal year ended October 31, 1994.
None of the distributions qualify for the dividends received
deduction available to corporations.
Shareholders will be mailed a 1994 U.S. Treasury Department Form
1099-DIV in January of 1995. This will reflect the total of all distributions
which are taxable for calendar year 1994.
19
<PAGE>
JOHN HANCOCK INTERNATIONAL FUND
CLASS A AND CLASS B SHARES
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1995
This Statement of Additional Information provides information about
John Hancock International Fund (the "Fund") in addition to the information
that is contained in the Fund's Class A and Class B Prospectus Prospectus dated
March 1, 1995 (the "Prospectus").
This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Fund's Prospectuses, a copy of which may
be obtained free of charge by writing or telephoning:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205
1-800-225-5291
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
ORGANIZATION OF THE FUND............................... 2
INVESTMENT OBJECTIVE AND POLICIES...................... 2
CERTAIN INVESTMENT PRACTICES........................... 2
INVESTMENT RESTRICTIONS................................ 11
THOSE RESPONSIBLE FOR MANAGEMENT....................... 15
INVESTMENT ADVISORY AND OTHER SERVICES................. 22
DISTRIBUTION CONTRACT.................................. 24
NET ASSET VALUE........................................ 26
INITIAL SALES CHARGE ON CLASS A SHARES................. 28
DEFERRED SALES CHARGE ON CLASS B SHARES................ 29
SPECIAL REDEMPTIONS.................................... 29
ADDITIONAL SERVICES AND PROGRAMS....................... 30
DESCRIPTION OF THE FUND'S SHARES....................... 31
TAX STATUS............................................. 36
CALCULATION OF PERFORMANCE............................. 37
BROKERAGE ALLOCATION................................... 39
TRANSFER AGENT SERVICES................................ 39
CUSTODY OF PORTFOLIO................................... 39
INDEPENDENT AUDITORS................................... 39
APPENDIX A - DESCRIPTION OF BOND RATINGS............... A-1
</TABLE>
<PAGE>
ORGANIZATION OF THE FUND
John Hancock International Fund (the "Fund") is a series of Freedom
Investment Trust II (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust under the laws of The Commonwealth
of Massachusetts. The Fund commenced operations on January 3, 1994. John
Hancock Advisers, Inc. (the "Adviser") is an indirect wholly-owned subsidiary
of John Hancock Mutual Life Insurance Company (the "Life Insurance Company"), a
Massachusetts life insurance company chartered in 1862, with national
headquarters at John Hancock Place, Boston, Massachusetts.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital. The
Fund seeks to achieve its investment objective by investing primarily in
foreign equity securities. The Fund's investments will be subject to the
market fluctuations and risks inherent in all securities. There is no
assurance that the Fund will achieve its investment objective. Reference is
made to "Investment Objective and Policies and Certain Risk Considerations" in
the Prospectuses.
CERTAIN INVESTMENT PRACTICES
FOREIGN SECURITIES. Investments in foreign securities may involve risk
and considerations not present in domestic investments. Since foreign
securities generally may be quoted and pay interest or dividends in foreign
currencies, the value of the assets of the Fund as measured in U.S. dollars
will be affected favorably or unfavorably by changes in the relationship of the
U.S. dollar and other currency rates. The Fund may incur costs in connection
with the conversion of foreign currencies into U.S. dollars and may be
adversely affected by restrictions on the conversion or transfer of foreign
currencies. In addition, there may be less publicly available information
about foreign companies than U.S. companies. Foreign companies may not be
subject to accounting, auditing, and financial reporting standards, practices
and requirements comparable to those applicable to U.S. companies.
Foreign securities markets, while growing in volume, have for the most
part substantially less volume than U.S. securities markets and securities of
foreign companies are generally less liquid and at times their prices may be
more volatile than securities of comparable U.S. companies. Foreign stock
exchanges, brokers and listed companies are generally subject to less
government supervision and regulation than those in the U.S. The customary
settlement time for non-U.S. securities is less frequent than in the U.S.,
which could affect the liquidity of the Fund's investments.
The Fund may invest in companies located in developing countries which,
compared to the U.S. and other developed countries, may have relatively
unstable governments, economies based on only a few industries and securities
markets which trade only a small number of securities. Prices on exchanges
located in developing countries tend to be volatile and, in the past,
securities traded on those exchanges have offered a greater potential for gain
(and loss) than securities traded on exchanges in the U.S. and more developed
countries.
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In some countries, there is the possibility of expropriation or
confiscator taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of foreign
government restrictions or other adverse political, social or diplomatic
developments that could affect investments in those countries.
SHORT-TERM TRADING. The Fund intends to use short-term trading of
securities as a means of managing its portfolio to achieve its investment
objective. The Fund, in reaching a decision to sell one security and purchase
another security at approximately the same time, will take into account a
number of factors, including the quality ratings, interest rates, yields,
maturity dates, call prices, and refunding and sinking fund provisions of the
securities under consideration, as well as historical yield spreads and current
economic information. The success of short-term trading will depend upon the
ability of the Fund to evaluate particular securities, to anticipate relevant
market factors, including trends of interest rates and earnings and variations
from such trends, to obtain relevant information, to evaluate it promptly, and
to take advantage of its evaluations by completing transactions on a favorable
basis. It is expected that the expenses involved in short-term trading, which
would not be incurred by an investment company which does not use this
portfolio technique, will be significantly less than the profits and other
benefits which will accrue to shareholders.
The portfolio turnover rate will depend on a number of factors,
including the fact that the Fund intends to continue to qualify as a regulated
investment company under the Internal Revenue Code. Accordingly, the Fund
intends to limit its short-term trading so that, for each taxable year, less
than 30% of the Fund's gross income will be derived from gross gains on the
sale or other disposition of stock securities and certain other investments
held for less than three months. This limitation, which must be met by all
mutual funds in order to obtain such Federal tax treatment, at certain times
may prevent the Fund from realizing capital gains on some securities held for
less than three months.
REPURCHASE AGREEMENTS. A repurchase agreement is a contract under
which the Fund would acquire a security for a relatively short period (usually
not more than 7 days) subject to the obligation of the seller to repurchase and
the Fund to resell such security at a fixed time and price (representing the
Fund's cost plus interest). The Fund will enter into repurchase agreements
only with member banks of the Federal Reserve System and with "primary dealers"
in U.S. Government securities. The Adviser will continuously monitor the
creditworthiness of the parties with whom it enters into repurchase agreements.
The Fund has established a procedure providing that the securities
serving as collateral for each repurchase agreement must be delivered to the
Fund's custodian either physically or in book-entry form and that the
collateral must be marked to market daily to ensure that each repurchase
agreement is fully collateralized at all times. In the event of bankruptcy or
other default by a seller of a repurchase agreement, the Fund could experience
delays in liquidating the underlying securities and could experience losses,
including the possible decline in the value of the underlying securities during
the period in which the Fund seeks to enforce its rights thereto, possible
subnormal levels of income and lack of access to income during this period, and
the expense of enforcing its rights.
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AMERICAN DEPOSITORY RECEIPTS; EUROPEAN DEPOSITORY RECEIPTS. As
discussed in the Prospectus, the Fund may invest in the securities of foreign
issuers in the form of American Depository Receipts ("Ads"), European
Depository Receipts ("Ed's") or other securities convertible into securities of
foreign issuers. These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted but rather in
the currency of the market in which they are traded. Ads are receipts
typically issued by an American bank or trust company which evidence ownership
of underlying securities issued by a foreign corporation. Ed's are receipts
issued in Europe by banks or depositories which evidence a similar ownership
arrangement. Generally, Ads, in registered form, are designed for use in U.S.
securities markets and Ed's, in bearer form, are designed for use in European
securities markets.
FINANCIAL FUTURES CONTRACTS. The Fund may hedge its portfolio by
selling or purchasing financial futures contracts as an offset against the
effect of expected changes in interest rates or in security or foreign currency
values. Although other techniques could be used to reduce the Fund's exposure
to interest rate fluctuations, the Fund may be able to hedge its exposure more
effectively and perhaps at a lower cost by using financial futures contracts.
The Fund will enter into financial futures contracts for hedging purposes, and
for speculative purposes to the extent permitted by regulations of the
Commodity Futures Trading Commission ( FTC ).
Financial futures contracts have been designed by boards of trade which
have been designated "contract markets" by the FTC. Futures contracts are
traded on these markets in a manner that is similar to the way a stock is
traded on a stock exchange. The boards of trade, through their clearing
corporations, guarantee that the contracts will be performed. It is expected
that if other financial futures contracts are developed and traded the Fund may
engage in transactions in such contracts.
Although financial futures contracts by their terms call for actual
delivery or acceptance of financial instruments, in most cases the contracts
are closed out prior to delivery by offsetting purchases or sales of matching
financial futures contracts (same exchange, underlying security and delivery
month). If the offsetting purchase price is less than the Fund's original sale
price, the Fund realizes a gain, or if it is more, the Fund realizes a loss.
Conversely, if the offsetting sale price is more than the Fund's original
purchase price, the Fund realizes a gain, or if it is less, the Fund realizes a
loss. The transaction costs must also be included in these calculations. The
Fund will pay a commission in connection with each purchase or sale of
financial futures contracts, including a closing transaction.
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," ranging upward from 1.1% of
the value of the financial futures contract being traded. The margin required
for a financial futures contract is set by the board of trade or exchange on
which the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance bond or good
faith deposit on the financial futures contract which is returned to the Fund
upon termination of the contract, assuming all contractual obligations have
been satisfied. The Fund expects to earn interest income on its initial margin
deposits. Each day,
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the futures contract is valued at the official settlement price of the board
of trade or exchange on which it is traded. Subsequent payments, known as
"variation margin," to and from the broker are made on a daily basis as the
market price of the financial futures contract fluctuates. This process is
known as "mark to market." Variation margin does not represent a borrowing or
lending by the Fund but is instead settlement between the Fund and the broker
of the amount one would owe the other if the financial futures contract
expired. In computing net asset value, the Fund will mark to market its open
financial futures positions.
Successful hedging depends on a strong correlation between the market
for the underlying securities and the futures contract market for those
securities. There are several factors that will probably prevent this
correlation from being a perfect one, and even a correct forecast of general
interest rate trends may not result in a successful hedging transaction. There
are significant differences between the securities and futures markets which
could create an imperfect correlation between the markets and which could
affect the success of a given hedge. The degree of imperfection of correlation
depends on circumstances such as: variations in speculative market demand for
financial futures and debt securities, including technical influences in
futures trading and differences between the financial instruments being hedged
and the instruments underlying the standard financial futures contracts
available for trading in such respects as interest rate levels, maturities and
creditworthiness of issuers. The degree of imperfection may be increased where
the underlying debt securities are lower-rated and, thus, subject to greater
fluctuation in price than higher-rated securities.
A decision as to whether, when and how to hedge involves the exercise
of skill and judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of market behavior or unexpected interest rate trends. The
Fund will bear the risk that the price of the securities being hedged will not
move in complete correlation with the price of the futures contracts used as a
hedging instrument. Although the Adviser believes that the use of financial
futures contracts will benefit the Fund, an incorrect prediction could result
in a loss on both the hedged securities in the Fund's portfolio and the hedging
vehicle so that the Fund's return might have been better had hedging not been
attempted. However, in the absence of the ability to hedge, the Adviser might
have taken portfolio actions in anticipation of the same market movements with
similar investment results but, presumably, at greater transaction costs. The
low margin deposits required for futures transactions permit an extremely high
degree of leverage. A relatively small movement in a futures contract may
result in losses or gains in excess of the amount invested.
Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount the price of a futures contract may vary either
up or down from the previous day's settlement price, at the end of the current
trading session. Once the daily limit has been reached in a futures contract
subject to the limit, no more trades may be made on that day at a price beyond
that limit. The daily limit governs only price movements during a particular
trading day and, therefore, does not limit potential losses because the limit
may work to prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for several
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consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.
Finally, although the Fund engages in financial futures transactions
only on boards of trade or exchanges where there appears to be an adequate
secondary market, there is no assurance that a liquid market will exist for a
particular futures contract at any given time. The liquidity of the market
depends on participants closing out contracts rather than making or taking
delivery. In the event participants decide to make or take delivery, liquidity
in the market could be reduced. In addition, the Fund could be prevented from
executing a buy or sell order at a specified price or closing out a position
due to limits on open positions or daily price fluctuation limits imposed by
the exchanges or boards of trade. If the Fund cannot close out a position, it
will be required to continue to meet margin requirements until the position is
closed.
OPTIONS ON FINANCIAL FUTURES CONTRACTS. The Fund may purchase and
write call and put options on financial futures contracts. An option on a
futures contract gives the purchaser the right, in return for the premium paid,
to assume a position in a futures contract at a specified exercise price at any
time during the period of the option. Upon exercise, the writer of the option
delivers the futures contract to the holder at the exercise price. The Fund
would be required to deposit with its custodian initial and variation margin
with respect to put and call options on futures contracts written by it.
Options on futures contracts involve risks similar to the risks
relating to transactions in financial futures contracts. Also, an option
purchased by the Fund may expire worthless, in which case the Fund would lose
the premium paid therefor.
RESTRICTIONS ON USE OF FUTURES TRANSACTIONS AND OPTIONS. The Fund
intends to comply with FTC Regulation 4.5 and thereby avoid the status of
"commodity pool operator." In doing so, when the Fund engages in futures
transactions and options thereon for hedging purposes in an attempt to protect
against a price increase on securities which the Fund holds or intends to
purchase later, it is anticipated that the Fund will complete at least 75% of
such intended purchases. Alternatively, Regulation 4.5 permits the Fund to
elect to comply with a different test, under which the Fund will not enter into
a futures contract or purchase an option thereon for speculative purposes if
immediately thereafter the initial margin deposits and premiums required to
establish speculative positions in futures contracts and options on futures
would exceed 5% of the Fund's total assets.
When the Fund purchases a futures contract, or writes a put option or
purchases a call option thereon, cash and high grade liquid debt securities
will be deposited in a segregated account with the Fund's custodian in an
amount that, together with the amount of initial and variation margin held in
the account of its broker, equals the market value of the futures contract.
FORWARD FOREIGN CURRENCY TRANSACTIONS. The foreign currency exchange
transactions of the Fund may be conducted on a spot (i.e., cash) basis at the
spot rate for purchasing or selling currency prevailing in the foreign exchange
market. The Fund may also deal in forward foreign currency exchange contracts
involving currencies of the different countries in which it will invest
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as a hedge against possible variations in the foreign exchange rate between
these currencies. This is accomplished through contractual agreements to
purchase or sell a specified currency at a specified future date and price set
at the time of the contract. The Fund's dealings in forward foreign currency
exchange contracts will be limited to hedging either specified transactions or
portfolio positions. Transaction hedging is the purchase or sale of forward
foreign currency contracts with respect to specific receivable or payable of
the Fund accruing in connection with the purchase and sale of its portfolio
securities denominated in foreign currencies. Portfolio hedging is the use of
forward foreign currency contracts to offset portfolio security positions
denominated or quoted in such foreign currencies. The Fund will not attempt to
hedge all of its foreign portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by the Adviser.
The Fund will not engage in speculative forward foreign currency exchange
transactions.
If the Fund purchases a forward contract, its custodian bank will
segregate cash or high grade, liquid debt securities in a separate account of
the Fund in an amount equal to the value of the Fund's total assets committed
to the consummation of such forward contract. Those assets will be valued at
market daily and if the value of the securities in the separate account
declines, additional cash or securities will be placed in the account so that
the value of the account will be equal to the amount of the Fund's commitment
with respect to such contracts.
Hedging against a decline in the value of currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it
may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates.
The cost to the Fund of engaging in foreign currency exchange
transactions varies with such factors as the currency involved, the length of
the contract period and the market conditions then prevailing. Since
transactions in foreign currency are usually conducted on a principal basis, no
fees or commissions are involved.
OPTIONS TRANSACTIONS. The Fund may write listed and over-the-counter
covered call options and covered put options on securities in order to earn
additional income from the premiums received. In addition, the Fund may
purchase listed and over-the-counter call and put options. The extent to which
covered options will be used by the Fund will depend upon market conditions and
the availability of alternative strategies. The Fund may write listed covered
and over-the-counter call and put options on up to 100% of its net assets.
The Fund will write listed and over-the-counter call options only if
they are "covered", which means that the Fund owns or has the immediate right
to acquire the securities underlying the options without additional cash
consideration upon conversion or exchange of other securities held in its
portfolio. A call option written by the Fund will also be "covered" if the
Fund holds on a share-for-share basis a covering call on the same securities
where (I) the exercise price of the covering call held is equal to or less than
the exercise price of the call written or the difference is
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maintained by the Fund in cash or high grade, liquid debt obligations in a
segregated account with the Fund's custodian, and (ii) the covering call
expires at the same time as the call written. If a covered call option is not
exercised, the Fund would keep both the option premium and the underlying
security. If the covered call option written by the Fund is exercised and the
exercise price, less the transaction costs, exceeds the cost of the underlying
security, the Fund would realize a gain in addition to the amount of the option
premium it received. If the exercise price, less transaction costs, is less
than the cost of the underlying security, the Fund's loss would be reduced by
the amount of the option premium.
The Fund will write a covered put option only with respect to
securities it intends to acquire for the Fund's portfolio and will maintain in
a segregated account with the Fund's custodian cash or high grade, liquid debt
securities with a value equal to the price at which the underlying security may
be sold to the Fund in the event the put option is exercised by the purchaser.
The Fund can also write a "covered" put option by purchasing on a
share-for-share basis a put on the same security as the put written by the Fund
if the exercise price of the covering put held is equal to or greater than the
exercise price of the put written and the covering put expires at the same time
or later than the put written.
In writing listed and over-the-counter covered put options on
securities, the Fund would earn income from the premiums received. If a
covered put option is not exercised, the Fund would keep the option premium and
the assets maintained to cover the option. If the option is exercised and the
exercise price, including transaction costs, exceeds the market price of the
underlying security, the Fund would realize a loss, but the amount of the loss
would be reduced by the amount of the option premium.
If the writer of an exchange-traded option wishes to terminate its
obligation prior to exercise, it may effect a "closing purchase transaction".
This is accomplished by buying an option of the same series as the option
previously written. The effect of the purchase is that the Fund's position
will be offset by the Options Clearing Corporation. The Fund may not effect a
closing purchase transaction after it has been notified of the exercise of an
option. There is no guarantee that a closing purchase transaction can be
effected. Although the Fund will generally write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange or board of trade will exist for any
particular option or at any particular time, and for some options no secondary
market on an exchange may exist.
In the case of a written call option, effecting a closing transaction
will permit the Fund to write another call option on the underlying security
with either a different exercise price, expiration date or both. In the case
of a written put option, it will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by deposited cash or
securities. Also, effecting a closing transaction will permit the cash or
proceeds from the concurrent sale of any securities subject to the option to be
used for other investments. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will effect a
closing transaction prior to or concurrent with the sale of the security.
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The Fund will realize a gain from a closing transaction if the cost of
the closing transaction is less than the premium received from writing the
option. The Fund will realize a loss from a closing transaction if the cost of
the closing transaction is more than the premium received for writing the
option. However, because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the Fund.
OVER-THE-COUNTER OPTIONS. The Fund may engage in options transactions
on exchanges and in the over-the-counter markets. 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 ("OTC")
transactions are two-party contracts with price and terms negotiated by the
buyer and seller. The Fund will acquire only those OTC options for which the
Adviser believes the Fund can receive on each business day at least two
separate bids or offers (one of which will be from an entity other than a party
to the option) or those OTC options valued by an independent pricing service.
The Fund will write and purchase OTC options only with member banks of the
Federal Reserve System and primary dealers in U.S. Government securities or
their affiliates. The Securities and Exchange Commission (the "SEC") takes the
position that OTC options are illiquid securities subject to the Fund's 15%
limitation on illiquid securities. The SEC allows the Fund to exclude from the
15% limitation on illiquid securities a portion of the value of the OTC options
written by the Fund, provided that certain conditions are met. First, the
other party to the OTC options has to be a primary U.S. Government securities
dealer designated as such by the Federal Reserve Bank. Second, the Fund would
have an absolute contractual right to repurchase the OTC options at a formula
price. If the above conditions are met, a Fund must treat as illiquid only that
portion of the OTC option's value (and the value of its underlying securities)
which is equal to the formula price for repurchasing the OTC option, less the
OTC option's intrinsic value.
GOVERNMENT SECURITIES. Certain U.S. Government securities, including
U.S. Treasury bills, notes and bonds, and Government National Mortgage
Association certificates ("Jinni Mass"), are supported by the full faith and
credit of the United States. Certain other U.S. Government securities, issued
or guaranteed by Federal agencies or government sponsored enterprises, are not
supported by the full faith and credit of the United States, but may be
supported by the right of the issuer to borrow from the U.S. Treasury. These
securities include obligations of the Federal Home Loan Mortgage Corporation
("Freebie Macs"), and obligations supported by the credit of the
instrumentality, such as Federal National Mortgage Association Bonds ("Fanny
Mass"). No assurance can be given that the U.S. Government will provide
financial support to such Federal agencies, authorities, instrumentalities and
government sponsored enterprises in the future.
Jinni Mass, Freebie Macs and Fanny Mass are mortgage-backed securities
which provide monthly payments which are, in effect, a "pass-through" of the
monthly interest and principal payments (including any prepayments) made by the
individual borrowers on the pooled mortgage loans. Collateralized mortgage
obligations ("CMS") in which the Fund may invest are securities issued by a
U.S. Government instrumentality that are collateralized by a portfolio of
mortgages or
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mortgage-backed securities. Mortgage-backed securities may be less effective
than traditional debt obligations of similar maturity at maintaining yields
during periods of declining interest rates.
WHEN-ISSUED SECURITIES. "When-issued" refers to securities whose terms
are available and for which a market exists, but which have not yet been
issued. No payment is made with respect to a when-issued transaction until
delivery is due, often a month or more after the purchase.
The Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain an advantageous price
and yield at the time of the transactions. When the Fund engages in a
when-issued transaction, it relies on the seller to consummate the transaction.
The failure of the issuer or seller to consummate the transaction may result in
the Fund's losing the opportunity to obtain a price and yield considered to be
advantageous. On the date the Fund enters into an agreement to purchase
securities on a when-issued basis, the Fund will segregate in a separate
account cash or liquid, high grade debt securities equal in value to the
when-issued commitment. These assets will be valued daily at market, and
additional cash or liquid, high grade debt securities will be segregated in a
separate account to the extent that the total value of the assets in the
account declines below the amount of the when-issued commitment.
SHORT SALES. The Fund may engage in short sales in order to profit
from an anticipated decline in the value of a security. The Fund may also
engage in short sales to attempt to limit its exposure to a possible market
decline in the value of its portfolio securities through short sales of
securities which the Adviser believes possess volatility characteristics
similar to those being hedged. To effect such a transaction, the Fund must
borrow the security sold short to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing it at the market
price at the time of replacement. Until the security is replaced, the Fund is
required to pay to the lender any accrued interest and may be required to pay a
premium.
The Fund will realize a gain if the security declines in price between
the date of the short sale and the date on which the Fund replaces the borrowed
security. On the other hand, the Fund will incur a loss as a result of the
short sale if the price of the security increases between those dates. The
amount of any gain will be decreased, and the amount of any loss increased, by
the amount of any premium or interest the Fund may be required to pay in
connection with a short sale. The successful use of short selling as a hedging
device may be adversely affected by imperfect correlation between movements in
the price of the security sold short and the securities being hedged.
Under applicable guidelines of the staff of the Securities and Exchange
Commission, if the Fund engages in short sales of the type referred to in
nonfundamental Investment Restriction No. (b) below, it must put in a
segregated account (not with the broker) an amount of cash or U.S. Government
securities equal to the difference between (a) the market value of the
securities sold short at the time they were sold short and (b) any cash or U.S.
Government securities required to be deposited as collateral with the broker in
connection with the short sale (not including the proceeds from the short
sale). In addition, until the Fund replaces the borrowed security, it must
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daily maintain the segregated account at such a level that (1) the amount
deposited in it plus the amount deposited with the broker as collateral will
equal the current market value of the securities sold short, and (2) the amount
deposited in it plus the amount deposited with the broker as collateral will
not be less than the market value of the securities at the time they were sold
short.
Short selling may produce higher than normal portfolio turnover which
may result in increased transaction costs to the Fund and may result in gross
gains from the sale of securities deemed to have been held for less than three
months, which gains must be less than 30% of the Fund's gross income in order
for the Fund to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended. (see "Taxation.")
The Fund does not intend to enter into short sales (other than those
"against the box") if immediately after such sale the aggregate of the value of
all collateral plus the amount in such segregated account exceeds the 5% of the
value of the Fund's net assets. A short sale is "against the box" to the extent
that the Fund contemporaneously owns or has the right to obtain at no added
cost securities identical to those sold short.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
- -----------------------------------
The following investment restrictions will not be changed without
approval of a majority of the Fund's outstanding voting securities which, as
used in the Prospectus and this Statement of Additional Information, means
approval of the lesser of (1) the holders of 67% or more of the shares
represented at a meeting if the holders of more than 50% of the outstanding
shares are present in person or by proxy or (2) the holders of more than 50% of
the outstanding shares.
The Fund observes the following fundamental restrictions:
The Fund may not:
(1) Issue senior securities, except as permitted by paragraph (2)
below. For purposes of this restriction, the issuance of shares of beneficial
interest in multiple classes or series, the purchase or sale of options,
futures contracts and options on future contracts, forward commitments, forward
foreign exchange contracts and repurchase agreements entered into in accordance
with the Fund's investment policy, and the pledge, mortgage or hypothecation of
the Fund's assets within the meaning of paragraph (j) below are not deemed to
be senior securities.
(2) Borrow money, except from banks as a temporary measure for
extraordinary emergency purposes in amounts not to exceed 33 % of the Fund's
total assets (including the amount borrowed) taken at market value.
(3) Act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the Securities Act of 1933.
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(4) Purchase or sell real estate or any interest therein, except that
the Fund may invest in securities of corporate or governmental entities secured
by real estate or marketable interests therein or issued by companies that
invest in real estate or interests therein.
(5) Make loans, except that the Fund may purchase or hold debt
instruments in accordance with the Fund's investment policies and may make
loans of portfolio securities provided that as a result no more than 33 % of
the Fund's total assets taken at current value would be so loaned. The Fund
does not, for this purpose, consider the purchase of repurchase agreements,
bank certificates of deposit, bank loan participation agreements, bankers'
acceptances, a portion of an issue of publicly distributed bonds, debentures or
other securities, whether or not the purchase is made upon the original
issuance of the securities, to be the making of a loan.
(6) Invest in commodities or commodity contracts or in puts, calls, or
combinations of both, except interest rate futures contracts, options on
securities, securities indices, currency and other financial instruments and
options on such futures contracts, forward foreign currency exchange contracts,
forward commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Fund's investment policies.
(7) Purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after such purchase, the
value of its investments in such industry would exceed 25% of its total assets
taken at market value at the time of each investment. This limitation does not
apply to investments in obligations of the U.S. Government or any of its
agencies or instrumentalities.
In connection with the lending of portfolio securities under item (5)
above, such loans must at all times be fully collateralized and the Fund's
custodian must take possession of the collateral either physically or in book
entry form. Securities used as collateral must be marked to market daily.
Nonfundamental Investment Restrictions
- --------------------------------------
The following restrictions, as well as the Fund's investment objective,
are designated as nonfundamental and may be changed by the Board of Trustees
without shareholder approval:
The Fund may not:
(a) Participate on a joint or joint-and-several basis in any
securities trading account (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). The "bunching" of orders
for the sale or purchase of marketable portfolio securities with other accounts
under the management of the Adviser to save commissions or to average prices
among them is not deemed to result in a securities trading account.
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(b) Make short sales of securities or maintain a short
position unless (I) at all times when a short position is open the Fund owns
an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities of
the same issuer as, and equal in amount to, the securities sold short; (ii) for
the purpose of hedging the Fund's exposure to an actual or anticipated market
decline in the value of its investments; or (iii) in order to profit from an
anticipated decline in the value of a security.
(c) Purchase a security if, as a result, (I) more than 10% of
the Fund's assets would be invested in securities of (closed-end) investment
companies, (ii) such purchase would result in more than 3% of the total
outstanding voting securities of any one such closed-end investment company
being held by the fund, or (iii) more than 5% of the Fund's assets would be
invested in any one such closed-end investment company.
(d) Purchase securities of any issuer which, together with any
predecessor, has a record of less than three years' continuous operations prior
to the purchase if such purchase would cause investments of the Fund in all
such issuers to exceed 5% of the value of the total assets of the Fund.
(e) Invest for the purpose of exercising control over or
management of any company.
(f) Purchase warrants of any issuer, if, as a result of such
purchases, more than 2% of the value of the Fund's total assets would be
invested in warrants which are not listed on the New York Stock Exchange or the
American Stock Exchange or more than 5% of the value of the total assets of the
Fund would be invested in warrants generally, whether or not so listed. For
these purposes, warrants are to be valued at the lesser of cost or market
value, but warrants acquired by the Fund in units with or attached to debt
securities shall be deemed to be without value.
(g) Knowingly purchase or retain securities of an issuer if
one or more of the Trustees or officers of the Fund or directors or officers of
the Adviser or any investment management subsidiary of the Adviser individually
owns beneficially more than 0.5% and together own beneficially more than 5% of
the securities of such issuer.
(h) Purchase interests in oil, gas or other mineral leases or
exploration programs; however, this policy will not prohibit the acquisition of
securities of companies engaged in the production or transmission of oil, gas
or other minerals.
(i) Purchase any security, including any repurchase agreement
maturing in more than seven days, which is not readily marketable, if more than
15% of the net assets of the Fund, taken at market value, would be invested in
such securities.
(j) Pledge, mortgage, or hypothecate its assets, except as may
be necessary in connection with permitted borrowings and then only if such
pledging, mortgaging or hypothecating does not exceed 33 % of the Fund's total
assets taken at market value. For the
13
<PAGE>
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 the 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.
(k) Purchase interests in real estate limited partnerships.
(l) Purchase securities while outstanding borrowings, other
than reverse repurchase agreements, exceed 5% of the Fund's total assets.
(m) 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.
In order to permit the sale of shares of the Fund in certain states,
the Trustees may, in their sole discretion, adopt restrictions or investment
policies more restrictive than those described above. Should the Trustees
determine that any such more restrictive policy is no longer in the best
interest of the Fund and its shareholders, the Fund may cease offering shares
in the state involved and the Trustees may revoke such restrictive policy.
Moreover, if the states involved no longer require any such restrictive policy,
the Trustees may, at their sole discretion, revoke such policy.
If a percentage restriction on investment or utilization of assets as
set forth above is adhered to at the time an investment is made, a later change
in percentage resulting from changes in the value of the Fund's assets will not
be considered a violation of the restriction.
In accordance with the guidelines of the Arkansas Securities
Department, until such guidelines no longer require, the Fund will not purchase
securities (excluding restricted securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933 that have been determined by the
Trustees to be liquid based upon the trading markets for the securities) of
issuers which the Fund is restricted from selling to the public without
registration under the Securities Act of 1933 if by any reason thereof the
value of its aggregate investment in such classes of securities will exceed 10%
of its total assets.
The Fund agrees that, in accordance with Texas Blue Sky Regulations,
until such regulations no longer require, the value of securities of any one
issuer in which the Fund is short may not exceed the lesser of 2% of the value
of the Fund's net assets or 2% of the securities of any class of any such
issuer.
14
<PAGE>
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its Trustees who elect officers
who are responsible for the day-to-day operations of the Fund and who execute
policies formulated by the Trustees. Several of the officers and Trustees of
the Fund are also officers and directors of the Adviser or directors of the
Fund's principal distributor, John Hancock Funds, Inc. ("John Hancock Funds").
The following table sets forth the principal occupations of the
Trustees and principal officers of the Fund during the past five years. Unless
otherwise indicated, the business address of each is 101 Huntington Avenue,
Boston, Massachusetts 02199.
15
<PAGE>
<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");
(hereinafter the Adviser, the Berkeley
Group, NM Capital, Advisers
International, John Hancock Funds,
Investor Services and SAMCorp are
collectively referred to as the
"Affiliated Companies"); Chairman,
First Signature Bank & Trust;
Director, John Hancock Freedom
Securities Corp., John Hancock
Capital Corp., New England/Canada
Business Council; Member,
Investment Company Institute Board
of Governors; Director, Asia
Strategic Growth Fund, Inc.; Trustee,
Museum of Science; President, the
Adviser (until July 1992); Chairman,
John Hancock Distributors, Inc.
("Distributors") until April 1994.
- ------------
<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.
</FN>
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
- ---------------- WITH REGISTRANTS DURING PAST 5 YEARS
---------------- -------------------
<S> <C> <C>
William A. Barron, III Trustee (1,2) Trustee, H.M. Payson & Company
RR 1 since 1991.
325 Sea Meadows Lane
Yarmouth, Maine 04096
Douglas M. Costle Trustee (1,2) Distinguished Senior Fellow, Institute
RR2 Box 480 for Sustainable Communities,
Woodstock, Vermont 05091 Vermont Law School, 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).
*Hugh A. Dunlap, Jr. Trustee and Vice Chairman of the Adviser;
President (3, 4) President of Freedom Capital
Management Corporation from 1983
to 1992.
Leland O. Erdahl Trustee (1,2) President of Stolar, Inc. from 1987 to
161 Camino Barranca 1991 and President of Albuquerque
Placitas, New Mexico 87043 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.
</FN>
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
- ---------------- WITH REGISTRANTS DURING PAST 5 YEARS
---------------- -------------------
<S> <C> <C>
Richard A. Farrell
Farrell, Healer & Company, Inc. Trustee (1,2) President of Farrell, Healer & Co., a
160 Federal Street -- 23rd Floor venture capital management firm, since
Boston, MA 02110 1980. Prior to that date, Mr. Farrell
headed the venture capital group at
Bank of Boston Corporation.
William F. Glavin Trustee (1,2) President, Babson College; Vice
Babson College Chairman, Xerox Corporation until
Horn Library June 1989. Director, Caldor Inc. and
Babson Park, MA 02157 Inco Ltd.
Patrick Grant Trustee (1, 2, 3) President, Financial Management
5 Haven Street Incorporated, a professional treasurer,
Dedham, MA 02026 since 1978. Prior to that date Mr.
Grant was Treasurer of Endowment
Management & Research Corp., an
investment advisory firm, and Omega
Fund, Inc., an open-end investment
company.
Ralph Lowell, Jr. Trustee (1, 2) Director, Lowell Blake and Associates,
45 Mill Street a registered investment adviser since
Edgartown, MA 02539 1978. Mr. Lowell was Vice President
of that company from 1978 to 1985.
Dr. John A. Moore Trustee (1, 2) President and Chief Executive Officer,
Institute for Evaluating Health Risks Institute for Evaluating Health Risks, a
1101 Vermont Avenue N.W. nonprofit institution, since September
Suite 608 1989. Assistant Administrator of the
Washington, DC 20005 Office of Pesticides and Toxic
Substances at the Environmental
Protection Agency from December
1983 to July 1989.
- -----------
<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.
</FN>
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
- ---------------- WITH REGISTRANTS DURING PAST 5 YEARS
---------------- -------------------
<S> <C> <C>
Patti McGill Peterson Trustee (1,2) President, St. Lawrence University;
St. Lawrence University Director, Niagara Mohawk Power
110 Vilas Hall Corporation and Secretary, Mutual
Canton, NY 13617 Life.
John W. Pratt Trustee (1,2) Since 1961, Professor of Business
2 Gray Gardens East Administration at Harvard University
Cambridge, MA 02138 Graduate School of Business
Administration.
Robert G. Freedman Vice Chairman and Vice Chairman and Chief Investment
Chief Investment Officer, the Adviser; President (until
Adviser December 1994).
Anne C. Hodsdon President President and Chief Operations
Officer; Executive Vice President, the
Adviser (until December 1994).
James B. Little Senior Vice President, Senior Vice President, the Adviser.
Chief Financial
Officer
Thomas H. Drohan Senior Vice President Senior Vice President and Secretary,
and Secretary the Adviser.
James K. Ho Senior Vice President Senior Vice President, the Adviser.
Michael P. DiCarlo Senior Vice President Senior Vice President, the Adviser.
Lawrence J. Daly Senior Vice President Senior Vice President, the Adviser;
Senior Vice President, Putman
Investment Management, Inc.
- -----------
<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.
</FN>
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
- ---------------- WITH REGISTRANTS DURING PAST 5 YEARS
---------------- -------------------
<S> <C> <C>
Anthony A. Goodchild Senior Vice President Senior Vice President, the Adviser;
Senior Vice President, Putman
Investment Management, Inc.
John A. Morin Vice President Vice President, the Adviser.
Susan S. Newton Vice President, Vice President and Assistant
Assistant Secretary Secretary, the Adviser.
and Compliance Officer
James J. Stokowski Vice President and Vice President, the Adviser.
Treasurer
David S. Beckwith Vice President Vice President, the Adviser.
- -----------
<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.
</FN>
</TABLE>
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.
20
<PAGE>
<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 for the Funds' 1994 fiscal year. The
two non-Independent Trustees, Messrs. Boudreau and Dunlap, 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>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM THE
AGGREGATE BENEFITS ESTIMATED FUND AND
COMPENSATION ACCRUED AS PART ANNUAL BENEFITS JOHN HANCOCK
INDEPENDENT FROM THE OF THE FUND'S UPON FUND COMPLEX
TRUSTEES FUND EXPENSES RETIREMENT TO TRUSTEES (1)
- -------- ---- -------- ---------- -----------
<S> <C> <C> <C> <C>
William A. Barron, III $-- $-- $-- $ 42,000
Douglas M. Costle -- -- -- 42,000
Leland O. Erdahl -- -- -- 42,000
Richard A. Farrell -- -- -- 43,500
William F. Glavin -- -- -- 41,750
Patrick Grant -- -- -- 44,000
Ralph Lowell, Jr. -- -- -- 42,000
Dr. John A. Moore -- -- -- 41,750
Patti McGill Peterson -- -- -- 42,000
John W. Pratt -- -- -- 42,000
--------
$-- $-- $-- $423,000
<FN>
(1) The total compensation paid by the John Hancock Fund Complex to the Independent Trustees
is as of the calendar year ended December 31, 1994.
</FN>
</TABLE>
<TABLE>
As of January 19, 1995, the officers and Trustees of the Fund as a group
owned less than 1% of the outstanding shares of the Fund. As of January 19,
1995, the following shareholders beneficially owned 5% or more of the
outstanding shares of the Fund:
<CAPTION>
Number of Shares Percentage of Total
Name and Address of Shareholder Class of of Beneficial Outstanding Shares of
- ------------------------------- Shares Interest Owned the Class of the Fund
------ -------------- ---------------------
<S> <C> <C> <C>
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C>
First Interstate Bank of Washington Class B 30,183 6.26%
Attn: Trust/MFDS
FBO David W. William IRA
Box 21927
Seattle, WA 98111-3927
John Hancock Advisers, Inc. Class A 58,826 10.72%
Attn: Chris Meyer
101 Huntington Ave.
Boston, MA 02199-7603
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
As described in the Prospectuses, the Fund receives its investment
advice from the Adviser. Investors should refer to the Prospectuses for a
description of certain information concerning the investment management
contract. Each of the Trustees and principal officers of the Fund who is also
an affiliated person of the Adviser is named above, together with the capacity
in which such person is affiliated with the Fund and the Adviser.
As described in the Prospectuses under the caption "Organization and
Management of the Fund," the Fund has entered into an investment management
contract with the Adviser, under which the Adviser provides the Fund with a
continuous investment program, consistent with the Fund's stated investment
objective and policies. The Adviser is responsible for the portfolio management
of the Fund's assets.
No person other than the Adviser and John Hancock Advisers International
Limited ("JH Advisers International") and its directors and employees regularly
furnish advice to the Fund with respect to the desirability of the Fund's
investing in, purchasing or selling securities. The Adviser may from time to
time receive statistical or other similar factual information, and information
regarding general economic factors and trends, from the Life Insurance Company
and its affiliates.
Under the terms of the investment management contract with the Fund, the
Adviser provides the Fund with office space, supplies and other facilities
required for the business of the Fund.
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 of Class A or Class B shares will be borne exclusively by such
class of shares, subject to certain
22
<PAGE>
conditions imposed by the Internal Revenue Service in issuing rulings to funds
with a multiple-class structure.
As discussed in the Prospectuses and as provided by the investment
management contract, the Fund pays the Adviser monthly an investment management
fee, which is accrued daily, based on a stated percentage of the average of the
daily net assets of the Fund as follows:
<TABLE>
<CAPTION>
Net Asset Value Annual Rate
--------------------------------------
<S> <C>
First $250 million 1.00%
Next $250 million .80%
Next $250 million .75%
Amounts over $750 million .625%
</TABLE>
The Fund and the Adviser have entered into a sub-investment management
contract with JH Advisers International under which JH 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 .70% on
an annual basis of the average daily net asset value of the Fund for each
calendar month up to $200 million of average daily net assets; and .6375% on an
annual basis of the average daily net asset value over $200 million. JH
Advisers International, 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.
If the total of all ordinary business expenses of the Fund for any
fiscal year exceeds the limitations prescribed in any state in which shares of
the Fund are qualified for sale, the fee payable to the Adviser and JH Advisers
International will be reduced to the extent of such excess and the Adviser and
JH Advisers International will make any additional arrangements necessary to
eliminate remaining excess expenses. At this time, the most restrictive limit
on expenses imposed by a state requires that expenses charged to the Fund in any
fiscal year not exceed 2#% of the first $30,000,000 of the Fund's average net
assets, 2% of the next $70,000,000 of such net assets, and 1#% of the remaining
average net assets. When calculating the above limit, the Fund may exclude
interest, brokerage commissions and extraordinary expenses.
Pursuant to its investment management contract, the Adviser is not
liable to the Fund or its shareholders for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
the investment management contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its duties or from reckless disregard by the Adviser of its
obligations and duties under the investment management contract.
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts
02199-7603, was organized in 1968 and presently has approximately $13 billion in
assets under management in its
23
<PAGE>
capacity as investment adviser to the Fund and the other mutual funds and
publicly traded investment companies in the John Hancock group of funds having a
combined total of over 1,060,000 shareholders. The Adviser is an indirect
wholly-owned subsidiary of the Life Insurance Company, one of the most
recognized and respected financial institutions in the nation. With total
assets under management of approximately $80 billion, the Life Insurance Company
is one of the ten largest life insurance companies in the United States, and
carries S&P's and A. M. Best's highest ratings. Founded in 1862, John Hancock
has been serving clients for over 130 years.
The investment management contract continues in effect until December
13, 1995 and from year to year if approved annually by vote of a majority of the
Fund's Trustees who are not interested persons of one of the parties to the
contract, cast in person at a meeting called for the purpose of voting on such
approval, and by either the Fund's Trustees or the holders of a majority of the
Fund's outstanding voting securities. The contract automatically terminates upon
assignment and may be terminated without penalty on 60 days' notice at the
option of either party to the contract or by vote of a majority of the
outstanding voting securities of the Fund. The sole shareholder of each class
of shares of the Fund approved the investment management contract on January 3,
1994.
DISTRIBUTION CONTRACT
The Fund has entered into a distribution contract with John Hancock
Funds. Under the contract, John Hancock Funds is obligated to use its best
efforts to sell shares of each class of the Fund. Shares of the Fund are also
sold by selected broker-dealers (the "Selling Brokers") which have entered into
selling agency agreements with John Hancock Funds. John Hancock Funds accepts
orders for the purchase of the shares of the Fund which are continually offered
at the 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 Fund, John
Hancock Funds and Selling Brokers receive compensation in the form of a sales
charge imposed, in the case of Class A shares at the time of sale or, in the
case of Class B shares, on a deferred basis. The sales charges are discussed
further in the Class A and Class B shares Prospectus.
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, the Fund will pay distribution and service fees at
an aggregate annual rate of up to 0.3.0% and 1.00% respectively, of the Fund's
daily net assets attributable to Class A and Class B shares, respectively.
However, the amount of the service fee will not exceed 0.25% of the Fund's
average daily net assets attributable to each class of shares. The
distribution fees reimburse John Hancock Funds for its distribution costs
incurred in the promotion of sales of shares of the Fund, and the service fees
compensate Selling Brokers for providing personal and account maintenance
services to shareholders. In the event that John Hancock Funds is not fully
reimbursed for expenses incurred by it under the Class B Plan in any fiscal
year, John Hancock Funds may carry these expenses forward, provided, however,
that the Trustees may terminate the Class B Plan and thus the Fund's obligation
to make further payments at any time. Accordingly, the Fund does not treat
unreimbursed expenses relating to the Class B shares as a liability of the
Fund. The Plans were approved by a majority of the voting securities of the
Fund. The Plans and all amendments were
24
<PAGE>
approved by the Trustees, including a majority of the Trustees who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plans (the "Independent Trustees"), by votes
cast in person at meetings called for the purpose of voting on such Plans.
Pursuant to the Plans, at least quarterly, John Hancock Funds provides the Fund
with a written report of the amounts expended under the Plans and the purpose
for which these expenditures were made. The Trustees review these reports on a
quarterly basis During the fiscal year ended October 31, 1994, the Fund paid
Investor Services the following amount of expenses with respect to the Class A
shares and Class B shares:
<TABLE>
Expense Items
-------------
Printing and Interest,
Mailing of Carrying or
Prospectuses Compensation Expenses of Other Finance
to New to Selling John Hancock Charges
Advertising Shareholders Brokers Funds Other
----------- ------------ ------- ----- -----
<S> <C> <C> <C> <C> <C>
International
- -------------
Class A shares $2,831 $ 918 $ 361 3,201 0
Class B shares $4,316 $1,471 $9,711 4,612 $258
For the fiscal year ended October 31, 1994, an aggregate of $311,039.
</TABLE>
Each of the Plans provides that it will continue in effect only as 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 mojority of the Independent
Trustees, (b) by a vote of a majority of the Fund's outstanding shares of the
applicable class in each case upon 60 days' written notice to John Hancock Funds
and (c) automatically in the event of assignment. Each of the Plans further
provides that it may not be amended to increase the maximum amount of the fees
for the services described therein without the approval of a majority of the
outstanding shares of the class of the Fund which has voting rights with respect
to the Plan. And finally, each of the Plans provides that no material amendment
to the Plan will, in any event, be effective unless it is approved by a vote of
the Trustees and the Independent Trustees of the Fund. The holders of Class A
shares and Class B shares have exclusive voting rights with respect to the Plan
applicable to their respective class of shares. In adopting the Plans the
Trustees concluded that, in their judgment, there is a reasonable likelihood
that the Plans will benefit the holders of the applicable class of shares of the
Fund.
When the Trust seeks an Independent Trustee to fill a vacancy or as a nominee
for election by shareholders, the selection or nomination of the Independent
Trustee is, under resolutions adopted by the Trustees contemporaneously with
their adoption of the Plan, committed to the discretion of the Committee on
Administration of the Trustees. The members of the Committee on
25
<PAGE>
Administration are all Independent Trustees and are identified in this
Statement of Additional Information under the heading "Those Responsible for
Management."
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of 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 category 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.
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INITIAL SALES CHARGE ON CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the Fund
are described in the Fund's Class A and Class B Prospectus. Methods of
obtaining reduced sales charges referred to generally in the Class A and Class B
Prospectus are described in detail below. In calculating the sales charge
applicable to current purchases of Class A shares, the investor is entitled to
cumulate current purchases with the greater of the current value (at offering
price) of the Class A shares of the Fund, or if Investor Services is notified by
the investor's dealer or the investor at the time of the purchase, the cost of
the Class A shares owned.
COMBINED PURCHASES. In calculating the sales charge applicable to
purchases of Class A shares made at one time, the purchases will be combined if
made by (a) an individual, his or her spouse and their children under the age of
21, purchasing securities for his, her, or their own account, (b) a trustee or
other fiduciary purchasing for a single trust, estate or fiduciary account and
(c) certain groups of four or more individuals making use of salary deductions
or similar group methods of payment whose funds are combined for the purchase of
mutual fund shares. Further information about combined purchases, including
certain restrictions on combined group purchases, is available from Fund
Services or a Selling Broker's representative.
WITHOUT SALES CHARGES. As described in the Class A and Class B
Prospectus, Class A shares of the Fund may be sold without a sales charge to
certain persons described in the Prospectus.
ACCUMULATION PRIVILEGE. Investors (including investors combining
purchases) who are already Class A shareholders may also obtain the benefit of
the reduced sales charge by taking into account not only the amount then being
invested but also the purchase price of the Class A shares already held by such
person.
COMBINATION PRIVILEGE. Reduced sales charges (according to the schedule
set forth in the Class A and Class B Prospectus) also are available to an
investor based on the aggregate amount of his concurrent and prior investments
in Class A shares of the Fund and shares of all other John Hancock funds which
carry a sales charge.
LETTER OF INTENTION. Reduced sales charges are also applicable to
investments in Class A shares made over a thirteen-month 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 IRAs, SEP, SARSEP, TSA, 401(k), 403(b) and 457 plans. Such an investment
(including accumulations and combinations) must aggregate $25,000 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 Fund Services.
The sales charge applicable to all amounts invested under the LOI is computed as
if the aggregate amount intended to be invested
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had been invested immediately. If such aggregate amount is not actually
invested, the difference in the sales charge actually paid and the sales charge
payable had the LOI not been in effect is due from the investor. However, for
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 Fund Services
to act as his or her attorney-in-fact to redeem any escrowed shares and adjust
the sales charge, if necessary. An LOI does not constitute a binding commitment
by an investor to purchase, or by the Fund to sell, any additional Class A
shares and may be terminated at any time.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per share
without the imposition of an initial sales charge so that the Fund will receive
the full amount of the purchase payment.
CONTINGENT DEFERRED SALES CHARGE. Class B shares which are redeemed
within six years of purchase will be subject to a contingent deferred sales
charge ("CDSC") at the rates set forth in the Class A and Class B Prospectus as
a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the current market value or the
original purchase cost of the Class B shares being redeemed. Accordingly, no
CDSC will be imposed on increases in account value above the initial purchase
prices, including increases in account value derived from reinvestment of
dividends or capital gains distributions.
The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares. Solely for purposes of determining this number,
all payments during a month will be aggregated and deemed to have been made on
the last day of the month.
Proceeds from the CDSC are paid to John Hancock Funds and are used in
whole or in part by John Hancock Funds to defray its expenses related to
providing distribution-related services to the Fund in connection with the sale
of the Class B shares, such as the payment of compensation to select Selling
Brokers for selling Class B shares. The combination of the CDSC and the
distribution and service fees facilitates the ability of the Fund to sell the
Class B shares without a sales charge being deducted at the time of the
purchase. See the Class A and Class B Prospectus for additional information
regarding the CDSC.
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SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. If a shareholder were to sell
portfolio securities received in this fashion, he would incur a brokerage
charge. Any such securities would be valued for the purposes of making such
payment at the same value as used in determining net asset value. The Fund has,
however, elected to be governed by Rule 18f-1 under the Investment Company Act.
Under that rule, the Fund must redeem its shares for cash except to the extent
that the redemption payments to any shareholder during any 90-day period would
exceed the lesser of $250,000 or 1% of the Fund's net asset value at the
beginning of such period.
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE. As described more fully in the Prospectuses, the
Fund permits exchanges of shares of any class of the Fund for shares of the same
class in any other John Hancock fund offering that class.
SYSTEMATIC WITHDRAWAL PLAN. As described briefly in the Fund's Class A
and Class B Prospectus, the Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of shares of the Fund. Since the redemption price of the shares of
the Fund may be more or less than the shareholder's cost, depending upon the
market value of the securities owned by the Fund at the time of redemption, the
distribution of cash pursuant to this plan may result in realization of gain or
loss for purposes of Federal, state and local income taxes. The maintenance of
a Systematic Withdrawal Plan concurrently with purchases of additional Class A
or Class B shares of the Fund could be disadvantageous to a shareholder because
of the initial sales charge payable on such purchases of Class A shares and the
CDSC imposed on redemptions of Class B shares and because redemptions are
taxable events. Therefore, a shareholder should not purchase Class A or Class B
shares of the Fund at the same time a Systematic Withdrawal Plan is in effect.
The Fund reserves the right to modify or discontinue the Systematic Withdrawal
Plan of any shareholder on 30 days' prior written notice to such shareholder, or
to discontinue the availability of such plan in the future. The shareholder may
terminate the plan at any time by giving proper notice to Investor Services.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM ("MAAP"). This program is
explained more fully in the Fund's Class A and Class B Prospectus and the
Account Privileges Application. The program, as it relates to automatic
investment checks, is subject to the following conditions:
The investments will be drawn on or about the day of the month
indicated.
The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by Fund Services without prior notice if any
investment is not honored by the shareholder's bank. The bank shall be under no
obligation to notify the shareholder as to the non-payment of any check.
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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 any part of the
redemption proceeds in shares of the same class of the Fund or in any other John
Hancock fund, subject to the minimum investment limit of that fund. The
proceeds from the redemption of Class A shares may be reinvested at net asset
value without paying a sales charge in Class A shares of the Fund or in Class A
shares of any of the other John Hancock funds. If a CDSC was paid upon a
redemption, a shareholder may reinvest the proceeds from such redemption at net
asset value in additional shares of the class from which the redemption was
made. Such shareholder's account will be credited with the amount of any CDSC
charged upon the prior redemption. The holding period of the shares acquired
through reinvestment will, for purposes of computing the CDSC payable upon a
subsequent redemption, include the holding period of the redeemed shares. The
Fund may modify or terminate the reinvestment privilege at any time.
A redemption or exchange of Fund shares is a taxable transaction for
Federal income tax purposes. Even if the reinvestment privilege is exercised,
and any gain or loss realized by a shareholder on the redemption or other
disposition of Fund shares will be treated for tax purposes as described under
the caption "Tax Status."
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Fund are responsible for the management and
supervision of the Fund. The Declaration of Trust permits the Trustees to issue
an unlimited number of full and fractional shares of beneficial interest of
separate series 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 shareholder action. As of the date of this Statement of
Additional Information, the Trustees have authorized shares of the Fund and four
other series. The Trustees have authority, without the necessity of a
shareholder vote, to classify the shares of any series into one or more
classes. As of the date of this Statement of Additional Information, the
Trustees have authorized the issuance of three classes of shares of the Fund,
designated as Class A, Class B and Class C, although Class C is no longer
offered for sale.
The shares of each class of the Fund represent an equal proportionate
interest in the aggregate net assets allocable to that class of the Fund. Class
B shares bear the expense of the deferred sales charge arrangement and any
expense (including the higher distribution fee and incremental transfer agency
costs) resulting from this sales arrangement. The holders of Class A and Class
B shares each have exclusive voting rights on matters relating to their
respective Rule 12b-1 distribution plans. The different classes of the Funds
may bear different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares.
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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 on the same day and
will be in the same amount, except that (i) the distribution and service fees
relating to Class A and Class B shares will be borne exclusively by such class,
(ii) Class B shares will pay higher distribution and service fees than Class A
shares and (iii) each class of shares will bear any other class expenses
properly attributable to that class of shares, subject to certain conditions
imposed by the Internal Revenue Service in issuing rulings to funds with a
multiple-class structure.
In the event of liquidation, shareholders of each class are entitled to
share pro rata in the net assets of the class of the Fund available for
distribution to such shareholders. Shares entitle their holders to one vote per
share, are freely transferable and have no preemptive, subscription or
conversion rights. When issued, shares are fully paid and non-assessable, except
as set forth in the Prospectuses.
Unless otherwise required by the Investment Company Act or the
Declaration of Trust, the Trust has no intention of holding annual meetings of
shareholders. Trust shareholders may remove a Trustee by the affirmative vote
of at least two-thirds of the Trust's outstanding shares and the Trustees shall
promptly call a meeting for such purpose when requested to do so in writing by
the record holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with a request for a special meeting of
shareholders. 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 act or
obligations of the Trust. However, the Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations or affairs of
the Fund. The Declaration of Trust also provides for indemnification out of the
Fund's assets for all losses and expenses of any Fund shareholder held
personally liable by reason of being or having been a shareholder. Liability is
therefor limited to circumstances in which the Fund itself would be unable to
meet its obligations, and the possibility of this occurrence is remote.
TAX STATUS
Each series of Freedom Investment Trust II, including the Fund, is
treated as a separate entity for accounting and tax purposes. The 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 in the future. 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 of its assets, the Fund
will not be subject to Federal income tax on taxable income (including net
short-term and long-term capital gains) which is distributed to shareholders at
least annually.
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The Fund will be subject to a 4% non-deductible Federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements. The
Fund intends under normal circumstances to avoid liability for such tax by
satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and
profits ("E&P"), as computed for Federal income tax purposes, will be taxable
as described in the Fund's Prospectus whether taken in shares or in cash.
Distributions, if any, in excess of E&P will constitute a return of capital,
which will first reduce an investor's tax basis in Fund shares and thereafter
(after such basis is reduced to zero) will generally give rise to capital
gains. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for Federal income tax purposes in
each share so received equal to the amount of cash they would have received had
they elected to receive the distributions in cash, divided by the number of
shares received.
If the Fund acquires stock in certain non-U.S. corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at lease 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its
shareholders. The Fund would not be able to pass through to its shareholders
any credit or deduction for such a tax. Certain elections may, if available,
ameliorate these adverse tax consequences, but any such election would require
the Fund to recognize taxable income or gain without the concurrent receipt of
cash. The Fund may limit and/or manage its holdings in passive foreign
investment companies to minimize its tax liability or maximize its return from
these investments.
Foreign exchange gains and losses realized by the Fund in connection
with certain transactions involving foreign currency-denominated debt
securities, 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 loses to be treated as ordinary income and losses and may
affect the amount, timing and character of distributions to shareholders. Any
such transactions that are not directly related to the Fund's investment in
stock or securities, possibly including speculative currency positions or
currency derivatives not used for hedging purposes, may increase the amount of
gain it is deemed to recognize from the sale of certain investments held for
less than three months, which gain is limited under the Code to less than 30% of
its annual gross income, and could under future Treasury regulations produce
income not among the types of "qualifying income" from which the Fund must
derive at lease 90% of its annual gross income. If the net foreign exchange loss
for a year treated as ordinary loss under Section 988 were to exceed the Fund's
investment company taxable income 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.
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The Fund may be subject to withholding and other taxes imposed by
foreign countries with respect to its investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. Investors may be entitled to claim U.S. foreign tax credits with respect
to such taxes, subject to certain provisions and limitations contained in the
Code. Specifically, if more than 50% of the value of the Fund's total assets at
the close of any taxable year consists of stock or securities of foreign
corporations, the Fund may file an election with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to (i) include in
ordinary gross income (in addition to taxable dividends actually received) their
pro rata shares of foreign income taxes paid by the Fund even though not
actually received by them, and (ii) treat such respective pro rata portions as
foreign income taxes paid by them.
If the Fund makes this election, shareholders may then deduct such pro
rata portions of foreign income taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of foreign income taxes paid by the Fund, although
such shareholders will be required to include their share of such taxes in gross
income. Shareholders who claim a foreign tax credit for such foreign taxes may
be required to treat a portion of dividends received from the Fund as a separate
category of income for purposes of computing the limitations on the foreign tax
credit. Tax-exempt shareholders will ordinarily not benefit from this election.
Each year that the Fund files the election described above, its shareholders
will be notified of the amount of (i) each shareholder's pro rata share of
foreign income taxes paid by the Fund and (ii) the portion of Fund dividends
which represents income from each foreign country.
The amount of net short-term and long-term capital gains, if any, in any
given year will vary depending upon the Adviser's current investment strategy
and whether the Adviser believes it to be in the best interest of the Fund to
dispose of portfolio securities or enter into options or futures transactions
that will generate capital gains. At the time of an investor's purchase of Fund
shares, a portion of the purchase price is often attributable to realized or
unrealized appreciation in the Fund's portfolio or undistributed taxable income
of the Fund. Consequently, subsequent distributions from such appreciation or
income may be taxable to such investor even if the net asset value of the
investor's shares is, as a result of the distributions, reduced below the
investor's cost for such shares, and the distributions in reality represent a
return of a portion of the purchase price.
Upon a redemption of shares of the Fund (including by exercise of the
exchange privilege) a shareholder may realize a taxable gain or loss depending
upon his basis in his shares. Such gain or loss will be treated as capital gain
or loss if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, depending upon the shareholder's tax holding period for
the shares. A sales charge paid in purchasing Class A shares of the Fund cannot
be taken into account for purposes of determining gain or loss on the redemption
or exchange of such shares within 90 days after their purchase to the extent
shares of the Fund or another John Hancock Fund are subsequently acquired
without payment of a sales charge pursuant to the reinvestment or exchange
privilege. Such disregarded load will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Also, any loss
realized on a redemption or exchange will be
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disallowed to the extent the shares disposed of are replaced 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 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 treated as a long-term capital loss
to the extent of any amounts treated as distributions of long-term capital gain
with respect to such shares.
Although its present intention is to distribute all net short-term and
long-term capital gains, if any, the Fund reserves the right to retain and
reinvest all or any portion of its "net capital gain," which is the excess, as
computed for Federal income tax purposes, of net long-term capital gain over net
short-term capital loss in any year. The Fund will not in any event distribute
net long-term capital gains realized in any year to the extent that a capital
loss is carried forward from prior years against such gain. To the extent such
excess was retained and not exhausted by the carryforward of prior years'
capital losses, it would be subject to Federal income tax in the hands of the
Fund. Each shareholder would be treated for Federal income tax purposes as if
the Fund had distributed to him on the last day of its taxable year his pro rata
share of such excess, and he had paid his pro rata share of the taxes paid by
the Fund and reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain 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 to 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 shares of such taxes.
For Federal income tax purposes, the Fund is permitted to carry forward
a net capital loss in any year to offset its net capital gains, if any, during
the eight years following the year of the loss. To the extent subsequent net
capital gains are offset by such losses, they would not result in Federal income
tax liability to the Fund and, as noted above, would not be distributed as such
to shareholders. The Fund had no capital loss carryforwards.
For purposes of the dividends received deduction available to
corporations, dividends received by the Fund, if any, from U.S. domestic
corporations in respect of the stock of such corporations held by the Fund, for
U.S.Federal income tax purposes, for at least 46 days (91 days in the case of
certain preferred stock) and distributed and designated by the Fund may be
treated as qualifying dividends. Because the Fund is not generally anticipated
to invest a significant portion of its assets in the stock of such U.S.
corporations, it is unlikely that a substantial portion of its distributions
will qualify for the dividends received deduction. Corporate shareholders must
meet the minimum holding period requirement stated above (46 or 91 days) with
respect to their shares of the Fund in order to qualify for the deduction and,
if they borrow to acquire such shares, may be denied a portion of the dividends
received deduction. The entire qualifying dividend, including the otherwise
deductible amount, will be included in determining the excess (if any) of a
corporate shareholder's adjusted current earnings over its alternative minimum
taxable income, which may increase its alternative minumum tax liability.
Additionally, any corporate shareholder should consult its tax adviser regarding
the possibility that its basis in its shares may be reduced, for Federal income
tax purposes, by reason of "extraordinary dividends" received with respect to
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<PAGE>
the shares, for the purpose of computing its gain or loss on redemption or
other disposition of the shares.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.
Limitations imposed by the Code on regulated investment companies like
the Fund may restrict the Fund's ability to enter into futures, options, and
forward transactions.
Certain options, futures and forward foreign currency transactions
undertaken by the Fund may cause the Fund to recognize gains or losses from
marking to market even though its positions have not been sold or terminated and
affect the character as long-term or short-term (or, in the case of certain
currency forwards, options and futures, as ordinary income or loss) and timing
of some capital gains and losses realized by the Fund. Also, certain of the
Fund's losses on its transactions involving options, futures or forward
contracts and/or offsetting portfolio positions may be deferred rather than
being taken into account currently in calculating the Fund's taxable income.
Certain of the applicable tax rules may be modified if the Fund is eligible and
chooses to make one or more of certain tax elections that may be available.
These transactions may therefore affect the amount, timing and character of the
Fund's distributions to shareholders. The Fund will take into account the
special tax rules (including consideration of available elections) applicable to
options, futures or forward contracts in order to minimize any potential adverse
tax consequences.
The foregoing discussion relates solely to U.S. Federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions. Dividends, capital gain distributions, and
ownership of or gains realized on the redemption (including an exchange) of Fund
shares may also be subject to state and local taxes. Shareholders should
consult their own tax advisers as to the Federal, state or local tax
consequences of ownership of shares of, and receipt of distributions from, the
Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which
their Fund investment is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that hat described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8 or authorized
substitute is on file, to 31% backup withholding on certain other payments from
the Fund. Non-U.S. investors should consult their tax advisers regarding such
treatment and the application of foreign taxes to an investment in the Fund.
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The Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Fund qualifies as a regulated investment company under
the Code, it will also not be required to pay any Massachusetts income tax.
CALCULATION OF PERFORMANCE
For the period ended October 31, 1994, the average annual total return
for Class A and Class B shares from commencement of operations on January 3,
1994 was (4.05%) and (4.47%), respectively.
In the case of Class A or Class B shares, this calculation assumes the
maximum sales charge of 5.0% is included in the initial investment or the 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.
T = nth root of (ERV/P - 1)
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical
$1,000 investment made at the beginning of the 1 year and life of the
fund periods.
From time to time, in reports and promotional literature, the Fund's
total return will be compared to indices of mutual funds such as Lipper
Analytical Services, Inc.'s "Lipper - Mutual Fund Performance Analysis," a
publication which tracks net assets, total return, and yield on more than 1,000
equity mutual funds in the United States. Ibottson and Associates, CDA
Weisenberger and F.C. Towers are also used for comparison purposes, as well as
the Russell and Wilshire Indices.
Performance rankings and ratings reported periodically in national
financial publications such as MONEY Magazine, FORBES, BUSINESS WEEK, THE WALL
STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S will also be
utilized.
The performance of the Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of the
Fund for any period in the future. The performance of the Fund is a function of
many factors, including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in
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operating expenses are all examples of items that can increase or decrease the
Fund's performance.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and
the allocation of brokerage commissions are made by officers of the Fund
pursuant to recommendations made by an investment committee of the Adviser,
which consists of officers and directors of the Adviser and affiliates, and
officers and Trustees who are interested persons of the Fund. Orders for
purchases and sales of securities are placed in a manner which, in the opinion
of the officers of the Fund, will offer the best price and market for the
execution of each such transaction. Purchases from underwriters of portfolio
securities may include a commission or commissions paid by the issuer and
transactions with dealers serving as market makers reflect a "spread."
Investments in debt securities are generally traded on a net basis through
dealers acting for their own account as principals and not as brokers; no
brokerage commissions are payable on such transactions.
The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing
primary policy, the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and such other policies as the Trustees may determine,
the Adviser may consider sales of shares of the Fund as a factor in the
selection of broker-dealers to execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed
in the selection of brokers and dealers, and in the negotiation of brokerage
commission rates and dealer spreads, by the reliability and quality of the
services, including primarily the availability and value of research information
and to a lesser extent statistical assistance furnished to the Adviser or JH
Advisers International, and their value and expected contribution to the
performance of the Fund. It is not possible to place a dollar value on
information and services to be received from brokers and dealers, since it is
only supplementary to the research efforts of the Adviser or JH Advisers
International. The receipt of research information is not expected to reduce
significantly the expenses of the Adviser or JH Advisers International. The
research information and statistical assistance furnished by brokers and dealers
may benefit the Life Insurance Company or other advisory clients of the Adviser
or JH Advisers International, and, conversely, brokerage commissions and spreads
paid by other advisory clients of the Adviser or JH Advisers International may
result in research information and statistical assistance beneficial to the
Fund. The Fund will make no commitment to allocate portfolio transactions upon
any prescribed basis. While the Fund's officers will be primarily responsible
for the allocation of the Fund's brokerage business, their policies and
practices in this regard must be consistent with the foregoing and will at all
times be subject to review by the Trustees. For the year ended on October 31,
1994, negotiated brokerage commissions were paid on portfolio transactions in
the amount of $50,807.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
the Fund may pay a broker which provides brokerage and research services to the
Fund an amount of disclosed
37
<PAGE>
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, 1994, the Fund did not pay
commissions as compensation to any brokers for research services such as
industry, economic and company reviews and evaluations of securities.
The Adviser's indirect parent, the Life Insurance Company, is the
indirect sole shareholder of John Hancock Freedom Securities Corporation and its
subsidiaries, three of which, Tucker Anthony Incorporated, John Hancock
Distributors, Inc. and Sutro & Company, Inc., are broker-dealers ("Affiliated
Brokers"). Pursuant to procedures determined by the Trustees and consistent
with the above policy of obtaining best net results, the Fund may execute
portfolio transactions with or through affiliated brokers. During the year
ending October 31, 1994, the Fund did not execute any portfolio transitions with
affiliated brokers.
Any of the Affiliated Brokers may act as broker for the Fund on exchange
transactions, subject, however, to the general policy of the Fund set forth
above and the procedures adopted by the Trustees pursuant to the Investment
Company Act. Commissions paid to an Affiliated Broker must be at least as
favorable as those which the Trustees believe to be contemporaneously charged by
other brokers in connection with comparable transactions involving similar
securities being purchased or sold. A transaction would not be placed with an
Affiliated Broker if the Fund would have to pay a commission rate less favorable
than the Affiliated Broker's contemporaneous charges for comparable transactions
for its other most favored, but unaffiliated, customers except for accounts for
which the Affiliated Broker acts as clearing broker and which are comparable to
the Fund as determined by a majority of the Trustees who are not interested
persons (as defined in the Investment Company Act) of the Fund, the Adviser or
the Affiliated Broker. Commissions on transactions with Affiliated Brokers must
comply with Rule 17e-1 of the 1940 Act and must be fair and reasonable to
shareholders as determined in good faith by the Trustees. Because the Adviser,
which is affiliated with the Affiliated Brokers, has, as an investment adviser
to the Fund, the obligation to provide investment management services, which
includes elements of research and related investment skills such research and
related skills will not be used by the Affiliated Brokers as a basis for
negotiating commissions at a rate higher than that determined in accordance with
the above criteria. The Fund will not effect principal transactions with
Affiliated Brokers.
Other investment advisory clients advised by the Adviser may also invest
in the same securities as the Fund. When these clients buy or sell the same
securities at substantially the same time, the Adviser may average the
transactions as to price and allocate the amount of available investments in a
manner which the Adviser believes to be equitable to each client, including the
Fund. In some instances, this investment procedure may adversely affect the
price paid or received by the Fund or the size of the position obtainable for
it. On the other hand, to the extent permitted by law, the Adviser may
aggregate the securities to be sold or purchased for the Fund with those to be
sold or purchased for other clients managed by it in order to obtain best
execution.
38
<PAGE>
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
Insurance Company, is the transfer and dividend paying agent of the Fund. The
Fund pays Investor Services an annual fee for Class A shares of $16.00 per
shareholder account and for Class B shares of $18.50 per shareholder account,
plus certain out-of-pocket expenses.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian
agreement between the Trust and State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110. Under the custodian agreement,
State Street Bank and Trust Company performs custody, portfolio and fund
accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are Price Waterhouse LLP, 160
Federal Street, Boston, Massachusetts 02110. Price Waterhouse provides services
including (1) audits and rendering an opinion of the Fund's annual financial
statements, (2) assistance and consultation in connection with Securities and
Exchange Commission filings, and (3) preparation of the Fund's annual Federal
income tax return.
39
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS
STANDARD & POOR'S BOND RATINGS
AAA Debt rated AAA has the highest rating assigned 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 highest 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 an 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.
To provide more detailed indications of credit quality, the ratings AA
to BBB may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
A provisional rating, indicated by "p" following a rating, is sometimes
used by Standard & Poor's. It assumes the successful completion of the project
being financed by the issuance of the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion.
MOODY'S BOND RATINGS
Aaa 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 unlikely to impair the fundamentally strong position of such issues.
Generally speaking, the safety of obligations of this class is so absolute that
with the occasional exception of oversupply in a few specific instances,
characteristically, their market value is affected solely by money market
fluctuations.
Aa 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
40
<PAGE>
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
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities. The market value
of Aa bonds is virtually immune to all but money market influences, with the
occasional exception of oversupply in a few specific instances.
A 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.
Baa 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.
Rating symbols may include numerical modifiers 1, 2 or 3. The numerical
modifier 1 indicates that the security ranks at the high end, 2 in the
mid-range, and 3 nearer the low end, of the generic category. These modifiers
of rating symbols Aa, A and Baa are to give investors a more precise indication
of relative debt quality in each of the historically defined categories.
Conditional ratings, indicated by "Con," are sometimes given when the
security for the bond depends upon the completion of some act or the fulfillment
of some condition. Such bonds, are given a conditional rating that denotes
their probable credit status upon completion of that act or fulfillment of that
condition.
41
<PAGE>
Financial Statements
John Hancock Funds - Freedom International Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
October 31, 1994
- --------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks and units (cost - $7,315,780) ................................ $7,553,467
Bonds (cost - $50,000) ..................................................... 48,250
Joint repurchase agreement (cost - $686,000) ............................... 686,000
----------
8,287,717
Cash ......................................................................... 277
Foreign currency, at value (cost - $362,692) ................................. 363,570
Receivable for shares sold ................................................... 50,981
Receivable for investments sold .............................................. 63,133
Interest receivable .......................................................... 321
Dividends receivable ......................................................... 11,177
Receivable from John Hancock Advisers, Inc. - Note B ......................... 102,268
Deferred organization expenses - Note A ...................................... 96,170
----------
Total Assets ............................... 8,975,614
---------------------------------------------------------
Liabilities:
Payable for foreign currency purchased ....................................... 297
Payable for investments purchased ............................................ 311,746
Foreign taxes payable ........................................................ 7,587
Payable to John Hancock Advisers, Inc. and affiliates - Note B ............... 201,400
Accounts payable and accrued expenses ........................................ 81,078
----------
Total Liabilities .......................... 602,108
---------------------------------------------------------
Net Assets:
Capital paid-in .............................................................. 8,072,102
Accumulated net realized gain on investments and foreign currency transactions 54,063
Net unrealized appreciation of investments and foreign currency transactions . 232,519
Undistributed net investment income .......................................... 14,822
----------
Net Assets ................................. $8,373,506
=========================================================
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 - $4,425,836/511,780 ................................................. $ 8.65
=================================================================================================
Class B - $3,947,670/458,714 ................................................. $ 8.61
=================================================================================================
Maximum Offering Price Per Share *
Class A - ($8.65 x 105.26%) .................................................. $ 9.10
=================================================================================================
<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.
</FN>
</TABLE>
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, 1994. You'll
also find the net asset value and the maximum offering price per share as of
that date.
See notes to financial statements.
7
<PAGE>
Financial Statements
John Hancock Funds - Freedom International Fund
<TABLE>
<CAPTION>
Statement of Operations
For the period January 3, 1994 (commencement of operations) to October 31, 1994
- -------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $9,318) ............................ $ 84,465
Interest .......................................................................... 28,605
---------
113,070
---------
Expenses:
Investment management fee - Note B .............................................. 44,740
Distribution/service fee - Note B
Class A ..................................................................... 7,311
Class B ..................................................................... 20,369
Transfer agent fee - Note B
Class A ..................................................................... 7,311
Class B ..................................................................... 6,518
Custodian fee ................................................................... 45,200
Organization expense - Note A ................................................... 18,981
Registration and filing fees .................................................... 14,998
Printing ........................................................................ 10,300
Auditing fee .................................................................... 7,500
Miscellaneous ................................................................... 465
Legal fees ...................................................................... 300
Trustees' fees .................................................................. 50
---------
Total Expenses ..................................................... 184,043
Less expenses reimbursable by John Hancock Advisers, Inc. - Note B . (102,268)
---------
Net Expenses ....................................................... 81,775
--------------------------------------------------------------------------------
Net Investment Income .............................................. 31,295
--------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
Transactions:
Net realized gain on investments sold ............................................. 47,824
Net realized loss on foreign currency transactions ................................ (20,941)
Change in net unrealized appreciation/depreciation of investments ................. 235,937
Change in net unrealized appreciation/depreciation of foreign currency transactions (3,418)
---------
Net Realized and Unrealized Gain on
Investments and Foreign Currency Transactions ....................... 259,402
---------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations ................ $ 290,697
=================================================================================
</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.
See notes to financial statements.
8
<PAGE>
Financial Statements
John Hancock Funds - Freedom International Fund
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
FOR THE PERIOD
JANUARY 3, 1994
(COMMENCEMENT
OF OPERATIONS) TO
OCTOBER 31, 1994
----------------
<S> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ........................................................................................ $ 31,295
Net realized gain on investments sold and foreign currency transactions ...................................... 26,883
Change in net unrealized appreciation/depreciation of investments and foreign currency transactions .......... 232,519
----------
Net Increase in Net Assets Resulting from Operations ................................................... 290,697
From Fund Share Transactions - Net* ................................................................................ 7,582,809
Net Assets:
Initial investment by John Hancock Advisers, Inc. - Note A ................................................... 500,000
----------
End of period (including undistributed net investment income of $14,822) ..................................... $8,373,506
==========
* Analysis of Fund Share Transactions:
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD JANUARY 3, 1994
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1994
------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
CLASS A
Shares sold ...................................................................... 535,016 $4,456,147
Less shares repurchased .......................................................... (82,060) (683,928)
-------- ----------
Net increase ..................................................................... 452,956 3,772,219
Initial Investment by John Hancock Advisers, Inc. - Note A ....................... 58,824 500,000
-------- ----------
Shares outstanding end of period ................................................. 511,780 $4,272,219
======== ==========
CLASS B
Shares sold ...................................................................... 512,942 $4,260,033
Less shares repurchased .......................................................... (54,228) (449,443)
-------- ----------
Net increase and shares outstanding end of period ................................ 458,714 $3,810,590
======== ==========
</TABLE>
The STATEMENT OF CHANGES IN NET ASSETS shows how the value of the Fund's net
assets have changed since the commencement of operations. The difference
reflects earnings less expenses, any investment and foreign currency gains and
losses and any increase or decrease in money shareholders invested in the Fund.
The footnote illustrates the number of Fund shares sold and redeemed during the
period, along with the corresponding dollar values.
See notes to financial statements.
9
<PAGE>
Financial Statements
John Hancock Funds - Freedom International 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:
- --------------------------------------------------------------------------------
FOR THE PERIOD JANUARY 3, 1994
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1994
---------------------------
<S> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period .................................................................. $ 8.50
------
Net Investment Income ................................................................................. 0.07(b)
Net Realized and Unrealized Gain on Investments and Foreign Currency Transactions ..................... 0.08
------
Total from Investment Operations .................................................................. 0.15
------
Net Asset Value, End of Period ........................................................................ $ 8.65
======
Total Investment Return at Net Asset Value (d) ........................................................ 1.77%(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) ............................................................. $4,426
Ratio of Expenses to Average Net Assets ** ............................................................ 1.50%*
Ratio of Adjusted Expenses to Average Net Assets (a) .................................................. 3.79%*
Ratio of Net Investment Income to Average Net Assets .................................................. 1.02%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a) ..................................... (1.27%)*
Portfolio Turnover Rate ............................................................................... 50%
** Expense Reimbursement Per Share .................................................................... $ 0.16(b)
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period .................................................................. $ 8.50
------
Net Investment Income ................................................................................. 0.02(b)
Net Realized and Unrealized Gain on Investments and Foreign Currency Transactions ..................... 0.09
------
Total from Investment Operations .................................................................. 0.11
------
Net Asset Value, End of Period ........................................................................ $ 8.61
======
Total Investment Return at Net Asset Value (d) ........................................................ 1.29%(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) ............................................................. $3,948
Ratio of Expenses to Average Net Assets ** ............................................................ 2.22%*
Ratio of Adjusted Expenses to Average Net Assets (a) .................................................. 4.51%*
Ratio of Net Investment Income to Average Net Assets .................................................. 0.31%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a) ..................................... (1.98%)*
Portfolio Turnover Rate ............................................................................... 50%
** Expense Reimbursement Per Share .................................................................... $ 0.16(b)
<FN>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) On average month end shares outstanding.
(c) Not annualized.
(d) Without the reimbursement, total investment return would have been lower.
</FN>
</TABLE>
See notes to financial statements.
10
<PAGE>
Financial Statements
John Hancock Funds - Freedom International Fund
Schedule of Investments
October 31, 1994
- --------------------------------------------------------------------------------
The SCHEDULE OF INVESTMENTS is a complete list of all securities owned by
Freedom International Fund on October 31, 1994. It's divided into four main
categories: common stocks, units, bonds and short-term investments. Common
stocks, units and bonds are further broken down by country. Short-term
investments, which represent the Fund's "cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
COMMON STOCKS
Argentina (0.59%)
Telefonica de Argentina, American
Depositary Receipts (ADR) (Utilities) .......... 800 $ 49,700
----------
Australia (8.95%)
Amcor Ltd. (Paper) ............................. 15,000 99,829
Australian National Industries Ltd.
(Diversified Operations) ....................... 75,000 80,777
Broken Hill Proprietary Co., Ltd.
(Diversified Operations) ....................... 12,500 191,636
News Corp. Ltd. (The) (Publishing) ............. 21,900 135,014
Renison Goldfields Consolidated Ltd.
(Metal Processing & Products)* ................. 35,000 136,485
Western Mining Corp. Holdings Ltd.
(Metal Processing & Products) .................. 16,875 105,163
----------
748,904
----------
France (6.43%)
Banque Nationale de Paris (Banks) .............. 1,903 94,244
LVMH Moet Henessey Louis Vuitton
(Beverages) .................................... 780 125,782
Lyonnaise Des Eaux Dumez
(Diversified Operations) ....................... 1,500 136,390
Societe Centrale Union des Assurances
de Paris (Insurance) ........................... 5,000 131,922
Technip (ADR) (Engineering) .................... 2,000 50,200
----------
538,538
----------
Germany (1.64%)
Bayer AG (Chemicals) ........................... 400 93,628
Bayerische Hypotheken-Und Wechsel-Bank
Aktiengesellschaft (Banks) ..................... 150 39,461
Bayerische Hypotheken-Und Wechsel-Bank
Aktiengesellschaft (New Shares) (Banks)* ....... 15 3,841
----------
136,930
----------
Hong Kong (13.81%)
Cheung Kong (Holdings) Ltd. (Real Estate) ...... 25,000 120,349
CITIC Pacific Ltd. (Diversified Operations) .... 40,000 120,349
Hongkong Electric Holdings Ltd. (Utilities) .... 30,000 94,339
Hongkong Land Holdings Ltd. (Real Estate) ...... 35,000 89,680
HSBC Holdings Ltd. (Banks) ..................... 11,800 139,722
Hutchison Whampoa Ltd.
(Diversified Operations) ....................... 17,000 78,538
Jardine Matheson Holdings Ltd.
(Diversified Operations) ....................... 12,000 99,774
Shangri-La Asia Ltd. (Hotels & Motels) ......... 50,000 72,145
Shun Tak Holdings Ltd. (Transportation) ........ 75,000 65,998
Sun Hung Kai Properties Ltd. (Real Estate) ..... 15,000 114,526
Swire Pacific Ltd. (Diversified Operations) .... 12,000 91,621
Yizheng Chemical Fibre Co., Ltd.
