<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION SEPTEMBER 29, 1995
REGISTRATION NO. 33-29438
REGISTRATION NO. 811-5732
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER
---
THE SECURITIES ACT OF 1933 X
---
PRE-EFFECTIVE AMENDMENT NO.
---
POST-EFFECTIVE AMENDMENT NO. 14 X
---
AND/OR
REGISTRATION STATEMENT UNDER
---
THE INVESTMENT COMPANY ACT OF 1940 X
---
AMENDMENT NO. 16
(CHECK APPROPRIATE BOX OR BOXES)
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FREEDOM INVESTMENT TRUST III
(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)
-- on (date) pursuant to paragraph (b)
-- 60 days after filing pursuant to paragraph (a)
X on December 1, 1995 pursuant to paragraph (a) of Rule 485
<TABLE>
Calculation of Registration Fees Under the Securities Act of 1933
<CAPTION>
Proposed Maximum Proposed Aggregate
Title of Securities Amount of Shares Offering Price Maximum Amount of
Being Registered Being Registered Per Share Offering Price Registration Fee
<S> <C> <C> <C> <C>
Shares of Beneficial Interest Indefinite<F1> N/A N/A N/A
Shares of Beneficial Interest 2,328,348 $13.55 $290,000 $100.00
<FN>
<F1> Registrant continues its election to register an indefinite number of
shares of beneficial inderest pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended.
<F2> Registrant elects to calculate the maximum aggregate offering price
pursuant to Rule 24e-2. 2,871,072 shares were redeemed during the fiscal
year ended July 31, 1995. 564,126 shares were used for reductions
pursuant to Paragraph (c) of Rule 24f-2 during the current fiscal year.
2,328,348 shares is the amount of redeemed shares used for reduction in
this Amendment. Pursuant to Rule 457(c) under the Securities Act of 1933,
the maximum public offering price of $13.55 per share on September 26, 1995
is the price used as the basis for calculating the registration fee. While
no fee is required for the 2,306,946 shares, the Registrant has elected to
register, for $100, an additional $290,000 of shares (approximately 21,402
shares at $13.55 per share).
</TABLE>
--------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has registered an indefinite number of securities 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 September 26, 1995.
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<PAGE>
FREEDOM INVESTMENT TRUST III
Cross Reference Sheet
Pursuant to Rule 495(a) under the Securities Act of 1933
ITEM NUMBER PROSPECTUS CAPTION STATEMENT OF ADDITIONAL
FORM N-1A, PART A INFORMATION CAPTION
- --------------------------------------------------------------------------------
1 Front Cover Page *
2 Expense Information; The *
Fund's Expenses; Share Price
3 The Fund's Financial *
Highlights; Performance
4 Investment Objectives and *
Policies; Organization and
Management of the Fund
5 Organization and Management of *
the Fund; The Fund's
Expenses; Back Cover Page
6 Organization and Management of *
the Fund; Dividends and Taxes;
How to Buy Shares; How to
Redeem Shares; Additional
Services and Programs
7 How to Buy Shares; Shares *
Price; Additional Services
and Programs; Alternative
Purchase Arrangements; The
Fund's Expenses; Back Cover
Page
8 How to Redeem Shares *
9 Not Applicable *
10 * Front Cover Page
11 * Table of Contents
12 * Organization of the Fund
13 * Investment Objectives
and Policies; Certain
Investment Practices;
Investment Restrictions
14 * Those Responsible for
Management
15 * Those Responsible for
Management
<PAGE>
ITEM NUMBER PROSPECTUS CAPTION STATEMENT OF ADDITIONAL
FORM N-1A, PART A INFORMATION CAPTION
- --------------------------------------------------------------------------------
16 * Investment Advisory and
Other Services;
Distribution Contract;
Transfer Agent Services;
Custody of Portfolio;
Independent Auditors
17 * Brokerage Allocation
18 * Description of Fund's
Shares
19 * Net Asset Value;
Additional Services and
Programs
20 * Tax Status
21 * Distribution Contract
22 * Calculation of
Performance
23 * Financial Statements
<PAGE>
JOHN HANCOCK
DISCOVERY FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
DECEMBER 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 ................................ 7
Alternative Purchase Arrangements ...................................... 8
The Fund's Expenses .................................................... 9
Dividends and Taxes .................................................... 10
Performance ............................................................ 11
How to Buy Shares ...................................................... 12
Share Price ............................................................ 13
How to Redeem Shares ................................................... 18
Additional Services and Programs ....................................... 20
This Prospectus sets forth information about John Hancock Discovery Fund
(the "Fund"), a diversified series of Freedom Investment Trust III, 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 December 1, 1995, 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 to 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 of Class A and Class
B shares for the fiscal year ended July 31, 1995 adjusted to reflect current
fees and expenses. Actual fees and expenses may be greater or less than those
indicated.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of
offering price) ............................................. 5.00% None
Maximum sales charge imposed on reinvested dividends .......... None None
Maximum deferred sales charge ................................. None<F1> 5.00%
Redemption fee<F3> ............................................ 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<F2> ................................................. 0.30% 1.00%
Other expenses ................................................ 0.80% 0.80%
---- ----
1.85% 2.55%
Total Fund operating expenses ................................. ==== ====
<FN>
<F1> No sales charge is payable at the time of purchase on investments of $1 million or
more, a contingent deferred sales charge may be imposed but for these investments, as
described under the caption "Share Price," in the event of certain redemption
transactions within one year of purchase.
<F2> 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.
<F3> Redemption by wire fee (currently $4.00) not included.
</FN>
</TABLE>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on
a $1,000 investment, assuming a 5%
annual return throughout the periods
and reinvestment of all dividends:
Class A Shares ........................ $68 $105 $145 $256
Class B Shares
--Assuming complete redemption at end
of period ......................... $76 $109 $155 $271
--Assuming no redemption ............ $26 $ 79 $135 $271
- -----------------
(The example should not be considered as a representation of past or future
expenses or future investment returns. Actual expenses may be greater or less
than shown.)
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the maximum
front-end sales charge permitted under the National Association of Securities
Dealers Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully explained
in this Prospectus under the caption "The Fund's Expenses" and in the
Statement of Additional Information under the captions "Investment Advisory
and Other Services" and "Distribution Contract."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following table of Financial Highlights for each of the three years in
the period ended July 31, 1995 has been audited by Ernst & Young LLP, the
Fund's independent auditors whose unqualified report is included in the Fund's
1995 Annual Report and is included in the Statement of Additional Information.
The Fund's Financial Highlights were audited by Price Waterhouse LLP for the
period ended July 31, 1992. 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, 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
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
--------------------------------------------------
1995 1994 1993 1992<F2>
------- ------- ------- -------
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........................ $ 8.56 $ 10.81 $ 8.95 $ 9.40
------- ------- ------- -------
Net Investment Loss ......................................... (0.17)<F4> (0.16) (0.16) (0.05)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions ............. 4.83 (0.43) 2.15 (0.40)
------- ------- ------- -------
Total from Investment Operations ...................... 4.66 (0.59) 1.99 (0.45)
------- ------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold.... (0.27) (1.66) (0.13) --
------- ------- ------- -------
Net Asset Value, End of Period ............................... $ 12.95 $ 8.56 $ 10.81 $ 8.95
------- ------- ------- -------
Total Investment Return at Net Asset Value ................... 55.80% (6.45%) 22.33% (4.79%)<F3>
------- ------- ------- -------
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) .................. $ 5,075 $ 3,226 $ 4,692 $ 3,866
Ratio of Expenses to Average Net Assets .................... 2.10% 2.01% 2.17% 1.78%<F1>
Ratio of Net Investment Loss to Average Net Assets ......... (1.73%) (1.64%) (1.61%) (1.20%)<F1>
Portfolio Turnover Rate .................................... 118% 108% 148% 138%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......................... $ 8.34 $ 10.65 $ 8.87 $ 8.00
------- ------- ------- -------
Net Investment Loss .......................................... (0.22) (0.22) (0.23) (0.11)
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions .......................... 4.69 (0.43) 2.14 0.98
------- ------- ------- -------
Total from Investment Operations ....................... 4.47 (0.65) 1.91 0.87
------- ------- ------- -------
Less Distributions:
Distributions from Net Relized Gain on Investments Sold .... (0.27) (1.66) (0.13) --
------- ------- ------- -------
Net Asset Value, End of Period ............................... $ 12.54 $ 8.34 $ 10.65 $ 8.87
======= ======= ======= =======
Total Investment Return at Net Asset Value ................... 54.97% (7.18%) 21.63% 10.88%<F3>
------- ------- ------- -------
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) .................. $31,645 $26,537 $38,672 $34,636
Ratio of Expenses to Average Net Assets .................... 2.70% 2.62% 2.86% 2.56%<F1>
Ratio of Net Investment Loss to Average Net Assets ......... (2.34%) (2.24%) (2.26%) (1.56%)<F1>
Portfolio Turnover Rate .................................... 118% 108% 148% 138%
- ----------
<FN>
<F1> On an annualized basis.