(Chemicals) .................................... 175,000 69,637
----------
1,156,678
----------
Indonesia (0.83%)
PT Astra International (Automobile/Trucks) ..... 31,500 69,641
----------
Japan (17.36%)
Daido Steel Co., Ltd. (Steel) .................. 20,000 121,043
Denki Kagaku Kogyo K.K. (Chemicals)* ........... 30,000 134,160
Itochu Corp. (Diversified Operations) .......... 15,000 116,809
Jusco Co., Ltd. (Retail) ....................... 6,000 135,089
Marui Co., Ltd. (Retail) ....................... 5,000 91,402
Matsushita Electric Industrial Co.,
Ltd. (Electronics) ............................. 10,000 166,279
NKK Corp. (Steel)* ............................. 40,000 123,522
Seino Transportation Co., Ltd.
(Transportation) ............................... 7,000 138,084
Sony Corp. (Electronics) ....................... 3,000 183,114
Sumitomo Cement Co., Ltd.
(Building Products) ............................ 20,000 102,040
Toshiba Corp. (Electronics) .................... 18,000 142,029
----------
1,453,571
----------
See notes to financial statements.
11
<PAGE>
Financial Statements
John Hancock Funds - Freedom International Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
Malaysia (4.44%)
Aokam Perdana Berhad (Building Products) ......... 15,000 $123,875
Land & General Berhad (Diversified
Operations) ...................................... 31,000 152,877
Resorts World Berhad (Leisure &
Recreation) ...................................... 15,000 95,108
--------
371,860
--------
Mexico (3.77%)
Cemex S.A. (Ser A) (Building Products) ........... 1,687 15,093
Cemex S.A. (Ser B) (Building Products) ........... 3,375 30,797
Grupo Iusacell, S.A. de C.V. (Ser D)
(ADR) (Telecommunications)* ...................... 3,000 84,000
Grupo Iusacell, S.A. de C.V. (Ser L)
(ADR) (Telecommunications)* ...................... 2,000 61,500
Grupo Televisa, S.A. de C.V. (ADR)
(Broadcasting) ................................... 1,000 44,375
Grupo Tribasa, S.A. de C.V. (ADR)
(Construction)* .................................. 1,500 47,063
Telefonos de Mexico S.A. de C.V. (ADR)
(Telecommunications) ............................. 600 33,075
--------
315,903
--------
Netherlands (2.44%)
ABN Amro Holdings N.V. (Banks) ................... 2,000 71,056
Polygram N.V. (Audio/Video) ...................... 3,000 133,452
--------
204,508
--------
New Zealand (2.59%)
Carter Holt Harvey Ltd. (Building Products) ...... 46,200 112,038
Telecom Corporation of New Zealand
(Utilities) ...................................... 30,000 104,512
--------
216,550
--------
Norway (0.46%)
Den norske Bank AS (ADR) (Banks)* ................ 1,500 38,625
--------
Pakistan (0.40%)
Cresent Textile Mills (Textile)* ................. 19,000 33,508
--------
Singapore (6.92%)
DBS Land Ltd. (Real Estate) ...................... 30,000 105,209
Fraser & Neave Ltd. (Diversified Operations) ..... 12,000 142,186
Keppel Corp. (Diversified Operations) ............ 14,000 128,703
Overseas Union Bank Ltd. (Banks) ................. 19,500 111,542
Singapore Press Holdings Ltd. (Publishing) ....... 5,000 91,590
--------
579,230
--------
Spain (2.43%)
Banco Popular Espanol SA (Banks) ............... 600 75,308
Repsol SA (Oil & Gas) .......................... 4,000 127,990
---------
203,298
---------
Sweden (2.48%)
Atlas Copco AB (Machinery) ..................... 6,250 $ 85,295
Telefonaktiebolaget (LM) Ericsson
(Telecommunications) ........................... 2,000 121,849
---------
207,144
---------
Switzerland (3.59%)
BBC Brown Boveri AG (Engineering) .............. 750 123,157
Ciba-Geigy AG (Drugs) .......................... 200 116,700
Nestle S.A. (Food) ............................. 65 60,829
---------
300,686
---------
Thailand (0.84%)
Thai Farmers Bank Ltd. (Banks) ................. 8,000 70,617
---------
United Kingdom (9.72%)
Cable & Wireless PLC (Telecommunications) ...... 15,000 103,042
Carlton Communications PLC (Broadcasting) ...... 10,000 144,259
Grand Metropolitan PLC (Diversified
Operations) .................................... 19,800 134,396
Sainsbury (J) PLC (Retail) ..................... 12,000 78,312
Smithkline Beecham (Drugs) ..................... 10,000 66,569
Thorn EMI PLC (Leisure & Recreation) ........... 10,000 158,979
Vodafone Group PLC (Telecommunications) ........ 37,000 128,144
---------
813,701
---------
TOTAL COMMON STOCKS
(Cost $7,275,775) (89.69%) 7,509,592
------- ---------
UNITS
India (0.52%)
CESC Ltd. (Utilities)* ......................... 750 43,875
---------
TOTAL UNITS
(Cost $40,005) (0.52%) 43,875
------- ---------
TOTAL COMMON STOCKS AND UNITS
(Cost $7,315,780) (90.21%) 7,553,467
------- ---------
See notes to financial statements.
12
<PAGE>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
BONDS
Peru (0.58%)
Tele 2000 S.A. (Telecommunications)
Conv. Note 04-14-97 ................ 9.750% $ 50 $ 48,250
---------- ----------
TOTAL BONDS
(Cost $50,000) (0.58%) 48,250
---------- ----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (8.19%)
Investment in a joint repurchase
agreement transaction with
Kidder Peabody & Co., Inc. -
Dated 10-31-94, Due 11-01-94
(secured by U.S. Treasury Bond,
9.00% Due 11-15-18 and by
U.S. Treasury Note, 6.375%
Due 08-15-02) Note A ............... 4.770 686 686,000
---------- ----------
TOTAL SHORT-TERM INVESTMENTS (8.19%) 686,000
---------- ----------
TOTAL INVESTMENTS (98.98%) $8,287,717
========== ==========
*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.
Industry Diversification (Unaudited)
- ------------------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other countries.
The performance of the Fund is closely tied to the economic conditions within
the countries it invests. The concentration of investments by country 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
industry groups. The table below shows the percentages of the Fund's Investments
at October 31, 1994 assigned to the various investment categories.
MARKET VALUE OF SECURITIES AS A
INVESTMENT CATEGORIES % OF FUNDS NET ASSETS
Audio/Video.......................... 1.59%
Automobile/Trucks.................... 0.83
Banks................................ 7.70
Beverages............................ 1.50
Broadcasting......................... 2.25
Building Products.................... 4.58
Chemicals............................ 3.55
Construction......................... 0.56
Diversified Operations............... 17.60
Drugs................................ 2.19
Electronics.......................... 5.87
Engineering.......................... 2.07
Food................................. 0.73
Hotels & Motels...................... 0.86
Insurance............................ 1.58
Leisure & Recreation................. 3.04
Machinery............................ 1.02
Metal Processing & Products.......... 2.89
Oil & Gas............................ 1.53
Paper................................ 1.19
Publishing........................... 2.71
Real Estate.......................... 5.13
Retail............................... 3.64
Steel................................ 2.92
Telecommunications................... 6.93
Textile.............................. 0.40
Transportation....................... 2.44
Utilities............................ 3.49
Short-term Investments............... 8.19
------
TOTAL INVESTMENTS 98.98%
======
See notes to financial statements.
13
<PAGE>
Notes to Financial Statements
John Hancock Funds - Freedom International Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust II(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 Freedom International Fund
(the "Fund," which commenced operations on January 3, 1994), John Hancock
Freedom Global Fund, John Hancock Freedom Global Income Fund, John Hancock
Special Opportunities Fund, and John Hancock Short-Term Strategic Income Fund.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B and Class C shares. 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 and the Internal Revenue Service.
Shareholders of a class which bears distribution/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. No Class C shares of the Fund have been issued as of October
31, 1994. Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Investments in equity securities traded on national
securities exchanges in the United States or on equivalent foreign exchanges
are normally valued at the last quoted sales price on the day of valuation.
Securities traded in the over-the-counter market and listed securities for
which no sale was reported on valuation date are valued at the mean between
the current closing bid and asked prices. Debt securities having an
over-the-counter primary market are valued on the basis of valuations
furnished by a pricing service which determines valuations for normal
institutional size trading units, without exclusive reliance upon quoted
prices. Short-term debt investments which have a remaining maturity of 60
days or less are valued at amortized cost, which generally approximates
market value. Investment securities for which no current market quotations
are available, are valued at fair value based on procedures approved by the
Trustees. All portfolio transactions initially expressed in terms of foreign
currencies have been translated into U.S. dollars as described in "Foreign
Currency Translation" below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial
Group, may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more 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. Capital gains
realized on some foreign securities are subject to foreign taxes and are
accrued, as applicable.
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. It will not be subject to Federal income tax on taxable earnings
which are distributed to shareholders. For federal income tax purposes, net
currency exchange gains and losses from sales of foreign debt securities must
be treated as ordinary income even though such items are capital gains and
losses for accounting purposes.
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
14
<PAGE>
Notes to Financial Statements
John Hancock Funds - Freedom International Fund
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 calculated 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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts
are marked-to-market daily at the applicable foreign currency exchange rates.
Any resulting unrealized gains and losses are included in the determination
of the Fund's daily net assets. The Fund records realized gains and losses at
the time the forward foreign currency contract is closed out or offset by a
matching contract. Risks may arise upon entering these contracts from
potential inability of counterparties to meet the terms of the contract and
from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
There were no open foreign currency forward contracts at October 31, 1994.
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 and losses arise from changes in the
value of assets and liabilities other than investmen ts in securities, resulting
from changes in the exchange rate.
OPTIONS Listed options are valued at the last quoted sales price on the exchange
on which they are primarily traded. Over-the-counter options are valued at the
mean between the last bid and asked prices. Upon the writing of a call or put
option, an amount equal to the premium received by the Fund is included in the
Statement of Assets and Liabilities as an asset and corresponding liability. The
amount of the liability is subsequently marked-to-market to reflect the current
market value of the written option.
There were no written option transactions for the period ended October 31,
1994.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund enters into a financial futures contract, it
is required to deposit with its custodian a specified amount of cash or U.S.
government securities, known as "initial margin," equal to a certain
percentage of the value of the financial futures
15
<PAGE>
Notes to Financial Statements
John Hancock Funds - Freedom International Fund
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, 1994, there were no open positions in financial futures
contracts.
DEFERRED ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged to the
Fund's operations ratably over a five-year period that began with the
commencement of investment operations of the Fund.
NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
The Adviser is solely responsible for advising the Fund with respect to
investments in the United States and Canada. The Fund and the Adviser also
have a sub-investment management contract with John Hancock Advisers
International Limited (the "Sub-Adviser"), a wholly-owned subsidiary of the
Adviser, under which the Sub-Adviser, subject to the review of the Trustees
and overall supervision of the Adviser, provides the Fund with investment
management services and advice with respect to the portion of the Fund's
assets invested in countries other than the United States and Canada.
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) 1% of the first $250,000,000 of the Fund's
average daily net asset value, (b) 0.80% of the next $250,000,000, (c) 0.75% of
the next $250,000,000 and (d) 0.625% of the Fund's average daily net asset value
in excess of $750,000,000. The Adviser pays the Sub-Adviser a fee equivalent, on
an annual basis to the sum of (a) 0.70% of the first $200,000,000 of the Fund's
average daily net asset value and (b) 0.6375% of the Fund's average daily net
asset value in excess of $200,000,000. The Fund is not responsible for payment
of the Sub-Adviser's 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.
The Adviser has voluntarily agreed to limit Fund expenses, including the
management fee (but not including the transfer agent fee and the 12b-1 fee), to
0.90% of the Fund's average daily net assets. Accordingly, the reduction in the
Adviser's fee amounted to $102,268 for the period ended October 31, 1994. The
Adviser reserves the right to terminate this voluntary limitation in the future.
The Fund has a distribution agreement with John Hancock Broker Distribution
Services, Inc. ("Broker Services"), a wholly-owned subsidiary of the Adviser.
For the period ended October 31, 1994, Broker Services received net sales
charges of $69,090 with regard to sales of Class A shares. Out of this amount,
$10,785 was retained and used for printing prospectuses, advertising, sales
literature and other purposes, $26,729 was paid as sales commissions to
unrelated broker-dealers and $31,576 was paid as sales commissions to sales
personnel of John Hancock Distributors, Inc. ("Distributors"), Tucker Anthony,
Incorporated ("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"). The Adviser's
indirect parent, John Hancock
16
<PAGE>
Notes to Financial Statements
John Hancock Funds - Freedom International Fund
Mutual Life Insurance Company, is the indirect sole shareholder of Distributors
and John Hancock Freedom Securities Corporation and its subsidiaries which
include Tucker Anthony and Sutro, which are broker-dealers.
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 Broker Services 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, 1994, contingent deferred sales charges received by Broker Services amounted
to $1,139.
In addition, to compensate Broker Services for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plan 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 Broker
Services, for distribution and service expenses at an annual rate not to exceed
0.30% of the Fund's average daily net assets attributable to Class A shares and
1.00% of the Fund's average daily net assets attributable to Class B shares to
reimburse Broker Services for its distribution/service costs. Up to a maximum of
0.25% of these payments may be service fees as defined by the amended Rules of
Fair Practice of the National Association of Securities Dealers which became
effective July 7, 1993. 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 Fund Services,
Inc. ("Fund Services"), a wholly-owned subsidiary of The Berkeley Financial
Group. The Fund pays Fund Services a monthly transfer agent fee equivalent, on
an annual basis, to 0.30% and 0.32% 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 proxy mailings. The
transfer agent fee, on an annual basis, attributable to Class C shares when they
become outstanding is 0.40% of their average daily net asset value.
Messers Edward J. Boudreau, Jr. and Hugh A. Dunlap, Jr. are directors and
officers of the Adviser, and its affiliates, as well as Trustees of the Fund.
The Adviser owns 58,824 Class A shares of beneficial interest of the Fund. The
compensation of unaffiliated Trustees is borne by the Fund.
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, 1994 aggregated $9,635,380 and $2,323,662,
respectively. There were no purchases or sales of obligations of the U.S.
government and its agencies during the period ended October 31, 1994.
The cost of investments owned at October 31, 1994 (including the joint
repurchase agreement) for Federal income tax purposes was $8,051,780. Gross
unrealized appreciation and depreciation of investments aggregated $447,245 and
$211,308, respectively, resulting in net unrealized appreciation of $235,937.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified amounts to
reflect an increase in accumulated net realized gain on investments of
$27,180, a decrease in undistributed net investment income of $16,473 and a
decrease in capital paid-in of $10,707. This represents the amount necessary
to report these balances on a tax basis, excluding certain temporary
differences, as of October 31, 1994. 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>
John Hancock Funds - Freedom International Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Freedom Investment Trust II and to the
Shareholders of John Hancock Freedom International Fund
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
Freedom International Fund (the "Fund") (a portfolio of Freedom Investment
Trust II) at October 31, 1994, the results of its operations, and the changes
in its net assets and the financial highlights for the period from January 3,
1994 (commencement of operations) to October 31, 1994, 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 audit. We conducted our
audit 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 audit, which included confirmation of securities at October 31, 1994 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provides a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 16, 1994
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund for its fiscal year ended October
31, 1994.
The Fund has not paid any distributions of ordinary income dividends or net
long-term capital gains during the fiscal year.
It is anticipated that there will be a distribution from net realized
capital gains from sales of securities to shareholders of record on December 23,
1994 and payable December 29, 1994. Shareholders will receive a 1994 U.S.
Treasury Department Form 1099-DIV in January 1995 representing their
proportionate share.
<PAGE>
Notes
John Hancock Funds - Freedom International Fund
19
<PAGE>
(GRAPHIC) JOHN HANCOCK FUNDS
Bulk Rate
101 Huntington Avenue Boston, MA 02199-7603 U.S. Postage
PAID
Brockton, MA
Permit No. 582
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Freedom International Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
(RECYCLE SYMBOL) Printed on Recycled Paper JH 4000A 10/94
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CLASS A AND CLASS B SHARES
JOHN HANCOCK SHORT-TERM STRATEGIC INCOME FUND
MARCH 1, 1995
This Statement of Additional Information provides information about John
Hancock Short- Term Strategic Income Fund (the "Fund") in addition to the
information that is contained in the Fund's Class A and Class B Prospectus,
dated March 1, 1995.
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Fund's Prospectus, a copy of which can be obtained
free of charge by writing or telephoning:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
1-800-225-5291
TABLE OF CONTENTS
Cross-
Referenced to
Statement of Class A and
Additional Class B
Information Prospectus
Page Page
ORGANIZATION OF THE FUND 2 9
INVESTMENT OBJECTIVES AND POLICIES 2 4
CERTAIN INVESTMENT PRACTICES 10 4
INVESTMENT RESTRICTIONS 11 4
THOSE RESPONSIBLE FOR MANAGEMENT 14 9
INVESTMENT ADVISORY AND OTHER SERVICES 21 9
DISTRIBUTION CONTRACT 22 11
NET ASSET VALUE 22 16
INITIAL SALES CHARGE ON CLASS A SHARES 24 16
DEFERRED SALES CHARGE ON CLASS B SHARES 25 17
SPECIAL REDEMPTIONS 25 21
ADDITIONAL SERVICES AND PROGRAMS 26 23
DESCRIPTION OF THE FUND'S SHARES 27 14
TAX STATUS 28 12
CALCULATION OF PERFORMANCE 32 13
BROKERAGE ALLOCATION 34 9
TRANSFER AGENCY SERVICES 35 --
1
<PAGE>
CUSTODY OF PORTFOLIO 35 --
INDEPENDENT ACCOUNTANTS. 35 --
APPENDIX A - DESCRIPTION OF BOND AND 36 27
COMMERCIAL PAPER RATINGS --
FINANCIAL STATEMENTS -- --
ORGANIZATION OF THE FUND
John Hancock Short-Term Strategic Income Fund (the "Fund") is a series
of Freedom Investment Trust II (the "Trust") an open-end management investment
company organized as a Massachusetts business trust on March 31, 1986. The
Fund commenced operations on July 31, 1990. John Hancock Advisers, Inc. (the
"Adviser") is an indirect wholly-owned subsidiary of John Hancock Mutual Life
Insurance Company (the "Life Insurance Company"), a Massachusetts life
insurance company chartered in 1862, with national headquarters at John Hancock
Place, Boston, Massachusetts.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Fund's
investment objective and policies discussed in the Prospectus.
GENERAL. The securities in which the 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. 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.
FOREIGN SECURITIES. The percentage of the Fund's assets that will be allocated
to foreign securities will vary depending on the relative yields of foreign and
U.S. securities, the economies of foreign countries, the condition of such
countries financial markets, the interest rate climate of such countries and the
relationship of such countries' currency to the U.S. dollar. These factors are
judged on the basis of fundamental economic criteria (e.g., relative inflation
levels and trends, growth rate forecasts, balance of payments status and
economic policies) as well as technical and political data. The Fund may
invest in any country where the Adviser believes there is a potential to
achieve the Fund's investment objective. The Fund may invest in securities of
issuers in industrialized Western European countries (including Scandinavian
countries) and in, Canada, Japan, Australia and New Zealand, as well as in
emerging markets or countries with limited or developing capital markets.
Investments in securities of issuers in emerging markets generally involve more
risk and may be considered highly speculative, as described in more detail in
the Prospectus.
2
<PAGE>
The value of portfolio securities denominated in foreign currencies
may increase or decrease in response to changes in currency exchange rates.
The Fund will incur costs in
connection with converting between currencies. The other risks associated
with foreign investments are disclosed in the Fund's Prospectus.
MONEY MARKET SECURITIES. The Fund's shorter-term investments may be money
market securities. Money market securities include short-term obligations
issued or guaranteed by the U.S. Government or foreign governments or issued
by such governments' respective agencies and instrumentalities, bank money
market instruments including certificates of deposit, banker's acceptances and
deposit notes and certain other short-term obligations such as short-term
commercial paper. With respect to bank money market instruments, the
obligations may be issued by U.S. or foreign depository institutions, foreign
branches or subsidiaries of U.S. depository institutions ("Eurodollar"
obligations), U.S. branches or subsidiaries of foreign depository institutions
("Yankee dollar" obligations) or foreign branches or subsidiaries of foreign
depository institutions. Eurodollar and Yankee dollar obligations and
obligations of branches or subsidiaries of foreign depository institutions may
be general obligations of the parent bank or may be limited to the issuing
branch or subsidiary by the terms of the specific obligations or by government
regulation. Foreign subsidiaries of U.S. depository institutions and U.S. and
foreign subsidiaries of foreign depository institutions may be considered
investment companies under the 1940 Act.
MORTGAGE-BACKED SECURITIES. Ginnie Mae Certificates, issued by the Government
National Mortgage Association, are mortgage-backed securities of the modified
pass-through type, which means that both interest and principal payments
(including prepayments) are passed through monthly to the holders of the
Certificates. The National Housing Act provides that the full faith and credit
of the United States is pledged to the timely payment of principal and interest
by Ginnie Maes of amounts due on these Ginnie Mae Certificates. The Government
National Mortgage Association is a wholly-owned corporate instrumentality of
the United States within the Department of Housing and Urban Development.
In addition to Ginnie Mae Certificates, the Fund may invest in mortgage-backed
securities issued by the Federal National Mortgage Association (Fannie Maes)
and by the Federal Home Loan Mortgage Corporation (Freddie Macs). Fannie Mae,
a federally chartered and privately owned corporation, issues pass-through
securities which are guaranteed as to payment of principal and interest by
Fannie Mae. Freddie Mac, a corporate instrumentality of the United States,
issues participation certificates which represent an interest in mortgages from
Freddie Mac's portfolio. Freddie Mac guarantees the timely payment of interest
and the ultimate collection of principal. As is the case with Ginnie Mae
Certificates, the actual maturity of and realized yield on particular Fannie
Mae and Freddie Mac mortgage-based securities will vary based on the prepayment
experience of the underlying pool of mortgages. Securities guaranteed by
Fannie Mae and Freddie Mac are not backed by the full faith and credit of the
United States.
Generally, the issuers of mortgaged-backed and receivable-backed bonds, notes
or pass-through certificates are special purpose entities and do not have any
significant assets other than the assets securing such obligations. Instruments
backed by pools of mortgages and receivables may be subject to unscheduled
prepayments of principal prior to maturity. When the obligations are prepaid,
the Fund must reinvest the prepaid amounts in securities the yields of which
reflect interest rates prevailing at the time. Therefore, the Fund's ability
to maintain a portfolio which includes high yielding asset-backed securities
will be adversely affected to the extent that prepayments of principal must be
reinvested in securities which have lower yields than the prepaid obligations.
Moreover, prepayments of securities purchased at a premium could result in a
realized loss.
3
<PAGE>
INDEXED OBLIGATIONS. Indexed notes and commercial paper typically provide
that the principal amount is adjusted upwards or downwards (but not below zero)
at maturity to reflect fluctuations in the exchange rate between two currencies
during the period the obligation is outstanding, depending on the terms of
the specific security. In selecting the two currencies, the Adviser will
consider the correlation and relative yields of various currencies. The Fund
will purchase an indexed obligation using the currency in which it is
denominated and, at maturity, will receive interest and principal payments
thereon in that currency. The amount of principal payable by the issuer at
maturity, however, will vary (i.e., increase or decrease) in response to the
change (if any) in the exchange rates between the two specified currencies
during the period from the date the instrument is issued to its maturity date.
The potential for realizing gains as a result of changes in foreign currency
exchange rates may enable the Fund to hedge the currency in which the
obligation is denominated (or to effect cross-hedges against other currencies)
against a decline in the U.S. Dollar value of investments denominated in
foreign currencies while providing an attractive money market rate of return.
However, there can be no assurance that the Fund's hedging strategies will be
effective. The Fund will purchase such indexed obligations to generate
current income or for hedging purposes and will not speculate in such
obligations. As of the date of this Statement of Additional Information, the
Fund has no present intention to invest in these obligations.
OBLIGATIONS OF FOREIGN GOVERNMENTAL ENTITIES. The obligations of foreign
governmental entities have various kinds of government support and include
obligations issued or guaranteed by foreign governmental entities with taxing
power. These obligations may or may not be supported by the full faith and
credit of a foreign government. The Fund will invest in foreign government
securities of issuers considered stable by the Adviser, based on its analysis
of factors such as general political or economic conditions relating to the
government and the likelihood of expropriation, nationalization, freezes or
confiscation of private property. The Adviser does not believe that the
credit risk inherent in the obligations of stable foreign governments is
significantly greater than that of U.S. Government securities.
MULTI-NATIONAL CURRENCY UNIT SECURITIES. As indicated above, the Fund may
invest in securities denominated in a multi-national currency unit. An
illustration of a multi-national currency unit is the European Currency Unit
(the "ECU"), which is a "basket" consisting of specified amounts of the
currencies of the member states of the European Community, a Western European
economic cooperative organization that includes France, West Germany, The
Netherlands and the United Kingdom. The specific amounts of currencies
comprising the ECU may be adjusted by the Council of Ministers of the European
Community to reflect changes in relative values of the underlying currencies.
The Adviser does not believe that such adjustments will adversely affect
holders of ECU-denominated obligations or the marketability of such securities.
European supranational entities, in particular, issue ECU-denominated
obligations. The Fund may invest in securities denominated in the currency of
one nation although issued by a governmental entity, corporation or financial
institution of another nation. For example, the Fund may invest in a British
Pound sterling-denominated obligation issued by a United States corporation.
Such investments involve credit risks associated with the issuer and currency
risks associated with the currency in which the obligation is denominated.
The Fund may invest in fixed and floating rate loans ("Loans") arranged
through private negotiations between a foreign entity and one or more financial
institutions ("Lenders"). The majority of the Fund's investments in Loans in
emerging markets is expected to be in the form of participations in Loans
("Participations") and assignments of portions of Loans from third parties
("Assignments"). Participations typically will result in the Fund having a
contractual relationship only with the Lender not with the borrower. As a
result, the Fund will assume the credit risk of
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both the borrower and the Lender that is selling the Participation. In the
event of the insolvency of the Lender selling a Participation, the Fund may be
treated as a general creditor of the Lender and may not benefit from any
set-off between the Lender and the borrower. The Fund will acquire
Participations only if the Lender interpositioned between the Fund and the
borrower is determined by the Adviser to be creditworthy.
The secondary market for Participations and Assignments is limited to
certain institutional investors, which could adversely affect the value of
these securities and make it more difficult to assign a value to them.
FINANCIAL FUTURES CONTRACTS. The Fund may hedge its portfolio by selling
interest rate and currency futures contracts as an offset against the effect of
expected increases in interest rates or declines in foreign currency values and
by purchasing such futures contracts as an offset against the effect of
expected declines in interest rates or increase in foreign currency values.
Although other techniques could be used to reduce the Fund's exposure to
interest rate and currency fluctuations, the Fund may be able to hedge its
exposure more effectively and perhaps at a lower cost by using futures
contracts. The Fund will enter into futures contracts for hedging and
non-hedging purposes to the extent permitted by regulations of the Commodity
Futures Trading Commission ("CFTC").
Futures contracts have been designed by boards of trade which have been
designated "contract markets" by the CFTC. Futures contracts are traded on
these markets in a manner that is similar to the way a stock is traded on a
stock exchange. The boards of trade, through their clearing corporations,
guarantee that the contracts will be performed. It is expected that if new
types of interest rate and currency futures contracts are developed and traded
the Fund may engage in transactions in such contracts.
Although futures contracts by their terms call for actual delivery or
acceptance of interest rate instruments or currency, in most cases the
contracts are closed out prior to delivery by offsetting purchases or sales of
matching futures contracts (same exchange, underlying security or currency and
delivery month). If the offsetting purchase price is less than the Fund's
original sale price, the Fund realizes a gain, or if it is more, the Fund
realizes a loss. Conversely, if the offsetting sale price is more than the
Fund's original purchase price, the Fund realizes a gain, or if it is less, the
Fund realizes a loss. The transaction costs must also be included in these
calculations. The Fund will pay a commission in connection with each purchase
or sale of futures contracts, including a closing out transaction. For a
discussion of the Federal income tax considerations of trading in futures
contracts, see the information under the caption "Tax Status" below.
At the time the Fund enters into a futures contract, it is required to
deposit with its custodian a specified amount of cash or U.S. Government
securities, known as "initial margin." The margin required for a futures
contract is set by the board of trade or exchange on which the contract is
traded and may be modified during the term of the contract. The initial margin
is in the nature of a performance bond or good faith deposit on the futures
contract which is returned to the Fund upon termination of the contract,
assuming all contractual obligations have been satisfied. The Fund expects to
earn interest income on its initial margin deposits. Each day, the futures
contract is valued at the official settlement price of the board of trade or
exchange on which it is traded. Subsequent payments, known as "variation
margin," to and from the broker, are made on a daily basis as the market price
of the futures contract fluctuates. This process is known as "mark to the
market." Variation margin does not represent a borrowing or lending by the
Fund but is instead settlement between the Fund and the broker of the amount
one would owe the other if the futures position was closed out. In computing
net asset value, the Fund will mark to the market its open futures positions.
The Fund will maintain with its custodian bank, State Street Bank and Trust
Co., a segregated asset account consisting of cash or cash equivalents in an
amount sufficient to cover its obligations with respect to open futures
contracts.
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Successful hedging depends on a strong correlation between the market
for the underlying securities or currency and the futures contract market for
those securities or currency. There are several factors that will probably
prevent this correlation from being a perfect one and even a correct forecast
of general interest rate or currency trends may not result in a successful
hedging transaction. There are significant differences between the securities
or currency and futures markets which could create an imperfect correlation
between the markets and which could cause a given hedge not to achieve its
objectives. The degree of imperfection of correlation depends on circumstances
such as: variations in speculative market demand for interest rate futures
and debt securities, including technical influences in futures trading and
differences between the financial instruments being hedged and the instruments
underlying the standard interest rate futures contracts available for trading
in such respects as interest rate levels, maturities, and creditworthiness of
issuers. The degree of imperfection may be increased where the underlying debt
securities are lower-rated and, thus, subject to greater fluctuation in price
than higher-rated securities.
A decision as to whether, when and how to hedge involves the exercise
of skill and judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of market behavior or unexpected interest rate or currency
volatility. The Fund will bear the risk that the price of the securities or
currency being hedged will not move in complete correlation with the price of
the futures contracts used as a hedging instrument. Although the Adviser
believes that the use of futures contracts will benefit the Fund, an incorrect
prediction could result in a loss on both the hedged securities or currency in
the Fund's portfolio and the hedging vehicle so that the Fund's return might
have been better had hedging not been attempted. However, in the absence of
the ability to hedge, the Adviser might have taken portfolio actions in
anticipation of the same market movements with similar investment results but,
presumably, at greater transaction costs. In addition, the low margin deposits
for futures transactions permit an extremely high degree of leverage. A
relatively small movement in a futures contract may result in losses or gains
in excess of the amount invested.
Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a
price beyond that limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential losses because
the limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.
Finally, although the Fund engages in futures transactions only on
boards of trade or exchanges where there appears to be an adequate secondary
market, there is no assurance that a liquid market will exist for a particular
futures contract at any given time. The liquidity of the market depends on
participants closing out contracts rather than making or taking delivery. In
the event participants decide to make or take delivery, liquidity in the market
could be reduced. In addition, the Fund could be prevented from executing a
buy or sell order at a specified price or closing out a position due to limits
on open positions or daily price fluctuation limits imposed by the exchanges or
boards of trade. If the Fund cannot close out a position, it will be required
to continue to meet margin requirements until the position is closed.
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OTHER CONSIDERATIONS. The Fund will engage in futures and related options
transactions only for bona fide hedging or non-hedging purposes to the extent
permitted by CFTC regulations. The Fund will determine that the price
fluctuations in the futures contracts and options on futures used for hedging
purposes are substantially related to price fluctuations in securities held by
the Fund or which it expects to purchase. Except as stated below, the Fund's
futures transactions will be entered into for traditional hedging purposes --
i.e., futures contracts will be sold to protect against a decline in the price
of securities or the currency in which they are denominated that the Fund owns,
or futures contracts will be purchased to protect the Fund against an increase
in the price of securities or the currency in which they are denominated it
intends to purchase. As evidence of this hedging intent, the Fund expects that
on 75% or more of the occasions on which it takes a long futures or option
position (involving the purchase of futures contracts), the Fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities or assets denominated in the related currency in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the Fund to do
so, a long futures position may be terminated or an option may expire without
the corresponding purchase of securities or other assets.
As an alternative to literal compliance with the bona fide hedging
definition a CFTC regulation permits the Fund to elect to comply with a
different test, under which the aggregate initial margin and premiums required
to establish non-hedging positions in futures contracts and options on futures
will not exceed 5 percent of the net asset value of the Fund's portfolio, after
taking into account unrealized profits and losses on any such positions and
excluding the amount by which such options were in-the-money at the time of
purchase. The Fund will engage in transactions in futures contracts and
related options only to the extent such transactions are consistent with the
requirements of the Internal Revenue Code for maintaining its qualification as
a regulated investment company for federal income tax purposes.
When the Fund purchases a futures contract, writes a put option thereon
or purchases a call option thereon, an amount of cash or high grade, liquid
debt securities (i.e., securities rated in one of the top three ratings
categories by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("Standard & Poor's") will be deposited in a segregated account
with the Fund's custodian which is equal to the underlying value of the futures
contract reduced by the amount of initial and variation margin held in the
account of its broker.
OPTIONS TRANSACTIONS. The Fund may write listed covered put options on debt
and equity securities in order to earn additional income from the premiums
received. In addition, the Fund may purchase listed and over-the-counter call
and put options written by the Fund. The extent to which covered options will
be used by the Fund will depend upon market conditions, the availability of
alternative strategies, and the future movement of interest rates. The Fund
may write listed covered and over-the-counter call and put options on up to
100% of its net assets.
The Fund will write listed and over-the counter call options only if
they are "covered," which means that the Funds owns or has the immediate right
to acquire the debt securities underlying the options without additional cash
consideration upon conversion or exchange of other securities held in its
portfolio. A call option written by the Fund will also be "covered" if the
Fund holds on a share-for-share basis a covering call on the same securities
where (i) the exercise price of the covering call held is equal to or less than
the exercise price of the call written if the difference is maintained by the
Fund in cash, U.S. Treasury bills or high grade short-term obligations in a
segregated account with the Fund's custodian and (ii) the covering call expires
at
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the same time as the call written. If a covered call option is not exercised,
the Fund would keep both the option premium and the underlying security. If
the covered call option written by the Fund is exercised and the exercise
price, less the transaction costs, exceeds the cost of the underlying security,
the Fund would realize a gain in addition to the amount of the option premium
it received. If the exercise price, less transaction costs, is less than the
cost of the underlying security, the Fund's loss would be reduced by the amount
of the option premium.
As the writer of a covered put option, the Fund will write a put option
only with respect to debt securities it intends to acquire for the Fund's
portfolio and will maintain in a segregated account with its custodian bank
cash, U.S. Government securities, or high-grade short-term debt securities with
a value equal to the price at which the underlying security may be sold to the
Fund in the event the put option is exercised by the purchaser. The Fund can
also write a "covered" put option by purchasing on a share-for-share basis a
put on the same security as the put written by the Fund where the exercise
price of the covering put held is equal to or greater than the exercise price
of the put written and the covering put expires at the same time or later than
the put written.
In writing listed over-the-counter covered put options on debt
securities, the Fund would earn income from the premiums received. If a
covered put option is not exercised, the Fund would keep the option premium and
the assets maintained to cover the option. If the option is exercised and the
exercise price, including transaction costs, exceeds the market price of the
underlying security, the Fund would realize a loss, but the amount of the loss
would be reduced by the amount of the option premium.
If the writer of an exchange-traded option wishes to terminate his
obligation prior to its exercise, it may effect a "closing purchase
transaction". This is accomplished by buying an option of the same series as
the option previously written. The effect of the purchase is that the Fund's
position will be offset by the Options Clearing Corporation. The Fund may not
effect a closing purchase transaction after it has been notified of the
exercise of an option. There is no guarantee that a closing purchase
transaction can be effected. Although the Fund will generally write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange or board of trade will
exist for any particular option or at any particular time, and for some options
no secondary market on an exchange may exist.
In the case of a written call option, effecting a closing transaction
will permit the Fund to write another call option on the underlying security
with either a different exercise price, expiration date or both. In the case
of a written put option, it will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction will permit the
cash or proceeds from the concurrent sale of any securities subject to the
option to be used for other investments. If the Fund desires to sell a
particular security from its portfolio on which it has written a call option,
it will effect a closing transaction prior to or concurrent with the sale of
the security.
The Fund will realize a gain from a closing transaction if the cost of
the closing transaction is less than the premium received from writing the
option. The Fund will realize a loss from a closing transaction if the cost of
the closing transaction is more than the premium received for writing the
option. However, because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the Fund.
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OVER-THE-COUNTER OPTIONS. The Fund may engage in options transactions on
exchanges and in the over-the-counter markets. 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 ("OTC")
transactions are two-party contracts with price and terms negotiated by the
buyer and seller. The Fund will write and purchase OTC 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 Securities and Exchange Commission (the "SEC") has
taken the position that OTC options are illiquid securities subject to the
restriction that illiquid securities are limited to not more than 10% of the
Fund's assets. The SEC, however, has a partial exemption from the above
restrictions on transactions in OTC options. The SEC allows a fund to exclude
from the 10% limitation on illiquid securities a portion of the value of the
OTC options written by the Fund, provided that certain conditions are met.
First, the other party to the OTC options has to be a primary U.S. Government
securities dealer designated as such by the Federal Reserve Bank. Second, the
Fund would have an absolute contractual right to repurchase the OTC options at
a formula price. If the above conditions are met, a fund must treat as
illiquid only that portion of the OTC option's value (and the value of its
underlying securities) which is equal to the formula price for repurchasing
the OTC option, less the OTC option's intrinsic value.
The investment practices described above are not fundamental and may
be changed by the Trustees without shareholder approval.
LOWER RATED HIGH YIELD "HIGH RISK" DEBT OBLIGATIONS. As discussed in the
Fund's Prospectus, the Fund seeks high current income and may invest in high
yielding, fixed income securities rated Baa, Ba or B by Moody's or BBB, BB or
B by Standard & Poor's. Ratings are based largely on the historical financial
condition of the issuer. Consequently, the rating assigned to any particular
security is not necessarily a reflection of the issuer's current financial
condition, which may be better or worse than the rating would indicate.
The values of lower-rated securities generally fluctuate more than
those of high-rated securities. In addition, the lower rating reflects a
greater possibility of an adverse change in financial condition affecting the
ability of the issuer to make payments of interest and principal. The Adviser
seeks to minimize these risks through diversification, investment analysis
and attention to current developments in interest rates and economic
conditions. Because the Fund invests in securities in the lower rated
categories, the achievement of the Fund's goals is more dependent on the
Adviser's ability than would be the case if the Fund were investing in
securities in the higher rated categories.
As noted in the Fund's Prospectus, the Fund may invest in pay-in-kind
(PIK) securities, which pay interest in either cash or additional securities,
at the issuer's option, for a specified period. The Fund also may invest in
zero coupon bonds, which have a determined interest rate, but payment of the
interest is deferred until maturity of the bonds. Both types of bonds may be
more speculative and subject to greater fluctuations in value than securities
which pay interest periodically and in cash, due to changes in interest rates.
The market value of debt securities which carry no equity participation
usually reflects yields generally available on securities of similar quality
and type. When such yields decline, the market value of a portfolio already
invested at higher yields can be expected to rise if such securities are
protected against early call. In general, in selecting securities for its
portfolio, the
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Fund intends to seek protection against early call. Similarly, when such
yields increase, the market value of a portfolio already invested at lower
yields can be expected to decline. The Fund's portfolio may include debt
securities which sell at substantial discounts from par. These securities are
low coupon bonds which, during periods of high interest rates, because of their
lower acquisition cost tend to sell on a yield basis approximating current
interest rates.
EFFECT OF OPTIONS AND FUTURES TRANSACTIONS ON QUALIFICATION AS REGULATED
INVESTMENT COMPANY. It is the policy of the Fund to meet the requirements of
the Internal Revenue Code to qualify as a regulated investment company to
prevent double taxation of the Fund and its investors. One of those
requirements is that less than 30% of the Fund's gross income must be derived
from gains from the sale or other disposition of securities (including
option's and futures) held for less than three months. The extent to which
the Fund may engage in options and futures transactions may be materially
limited by this 30% test.
PORTFOLIO TURNOVER. The Fund's portfolio turnover rate may vary widely from
year to year and may be higher than that of many other mutual funds with
similar investment objectives. Nevertheless, high portfolio turnover may
involve correspondingly greater commissions and other transaction costs, which
will be borne directly by the Fund.
CERTAIN INVESTMENT PRACTICES
The following information supplements the discussion of the Fund's
investment strategies and techniques in the Prospectus.
REPURCHASE AGREEMENTS. A repurchase agreement is a contract under which the
Fund would acquire a security for a relatively short period (usually not more
than 7 days) subject to the obligation of the seller to repurchase and the
Fund to resell such security at a fixed time and price (representing the
Fund's cost plus interest). The Fund will enter into repurchase agreements
only with member banks of the Federal Reserve System and with "primary
dealers" in U.S. Government securities. The Adviser or a Sub-Adviser will
continuously monitor the creditworthiness of the parties with whom the Fund
enters into repurchase agreements.
The Fund has established a procedure providing that the securities
serving as collateral for each repurchase agreement must be delivered to the
Fund's custodian either physically or in book-entry form and that the
collateral must be marked to market daily to ensure that each repurchase
agreement is fully collateralized at all times. In the event of bankruptcy or
other default by a seller of a repurchase agreement, the Fund could experience
delays in liquidating the underlying securities and could experience losses,
including possible decline in the value of the underlying securities during the
period in which the Fund seeks to enforce its rights thereto, possible
subnormal levels of income and lack of access to income during this period, and
the expense of enforcing its rights.
RESTRICTED SECURITIES. The Fund may purchase securities that are not
registered ("restricted securities") under the Securities Act of 1933 ("1933
Act"), including securities offered and sold to "qualified institutional
buyers" under Rule 144A under the 1933 Act. However, the Fund will not invest
more than 10% of its assets in illiquid investments, which include repurchase
agreements maturing in more than seven days, securities that are not readily
marketable and restricted securities. However, if the Board of Trustees
determines, based upon a continuing review of the trading markets for specific
Rule 144A securities, that they are liquid, then such securities may be
purchased without regard to the 10% limit. The Trustees may adopt guidelines
and delegate to the Adviser the daily function of determining and monitoring
the liquidity of restricted securities.
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The Trustees, however, will retain sufficient oversight and be ultimately
responsible for the determinations. The Trustees will carefully monitor the
Fund's investments in these securities, focusing on such important factors,
among others, as valuation, liquidity and availability of information. This
investment practice could have the effect of increasing the level of
illiquidity in the Fund if qualified institutional buyers become for a time
uninterested in purchasing these restricted securities.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
The following investment restrictions (as well as the Fund's
investment objective) will not be changed without approval of a majority of
outstanding voting securities, which, as used in the Prospectus and this
Statement of Additional Information, means approval of the lesser of (1) the
holders of 67% or more of the shares represented at a meeting if the holders
of more than 50% of the outstanding shares are present in person or by proxy
or 2) the holders of more than 50% of the outstanding shares.
The Fund may not:
1. Purchases on Margin and Short Sales. Purchase securities on
margin or sell short, except that the Fund may obtain such short term
credits as are necessary for the clearance of securities transactions.
The deposit or payment by the 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 10% of the value of
the Fund's total assets at the time of such borrowing, provided that
the Fund will not purchase securities for investment while borrowings
equaling 5% or more of the Fund's total assets are outstanding.
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 12.)
4. Senior Securities. Issue senior securities except as appropriate
to evidence indebtedness which the Fund is permitted to incur, provided
that (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 the Fund as described in the Prospectus, including
deposits of initial and variation margin, and (iii) the establishment
of separate classes of shares of the Fund for providing alternative
distribution methods are not considered to be the issuance of senior
securities for purposes of this restriction.
5. Warrants. Invest more than 5% of its 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 total assets of
the Fund in warrants which are not listed on those exchanges. Warrants
acquired in units or attached to securities are not included in this
restriction.
6. Real Estate. Purchase or sell real estate although the 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 the Fund
will not purchase real estate limited partnership interests.
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7. 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 the 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.
8. Making Loans. Make loans, except that the Fund may purchase or
hold debt instruments and may enter into repurchase agreements (subject
to Restriction 11) in accordance with its investment objectives and
policies and make loans of portfolio securities provided that as a
result, no more than 30% of the total assets of the Fund taken at
current value would be so loaned.
9. 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 the Fund's total assets would be
invested 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, the 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.
10. Industry Concentration. Purchase any securities which would cause
more than 25% of the market value of the 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. 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:
The Fund may not:
11. Illiquid Securities. Purchase or otherwise acquire any security
if, as a result, more than 10% of the 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.
12. 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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13. 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 the 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. This
restriction shall not apply to obligations issued or guaranteed by any
foreign government or its agencies or instrumentalities. This
restriction shall not apply to issuers of mortgage-backed and
receivable-backed bonds, notes or pass-through certificates.
14. Beneficial Ownership of Officers and Directors of Fund and
Adviser. Purchase or retain the securities of any issuer if those
officers or trustees of the 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.
15. Hypothecating, Mortgaging and Pledging Assets. Hypothecate,
mortgage or pledge any of its assets except 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) 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.
16. 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).
17. Purchase interests in oil, gas or other mineral exploration
programs; however, this policy will not prohibit the acquisition of
securities of companies engaged in the production of transmission of
oil, gas, or other minerals.
18. 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 that 5% of the Fund's assets
would be invested in any one such investment company.
The 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 "Tax Status."
In order to permit the sale of shares of the Fund in certain states,
the Trustees may, in their sole discretion, adopt restrictions on investment
policy more restrictive than those described above. Should the Trustees
determine that any such more restrictive policy is no longer in the best
interest of the Fund and its shareholders, the Fund may cease offering shares
in the state involved and the Trustees may revoke such restrictive policy.
Moreover, if the states involved no longer require any such restrictive
policy, the Trustees may, at their sole discretion revoke such policy.
13
<PAGE>
If a percentage restriction on investment or utilization of assets as
set forth above is adhered to at the time an investment is made, a later
change in percentage resulting from changes in the value of the Fund's assets
will not be considered a violation of restriction.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its Trustees, who elect
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Fund are also officers and directors of the Adviser or
officers and directors of the Fund's principal distributor, John Hancock
Funds, Inc. ("John Hancock Funds").
The following table sets forth the principal occupation or employment
of the Trustees and principal officers of the Fund during the past five years:
14
<PAGE>
<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.
("Distributors") 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.
</FN>
</TABLE>
15
<PAGE>
<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) Distinguished Senior Fellow, Institute
RR2 Box 480 for Sustainable Communities, Vermont
Woodstock, Vermont 05091 Law School, 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).
*Hugh A. Dunlap, Jr. Trustee and Vice Chairman of the Adviser; President
President (3,4) of Freedom Capital Management
Corporation from 1983 to 1992.
Leland O. Erdahl Trustee (1, 2) President of Stolar, Inc. from 1987 to
161 Camino Barranca 1991 and President of Albuquerque
Placitas, New Mexico 87043 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.
Richard A. Farrell Trustee (1, 2) President of Farrell, Healer & Co., a
Farrell, Healer & Company, Inc. venture capital management firm, since
100 Federal Street -- 23rd Floor 1980. Prior to that date, Mr. Farrell
Boston, MA 02110 headed the venture capital group at Bank
of Boston Corporation.
William F. Glavin Trustee (1, 2) President, Babson College; Vice
Babson College Chairman, Xerox Corporation until June
Horn Library 1989. Director, Caldor Inc. and Inco
Babson Park, MA 02157 Ltd.
- -----------
<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.
</FN>
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
- ---------------- WITH REGISTRANTS DURING PAST 5 YEARS
---------------- -------------------
<S> <C> <C>
Patrick Grant Trustee (1, 2, 3) President, Financial Management
5 Haven Street Incorporated, a
Dedham, MA 02026 professional treasurer,
since 1978. Prior to that date Mr.
Grant was Treasurer of Endowment
Management & Research Corp., an
investment advisory firm, and Omega
Fund, Inc., an open-end investment
company.
Ralph Lowell, Jr. Trustee (1, 2) Director, Lowell Blake and
45 Mill Street Associates, a registered investment
Edgartown, MA 02539 adviser since 1978. Mr. Lowell was
Vice President of that company from
1978 to 1985.
Dr. John A. Moore Trustee (1, 2) President and Chief Executive Officer,
Institute for Evaluating Health Institute for Evaluating Health Risks,
Risks a nonprofit institution, since
1101 Vermont Avenue N.W. September 1989. Assistant
Suite 608 Administrator of the Office of
Washington, DC 20005 Pesticides and Toxic Substances at the
Environmental Protection Agency
from December 1983 to July 1989.
Patti McGill Peterson Trustee (1, 2) President, St. Lawrence University;
St. Lawrence University Director, Niagara Mohawk Power
110 Vilas Hall Corporation and Secretary, Mutual
Canton, NY 13617 Life.
John W. Pratt Trustee (1, 2) Since 1961, Professor of Business
2 Gray Gardens East Administration at Harvard University
Cambridge, MA 02138 Graduate School of Business
Administration.
- -----------
<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.
</FN>
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
- ---------------- WITH REGISTRANTS DURING PAST 5 YEARS
---------------- -------------------
<S> <C> <C>
Robert G. Freedman Vice Chairman and Vice Chairman and Chief Investment
Chief Investment Officer, the Adviser; President (until
Officer December 1994).
Anne C. Hodsdon President President and Chief Operations Officer;
Executive Vice President, the Adviser (until
December 1994).
James B. Little Senior Vice Senior Vice President, the Adviser.
President, Chief
Financial Officer
Thomas H. Drohan Senior Vice President Senior Vice President and Secretary, the
and Secretary Adviser.
James K. Ho Senior Vice President Senior Vice President, the Adviser.
Michael P. DiCarlo Senior Vice President Senior Vice President, the Adviser.
Lawrence J. Daly Senior Vice President Senior Vice President, the Adviser; Senior
Vice President, Putman Investment
Management, Inc.
Anthony A. Goodchild Senior Vice President Senior Vice President, the Adviser; Senior
Vice President, Putman Investment
Management, Inc.
- -----------
<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.
</FN>
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
- ---------------- WITH REGISTRANTS DURING PAST 5 YEARS
---------------- -------------------
<S> <C> <C>
John A. Morin Vice President Vice President, the Adviser.
Susan S. Newton Vice President, Vice President and Assistant Secretary, the
Assistant Secretary Adviser.
and Compliance
Officer
James J. Stokowski Vice President and Vice President, the Adviser.
Treasurer
David S. Beckwith Vice President Vice President, the Adviser.
- -----------
<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.
</FN>
</TABLE>
19
<PAGE>
All of the officers listed are officers or employees of the Investment
Adviser and/or the 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 John Hancock Advisers, Inc. serves as Adviser.
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 for each Fund's 1994
fiscal year. The two non-Independent Trustees, Messrs. Boudreau and Dunlap,
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.
<TABLE>
<CAPTION>
TOTAL
PENSION COMPENSATION
OR RETIREMENT FROM THE FUND
BENEFITS ESTIMATED AND JOHN
AGGREGATE ACCRUED AS PART ANNUAL BENEFITS HANCOCK FUND
INDEPENDENT COMPENSATION OF THE FUND'S UPON COMPLEX TO
TRUSTEES FROM THE FUND EXPENSES RETIREMENT TRUSTEES(1)
- -------- ------------- -------- ---------- -----------
(TOTAL OF 11 FUNDS)
<S> <C> <C> <C> <C>
William A Barron III $ 2,739 - - $ 42,000
Douglas M. Costle 2,739 - - 42,000
Leland O. Erdahl 2,739 - - 42,000
Richard A. Farrell 2,847 - - 43,500
William F. Glavin 2,739 - - 41,750
Patrick Grant 2,883 - - 44,000
Ralph Lowell, Jr. 2,739 - - 42,000
Dr. John A. Moore 2,739 - - 41,750
PattiMcGill Peterson 2,739 - - 42,000
John W. Pratt 2,739 - - 42,000
--------- ----- ----- ---------
$ 27,642 $ 423,000
<FN>
(1 )The total compensation paid by the John Hancock Fund Complex to the Independent Trustees
is as of calendar year ended December 31, 1994.
</FN>
</TABLE>
<TABLE>
As of January 19, 1995, the officers and Trustees of the Fund as a
group owned less than 1% of the outstanding shares of the Fund. As of January
19, 1995, the following shareholders beneficially owned 5% or more of the
outstanding shares of the Fund:
<CAPTION>
Percentage of
Number of shares of total outstanding
Name and Address Class beneficial interest shares of the class
of Shareholder of shares owned of the Fund
------------- --------- ----- -----------
<S> <C> <C> <C>
Mary M. Jensen Trust #1 Class A 112,178 5.94%
8200 Hillside Avenue
Los Angeles, CA 90069-
1608
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C> <C>
Osteopathic Mutual Ins
Co. Class A 127,569 6.76%
P.O. Box 12200
1545 Raymond Diehl
Road
Tallahassee, FL 32308
</TABLE>
The nominees of the Fund may at times be the record holders of in
excess of 5% of shares of the Fund by virtue of holding shares in "street
name."
INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser for the Fund 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 Fund.
The Adviser was organized in 1968 and presently has approximately $13
billion in assets under management in its capacity as investment adviser to the
Fund and the other mutual funds and publicly traded investment companies in the
John Hancock group of funds having a combined total of over 1,060,000
shareholders. The Adviser is an affiliate of John Hancock Mutual Life
Insurance Company, one of the most recognized and respected financial
institutions in the nation. With total assets under management of $80 billion,
John Hancock Mutual Life Insurance Company is one of the 10 largest life
insurance companies in the United States, and carries Standard & Poor's and
A.M. Best's highest ratings. Founded in 1862, John Hancock Mutual Life
Insurance Company has been serving clients for over 125 years.
The Trust has entered into an investment advisory agreement dated as of
June 26, 1986 between Freedom Investment Trust II and Freedom Capital
Management Corporation ("Freedom Capital"), the Fund's former investment
adviser (the "Advisory Agreement") which Advisory Agreement was transferred to
John Hancock Advisers, Inc. on July 1, 1992 pursuant to a Transfer and
Assumption Agreement dated as of such date. Pursuant to the Advisory
Agreement, the Adviser agreed to act as investment adviser and manager to the
Fund. As manager and investment adviser, the Adviser will: (a) furnish
continuously an investment program for the Fund and determine, subject to the
overall supervision and review of the Board of Trustees, which investments
should be purchased, held, sold or exchanged, (b) provide supervision over all
aspects of the Fund's operations except those which are delegated to a
custodian, transfer agent or other agent, and (c) provide the Fund with such
executive, administrative and clerical personnel, officers and equipment as are
deemed necessary for the conduct of their business.
As compensation for its services under the Advisory Agreement, the
Adviser receives from the Fund a fee computed and paid monthly at the annual
rate of 0.65% of the first $500 million of the average daily net assets of the
Fund and 0.60% on the value of the average daily net assets in excess of $500
million.
From time to time, the Adviser may reduce its fee or make other
arrangements to limit the Fund's expenses to a specified percentage of average
daily net assets. The Adviser retains the right to reimpose a fee and recover
any other payments to the extent that at the end of any fiscal year, the Fund's
actual expenses fall below the limit.
The Fund bears all costs of its organization and operation, including
expenses of preparing, printing and mailing all shareholders' reports, notices,
prospectuses, proxy statements and reports to regulatory agencies; expenses
relating to the issuance, registration and qualification of shares; government
fees; interest charges; expenses of furnishing to shareholders their account
statements; taxes; expenses of redeeming shares; brokerage and other expenses
connected with
21
<PAGE>
the execution of portfolio securities transactions; expenses pursuant to the
Fund's Plan of Distribution; fees and expenses of custodians including those
for keeping books and accounts and calculating the net asset value of shares;
fees and expenses of independent accountants, legal counsel, transfer agents
and dividend disbursing agents; the compensation and expenses of Trustees who
are not otherwise affiliated with the Trust, the Adviser or John Hancock or any
of their affiliates; expenses of Trustees' and shareholders' meetings; trade
association memberships; insurance premiums; and any extraordinary expenses.
The State of California imposes a limitation on the expenses of the
Fund. The Advisory Agreement provides that if, in any fiscal year, the total
expenses of the Fund (excluding taxes, interest, brokerage commissions and
extraordinary items, but including the management fee) exceed the expense
limitations applicable to the Fund imposed by the securities regulations of
any state in which it is then registered to sell shares, the Adviser will pay
or reimburse monthly the Fund for that excess up to the amount of its
management 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 the Trust was last
approved on May 18, 1993 by all of the Trustees of Freedom Investment Trust II,
including all of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any such party. The Advisory Agreement was approved by
the shareholders of the Fund on September 6, 1991 and an amendment to the
Advisory Agreement to increase the fee payable thereunder was approved by the
shareholders of the 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 Fund or by the Board of Trustees, and (ii) by a majority of
the Trustees who are not parties to the Advisory Agreement or "interested
persons" of any such party. The Advisory Agreement may be terminated on 60
days' written notice by either party and will terminate automatically if it is
assigned.
DISTRIBUTION CONTRACT
Freedom Investment Trust II has entered into a Distribution Agreement
with John Hancock Funds, Inc. and Freedom Distributors Corporation (together
the "Distributors") on a "best efforts" basis. Class A and Class B shares of
the Fund are sold to dealers who have entered into dealer agreements with the
Distributors (the "Selling Brokers").
The Distributors accept orders for the purchase of the shares of the
Fund 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 Fund, 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 Class A and Class B
Shares Prospectus.
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, the Fund will pay distribution and
service fees at an aggregate annual rate of 0.30% and 1.00% respectively, of
the Fund's daily net assets attributable to Class A and Class B shares,
respectively. However, the amount of the service fee will not exceed 0.25% of
the Fund's average daily net assets attributable to each class of shares. The
distribution fees reimburse the Distributors for their distribution costs
incurred in the promotion of sales of shares of the Fund, and the service fees
compensate Selling Brokers for providing personal and account maintenance
services to shareholders. In the event that 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 the Fund's obligation to make
further payments at any time. Accordingly, the Fund does not treat
22
<PAGE>
unreimbursed expenses relating to the Class B shares as a liability of the
Fund. The Plans were approved by a majority of the voting securities of the
Fund. The Plans and all amendments were approved by the Trustees, including a
majority of the Trustees who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the Plans (the
"Independent Trustees"), by votes cast in person at meeting called for the
purpose of voting on such Plans.
Pursuant to the Plans, at least quarterly, the Distributors provide the
Fund with a written report of the amounts expended under the Plans and the
purpose for which these expenditures were made. The Trustees review these
reports on a quarterly basis.
Each of the Plans provides that it will continue in effect only as 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 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 Fund which has voting rights with
respect to the Plan. And finally, each of the Plans provides that no material
amendment to the Plan will, in any event, be effective unless it is approved by
a vote of the Trustees and the Independent Trustees of the Fund. The holders
of Class A shares 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 classes of
shares of the Fund.
During the fiscal year ended October 31, 1994, with respect to the
Class A shares and Class B shares of the Fund, the Fund paid the Distributors
the following amounts of expenses:
<TABLE>
<CAPTION>
Expense Class A Class B
Items Shares Shares
- ------- --------- ---------
<S> <C> <C>
Advertising $ 4,240 $ 23,797
Printing and Mailing of prospectuses to
New Shareholders $ 2,063 $ 9,980
Compensation to Selling Brokers $ 10,683 $ 881,917
Expenses of Distributor $ 11,383 $ 67,423
Interest, Carrying or other Finance Charges None $ 106,320
</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.
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.
23
<PAGE>
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 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.
INITIAL SALES CHARGE ON CLASS A SHARES
The sales charges applicable to purchase of Class A shares of the Fund
are described in the Fund's Class A and Class B Prospectus. Methods of
obtaining reduced sales charges referred to generally in the Class A and Class
B Prospectus are described in detail below. In calculating the sales charge
applicable to current purchases of Class A shares, the investor is entitled to
cumulate current purchases with the greater of the current value (at offering
price) of the Class A shares of the Fund, or if Investor Services is notified
by the investor's dealer or the investor at the time of the purchase, the cost
of the Class A shares owned.
COMBINED PURCHASES. In calculating the sales charge applicable to
purchases of Class A shares made at one time, the purchases will be combined if
made by (a) an individual, his, 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 Fund
Services or a Selling Broker's representative.
WITHOUT SALES CHARGE. As described in the Class A and Class B
Prospectus, Class A shares of the Fund may be sold without a sales charge to
certain persons described in the Prospectus.
ACCUMULATION PRIVILEGE. Investors (including investors combining
purchases) who are already Class A shareholders may also obtain the benefit of
the reduced sales charge by taking into account not only the amount then being
invested but also the purchase price of the Class A shares already held by such
persons.
COMBINATION PRIVILEGE. Reduced sales charges (according to the
schedule set forth in the Class A and Class B Prospectus) are also available to
an investor based on the aggregate amount of his concurrent and prior
investments in Class A shares of the Fund and shares of all other John Hancock
funds which carry a sales charge.
LETTER OF INTENTION. The reduced sales charges are also applicable to
investments made over a specified period pursuant to a Letter of Intention (the
"LOI"), which should be read carefully prior to its execution by an investor.
The Fund offers two options regarding the specified period for making
investments under the LOI. All investors have the option of making their
investments over a specified period of thirteen (13) months. Investors who are
using the Fund as a funding medium for a qualified retirement plan, however,
may opt to make the necessary investments called for by the LOI over a
forty-eight (48) month period. These qualified retirement plans include group
IRA, SEP, SARSEP, TSA, 401(k) and 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 Fund Services. The
sales charge applicable to all amounts invested under the LOI is
24
<PAGE>
computed as if the aggregate amount intended to be invested had been invested
immediately. If such aggregate amount is not actually invested, the difference
in the sales charge actually paid and the sales charge payable had the LOI not
been in effect is due from the investor. However, for 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 3% of the aggregate) sufficient to make up any
difference in sales charges on the amount intended to be invested and the
amount actually invested, until such investment is completed within the
specified period, at which time the escrow shares will be released. If the
total investment specified in the LOI is not completed, the Class A shares
held in escrow may be redeemed and the proceeds used as required to pay such
sales charge as may be due. By signing the LOI, the investor authorizes
Investor Services to act as his or her attorney-in-fact to redeem any escrowed
shares and adjust the sales charge, if necessary. A LOI does not constitute a
binding commitment by an investor to purchase, or by the Fund to sell, any
additional Class A shares and may be terminated at any time.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per
share without the imposition of an initial sales charge so that the Fund will
receive the full amount of the purchase price.
CONTINGENT DEFERRED SALES CHARGE. Class B shares which are redeemed within
four years of purchase will be subject to a contingent deferred sales charge
("CDSC") at the rates set forth in the Class A and Class B Prospectus as a
percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the current market value or the
original purchase cost of the Class B shares being redeemed. Accordingly, no
CDSC will be imposed on increases in account value above the initial purchase
prices, including increases in account value derived from reinvestment of
dividends or capital gains distributions.
The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the
time of redemption of such shares. Solely for purposes of determining this
number of years, 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 and are used in
whole or in part by John Hancock Funds to defray their expenses related to
providing distribution-related services to the Fund in connection with the sale
of the Class B shares, such as the payment of compensation to select Selling
Brokers for selling Class B shares. The combination of the CDSC and the
distribution and service fees facilitates the ability of the Fund to sell the
Class B shares without a sales charge being deducted at the time of the
purchase. See the Class A and Class B Prospectus for additional information
regarding the CDSC.
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. If the shareholder were to sell
portfolio securities received in this fashion, he or she would incur a
brokerage charge. Any such securities would be valued for the purposes of
making such payment
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at the same value as used in determining net asset value. The Fund has,
however, elected to be governed by Rule 18f-1 under the Investment Company Act.
Under that rule, the Fund must redeem its shares for cash except to the extent
that the redemption payments to any shareholder during any 90-day period would
exceed the lesser of $250,000 or 1% of the Fund's net asset value at the
beginning of such period.
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE. As described more fully in the Prospectuses, the Fund
permits exchanges of shares of any class of the Fund for shares of the same
class in any other John Hancock fund offering that class.
SYSTEMATIC WITHDRAWAL PLAN. As described briefly in the Class A and Class B
Prospectus, the Fund permits the establishment of a Systematic Withdrawal Plan.
Payments under this plan represent proceeds from the redemption of shares of
the Fund. Since the redemption price of the shares of the Fund may be more or
less than the shareholder's cost, depending upon the market value of the
securities owned by the Fund at the time of redemption, the distribution of
cash pursuant to this plan may result in realization of gain or loss for
purposes of Federal, state and local income taxes. The maintenance of a
Systematic Withdrawal Plan concurrently with purchases of additional Class A
or Class B shares of the Fund could be disadvantageous to a shareholder
because of the initial sales charge payable on such purchases of Class A shares
and the CDSC imposed on redemptions of Class B shares and because redemptions
are taxable events. Therefore, a shareholder should not purchase Class A or
Class B shares of the Fund at the same time a Systematic Withdrawal Plan is in
effect. The Fund reserves the right to modify or discontinue the Systematic
Withdrawal Plan of any shareholder on 30 days' prior written notice to such
shareholder, or to discontinue the availability of such plan in the future.
The shareholder may terminate the plan at any time by giving proper notice to
Investor Services.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM ("MAAP"). This program is explained
more fully in the Fund's Class A and Class B Prospectus and the Account
Privileges Application. The program, as it relates to automatic investment
checks, is subject to the following conditions:
The investments will be drawn on or about the day of the month
indicated.
The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by Investor Services without prior notice
if any investment is not honored by the shareholder's bank. The bank shall be
under no obligation to notify the shareholder as to the non-payment of any
check.
The program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is received
at least five (5) business days prior to the processing date of any investment.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed Fund shares may,
within 120 days after the date of redemption, reinvest without payment of a
sales charge any part of the redemption proceeds in shares of the same class of
the Fund or in any other John Hancock fund, subject to the minimum investment
limit of that fund. The proceeds from the redemption of Class A shares may be
reinvested at net asset value without paying a sales charge in Class A shares
of the Fund or in Class A shares of another John Hancock fund. If a CDSC was
paid upon a redemption, a shareholder may reinvest the proceeds from this
redemption at net asset value in additional shares of the class from which the
redemption was made. The shareholder's account will be credited with the
amount of any CDSC charged upon the prior redemption and the new shares will
continue to be subject to the CDSC. The holding period of the shares acquired
through reinvestment will, for purposes of computing the CDSC payable upon a
subsequent redemption, including the holding period of the redeemed shares.
The Fund may modify or terminate the reinvestment privilege at any time.
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<PAGE>
A redemption or exchange of Fund shares is a taxable transaction for
Federal income tax purposes even if the reinvestment privilege is exercised,
and any gain or loss realized by a shareholder on the redemption or other
disposition of Fund shares will be treated for tax purposes as described under
the caption "Tax Status."
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Trust are responsible for the management and
supervision of the Fund. The Declaration of Trust permits the Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
of the Trust, without par value. Under the Declaration of Trust, the Trustees
have the authority to create and classify shares of beneficial interest in
separate series, without further action by shareholders. As of the date of
this Statement of Additional Information, the Trustees have authorized the
issuance of two classes of shares of the Fund, designated as Class A and Class
B.
The shares of each class of the Fund represent an equal proportionate
interest in the aggregate net assets attributable to the class of the Fund.
Class A shares and Class B shares of the Fund will be sold exclusively to
members of the public (other than the institutional investors described in the
Class A and Class B Prospectus) at net asset value. A sales charge will be
imposed either at the time of the purchase, for Class A shares, or on a
contingent deferred basis, for Class B shares. For Class A shares, no sales
charge is payable at the time of purchase on investments of $1 million or more,
but for such investments a contingent deferred sales charge may be imposed in
the event of certain redemption transactions within one year of purchase.
Holders of Class A shares and Class B shares each have exclusive voting
rights on matters relating to their respective distribution plans. The
different classes of the Fund may bear different expenses relating to the cost
of holding shareholder meetings necessitated by the exclusive voting rights of
any class of shares.
Dividends paid by the Fund, if any, with respect to each class of
shares will be calculated in the same manner, at the same time and on the same
day and will be in the same amount, except that (i) the distribution and
service fees relating to 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) each of Class A shares 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 the Fund
has received from the Internal Revenue Service relating to its multiple-class
structure. The net asset value per share may vary depending on whether Class A
shares and Class B shares are purchased.
In the event of liquidation, shareholders are entitled to share pro
rata in the net assets of the Fund available for Distribution to such
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable except as set forth in the
Prospectuses.
Unless otherwise required by the Investment Company Act or the
Declaration of Trust, the 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.
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Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for act or
obligations of the Trust. However, the Trust's Declaration of Trust contains
an express disclaimer of shareholder liability for acts, obligations or affairs
of the Fund. The Declaration of Trust also provides for indemnification out
of the Fund's assets for all losses and expenses of any Fund shareholder held
personally liable by reason of being or having been a shareholder. Liability
is therefor limited to circumstances in which the Fund itself would be unable
to meet its obligations, and the possibility of this occurrence is remote.
TAX STATUS
Each series of Freedom Investment Trust II, including the Fund, is
treated as a separate entity for accounting and tax purposes. The Fund has
qualified and has elected or will elect 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 in the future. 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
of its assets, the Fund will not be subject to Federal income tax on taxable
income (including net short-term and long-term capital gains) which is
distributed to shareholders at least annually.
Distributions from the Fund's current or accumulated earnings and
profits (E & P) The Fund will be subject to a 4% percent non-deductible
Federal excise tax on certain amounts not distributed (and not treated as
having been distributed) on a timely basis in accordance with annual minimum
distribution requirements. The Fund intends under normal circumstances to
avoid liability for such tax by satisfying such distribution requirements, as
computed for Federal income tax purposes, will be taxable as described in the
Fund's Prospectus whether taken in shares or in cash. Distributions, if any,
in excess of E & P will constitute a return of capital, which will first reduce
an investor's tax basis in Fund shares and thereafter (after such basis is
reduced to zero) will generally give rise to capital gains. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis for Federal income tax purposes in each share so received equal to
the amount of cash they would have received had they elected to receive the
distributions in cash, dividend by the number of shares received.
If the Fund acquires stock in certain non-U.S. corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its
shareholders. The Fund would not be able to pass through to its shareholders
any credit or deduction for such tax. Certain elections may if available
ameliorate these adverse tax consequences, but any such election would require
the Fund to recognize taxable income or gain without the concurrent receipt of
cash. The Fund may limit and/or manage its holdings in passive foreign
investment companies to minimize its tax liability or maximize its return from
these investments.
Foreign exchange gains and losses realized by the Fund in connection
with certain transactions involving foreign currency-denominated debt
securities, 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 the Fund's investment in
stock or securities, possibly including speculative currency positions or
currency derivatives not used for hedging purposes, may increase the amount of
gain it is deemed to recognize from the sale of certain investments held for
less than
28
<PAGE>
three months, which gain is limited under the Code to less than 30%
of its annual gross income, and could under future Treasury regulations produce
income not among the types of "qualifying income" from which the Fund must
derive at least 90% of its annual gross income. If the net foreign exchange
loss for a year treated as ordinary loss under Section 988 were to exceed the
Fund's investment company taxable income 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.
The Fund may be subject to withholding and other taxes imposed by
foreign countries with respect to its investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. Investors may be entitled to claim U.S. foreign tax credits with
respect to such taxes, subject to certain provisions and limitations contained
in the Code. Specifically, if more than 50% of the value of the Fund's total
assets at the close of any taxable year consists of stock or securities of
foreign corporations, the Fund may file an election with the Internal Revenue
Service pursuant to which shareholders of the Fund will be required to (i)
include in ordinary gross income (in addition to taxable dividends actually
received) their pro rata shares of foreign income taxes paid by the Fund even
though not actually received by them, and (ii) treat such respective pro rata
portions as foreign income taxes paid by them.
If the Fund makes this election, shareholders may then deduct such pro
rata portions of foreign income taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able
to deduct their pro rata portions of foreign income taxes paid by the Fund,
although such shareholders will be required to include their share of such
taxes in gross income. Shareholders who claim a foreign tax credit for such
foreign taxes may be required to treat a portion of dividends received from the
Fund as a separate category of income for purposes of computing the
limitations on the foreign tax credit. Tax-exempt shareholders will ordinarily
not benefit from this election. Each year that the Fund files the election
described above, its shareholders will be notified of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the Fund and (ii)
the portion of Fund dividends which represents income from each foreign
country.
The amount of net short-term and long-term capital gains, if any, in
any given year will vary depending upon the Adviser's current investment
strategy and whether the Adviser believes it to be in the best interest of the
Fund to dispose of portfolio securities or enter into options or futures
transactions that will generate capital gains. At the time of an investor's
purchase of Fund shares, a portion of the purchase price is attributable
realized or unrealized appreciation in the Fund's portfolio or undistributed
taxable income of the Fund. Consequently, subsequent distributions from such
appreciation or income may be taxable to such investor even if the net asset
value of the investor shares is, as a result of the distributions, reduced
below the investor's cost for such shares, and the distributions in reality
represent a return of a portion of the purchase price.
Upon a redemption of shares of the Fund (including by exercise of the
exchange privilege) a shareholder may realize a taxable gain or loss depending
upon his basis in his shares. Such gain or loss will be treated as capital
gain or loss if the shares are capital assets in the shareholder's hands and
will be long-term or short-term, depending upon the shareholder's tax holding
period for the shares. A sales charge paid in purchasing Class A shares of the
Fund cannot be taken into account for purposes of determining gain or loss on
the redemption or exchange of such shares within 90 days after their purchase
to the extent shares of the Fund or another John Hancock Fund are subsequently
acquired without payment of a sales charge pursuant to the reinvestment or
exchange privilege. Such disregarded load will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Also, any loss
realized on a redemption or exchange will be
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<PAGE>
disallowed to the extent the shares disposed of are replaced 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 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 treated as a long-term capital
loss to the extent of any amounts treated as distributions of long-term capital
gain with respect to such shares.
Although its present intention is to distribute all net short-term and
long-term capital gains, if any, the Fund reserves the right to retain and
reinvest all or any portion of its "net capital gain", which is the excess, as
computed for Federal income tax purposes, of net long-term capital gain over
net short-term capital loss in any year. The Fund will not in any event
distribute net long-term capital gains realized in any year to the extent that
a capital loss is carried forward from prior years against such gain. To the
extent such excess was retained and not exhausted by the carryforward of prior
years' capital losses, it would be subject to Federal income tax in the hands
of the Fund. Each shareholder would be treated for Federal income tax
purposes as if the Fund had distributed to him on the last day of its taxable
year his pro rata shares of such excess, and he had paid his pro rata share of
the taxes paid by the Fund and reinvested the remainder in the Fund.
Accordingly, each shareholder would (a) include his pro rate 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 to a refund of, his pro rata shares of the
taxes paid by the Fund, and (c) be entitled to increase the adjusted tax basis
for his shares in the Fund by the difference between his pro rata share of such
excess and his pro rata share of such taxes.
For Federal income tax purposes, the Fund is permitted to carry forward
a net capital loss in any year to offset its net capital gains, if any, during
the eight years following the year of the loss. To the extent subsequent net
capital gains are offset by such losses, they would not result in Federal
income tax liability to the Fund and, as noted above, would not be distributed
as such to shareholders. The Fund has $ 24,112,418 of capital loss
carryforwards, available, to the extend provided by regulations, to offset net
capital gains of these, $1,001,257 expire October 31, 1999, $ 17,243,199 expire
October 31, 2000, $ 3,127,414 expire October 31, 2001 and $ 2,740,548 expire
October 31, 2002.
Only a very small portion, if any, of the distributions from the Fund
is expected to qualify for the dividends-received deduction for corporations,
subject to the limitations applicable under the Code. The qualifying portion
is limited to properly designated distributions derived from dividend income
(if any) the Fund receives from certain stock in U.S. domestic corporations.
The Fund accrues income on certain PIKs, zero couponSsecurities or
certain increasing rate securities (and, inSgeneral, other securities with
original issue discount or withSmarket discount if the Fund elects to include
market discount inSincome currently) prior to the receipt of the corresponding
cashSpayments. However, the Fund must distribute, at least annually,Sall or
substantially all of its net income, including suchSaccrued income, to
shareholders to qualify as a regulatedSinvestment company under the Code and
avoid Federal income andSexcise taxes. Therefore, the Fund may have to dispose
of itsSportfolio securities under disadvantageous circumstances toSgenerate
cash, or may have to leverage itself by borrowing theScash, to satisfy
distribution requirements.
Investment in debt obligations that are at risk of or in default
presents special tax issues for the Fund. 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
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<PAGE>
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 the Fund 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 Fund may restrict the Fund's ability to enter into futures, options, and
forward transactions. Certain payments received by the Fund with respect to
loan participations, such as commitment fees or facility fees, may not be
treated as qualifying income under the 90% requirement referred to above if
they are not properly treated as interest under the Code.
Certain options, futures and forward foreign currency transactions
undertaken by the Fund may cause the Fund to recognize gains or losses from
marking to market even though its positions have not been sold or terminated
and affect the character as long-term or short-term (or, in the case of certain
currency forwards, options and futures, as ordinary income or loss) and timing
of some capital gains and losses realized by the Fund. Also, certain of the
Fund's losses on its transactions involving options, futures or forward
contracts and/or offsetting portfolio positions may be deferred rather than
being taken into account currently in calculating the Fund's taxable income.
Certain of the applicable tax rules may be modified if the Fund is eligible and
chooses to make one or more of certain tax elections that may be available.
These transactions may therefore affect the amount, timing and character of the
Fund's distributions to shareholders. The Fund will take into account the
special tax rules (including consideration of available elections) applicable
to options, futures or forward contracts in order to minimize any potential
adverse tax consequences.
The foregoing discussion relates solely to U.S. Federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions. Dividends, capital gain distributions, and
ownership of or gains realized on the or redemption (including an exchange) of
Fund shares may also be subject to state and local taxes. Shareholders should
consult their own tax advisers as to the Federal, state or local tax
consequences of ownership of shares of, and receipt of distributions from, the
Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which
their Fund investment is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of
30% (or a lower rate under an applicable tax treaty) on amounts treated as
ordinary dividends from the Fund and, unless an effective IRS Form W-8 or
authorized substitute is on file, to 31% backup withholding on certain other
payments from the Fund should consult their tax advisers regarding such
treatment and the application of foreign taxes to an investment in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Fund qualifies as a regulated investment company
under the Code, it will also not be required to pay any Massachusetts income
tax.
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CALCULATION OF PERFORMANCE
For the 30-day period ended October 31, 1994, the annualized yield on
Class A and Class B shares of the Fund was 7.93% and 7.43%, respectively. The
average annual total return of the Class A and for Class B shares of the Fund
for the 1 year period ended October 31, 1994 was 0.07% and 0.64%, respectively.
For the period ended October 31, 1994, the average annual total return for
Class A shares from commencement of operations on January 3, 1992 and for Class
B shares from commencement of operations on December 28, 1990 was 2.72% and
4.05%, respectively.
The Fund's yield is computed by dividing net investment income per
share determined for a 30-day period by the maximum offering price per share
(which includes the full sales charge) on the last day of the period, according
to the following standard formula:
YIELD = 2 [ {(a - b/cd + 1) (to the sixth power)} -1 ]
Where:
a = dividends and interest earned during the period.
b = net expenses accrued during the period.
c = the average daily number of fund shares outstanding during the period
that would be entitled to receive dividends.
d = the maximum offering price per share on the last day of the period
(NAV where applicable).
The "distribution rate" is determined by annualizing the result of
dividing the declared dividends of the Fund during the period stated by the
maximum offering price or net asset value at the end of the period. Excluding
the Fund's sales load from the distribution rate produces a higher rate.
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<PAGE>
The Fund's total return is computed by finding the average annual
compounded rate of return over the 1 year and life of fund periods that would
equate the initial amount invested to the ending redeemable value according to
the following formula:
T = the nth root of (ERV/P) - 1
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment made at
the beginning of the 1 year and life-of-the fund periods.
In the case of Class A shares or Class B shares, this calculation
assumes the maximum sales charge of 3.00% is included in the initial investment
or the CDSC applied at the end of the period. This calculation also assumes
that all dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period.
In addition to average annual total returns, the Fund may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Cumulative total returns may be quoted as
a percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, and/or a series of redemptions, over any
time period. Total returns may be quoted with or without taking the Fund's
3.00% sales charge on Class A shares or the 3.00% CDSC on Class B shares into
account. Excluding the Fund's sales charge on Class A shares and the CDSC on
Class B shares from a total return calculation produces a higher total return
figure.
From time to time, in reports and promotional literature, the Fund's
total return will be ranked or compared to indices of mutual funds such as
Lipper Analytical Services, Inc.'s "Lipper-Mutual Performance Analysis," a
monthly publication which tracks net assets, total return, and yield on mutual
funds in the United States. Ibottson and Associates, CDA Weisenberger and
F.C. Towers are also used for comparison purposes, as well as the Russell and
Wilshire indices.
Performance rankings and ratings reported periodically in national
financial publications such as Money Magazine, Forbes, Business Week, The Wall
Street Journal, Morningstar, Stangers and Barron's will also be utilized.
The performance of the Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of the
Fund for any period in the future. The performance of the Fund is a function
of many factors including its earnings, expenses and number of outstanding
shares. Fluctuating market conditions; purchases, sales and maturities of
portfolio securities; sales and redemptions of shares of beneficial interest;
and changes in operating expenses are all examples of items that can increase
or decrease Fund performance.
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<PAGE>
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and
the allocation of brokerage commissions are made by officers of the Fund
pursuant to recommendations made by an investment committee of the Adviser,
which consists of officers and directors of the Adviser and its affiliates, and
officers and Trustees who are interested persons of the Fund. Orders for
purchases and sales of securities are placed in a manner which, in the opinion
of the officers of the Fund, will offer the best price and market for the
execution of each such transaction. Purchases from underwriters of portfolio
securities may include a commission or commissions paid by the issuer and
transactions with dealers serving as market makers reflect a "spread."
Investments in debt securities are generally traded on a net basis through
dealers acting for their own account as principals and not as brokers; no
brokerage commissions are payable on such transactions.
The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing
primary policy, the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and such other policies as the Trustees may determine,
the Adviser may consider sales of shares of the Fund a factor in the selection
of broker-dealers to execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed
in the selection of brokers and dealers, and in the negotiation of brokerage
commission rates and dealer spreads, by the reliability and quality of the
services, including primarily the availability and value of research
information, and, to a lesser extent, statistical assistance furnished to the
Adviser of the Fund, and their value and expected contribution to the
performance of the Fund. It is not possible to place a dollar value on
information and services to be received from brokers and dealers, since it is
only supplementary to the research efforts of the Adviser. The receipt of
research information is not expected to reduce significantly the expenses of
the Adviser. The research information and statistical assistance furnished by
brokers and dealers may benefit the Life Insurance Company or other advisory
clients of the Adviser, and conversely, brokerage commissions and spreads paid
by other advisory clients of the Adviser may result in research information and
statistical assistance beneficial to the Fund. The Fund will make no
commitment to allocate portfolio transactions upon any prescribed basis. While
the Fund's officers will be primarily responsible for the allocation of the
Fund's brokerage business, their policies and practices in this regard must be
consistent with the foregoing and will at all times be subject to review by the
Trustees. For the years ended on October 31, 1994, 1993 and 1992, no
negotiated brokerage commissions were paid on portfolio transactions.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
the Fund may pay a broker which provides brokerage and research services to the
Fund an amount of disclosed commission in excess of the commission which
another broker would have charged for effecting that transaction. This
practice is subject to 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, 1994, the Fund did not pay commissions as compensation to any brokers for
research services such as industry, economic and company reviews and
evaluations of securities.
The Adviser's indirect parent, the Life Insurance Company, is the
indirect sole shareholder of John Hancock Freedom Securities Corporation and
its subsidiaries, two of which, Tucker Anthony Incorporated ("Tucker Anthony")
and Sutro & Company, Inc. ("Sutro"), are broker-dealers ("Affiliated Brokers").
Pursuant to procedures determined by the Trustees and consistent with the
above policy of obtaining best net results, the Fund may execute portfolio
transactions with or through Tucker Anthony or Sutro. During the year ending
October 31, 1994, the Fund did not execute any portfolio transactions with
Affiliated Brokers.
34
<PAGE>
Any of the Affiliated Brokers may act as broker for the Fund on
exchange transactions, subject, however, to the general policy of the Fund set
forth above and the procedures adopted by the Trustees pursuant to the
Investment Company Act. Commissions paid to an Affiliated Broker must be at
least as favorable as those which the connection with comparable transactions
involving similar securities being purchased or sold. A transaction would not
be placed with an Affiliated Broker if the Fund would have to pay a commission
rate less favorable than the Affiliated Broker's contemporaneous charges for
comparable transactions for its other most favored, but unaffiliated, customers
except for accounts for which the Affiliated Brokers acts as of the Trustees
who are not interested persons (as defined in the Investment Company Act) of
the Fund, the Adviser or the Affiliated Broker. Because the Adviser, which is
affiliated with the Affiliated Brokers, has, as an investment adviser to the
Fund, the obligation to provide investment management services, which includes
elements of research and related investment skills, such research and related
skills will not be used by the Affiliated Brokers as a basis for negotiating
commissions at a rate higher than that determined in accordance with the above
criteria. The Fund will not effect principal transactions with Affiliated
Brokers.
TRANSFER AGENCY SERVICES
John Hancock Investor Services, Corporation ("Investor Services"), P.O.
Box 9116, Boston, MA 02205-9116, a wholly-owned indirect subsidiary of John
Hancock Mutual Life Insurance Co., is the transfer and dividend paying agent
for the Fund. The Fund pays Investor Services an annual fee for Class A shares
of $20.00 per shareholder account and for Class B shares of $22.50 per
shareholder account.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian
agreement between the Trust and State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110. Under the custodian agreement,
State Street Bank and Trust Company performs custody, portfolio and fund
accounting services. The Trustees have determined that, except as otherwise
permitted under applicable Securities and Exchange Commission "no-action"
letters or exemptive orders, it is in the best interests of the Fund to hold
foreign assets of the Fund in qualified foreign banks and depositories meeting
the requirements of Rule 17f-5 under the Investment Company Act.
INDEPENDENT AUDITORS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts, serves
as the Trust's independent auditors, providing services including (1)
examination of annual financial statements, (2) assistance and consultation in
connection with Securities and Exchange Commission filings, and (3) preparation
of the annual federal income tax returns filed on behalf of the Fund.
35
<PAGE>
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 greater 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.
- -----------------
* As described by the rating companies themselves.
36
<PAGE>
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.
37
<PAGE>
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." 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."
38
<PAGE>
FINANCIAL STATEMENTS
John Hancock Mutual Funds - Short-Term Strategic Income Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value - Note C:
Bonds (cost - $108,862,401).................................................... $105,381,325
Short-term investments (cost - $3,353,776)..................................... 3,591,500
------------
108,972,825
Cash............................................................................... 726
Receivable for forward foreign currency exchange contracts sold.................... 26,574
Receivable for shares sold....................................................... 32,001
Interest receivable.............................................................. 4,375,079
Foreign tax receivable........................................................... 135,785
Deferred organization expenses - Note A.......................................... 24,325
Other assets..................................................................... 15,638
------------
Total Assets............................................ 113,582,953
------------------------------------------------------------------------
LIABILITIES:
Payable for forward foreign currency exchange contracts sold .................... 1,173,876
Dividend payable................................................................. 556,266
Payable for shares repurchased................................................... 185,602
Payable to John Hancock Advisers, Inc. and affiliates - Note B................... 70,333
Accounts payable and accrued expenses............................................ 115,997
------------
Total Liabilities....................................... 2,102,074
------------------------------------------------------------------------
NET ASSETS:
Capital paid-in.................................................................. 141,576,194
Accumulated net realized loss on investments and foreign currency transactions... ( 24,568,945)
Net unrealized depreciation of investments and foreign currency transactions..... ( 4,250,551)
Distributions in excess of net investment income................................. ( 1,275,819)
------------
Net Assets.............................................. $111,480,879
========================================================================
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 - $13,090,909/1,545,084.................................................. $ 8.47
=================================================================================================
Class B - $98,389,970/11,627,397................................................. $ 8.46
=================================================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($8.47 x 103.09%)...................................................... $ 8.73
=================================================================================================
</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 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, 1994. You'll
also find the net asset value per share as of that date.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
FINANCIAL STATEMENTS
John Hancock Mutual Funds - Short-Term Strategic Income Fund
STATEMENT OF OPERATIONS
Year ended October 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $45,869)................................ $12,287,430
-----------
Expenses:
Distribution/service fee - Note B
Class A........................................................................... 28,369
Class B........................................................................... 1,089,457
Investment management fee - Note B.................................................. 774,309
Transfer agent fee - Note B
Class A........................................................................... 9,809
Class B........................................................................... 148,979
Custodian fee....................................................................... 130,330
Auditing fee........................................................................ 64,439
Registration and filing fees........................................................ 39,377
Trustees' fees...................................................................... 29,117
Printing............................................................................ 23,880
Organization expense - Note A....................................................... 15,997
Legal fees.......................................................................... 12,580
Miscellaneous....................................................................... 10,708
-----------
Total Expenses................................................... 2,377,351
----------------------------------------------------------------------------------
Net Investment Income............................................ 9,910,079
----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investments sold................................................. ( 6,697,231)
Net realized gain on foreign currency transactions.................................... 886,305
Change in net unrealized appreciation/depreciation of investments..................... 279,054
Change in net unrealized appreciation/depreciation of foreign currency transactions... ( 2,181,080)
-----------
Net Realized and Unrealized Loss on Investments and Foreign
Currency Transactions............................................ ( 7,712,952)
----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations............. $ 2,197,127
==================================================================================
</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.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
FINANCIAL STATEMENTS
John Hancock Mutual Funds - Short-Term Strategic Income Fund
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
1994 1993
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.............................................................. $ 9,910,079 $ 15,671,298
Net realized gain (loss) on investments sold and foreign currency transactions..... ( 5,810,926) 4,947,540
Change in net unrealized appreciation/depreciation of investments and
foreign currency transactions.................................................... ( 1,902,026) ( 8,744,852)
------------ ------------
Net Increase in Net Assets Resulting from Operations............................. 2,197,127 11,873,986
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.6224 and $0.8250 per share, respectively).......................... ( 693,087) ( 1,421,776)
Class B - ($0.5649 and $0.7535 per share, respectively).......................... ( 7,303,157) ( 14,236,138)
Distributions in excess of net investment income
Class A - ($0.0428 and none per share, respectively)............................. ( 47,616) --
Class B - ($0.0393 and none per share, respectively)............................. ( 508,661) --
Distributions in excess of net realized gain on investments sold
Class A - ($0.1154 and none per share, respectively)............................. ( 114,916) --
Class B - ($0.1154 and none per share, respectively)............................. ( 1,691,979) --
Distributions from capital paid-in
Class A - ($0.0966 and none per share, respectively)............................. ( 107,572) --
Class B - ($0.0966 and none per share, respectively)............................. ( 1,249,943) --
------------ ------------
Total Distributions to Shareholders.......................................... ( 11,716,931) ( 15,657,914)
------------ ------------
FROM FUND SHARE TRANSACTIONS - NET*
Net decrease in net assets from Fund share transactions............................ ( 33,002,925) ( 98,739,396)
------------ ------------
NET ASSETS:
Beginning of period................................................................ 154,003,608 256,526,932
------------ ------------
End of period (including distributions in excess of net investment income and
undistributed net investment income of ($1,275,819) and $2,207,284,
respectively)................................................................. $111,480,879 $154,003,608
============ ============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1994 1993
---------------------------------------------------------------
Shares Amount Shares Amount
---------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold........................................ 932,145 $ 8,040,859 571,031 $ 5,328,747
Shares issued to shareholders in reinvestment of
distributions.................................... 74,101 644,945 76,389 708,959
--------- ----------- ------------ ------------
1,006,246 8,685,804 647,420 6,037,706
Less shares repurchased............................ ( 681,111) ( 6,037,753) ( 1,623,462) ( 15,048,936)
--------- ----------- ------------ ------------
Net increase (decrease)............................ 325,135 $ 2,648,051 ( 976,042) ($ 9,011,230)
========= =========== ============ ============
CLASS B
Shares sold........................................ 1,599,938 $13,816,191 632,685 $ 5,885,322
Shares issued to shareholders in reinvestment of
distributions.................................... 681,528 5,955,744 764,013 7,089,456
--------- ----------- ------------ ------------
2,281,466 19,771,935 1,396,698 12,974,778
Less shares repurchased............................ (6,332,319) ( 55,422,911) ( 11,065,639) ( 102,702,944)
--------- ----------- ------------ ------------
Net decrease....................................... (4,050,853) ($35,650,976) ( 9,668,941) ($ 89,728,166)
========= =========== ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
FINANCIAL STATEMENTS
John Hancock Mutual Funds - Short-Term Strategic Income 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,
------------------------------------------------
1994 1993 1992(a) 1991(b)
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............................. $ 9.12 $ 9.32 $ 9.86
------- ------- -------
Net Investment Income............................................. 0.76** 0.83** 0.65
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions................................... ( 0.53) ( 0.20) ( 0.55)
------- ------- -------
Total from Investment Operations................................ 0.23 0.63 0.10
------- ------- ------
Less Distributions:
Dividends from Net Investment Income.............................. ( 0.62) ( 0.83) ( 0.64)
Distributions in Excess of Net Investment Income.................. ( 0.04) -- --
Distributions in Excess of Net Realized Gain on Investments Sold.. ( 0.12) -- --
Distributions from Capital Paid-in................................ ( 0.10) -- --
------- ------- -------
Total Distributions............................................. ( 0.88) ( 0.83) ( 0.64)
------- ------- -------
Net Asset Value, End of Period.................................... $ 8.47 $ 9.12 $ 9.32
======= ======= =======
Total Investment Return at Net Asset Value ....................... 2.64% 6.78% 1.16%*
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......................... $13,091 $11,130 $20,468
Ratio of Expenses to Average Net Assets........................... 1.26% 1.21% 1.37%*
Ratio of Net Investment Income to Average Net Assets.............. 8.71% 8.59% 8.09%*
Portfolio Turnover Rate........................................... 150% 306% 86%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended October 31,
-------------------------------------------------
1994 1993 1992(a) 1991(b)
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............................. $ 9.11 $ 9.31 $ 10.01 $ 10.00
-------- --------- --------- ---------
Net Investment Income............................................. 0.70** 0.75** 0.87 0.76+
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions................................... ( 0.53) ( 0.20) ( 0.80) 0.01
-------- --------- --------- ---------
Total from Investment Operations................................ 0.17 0.55 0.07 0.77
-------- --------- --------- ---------
Less Distributions:
Dividends from Net Investment Income ............................. ( 0.56) ( 0.75) ( 0.77) ( 0.76)
Distributions in Excess of Net Investment Income.................. ( 0.04) -- -- --
Distributions in Excess of Net Realized Gain on Investments Sold.. ( 0.12) -- -- --
Distributions from Capital Paid-in................................ ( 0.10) -- -- --
-------- --------- --------- ---------
Total Distributions............................................. ( 0.82) ( 0.75) ( 0.77) ( 0.76)
-------- --------- --------- ---------
Net Asset Value, End of Period.................................... 8.46 $ 9.11 $ 9.31 $ 10.01
======== ========= ========= =========
Total Investment Return at Net Asset Value ....................... 1.93% 5.98% 0.64% 8.85%*+
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......................... 98,390 $142,873 $236,059 $ 218,562
Ratio of Expenses to Average Net Assets........................... 1.99% 2.01% 2.07% 1.89%*+
Ratio of Net Investment Income to Average Net Assets.............. 8.00% 7.81% 8.69% 8.72%*+
Portfolio Turnover Rate........................................... 150% 306% 86% 22%
<FN>
* On an annualized basis.
** On average month end shares outstanding.
+ Reflects expense limitation in effect for the period ended October 31,
1991 (see Note B). As a result of such limitation, expenses for Class B
shares reflect a reduction of $0.0039 per share. Absent of such reduction,
for the year ended October 31, 1991 the ratio of expenses to average net
assets would have been 1.93% and the ratio of net investment income to
average net assets would have been 8.68%. Without the reimbursement, total
investment return would have been lower.
(a) Class A shares commenced operations on January 3, 1992.
(b) Class B shares commenced operations on December 28, 1990.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
SHORT-TERM STRATEGIC INCOME FUND ON OCTOBER 31, 1994. IT'S DIVIDED INTO TWO MAIN
CATEGORIES: BONDS AND SHORT-TERM INVESTMENTS. BONDS ARE FURTHER BROKEN DOWN BY
CURRENCY DENOMINATION.
SCHEDULE OF INVESTMENTS
October 31, 1994
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000'S
ISSUER, DESCRIPTION RATE OMITTED)# MARKET VALUE
- ------------------- -------- ---------- ------------
<S> <C> <C> <C>
BONDS
CANADIAN DOLLAR (3.45% )
Government of Canada,
Government Bond
12-15-95......................... 10.750% 5,000 $ 3,845,974
------------
PORTUGESE ESCUDO (7.43%)
Banco Portugues Do
Atlantico, Foreign Corp
Bond 04-23-95 ***................ 12.500 1,250,000 8,283,650
------------
SLOVAKIAN CROWN (2.58%)
*ING Capital Holdings,
Foreign Corp Bond
10-10-95 (r)
(Slovakian crown
linked note) ***................. 0.000 100,000 2,870,169
------------
SPANISH PESETA (5.04%)
Government of Spain,
Government Bond
11-30-96......................... 10.550 700,000 5,620,552
------------
UNITED STATES DOLLAR (76.03%)
*Anacomp, Inc., Sub
Note 11-01-00.................... 15.000 2,000 2,185,000
*Banco Central Do
Brazil, (Brazil), Foreign
Corp Bond 10-15-99............... 6.688** 4,107 3,716,960
*CTC Mansfield Funding
Corp., Sec Bonds
09-30-16......................... 11.125 2,000 1,882,560
*Container Corp. of
America, Sub Deb
12-01-01......................... 14.000 2,000 2,152,500
*Czech National Bank,
(Czech), Med Term
Note 12-15-94
(Discount Security
with redemption
linked to CZK Fx
rates) *** (R)................... 0.000 2,000 1,976,000
*Essar Gujarat Ltd., (India),
Foreign Agency
07-15-99 (r)..................... 8.025** 4,000 4,000,000
*Government of Barbados,
(Barbados), Government
Bond 06-09-97 (R)................ 10.500 1,000 991,250
*Great Dane Holdings, Sr
Sub Deb 08-01-01................. 12.750 2,000 1,980,000
*IMO Industries, Inc., Sub
Deb 08-15-97..................... 12.250 2,000 2,010,000
Inter-American Development
Bank, (SupraNational),
Bond 12-01-94.................... 11.625 5,000 5,018,325
*Jones Intercable, Inc.,
Sub Deb 07-15-04................. 11.500 1,000 1,055,000
Kingdom of Denmark,
(Denmark), Government
Bond 02-13-95.................... 8.875 6,000 6,030,000
*Loehmann's Holdings, Inc.,
Sr Sub Note 02-15-99............. 13.750 3,000 3,015,000
*NWA Inc., Note
11-30-00 (r)..................... 12.092 4,860 4,859,557
Osaka, Prefecture of,
(Japan), Foreign Agency
11-10-94......................... 10.375 2,000 2,000,600
*Republic of Brazil, (Brazil),
Government Bond
04-15-09......................... 6.750** 5,000 3,175,000
*Republic of Venezuela,
(Venezuela), Var Rate
Note 12-29-95.................... 6.375** 3,967 3,818,222
*USAfrica Airways Holdings, Inc.,
Bond 05-31-99 (r)................ 12.000 1,000 1,000,000
*USAir, Inc., Sr Notes
07-01-03......................... 10.000 3,000 1,740,000
*United States Treasury,
Bond 02-15-95.................... 10.500 8,000 8,115,000
United States Treasury,
Note 07-15-95.................... 8.875 10,000 10,198,440
*United States Treasury,
Note 10-15-95.................... 8.625 2,000 2,044,062
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000'S
ISSUER, DESCRIPTION RATE OMITTED)# MARKET VALUE
- ------------------- -------- ---------- ------------
<S> <C> <C> <C>
UNITED STATES (CONTINUED)
*United States Treasury,
Note 12-31-95.................... 4.250% 4,000 $ 3,908,752
*United States Treasury,
Note 08-15-97.................... 6.500 8,000 7,888,752
------------
84,760,980
------------
TOTAL BONDS
(Cost $108,862,401) (94.53%) 105,381,325
------ ------------
SHORT-TERM INVESTMENTS
SHORT-TERM FOREIGN GOVERNMENT
INVESTMENTS (2.23%)
Banque Paribas, Grand
Caymen Branch, 01-30-95
(Yankee CD linked to
Bulgaria discount brady
bond floating rate note
due 7-28-24)***.................. 6.062** 5,000 2,487,500
------------
SHORT-TERM GOVERNMENT INVESTMENTS (0.99%)
Federal Home Loan
Mortgage, 11-01-94............... 4.650 1,104 1,104,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,353,776) ( 3.22%) 3,591,500
------ ------------
TOTAL INVESTMENTS (97.75%) $108,972,825
====== ============
<FN>
NOTES TO SCHEDULE OF INVESTMENTS
* Securities, other than short-term investments, newly added to the port-
folio during the year ended October 31, 1994
** Represents rate in effect on October 31, 1994
*** An indexed security's value is linked to changes in foreign currencies,
interest rates or other reference instruments. Indexed securities amounted
to $15,617,319 or 14% as of October 31, 1994.
# Par value of non US$ denominated foreign bonds is expressed in local
currency for each country listed.
(R) Security is exempt from registration under rule 144A of the Securities Act
of 1933. Such securities may be resold, normally to qualified institutional
buyers, in transactions exempt from registration. See Note A of the Notes to
Financial Statements for valuation policy. Rule 144A security amounted to
$991,250 as of October 31, 1994.
(r) Direct placement securities are restricted to resale. They have been valued
using procedures approved by the Trustees after considerations of
restrictions as to resale, financial condition and prospects of the issuer,
general market conditions and pertinent information in accordance with the
Fund's By-Laws and the Investment Company Act of 1940, as amended. The Fund
has limited rights to registration under the Securities Act of 1933 with
respect to these restricted securities.
</FN>
</TABLE>
Additional information on each restricted security is as follows:
<TABLE>
<CAPTION>
VALUE AS A
PERCENTAGE VALUE AT
AQUISITION AQUISITION OF FUND'S OCTOBER 31,
DATE COST NET ASSETS 1994
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Essar Gujarat Ltd.,
(India) Foreign
Agency 07-15-99 07-06-94 $4,002,500 3.59% $4,000,000
ING Capital Holdings,
(Slovakia) Foreign
Corp Bond
10-10-95 10-05-94 2,773,069 2.57% 2,870,169
NWA Inc., Note
11-30-00 06-17-94 4,464,701 4.36% 4,859,557
USAfrica Airways
Holdings, Inc.,
Bond 05-31-99 10-13-94 1,000,000 0.90% 1,000,000
</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.
14
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
PORTFOLIO CONCENTRATION (UNAUDITED)
- --------------------------------------------------------------------------------
THE FUND PRIMARILY INVESTS IN BONDS ISSUED BY COMPANIES AND GOVERNMENTS OF OTHER
COUNTRIES. THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE ECONOMIC CONDITION
WITHIN THE COUNTRIES IN WHICH IT INVESTS. THE CONCENTRATION OF INVESTMENTS BY
CURRENCY DENOMINATION FOR INDIVIDUAL SECURITIES HELD BY THE FUND IS SHOWN IN THE
SCHEDULE OF INVESTMENTS. IN ADDITION, CONCENTRATION OF INVESTMENTS CAN BE
AGGREGATED BY VARIOUS INVESTMENT CATEGORIES. THE TABLE BELOW SHOWS THE
PERCENTAGES OF THE FUND'S INVESTMENTS AT OCTOBER 31, 1994 ASSIGNED TO THE
VARIOUS INVESTMENT CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE AS A
INVESTMENT CATEGORIES % OF NET ASSETS
--------------------- -----------------
<S> <C>
Banks................................................ 19.61%
Broadcasting - Radio/TV/Cable........................ 0.95
Computer - Software.................................. 1.96
Containers........................................... 1.93
Diversified Operations............................... 1.78
Electronics.......................................... 1.80
Governmental - Foreign............................... 21.06
Governmental - Foreign Agencies...................... 1.79
Governmental - U.S................................... 28.84
Governmental - U.S. Agencies - Short Term............ 0.99
Retail............................................... 2.71
Steel Producers...................................... 3.59
Transportation....................................... 6.82
Utilities............................................ 1.69
Short-term investments............................... 2.23
-----
TOTAL INVESTMENTS 97.75%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
NOTE A -
ACCOUNTING POLICIES
Freedom Investment Trust II (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 Short-Term Strategic Income Fund (the
"Fund"), John Hancock Special Opportunities Fund, John Hancock Freedom Global
Income Fund, John Hancock Freedom Global Fund and John Hancock Freedom
International Fund. On November 1, 1993 the Fund changed its name from Freedom
Short-Term World Income Fund.
The Trustees have authorized the issuance of two classes 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, 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 and the Internal Revenue Service. 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 Debt securities having an over-the-counter primary
market are valued on the basis of valuations furnished by a pricing service
which determines valuations for normal institutional size trading units, without
exclusive reliance upon quoted prices. If no sale has occurred on the date
assets are valued and for other over-the-counter securities, the security will
normally be 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 valued at amortized cost, which generally approximates market value.
Investment securities for which no current market quotations are available are
valued at fair value based on procedures approved by the Trustees. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below. The Fund may invest in indexed securities whose value is linked either
directly or inversely to changes in foreign currencies, interest rates,
commodities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
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. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
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 $24,112,418 of capital
loss carryforwards available, to the extent provided by regulations, to offset
future net realized capital gains. Of these, $1,001,257 expire October 31, 1999,
$17,243,199 expire October 31, 2000, $3,127,414 expire October 31, 2001 and
$2,740,548 expire October 31, 2002. To the extent that capital loss carryovers
are used to offset realized capital gains it is unlikely that gains so offset
will be distributed to shareholders. For federal income tax purposes, net
currency exchange gains and losses from sales of foreign debt securities may be
treated as ordinary income even though such items are capital gains and losses
for accounting purposes.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
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. Foreign income
may be subject to foreign withholding taxes which are accrued as applicable.
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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked-to-market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
Open foreign currency forward sell contracts at October 31, 1994 are as follows:
<TABLE>
<CAPTION>
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION/
CURRENCY COVERED BY CONTRACT MONTH (DEPRECIATION)
- -------- ------------------- ---------- --------------
<S> <C> <C> <C>
Spanish Peseta 775,000,000 Jan 95 $ 26,574
Portuguese Escudo 1,300,000,000 Jun 95 ( 1,173,876)
-----------
($ 1,147,302)
===========
</TABLE>
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain (loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investmen ts in securities resulting
from changes in the exchange rate.
OPTIONS Listed options are valued at the last quoted sales price on the exchange
on which they are primarily traded. Over-the-counter options are valued at the
mean between the last bid and asked prices. Upon the writing of a call or put
option, an amount equal to the premium received by the Fund is included in the
Statement of Assets and Liabilities as an asset and corresponding liability. The
amount of the liability is subsequently marked-to-market to reflect the current
market value of the written option.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
There were no written option transactions for the year ended October 31,
1994.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates,
currency exchange rates and other market conditions. At the time the Fund
enters into a financial futures contract, it is required to deposit with its
custodian a specified amount of cash of 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
flucutuates. 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 contract 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.
There were no open positions in financial futures contracts at October 31,
1994.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or date of purchase over the life of the security,
as required by the Internal Revenue Code.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Fund have been capitalized and are being charged to the Fund's operations
ratably over a five-year period that began with the commencement of investment
operations of the Fund.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent on
an annual basis, to the sum of (a) 0.65% of the first $500,000,000 of the Fund's
average daily net asset value and (b) 0.60% of the Fund's average daily net
asset value in excess of $500,000,000. Prior to January 1, 1994 the Fund paid a
monthly management fee to the Adviser equivalent on an annual basis, to 0.55% of
the Fund's average daily net asset value.
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 Broker Distribution Services, Inc. ("Broker Services"), a
wholly-owned subsidiary of the Adviser, and Freedom Distributors Corporation
("FDC") act as Co-Distributors for shares of the Fund. For the year ended
October 31, 1994, net sales charges received on sales of Class A shares of the
Fund amounted to $84,726. Out of this amount, $10,140 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, $14,032
was paid as sales commissions to unrelated broker-dealer and $60,554 was paid as
sales commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"). 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, all of which are broker-dealers.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
Class B shares which are redeemed within four years of purchase (three years
for purchases prior to January 1, 1994) will be subject to a contingent deferred
sales charge ("CDSC") at declining rates beginning at 3.0% 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 Broker Services
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 year ended October 31, 1994, contingent deferred sales charges
received by Broker Services amounted to $268,182.
In addition, to compensate the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted a Distribution Plan
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 distribution and service expenses at an annual rate not to
exceed 0.30% (0.25% prior to January 1, 1994) of the Fund's average daily net
assets attributable to Class A shares and 1.00% of the Fund's average daily net
assets attributable to Class B shares, to reimburse the Co-Distributors for
their distribution/service costs. Up to a maximum of 0.25% of these payments may
be service fees as defined by the amended Rules of Fair Practice of the National
Association of Securities Dealers, which became effective July 7, 1993. 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 was decreased on Class B shares to 0.95% effective July 1,
1994 and increased to 1.00% effective September 1, 1994.
The Fund has a transfer agent agreement with John Hancock Fund Services,
Inc. ("Fund Services"), a wholly-owned subsidiary of The Berkeley Financial
Group. The Fund pays Fund Services a monthly transfer agent fee equivalent, on
an annual basis, to 0.10% and 0.13% 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 proxy mailings.
Messer. Edward J. Boudreau, Jr. and Hugh A. Dunlap, Jr. are directors and
officers of the Adviser, and its affiliates, as well as Trustees of the Fund.
The compensation of unaffiliated Trustees is borne by the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obli- gations of the
U.S. government and its agencies and short-term securities, during the year
ended October 31, 1994, aggregated $118,852,013 and $148,168,873, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies during the year ended October 31, 1994, aggregated $42,589,573 and
$38,822,344, respectively.
The cost of investments owned at October 31, 1994 (including short-term
investments), for Federal income tax purposes was $111,790,664. Gross unrealized
appreciation and depreciation of investments aggregated $929,591 and $3,747,430,
respectively, resulting in net unrealized depreciation of $2,817,839.
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified amounts to
reflect an increase in capital paid-in of $721,317 a decrease in accumulated net
realized loss on investments of $4,119,344 and a decrease in distributions in
excess of net investment income of $4,840,661. This represents the amount
necessary to report these balances on a tax basis, excluding certain temporary
differences, as of October 31, 1994. These reclassifications, which have no
impact on the net asset value of the Fund, ar e primarily attributable to
certain differences in the computation of distributable income and capital gains
under federal tax rules versus generally accepted accounting principles.
19
<PAGE>
John Hancock Funds - Short-Term Strategic Income Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Freedom Investment Trust II and the Shareholders of
John Hancock Short-Term Strategic Income Fund
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 Short-Term Strategic
Income Fund (the "Fund") (a portfolio of Freedom Investment Trust II) at October
31, 1994, the results of its operations, the changes in its net assets and the
financial highlights for the periods indicat ed, 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, 1994 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 16, 1994
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during the fiscal year ended October
31, 1994.
None of the distributions qualify for the dividends received deduction
available to corporations.
Shareholders will be mailed a 1994 U.S. Treasury Department Form 1099-DIV in
January of 1995. This will reflect the total of all distributions which are
taxable for the calendar year 1994.
20
<PAGE>
JOHN HANCOCK SPECIAL OPPORTUNITIES FUND
Class A and Class B Shares
Statement of Additional Information
March 1, 1995
This Statement of Additional Information provides
information about John Hancock Special Opportunities Fund (the
"Fund") in addition to the information that is contained in the
Fund's Class A and Class B Prospectus dated March 1, 1995 (the
"Prospectus").
This Statement of Additional Information is not a
prospectus. It should be read in conjunction with the Fund's
Prospectuses, copies of which may be obtained free of charge by
writing or telephoning:
John Hancock Investor Services, Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
1-800-225-5291
<TABLE>
TABLE OF CONTENTS
Page
<S> <C>
ORGANIZATION OF THE FUND ..................................... 1
INVESTMENT OBJECTIVE AND POLICIES ............................ 1
CERTAIN INVESTMENT PRACTICES ................................. 1
INVESTMENT RESTRICTIONS ...................................... 10
THOSE RESPONSIBLE FOR MANAGEMENT ............................. 13
INVESTMENT ADVISORY AND OTHER SERVICES ....................... 20
DISTRIBUTION CONTRACT ........................................ 21
NET ASSET VALUE .............................................. 23
INITIAL SALES CHARGE ON CLASS A SHARES ....................... 23
DEFERRED SALES CHARGE ON CLASS B SHARES ...................... 25
SPECIAL REDEMPTIONS .......................................... 26
ADDITIONAL SERVICES AND PROGRAMS ............................. 26
DESCRIPTION OF THE FUND'S SHARES ............................. 27
TAX STATUS ................................................... 28
CALCULATION OF PERFORMANCE ................................... 33
BROKERAGE ALLOCATION ......................................... 34
TRANSFER AGENT SERVICES ...................................... 35
CUSTODY OF PORTFOLIO ......................................... 35
INDEPENDENT AUDITORS ......................................... 35
APPENDIX A - ECONOMIC SECTORS AND DESCRIPTION OF BOND RATINGS. A-1
</TABLE>
<PAGE>
ORGANIZATION OF THE FUND
John Hancock Special Opportunities Fund ("the Fund") is a
series of Freedom Investment Trust II (the "Trust"), an open-end
management investment company organized as a Massachusetts
business trust on March 31, 1986, under the laws of The
Commonwealth of Massachusetts. The Fund commenced operations on
September 7, 1993. John Hancock Advisers, Inc. (the "Adviser")
is an indirect wholly-owned subsidiary of John Hancock Mutual
Life Insurance Company (the "Life Insurance Company"), a
Massachusetts life insurance company chartered in 1862, with
national headquarters at John Hancock Place, Boston,
Massachusetts.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek long-term capital
appreciation. The Fund seeks to achieve its objective by
emphasizing investments in equity securities of issuers in
various economic sectors. There are market fluctuations and
risks in any investment and therefore there can be no assurance
that the investment objective of the Fund will be realized.
CERTAIN INVESTMENT PRACTICES
WHEN-ISSUED SECURITIES . "When-issued" refers to securities
whose terms are available and for which a market exists, but
which have not yet been issued. No payment is made with respect
to a when-issued transaction, until delivery is due, often a
month or more after the purchase.
The Fund will engage in when-issued transactions with
respect to securities purchased for its portfolio in order to
obtain an advantageous price and yield at the time of the
transactions. When the Fund engages in a when-issued
transaction, it relies on the seller to consummate the
transaction. The failure of the issuer or seller to consummate
the transaction may result in the Fund's losing the opportunity
to obtain a price and yield considered to be advantageous. On
the date the Fund enters into an agreement to purchase securities
on a when-issued basis, the Fund will segregate in a separate
account cash or liquid, high grade debt securities equal in value
to the when-issued commitment. These assets will be valued daily
at market, and additional cash or liquid, high grade debt
securities will be segregated in a separate account to the extent
that the total value of the assets in the account declines below
the amount of the when-issued commitment.
REPURCHASE AGREEMENTS . A repurchase agreement is a contract
under which the Fund would acquire a security for a relatively
short period (usually not more than 7 days) subject to the
obligation of the seller to repurchase and the Fund to resell
such security at a fixed time and price (representing the Fund's
cost plus interest). The Fund will enter into repurchase
agreements only with member banks of the Federal Reserve System
and with "primary dealers" in U.S. Government securities. The
Adviser will continuously monitor the creditworthiness of the
parties with whom it enters into repurchase agreements.
1
<PAGE>
The Fund has established a procedure providing that the securities
serving as collateral for each repurchase agreement must be delivered to the
Fund's custodian either physically or in book-entry form and that the
collateral must be marked to market daily to ensure that each repurchase
agreement is fully collateralized at all times. In the event of bankruptcy or
other default by a seller of a repurchase agreement, the Fund could
experience delays in liquidating the underlying securities and could
experience losses, including possible decline in the value of the underlying
securities during the period while the Fund seeks to enforce its rights
thereto, possible subnormal levels of income and lack of access to income
during this period, and expense of enforcing its rights.
FINANCIAL FUTURES CONTRACTS. The Fund may hedge its portfolio by
selling or purchasing financial futures contracts as an offset against the
effect of expected changes in interest rates or in security or foreign
currency values. Although other techniques could be used to reduce the Fund's
exposure to interest rate, securities market and currency fluctuations, the
Fund may be able to hedge its exposure more effectively and at a lower cost by
using financial futures contracts. The Fund will enter into financial futures
contracts for hedging purposes and for speculative purposes to the extent
permitted by regulations of the Commodity Futures Trading Commission ("CFTC").
Financial futures contracts have been designed by boards of trade
which have been designated "contract markets" by the CFTC. Futures contracts
are traded on these markets in a manner that is similar to the way a stock is
traded on a stock exchange. The boards of trade, through their clearing
corporations, guarantee that the contracts will be performed. It is expected
that if new types of financial futures contracts are developed and traded the
Fund may engage in transactions in such contracts.
Although financial futures contracts by their terms call for actual
delivery or acceptance of financial instruments, in most cases the contracts
are closed out prior to delivery by offsetting purchases or sales of matching
financial futures contracts (same exchange, underlying security or currency
and delivery month). If the offsetting purchase price is less than the
Fund's original sale price, the Fund realizes a gain, or if it is more, the
Fund realizes a loss. Conversely, if the offsetting sale price is more than
the Fund's original purchase price, the Fund realizes a gain, or if it is
less, the Fund realizes a loss. The Fund's transaction costs must also be
included in these calculations. The Fund will pay a commission in connection
with each purchase or sale of financial futures contracts, including a closing
transaction.
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." The margin required for a
financial futures contract is set by the board of trade or exchange on which
the contract is traded and may be modified during the term of the contract.
The initial margin is in the nature of a performance bond or good faith
deposit on the financial futures contract which is returned to the Fund upon
termination of the contract, assuming all contractual obligations have been
satisfied. The Fund expects to earn interest income on its initial margin
deposits. Each day, the futures contract is valued at the official settlement
price of the board of
2
<PAGE>
trade or exchange on which it is traded. Subsequent payments,
known as "variation margin," to and from the broker are made on a
daily basis as the market price of the financial futures contract
fluctuates. This process is known as "mark to market." Variation
margin does not represent a borrowing or lending by the Fund but is
instead a settlement between the Fund and the broker of the amount
one would owe the other if the financial futures contract expired.
In computing net asset value, the Fund will mark to the market its
open financial futures positions.
Successful hedging depends on the extent of correlation
between the market for the underlying securities and the futures
contract market for those securities or currency. There are
several factors that will probably prevent this correlation from
being perfect, and even a correct forecast of general interest
rate, securities market or currency trades may not result in a
successful hedging transaction. There are significant
differences between the securities or currency markets and the
futures markets which could create an imperfect correlation
between the markets and which could affect the success of a given
hedge. The degree of imperfection of correlation depends on
circumstances such as: variations in speculative market demand
for financial futures and debt and equity securities, including
technical influences in futures trading and differences between
the financial instruments being hedged and the instruments
underlying the standard financial futures contracts available for
trading in such respects as interest rate levels, maturities and
creditworthiness of issuers. The degree of imperfection may be
increased where the underlying debt securities are lower-rated,
and, thus, subject to greater fluctuation in price than
higher-rated securities.
A decision as to whether, when and how to hedge involves the
exercise of skill and judgment, and even a well-conceived hedge
may be unsuccessful to some degree because of market behavior or
unexpected interest rate, securities market or currency trends.
The Fund will bear the risk that the price of the securities
being hedged will not move in complete correlation with the price
of the futures contracts used as a hedging instrument. Although
the Adviser believes that the use of financial futures contracts
will benefit the Fund, an incorrect prediction could result in a
loss on both the hedged securities or currency in the Fund's
portfolio and the futures position so that the Fund's return
might have been better had hedging not been attempted. However,
in the absence of the ability to hedge, the Adviser might have
taken portfolio actions in anticipation of the same market
movements with similar investment results but, presumably, at
greater transaction costs. The low margin deposits required for
futures transactions permit an extremely high degree of leverage.
A relatively small movement in the price of instruments
underlying a futures contract may result in losses or gains in
excess of the amount invested.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount the
price of a futures contract may vary either up or down from the
previous day's settlement price, at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit
governs only price movements during a particular trading day and,
therefore, does not limit potential losses because the limit may
work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily
limit for several
3
<PAGE>
consecutive trading days with little or no trading, thereby
preventing prompt liquidation of positions and subjecting some
holders of futures contracts to substantial losses.
Finally, although the Fund engages in financial futures
transactions only on boards or trade or exchanges where there
appears to be an adequate secondary market, there is no assurance
that a liquid market will exist for a particular futures contract
at any given time. The liquidity of the market depends on
participants closing out contracts rather than making or taking
delivery. In the event participants decide to make or take
delivery, liquidity in the market could be reduced. In addition,
the Fund could be prevented from executing a buy or sell order at
a specified price or closing out a position due to limits on open
positions or daily price fluctuation limits imposed by the
exchanges or boards of trade. If the Fund cannot close out a
position, it will be required to continue to meet margin
requirements until the position is closed.
OPTIONS ON FINANCIAL FUTURES CONTRACTS . The Fund may
purchase and write call and put options on financial contracts.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the
period of the option. Upon exercise, the writer of the option
delivers the futures contract to the holder at the exercise
price. The Fund would be required to deposit with its custodian
initial and variation margin with respect to put and call options
on futures contracts written by it.
Options on futures contracts involve risks similar to the
risks relating to transactions in financial futures contracts.
Also, an option purchased by the Fund may expire worthless, in
which case the Fund would lose the premium paid therefor.
OTHER CONSIDERATIONS . The Fund will engage in futures and
related options transactions only for bona fide hedging or
speculative purposes to the extent permitted by CFTC regulations.
The Fund will determine that the price fluctuations in the
futures contracts and options on futures used for hedging
purposes are substantially related to price fluctuations in
securities held by the Fund or which it expects to purchase.
Except as stated below, the Fund's futures transactions will be
entered into for traditional hedging purposes -- i.e., futures
contracts will be sold to protect against a decline in the price
of securities or the currency in which they are denominated that
the Fund owns, or futures contracts will be purchased to protect
the Fund against an increase in the price of securities or the
currency in which they are denominated it intends to purchase.
As evidence of this hedging intent, the Fund expects that on 75%
or more of the occasions on which it takes a long futures or
option position (involving the purchase of futures contracts),
the Fund will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities or assets
denominated in the related currency in the cash market at the
time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the
Fund to do so, a long futures position may be terminated or an
option may expire without the corresponding purchase of
securities or other assets.
As an alternative to literal compliance with the bona fide
hedging definition, a CFTC regulation permits the Fund to elect
to comply with a different test, under which the aggregate
initial margin and premiums required to establish speculative
positions in futures contracts and
4
<PAGE>
options on futures will not exceed 5 percent of the net asset value of
the Fund's portfolio, after taking into account unrealized profits and losses
on any such positions and excluding the amount by which such options were
in-the-money at the time of purchase. The Fund will engage in transactions in
futures contracts and related options only to the extent such transactions are
consistent with the requirements of the Internal Revenue Code of 1986, as
amended, for maintaining its qualification as a regulated investment company
for Federal income tax purposes.
When the Fund purchases a futures contract, writes a put option
thereon or purchases a call option thereon, an amount of cash or high grade,
liquid debt securities (i.e., securities rated in one of the top three ratings
categories by Moody's Investors Service, Inc. or Standard & Poor's
Corporation) will be deposited in a segregated account with the Fund's
custodian which is equal to the underlying value of the futures contract
reduced by the amount of initial and variation margin held in the account of
its broker.
OPTIONS TRANSACTIONS. The Fund may write listed and over-the-counter
covered call options and covered put options on securities in order to earn
additional income from the premiums received. In addition, the Fund may
purchase listed and over-the-counter call and put options. The extent to
which covered options will be used by the Fund will depend upon market
conditions and the availability of alternative strategies. The Fund may write
listed covered and over-the-counter call and put options on up to 100% of its
net assets.
The Fund will write listed and over-the-counter call options only if
they are "covered", which means that the Fund owns or has the immediate right
to acquire the securities underlying the options without additional cash
consideration upon conversion or exchange of other securities held in its
portfolio. A call option written by the Fund will also be "covered" if the
Fund holds on a share-for-share basis a covering call on the same securities
where (i) the exercise price of the covering call held is equal to or less
than the exercise price of the call written or the difference is maintained by
the Fund in cash or high grade, liquid debt obligations in a segregated
account with the Fund's custodian, and (ii) the covering call expires at the
same time as the call written. If a covered call option is not exercised,
the Fund would keep both the option premium and the underlying security. If
the covered call option written by the Fund is exercised and the exercise
price, less the transaction costs, exceeds the cost of the underlying
security, the Fund would realize a gain in addition to the amount of the
option premium it received. If the exercise price, less transaction costs,
is less than the cost of the underlying security, the Fund's loss would be
reduced by the amount of the option premium.
The Fund will write a covered put option only with respect to
securities it intends to acquire for the Fund's portfolio and will maintain in
a segregated account with the Fund's custodian cash or high grade, liquid debt
securities with a value equal to the price at which the underlying security may
be sold to the Fund in the event the put option is exercised by the purchaser.
The Fund can also write a "covered" put option by purchasing on a
share-for-share basis a put on the same security as the put written by the Fund
if the exercise price of the covering put held is equal to or greater than the
exercise price of the put written and the covering put expires at the same time
as or later than the put written.
5
<PAGE>
In writing listed and over-the-counter covered put options on
securities, the Fund would earn income from the premiums received. If a
covered put option is not exercised, the Fund would keep the option premium
and the assets maintained to cover the option. If the option is exercised and
the exercise price, including transaction costs, exceeds the market price of
the underlying security, the Fund would realize a loss, but the amount of the
loss would be reduced by the amount of the option premium.
If the writer of an exchange-traded option wishes to terminate its
obligation prior to exercise, it may effect a "closing purchase transaction".
This is accomplished by buying an option of the same series as the option
previously written. The effect of the purchase is that the Fund's position
will be offset by the Options Clearing Corporation. The Fund may not effect
a closing purchase transaction after it has been notified of the exercise of
an option. There is no guarantee that a closing purchase transaction can be
effected. Although the Fund will generally write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange or board of trade will exist for any
particular option or at any particular time, and for some options no secondary
market on an exchange may exist.
In the case of a written call option, effecting a closing transaction
will permit the Fund to write another call option on the underlying security
with either a different exercise price, expiration date or both. In the case
of a written put option, it will permit the Fund to write another put option
to the extent that the exercise price thereof is secured by deposited cash or
securities. Also, effecting a closing transaction will permit the cash or
proceeds from the concurrent sale of any securities subject to the option to
be used for other investments. If the Fund desires to sell a particular
security from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale of the
security.
The Fund will realize a gain from a closing transaction if the cost of
the closing transaction is less than the premium received from writing the
option. The Fund will realize a loss from a closing transaction if the cost
of the closing transaction is more than the premium received for writing the
option. However, because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security,
any loss resulting from the repurchase of a call option is likely to be offset
in whole or in part by appreciation of the underlying security owned by the
Fund.
OVER-THE-COUNTER OPTIONS. The Fund may engage in options
transactions on exchanges and in the over-the-counter markets. 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
("OTC") transactions are two-party contracts with price and terms negotiated
by the buyer and seller. The Fund will acquire only those OTC options for
which the Adviser believes the Fund can receive on each business day at least
two separate bids or offers (one of which will be from an entity other than a
party to the option) or those OTC options valued by an independent pricing
service. The Fund will write and purchase OTC options only with member banks
of the Federal Reserve System and primary dealers in U.S. Government
securities or their affiliates. The Securities and
6
<PAGE>
Exchange Commission (the "SEC") takes the position that OTC options
are illiquid securities subject to the Fund's 15% limitation on illiquid
securities. The SEC allows the Fund to exclude from the 15% limitation on
illiquid securities a portion of the value of the OTC options written by the
Fund, provided that certain conditions are met. First, the other party to the
OTC options has to be a primary U.S. Government securities dealer designated
as such by the Federal Reserve Bank. Second, the Fund would have an absolute
contractual right to repurchase the OTC options at a formula price. If the
above conditions are met, a Fund must treat as illiquid only that portion of
the OTC option's value (and the value of its underlying securities) which is
equal to the formula price for repurchasing the OTC option, less the OTC
option's intrinsic value.
GOVERNMENT SECURITIES. Certain U.S. Government securities, including
U.S. Treasury bills, notes and bonds, and Government National Mortgage
Association certificates ("Ginnie Maes"), are supported by the full faith and
credit of the United States. Certain other U.S. Government securities, issued
or guaranteed by Federal agencies or government sponsored enterprises, are not
supported by the full faith and credit of the United States, but may be
supported by the right of the issuer to borrow from the U.S. Treasury. These
securities include obligations of the Federal Home Loan Mortgage Corporation
("Freddie Macs"), and obligations supported by the credit of the
instrumentality, such as Federal National Mortgage Association Bonds ("Fannie
Maes"). No assurance can be given that the U.S. Government will provide
financial support to such Federal agencies, authorities, instrumentalities and
government sponsored enterprises in the future.
Ginnie Maes, Freddie Macs and Fannie Maes are mortgage-backed
securities which provide monthly payments which are, in effect, a
"pass-through" of the monthly interest and principal payments (including any
prepayments) made the by individual borrowers on the pooled mortgage loans.
Collateralized mortgage obligations ("CMOs") in which the Fund may invest are
securities issued by a U.S. Government instrumentality that are collateralized
by a portfolio of mortgages or mortgage-backed securities. Mortgage-backed
securities may be less effective than traditional debt obligations of similar
maturity at maintaining yields during periods of declining interest rates.
FORWARD FOREIGN CURRENCY TRANSACTIONS. The foreign currency exchange
transactions of the Fund may be conducted on a spot (i.e., cash) basis at the
spot rate for purchasing or selling currency prevailing in the foreign
exchange market. The Fund may also deal in forward foreign currency exchange
contracts involving currencies of the different countries in which it will
invest as a hedge against possible variations in the foreign exchange rate
between these currencies. This is accomplished through contractual agreements
to purchase or sell a specified currency at a specified future date and price
set at the time of the contract. The Fund's dealings in forward foreign
currency exchange contracts will be limited to hedging either specified
transactions or portfolio positions. Transaction hedging is the purchase or
sale of forward foreign currency contracts with respect to specific
receivables or payables of the Fund accruing in connection with the purchase
and sale of its portfolio securities denominated in foreign currencies.
Portfolio hedging is the use of forward foreign currency contracts to offset
portfolio security positions denominated or quoted in such foreign currencies.
The Fund will not attempt to hedge all of its foreign portfolio positions and
will enter into such transactions only to the extent, if any, deemed
7
<PAGE>
appropriate by the Adviser. The Fund will not engage in speculative
forward foreign currency exchange transactions.
If the Fund purchases a forward contract, its custodian bank will
segregate cash or high grade, liquid debt securities in a separate account of
the Fund in an amount equal to the value of the Fund's total assets committed
to the consummation of such forward contract. Those assets will be valued at
market daily and if the value of the securities in the separate account
declines, additional cash or securities will be placed in the account so that
the value of the account will be equal to the amount of the Fund's commitment
with respect to such contracts.
Hedging against a decline in the value of currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it
may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates.
The cost to the Fund of engaging in foreign currency exchange
transactions varies with such factors as the currency involved, the length of
the contract period and the market conditions then prevailing. Since
transactions in foreign currency are usually conducted on a principal basis,
no fees or commissions are involved.
FOREIGN SECURITIES. Investments in foreign securities may involve
risk and considerations not present in domestic investments. Since foreign
securities generally may be quoted and pay interest or dividends in foreign
currencies, the value of the assets of the Fund as measured in U.S. dollars
will be affected favorably or unfavorably by changes in the relationship of
the U.S. dollar and other currency rates. The Fund may incur costs in
connection with the conversion of foreign currencies into U.S. dollars and may
be adversely affected by restrictions on the conversion or transfer of foreign
currencies. In addition, there may be less publicly available information
about foreign companies than U.S. companies. Foreign companies may not be
subject to accounting, auditing, and financial reporting standards, practices
and requirements comparable to those applicable to U.S. companies.
Foreign securities markets, while growing in volume, have for the most
part substantially less volume than U.S. securities markets and securities of
foreign companies are generally less liquid and at times their prices may be
more volatile than securities of comparable U.S. companies. Foreign stock
exchanges, brokers and listed companies are generally subject to less
government supervision and regulation than those in the U.S. The customary
settlement time for non-U.S. securities is less frequent than in the U.S.,
which could affect the liquidity of the Fund's investments.
The Fund may invest in companies located in developing countries
which, compared to the U.S. and other developed countries, may have relatively
unstable governments, economies based on only a few industries and securities
markets which trade only a small number of securities. Prices on exchanges
located in developing countries tend to be volatile and, in the past,
securities
8
<PAGE>
traded on those exchanges have offered a greater potential for gain
(and loss) than securities traded on exchanges in the U.S. and more developed
countries.
In some countries, there is the possibility of expropriation or
confiscatory taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of foreign
government restrictions or other adverse political, social or diplomatic
developments that could affect investments in these countries.
SHORT SALES. The Fund may engage in short sales in order to profit
from an anticipated decline in the value of a security. The Fund may also
engage in short sales to attempt to limit its exposure to a possible market
decline in the value of its portfolio securities through short sales of
securities which the Adviser believes possess volatility characteristics
similar to those being hedged. To effect such a transaction, the Fund must
borrow the security sold short to make delivery to the buyer. The Fund then
is obligated to replace the security borrowed by purchasing it at the market
price at the time of replacement. Until the security is replaced, the Fund is
required to pay to the lender any accrued interest and may be required to pay
a premium.
The Fund will realize a gain if the security declines in price between
the date of the short sale and the date on which the Fund replaces the
borrowed security. On the other hand, the Fund will incur a loss as a result
of the short sale if the price of security increases between those dates. The
amount of any gain will be decreased, and the amount of any loss increased, by
the amount of any premium or interest the Fund may be required to pay in
connection with a short sale. The successful use of short selling as a
hedging device may be adversely affected by imperfect correlation between
movements in the price of the security sold short and the securities being
hedged.
Under applicable guidelines of the staff of the Securities and
Exchange Commission, if the Fund engages in short sales of the type referred
to in non-fundamental Investment Restriction No.(b) below, it must put in a
segregated account (not with the broker) an amount of cash or U.S. Government
securities equal to the difference between (a) the market value of the
securities sold short at the time they were sold short and (b) any cash or
U.S. Government securities required to be deposited as collateral with the
broker in connection with the short sale (not including the proceeds from the
short sale). In addition, until the Fund replaces the borrowed security, it
must daily maintain the segregated account at such a level that (1) the amount
deposited in it plus the amount deposited with the broker as collateral will
equal the current market value of the securities sold short, and (2) the
amount deposited in it plus the amount deposited with the broker as collateral
will not be less than the market value of the securities at the time they were
sold short.
Short selling may produce higher than normal portfolio turnover which
may result in increased transaction costs to the Fund and may result in gains
from the sale of securities deemed to have been held for less than three
months, which gains must be less than 30% of the Fund's gross income in order
for the Fund to qualify for regulated investment company pass-through tax
treatment under the Internal Revenue Code of 1986, as amended.
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<PAGE>
The Fund does not intend to enter into short sales (other than those
"against the box") if immediately after such sale the aggregate of the value
of all collateral plus the amount in such segregated account exceeds the value
of 5% of the Fund's net assets. A short sale is "against the box" to the
extent that the Fund contemporaneously owns or has the right to obtain at no
added cost securities identical to those sold short.
INVESTMENT RESTRICTIONS
The following investment restrictions may not be changed without a
shareholder vote. A change requires the affirmative vote of a majority of the
Fund's outstanding shares, which as used in this Statement means the lesser of
(1) 67% of the Fund's outstanding shares present at a meeting at which the
holders of more than 50% of the outstanding shares are present in person or
by proxy, or (2) more than 50% of the Fund's outstanding shares.
The Fund may not:
(1) Issue senior securities, except as permitted by paragraph (2)
below. For purposes of this restriction, the issuance of shares of beneficial
interest in multiple classes or series, the purchase or sale of options,
futures contracts and options on futures contracts, interest rate or currency
swaps, forward commitments, forward foreign currency exchange contracts and
repurchase agreements entered into in accordance with the Fund's investment
policies, and the pledge, mortgage or hypothecation of the Fund's assets
within the meaning of paragraph (3) below are not deemed to be senior
securities.
(2) Borrow money, except from banks as a temporary measure for
extraordinary or emergency purposes, except pursuant to reverse repurchase
agreements, in amounts not to exceed 33% of the Fund's total assets (including
the amount borrowed) taken at market value.
(3) Pledge, mortgage, or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such pledging,
mortgaging or hypothecating does not exceed 33% of the Fund's total assets
taken at market value.
(4) Act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the Securities Act of 1933.
(5) Purchase or sell real estate or any interest therein, except that
the Fund may invest in securities secured by real estate or marketable
interests therein or issued by companies that invest in real estate or
interests therein and may retain or sell real estate acquired due to the
ownership of securities.
(6) Make loans, except that the Fund may (a) lend portfolio
securities in an amount that does not exceed 33% of such Fund's total assets;
(b) enter into repurchase agreements; and
10
<PAGE>
(c) purchase bank certificates of deposit, bank loan participation
agreements, bankers' acceptances or all or a portion of an issue
of debt securities, whether or not the purchase is made upon the
original issuance of the securities.
(7) Invest in commodities or commodity contracts or in
puts, calls, or combinations of both, except financial futures
contracts, options on securities, securities indices, currency
and other financial instruments, options on futures contracts,
forward foreign currency exchange contracts, forward commitments,
interest rate or currency swaps, warrants and repurchase
agreements entered into in accordance with the Fund's investment
policies.
(8) Purchase the securities of issuers conducting their
principal business activity in the same industry if, immediately
after such purchase, the value of the Fund's investments in such
industry would exceed 25% of its total assets taken at market
value at the time of each investment. For purposes of this
restriction, telephone, water, gas and electric public utilities
are each regarded as separate industries and wholly-owned finance
companies are considered to be in the industry of their parents
if their activities are primarily related to financing the
activities of their parent. This limitation does not apply to
investments by the Fund in obligations of the U.S. Government or
any of its agencies or instrumentalities.
In connection with the lending of portfolio securities under
item (6) above, such loans must at all times be fully
collateralized and the Fund's custodian must take possession of
the collateral either physically or in book entry form.
Securities used as collateral must be marked to market daily.
Notwithstanding the foregoing fundamental investment
restrictions, or any investment policy or non-fundamental
investment restriction of the Fund, the Fund may invest all or
part of its assets in an open-end management investment company
with substantially the same investment objectives, policies and
restrictions as the Fund.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS . The following
restrictions are designated as non-fundamental and may be changed
by the Board of Trustees without shareholder approval.
The Fund may not:
(a) Participate on a joint or joint-and-several basis in
any securities trading account. The "bunching" of orders for the
sale or purchase of marketable portfolio securities with other
accounts under the management of the Adviser to save commissions
or to average prices among them is not deemed to result in a
securities trading account.
(b) Make short sales of securities or maintain a short
position unless (i) at all times when a short position is open the
Fund owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further
consideration, for securities of the same issuer as, and equal in
amount to, the securities sold short; (ii) for the purpose of
hedging the Fund's exposure to an actual or anticipated market
decline in the value of its investments; or (iii) in order to
profit from an anticipated decline in the value of a security.
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<PAGE>
(c) Purchase a security if, as a result, (i) more than 10%
of the Fund's assets would be invested in securities of
closed-end investment companies, (ii) such purchase would result
in more than 3% of the total outstanding voting securities of any
one such closed-end investment company being held by the Fund, or
(iii) more than 5% of the Fund's assets would be invested in any
one such closed-end investment company.
(d) Purchase securities of any issuer which, together with
any predecessor, has a record of less than three years'
continuous operations prior to the purchase if such purchase
would cause investments of the Fund in all such issuers to exceed
5% of the value of the total assets of the Fund.
(e) Invest for the purpose of exercising control over or
management of any company.
(f) Purchase warrants of any issuer, if, as a result of
such purchases, more than 2% of the value of the Fund's total
assets would be invested in warrants which are not listed on the
New York Stock Exchange or the American Stock Exchange or more
than 5% of the value of the total assets of the Fund would be
invested in warrants generally, whether or not so listed. For
these purposes, warrants are to be valued at the lesser of cost
or market, but warrants acquired by the Fund in units with or
attached to debt securities shall be deemed to be without value.
(g) Knowingly purchase or retain securities of an issuer if
one or more of the Trustees or officers of the Trust or directors
or officers of the Adviser or any investment management
subsidiary of the Adviser individually owns beneficially more
than 0.5% and together own beneficially more than 5% of the
securities of such issuer.
(h) Purchase interests in oil, gas or other mineral leases
or exploration programs; however, this policy will not prohibit
the acquisition of securities of companies engaged in the
production or transmission of oil, gas or other minerals.
(i) Purchase interests in real estate limited
partnerships.
(j) Purchase any security, including any repurchase
agreement maturing in more than seven days, which is not readily
marketable, if more than 15% of the net assets of the Fund, taken
at market value, would be invested in such securities.
(k) Purchase securities while outstanding borrowings, other
than reverse repurchase agreements, exceed 5% of the Fund's total
assets.
(l) 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
12
<PAGE>
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.
In order to permit the sale of shares of the Fund in certain
states, the Trustees may, in their sole discretion, adopt
restrictions or investment policies more restrictive than those
described above. Should the Trustees determine that any such
more restrictive policy is no longer in the best interest of the
Fund and its shareholders, the Fund may cease offering shares in
the state involved and the Trustees may revoke such restrictive
policy. Moreover, if the states involved shall no longer require
any such restrictive policy, the Trustees may, at their sole
discretion, revoke such policy.
If a percentage restriction on investment or utilization of
assets as set forth above is adhered to at the time an investment
is made, a later change in percentage resulting from changes in
the value of the Fund's assets will not be considered a violation
of the restriction.
The Fund agrees that, in accordance with the guidelines of
the Arkansas Securities Department and the statutes of the State
of Wisconsin, until such guidelines and statutes no longer
require, it will not purchase securities (excluding restricted
securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined by the Trustees
to be liquid based upon the trading markets for the securities)
of issuers which the Fund is restricted from selling to the
public without registration under the Securities Act of 1933 if
by any reason thereof the value of its aggregate investment in
such classes of securities will exceed 10% of its total assets.
The Fund agrees that, in accordance with Texas Blue Sky
Regulations, until such regulations no longer require, the value
of securities of any one issuer in which the Fund is short may
not exceed the lesser of 2% of the value of the Fund's net assets
or 2% of the securities of any class of any such issuer.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its Trustees who
elect officers who are responsible for the day-to-day operations
of the Fund and who execute policies formulated by the Trustees.
Several of the officers and Trustees of the Fund are also
officers and directors of the Fund's investment adviser, John
Hancock Advisers, Inc. (the "Adviser") or directors of the Fund's
principal distributor, John Hancock Funds, Inc. ("John Hancock
Funds").
The following table sets forth the principal occupations of
the Trustees and principal officers of the Fund during the past
five years. Unless otherwise indicated, the business address of
each is 101 Huntington Avenue, Boston, Massachusetts 02199.
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<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"); (hereinafter the Adviser, the
Berkeley Group, NM Capital, Advisers International, John Hancock
Funds, Investor Services and SAMCorp are collectively referred to
as the "Affiliated Companies"); Chairman, First Signature Bank &
Trust; Director, John Hancock Freedom Securities Corp., John
Hancock Capital Corp., New England/Canada Business Council;
Member, Investment Company Institute Board of Governors;
Director, Asia Strategic Growth Fund, Inc.; Trustee, Museum of
Science; President, the Adviser (until July 1992); Chairman, John
Hancock Distributors, Inc. ("Distributors") until April 1994.
William A. Barron, III Trustee (1, 2) Trustee, H.M. Payson & Company since 1991.
RR 1
325 Sea Meadows Lane
Yarmouth, Maine 04096
____________
<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 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.
</FN>
</TABLE>
14
<PAGE>
<TABLE>
Name and Address Position(s) Held Principal Occupation(s)
- ---------------- With Registrants During Past 5 Years
---------------- ----------------
<S> <C> <C>
Douglas M. Costle Trustee (1, 2) Distinguished Senior Fellow, Institute for
RR2 Box 480 Sustainable Communities, Vermont Law School, since 1991. Dean
Woodstock, Vermont 05091 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).
*Hugh A. Dunlap, Jr. Trustee and Vice Chairman of the Adviser; President of
President (3, 4) Freedom Capital Management Corporation from 1983 to 1992.
Leland O. Erdahl Trustee (1, 2) President of Stolar, Inc. from 1987 to 1991 and
161 Camino Barranca President of Albuquerque Uranium Corporation from 1985 to 1992.
Placitas, New Mexico 87043 Director of Freeport-McMoRan Copper & Gold Company, Inc., Hecla
Mining Company, Canyon Resources Corporation and Original Sixteen
to One Mines, Inc. From 1984 to 1987 and 1991, management
consultant.
Richard A. Farrell Trustee(1, 2) President of Farrell, Healer & Co., a venture
Farrell, Healer & Company, Inc. capital management firm, since 1980. Prior to that date, Mr.
160 Federal Street -- 23rd Floor Farrell headed the venture capital group at Bank of Boston
Boston, MA 02110 Corporation.
William F. Glavin Trustee (1, 2) President, Babson College; Vice Chairman, Xerox
Babson College Corporation until June 1989. Director, Caldor Inc. and Inco
Horn Library Ltd.
Babson Park, MA 02157
___________
<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.
</FN>
</TABLE>
15
<PAGE>
<TABLE>
Name and Address Position(s) Held Principal Occupation(s)
- ---------------- With Registrants During Past 5 Years
---------------- -------------------
<S> <C> <C>
Patrick Grant Trustee (1, 2, 3) President, Financial Management Incorporated, a
5 Haven Street professional treasurer, since 1978. Prior to that date Mr. Grant
Dedham, MA 02026 was Treasurer of Endowment Management & Research Corp., an
investment advisory firm, and Omega Fund, Inc., an open-end
investment company.
Ralph Lowell, Jr. Trustee (1, 2) Director, Lowell Blake and Associates, a registered
45 Mill Street investment adviser since 1978. Mr. Lowell was Vice President of
Edgartown, MA 02539 that company from 1978 to 1985.
Dr. John A. Moore Trustee (1, 2) President and Chief Executive Officer, Institute
Institute for Evaluating Health Risks for Evaluating Health Risks, a nonprofit institution, since
1101 Vermont Avenue N.W. September 1989. Assistant Administrator of the Office of
Suite 608 Pesticides and Toxic Substances at the Environmental Protection
Washington, DC 20005 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 Secretary, Mutual Life.
110 Vilas Hall
Canton, NY 13617
John W. Pratt Trustee (1, 2) Since 1961, Professor of Business Administration at
2 Gray Gardens East Harvard University Graduate School of Business Administration.
Cambridge, MA 02138
____________
<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.
</FN>
</TABLE>
16
<PAGE>
<TABLE>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH REGISTRANTS DURING PAST 5 YEARS
- ---------------- ---------------- -------------------
<S> <C> <C>
Robert G. Freedman Vice Chairman and Vice Chairman and Chief
Chief Investment Investment Officer, the
Officer Adviser; President (until
December 1994).
Anne C. Hodsdon President President and Chief Operations
Officer; Executive Vice
President, the Adviser (until
December 1994).
James B. Little Senior Vice President, Senior Vice President, the
Chief Financial Adviser.
Officer
Thomas H. Drohan Senior Vice President Senior Vice President and
and Secretary Secretary, the Adviser.
James K. Ho Senior Vice President Senior Vice President, the
Adviser.
Michael P. DiCarlo Senior Vice President Senior Vice President, the
Adviser.
Lawrence J. Daly Senior Vice President Senior Vice President, the
Adviser; Senior Vice
President, Putman Investment
Management, Inc.
Anthony A. Goodchild Senior Vice President Senior Vice President, the
Adviser; Senior Vice
President, Putman Investment
Management, Inc.
_____________
*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>
17
<PAGE>
<TABLE>
Name and Address Position(s) Held Principal Occupation(s)
- ---------------- With Registrants During Past 5 Years
---------------- -------------------
<S> <C> <C>
John A. Morin Vice President Vice President, the Adviser.
Susan S. Newton Vice President, Vice President and Assistant Secretary, the
Assistant Secretary and Adviser
Compliance Officer
James J. Stokowski Vice President and Vice President, the Adviser
Treasurer
David S. Beckwith Vice President Vice President, the Adviser.
____________
<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.
</FN>
</TABLE>
18
<PAGE>
All of the officers listed are officers or employees of the
Adviser or Affiliated Companies. Some of the Trustees and
officers may also be officers and/or directors and/or Trustees of
one or more of the other funds for which John Hancock Advisers,
Inc. serves as Adviser.
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 for each Fund's 1994 fiscal year. The two
non-Independent Trustees, Messrs. Boudreau and Dunlap, and each
of the officers of the Funds are interested persons of the
Adviser, are compensated by the Adviser and received no
compensation for the Funds for their services.
<TABLE>
Total
Pension or Compensation
Retirement from Funds and
Aggregate Benefits Accrued Estimated Annual John Hancock
Independent Compensation as Part of the Benefits Upon Fund Complex to
Trustees from the Fund Fund's Expenses Retirement Trustees*
- -------- ------------- --------------- ---------- ----------
(Total of 11 Funds)
<S> <C> <C> <C> <C>
William A. Barron, III $ 2,288 $ ---- $ ---- $ 42,000
Douglas M. Costle $ 2,288 $ ---- $ ---- 42,000
Leland O. Erdahl $ 2,288 $ ---- $ ---- 42,000
Richard A. Farrell $ 2,361 $ ---- $ ---- 43,500
William F. Glavin $ 2,288 $ ---- $ ---- 41,750
Patrick Grant $ 2,385 $ ---- $ ---- 44,000
Ralph Lowell, Jr. $ 2,288 $ ---- $ ---- 42,000
Dr. John A. Moore $ 2,288 $ ---- $ ---- 41,750
Patti McGill Peterson $ 2,288 $ ---- $ ---- 42,000
John W. Pratt $ 2,288 $ ---- $ ---- 42,000
$23,050 $ ---- $ ---- $423,000
<FN>
* The total compensation paid by the John Hancock Fund Complex to the Independent Trustees is as
of the calendar year ended December 31, 1994.
As of the date hereof, the officers and Trustees of the Trust as a group owned
less than 1% of the outstanding shares of each class of the Fund and to the knowledge of the
registrant, no persons owned of record or beneficially 5% or more of any class of registrant's
outstanding securities.
</FN>
</TABLE>
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser for the Fund 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 Fund.
The Adviser was organized in 1968 and presently has
approximately $13 billion in assets under management in its
capacity as investment adviser to the Fund and the other mutual
funds and publicly traded investment companies in the John
Hancock group of funds having a combined total of over 1,060,000
shareholders. The Adviser is an affiliate of John Hancock Mutual
Life Insurance Company, one of the most recognized and respected
financial institutions in the nation. With total assets under
management of $80 billion, John Hancock Mutual Life Insurance
Company is one of the 10 largest life insurance companies in the
United States, and carries Standard & Poor's and A.M. Best's
highest ratings. Founded in 1862, John Hancock Mutual Life
Insurance Company has been serving clients for over 130 years.
The Trust, on behalf of the Fund, has entered into an
advisory agreement with the Adviser, under which the Adviser
provides the Fund with (i) a continuous investment program,
consistent with the Fund's stated investment objective and
policies, (ii) supervision of all aspects of the Fund's
operations except those that are delegated to a custodian,
transfer agent or other agent and (iii) such executive,
administrative and clerical personnel, officers and equipment as
are necessary for the conduct of its business.
Under the terms of the advisory agreement with the Fund, the
Adviser provides the Fund with office space, supplies and other
facilities required for the business of the Fund. The Adviser
pays the compensation of all officers and employees of the Trust,
and pays the expenses of clerical services relating to the
administration of the Fund. 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 Trust
who are not "interested persons," as such term is defined in the
Investment Company Act) are borne by the Fund.
The Fund pays the Adviser monthly an advisory fee, which is
accrued daily, based on a stated percentage of the Fund's average
daily net asset value as follows: .80% on the first $500 million
of average daily net assets of the Fund, .75% on the next $500
million of average net assets and .70% of average net assets in
excess of $1 billion.
If the total of all ordinary business expenses of the Fund
for any fiscal year exceeds the limitations prescribed by any
state in which shares of the Fund are qualified for sale, the fee
payable to the Adviser will be reduced to the extent of such
excess and the Adviser will make any additional arrangements
necessary to eliminate remaining excess expenses. At this time,
the most restrictive limit on expenses imposed by a state
requires that expenses charged to the Fund in any
20
<PAGE>
fiscal year not exceed 2 1/2of the first $30,000,000 of the Fund's
average net assets, 2% of the next $70,000,000 of such net
assets, and 1 1/2 of the remaining average net assets. When
calculating the above limit, the Fund may exclude interest,
brokerage commissions and extraordinary expenses.
Pursuant to the advisory agreement, the Adviser is not
liable to the Fund or its shareholders for any error of judgment
or mistake of law or for any loss suffered by the Fund in
connection with the matters to which the investment management
contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless
disregard by the Adviser of its obligations and duties under the
investment management contract.
The advisory agreement will continue in effect until
September 7, 1995 and from year to year thereafter if approved
annually by vote of a majority of the Trustees of the Trust who
are not interested persons of one of the parties to the contract,
cast in person at a meeting called for the purpose of voting on
such approval, and by either the Trustees or the holders of a
majority of the Fund's outstanding voting securities. The
agreement will automatically terminate upon assignment. The
agreement may be terminated without penalty on 60 days' notice at
the option of either party to the contract or by vote of a
majority of the outstanding voting securities of the Fund.
DISTRIBUTION CONTRACT
The Fund has entered into a distribution contract with John
Hancock Funds. Under the contract, John Hancock Funds is obligated
to use its best efforts to sell shares of each class of the Fund.
Shares of the Fund are also sold by selected broker-dealers (the
"Selling Brokers") which have entered into selling agency agreements
with John Hancock Funds. John Hancock Funds accepts orders for the
purchase of the shares of the Fund which are continually offered at
net asset value next determined plus an applicable sales charge, if
any. In connection with the sale of Class A or Class B shares of the
Fund, John Hancock Funds and Selling Brokers receive compensation
in the form of a sales charge imposed, in the case of Class A
shares at the time of sale or, in the case of Class B shares, on
a deferred basis. The sales charges are discussed further in the
Class A and Class B shares Prospectus.
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, the
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 Class A and Class B shares,
respectively. However, the amount of the service fee will not
exceed 0.25% of the Fund's average daily net assets attributable
to each class of shares. The distribution fees reimburse John
Hancock Funds for its distribution costs incurred in the
promotion of sales of shares of the Fund, and the service fees
compensate Selling Brokers for providing personal and account
maintenance services to shareholders. In the event that John
Hancock Funds is not fully reimbursed for expenses incurred by it
under the Class B Plan in any fiscal year, John Hancock Funds may
carry these expenses forward, provided, however, that the
Trustees may terminate the Class B Plan and thus the Fund's
obligation to make further payments at any time. Accordingly,
the Fund does not treat
21
<PAGE>
unreimbursed expenses relating to the Class B shares as a liability
of the Fund. The Plans were approved by a majority of the voting
securities of the Fund. The Plans and all amendments were approved
by the Trustees, including a majority of the Trustees who are not
interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plans (the "Independent
Trustees"), by votes cast in person at meetings called for the
purpose of voting on such Plans.
Pursuant to the Plans, at least quarterly, John Hancock Funds
provides the Fund with a written report of the amounts expended
under the Plans and the purpose for which these expenditures were
made. The Trustees review these reports on a quarterly basis.
During the fiscal year ended October 31, 1994, the Funds paid
Investor Services the following amounts of expenses with respect
to the Class A shares and Class B shares of each of the Funds:
<TABLE>
<CAPTION>
Expense Items
-------------
Advertising Printing and Expenses of Interest
----------- Mailing of Compensation John Carrying or
Prospectuses to to Selling Hancock Other Finance
New Shareholders Brokers Funds Charges Other
---------------- ------- ----- -------------
Special
- -------
Opportunities
- -------------
<S> <C> <C> <C> <C> <C>
Class A shares $48,404 $4,652 $ 53,878 $103,228 $0
Class B shares $49,555 $4,676 $ 773,633 $103,876 $22,835
</TABLE>
For the fiscal year ended October 31, 1994, an aggregate of
$6,461,933 of distribution expenses or 7%, of the average net
assets of the Class B shares of the Fund, was not reimbursed or
recovered by John Hancock Funds through the receipt of deferred
sales charge or 12b-1 fees in prior periods. 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 Fund's outstanding shares of the applicable class
in each case upon 60 days' written notice to John Hancock Funds
and (c) automatically in the event of assignment. Each of the
Plans further provides that it may not be amended to increase the
maximum amount of the fees for the services described therein
without the approval of a majority of the outstanding shares of
the class of the Fund which has voting rights with respect to the
Plan. And finally, each of the Plans provides that no material
amendment to the Plan will, in any event, be effective unless it
is approved by a vote of the Trustees and the Independent
Trustees of the Fund. The holders of Class A shares and Class B
shares have exclusive voting rights with respect to the Plan
applicable to their respective class of shares. In adopting the
Plans the Trustees concluded that, in their judgment, there is a
reasonable likelihood that the Plans will benefit the holders of
the applicable class of shares of the Fund.
22
<PAGE>
When the Trust seeks an Independent Trustee to fill a vacancy or
as a nominee for election by shareholders, the selection or
nomination of the Independent Trustee is, under resolutions
adopted by the Trustees contemporaneously with their adoption of
the Plan, committed to the discretion of the Committee on
Administration of the Trustees. The members of the Committee on
Administration are all Independent Trustees and are identified in
this Statement of Additional Information under the heading "Those
Responsible for Management."
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of 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 of NASDAQ
National Market Issues are generally valued at last sale price on
the day of valuation. Securities in the aforementioned category
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.
INITIAL SALES CHARGE ON CLASS A SHARES
The sales charges applicable to purchases of Class A shares
of the Fund are described in the Fund's Class A and Class B
Prospectus. Methods of obtaining reduced sales charges referred
23
<PAGE>
to generally in the Class A and Class B Prospectus are described
in detail below. In calculating the sales charge applicable to
current purchases of Class A shares, the investor is entitled to
cumulate current purchases with the greater of the current value
(at offering price) of the Class A shares of the Fund, or if
Investor Services is notified by the investor's dealer or the
investor at the time of the purchase, the cost of the Class A
shares owned.
COMBINED PURCHASES. In calculating the sales charge
applicable to purchases of Class A shares made at one time, the
purchases will be combined if made by (a) an individual, his or
her spouse and their children under the age of 21, purchasing
securities for his or their own account, (b) a trustee or other
fiduciary purchasing for a single Fund, 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 Investors Services or a Selling Broker's representative.
WITHOUT SALES CHARGE. As described in the Class A and Class
B Prospectus, Class A shares of the Fund may be sold without a
sales charge to certain persons described in the prospectus.
ACCUMULATION PRIVILEGE. Investors (including investors
combining purchases) who are already Class A shareholders may
also obtain the benefit of the reduced sales charge by taking
into account not only the amount then being invested but also the
purchase price or value of the Class A shares already held by
such persons.
COMBINATION PRIVILEGE. Reduced sales charges (according to
the schedule set forth in the Class A and Class B Prospectus)
also are available to an investor purchasing Class A shares based
on the aggregate amount of his concurrent and prior investments
in Class A shares of the Fund and shares of all other John
Hancock funds which carry a sales charge.
LETTER OF INTENTION. Reduced sales charges are also
applicable to investments in Class A shares made over a specified
period pursuant to a Letter of Intention ("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 period of thirteen 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 48 month period. These
qualified retirement plans include group IRA's, SEP, SARSEP, TSA,
401(k) plans, and 457 plans. Such an investment (including
accumulations and combinations) must aggregate $25,000 or more
invested during the specified period from the date of the Letter
or from a date within ninety days prior thereto, upon written
request to Investor Services. The sales load 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 load actually paid and the sales load payable had the
LOI not been in effect is due from the investor. However, for
the purchases actually made in with the specified period (either
13 or 48 months), the sales load
24
<PAGE>
applicable will not be higher than that which would have been applied
(including accumulations and combinations) had the LOI been for the amount
actually invested.
The LOI authorizes the 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
thirteen-month period, at which time the escrowed Class A shares will be
released. If the total investment specified in the LOI is not completed, the
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
Class A shares and adjust the sales charge, if necessary. A LOI does not
constitute a binding commitment by an investor to purchase, or by the Fund to
sell, any additional shares and may be terminated at any time.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per
share without the imposition of an initial sales charge so that the Fund will
receive the full amount of the purchase payment.
CONTINGENT DEFERRED SALES CHARGE. Class B shares which are redeemed
within six years of purchase will be subject to a contingent deferred sales
charge ("CDSC") at the rates set forth in the Class A and Class B Prospectus
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the current market value or the
original purchase cost of the Class B shares being redeemed. Accordingly, no
CDSC will be imposed on increases in account value above the initial purchase
prices, including increases in account value derived from reinvestment of
dividends or capital gains distributions.
The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the
time of redemption of such shares. Solely for purposes of determining this
number of years, 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 and are used in
whole or in part by John Hancock Funds to defray its expenses related to
providing distribution-related services to the Fund in connection with the
sale of the Class B shares, such as the payment of compensation to select
Selling Brokers for selling Class B shares. The combination of the CDSC and
the distribution and service fees facilitates the ability of the Fund to sell
the Class B shares without a sales charge being deducted at the time of the
purchase. See the Class A and Class B Prospectus for additional information
regarding the CDSC.
25
<PAGE>
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay
the redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells
portfolio securities received in this fashion, he or she would incur a
brokerage charge. Any such securities would be valued for the purposes of
making such payment at the same value as used in determining net asset value.
The Fund has, however, elected to be governed by Rule 18f-1 under the
Investment Company Act. Under that rule, the Fund must redeem its shares for
cash except to the extent that the redemption payments to any shareholder
during any 90-day period would exceed the lesser of $250,000 or 1% of the
Fund's net asset value at the beginning of such period.
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE. As described more fully in the Prospectuses, the
Fund permits exchanges of shares of any class of the Fund for shares of the
same class in any other John Hancock fund offering that class.
SYSTEMATIC WITHDRAWAL PLAN. As described briefly in the Fund's Class
A and B Prospectus, the Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of the Fund's shares. Since the redemption price of the shares of
the Fund may be more or less than the shareholder's cost, depending upon the
market value of the securities owned by the Fund at the time of redemption,
the distribution of cash pursuant to this plan may result in realization of
gain or loss for purposes of federal, state and local income taxes. The
maintenance of a Systematic Withdrawal Plan concurrently with purchases of
additional Class A or Class B shares of the Fund could be disadvantageous to a
shareholder because of the sales charge payable on such purchases of Class A
shares and upon redemption 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 as a Systematic Withdrawal Plan is in effect. The
Fund reserves the right to modify or discontinue the Systematic Withdrawal
Plan of any shareholder on 30 days' prior written notice to such shareholder,
or to discontinue the availability of such plan in the future. The shareholder
may terminate the plan at any time by giving proper notice to Investor
Services.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP). This program is
explained more fully in the Class A and Class B Prospectus and the Account
Privileges Application. The program, as it relates to automatic investment
checks, is subject to the following conditions:
The investments will be drawn on or about the day of the month
indicated.
The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by Investor Services without prior notice
if any investment is not honored by the shareholder's bank. The bank shall be
under no obligation to notify the shareholder as to the non-payment of any
check.
26
<PAGE>
The Program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is
received at least five (5) business days prior to the processing date of any
investment.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed Fund shares
may, within 120 days after the date of redemption, reinvest without payment of
a sales charge any part of the redemption proceeds in the same class of the
Fund or in any of the other John Hancock funds, subject to the minimum
investment limits of that fund. The proceeds from the redemption of Class A
shares may be reinvested at net asset value without paying a sales charge in
Class A shares of the Fund or in Class A shares of any of the other John
Hancock funds. If a CDSC was paid upon a redemption, a shareholder may
reinvest the proceeds from such redemption at net asset value in additional
shares of the class from which the redemption was made. Such shareholder's
account will be credited with the amount of any CDSC charge upon the prior
redemption. The holding period of the shares acquired through reinvestment
will, for purposes of computing the CDSC payable upon a subsequent redemption,
include the holding period of the redeemed shares. The Fund may modify or
terminate the reinvestment privilege at any time.
A redemption or exchange of Fund shares is a taxable transaction for
federal income tax purposes even if the reinvestment privilege is exercised,
and any gain or loss realized by a shareholder on the redemption or other
disposition of Fund shares will be treated as described under the heading
"Tax Status."