<F2> Class A and Class B shares commenced operations on January 3, 1992 and August 30, 1991, respectively.
<F3> Not annualized.
<F4> On average month end shares outstanding.
</FN>
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE IS TO ACHIEVE LONG-TERM GROWTH OF CAPITAL.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to achieve long-term growth of capital. The
Fund will invest primarily in common stocks that are believed by the Fund's
managers to offer superior prospects for growth. Any income received on the
Fund's investments will be incidental to the Fund's objective of long-term
growth of capital. There are market fluctuations and risks in any investment,
and therefore there is no assurance that the Fund will achieve its investment
objective.
John Hancock Advisers, Inc. (the "Adviser") will seek to identify companies
with growth rates exceeding the market in general in the belief that superior
earnings growth may lead to more rapid share price appreciation. The market
valuation of these companies tends to fluctuate during economic or market
cycles, presenting attractive investment opportunities as the cycles develop.
The Adviser constantly monitors the markets looking for companies that are
creating new technologies, a unique or proprietary product or a profitable
market niche.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in equity securities, including common stock, preferred stock and
investment grade debt securities convertible into common stock. The selection
of portfolio investments by the Adviser will focus on companies with broad
market opportunities and consistent or accelerating earnings growth. These
companies may be in a relatively early stage of development, but have usually
established a record of profitability and a strong financial position. They
may possess a new technology, a unique or proprietary product, or a profitable
market niche--all of which help drive strong unit volume growth, profitability
and ultimately earnings per share growth. Other desirable attributes of
portfolio investments may include participation by a company in an industrial
sector with a favorable secular growth outlook (e.g., medical/healthcare,
communications, technology, etc.), a capable management team with a
significant equity stake in its company, and financial cash flows sufficient
to sustain estimated growth rates.
The Fund may invest up to 25% of its assets in the securities of foreign
issuers, including securities in the form of sponsored or unsponsored American
Depositary Receipts (ADRs), European Depositary Receipts (EDRs) or other
securities convertible into securities of foreign issuers. ADRs are receipts
typically issued by an American bank or trust company which evidence ownership
of underlying securities issued by a foreign corporation. EDRs are receipts
issued in Europe which evidence a similar ownership arrangement. Issuers of
unsponsored ADRs are not contractually obligated to disclose material
information, including financial information, in the United States. Generally,
ADRs are designed for use in the United States securities markets and EDRs are
designed for use in European securities markets.
To avoid the need to sell equity securities in the portfolio to provide funds
for redemption, and to give the Fund the flexibility to take advantage of
investment opportunities, the Fund may invest up to 15% of its net assets in
short-term (less than one year) investment grade (i.e., rated at the time of
purchase AAA, AA, A or BBB by Standard & Poor's Ratings Group or Aaa, Aa, A or
Baa by Moody's Investors Service, Inc.) debt securities of corporations (such
as commercial paper, notes, bonds or debentures), certificates of deposit,
money market securities, U.S. Government agency securities, or repurchase
agreements that are fully collateralized by U.S. Government obligations. When
the Adviser believes that abnormal financial conditions warrant it, up to 80%
of the Fund's assets may be temporarily invested in these securities rated in
the three highest categories for defensive purposes. Medium grade obligations
(i.e., BBB or Baa) lack outstanding investment characteristics and, in fact,
have speculative characteristics. In the event these securities are
subsequently downgraded below the three highest ratings, the Adviser will
consider this event when it determines whether the Fund should continue to
hold the securities. See Appendix A to the Statement of Additional Information
for a description of the various ratings of investment grade debt securities.
THE FUND MAY EMPLOY CERTAIN INVESTMENT STRATEGIES TO HELP ACHIEVE ITS
INVESTMENT OBJECTIVE.
SECURITIES OF FOREIGN ISSUERS. The Fund may invest up to 25% of its total
assets in securities of foreign issuers. Investments in foreign securities may
involve a greater degree of risk than those in domestic securities due to
exchange controls, less publicly available information, more volatile or less
liquid securities markets, and the possibility of expropriation,
nationalization, confiscatory taxation or political, economic or social
instability. Some foreign companies are not generally subject to the same
uniform accounting, auditing and financial reporting requirements as domestic
companies; also foreign regulation may differ considerably from domestic
regulation of stock exchanges, brokers and securities. Additionally, because
foreign securities may be denominated in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will affect the Fund's net
asset value, the value of dividends and interest earned, gains and losses
realized on the sale of securities, and any net investment income and gains
that the Fund distributes to shareholders. Securities transactions undertaken
in some foreign markets may not be settled promptly. Therefore, the Fund's
investments on foreign exchanges may be less liquid and subject to the risk of
fluctuating currency exchange rates pending settlement.
OPTIONS TRANSACTIONS. The Fund may purchase listed put and call options on
securities and foreign currencies. However, no more than an aggregate of 5% of
the Fund's total assets, measured by the amount of the premium, will be
invested in these options.
FUTURES TRANSACTIONS FOR HEDGING PURPOSES. Although it has no present
intention to engage in these strategies, the Fund has also reserved the right
to purchase or write (sell) financial futures contracts and related options
that are traded on a U.S. exchange or board of trade, for hedging purposes
(i.e., to reduce the risks of fluctuations in the value of the Fund's
portfolio). Before the Fund will invest in any futures contracts or related
options, shareholders of the Fund will be notified and the Prospectus will be
supplemented accordingly.
The Fund's ability to use options and futures contracts, either to earn income
successfully or to hedge, will depend on the Adviser's ability to predict
accurately the future direction of stock market prices, interest rate changes,
currency rate fluctuations and other market factors. There is no assurance
that a liquid market for options and futures will always exist. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out an options or futures position because of position limits or limits on
daily price fluctuations imposed by an exchange. See the Statement of
Additional Information for further discussion of options and futures
transactions, including tax effects and investment risks.
FOREIGN CURRENCY TRANSACTIONS FOR HEDGING PURPOSES. The Fund may enter into
transactions in foreign currencies or in forward foreign currency exchange
contracts, but only in connection with its 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 enter into a forward contract with a term greater
than one year or commit more than 25% of the value of its total assets to
these contracts. 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. Purchase of other restricted securities are subject to an
investment restriction limiting all the Fund's illiquid securities to not more
than 15% of its net assets.
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.
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. In a repurchase agreement, the Fund buys a security
subject to the right and obligation to sell it back to the issuer 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 the Fund is delayed or prevented from
liquidating the collateral.
The Fund has adopted certain investment restrictions which are enumerated in
detail in the Statement of Additional Information, where they are classified
as fundamental or non-fundamental. The Fund's investment objective and those
investment restrictions designated as fundamental may not be changed without
shareholder approval. All other restrictions and investment policies are
nonfundamental and can be changed by a vote of the Trustees without
shareholder approval.
A high rate of portfolio turnover (greater than 100%) 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. The Fund's
portfolio turnover rates for recent periods are shown in the section "The
Fund's Financial Highlights."
The Fund believes that its shares are suitable for investment by persons who
are in a financial position to assume above-average investment risk in search
of above-average long-term reward, and who can invest without concern for
current income. The Fund is not intended as a complete investment program, but
is most appropriately considered as only one portion of your overall
investment portfolio.
BROKERS ARE CHOSEN BASED ON BEST PRICE AND EXECUTION.
When choosing brokerage firms to carry out the Fund's transactions, the
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 established by the Trustees, the Adviser may place
securities transactions with brokers affiliated with the Adviser. These
brokers include Tucker Anthony Incorporated John Hancock Distributors, Inc.
and Sutro & Company Inc. which are indirectly owned by John Hancock Mutual
Life Insurance Company, which in turn indirectly owns the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
THE TRUSTEES ELECT OFFICERS AND RETAIN THE INVESTMENT ADVISER WHO IS
RESPONSIBLE FOR THE DAY-TO-DAY OPERATIONS OF THE FUND, SUBJECT TO THE
TRUSTEES' POLICIES AND SUPERVISION.