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Trust are responsible for the management and
supervision of the Fund. The Declaration of Trust permits the Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
of the Trust, without par value. Under the Declaration of Trust, the Trustees
have the authority to create and classify shares of beneficial interest in
separate series, without further action by shareholders. As of the date of
this Statement of Additional Information, the Trustees have authorized shares
of the Fund and two other series. The Declaration of Trust also authorizes
the Trustees to classify and reclassify the shares of the Fund, or any new
series of the Fund, into one or more classes. As of the date of this
Statement of Additional Information, the Trustees have authorized the issuance
of three classes of shares of the Fund, designated as Class A, Class B, and
Class C, although Class C shares are no longer offered for sale.
The shares of each class of the Fund represent an equal proportionate
interest in the aggregate net assets attributable to that class of the Fund.
Class B shares bear the expense of the deferred sales charge arrangement and
any expenses (including the higher distribution fee and incremental transfer
agency costs) resulting from this sales arrangement. Holders of Class A
shares and Class B shares have certain exclusive voting rights on matters
relating to their respective distribution plans. The different classes of the
Fund may bear different expenses relating to the cost of holding shareholder
meetings necessitated by the exclusive voting rights of any class of shares.
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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 on the same
day and will be in the same amount, except that (i) the distribution and
service fees relating to 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) each of Class A shares and Class B shares
shares will bear any other class expenses properly allocable to such class of
shares, subject to certain conditions imposed by the Internal Revenue Service
in issuing rulings to funds with a multiple-class structure. The net asset
value per share may vary depending on whether Class A shares and Class B
shares are purchased.
In the event of liquidation, shareholders are entitled to share pro
rata in the net assets of the Fund available for distribution to such
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable except as set forth in the
Prospectuses.
Unless otherwise required by the Investment Company Act or the
Declaration of Trust, the 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, the Trust's Declaration of Trust
contains an express disclaimer of shareholder liability for acts, obligations
or affairs of the Fund. The Declaration of Trust also provides for
indemnification out of the Fund's assets for all losses and expenses of any
Fund shareholder held personally liable by reason of being or having been a
shareholder. Liability is therefore limited to circumstances in which the
Fund itself would be unable to meet its obligations, and the possibility of
this occurrence is remote.
TAX STATUS
Each series of Freedom Investment Trust II, including the Fund, is
treated as a separate entity for accounting and tax purposes. The 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 in the future. 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 of its
assets, the Fund will not be subject to Federal income tax on taxable income
(including net short-term and long-term capital gains) which is distributed to
shareholders at least annually.
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The Fund will be subject to a 4% non-deductible Federal excise tax on
certain amounts not distributed (and not treated as having been distributed)
on a timely basis in accordance with annual minimum distribution requirements.
The Fund intends under normal circumstances to avoid liability for such tax by
satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and
profits ("E&P"), as computed for Federal income tax purposes, will be taxable
as described in the Fund's Prospectus whether taken in shares or in cash.
Distributions, if any, in excess of E&P will constitute a return of capital,
which will first reduce an investor's tax basis in Fund shares and thereafter
(after such basis is reduced to zero) will generally give rise to capital
gains. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for Federal income tax purposes in
each share so received equal to the amount of cash they would have received
had they elected to receive the distributions in cash, divided by the number
of shares received.
If the Fund acquires stock in certain non-U.S. corporations that
receive at least 75% of their annual gross income from passive sources (such
as interest, dividends, rents, royalties or capital gain) or hold at least 50%
of their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its
shareholders. The Fund would not be able to pass through to its shareholders
any credit or deduction for such a tax. Certain elections may, if available,
ameliorate these adverse tax consequences, but any such election would require
the Fund to recognize taxable income or gain without the concurrent receipt of
cash. The Fund may limit and/or manage its holdings in passive foreign
investment companies to minimize its tax liability or maximize its return
from these investments.
Foreign exchange gains and losses realized by the Fund in connection
with certain transactions involving foreign currency-denominated debt
securities, 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 the Fund's investment
in stock or securities, possible including speculative currency positions or
currency derivatives not used for hedging purposes, may increase the amount of
gain it is deemed to recognize from the sale of certain investments held for
less than three months, which gain is limited under the Code to less than 30%
of its annual gross income, and could under future Treasury regulations
produce income not among the types of "qualifying income" from which the Fund
must derive at least 90% of its annual gross income. If the net foreign
exchange loss for a year treated as ordinary loss under Section 988 were to
exceed the Fund's investment company taxable income 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.
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The Fund may be subject to withholding and other taxes imposed by
foreign countries with respect to its investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate
such taxes. Investors may be entitled to claim U.S. foreign tax credits with
respect to such taxes, subject to certain provisions and limitations
contained in the Code. Specifically, if more than 50% of the value of the
Fund's total assets at the close of any taxable year consists of stock or
securities of foreign corporations, the Fund may file an election with the
Internal Revenue Service pursuant to which shareholders of the Fund will be
required to (i) include in ordinary gross income (in addition to taxable
dividends actually received) their pro rata shares of foreign income taxes
paid by the Fund even though not actually received by them, and (ii) treat
such respective pro rata portions as foreign income taxes paid by them.
If the Fund makes this election, shareholders may then deduct such pro
rata portions of foreign income taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able
to deduct their pro rata portion of foreign income taxes paid by the Fund,
although such shareholders will be required to include their share of such
taxes in gross income. Shareholders who claim a foreign tax credit for such
foreign taxes may be required to treat a portion of dividends received from
the Fund as a separate category of income for purposes of computing the
limitations on the foreign tax credit. Tax-exempt shareholders will
ordinarily not benefit from this election. Each year that the Fund files the
election described above, its shareholders will be notified of the amount of
(i) each shareholder's pro rata share of foreign income taxes paid by the Fund
and (ii) the portion of Fund dividends which represents income from each
foreign country.
The amount of net short-term and long-term capital gains, if any, in
any given year will vary depending upon the Adviser's current investment
strategy and whether the Adviser believes it to be in the best interest of the
Fund to dispose of portfolio securities or enter into options or futures
transactions that will generate capital gains. At the time of an investor's
purchase of Fund shares, a portion of the purchase price is often attributable
to realized or unrealized appreciation in the Fund's portfolio or
undistributed taxable income of the Fund. Consequently, subsequent
distributions from such appreciation or income may be taxable to such investor
even if the net asset value of the investor's shares is, as a result of the
distributions, reduced below the investor's cost for such shares, and the
distributions in reality represent a return of a portion of the purchase
price.
Upon a redemption of shares of the Fund (including by exercise of the
exchange privilege) a shareholder may realize a taxable gain or loss depending
upon his basis in his shares. Such gain or loss will be treated as capital
gain or loss if the shares are capital assets in the shareholder's hands and
will be long-term or short-term, depending upon the shareholder's tax holding
period for the shares. A sales charge paid in purchasing Class A shares of
the Fund cannot be taken into account for purposes of determining gain or loss
on the redemption or exchange of such shares within 90 days after their
purchase to the extent shares of the Fund or another John Hancock fund are
subsequently acquired without payment of a sales charge pursuant to the
reinvestment or exchange privilege. Such disregarded load will result in an
increase in the shareholder's tax basis in the shares subsequently acquired.
Also, any loss realized on a redemption or exchange will be
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disallowed to the extent the shares disposed of are replaced 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 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 treated as a long-term capital loss to the
extent of any amounts treated as distributions of long-term capital
gain with respect to such shares.
Although its present intention is to distribute all net
short-term and long-term capital gains, if any, the Fund reserves
the right to retain and reinvest all or any portion of its "net
capital gain," which is the excess, as computed for Federal
income tax purposes, of net long-term capital gain over net
short-term capital loss in any year. The Fund will not in any
event distribute net long-term capital gains realized in any year
to the extent that a capital loss is carried forward from prior
years against such gain. To the extent such excess was retained
and not exhausted by the carryforward of prior years' capital
losses, it would be subject to Federal income tax in the hands of
the Fund. Each shareholder would be treated for Federal income
tax purposes as if the Fund had distributed to him on the last
day of its taxable year his pro rata share of such excess, and he
had paid his pro rata share of the taxes paid by the Fund and
reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess
as long-term capital gain 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 to a
refund of, his pro rata share of the taxes paid by the Fund, and
(c) be entitled to increase the adjusted tax basis for his shares
in the Fund by the difference between his pro rata share of such
excess and his pro rata share of such taxes.
For Federal income tax purposes, the Fund is permitted to
carryforward a net capital loss in any year to offset its net
capital gains, if any, during the eight years following the year
of the loss. To the extent subsequent net capital gains are
offset by such losses, they would not result in Federal income
tax liability to the Fund and, as noted above, would not be
distributed as such to shareholders. The Fund has no capital
loss carryforwards.
For purposes of the dividends received deduction available
to corporations, dividends received by the Fund, if any, from
U.S. domestic corporations in respect of the stock of such
corporations held by the Fund, for U.S. Federal income tax
purposes, for at least 46 days (91 days in the case of certain
preferred stock) and distributed and designated by the Fund may
be treated as qualifying dividends. Corporate shareholders must
meet the minimum holding period requirement stated above (46 or
91 days) with respect to their shares of the Fund in order to
qualify for the deduction and, if they borrow to acquire such
shares, may be denied a portion of the dividends received
deduction. The entire qualifying dividend, including the
otherwise deductible amount, will be included in determining the
excess (if any) of a corporate shareholder's adjusted current
earnings over its alternative minimum taxable income, which may
increase its alternative minimum tax liability. Additionally,
any corporate shareholder should consult its tax adviser
regarding the possibility that its basis in its shares may be
reduced, for Federal income tax purposes, by reason of
"extraordinary dividends" received with respect to the shares,
for the purpose of computing its gain or loss on redemption or
other disposition of the shares.
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The Fund accrues income on certain PIKs, zero coupon
securities or certain increasing rate securities (and, in
general, any other securities with original issue discount or
with market discount if the Fund elects to include market
discount in income currently) prior to the receipt of the
corresponding cash payments. However, the Fund must distribute,
at lease annually, all or substantially all of its net income,
including such accrued income, to shareholders to qualify as a
regulated investment company under the Code and avoid Federal
income and excise taxes. Therefore, the Fund may have to dispose
of its portfolio securities under disadvantageous circumstances
to generate cash, or may have to leverage itself by borrowing the
cash, to satisfy distribution requirements.
Investment in debt obligations that are at risk of our in
default presents special tax issues for the Fund. 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 the Fund 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 Fund may restrict the Fund's ability to enter
into futures, options, and forward transactions.
Certain options, futures and forward foreign currency
transactions undertaken by the Fund may cause the Fund to
recognize gains or losses from marking to market even though its
positions have not been sold or terminated and affect the
character as long-term or short-term (or, in the case of certain
currency forwards, options and futures, as ordinary income or
loss) and timing of some capital gains and losses realized by the
Fund. Also, certain of the Fund's losses on its transactions
involving options, futures or forward contracts and/or offsetting
portfolio positions may be deferred rather than being taken into
account currently in calculating the Fund's taxable income.
Certain of the applicable tax rules may be modified if the Fund
is eligible and chooses to make one or more of certain tax
elections that may be available. These transactions may
therefore affect the amount, timing and character of the Fund's
distributions to shareholders. The Fund will take into account
the special tax rules (including consideration of available
elections) applicable to options, futures or forward contracts in
order to minimize any potential adverse tax consequences.
The foregoing discussion relates solely to U.S. Federal
income tax law as applicable to U.S. persons (i.e., U.S. citizens
or residents and U.S. domestic corporations, partnerships, trusts
or estates) subject to tax under such law. The discussion does
not address special tax rules
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applicable to certain classes of investors, such as tax-exempt
entities, insurance companies, and financial institutions.
Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may
also be subject to state and local taxes. Shareholders should
consult their own tax advisers as to the Federal, state or local tax
consequences of ownership of shares of, and receipt of distributions
from, the Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business
with which their Fund investment is effectively connected will be
subject to U.S. Federal income tax treatment that is different
from that described above. These investors may be subject to
nonresident alien withholding tax at the rate of 30% (or a lower
rate under an applicable tax treaty) on amounts treated as
ordinary dividends from the Fund and, unless an effective IRS
Form W-8 or authorized substitute is on file, to 31% backup
withholding on certain other payments from the Fund. Non-U.S.
investors should consult their tax advisers regarding such
treatment and the application of foreign taxes to an investment
in the Fund.
The Fund is not subject to Massachusetts corporate excise or
franchise taxes. Provided that the Fund qualifies as a regulated
investment company under the Code, it will also not be required
to pay any Massachusetts income tax.
CALCULATION OF PERFORMANCE
TOTAL RETURN
The average total return of the Class A and Class B shares
of the Fund for the 1 year period ended October 31, 1994
(commencement of operations) was (13.86%) and (14.39%),
respectively and reflect payment of the maximum sales charge of
5.00% for Class A shares and the maximum contingent deferred
sales charge of 5.00% for Class B shares. For the period ended
October 31, 1994, the average annual total return for Class C
shares from commencement of operations on July 6, 1994 was 4.47%
(not annualized).
Average annual total return is determined separately for
Class A, Class B and Class C shares. Total return is computed by
finding the average annual compounded rates of return over the
designated periods that would equate the initial amount invested
to the ending redeemable value, according to the following
formula:
[PDS] [PCT]
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
designated period assuming a hypothetical $1,000 payment made at the
beginning of the designated period
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From time to time, in reports and promotional literature,
the Fund's total return will be compared to indices of mutual
funds such as Lipper Analytical Services, Inc.'s "Lipper-Mutual
Fund Performance Analysis", a publication which tracks net
assets, total return, and yield on more than 1,000 equity mutual
funds in the United States. Ibottson and Associates, CDA
Weisenberger and F.C. Towers are also used for comparison
purposes, as well as the Russell and Wilshire Indices.
Performance ranking and rating reported periodically in
national financial publications such as MONEY Magazine, FORBES,
BUSINESS WEEK, THE WALL STREET JOURNAL, MICROPAL, INC.,
MORNINGSTAR, STANGER'S and BARRON"S may also be utilized.
The performance of the Fund is not fixed or guaranteed.
Performance quotations should not be considered to be
representations of performance of the Fund for any period in the
future. The performance of the Fund is a function of many
factors, including its earnings, expenses and number of
outstanding shares. Fluctuating market conditions; purchases,
sales and maturities of portfolio securities; sales and
redemption of shares of beneficial interest; and changes in
operating expenses are all examples of items that can increase or
decrease the Fund's performance.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio
securities and the allocation of brokerage commissions are made
by officers of the Trust pursuant to recommendations made by an
investment committee of the Adviser, which consists of officers
and directors of the Adviser and its affiliates, and officers and
Trustees who are interested persons of the Trust. Orders for
purchases and sales of securities are placed in a manner which,
in the opinion of the officers of the Fund, will offer the best
price and market for the execution of each such transaction.
Purchases from underwriters of portfolio securities may include a
commission or commissions paid by the issuer and transactions
with dealers serving as market makers reflect a "spread."
Investments in debt securities are generally traded on a net
basis through dealers acting for their own account as principals
and not as brokers; no brokerage commissions are payable on such
transactions.
The Fund's primary policy is to execute all purchases and
sales of portfolio instruments at the most favorable prices
consistent with best execution, considering all of the costs of
the transaction including brokerage commissions. This policy
governs the selection of brokers and dealers and the market in
which a transaction is executed. Consistent with the foregoing
primary policy, the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and such other policies
as the Trustees may determine, the Adviser may consider sales of
shares of the Fund a factor in the selection of broker-dealers to
execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will
be governed in the selection of brokers and dealers, and in the
negotiation of brokerage commission rates and dealer spreads, by
the reliability and quality of the services, including primarily
the availability and value of research information and to a
lesser extent statistical assistance furnished to the Adviser,
and their value and expected contribution to the performance of
the Fund. It is not possible to place a dollar value on
information and services to be received from brokers and dealers,
since it is only
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supplementary to the research efforts of the Adviser. The receipt
of research information is not expected to reduce significantly the
expenses of the Adviser. The research information and statistical
assistance furnished by brokers and dealers may benefit the Company
or other advisory clients of the Adviser, and, conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser
may result in research information and statistical assistance
beneficial to the Fund. The Fund will make no commitment to allocate
portfolio transactions upon any prescribed basis. While the Trust's
officers will be primarily responsible for the allocation of the
Fund's brokerage business, their policies and practices in this
regard must be consistent with the foregoing and will at all
times be subject to review by the Trustees. For the year ended
October 31, 1994, the Fund paid negotiated brokerage commissions
in the amount of $326,247.
As permitted by Section 28(e) of the Securities Exchange Act
of 1934, the Fund may pay a broker which provides brokerage and
research services to the Fund an amount of disclosed commission
in excess of the commission which another broker would have
charged for effecting that transaction. This practice is subject
to 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 year
ended October 31, 1994, the Fund paid commissions of $1,272 to
compensate brokers for research services such as industry and
company reviews and evaluations of the securities.
The indirect parent of the Adviser, the Company, is the
indirect sole shareholder of John Hancock Freedom Securities
Corporation and its subsidiaries, three of which, Tucker Anthony
Incorporated, John Hancock Distributors, Inc. and Sutro &
Company, Inc., are broker-dealers ("Affiliated Brokers").
Pursuant to procedures determined by the Trustees and consistent
with the above policy of obtaining best net results, the Fund may
execute portfolio transactions with through Affiliated Brokers.
For the fiscal year ended October 31, 1994, the Fund paid no
commissions to Affiliated Brokers.
Any of the Affiliated Brokers may act as broker for the Fund
on exchange transactions, subject, however, to the general policy
of the Fund set forth above and the procedures adopted by the
Trustees pursuant to the Investment Company Act. Commissions
paid to an Affiliated Broker must be at least as favorable as
those which the Trustees believe to be contemporaneously charged
by other brokers in connection with comparable transactions
involving similar securities being purchased or sold. A
transaction would not be placed with an Affiliated Broker if the
Fund would have to pay a commission rate less favorable than the
Affiliated Broker's contemporaneous charges for comparable
transactions for its other most favored, but unaffiliated,
customers except for accounts for which the Affiliated Broker
acts as clearing broker and comparable to the Fund as determined
by a majority of the Trustees who are not interested persons (as
defined in the Investment Company Act) of the Trust, the Adviser
or the Affiliated Broker. Commissions on transactions with
Affiliated Brokers must comply with Rule 17e-1 of the 1940 Act
and must be fair and reasonable to shareholders as determined in
good faith by the Trustees. Because the Adviser, which is
affiliated with the Affiliated Brokers, has, as investment
adviser to the Fund, the obligation to provide investment
management services, which includes elements of research and
related investment skills, such research and related skills will
not be used by the Affiliated Brokers
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as a basis for negotiating commissions at a rate higher than
that determined in accordance with the above criteria. The Fund
will not effect principal transactions with Affiliated Brokers.
Other investment advisory clients advised by the Adviser may
also invest in the same securities as the Fund. When these
clients buy or sell the same securities at substantially the same
time, the Adviser may average the transactions as to price and
allocate the amount of available investments in a manner which
the Adviser believes to be equitable to each client, including
the Fund. In some instances, this investment procedure may
adversely affect the price paid or received by the Fund or the
size of the position obtainable for it. On the other hand, to
the extent permitted by law, the Adviser may aggregate the
securities to be sold or purchased for the Fund with those to be
sold or purchased for other clients managed by it in order to
obtain best execution.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation ("Investor
Services"), P.O. Box 9116, Boston, MA 02205-9116, a wholly-owned
indirect subsidiary of John Hancock Mutual Life Insurance Co., is
the transfer and dividend paying agent for the Fund. The Fund
pays Investor Services an annual fee for Class A shares of $16.00
per shareholder account and for Class B of $18.50 per shareholder
account, plus certain out-of-pocket expenses.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a
custodian agreement between the Trust and Investors Bank & Trust
Company, 24 Federal Street, Boston, Massachusetts 02110. Under
the custodian agreement, State Street Bank and Trust Company
performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
Price Waterhouse LLP, 160 Federal Street, Boston,
Massachusetts, serves as the Trust's independent auditors,
providing services including (1) examination of annual financial
statements, (2) assistance and consultation in connection with
Securities and Exchange Commission filings, and (3) preparation
of the annual federal income tax returns filed on behalf of the
Fund.
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APPENDIX A
ECONOMIC SECTORS AND DESCRIPTION OF BOND RATINGS
ECONOMIC SECTORS
The Fund seeks to achieve its investment objective by varying the
weighting of its portfolio among the following sixteen economic sectors:
1. AUTOMOTIVE AND HOUSING SECTOR: companies engaged in the
design, production and sale of automobiles, automobile parts, mobile homes and
related products, and in the design, construction, renovation and refurbishing
of residential dwellings. The value of automobile industry securities is
affected by foreign competition, consumer confidence, consumer debt and
installment loan rates. The housing construction industry is affected by the
level of consumer confidence, consumer debt, mortgage rates and the inflation
outlook.
2. CONSUMER GOODS AND SERVICES SECTOR: companies engaged in
providing consumer goods and services such as: the design, processing,
production and storage of packaged, canned, bottled and frozen foods and
beverages; and the design, production and sale of home furnishings,
appliances, clothing, accessories, cosmetics and perfumes. Certain such
companies are subject to government regulation affecting the permissibility of
using various food additives and production methods, which regulations could
affect company profitability. Also, the success of food- and fashion-related
products may be strongly affected by fads, marketing campaigns and other
factors affecting supply and demand.
3. DEFENSE AND AEROSPACE SECTOR: companies engaged in the
research, manufacture or sale of products or services related to the defense
and aerospace industries, such as: air transport; data processing or
computer-related services; communications systems; military weapons and
transportation; general aviation equipment, missiles, space launch vehicles
and spacecraft; units for guidance, propulsion and control of flight
vehicles; and airborne and ground-based equipment essential to the test,
operation and maintenance of flight vehicles. Since such companies rely
largely on U.S. (and other) governmental demand for their products and
services, their financial conditions are heavily influenced by Federal (and
other governmental) defense spending policies.
4. ENERGY SECTOR: companies in the energy field, including oil,
gas, electricity and coal as well as nuclear, geothermal, oil shale and solar
sources of energy. The business activities of companies comprising this
sector may include: production, generation, transmission, marketing, control
or measurement of energy or energy fuels; provision of component parts or
services to companies engaged in such activities; energy research or
experimentation; environmental activities related to the solution of energy
problems; and activities
A1
<PAGE>
resulting from technological advances or research discoveries in the
energy field. The value of such companies' securities varies based on the
price and supply of energy fuels and may be affected by events relating to
international politics, energy conservation, the success of exploration
projects, and the tax and other regulatory policies of various governments.
5. FINANCIAL SERVICES SECTOR: companies providing financial
services to consumers and industry, such as: commercial banks and thrift
institutions; consumer and industrial finance companies; securities brokerage
companies; leasing companies; and firms in all segments of the insurance field
(such as multiline, property and casualty, and life insurance). These kinds
of companies are subject to extensive governmental regulations, some of which
regulations are currently being studied by Congress. The profitability of
these groups may fluctuate significantly as a result of volatile interest
rates and general economic conditions.
6. HEALTH CARE SECTOR: companies engaged in the design,
manufacture or sale of products or services used in connection with health
care or medicine, such as: pharmaceutical companies; firms that design,
manufacture, sell or supply medical, dental and optical products, hardware or
services; companies involved in biotechnology, medical diagnostic and
biochemical research and development; and companies involved in the operation
of health care facilities. Many of these companies are subject to government
regulation, which could affect the price and availability of their products
and services. Also, products and services in this sector could quickly become
obsolete.
7. HEAVY INDUSTRY SECTOR: companies engaged in the research,
development, manufacture or marketing of products, processes or services
related to the agriculture, chemicals, containers, forest products,
non-ferrous metals, steel and pollution control industries, such as:
synthetic and natural materials, for example, chemicals, plastics,
fertilizers, gases, fibers, flavorings and fragrances; paper, wood products;
steel and cement. Certain companies in this sector are subject to regulation
by state and Federal authorities, which could require alteration or cessation
of production of a product, payment of fines or cleaning of a disposal site.
In addition, since some of the materials and processes used by these companies
involve hazardous components, there are risks associated with their
production, handling and disposal. The risk of product obsolescence is also
present.
8. LEISURE AND ENTERTAINMENT SECTOR: companies engaged in the
design, production or distribution of goods or services in the leisure
industry, such as: television and radio broadcast or manufacture; motion
pictures and photography: recordings and musical instruments; publishing;
sporting goods, camping and recreational equipment; sports arenas; toys and
games; amusement and theme parks; travel-related services and airlines; hotels
and motels; fast food and other restaurants; and gaming casinos. Many products
produced by companies in this sector - for example, video and electronic games
- - may quickly become obsolete.
9. MACHINERY AND EQUIPMENT SECTOR: companies engaged in the
research, development or manufacture of products, processes or services
relating to electrical equipment, machinery, pollution control and
construction services, such as: transformers, motors, turbines, hand tools,
earth-moving equipment and waste disposal services. The profitability of most
A2
<PAGE>
companies in this group may fluctuate significantly in response to
capital spending and general economic conditions. Since some of the materials
and processes used by these companies involve hazardous components, there are
risks associated with their production, handling and disposal. The risk of
product obsolescence is also present.
10. PRECIOUS METALS SECTOR: companies engaged in exploration,
mining, processing or dealing in gold, silver, platinum, diamonds or other
precious metals or companies which, in turn, invest in companies engaged in
these activities. A significant portion of this sector may be represented by
securities of foreign companies, and investors should understand the special
risks related to such an investment emphasis. Also, such securities depend
heavily on prices in metals, some of which may experience extreme price
volatility based on international economic and political developments.
11. RETAILING SECTOR: companies engaged in the retail distribution
of home furnishings, food products, clothing, pharmaceuticals, leisure
products and other consumer goods, such as: department stores; supermarkets;
and retail chains specializing in particular items such as shoes, toys or
pharmaceuticals. The value of securities in this sector will fluctuate based
on consumer spending patterns, which depend on inflation and interest rates,
level of consumer debt and seasonal shopping habits. The success or failure
of a particular company in this highly competitive sector will depend on such
company's ability to predict rapidly changing consumer tastes.
12. TECHNOLOGY SECTOR: companies which are expected to have or
develop products, processes or services which will provide or will benefit
significantly from technological advances and improvements or future
automation trends in the office and factory, such as: semiconductors;
computers and peripheral equipment; scientific instruments; computer software;
telecommunications; and electronic components, instruments and systems. Such
companies are sensitive to foreign competition and import tariffs. Also, many
products produced by companies in this sector may quickly become obsolete.
13. TRANSPORTATION SECTOR: companies involved in the provision
of transportation of people and products, such as: airlines, railroads and
trucking firms. Revenues of companies in this sector will be affected by
fluctuations in fuel prices resulting from domestic and international events,
and government regulation of fares.
14. UTILITIES SECTOR: companies in the public utilities industry
and companies deriving a substantial majority of their revenues through
supplying public utilities such as: companies engaged in the manufacture,
production, generation, transmission and sale of gas and electric energy; and
companies engaged in the communications field, including telephone,
telegraph, satellite, microwave and the provision of other communication
facilities to the public. The gas and electric public utilities industries
are subject to various uncertainties, including the outcome of political
issues concerning the environment, prices of fuel for electric generation,
availability of natural gas, and risks associated with the construction and
operation of nuclear power facilities.
A3
<PAGE>
15. FOREIGN SECTOR: companies whose primary business
activity takes place outside of the United States. The
securities of foreign companies would be heavily influenced by
the strength of national economies, inflation levels and the
value of the U.S. dollar versus foreign currencies. Investments
in the Foreign Sector will be subject to certain risks not
generally associated with domestic investments. Such investments
may be favorably or unfavorably affected by changes in interest
rates, currency exchange rates and exchange control regulations,
and costs may be incurred in connection with conversions between
currencies. In addition, investments in foreign countries could
be affected by less favorable tax provisions, less publicly
available information, less securities regulation, political or
social instability, limitations on the removal of funds or other
assets of the Fund, expropriation of assets, diplomatic
developments adverse to U.S. investments and difficulties in
enforcing contractual obligations.
16. ENVIRONMENTAL SECTOR: companies that are engaged
in the research, development, manufacture or distribution of
products, processes or services related to pollution control,
waste management or pollution/waste remediation, or that provide
alternative energies such as natural gas, water utilities and
clean renewable fuels such as solar, geothermal and hydropower,
various technologies that make coal burning cleaner, notably
scrubbers, emission monitoring and control equipment,
biodegradable products and materials, or new biotechnological
products favoring the environment such as non-chemical
pesticides. These companies may have broadly-diversified
business segments or lines of business, only one or several of
which are in the environmental sector.
DESCRIPTION OF BOND RATINGS (2)
STANDARD & POOR'S BOND RATINGS
AAA-Debt rated AAA has the highest rating assigned 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 highest 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 an 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.
- --------------------
As described by the rating companies themselves.
A4
<PAGE>
To provide more detailed indications of credit quality, the
ratings AA to BBB may be modified by the addition of a plus or
minus sign to show relative standing within the major rating
categories.
A provisional rating, indicated by "p" following a rating,
is sometimes used by Standard & Poor's. It assumes the successful
completion of the project being financed by the issuance of the
bonds being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however,
while addressing credit quality subsequent to completion, makes
no comment on the likelihood of, or the risk of default upon
failure of, such completion.
MOODY'S BOND RATINGS
Aaa-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
unlikely to impair the fundamentally strong position of such
issues. Generally speaking, the safety of obligations of this
class is so absolute that with the occasional exception of
oversupply in a few specific instances, characteristically, their
market value is affected solely by money market fluctuations.
Aa-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 greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger
than in Aaa securities. The market value of Aa bonds is
virtually immune to all but money market influences, with the
occasional exception of oversupply in a few specific instances.
A-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.
Baa-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.
Rating symbols may include numerical modifiers 1, 2 or 3.
The numerical modifier 1 indicates that the security ranks at the
high end, 2 in the mid-range, and 3 nearer the low end, of the
generic category. These modifiers of rating symbols Aa, A and Baa
are to give investors a more precise indication of relative debt
quality in each of the historically defined categories.
A5
<PAGE>
Conditional ratings, indicated by "Con", are sometimes given
when the security for the bond depends upon the completion of
some act or the fulfillment of some condition. Such bonds, are
given a conditional rating that denotes their probably credit
statute upon completion of that act or fulfillment of that
condition.
A6
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds -- Special Opportunities Fund
Statement of Assets and Liabilities
October 31, 1994
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
ASSETS:
Investments at value - Note C:
Common stocks (cost - $149,121,688).................. $161,963,587
Joint repurchase agreement (cost - $54,143,000)...... 54,143,000
Corporate savings account............................ 275
-----------
216,106,862
Receivable for shares sold............................. 472,109
Receivable for investments sold........................ 8,869,441
Interest receivable.................................... 7,155
Dividends receivable................................... 51,974
Receivable from John Hancock Advisers, Inc. -
Note B............................................... 201,754
Deferred organization expenses - Note A................ 104,336
-----------
Total Assets........................ 225,813,631
------------------------------------------------------
LIABILITIES:
Payable for shares repurchased......................... 214,449
Payable for investments purchased...................... 753,593
Payable to John Hancock Advisers, Inc. and
affiliates - Note B.................................. 334,767
Accounts payable and accrued expenses.................. 37,817
-----------
Total Liabilities................... 1,340,626
------------------------------------------------------
NET ASSETS:
Capital paid-in........................................ 234,598,464
Accumulated net realized loss on investments........... ( 22,967,358)
Net unrealized appreciation of investments............. 12,841,899
-----------
Net Assets.......................... $224,473,005
======================================================
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 - $92,325,524/11,647,145...................... $ 7.93
========================================================================
Class B - $131,982,722/16,761,028..................... $ 7.87
========================================================================
Class C - $164,759/20,753............................. $ 7.94
========================================================================
MAXIMUM OFFERING PRICE PER SHARE<F1>
Class A - ($7.93 x 105.26%)........................... $ 8.35
========================================================================
<F1>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.
<PAGE>
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, 1994. 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 gains (losses) for
the period stated.
STATEMENT OF OPERATIONS
For the period November 1, 1993 (commencement of operations) to October 31, 1994
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTMENT INCOME:
Interest............................................. $ 1,067,317
Dividends (net of foreign withholding taxes
of $21,819)........................................ 739,318
----------
1,806,635
----------
Expenses:
Investment management fee - Note B................. 1,324,439
Distribution/service fee - Note B
Class A.......................................... 210,162
Class B.......................................... 954,594
Transfer agent fee - Note B
Class A.......................................... 210,162
Class B.......................................... 305,470
Class C<F2>...................................... 41
Registration and filing fees....................... 177,584
Custodian fee...................................... 59,705
Printing........................................... 30,816
Trustees' fees..................................... 27,073
Organization expense - Note A...................... 25,975
Auditing fee....................................... 25,889
Legal fees......................................... 10,502
Miscellaneous...................................... 9,766
----------
Total Expenses.................... 3,372,178
Less Expenses Reimbursable
by John Hancock Advisers, Inc. -
Note B............................ ( 201,754)
----------
Net Expenses...................... 3,170,424
-----------------------------------------------
Net Investment Loss............... ( 1,363,789)
-----------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments sold................ ( 22,967,358)
Change in net unrealized appreciation/depreciation
of investments..................................... 12,841,899
----------
Net Realized and Unrealized
Loss on Investments............... ( 10,125,459)
-----------------------------------------------
Net Decrease in Net Assets
Resulting from Operations......... ($11,489,248)
-----------------------------------------------
<F2> Class C shares commenced operations on July 6, 1994.
See notes to financial statements.
7
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds -- Special Opportunities Fund
STATEMENT OF CHANGES IN NET ASSETS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOR THE PERIOD
NOVEMBER 1, 1993
(COMMENCEMENT OF
OPERATIONS) TO
OCTOBER 31, 1994
-----------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss............................................ ($ 1,363,789)
Net realized loss on investments sold.......................... ( 22,967,358)
Change in net unrealized appreciation/depreciation
of investments............................................... 12,841,899
-----------
Net Decrease in Net Assets Resulting from Operations......... ( 11,489,248)
-----------
FROM FUND SHARE TRANSACTIONS-- NET<F1>.......................... 235,962,253
-----------
NET ASSETS:
End of year ................................................... $224,473,005
===========
<F1> ANALYSIS OF FUND SHARE TRANSACTIONS:
FOR THE PERIOD
NOVEMBER 1, 1993
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1994
------------------------
SHARES AMOUNT
--------- -----------
CLASS A
Shares sold....................................... 20,116,435 $167,224,012
Less shares repurchased........................... ( 8,469,290) ( 70,395,194)
--------- -----------
Net increase and shares outstanding end of
period.......................................... 11,647,145 $ 96,828,818
========= ===========
CLASS B
Shares sold....................................... 19,318,988 $159,278,074
Less shares repurchased........................... ( 2,557,960) ( 20,304,549)
--------- -----------
Net increase and shares outstanding end of
period.......................................... 16,761,028 $138,973,525
========== ===========
CLASS C<F2>
Shares sold....................................... 21,556 $ 166,302
Less shares repurchased........................... ( 803) ( 6,392)
--------- -----------
Net increase and shares outstanding end of
period........................................ 20,753 $ 159,910
========= ===========
<F2>Class C shares commenced operations on July 6, 1994.
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the commencement of operations. 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 and redeemed during the period, along with the
corresponding dollar value.
See notes to financial statements.
8
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds -- Special Opportunities 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:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOR THE PERIOD
NOVEMBER 1, 1993
(COMMENCEMENT OF
OPERATIONS) TO
OCTOBER 31, 1994
------------------
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period................... $ 8.50
--------
Net Investment Loss.................................... ( 0.03)(b)
Net Realized and Unrealized Loss on Investments........ ( 0.54)
--------
Total from Investment Operations..................... ( 0.57)
--------
Net Asset Value, End of Period......................... $ 7.93
========
Total Investment Return at Net Asset Value (d)......... ( 6.71%)(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).............. $ 92,325
Ratio of Expenses to Average Net Assets<F2>............ 1.50%
Ratio of Adjusted Expenses to Average Net Assets (a)... 1.62%
Ratio of Net Investment Loss to Average Net Assets..... ( 0.41%)
Ratio of Adjusted Net Investment Loss to Average
Net Assets (a)....................................... ( 0.53%)
Portfolio Turnover Rate................................ 57%
<F2>Expense Reimbursement Per Share..................... $ 0.01(b)
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period................... $ 8.50
--------
Net Investment Loss.................................... ( 0.09)(b)
Net Realized and Unrealized Loss on Investments........ ( 0.54)
--------
Total from Investment Operations..................... ( 0.63)
--------
Net Asset Value, End of Period......................... $ 7.87
========
Total Investment Return at Net Asset Value (d)......... ( 7.41%)(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).............. $131,983
Ratio of Expenses to Average Net Assets<F2> ........... 2.22%
Ratio of Adjusted Expenses to Average Net Assets (a)... 2.34%
Ratio of Net Investment Loss to Average Net Assets..... ( 1.13%)
Ratio of Adjusted Net Investment Loss to Average
Net Assets (a)....................................... ( 1.25%)
Portfolio Turnover Rate................................ 57%
<F2> Expense Reimbursement Per Share.................... $ 0.01(b)
See notes to financial statements.
9
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds -- Special Opportunities Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 6, 1994
(COMMENCEMENT OF
OPERATIONS) TO
OCTOBER 31, 1994
----------------
<S> <C>
CLASS C
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.......................... $ 7.60
--------
Net Realized and Unrealized Gain on Investments............... 0.34<F7>
--------
Net Asset Value, End of Period................................ $ 7.94
========
Total Investment Return at Net Asset Value <F6>............... ( 4.47%)<F5>
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)..................... $ 165
Ratio of Expenses to Average Net Assets <F2>.................. 1.01%<F1>
Ratio of Adjusted Expenses to Average Net Assets<F3>.......... 1.39%<F1>
Ratio of Net Investment Income to Average Net Assets.......... 0.03%<F1>
Ratio of Adjusted Net Investment Income to
Average Net Assets <F3> .................................... ( 0.35%)<F1>
Portfolio Turnover Rate....................................... 57%
<F2>Expense Reimbursement Per Share........................... $ 0.01<F4>
<FN>
<F1> On an annualized basis.
<F3> On an unreimbursed basis.
<F4> On average month end shares outstanding.
<F5> Not annualized.
<F6> Without the reimbursement, total investment return would be lower.
<F7> May not accord to amounts shown elsewhere in the financial statements.
</FN>
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single share for the period indicated: the net investment loss, gains (losses),
and total investment return of the Fund. It shows how the Fund's net asset value
for a share has changed since the commencement of operations. Additionally,
important relationships between some items presented in the financial statements
are expressed in ratio form.
See notes to financial statements.
10
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds -- Special Opportunities Fund
SCHEDULE OF INVESTMENTS
October 31, 1994
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
COMMON STOCKS
BROADCASTING (4.25%)
Grupo Televisa S.A. de C.V. - American
Depositary Receipts (ADR) (Mexico) ......... 115,500 $ 5,125,313
Infinity Broadcasting Corp. CI A ........ 145,000 4,404,375
-----------
9,529,688
-----------
COMPUTERS (16.68%)
BMC Software, Inc. ........................ 100,000 4,525,000
COMPAQ Computer Corp. ..................... 258,500 10,372,312
Computer Associates International, Inc. ...... 128,000 6,352,000
Microsoft Corp. ........................... 173,000 10,899,000
Seagate Technology, Inc. ................. 208,500 5,290,688
----------
37,439,000
----------
DIVERSIFIED OPERATIONS (2.86%)
CUC International Inc. ............... 200,000 6,425,000
----------
ELECTRONICS (7.94%)
Helix Technology Corp ................... 43,000 1,354,500
Motorola, Inc. .......................... 155,000 9,125,625
Sony Corp. (ADR) (Japan) ................ 121,500 7,335,562
----------
17,815,687
----------
FINANCE (1.19%)
First USA, Inc .......................... 76,100 2,682,525
----------
PUBLISHING (5.97%)
News Corp., Ltd. (ADR) (Australia) ....... 160,500 7,844,437
Time Warner Inc. ......................... 156,500 5,555,750
----------
13,400,187
----------
RETAIL (10.44%)
AnnTaylor Stores Corp. ................. 120,000 4,980,000
Best Buy Co., Inc. ..................... 142,000 5,360,500
Nordstrom, Inc............................. 160,000 7,880,000
Talbots, Inc............................... 150,000 5,212,500
-----------
23,433,000
-----------
TELECOMMUNICATIONS (19.62%)
Airtouch Communications, Inc. .......... 160,000 4,780,000
ALC Communications Corp. ............... 102,000 3,863,250
America Online, Inc. ................... 110,000 7,782,500
Cable & Wireless PLC (ADR)
(United Kingdom)......................... 81,000 1,660,500
General Instrument Corp. ............... 220,000 7,370,000
LDDS Communications Inc. ............... 130,500 3,066,750
The Schedule of Investments is a complete list of all securities owned by
Special Opportunities Fund on October 31, 1994. It's divided into two main
categories: common stocks and short-term investments. The common stocks are
further broken down by industry groups. Short-term investments, which represent
the Fund's "cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
TELECOMMUNICATIONS (CONTINUED)
Renaissance Communications Corp. ...... 50,000 $ 1,300,000
Telefonos de Mexico, S.A.
de C.V. CI L (ADR) (Mexico)............. 83,000 4,575,375
Telephone And Data Systems, Inc........... 120,000 5,940,000
Vanguard Cellular Systems, Inc. CI A .. 127,500 3,713,438
-----------
44,051,813
-----------
TEXTILE-APPAREL MANUFACTURING (3.20%)
Cygne Designs, Inc. ................... 94,500 1,216,687
St. John Knits, Inc....................... 80,000 2,440,000
Tommy Hilfiger Corp. .................. 80,000 3,530,000
-----------
7,186,687
-----------
TOTAL COMMON STOCKS
(Cost $149,121,688) 72.15% $161,963,587
------- -----------
See notes to financial statements.
11
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds -- Special Opportunities Fund
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (24.12%)
Investment in a joint repurchase
agreement transaction with Kidder
Peabody & Co., Inc. - Dated
10-31-94, Due 11-01-94 (secured by
U.S. Treasury Bond, 9.00% Due
11-15-18, and by U.S. Treasury
Notes, 6.75% Due 02-28-97 and
5.625% Due 01-31-98.) Note A... 4.77% $54,143 $ 54,143,000
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank and Trust Company
Daily Interest Savings Account
Current Rate 2.15%................ 275
-----------
TOTAL SHORT-TERM INVESTMENTS 24.12% 54,143,275
------- -----------
TOTAL INVESTMENTS 96.27% $216,106,862
======= ===========
Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents the country of foreign issuer, however security is U.S. dollar
denominated.
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.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust II (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 Special Opportunities Fund (the "Fund,"
which commenced operations on November 1, 1993), John Hancock Freedom Global
Fund, John Hancock Freedom Global Income Fund, John Hancock Short-Term Strategic
Income Fund and John Hancock Freedom International Fund.
The Trustees have authorized the issuance of three classes of the Fund,
designated as Class A, Class B and Class C shares. 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 and the Internal Revenue Service.
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 Investments in equity securities traded on national
securities exchanges in the United States or on equivalent foreign exchanges are
normally valued at the last quoted sales price on the day of valuation.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on valuation date are valued at the mean between the
current closing bid and asked prices. Debt securities having an over-the-counter
primary market are valued on the basis of valuations furnished by a pricing
service which determines valuations for normal institutional size trading units
of debt securities, without exclusive reliance upon quoted prices. Short-term
debt investments which have a remaining maturity of 60 days or less are valued
at amortized cost, which generally approximates market value. Investment
securities for which no current market quotations are available, are valued at
fair value based on procedures approved by the Trustees. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more 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 $22,967,357 of a capital
loss carryforward 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 distributions will be made. The carryforward expires October 31,
2002.
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.
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.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
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.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
OPTIONS Listed options are valued at the last quoted sales price on the exchange
on which they are primarily traded. Over-the-counter options are valued at the
mean between the last bid and asked prices. Upon the writing of a call or put
option, an amount equal to the premium received by the Fund is included in the
Statement of Assets and Liabilities as an asset and corresponding liability. The
amount of the liability is subsequently marked-to-market to reflect the current
market value of the written option.
There were no written option transactions for the year ended October 31,
1994.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked-to-market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
There were no open foreign currency forward contracts at October 31, 1994.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund enters into a financial futures contract, it is
required to deposit with its custodian a specified amount of cash or U.S.
government securities, known as "initial margin," equal to a certain percentage
of the value of the financial
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
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 contract 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, 1994, there were no open positions in financial futures
contracts.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Fund have been capitalized and are being charged to the Fund's operations
ratably over a five-year period that began with the commencement of investment
operations of the Fund.
NOTE B --
MANAGEMENT FEE, AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of: (a) 0.80% of the first $500,000,000 of the
Fund's average daily net asset value, (b) 0.75% of the next $500,000,000 and (c)
0.70% of the Fund's average daily net asset value in excess of $1,000,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
The Adviser has voluntarily agreed to limit Fund expenses, including the
management fee (but not including the transfer agent fee and the 12b-1 fee), to
0.90% of the Fund's average daily net assets. Accordingly, the reduction in the
Adviser's fee amounted to $201,754 for the year ended October 31, 1994. The
Adviser reserves the right to terminate this voluntary limitation in the future.
The Fund has a distribution agreement with John Hancock Broker Distribution
Services, Inc. ("Broker Services"), a wholly-owned subsidiary of the Adviser.
For the year ended October 31, 1994, Broker Services received net sales charges
of $3,095,739 with regard to sales of Class A shares. Out of this amount,
$478,203 was retained and used for printing prospectuses, advertising, sales
literature and other purposes, $1,658,547 was paid as sales commissions to
unrelated broker-dealers and $958,989 was paid as sales commissions to sales
personnel of John Hancock Distributors, Inc. ("Distributors"), Tucker Anthony,
Incorporated ("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"). 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 Tucker Anthony and Sutro, which are
broker-dealers.
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 Broker Services 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 year ended
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
October 31, 1994, contingent deferred sales charges received by Broker Services
amounted to $78,804.
In addition, to compensate Broker Services for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plan 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 Broker Services
for distribution and service expenses at an annual rate not to exceed 0.30% of
the Fund's average daily net assets attributable to Class A shares and 1.00% of
the Fund's average daily net assets attributable to Class B shares, to reimburse
Broker Services for its distribution/service costs. Up to a maximum of 0.25% of
these payments may be service fees as defined by the amended Rules of Fair
Practice of the National Association of Securities Dealers which became
effective July 7, 1993. 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 Fund Services,
Inc. ("Fund Services"), a wholly-owned subsidiary of The Berkeley Financial
Group. The Fund pays Fund Services a monthly transfer agent fee equivalent, on
an annual basis, to 0.30%, 0.32% and 0.10% of the average daily net asset value
of Class A, Class B and Class C shares of the Fund, respectively, plus out of
pocket expenses incurred by Fund Services on behalf of the Fund for proxy
mailings.
Messrs. Edward J. Boudreau, Jr. and Hugh A. Dunlap, Jr. are directors and
officers of the Adviser, and its affiliates as well as Trustees of the Fund. The
compensation of unaffiliated Trustees is borne by the Fund.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obli-
gation of the U.S. government and its agencies and short-term
securities, during the year ended October 31, 1994 aggregated $248,843,618 and
$76,754,652, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the year ended October 31, 1994.
The cost of investments owned at October 31, 1994 (including the short-term
investments) for Federal income tax purposes was $203,264,688. Gross unrealized
appreciation and depreciation of investments aggregated $18,949,416, and
$6,107,518, respectively, resulting in net unrealized appreciation of
$12,841,898.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified the
accumulated net investment loss in the amount of $1,363,789 to capital paid-in.
This represents the cumulative amount necessary to report these balances on a
tax basis, excluding certain temporary differences, as of October 31, 1994.
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>
John Hancock Funds - Special Opportunities Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Freedom Investment Trust II and to the Shareholders
of John Hancock Special Opportunities Fund
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 Special Opportunities
Fund (the "Fund") (a portfolio of Freedom Investment Trust II) at October 31,
1994, the results of its operations, the changes in its net assets and the
financial highlights for the period 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 audit. We conducted our audit
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
audit, which included confirmation of securities at October 31, 1994 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provides
a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 15, 1994
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during the fiscal year ended October
31, 1994.
The Fund has not paid any distributions of dividends or net realized gains
during the fiscal year.
17
<PAGE>
PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in the Registration Statement:
Freedom Investment Trust II--
John Hancock Global Fund
John Hancock Global Income Fund
John Hancock International Fund
John Hancock Special Opportunities Fund
John Hancock Short Term Strategic Income Fund
Statement of Assets and Liabilities as of October 31, 1994. Statement
of Operations for the year ended October 31, 1994 Statement of
Changes in Net Assets for each of the two years in the period ended
October 31, 1994. Financial Highlights for each of the 10 years ended
October 31, 1994. Schedule of Investments as of October 31, 1994.
Notes to Financial Statements. Schedule of Investment as of October
31, 1994
(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 February 6, 1995 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 Class C
<S> <C> <C> <C>
John Hancock Global Fund 15,575 4,009 62
John Hancock Global Income Fund 792 7,381 --
John Hancock Short Term Strategic Income Fund 708 5,793 --
John Hancock International Fund 799 903 0
John Hancock Special Opportunities Fund 18,469 21,790 0
</TABLE>
Item 27. Indemnification
(a) Under Article VI of the Registrant's Master Trust Agreement each of
its Trustees and Officers or person serving in such capacity with another entity
at the request of the Registrant ("Covered Person") shall be indemnified against
all liabilities, including, but not limited to, amounts paid in satisfaction of
judgments, in compromises or as fines or penalties, and expenses, including
reasonable legal and accounting fees, in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or otherwise or with which
such person may be or may have been threatened, while in office or thereafter,
by reason of being or having been such a Trustee or officer, director or
trustee, except with respect to any matter as to which it has been determined
that such Covered Person (i) did not act in good faith in the reasonable belief
that such Covered Person's action was in or not opposed to the best interests of
the Trust or (ii) had acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office (either and both of the conduct described in (i) and
(ii) being referred to hereafter as "Disabling Conduct"). A determination that
the Covered Person is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an administrative proceeding
against a Covered Person for insufficiency of evidence of Disabling Conduct, or
(iii) a reasonable determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by (a) a vote of a
majority of a quorum of Trustees who are neither "interested persons" of the
Trust as defined in section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion.
(b) Under the Distribution Agreement. Under Section 12 of the
Distribution Agreement, John Hancock Funds, Inc. ("John Hancock Funds")
has agreed to indemnify the Registrant and its Trustees, officers and
controlling persons against claims arising out of certain acts and statements
of John Hancock Funds.
Section 9(a) of the By-Laws of the Insurance Company provides, in effect,
that the Insurance Company will, subject to limitations of law, indemnify each
present and former director, officer and employee of the of the Insurance
Company who serves as a Trustee or officer of the Registrant at the direction or
request of the Insurance Company against litigation expenses and liabilities
incurred while acting as such, except that such indemnification does not cover
any expense or liability incurred or imposed in connection with any matter as to
which such person shall be finally adjudicated not to have acted in good faith
in the reasonable belief that his action was in the best interests of the
Insurance Company. In addition, no such person will be indemnified by the
Insurance Company in respect of any liability or expense incurred in connection
with any matter settled without final adjudication unless such settlement shall
have been approved as in the best interests of the Insurance Company either by
vote of the Board of Directors at a meeting composed of directors who have no
interest in the outcome of such vote, or by vote of the policyholders. The
Insurance Company may pay expenses incurred in defending an action or claim in
advance of its final disposition, but only upon receipt of an undertaking by the
person indemnified to repay such payment if he should be determined to be
entitled to indemnification.
Article IX of the respective By-Laws of John Hancock Funds and the
Adviser provide as follows:
"Section 9.01. Indemnity: Any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the Corporation a serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by the Corporation
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and the liability was not
incurred by reason of gross negligence or reckless disregard of the duties
involved in the conduct of his office, and expenses in connection therewith may
be advanced by the Corporation, all to the full extent authorized by the law."
"Section 9.02. Not Exclusive; Survival of Rights: The indemnification provided
by Section 9.01 shall not be deemed exclusive of any other right to which those
indemnified may be entitled, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such as person."
Insofar as indemnification for liabilities under the Securities Act of 1933 (the
"Act") may be permitted to Trustees, officers and controlling persons of
Registrant pursuant to the Registrant's Amended and Restated Articles of
Incorporation, Article 10.1 of the Registrant's By-Laws, The underwriting
Agreement, the By-Laws of Distributors, the Adviser, or the Insurance Company or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and other Connections of Investment Adviser
For information as to the business, profession, vocation or employment
of a substantial nature of each of the officers and Directors of the Investment
Adviser, reference is made to Forms ADV (801-8124) filed under the Investment
Advisers Act of 1940, herein incorporated by reference.
Item 29. Principal Underwriters
(a) John Hancock Funds acts as principal underwriter for the Registrant and
also serves as principal underwriter or distributor of shares for John
Hancock Cash Reserve, Inc., John Hancock Bond Fund, John Hancock Capital
Growth 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 Fund, John Hancock Sovereign Investors Fund,
Inc., John Hancock Cash Management Fund, John Hancock Special Equities Fund
John Hancock Sovereign Bond Fund, John Hancock Tax-Exempt Series Fund, John
Hancock Strategic Series, John Hancock Technology Series, Inc. and John
Hancock World Fund, John Hancock Freedom Investment Trust, John Hancock
Freedom Investment Trust II and John Hancock Freedom Investment Trust III.
(b) The following table lists, for each director and officer of John Hancock
Funds, the information indicated.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Positions and Offices with
Business Address Underwriter Registrant
<S> <C> <C>
Edward J. Boudreau, Jr. Chairman Chairman
101 Huntington Avenue
Boston, Massachusetts
Robert H. Watts Director and Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
C. Troy Shaver, Jr. President, Chief Executive Officer None
101 Huntington Avenue and Director
Boston, Massachusetts
Foster Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Robert G. Freedman Director Vice Chairman and Chief Investment
101 Huntington Avenue . Officer
Boston, Massachusetts
Stephen M. Blair Senior Vice President-Sales None
101 Huntington Avenue
Boston, Massachusetts
Thomas H. Drohan Senior Vice President Senior Vice President and Secretary
101 Huntington Avenue
Boston, Massachusetts
David A. King Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
James B. Little Senior Vice President Senior Vice President and
101 Huntington Avenue Chief Financial Officer
Boston, Massachusetts
John A. Morin Vice President Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Secretary Vice President, Assistant Secretary
101 Huntington Avenue and Compliance Officer
Boston, Massachusetts
Christopher M. Meyer Treasurer None
101 Huntington Avenue
Boston, Massachusetts
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director Trustee
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John Goldsmith Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
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
</TABLE>
(b) The name of each director and officer of Freedom, together with the
offices held by such person with Freedom and the Registrant, are set forth
below.
<TABLE>
<CAPTION>
Name and Principal 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
</TABLE>
(b) Subadviser
Registrant's subadviser, John Hancock Advisers International Limited
("JHAIL"), 34 Dover Street, WIX 3RA, London, England, also acts as investment
adviser, to other Investment Company clients. Information pertaining to the
officers and directors of JHAIL and their affiliations is set forth in the Form
ADV of JHAIL, (File No. 801 - 29498) which is hereby incorporated by reference.
(c) None.
Item 30. Location of Accounts and Records
Registrant maintains the records required to be maintained by it under Rules
31a-1 (a), 31a-a(b), and 31a-2(a) under the Investment Company Act of 1940 as
its principal executive offices at 101 Huntington Avenue, Boston Massachusetts
02199-7603. Certain records, including records relating to Registrant's
shareholders and the physical possession of its securities, may be maintained
pursuant to Rule 31a-3 at the main office of Registrant's Transfer Agent and
Custodian.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus with respect to a series of the Registrant is delivered with a copy
of the latest annual report to shareholders with respect to that series
upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement 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 24th day of February, 1995.
FREEDOM INVESTMENT TRUST II
By: *
Edward J. Boudreau, Jr.
Chairman
Pursuant to the requirements of the Securities Act of 1933, the
Registration has been signed below by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
* Chairman
Edward J. Boudreau, Jr. (Principal Executive Officer)
James B. Little
James B. Little Senior Vice President and Chief February 24, 1995
Financial Officer (Principal
Financial and Accounting Officer)
* Trustee
William A. Barron III
* Trustee
Douglas M. Costle
* Trustee
Hugh A. Dunlap, Jr.
* Trustee
Leland O. Erdahl
* Trustee
Richard A. Farrell
* Trustee
William F. Glavin
* Trustee
Patrick Grant
<PAGE>
Signature Title Date
* Trustee
Ralph Lowell, Jr.
* Trustee
John A. Moore
* Trustee
Patti McGill Peterson
* Trustee
John W. Pratt
</TABLE>
*By: Thomas H. Drohan February 24, 1995
----------------
Thomas H. Drohan, Attorney-in-Fact under Powers of Attorney dated June
25, 1992, incorporated by reference to Post-Effective Amendment No. 8
and dated December 14, 1992, and August 17, 1993, filed as an exhibit
to Post-Effective Amendment No. 23.
<PAGE>
EXHIBIT INDEX
The exhibits listed below which are marked by an asterisk (*) have previously
been filed with the Commission and are incorporated by reference.
Exhibit No. Description Page Number
99.B1 Master Trust Agreement (Agreement and Declaration of Trust)
amended and restated dated September 10, 1991; Amendment
to the Master Trust Agreement dated June 25, 1992;
Amendment to the Master Trust Agreement dated
September 7, 1993; Amendment to the Master Trust Agreement
dated September 27, 1994; Amendment to the Master Trust
Agreement dated August 3, 1993; Amendment to the Master Trust
Agreement dated October 25, 1993; Amendment to the Master
Trust Agreement dated December 13, 1993.
99.B2 By-Laws as amended September 16, 1992.
99.B3 None.
99.B4 Specimen share certificate for International Fund
(Classes A, B and C).
99.B4.1 Specimen share certificate for Global Fund (Classes A,
B and C).
99.B4.2 Specimen share certificate for Global Income Fund
(Classes A and B).
99.B4.3 Specimen share certificate for Special Opportunities Fund
(Classes A, B and C).
99.B4.4 Specimen share certificate for Short Term Strategic
Income Fund (Classes A, B)
99.B4.5 Designation of Classes dated December 13, 1993
99.B4.6 Designation of Classes dated September 7, 1993
99.B4.7 Designation of Classes dated December 14, 1992
99.B5 Advisory Agreement restated January 1, 1994.
99.B5.1 Sub-Advisory Agreement with John Hancock Advisers
International Limited dated October 1, 1992 for
International Fund.
99.B5.2 Sub-Advisory Agreement with John Hancock Advisers
International Limited for Global Fund.
99.B6 Distribution Agreement with John Hancock Broker
Distribution Services, Inc. and Freedom Distributors
Corporation.
99.B6.1 Form of Soliciting Dealer Agreement between John Hancock
Broker Distribution Services, Inc. and Selected Dealers.
99.B6.2 Form of Financial Institution Sales & Service Agreement.
99.B7 None.
99.B8 Custodian Contract with State Street Bank and Trust
Company dated July 15, 1994.
99.B8.1 Custodian Contract with Investors Bank and Trust
Company Bank, dated December 15, 1994.
99.B9 Transfer Agency and Service Agreement with John Hancock
Fund Services, Inc.
99.B10 Legal opinion and consent of Goodwin, Procter & Hoar
dated June 10, 1986
99.B10.1 Legal opinion and consent of Goodwin, Procter & Hoar
dated August 13, 1986
99.B10.2 Legal opinion and consent of Goodwin, Procter & Hoar
dated September 10, 1990.
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 22, 1992.
99.B10.5 Legal opinion and consent of Goodwin, Procter & Hoar
dated November 1, 1993.
99.B10.6 Legal opinion and consent of Goodwin, Procter & Hoar
dated November 2, 1993.
99.B10.7 Legal opinion and consent of Goodwin, Procter & Hoar
dated January 3, 1994.
99.B11 Consent of Price Waterhouse
99.B11.1 Consent of Morningstar Mutual Fund Values.
99.B12 Financial Statement of the Global Fund for the year
ended October 31, 1994 filed herewith in Part A and
Part B.
99.B12.1 Financial Statement of the Global Income Fund for the
year ended October 31, 1994 filed herewith in Part A
and Part B.
99.B12.2 Financial Statement of the Short Term Strategic Income
Fund for the year ended October 31, 1994 filed herewith
in Part A and Part B.
99.B12.3 Financial Statement of the International Fund for the
year ended October 31, 1994 filed herewith in Part
A and Part B.
99.B.12.4 Financial Statement of the Opportunities Fund for the
year ended October 31, 1994 filed herewith in Part A
and Part B.
13.B13 NONE
99.B15 Plan of Distribution pursuant to Rule 12b-1 as amended
and restated January 1, 1994.
99.B16* Working papers showing yield calculation for Global
Income Fund for the thirty days ending January 30,
1990 incorporated by reference to Post-Effective
Amendment No. 11. Working papers showing yield
calculations for Short-Term Strategic Income Fund
for the thirty days ending June 30, 1991 incorporated
by reference to Post-Effective Amendment No. 16.
99.B17 Power of Attorney dated June 25, 1992; Power of
Attorney dated December 14, 1992; Power of Attorney
dated August 17, 1993.
27.1A John Hancock Global Fund
27.1B John Hancock Global Fund
27.1C John Hancock Global Fund
27.2A John Hancock Global Income Fund
27.2B John Hancock Global Income Fund
27.3A John Hancock Special Opportunities Fund
27.3B John Hancock Special Opportunities Fund
27.3C John Hancock Special Opportunities Fund
27.4A John Hancock International Fund
27.4B John Hancock International Fund
27.5A John Hancock Short Term Strategic Income Fund
27.5B John Hancock Short Term Strategic Income Fund
GOODWIN, PROCTER & HOAR
(A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS)
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
June 10, 1986
Freedom Investment Trust II
Three Center Plaza
Boston, Massachusetts 02108
Gentlemen:
As counsel to Freedom Investment Trust II, a voluntary association of the type
commonly known as a business trust organized under the laws of the Commonwealth
of Massachusetts (the "Trust"), we have been asked to render our opinion in
connection with the proposed issuance by the Trust of shares of Freedom Global
Fund, a series of the Trust which has been established and designated in Section
4.2 of Article IV of the Trust's Agreement and Declaration of Trust (also
referred to as the Master Trust Agreement) dated March 31, 1986 (the
"Declaration") as more fully described in the Prospectus and Statement of
Additional Information contained in the Registration Statement on Form N-1A
(Registration No. : 33-4559) filed by the Trust, as amended (the "Registration
Statement").
We have examined the Declaration and By-Laws of the Trust, the records of
the meetings and written consents of the Board of Trustees and shareholders of
the Trust, the Prospectus and Statement of Additional Information contained in
the Registration Statement and such other documents, records and certificates as
we deemed necessary for purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Trust has been
duly organized and is validly existing pursuant to the laws of the Commonwealth
of Massachusetts, and that the shares of beneficial interest of the Trust which
are the subject of the foregoing Registration Statement will, when sold in
accordance with the terms of such Registration Statement in effect at the time
of the sale, be legally issued, fully paid and non-assessable by the Trust.
We consent to being named in the Prospectus and Statement of Additional
Information and to a copy of this opinion being filed as an exhibit to the
foregoing Registration Statement.
Very truly yours.
GOODWIN, PROCTER & HOAR
GOODWIN, PROCTER & HOAR
(A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS)
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
August 13, 1986
Freedom Investment Trust II
Three Center Plaza
Boston, Massachusetts 02108
Gentlemen:
Reference is made to the Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (Registration No. 33-4559) to be filed with
the Securities and Exchange Commission with respect to the proposed sale of an
indefinite number of shares of beneficial interest, without par value (the
"Shares"), of the Freedom Global Income Plus series of Freedom Investment Trust
II (the "Trust"). We wish to advise you that we have examined the proceedings
taken to form the Trust, including its Master Trust Agreement dated March 31,
1986, as amended, its By-Laws, and the record of proceedings of its Trustees and
shareholder from the date of formation until the present time. We have also
examined the applicable provisions of the laws of the Commonwealth of
Massachusetts under which the Trust was formed and such other documents and
questions of law as we have deemed necessary to this opinion. Based upon the
foregoing, we are of the opinion that:
1. The Trust is a duly formed and existing business trust under the
laws of the Commonwealth of Massachusetts, with authority to issue the
Shares; and
2. The Shares, when issued pursuant to the terms, provisions and
conditions set forth in the Master Trust Agreement and in the above referenced
Registration Statement relating to the Shares, will be validly issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 10 to said
Registration Statement.
Respectfully submitted,
GOODWIN, PROCTER & HOAR
GOODWIN, PROCTER & HOAR
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02108
September 10, 1990
Freedom Investment Trust II
One Beacon Street
Boston, Massachusetts 02108
Gentlemen:
As counsel to Freedom Investment Trust II (the "Trust"), a Massachusetts
business trust, we have been asked to render our opinion with respect to the
issuance of an indefinite number of shares of beneficial interest, no par value,
of the Trust (the "Shares") representing interests in the Freedom Short-Term
World Income Fund (the "Fund"), as more fully described in the Prospectus and
Statement of Additional Information contained in Post-Effective Amendment No. 12
(the "Amendment") to the Trust's Registration Statement on Form N-1A
(Registration No. 33-4559) filed with the Securities and Exchange Commission.
We have examined the Master Trust Agreement dated March 31, 1986, as
amended, the By-laws of the Trust, the records of certain meetings of the
Trustees of the Trust, the Prospectus and the Statement of Additional
Information contained in the Amendment, and such other documents, records and
certificates as we have deemed necessary for the purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Trust has been
duly organized and is validly existing pursuant to the laws of The Commonwealth
of Massachusetts, with authority to issue the Shares, and that the Shares, when
sold in accordance with the terms of the Prospectus and Statement of Additional
Information in effect at the time of sale, will be legally issued, fully paid
and non-assessable by the Trust.
We hereby consent to being named in the Statement of Additional
Information and to the filing of this opinion as an exhibit to the Amendment.
Very truly yours,
GOODWIN, PROCTER & HOAR
GOODWIN, PROCTER & HOAR
Counselors At Law
Exchange Place
Boston, Massachusetts 02109-2881
December 20, 1991
Freedom Investment Trust II
One Beacon Street
Boston, MA 02108
Gentlemen:
As counsel to Freedom Investment Trust II, a voluntary association of the
type commonly known as a business trust (the "Trust"), we have been asked to
render our opinion in connection with the proposed issuance by the Trust of
Class A shares of Freedom Global Fund, Freedom Global Income Fund and Freedom
Short-Term World Income Fund, all of which are series of the Trust which have
been established and designated in Section 4.2 of Article IV of the Trust's
Amended and Restated Agreement and Declaration of Trust (also referred to as the
Master Trust Agreement) dated September 10, 1991 (the "Declaration") as more
fully described in the Prospectus and Statement of Additional Information
contained in the Registration Statement on Form N-1A (Registration No. 33-4559)
filed by the Trust, as amended (the "Registration Statement").
We have examined the Declaration and By-Laws of the Trust, the records of
the meetings and written consents of the Board of Trustees and shareholders of
the Trust, the Prospectus and Statement of Additional Information contained in
the Registration Statement and such other documents, records and certificates as
we deemed necessary for purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Trust has been
duly organized and is validly existing pursuant to the laws of the Commonwealth
of Massachusetts, and that the shares of beneficial interest of the Trust which
are the subject of the foregoing Registration Statement will, when sold in
accordance with the terms of such Registration Statement in effect at the time
of the sale and assuming full payment is received by the Trust therefor, be
legally issued, fully paid and non-assessable by the Trust.
We consent to being named in the Statement of Additional Information and
to a copy of this opinion being filed as an exhibit to the foregoing
Registration Statement.
Very truly yours,
GOODWIN, PROCTER & HOAR
GOODWIN, PROCTER & HOAR
(A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS)
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
December 22, 1992
Freedom Investment Trust II
Three Center Plaza
Boston, Massachusetts 02108
Gentlemen:
As counsel to Freedom Investment Trust II, a voluntary association of the type
commonly known as a business trust organized under the laws of the Commonwealth
of Massachusetts (the "Trust"), we have been asked to render our opinion in
connection with the proposed issuance by the Trust of Class C shares of Freedom
Global Fund, a series of the Trust which has been established and designated in
Section 4.2 of Article IV of the Trust's Agreement and Declaration of Trust
(also referred to as the Master Trust Agreement) dated September 10, 1991 (the
"Declaration") as more fully described in the Prospectus and Statement of
Additional Information contained in the Registration Statement on Form N-1A
(Registration No. : 33-4559) filed by the Trust, as amended (the "Registration
Statement").
We have examined the Declaration and By-Laws of the Trust, the records of
the meetings and written consents of the Board of Trustees and shareholders of
the Trust, the Prospectus and Statement of Additional Information contained in
the Registration Statement and such other documents, records and certificates as
we deemed necessary for purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Trust has been
duly organized and is validly existing pursuant to the laws of the Commonwealth
of Massachusetts, and that the shares of beneficial interest of the Trust which
are the subject of the foregoing Registration Statement will, when sold in
accordance with the terms of such Registration Statement in effect at the time
of the sale, be legally issued, fully paid and non-assessable by the Trust.
We consent to being named in the Prospectus and Statement of Additional
Information and to a copy of this opinion being filed as an exhibit to the
foregoing Registration Statement.
Very truly yours.
GOODWIN, PROCTER & HOAR
GOODWIN, PROCTER & HOAR
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
November 1, 1993
Freedom Investment Trust II
101 Huntington Avenue
Boston, MA 02199
Ladies and Gentlemen:
As counsel to Freedom Investment Trust II (the "Trust"), a Massachusetts
business trust, we have been asked to render our opinion with respect to the
issuance of an indefinite number of shares of beneficial interest, no par value,
of the Trust (the "Shares") representing interests in Class A and Class B of the
John Hancock Special Opportunities Fund (the "Fund"), as more fully described in
the Prospectus and Statement of Additional Information contained in
Post-Effective Amendment No. 23 (the "Amendment") to the Trust's Registration
Statement on Form N-1A (Registration No. 33-4559) filed with the Securities and
Exchange Commission.
We have examined the Trust's Master Trust Agreement dated March 31, 1986,
as amended, the By-laws of the Trust, the records of certain meetings of the
Trustees of the Trust, the Prospectus and the Statement of Additional
Information of the Fund, and such other documents, records and certificates as
we have deemed necessary for the purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Trust has been
duly organized and is validly existing pursuant to the laws of The Commonwealth
of Massachusetts, with authority to issue the Shares, and that the Shares, when
sold in accordance with the terms of the Prospectus and Statement of Additional
Information in effect at the time of sale and assuming due consideration is
received therefor, will be legally issued, fully paid and non-assessable by the
Trust.
We hereby consent to being named in the above-referenced Prospectus and to
the filing of this opinion as an exhibit to the Trust's Registration Statement.
Very truly yours,
GOODWIN, PROCTER & HOAR
GOODWIN, PROCTER & HOAR
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATINS
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
November 2, 1993
Freedom Investment Trust II
101 Huntington Avenue
Boston, MA 02199
Ladies and Gentlemen:
We hereby consent to being named in (i) the Prospectus relating to shares
of beneficial interest of Class A and Class B of the John Hancock Freedom
International Fund, (ii) the Prospectus relating to shares of beneficial
interest of Class C of the John Hancock Freedom International Fund, and (iii)
the Prospectus relating to shares of beneficial interest of Class C of the John
Hancock Special Opportunities Fund, and the filing of this consent as an exhibit
to the Registration Statement of Freedom Investment Trust II.
Very truly yours,
GOODWIN, PROCTER & HOAR
GOODWIN PROCTER & HOAR
Counselors at Law
Exchange Place
Boston, Massachusetts 02109-2881
January 3, 1994
Freedom Investment Trust II
101 Huntington Avenue
Boston, MA 02199
Ladies and Gentlemen:
As counsel to Freedom Investment Trust II (the "Trust"), a Massachusetts
business trust, we have been asked to render our opinion with respect to the
issuance of an indefinite number of shares of beneficial interest, no par value,
of the Trust (the "Shares") representing interests in Class A, Class B and Class
C of the John Hancock Freedom International Fund and Class C of the John Hancock
Special Opportunities Fund (collectively, the "Funds"), as more fully described
in the Prospectuses and Statements of Additional Information contained in
Post-Effective Amendment No. 24 (the "Amendment") to the Trust's Registration
Statement on Form N-1A (Registration No. 33-4559) filed with the Securities and
Exchange Commission.
We have examined the Trust's Master Trust Agreement dated March 31, 1986,
as amended, the By-laws of the Trust, the records of certain meetings of the
Trustees of the Trust, the Prospectuses and the Statements of Additional
Information of the Funds, and such other documents, records and certificates as
we have deemed necessary for the purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Trust has been
duly organized and is validly existing pursuant to the laws of The Commonwealth
of Massachusetts, with authority to issue the Shares, and that the Shares, when
sold in accordance with the terms of the Prospectuses and Statements of
Additional Information in effect at the time of sale and assuming due
consideration is received therefor, will be legally issued, fully paid and
non-assessable by the Trust.
We hereby consent to being named in the above-referenced Prospectuses and
to the filing of this opinion as an exhibit to the Trust's Registration
Statement.
Very truly yours,
GOODWIN, PROCTER & HOAR
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statements of Additional Information
constituting part of this Post Effective Amendment No. 28 to the
registration statement on Form N-1A (the "Registration Statement") of our
report dated December 16, 1994, relating to the financial statements and
financial highlights appearing in the October 31, 1994 Annual Reports to
Shareholders of John Hancock Freedom Global Fund, John Hancock Freedom
Global Income Fund, John Hancock Freedom International Fund and John
Hancock Short-Term Strategic Income Fund and our report dated December 15,
1994, relating to the financial statement and financial highlights appearing
in the October 31, 1994 Annual Report to Shareholders of John Hancock
Special Opportunities Fund, which appears in such Statement of Additional
Information and to the incorporation by reference of our reports into the
Prospectuses which constitute part of this Registration Statement. We
further consent to the references to us under the headings "Independent
Auditors" in the Statement of Additional Information and "The Fund's
Financial Highlights" in the Prospectuses.
PRICE WATERHOUSE
Boston, Massachusetts
February 21, 1995
MORNINGSTAR
53 West Jackson Boulevard
Chicago, Illinois 60604
312-427-1985 FAX: 312-427-9215
September 21, 1992
Freedom Investment Trust II
c/o John Hancock Advisers, Inc.
101 Huntington Avenue, 7th Floor
Boston, Massachusetts 02199-7603
Gentlemen:
We hereby consent to the use of the name MORNINGSTAR in the registration
statement of Freedom Investment Trust II (the "Trust") on Form N-1A, File No.
33-4559 filed under the Securities Act of 1933, as amended, and to the inclusion
of or reference to any Morningstar manual fund ratings, ranking and/or other
Morningstar information in advertising and sales and sales literature with
respect to the series of the Trust.
Sincerely,
/s/Susan Newsoe
Effective January 1, 1994
as amended December 13, 1994
FREEDOM INVESTMENT TRUST II
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1
WHEREAS, FREEDOM INVESTMENT TRUST II, an unincorporated association of the
type commonly known as a business trust organized under the laws of the
Commonwealth of Massachusetts (the "Trust"), engages in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust is authorized (i) to issue shares of beneficial
interest (the "Shares") in separate series, with the Shares of each such series
representing the interest in a separate portfolio of securities and other assets
and (ii) to issue or divide the Shares within each such series into two or more
classes;
WHEREAS, the Trust has established five portfolio series, John Hancock
Freedom Global Fund, John Hancock Freedom Global Income Fund, John Hancock
Short-Term Strategic Income Fund, John Hancock Special Opportunities Fund and
John Hancock Freedom International Fund (the "Existing Funds" - such series,
together with all other series subsequently established by the Trust, being
referred to herein individually as a "Fund" and collectively as the "Funds");
WHEREAS, the Trust employs John Hancock Broker Distribution Services, Inc.
("John Hancock") and, with respect to John Hancock Freedom Global Fund, John
Hancock Freedom Global Income Fund and John Hancock Short-Term Strategic Income
Fund, Freedom Distributors Corporation ("Freedom") as the distributors of the
Shares pursuant to a Distribution Agreement (the "Agreement") (Freedom and John
Hancock shall herein be collectively referred to as the "Distributor");
WHEREAS, the Board of Trustees as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of this Plan or the Agreement
(the "Qualified Trustees"), have determined in the exercise of their reasonable
business judgement and in light of their fiduciary duties under state law and
under Section 36(a) and (b) of the Act, that there is a reasonable likelihood
that this Plan of Distribution pursuant to Rule 12b-1 under the Act (the "Plan")
and the Agreement will benefit the Funds and their shareholders, and have
accordingly approved this Plan and the Agreement by votes cast in person at a
meeting called for the purpose of voting on this Plan and the Agreement.
NOW, THEREFORE, the Trust hereby amends and restates the Plan in
accordance with Rule 12b-1 under the Act, on the following terms and conditions:
SECTION 1. DISTRIBUTION ACTIVITIES
Subject to the supervision of the Trustees, the Trust and the Funds are
authorized to engage in any activities and in financing any activities primarily
intended to result in the sale of Class A and/or Class B Shares of the Funds,
either directly or indirectly through other persons (including the Distributor)
with which the Trust has entered into agreements pursuant to the Plan,
including, without limitation, payment of Distribution Expenses (as defined
below) and Service Expenses (as defined below).
Distribution Expenses include, but are not limited to: (a) initial and
ongoing sales compensation to selected broker-dealers and others (including
affiliates of the Distributor) engaged in the sale of Shares of the Funds; (b)
direct out-of-pocket expenses incurred in connection with the distribution of
Shares of the Funds, including expenses relating to the formulation and
implementation of marketing strategies and promotional activities such as direct
mail promotions and television, radio, newspaper, magazine and other mass media
advertising, the preparation, printing and distribution of sales literature, the
preparation, printing and distribution of Prospectuses of the Trust and reports
for recipients other than existing shareholders of the Funds, and obtaining such
information, analyses and reports with respect to marketing and promotional
activities and investor accounts as the Trust may, from time to time, deem
advisable; (c) an allocation of overhead and other office expenses of the
Distributor related to the distribution of Shares of the Funds; (d) expenses
incurred in connection with the distribution of shares of any open-end,
registered investment company which sells all or substantially all of its assets
to any Fund of the Trust or which merges or otherwise combines with any Fund of
the Trust, which expenses were not previously reimbursed by such other open-end,
registered investment company; and (e) interest expenses on unreimbursed
distribution expenses related to Class B Shares, as described in Section 3(c).
Service Expenses include, but are not limited to, payments made to, or on
account of, account executives of selected broker-dealers (including affiliates
of the Distributor) and others for the furnishing of personal service to
shareholders of the Funds and/or the maintenance of shareholder accounts.
SECTION 2. MAXIMUM EXPENDITURES
The expenditures to be made pursuant to this Plan, and the basis upon
which payment of such expenditures will be made, shall be determined by the
Trust, but in no event shall such expenditures exceed the following:
(i) John Hancock Freedom Global Fund:
(a) with respect to Class A Shares, an annual rate of 0.30 of 1% of the
average daily value of the net assets of the Fund attributable to that class of
Shares to cover Distribution Expenses and Service Expenses, provided that the
portion of such fee used to cover Service Expenses shall not exceed an annual
rate of 0.25 of 1% of the average daily net asset value of the Fund attributable
to that class of Shares.
(b) with respect to Class B Shares, an annual rate of 1% of the average
daily value of the net assets of the Fund attributable to that class of Shares
to cover Distribution Expenses and Service Expenses, provided that the portion
of such fee used to cover Service Expenses shall not exceed an annual rate of
0.25 of 1% of the average daily net asset value of the Fund attributable to that
class of Shares.
(ii) John Hancock Freedom Global Income Fund:
(a) with respect to Class A Shares, an annual rate of 0.30 of 1% of the
average daily value of the net assets of the Fund attributable to that class of
Shares to cover Distribution Expenses and Servicing Expenses, provided that the
portion of such fee used to cover Service Expenses shall not exceed an annual
rate of 0.25 of 1% of the average daily net asset value of the Fund attributable
to that class of Shares.
(b) with respect to Class B Shares, an annual rate of 1% of the average
daily value of the net assets of the Fund attributable to that class of Shares
to cover Distribution Expenses and Service Expenses, provided that the portion
of such fee used to cover Service Expenses shall not exceed an annual rate of
0.25 of 1% of the average daily net asset value of the Fund attributable to that
class of Shares.
(iii) John Hancock Short-Term Strategic Income Fund:
(a) with respect to Class A Shares, an annual rate of 0.30 of 1% of the
average daily value of the net assets of the Fund attributable to that class of
Shares to cover Distribution Expenses and Service Expenses, provided that the
portion of such fee used to cover Service Expenses shall not exceed an annual
rate of 0.25 of 1% of the average daily net asset value of the Fund attributable
to that class of Shares.
(b) with respect to Class B Shares, an annual rate of 1% of the average
daily value of the net assets of the Fund attributable to that class of Shares
to cover Distribution Expenses and Service Expenses, provided that the portion
of such fee used to cover Service Expenses shall not exceed an annual rate of
0.25 of 1% of the average daily net asset value of the Fund attributable to that
class of Shares.
(iv) John Hancock Special Opportunities Fund
(a) with respect to Class A Shares, an annual rate of 0.30 of 1% of the
average daily value of the net assets of the Fund attributable to that class of
Shares to cover Distribution Expenses and Service Expenses, provided that the
portion of such fee used to cover Service Expenses shall not exceed an annual
rate of 0.25 of 1% of the average daily net asset value of the Fund attributable
to that class of Shares.
(b) with respect to Class B Shares, an annual rate of 1% of the average
daily value of the net assets of the Fund attributable to that class of Shares
to cover Distribution Expenses and Service Expenses, provided that the portion
of such fee used to cover Service Expenses shall not exceed an annual rate of
0.25 of 1% of the average daily net asset value of the Fund attributable to that
class of Shares.
(v) John Hancock Freedom International Fund
(a) with respect to Class A Shares, an annual rate of 0.30 of 1% of the
average daily value of the net assets of the Fund attributable to that class of
Shares to cover Distribution Expenses and Service Expenses, provided that the
portion of such fee used to cover Service Expenses shall not exceed an annual
rate of 0.25 of 1% of the average daily net asset value of the Fund attributable
to that class of Shares.
(b) with respect to Class B Shares, an annual rate of 1% of the average
daily value of the net assets of the Fund attributable to that class of Shares
to cover Distribution Expenses and Service Expenses, provided that the portion
of such fee used to cover Service Expenses shall not exceed an annual rate of
025 of 1% of the average daily net asset value of the Fund attributable to that
class of Shares.
(vi) All Funds subsequently established by the Trust, the annual rate or
rates as agreed upon and specified in an addendum hereto.
The expenditures to be made pursuant to this Plan shall commence with
respect to each Fund or class of Shares thereof as of the date on which this
Plan becomes effective with respect to such Fund or class of Shares thereof.