The Fund is a diversified series of Freedom Investment Trust III, an open-end
management investment company organized as a Massachusetts business trust in
1989 (the "Trust"). The Trust reserves the right to create and issue a number
of series of shares, or funds or classes of shares of those series, which are
separately managed and have different investment objectives. The Trust is not
required and does not intend to hold annual meetings of shareholders, although
special meetings may be held for such purposes as electing or removing
Trustees, changing fundamental policies or approving a management contract.
The 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
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.
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
also an indirect subsidiary of John Hancock Mutual Life Insurance Company
(together with John Hancock Funds, the "Distributor"). 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 Bernice S. Behar,
supported by an investment team from the Adviser's equity group, headed by
Michael P. DiCarlo. Ms. Behar has been with the Adviser since 1991 and prior
to that was a portfolio manager and investment analyst with Sanyo Securities
America.
In order to avoid conflicts with portfolio trades for the Fund, the Adviser
and the Fund have adopted extensive restrictions on personal securities
trading by personnel of the Adviser and its affiliates. Some of these
restrictions are: pre-clearance for all personal trades and a ban on the
purchase of initial public offerings, as well as contributions to specified
charities of profits on securities held for less than 91 days. These
restrictions are a continuation of the basic principle that the interests of
the Fund and its shareholders come first.
ALTERNATIVE PURCHASE ARRANGEMENTS
You can purchase shares of the Fund at a price equal to their net asset value
per share, plus a sales charge. At your election this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge Alternative,"
Class A Shares) or on a contingent deferred basis (see "Contingent Deferred
Sales Charge Alternative," Class B Shares). If you do not specify on your
account application the class of shares you are purchasing, it will be assumed
that you are investing in Class A shares.
INVESTMENTS IN CLASS A SHARES ARE SUBJECT TO AN INITIAL SALES CHARGE.
CLASS A SHARES. If you elect to purchase Class A shares, you will incur an
initial sales charge unless the amount you purchase is $1 million or more. If
you purchase $1 million or more of Class A shares, you will not be subject to
an initial sales charge, but you will incur a sales charge if you redeem your
shares within one year of purchase. Class A shares are subject to ongoing
distribution and service fees at a combined annual rate of up to 0.30% of the
Fund's average daily net assets attributable to the Class A shares. Certain
purchases of Class A shares qualify for reduced initial sales charges. See
"Share Price -- Qualifying for a Reduced Sales Charge."
INVESTMENTS IN CLASS B SHARES ARE SUBJECT TO A CONTINGENT DEFERRED SALES
CHARGE.
CLASS B SHARES. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them within
six years of purchase (the "contingent deferred sales charge" or the "CDSC").
Class B shares are subject to ongoing distribution and service fees at a
combined annual rate of up to 1.00% of the Fund's average daily net assets
attributable to the Class B shares. Investing in Class B shares permits all of
your dollars to work from the time you make your investment, but the higher
ongoing distribution fee will cause the shares to have a higher expenses than
Class A shares. To the extent that any dividends are paid by the Fund, these
higher expenses will also result in lower dividends than those paid on Class A
shares.
Class B shares are not available to full-service defined contribution plans
administered by John Hancock Investor Services Corporation or the Life Company
that had more than 100 eligible employees at the inception of the Fund
account.
YOU SHOULD CONSIDER WHICH CLASS OF SHARES WOULD BE MORE BENEFICIAL FOR YOU.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider
whether, during the anticipated life of your Fund investment, the CDSC and
accumulated fees on Class B shares would be less than the initial sales charge
and accumulated fees on Class A shares purchased at the same time; and to what
extent this differential would be offset by the Class A shares' lower
expenses. To help you make this determination, the table under the caption
"Expense Information" on the inside cover page of this Prospectus shows
examples of the charges applicable to each class of shares. Class A shares
will normally be more beneficial if you qualify for reduced sales charges. See
"Share Price -- Qualifying for a Reduced Sales Charge."
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent any
dividends are paid. However, because initial sales charges are deducted at the
time of purchase, you would not have all of your funds invested initially and,
therefore, would initially own fewer shares. If you do not qualify for reduced
initial sales charges and expect to maintain your investment for an extended
period of time, you might consider purchasing Class A shares. This is because
the accumulated distribution and service charges on Class B shares may exceed
the initial sales charge and accumulated distribution and service charges on
Class A shares during the life of your investment.
Alternatively, you might determine that it is more advantageous to purchase
Class B shares in order to have all your funds invested initially. However,
you will be subject to higher distribution charges and, for a six-year period,
a CDSC.
In the case of Class A shares, the distribution expenses that John Hancock
Funds incurs in connection with the sale of the shares will be paid from the
proceeds of the initial sales charge and the ongoing distribution and service
fees. In the case of Class B shares, the expenses will be paid from the
proceeds of the ongoing distribution and service fees, as well as from CDSC
incurred upon redemption within six years of purchase. The purpose and
function of the Class B shares' CDSC and ongoing distribution and service fees
are the same as those of the Class A shares' initial sales charge and ongoing
distribution and service fees. Sales personnel distributing the Fund's shares
may receive different compensation for selling each class of shares.
Dividends, if any on Class A and Class B shares will be calculated in the same
manner, at the same time, and on the same day. They will also be in the same
amount, except for differences resulting from the fact that each class bearing
only its own distribution and service fees, shareholder meeting expenses and
any incremental transfer agency costs. See "Dividends and Taxes."
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a fee,
effective December 1, 1995, to the Adviser which is based on a stated
percentage of the Fund's average daily net asset value, as follows:
NET ASSET VALUE ANNUAL RATE
--------------- -----------
First $750,000,000 0.75%
Amount over $750,000,000 0.70%
The investment management fee through November 30, 1995 was 1.00% of the Fund's
average daily net asset value.
The investment management fee is higher than the fees paid to most mutual
funds, but comparable to fees paid by funds that invest in similar securities.
From time to time, the Adviser may reduce its fee or make other arrangements
to limit the Fund's expenses to not more than a specified percentage of
average daily net assets. The Adviser retains the right to re-impose a fee and
recover any other payments to the extent that, at the end of any fiscal year,
the Fund's annual expenses fall below the limit.
THE FUND PAYS DISTRIBUTION AND SERVICE FEES FOR MARKETING AND SALES-RELATED
SHAREHOLDER SERVICING.
The Class A and Class B shareholders have adopted a distribution plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). Under the Plan, the Fund will pay distribution and service fees
at an aggregate annual rate of up to 0.30% of the Class A shares' average
daily net assets and an aggregate annual rate of up to 1.00% of the Class B
shares' average daily net assets. In each case, up to 0.25% is for service
expenses and the remaining amount is for distribution expenses. The
distribution fees will be used to reimburse the Distributor for its
distribution expenses, including but not limited to: (i) initial and ongoing
sales compensation to Selling Brokers and others (including affiliates of the
Distributor) engaged in the sale of Fund shares; (ii) marketing, promotional
and overhead expenses incurred in connection with the distribution of Fund
shares; and (iii) with respect to Class B shares only, interest expenses on
unreimbursed distribution expenses. The service fees will be used to
compensate Selling Brokers for providing personal and account maintenance
services to shareholders. In the event the Distributor is not fully reimbursed
for payments or expenses it incurs under the Plan, these expenses will not be
carried beyond twelve months from the date they were incurred. Unreimbursed
expenses under the Class B Plan will be carried forward together with interest
on the balance of these unreimbursed expenses.
For the fiscal year ended July 31, 1995 an aggregate of $552,329 of
distribution expenses or 1.75% of the average net assets of the Class B shares
of the Fund, was not reimbursed or recovered by the Distributor through the
receipt of deferred sales charges or 12b-1 fees in prior periods.
Information on the Fund's total expenses is in the Fund's Financial Highlights
section of this Prospectus.
DIVIDENDS AND TAXES
DIVIDENDS ARE GENERALLY DECLARED ANNUALLY.
DIVIDENDS. Dividends from the Fund's net investment income and capital gains,
if any, are generally declared annually. Dividends are reinvested in
additional shares of your class unless you elect the option to receive them in
cash. If you elect the cash option and the U.S. Postal Service cannot deliver
your checks, your election will be converted to the reinvestment option.
Because of the higher expenses associated with Class B shares, any dividends
on these shares will be lower than those of Class A shares. See "Share Price."
TAXATION. Dividends from the Fund's net investment income, certain net foreign
exchange gains, and net short-term capital gains are taxable to you as
ordinary income, and dividends from the Fund's net long-term capital gains are
taxable as long-term capital gains. These dividends are taxable whether
received in cash or reinvested in additional shares. Certain dividends paid by
the Fund in January of a given year will be taxable to you as if you received
them the prior December. The Fund will send you a statement by January 31
showing the tax status of the dividends you received for the prior year.
The Fund 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 taxes on any net investment income and net realized
capital gains that are distributed to its shareholders at least annually. When
you redeem (sell) or exchange shares, you may realize a gain or loss.
On the account application, you must certify that your social security or
other taxpayer identification number you provide is your correct number and
that you are not subject to back-up withholding of Federal income tax. If you
do not provide this information, or are otherwise subject to backup
withholding, the Fund may be required to withhold 31% of your dividends and
proceeds of redemptions and exchanges.
In addition to Federal taxes, you may be subject to state and local or foreign
taxes with respect to your investment in and distributions from the Fund. In
many states, any portion of the Fund's dividends that represents interest
received by the Fund on direct U.S. Government obligations may be exempt from
tax. You should consult your tax advisor for specific advice.
PERFORMANCE
THE FUND MAY ADVERTISE ITS TOTAL RETURN.
Total return is based on the overall change in value of a hypothetical
investment in the Fund. The Fund's total return shows the overall dollar or
percentage change in value, assuming the reinvestment of all dividends.
Cumulative total return shows the Fund's performance over a period of time.
Average annual total return shows the cumulative return divided over the
number of years included in the period. Because average annual total return
tends to smooth out variations in the Fund's performance, you should recognize
that it is not the same as actual year-to-year results.
Total return for Class A shares includes the effect of paying the maximum
sales charge (except as shown in "The Fund's Financial Highlights").
Investments at lower sales charges would result in higher performance figures.
Total return for the Class B shares reflects deduction of the applicable
contingent deferred sales charge imposed on a redemption of shares held for
the applicable period. All calculations assume that all dividends are
reinvested at net asset value on the reinvestment dates during the periods.
The total return of Class A and Class B shares will be calculated separately
and, because each class is subject to certain different expenses, the total
return with respect to that class for the same period may differ. The relative
performance of the Class A and Class B shares will be affected by a variety of
factors, including the higher operating expenses attributable to the Class B
shares, whether the Fund's investment performance is better in the earlier or
later portions of the period measured, and the level of net assets of the
classes during the period. The Fund will include the total return of both
classes in any advertisement or promotional materials including Fund
performance data. Total return is an historical calculation and is not an
indication of future performance. The value of the Fund's shares, when
redeemed, may be more or less than their original cost. See "Factors to
Consider in Choosing an Alternative."
HOW TO BUY SHARES
- -----------------------------------------------------------------------------
The minimum initial investment in Class A or Class B shares and retirement
plans).
Complete the Account Application attached to this Prospectus. Indicate whether
you are purchasing Class A or Class B shares. If you do not specify which class
of shares you are purchasing, Investor Services will assume you are investing in
Class A shares.
- ------------------------------------------------------------------------------
OPENING AN ACCOUNT.
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation.
2. Deliver the completed application and check to your registered
representative, 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 Discovery 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 AUTOMATIC 1. Complete the "Automatic Investing" and "Bank Information"
ACCUMULATION sections on the Account Privileges Application,
PROGRAM (MAAP) designating a bank account from which your funds may be
drawn.
2. The amount you elect to invest will be automatically
withdrawn from your bank or credit union account.
- ------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A AND CLASS B SHARES.
BY TELEPHONE 1. Complete the "Invest-By-Phone" and "Bank Information"
Account Privileges Application, designating a bank account
from which your funds may be drawn. Note that in order to
invest by phone, your account must be in a bank or credit
union that is a member of the Automated Clearing House
system (ACH).
2. After your authorization form has been processed, you may
purchase additional Class A or Class B shares by calling
Investor Services toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(s) in
which your account is registered, the Fund name, the class
of shares you own, your account number, and the amount you
wish to invest.
4. Your investment normally will be credited to your account
the business day following your phone request.
- ------------------------------------------------------------------------------
BY CHECK 1. Either complete the detachable stub included on your
account statement or include a note with your investment
listing the name of the Fund, the class of shares you own,
your account number and the name(s) in which the account
is registered.
2. Make your check payable to John Hancock Investor Services
Corporation.
3. Mail the account information and check to:
John Hancock Investor Services Corporation
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling
Broker.
- ------------------------------------------------------------------------------
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 Discovery Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
- ------------------------------------------------------------------------------
Other Requirements: All purchases must be made in U.S. dollars. Checks written
on foreign banks will delay purchases until U.S. funds are received, and a
collection charge may be imposed. Shares of the Fund are priced at the offering
price listed or the net asset value computed after John Hancock Funds receives
notification of the dollar equivalent from the Fund's custodian bank. Wire
purchases normally take two or more hours to complete and, to be accepted the
same day, must be received by 4:00 P.M., New York time. Your bank may charge a
fee to wire funds. Telephone transactions are recorded to verify information.
Certificates are not issued unless a request is made in writing to Investor
Services.
- ------------------------------------------------------------------------------
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.
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.
SHARE PRICE
The net asset value (the "NAV") is the value of one share. The NAV is
calculated by dividing the net assets of each class by the number of
outstanding shares of that class. The NAV of each class can differ. Securities
in the Fund's portfolio are valued on the basis of market quotations,
valuations provided by independent pricing services, or at fair value as
determined in good faith according to procedures approved by the Trustees.
Short-term debt investments maturing within 60 days are valued at amortized
cost, which approximates market value. Foreign securities are valued on the
basis of quotations from the primary market in which they are traded, and are
translated from the local currency into U.S. dollars using current exchange
rates. If quotations are not readily available, or the value has been
materially affected by events occurring after the closing of a foreign market,
assets are valued by a method that the Trustees believe accurately reflects
fair value. The NAV is calcuated 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.
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 Class A shares of $1 million or more in the
aggregate as follows: 1% on sales up to $4,999,999, 0.50% on the next $5
million and 0.25% on $10 million and over.
<F4> 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.
</TABLE>
Sales charges ARE NOT APPLIED to any dividends that are reinvested in
additional shares of the Fund.
John Hancock Funds will pay certain affiliated Selling Brokers at an annual
rate of up to 0.05% of the daily net assets of the accounts attributable to
these brokers.
Under certain circumstances as described below, investors in Class A shares
may be entitled to pay reduced sales charges. See "Qualifying for a Reduced
Sales Charge."
CONTINGENT DEFERRED SALES CHARGE -- INVESTMENTS OF $1 MILLION OR MORE IN CLASS
A SHARES. Purchases of $1 million or more of the Class A shares will be made
at net asset value with no initial sales charge, but if the shares are
redeemed within 12 months after the end of the calendar month in which the
purchase was made (the contingent deferred sales charge period), a contingent
deferred sales charge will be imposed. The rate of the CDSC will depend on the
amount invested as follows:
AMOUNT INVESTED CDSC RATE
--------------- ---------
$1 Million to $4,999,999 1.00%
Next $5 Million to $9,999,999 0.50%
Amounts of $10 Million and over 0.25%
Existing full service clients of the Life Company who were group annuity
contract holders as of September 1, 1994, and participant directed defined
contribution plans with at least 100 eligible employees at the inception of
the Fund account, may purchase Class A shares with no initial sales charge.
However, if the shares are redeemed within 12 months after the end of the
calendar year in which the purchase was made, a CDSC will be imposed at the
above rate.
The CDSC will be assessed on an amount equal to the lesser of the current
market value or the original purchase cost of the redeemed Class A shares.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any dividends which have been reinvested in
additional Class A shares.
In determining whether a CDSC is applicable to a redemption of Class A shares,
the calculation will be determined in a manner that results in the lowest
possible rate being charged. Therefore, it will be assumed that the redemption
is first made from any shares in the shareholder's account that are not
subject to the CDSC. The CDSC is waived on redemptions in certain
circumstances. See "Waiver of Contingent Deferred Sales Charge".
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE ON YOUR INVESTMENT IN CLASS A
SHARES.