SECTION 3. PAYMENTS
Pursuant to this Plan, the Trust shall make monthly payments to the
Distributor at the annual rates provided for in Section 2 with respect to each
Fund or class of Shares thereof, as the case may be, as more fully described
below. Notwithstanding anything to the contrary herein, the aggregate of all
payments to the Distributor shall not exceed at any time the aggregate of all
payments made or expenses incurred by the Distributor pursuant to this Section 3
and to the extent that such payments and expenses have not previously been
reimbursed by the Distributor's receipt of deferred sales charges as set forth
in the Agreement and Prospectus.
(a) Class A Shares. The Distributor shall apply all monthly payments
received pursuant to this Plan as provided in Section 2 to the payment and/or
reimbursement of Distribution Expenses and Service Expenses as contemplated by
Section 1 hereof.
(b) Class B Shares. The Distributor shall apply all monthly payments
received pursuant to this Plan to the payment and/or reimbursement of
Distribution Expenses and Service Expenses as contemplated by Section 1 hereof.
(c) Unreimbursed Distribution Expenses. In the event that the Distributor
is not fully reimbursed for payments made or expenses incurred by it as
contemplated by Section 1 hereof, in any fiscal year, the Distributor shall be
entitled to carry forward such expenses to subsequent fiscal years for
submission to the Shares of the applicable Fund for payment, provided that any
such carry forward for Class A Shares shall not exceed twelve months from the
date the expense was incurred and subject always to the annual maximum
expenditures for Shares of each Fund set forth in Section 2 hereof; provided
further, however, that nothing herein shall prohibit or limit the Trustees from
terminating this Plan and all payments hereunder with respect to the Class B
Shares (or Class A Shares) of any Fund at any time pursuant to Section 4(e)
hereof.
(d) Allocation of Distribution Expenses Between Classes. Amounts paid to
the Distributor by any class of Shares of any Fund will not be used to pay the
distribution expenses incurred with respect to any other class of Shares of any
Fund; provided, however, that distribution expenses attributable to any Fund as
a whole will be allocated, to the extent permitted by law, according to a
formula based upon gross sales dollars and/or average daily net assets of each
such Class as may be approved from time to time by vote of a majority of the
Board of Trustees, including the Qualified Trustees.
SECTION 4. TERM AND TERMINATION
(a) Existing Funds. This Plan shall continue in effect with respect to the
Class A and Class B shares of each Existing Fund (subject to Section 4(c)
hereof) until May 31, 1994, unless the continuation of this Plan shall have been
approved with respect to that class of Shares of each Existing Fund in
accordance with the provisions of Section 4(c) hereof.
(b) Additional Funds. This Plan shall become effective with respect to
each additional Fund and each class of Shares thereof established by the Trust
upon commencement of the initial public offering thereof; provided that the Plan
has previously been approved for continuation by votes of a majority of both (i)
the Board of Trustees of the Trust, and (ii) the Qualified Trustees, cast in
person at a meeting held before the initial public offering of such additional
Fund and each class of Shares thereof and called for the purpose of voting on
such approval. This Plan shall continue in effect with respect to each such
additional Fund and each class of Shares thereof (subject to Section 4(c)
hereof) for one year after the date of such initial public offering, unless the
continuation of this Plan shall have been approved with respect to such
additional Fund and each class of Shares thereof in accordance with the
provisions of Section 4(c) hereof. The Distributor and the Trust on behalf of
each such additional Fund and each class of Shares thereof shall each sign an
addendum hereto agreeing to be bound hereby and setting forth such specific and
different terms as the parties may agree upon, including, without implied
limitation, the amount and purpose of payments to be made hereunder.
(c) Continuation. This Plan shall continue in effect with respect to each
Fund and each class of Shares thereof subsequent to the initial term specified
in Section 4(a) and (b) for so long as such continuance is specifically approved
at least annually by votes of a majority of both (i) the Board of Trustees of
the Trust, and (ii) the Qualified Trustees, cast in person at a meeting called
for the purpose of voting on this Plan.
(d) Shareholder Approval. Notwithstanding the foregoing provisions of this
Section 4, the continuance of this Plan with respect to any additional Fund and
each class of Shares thereof subsequently established by the Trust is subject to
the approval of this Plan by a majority of the outstanding voting securities (as
defined in the Act) of such Fund and each class of Shares thereof.
(e) Termination.
(i) This Plan may be terminated at any time with respect to any Fund or
class of Shares thereof by vote of a majority of the Qualified Trustees, or by
vote of a majority of the outstanding voting securities of that Fund or class of
Shares thereof, as the case may be. The Plan may remain in effect with respect
to a Fund or Class of Shares thereof even if it has been terminated in
accordance with this Section 4(e) with respect to one or more other Funds or
classes of Shares thereof.
(ii) The Agreement may be terminated at any time, without penalty, with
respect to any Fund or class of Shares thereof by vote of a majority of the
Qualified Trustees or by vote of a majority of the outstanding voting securities
of that Fund or class of Shares thereof on sixty days' written notice to the
Distributor. In addition, the Agreement provides for automatic termination in
the event of its assignment.
SECTION 5. AMENDMENTS
This Plan may not be amended to increase materially the amount of
distribution expenditures provided for herein unless such amendment is approved
by a vote of a majority of the outstanding voting securities of each Fund or
class of Shares thereof, as the case may be, with respect to which a material
shall be made unless approved in the manner provided for annual renewal in
Section 4(c) hereof. Otherwise, the Plan may be amended with respect to any Fund
or class of Shares thereof by vote of a majority of the Qualified Trustees or
the outstanding voting securities of that Fund or class of Shares thereof.
SECTION 6. QUALIFIED TRUSTEES
While this Plan is in effect with respect to any Fund or class of Shares
thereof, the selection and nomination of the Qualified Trustees of the Trust
shall be committed to the discretion of the Qualified Trustees.
SECTION 7. QUARTERLY REPORTS
The Treasurer of the Trust and the Treasurer of the Distributor shall
provide to the Trustees of the Trust and the Trustees shall review, at least
quarterly, a written report of the amounts expended for distribution pursuant to
this Plan and the purposes for which such expenditures were made.
SECTION 8. RECORDKEEPING
The Trust shall preserve copies of this Plan, the Agreement and any
related agreements and all reports made pursuant to Section 7 hereof, for a
period of not less than six years from the date of this Plan and the Agreement,
with the agreements or such reports, as the case may be, the first two years to
be kept in an easily accessible place.
SECTION 9. LIMITATION OF LIABILITY
The term "Freedom Investment Trust II" means and refers to the Trustees
from time to time serving under the Master Trust Agreement of the Trust dated
March 31, 1986, as amended and restated September 10, 1991, as the same may
subsequently thereto have been, or subsequently hereto be, amended. It is
expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agent or
employees of the Trust, personally, but bind only the trust property of the
Trust, as provided in the Master Trust Agreement of the Trust. The execution and
delivery of this Plan and the Plan have been authorized by the Trustees of the
Trust and signed by an authorized officer of the Trust, acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Master Trust Agreement. The Master
Trust Agreement of the Trust further provides, and it is expressly agreed, that
each Fund of the Trust shall be solely and exclusively responsible for the
payment of its debts, liabilities and obligations and that no other Fund shall
be responsible or liable for the same.
SECTION 10. MISCELLANEOUS
For purposes of this Plan, references to the Prospectus of the Trust shall
be deemed to include all Prospectuses and Statements of Additional Information
of any of the Funds and of the Trust, all as from time to time amended and in
effect.
IN WITNESS WHEREOF, the Trust has executed this Plan of Distribution dated
as of June 26, 1986, as amended and restated effective as of the day and year
set forth below in Boston, Massachusetts.
ATTEST: FREEDOM INVESTMENT TRUST II
/s/Thomas H. Drohan By: /s/Hugh A. Dunlap, Jr
Secretary President
Date: December 13, 1994
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Freedom Investment Trust II
(the "Trust"), do hereby severally constitute and appoint Edward J. Boudreau,
Jr., Hugh A. Dunlap, Jr., James B. Little and Thomas H. Drohan, and each of them
acting singly, as our true and lawful attorneys, with full powers to them and
each of them to sign for us, in our names in the capacities indicated below, any
and all Registration Statements of the Trust on Form N-1A or N-14 and any and
all amendments thereto filed with the Securities and Exchange Commission to
enable the Trust to comply with the provisions of the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended and the Investment
Company Act of 1940, as amended, and all requirements and regulations of the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys to any and all said
amendments to the Registration Statement.
IN WITNESS WHEREOF, we have hereunto set our hands on the date indicated
below.
SIGNATURE TITLE DATE AS OF:
/s/Edward J. Boudreau, Jr. Chairman, Trustee June 25, 1992
Edward J. Boudreau, Jr. and Principal
Executive Officer
/s/James B. Little Treasurer, June 25, 1992
James B. Little Principal
Accounting Officer and
Principal Financial Officer
/s/William Barron, III Trustee June 25, 1992
William Barron, III
/s/Douglas M. Costle Trustee June 25, 1992
Douglas M. Costle
/s/Hugh A. Dunlap, Jr. Trustee June 25, 1992
Hugh A. Dunlap
/s/Leland O. Erdahl Trustee June 25, 1992
Leland O. Erdahl
/s/Richard A. Farrell Trustee June 25, 1992
Richard a. Farrell
/s/Patrick Grant Trustee June 25, 1992
Patrick Grant
/s/Ralph Lowell, Jr. Trustee June 25, 1992
Ralph Lowell, Jr.
/s/John A. Moore Trustee June 25, 1992
John A. Moore
/s/John W. Pratt Trustee June 25, 1992
John W. Pratt
/s/William F. Glavin Trustee December 14, 1992
William F. Glavin
/s/Patti McGill Peterson Trustee August 17, 1993
Patti McGill Peterson
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> JOHN HANCOCK FREEDOM GLOBAL FUND, CLASS A
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<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
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<INVESTMENTS-AT-VALUE> 130,419,163
<RECEIVABLES> 2,981,121
<ASSETS-OTHER> 2,987,580
<OTHER-ITEMS-ASSETS> 28,680,739
<TOTAL-ASSETS> 136,257,445
<PAYABLE-FOR-SECURITIES> 2,261,177
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 449,215
<TOTAL-LIABILITIES> 2,710,392
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 92,308,006
<SHARES-COMMON-STOCK> 7,131,436
<SHARES-COMMON-PRIOR> 6,347,547
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,558,308
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 28,680,739
<NET-ASSETS> 133,547,053
<DIVIDEND-INCOME> 1,640,883
<INTEREST-INCOME> 127,285
<OTHER-INCOME> 0
<EXPENSES-NET> 2,572,386
<NET-INVESTMENT-INCOME> (804,218)
<REALIZED-GAINS-CURRENT> 13,362,429
<APPREC-INCREASE-CURRENT> (2,685,194)
<NET-CHANGE-FROM-OPS> 9,873,017
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 8,324,136
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,101,077
<NUMBER-OF-SHARES-REDEEMED> 917,934
<SHARES-REINVESTED> 600,746
<NET-CHANGE-IN-ASSETS> 23,013,739
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10,356,293
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,175,313
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,572,386
<AVERAGE-NET-ASSETS> 95,299,048
<PER-SHARE-NAV-BEGIN> 14.30
<PER-SHARE-NII> (0.07)
<PER-SHARE-GAIN-APPREC> 1.24
<PER-SHARE-DIVIDEND> 0
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.16
<EXPENSE-RATIO> 1.98
<AVG-DEBT-OUTSTANDING> O
<AVG-DEBT-PER-SHARE> O
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<NAME> JOHN HANCOCK FREEDOM GLOBAL FUND, CLASS B
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<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 101,608,005
<INVESTMENTS-AT-VALUE> 130,419,163
<RECEIVABLES> 2,981,121
<ASSETS-OTHER> 2,987,580
<OTHER-ITEMS-ASSETS> 28,680,739
<TOTAL-ASSETS> 136,257,445
<PAYABLE-FOR-SECURITIES> 2,261,177
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 449,215
<TOTAL-LIABILITIES> 2,710,392
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 92,308,006
<SHARES-COMMON-STOCK> 2,283,610
<SHARES-COMMON-PRIOR> 1,364,839
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,558,308
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 28,680,739
<NET-ASSETS> 133,547,053
<DIVIDEND-INCOME> 1,640,883
<INTEREST-INCOME> 127,285
<OTHER-INCOME> 0
<EXPENSES-NET> 2,572,386
<NET-INVESTMENT-INCOME> (804,218)
<REALIZED-GAINS-CURRENT> 13,362,429
<APPREC-INCREASE-CURRENT> (2,685,194)
<NET-CHANGE-FROM-OPS> 9,873,017
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,992,338
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,382,515
<NUMBER-OF-SHARES-REDEEMED> (590,659)
<SHARES-REINVESTED> 126,915
<NET-CHANGE-IN-ASSETS> 23,013,739
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10,356,293
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,175,313
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,572,386
<AVERAGE-NET-ASSETS> 27,305,839
<PER-SHARE-NAV-BEGIN> 14.17
<PER-SHARE-NII> (0.15)
<PER-SHARE-GAIN-APPREC> 1.22
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.31)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.93
<EXPENSE-RATIO> 2.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> JOHN HANCOCK FREEDOM GLOBAL FUND, CLASS C
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<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
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<INVESTMENTS-AT-VALUE> 130,419,163
<RECEIVABLES> 2,981,121
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<OTHER-ITEMS-ASSETS> 28,680,739
<TOTAL-ASSETS> 136,257,445
<PAYABLE-FOR-SECURITIES> 2,261,177
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 449,215
<TOTAL-LIABILITIES> 2,710,392
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 92,308,006
<SHARES-COMMON-STOCK> 52,719
<SHARES-COMMON-PRIOR> 28,315
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,558,308
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 28,680,739
<NET-ASSETS> 133,547,053
<DIVIDEND-INCOME> 1,640,883
<INTEREST-INCOME> 127,285
<OTHER-INCOME> 0
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<NET-INVESTMENT-INCOME> (804,218)
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<NET-CHANGE-FROM-OPS> 9,873,017
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<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 39,722
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21,769
<NUMBER-OF-SHARES-REDEEMED> 303
<SHARES-REINVESTED> 2,938
<NET-CHANGE-IN-ASSETS> 23,013,739
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<ACCUMULATED-GAINS-PRIOR> 10,356,293
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<GROSS-EXPENSE> 2,572,386
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<AVG-DEBT-OUTSTANDING> O
<AVG-DEBT-PER-SHARE> O
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<SERIES>
<NUMBER> 2
<NAME> JOHN HANCOCK FREEDOM GLOBAL INCOME FUND, CLASS A
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<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
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<INVESTMENTS-AT-VALUE> 119,635,009
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<OTHER-ITEMS-LIABILITIES> 784,631
<TOTAL-LIABILITIES> 6,358,412
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 132,742,813
<SHARES-COMMON-STOCK> 1,010,968
<SHARES-COMMON-PRIOR> 1,338,774
<ACCUMULATED-NII-CURRENT> 506,675
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,631,525)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5,012,854)
<NET-ASSETS> 123,605,109
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,029,591
<OTHER-INCOME> 0
<EXPENSES-NET> 3,487,062
<NET-INVESTMENT-INCOME> 10,542,529
<REALIZED-GAINS-CURRENT> (8,918,471)
<APPREC-INCREASE-CURRENT> (6,180,526)
<NET-CHANGE-FROM-OPS> (4,556,468)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 133,439
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 607,771
<NUMBER-OF-SHARES-SOLD> 224,553
<NUMBER-OF-SHARES-REDEEMED> 600,757
<SHARES-REINVESTED> 48,398
<NET-CHANGE-IN-ASSETS> (86,442,629)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,695,775)
<OVERDISTRIB-NII-PRIOR> (1,381,848)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,207,673
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,515,235
<PER-SHARE-NAV-BEGIN> 9.62
<PER-SHARE-NII> 0.64
<PER-SHARE-GAIN-APPREC> (0.78)
<PER-SHARE-DIVIDEND> (0.11)
<PER-SHARE-DISTRIBUTIONS> 0
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<PER-SHARE-NAV-END> 8.85
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> O
<AVG-DEBT-PER-SHARE> O
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<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> JOHN HANCOCK FREEDOM GLOBAL INCOME FUND, CLASS B
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<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
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<INVESTMENTS-AT-VALUE> 119,635,009
<RECEIVABLES> 10,309,747
<ASSETS-OTHER> (468,271)
<OTHER-ITEMS-ASSETS> (5,012,854)
<TOTAL-ASSETS> 129,963,521
<PAYABLE-FOR-SECURITIES> 5,573,781
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 784,631
<TOTAL-LIABILITIES> 6,358,412
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 132,742,813
<SHARES-COMMON-STOCK> 12,959,426
<SHARES-COMMON-PRIOR> 20,499,476
<ACCUMULATED-NII-CURRENT> 506,675
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,631,525)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5,012,854)
<NET-ASSETS> 123,605,109
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,029,591
<OTHER-INCOME> 0
<EXPENSES-NET> 3,487,062
<NET-INVESTMENT-INCOME> 10,542,529
<REALIZED-GAINS-CURRENT> (8,918,471)
<APPREC-INCREASE-CURRENT> (6,180,526)
<NET-CHANGE-FROM-OPS> (4,556,468)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,025,278
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 8,776,041
<NUMBER-OF-SHARES-SOLD> 912,315
<NUMBER-OF-SHARES-REDEEMED> 8,973,138
<SHARES-REINVESTED> 520,773
<NET-CHANGE-IN-ASSETS> (86,442,629)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,695,775)
<OVERDISTRIB-NII-PRIOR> (1,381,848)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,207,673
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 152,049,428
<PER-SHARE-NAV-BEGIN> 9.62
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> (0.78)
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (0.52)
<PER-SHARE-NAV-END> 8.85
<EXPENSE-RATIO> 2.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> JOHN HANCOCK SPECIAL OPPORTUNITIES FUND, CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 203,264,688
<INVESTMENTS-AT-VALUE> 216,106,587
<RECEIVABLES> 9,602,433
<ASSETS-OTHER> 104,611
<OTHER-ITEMS-ASSETS> 12,841,899
<TOTAL-ASSETS> 225,813,631
<PAYABLE-FOR-SECURITIES> 753,593
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 587,033
<TOTAL-LIABILITIES> 1,340,626
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 234,598,464
<SHARES-COMMON-STOCK> 11,647,145
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (22,967,358)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,841,899
<NET-ASSETS> 224,473,005
<DIVIDEND-INCOME> 739,318
<INTEREST-INCOME> 1,067,317
<OTHER-INCOME> 0
<EXPENSES-NET> 3,170,424
<NET-INVESTMENT-INCOME> (1,363,789)
<REALIZED-GAINS-CURRENT> (22,967,358)
<APPREC-INCREASE-CURRENT> 12,841,899
<NET-CHANGE-FROM-OPS> (11,489,248)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,116,435
<NUMBER-OF-SHARES-REDEEMED> 8,469,290
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 224,473,005
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,324,439
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,170,424
<AVERAGE-NET-ASSETS> 70,246,503
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> (0.54)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.93
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> JOHN HANCOCK SPECIAL OPPORTUNITIES FUND, CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 203,264,688
<INVESTMENTS-AT-VALUE> 216,106,587
<RECEIVABLES> 9,602,433
<ASSETS-OTHER> 104,611
<OTHER-ITEMS-ASSETS> 12,841,899
<TOTAL-ASSETS> 225,813,631
<PAYABLE-FOR-SECURITIES> 753,593
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 587,033
<TOTAL-LIABILITIES> 1,340,626
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 234,598,464
<SHARES-COMMON-STOCK> 16,761,028
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (22,967,358)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,841,899
<NET-ASSETS> 224,473,005
<DIVIDEND-INCOME> 739,318
<INTEREST-INCOME> 1,067,317
<OTHER-INCOME> 0
<EXPENSES-NET> 3,170,424
<NET-INVESTMENT-INCOME> (1,363,789)
<REALIZED-GAINS-CURRENT> (22,967,358)
<APPREC-INCREASE-CURRENT> 12,841,899
<NET-CHANGE-FROM-OPS> (11,489,248)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 19,318,988
<NUMBER-OF-SHARES-REDEEMED> (2,557,960)
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,170,424
<AVERAGE-NET-ASSETS> 95,721,692
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> (0.09)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> JOHN HANCOCK SPECIAL OPPORTUNITIES FUND, CLASS C
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> JUL-06-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 203,264,688
<INVESTMENTS-AT-VALUE> 216,106,587
<RECEIVABLES> 9,602,433
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<OTHER-ITEMS-ASSETS> 12,841,899
<TOTAL-ASSETS> 225,813,631
<PAYABLE-FOR-SECURITIES> 753,593
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<OTHER-ITEMS-LIABILITIES> 587,033
<TOTAL-LIABILITIES> 1,340,626
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<PAID-IN-CAPITAL-COMMON> 234,598,464
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<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> (22,967,358)
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<NET-ASSETS> 224,473,005
<DIVIDEND-INCOME> 739,318
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<PER-SHARE-DIVIDEND> 0
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<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> JOHN HANCOCK FREEDOM INTERNATIONAL FUND, CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> JAN-03-1994
<PERIOD-END> OCT-31-1994
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<INVESTMENTS-AT-VALUE> 8,287,717
<RECEIVABLES> 227,880
<ASSETS-OTHER> 463,435
<OTHER-ITEMS-ASSETS> 232,519
<TOTAL-ASSETS> 8,975,614
<PAYABLE-FOR-SECURITIES> 311,746
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 290,362
<TOTAL-LIABILITIES> 602,108
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,072,102
<SHARES-COMMON-STOCK> 511,780
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 14,822
<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 232,519
<NET-ASSETS> 8,373,506
<DIVIDEND-INCOME> 84,465
<INTEREST-INCOME> 28,605
<OTHER-INCOME> 0
<EXPENSES-NET> 81,775
<NET-INVESTMENT-INCOME> 31,295
<REALIZED-GAINS-CURRENT> 26,883
<APPREC-INCREASE-CURRENT> 232,519
<NET-CHANGE-FROM-OPS> 290,697
<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
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<NUMBER-OF-SHARES-REDEEMED> 82,060
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<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0.08
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> O
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.65
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> JOHN HANCOCK FREEDOM INTERNATIONAL FUND, CLASS B
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> JAN-03-1994
<PERIOD-END> OCT-31-1994
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<ASSETS-OTHER> 463,435
<OTHER-ITEMS-ASSETS> 232,519
<TOTAL-ASSETS> 8,975,614
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 290,362
<TOTAL-LIABILITIES> 602,108
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,072,102
<SHARES-COMMON-STOCK> 458,714
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 14,822
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 54,063
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 232,519
<NET-ASSETS> 8,373,506
<DIVIDEND-INCOME> 84,465
<INTEREST-INCOME> 28,605
<OTHER-INCOME> 0
<EXPENSES-NET> 81,775
<NET-INVESTMENT-INCOME> 31,295
<REALIZED-GAINS-CURRENT> 26,883
<APPREC-INCREASE-CURRENT> 232,519
<NET-CHANGE-FROM-OPS> 290,697
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 512,942
<NUMBER-OF-SHARES-REDEEMED> 54,228
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,373,506
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.09
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<EXPENSE-RATIO> 2.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> JOHN HANCOCK SHORT-TERM STRATEGIC INCOME FUND, CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 112,216,177
<INVESTMENTS-AT-VALUE> 108,972,825
<RECEIVABLES> 4,569,439
<ASSETS-OTHER> 1,047,888
<OTHER-ITEMS-ASSETS> (4,250,551)
<TOTAL-ASSETS> 113,582,953
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,102,074
<TOTAL-LIABILITIES> 2,102,074
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,871,299
<SHARES-COMMON-STOCK> 1,545,084
<SHARES-COMMON-PRIOR> 1,219,949
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 47,616
<ACCUMULATED-NET-GAINS> (24,568,945)
<OVERDISTRIBUTION-GAINS> 114,916
<ACCUM-APPREC-OR-DEPREC> (4,250,551)
<NET-ASSETS> 111,480,879
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12,287,430
<OTHER-INCOME> 0
<EXPENSES-NET> 2,377,351
<NET-INVESTMENT-INCOME> 9,910,079
<REALIZED-GAINS-CURRENT> (5,810,926)
<APPREC-INCREASE-CURRENT> (1,902,026)
<NET-CHANGE-FROM-OPS> 2,197,127
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 693,087
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 107,572
<NUMBER-OF-SHARES-SOLD> 932,145
<NUMBER-OF-SHARES-REDEEMED> 681,111
<SHARES-REINVESTED> 74,101
<NET-CHANGE-IN-ASSETS> (42,522,729)
<ACCUMULATED-NII-PRIOR> 2,207,284
<ACCUMULATED-GAINS-PRIOR> (21,070,468)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 774,309
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,377,351
<AVERAGE-NET-ASSETS> 9,686,695
<PER-SHARE-NAV-BEGIN> 9.12
<PER-SHARE-NII> 0.76
<PER-SHARE-GAIN-APPREC> (0.53)
<PER-SHARE-DIVIDEND> 0.62
<PER-SHARE-DISTRIBUTIONS> 0.12
<RETURNS-OF-CAPITAL> 0.14
<PER-SHARE-NAV-END> 8.47
<EXPENSE-RATIO> 1.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> JOHN HANCOCK SHORT-TERM STRATEGIC INCOME FUND, CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 112,216,177
<INVESTMENTS-AT-VALUE> 108,972,825
<RECEIVABLES> 4,569,439
<ASSETS-OTHER> 1,047,888
<OTHER-ITEMS-ASSETS> (4,250,551)
<TOTAL-ASSETS> 113,582,953
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,102,074
<TOTAL-LIABILITIES> 2,102,074
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 126,704,895
<SHARES-COMMON-STOCK> 11,627,397
<SHARES-COMMON-PRIOR> 15,678,250
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 508,661
<ACCUMULATED-NET-GAINS> (24,568,945)
<OVERDISTRIBUTION-GAINS> 1,691,979
<ACCUM-APPREC-OR-DEPREC> (4,250,551)
<NET-ASSETS> 111,480,879
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12,287,430
<OTHER-INCOME> 0
<EXPENSES-NET> 2,377,351
<NET-INVESTMENT-INCOME> 9,910,079
<REALIZED-GAINS-CURRENT> (5,810,926)
<APPREC-INCREASE-CURRENT> (1,902,026)
<NET-CHANGE-FROM-OPS> 2,197,127
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,303,157
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 1,249,943
<NUMBER-OF-SHARES-SOLD> 1,599,938
<NUMBER-OF-SHARES-REDEEMED> 6,322,319
<SHARES-REINVESTED> 681,528
<NET-CHANGE-IN-ASSETS> (42,522,729)
<ACCUMULATED-NII-PRIOR> 2,207,284
<ACCUMULATED-GAINS-PRIOR> (21,070,468)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 774,309
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,377,351
<AVERAGE-NET-ASSETS> 112,643,978
<PER-SHARE-NAV-BEGIN> 9.11
<PER-SHARE-NII> 0.70
<PER-SHARE-GAIN-APPREC> (0.53)
<PER-SHARE-DIVIDEND> 0.56
<PER-SHARE-DISTRIBUTIONS> 0.12
<RETURNS-OF-CAPITAL> 0.14
<PER-SHARE-NAV-END> 8.46
<EXPENSE-RATIO> 1.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
FREEDOM INVESTMENT TRUST II
MASTER TRUST AGREEMENT
AS AMENDED AND RESTATED
September 10, 1991
c 1991 Goodwin, Procter & Hoar
All Rights Reserved
<PAGE>
FREEDOM INVESTMENT TRUST II
AMENDED AND RESTATED
MASTER TRUST AGREEMENT
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. NAME AND DEFINITIONS 1
Section 1.1 Name and Principal Office 1
Section 1.2 Definitions 2
(a) "By Laws" 2
(b) "Commission" 2
(c) "Declaration of Trust" 2
(d) "1940 Act" 2
(e) "Shareholder" 2
(f) "Shares" 2
(g) "Sub-Trust" or "Series" 2
(h) "Class" 2
(i) "Trust" 2
(j) "Trustees" 2
ARTICLE II. PURPOSE OF TRUST 2
ARTICLE III. THE TRUSTEES 3
Section 3.1 Number, Designation, Election, Term, etc. 3
(a) Trustees 3
(b) Number 3
(c) Election and Term 3
(d) Resignation and Retirement 3
(e) Removal 3
(f) Vacancies 4
(g) Effect of Death, Resignation, etc. 4
(h) No Accounting 4
Section 3.2 Powers of Trustees 4
(a) Investments 5
(b) Disposition of Assets 6
(c) Ownership Powers 6
(d) Subscription 6
(e) Form of Holding 6
(f) Reorganization, etc. 6
(g) Voting Trusts, etc. 6
(h) Compromise 6
(i) Partnerships, etc. 7
(j) Borrowing and Security 7
(k) Guarantees, etc. 7
(l) Insurance 7
(m) Pensions, etc. 7
Section 3.3 Certain Contracts 8
(a) Advisory 8
(b) Administration 8
(c) Distribution 8
(d) Custodian and Depository 8
(e) Transfer and Dividend Disbursing Agency 8
(f) Shareholder Servicing 9
(g) Accounting 9
Section 3.4 Payment of Trust Expenses and Compensation of Trustees 10
Section 3.5 Ownership of Assets of the Trust 10
ARTICLE IV. SHARES 10
Section 4.1 Description of Shares 10
Section 4.2 Establishment and Designation of Sub-Trusts 12
(a) Assets Belonging to Sub-Trusts 13
(b) Liabilities Belonging to Sub-Trusts 13
(c) Dividends 14
(d) Liquidation 15
(e) Voting 15
(f) Redemption by Shareholder 15
(g) Redemption by Trust 16
(h) Net Asset Value 16
(i) Transfer 17
(j) Equality 17
(k) Fractions 17
(l) Conversion Rights 18
Section 4.3 Ownership of Shares 18
Section 4.4 Investments in the Trust 18
Section 4.5 No Pre-emptive Rights 18
Section 4.6 Status of Shares and Limitation of Personal Liability 18
ARTICLE V. SHAREHOLDERS' VOTING POWER AND MEETINGS 19
- ---------- ---------------------------------------
Section 5.1 Voting Powers 19
Section 5.2 Meetings 20
Section 5.3 Record Dates 20
Section 5.4 Quorum and Required Vote 21
Section 5.5 Action by Written Consent 21
Section 5.6 Inspection of Records 21
Section 5.7 Additional Provisions 21
Section 5.8 Shareholder Communications 21
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION 22
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice 22
Section 6.2 Trustee's Good Faith Action; Expert Advise; No Bond or Surety 23
Section 6.3 Indemnification of Shareholders 23
Section 6.4 Indemnification of Trustees, Officers, etc. 24
Section 6.5 Compromise Payment 25
Section 6.6 Indemnification Not Exclusive, etc. 25
Section 6.7 Liability of Third Persons Dealing with Trustees 25
ARTICLE VII. MISCELLANEOUS 26
Section 7.1 Duration and Termination of Trust 26
Section 7.2 Reorganization 26
Section 7.3 Amendments 27
Section 7.4 Filing of Copies; References; Headings 28
Section 7.5 Applicable Law 28
</TABLE>
<PAGE>
FREEDOM INVESTMENT TRUST II
AMENDED AND RESTATED
MASTER TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts on the 31st day
of March, 1986 (the "Original Master Trust Agreement"), by the Trustees
hereunder, and by the holders of shares of beneficial interest to be issued
hereunder as hereinafter provided, is amended and restated in its entirety this
10th day of September, 1991 in Boston, Massachusetts as follows.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an investment
company; and
WHEREAS this Trust is authorized to issue its shares of beneficial interest in
separate series, each separate series to be a Sub-Trust hereunder, and to issue
classes of Shares of any Sub-Trust or divide Shares of any Sub-Trust into two or
more classes, all in accordance with the provision hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property coming into their hands
as trustees of a Massachusetts business trust in accordance with the provisions
hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the benefit of the holders from time to time
of shares of beneficial interest in this Trust or Sub-Trusts (as hereinafter
defined) created hereunder as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name and Principal Office. This Trust shall be known as "Freedom
Investment Trust II" and the Trustees shall conduct the business of the Trust
under that name or any other name or names as they may from time to time
determine. The principal office of the Trust shall be located at One Beacon
Street, Boston, Massachusetts 02108 or at such other location as the Trustees
may from time to time determine.
Section 1.2 Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time;
(b) "Commission" shall have the meaning given it in the 1940 Act;
(c) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time;
(d) "1940 Act" refers to the Investment Company Act of 1940 and the Rules
and Regulations thereunder, all as amended from time to time;
(e) "Shareholder" means a record owner of Shares;
(f) "Shares" refers to the transferable units of interest into with the
beneficial interest in the Trust and each Sub-Trust of the Trust and/or
any class of any Sub-Trust (as the context may require) shall be divided
from time to time;
(g) "Sub-Trust" or "Series" refers to a series of Shares established and
designated under or in accordance with the provisions of Article IV;
(h) "Class" refers to any class of Shares of any Series or Sub-Trust
established and designated under or in accordance with the provisions of
Article IV;
(i) "Trust" refers to the Massachusetts business trust established by this
Declaration of Trust, as amended from time to time, inclusive of each
and every Sub-Trust established hereunder; and
(j) "Trustees" refers to the Trustees of the Trust and of each Sub-Trust
hereunder named herein or elected in accordance with Article III.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company and to offer
Shareholders of the Trust and each Sub-Trust of the Trust one or more investment
programs primarily in securities and debt instruments.
ARTICLE III
THE TRUSTEES
Section 3.1 Number, Designation, Election, Term, etc.
(a) Trustees. The Trustees hereof and of each Sub-Trust hereunder shall be
William A. Barron, III, Thomas J. Brown, Douglas M. Costle, Hugh A.
Dunlap, Jr., Leland O. Erdahl, Richard A. Farrell, Patrick Grant, Ralph
Lowell, Jr., John A. Moore and John W. Pratt.
(b) Number. The Trustees serving as such, whether named above or hereafter
becoming Trustees, may increase or decrease (to not less than two) the
number of Trustees to a number other than the number theretofore
determined. No decrease in the number of Trustees shall have the effect
of removing any Trustee from office prior to the expiration of his term,
but the number of Trustees may be decreased in conjunction with the
removal of a Trustee pursuant to subsection (e) of this Section 3.1.
(c) Election and Term. The Trustees shall be elected by the Shareholders of
the Trust at the first meeting of the Shareholders following the initial
public offering of shares of the Trust. Each Trustee, whether named
above or hereafter becoming a Trustee, shall serve as a Trustee of the
Trust and of each Sub-Trust hereunder during the lifetime of this Trust
and until its termination as hereinafter provided except as such Trustee
sooner dies, resigns or is removed. Subject to Section 16(a) of the 1940
Act, the Trustees may elect their own successors and may, pursuant to
Section 3.1(f) hereof, appoint Trustees to fill vacancies.
(d) Resignation and Retirement. Any Trustee may resign his trust or retire
as a Trustee, by written instrument signed by him and delivered to the
other Trustees or to any officer of the Trust, and such resignation or
retirement shall take effect upon such delivery or upon such later date
as is specified in such instrument and shall be effective as to the
Trust and each Sub-Trust hereunder.
(e) Removal. Any Trustee may be removed with or without cause at any time:
(i) by written instrument, signed by at least two-thirds of the number
of Trustees in office immediately prior to such removal, specifying the
date upon which such removal shall become effective; or (ii) by vote of
Shareholders holding not less than two-thirds of the Shares then
outstanding, cast in person or by proxy at any meeting called for the
purpose; or (iii) by a written declaration signed by Shareholders
holding not less than two-thirds of the Shares then outstanding and
filed with the Trust's custodian. Any such removal shall be effective as
to the Trust and each Sub-Trust hereunder.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from any reason,
including without limitation the death, resignation, retirement, removal
or incapacity of any of the Trustees, or resulting from an increase in
the number of Trustees by the other Trustees may (but so long as there
are at least two remaining Trustees, need not unless required by the
1940 Act) be filled by a majority of the remaining Trustees, subject to
the provisions of Section 16(a) of the 1940 Act, through the appointment
in writing of such other person as such remaining Trustees in their
discretion shall determine and such appointment shall be effective upon
the written acceptance of the person named therein to serve as a Trustee
and agreement by such person to be bound by the provisions of this
Declaration of Trust, except that any such appointment in anticipation
of a vacancy to occur by reason of retirement, resignation or increase
in number of Trustees to be effective at a later date shall become
effective only at or after the effective date of said retirement,
resignation or increase in number of Trustees. As soon as any Trustee so
appointed shall have accepted such appointment and shall have agreed in
writing to be bound by this Declaration of Trust and the appointment is
effective, the Trust estate shall vest in the new Trustee, together with
the continuing Trustees, without any further act or conveyance.
(g) Effect of Death, Resignation, etc. The death, resignation, retirement,
removal or incapacity of the Trustees, or any one of them, shall not
operate to annul or terminate the Trust or any Sub-Trust hereunder or to
revoke or terminate any existing agency or contract created or entered
into pursuant to the terms of this Declaration of Trust.
(h) No Accounting. Except to the extent required by the 1940 Act or under
circumstances which would justify his removal for cause, no person
ceasing to be a Trustee as a result of his death, resignation,
retirement, removal or incapacity (nor the estate of any such person)
shall be required to make an accounting to the Shareholders or remaining
Trustees upon such cessation.
Section 3.2 Powers of Trustees. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or convenient to carry out that responsibility
and the purpose of the Trust. Without limiting the foregoing, the Trustees may
adopt By-Laws not inconsistent with this Declaration of Trust providing for the
conduct of the business and affairs of the Trust and may amend and repeal them
to the extent that such By-Laws do not reserve that right to the Shareholders;
they may from time to time in accordance with the provisions of Section 4.1
hereof establish Sub-Trusts, each such Sub-Trust to operate as a separate and
distinct investment medium and with separately defined investment objectives and
policies and distinct investment purposes and they may from time to time in
accordance with the provisions of Section 4.1 hereof establish classes of Shares
of any Series or Sub-Trust or divide the Shares of any Series or Sub-Trust into
classes; they may as they consider appropriate elect and remove officers and
appoint and terminate agents and consultants and hire and terminate employees,
any one or more of the foregoing of whom may be a Trustee, any may provide for
the compensation of all of the foregoing; they may appoint from their own
number, and terminate, any one or more committees consisting of two or more
Trustees, including without implied limitation an executive committee, which
may, when the Trustees are not in session and subject to the 1940 Act, exercise
some or all of the power and authority of the Trustees as the Trustees may
determine; in accordance with Section 3.3 they may employ one or more advisers,
administrators, depositories and custodians and may authorize any depository or
custodian to employ subcustodians or agents and to deposit all or any part of
such assets in a system or systems for the central handling of securities and
debt instruments, retain transfer, dividend, accounting or Shareholder servicing
agents or any of the foregoing, provide for the distribution of Shares by the
Trust through one or more distributors, principal underwriters or otherwise, and
set record dates or times for the determination of Shareholders or various of
them with respect to various matters; they may compensate or provide for the
compensation of the Trustees, officers, advisers, administrators, custodians,
other agents, consultants and employees of the Trust or the Trustees on such
terms as they deem appropriate; and in general they may delegate to any officer
of the Trust, to any committee of the Trustees and to any employee, adviser,
administrator, distributor, depository, custodian, transfer and dividend
disbursing agent, or any other agent or consultant of the Trust such authority,
powers, functions and duties as they consider desirable or appropriate for the
conduct of the business and affairs of the Trust, including without implied
limitation the power and authority to act in the name of the Trust and any
Sub-Trust and of the Trustees, to sign documents and to act as attorney-in-fact
for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with the 1940
Act or other applicable law, the Trustees shall have power and authority for and
on behalf of the Trust and each separate Sub-Trust established hereunder:
(a) Investments. To invest and reinvest cash and other property, and to hold
cash or other property uninvested without in any event being bound or
limited by any present or future law or custom in regard to investments
by trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the
Trust;
(c) Ownership Powers. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments
or property; and to execute and deliver proxies or powers of attorney to
such person or persons as the Trustees shall deem proper, granting to
such person or persons such power and discretion with relation to
securities, debt instruments or property as the Trustees shall deem
proper;
(d) Subscription. To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities or debt
instruments;
(e) Form of Holding. To hold any security, debt instrument or property in a
form not indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust or of
any Sub-Trust or in the name of a custodian, subcustodian or other
depository or a nominee or nominees or otherwise;
(f) Reorganization, etc. To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer,
any security or debt instrument of which is or was held in the Trust; to
consent to any contract, lease, mortgage, purchase or sale of property
by such corporation or issuer, and to pay calls or subscriptions with
respect to any security or debt instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any securities or debt
instruments in acting through a committee, depository, voting trustee or
otherwise, and in that connection to deposit any security or debt
instrument with, or transfer any security or debt instrument to, any
such committee, depository or trustee, and to delegate to them such
power and authority with relation to any security or debt instrument
(whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses
and compensation of such committee, depository or trustee as the
Trustees shall deem proper;
(h) Compromise. To compromise, arbitrate or otherwise adjust claims in favor
of or against the Trust or any Sub-Trust or any matter in controversy,
including but not limited to claims for taxes;
(i) Partnerships, etc. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) Borrowing and Security. To borrow funds and to mortgage and pledge the
assets of the Trust or any part thereof to secure obligations arising in
connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust property or any part thereof to secure any
of or all such obligations;
(1) Insurance. To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies insuring
the assets of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, consultants,
investment advisers, managers, administrators, distributors, principal
underwriters, or independent contractors, or any thereof (or any person
connected therewith), of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person in any such
capacity, including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would have the power
to indemnify such person against such liability; and
(m) Pensions, etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift
and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits,
for any or all of the Trustees, officers, employees and agents of the
Trust.
Except as otherwise provided by the 1940 Act or other applicable law, this
Declaration of Trust or the By-Laws, any action to be taken by the Trustees on
behalf of or with respect to the Trust or any Sub-Trust or class thereof may be
taken by a majority of the Trustees present at a meeting of Trustees (a quorum,
consisting of at least one-half of the Trustees then in office, being present),
within or without Massachusetts, including any meeting held by means of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence in person at a meeting, or
by written consents of a majority of the Trustees then in office (or such larger
or different number as may be required by the 1940 Act or other applicable law).
Section 3.3 Certain Contracts. Subject to compliance with the provisions of the
1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time and without limiting the generality of
their powers and authority otherwise set forth herein, enter into one or more
contracts with any one or more corporations, trusts, associations, partnerships,
limited partnerships, other type of organizations, or individuals (a
"Contracting Party"), to provide for the performance and assumption of some or
all of the following services, duties and responsibilities to, for or on behalf
of the Trust and/or any Sub-Trust, and/or the Trustees, and to provide for the
performance and assumption of such other services, duties and responsibilities
in addition to those set forth below as the Trustees may determine appropriate:
(a) Advisory. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Sub-Trust of
the Trust (as that phrase is defined in subsection (a) of Section 4.2),
to manage such investments and assets, make investment decisions with
respect thereto, and to place purchase and sale orders for portfolio
transactions relating to such investments and assets;
(b) Administration. Subject to the general supervision of the Trustees and
in conformity with any policies of the Trustees with respect to the
operations of the Trust and each Sub-Trust, to supervise all or any part
of the operations of the Trust and each Sub-Trust, and to provide all or
any part of the administrative and clerical personnel, office space and
office equipment and services appropriate for the efficient
administration and operations of the Trust and each Sub-Trust;
(c) Distribution. To distribute the Shares of the Trust and each Sub-Trust
(including any classes thereof), to be principal underwriter of such
Shares, and/or to act as agent of the Trust and each Sub-Trust in the
sale of Shares and the acceptance or rejection of orders for the
purchase of Shares;
(d) Custodian and Depository. To act as depository for and to maintain
custody of the property of the Trust and each Sub-Trust and accounting
records in connection therewith;
(e) Transfer and Dividend Disbursing Agency. To maintain records of the
ownership of outstanding Shares, the issuance and redemption and the
transfer thereof, and to disburse any dividends declared by the Trustees
and in accordance with policies of the Trustees and/or the instructions
of any particular Shareholder to reinvest any such dividends;
(f) Shareholder Servicing. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) Accounting. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties,
Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into sub-contractual arrangements relating to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting party, or of or for any parent or affiliate of any
Contracting Party or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust or
any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for the rendering of
any similar services to one or more other corporations, trusts,
associations, partnerships, limited partnerships or other organizations,
or have other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust or any
Sub-Trust and/or the Trustees or disqualify any Shareholder, Trustee or officer
of the Trust from voting upon or executing the same or create any liability or
accountability to the Trust, any Sub-Trust or its Shareholders, provided that in
the case of any relationship or interest referred to in the preceding clause (i)
on the part of any Trustee or officer of the Trust either (x) the material facts
as to such relationship or interest have been disclosed to or are known by the
Trustees not having any such relationship or interest and the contract involved
is approved in good faith by a majority of such Trustees not having any such
relationship or interest (even though such unrelated or disinterested Trustees
are less than a quorum of all of the Trustees), (y) the material facts as to
such relationship or interest and as to the contract have been disclosed to or
are known by the Shareholders entitled to vote thereon and the contract involved
is specifically approved in good faith by vote of the Shareholders, or (z) the
specific contract involved is fair to the Trust as of the time it is authorized,
approved or ratified by the Trustees or by the Shareholders.
Section 3.4 Payment of Trust Expenses and Compensation of Trustees. The Trustees
are authorized to pay or to cause to be paid out of the principal or income of
the Trust or any Sub-Trust, or partly out of principal and partly out of income,
and to charge or allocate the same to, between or among such one or more of the
Sub-Trusts and/or one or more classes of Shares thereof that may be established
and designated pursuant to Article IV, as the Trustees deem fair, all expenses,
fees, charges, taxes and liabilities incurred or arising in connection with the
Trust or any Sub-Trust and/or any class of Shares thereof, or in connection with
the management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the Trust's
officers, employees, investment adviser, administrator, distributor, principal
underwriter, auditor, counsel, depository, custodian, transfer agent, dividend
disbursing agent, accounting agent, Shareholder servicing agent, and such other
agents, consultants, and independent contractors and such other expenses and
charges as the Trustees may deem necessary or proper to incur. Without limiting
the generality of any other provision hereof, the Trustees shall be entitled to
reasonable compensation from the Trust for their services as Trustees and may
fix the amount of such compensation.
Section 3.5 Ownership of Assets of the Trust. Title to all of the assets of the
Trust and of each Sub-Trust shall at all times be considered as vested in the
Trustees.
ARTICLE IV
SHARES
Section 4.1 Description of Shares. The beneficial interest in the Trust shall be
divided into Shares, all without par value and of one class, but the Trustees
shall have the authority from time to time to issue Shares in one or more Series
of Shares (each of which Series of Shares shall represent the beneficial
interest in a separate and distinct Sub-Trust of the Trust, including without
limitation each Sub-Trust specifically established and designated in Section
4.2), as they deem necessary or desirable. For all purposes under this
Declaration of Trust, including, without implied limitation, (i) with respect to
the rights of creditors and (ii) for purposes of interpreting the relative
rights of each Sub-Trust and the Shareholders of each Sub-Trust, each Sub-Trust
established hereunder shall be deemed to be a separate trust under Massachusetts
General Laws Chapter 182. The Trustees shall have exclusive power without the
requirement of Shareholder approval to establish and designate such separate and
distinct Sub-Trusts, and to fix and determine the relative rights and
preferences as between the shares of the separate Sub-Trusts as to right of
redemption and the price, terms and manner of redemption, special and relative
rights as to dividends and other distributions and on liquidation, sinking or
purchase fund provisions, conversion rights, and conditions under which the
several Sub-Trusts shall have separate voting rights or no voting rights.
In addition, the Trustees may issue classes of Shares of any Sub-Trust or divide
the Shares of any Sub-Trust into classes, having such different dividend,
liquidation, voting and other rights as the Trustees may determine, and may
establish or designate the specific classes of Shares of each Sub-Trust. The
fact that a Sub-Trust shall have initially been established and designated
without any specific establishment or designation of classes (i.e., that all
Shares of such Sub-Trust are initially of a single class) or that a Sub-Trust
shall have more than one established and designated class, shall not limit the
authority of the Trustees to establish and designate separate classes, or one or
more further classes, of said Sub-Trust without approval of the holders of the
initial class thereof, or previously established and designated class or classes
thereof, if the establishment and designation of such further separate classes
would not adversely affect the rights of the holders of the initial or
previously established and designated class or classes (within the meaning of
section 77 of the Massachusetts Business Corporation Law).
The number of authorized Shares and the number of Shares of each Sub-Trust or
class thereof that may be issued is unlimited, and the Trustees may issue Shares
of any Sub-Trust or class thereof for such consideration and on such terms as
they may determine (or for no consideration if pursuant to a Share dividend or
split-up), all without action or approval of the Shareholders. All Shares when
so issued on the terms determined by the Trustees shall be fully paid and
non-assessable (but may be subject to mandatory contribution back to the Trust
as provided in subsection (h) of Section 4.2). The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any Sub-Trust or class thereof into one or more Sub-Trusts or classes thereof
that may be established and designated from time to time. The Trustees may hold
as treasury Shares, reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Shares of any
Sub-Trust reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish record
dates and times for the purposes of determining the holders of Shares entitled
to be treated as such, to the extent provided or referred to in Section 5.3.
The establishment and designation of any Sub-Trust or of any class of Shares of
any Sub-Trust in addition to those established and designated in Section 4.2
shall be effective (i) upon the execution by a majority of the then Trustees of
an instrument setting forth such establishment and designation of the relative
rights and preferences of the Shares of such Sub-Trust or class, (ii) upon the
execution of an instrument in writing by an officer of the Trust pursuant to the
vote of a majority of the Trustees, or (iii) as otherwise provided in either
such instrument. At any time that there are no Shares outstanding of any
particular Sub-Trust or class previously established and designated the Trustees
may by an instrument executed by a majority of their number abolish that
Sub-Trust and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment to this
Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization in which
any such person is interested may acquire, own, hold and dispose of Shares of
any Sub-Trust (including any classes thereof) of the Trust to the same extent as
if such person were not a Trustee, officer or other agent of the Trust; and the
Trust may issue and sell or cause to be issued and sold and may purchase Shares
of any Sub-Trust (including any classes thereof) from any such person or any
such organization subject only to the general limitations, restrictions or other
provisions applicable to the sale or purchase of Shares of such Sub-Trust
(including any classes thereof) generally.
Section 4.2 Establishment and Designation of Sub-Trusts. Without limiting the
authority of the Trustees set forth in Section 4.1 to establish and designate
any further Sub-Trusts, the Trustees hereby establish and designate three
Sub-Trusts: Freedom Global Fund, Freedom Global Income Fund and Freedom
Short-Term World Income Fund. The Shares of such Sub-Trusts and any Shares of
any further Sub-Trust that may from time to time be established and designated
by the Trustees shall (unless the Trustees otherwise determine with respect to
some further Sub-Trust at the time of establishing and designating the same)
have the following relative rights and preferences:
(a) Assets Belonging to Sub-Trusts. All consideration received by the Trust
for the issue or sale of Shares of a particular Sub-Trust or any classes
thereof, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in trust for the benefit of the holders of Shares
of that Sub-Trust or class thereof and shall irrevocably belong to that
Sub-Trust (and be allocable to any classes thereof) for all purposes,
and shall be so recorded upon the books of account of the Trust. Such
consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds, in whatever form the same may be, together with any
General Items (as hereinafter defined) allocated to that Sub-Trust as
provided in the following sentence, are herein referred to as "assets
belonging to" that Sub-Trust (and be allocable to any classes thereof).
In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable
as belonging to any particular Sub-Trust (collectively "General Items"),
the Trustees shall allocate such General Items to and among any one or
more of the Sub-Trusts established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem
fair and equitable; and any General Items so allocated to a particular
Sub-Trust shall belong to that Sub-Trust (and be allocable to any
classes thereof). Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Sub-Trusts
(including any classes thereof) for all purposes.
(b) Liabilities Belonging to Sub-Trusts. The assets belonging to each
particular Sub-Trust shall be charged with the liabilities in respect of
that Sub-Trust and all expenses, costs, charges and reserves belonging
to that Sub-Trust, and any general liabilities, expenses, costs, charges
or reserves of the Trust which are not readily identifiable as belonging
to any particular Sub-Trust shall be allocated and charged by the
Trustees to and among any one or more of the Sub-Trusts established and
designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. In addition,
the liabilities in respect of a particular class of Shares of a
particular Sub-Trust and all expenses, costs, charges and reserves
belonging to that class of Shares, and any general liabilities,
expenses, costs, charges or reserves of that particular Sub-Trust which
are not readily identifiable as belonging to any particular class of
Shares of that Sub-Trust shall be allocated and charged by the Trustees
to and among any one or more of the classes of Shares of that Sub-Trust
established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable.
The liabilities, expenses, costs, charges and reserves allocated and so
charged to a Sub-Trust or class thereof are herein referred to as
"liabilities belonging to" that Sub-Trust or class thereof. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all
Sub-Trusts (including any classes thereof) for all purposes. Any
creditor of any Sub-Trust may look only to the assets of that Sub-Trust
to satisfy such creditor's debt.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income
and which items as capital; and each such determination and allocation
shall be conclusive and binding upon the Shareholders.
(c) Dividends. Dividends and distributions on Shares of a particular
Sub-Trust or any class thereof may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise pursuant to a
standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine, to the holders of Shares of
that Sub-Trust or class, from such of the income and capital gains,
accrued or realized, from the assets belonging to that Sub-Trust, or in
the case of a class, belonging to that Sub-Trust and allocable to that
class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Sub-Trust or class. All dividends
and distributions on Shares of a particular Sub-Trust or class thereof
shall be distributed pro rata to the holders of Shares of that Sub-Trust
or class in proportion to the number of Shares of that Sub-Trust or
class held by such holders at the date and time of record established
for the payment of such dividends or distributions, except that in
connection with any dividend or distribution program or procedure the
Trustees may determine that no dividend or distribution shall be payable
on Shares as to which the Shareholder's purchase order and/or payment
have not been received by the time or times established by the Trustees
under such program or procedure. Such dividends and distributions may be
made in cash or Shares of that Sub-Trust or class or a combination
thereof as determined by the Trustees or pursuant to any program that
the Trustees may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or distribution
to that Shareholder. Any such dividend or distribution paid in Shares
will be paid at the net asset value thereof as determined in accordance
with subsection (h) of Section 4.2.
(d) Liquidation. In the event of the liquidation or dissolution of the
Trust, the holders of Shares of each Sub-Trust or any class thereof that
has been established and designated shall be entitled to receive, when
and as declared by the Trustees, the excess of the assets belonging to
that Sub-Trust, or in the case of a class, belonging to that Sub-Trust,
and allocable to that class, over the liabilities belonging to that
Sub-Trust or class. The assets so distributable to the holders of Shares
of any particular Sub-Trust or class thereof shall be distributed among
such holders in proportion to the number of Shares of that Sub-Trust or
class thereof held by them and recorded on the books of the Trust. The
liquidation of any particular Sub-Trust or class thereof may be
authorized at any time by vote of a majority of the Trustees then in
office subject to the approval of a majority of the outstanding voting
Shares of that Sub-Trust, as defined in the 1940 Act.
(e) Voting. On each matter submitted to a vote of the Shareholders, each
holder of a Share shall be entitled to one vote for each whole Share and
to a proportionate fractional vote for each fractional Share standing in
his name on the books of the Trust. All Shares of each Sub-Trust shall
vote as a separate class, except as to voting for Trustees and as
otherwise required by the 1940 Act, and except as set forth in the
provisions of the writing establishing and designating any class of any
Sub-Trust, and except that on any matter which does not affect the
interest of a particular Sub-Trust or class thereof, only the holders of
Shares of the one or more affected Sub-Trusts or classes shall be
entitled to vote.
(f) Redemption by Shareholder. Each holder of Shares of a particular
Sub-Trust or any class thereof shall have the right at such times as may
be permitted by the Trust, but no less frequently than once each week,
to require the Trust to redeem all or any part of his Shares of that
Sub-Trust or class thereof at a redemption price equal to the net asset
value per Share of that Sub-Trust or class thereof next determined in
accordance with subsection (h) of this Section 4.2 after the Shares are
properly tendered for redemption, subject to any contingent deferred
sales charge in effect at the time of redemption. Payment of the
redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or
undesirable, the Trust may, subject to the requirements of the 1940 Act,
make payment wholly or partly in securities or other assets belonging to
the Sub-Trust or which the Shares being redeemed are part at the value
of such securities or assets used in such determination of net asset
value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of
any Sub-Trust or class thereof to require the Trust to redeem Shares of
that Sub-Trust during any period or at any time when and to the extent
permissible under the 1940 Act.
(g) Redemption by Trust. Each Share of each Sub-Trust or class thereof that
has been established and designated is subject to redemption by the
Trust at the redemption price which would be applicable if such Share
was then being redeemed by the Shareholder pursuant to subsection (f) of
this Section 4.2: (a) at any time, if the Trustees determine in their
sole discretion that failure to so redeem may have materially adverse
consequences to the holders of the Shares of the Trust or any Sub-Trust
thereof or class thereof, or (b) upon such other conditions as may from
time to time be determined by the Trustees and set forth in the then
current Prospectus of the Trust with respect to maintenance of
Shareholder accounts of a minimum amount. Upon such redemption the
holders of the Shares so redeemed shall have no further right with
respect thereto other than to receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of any Sub-Trust shall be
(i) in the case of a Sub-Trust whose Shares are not divided into
classes, the quotient obtained by dividing the value of the net assets
of that Sub-Trust (being the value of the assets belonging to that
Sub-Trust less the liabilities belonging to that Sub-Trust) by the total
number of Shares of that Sub-Trust outstanding, and (ii) in the case of
a class of Shares of a Sub-Trust whose Shares are divided into classes,
the quotient obtained by dividing the value of the net assets of that
Sub-Trust allocable to such class (being the value of the assets
belonging to that Sub-Trust allocable to such class less the liabilities
belonging to such class) by the total number of Shares of such class
outstanding; all determined in accordance with the methods and
procedures, including without limitation those with respect to rounding,
established by the Trustees from time to time.
The Trustees may determine to maintain the net asset value per Share of
any Sub-Trust at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for
the continuing declarations of income attributable to that Sub-Trust as
dividends payable in additional Shares of that Sub-Trust at the
designated constant dollar amount and for the handling of any losses
attributable to that Sub-Trust. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed to have contributed
to the capital of the Trust attributable to that Sub-Trust his pro rata
portion of the total number of Shares required to be cancelled in order
to permit the net asset value per Share of that Sub-Trust to be
maintained, after reflecting such loss, at the designated constant
dollar amount. Each Shareholder of the Trust shall be deemed to have
agreed, by his investment in any Sub-Trust with respect to which the
Trustees shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such loss.
(i) Transfer. All Shares of each particular Sub-Trust or class thereof shall
be transferable, but transfers of Shares of a particular Sub-Trust or
class thereof will be recorded on the Share transfer records of the
Trust applicable to that Sub-Trust or class only at such times as
Shareholders shall have the right to require the Trust to redeem Shares
of that Sub-Trust or class and at such other times as may be permitted
by the Trustees.
(j) Equality. Except as provided herein or in the instrument designating and
establishing any class of any Shares or any Sub-Trust, all Shares of
each particular Sub-Trust or class thereof shall represent an equal
proportionate interest in the assets belonging to that Sub-Trust, or in
the case of a class, belonging to that Sub-Trust and allocable to that
class, subject to the liabilities belonging to that Sub-Trust or class,
and each Share of any particular Sub-Trust or class shall be equal to
each other Share of that Sub-Trust or class; but the provisions of this
sentence shall not restrict any distinctions permissible under
subsection (c) of this Section 4.2 that may exist with respect to
dividends and distributions on Shares of the same Sub-Trust or class.
The Trustees may from time to time divide or combine the Shares of any
particular Sub-Trust or class into a greater or lesser number of Shares
of that Sub-Trust or class without thereby changing the proportionate
beneficial interest in the assets belonging to that Sub-Trust or class
or in any way affecting the rights of Shares of any other Sub-Trust or
class.
(k) Fractions. Any fractional Share of any Sub-Trust or class, if any such
fractional Share is outstanding, shall carry proportionately all the
rights and obligations of a whole Share of that Sub-Trust or class,
including rights and obligations with respect to voting, receipt of
dividends and distributions, redemption of Shares, and liquidation of
the Trust.
(l) Conversion Rights. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that holders
of Shares of any Sub-Trust or class thereof shall have the right to
convert said Shares into Shares of one or more other Sub-Trust or class
thereof in accordance with such requirements and procedures as may be
established by the Trustees.
Section 4.3 Ownership of Shares. The ownership of Shares shall be recorded on
the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Sub-Trust and each
class thereof that has been established and designated. No certificates
certifying the ownership of Shares need be issued except as the Trustees may
otherwise determine from time to time. The Trustees may make such rules as they
consider appropriate for the issuance of Share certificates, the use of
facsimile signatures, the transfer of Shares and similar matters. The record
books of the Trust as kept by the Trust or any transfer or similar agent, as the
case may be, shall be conclusive as to who are the Shareholders and as to the
number of Shares of each Sub-Trust and class thereof held from time to time by
each such Shareholder.
Section 4.4 Investments in the Trust. The Trustees may accept investments in the
Trust and each Sub-Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any distributor,
principal underwriter, custodian, transfer agent or other person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any purchase orders for Shares whether or not conforming to such
authorized terms.
Section 4.5 No Pre-emptive Rights. Shareholders shall have no pre-emptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
Section 4.6 Status of Shares and Limitation of Personal Liability. Shares shall
be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the Trust or any Sub-Trust thereof nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
only to the rights of said decedent under this Trust. Ownership of Shares shall
not entitle the Shareholder to any title in or to the whole or any part of the
Trust Property or right to call for a partition or division of the same or for
an accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind personally any Shareholder, nor except
as specifically provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder,
may at any time personally agree to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 Voting Powers. The Shareholders shall have power to vote only (i)
for the election or removal of Trustees as provided in Section 3.1, (ii) with
respect to any contract with a Contracting Party as provided in Section 3.3 as
to which Shareholder approval is as required by the 1940 Act, (iii) with respect
to any termination or reorganization of the Trust or any Sub-Trust to the extent
and as provided in Sections 7.1 and 7.2, (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Section 7.3, (v) to
the same extent as the stockholders of a Massachusetts business corporation as
to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or any Sub-Trust thereof or the Shareholders (provided, however, that a
Shareholder of a particular Sub-Trust shall not be entitled to a derivative or
class action on behalf of any other Sub-Trust (or Shareholder of any other
Sub-Trust) of the Trust) and (vi) with respect to such additional matters
relating to the Trust as may be required by the 1940 Act, this Declaration of
Trust, the By-Laws or any registration of the Trust with the Commission (or any
successor agency) or any state, or as the Trustees may consider necessary or
desirable. There shall be no cumulative voting in the election of Trustees.
Shares may be voted in person or by proxy. A proxy with respect to Shares held
in the name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration of Trust or the By-Laws to be taken by Shareholders.
Section 5.2 Meetings. No annual or regular meeting of Shareholders is required.
Special meetings of Shareholders may be called by the Trustees from time to time
for the purpose of taking action upon any matter requiring the vote or authority
of the Shareholders as herein provided or upon any other matter deemed by the
Trustees to be necessary or desirable. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at least seven days before such meeting, postage prepaid, stating
the time, place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust. The Trustees
shall promptly call and give notice of a meeting of Shareholders for the purpose
of voting upon removal of any Trustee of the Trust when requested to do so in
writing by Shareholders holding not less than 10% of the Shares then
outstanding. If the Trustees shall fail to call or give notice of any meeting of
Shareholders for a period of 30 days after written application by Shareholders
holding at least 10% of the Shares then outstanding requesting a meeting be
called for any other purpose requiring action by the Shareholders as provided
herein or in the By-Laws, then Shareholders holding at least 10% of the Shares
then outstanding may call and give notice of such meeting, and thereupon the
meeting shall be held in the manner provided for herein in case of call thereof
by the Trustees.
Section 5.3 Record Dates. For the purpose of determining the Shareholders who
are entitled to vote or act at any meeting or any adjournment thereof, or who
are entitled to participate in any dividend or distribution, or for the purpose
of any other action, the Trustees may from time to time close the transfer books
for such period, not exceeding 30 days (except at or in connection with the
termination of the Trust), as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date and time not more than 60 days prior
to the date of any meeting of Shareholders or other action as the date and time
of record for the determination of Shareholders entitled to vote at such meeting
or any adjournment thereof or to be treated as Shareholders of record for
purposes of such other action, and any Shareholder who was a Shareholder at the
date and time so fixed shall be entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record for purposes of
such other action, even though he has since that date and time disposed of his
Shares, and no Shareholder becoming such after that date and time shall be so
entitled to vote at such meeting or any adjournment thereof or to be treated as
a Shareholder of record for purposes of such other action.
Section 5.4 Quorum and Required Vote. A majority of the Shares entitled to vote
shall be a quorum for the transaction of business at a Shareholders' meeting,
but any lesser number shall be sufficient for adjournments. Any adjourned
session or sessions may be held, within a reasonable time after the date set for
the original meeting without the necessity of further notice. A majority of the
Shares voted, at a meeting of which a quorum is present shall decide any
questions and a plurality shall elect a Trustee, except when a different vote is
required or permitted by any provision of the 1940 Act or other applicable law
or by this Declaration of Trust or the By-Laws.
Section 5.5 Action by Written Consent. Subject to the provisions of the 1940 Act
and other applicable law, any action taken by Shareholders may be taken without
a meeting if a majority of Shareholders entitled to vote on the matter (or such
larger proportion thereof as shall be required by the 1940 Act or by any express
provision of this Declaration of Trust or the By-Laws) consent to the action in
writing and such written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote taken at
a meeting of Shareholders.
Section 5.6 Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted stockholders of a
Massachusetts business corporation under the Massachusetts Business Corporation
Law.
Section 5.7 Additional Provisions. The By-Laws may include further provisions
for Shareholders' votes and meetings and related matters not inconsistent with
the provisions hereof.
Section 5.8 Shareholder Communications. Whenever ten or more Shareholders of
record who have been such for at least six months preceding the date of
application, and who hold in the aggregate either Shares having a net asset
value of at least $25,000 or at least 1% of the outstanding Shares, whichever is
less, shall apply to the Trustees in writing, stating that they wish to
communicate with other Shareholders with a view to obtaining signatures to a
request for a Shareholder meeting and accompanied by a form of communication and
request which they wish to transmit, the Trustees shall within five business
days after receipt of such application either (1) afford to such applicants
access to a list of the names and addresses of all Shareholders as recorded on
the books of the Trust or Sub-Trust, as applicable; or (2) inform such
applicants as to the approximate number of Shareholders of record, and the
approximate cost of mailing to them the proposed communication and form of
request.
If the Trustees elect to follow the course specified in clause (2) above, the
Trustees, upon the written request of such applicants, accompanied by a tender
of the material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all Shareholders of record at
their addresses as recorded on the books, unless within five business days after
such tender the Trustees shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Trustees to the effect that in
their opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion. The Trustees shall thereafter comply with any order entered by
the Commission and the requirements of the 1940 Act and the Securities Exchange
Act of 1934.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Sub-Trust with which such person
dealt for payment under such credit, contract or claim; and neither the
Shareholders of any Sub-Trust nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, nor any other Sub-Trust
shall be personally liable therefor. Every note, bond, contract, instrument,
certificate or undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust, any Sub-Trust or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have been executed
or done only by or for the Trust (or the Sub-Trust) or the Trustees and not
personally. Nothing in this Declaration of Trust shall protect any Trustee or
officer against any liability to the Trust or the Shareholders to which such
Trustee or officer would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee or of such officer.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite to the effect that the same was executed or made
by or on behalf of the Trust or by them as Trustees or Trustee or as officers or
officer and not individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are binding only
upon the assets and property of the Trust, or the particular Sub-Trust in
question, as the case may be, but the omission thereof shall not operate to bind
any Trustees or Trustee or officers or officer or Shareholders or Shareholder
individually.
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety. The
exercise by the Trustees of their powers and discretion hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. Subject
to the foregoing, (a) the Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, consultant,
adviser, administrator, distributor or principal underwriter, custodian or
transfer, dividend disbursing, Shareholder servicing or accounting agent of the
Trust, nor shall any Trustee be responsible for the act or omission of any other
Trustee; (b) the Trustees may take advice of counsel or other experts, with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (c) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of the contract involved)
any officer, partner or responsible employee of a Contracting Party appointed by
the Trustees pursuant to Section 3.3. The Trustees as such shall not be required
to give any bond or surety or any other security for the performance of their
duties.
Section 6.3 Indemnification of Shareholders. In case any Shareholder (or former
Shareholder) of any Sub-Trust of the Trust shall be charged or held to be
personally liable for any obligation or liability of the Trust solely by reason
of being or having been a Shareholder and not because of such Shareholder's acts
or omissions or for some other reason, said Sub-Trust (upon proper and timely
request by the Shareholder) shall assume the defense against such charge and
satisfy any judgment thereon, and the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or in the case
of a corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets of said Sub-Trust estate to be held harmless
from and indemnified against all loss and expense arising from such liability.
Section 6.4 Indemnification of Trustees, Officers, etc. The Trust shall
indemnify (from the assets of the Sub-Trust or Sub-Trusts in question) each of
its Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise [hereinafter referred to as
"Covered Person"]) against all liabilities, including but limited to amounts
paid in satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants and counsel fees, incurred by any
Covered Person 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. Expenses, including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be paid
from time to time by the Sub-Trust in question in advance of the final
disposition of any such action, suit or proceeding, provided that the Covered
Person shall have undertaken to repay the amounts so paid to the Sub-Trust in
question if it is ultimately determined that indemnification of such expenses is
not authorized under this Article VI and (i) the Covered Person shall have
provided security for such undertaking, (ii) the Trust shall be insured against
losses arising by reason of any lawful advances, or (iii) a majority of a quorum
of the disinterested Trustees who are not a party to the proceeding, or an
independent legal counsel in a written opinion, shall have determined, based on
a review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person ultimately will be found
entitled to indemnification.
Section 6.5 Compromise Payment. As to any matter disposed of by a compromise
payment by any such Covered Person referred to in Section 6.4, pursuant to a
consent decree or otherwise, no such indemnification either for said payment or
for any other expenses shall be provided unless such indemnification shall be
approved (a) by a majority of the disinterested Trustees who are not parties to
the proceeding or (b) by an independent legal counsel in a written opinion.
Approval by the Trustees pursuant to clause (a) or by independent legal counsel
pursuant to clause (b) shall not prevent the recovery from any Covered Person of
any amount paid to such Covered Person in accordance with any of such clauses as
indemnification if such Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted 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 to have been liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
Section 6.6 Indemnification Not Exclusive, etc. The right of indemnification
provided by this Article VI shall not be exclusive of or affect any other rights
to which any such Covered Person may be entitled. As used in this Article VI,
"Covered Person" shall include such person's heirs, executors and
administrators, an "interested Covered Person" is one against whom the action,
suit or other proceeding in question or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened, and a
"disinterested" person is a person against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending or threatened. Nothing contained in
this Article shall affect any rights to indemnification to which personnel of
the Trust, other than Trustees and officers, and other persons may be entitled
by contract or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
Section 6.7 Liability of Third Persons Dealing with Trustees. No person dealing
with the Trustees shall be bound to make any inquiry concerning the validity of
any transaction made or to be made by the Trustees or to see to the application
of any payments made or property transferred to the Trust or upon its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Duration and Termination of Trust. Unless terminated as provided
herein, the Trust shall continue without limitation of time and, without
limiting the generality of the foregoing, no change, alteration or modification
with respect to any Sub-Trust shall operate to terminate the Trust. The Trust or
any Sub-Trust may be terminated at any time by a majority of the Trustees then
in office subject to a favorable vote of a majority of the outstanding voting
securities, as defined in the 1940 Act, Shares of each Sub-Trust voting
separately by Sub-Trust.
Upon termination, after paying or otherwise providing for all charges, taxes,
expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
Section 7.2 Reorganization. The Trustees may sell, convey, merge and transfer
the assets of the Trust, or the assets belonging to any one or more Sub-Trusts,
to another trust, partnership, association or corporation organized under the
laws of any state of the United States, or to the Trust to be held as assets
belonging to another Sub-Trust of the Trust, in exchange for cash, shares or
other securities (including, in the case of a transfer to another Sub-Trust of
the Trust, Shares of such other Sub-Trust or any class thereof) with such
transfer either (1) being made subject to, or with the assumption by the
transferee of, the liabilities belonging to each Sub-Trust the assets of which
are so transferred, or (2) not being made subject to, or not with the assumption
of, such liabilities; provided, however, that no assets belonging to any
particular Sub-Trust shall be so transferred unless the terms of such transfer
shall have first been approved at a meeting called for the purpose by the
affirmative vote of the holders of a majority of the outstanding voting Shares,
as defined in the 1940 Act, of that Sub-Trust. Following such transfer, the
Trustees shall distribute such cash, shares or other securities (giving due
effect to the assets and liabilities belonging to and any other differences
among the various Sub-Trusts or classes thereof the assets belonging to which
have so been transferred) among the Shareholders of the Sub-Trust (taking into
account the differences among the classes of Shares thereof, if any) the assets
belonging to which have been so transferred; and if all of the assets of the
Trust have been so transferred, the Trust shall be terminated.
The Trust, or any one or more Sub-Trusts, may, either as the successor,
survivor, or non-survivor, (1) consolidate with one or more other trusts,
partnerships, associations or corporations organized under the laws of the
Commonwealth of Massachusetts or any other state of the United States, to form a
new consolidated trust, partnership, association or corporation under the laws
of which any one of the constituent entities is organized, or (2) merge into one
or more other trusts, partnerships, associations or corporations organized under
the laws of the Commonwealth of Massachusetts or any other state of the United
States, or have one or more such trusts, partnerships, associations or
corporations merged into it, any such consolidation or merger to be upon such
terms and conditions as are specified in an agreement and plan of reorganization
entered into by the Trust, or one or more Sub-Trusts as the case may be, in
connection therewith. The terms "merge" or "merger" as used herein shall also
include the purchase or acquisition of any assets of any other trust,
partnership, association or corporation which is an investment company organized
under the laws of the Commonwealth of Massachusetts or any other state of the
United States. Any such consolidation or merger shall require the affirmative
vote of the holders of a majority of the outstanding voting Shares, as defined
in the 1940 Act, of each Sub-Trust affected thereby.
Section 7.3 Amendments. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time, so long as such
amendment does not adversely affect the rights of any Shareholder with respect
to which such amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including the 1940 Act, by
an instrument in writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to the vote of a majority of such Trustees). Any
amendment to this Declaration of Trust that adversely affects the rights of
Shareholders may be adopted at any time by an instrument in writing signed by a
majority of the then Trustees (or by an officer of the Trust pursuant to a vote
of a majority of such Trustees) when authorized to do so by the vote in
accordance with subsection (e) of Section 4.2 of Shareholders holding a majority
of the Shares entitled to vote. Subject to the foregoing, any such amendment
shall be effective as provided in the instrument containing the terms of such
amendment or, if there is no provision therein with respect to effectiveness,
upon the execution of such instrument and of a certificate (which may be a part
of such instrument) executed by a Trustee or officer of the Trust to the effect
that such amendment has been duly adopted.
Section 7.4 Filing of Copies; References; Headings. The original or a copy of
this instrument and of each amendment hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this instrument
and of each amendment hereto shall be filed by the Trust with the Secretary of
The Commonwealth of Massachusetts and with the Boston City Clerk, as well as any
other governmental office where such filing may from time to time be required,
but the failure to make any such filing shall not impair the effectiveness of
this instrument or any such amendment. Anyone dealing with the Trust may rely on
a certificate by an officer of the Trust as to whether or not any such
amendments have been made, as to the identities of the Trustees and officers,
and as to any matters in connection with the Trust hereunder; and, with the same
effect as if it were the original, may rely on a copy certified by an officer of
the Trust to be a copy of this instrument or of any such amendments. In this
instrument and in any such amendment, references to this instrument, and all
expressions like "herein", "hereof" and "hereunder" shall be deemed to refer to
this instrument as a whole as the same may be amended or affected by any such
amendments. The masculine gender shall include the feminine and neuter genders.
Headings are placed herein for convenience of reference only and shall not be
taken as a part hereof or control or affect the meaning, construction or effect
of this instrument. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 7.5 Applicable Law. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth,
including the Massachusetts Business Corporation Law as the same may be amended
from time to time, to which reference is made with the intention that matters
not specifically covered herein or as to which an ambiguity may exist shall be
resolved as if the Trust were a business corporation organized in Massachusetts,
but the reference to said Business Corporation Law is not intended to give the
Trust, the Trustees, the Shareholders or any other person any right, power,
authority or responsibility available only to or in connection with an entity
organized in corporate form. The Trust shall be of the type referred to in
Section 1 of Chapter 182 of the Massachusetts General Laws and of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a Trust.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals in
the City of Boston, Massachusetts for themselves and their assigns, as of the
day and year first above written.
\ s \ William A. Barron, III
--------------------------------
\ s \ Thomas J. Brown
--------------------------------
\ s \ Douglas M. Costle
--------------------------------
\ s \ Hugh A. Dunlap, Jr.
--------------------------------
\ s \ Leland O. Erdahl
--------------------------------
\ s \ Richard A. Farrell
--------------------------------
\ s \ Patrick Grant
--------------------------------
\ s \ Ralph Lowell, Jr.
--------------------------------
\ s \ John A. Moore
--------------------------------
\ s \ John W. Pratt
--------------------------------
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss.
Then personally appeared the within-named William A. Barron, III, RR1, 325 Sea
Meadows Lane, Yarmouth, ME 04096, Thomas J. Brown, 13 Beaver Dam Drive,
Westford, MA 01886, Douglas M. Costle, RR2, Box 480, Woodstock, VT 05091, John
A. Moore, 1530 "O" Street, N.W., Washington, D.C. 20005, Hugh A. Dunlap, Jr., 29
Lowell Road, Brookline, MA 02146, Leland O. Erdahl, 7690 West 70th Drive,
Arvada, CO 80004, Richard A. Farrell, 50 Beacon Street, Marblehead, MA 01945,
Patrick Grant, 5 Haven Street, Dedham, MA 02026, Ralph Lowell, Jr., 45 Mill
Street, Edgartown, MA 02539, and John W. Pratt, 2 Gray Gardens East, Cambridge,
MA 02138 who acknowledged the foregoing instrument to be their free act and
deed, before me, this 10th day of September, 1991.
\ s \ John J. Danello
---------------------------
Notary Public
My commission expires: 12/5/91
DP-1925/T
<PAGE>
FREEDOM INVESTMENT TRUST II
AMENDMENT TO MASTER TRUST AGREEMENT
Amendment to the Master Trust Agreement dated March 31, 1986, as
amended and restated, made at Boston, Massachusetts, as of this 13th day of
December, 1993.
W I T N E S S E T H:
WHEREAS, Section 7.3 of the Master Trust Agreement dated March 31,
1986, as amended and restated (the "Agreement") of Freedom Investment Trust II
(the "Trust") provides that the Agreement may be amended; and
WHEREAS, Section 4.1 of Agreement of the Trust provides that the
Trustees of the Trust may establish and designate additional Sub-Trusts by an
instrument in writing, signed by a majority of the Trustees of the Trust.
NOW, THEREFORE, the Trustees hereby state:
1. That Section 4.2 of the Agreement and all other appropriate
references in the Agreement are amended to designate and establish a new series
of shares (in addition to the "John Hancock Freedom Global Fund" series, the
"John Hancock Freedom Global Income Fund" series, the "John Hancock Short-Term
Strategic Income Fund" series and the "John Hancock Special Opportunities Fund"
series heretofore established and designated) to be known as the "John Hancock
Freedom International Fund" series effective as of this date, such new series to
have the relative rights and preferences set forth in Subsections (a) through
(1) of Section 4.2 of the Agreement.
<PAGE>
Accordingly, the initial paragraph of Section 4.2 of the Agreement as
heretofore in effect is hereby amended to read as follows:
Section 4.2 Establishment and Designation of Sub-Trusts.
Without limiting the authority of the Trustees set forth in Section 4.1
to establish and designate any further Sub-Trusts, the Trustees hereby
establish and designate five Sub-Trusts: John Hancock Freedom Global
Fund, John Hancock Freedom Global Income Fund, John Hancock Short-Term
Strategic Income Fund, John Hancock Special Opportunities Fund and John
Hancock Freedom International Fund. The Shares of such Sub-Trusts and
any Shares of any further Sub-Trusts that may from time to time be
established and designated by the Trustees shall (unless the Trustees
otherwise determine with respect to some further Sub-Trust at the time
of establishing and designating the same) have the following relative
rights and preferences:
The undersigned, being a majority of the Trustees of the Trust, hereby
certify that the amendment set forth above has been duly adopted in accordance
with the provisions of the Master Trust Agreement of the Trust.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals for themselves and their assigns, as of this 13th day of December, 1993.
/S/William A. Barron, III /S/Edward J. Boudreau, Jr.
- -------------------------- --------------------------
William A. Barron, III Edward J. Boudreau, Jr.
/S/Douglas M. Costle /S/Hugh A. Dunlap, Jr.
- ------------------------- --------------------------
Douglas M. Costle Hugh A. Dunlap, Jr.
/S/Leland O. Erdahl /S/Richard A. Farrell
- ------------------------ --------------------------
Leland O. Erdahl Richard A. Farrell
/S/William F. Glavin /S/Patrick Grant
- ----------------------- --------------------------
William F. Glavin Patrick Grant
/S/Ralph Lowell, Jr. /S/John A. Moore
- ----------------------- --------------------------
Ralph Lowell, Jr. John A. Moore
/S/Patti McGill Peterson /S/John W. Pratt
- ------------------------ --------------------------
Patti McGill Peterson John W. Pratt
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
SS:
COUNTY OF SUFFOLK:
Then personally appeared the above-named William A. Barron, III,
Edward J. Boudreau, Jr., Douglas M. Costle, Hugh A. Dunlap, Jr., Leland O.
Erdahl, Richard A. Farrell, William F. Glavin, Patrick Grant, Ralph Lowell, Jr.,
John A. Moore, Patti McGill Peterson and John W. Pratt who each acknowledged the
foregoing instrument to be his or her free act and deed, before me, this 13th
day of December, 1993.
/S/Ann Marie Kalapinski
---------------------------
Notary Public
My commission expires: 10/20/00
<PAGE>
FREEDOM INVESTMENT TRUST II
AMENDMENT NO. 1 TO MASTER AGREEMENT
AS AMENDED AND RESTATED
Amendment No. 1 to the Master Trust Agreement dated March 31, 1986, as
amended and restated as of September 10, 1991, made at Boston, Massachusetts, as
of this 25th day of June, 1992.
W I T N E S S E T H:
WHEREAS, Section 7.3 of the Master Trust Agreement date March 31, 1986,
as amended and restated as of September 10, 1991 (the "Agreement") of Freedom
Investment Trust II (the "Trust") provides that the Agreement maybe amended at
any time, so long as such amendment does not adversely affect the rights of any
shareholder.