QUALIFYING FOR A REDUCED SALES CHARGE -- CLASS A SHARES. If you invest more
than $50,000 in Class A shares of the Fund or a combination of John Hancock
funds (except money market funds), you may qualify for a reduced sales charge
on your investments in Class A shares through a LETTER OF INTENTION. You may
also be able to use the ACCUMULATION PRIVILEGE and COMBINATION PRIVILEGE to
take advantage of the value of your previous investments in shares of John
Hancock funds in meeting the breakpoints for a reduced sales charge. For the
ACCUMULATION PRIVILEGE and COMBINATION PRIVILEGE the applicable sales charge
will be based on the total of:
1. Your current purchase of Class A shares of the Fund;
2. The net asset value (at the close of business on the previous day) of (a)
all Class A shares of the Fund you hold, and (b) all Class A shares of any
other John Hancock mutual fund you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
EXAMPLE:
If you hold Class A shares of a John Hancock mutual fund with a net asset
value of $20,000 and, subsequently, invested $30,000 in Class A shares of the
Fund, the sales charge on this subsequent investment would be 4.50% and not
5.00% (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 under one of the following categories, you may purchase Class A
shares of the Fund without paying a sales charge:
* A Trustee/Director or officer of the Trust/Company; a Director or officer of
the Adviser and its affiliates or Selling Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a 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 type of
depository institution, its trust department or common trust funds if it is
purchasing $1 million or more for non-discretionary customers or accounts.*
* A broker, dealer, financial planner, consultant or registered investment
adviser that has entered into an agreement with John Hancock Funds providing
specifically for the use of Fund shares in fee-based investment products or
services made available to their clients.
* A former participant in an employee benefit plan with John Hancock funds,
when he or she withdraws from his or her plan and transfers any or all of
his or her plan distributions 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 may also be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. Class B shares
are offered at net asset value per share without an initial sales charge, so
that your entire 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 dividend reinvestment.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
reinvestment of dividends, and next from the shares you have held the longest
during the six-year period. The CDSC is waived on redemptions in certain
circumstances. See the discussion "Waiver of Contingent Deferred Sales
Charges" below.
EXAMPLE:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and 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 will
use all or part of them to defray its expenses related to providing the Fund
with distribution services in connection with the sale of the Class B shares,
such as compensating selected Selling Brokers for selling Class B shares. The
combination of the CDSC and the distribution and service fees makes it
possible for the Fund to sell the Class B shares without an initial sales
charge.
The amount of the CDSC, if any, will vary depending on the number of years
from the time you purchase your Class B shares until the time you redeem them.
Solely for purposes of determining this holding period, any payments you make
during the month will be aggregated and deemed to have been made on the last
day of the month.
CONTINGENT
DEFERRED SALES
CHARGE AS A
PERCENTAGE
YEAR IN WHICH CLASS B SHARES OF DOLLAR AMOUNT
REDEEMED FOLLOWING PURCHASE SUBJECT TO CDSC
- --------------------------- ----------------
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
John Hancock Funds pays to Selling Brokers a commission equal to 3.75% of the
amount invested and a first year's service fee equal to 0.25% of the amount
invested. The initial service fee is paid in advance at the time of sale for
the provision of personal and account maintenance services to shareholders
during the twelve months following the sale and thereafter the service fee is
paid in arrears.
If you purchased Class B shares prior to January 1, 1994, 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 the seventh year and thereafter.
UNDER CERTAIN CIRCUMSTANCES, THE CDSC ON CLASS B SHARE REDEMPTIONS WILL BE
WAIVED.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to a
CDSC, unless indicated otherwise, in these circumstances:
* 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 that purchased shares
prior to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you must
notify Investor Services either directly or through your Selling Broker at the
time you make your redemption. The waiver will be granted once Investor
Services has confirmed that you are entitled to the waiver.
CONVERSION OF CLASS B SHARES. Your Class B shares and an appropriate portion
of reinvested dividends on those shares will be converted into Class A shares
automatically. This will occur at the end of the month following eight years
after the shares were purchased, resulting in lower annual distribution fees.
If you exchanged Class B shares into this Fund from another John Hancock fund,
the conversion will be based on the time you purchase the shares in the
original fund. The Fund has been advised that the conversion of Class B shares
to Class A shares should not be taxable for Federal income tax purposes, nor
should it change your tax basis or tax holding period for the converted
shares.
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION REQUEST, PLEASE FOLLOW THESE
PROCEDURES.
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
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 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. In addition, telephone instructions are
recorded.
You may redeem up to $100,000 by telephone, but the address
on the account must not have changed for the last 30 days. A
check will be mailed to the exact name(s) and address shown
on the account.
If reasonable procedures, such as those described above, are
not followed, the Fund may be liable for any loss due to
unauthorized or fraudulent telephone instructions. In all
other cases, neither the Fund nor Investor Services will be
liable for any loss or expense for acting upon telephone
instructions made 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 certificate form.
During periods of extreme economic conditions or market
changes, telephone requests may be difficult to implement due
to a large volume of calls. During these times you should
consider placing redemption requests in writing or using
EASI-Line. EASI-Line's telephone number is 1-800-338-8080.
- -------------------------------------------------------------------------------
BY WIRE
If you have a telephone redemption form on file with the
Fund, redemption proceeds of $1,000 or more can be wired on
the next business day to your designated bank account and a
fee (currently $4.00) will be deducted. You may also use
electronic funds transfer to your assigned bank account and
the funds are usually collectable after two business days.
Your bank may or may not charge for this service. Redemptions
of less than $1,000 will be sent by check or electronic funds
transfer.
This feature may be elected by completing the "Telephone
Redemption" section on the Account Privileges Application
that is included with this Prospectus.
- ------------------------------------------------------------------------------
IN WRITING Send a stock power or letter of instruction specifying the
name of the Fund, the dollar amount or the number of shares
to be redeemed, your name, class of shares, your account
number, and the additional requirements listed below that
apply to your particular account.
- ------------------------------------------------------------------------------
TYPE OF REGISTRATION REQUIREMENTS
- -------------------- ------------
Individual, Joint Tenants, Sole A letter of instruction
Proprietorship, Custodial signed (with titles where
(Uniform Gifts or Transfer to applicable) by all persons
Minors Act), General Partners. authorized to sign for the
account, exactly as it is
registered, with the
signature(s) guaranteed.
Corporation, Association A letter of instruction and a
corporate resolution, signed
by person(s) authorized to
act on the account with the
signature(s) guaranteed.
Trusts A letter of instruction
signed by the Trustee(s) with
the signature(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 on your request. It
may not be provided by a notary public. If the net asset value of the shares
redeemed is $100,000 or less, John Hancock Funds may guarantee the signature.
The following institutions may provide you with a signature guarantee, provided
that any such institution meets credit standards established by Investor
Services: (i) a bank; (ii) a securities broker or dealer, including a government
or municipal securities broker or dealer, that is a member of a clearing
corporation or meets certain net capital requirements; (iii) a credit union
having authority to issue signature guarantees; (iv) a savings and loan
association, a building and loan association, a cooperative bank, a federal
savings bank or association; or (v) a national securities exchange, a registered
securities exchange or a clearing agency.
- ------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
THROUGH YOUR BROKER. Your broker may be able to initiate instructions.
Contact him or her 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. Redemptions
of certificated shares may not be made by telephone.
Due to the proportionately high cost of maintaining small accounts, the Fund
reserves the right to redeem at net asset value all shares in an account which
holds fewer than 50 shares (except accounts under retirement plans) and to mail
the proceeds to the shareholder, or the transfer agent may impose an annual fee
of $10.00. No account will be involuntarily redeemed or any additional fee
imposed, if the value of the account is in excess of the Fund's minimum initial
investment. No CDSC will be imposed on involuntary redemptions of shares.
Shareholders will be notified before these redemptions are to be made or this
fee is imposed, and will have 30 days to purchase additional shares to bring
their account balance up to the required minimum. Unless the number of shares
acquired by additional purchases and any dividend reinvestments, exceeds the
number of shares redeemed, repeated redemptions from a smaller account may
eventually trigger this redemption policy.
- -------------------------------------------------------------------------------
ADDITIONAL SERVICES AND PROGRAMS
YOU MAY EXCHANGE SHARES OF THE FUND ONLY FOR SHARES OF THE SAME CLASS OF
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 mutual funds that interest you.
Please read the prospectus carefully before exchanging your shares. You can
exchange shares of each class of the Fund only for shares of the same class of
another John Hancock mutual fund. For this purpose, John Hancock mutual funds
with only one class of shares will be treated as Class A whether or not they
have been so designated.
Exchanges between funds that are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is imposed.
Class B shares of the Fund which are subject to a CDSC may be exchanged for
Class B shares of another John Hancock fund without incurring the CDSC;
however the shares will be subject to the CDSC schedule of the shares acquired
(except that exchanged into John Hancock Short-Term Strategic Income Fund,
John Hancock Intermediate Maturity Government Trust 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.
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 gain or loss.