NOW, THEREFORE, the Trustees hereby state:
1. That Section 4.2 of the Agreement and all other appropriate
references in the Agreement are amended, effective October 1, 1992, to change
the names of the established and designated Sub-Trusts as follows:
Freedom Global Fund
to John Hancock Freedom Global Fund
Freedom Global Income Fund
to John Hancock Freedom Global Income Fund
Freedom Short-Term World Income Fund
to John Hancock Freedom Short-Term World Income Fund
Furthermore, that the initial paragraph of Section 4.2 of the Agreement
as heretofore in effect is amended, effective October 1, 1992, to read as
follows:
"Section 4.2 Establishment and Declaration of Sub-Trusts.
Without limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby establish
and designate three Sub-Trusts: John Hancock Freedom Global Fund, John Hancock
Freedom Global Income Fund and John Hancock Freedom Short-Term World Income
Fund. The Shares of such Sub-Trusts and any Shares of any further Sub-trusts
that may from time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with respect to establishing and
designating the same) have the following relative rights and preferences:"
2. That Section 1.1 of the Agreement and all other appropriate references in the
Agreement are amended, effective July 1, 1992, to change the address of the
Trust as follows:
One Beacon Street
Boston, Massachusetts 02108
to 101 Huntington Avenue
Boston, Massachusetts 02199
Furthermore, that Section 1.1 of the Agreement as heretofore in effect
is amended, effective July 1, 1992, to read as follows:
"Section 1.1 Name and Principal Office. This trust shall be
known as "Freedom Investment Trust II" and the trustees shall conduct the
business of the Trust under that name or any other name or names as they may fro
time to time determine. The principal office of the Trust shall be located at
101 Huntington Avenue, Boston, Massachusetts 02199 or at such other location as
the Trustees may from time to time determine."
The undersigned, being a majority of the trustees of the Trust, hereby
certify that the amendment set forth above has duly adopted in accordance with
the provisions of the Master Trust Agreement of the Trust.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals for themselves and their assigns, as of this 25th day of June, 1992.
/s/ Hugh A. Dunlap, Jr. /s/ Douglas M. Costile
Hugh A. Dunlap, Jr. Douglas M. Costile
/s/ Edward J. Boudreau, Jr. /s/ William A. Barron, III
Edward J. Boudreau, Jr. William A. Barron, III
/s/ Richard A. Farrell /s/ Ralph Lowell, Jr.
Richard A. Farrell Ralph Lowell, Jr.
/s/ Leland O. Erdahl /s/ Patrick Grant
Leland O. Erdahl Patrick Grant
/s/ John A. Moore /s/ John W. Pratt
John A. Moore John W. Pratt
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK
Then personally appeared the above-named Hugh A. Dunlap, Jr., Edward
J. Boudreau, Jr., Douglas Costile, John A. Moore, John W. Pratt, Patrick Grant,
Richard A. Farrell, Leland O. Erdahl, William A. Barron, III and Ralph Lowell,
Jr. and acknowledged this instrument to be his free act and deed as of this 25th
day of June, 1992.
/s/ (illegible)
Notary Public
My Commission expires: 1-24-97
<PAGE>
FREEDOM INVESTMENT TRUST II
AMENDMENT NO. 2 TO MASTER TRUST AGREEMENT
Amendment No. 2 to the Master Trust Agreement dated March 31, 1986, as amended
and restated as of September 10, 1991, made at Boston, Massachusetts, as of this
7th day of September, 1993.
W I T N E S S E T H:
WHEREAS, Section 7.3 of the Master Trust Agreement dated March 31,
1986, as amended and restated as of September 10, 1991 (the "Agreement") of
Freedom Investment Trust II (the "Trust") provides that the Agreement may be
amended; and
WHEREAS, Section 4.1 of Agreement of the Trust provides that the
Trustees of the Trust may establish and designate additional Sub-Trusts by an
instrument in writing, signed by a majority of the Trustees of the Trust.
NOW, THEREFORE, the Trustees hereby state:
1. That Section 4.2 of the Agreement and all other appropriate
references in the Agreement are amended to designate and establish a new series
of shares (in addition to the "John Hancock Freedom Global Fund" series, the
"John Hancock Freedom Global Income Fund" series and the "John Hancock Freedom
Short-Term World Income Fund" heretofore established and designated) to be known
as the "John Hancock Tactical Equities Fund" series effective as of this date,
such new series to have the relative rights and preferences set forth in
Subsections (a) through (1) of Section 4.2 of the Agreement.
Accordingly, the initial paragraph of Section 4.2 of the Agreement as
heretofore in effect is hereby amended to read as follows:
Section 4.2 Establishment and Designation of Sub-Trusts. Without
limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby
establish and designate four Sub-Trusts: John Hancock Freedom Global
Fund, John Hancock Freedom Global Income Fund, John Hancock Freedom
Short-Term World Income Fund and John Hancock Tactical Equities Fund.
The Shares of such Sub-Trusts and any Shares of any further Sub-Trusts
that may from time to time be established and designated by the
Trustees shall (unless the Trustees otherwise determine with respect to
some further Sub-Trust at the time of establishing and designating the
same) have the following relative rights and preferences:
2. That Section 7.2 of the Agreement regarding the shareholder vote
necessary to effect a reorganization is amended, inter alia, to delete the
requirement for approval of a reorganization by the shareholders of a fund
acquiring the assets of another fund, thereby only requiring approval by the
shareholders of the fund which is not surviving or whose assets are being
acquired.
Accordingly, that Section 7.2 of the Agreement is hereby amended to
read in its entirety as follows, such amendment to become effective with respect
to the John Hancock Tactical Equities Fund and all funds or series created
subsequent to the creation of the John Hancock Tactical Equities Fund upon the
execution hereof, and with respect to the John Hancock Freedom Global Fund, John
Hancock Freedom Global Income Fund and John Hancock Freedom Short-Term Word
Income Fund upon shareholder approval of such amendment as provided in the
Agreement:
Section 7.2 Reorganization. The Trustees may sell, convey, merge and
transfer the assets of the Trust, or the assets belonging to any one or
more Sub-Trusts, to another Trust, partnership, association or
corporation organized under the laws of any state of the United States,
or to the Trust to be held as assets belonging to another Sub-Trust of
the Trust, in exchange for cash, shares or other securities (including,
in the case of a transfer to another Sub-Trust of the Trust, Shares of
such other Sub-trust or any class thereof) with such transfer either
(1) being made subject to, or with the assumption by the transferee of,
the liabilities belonging to each Sub-Trust the assets of which are so
transferred, or (2) not being made subject to, or not with the
assumption of, such liabilities; provided, however, that no assets
belonging to any particular Sub-Trust shall be so transferred unless
the terms of such transfer shall have first been approved at a meeting
called for the purpose by the affirmative vote of the holders of a
majority of the outstanding voting Shares, as defined in the 1940 Act,
of that Sub-Trust. Following such transfer, the Trustees shall
distribute such cash, shares or other securities among the Shareholders
of the Sub-Trust (taking into account the differences among the classes
of Shares thereof, if any) the assets belonging to which have been so
transferred; and if all of the assets of the Trust have been so
transferred, the Trust shall be terminated.
The Trust, or any one or more Sub-Trusts, may, either as the successor,
survivor, or non-survivor, (1) consolidate with one or more other trusts,
partnerships, associations or corporations organized under the laws of the
Commonwealth of Massachusetts or any other state of the United States, to form a
new consolidated trust, partnership, association or corporation under the laws
of which any one of the constituent entities is organized, or (2) merge into or
transfer all or a substantial portion of its assets to one or more other trusts,
partnerships, associations or corporations organized under the laws of the
Commonwealth of Massachusetts or any other state of the United States, or have
one or more such trusts, partnerships, associations or corporations merged into
or transfer all or a substantial portion of its assets to it, any such
consolidation, merger or transfer to be upon such terms and conditions as are
specified in an agreement and plan of reorganization entered into by the Trust,
or one or more Sub-Trusts as the case may be, in connection therewith. Any such
consolidation, merger or transfer shall require the affirmative vote of the
holders of a majority of the outstanding voting Shares, as defined in the 1940
Act, of the Trust (or each Sub-Trust affected thereby, as the case may be),
except that such affirmative vote of the holders of Shares shall not be required
if the Trust (or Sub-Trust affected thereby, as the case may be) shall be the
survivor of such consolidation or merger or the transferee of such assets.
The undersigned, being a majority of the Trustees of the Trust, hereby
certify that the amendment set forth above has been duly adopted in accordance
with the provisions of the Master Trust Agreement of the Trust.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seal for themselves and their assigns, as of this 7th day of September, 1993.
/s/ William A. Barron, III /s/ Edward J. Boudreau, Jr.
William A. Barron, III Edward J. Boudreau, Jr.
/s/ Douglas M. Costle /s/ Hugh A. Dunlap, Jr.
Douglas M. Costle Hugh A. Dunlap, Jr.
/s/ Leland O. Erdahl /s/ Richard A. Farrell
Leland O. Erdahl Richard A. Farrell
/s/ Patrick Grant
William F. Glavin Patrick Grant
/s/ Ralph Lowell, Jr. /s/ John A. Moore
Ralph Lowell, Jr. John A. Moore
/s/ Patti McGill Peterson /s/ John W. Pratt
Patti McGill Peterson John W. Pratt
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
SS:
COUNTY OF SUFFOLK:
Then personally appeared the above-named William A. Barron, III,
Edward J. Boudreau, Jr., Douglas M. Costle, Hugh A. Dunlap, Jr., Leland O.
Erdahl, Richard A. Farrell, Patrick Grant, Ralph Lowell, Jr., John A. Moore,
Patti McGill Peterson and John W. Pratt who each acknowledged the foregoing
instrument to be his or her free act and deed, before me, this 7th day of
September 1993.
/s/ Regina M. Pisa
Notary Public
My commission expires: 1-24-97
<PAGE>
FREEDOM INVESTMENT TRUST II
Instrument Changing Name of Series of Shares of the Trust
The Trustees of Freedom Investment Trust II (the "Trust"), hereby amend
the Trust's Amended and Restated Master Trust Agreement, dated March 31, 1986 as
amended and restated September 10, 1991, to the extent necessary to reflect the
change of name of the John Hancock Freedom Short-Term World Income Fund to John
Hancock Short-Term Strategic Income Fund, effective November 1, 1993.
IN WITNESS WHEREOF, the Trustees of the Trust have executed this
Instrument on the 3rd day of August, 1993.
/s/William A. Barron III /s/William F. Glavin
William A. Barron III William F. Glavin
/s/Edward J. Boudreau, Jr. /s/Patrick Grant
Edward J. Boudreau, Jr. Patrick Grant
/s/Douglas M. Costle /s/Ralph Lowell, Jr.
Douglas M. Costle Ralph Lowell, Jr.
/s/Hugh A. Dunlap, Jr. /s/John A. Moore
Hugh A. Dunlap, Jr. John A. Moore
/s/Leland O. Erdahl /s/Patti McGill Peterson
Leland O. Erdahl Patti McGill Peterson
/s/Richard A. Farrell /s/John W. Pratt
Richard A. Farrell John W. Pratt
<PAGE>
FREEDOM INVESTMENT TRUST II
Instrument Changing Names of Series of Shares of the Trust
The Trustees of Freedom Investment Trust II (the "Trust"), hereby amend
the Trust's Master Trust Agreement, dated March 31, 1986 as amended and restated
September 10, 1991, to the extent necessary to reflect the change of the name of
the John Hancock Freedom Global Fund to John Hancock Global Fund, John Hancock
Freedom Global Income Fund to John Hancock Global Income Fund, and John Hancock
Freedom International Fund to John Hancock International Fund, effective January
2, 1995.
IN WITNESS WHEREOF, the Trustees of the Trust have executed this
Instrument on the 27th day of September, 1994.
/s/William A. Barron III /s/William F. Glavin
William A. Barron III William F. Glavin
/s/Edward J. Boudreau, Jr. /s/Patrick Grant
Edward J. Boudreau, Jr. Patrick Grant
/s/Douglas M. Costle /s/Ralph Lowell, Jr.
Douglas M. Costle Ralph Lowell, Jr.
/s/Hugh A. Dunlap, Jr. /s/John A. Moore
Hugh A. Dunlap, Jr. John A. Moore
/s/Leland O. Erdahl /s/Patti McGill Peterson
Leland O. Erdahl Patti McGill Peterson
/s/Richard A. Farrell /s/John W. Pratt
Richard A. Farrell John W. Pratt
<PAGE>
FREEDOM INVESTMENT TRUST II
Instrument Changing Name of Series of Shares of the Trust
The Trustees of Freedom Investment Trust II (the "Trust"), hereby amend
the Trust's Amended and Restated Master Trust Agreement, dated September 10,
1991, as amended from time to time, to the extent necessary to reflect the
change of name of the John Hancock Tactical Equities Fund to John Hancock
Special Opportunities Fund, effective November 1, 1993.
IN WITNESS WHEREOF, the Trustees of the Trust have executed this
Instrument on the 25th day of October, 1993.
/s/William A. Barron III /s/William F. Glavin
William A. Barron III William F. Glavin
/s/Edward J. Bourdreau, Jr. /s/Patrick Grant
Edward J. Boudreau, Jr. Patrick Grant
/s/Douglas M. Costle /s/Ralph Lowell, Jr.
Douglas M. Costle Ralph Lowell, Jr.
/s/Hugh A. Dunlap, Jr. /s/John A. Moore
Hugh A. Dunlap, Jr. John A. Moore
/s/Leland O. Erdahl /s/Patti McGill Peterson
Leland O. Erdahl Patti McGill Peterson
/s/Richard A. Farrell /s/John W. Pratt
Richard A. Farrell John W. Pratt
As amended September 16, 1992
BY-LAWS
OF
FREEDOM INVESTMENT TRUST II
ARTICLE 1
Agreement and Declaration
of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Freedom Investment Trust II, the Massachusetts
business trust established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust
shall be located in Boston, Massachusetts.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the Chairman of the Board of Trustees, the President or the Treasurer or by two
or more Trustees, sufficient notice thereof being given to each Trustee by the
Secretary or an Assistant Secretary or by the officer of the Trustees calling
the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
2.4 Quorum. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 Participation by Telephone. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
Chairman of the Trustees, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, if any, as the Trustees from time to time
may in their discretion elect. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. The Chairman of the
Trustees shall be a Trustee and may but need not be a shareholder; and any other
officer may be but none need be a Trustee or shareholder. Any two or more
offices may be held by the same person.
3.2 Election. The Chairman of the Trustees, the President, the
Treasurer, and the Secretary shall be elected by the Trustees. The meeting at
which the officers are elected shall be known as the annual meeting of Trustees.
Other officers, if any, may be elected or appointed by the Trustees at said
meeting or at any other time. Vacancies in any office may be filled at any time.
3.3 Tenure. The officers of the Trust shall hold office and retain
authority at the pleasure of the Trustees.
3.4 Powers. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 Chairman; President. Unless the Trustees otherwise provide, the
Chairman of the Trustees, or, if there is none, or in the absence of the
Chairman, the President shall preside at all meetings of the shareholders and of
the Trustees. The President shall be the chief executive officer.
3.6 Vice President. The Vice President, or if there be more than one
Vice President, the Vice Presidents in the order determined by the Trustees (or
if there be no such determination, then in the order of their election) shall in
the absence of the President or in the event of his inability or refusal to act,
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Board of Trustees may from time to time prescribe.
3.7 Chief Financial Officer, Treasurer, Associate Treasurer and
Assistant Treasurers. The Chief Financial Officer shall be the principal
financial and accounting officer of the Trust and each Series thereof and shall
have general charge of the finances and books of account of the Trust and each
Series thereof. Except as otherwise provided by the Trustees, he shall have
general supervision of the funds and property of the Trust and of the Custodian
of its duties with respect thereto. The Chief Financial Officer shall render a
statement of condition of the finances of the Trust and each Series thereof to
the Trustees as often as they shall require the same and he shall in general
perform all the duties incident to the office of the Chief Financial Officer and
such other duties as from time to time may be assigned to him by the Trustees.
The Treasurer or any Associate or Assistant Treasurer may perform
such duties of the Chief Financial Officer as the Chief Financial Officer or the
Trustees may assign. In the absence of the Chief Financial Officer, the
Treasurer may perform all duties of the Chief Financial Officer. In the absence
of the Chief Financial Officer and the Treasurer, any Associate or Assistant
Treasurer may perform all duties of the Chief Financial Officer.
3.8 Secretary. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.9 Assistant Secretary The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Trustees (or
if there be no determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Trustees may from
time to time prescribe.
3.10 Subordinate Officers. The Trustees from time to time may appoint
such other subordinate officers or agents as they may deem advisable, each of
whom shall have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine. The Trustees from time to
time may delegate to one or more officers or agents the power to appoint any
such subordinate officers or agents and to prescribe their respective rights,
terms of office, authorities and duties.
3.11 Resignations and Removals. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the Chairman,
the President or the Secretary or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. The Trustees may remove any officer elected by them with or without cause.
Except to the extent expressly provided in a written agreement with the Trust,
no Trustee or officer resigning and no officer removed shall have any right to
any compensation for any period following his or her resignation or removal, or
any right to damages on account of such removal.
ARTICLE 4
Committees
4.1 General. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number an Executive Committee or other committees
and may delegate thereto some or all of their powers except those which by law,
by the Declaration of Trust, or by these By-Laws may not be delegated. Except as
the Trustees may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these By-Laws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its action to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
The Executive Committee of the Trustees may exercise all of the power
and authority of the Trustees between meetings of the Trustees, provided that
no committee shall have the power
a. to change the principal office of the Trust;
b. to amend the By-Laws;
c. to issue shares;
d. to elect or remove from office any Trustee or the Chairman of the
Board, the President, the Treasurer or the Secretary of the Trust;
e. to increase or decrease the number of Trustees;
f. to declare a dividend or other distribution on the shares;
g. to authorize the repurchase of shares;
h. to authorize any merger, consolidation or sale, lease or exchange
of all or substantially all of the Trust property; or
i. to take or authorize the taking of any action that under the
Investment Company Act of 1940 or the rules and regulations
thereunder would require the taking or the authorization of the
taking of such action by the Trustees.
4.2 Other Committees. The Trustees may appoint other committees, each
consisting of one or more persons who need not be Trustees. Each such committee
shall have such powers and perform such duties as may be assigned to it from
time to time by the Trustees, but shall not exercise any power which may
lawfully be exercised only by the Trustees or a committee thereof.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. The fiscal year of the Trust shall be fixed by
resolution of the Trustees.
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a flat-faced die
with the word "Massachusetts", together with the name of the Trust and the year
of its organization cut or engraved thereon, but, unless otherwise required by
the Trustees, the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument or other paper
executed and delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust.
ARTICLE 9
Issuance of Share Certificates
9.1 Share Certificates. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates either in limited cases or to all shareholders. In that event, a
shareholder may receive a certificate stating the number of shares owned by him,
in such form as shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by the President or a Vice President and by the
Treasurer or Assistant Treasurer. Such signatures may be facsimiles if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed or
whose facsimile signature has been placed on such certificate shall cease to be
such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he were such officer at the time of its issue.
9.2 Loss of Certificates. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 Issuance of New Certificate to Pledgee. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificate shall express on its face that it is
held as collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a shareholder, and entitled to vote
thereon.
9.4 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of shares certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 10
Dealings with Trustees and Officers
10.1 General. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which any Trustee,
officer or other agent of the Trust may have an interest.
ARTICLE 11
Amendments to the By-Laws
11.1 General. These By-Laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK INTERNATIONAL FUND
SHARES OF BENEFICIAL INTEREST
CLASS A
fully paid and non-assessable shares (without par value) of John Hancock
International Fund (the "Fund"), a Series of Shares established and designated
under the amended and restated Master Trust Agreement of FREEDOM INVESTMENT
TRUST II, a Massachusetts business trust (the "Trust") dated September 10, 1991
as amended from time to time (the "Trust Agreement"). The Terms of the Trust
Agreement, a copy of which is on file with the Secretary of the Commonwealth of
Massachusetts, are hereby incorporated by reference as fully as if set forth
herein in their entirety. As provided in the Trust Agreement, the beneficial
interest in the Trust has been divided into Shares of such Series as may be
established and designated from time to time, and the Shares evidenced hereby
represent the beneficial interest in an undivided proportionate part of the
assets belonging to the above designated Series subject to the liabilities
belonging to such Series. Such Series and other Series have the relative rights
and preferences set forth in the Trust Agreement, and the Trust will furnish to
the holder of this certificate upon written request and without charge a
statement of such relative rights and preferences. THE SHARES EVIDENCED HEREBY
ARE SUBJECT TO REDEMPTION BY THE TRUST pursuant to the procedures that may be
determined by the Trustees in accordance with the Trust Agreement. This
certificate is issued by the Trustees of FREEDOM INVESTMENT TRUST II not
individually but as Trustees under the Trust Agreement, and represents Shares of
the above designated Series and does not bind any of the Trustees, Shareholders,
Officers, Employees or Agents of the Trust personally, but only the assets and
property of the Trust. Subject to the provisions of the Trust Agreement, the
Shares represented by this certificate are transferable upon the books of the
Trust by the registered holder hereof in person or by his duly authorized
attorney upon surrender of this certificate.
Change date 12/30/94...jjm
Mass Fund
signed by Dunlap, President
fund #40
<PAGE>
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK INTERNATIONAL FUND
SHARES OF BENEFICIAL INTEREST
CLASS B
Change date 12/30/94...jjm
Mass Fund
signed by Dunlap, President
fund #140
<PAGE>
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK INTERNATIONAL FUND
SHARES OF BENEFICIAL INTEREST
CLASS C
Change date 12/30/94...jjm
Mass Fund
signed by Dunlap, President
fund #240
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK GLOBAL FUND
SHARES OF BENEFICIAL INTEREST
CLASS A
fully paid and non-assessable shares (without par value) of John Hancock Global
Fund (the "Fund"), a Series of Shares established and designated under the
amended and restated Master Trust Agreement of FREEDOM INVESTMENT TRUST II, a
Massachusetts business trust (the "Trust") dated September 10, 1991 as amended
from time to time (the "Trust Agreement"). The Terms of the Trust Agreement, a
copy of which is on file with the Secretary of the Commonwealth of
Massachusetts, are hereby incorporated by reference as fully as if set forth
herein in their entirety. As provided in the Trust Agreement, the beneficial
interest in the Trust has been divided into Shares of such Series as may be
established and designated from time to time, and the Shares evidenced hereby
represent the beneficial interest in an undivided proportionate part of the
assets belonging to the above designated Series subject to the liabilities
belonging to such Series. Such Series and other Series have the relative rights
and preferences set forth in the Trust Agreement, and the Trust will furnish to
the holder of this certificate upon written request and without charge a
statement of such relative rights and preferences. THE SHARES EVIDENCED HEREBY
ARE SUBJECT TO REDEMPTION BY THE TRUST pursuant to the procedures that may be
determined by the Trustees in accordance with the Trust Agreement. This
certificate is issued by the Trustees of FREEDOM INVESTMENT TRUST II not
individually but as Trustees under the Trust Agreement, and represents Shares of
the above designated Series and does not bind any of the Trustees, Shareholders,
Officers, Employees or Agents of the Trust personally, but only the assets and
property of the Trust. Subject to the provisions of the Trust Agreement, the
Shares represented by this certificate are transferable upon the books of the
Trust by the registered holder hereof in person or by his duly authorized
attorney upon surrender of this certificate.
Change date 12/30/94...jjm
<PAGE>
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK GLOBAL FUND
SHARES OF BENEFICIAL INTEREST
CLASS B
<PAGE>
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK GLOBAL FUND
SHARES OF BENEFICIAL INTEREST
CLASS C
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK GLOBAL INCOME FUND
SHARES OF BENEFICIAL INTEREST
CLASS A
fully paid and non-assessable shares (without par value) of John Hancock Global
Income Fund (the "Fund"), a Series of Shares established and designated under
the amended and restated Master Trust Agreement of FREEDOM INVESTMENT TRUST II,
a Massachusetts business trust (the "Trust") dated September 10, 1991 as amended
from time to time (the "Trust Agreement"). The Terms of the Trust Agreement, a
copy of which is on file with the Secretary of the Commonwealth of
Massachusetts, are hereby incorporated by reference as fully as if set forth
herein in their entirety. As provided in the Trust Agreement, the beneficial
interest in the Trust has been divided into Shares of such Series as may be
established and designated from time to time, and the Shares evidenced hereby
represent the beneficial interest in an undivided proportionate part of the
assets belonging to the above designated Series subject to the liabilities
belonging to such Series. Such Series and other Series have the relative rights
and preferences set forth in the Trust Agreement, and the Trust will furnish to
the holder of this certificate upon written request and without charge a
statement of such relative rights and preferences. THE SHARES EVIDENCED HEREBY
ARE SUBJECT TO REDEMPTION BY THE TRUST pursuant to the procedures that may be
determined by the Trustees in accordance with the Trust Agreement. This
certificate is issued by the Trustees of FREEDOM INVESTMENT TRUST II not
individually but as Trustees under the Trust Agreement, and represents Shares of
the above designated Series and does not bind any of the Trustees, Shareholders,
Officers, Employees or Agents of the Trust personally, but only the assets and
property of the Trust. Subject to the provisions of the Trust Agreement, the
Shares represented by this certificate are transferable upon the books of the
Trust by the registered holder hereof in person or by his duly authorized
attorney upon surrender of this certificate.
Change date 12/30/94...jjm
<PAGE>
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK GLOBAL INCOME FUND
SHARES OF BENEFICIAL INTEREST
CLASS B
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK SPECIAL OPPORTUNITIES FUND
SHARES OF BENEFICIAL INTEREST
CLASS A
fully paid and non-assessable shares (without par value) of John Hancock Special
Opportunities Fund (the "Fund"), a Series of Shares established and designated
under the Master Trust Agreement of FREEDOM INVESTMENT TRUST II, a Massachusetts
business trust (the "Trust") dated March 31, 1986 as amended from time to time
(the "Trust Agreement"). The Terms of the Trust Agreement, a copy of which is on
file with the Secretary of the Commonwealth of Massachusetts, are hereby
incorporated by reference as fully as if set forth herein in their entirety. As
provided in the Trust Agreement, the beneficial interest in the Trust has been
divided into Shares of such Series as may be established and designated from
time to time, and the Shares evidenced hereby represent the beneficial interest
in an undivided proportionate part of the assets belonging to the above
designated Series subject to the liabilities belonging to such Series. Such
Series and other Series have the relative rights and preferences set forth in
the Trust Agreement, and the Trust will furnish to the holder of this
certificate upon written request and without charge a statement of such relative
rights and preferences. THE SHARES EVIDENCED HEREBY ARE SUBJECT TO REDEMPTION BY
THE TRUST pursuant to the procedures that may be determined by the Trustees in
accordance with the Trust Agreement. This certificate is issued by the Trustees
of FREEDOM INVESTMENT TRUST II not individually but as Trustees under the Trust
Agreement, and represents Shares of the above designated Series and does not
bind any of the Trustees, Shareholders, Officers, Employees or Agents of the
Trust personally, but only the assets and property of the Trust. Subject to the
provisions of the Trust Agreement, the Shares represented by this certificate
are transferable upon the books of the Trust by the registered holder hereof in
person or by his duly authorized attorney upon surrender of this certificate.
version 11/1/93...jjm
Mass fund
signed by Dunlap, President
fund 39
<PAGE>
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK SPECIAL OPPORTUNITIES FUND
SHARES OF BENEFICIAL INTEREST
CLASS B
version 11/1/93...jjm
Mass Fund
signed by Dunlap, President
Fund 139
<PAGE>
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK SPECIAL OPPORTUNITIES FUND
SHARES OF BENEFICIAL INTEREST
CLASS C
version 1/3/94...jjm
Mass Fund
signed by Dunlap, President
Fund 239
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK SHORT-TERM STRATEGIC INCOME FUND
SHARES OF BENEFICIAL INTEREST
CLASS A
fully paid and non-assessable shares (without par value) of John Hancock
Short-Term Strategic Income Fund (the "Fund"), a Series of Shares established
and designated under the Master Trust Agreement of FREEDOM INVESTMENT TRUST II,
a Massachusetts business trust (the "Trust") dated March 31, 1986 as amended
from time to time (the "Trust Agreement"). The Terms of the Trust Agreement, a
copy of which is on file with the Secretary of the Commonwealth of
Massachusetts, are hereby incorporated by reference as fully as if set forth
herein in their entirety. As provided in the Trust Agreement, the beneficial
interest in the Trust has been divided into Shares of such Series as may be
established and designated from time to time, and the Shares evidenced hereby
represent the beneficial interest in an undivided proportionate part of the
assets belonging to the above designated Series subject to the liabilities
belonging to such Series. Such Series and other Series have the relative rights
and preferences set forth in the Trust Agreement, and the Trust will furnish to
the holder of this certificate upon written request and without charge a
statement of such relative rights and preferences. THE SHARES EVIDENCED HEREBY
ARE SUBJECT TO REDEMPTION BY THE TRUST pursuant to the procedures that may be
determined by the Trustees in accordance with the Trust Agreement. This
certificate is issued by the Trustees of FREEDOM INVESTMENT TRUST II not
individually but as Trustees under the Trust Agreement, and represents Shares of
the above designated Series and does not bind any of the Trustees, Shareholders,
Officers, Employees or Agents of the Trust personally, but only the assets and
property of the Trust. Subject to the provisions of the Trust Agreement, the
Shares represented by this certificate are transferable upon the books of the
Trust by the registered holder hereof in person or by his duly authorized
attorney upon surrender of this certificate.
Change date 11/1/93...jjm
Mass Fund
Signed by Dunlap, President
fund 32
<PAGE>
FREEDOM INVESTMENT TRUST II
(A Massachusetts Business Trust)
JOHN HANCOCK SHORT-TERM STRATEGIC INCOME FUND
SHARES OF BENEFICIAL INTEREST
CLASS B
Change Date 11/1/93 jjm
Mass fund
Signed by Dunlap, President
fund 132
FREEDOM INVESTMENT TRUST II
OFFICER'S CERTIFICATE REGARDING
DESIGNATION OF CLASSES
WHEREAS, Section 4.1 of the Master Trust Agreement of Freedom Investment
Trust II (the "Trust") dated March 31, 1986, as subsequently amended and
restated, authorizes the Trustees of the Trust to issue classes of shares of any
Sub-Trust or divide the shares of any Sub-Trust into classes, having different
dividend, liquidation, voting and other rights as the Trustees may determine;
and
WHEREAS, the Trustees unanimously voted on December 13, 1993 to establish
and designate Class C shares of John Hancock Special Opportunities Fund, and
Class A, Class B and Class C shares of John Hancock Freedom International Fund.
NOW, THEREFORE, the undersigned President of the Trust hereby states as
follows:
1. That, pursuant to the vote of the Trustees, a third class of shares,
Class C shares, shall be added to the heretofore authorized, established and
designated Class A and Class B shares of the Sub-Trust, John Hancock Special
Opportunities Fund. The Class C shares shall have the rights and preferences as
set forth in the Prospectus and Statement of Additional Information of such
Sub-Trust describing such shares included in the Trust's Registration Statement
on Form N-1A under the Securities Act of 1933 and/or the Investment Act of 1940,
as amended and as in effect at the time of issuing such shares, and as such
Prospectus and Statement of Additional Information may be further amended from
time to time.
2. That, pursuant to the vote of the Trustees, the Sub-Trust, John Hancock
Freedom International Fund, is authorized to issue and sell three classes of
shares established and designated as Class A, Class B and Class C. Each class of
shares shall have the rights and preferences as set forth in the Prospectuses
and Statements of Additional Information of such Sub-Trust describing such
shares included in the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 and/or the Investment Company Act of 1940, as amended and
as in effect at the time of issuing such shares, and as such Prospectuses and
Statements of Additional Information may be further amended from time to time.
IN WITNESS WHEREOF, the undersigned hereby sets his hand as of this 13th
day of December, 1993.
FREEDOM INVESTMENT TRUST II
/S/Hugh A. Dunlap, Jr.
-------------------------------
By: Hugh A. Dunlap, Jr.
Title: President
FREEDOM INVESTMENT TRUST II
OFFICER'S CERTIFICATE REGARDING
DESIGNATION OF CLASSES
WHEREAS, Section 4.1 of the Master Trust Agreement of Freedom Investment
Trust II (the "Trust") dated March 31, 1986, as subsequently amended and
restated, authorizes the Trustees of the Trust to issue classes of shares of any
Sub-Trust or divide the shares of any Sub-Trust into classes, having different
dividend, liquidation, voting and other rights as the Trustees may determine;
and
WHEREAS, the Trustees unanimously voted on September 7, 1993 to establish
and designate Class A and B shares of John Hancock Special Opportunities Fund.
NOW, THEREFORE, the undersigned President of the Trust hereby states as
follows:
1. That, pursuant to the vote of the Trustees, the Sub-Trust, John Hancock
Special Opportunities Fund, is authorized to issue and sell two classes of
shares established and designated as Class A and Class B. Each class of shares
shall have the rights and preferences as set forth in the Prospectus and
Statement of Additional Information of such Sub-Trust included in the Trust's
Registration Statement on Form N-1A under the Securities Act of 1933 and/or the
Investment Company Act of 1940, as amended and as in effect at the Time of
issuing such shares, and as such Prospectus and Statement of Additional
Information may be further amended from time to time.
IN WITNESS WHEREOF, the undersigned hereby sets his hand as of this 7th
day of September, 1993.
FREEDOM INVESTMENT TRUST II
/S/Hugh A. Dunlap, Jr.
-------------------------------
By: Hugh A. Dunlap, Jr.
Title: President
FREEDOM INVESTMENT TRUST II
OFFICER'S CERTIFICATE REGARDING
DESIGNATION OF CLASSES
WHEREAS, Section 4.1 of the Master Trust Agreement of Freedom Investment
Trust II (the "Trust") dated March 31, 1986, as subsequently amended and
restated, authorizes the Trustees of the Trust to issue classes of shares of any
Sub-Trust or divide the shares of any Sub-Trust into classes, having different
dividend, liquidation, voting and other rights as the Trustees may determine;
and
WHEREAS, the Trustees unanimously voted on December 14, 1992 to establish
and designate Class C shares of John Hancock Freedom Global Fund.
NOW THEREFORE, the undersigned President of the Trust hereby states as
follows:
1. That, pursuant to the vote of the Trustees, a third class of shares,
Class C shares, shall be added to the heretofore authorized, established and
designated Class A and Class B shares of the Sub-Trust, John Hancock Freedom
Global Fund. The Class C shares shall have the rights and preferences as set
forth in the Prospectus and Statement of Additional Information of such
Sub-Trust describing such shares included in the Trust's Registration Statement
on Form N-1A under the Securities Act of 1933 and/or the Investment Company Act
of 1940, as amended and as in effect at the time of issuing such shares, and as
such Prospectus and Statement of Additional Information may be further amended
from time to time.
IN WITNESS WHEREOF, the undersigned hereby sets his hand as of this 14th
day of December, 1992.
FREEDOM INVESTMENT TRUST II
/S/Hugh A. Dunlap, Jr.
-------------------------------
By: Hugh A. Dunlap, Jr.
Title: President
ADVISORY AGREEMENT
ADVISORY AGREEMENT made as of the 26th day of June, 1986, as amended
October 1, 1992 and as amended and restated January 1, 1994, by and between JOHN
HANCOCK ADVISERS, INC. (successor to Tucker Anthony Management Corporation), a
corporation organized under the laws of Delaware having its principal place of
business in Boston, Massachusetts (the "Manager"), and FREEDOM INVESTMENT TRUST
II, a Massachusetts business trust having its principal place of business in
Boston, Massachusetts (the "Trust").
WHEREAS, the trust is engaged in business as an open-end diversified
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment management services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust currently offers shares in five series, John Hancock
Freedom Global Fund, John Hancock Freedom Global Income Fund, John Hancock
Short-Term Strategic Income Fund, John Hancock Special Opportunities Fund, John
Hancock Freedom International Fund (such series being herein collectively
referred to as the "Funds" and individually as a "Fund");"
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the
parties hereto as follows:
1. APPOINTMENT OF MANAGER.
(a) Funds. the Trust hereby appoints the Manager to act as manager and
investment adviser to the Funds for the period and on the terms herein set
forth. The Manager accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided.
(b) Additional Funds. In the event that the Trust establishes one or more
series of shares other than the Funds with respect to which it desires to retain
the Manager to render management and investment advisory services hereunder, it
shall so notify the Manager in writing, indicating the advisory fee to be
payable with respect to the additional series of shares. If the Manager is
willing to render such services, it shall so notify the Trust in writing,
whereupon such series of shares shall become a Fund hereunder.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following services and
facilities to the Trust:
(a) Investment Program. The Manager shall (i) furnish continuously an
investment program for each Fund, (ii) determine (subject to the overall
supervision and review of the Board of Trustees of the Trust) what investments
shall be purchased, held, sold or exchanged by each Fund and what portion, if
any, of the assets of each Fund shall be held uninvested, and (iii) make changes
on behalf on the Trust in the investments of each Fund. The Manager shall also
manage, supervise and conduct the other affairs and business of the Trust and
each Fund thereof and matters incidental thereto, subject always to the control
of the Board of Trustees of the Trust and to the provisions of the Master Trust
Agreement and By-laws of the Trust, as amended, and the 1940 Act.
(b) Regulatory Reports. The Manager shall furnish to the Trust
necessary assistance in:
(i) the preparation of all reports now or hereafter
required by federal or other laws; and
(ii) the preparation of prospectuses, registration statements and
amendments thereto that may be required by federal or other laws or by the
rules or regulations of any duly authorized commission or administrative
body.
(c) Office Space and Facilities. The Manager shall furnish the Trust
office space in the offices of the Manager, or in such other place or places as
may be agreed upon from time to time, and all necessary office facilities,
simple business equipment, supplies, utilities, and telephone service.
(d) Services of Personnel. The Manager shall provide all necessary
executive and administrative personnel for managing the affairs of the Trust,
including personnel to perform clerical, bookkeeping, accounting and other
office functions. These services are exclusive of the bookkeeping and accounting
services of any dividend disbursing agent, transfer agent, registrar or
custodian. The Manager shall compensate all personnel, officers and Trustees of
the Trust if such persons are also employees of the Manager or its affiliates.
(e) Fidelity Bond. The Manager shall arrange for providing and maintaining
a bond issued by a reputable insurance company authorized to do business in the
place where the bond is issued against larceny and embezzlement covering each
officer and employee of the Trust and/or the Manager who may singly or jointly
with others have access to funds or securities of the Trust, with direct or
indirect authority to draw upon such funds or to direct generally the
disposition of such funds. The bond shall be in such reasonable amount as a
majority of the Trustees who are not "interested persons" of the Trust, as
defined in the 1940 Act, shall determine, with due consideration given to the
aggregate assets of the Trust to which any such officer or employee may have
access. The premium for the bond shall be payable by the Trust in accordance
with paragraph 3(p).
3. ALLOCATION OF EXPENSE.
Except for the services and facilities to be provided by the Manager as
set forth in paragraph 2 above, the Trust assumes and shall pay all expenses for
all other Trust operations and activities and shall reimburse the Manager for
any such expenses incurred by the Manager (it being understood that the Trust
shall allocate such expenses between or among its Funds to the extent
contemplated by its Master Trust Agreement). The expenses to be borne by the
Trust shall include, without limitation:
(a) all expenses of organizing the Trust or forming any series
thereof;
(b) all expenses (including information, materials and services other than
services of the Manager) of preparing, printing and mailing all annual,
semiannual and periodic reports, proxy materials and other communications
(including registration statements, prospectuses and amendments and revisions
thereto) furnished to existing shareholders of the Trust and/or regulatory
authorities;
(c) fees involved in registering and maintaining registration of the Trust
and its shares with the Securities and Exchange Commission and state regulatory
authorities;
(d) any other registration, filing or other fees in connection
with requirements of regulatory authorities;
(e) expenses, including the cost of printing of certificates,
relating to issuance of shares of the Trust;
(f) the expenses of maintaining a shareholder account and furnishing, or
causing to be furnished, to each shareholder a statement of his account,
including the expense of mailing;
(g) expenses related to the redemption of its shares, including
expenses attributable to any program of periodic redemption;
(h) all issue and transfer taxes, brokers' commissions and other costs
chargeable to the Trust in connection with securities transactions to which the
Trust is a party, including any portion of such commissions attributable to
research and brokerage services as defined by Section 28(e) of the Securities
Exchange Act of 1934, as amended from time to time;
(i) the charges and expenses of the custodian appointed by the
Trust, or any depository utilized by such custodian, for the
safekeeping of its property;
(j) charges and expenses of any shareholder servicing agents, transfer
agents and registrars appointed by the Trust, including costs of servicing
shareholder investment accounts;
(k) charges and expenses of independent accountants retained by
the Trust;
(l) legal fees and expenses in connection with the affairs of the Trust,
including legal fees and expenses in connection with registering and qualifying
its shares with Federal and state regulatory authorities;
(m) compensation and expenses of Trustees of the Trust who are
not "interested persons" of the Trust (as defined in the 1940 Act);
(n) expenses of shareholders' and Trustees' meetings;
(o) membership dues in, and assessments of, the Investment
Company Institute or similar organizations;
(p) insurance premiums on fidelity, errors and omissions and
other coverages; and
(q) such other non-recurring expenses of the Trust as may arise, including
expenses of actions, suits, or proceedings to which the Trust is a party and the
legal obligation which the Trust may have to indemnify its Trustees or
shareholders with respect thereto.
4. ADVISORY FEE.
For the services and facilities to be provided by the Manager as set forth
in paragraph 2 hereof, the Trust agrees that the each Fund shall pay to the
Manager a monthly fee as soon as practical after the last day of each calendar
month, which fee shall be paid at a rate equal to (i) with respect to John
Hancock Freedom Global Fund one percent (1%) of the first $100 million of
average daily net assets of the Fund, (ii) four-fifths of one percent (.80%) on
the next $200 million of average daily net assets of the Fund, (iii)
three-quarters of one percent (.75%) on the next $200 million of average daily
net assets of the Fund and (iv) five-eighths of one percent (.625%) on the value
of the average daily net assets in excess of that amount. With respect to John
Hancock Freedom Global Income Fund, the Trust shall pay to the Manager such
monthly fee at a rate equal to (i) three-quarters of one percent (.75%) of the
first $250 million of average daily net assets of the Fund and (ii) seven-tenths
of one percent (.70%) on the value of the average daily net assets in excess of
$250 million. With respect to John Hancock Short-Term Strategic Income Fund, the
Trust shall pay to the Manager such monthly fee at a rate equal to (i) thirteen-
twentieths of one percent (.65%) of the first $500 million of the average daily
net assets of the Fund and (ii) three-fifths of one percent (.60%) on the value
of the average daily net assets in excess of $500 million. With respect to John
Hancock Special Opportunities Fund, the Trust shall pay to the Manager such
monthly fee at a rate equal to (i) four-fifths of one percent (.80%) of the
first $500 million of average daily net assets of the Fund, (ii) three-quarters
of one percent (.75%) on the next $500 million of average daily net assets and
(iii) seven-tenths of one percent (.70%) on value of the average daily net
assets in excess of $1 billion. With respect to John Hancock Freedom
International Fund, the Trust shall pay to the Manager such monthly fee at a
rate equal to (i) one percent (1.00%) of the first $250 million of average daily
net assets of the Fund, (ii) eight-tenths of one percent (.80%) on the next $250
of average daily net assets, (iii) three-quarters of one percent (.75%) on the
next $250 million of average daily net assets and (iii) five-eighths of one
percent (.625%) on value of the average daily net assets in excess of $750
million.
In the case of commencement or termination of this Agreement with respect
to any Fund during any calendar month, the fee with respect to such Fund for
that month shall be reduced proportionately based upon the number of calendar
days during which this Agreement is in effect with respect to such Fund, and the
fee shall be computed based upon the average daily net asset value of such Fund
during such period.
5. EXPENSE LIMITATION.
The Manager agrees that if the total expenses of any Fund (exclusive of
interest, taxes, brokerage expenses and extraordinary items such as litigation
expenses) for any fiscal year of the Trust exceed the lowest expense limitation
imposed in any jurisdiction in which that Fund is then making sales of its
shares or in which its shares are then qualified for sale, if any, the Manager
will pay or reimburse such Fund for that excess up to the amount of its advisory
fees payable with respect to that Fund during that fiscal year. The amount of
the monthly advisory fee payable by any Fund under paragraph 4 hereof shall be
reduced to the extent that the monthly expenses of that Fund, on an annualized
basis, would exceed the foregoing limitation. At the end of each fiscal year of
the Trust, if the aggregate annual expenses chargeable to any Fund for that year
exceed the foregoing limitation based upon the average of the monthly average
net asset value of that Fund for the year, the Manager will promptly reimburse
that Fund for the amount of such excess to the extent not already reimbursed by
reduction of the monthly advisory fee, but if such expenses are within the
foregoing limitation, any excess amount previously withheld from the monthly
advisory fee during that fiscal year will be promptly paid over to the Manager.
In the event that this Agreement (i) is terminated with respect to any one
or more Funds as of a date other than the last day of the fiscal year of the
Trust or (ii) commences with respect to one or more of the Funds as of a date
other than the first day of the fiscal year of the Trust, then the expenses of
such Fund or Funds shall be annualized and the Manager shall pay to, or receive
from, the applicable Fund or Funds a pro rata portion of the amount that the
Manager would have been required to pay or would have been entitled to receive,
if any, had this Agreement been in effect with respect to such Fund or Funds for
the full fiscal year.
6. PORTFOLIO TRANSACTIONS.
In connection with the management of the investment and reinvestment of
the assets of the Trust, the Manager, acting by its own officers, directors or
employees or by a duly authorized subcontractor, is authorized to select the
brokers or dealers that will execute purchase and sale transactions for the
Trust. In executing portfolio transactions and selecting brokers or dealers, if
any, the Manager will use its best efforts to seek on behalf of a Fund the best
overall terms available. In assessing the best overall terms available for any
transaction, the Manager shall consider all factors it deems relevant, including
the breadth of the market in and the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any (for the specific transaction and on a
continuing basis). In evaluating the best overall terms available, and in
selecting the broker or dealer, if any, to execute a particular transaction, the
Manager may also consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to
any Fund of the Trust and/or other accounts over which the Manager or an
affiliate of the Manager exercises investment discretion. With the prior
approval of the Trustees, the Manager may pay to a broker or dealer who provides
such brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if, but only if, the
Manager determines in good faith that such commission was reasonable in relation
to the value of the brokerage and research services provided.
7. RELATIONS WITH THE TRUST.
Subject to and in accordance with the Master Trust Agreement and By-laws
of the Trust and the Articles of Organization and By-laws of the Manager, it is
understood that Trustees, officers, agents, and shareholders of the Trust are or
may be interested in the Manager (or any successor thereof) as directors,
officers or otherwise, that directors, officers, agents, and shareholders of the
Manager (or any successor thereof) are or may be interested in the Trust as
Trustees, officers, agents, shareholders or otherwise, that the Manager (or any
such successor thereof) is or may be interested in the Trust as a shareholder or
otherwise and that the effect of any such adeverse interests shall be governed
by said Master Trust Agreement, Articles of Organization and By-laws.
8. LIABILITY OF MANAGER.
The Manager shall not be liable to the Trust for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
matters to which this Agreement relates; provided, however, that no provision of
this Agreement shall be deemed to protect the Manager against any liability to
the Trust or its shareholders to which it might otherwise be subject by reason
of any willful misfeasance, bad faith or gross negligence in the performance of
its duties or the reckless disregard of its obligations and duties under this
Agreement, nor shall any provision hereof be deemed to protect any Trustee or
officer of the Trust against any such liability to which he might otherwise be
subject by reason of any willful misfeasance, bad faith or gross negligence in
the performance of his duties or the reckless disregard of his obligations and
duties. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
Initial Fund (defined for purposes hereof as John Hancock Freedom Global Fund)
on June 26, 1986 and, with respect to any additional Fund, on the date of
receipt by the Trust of notice from the Manager in accordance with paragraph
1(b) hereof that the Manager is willing to serve as Manager with respect to such
Fund. Unless terminated as herein provided, this Agreement shall remain in full
force and effect for two years from the June 26, 1986 with respect to the
Initial Fund and, with respect to each additional Fund, for two years from the
date on which such Fund becomes a Fund hereunder. Subsequent to such initial
periods of effectiveness, this Agreement shall continue in full force and effect
for periods of one year thereafter with respect to each Fund so long as such
continuance with respect to such Fund is approved at least annually (a) by
either the Trustees of the Trust or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of such Fund, and (b) in either
event, by the vote of a majority of the Trustees who are not parties to this
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that the continuance of this Agreement with respect
to the Initial Fund or any additional Fund is subject to the approval of this
Agreement by a majority of the outstanding voting securities of that Fund (as
defined in the 1940 Act) at the first annual or special meeting of shareholders
after this Agreement becomes effective with respect to that Fund.
(b) Amendment. Any amendment to this Agreement shall become effective with
respect to a Fund upon approval of the Manager and a majority of the outstanding
voting securities (as defined in the 1940 Act) of that Fund.
(c) Termination. This Agreement may be terminated with respect to any Fund
at any time, without payment of any penalty, by vote of the Trustees or by vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of that Fund, or by the Manager, in each case on sixty (60) days prior written
notice to the other party.
(d) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment (as defined in the
1940 Act).
(e) Approval, Amendment or Termination by Individual Fund. Any approval,
amendment or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to such
Fund notwithstanding (i) that such action has not been approved by the holders
of a majority of the outstanding voting securities of any other Fund affected
thereby, and (ii) that such action has not been approved by the vote of a
majority of the outstanding voting securities of the Trust, unless such action
shall be required by any applicable law or otherwise.
10. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Trust hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
11. SUBCONTRACTORS.
The Trust hereby agrees that the Manager may subcontract for the
performance of any of the services contemplated to be rendered by the Manager to
any Fund hereunder.
12. LIMITATION OF LIABILITY.
The term "Freedom Investment Trust II" means and refers to the Trustees
from time to time serving under the Master Trust Agreement of the Trust dated
March 31, 1986 as the same may subsequently hereto have been, or subsequently
hereto may be, amended. It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust as individuals or personally, but
shall bind only the trust property of the Trust, as provided in the Master Trust
Agreement of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by the President of the
Trust, acting as such, and neither such authorization nor such execution and
delivery shall be deemed to have been made individually or to impose any
personal liability, but shall bind only the trust property of the Trust as
provided in its Master Trust Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
Attest: FREEDOM INVESTMENT TRUST II
/s/ Thomas H. Drohan By: /s/Hugh A. Dunlap, Jr.
Thomas H. Drohan Hugh A. Dunlap
Secretary President
Attest: JOHN HANCOCK ADVISERS, INC.
Thomas H. Drohan By:Robert G. Freedman
/s/Thomas H. Drohan /s/Robert G. Freedman
Secretary President
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199
FREEDOM INVESTMENT TRUST II
- - John Hancock Freedom International Fund
101 Huntington Avenue
Boston, Massachusetts 02199
JOHN HANCOCK ADVISERS INTERNATIONAL LIMITED
34 Dover Street
London, England W1X 3RA
Sub-Advisory Agreement
Dear Ladies and Gentlemen:
Freedom Investment Trust II (the "Trust") has been organized as a business
trust under the laws of the Commonwealth of Massachusetts to engage in the
business of an investment company. The Trust's shares of beneficial interest may
be classified into series, each series representing the entire undivided
interest in a separate portfolio of assets. As of the date hereof, the Trust has
several series of shares, each with a separate portfolio of assets, one of which
is John Hancock Freedom International Fund. The Trustees of the Trust (the
"Trustees") have selected John Hancock Advisers, Inc. (the "Adviser") to provide
overall investment advice and management for the Trust and the Fund, and to
provide certain other services, under the terms and conditions provided in a
certain Advisory Agreement between the Trust and the Adviser (the "Advisory
Agreement").
The Adviser and the Trustees have selected John Hancock Advisers
International Limited (the "Sub-Adviser") to provide the Adviser and the Trust
with the advice and services set forth below with respect to such portion of the
Trust's and the Funds' assets as the Adviser, in consultation with the
Sub-Adviser, shall allocate pursuant to Section 3 of this Agreement to
investment in countries other than the United States and Canada (the "Foreign
Assets"), and the Sub-Adviser is willing to provide such advice and services,
subject to the review of the Trustees and overall supervision of the Adviser,
under the terms and conditions hereinafter set forth. The Sub-Adviser hereby
represents and warrants that it is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. Accordingly, the Trust and the
Adviser agree with the Sub-Adviser as follows:
1. Delivery of Documents.
The Trust has furnished the Sub-Adviser with copies, properly certified or
otherwise authenticated, of each of the following:
(a) Declaration of Trust of the Trust, dated March 31, 1986, as
amended and restated (the "Declaration of Trust").
(b) By-Laws of the Trust as in effect on the date hereof.
(c) Resolutions of the Trustees selecting the Sub-Adviser
as sub-adviser to the Trust and the Fund and approving the
form of this Agreement.
(d) Resolutions of the Trustees selecting the Adviser as investment
adviser to the Trust and the Fund and approving the form of the
Adviser's Investment Management Contract with the Trust and the
Fund.
(e) The Adviser's Advisory Agreement with the Trust and the
Fund.
(f) Commitments, limitations and undertakings made by the Trust to
state "blue sky" authorities for the purpose of qualifying shares of
the Trust and the Fund for sale in such states.
(g) The Adviser's Code of Ethics as currently in effect. The Trust
will furnish the Sub-Adviser from time to time with copies, properly
certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any.
2. Investment Services.
The Sub-Adviser will use its best efforts to provide to the Fund
continuing and suitable investment programs with respect to investments in
Foreign Assets, consistent with the investment policies, objectives and
restrictions of the Fund. In the performance of the Sub-Adviser's duties
hereunder, subject always (x) to the provisions contained in the documents
delivered to the Sub-Adviser pursuant to Section 1, as each of the same
may from time to time be amended or supplemented, and (y) to the
limitations set forth in the registration statement of the Trust as in
effect from time to time under the Securities Act of 1933, as amended, the
Sub-Adviser will, at its own expense with respect to the Foreign Assets:
(a) furnish the Adviser and the Fund with advice and
recommendations, consistent with the investment policies, objectives
and restrictions of such Fund, with respect to the purchase, holding
and disposition of portfolio securities consisting of Foreign
Assets, including advice on the selection and allocation of
investments among foreign securities markets and among foreign
equity and debt securities, and what portion of such assets, if any,
should be held in cash or cash equivalents denominated in United
States dollars or foreign currencies;
(b) furnish the Adviser and the Fund with advice respecting foreign
currency matters having regard to foreign exchange controls, if any,
including advice with respect to entering into forward foreign
exchange contracts;
(c) furnish the Adviser and the Fund with advice as to the manner in
which voting rights, subscription rights, rights to consent to
corporate action and any other rights pertaining to the Fund's
Foreign Assets shall be exercised;
(d) furnish the Adviser with research, economic and statistical data
in connection with the Fund's investments and investment policies
respecting Foreign Assets;
(e) submit such reports relating to the valuation of the Fund's
securities consisting of Foreign Assets, including forward foreign
exchange contracts relating to such Foreign Assets, as the Adviser
may reasonably request;
(f) subject to prior consultation with the Adviser, engage in
negotiations relating to the Fund's investments in Foreign Assets
with issuers, investment banking firms, securities brokers or
dealers and other institutions or investors;
(g) consistent with the provisions of Section 8 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities consisting of Foreign Assets for the Fund's account with
brokers or dealers selected by the Adviser and seek to obtain
execution and pricing within the policy guidelines determined by the
Trustees and set forth in the Prospectus and Statement of Additional
Information of the Fund;
(h) from time to time or at any time requested by the Adviser or the
Trustees, make reports to the Adviser or the Trust, as requested, of
the Sub-Adviser's performance of the foregoing services;
(i) subject to the supervision of the Adviser, maintain and preserve
the records required by the Investment Company Act of 1940 to be
maintained by the Sub-Adviser (the Sub-Adviser agrees that such
records are the property of the Trust and will be surrendered to the
Trust promptly upon request therefor);
(j) obtain and evaluate such information relating to economies,
industries, businesses and securities markets, as well as portfolio
securities of the Fund, as the Sub-Adviser may deem necessary or
useful in the discharge of its duties hereunder;
(k) give instructions to the custodian any sub-custodian of the Fund
as to deliveries of securities to and from such custodian or
sub-custodian, transfer of currencies and payments of cash for the
account of the Fund, and advise the Adviser on the same day such
instructions are given; and
(l) cooperate generally with the Fund and the Adviser to provide
information necessary for the preparation of registration statements
and periodic reports to be filed with the Securities and Exchange
Commission, including Forms N-1A and N-SAR, periodic statements,
shareholder communications and proxy materials furnished to holders
of shares of the Funds, filings with state "blue sky" authorities
and with United States and foreign agencies responsible for tax
matters, and other reports and filings of like nature.
3. Allocation of Assets.
Subject to the review of the Trustees, the Adviser in consultation with
the Sub-Adviser shall determine at least quarterly the percentage of the
Fund's assets that shall be allocated to the Adviser or the Sub-Adviser
for investment management (the "Asset Allocation") and the manner in which
such Asset Allocation in general is to be achieved by adjustments to the
Fund's existing portfolio of securities. The Asset Allocation will specify
the percentage of assets of the Fund allocated to the Adviser or the
Sub-Adviser for management on the effective date of such determination and
will apply to cash inflow and outflow thereafter until the Asset
Allocation is next redetermined. If the Adviser and the Sub-Adviser cannot
agree on an Asset Allocation, the Adviser has the right to make the final
determination, subject to review by the Trustees.
4. Expenses Paid by the Sub-Adviser.
The Sub-Adviser will pay the cost of maintaining the staff and personnel
necessary for it to perform its obligations under this Agreement, the
expenses of office rent, telephone, telecommunications and other
facilities it is obligated to provide in order to perform the services
specified in Section 2, and any other expenses incurred by it in
connection with the performance of its duties hereunder.
5. Expenses of the Funds Not Paid by the Sub-Adviser.
The Sub-Adviser will not be required to pay any expenses which this
Agreement does not expressly state shall be payable by it. In particular,
and without limiting the generality of the foregoing but subject to the
provisions of Section 4, the Sub-Adviser will not be required to pay:
(a) the compensation and expenses of Trustees of the Trust, and of
independent advisers, independent contractors, consultants, managers
and other agents employed by the Trust or the Fund other than
through the Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the
Trust or the Fund;
(c) the fees or disbursements of custodians, sub-custodians and
depositories of the Trust or the Fund's assets, transfer agents,
disbursing agents, plan agents and registrars;
(d) taxes and governmental fees assessed against the
Trust's assets and payable by the Trust;
(e) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the Trust
and the Fund, except that the Sub-Adviser shall bear the costs of
providing the information referred to in Section 2(1);
(f) brokers' commissions and underwriting fees;
(g) fees and other expenses relating to foreign currency
transactions, including entering into forward foreign exchange
contracts; and
(h) the expense of periodic calculations of the net asset
value of the Fund's shares.
6. Compensation of the Sub-Adviser.
For all services to be rendered, facilities furnished and expenses paid or
assumed by the Sub-Adviser as herein provided, for the Fund, the Adviser
will pay the Sub-Adviser monthly, based on the average daily net asset
value of such Fund for the preceding month, a fee at the annual rate of
.70% of the portion of the average daily net asset value of the Fund
during such month that does not exceed $200,000,000 and .6375% of the
portion, if any, of the average daily net asset value of the Fund during
such month that is in excess of $200,000,000 computed and paid in United
States dollars. The Fund shall not be liable to the Sub-Adviser for the
Sub-Adviser's compensation hereunder.
7. Other Activities of the Sub-Adviser and Its Affiliates.
Nothing herein contained shall prevent the Sub-Adviser or any of its
affiliates or associates from engaging in any other business or from
acting as investment adviser or investment manager for any other person or
entity, whether or not having investment policies or portfolios similar to
the Trust or the Fund, except that, without the written consent of the
Adviser, which consent shall not be unreasonably withheld, the Sub-Adviser
shall not act as investment manager for or provide investment advice to
any other investment company registered under the Investment Company Act
of 1940 with investment objectives and policies similar to the Trust or
the Fund. It is specifically understood that officers, directors and
employees of the Sub-Adviser and those of its affiliates may engage in
providing portfolio management services and advice to other investment
advisory clients of the Sub-Adviser or of its affiliates.
8. Avoidance of Inconsistent Position, etc.
In connection with purchases or sales of portfolio securities for the
account of the Trust or the Fund, neither the Sub-Adviser nor any of its
directors, officers or employees will act as principal or agent or receive
any commission. The Sub-Adviser shall adopt and imp lement policies and
procedures substantially similar to those contained in the Adviser's Code
of Ethics (a copy of which has been furnished to the Sub-Adviser by the
Adviser), which shall apply to the Sub-Adviser, its officers, directors
and employees. The Sub-Adviser shall not knowingly recommend that the
Trust purchase, sell or retain securities of any issuer in which the
Sub-Adviser or any of its affiliates has a financial interest without
obtaining prior approval of the Adviser prior to the execution of any such
transaction. For purposes of the foregoing sentence, the term "affiliate"
shall not mean any client of the Sub-Adviser. If any occasion should arise
in which the Sub-Adviser advises persons concerning the shares of the
Trust, the Sub-Adviser will act solely on its own behalf and not in any
way on behalf of the Trust.
9. No Partnership of Joint Venture.
The Trust, the Fund, the Adviser and the Sub-Adviser are not partners of
or joint venturers with each other and nothing herein shall be construed
so as to make them such partners or joint venturers or impose any
liability as such on any of them.
10. Limitation of Liability of the Sub-Adviser.
The Sub-Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or the Fund or the Adviser in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the
Sub-Adviser's part in the performance of its duties or from reckless
disregard by its of its obligations and duties under this Agreement. Any
person, even though also employed by the Sub-Adviser, who may be or become
an employee of and paid by the Trust or the Fund shall be deemed, when
acting within the scope of his employment by the Trust or the Fund, to be
acting in such employment solely for the Trust or the Fund and not as the
Sub-Adviser's employee or agent.
11. Duration and Termination of this Agreement.
This Agreement shall remain in force until the second anniversary of the
date upon which this Agreement was executed by the parties hereto, and
from year to year thereafter, but only so long as such continuance is
specifically approved at least annually by (a) a majority of the Trustees
who are not interested persons of the Adviser, of the Sub-Adviser or
(other than as Trustees) of the Trust, cast in person at a meeting called
for the purpose of voting on such approval, and (b) either (i) the
Trustees or (ii) a majority of the outstanding voting securities of the
Fund. This Agreement may, on 60 days' written notice, be terminated at any
time without the payment of any penalty by the Trust or the Fund by vote
of a majority of the outstanding voting securities of the Fund, by the
Adviser or by the Sub-Adviser. Termination of this Agreement with respect
to the Fund shall not be deemed to terminate or otherwise invalidate any
provision of any contract between the Sub-Adviser and any other se ries of
the Trust. This Agreement shall automatically terminate in the event of
its assignment or upon the termination of the Adviser's Investment
Management Contract with the Trust. In interpreting the provisions of this
Section 11, the definitions contained in Section 2(a) of the Investment
Company Act of 1940, as amended (particularly the definitions of
"assignment," "interested person" or "voting security"), shall be applied.
12. Amendment of This Agreement.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment, transfer, assignment, sale,
hypothecation or pledge of this Agreement shall be effective until
approved by (a) the Trustees, including a majority of the Trustees who are
not interested persons of the Adviser, of the Sub-Adviser or (other than
as Trustees) of the Trust or the Fund, cast in person at a meeting called
for the purpose of voting on such approval, and (b) a majority of the
outstanding voting securities of the Fund, as defined in the Investment
Company Act of 1940, as amended, providing that no approval shall be
required pursuant to this clause (b) in respect of any contract between
the Sub-Adviser, the Adviser and the holders of outstanding voting
securities of any series of the Trust other than the Fund.
13. Miscellaneous.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be
executed simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and
the same instrument. The name Freedom Investment Trust II is the
designation of the Trustees under the Declaration of Trust, dated March
31, 1986, as amended from time to time. The Declaration of Trust has been
filed with the Secretary of State of the Commonwealth of Massachusetts.
The obligations of the Trust and the Fund are not personally binding upon,
nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trustor the Fund, but
only the Trust's property shall be bound.
14. Governing Law.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and the applicable provisions of the
Investment Company Act of 1940, as amended.
Yours very truly,
JOHN HANCOCK ADVISERS, INC.
BY: /s/Robert G. Freedman
President
Dated: January 1, 1994
The foregoing contract is hereby agreed to as of the date set forth above.
JOHN HANCOCK ADVISERS INTERNATIONAL LIMITED
BY: /s/Edward J. Boudreau, Jr.
Chairman of the Board
FREEDOM INVESTMENT TRUST II
- John Hancock Freedom International Fund
BY: /s/Hugh A. Dunlap, Jr.
President
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199
October 1, 1992
FREEDOM INVESTMENT TRUST II
Freedom Global Fund
101 Huntington Avenue
Boston, Massachusetts 02199
JOHN HANCOCK ADVISERS INTERNATIONAL LIMITED
34 Dover Street
London, England W1X 3RA
Sub-Advisory-Agreement
Dear Sirs:
Freedom Investment Trust II (the "Trust") has been organized as a business
trust under the laws of the Commonwealth of Massachusetts to engage in the
business of an investment company. The Trust's shares of beneficial interest may
be classified into series, each series representing the entire undivided
interest in a separate portfolio of assets. As of the date hereof, the Trust has
several series of shares, each with a separate portfolio of assets, one of which
is Freedom Global Fund. The Trustees of the Trust (the "Trustees") have selected
John Hancock Advisers, Inc. (the ("Adviser") to provide overall investment
advice and management for the Trust and the Fund, and to provide certain other
services, under the terms and conditions provided in a certain Advisory
Agreement between the Trust and the Adviser (the "Advisory Agreement").
The Adviser and the Trustees have selected John Hancock Advisers
International Limited (the "Sub-Adviser") to provide the Adviser and the Trust
with the advice and services set forth below worth respect to such portion of
the Trust's and the Funds' assets as the Adviser, in consultation with the
Sub-Adviser, shall allocate pursuant to Section 3 of this Agreement to
investment in countries other than the United States and Canada (the "Foreign
Assets"), and the Sub-Adviser is willing to provide such advice and services,
subject to the review of the Trustees and overall supervision of the Adviser,
under the terms and conditions hereinafter set forth. The Sub-Adviser hereby
represents and warrants that it is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. Accordingly, the Trust and the
Advisers agree with the Sub-Adviser as follows:
1. Delivery of Documents. The Trust has furnished the
Sub-Adviser with copies, properly certified or otherwise authenticated,
of each of the following:
(a) Declaration of Trust of the Trust, date March 31, 1986 (the
"Declaration of Trust").
(b) By-Laws of the Trust as in effect on the date hereof.
(c) Resolutions of the Trustees selecting the Sub-Adviser as
sub-adviser to the Trust and the Fund and approving the form of this
Agreement.
(d) Resolutions of the Trustees selecting the Adviser as investment
adviser to the Trust and the Fund and approving the form of the
Adviser's Investment Management Contract with the Trust and the Fund.
(e) The Adviser's Advisory Agreement with the Trust and the Fund.
(f) Commitments, limitation and undertakings made by the Trust to
state "blue sky" authorities for the purpose of qualifying shares of the
Trust and the Fund for sale in such states.
(g) The Adviser's Code of Ethics as currently in effect.
The Trust will furnish the Sub-Adviser from time to time with copies,
properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any.
2. Investment Services. The Sub-Adviser will use its best efforts to
provide to the Fund continuing and suitable investment programs with respect to
investments in Foreign Assets, consistent with the investment policies,
objectives and restrictions of the Fund. In the performance of the Sub-Adviser's
duties hereunder, subject always (x) to the provisions contained in the
documents delivered to the Sub-Adviser pursuant to Section 1, as each of the
same may from time to time be amended or supplemented, and (y) to the
limitations set forth in the registration statement of the Trust as in effect
from time to time under the Securities Act of 1933, as amended, the Sub-Adviser
will, at its own expense with respect to the Foreign Assets:
(a) furnish the Adviser and the Fund with advice and recommendations,
consistent with the investment policies, objectives and restrictions of
such Fund, with respect to the purchase, holding and disposition of
portfolio securities consisting of Foreign Assets, including advice on
the selection and allocation of investments among foreign securities
markets and among foreign equity and debt securities, and what portion
of such assets, if any, should be held in cash or cash equivalents
denominated in United States dollars or foreign currencies;
(b) furnish the Adviser and the Fund with advice respecting foreign
currency matters having regard to foreign exchange controls, if any,
including advice with respect to entering into forward foreign exchange
contracts;
(c) furnish the Adviser and the Fund with advice as to the manner in
which voting rights, subscription rights, rights to consent to corporate
action and any other rights pertaining to the Fund's Foreign Assets
shall be exercised;
(d) furnish the Adviser with research, economic and statistical data
in connection with the Fund's investments and investment policies
respecting Foreign Assets.
(e) submit such reports relating to the valuation of the Fund's
securities consisting of Foreign Assets, including forward foreign
exchange contracts relating to such Foreign Assets, as the Adviser may
reasonably request.
(f) subject to prior consultation with the Adviser, engage in
negotiations relating to the Fund's investments in Foreign Asset with
issuers, investment banking firms, securities brokers or dealers and
other institutions or investors;
(g) consistent with the provisions of Section 8 of this Agreement,
place orders for the purchase, sale or exchange of portfolio securities
consisting of Foreign Assets for the Fund's account with brokers or
dealers selected by the Adviser and seek to obtain execution and pricing
within the policy guidelines determined by the Trustees and set forth in
the Prospectus and Statement of Additional Information of the Fund;
(h) from time to time or at any time requested by the Adviser or the
Trustees, make reports to the Adviser or the Trust, as requested, of the
Sub-Adviser's performance of the foregoing services;
(i) subject to the supervision of the Adviser, maintain and preserve
the records required by the Investment Company Act of 1940 to be
maintained by the Sub- Adviser (the Sub-Adviser agrees that such records
are the property of the Trust and will be surrendered to the Trust
promptly upon request therefor);
(j) obtain and evaluation such information relating to economies,
industries, businesses and securities markets, as will as portfolio
securities or the fund, as the Sub-Adviser may deem necessary or useful
in the discharge of its duties hereunder;
(k) give instructions to the custodian any sub-custodian of the Fund
as to deliveries of securities to and from such custodian or
sub-custodian, transfer of currencies and payments of cash for the
account of the Fund, and advise the Advisers on the same day such
instructions are given; and
(l) cooperate generally with the Fund and the Adviser to provide
information necessary for the preparation of registration statements and
periodic reports to be filed with the Securities and Exchange
Commission, including Forms N-1A and N-SAR, periodic statements,
shareholder communications and proxy materials furnished to holders of
shares of the Funds, filings with state "blue sky" authorities and with
United States and foreign agencies responsible for tax matters, and
other reports and filings of like nature.
3. Allocation of Assets. Subject to the review of the Trustees, the
Adviser in consultation with the Sub-Adviser shall determine at least quarterly
the percentage of the Fund's assets that shall be allocated to the Adviser or
the Sub-Adviser for investment management (the "Asset Allocation") and the
manner in which such Asset Allocation in general is to be achieved by
adjustments to the Fund's existing portfolio of securities. The Asset Allocation
will specify the percentage of assets of the Fund allocated to the Adviser or
the Sub-Adviser for management on the effective date of such determination and
will apply to cash inflow and outflow thereafter until the Asset Allocation is
next redetermined. If the Adviser and the Sub-Adviser cannot agree on an Asset
Allocation, the Adviser has the right to make the final determination, subject
to review by the Trustees.
4. Expenses Paid by the Sub-Adviser. The Sub-Adviser will pay the cost of
maintaining the staff and personnel necessary for it to perform its obligations
under this Agreement, the expenses of office rent, telephone, telecommunications
and other facilities it is obligated to provide in order to perform the services
specified in Section 2, and any other expenses incurred by it in connection with
the performance of its duties hereunder.
5. Expenses of the Funds Not Paid by the Sub-Advisers. The Sub-Adviser
will not be requires to pay any expenses with this Agreement does not expressly
state shall be payable by it. In particular, and without limiting the generality
of the foregoing but subject to the provisions of Section 4, the Sub-Adviser
will not be required to pay:
(a) the compensation and expenses of Trustees of the Trust, and of
independent advisers, independent contractors, consultants, managers and
other agents employed by the Trust or the Fund other than through the
Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the Trust or
the Fund;
(c) the fees or disbursements of custodians, sub-custodians and
depositories of the Trust or the Fund's assets, transfer agents,
disbursing agents, plan agents and registrars;
(d) taxes and governmental fees assessed against the Trust's assets
and payable by the Trust;
(e) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the Trust and
the Fund, except that the Sub-Adviser shall bear the costs of providing
the information referred to in Section 2(1);
(f) brokers' commissions and underwriting fees;
(g) fees and other expenses relating to foreign currency transactions,
including entering into forward foreign exchange contracts; and
(h) the expense of periodic calculations of the net asset value of the
Fund's shares.
6. Compensation of the Sub-Adviser. For all services to be rendered,
facilities furnished and expenses paid or assumed by the Sub-Adviser as herein
provided, for the Fund, the Adviser will pay the Sub-Adviser monthly, based on
the average daily net asset value of such Fund for the preceding month, a fee at
the annual rate of 0.70 percent of the portion of the average daily net asset
value of the Fund during such month that does not exceed $200,000,000 and 0.6375
percent of the portion, if any, of the average daily net asset value of the Fund
during such month that is in excess of $200,000,000 computed and paid in United
States dollars. The Fund shall not be liable to the Sub-Adviser for the
Sub-Adviser's compensation hereunder.
7. Other Activities of the Sub-Advisers and Its Affiliates. Nothing herein
contained shall prevent the Sub-Adviser or any of its affiliates or associates
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or portfolios similar to the Trust or the Fund, except that,
without the written consent of the Adviser, which consent shall not be
unreasonably withheld, the Sub-Adviser shall not act as investment manager for
or provide investment advice to any other investment company registered under
the Investment Company Act of 1940 with investment objectives and policies
similar to the Trust or the Fund. It is specifically understood that officers,
directors and employees of the Sub-Adviser and those of its affiliates may
engage in providing portfolio management services and advice to other investment
clients of the Sub-Adviser or of its affiliates.
8. Avoidance of Inconsistent Position, etc. In connection with purchases
or sales of portfolio securities for the account of the Trust or the Fund,
neither the Sub-Adviser nor any of its directors , officers or employees will
act as principal or agent or receive any commission. The Sub-Adviser shall adopt
and implement policies and procedures substantially similar to those contained
in the Adviser's Code of Ethics (a copy of which has been furnished to the
Sub-Adviser by the Adviser), which shall apply to the Sub-Adviser, its officers,
directors and employees. The Sub-Adviser shall not knowingly recommend that the
Trust purchase, sell or retain securities of any issuer in which the Sub-Adviser
or any of its affiliates has a financial interest without obtaining prior
approval of the Adviser prior to the execution of any such transaction. For
purposes of the foregoing sentence, the term "affiliate" shall not man any
client of the Sub-Adviser. If any occasion should arise in which the Sub-Adviser
advises persons concerning the shares of the Trust, the Sub-Adviser will act
solely on its own behalf and not in any way on behalf of the Trust.
9. No Partnership of Joint Venture. The Trust , the Fund, the Adviser and
the Sub-Adviser are not partners of or joint venturers with each other and
nothing herein shall be construed so as to make them such partners or joint
venturers or impose any liability as such on any of them.
10. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Trust or the Fund or the Adviser in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the Sub-Adviser's part in the performance of its
duties or from reckless disregard by its of its obligations and duties under
this Agreement. Any person, even though also employed by the Sub-Adviser, who
may be or become an employee of and paid by the Trust or the Fund shall be
deemed, when acting within the scope of his employment by the Trust or the Fund,
to be acting in such employment solely for the Trust or the Fund and not as the
Sub-Adviser's employee or agent.
11. Duration and Termination of this Agreement. This Agreement shall
remain in force until the second anniversary of the date upon which this
Agreement was executed by the parties hereto, and from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
by (a) a majority of the Trustees who are not interested person of the Adviser,
of the Sub-Adviser or (other than as Trustees) of the Trust, cast in person at a
meeting called for the purpose of voting on such approval, and (b) either (i)
the Trustees or (ii) a majority of the outstanding voting securities of the
Fund. This Agreement may, on 60 days' written notice, be terminated at any time
without the payment of any penalty by the Trust or the Fund by vote of a
majority of the outstanding voting securities of the Fund, by the Adviser or by
the Sub-Adviser. Termination of this Agreement with respect to the Fund shall
not be deemed to terminate or otherwise invalidate any provision of any contract
between the Sub-Adviser and any other series of the Trust. This Agreement shall
automatically terminate in the event of its assignment or upon the termination
of the Adviser's Investment Management Contract with the Trust. In interpreting
the provision of this Section 11, the definitions contained in Section 2(a) of
the Investment Company Act of 1940, as amended (particularly the definitions of
"assignment," "interested person" or "voting security"), shall be applied.
12. Amendment of This Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be effective until
approved by (a) the Trustees, including a majority of the Trustees who are not
interested persons of the Adviser, of the Sub-Adviser or (other than as
Trustees) of the Trust or the Fund, cast in person at a meeting called for the
purpose of voting on such approval, and (b) a majority of the outstanding voting
securities of the Fund, as defined in the Investment Company Act of 1940, as
amended, providing that no approval shall be required pursuant to this clause
(b) in respect of any contract between the Sub-Adviser, the Adviser and the
holders of outstanding voting securities of any series of the Trust other than
the Fund.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in tow or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The name Freedom Investment Trust II is the
designation of the Trustees under the Declaration of Trust, dated March 31,
1986, as amended from time to time. The Declaration of Trust has been filed with
the Secretary of State of the Commonwealth of Massachusetts. The obligations of
the Trust and the Fund are not personally binding upon, nor shall resort be had
to the private property of, any of the Trustees, shareholders, officers,
employees or agents of the Trust or the Fund, but only the Trust's property
shall be bound.
14. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Massachusetts ad the
applicable provision of the Investment Company Act of 1940, as amended.
Your very truly,
JOHN HANCOCK ADVISERS, INC.
Dated By: /s/ Edward J. Boudreau, Jr.
Chairman of the Board and
Chief Executive Officer
The forgoing contract
is hereby agreed to as
of the date set forth above
JOHN HANCOCK ADVISERS
INTERNATIONAL LIMITED
By /s/ Edward J. Boudreau, Jr.
Chairman of the Board
FREEDOM INVESTMENT TRUST II
Freedom Global Fund
By /s/ Hugh Dunlap, Jr.
President
DISTRIBUTION AGREEMENT
Distribution Agreement dated as of July 1, 1992 (the "Distribution
Agreement") by and among FREEDOM DISTRIBUTORS CORPORATION, and JOHN HANCOCK
BROKER DISTRIBUTION SERVICES, INC., both corporations organized under the laws
of the Commonwealth of Massachusetts and having places of business at One Beacon
Street, Boston, Massachusetts and 101 Huntington Avenue, Boston, Massachusetts,
respectively (Freedom Distributors Corporation and John Hancock Broker
Distribution Services, Inc. are collectively referred to herein as the
"Distributor"), and FREEDOM INVESTMENT TRUST II, a Massachusetts business trust
having a place of business at One Beacon Street, Boston, Massachusetts (the
"Trust") which offers shares of beneficial interest in different series
representing interests in separate portfolios of assets (each series being
referred to herein as a "Fund" and such series being referred to herein
collectively as the "Funds").
WITNESSETH:
In consideration of the agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, it is agreed:
1. Appointment of Distributor. The Trust hereby appoints Freedom
Distributors Corporation and John Hancock Broker Distribution Services, Inc.
each as distributors and as its exclusive agents to sell and distribute three
separate classes of shares, Class A Shares, Class B Shares and Class C Shares,
each as more fully described in Section 4 hereof (the Class A Shares, Class B
Shares and the Class C Shares (if any) being collectively referred to herein as
the "shares") of each Fund of the Trust in existence as of the date hereof (the
"Initial Funds"). Distributor hereby accepts such appointment and agrees during
the term of this Distribution Agreement to provide the services and to assume
the obligations herein set forth. In the event that the Trust establishes one or
more series of shares other than the Initial Funds with respect to which it
desires to retain Distributor to serve as distributors and principal
underwriters hereunder, it shall so notify Distributor in writing. If
Distributor is willing to render such services, it shall so notify the Trust in
writing, whereupon such series of shares shall become a Fund hereunder. In such
event a writing signed by each of the Trust and Distributor shall be annexed
hereto as a part hereof indicating that such additional series of shares has
become a Fund hereunder.
2. Sale of Shares. Shares of each Fund shall be sold at the offering price
thereof as from time to time determined in the manner described in Section 4
hereof. The Trust agrees that it will not, without Distributor's consent, sell
or agree to sell any shares of a Fund otherwise than through Distributor, except
that the Trust may sell and/or issue shares for not less than the net asset
value thereof (i) to such persons or classes of persons as may be indicated in
the applicable Fund prospectus as from time to time amended and in effect, (ii)
directly to holders of shares of any Fund upon such terms and for such
consideration, if any, as it may determine, whether in connection with the
distribution of subscription or purchase rights, the payment or reinvestment of
distributions or dividends, the exercise of any applicable retirement privilege,
or otherwise, (iii) to the shareholders of any other Fund or investment company
for which the Trust's investment adviser acts as investment adviser in
connection with the exercise of exchange privileges offered by the Trust, and
(iv) in connection with a merger, consolidation or acquisition of assets on such
basis as may be authorized or permitted under the Investment Company Act of 1940
(the "1940 Act").
3. Basis of Sale of Shares; Dealers. Distributor does not agree to sell
any specific number of shares. Shares will be sold by the Distributor as agents
for the Funds and Trust only against orders therefor. Distributor will not
purchase shares except as agents for the Trust. Notwithstanding anything herein
to the contrary, the Trust may terminate, suspend or withdraw the offering of
shares whenever, in its sole discretion, it deems such action desirable. In
connection with its performance of services hereunder, Distributor may engage
other members in good standing of the National Association of Securities
Dealers, Inc., to act as dealers in accordance with the terms of a dealer
agreement in substantially the form attached hereto as Exhibit A.
4. Offering Price. The offering price for shares of any Fund of the Trust
shall be the "net asset value per share" for that Fund determined in accordance
with the Master Trust Agreement of the Trust, as amended from time to time (the
"Master Trust Agreement"); plus a sales charge which may be imposed (i) on
shares designated as Class A Shares at the time of purchase (the "Class A
Shares") upon the terms and conditions and as described in the applicable Fund
prospectus as from time to time amended and in effect or (ii) on shares
designated as Class B Shares on a deferred basis upon certain redemptions of
shares of the Funds (the "Class B Shares") upon the terms and conditions and as
described in the applicable Fund prospectus as from time to time amended and in
effect. In addition, the Trust may offer shares designated as Class C Shares of
any Fund to certain investors at their net asset value without the imposition of
any sales charges, either at the time of purchase or upon redemption (the "Class
C Shares"). The net asset value per share for each Fund shall be determined at
such time and on such days as are established by the Board of Trustees of the
Trust from time to time.