When you make an exchange your account registration must be identical in both
the existing and new account. The exchange privilege is available only in
states where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers
and investment advisers may exchange their clients' Fund shares, subject to
the terms of those agreements and John Hancock Funds' right to reject or
suspend those exchanges at any time. Because of the restrictions and
procedures under those agreements, the exchanges may be subject to timing
limitations and other restrictions that do not apply to exchanges requested by
shareholders directly, as described above.
Because Fund performance and shareholders can be hurt by excessive trading,
the Fund reserves the right to terminate the exchange privilege for any person
or group that, in John Hancock Funds' judgment, is involved in a pattern of
exchanges that coincide with a "market timing" strategy that may disrupt the
Fund's ability to invest effectively according to its investment objective and
policies, or might otherwise affect the Fund and its shareholders adversely.
The Fund may also temporarily or permanently terminate the exchange privilege
for any person who makes seven or more exchanges out of the Fund per calendar
year. Accounts under common control or ownership will be aggregated for this
purpose. Although the Fund will attempt to give prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
BY TELEPHONE
1. When you complete the application for your initial purchase of Fund shares,
you automatically authorize exchanges by telephone unless you check the box
indicating that you do not wish to authorize telephone exchanges.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.
3. Your name, the account number, taxpayer identification number applicable to
the account and other relevant information may be requested. In addition,
telephone instructions are recorded.
IN WRITING
1. In a letter request an exchange and list the following:
-- 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 SHARES OF THIS OR ANOTHER JOHN HANCOCK FUND WITHOUT PAYING AN
ADDITIONAL SALES CHARGE.
1. You will not be subject to a sales charge on Class A shares reinvested in
any John Hancock fund that is otherwise subject to a sales charge as long
as you invest within 120 days of the redemption date. If you paid a CDSC
upon a redemption, you may reinvest at net asset value in the same class of
shares from which you redeemed within 120 days. Your account will be
credited with the amount of the CDSC that was charged previously 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 you 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 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 ACCOUNTS TO COMPLY WITH IRS REGULATIONS.
1. You can elect the Systematic Withdrawal Plan at any time by completing the
attached Account Privileges Application which is attached to this
Prospectus. You can also obtain the application 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
on a selected monthly basis and they can be sent to you 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 shares, because you may be
subject to initial sales charges on purchases of Class A shares or you will
be subject to a CDSC imposed on redemptions of Class B shares. In addition,
your redemptions are taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks, or if deposits to a bank account are returned for any reason.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
YOU CAN MAKE AUTOMATIC INVESTMENTS AND SIMPLIFY YOUR INVESTING.
1. You can authorize an investment to be drawn automatically drawn each month
from your bank for investment under the "Automatic Investing" and "Bank
Information" sections on the Account Privileges Application.
2. You can also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
3. You can terminate your Monthly Automatic Accumulation Program at any time.
4. There is no charge to you for this program, and there is no cost to the
Fund.
5. If you have payments 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
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 to fund various types of qualified retirement plans,
including Individual Retirement Accounts, Keogh Plans (H.R. 10), Pension
and Profit-Sharing Plans (including 401(k) Plans), Tax-Sheltered Annuity
Retirement Plans, (403(b) or TSA Plans), and 457 Plans.
2. The initial investment minimum or aggregate minimum for any of these plans
is $250. However, accounts being established as group IRA, SEP, SARSEP,
TSA, 401(k) and 457 Plans will be accepted without an initial minimum
investment.
<PAGE>
JOHN HANCOCK DISCOVERY FUND JOHN HANCOCK
DISCOVERY
INVESTMENT ADVISER FUND
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CLASS A AND CLASS B SHARES
PRINCIPAL DISTRIBUTOR PROSPECTUS
John Hancock Funds, Inc. DECEMBER 1, 1995
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
Investors Bank & Trust Company A MUTUAL FUND SEEKING LONG-TERM
24 Federal Street GROWTH OF CAPITAL PRIMARILY IN
Boston, Massachusetts 02110 COMMON STOCKS WHICH ARE BELIEVED
BY THE FUND'S MANAGERS TO OFFER
SUPERIOR PROSPECTS FOR GROWTH.
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
101 HUNTINGTON AVENUE
INDEPENDENT AUDITORS BOSTON, MASSACHUSETTS 02199-7603
Ernst & Young LLP TELEPHONE 1-800-225-5291
200 Clarendon Street
Boston, Massachusetts 02116
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchange call 1-800-225-5291
Investment-by-Phone
Telephone Redemption
For: TDD call 1-800-544-6713
[recycle symbol] Printed on Recycled Paper
JHD -- 3400P 12/95
<PAGE>
JOHN HANCOCK DISCOVERY FUND
Statement of Additional Information
Class A and Class B Shares
December 1, 1995
This Statement of Additional Information provides information about John Hancock
Discovery Fund (the "Fund") in addition to the information that is contained in
the Fund's Class A and Class B Prospectus dated December 1, 1995 (the
"Prospectus"). The Fund is a series portfolio of Freedom Investment Trust III
(the "Trust").
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus, a copy of which can be obtained free of
charge by writing or telephoning:
John Hancock Investor Services, Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
1-800-225-5291
TABLE OF CONTENTS
Statement of Cross
Additional Referenced to
Information Page Prospectus Page
Organization of the Fund 2 7
Investment Objective and Policies 2 4
Investment Restrictions 10 4
Those Responsible for Management 13 7
Investment Advisory and Other Services 17 7
Distribution Contracts 19 9
Net Asset Value 20 13
Initial Sales Charge on Class A Shares 21 14
Deferred Sales Charge on Class B Shares 22 16
Special Redemptions 23 18
Additional Services and Programs for
Class A and Class B Shares 23 20
Description of the Fund's Shares 24 --
Tax Status 25 10
Calculation of Performance 28 10
Brokerage Allocation 30 --
Transfer Agent Services 31 --
Custody of Portfolio 32 --
Independent Auditors 32 --
Appendix A - Description of Bond and
Commercial Paper Ratings 33 --
Financial Statements -- 3
ORGANIZATION OF THE FUND
The Fund is a diversified portfolio of the Trust, an open-end management
investment company organized as a Massachusetts business trust on June 16, 1989.
The Board of Trustees has authority to issue an unlimited number of shares of
beneficial interest of separate series without par value. The Fund was
established on May 14, 1991. Prior to August 1, 1992, the Fund was named Freedom
Discovery Fund.
The Fund's investment manager, John Hancock Advisers, Inc. (the "Adviser"), is
an indirect wholly-owned subsidiary of John Hancock Mutual Life Insurance
Company (the "Life Company"), a Massachusetts life insurance company chartered
in 1862, with national headquarters at John Hancock Place, Boston,
Massachusetts.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus.
The Fund's investment objective is to "achieve long-term growth of capital". The
Fund will seek to achieve this objective through investment primarily in common
stocks that are believed by the Fund's manager to offer superior prospects for
growth.
Common Stocks and Convertible Securities: The Fund may invest in common stocks
and securities convertible into common stocks of companies which, in the
Adviser's opinion, have high long term growth characteristics, as more fully
described in the Prospectus. See "Investment Objective and Policies."
Investment in Foreign Securities. There is generally less publicly available
information about foreign companies and other issuers comparable to reports and
ratings that are published about issuers in the United States. Foreign issuers
are also generally not subject to uniform accounting and auditing and financial
reporting standards, practices and requirements comparable to those applicable
to United States issuers.
It is contemplated that most foreign securities will be purchased in
over-the-counter markets or on exchanges located in the countries in which the
respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
States exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.
With respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of
the Fund, political or social instability, or diplomatic developments which
could affect United States investments in those countries. Moreover, individual
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 Fund's foreign portfolio
securities, as well as, in some cases, capital gains, may be subject to foreign
withholding or other foreign taxes, thus reducing the net amount of income or
gains available for distribution to the Fund's shareholders.
Securities of Other Investment Companies. Currently, the Fund does not intend to
invest more than 5% of its total assets in securities of closed-end investment
companies.
Repurchase Agreements. The Fund may also enter into repurchase agreements with
domestic broker-dealers, banks and financial institutions, but the Fund may not
invest more than 10% of its net assets in repurchase agreements having
maturities of greater than seven days.
A repurchase agreement is a contract pursuant to which the Fund, against receipt
of securities of at least equal value including accrued interest, agrees to
advance a specified sum to a broker-dealer, bank or financial institution which
agrees to reacquire the securities at a mutually agreed upon time and price.
Repurchase agreements, which are usually for periods of one week or less, enable
the Fund to invest its cash reserves at fixed rates of return. The Fund may
enter into repurchase agreements with domestic broker-dealers, banks and other
financial institutions, provided the Fund's custodian always has possession of
securities serving as collateral whose market value at least equals the amount
of the institution's repurchase obligation. The 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 Fund will enter into repurchase
agreements only with institutions and dealers which the Trustees considers to be
creditworthy. If an institution enters an insolvency proceeding, the resulting
delay in liquidation of the securities serving as collateral could cause the
Fund some loss, as well as legal expense, if the value of the securities
declined prior to liquidation.
Investment in Rule 144A Securities and Other Restricted Securities. The Fund may
purchase restricted securities eligible for resale to "qualified institutional
buyers" pursuant to Rule 144A under the Securities Act of 1933 if the Fund's
Trustees or the Adviser has determined under Board-approved guidelines that such
restricted securities are liquid. The Trustees will determine as a question of
fact the liquidity of Rule 144A securities in the Fund's portfolio using the
guidelines set forth below.
In its determination of liquidity, the 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, the Trustees intend to delegate their responsibility to the Adviser to
determine the liquidity of each restricted security purchased by the Fund
pursuant to Rule 144A, subject to the Trustees 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 these Rule 144A securities.
The Fund 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, the Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the time
of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
will be priced at fair market value as determined in good faith by the Fund's
Trustees. If through the appreciation of restricted securities or the
depreciation of unrestricted securities, the Fund should be in a position where
more than 15% 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 15% limitation.
Ratings as Investment Criteria. 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 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 Fund as initial criteria for the selection of portfolio securities. 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 Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither of the foregoing events will require the sale of such
securities by the Fund, but the Adviser will consider such event in its
determination of whether the Fund should continue to hold the securities.
Foreign Currency Transactions. With respect to its foreign securities
investments, the Fund will conduct its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into forward contracts to purchase
or sell foreign currencies. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific amount of currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are usually traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for such trades.
The Fund may purchase or sell call and put options on foreign currencies as a
hedge against changes in the value of the U.S. dollar in relation to a foreign
currency or multi-national currency unit in which portfolio securities of the
Fund may be denominated. A call option on a foreign currency gives the buyer the
right to buy, and a put option the right to sell, a certain amount of foreign
currency at a specified price during a fixed period of time. Currently, options
are traded on such foreign currencies as the British pound, Canadian dollar,
West German mark, Japanese yen, French franc and Swiss franc. See "The Fund's
Options Trading Activities" below for more information.
The Fund may also enter into forward foreign currency exchange contracts in two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, the Fund may desire to
"lock-in" the United States dollar price of the security. By entering into a
forward contract for a fixed amount of dollars for the purchase or sale of the
amount of foreign currency involved in the underlying transactions, the Fund
will be able to protect itself against a possible loss resulting from an adverse
change in the relationship between the United States dollar and such foreign
currency during the period between the date on which the security is purchased
or sold and the date on which payment is made or received.
Second, when the Adviser believes that the currency of a particular foreign
country may suffer or enjoy a substantial movement against another currency, the
Fund may enter into a forward contract to sell or buy the amount of the former
foreign currency approximating the value of some or all of 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. The Fund does not intend to enter into forward contracts under this
second circumstance on a regular or continuous basis, and the Fund will not do
so, if, as a result, it will have more than 25% of the value of its total
assets, computed at market value, at the time of commitment, committed to the
consummation of such contracts. The 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 the Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency. Under normal circumstances, consideration of the
prospects for currency exchange rates will be incorporated into the Fund's
long-term investment decisions made with regard to overall investment
strategies. However, the Fund believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of the Fund will thereby be served. Investors Bank & Trust
Company, the Fund's custodian, will place cash or liquid or debt securities into
a segregated account of the Fund in an amount equal to the value of the Fund's
total assets committed to the consummation of forward 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. The Fund will not enter into any
forward contract with a term of greater than one year. At the maturity of a
forward contract, the 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 the Fund will be able to effect such a closing
purchase transaction. It is impossible to forecast the market value of a
particular portfolio security at the expiration of the contract. Accordingly, it
may be necessary for the Fund to purchase additional foreign currency on the
spot market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency that the Fund is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. Should forward
prices decline during the period between the Fund's entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Fund will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent that the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
Transactions in forward foreign currency exchange contracts by the Fund will be
limited to the transactions described above. The Fund is not required to enter
into such transactions with regard to its foreign currency-denominated
securities. It also should be realized that this method of protecting the value
of the Fund's portfolio securities against a decline in the value of a currency
does not eliminate fluctuations in the underlying prices of the securities. It
simply establishes a rate of exchange which one can achieve at some future point
in time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they tend
to limit any potential gain which might result should the value of such currency
increase.
Although the Fund values its assets daily in terms of United States dollars, the
Fund does not intend physically to convert its holdings of foreign currencies
into United States dollars on a daily basis. The 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 the Fund at one rate, while offering a lesser rate
of exchange should the Fund desire to resell that currency to the dealer.
The Fund's Options Trading Activities. The following information supplements the
discussion in the Prospectus regarding options transactions in which the Fund
may engage.
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.
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.
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 Ratings Group
("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.
Call Options. The Fund may purchase calls on equity securities only if the calls
are listed on a domestic exchange. The Fund will purchase call options to
attempt to obtain capital appreciation. When the Fund buys a call, it pays a
premium and has the right to buy the callable securities from a seller of a call
during a period at a fixed exercise price. The Fund benefits only if the market
price of the callable securities is above the call price during the call period
and the call is either exercised or sold at a profit. If the call is not
exercised or sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payment and the right to
purchase the underlying security.
Put Options. The Fund may purchase put options on equity securities ("puts") if
they are listed on a domestic exchange. When the Fund buys a put, it pays a
premium and has the right to sell the underlying assets to a seller of a put
during the put period at a fixed exercise price.
The Fund may buy puts related to securities it owns ("protective puts") or to
securities it does not own ("non-protective puts"). Buying a protective put
permits the Fund to protect itself during the put period against a decline in
the value of the underlying securities below the exercise price by selling them
through the exercise of the put. Thus, protective puts will assist the Fund in
achieving its investment objective of capital appreciation by protecting it
against a decline in the market value of its portfolio securities.
Buying a non-protective put permits the Fund, if the market price of the
underlying securities is below the put price during the put period, either to
resell the put or to buy the underlying securities and sell them at the exercise
price. A non-protective put can enable the Fund to achieve appreciation during a
period when the price of securities underlying such put are 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.
Options-General. An option position may be closed out only on an exchange which
provides a secondary market for options for the same series. Although the Fund
will generally purchase only those exchange-traded options for which there
appears to be an active secondary market, there can be no assurance that a
liquid secondary market on an exchange will exist for any particular option, or
at any particular time. In the event that no liquid secondary market exists, it
might not be possible to effect closing transactions in particular options. If
the Fund cannot close out an exchange-traded 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 securities. In the
absence of a liquid secondary market, the Fund, as the purchaser of a put or
call option, would be able to realize a profit or limit a loss on such options
only by exercising such options and incurring additional transaction costs on
the disposition of the underlying securities.
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) the facilities of an exchange or the Options Clearing
Corporation may not at all times be adequate to handle current trading volume;
or (v) 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 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 the Fund may affect its turnover rate and
the amount of brokerage commissions paid by it. The exercise of calls written by
the Fund may cause the Fund to sell portfolio securities or other assets at
times and amounts controlled by the holder of a call, thus increasing the Fund's
portfolio turnover rate and brokerage commission payments. The exercise of puts
may also cause the sale of securities, also increasing turnover. Although such
exercise is within the Fund's control, holding a protective put might cause the
Fund to sell the underlying securities 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 to permit the Fund to exercise the put.
The Fund will pay a brokerage commission each time it buys or sells a put or
call or buys or sells a security in connection with the exercise of a put or
call. Such commissions may be higher than those which would apply to direct
purchases or sales of equity securities.
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
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) Purchase securities on margin or make short sales, unless, by virtue of
its ownership of other securities, the Fund has the right to obtain
securities equivalent in kind and amount to the securities sold and, if
the right is conditional, the sale is made upon the same conditions,
except (i) in connection with arbitrage transactions, (ii) for hedging
the Fund's exposure to an actual or anticipated market decline in the
value of its securities, (iii) to profit from an anticipated decline in
the value of a security, and (iv) obtaining such short-term credits as
may be necessary for the clearance of purchases and sales of
securities. 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) 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 5% of the value of the Fund's net
assets at the time of such borrowing.