5. Compensation of Distributor.
(a) Initial and Deferred Sales Charges. Distributor shall be
entitled to receive that portion of any sales charge or underwriting discount
that is not allowed by the Distributor as a concession to dealers in connection
with the sale of Class A Shares of a Fund and any applicable deferred sales
charge on redemptions of Class B Shares of a Fund as described in the applicable
Fund prospectus as from time to time amended and in effect.
(b) 12b-1 Expenses. The Trust has adopted a Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plan") attached hereto as
Exhibit B, pursuant to which Distributor shall receive monthly payments from
each Fund, with respect to the Class A Shares and the Class B Shares. Such 12b-1
payments shall be made at the rates and upon the terms and conditions set forth
in the 12b-1 Plan as amended from time to time, including without limitation the
maximum amounts set forth therein, during such period as the 12b-1 Plan shall be
in effect with respect to such Fund or class of shares thereof. Class C Shares
will not be subject to any distribution fees pursuant to the Trust's 12b-1 Plan.
Distributor shall only use such 12b-1 payments for the purposes set forth in the
12b-1 Plan.
6. Manner of Offering. Distributor will conform to the securities laws of
any jurisdiction in which it sells, directly or indirectly, any shares of the
Funds. Distributor also agrees to furnish to the Trust sufficient copies of any
agreements, plans or sales literature it intends to use in connection with any
sales of shares in adequate time for the Trust to file and clear them with the
proper authorities before they are put in use, and not to use them until so
filed and cleared.
Distributor and the Trust shall have the right to accept or reject orders
for the purchase of shares of the Trust. Any consideration which the Distributor
may receive in connection with a rejected purchase order will be returned
promptly to the prospective purchaser. Distributor, or its duly appointed
transfer or shareholder servicing agent, agrees promptly to issue confirmations
of all accepted purchase orders and to transmit a copy of such confirmations to
the Trust. The net asset value of all shares which are the subject of such
confirmations, computed in accordance with the applicable rules under the 1940
Act, shall be a liability of Distributor to the Trust to be paid promptly after
receipt of payment from the originating dealer and not later than eleven
calendar days after such confirmation even if Distributor has not actually
received payment from the originating dealer. If the originating dealer shall
fail to make timely settlement of its purchase order in accordance with the
rules of the National Association of Securities Dealers, Inc., Distributor shall
have the right to cancel such purchase order and, at Distributor's account and
risk, to hold the originating dealer responsible. Distributor agrees promptly to
reimburse the Trust for any amount by which the Trust's losses attributable to
any such cancellation, or to accepted purchase orders, exceed contemporaneous
gains realized by the Trust for either of such reasons in respect to other
purchase orders. The Trust shall register or cause to be registered all shares
sold by the Distributor pursuant to the provisions hereof in such name or names
and amounts as Distributor may request from time to time. All shares of the
Trust, when so issued and paid for, shall be fully paid and non-assessable.
The Distributor agrees that if any person tenders to the Trust for
redemption any shares of the Fund purchased from the Trust within seven days of
the redemption request, the Distributor will promptly pay to the Trust the full
sales commission paid with respect to the shares so tendered for redemption,
such payment to be made (in the case of such a tender by the Distributor) by the
Trust's withholding the amount thereof from payment upon redemption, and such
payment to be made (in the case of such a tender by a person other than the
Distributor) promptly after notification by the Trust to the Distributor of
liability for such a payment; provided, however, that the Distributor shall not
be obligated to make any such payments in respect of shares sold through
Selected Dealers who have entered into Dealer Agreements with the Distributor in
the form attached hereto as Exhibit A, which Dealer Agreements, insofar as they
provide for similar payments by a Selected Dealer to the Trust, are intended to
be for the benefit of the Trust.
7. Securities Laws. The Trust has delivered to the Distributor a copy of
each Fund's applicable prospectus as in effect on the date hereof. The Trust
agrees that it will use its best efforts to continue the effectiveness of the
Trust's Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act") and the 1940 Act. The Trust further agrees to prepare and file
any amendments to its Registration Statement and any supplemental data as may be
necessary in order to comply with the Securities Act and the 1940 Act. The Trust
has already registered under the 1940 Act as an investment company, and it will
use its best efforts to maintain such registration and to comply with the
requirements of said Act.
At the Distributor's request, the Trust will take such steps as may be
necessary and feasible to qualify shares of the Funds for sale in states,
territories or dependencies of the United States of America, in the District of
Columbia and in foreign countries, in accordance with the laws thereof, and to
renew or extend any such qualification; provided, however, that the Trust shall
not be required to qualify shares or to maintain the qualification of shares in
any state, territory, dependency, district or country where it shall deem such
qualification disadvantageous to the Trust.
The Distributor agrees that:
(a) Distributor shall furnish to the Trust any pertinent information
required to be inserted with respect to the Distributor as Distributor within
the purview of the Securities Act in any reports or registration required to be
filed with any governmental authority;
(b) Distributor will not make any representations inconsistent with
the Registration Statement or Prospectus of the Funds filed under the Securities
Act, as from time to time amended.
(c) Distributor will not use, distribute or disseminate or authorize
the use, distribution or dissemination by others in connection with the sale of
shares of the Funds, any statement, other than those contained in the applicable
Fund prospectus as from time to time amended and in effect, except such
supplemental literature or advertising as shall be approved by the Trust;
(d) Distributor will conform to the requirements of all state and
federal laws and the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. relating to the sale of shares of the Funds (including,
without limitation, the maintenance of effective broker-dealer registrations as
required); and
(e) Distributor will observe and be bound by all the provisions of
the Master Trust Agreement (and of any fundamental policies adopted by the Trust
pursuant to the 1940 Act, notice of which shall have been given to Distributor)
which at the time in any way require, limit, restrict or prohibit or otherwise
regulate any action on the part of Distributor.
8. Quarterly Reports. Distributor will prepare reports to the Board of
Trustees of the Trust on a quarterly basis showing the manner in which any
distribution fees paid by the Trust to Distributor pursuant to the 12b-1 Plan in
accordance with Section 5(b) hereof have been spent by Distributor for the
preceding quarter.
9. Allocation of Expenses.
(a) The Funds, either directly or through their investment adviser,
will be responsible for, and shall pay its allocable portions of the expenses
of:
(i) providing all necessary services, including fees and
disbursements of counsel, related to the preparation, setting in type,
printing and filing of any registration statement and/or prospectus
required under the Securities Act or 1940 Act, or under state securities
laws covering their shares, and all amendments and supplements thereto,
the mailing of any such prospectus to existing shareholders, and
preparing, setting in type, printing and mailing periodic reports to
existing shareholders;
(ii) the cost of all registration or qualification fees
relating to the Funds' shares;
(iii) the cost of preparing temporary and permanent share
certificates for shares of the Funds, if any;
(iv) any and all federal and state (if any) issue and/or
transfer taxes payable upon the issue by or (in the case of treasury
shares) transfer from a Fund to Distributor of any and all shares
distributed hereunder.
(b) Distributor agrees that, after the Funds' prospectus and
periodic reports have been set in type, it will bear the expense of printing and
distributing any copies thereof which are to be used in connection with the
offering of shares to investors. Distributor further agrees that it will bear
the expenses of preparing, printing and distributing any other literature used
by the Distributor or furnished by it for use in connection with the offering of
the shares for sale to the public, and any expenses of advertising in connection
with such offering. It is understood and agreed that, so long as the 12b-1 Plan
continues in effect, any expenses incurred by the Distributor pursuant to this
Distribution Agreement or the dealer agreements, including the payment of sales
commissions for Class B Shares of a Fund and service compensation for both Class
A and Class B Shares of a Fund to account executives or dealers, may be paid
from amounts received by Distributor from the Trust under the 12b-1 Plan.
(c) The Funds will be responsible for, and shall pay the expenses
of, maintaining shareholder accounts and furnishing or causing to be furnished
to each shareholder a statement of his account.
10. Distributor Is Independent Contractor. Distributor shall be an
independent contractor. Distributor is responsible for its own conduct, for the
employment, control and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents or employees.
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employer taxes thereunder.
11. Term of Contract. This Distribution Agreement shall become effective
(i) with respect to the Initial Funds and each class of shares thereof, on the
date of its execution, and (ii) with respect to any additional Fund or class of
shares thereof, on the date of receipt by the Trust of notice from the
Distributor in accordance with Section 1(a) hereof that the Distributor is
willing to serve as Distributor with respect to such Fund or class of shares
thereof. This Distribution Agreement shall thereafter continue in full force and
effect, subject to the last sentence of this Section 11, for successive one-year
periods with respect to each Fund and class of shares thereof so long as such
continuance with respect to such Fund or class of shares thereof is approved at
least annually (a) by either the Trustees of the Trust or by vote of a majority
of the outstanding voting securities (as defined in the 1940 Act) of such Fund
or class of shares thereof, and (b) in either event, by the vote of a majority
of the Trustees of the Trust who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party or the Trust
and who have no direct or indirect financial interest in the operation of the
12b-1 Plan or this Agreement (the "Qualified Trustees"), cast in person at a
meeting called for the purpose of voting on such approval. This Distribution
Agreement may remain in effect with respect to a Fund or class of shares thereof
even if it has not been continued in accordance with this Section 11 with
respect to one or more other Funds or class of shares thereof of the Trust.
12. Termination. This Distribution Agreement may be terminated at any time
with respect to the Trust or any Fund of the Trust, or any class of shares of
any Fund, as the case may be, without the payment of any penalty, by the vote of
(i) a majority of the Qualified Trustees, or (ii) a majority of the outstanding
voting securities of the Trust or that Fund or that class of shares of any Fund,
as the case may be, in each case on at least sixty (60) days' prior written
notice to any other party to this Distribution Agreement. This Distribution
Agreement may be terminated by Distributor on at least sixty (60) days' prior
written notice to the Trust. The Distribution Agreement may remain in effect
with respect to a Fund or a class of shares thereof even if it has been
terminated in accordance with this Section 12 with respect to one or more Funds
of the Trust or one or more classes of such Fund, as the case may be.
13. Assignment. This Distribution Agreement may not be assigned by
Distributor and shall automatically terminate in the event of its assignment as
defined by the 1940 Act; provided, however, that the Distributor may employ or
enter into agreements with such other person, persons, corporation, or
corporations, as it shall determine in order to assist it in carrying out this
Distribution Agreement including, without limitation, Dealers as contemplated by
Section 3.
14. Indemnification by Distributor. Distributor agrees to indemnify and
hold harmless the Trust or any other person who has been, is, or may hereafter
be an officer, Trustee, employee or agent of the Trust against any loss, damage
or expense reasonably incurred by any of them in connection with any claim or in
connection with any action, suit, or proceeding to which any of them may be a
party, which arises out of or is alleged to arise out of or is based upon any
violation of any of its representations or covenants herein contained or any
untrue statement or alleged untrue statement of a material fact, or the omission
or alleged omission to state a material fact necessary to make the statements
made not misleading, on the part of Distributor or any agent or employee of
Distributor or any other person for whose acts Distributor is responsible or is
alleged to be responsible (such as any dealer or person through whom sales are
made pursuant to a dealer agreement with Distributor), whether made orally or in
writing, unless such statement or omission was made in reliance upon written
information furnished by the Trust. The term "expenses" for purposes of this and
the next paragraph includes reasonable attorneys fees and amounts paid in
satisfaction of judgments or in settlements which are made with Distributor's
consent. The foregoing rights of indemnification shall be in addition to any
other rights to which any of the foregoing indemnified parties may be entitled
as a matter of law.
15. Indemnification by Trust. The Trust agrees to indemnify and hold
harmless the Distributor and each person who has been, is, or may hereafter be
an officer, director, employee or agent of the Distributor against any loss,
damage or expense reasonably incurred by any of them in connection with any
claim or in connection with any action, suit or proceeding to which any of them
may be a party, which arises out of or is alleged to arise out of or is based
upon any untrue or alleged untrue statement of material fact, or the omission or
alleged omission to state a material fact necessary to make the statements
therein not misleading, contained in a Registration Statement of the Trust or
applicable prospectus of the Trust or Funds, or any amendment or supplement
thereto, unless such statement or omission was made in reliance upon written
information furnished by the Distributor. The foregoing rights of
indemnification shall be in addition to any other rights to which any of the
foregoing indemnified parties may be entitled as a matter of law. Nothing
contained herein shall relieve the Distributor of any liability to the Trust or
its shareholders to which the Distributor would otherwise be subject by reason
of willful misfeasance, bad faith, or gross negligence in the performance of its
duties or reckless disregard of its obligations and duties hereunder.
16. Non-Exclusive Agreement. The services of Distributor to the Trust
hereunder shall not be deemed to be exclusive, and Distributor shall be free to
(a) render similar services to, and act as underwriter or distributor in
connection with the distribution of shares of, other investment companies, and
(b) engage in any other businesses and activities from time to time.
17. Amendment. This Distribution Agreement may be amended at any time by
mutual agreement in writing of the parties hereto, provided that any such
amendment is approved (i) by a majority of the Trustees of the Trust who are not
interested persons of the Distributor or (ii) by the holders of a majority of
the outstanding shares of the Funds.
18. Governing Law; Counterparts. This Distribution Agreement shall be
construed in accordance with the laws of the Commonwealth of Massachusetts. This
Distribution Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
19. Limitation of Liability. The term "Freedom Investment Trust II" means
and refers to the Trustees from time to time serving under the Master Trust
Agreement of the Trust dated June 16, 1989, as the same may subsequently hereto
have been, or subsequently hereto may be, amended. It is expressly agreed that
the obligations of the Trust hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Trust as
individuals or personally, but shall bind only the trust property of the Trust,
as provided in the Master Trust Agreement of the Trust. The execution and
delivery of this Distribution Agreement have been authorized by the Trustees of
the Trust and signed by the President of the Trust, acting as such, and neither
such authorization nor such execution and delivery shall be deemed to have been
made individually or to impose any personal liability, but shall bind only the
trust property of the Trust as provided in its Master Trust Agreement. The
Master Trust Agreement of the Trust further provides, and it is expressly
agreed, that each Fund of the Trust shall be solely and exclusively responsible
for the payment of its debts, liabilities and obligations and that no other Fund
shall be responsible or liable for the same.
20. Prior Agreements Superseded; Construction. This Distribution
Agreement supersedes any prior agreement relating to the subject matter
hereof between the parties hereto. Without limiting the generality of the
foregoing, all references to the Trust's prospectus shall include all
prospectuses thereunder.
21. Notices. Notices under this Distribution Agreement shall be in writing
and shall be addressed, and delivered or mailed postage prepaid, to the other
parties at such address as such other parties may designate from time to time
for the receipt of such notices. Until further notice to the other party, the
address of each party to this Distribution Agreement for this purpose shall be
as follows: Freedom Distributors Corporation, One Beacon Street, 4th Floor,
Boston, Massachusetts 02108; John Hancock Broker Distribution Services, Inc.,
101 Huntington Avenue, Boston, Massachusetts 02199, and Freedom Investment Trust
II, One Beacon Street, 4th Floor, Boston, Massachusetts 02108.
<PAGE>
IN WITNESS WHEREOF, this Distribution Agreement has been executed for the
Distributor and the Trust by their duly authorized officers, as of the date
first set forth above.
FREEDOM DISTRIBUTORS
CORPORATION
By: /s/ John Danello
Title: President
ATTEST: /s/ Elaine A. Borghesani
Title: Asst. Vice President
JOHN HANCOCK BROKER
DISTRIBUTION SERVICES, INC.
By: /s/ C. Troy Shaver, Jr.
President
ATTEST: /s/ Susan S. Newton
Secretary
FREEDOM INVESTMENT TRUST II
By: /s/ Hugh Dunlap, Jr.
President
ATTEST: /s/ John Danello
Secretary
<PAGE>
FREEDOM INVESTMENT TRUST II
101 Huntington Avenue
Boston, MA 02199
John Hancock Broker Distribution
Services, Inc.
101 Huntington Avenue
Boston, MA 02199
Ladies and Gentlemen:
Pursuant to Section 1 of the Distribution Agreement dated as of July 1,
1992 between Freedom Investment Trust II (the "Trust"), Freedom Distributors
Corporation and John Hancock Broker Distribution Services, Inc., please be
advised that the Trust has established a new series of its shares, namely, John
Hancock Special Opportunities Fund (the "Fund"), and please be further advised
that the Trust desires to retain John Hancock Broker Distribution Services, Inc.
to serve as distributor and principal underwriter under the Distribution
Agreement for the Fund. With respect to the Fund, where the term "Distributors"
is used in the Distribution Agreement, such term shall refer to John Hancock
Broker Distribution Services, Inc.
Please indicate your acceptance of this responsibility by signing this
letter as indicated below.
ACCEPTED AND AGREED TO:
JOHN HANCOCK BROKER DISTRIBUTION FREEDOM INVESTMENT TRUST II
SERVICES, INC.
By: /s/C. Troy Shaver, Jr. By: /s/Hugh Dunlap, Jr.
President
Dated: November 1, 1993
<PAGE>
FREEDOM INVESTMENT TRUST II
101 Huntington Avenue
Boston, MA 02199
John Hancock Broker Distribution
Services, Inc.
101 Huntington Avenue
Boston, MA 02199
Ladies and Gentlemen:
Pursuant to Section 1 of the Distribution Agreement dated as of July 1,
1992 between Freedom Investment Trust II (the "Trust"), Freedom Distributors
Corporation and John Hancock Broker Distribution Services, Inc., please be
advised that the Trust has established a new series of its shares, namely, John
Hancock Freedom International Fund (the "Fund"), and please be further advised
that the Trust desires to retain John Hancock Broker Distribution Services, Inc.
to serve as distributor and principal underwriter under the Distribution
Agreement for the Fund. With respect to the Fund, where the term "Distributors"
is used in the Distribution Agreement, such term shall refer to John Hancock
Broker Distribution Services, Inc.
Please indicate your acceptance of this responsibility by signing this
letter as indicated below.
ACCEPTED AND AGREED TO:
JOHN HANCOCK BROKER DISTRIBUTION FREEDOM INVESTMENT TRUST II
SERVICES, INC.
By: /s/C.Troy Shaver, Jr. By: /s/Hugh Dunlap, Jr.
Title: President
Dated: January 3, 1994
SOLICITING DEALER AGREEMENT
[LOGO]
JOHN HANCOCK FUNDS, INC.
BOSTON -- MASSACHUSETTS -- 02199-7603
<PAGE>
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MA 02199-7603
SOLICITING DEALER AGREEMENT
Date
------------------------------
John Hancock Funds, Inc. ("the Distributor" or "Distributor") is the
principal distributor of the shares of beneficial interest (the "securities")
of each of the John Hancock Funds, ("We" or "us"), (the "Funds"). Such Funds
are those listed on Schedule A hereto which may be amended or supplemented from
time to time by the Distributor to include additional Funds for which the
Distributor is the principal distributor. You represent that you are a member
of the National Association of Securities Dealers, Inc., (the "NASD") and,
accordingly, we invite you to become a non-exclusive soliciting dealer to
distribute the securities of the Funds and you agree to solicit orders for the
purchase of the securities on the following terms. Securities are offered
pursuant to each Fund's prospectus and statement of additional information, as
such prospectus and statement of additional information may be amended from
time to time. To the extent that the prospectus or statement of additional
information contains provisions that are inconsistent with the terms of this
Agreement, the terms of the prospectus or statement of additional information
shall be controlling.
OFFERINGS
1. You agree to abide by the Rules of Fair Practice of the NASD and to all
other rules and regulations that are now or may become applicable to
transactions hereunder.
2. As principal distributor of the Funds, we shall have full authority to
take such action as we deem advisable in respect of all matters pertaining to
the distribution. This offer of shares of the Funds to you is made only in
such jurisdictions in which we may lawfully sell such shares of the Funds.
3. You shall not make any representation concerning the Funds or their
securities except those contained in the then- current prospectus or
statement of additional information for each Fund.
4. With the exception of listings of product offerings, you agree not to
furnish or cause to be furnished to any person or display, or publish any
information or materials relating to any Fund (including, without limitation,
promotional materials, sales literature, advertisements, press releases,
announcements, posters, signs and other similar materials), except such
information and materials as may be furnished to you by the Distributor or the
Fund. All other materials must receive written approval by the Distributor
before distribution or display to the public. Use of all approved advertising
and sales literature materials is restricted to appropriate distribution
channels.
5. You are not authorized to act as our agent. Nothing shall constitute you
as a syndicate, association, joint venture, partnership, unincorporated
business, or other separate entity or otherwise partners with us, but you shall
be liable for your proportionate share of any tax, liability or expense based
on any claim arising from the sale of shares of the Funds under this Agreement.
We shall not be under any liability to you, except for obligations expressly
assumed by us in this Agreement and liabilities under Section 11(f) of the
Securities Act of 1933, and no obligations on our part shall be implied or
inferred herefrom.
-2-
<PAGE>
6. DEALER COMPLIANCE/SUITABILITY STANDARDS (CLASS A AND CLASS B SHARES) -
Certain mutual funds distributed by the Distributor are being offered with two
or more classes of shares of the same investment portfolio ("Fund") - refer to
each Fund prospectus for availability and details. It is essential that the
following minimum compliance/suitability standards be adhered to in offering
and selling shares of these Funds to investors. All dealers offering shares of
the Funds and their associated persons agree to comply with these general
suitability and compliance standards.
SUITABILITY
With two classes of shares of certain funds available to individual
investors, (Class A and Class B), it is important that each investor purchases
not only the fund that best suits his or her investment objective but also the
class of shares that offers the most beneficial distribution financing method
for the investor based upon his or her particular situation and preferences.
Fund share recommendations and orders must be carefully reviewed by you and
your registered representatives in light of all the facts and circumstances, to
ascertain that the class of shares to be purchased by each investor is
appropriate and suitable. These recommendations should be based on several
factors, including but not limited to:
(A) the amount of money to be invested initially and over a period of
time;
(B) the current level of front-end sales load or back-end sales load
imposed by the Fund;
(C) the period of time over which the client expects to retain the
investment;
(D) the anticipated level of yield from fixed income funds' Class A and
Class B shares;
(E) any other relevant circumstances such as the availability of
reduced sales charges under letters of intent and/or rights of
accumulation.
There are instances when one distribution financing method may be more
appropriate than another. For example, shares subject to a front-end sales
charge may be more appropriate than shares subject to a contingent deferred
sales charge for large investors who qualify for a significant quantity
discount on the front-end sales charge. In addition, shares subject to a
contingent deferred sales charge may be more appropriate for investors whose
orders would not qualify for quantity discounts and who, therefore, may prefer
to defer sales charges and also for investors who determine it to be
advantageous to have all of their funds invested without deduction of a
front-end sales commission. However, if it is anticipated that an investor may
redeem his or her shares within a short period of time, the investor may,
depending on the amount of his or her purchase, bear higher distribution
expenses by purchasing contingent deferred sales charge shares than if he or
she had purchased shares subject to a front-end sales charge.
COMPLIANCE
Your supervisory procedures should be adequate to assure that an
appropriate person reviews and approves transactions entered into pursuant to
this Soliciting Dealer Agreement for compliance with the foregoing standards.
In certain instances, it may be appropriate to discuss the purchase with the
registered representatives involved or to review the advantages and
disadvantages of selecting one class of shares over another with the client.
The Distributor will not accept orders for Class B Shares in any Fund from you
for accounts maintained in street name. Trades for Class B Shares will only be
accepted in the name of the shareholder.
7. CLASS C SHARES - Certain mutual funds distributed by the Distributor may be
offered with Class C shares. Refer to each Fund prospectus for availability
and details. Class C shares are designed for institutional investors and
qualified benefit plans, including pension funds, and are sold without a sales
charge or 12b-1 fee. If a commission is paid to you for transactions in Class
C shares, it will be paid by the Distributor out of its own resources.
SALES
8. Orders for securities received by you from investors will be for the sale
of the securities at the public offering price, which will be the net asset
value per share as determined in the manner provided in the relevant Fund's
prospectus, as now in effect or as amended from time to time, next after
receipt by us (or the relevant Fund's transfer agent) of the purchase
application and payment for the securities, plus the relevant sales charges set
forth in the relevant Fund's then- current prospectus (the "Public Offering
Price"). The procedures relating to the handling of orders shall be subject to
our instructions which we will forward from time to time to you. All orders
are subject to acceptance by us, and we reserve the right in our sole
discretion to reject any order.
-3-
<PAGE>
In addition to the foregoing, you acknowledge and agree to the initial
and subsequent investment minimums, which may vary from year to year, as
described in the then-current prospectus for each Fund.
9. You agree to sell the securities only (a) to your customers at the public
offering price then in effect, or (b) back to the Funds at the currently quoted
net asset value.
10. The amount of sales charge to be reallowed to you (the "Reallowance") as a
percentage of the offering price is set forth in the then-current prospectus of
each Fund.
If a sales charge on the purchase is reduced in accordance with the
provisions of the relevant Fund's then-current prospectus pertaining to
"Methods of Obtaining Reduced Sales Charges," the Reallowance shall be reduced
pro rata.
11. We shall pay a Reallowance subject to the provisions of this agreement as
set forth in Schedule B hereto on all purchases made by your customers pursuant
to orders accepted by us (a) where an order for the purchase of securities is
obtained by a registered representative in your employ and remitted to us
promptly by you, (b) where a subsequent investment is made to an account
established by a registered representative in your employ or (c) where a
subsequent investment is made to an account established by a broker/dealer
other than you and is accompanied by a signed request from the account
shareholder that your registered representative receive the Reallowance for
that investment and/or for subsequent investments made in such account. If for
any reason, a purchase transaction is reversed, you shall not be entitled to
receive or retain any part of the Reallowance on such purchase and shall pay to
us on demand in full the amount of the Reallowance received by you in
connection with any such purchase. We may withhold and retain from the amount
of the Reallowance due you a sum sufficient to discharge any amount due and
payable by you to us.
12. Certain of the Funds have adopted a plan under Investment Company Act
Rule 12b-1 ("Distribution Plan" as described in the the prospectus). To the
extent you provide distribution and marketing services in the promotion of the
sale of shares of these Funds, including furnishing services and assistance to
your customers who invest in and own shares of such Funds and including, but
not limited to, answering routine inquiries regarding such Funds and assisting
in changing distribution options, account designations and addresses, you may
be entitled to receive compensation from us as set forth in Schedule C hereto.
All compensation, including 12b-1 fees, shall be payable to you only to the
extent that funds are received and in the possession of the Distributor.
13. We will advise you as to the jurisdictions in which we believe the shares
have been qualified for sale under the respective securities or "blue sky" laws
of such jurisdictions, but we assume no responsibility or obligations as to
your right to sell the shares of the Funds in any state or jurisdiction.
14. Orders may be placed through:
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
1-800-338-4265
SETTLEMENT
15. Settlements for wire orders shall be made within five business days after
our acceptance of your order to purchase shares of the Funds. Certificates,
when requested, will be delivered to you upon payment in full of the sum due
for the sale of the shares of the Funds. If payment is not so received or
made, we reserve the right forthwith to cancel the sale, or, at our option, to
liquidate the shares of the Fund subject to such sale at the then prevailing
net asset value, in which latter case you will agree to be responsible for any
loss resulting to the Funds or to us from your failure to make payments as
aforesaid.
-4-
<PAGE>
INDEMNIFICATION
16. The parties to this agreement hereby agree to indemnify and hold harmless
each other, their officers and directors, and any person who is or may be
deemed to be a controlling person of each other, from and against any losses,
claims, damages, liabilities or expenses (including reasonable fees of
counsel), whether joint or several, to which any such person or entity may
become subject insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arise out of or are based upon, (a) any untrue
statement or alleged untrue statement of material fact, or any omission or
alleged omission to state a material fact made or omitted by it herein, or, (b)
any willful misfeasance or gross misconduct by it in the performance of its
duties and obligations hereunder.
17. NSCC INDEMNITY - SHAREHOLDER AND HOUSE ACCOUNTS - In consideration of the
Distributor and John Hancock Investor Services Corporation ("Investor
Services") liquidating, exchanging, and/or transferring unissued shares of the
Funds for your customers without the use of original or underlying
documentation supporting such instructions (e.g., a signed stock power or
signature guarantee), you hereby agree to indemnify the Distributor, Investor
Services and each respective Fund against any losses, including reasonable
attorney's fees, that may arise from such liquidation exchange, and/or
transfer of unissued shares upon your direction. This indemnification shall
apply only to the liquidation, exchange and/or transfer of unissued shares in
shareholder and house accounts executed as wire orders transmitted via NSCC's
Fund/SERVsystem. You represent and warrant to the Funds, the Distributor and
Investor Services that all such transactions shall be properly authorized by
your customers.
The indemnification in this Section 16 shall not apply to any losses
(including attorney's fees) caused by a failure of the Distributor, Investor
Services or a Fund to comply with any of your instructions governing any of the
above transactions, or any negligent act or omission of the Distributor,
Investor Services or a Fund, or any of their directors, officers, employees or
agents. All transactions shall be settled upon your confirmation through NSCC
transmission to Investor Services.
The Distributor, Investor Services or you may revoke the indemnity
contained in this Section 16 upon prior written notice to each of the other
parties hereto, and in the case of such revocation, this indemnity agreement
shall remain effective as to trades made prior to such revocation.
MISCELLANEOUS
18. We will supply to you at our expense additional copies of the prospectus
and statement of additional information for each of the Funds and any printed
information supplemental to such material in reasonable quantities upon
request.
19. Any notice to you shall be duly given if mailed or telegraphed to you at
your address as registered from time to time with the NASD.
20. Miscellaneous provisions, if any, are attached hereto and incorporated
herein by reference.
21. This agreement, which shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, may be terminated by any party hereto at any
time upon written notice.
-5-
<PAGE>
SOLICITING DEALER
-------------------------------------------------
Name of Organization
By:-------------------------------------------------
Authorized Signature of Soliciting Dealer
-------------------------------------------------
Please Print or Type Name
-------------------------------------------------
Title
-------------------------------------------------
Print or Type Address
-------------------------------------------------
Telephone Number
Date:
-------------------------------------------------
In order to service you efficiently, please provide the following
information on your Mutual Funds Operations Department:
OPERATIONS MANAGER:
---------------------------------------------
ORDER ROOM MANAGER:
---------------------------------------------
OPERATIONS ADDRESS:
---------------------------------------------
---------------------------------------------
TELEPHONE: FAX:
-------------------------------- ------------------------------
<TABLE>
<S> <C>
TO BE COMPLETED BY: TO BE COMPLETED BY:
JOHN HANCOCK FUNDS, INC. JOHN HANCOCK INVESTOR
SERVICES CORPORATION
BY: BY:
------------------------------------------- -------------------------------------------
- ---------------------------------------------- ----------------------------------------------
TITLE TITLE
</TABLE>
DEALER NUMBER:
------------------------------------
-6-
<PAGE>
JOHNHANCOCK
MUTUAL FUNDS
John Hancock Broker Distrubution Services, Inc.
101 Huntington Avenue Boston, MA 02199-7608 1-800-225-5291
/s/ John Hancock
<PAGE>
JOHN HANCOCK FUNDS, INC.
SCHEDULE A
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
<TABLE>
<S> <C>
John Hancock Sovereign Achievers Fund John Hancock National Aviation & Technology Fund
John Hancock Sovereign Investors Fund John Hancock Regional Bank Fund
John Hancock Sovereign Balanced Fund John Hancock Gold and Government Fund
John Hancock Sovereign Bond Fund John Hancock Global Rx Fund
John Hancock Sovereign U.S. Government Income Fund John Hancock Global Technology Fund
John Hancock Special Equities Fund* John Hancock Global Fund
John Hancock Special Opportunities Fund John Hancock Pacific Basin Equities Fund
John Hancock Discovery Fund John Hancock Global Income Fund
John Hancock Growth Fund John Hancock International Fund
John Hancock Strategic Income Fund John Hancock Global Resources Fund
John Hancock Limited-Term Government Fund John Hancock Emerging Growth Fund
John Hancock Cash Management Fund John Hancock Capital Growth Fund
John Hancock Managed Tax-Exempt Fund John Hancock Growth & Income Fund
John Hancock Tax-Exempt Income Fund John Hancock High Yield Bond Fund
John Hancock Tax-Exempt Series Fund John Hancock Investment Quality Bond Fund
John Hancock Special Value Fund John Hancock Government Securities Fund
John Hancock Strategic Short-Term Income Fund John Hancock U.S. Government Fund
John Hancock CA Tax-Free Fund John Hancock Government Income Fund
John Hancock High Yield Tax-Free Fund John Hancock Intermediate Government Fund
John Hancock Tax-Free Bond Fund John Hancock Adjustable U.S. Government Fund
John Hancock U.S. Government Cash Reserve Fund John Hancock Cash Reserve Money Market B Fund
</TABLE>
From time to time John Hancock Funds, Inc., as principal distributor of the
John Hancock funds, will offer additional funds for sale. These funds will
automatically become part of this Agreement and will be subject to all its
provisions unless otherwise directed by John Hancock Funds, Inc.
*Closed to new investors as of 9/30/94
<PAGE>
JOHN HANCOCK FUNDS, INC.
SCHEDULE B
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
I. REALLOWANCE
The Reallowance paid to the selling Brokers for sales of John Hancock
Funds is set forth in each Fund's then- current prospectus. No Commission will
be paid on sales of John Hancock Cash Management Fund or any John Hancock Fund
that is without a sales charge. Purchases of Class A shares of $1 million or
more, or purchases into an account or accounts whose aggregate value of fund
shares is $1 million or more will be made at net asset value with no initial
sales charge. On purchases of this type, John Hancock Funds, Inc. will pay a
commission as set forth in each Fund's then-current prospectus. John Hancock
Funds, Inc. will pay Brokers for sales of Class B shares of the Funds a
marketing fee as set forth in each Fund's then-current prospectus.
<PAGE>
JOHN HANCOCK FUNDS, INC.
SCHEDULE C
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
FIRST YEAR SERVICE FEES
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, John Hancock Funds, Inc. will advance to you a First Year
Service Fee related to the purchase of Class A shares (only if subject to sales
charge) or Class B shares of any of the Funds, as the case may be, sold by your
firm. This Service Fee will be compensation for your personal service and/or
the maintenance of shareholder accounts ("Customer Servicing") during the
twelve-month period immediately following the purchase of such shares, in the
amount not to exceed .25 of 1% of net assets invested in Class A shares or
Class B shares of the Fund, as the case may be, purchased by your customers.
SERVICE FEE SUBSEQUENT TO THE FIRST YEAR
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will pay you quarterly, in arrears, a
Service Fee commencing at the end of the twelve month period immediately
following the purchase of Class A shares (only if subject to sales charge) or
Class B shares, as the case may be, sold by your firm, for Customer Servicing,
in an amount not to exceed .25 of 1% of the average daily net assets
attributable to the Class A shares or Class B shares of the Fund, as the case
may be, purchased by your customers, provided your firm has under management
with the Funds combined average daily net assets for the preceding quarter of
no less than $1 million, or an individual representative of your firm has under
management with the Funds combined average daily net assets for the preceding
quarter of no less than $250,000 (an "Eligible Firm").
<PAGE>
JOHN HANCOCK BROKER DISTRIBUTION SERVICES, INC.
SCHEDULE D
DATED JULY 1, 1992 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK MUTUAL FUNDS
No broker/dealer shall represent the FUnds or Distribution Services in any
written communications without prior receipt of written approval from John
Hancock Broker Distribution Services, Inc. This includes but is not limited to
all advertising, public relations, marketing and sales literature, and media
contacts.
Further, subsequent to the creation of such materialsbefore written
approval from JHBDS will be given, a copy of the NASD review document
applicable to such materials must be furnished to John Hancock Broker
Distribution Services, Inc. for its review and files.
FOR PURPOSES OF THIS SCHEDULE D, THE FOLLOWING TERMS ARE DEFINED:
Advertising:
materials designed for the mass market, e.g. print ads, radio and tv
commercials, billboards, etc.
Sales literature:
materials designed for a directed market, e.g. prospecting letters,
brochures, mailers, stuffers, etc.
Coop Advertising:
advertising materials (as defined above) used by selling group members
for which John Hancock pays some or all of the costs of publication
whether the materials were developed by JHBDS Marketing or not.
John Hancock Broker Distribution Services, Inc. Approval of Advertising:
Approval has four meanings:approval of the material itself from a
marketing perspective (JHBDS product managers), proactive compliance
officer), parent company corporate advertising approval (John Hancock
Mutual Life Insurance Company Advertising Dept. personnel) and
approval for use and related cost-sharing arrangements (national sales
coordinators).
NASD Filing:
Materials created by JHBDS will be filed with the NASD by the JHBDS
Compliance Department. Materials not created by JHBDS but to be
included in the coop program will be filed with the NASD by the
broker-dealer creating the materials. However, prior to use of the
materials in our coop program, we will need a copy of the final
version of the material as well as the NASDcomment letter. When this
is received, the above approvals can be obtained.
FINANCIAL INSTITUTION
SALES AND SERVICE AGREEMENT
[LOGO]
JOHN HANCOCK FUNDS, INC.
Boston - Massachusetts - 02199-7603
<PAGE>
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MA 02199-7603
FINANCIAL INSTITUTION
SALES AND SERVICE AGREEMENT
Date
--------------------------------
John Hancock Funds, Inc. ("The Distributor", or "Distributor"), ("We" or
"us"), is the principal distributor of the shares of beneficial interest (the
"securities") of each of the John Hancock Funds (the "Funds"). Such Funds are
those listed on Schedule A hereto which may be amended or supplemented from
time to time by the Distributor to include additional Funds for which the
Distributor is the principal distributor. You hereby represent that you are a
"bank" as defined in Section 3(a)(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and at the time of each transaction in shares of
the Funds, are not required to register as a broker/dealer under the Exchange
Act or regulations thereunder. We invite you to become a non-exclusive
soliciting financial institution ("Financial Institution") to distribute the
securities of the Funds and you agree to solicit orders for the purchase of the
securities on the following terms. Securities are offered pursuant to each
Fund's prospectus and statement of additional information, as such prospectus
and statement of additional information may be amended from time to time. To
the extent that the prospectus or statement of additional information contains
provisions that are inconsistent with the terms of this Agreement, the terms of
the prospectus or statement of additional information shall be controlling.
OFFERINGS
1. You represent and warrant that you will use your best efforts to ensure
that any purchase of shares of the Funds by your customers constitutes a
suitable investment for such customers. You acknowledge that you will base
such a decision of suitability on all the facts you have gathered about your
customer's financial situation, investment objectives, risk tolerance and
sophistication.
2. You represent and warrant that a copy of the then-current prospectus of a
Fund will be delivered to your customer before any purchase of shares of that
Fund are effected for that customer. You shall not effect any transaction in,
or induce any purchase or sale of, any shares of the Funds by means of any
manipulative, deceptive or other fraudulent device or contrivance, and shall
otherwise deal equitably and fairly with your customers with respect to
transactions in shares of a Fund.
3. You represent and warrant that you will not make shares of any Fund
available to your customers, including your fiduciary customers, except in
compliance with all Federal and state laws and rules and regulations of
regulatory agencies or authorities applicable to you, or any of your affiliates
engaging in such activity, which may affect your business practices. You
confirm that you are not in violation of any banking law or regulations as to
which you are subject. You agree that you will comply with the requirements of
Banking Circular 274 issued by the Office of the Comptroller of the Currency in
offering shares of the Funds to your customers. We agree that we will comply
with all Federal and state laws and rules and regulations of regulatory
agencies or authorities applicable to us. We and you acknowledge and agree
that the offering of shares of the Funds pursuant to this agreement is subject
to the oversight of your management and the regulatory authorities by which you
are subject to review, and that appropriate records and materials relating to
any activity by you or us undertaken pursuant to this agreement may be accessed
by bank examiners in the due course of any regulatory review to which you may
be subject.
4. As principal distributor of the Funds, we shall have full authority to take
such action as we deem advisable in respect of all matters pertaining to the
distribution. This offer of shares of the Funds to you is made only in such
jurisdictions in which we may lawfully sell such shares of the Funds.
-2-
<PAGE>
5. You shall not make any representation concerning the Funds or their
securities except those contained in the then-current prospectus or statement
of additional information for each Fund.
6. We will supply to you at our expense additional copies of the then-current
prospectus and statement of additional information for each of the Funds and
any printed information supplemental to such material in reasonable quantities
upon request. It shall be your obligation to ensure that all such information
and materials are distributed to your customers who own or seek to own shares
of the Funds in accordance with securities and/or banking law and regulations
and any other applicable regulations.
7. With the exception of listings of product offerings, you agree not to
furnish or cause to be furnished to any person or display, or publish any
information or materials relating to any Fund (including, without limitation,
promotional materials, sales literature, advertisements, press releases,
announcements, posters, signs and other similar materials), except such
information and materials as may be furnished to you by us the Distributor or
the Fund. All other materials must receive written approval by the Distributor
before distribution or display to the public. Use of all approved advertising
and sales literature materials is restricted to appropriate distribution
channels.
8. You are not authorized to act as our agent. In making available shares of
the Funds under this Financial Institution Sales and Service Agreement, nothing
herein shall be construed to constitute you or any of your agents, employees or
representatives as our agent or employee, or as an agent or employee of the
Funds, and you shall not make any representations to the contrary. Nothing
shall constitute you as a syndicate, association, unincorporated business, or
other separate entity or partners with us, but you shall be liable for your
proportionate share of any tax, liability or expense based on any claim arising
from the sale of shares of the Funds under this Agreement. We shall not be
under any liability to you, except for obligations expressly assumed by us in
this Agreement and liabilities under Section 11(f) of the Securities Act of
1933, and no obligations on our part shall be implied or inferred herefrom.
9. DEALER COMPLIANCE/SUITABILITY STANDARDS (CLASS A AND CLASS B SHARES) -
Certain mutual funds distributed by the Distributor are being offered with two
or more classes of shares of the same investment portfolio ("Fund") - refer to
each Fund prospectus for availability and details. It is essential that the
following minimum compliance/suitability standards be adhered to in offering
and selling shares of these Funds to investors. All soliciting financial
institutions offering shares of the Funds and their agents, employees and
representatives agree to comply with these general suitability and compliance
standards.
SUITABILITY
With two classes of shares of certain funds available to individual
investors, (Class A and Class B), it is important that each investor purchases
not only the fund that best suits his or her investment objective but also the
class of shares that offers the most beneficial distribution financing method
for the investor based upon his or her particular situation and preferences.
Fund share recommendations and orders must be carefully reviewed by you and
your agents, employees and representatives in light of all the facts and
circumstances, to ascertain that the class of shares to be purchased by each
investor is appropriate and suitable. These recommendations should be based on
several factors, including but not limited to:
(A) the amount of money to be invested initially and over
a period of time;
(B) the current level of front-end sales load or back-end
sales load imposed by the Fund;
(C) the period of time over which the customer expects to
retain the investment;
(D) the anticipated level of yield from fixed income
funds' Class A and Class B shares;
(E) any other relevant circumstances such as the
availability of reduced sales charges under letters
of intent and/or rights of accumulation.
There are instances when one distribution financing method may be more
appropriate than another. For example, shares subject to a front-end sales
charge may be more appropriate than shares subject to a contingent deferred
sales charge for large investors who qualify for a significant quantity
discount on the front-end sales charge. In addition, shares subject to a
contingent deferred sales charge may be more appropriate for investors whose
orders would not qualify for quantity discounts and who, therefore, may prefer
to defer sales charges and also for investors who determine it to be
advantageous to have all of their funds invested without deduction of a
front-end sales commission. However, if it is anticipated that an investor may
redeem his or her shares within a short period of time, the investor may,
depending on the amount of his or her purchase, bear higher distribution
expenses by purchasing contingent deferred sales charge shares than if he or
she had purchased shares subject to a front-end sales charge.
-3-
<PAGE>
COMPLIANCE
Your supervisory procedures should be adequate to assure that an
appropriate person reviews and approves transactions entered into pursuant to
this Financial Institution Sales and Service Agreement for compliance with the
foregoing standards. In certain instances, it may be appropriate to discuss
the purchase with the agents, employees and representatives involved or to
review the advantages and disadvantages of selecting one class of shares over
another with the client. The Distributor will not accept orders for Class B
Shares in any Fund from you for accounts maintained in your name or in the name
of your nominee for the benefit of certain of your customers. Trades for Class
B Shares will only be accepted in the name of the shareholder.
10. CLASS C SHARES - Certain mutual funds distributed by the Distributor may
be offered with Class C shares. Refer to each Fund prospectus for availability
and details. Class C shares are designed for institutional investors and
qualified benefit plans, including pension funds, and are sold without a sales
charge or 12b-1 fee. If a commission is paid to you for transactions in Class
C shares, it will be paid by the Distributor out of its own resources.
SALES
11. With respect to any and all transactions in the shares of any Fund
pursuant to this Financial Institution Sales and Service Agreement it is
understood and agreed in each case that: (a) you shall be acting solely as
agent for the account of your customer; (b) each transaction shall be initiated
solely upon the order of your customer; (c) we shall execute transactions only
upon receiving instructions from you acting as agent for your customer or upon
receiving instructions directly from your customer; (d) as between you and your
customer, your customer will have full beneficial ownership of all shares; (c)
each transaction shall be for the account of your customer and not for your
account; and (f) unless otherwise agreed in writing we will serve as a clearing
broker for you on a fully disclosed basis, and you shall serve as the
introducing agent for your customers' accounts. Subject to the foregoing,
however, and except for Class B shares, as described in Section 8 above, you
may maintain record ownership of such customers' shares in an account
registered in your name or the name of your nominee, for the benefit of such
customers. Each transaction shall be without recourse to you provided that you
act in accordance with the terms of this Financial Institution Sales and
Service Agreement. You represent and warrant to us that you will have full
right, power and authority to effect transactions (including, without
limitation, any purchases and redemptions) in shares of the Funds on behalf of
all customer accounts provided by you.
12. Orders for securities received by you from your customers will be for the
sale of the securities at the public offering price, which will be the net
asset value per share as determined in the manner provided in the relevant
Fund's prospectus, as now in effect or as amended from time to time, next after
receipt by us (or the relevant Fund's transfer agent) of the purchase
application and payment for the securities, plus the relevant sales charges set
forth in the relevant Fund's then-current prospectus (the "Public Offering
Price"). The procedures relating to the handling of orders shall be subject to
our instructions which we will forward from time to time to you. All orders
are subject to acceptance by us, and we reserve the right in our sole
discretion to reject any order.
In addition to the foregoing, you acknowledge and agree to the initial and
subsequent investment minimums, which may vary from year to year, as described
in the then-current prospectus for each Fund.
13. You agree to sell the securities only (a) to your customers at the public
offering price then in effect, or (b) back to the Funds at the currently quoted
net asset value.
14. The amount of sales charge to be reallowed to you (the "Reallowance") as a
percentage of the offering price is set forth in the then-current prospectus of
each Fund.
If a sales charge on the purchase is reduced in accordance with the
provisions of the relevant Fund's then- current prospectus pertaining to
"Methods of Obtaining Reduced Sales Charges," the Reallowance shall be reduced
pro rata.
15. We shall pay a Reallowance subject to the provisions of this agreement as
set forth in Schedule B hereto on all purchases made by your customers pursuant
to orders accepted by us (a) where an order for the purchase of securities is
obtained by you and remitted to us promptly by you, (b) where a subsequent
investment is made to an account established by you or (c) where a subsequent
investment is made to an account established by a financial institution or
-4-
<PAGE>
registered broker/dealer other than you and is accompanied by a signed request
from the account shareholder that you receive the Reallowance for that
investment and/or for subsequent investments made in such account. If for any
reason, a purchase transaction is reversed, you shall not be entitled to
receive or retain any part of the Reallowance on such purchase and shall pay to
us on demand in full the amount of the Reallowance received by you in
connection with any such purchase. We may withhold and retain from the amount
of the Reallowance due you a sum sufficient to discharge any amount due and
payable by you to us.
16. Certain of the Funds have adopted a plan under Investment Company Act
Rule 12b-1 ("Distribution Plan" as described in the prospectus). To the extent
you provide distribution and marketing services in the promotion of the sale of
shares of these Funds, including furnishing services and assistance to your
customers who invest in and own shares of such Funds and including, but not
limited to, answering routine inquiries regarding such Funds and assisting in
changing distribution options, account designations and addresses, you may be
entitled to receive compensation from us as set forth in Schedule C hereto.
All compensation, including 12b-1 fees, shall be payable to you only to the
extent that funds are received and in the possession of the Distributor.
17. We will advise you as to the jurisdictions in which we believe the shares
have been qualified for sale under the respective securities or "blue sky" laws
of such jurisdictions, but we assume no responsibility or obligations as to
your right to sell the shares of the Funds in any state or jurisdiction.
18. Orders may be placed through:
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
1-800-338-4265
SETTLEMENT
19. Settlements for wire orders shall be made within five business days after
our acceptance of your order to purchase shares of the Funds. Certificates,
when requested, will be delivered to you upon payment in full of the sum due
for the sale of the shares of the Funds. If payment is not so received or
made, we reserve the right forthwith to cancel the sale, or, at our option, to
liquidate the shares of the Fund subject to such sale at the then prevailing
net asset value, in which latter case you will agree to be responsible for any
loss resulting to the Funds or to us from your failure to make payments as
aforesaid.
INDEMNIFICATION
20. The parties to this agreement hereby agree to indemnify and hold harmless
each other, their officers and directors, and any person who is or may be
deemed to be a controlling person of each other, from and against any losses,
claims, damages, liabilities or expenses (including reasonable fees of
counsel), whether joint or several, to which any such person or entity may
become subject insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arise out of or are based upon, (a) any untrue
statement or alleged untrue statement of material fact, or any omission or
alleged omission to state a material fact made or omitted by it herein, or, (b)
any willful misfeasance or gross misconduct by it in the performance of its
duties and obligations hereunder.
MISCELLANEOUS
21. Any notice to you shall be duly given if mailed or telegraphed to you at
your address as most recently furnished to us by you.
22. Miscellaneous provisions, if any, are attached hereto and incorporated
herein by reference.
23. This agreement, which shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, may be terminated by any party hereto at any
time upon written notice.
-5-
<PAGE>
FINANCIAL INSTITUTION
-------------------------------------------------
Financial Institution
By:
-------------------------------------------------
Authorized Signature of Financial Institution
-------------------------------------------------
Please Print or Type Name
-------------------------------------------------
Title
-------------------------------------------------
Print or Type Address
-------------------------------------------------
Telephone Number
Date:
-------------------------------------------------
In order to service you efficiently, please provide the
following information on your Mutual Funds Operations Department:
OPERATIONS MANAGER:
---------------------------------------------
ORDER ROOM MANAGER:
---------------------------------------------
OPERATIONS ADDRESS:
---------------------------------------------
---------------------------------------------
TELEPHONE: FAX:
--------------------- ----------------------------
TO BE COMPLETED BY: JOHN HANCOCK INVESTOR
JOHN HANCOCK FUNDS, INC. SERVICES CORPORATION
By: By:
--------------------------------- ------------------------------------
- ------------------------------------ ------------------------------------
Title Title
TO BE COMPLETED BY:
FINANCIAL INSTITUTION NUMBER:
----------------------------------------------
-6-
<PAGE>
JOHN HANCOCK FUNDS, INC.
SCHEDULE A
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
<TABLE>
<S> <C>
John Hancock Sovereign Achievers Fund John Hancock National Aviation & Technology Fund
John Hancock Sovereign Investors Fund John Hancock Regional Bank Fund
John Hancock Sovereign Balanced Fund John Hancock Gold and Government Fund
John Hancock Sovereign Bond Fund John Hancock Global Rx Fund
John Hancock Sovereign U.S. Government Income Fund John Hancock Global Technology Fund
John Hancock Special Equities Fund* John Hancock Global Fund
John Hancock Special Opportunities Fund John Hancock Pacific Basin Equities Fund
John Hancock Discovery Fund John Hancock Global Income Fund
John Hancock Growth Fund John Hancock International Fund
John Hancock Strategic Income Fund John Hancock Global Rescources Fund
John Hancock Limited Term Government Fund John Hancock Emerging Growth Fund
John Hancock Cash Management Fund John Hancock Capital Growth Fund
John Hancock Managed Tax-Exempt Fund John Hancock Growth & Income Fund
John Hancock Tax-Exempt Income Fund John Hancock High Yield Bond Fund
John Hancock Tax-Exempt Series Fund John Hancock Investment Quality Bond Fund
John Hancock Special Value Fund John Hancock Government SecurritiesFund
John Hancock Strategic Short-Term Income Fund John Hancock U.S. Government Fund
John Hancock CA Tax-Free Fund John Hancock Governtment Income Fund
John Hancock High Yield Tax-Free Fund John Hancock Intermediate Government Fund
John Hancock Tax-Free Bond Fund John Hancock Adjustable U.S. Government Fund
John Hancock U.S. Government Cash Reserve Fund John Hancock Cash Reserve Money Market B Fund
</TABLE>
From time to time John Hancock Funds, as principal distributor of the
John Hancock Funds, will offer additional funds for sale. These funds will
automatically become part of this Agreement and will be subject to all its
provisions unless otherwise directed by John Hancock Funds, Inc.
* Closed to new invstors as of 9/30/94.
<PAGE>
JOHN HANCOCK FUNDS, INC.
SCHEDULE B
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
I. REALLOWANCE
The Reallowance paid to Financial Institutions for sales of John Hancock
Funds is the same as that paid to Selling Brokers described and set forth
in each Fund's then-current prospectus. No Commission will be paid on
sales of John Hancock Cash Management Fund or any John Hancock Fund that is
without a sales charge. Purchases of Class A shares of $1 million or more,
or purchases into an account or accounts whose aggregate value of fund
shares is $1 million or more will be made at net asset value with no
initial sales charge. On purchases of this type, the Distributor will pay a
commission as set forth in each Fund's then-current prospectus. John
Hancock Funds, Inc. will pay Financial Institutions for sales of Class B
shares of the Funds a marketing fee as set forth in each Fund's then-
current prospectus for Selling Brokers.
<PAGE>
JOHN HANCOCK FUNDS, INC.
SCHEDULE C
DISTRIBUTION PLAN SCHEDULE OF COMPENSATION
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
FIRST YEAR SERVICE FEE
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will advance to you a First Year Service
Fee related to the purchase of Class A shares (only if subject to sales charge)
or Class B shares of any of the Funds, as the case maybe, sold by your firm on
or after July 1, 1993. This Service Fee will be compensation for your personal
service and/or the maintenance of shareholder accounts ("Customer Servicing")
during the twelve-month period immediately following the purchase of such
shares, in an amount not to exceed .25 of 1% of the average daily net assets
attributable to Class A shares or Class B shares of the Fund, as the case may
be, purchased by your customers.
SERVICE FEE SUBSEQUENT TO THE FIRST YEAR
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will pay you quarterly, in arrears, a
Service Fee commencing at the end of the twelve-month period immediately
following the purchase of Class A shares (only if subject to sales charge) or
Class B shares, as the case may be, sold by your firm, for Customer Servicing,
in an amount not to exceed .25 of 1% of the average daily net assets
attributable to the Class A shares or Class B shares of the Fund, as the case
may be, purchased by your customers, provided your Financial Institution has
under management with the Funds combined average daily net assets for the
preceding quarter of no less than $1 million, or an individual representative
of your Financial Institution has under management with the Funds combined
average daily net assets for the preceding quarter of no less than $250,000 (an
"Eligible Financial Institution").
MASTER CUSTODIAN AGREEMENT
between
JOHN HANCOCK MUTUAL FUNDS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
1. Definitions..................................................1-3
2. Employment of Custodian and Property to be held by it........3-4
3. Duties of the Custodian with Respect to
Property of the Fund.........................................4
A. Safekeeping and Holding of Property......................4
B. Delivery of Securities...................................4-7
C. Registration of Securities...............................7
D. Bank Accounts............................................7
E. Payments for Shares of the Fund..........................8
F. Investment and Availability of Federal Funds.............8
G. Collections..............................................8-9
H. Payment of Fund Moneys...................................9-10
I. Liability for Payment in Advance of
Receipt of Securities Purchased..........................10
J. Payments for Repurchases of Redemptions
of Shares of the Fund....................................11
K. Appointment of Agents by the Custodian...................11
L. Deposit of Fund Portfolio Securities in
Securities Systems.......................................12-13
M. Deposit of Fund Commercial Paper in an Approved
Book-Entry System for Commercial Paper...................14-16
N. Segregated Account.......................................16
O. Ownership Certificates for Tax Purposes..................16
P. Proxies .................................................17
Q. Communications Relating to Fund Portfolio
Securities.........................................17
R. Exercise of Rights; Tender Offers.......................17-18
S. Depository Receipts......................................18
T. Interest Bearing Call or Time Deposits...................18
U. Options, Futures Contracts and Foreign
Currency Transactions....................................18-20
V. Actions Permitted Without Express Authority..............20
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value...............................20-21
5. Records and Miscellaneous Duties.............................21
6. Opinion of Fund's Independent Public Accountants.............22
7. Compensation and Expenses of Bank............................22
8. Responsibility of Bank.......................................22-23
9. Persons Having Access to Assets of the Fund..................23
10. Effective Period, Termination and Amendment;
Successor Custodian..........................................24
11. Interpretive and Additional Provisions.......................25
12. Certification as to Authorized Officers......................25
13. Notices......................................................25
14. Massachusetts Law to Apply...................................25
15. Adoption of the Agreement by the Fund........................26
<PAGE>
MASTER CUSTODIAN AGREEMENT
This Agreement is made as of June 15, 1994 between each investment company
advised by John Hancock Advisers, Inc. which has adopted this Agreement in the
manner provided herein and State Street Bank and Trust Company (hereinafter
called "Bank", "Custodian" and "Agent"), a trust company established under the
laws of Massachusetts with a principal place of business in Boston,
Massachusetts.
Whereas, each such investment company is registered under the Investment
Company Act of 1940 and has appointed the Bank to act as Custodian of its
property and to perform certain duties as its Agent, as more fully hereinafter
set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company and the
Bank agree as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Fund" shall mean the investment company which has adopted this
Agreement and is listed on Appendix A hereto. If the Fund is a Massachusetts
business trust or Maryland corporation, it may in the future establish and
designate other separate and distinct series of shares, each of which may be
called a "portfolio"; in such case, the term "Fund" shall also refer to each
such separate series or portfolio.
(b) "Board" shall mean the board of directors/trustees/managing general
partners/director general partners of the Fund, as the case may be.
(c) "The Depository Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(d) "Authorized Officer", shall mean any of the following officers of the
Trust: The Chairman of the Board of Trustees, the President, a Vice President,
the Secretary, the Treasurer or Assistant Secretary or Assistant Treasurer, or
any other officer of the Trust duly authorized to sign by appropriate resolution
of the Board of Trustees of the Trust.
(e) "Participants Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(f) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934 which acts as a securities depository but
only if the Custodian has received a certified copy of a vote of the Board
approving such clearing agency as a securities depository for the Fund.
(g) "Federal Book-Entry System" shall mean the book-entry system referred
to in Rule 17f-4(b) under the Investment Company Act of 1940 for United States
and federal agency securities (i.e., as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the book-entry
regulations of federal agencies substantially in the form of Subpart O).
(h) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in rule 17f-4 under the
Investment Company Act of 1940 for foreign securities but only if the Custodian
has received a certified copy of a vote of the Board approving such depository
or clearing agency as a foreign securities depository for the Fund.
(i) "Approved Book-Entry System for Commercial Paper" shall mean a system
maintained by the Custodian or by a subcustodian employed pursuant to Section 2
hereof for the holding of commercial paper in book-entry form but only if the
Custodian has received a certified copy of a vote of the Board approving the
participation by the Fund in such system.
(j) The Custodian shall be deemed to have received "proper instructions" in
respect of any of the matters referred to in this Agreement upon receipt of
written or facsimile instructions signed by such one or more person or persons
as the Board shall have from time to time authorized to give the particular
class of instructions in question. Electronic instructions for the purchase and
sale of securities which are transmitted by John Hancock Advisers, Inc. to the
Custodian through the John Hancock equity trading system and the John Hancock
fixed income trading system shall be deemed to be proper instructions; the Fund
shall cause all such instructions to be confirmed in writing. Different persons
may be authorized to give instructions for different purposes. A certified copy
of a vote of the Board may be received and accepted by the Custodian as
conclusive evidence of the authority of any such person to act and may be
considered as in full force and effect until receipt of written notice to the
contrary. Such instructions may be general or specific in terms and, where
appropriate, may be standing instructions. Unless the vote delegating authority
to any person or persons to give a particular class of instructions specifically
requires that the approval of any person, persons or committee shall first have
been obtained before the Custodian may act on instructions of that class, the
Custodian shall be under no obligation to question the right of the person or
persons giving such instructions in so doing. Oral instructions will be
considered proper instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. The Fund authorizes the Custodian to tape record any and all
telephonic or other oral instructions given to the Custodian. Upon receipt of a
certificate signed by two officers of the Fund as to the authorization by the
President and the Treasurer of the Fund accompanied by a detailed description of
the communication procedures approved by the President and the Treasurer of the
Fund, "proper instructions" may also include communications effected directly
between electromechanical or electronic devices provided that the President and
Treasurer of the Fund and the Custodian are satisfied that such procedures
afford adequate safeguards for the Fund's assets. In performing its duties
generally, and more particularly in connection with the purchase, sale and
exchange of securities made by or for the Fund, the Custodian may take
cognizance of the provisions of the governing documents and registration
statement of the Fund as the same may from time to time be in effect (and votes,
resolutions or proceedings of the shareholders or the Board), but, nevertheless,
except as otherwise expressly provided herein, the Custodian may assume unless
and until notified in writing to the contrary that so-called proper instructions
received by it are not in conflict with or in any way contrary to any provisions
of such governing documents and registration statement, or votes, resolutions or
proceedings of the shareholders or the Board.
2. Employment of Custodian and Property to be Held by It
The Fund hereby appoints and employs the Bank as its Custodian and Agent in
accordance with and subject to the provisions hereof, and the Bank hereby
accepts such appointment and employment. The Fund agrees to deliver to the
Custodian all securities, participation interests, cash and other assets owned
by it, and all payments of income, payments of principal and capital
distributions and adjustments received by it with respect to all securities and
participation interests owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held by the Fund and not delivered by
the Fund to the Custodian. The Fund will also deliver to the Bank from time to
time copies of its currently effective charter (or declaration of trust or
partnership agreement, as the case may be), By-Laws, prospectus, statement of
additional information and distribution agreement with its principal
underwriter, together with such resolutions, votes and other proceedings of the
Fund as may be necessary for or convenient to the Bank in the performance of its
duties hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Board. Any such subcustodian so employed by
the Custodian shall be deemed to be the agent of the Custodian, and the
Custodian shall remain primarily responsible for the securities, participation
interests, moneys and other property of the Fund held by such subcustodian. Any
foreign subcustodian shall be a bank or trust company which is an eligible
foreign custodian within the meaning of Rule 17f-5 under the Investment Company
Act of 1940, and the foreign custody arrangements shall be approved by the Board
and shall be in accordance with and subject to the provisions of said Rule. For
the purposes of this Agreement, any property of the Fund held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the Custodian
under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Fund
A. Safekeeping and Holding of Property The Custodian shall keep
safely all property of the Fund and on behalf of the Fund
shall from time to time receive delivery of Fund property for
safekeeping. The Custodian shall hold, earmark and segregate
on its books and records for the account of the Fund all
property of the Fund, including all securities, participation
interests and other assets of the Fund (1) physically held by
the Custodian, (2) held by any subcustodian referred to in
Section 2 hereof or by any agent referred to in Paragraph K
hereof, (3) held by or maintained in The Depository Trust
Company or in Participants Trust Company or in an Approved
Clearing Agency or in the Federal Book-Entry System or in an
Approved Foreign Securities Depository, each of which from
time to time is referred to herein as a "Securities System",
and (4) held by the Custodian or by any subcustodian referred
to in Section 2 hereof and maintained in any Approved
Book-Entry System for Commercial Paper.
B. Delivery of Securities The Custodian shall release and deliver
securities or participation interests owned by the Fund held (or deemed
to be held) by the Custodian or maintained in a Securities System
account or in an Approved Book-Entry System for Commercial Paper
account only upon receipt of proper instructions, which may be
continuing instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities or participation interests for the
account of the Fund, but only against receipt of payment
therefor; if delivery is made in Boston or New York City, payment
therefor shall be made in accordance with generally accepted
clearing house procedures or by use of Federal Reserve Wire
System procedures; if delivery is made elsewhere payment therefor
shall be in accordance with the then current "street delivery"
custom or in accordance with such procedures agreed to in writing
from time to time by the parties hereto; if the sale is effected
through a Securities System, delivery and payment therefor shall
be made in accordance with the provisions of Paragraph L hereof;
if the sale of commercial paper is to be effected through an
Approved Book-Entry System for Commercial Paper, delivery and
payment therefor shall be made in accordance with the provisions
of Paragraph M hereof; if the securities are to be sold outside
the United States, delivery may be made in accordance with
procedures agreed to in writing from time to time by the parties
hereto; for the purposes of this subparagraph, the term "sale"
shall include the disposition of a portfolio security (i) upon
the exercise of an option written by the Fund and (ii) upon the
failure by the Fund to make a successful bid with respect to a
portfolio security, the continued holding of which is contingent
upon the making of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the Fund;
3) To the depository agent in connection with tender or
other similar offers for portfolio securities of the
Fund;
4) To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or
otherwise become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the Custodian
or any subcustodian employed pursuant to Section 2 hereof;
5) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee of the Custodian or
into the name or nominee name of any agent appointed pursuant to
Paragraph K hereof or into the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities or
participation interests are to be delivered to the Custodian or
any subcustodian employed pursuant to Section 2 hereof;
6) To the broker selling the same for examination in accordance with
the "street delivery" custom; provided that the Custodian shall
adopt such procedures as the Fund from time to time shall approve
to ensure their prompt return to the Custodian by the broker in
the event the broker elects not to accept them;
7) For exchange or conversion pursuant to any plan of merger,
consolidation, re capitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion of such securities, or pursuant to
any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian
or any subcustodian employed pursuant to Section 2 hereof;
8) In the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such
warrants, rights or similar securities, or the surrender of
interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
9) For delivery in connection with any loans of securities made by
the Fund (such loans to be made pursuant to the terms of the
Fund's current registration statement), but only against receipt
of adequate collateral as agreed upon from time to time by the
Custodian and the Fund, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities.
10) For delivery as security in connection with any borrowings by the
Fund requiring a pledge or hypothecation of assets by the Fund
(if then permitted under circumstances described in the current
registration statement of the Fund), provided, that the
securities shall be released only upon payment to the Custodian
of the monies borrowed, except that in cases where additional
collateral is required to secure a borrowing already made,
further securities may be released for that purpose; upon receipt
of proper instructions, the Custodian may pay any such loan upon
redelivery to it of the securities pledged or hypothecated
therefor and upon surrender of the note or notes evidencing the
loan;
11) When required for delivery in connection with any redemption or
repurchase of Shares of the Fund in accordance with the
provisions of Paragraph J hereof;
12) For delivery in accordance with the provisions of any agreement
between the Custodian (or a subcustodian employed pursuant to
Section 2 hereof) and a broker-dealer registered under the
Securities Exchange Act of 1934 and, if necessary, the Fund,
relating to compliance with the rules of The Options Clearing
Corporation or of any registered national securities exchange, or
of any similar organization or organizations, regarding deposit
or escrow or other arrangements in connection with options
transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian (or a subcustodian employed
pursuant to Section 2 hereof), and a futures commission merchant,
relating to compliance with the rules of the Commodity Futures
Trading Commission and/or of any contract market or commodities
exchange or similar organization, regarding futures margin
account deposits or payments in connection with futures
transactions by the Fund;
14) For any other proper corporate purpose, but only upon receipt of,
in addition to proper instructions, a certified copy of a vote of
the Board specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made,
declaring such purpose to be proper corporate purpose, and naming
the person or persons to whom delivery of such securities shall
be made.
C. Registration of Securities Securities held by the Custodian
(other than bearer securities) for the account of the Fund
shall be registered in the name of the Fund or in the name of
any nominee of the Fund or of any nominee of the Custodian, or
in the name or nominee name of any agent appointed pursuant to
Paragraph K hereof, or in the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof, or in the
name or nominee name of The Depository Trust Company or
Participants Trust Company or Approved Clearing Agency or
Federal Book-Entry System or Approved Book-Entry System for
Commercial Paper; provided, that securities are held in an
account of the Custodian or of such agent or of such
subcustodian containing only assets of the Fund or only assets
held by the Custodian or such agent or such subcustodian as a
custodian or subcustodian or in a fiduciary capacity for
customers. All certificates for securities accepted by the
Custodian or any such agent or subcustodian on behalf of the
Fund shall be in "street" or other good delivery form or shall
be returned to the selling broker or dealer who shall be
advised of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a
separate bank account or accounts in the name of the Fund,
subject only to draft or order by the Custodian acting in
pursuant to the terms of this Agreement, and shall hold in
such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the Fund
other than cash maintained by the Fund in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian
for the Fund may be deposited by it to its credit as Custodian
in the banking department of the Custodian or in such other
banks or trust companies as the Custodian may in its
discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940
and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be
approved in writing by an Authorized Officer. Such funds
shall be deposited by the Custodian in its capacity as
Custodian and shall be subject to withdrawal only by the
Custodian in that capacity.
E. Payment for Shares of the Fund The Custodian shall make
appropriate arrangements with the Transfer Agent and the
principal underwriter of the Fund to enable the Custodian to
make certain it promptly receives the cash or other
consideration due to the Fund for such new or treasury Shares
as may be issued or sold from time to time by the Fund, in
accordance with the governing documents and offering
prospectus and statement of additional information of the
Fund. The Custodian will provide prompt notification to the
Fund of any receipt by it of payments for Shares of the Fund.
F. Investment and Availability of Federal Funds Upon agreement
between the Fund and the Custodian, the Custodian shall, upon
the receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, invest in
such securities and instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and
the Fund.
G. Collections The Custodian shall promptly collect all income
and other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall
promptly collect all income and other payments with respect to
bearer securities if, on the date of payment by the issuer,
such securities are held by the Custodian or agent thereof and
shall credit such income, as collected, to the Fund's
custodian account.
The Custodian shall do all things necessary and proper in connection with such
prompt collections and, without limiting the generality of the foregoing, the
Custodian shall
1) Present for payment all coupons and other income items
requiring presentations;
2) Present for payment all securities which may mature or
be called, redeemed, retired or otherwise become payable;
3) Endorse and deposit for collection, in the name of the
Fund, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a Securities System
or in an Approved Book-Entry System for Commercial Paper at the
time funds become available to the Custodian; in the case of
securities maintained in The Depository Trust Company funds shall
be deemed available to the Fund not later than the opening of
business on the first business day after receipt of such funds by
the Custodian.
The Custodian shall notify the Fund as soon as reasonably practicable whenever
income due on any security is not promptly collected. In any case in which the
Custodian does not receive any due and unpaid income after it has made demand
for the same, it shall immediately so notify the Fund in writing, enclosing
copies of any demand letter, any written response thereto, and memoranda of all
oral responses thereto and to telephonic demands, and await instructions from
the Fund; the Custodian shall in no case have any liability for any nonpayment
of such income provided the Custodian meets the standard of care set forth in
Section 8 hereof. The Custodian shall not be obligated to take legal action for
collection unless and until reasonably indemnified to its satisfaction.
The Custodian shall also receive and collect all stock dividends, rights and
other items of like nature, and deal with the same pursuant to proper
instructions relative thereto.
H. Payment of Fund Moneys Upon receipt of proper instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out moneys of the Fund in the following cases only:
1) Upon the purchase of securities, participation interests,
options, futures contracts, forward contracts and options on
futures contracts purchased for the account of the Fund but only
(a) against the receipt of:
(i) such securities registered as provided in
Paragraph C hereof or in proper form for transfer
or
(ii) detailed instructions signed by an officer of the
Fund regarding the participation interests to be
purchased or
(iii) written confirmation of the purchase by the Fund
of the options, futures contracts, forward
contracts or options on futures contracts
by the Custodian (or by a subcustodian employed pursuant to
Section 2 hereof or by a clearing corporation of a national
securities exchange of which the Custodian is a member or by any
bank, banking institution or trust company doing business in the
United States or abroad which is qualified under the Investment
Company Act of 1940 to act as a custodian and which has been
designated by the Custodian as its agent for this purpose or by
the agent specifically designated in such instructions as
representing the purchasers of a new issue of privately placed
securities); (b) in the case of a purchase effected through a
Securities System, upon receipt of the securities by the
Securities System in accordance with the conditions set forth in
Paragraph L hereof; (c) in the case of a purchase of commercial
paper effected through an Approved Book-Entry System for
Commercial Paper, upon receipt of the paper by the Custodian or
subcustodian in accordance with the conditions set forth in
Paragraph M hereof; (d) in the case of repurchase agreements
entered into between the Fund and another bank or a
broker-dealer, against receipt by the Custodian of the securities
underlying the repurchase agreement either in certificate form or
through an entry crediting the Custodian's segregated,
non-proprietary account at the Federal Reserve Bank of Boston
with such securities along with written evidence of the agreement
by the bank or broker-dealer to repurchase such securities from
the Fund; or (e) with respect to securities purchased outside of
the United States, in accordance with written procedures agreed
to from time to time in writing by the parties hereto;
2) When required in connection with the conversion,
exchange or surrender of securities owned by the Fund as
set forth in Paragraph B hereof;
3) When required for the redemption or repurchase of Shares
of the Fund in accordance with the provisions of
Paragraph J hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund: advisory fees, distribution plan payments,
interest, taxes, management compensation and expenses,
accounting, transfer agent and legal fees, and other operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends or other distributions
to holders of Shares declared or authorized by the
Board; and
6) For any other proper corporate purpose, but only upon receipt of,
in addition to proper instructions, a certified copy of a vote of
the Board, specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person
or persons to whom such payment is to be made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for purchase of
securities for the account of the Fund is made by the
Custodian in advance of receipt of the securities purchased in
the absence of specific written instructions signed by two
officers of the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the
same extent as if the securities had been received by the
Custodian; except that in the case of a repurchase agreement
entered into by the Fund with a bank which is a member of the
Federal Reserve System, the Custodian may transfer funds to
the account of such bank prior to the receipt of (i) the
securities in certificate form subject to such repurchase
agreement or (ii) written evidence that the securities subject
to such repurchase agreement have been transferred by
book-entry into a segregated non-proprietary account of the
Custodian maintained with the Federal Reserve Bank of Boston
or (iii) the safekeeping receipt, provided that such
securities have in fact been so transferred by book-entry and
the written repurchase agreement is received by the Custodian
in due course; and except that if the securities are to be
purchased outside the United States, payment may be made in
accordance with procedures agreed to from time to time by the
parties hereto.
J. Payments for Repurchases or Redemptions of Shares of the Fund
From such funds as may be available for the purpose, but
subject to any applicable votes of the Board and the current
redemption and repurchase procedures of the Fund, the
Custodian shall, upon receipt of written instructions from the
Fund or from the Fund's transfer agent or from the principal
underwriter, make funds and/or portfolio securities available
for payment to holders of Shares who have caused their Shares
to be redeemed or repurchased by the Fund or for the Fund's
account by its transfer agent or principal underwriter.
The Custodian may maintain a special checking account upon which
special checks may be drawn by shareholders of the Fund holding Shares
for which certificates have not been issued. Such checking account and
such special checks shall be subject to such rules and regulations as
the Custodian and the Fund may from time to time adopt. The Custodian
or the Fund may suspend or terminate use of such checking account or
such special checks (either generally or for one or more shareholders)
at any time. The Custodian and the Fund shall notify the other
immediately of any such suspension or termination.
K. Appointment of Agents by the Custodian The Custodian may at
any time or times in its discretion appoint (and may at any
time remove) any other bank or trust company (provided such
bank or trust company is itself qualified under the Investment
Company Act of 1940 to act as a custodian or is itself an
eligible foreign custodian within the meaning of Rule 17f-5
under said Act) as the agent of the Custodian to carry out
such of the duties and functions of the Custodian described in
this Section 3 as the Custodian may from time to time direct;
provided, however, that the appointment of any such agent
shall not relieve the Custodian of any of its responsibilities
or liabilities hereunder, and as between the Fund and the
Custodian the Custodian shall be fully responsible for the
acts and omissions of any such agent. For the purposes of
this Agreement, any property of the Fund held by any such
agent shall be deemed to be held by the Custodian hereunder.
L. Deposit of Fund Portfolio Securities in Securities Systems
The Custodian may deposit and/or maintain securities owned by
the Fund
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and regulations, and at
all times subject to the following
provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep securities
of the Fund in a Securities System provided that such
securities are maintained in a non-proprietary account
("Account") of the Custodian or such subcustodian in the
Securities System which shall not include any assets of the
Custodian or such subcustodian or any other person other than
assets held by the Custodian or such subcustodian as a
fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to securities of the Fund
which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund, and the Custodian
shall be fully and completely responsible for maintaining a record
keeping system capable of accurately and currently stating the Fund's
holdings maintained in each such Securities System.
(c) The Custodian shall pay for securities purchased in book-entry
form for the account of the Fund only upon (i) receipt of
notice or advice from the Securities System that such
securities have been transferred to the Account, and (ii) the
making of any entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold for the account of
the Fund only upon (i) receipt of notice or advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all notices or
advises from the Securities System of transfers of securities
for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be promptly
provided to the Fund at its request. The Custodian shall
promptly send to the Fund confirmation of each transfer to or
from the account of the Fund in the form of a written advice
or notice of each such transaction, and shall furnish to the
Fund copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Fund on the next business day.
(d) The Custodian shall promptly send to the Fund any report or
other communication received or obtained by the Custodian
relating to the Securities System's accounting system, system
of internal accounting controls or procedures for safeguarding
securities deposited in the Securities System; the Custodian
shall promptly send to the Fund any report or other
communication relating to the Custodian's internal accounting
controls and procedures for safeguarding securities deposited
in any Securities System; and the Custodian shall ensure that
any agent appointed pursuant to Paragraph K hereof or any
subcustodian employed pursuant to Section 2 hereof shall
promptly send to the Fund and to the Custodian any report or
other communication relating to such agent's or
subcustodian's internal accounting controls and procedures for
safeguarding securities deposited in any Securities System.
The Custodian's books and records relating to the Fund's
participation in each Securities System will at all times
during regular business hours be open to the inspection of the
Fund's Authorized Officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the
absence of receipt of a certificate of an Authorized Officer
that the Board has approved the use of a particular Securities
System; the Custodian shall also obtain appropriate assurance
from an Authorized Officer that the Board has annually
reviewed and approved the continued use by the Fund of each
Securities System, so long as such review and approval is
required by Rule 17f-4 under the Investment Company Act of
1940, and the Fund shall promptly notify the Custodian if the
use of a Securities System is to be discontinued; at the
request of the Fund, the Custodian will terminate the use of
any such Securities System as promptly as practicable.
(f) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Securities System
by reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or subcustodians or of any of
its or their employees or from any failure of the Custodian or
any such agent or subcustodian to enforce effectively such
rights as it may have against the Securities System or any
other person; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the Fund has
not been made whole for any such loss or damage.
M. Deposit of Fund Commercial Paper in an Approved Book-Entry System
for Commercial Paper Upon receipt of proper instructions with
respect to each issue of direct issue commercial paper purchased
by the Fund, the Custodian may deposit and/or maintain direct
issue commercial paper owned by the Fund in any Approved
Book-Entry System for Commercial Paper, in each case only in
accordance with applicable Securities and Exchange Commission
rules, regulations, and no-action correspondence, and at all
times subject to the following provisions:
(a) The Custodian may (either directly or through one or
more subcustodians employed pursuant to Section 2) keep
commercial paper of the Fund in an Approved Book-Entry
System for Commercial Paper, provided that such paper is
issued in book entry form by the Custodian or
subcustodian on behalf of an issuer with which the
Custodian or subcustodian has entered into a book-entry
agreement and provided further that such paper is
maintained in a non-proprietary account ("Account") of
the Custodian or such subcustodian in an Approved
Book-Entry System for Commercial Paper which shall not
include any assets of the Custodian or such subcustodian
or any other person other than assets held by the
Custodian or such subcustodian as a fiduciary,
custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to commercial
paper of the Fund which is maintained in an Approved
Book-Entry System for Commercial Paper shall identify by
book-entry each specific issue of commercial paper
purchased by the Fund which is included in the System
and shall at all times during regular business hours be
open for inspection by authorized officers, employees or
agents of the Fund. The Custodian shall be fully and
completely responsible for maintaining a record keeping
system capable of accurately and currently stating the
Fund's holdings of commercial paper maintained in each
such System.
(c) The Custodian shall pay for commercial paper purchased
in book-entry form for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice from the
issuer that such paper has been issued, sold and
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
purchase, payment and transfer for the account of the
Fund. The Custodian shall transfer such commercial
paper which is sold or cancel such commercial paper
which is redeemed for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice that
payment for such paper has been transferred to the
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such transfer or redemption
and payment for the account of the Fund. Copies of all
notices, advises and confirmations of transfers of
commercial paper for the account of the Fund shall
identify the Fund, be maintained for the Fund by the
Custodian and be promptly provided to the Fund at its
request. The Custodian shall promptly send to the Fund
confirmation of each transfer to or from the account of
the Fund in the form of a written advice or notice of
each such transaction, and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transactions in the System for the account of the Fund
on the next business day.
(d) The Custodian shall promptly send to the Fund any report
or other communication received or obtained by the
Custodian relating to each System's accounting system,
system of internal accounting controls or procedures for
safeguarding commercial paper deposited in the System;
the Custodian shall promptly send to the Fund any report
or other communication relating to the Custodian's
internal accounting controls and procedures for
safeguarding commercial paper deposited in any Approved
Book-Entry System for Commercial Paper; and the
Custodian shall ensure that any agent appointed pursuant
to Paragraph K hereof or any subcustodian employed
pursuant to Section 2 hereof shall promptly send to the
Fund and to the Custodian any report or other
communication relating to such agent's or subcustodian's
internal accounting controls and procedures for
safeguarding securities deposited in any Approved
Book-Entry System for Commercial Paper.
(e) The Custodian shall not act under this Paragraph M in
the absence of receipt of a certificate of an officer of
the Fund that the Board has approved the use of a
particular Approved Book-Entry System for Commercial
Paper; the Custodian shall also obtain appropriate
assurance from an Authorized Officer that the Board has
annually reviewed and approved the continued use by the
Fund of each Approved Book-Entry System for Commercial
Paper, so long as such review and approval is required
by Rule 17f-4 under the Investment Company Act of 1940,
and the Fund shall promptly notify the Custodian if the
use of an Approved Book-Entry System for Commercial
Paper is to be discontinued; at the request of the Fund,
the Custodian will terminate the use of any such System
as promptly as practicable.
(f) The Custodian (or subcustodian, if the Approved Book-Entry System
for Commercial Paper is maintained by the subcustodian) shall
issue physical commercial paper or promissory notes whenever
requested to do so by the Fund or in the event of an electronic
system failure which impedes issuance, transfer or custody of
direct issue commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Fund for any loss or damage to the Fund resulting from
use of any Approved Book-Entry System for Commercial
Paper by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or
subcustodians or of any of its or their employees or
from any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it
may have against this System, the issuer of the
commercial paper or any other person; at the election of
the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim
against this System, the issuer of the commercial paper
or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any
such loss or damage.
N. Segregated Account The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant
to Paragraph L hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Custodian and any
registered broker-dealer (or any futures commission merchant),
relating to compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange
(or of the Commodity Futures Trading Commission or of any
contract market or commodities exchange), or of any similar
organization or organizations, regarding escrow or deposit or
other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or U.S. Government
securities in connection with options purchased, sold or
written by the Fund or futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of
compliance by the Fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
purposes, but only, in the case of clause (iv), upon receipt
of, in addition to proper instructions, a certificate signed
by two officers of the Fund, setting forth the purpose such
segregated account and declaring such purpose to be a proper
purpose.
O. Ownership Certificates for Tax Purposes The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund held by it and in
connection with transfers of securities.
P. Proxies The Custodian shall, with respect to the securities
held by it hereunder, cause to be promptly delivered to the
Fund all forms of proxies and all notices of meetings and any
other notices or announcements or other written information
affecting or relating to the securities, and upon receipt of
proper instructions shall execute and deliver or cause its
nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor
its nominee shall vote upon any of the securities or execute
any proxy to vote thereon or give any consent or take any
other action with respect thereto (except as otherwise herein
provided) unless ordered to do so by proper instructions.
Q. Communications Relating to Fund Portfolio Securities The
Custodian shall deliver promptly to the Fund all written
information (including, without limitation, pendency of call
and maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers and other persons
relating to the securities and participation interests being
held for the Fund. With respect to tender or exchange offers,
the Custodian shall deliver promptly to the Fund all written
information received by the Custodian from issuers and other
persons relating to the securities and participation interests
whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender
offers, similar offers to purchase or exercise rights
(including, without limitation, pendency of calls and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options and the maturity of futures
contracts) affecting or relating to securities and
participation interests held by the Custodian under this
Agreement, the Custodian shall have responsibility for
promptly notifying the Fund of all such offers in accordance
with the standard of reasonable care set forth in Section 8
hereof. For all such offers for which the Custodian is
responsible as provided in this Paragraph R, the Fund shall
have responsibility for providing the Custodian with all
necessary instructions in timely fashion. Upon receipt of
proper instructions, the Custodian shall timely deliver to the
issuer or trustee thereof, or to the agent of either,
warrants, puts, calls, rights or similar securities for the
purpose of being exercised or sold upon proper receipt
therefor and upon receipt of assurances satisfactory to the
Custodian that the new securities and cash, if any, acquired
by such action are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof. Upon
receipt of proper instructions, the Custodian shall timely
deposit securities upon invitations for tenders of securities
upon proper receipt therefor and upon receipt of assurances
satisfactory to the Custodian that the consideration to be
paid or delivered or the tendered securities are to be
returned to the Custodian or subcustodian employed pursuant to
Section 2 hereof. Notwithstanding any provision of this
Agreement to the contrary, the Custodian shall take all
necessary action, unless otherwise directed to the contrary by
proper instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or
similar rights of security ownership, and shall thereafter
promptly notify the Fund in writing of such action.
S. Depository Receipts The Custodian shall, upon receipt of
proper instructions, surrender or cause to be surrendered
foreign securities to the depository used by an issuer of
American Depository Receipts, European Depository Receipts or
International Depository Receipts (hereinafter collectively
referred to as "ADRs") for such securities, against a written
receipt therefor adequately describing such securities and
written evidence satisfactory to the Custodian that the
depository has acknowledged receipt of instructions to issue
with respect to such securities ADRs in the name of a nominee
of the Custodian or in the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof, for
delivery to the Custodian or such subcustodian at such place
as the Custodian or such subcustodian may from time to time
designate. The Custodian shall, upon receipt of proper
instructions, surrender ADRs to the issuer thereof against a
written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian
that the issuer of the ADRs has acknowledged receipt of
instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian or to a subcustodian
employed pursuant to Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian shall,
upon receipt of proper instructions, place interest bearing
fixed term and call deposits with the banking department of
such banking institution (other than the Custodian) and in
such amounts as the Fund may designate. Deposits may be
denominated in U.S. Dollars or other currencies. The
Custodian shall include in its records with respect to the
assets of the Fund appropriate notation as to the amount and
currency of each such deposit, the accepting banking
institution and other appropriate details and shall retain
such forms of advice or receipt evidencing the deposit, if
any, as may be forwarded to the Custodian by the banking
institution. Such deposits shall be deemed portfolio
securities of the applicable Fund for the purposes of this
Agreement, and the Custodian shall be responsible for the
collection of income from such accounts and the transmission
of cash to and from such accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
1. Options. The Custodians shall, upon receipt of proper
instructions and in accordance with the provisions of
any agreement between the Custodian, any registered
broker-dealer and, if necessary, the Fund, relating to
compliance with the rules of the Options Clearing
Corporation or of any registered national securities
exchange or similar organization or organizations,
receive and retain confirmations or other documents, if
any, evidencing the purchase or writing of an option on
a security, securities index, currency or other
financial instrument or index by the Fund; deposit and
maintain in a segregated account for each Fund
separately, either physically or by book-entry in a
Securities System, securities subject to a covered call
option written by the Fund; and release and/or transfer
such securities or other assets only in accordance with
a notice or other communication evidencing the
expiration, termination or exercise of such covered
option furnished by the Options Clearing Corporation,
the securities or options exchange on which such covered
option is traded or such other organization as may be
responsible for handling such options transactions.
2. Futures Contracts The Custodian shall, upon receipt of
proper instructions, receive and retain confirmations
and other documents, if any, evidencing the purchase or
sale of a futures contract or an option on a futures
contract by the Fund; deposit and maintain in a
segregated account, for the benefit of any futures
commission merchant, assets designated by the Fund as
initial, maintenance or variation "margin" deposits
(including mark-to-market payments) intended to secure
the Fund's performance of its obligations under any
futures contracts purchased or sold or any options on
futures contracts written by Fund, in accordance with
the provisions of any agreement or agreements among the
Fund, the Custodian and such futures commission
merchant, designed to comply with the rules of the
Commodity Futures Trading Commission and/or of any
contract market or commodities exchange or similar
organization regarding such margin deposits or payments;
and release and/or transfer assets in such margin
accounts only in accordance with any such agreements or
rules.
3. Foreign Exchange Transactions The Custodian shall,
pursuant to proper instructions, enter into or cause a
subcustodian to enter into foreign exchange contracts,
currency swaps or options to purchase and sell foreign
currencies for spot and future delivery on behalf and
for the account of the Fund. Such transactions may be
undertaken by the Custodian or subcustodian with such
banking or financial institutions or other currency
brokers, as set forth in proper instructions. Foreign
exchange contracts, swaps and options shall be deemed to
be portfolio securities of the Fund; and accordingly,
the responsibility of the Custodian therefor shall be
the same as and no greater than the Custodian's
responsibility in respect of other portfolio securities
of the Fund. The Custodian shall be responsible for the
transmittal to and receipt of cash from the currency
broker or banking or financial institution with which
the contract or option is made, the maintenance of
proper records with respect to the transaction and the
maintenance of any segregated account required in
connection with the transaction. The Custodian shall
have no duty with respect to the selection of the
currency brokers or banking or financial institutions
with which the Fund deals or for their failure to comply
with the terms of any contract or option. Without
limiting the foregoing, it is agreed that upon receipt
of proper instructions and insofar as funds are made
available to the Custodian for the purpose, the
Custodian may (if determined necessary by the Custodian
to consummate a particular transaction on behalf and for
the account of the Fund) make free outgoing payments of
cash in the form of U.S. dollars or foreign currency
before receiving confirmation of a foreign exchange
contract or swap or confirmation that the countervalue
currency completing the foreign exchange contract or
swap has been delivered or received. The Custodian
shall not be responsible for any costs and interest
charges which may be incurred by the Fund or the
Custodian as a result of the failure or delay of third
parties to deliver foreign exchange; provided that the
Custodian shall nevertheless be held to the standard of
care set forth in, and shall be liable to the Fund in
accordance with, the provisions of Section 8.
V. Actions Permitted Without Express Authority The Custodian may in
its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Agreement, provided, that all such payments shall be
accounted for by the Custodian to the Treasurer of the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Fund
except as otherwise directed by the Fund.
4. Duties of Bank with Respect to Books of Account and Calculations
of Net Asset Value
The Bank shall as Agent (or as Custodian, as the case may be) keep such books of
account and render as at the close of business on each day a detailed statement
of the amounts received or paid out and of securities received or delivered for
the account of the Fund during said day and such other statements, including a
daily trial balance and inventory of the Fund's portfolio securities; and shall
furnish such other financial information and data as from time to time requested
by the Treasurer or any Authorized Officer of the Fund; and shall compute and
determine, as of the close of regular trading on the New York Stock Exchange, or
at such other time or times as the Board may determine, the net asset value of a
share in the Fund, such computation and determination to be made in accordance
with the governing documents of the Fund and the votes and instructions of the
Board at the time in force and applicable, and promptly notify the Fund and its
investment adviser and such other persons as the Fund may request of the result
of such computation and determination. In computing the net asset value the
Custodian may rely upon security quotations received by telephone or otherwise
from sources or pricing services designated by the Fund by proper instructions,
and may further rely upon information furnished to it by any authorized officer
of the Fund relative (a) to liabilities of the Fund not appearing on its books
of account, (b) to the existence, status and proper treatment of any reserve or
reserves, (c) to any procedures established by the Board regarding the valuation
of portfolio securities, and (d) to the value to be assigned to any bond, note,
debenture, Treasury bill, repurchase agreement, subscription right, security,
participation interest or other asset or property for which market quotations
are not readily available.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All books of account and
records maintained by the Bank in connection with the performance of its duties
under this Agreement shall be the property of the Fund, shall at all times
during the regular business hours of the Bank be open for inspection by
authorized officers, employees or agents of the Fund, and in the event of
termination of this Agreement shall be delivered to the Fund or to such other
person or persons as shall be designated by the Fund. Disposition of any account
or record after any required period of preservation shall be only in accordance
with specific instructions received from the Fund. The Bank shall assist
generally in the preparation of reports to shareholders, audits of accounts, and
other ministerial matters of like nature; and, upon request, shall furnish the
Fund's auditors with an attested inventory of securities held with appropriate
information as to securities in transit or in the process of purchase or sale
and with such other information as said auditors may from time to time request.
The Custodian shall also maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory thereof, and
shall conduct periodic verifications (including sampling counts at the
Custodian) of certificates representing bonds and other securities for which it
is responsible under this Agreement in such manner as the Custodian shall
determine from time to time to be advisable in order to verify the accuracy of
such inventory. The Bank shall not disclose or use any books or records it has
prepared or maintained by reason of this Agreement in any manner except as
expressly authorized herein or directed by the Fund, and the Bank shall keep
confidential any information obtained by reason of this Agreement.
6. Opinion of Fund's Independent Public Accountants
The Custodian shall take all reasonable action, as the Fund may from time to
time request, to enable the Fund to obtain from year to year favorable opinions
from the Fund's independent public accountants with respect to its activities
hereunder in connection with the preparation of the Fund's registration
statement and Form N-SAR or other periodic reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
7. Compensation and Expenses of Bank
The Bank shall be entitled to reasonable compensation for its services as
Custodian and Agent, as agreed upon from time to time between the Fund and the
Bank. The Bank shall be entitled to receive from the Fund on demand
reimbursement for its cash disbursements, expenses and charges, including
counsel fees, in connection with its duties as Custodian and Agent hereunder,
but excluding salaries and usual overhead expenses.
8. Responsibility of Bank
So long as and to the extent that it is in the exercise of reasonable care, the
Bank as Custodian and Agent shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
The Bank as Custodian and Agent shall be held to the exercise of reasonable care
in carrying out the provisions of this Agreement but shall be liable only for
its own negligent or bad faith acts or failures to act. Notwithstanding the
foregoing, nothing contained in this paragraph is intended to nor shall it be
construed to modify the standards of care and responsibility set forth in
Section 2 hereof with respect to subcustodians and in subparagraph f of
Paragraph L of Section 3 hereof with respect to Securities Systems and in
subparagraph g of Paragraph M of Section 3 hereof with respect to an Approved
Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect to subcustodians
generally in Section 2 hereof, provided that, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign securities
depository or a branch of a U.S. bank, the Custodian shall not be liable for any
loss, damage, cost, expense, liability or claim resulting from, or caused by,
the direction of or authorization by the Fund to maintain custody of any
securities or cash of the Fund in a foreign county including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
acts of war, civil war or terrorism, insurrection, revolution, military or
usurped powers, nuclear fission, fusion or radiation, earthquake, storm or other
disturbance of nature or acts of God.
If the Fund requires the Bank in any capacity to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Bank, result in the Bank or its nominee assigned to the Fund
being liable for the payment of money or incurring liability of some other form,
the Fund, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to
advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund assets to
the extent necessary to obtain reimbursement.
9. Persons Having Access to Assets of the Fund
(i) No trustee, director, general partner, officer, employee
or agent of the Fund shall have physical access to the
assets of the Fund held by the Custodian or be
authorized or permitted to withdraw any investments of
the Fund, nor shall the Custodian deliver any assets of
the Fund to any such person. No officer or director,
employee or agent of the Custodian who holds any similar
position with the Fund or the investment adviser of the
Fund shall have access to the assets of the Fund.
(ii) Access to assets of the Fund held hereunder shall only
be available to duly Authorized Officers, employees,
representatives or agents of the Custodian or other
persons or entities for whose actions the Custodian
shall be responsible to the extent permitted hereunder,
or to the Fund's independent public accountants in
connection with their auditing duties performed on
behalf of the Fund.
(iii) Nothing in this Section 9 shall prohibit any Authorized Officer,
employee or agent of the Fund or of the investment adviser of the
Fund from giving instructions to the Custodian or executing a
certificate so long as it does not result in delivery of or
access to assets of the Fund prohibited by paragraph (i) of this
Section 9.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than sixty (60) days
after the date of such delivery or mailing; provided, that the Fund may at any
time by action of its Board, (i) substitute another bank or trust company for
the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the Federal Deposit Insurance
Corporation or by the Banking Commissioner of The Commonwealth of Massachusetts
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction. Upon termination of the
Agreement, the Fund shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
Unless the holders of a majority of the outstanding shares of the Fund vote to
have the securities, funds and other properties held hereunder delivered and
paid over to some other bank or trust company, specified in the vote, having not
less than $2,000,000 of aggregate capital, surplus and undivided profits, as
shown by its last published report, and meeting such other qualifications for
custodians set forth in the Investment Company Act of 1940, the Board shall,
forthwith, upon giving or receiving notice of termination of this Agreement,
appoint as successor custodian, a bank or trust company having such
qualifications. The Bank, as Custodian, Agent or otherwise, shall, upon
termination of the Agreement, deliver to such successor custodian, all
securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no such vote has been adopted by
the shareholders and that no written order designating a successor custodian
shall have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Fund to the Fund but shall have
the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all funds, securities and properties of the Fund held by or
deposited with the Bank, and all books of account and records kept by the Bank
pursuant to this Agreement, and all documents held by the Bank relative thereto.
Thereafter such bank or trust company shall be the successor of the Custodian
under this Agreement.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and the Fund
may from time to time agree on such provisions interpretive of or in addition to
the provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
governing instruments of the Fund. No interpretive or additional provisions made
as provided in the preceding sentence shall be deemed to be an amendment of this
Agreement.
12. Certification as to Authorized Officers
The Secretary of the Fund shall at all times maintain on file with the Bank his
certification to the Bank, in such form as may be acceptable to the Bank, of the
names and signatures of the Authorized Officers of each fund, it being
understood that upon the occurrence of any change in the information set forth
in the most recent certification on file (including without limitation any
person named in the most recent certification who has ceased to hold the office
designated therein), the Secretary of the Fund shall sign a new or amended
certification setting forth the change and the new, additional or omitted names
or signatures. The Bank shall be entitled to rely and act upon instructions from
any officers named in the most recent certification.
13. Notices
Notices and other writings delivered or mailed postage prepaid to the Fund
addressed to Thomas H. Drohan, John Hancock Advisers, Inc., 101 Huntington
Avenue, Boston, Massachusetts 02199, or to such other address as the Fund may
have designated to the Bank, in writing, or to State Street Bank and Trust
Company, shall be deemed to have been properly delivered or given hereunder to
the respective addressees.
14. Massachusetts Law to Apply; Limitations on Liability
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with the laws of The Commonwealth of Massachusetts.
If the Fund is a Massachusetts business trust, the Custodian expressly
acknowledges the provision in the Fund's declaration of trust limiting the
personal liability of the trustees and shareholders of the Fund; and the
Custodian agrees that it shall have recourse only to the assets of the Fund for
the payment of claims or obligations as between the Custodian and the Fund
arising out of this Agreement, and the Custodian shall not seek satisfaction of
any such claim or obligation from the trustees or shareholders of the Fund. Each
Fund, and each series or portfolio of a Fund, shall be liable only for its own
obligations to the Custodian under this Agreement and shall not be jointly or
severally liable for the obligations of any other Fund, series or portfolio
hereunder.
15. Adoption of the Agreement by the Fund
The Fund represents that its Board has approved this Agreement and has duly
authorized the Fund to adopt this Agreement. This Agreement shall be deemed to
supersede and terminate, as of the date first written above, all prior
agreements between the Fund and the Bank relating to the custody of the Fund's
assets.
* * * * *
<PAGE>
In Witness Whereof, the parties hereto have caused this agreement to be executed
in duplicate as of the date first written above by their respective officers
thereunto duly authorized.
John Hancock Mutual Funds listed on Appendix A
by: /s/James B. Little
James B. Little
Senior Vice President and Chief Financial Officer
Attest:
/s/ Avery P. Maher
State Street Bank and Trust Company
by: /s/Ronald E. Logue
Attest:
/s/ Sharon Baker Morin
<PAGE>
State Street Bank and Trust Company
Appendix A
[EFFECTIVE JANUARY 30, 1995]
John Hancock Cash Management Fund
John Hancock World Fund
John Hancock Pacific Basin Equities Fund
John Hancock Global Rx Fund
John Hancock Global Retail Fund
John Hancock Patriot Premium Dividend Fund I
John Hancock Patriot Premium Dividend Fund II
John Hancock Patriot Select Dividend Trust
John Hancock Patriot Global Dividend Fund
John Hancock Patriot Preferred Dividend Fund
John Hancock Bank and Thrift Opportunity Fund (Effective - August 15,
1994)
Freedom Investment Trust II
John Hancock Global Fund
John Hancock Global Income Fund
John Hancock Short-Term Strategic Income Fund
John Hancock International Fund
The Southeastern Thrift and Bank Fund, Inc.
John Hancock Institutional Series Trust
John Hancock Berkeley Global Bond Fund
John Hancock Berkeley Overseas Growth Fund
MASTER CUSTODIAN AGREEMENT
between
JOHN HANCOCK MUTUAL FUNDS
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
<TABLE>
TABLE OF CONTENTS
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<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3
2. Employment of Custodian and Property to be held by it . . . . . . . . . . . . . . . 3-4
3. Duties of the Custodian with Respect toProperty of the Fund . . . . . . . . . . . . 4
A. Safekeeping and Holding of Property . . . . . . . . . . . . . . . . . . . . . 4
B. Delivery of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-8
C. Registration of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9
E. Payments for Shares of the Fund . . . . . . . . . . . . . . . . . . . . . . . 9
F. Investment and Availability of Federal Funds . . . . . . . . . . . . . . . . . 9
G. Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-10
H. Payment of Fund Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-12
I. Liability for Payment in Advance of Receipt of Securities Purchased . . . . . 12-13
J. Payments for Repurchases of Redemptions of Shares of the Fund . . . . . . . . 13
K. Appointment of Agents by the Custodian . . . . . . . . . . . . . . . . . . . . 13
L. Deposit of Fund Portfolio Securities in Securities Systems . . . . . . . . . . 13-16
M. Deposit of Fund Commercial Paper in an Approved
Book-Entry System for Commercial Paper . . . . . . . . . . . . . . . . . . 16-18
N. Segregated Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-19
O. Ownership Certificates for Tax Purposes . . . . . . . . . . . . . . . . . . . 19
P. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Q. Communications Relating to Fund Portfolio Securities . . . . . . . . . . . . . 19-20
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
R. Exercise of Rights; Tender Offers . . . . . . . . . . . . . . . . . . . . . . 20
S. Depository Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-21
T. Interest Bearing Call or Time Deposits . . . . . . . . . . . . . . . . . . . . 21
U. Options, Futures Contracts and Foreign Currency Transactions . . . . . . . . . 21-23
V. Actions Permitted Without Express Authority . . . . . . . . . . . . . . . . . 23-24
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5. Records and Miscellaneous Duties . . . . . . . . . . . . . . . . . . . . . . . . . . 24-25
6. Opinion of Fund`s Independent Public Accountants . . . . . . . . . . . . . . . . . . 25
7. Compensation and Expenses of Bank . . . . . . . . . . . . . . . . . . . . . . . . . 25-26
8. Responsibility of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26-27
9. Persons Having Access to Assets of the Fund . . . . . . . . . . . . . . . . . . . . 27
10. Effective Period, Termination and Amendment; Successor Custodian . . . . . . . . . . 27-28
11. Interpretive and Additional Provisions . . . . . . . . . . . . . . . . . . . . . . . 28-29
12. Certification as to Authorized Officers . . . . . . . . . . . . . . . . . . . . . . 29
13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
15. Adoption of the Agreement by the Fund . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
<PAGE>
MASTER CUSTODIAN AGREEMENT
This Agreement is made as of December 15, 1992 between each investment
company advised by John Hancock Advisers, Inc. which has adopted this Agreement
in the manner provided herein and Investors Bank & Trust Company (hereinafter
called "Bank", "Custodian" and "Agent"), a trust company established under the
laws of Massachusetts with a principal place of business in Boston,
Massachusetts.
Whereas, each such investment company is registered under the Investment
Company Act of 1940 and has appointed the Bank to act as Custodian of its
property and to perform certain duties as its Agent, as more fully hereinafter
set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company and the
Bank agree as follows:
1. Definitions
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Fund" shall mean the investment company which has adopted this
Agreement and is listed on Appendix A hereto. If the Fund is a Massachusetts
business trust or Maryland corporation, it may in the future establish and
designate other separate and distinct series of shares, each of which may be
called a "portfolio"; in such case, the term "Fund" shall also refer to each
such separate series or portfolio.
(b) "Board" shall mean the board of directors/trustees/managing general
partners/director general partners of the Fund, as the case may be.
(c) "The Depository Trust Company", a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(d) "Authorized Officer", shall mean any of the following officers of
the Trust: The Chairman of the Board of Trustees, the President, a Vice
President, the Secretary, the Treasurer or Assistant Secretary or Assistant
Treasurer, or any other officer of the Trust duly authorized to sign by
appropriate resolution of the Board of Trustees of the Trust.
(e) "Participants Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
<PAGE>
(f) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934 which acts as a securities depository
but only if the Custodian has received a certified copy of a vote of the Board
approving such clearing agency as a securities depository for the Fund.
(g) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for
United States and federal agency securities (i.e., as provided in Subpart O of
Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the
book-entry regulations of federal agencies substantially in the form of Subpart
O).
(h) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in rule 17f-4 under the
Investment Company Act of 1940 for foreign securities but only if the Custodian
has received a certified copy of a vote of the Board approving such depository
or clearing agency as a foreign securities depository for the Fund.
(i) "Approved Book-Entry System for Commercial Paper" shall mean a
system maintained by the Custodian or by a subcustodian employed pursuant to
Section 2 hereof for the holding of commercial paper in book-entry form but
only if the Custodian has received a certified copy of a vote of the Board
approving the participation by the Fund in such system.
(j) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this Agreement
upon receipt of written or facsimile instructions signed by such one or more
person or persons as the Board shall have from time to time authorized to give
the particular class of instructions in question. Electronic instructions for
the purchase and sale of securities which are transmitted by John Hancock
Advisers, Inc. to the Custodian through the John Hancock equity trading system
and the John Hancock fixed income trading system shall be deemed to be proper
instructions; the Fund shall cause all such instructions to be confirmed in
writing. Different persons may be authorized to give instructions for
different purposes. A certified copy of a vote of the Board may be received
and accepted by the Custodian as conclusive evidence of the authority of any
such person to act and may be considered as in full force and effect until
receipt of written notice to the contrary. Such instructions may be general or
specific in terms and, where appropriate, may be standing instructions. Unless
the vote delegating authority to any person or persons to give a particular
class of instructions specifically requires that the approval of any person,
persons or committee shall first have been obtained before the Custodian may
act on instructions of that class, the Custodian shall be under no obligation
to question the right of the person or persons giving such instructions in so
doing. Oral instructions will be considered proper instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund
shall cause all oral
<PAGE>
instructions to be confirmed in writing. The Fund authorizes the Custodian to
tape record any and all telephonic or other oral instructions given to the
Custodian. Upon receipt of a certificate signed by two officers of the Fund as
to the authorization by the President and the Treasurer of the Fund accompanied
by a detailed description of the communication procedures approved by the
President and the Treasurer of the Fund, "proper instructions" may also include
communications effected directly between electromechanical or electronic
devices provided that the President and Treasurer of the Fund and the Custodian
are satisfied that such procedures afford adequate safeguards for the Fund's
assets. In performing its duties generally, and more particularly in
connection with the purchase, sale and exchange of securities made by or for
the Fund, the Custodian may take cognizance of the provisions of the governing
documents and registration statement of the Fund as the same may from time to
time be in effect (and votes, resolutions or proceedings of the shareholders or
the Board), but, nevertheless, except as otherwise expressly provided herein,
the Custodian may assume unless and until notified in writing to the
contrary that so-called proper instructions received by it are not in conflict
with or in any way contrary to any provisions of such governing documents and
registration statement, or votes, resolutions or proceedings of the
shareholders or the Board.
2. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby appoints and employs the Bank as its Custodian and Agent
in accordance with and subject to the provisions hereof, and the Bank hereby
accepts such appointment and employment. The Fund agrees to deliver to the
Custodian all securities, participation interests, cash and other assets owned
by it, and all payments of income, payments of principal and capital
distributions and adjustments received by it with respect to all securities and
participation interests owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held by the Fund and not delivered by
the Fund to the Custodian. The Fund will also deliver to the Bank from time to
time copies of its currently effective charter (or declaration of trust or
partnership agreement, as the case may be), by-laws, prospectus, statement of
additional information and distribution agreement with its principal
underwriter, together with such resolutions, votes and other proceedings of the
Fund as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Board. Any such subcustodian so employed by
the Custodian shall be deemed to be the agent of the Custodian, and the
Custodian shall remain primarily responsible for the securities, participation
interests, moneys and other property of the Fund held by such subcustodian.
Any foreign subcustodian shall be a bank or trust company which is an eligible
foreign custodian within the meaning of Rule 17f-5 under the Investment Company
Act of 1940, and the foreign custody arrangements shall be approved by the
Board and shall be in accordance with and subject to the provisions of said
Rule. For
<PAGE>
the purposes of this Agreement, any property of the Fund held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the Custodian
under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Fund
------------------------------------------------------------
A. SAFEKEEPING AND HOLDING OF PROPERTY The Custodian shall keep
safely all property of the Fund and on behalf of the Fund shall
from time to time receive delivery of Fund property for
safekeeping. The Custodian shall hold, earmark and segregate on
its books and records for the account of the Fund all property of
the Fund, including all securities, participation interests and
other assets of the Fund (1) physically held by the Custodian, (2)
held by any subcustodian referred to in Section 2 hereof or by any
agent referred to in Paragraph K hereof, (3) held by or maintained
in The Depository Trust Company or in Participants Trust Company
or in an Approved Clearing Agency or in the Federal Book- Entry
System or in an Approved Foreign Securities Depository, each of
which from time to time is referred to herein as a "Securities
System", and (4) held by the Custodian or by any subcustodian
referred to in Section 2 hereof and maintained in any Approved
Book-Entry System for Commercial Paper.
B. DELIVERY OF SECURITIES The Custodian shall release and deliver
securities or participation interests owned by the Fund held (or
deemed to be held) by the Custodian or maintained in a Securities
System account or in an Approved Book-Entry System for Commercial
Paper account only upon receipt of proper instructions, which may
be continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities or participation interests
for the account of the Fund, BUT ONLY against receipt of
payment therefor; if delivery is made in Boston or New
York City, payment therefor shall be made in accordance
with generally accepted clearing house procedures or by
use of Federal Reserve Wire System procedures; if delivery
is made elsewhere payment therefor shall be in accordance
with the then current "street delivery" custom or in
accordance with such procedures agreed to in writing from
time to time by the parties hereto; if the sale is
effected through a Securities System, delivery and payment
therefor shall be made in accordance with the provisions
of Paragraph L hereof; if the sale of commercial paper is
to be effected through an Approved Book-Entry System for
Commercial Paper, delivery and payment therefor shall be
made in accordance with the provisions of Paragraph M
hereof; if the securities are to be sold outside the
United States, delivery may be made in accordance with
procedures agreed to in writing from time to time by the
parties hereto; for the purposes of this subparagraph, the
term "sale" shall include the disposition of a portfolio
<PAGE>
security (i) upon the exercise of an option written by the
Fund and (ii) upon the failure by the Fund to make a
successful bid with respect to a portfolio security, the
continued holding of which is contingent upon the making
of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the Fund;
3) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
4) To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or
otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
5) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Paragraph K hereof or into the name
or nominee name of any subcustodian employed pursuant to
Section 2 hereof; or for exchange for a different number
of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided
that, in any such case, the new securities or
participation interests are to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom; provided
that the Custodian shall adopt such procedures as the Fund
from time to time shall approve to ensure their prompt
return to the Custodian by the broker in the event the
broker elects not to accept them;
7) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion of
such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
<PAGE>
8) In the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such
warrants, rights or similar securities, or the surrender
of interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
9) For delivery in connection with any loans of securities
made by the Fund (such loans to be made pursuant to the
terms of the Fund's current registration statement), but
only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund, which may
be in the form of cash or obligations issued by the United
States government, its agencies or instrumentalities.
10) For delivery as security in connection with any borrowings
by the Fund requiring a pledge or hypothecation of assets
by the Fund (if then permitted under circumstances
described in the current registration statement of the
Fund), provided, that the securities shall be released
only upon payment to the Custodian of the monies borrowed,
except that in cases where additional collateral is
required to secure a borrowing already made, further
securities may be released for that purpose; upon receipt
of proper instructions, the Custodian may pay any such
loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or
notes evidencing the loan;
11) When required for delivery in connection with any
redemption or repurchase of Shares of the Fund in
accordance with the provisions of Paragraph J hereof;
12) For delivery in accordance with the provisions of any
agreement between the Custodian (or a subcustodian
employed pursuant to Section 2 hereof) and a broker-dealer
registered under the Securities Exchange Act of 1934 and,
if necessary, the Fund, relating to compliance with the
rules of The Options Clearing Corporation or of any
registered national securities exchange, or of any similar
organization or organizations, regarding deposit or escrow
or other arrangements in connection with options
transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian (or a subcustodian
employed pursuant to Section 2 hereof),
and a futures commission merchant, relating to compliance
with the rules of the Commodity Futures Trading Commission
and/or of any
<PAGE>
contract market or commodities exchange or similar
organization, regarding futures margin account deposits or
payments in connection with futures transactions by
the Fund;
14) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board specifying the
securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose
to be proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
C. REGISTRATION OF SECURITIES Securities held by the Custodian
(other than bearer securities) for the account of the Fund shall
be registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian, or in the
name or nominee name of any agent appointed pursuant to Paragraph
K hereof, or in the name or nominee name of any subcustodian
employed pursuant to Section 2 hereof, or in the name or nominee
name of The Depository Trust Company or Participants Trust Company
or Approved Clearing Agency or Federal Book-Entry System or
Approved Book-Entry System for Commercial Paper; provided, that
securities are held in an account of the Custodian or of such
agent or of such subcustodian containing only assets of the Fund
or only assets held by the Custodian or such agent or such
subcustodian as a custodian or subcustodian or in a fiduciary
capacity for customers. All certificates for securities accepted
by the Custodian or any such agent or subcustodian on behalf of
the Fund shall be in "street" or other good delivery form or shall
be returned to the selling broker or dealer who shall be advised
of the reason thereof.
D. BANK ACCOUNTS The Custodian shall open and maintain a separate
bank account or accounts in the name of the Fund, subject only to
draft or order by the Custodian acting in pursuant to the terms of
this Agreement, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or
for the account of the Fund other than cash maintained by the Fund
in a bank account established and used in accordance with Rule
17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for the Fund may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as the Custodian may in its
discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each
such bank or trust company and the funds to be deposited with each
such bank or trust company shall be approved in writing by two
officers of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be subject to
withdrawal only by the Custodian in that capacity.
<PAGE>
E. PAYMENT FOR SHARES OF THE FUND The Custodian shall make
appropriate arrangements with the Transfer Agent and the principal
underwriter of the Fund to enable the Custodian to make certain it
promptly receives the cash or other consideration due to the Fund
for such new or treasury Shares as may be issued or sold from time
to time by the Fund, in accordance with the governing documents
and offering prospectus and statement of additional information of
the Fund. The Custodian will provide prompt notification to the
Fund of any receipt by it of payments for Shares of the Fund.
F. INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS Upon agreement
between the Fund and the Custodian, the Custodian shall, upon the
receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, invest in
such securities and instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and the
Fund.
G. COLLECTIONS The Custodian shall promptly collect all income and
other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall promptly
collect all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or agent thereof and shall
credit such income, as collected, to the Fund's custodian account.
The Custodian shall do all things necessary and proper in connection with such
prompt collections and, without limiting the generality of the foregoing, the
Custodian shall
1) Present for payment all coupons and other income items
requiring presentations;
2) Present for payment all securities which may mature or be
called, redeemed, retired or otherwise become payable;
3) Endorse and deposit for collection, in the name of the
Fund, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a Securities
System or in an Approved Book-Entry System for Commercial
Paper at the time funds become available to the Custodian;
in the case of securities maintained in The Depository
Trust Company funds shall be deemed available to the Fund
not later than the opening of business on the first
business day after receipt of such funds by the Custodian.
<PAGE>
The Custodian shall notify the Fund as soon as reasonably practicable whenever
income due on any security is not promptly collected. In any case in which the
Custodian does not receive any due and unpaid income after it has made demand
for the same, it shall immediately so notify the Fund in writing, enclosing
copies of any demand letter, any written response thereto, and memoranda of all
oral responses thereto and to telephonic demands, and await instructions from
the Fund; the Custodian shall in no case have any liability for any nonpayment
of such income provided the Custodian meets the standard of care set forth in
Section 8 hereof. The Custodian shall not be obligated to take legal action
for collection unless and until reasonably indemnified to its satisfaction.
The Custodian shall also receive and collect all stock dividends, rights and
other items of like nature, and deal with the same pursuant to proper
instructions relative thereto.
H. PAYMENT OF FUND MONEYS Upon receipt of proper instructions, which
may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of the Fund in the
following cases only:
1) Upon the purchase of securities, participation interests,
options, futures contracts, forward contracts and options
on futures contracts purchased for the account of the Fund
but only (a) against the receipt of
(i) such securities registered as provided in
Paragraph C hereof or in proper form for
transfer or
(ii) detailed instructions signed by an officer of the
Fund regarding the participation interests to be
purchased or
(iii) written confirmation of the purchase by the Fund
of the options, futures contracts, forward
contracts or options on futures contracts
by the Custodian (or by a subcustodian employed pursuant
to Section 2 hereof or by a clearing corporation of a
national securities exchange of which the Custodian is a
member or by any bank, banking institution or trust
company doing business in the United States or abroad
which is qualified under the Investment Company Act of
1940 to act as a custodian and which has been designated
by the Custodian as its agent for this purpose or by the
agent specifically designated in such instructions as
representing the purchasers of a new issue of privately
placed securities); (b) in the case of a purchase effected
through a Securities System, upon receipt of the
securities by the Securities System in accordance with the
conditions set forth in Paragraph L hereof; (c) in the
case of a purchase of commercial paper effected through an
Approved Book-Entry System for Commercial Paper, upon
<PAGE>
receipt of the paper by the Custodian or subcustodian in
accordance with the conditions set forth in Paragraph M
hereof; (d) in the case of repurchase agreements entered
into between the Fund and another bank or a broker-
dealer, against receipt by the Custodian of the securities
underlying the repurchase agreement either in certificate
form or through an entry crediting the Custodian's
segregated, non-proprietary account at the Federal Reserve
Bank of Boston with such securities along with written
evidence of the agreement by the bank or broker-dealer to
repurchase such securities from the Fund; or (e) with
respect to securities purchased outside of the United
States, in accordance with written procedures agreed to
from time to time in writing by the parties hereto;
2) When required in connection with the conversion, exchange
or surrender of securities owned by the Fund as set forth
in Paragraph B hereof;
3) When required for the redemption or repurchase of Shares
of the Fund in accordance with the provisions of Paragraph
J hereof;
4) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: advisory fees,
distribution plan payments, interest, taxes, management
compensation and expenses, accounting, transfer agent and
legal fees, and other operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends or other distributions to
holders of Shares declared or authorized by the Board; and
6) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board, specifying the
amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
I. LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED In any and every case where payment for purchase of
securities for the account of the Fund is made by the Custodian in
advance of receipt of the securities purchased in the absence of
specific written instructions signed by two officers of the Fund
to so pay in advance, the Custodian shall be absolutely liable to
the Fund for such securities to the same extent as if the
securities had been received by the Custodian; EXCEPT that in the
case of a repurchase agreement
<PAGE>
entered into by the Fund with a bank which is a member of the
Federal Reserve System, the Custodian may transfer funds to the
account of such bank prior to the receipt of (i) the securities in
certificate form subject to such repurchase agreement or (ii)
written evidence that the securities subject to such repurchase
agreement have been transferred by book-entry into a segregated
non-proprietary account of the Custodian maintained with the
Federal Reserve Bank of Boston or (iii) the safekeeping receipt,
PROVIDED that such securities have in fact been so transferred by
book-entry and the written repurchase agreement is received by the
Custodian in due course; AND EXCEPT that if the securities are to
be
purchased outside the United States, payment may be made in
accordance with procedures agreed to from time to time by the
parties hereto.
J. PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
From such funds as may be available for the purpose, but subject
to any applicable votes of the Board and the current redemption
and repurchase procedures of the Fund, the Custodian shall, upon
receipt of written instructions from the Fund or from the Fund's
transfer agent or from the principal underwriter, make funds
and/or portfolio securities available for payment to holders of
Shares who have caused their Shares to be redeemed or repurchased
by the Fund or for the Fund's account by its transfer agent or
principal underwriter.
The Custodian may maintain a special checking account upon which
special checks may be drawn by shareholders of the Fund holding
Shares for which certificates have not been issued. Such checking
account and such special checks shall be subject to such rules and
regulations as the Custodian and the Fund may from time to time
adopt. The Custodian or the Fund may suspend or terminate use of
such checking account or such special checks (either generally or
for one or more shareholders) at any time. The Custodian and the
Fund shall notify the other immediately of any such suspension or
termination.
K. APPOINTMENT OF AGENTS BY THE CUSTODIAN The Custodian may at any
time or times in its discretion appoint (and may at any time
remove) any other bank or trust company (provided such bank or
trust company is itself qualified under the Investment Company Act
of 1940 to act as a custodian or is itself an eligible foreign
custodian within the meaning of Rule 17f-5 under said Act) as the
agent of the Custodian to carry out such of the duties and
functions of the Custodian described in this Section 3 as the
Custodian may from time to time direct; provided, however, that
the appointment of any such agent shall not relieve the Custodian
of any of its responsibilities or liabilities hereunder, and as
between the Fund and the Custodian the Custodian shall be fully
responsible for the acts and omissions of any such agent. For the
purposes of this Agreement, any property of the Fund held by any
such agent shall be deemed to be held by the Custodian hereunder.
<PAGE>
L. DEPOSIT OF FUND PORTFOLIO SECURITIES IN SECURITIES SYSTEMS The
Custodian may deposit and/or maintain securities owned by the Fund
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, and at all times subject to the following
provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep securities of
the Fund in a Securities System provided that such securities are
maintained in a non-proprietary account ("Account") of the
Custodian or such subcustodian in the Securities System which
shall not include any assets of the Custodian or such subcustodian
or any other person other than assets held by the Custodian or
such subcustodian as a fiduciary, custodian, or otherwise for its
customers.
(b) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund, and the
Custodian shall be fully and completely responsible for
maintaining a recordkeeping system capable of accurately and
currently stating the Fund's holdings maintained in each such
Securities System.
(c) The Custodian shall pay for securities purchased in book-entry
form for the account of the Fund only upon (i) receipt of notice
or advice from the Securities System that such securities have
been transferred to the Account, and (ii) the making of any entry
on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund only upon (i)
receipt of notice or advice from the Securities System that
payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Fund.
Copies of all notices or advises from the Securities System of
transfers of securities for the account of the Fund shall identify
the Fund, be maintained for the Fund by the Custodian and be
promptly provided to the Fund at its request.
<PAGE>
The Custodian shall promptly send to the Fund confirmation
of each transfer to or from the
account of the Fund in the form of a written advice or notice of
each such transaction, and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund on the next business
day.
(d) The Custodian shall promptly send to the Fund any report or other
communication received or obtained by the Custodian relating to
the Securities System's accounting system, system of internal
accounting controls or procedures for safeguarding securities
deposited in the Securities System; the Custodian shall promptly
send to the Fund any report or other communication relating to the
Custodian's internal accounting controls and procedures for
safeguarding securities deposited in any Securities System; and
the Custodian shall ensure that any agent appointed pursuant to
Paragraph K hereof or any subcustodian employed pursuant to
Section 2 hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to such
agent's or subcustodian's internal accounting controls and
procedures for safeguarding securities deposited in any Securities
System. The Custodian's books and records relating to the Fund's
participation in each Securities System will at all times during
regular business hours be open to the inspection of the Fund's
authorized officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the absence
of receipt of a certificate of an officer of the Fund that the
Board has approved the use of a particular Securities System; the
Custodian shall also obtain appropriate assurance from the
officers of the Fund that the Board has annually reviewed and
approved the continued use by the Fund of each Securities System,
so long as such review and approval is required by Rule 17f-4
under the Investment Company Act of 1940, and the Fund shall
promptly notify the Custodian if the use of a Securities System is
to be discontinued; at the request of the Fund, the Custodian will
terminate the use of any such Securities System as promptly as
practicable.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or subcustodians or of any of its or their employees
or from any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it may have
against the Securities System or any other person; at the election
of the Fund, it shall be entitled to be
<PAGE>
subrogated to the rights of the Custodian with respect to any claim
against the Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage
if and to the extent that the Fund has not been made whole for any
such loss or damage.
M. DEPOSIT OF FUND COMMERCIAL PAPER IN AN APPROVED BOOK-ENTRY SYSTEM FOR
COMMERCIAL PAPER Upon receipt of proper instructions with respect to
each issue of direct issue commercial paper purchased by the Fund, the
Custodian may deposit and/or maintain direct issue commercial paper
owned by the Fund in any Approved Book-Entry System for Commercial
Paper, in each case only in accordance with applicable Securities and
Exchange Commission rules, regulations, and no-action correspondence,
and at all times subject to the following provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep
commercial paper of the Fund in an Approved Book-Entry
System for Commercial Paper, provided that such paper is
issued in book entry form by the Custodian or subcustodian
on behalf of an issuer with which the Custodian or
subcustodian has entered into a book-entry agreement and
provided further that such paper is maintained in a
non-proprietary account ("Account") of the Custodian or
such subcustodian in an Approved Book-Entry System for
Commercial Paper which shall not include any assets of the
Custodian or such subcustodian or any other person other
than assets held by the Custodian or such subcustodian as
a fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to commercial
paper of the Fund which is maintained in an Approved
Book-Entry System for Commercial Paper shall identify by
book-entry each specific issue of commercial paper
purchased by the Fund which is included in the System and
shall at all times during regular business hours be open
for inspection by authorized officers, employees or agents
of the Fund. The Custodian shall be fully and completely
responsible for maintaining a recordkeeping system capable
of accurately and currently stating the Fund's holdings of
commercial paper maintained in each such System.
(c) The Custodian shall pay for commercial paper purchased in
book-entry form for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice
from the issuer that such paper has been issued, sold and
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
purchase, payment and transfer for the account of the
Fund. The Custodian shall transfer such commercial
<PAGE>
paper which is sold or cancel such commercial paper which
is redeemed for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice that
payment for such paper has been transferred to the Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such transfer or redemption and
payment for the account of the Fund. Copies of all notices,
advises and confirmations of transfers of commercial paper
for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be
promptly provided to the Fund at its request. The
Custodian shall promptly send to the Fund confirmation of
each transfer to or from the account of the Fund in the
form of a written advice or notice of each such
transaction, and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in
the System for the account of the Fund on the next business
day.
(d) The Custodian shall promptly send to the Fund any report
or other communication received or obtained by the
Custodian relating to each System's accounting system,
system of internal accounting controls or procedures for
safeguarding commercial paper deposited in the System; the
Custodian shall promptly send to the Fund any report or
other communication relating to the Custodian's internal
accounting controls and procedures for safeguarding
commercial paper deposited in any Approved Book-Entry
System for Commercial Paper; and the Custodian shall
ensure that any agent appointed pursuant to Paragraph K
hereof or any subcustodian employed pursuant to Section 2
hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to
such agent's or subcustodian's internal accounting
controls and procedures for safeguarding securities
deposited in any Approved Book-Entry System for Commercial
Paper.
(e) The Custodian shall not act under this Paragraph M in the
absence of receipt of a certificate of an officer of the
Fund that the Board has approved the use of a particular
Approved Book-Entry System for Commercial Paper; the
Custodian shall also obtain appropriate assurance from the
officers of the Fund that the Board
has annually reviewed and approved the continued use by
the Fund of each Approved Book-Entry System for Commercial
Paper, so long as such review and approval is required by
Rule 17f-4 under the Investment Company Act of 1940, and
the Fund shall promptly notify the Custodian if the use of
an Approved Book-Entry System for Commercial Paper is to
be discontinued; at the request of the Fund, the Custodian
will terminate the use of any such System as promptly as
practicable.
<PAGE>
(f) The Custodian (or subcustodian, if the Approved Book-Entry
System for Commercial Paper is maintained by the
subcustodian) shall issue physical commercial paper or
promissory notes whenever requested to do so by the Fund
or in the event of an electronic system failure which
impedes issuance, transfer or custody of direct issue
commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Fund
for any loss or damage to the Fund resulting from use of
any Approved Book-Entry System for Commercial Paper by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or subcustodians or of any
of its or their employees or from any failure of the
Custodian or any such agent or subcustodian to enforce
effectively such rights as it may have against the System,
the issuer of the commercial paper or any other person; at
the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to
any claim against the System, the issuer of the commercial
paper or any other person which the Custodian may have as
a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such
loss or damage.
N. SEGREGATED ACCOUNT The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Paragraph L hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and any registered
broker-dealer (or any futures commission merchant), relating to
compliance with the rules of the Options Clearing Corporation and
of any registered national securities exchange (or of the
Commodity Futures Trading Commission or of any contract market or
commodities exchange), or of any similar
organization or organizations, regarding escrow or deposit or
other arrangements in connection with transactions by the Fund,
(ii) for purposes of segregating cash or U.S. Government
securities in connection with options purchased, sold or written
by the Fund or futures contracts or options thereon purchased or
sold by the Fund, (iii) for the purposes of compliance by the Fund
with the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other
proper purposes, but only, in the case of clause (iv), upon
receipt of, in addition to proper instructions, a certificate
signed by two officers of the Fund, setting forth the purpose such
segregated account and declaring such purpose to be a proper
purpose.
<PAGE>
O. OWNERSHIP CERTIFICATES FOR TAX PURPOSES The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Fund
held by it and in connection with transfers of securities.
P. PROXIES The Custodian shall, with respect to the securities held
by it hereunder, cause to be promptly delivered to the Fund all
forms of proxies and all notices of meetings and any other notices
or announcements or other written information affecting or
relating to the securities, and upon receipt of proper
instructions shall execute and deliver or cause its nominee to
execute and deliver such proxies or other authorizations as may be
required. Neither the Custodian nor its nominee shall vote upon
any of the securities or execute any proxy to vote thereon or give
any consent or take any other action with respect thereto (except
as otherwise herein provided) unless ordered to do so by proper
instructions.
Q. COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES The
Custodian shall deliver promptly to the Fund all written
information (including, without limitation, pendency of call and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers and other persons relating
to the securities and participation interests being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall deliver promptly to the Fund all written information
received by the Custodian from issuers and other persons relating
to the securities and participation interests whose tender or
exchange is sought and from the party (or his agents) making the
tender or exchange offer.
R. EXERCISE OF RIGHTS; TENDER OFFERS In the case of tender offers,
similar offers to purchase or exercise rights (including, without
limitation, pendency of calls and maturities of securities and
participation interests and expirations of rights in connection
therewith and notices of exercise of call and put options and the
maturity of futures contracts) affecting or relating to securities
and participation interests held by the Custodian under this
Agreement, the Custodian shall have responsibility for promptly
notifying the Fund of all such offers in accordance with the
standard of reasonable care set forth in Section 8 hereof. For
all such offers for which the Custodian is responsible as provided
in this Paragraph R, the Fund shall have responsibility for
providing the Custodian with all necessary instructions in timely
fashion. Upon receipt of proper instructions, the Custodian shall
timely deliver to the issuer or trustee thereof, or to the agent
of either, warrants, puts, calls, rights or similar
<PAGE>
securities for the purpose of being exercised or sold upon proper
receipt therefor and upon receipt of assurances satisfactory to
the Custodian that the new securities and cash, if any,
acquired by such action are to be delivered to the Custodian or
any subcustodian employed pursuant to Section 2 hereof. Upon
receipt of proper instructions, the Custodian shall timely deposit
securities upon invitations for tenders of securities upon proper
receipt therefor and upon receipt of assurances satisfactory to
the Custodian that the consideration to be paid or delivered or
the tendered securities are to be returned to the Custodian or
subcustodian employed pursuant to Section 2 hereof.
Notwithstanding any provision of this Agreement to the contrary,
the Custodian shall take all necessary action, unless otherwise
directed to the contrary by proper instructions, to comply with
the terms of all mandatory or compulsory exchanges, calls,
tenders, redemptions, or similar rights of security ownership, and
shall thereafter promptly notify the Fund in writing of such
action.
S. DEPOSITORY RECEIPTS The Custodian shall, upon receipt of proper
instructions, surrender or cause to be surrendered foreign
securities to the depository used by an issuer of American
Depository Receipts, European Depository Receipts or International
Depository Receipts (hereinafter collectively referred to as
"ADRs") for such securities,
against a written receipt therefor adequately describing such
securities and written evidence satisfactory to the Custodian that
the depository has acknowledged receipt of instructions to issue
with respect to such securities ADRs in the name of a nominee of
the Custodian or in the name or nominee name of any subcustodian
employed pursuant to Section 2 hereof, for delivery to the
Custodian or such subcustodian at such place as the Custodian or
such subcustodian may from time to time designate. The Custodian
shall, upon receipt of proper instructions, surrender ADRs to the
issuer thereof against a written receipt therefor adequately
describing the ADRs surrendered and written evidence satisfactory
to the Custodian that the issuer of the ADRs has acknowledged
receipt of instructions to cause its depository to deliver the
securities underlying such ADRs to the Custodian or to a
subcustodian employed pursuant to Section 2 hereof.
T. INTEREST BEARING CALL OR TIME DEPOSITS The Custodian shall, upon
receipt of proper instructions, place interest bearing fixed term
and call deposits with the banking department of such banking
institution (other than the Custodian) and in such amounts as the
Fund may designate. Deposits may be denominated in U.S. Dollars
or other currencies. The Custodian shall include in its records
with respect to the assets of the Fund appropriate notation as to
the amount and currency of each such deposit, the accepting
banking institution and other appropriate details and shall retain
such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Custodian by the banking
<PAGE>
institution. Such deposits shall be deemed portfolio securities
of the applicable Fund for the purposes of this Agreement, and the
Custodian shall be responsible for the collection of income from
such accounts and the transmission of cash to and from such
accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
------------------------------------------------------------
1. OPTIONS. The Custodians shall, upon receipt of proper
instructions and in accordance with the provisions of any
agreement between the Custodian, any registered
broker-dealer and, if necessary, the Fund, relating to
compliance with the rules of the Options Clearing
Corporation or of any registered national securities
exchange or similar organization or organizations, receive
and retain confirmations or other documents, if any,
evidencing the purchase or writing of an option on a
security, securities index, currency or other financial
instrument or index by the Fund;
deposit and maintain in a segregated account for each Fund
separately, either physically or by book-entry in a
Securities System, securities subject to a covered call
option written by the Fund; and release and/or transfer
such securities or other assets only in accordance with a
notice or other communication evidencing the expiration,
termination or exercise of such covered option furnished
by the Options Clearing Corporation, the securities or
options exchange on which such covered option is traded or
such other organization as may be responsible for handling
such options transactions. The Custodian and the
broker-dealer shall be responsible for the sufficiency of
assets held in each Fund's segregated account in
compliance with applicable margin maintenance
requirements.
2. FUTURES CONTRACTS The Custodian shall, upon receipt of
proper instructions, receive and retain confirmations and
other documents, if any, evidencing the purchase or sale
of a futures contract or an option on a futures contract
by the Fund; deposit and maintain in a segregated account,
for the benefit of any futures commission merchant, assets
designated by the Fund as initial, maintenance or
variation "margin" deposits (including mark- to-market
payments) intended to secure the Fund's performance of its
obligations under any futures contracts purchased or sold
or any options on futures contracts written by Fund, in
accordance with the provisions of any agreement or
agreements among the Fund, the Custodian and such futures
commission merchant, designed to comply with the rules of
the Commodity Futures Trading Commission and/or of any
contract market or commodities exchange or similar
organization regarding such margin deposits or payments;
and release and/or transfer assets in such margin accounts
only in
<PAGE>
accordance with any such agreements or rules. The
Custodian and the futures commission merchant shall be
responsible for the sufficiency of assets held in the
segregated account in compliance with the applicable
margin maintenance and mark-to-market payment requirements.
3. FOREIGN EXCHANGE TRANSACTIONS The Custodian shall,
pursuant to proper instructions, enter into or cause a
subcustodian to enter into foreign exchange contracts,
currency swaps or options to purchase and sell foreign
currencies for spot and future delivery on behalf and for
the account of the Fund. Such transactions may be
undertaken by the Custodian or subcustodian with such
banking or financial institutions or other currency
brokers, as set forth in proper instructions. Foreign
exchange contracts, swaps and options shall be deemed to
be portfolio securities of the Fund; and accordingly, the
responsibility of the Custodian therefor shall be the same
as and no greater than the Custodian's responsibility in
respect of other portfolio securities of the Fund. The
Custodian shall be responsible for the transmittal to and
receipt of cash from the currency broker or banking or
financial institution with which the contract or option is
made, the maintenance of proper records with respect to
the transaction and the maintenance of any segregated
account required in connection with the transaction. The
Custodian shall have no duty with respect to the selection
of the currency brokers or banking or financial
institutions with which the Fund deals or for their
failure to comply with the terms of any contract or
option. Without limiting the foregoing, it is agreed that
upon receipt of proper instructions and insofar as funds
are made available to the Custodian for the purpose, the
Custodian may (if determined necessary by the Custodian to
consummate a particular transaction on behalf and for the
account of the Fund) make free outgoing payments of cash
in the form of U.S. dollars or foreign currency before
receiving confirmation of a foreign exchange contract or
swap or confirmation that the countervalue currency
completing the foreign exchange contract or swap has been
delivered or received. The Custodian shall not be
responsible for any costs and interest charges which may
be incurred by the Fund or the Custodian as a result of
the failure or delay of third parties to deliver foreign
exchange; provided that the Custodian shall nevertheless
be held to the standard of care set forth in, and shall be
liable to the Fund in accordance with, the provisions of
Section 8.
V. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY The Custodian may in its
discretion, without express authority from the Fund:
<PAGE>
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, PROVIDED, that all such
payments shall be accounted for by the Custodian to the
Treasurer of the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities
and property of the Fund except as otherwise directed by
the Fund.
4. Duties of Bank with Respect to Books of Account and Calculations of Net
Asset Value
-----------------------------------------------------------------------
The Bank shall as Agent (or as Custodian, as the case may be) keep such books
of account and render as at the close of business on each day a detailed
statement of the amounts received or paid out and of securities received or
delivered for the account of the Fund during said day and such other
statements, including a daily trial balance and inventory of the Fund's
portfolio securities; and shall furnish such other financial information and
data as from time to time requested by the Treasurer or any authorized officer
of the Fund; and shall compute and determine, as of the close of regular
trading on the New York Stock Exchange, or at such other time or times as the
Board may determine, the net asset value of a Share in the Fund, such
computation and determination to be made in accordance with the governing
documents of the Fund and the votes and instructions of the Board at the time
in force and applicable, and promptly notify the Fund and its investment
adviser and such other persons as the Fund may request of the result of such
computation and determination. In computing the net asset value the Custodian
may rely upon security quotations received by telephone or otherwise from
sources or pricing services designated by the Fund by proper instructions, and
may further rely upon information furnished to it by any authorized officer of
the Fund relative (a) to liabilities of the Fund not appearing on its books of
account, (b) to the existence, status and proper treatment of any reserve or
reserves, (c) to any procedures established by the Board regarding the
valuation of portfolio securities, and (d) to the value to be assigned to any
bond, note, debenture, Treasury bill, repurchase agreement, subscription right,
security, participation interest or other asset or property for which market
quotations are not readily available.
5. Records and Miscellaneous Duties
--------------------------------
The Bank shall create, maintain and preserve all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund
<PAGE>
under the Investment Company Act of 1940, with particular attention to Section
31 thereof and Rules 31a-1 and 31a-2 thereunder, applicable federal and state
tax laws and any other law or administrative rules or procedures which may be
applicable to the Fund. All books of account and records maintained by the Bank
in connection with the performance of its duties under this Agreement shall be
the property of the Fund, shall at all times during the regular business hours
of the Bank be open for inspection by authorized officers, employees or agents
of the Fund, and in the event of termination of this Agreement shall be
delivered to the Fund or to such other person or persons as shall be designated
by the Fund. Disposition of any account or record after any required period of
preservation shall be only in accordance with specific instructions received
from the Fund. The Bank shall assist generally in the preparation of
reports to shareholders, audits of accounts, and other ministerial matters of
like nature; and, upon request, shall furnish the Fund's auditors with an
attested inventory of securities held with appropriate information as to
securities in transit or in the process of purchase or sale and with such other
information as said auditors may from time to time request. The Custodian shall
also maintain records of all receipts, deliveries and locations of such
securities, together with a current inventory thereof, and shall conduct
periodic verifications (including sampling counts at the Custodian) of
certificates representing bonds and other securities for which it is responsible
under this Agreement in such manner as the Custodian shall determine from time
to time to be advisable in order to verify the accuracy of such inventory. The
Bank shall not disclose or use any books or records it has prepared or
maintained by reason of this Agreement in any manner except as expressly
authorized herein or directed by the Fund, and the Bank shall keep confidential
any information obtained by reason of this Agreement.
6. Opinion of Fund's Independent Public Accountants
------------------------------------------------
The Custodian shall take all reasonable action, as the Fund may from time to
time request, to enable the Fund to obtain from year to year favorable opinions
from the Fund's independent public accountants with respect to its activities
hereunder in connection with the preparation of the Fund's registration
statement and Form N-SAR or other periodic reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
7. Compensation and Expenses of Bank
---------------------------------
The Bank shall be entitled to reasonable compensation for its services as
Custodian and Agent, as agreed upon from time to time between the Fund and the
Bank. The Bank shall entitled to receive from the Fund on demand reimbursement
for its cash disbursements, expenses and charges, including counsel fees, in
connection with its duties as Custodian and Agent hereunder, but excluding
salaries and usual overhead expenses.
8. Responsibility of Bank
----------------------
<PAGE>
So long as and to the extent that it is in the exercise of reasonable care, the
Bank as Custodian and Agent shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall
be without liability for any action reasonably taken or omitted pursuant to
such advice.
The Bank as Custodian and Agent shall be held to the exercise of reasonable
care in carrying out the provisions of this Agreement but shall be liable only
for its own negligent or bad faith acts or failures to act. Notwithstanding
the foregoing, nothing contained in this paragraph is intended to nor shall it
be construed to modify the standards of care and responsibility set forth in
Section 2 hereof with respect to subcustodians and in subparagraph f of
Paragraph L of Section 3 hereof with respect to Securities Systems and in
subparagraph g of Paragraph M of Section 3 hereof with respect to an Approved
Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect to subcustodians
generally in Section 2 hereof, provided that, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim resulting from,
or caused by, the direction of or authorization by the Fund to maintain custody
of any securities or cash of the Fund in a foreign county including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, revolution,
military or usurped powers, nuclear fission, fusion or radiation, earthquake,
storm or other disturbance of nature or acts of God.
If the Fund requires the Bank in any capacity to take any action with respect
to securities, which action involves the payment of money or which action may,
in the opinion of the Bank, result in the Bank or its nominee assigned to the
Fund being liable for the payment of money or incurring liability of some other
form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
9. Persons Having Access to Assets of the Fund
-------------------------------------------
(i) No trustee, director, general partner, officer, employee
or agent of the Fund shall have physical access to the
assets of the Fund held by the Custodian or be authorized
or permitted to withdraw any investments of the Fund, nor
shall the Custodian deliver any assets of the Fund to any
such person. No officer or director, employee or agent of
the Custodian who holds any similar position with the Fund
or the
<PAGE>
investment adviser of the Fund shall have access to the
assets of the Fund.
(ii) Access to assets of the Fund held hereunder shall only be
available to duly authorized officers, employees,
representatives or agents of the Custodian or other
persons or entities for whose actions the Custodian shall
be responsible to the extent permitted hereunder, or to
the Fund's independent public accountants in connection
with their auditing duties performed on behalf of the
Fund.
(iii) Nothing in this Section 9 shall prohibit any officer,
employee or agent of the Fund or of the investment adviser
of the Fund from giving instructions to the Custodian or
executing a certificate so long as it does not result in
delivery of or access to assets of the Fund prohibited by
paragraph (i) of this Section 9.
10. Effective Period, Termination and Amendment; Successor Custodian
----------------------------------------------------------------
This Agreement shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid
to the other party, such termination to take effect not sooner than sixty (60)
days after the date of such delivery or mailing; provided, that the Fund may at
any time by action of its Board, (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the Federal Deposit Insurance
Corporation or by the Banking Commissioner of The Commonwealth of Massachusetts
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction. Upon termination of the
Agreement, the Fund shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
Unless the holders of a majority of the outstanding Shares of the Fund vote to
have the securities, funds and other properties held hereunder delivered and
paid over to some other bank or trust company, specified in the vote, having
not less than $2,000,000 of aggregate capital, surplus and undivided profits,
as shown by its last published report, and meeting such other qualifications
for custodians set forth in the Investment Company Act of 1940, the Board
shall, forthwith, upon giving or receiving notice of termination of this
Agreement, appoint as successor custodian, a bank or trust company having such
qualifications. The Bank, as Custodian, Agent or otherwise, shall, upon
termination of the Agreement, deliver to such successor custodian, all
securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no such vote has been
<PAGE>
adopted by the shareholders and that no written order designating a successor
custodian shall have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Fund to the Fund but shall have
the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all funds, securities and properties of the Fund held by or
deposited with the Bank, and all books of account and records kept by the Bank
pursuant to this Agreement, and all documents held by the Bank relative
thereto. Thereafter such bank or trust company shall be the successor of the
Custodian under this Agreement.
11. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Agreement, the Custodian and the Fund
may from time to time agree on such provisions interpretive of or in addition
to the provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
governing instruments of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment
of this Agreement.
12. Certification as to Authorized Officers
---------------------------------------
The Secretary of the Fund shall at all times maintain on file with the Bank his
certification to the Bank, in such form as may be acceptable to the Bank, of
the names and signatures of the authorized officers of each fund, it being
understood that upon the occurence of any change in the information set forth
in the most recent certification on file (including without limitation any
person named in the most recent certification who has ceased to hold the office
designated therein), the Secretary of the Fund shall sign a new or amended
certification setting forth the change and the new, additional or ommitted
names or signatures. The Bank shall be entitled to rely and act upon any
officers named in the most recent certification.
13. Notices
-------
Notices and other writings delivered or mailed postage prepaid to the Fund
addressed to Thomas H. Drohan, John Hancock Advisers, Inc., 101 Huntington
Avenue, Boston, Massachusetts 02199, or to such other address as the Fund may
have designated to the Bank, in writing, or to Investors Bank & Trust Company,
24 Federal Street, Boston, Massachusetts 02110, shall be deemed to have been
properly delivered or given hereunder to the respective addressees.
<PAGE>
14. Massachusetts Law to Apply; Limitations on Liability
----------------------------------------------------
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with the laws of The Commonwealth of Massachusetts.
If the Fund is a Massachusetts business trust, the Custodian expressly
acknowledges the provision in the Fund's declaration of trust limiting the
personal liability of the trustees and shareholders of the Fund; and the
Custodian agrees that it shall have recourse only to the assets of the Fund for
the payment of claims or obligations as between the Custodian and the Fund
arising out of this Agreement, and the Custodian shall not seek satisfaction of
any such claim or obligation from the trustees or shareholders of the Fund.
Each Fund, and each series or portfolio of a Fund, shall be liable only for its
own obligations to the Custodian under this Agreement and shall not be jointly
or severally liable for the obligations of any other Fund, series or portfolio
hereunder.
<PAGE>
15. Adoption of the Agreement by the Fund
-------------------------------------
The Fund represents that its Board has approved this Agreement and has duly
authorized the Fund to adopt this Agreement. This Agreement shall be deemed to
supersede and terminate, as of the date first written above, all prior
agreements between the Fund and the Bank relating to the custody of the Fund's
assets.
* * * *
<PAGE>
In Witness Whereof, the parties hereto have caused this agreement to be
executed in duplicate as of the date first written above by their respective
officers thereunto duly authorized.
John Hancock Mutual Funds
by: /s/ Robert G. Freedman
----------------------
Attest:
/s/Avery P. Maher
- -----------------
Investors Bank & Trust Company
by: /s/ Henry M. Joyce
------------------
Attest:
/s/ JM Keenan
- -------------
<PAGE>
Page 1 of 2
INVESTORS BANK & TRUST COMPANY
APPENDIX A
[EFFECTIVE JANUARY 30, 1995]
John Hancock Limited Term Government Fund
John Hancock Capital Series
John Hancock Special Value Fund
John Hancock Growth Fund
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Sovereign Bond Fund
John Hancock Sovereign Investors Fund, Inc.
John Hancock Sovereign Investors Fund
John Hancock Sovereign Balanced Fund
John Hancock Special Equities Fund
John Hancock Strategic Series
John Hancock Independence Diversified Core Equity Fund
John Hancock Strategic Income Fund
John Hancock Utilities Fund
John Hancock Tax-Exempt Income Fund
John Hancock Tax-Exempt Series Fund
California Portfolio
Massachusetts Portfolio
New York Portfolio
John Hancock Technology Series, Inc.
John Hancock National Aviation & Technology Fund
John Hancock Global Technology Fund
Freedom Investment Trust
John Hancock Gold & Government Fund
John Hancock Regional Bank Fund
John Hancock Sovereign U.S. Government Income Fund
John Hancock Managed Tax-Exempt Fund
John Hancock Sovereign Achievers Fund
Freedom Investment Trust II
John Hancock Special Opportunities Fund
Freedom Investment Trust III
John Hancock Discovery Fund
<PAGE>
Page 2 of 2
INVESTORS BANK & TRUST COMPANY
APPENDIX A
[EFFECTIVE JANUARY 30, 1995]
John Hancock Series, Inc.
John Hancock Emerging Growth Fund
John Hancock Global Resources Fund
John Hancock Government Income Fund
John Hancock High Yield Bond Fund
John Hancock High Yield Tax-Free Fund
John Hancock Money Market Fund B
John Hancock Cash Reserve, Inc.
John Hancock Current Interest
John Hancock U.S. Government Cash Reserve
John Hancock Capital Growth Fund
John Hancock Investment Trust
John Hancock Growth and Income Fund
John Hancock California Tax-Free Income Fund
John Hancock Tax-Free Bond Fund
John Hancock Bond Fund
John Hancock Investment Quality Bond Fund
John Hancock Government Securities Trust
John Hancock U.S. Government Trust
John Hancock Adjustable U.S. Government Trust
John Hancock Adjustable U.S. Government Fund
John Hancock Intermediate Government Trust
John Hancock Institutional Series Trust
John Hancock Berkeley Dividend Performers Fund
John Hancock Berkeley Bond Fund
John Hancock Berkeley Fundamental Value Fund
John Hancock Berkeley Sector Opportunity Fund
John Hancock Independence Diversified Core Equity Fund II
John Hancock Independence Value Fund
John Hancock Independence Growth Fund
John Hancock Independence Medium Capitalization Fund
John Hancock Independence Balanced Fund
FREEDOM INVESTMENT TRUST II
TRANSFER AGENCY AND SERVICE AGREEMENT
Dated August 10, 1992
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 10th day of August, 1992 by and between Freedom
Investment Trust II, a Massachusetts business trust having its principal office
and place of business at 101 Huntington Avenue, Boston, Massachusetts (the
"Fund"), and John Hancock Fund Services, Inc., a Delaware corporation having its
principal office and place of business at 101 Huntington Avenue, Boston,
Massachusetts 02199 ("JHFSI").
WITNESSETH:
WHEREAS, the Fund desires to appoint JHFSI as its transfer agent, dividend
disbursing agent and agent in connection with certain other activities, and
JHFSI desires to accept such appointment;
WHEREAS, the Fund is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Fund presently offers shares in three series, such series,
together with all other series subsequently established by the Fund and made
subject to this Agreement in accordance with Article 8, being herein referred to
as the "Fund(s)";
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 Terms of Appointment: Duties of JHFSI
1.01 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby, employs and appoints JHFSI to act as, and JHFSI agrees to act as
transfer agent for the Fund's authorized and issued shares of beneficial
interest ("Shares"), with any accumulation, open-account or similar plans
provided to the shareholders of the Fund ("Shareholders") and set out in the
currently effective prospectus of the Fund, including without limitation any
periodic investment plan or periodic withdrawal program.
1.02 JHFSI agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and JHFSI, JHFSI shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the Custodian
of the Fund authorized pursuant to the By-Laws of the Fund as in effect on the
date thereof (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance, redemption requests and redemption
directions and deliver the appropriate documentation therefor to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or cause to be paid
over in the appropriate manner such monies as instructed by the redeeming
Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund; and
(vii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(viii) Record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number of Shares of the
Fund which are authorized, based upon data provided to it by the Fund, and
issued and outstanding. JHFSI shall also provide the Fund on a regular basis
with the total number of Shares which are authorized and issued and outstanding
and shall have no obligation, when recording the issuance of Shares, to monitor
the issuance of such Shares or to take cognizance of any laws relating to the
issue or sale of such Shares, which functions shall be the sole responsibility
of the Fund.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a), JHFSI shall: (i) perform all of the customary services of a
transfer agent, dividend disbursing agent and, as relevant, agent in connection
with accumulation, open-account or similar plans (including without limitation
any periodic investment plan or periodic withdrawal program); including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, receiving and tabulating proxies, mailing Shareholder
reports and prospectuses to current Shareholders, withholding taxes on U.S.
resident and non-resident alien accounts, preparing and filing U.S. Treasury
Department Forms 1099 and other appropriate forms required with respect to
dividends and distributions by federal authorities for all Shareholders,
preparing and mailing confirmations forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity statements
for Shareholders, and providing Shareholder account information and (ii) provide
a system which will enable the Fund to monitor the total number of Shares sold
in each State.
(c) In addition, the Fund shall (i) identify to JHFSI in writing those
transactions and assets to be treated as exempt from the blue sky reporting for
each State and (ii) verify the establishment of transactions for each State on
the system prior to activation and thereafter monitor the daily activity for
each State. The responsibility of JHFSI for the Fund's blue sky State
registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
(d) Additionally, JHFSI shall:
(i) Utilize a system to identify all share transactions which involve
purchase and redemption orders that are processed at a time other than the time
of the computation of net asset value per share next computed after receipt of
such orders, and shall compute the net effect upon the Fund of such transactions
so identified on a daily and cumulative basis.
(ii) If upon any day the cumulative net effect of such transactions upon
the Fund is negative and exceed a dollar amount equivalent to 1/2 of 1 cent per
share, JHFSI shall promptly make a payment to the Fund in cash or through the
use of a credit, in the manner described in paragraph (iv) below, in such amount
as may be necessary to reduce the negative cumulative net effect to less than
1/2 of 1 cent per share.
(iii) If on the last business day of any month the cumulative net effect
upon the Fund (adjusted by the amount of all prior payments and credits by JHFSI
and the Fund) is negative, the Fund shall be entitled to a reduction in the fee
next payable under the Agreement by an equivalent amount, except as provided in
paragraph (iv) below. If on the last business day in any month the cumulative
net effect upon the Fund (adjusted by the amount of all prior payments and
credits by JHFSI and the Fund) is positive, JHFSI shall be entitled to recover
certain past payments and reductions in fees, and to credit against all future
payments and fee reductions that may be required under the Agreement as herein
described in paragraph (iv) below.
(iv) At the end of each month, any positive cumulative net effect upon the
Fund shall be deemed to be a credit to JHFSI which shall first be applied to
permit JHFSI to recover any prior cash payments and fee reductions made by it to
the Fund under paragraphs (ii) and (iii) above during the calendar year, by
increasing the amount of the monthly fee under the Agreement next payable in an
amount equal to prior payments and fee reductions made by JHFSI during such
calendar year, but not exceeding the sum of that month's credit and credits
arising in prior months during such calendar year to the extent such prior
credits have not previously been utilized as contemplated by this paragraph. Any
portion of a credit to JHFSI not so used by it shall remain as a credit to be
used as payment against the amount of any future negative cumulative net effects
that would otherwise require a cash payment or fee reduction to be made to the
Fund pursuant to paragraphs (ii) or (iii) above (regardless of whether or not
the credit or any portion thereof arose in the same calendar year as that in
which the negative cumulative net effects or any portion thereof arose).
(v) JHFSI shall supply to the Fund from time to time, as mutually agreed
upon, reports summarizing the transactions identified pursuant to paragraph (i)
above, and the daily and cumulative net effects of such transactions, and shall
advise the Fund at the end of each month of the net cumulative effect at such
time. JHFSI shall promptly advise the Fund if at any time the cumulative net
effect exceeds a dollar amount equivalent to 1/2 of 1 cent per share.
(vi) In the event that this Agreement is terminated for whatever cause,
the Fund shall promptly pay to JHFSI an amount in cash equal to the amount by
which the cumulative net effect upon the Fund is positive or, if the cumulative
net effect upon the Fund is negative, JHFSI shall promptly pay to the Fund an
amount in cash equal to the amount of such cumulative net effect.
Procedures applicable to certain of these services may be establishes from
time to time by agreement between the Fund and JHFSI but the failure of the Fund
to establish such procedures with respect to any service shall not in any way
diminish the duty and obligation of JHFSI to perform such services hereunder.
Article 2 Fees and Expenses
2.01 For performance by JHFSI pursuant to this Agreement, the Fund agrees
to pay JHFSI monthly a fee based on the average daily net assets of the Fund as
set out in the initial fee schedule attached hereto. Such fees and out-of-pocket
expenses and advances identified under Section 2.02 below may be changed from
time to time subject to mutual written agreement between the Fund and JHFSI.
2.02 In addition to the fee paid under Section 2.01 above the Fund agrees
to reimburse JHFSI for out-of-pocket expenses or advances incurred by JHFSI for
the items set out in the fee schedule attached hereto. In addition, any other
expenses incurred by JHFSI at the request or with the consent of the Fund, will
be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses promptly
following the mailing of the respective billing notice. Postage for mailing of
dividends, proxies, Fund reports and other mailings to all shareholder accounts
shall be advanced to JHFSI by the Fund at least seven (7) days prior to the
mailing date of such materials.
Article 3 Representations and Warranties of JHFSI
JHFSI represents and warrants to the Fund that:
3.01 It is a Delaware corporation duly organized and existing and in good
standing under the laws of the State of Delaware, and as a Foreign Corporation
under the Laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.
3.03 It is empowered under applicable laws and by its charter and By-Laws
to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to JHFSI that:
4.01 It is a trust duly organized and existing and in good standing under
the laws of the state of Massachusetts.
4.02 It is empowered under applicable laws and by its declaration of trust
and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said declaration of trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end and diversified investment company registered under
the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with respect to all
Shares of the Fund being offered for sale.
Article 5 Indemnification
5.01 JHFSI shall not be responsible for, and the Fund shall indemnify and
hold JHFSI harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising out of or
attributable to:
(a) All actions of JHFSI or its agent or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in good
faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
(c) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or regulations of
any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state unless such
violation results from any action or omission by JHFSI or any of its agents or
sub-contractors which fails to comply with written instructions of the Fund or
any officer of the Fund that no offers or sales be made in general or to the
residents of a particular state.
5.02 JHFSI shall indemnify and hold the Fund harmless from and against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributed to any action or failure or omission to
act by JHFSI as a result of JHFSI's lack of good faith, negligence or willful
misconduct.
5.03 At any time JHFSI may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by JHFSI under this
Agreement, and JHFSI and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. JHFSI, its
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided JHFSI or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. JHFSI, its agents and subcontractors shall also be
protected and indemnified in recognizing share certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the officer of the
Fund, and the proper countersignature of any former transfer agent or registrar,
or of a co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 Covenants of the Fund and JHFSI
6.01 The Fund shall promptly furnish to JHFSI the following:
(a) A certified copy of the resolution of the Board of Trustees
authorizing both the appointment of JHFSI and the execution and delivery of this
Agreement.
(b) A copy of the Master Trust Agreement and By-Laws of the Fund and
all amendments thereto.
6.02 JHFSI hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 JHFSI shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, JHFSI agrees that all such records prepared or maintained
by JHFSI relating to the services to be performed by JHFSI hereunder are the
property of the Fund and will be preserved, maintained and made available in
accordance with such Section and Rules, and will be surrendered to the Fund on
and in accordance with its request.
6.04 JHFSI and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, JHFSI will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
instruction. JHFSI reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
Article 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
7.02 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund. Additionally, JHFSI reserves the right to charge for any other
reasonable expenses associated with such termination.
Article 8 Additional Funds
8.01 In the event that the Fund establishes one or more of series of
Shares in addition to the present series with respect to which it desires to
have JHFSI render services as a transfer agent under the terms hereof, it shall
so notify JHFSI in writing, and if JHFSI agrees in writing to provide such
services, such series of Shares shall become a Fund hereunder.
Article 9 Assignment
9.01 Except as provided in Section 9.03 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
9.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
9.03 JHFSI may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A (c)(1) of the Securities Exchange Act of
1934 ("Section 17A (c)(1)"), (ii) or any other entity JHFSI deems appropriate in
order to comply with the terms and conditions of this Agreement, provided,
however, that JHFSI shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
Article 10 Amendment
10.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Trustees of the Fund.
Article 11 Massachusetts Law to Apply
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 12 Merger of Agreement
12.01 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or written.
Article 13 Limitation on Liability
13.01 The Master Trust Agreement establishing the Fund, dated March 31,
1986 a copy of which, together with all amendments thereto, is on file in the
Office of the Secretary of the Commonwealth of Massachusetts, provides all
persons extending credit to, contracting with or having any claim against the
Fund shall look only to the assets of the Fund, and neither the shareholders nor
the Trustees, nor any of the Fund's officers, employees, or agents shall be
personally liable therefore.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
ATTEST: FREEDOM INVESTMENT TRUST II
/s/Thomas H. Connors BY: /s/Hugh A. Dunlap, Jr.
Thomas H. Connors Hugh A. Dunlap, Jr.
Assistant Secretary President
ATTEST: JOHN HANCOCK FUND SERVICES, INC.
/s/Thomas H. Connors BY: /s/David A. King
Thomas H. Connors David A. King
Assistant Secretary President
<PAGE>
FREEDOM INVESTMENT TRUST II
101 Huntington Avenue
Boston, MA 02199
John Hancock Fund Services, Inc.
101 Huntington Avenue
Boston, MA 02199
Re: Transfer Agency and Service Agreement
Ladies and Gentlemen:
Pursuant to Section 8.01 of the Transfer Agency and Service Agreement
dated as of August 10, 1992 between Freedom Investment Trust II (the "Trust")
and John Hancock Fund Services, Inc. (the "Transfer Agent"), please be advised
that the Trust has established a new series of its shares, namely, John Hancock
Special Opportunities Fund (the "Fund"), and please be further advised that the
Trust desires to retain the Transfer Agent to render transfer agency services
under the Transfer Agency and Service Agreement to the Fund in accordance with
the fee schedule attached hereto as Exhibit A.
Please state below whether you are willing to render such services in
accordance with the fee schedule attached hereto as Exhibit A.
FREEDOM INVESTMENT TRUST II
ATTEST: /s/ Thomas H. Drohan By: /s/Hugh A Dunhap, Jr.
Secretary President
Dated: November 1, 1993
We are willing to render transfer agency services to the John Hancock
Special Opportunities Fund in accordance with the fee schedule attached hereto
as Exhibit A.
JOHN HANCOCK FUND
SERVICES, INC.
ATTEST: /s/ Thomas H. Drohan By: /s/ David A. King
President
Dated: November 1, 1993
<PAGE>
FREEDOM INVESTMENT TRUST II
101 Huntington Avenue
Boston, MA 02199
John Hancock Fund Services, Inc.
101 Huntington Avenue
Boston, MA 02199
Re: Transfer Agency and Service Agreement
Ladies and Gentlemen:
Pursuant to Section 8.01 of the Transfer Agency and Service Agreement
dated as of August 10, 1992 between Freedom Investment Trust II (the "Trust")
and John Hancock Fund Services, Inc. (the "Transfer Agent"), please be advised
that the Trust has established a new series of its shares, namely, John Hancock
Freedom International Fund (the "Fund"), and please be further advised that the
Trust desires to retain the Transfer Agent to render transfer agency services
under the Transfer Agency and Service Agreement to the Fund in accordance with
the fee schedule attached hereto as Exhibit A.
Please state below whether you are willing to render such services in
accordance with the fee schedule attached hereto as Exhibit A.
FREEDOM INVESTMENT TRUST II
ATTEST: /s/Thomas H. Drohan By: /s/Hugh A. Dunlap, Jr.
Secretary President
Dated: January 3, 1994
We are willing to render transfer agency services to John Hancock Freedom
International Fund in accordance with the fee schedule attached hereto as
Exhibit A.
JOHN HANCOCK FUND
SERVICES, INC.
ATTEST: /s/Thomas A. Drohan By: /s/David A. King
Title: President
Dated: January 3, 1994