(3) 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) 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) 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) 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 the
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 up to 25% of the value of the Fund's
total assets may be invested without regard to these limitations.
(7) 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 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, and all preferred stocks of an
issuer shall be deemed a single class.
(8) 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.
(9) 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.
(10) Make loans, except that the Fund (1) may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% of the
Fund's total assets taken at market value, (2) enter into repurchase
agreements, and (3) purchase all or a portion of an issue of debt
securities, bank loan participation interests, bank certificates of
deposit, bankers' acceptances, debentures or other securities, whether
or not the purchase is made upon the original issuance of the
securities."
(11) 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.
(12) 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.
Nonfundamental Investment Restrictions. The following investment restrictions
are designated as nonfundamental and may be changed by the Board of Trustees
without the approval of shareholders.
The Fund may not:
(13) Write, purchase, or sell puts, calls or combinations thereof except
that the Fund may write, purchase or sell puts and calls on foreign
currencies and securities as described in the Prospectus.
(14) 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.
(15) Purchase securities of any issuer for the purpose of exercising control
or management, except in connection with a merger, consolidation,
acquisition or reorganization.
(16) 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.
(17) 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.
(18) 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.
(19) Participate on a joint or joint and several basis in any trading
accounting 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.
In order to permit the sale of shares of the Fund in certain states, the
Trustees may, in their sole discretion, adopt 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 values or the total costs of the Fund's
assets will not be considered a violation of the 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 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.
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS 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.
- ------------
*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>
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH REGISTRANTS DURING PAST 5 YEARS
----------------- ------------------ --------------------------
<S> <C> <C>
Dennis S. Aronowitz Trustee (4) Professor of Law, Boston University
Boston University School of Law; Trustee, Brookline
Boston, Massachusetts Savings Bank; Director, Boston
University Center for Banking Law
Studies (until 1990).
William A. Barron, III Trustee (1, 2) Trustee, H.M. Payson & Company since
RR 1 1991.
325 Sea Meadows Lane
Yarmouth, Maine 04096
Richard P. Chapman, Jr. Trustee (4) President, Brookline Savings Bank.
160 Washington Street
Brookline, Massachusetts
William J. Cosgrove Trustee (4) Vice President, Senior Banker and
20 Buttonwood Place Senior Credit Officer, Citibank, N.A.
Saddle River, New Jersey (retired September 1991); Executive
Vice President, Citadel Group
Representatives, Inc.; Director, the
Hudson City Savings Bank.
Douglas M. Costle Trustee (1, 2) Director Chairman of the Board and
RR2 Box 480 Distinguished Senior Fellow, Institute
Woodstock, Vermont 05091 for Sustainable Communities, Montpelier,
Vermont, since 1991. Dean Vermont Law
School, until 1991. Director, Air and
Water
- -----------
*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>
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH REGISTRANTS DURING PAST 5 YEARS
- ---------------- ---------------- -----------------------
<S> <C> <C>
Technologies Corporation
(environmental services and
equipment), Niagara Mohawk Power
Company (electric services) and
MITRE Corporation (governmental
consulting services).
Leland O. Erdahl Trustee (1, 2) President and Director of Nature
9449 Navy Blue Court Quality Ingredients Company, Inc. and
Las Vegas, NV 89117 Sante Fe Ingredients Company, Inc. ,
private food processing companies.
Director of Uranium Resources, Inc.
President of Stolar, Inc. from 1987 to
1991 and President of Albuquerque
Uranium Corporation from 1985 to 1992.
Director of Freeport-McMoRan Copper &
Gold Company, Inc., Hecla Mining
Company, Canyon Resources Corporation
and Original Sixteen to One Mines,
Inc. From 1984 to 1987 and 1991,
management consultant.
Richard A. Farrell Trustee(1, 2) President of Farrell, Healer & Co., a
Farrell, Healer & Company, Inc. venture capital management firm, since
160 Federal Street -- 23rd Floor 1980. Prior to that date, Mr. Farrell
Boston, MA 02110 headed the venture capital group at
Bank of Boston Corporation.
Gail D. Fosler Trustee (4) Vice President and Chief Economist, The
4104 Woodbine Street Conference Board (non-profit economic
Chevy Chase, MD and business research).
- -----------
*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>
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH REGISTRANTS DURING PAST 5 YEARS
- ---------------- ---------------- ----------------------
<S> <C> <C>
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.
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.
Bayard Henry Trustee (4) Corporate Advisor; Director, Fiduciary
31 Milk Street Trust Company (a trust company);
Boston, Massachusetts Director, Groundwater Technology, Inc.
(remediation); Samuel Cabot, Inc.;
Advisor, Kestrel Venture Management.
Ralph Lowell, Jr. Trustee (1, 2) Director, Lowell Blake and Associates, a
45 Mill Street 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.
- -----------
*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>
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS 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 Security 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.
*Richard S. Scipione Trustee (3) General Counsel, the Life Insurance
John Hancock Place Company; Director, the Adviser, the
P.O. Box 111 Affiliated Companies, John Hancock
Boston, Massachusetts Distributors, Inc., JH Networking
Insurance Agency, Inc., John Hancock
Subsidiaries, Inc., SAMCorp, NM
Capital and John Hancock Property and
Casualty Insurance and its affiliates
(until November, 1993); Trustee; The
Berkeley Group; Director, John
Hancock Home Mortgages Corp. and John
Hancock Financial Access, Inc. (until
July 1990).
Edward J. Spellman, CPA Trustee (4) Partner, KPMG Peat Marwick LLP
259C Commercial Bld. (retired June 1990).
Lauderdale, FL
- -----------
*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>
Each of the Trustees also serves as Trustee of Freedom Investment Trust and
Freedom Investment Trust II - two other investment companies for which the
Adviser serves as adviser.
The executive officers of the Trust (who are not also Trustees) and their
principal occupations during the past five years are set forth below. Unless
otherwise indicated, the business address of each is 101 Huntington Avenue,
Boston, Massachusetts 02199.
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH REGISTRANTS DURING PAST 5 YEARS
- ---------------- ---------------- -----------------------
<S> <C> <C>
Robert G. Freedman Vice Chairman and Chief Vice Chairman and Chief Investment
Investment Officer (4) Officer, the Adviser; President
(until December 1994).
Anne C. Hodsdon President (4) President and Chief Operating
Officer, the Adviser; Executive Vice
President, the Adviser (until
December 1994); Senior Vice
President; the Adviser (until
December 1993); Vice President, the
Adviser, 1991.
James B. Little Senior Vice President, Chief Senior Vice President, the Adviser.
Financial Officer
Thomas H. Drohan Senior Vice President Senior Vice President and Secretary,
and Secretary the Adviser.
- -----------
*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>
As of August 31, 1995, there were 536,431 shares of Class A shares of the Fund
outstanding and 2,538,762 shares of Class B shares of the Fund outstanding and
officers and trustees of the Fund as a group beneficially owned less than 1% of
these outstanding shares. At that date, J.C. Bradford & Co., Cust FBO, RCIP
Limited Partners II, 330 Commerce St., Nashville, TN held of record 130,427
Class A shares representing approximately 24.31% of the shares outstanding. At
that date, no other person owned of record or beneficially as much as 5% of the
outstanding shares of the Fund.
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
Fund and the other investment companies in the John Hancock Fund Complex to the
Independent Trustees for their services for each Fund's fiscal year. The two
non-Independent Trustees, Messrs. Boudreau and Scipione, 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 Fund for their services.
<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM THE FUND
AGGREGATE PENSIONS OR ESTIMATED ANNUAL AND JOHN HANCOCK FUND COMPLEX TO
COMPENSATION FROM RETIREMENT BENEFITS UPON TRUSTEES FUND'S EXPENSES (1) AS
INDEPENDENT TRUSTEES THE FUND BENEFITS ACCRUED RETIREMENT PART OF THE (TOTAL OF FUNDS)
- -------------------- ----------------- ---------------- ---------------- --------------------------------
<S> <C> <C> <C> <C>
Dennis S. Aronowitz* $ 0 -- -- $ 60,950
William A. Barron, III** $ 551 -- -- $ 42,000
Richard P. Chapman, Jr.* $ 0 -- -- $ 62,950
William J. Cosgrove* $ 0 -- -- $ 60,950
Douglas M. Costle** $ 551 -- -- $ 42,000
Leland O. Erdahl** $ 551 -- -- $ 42,000
Richard A. Farrell** $ 571 -- -- $ 43,500
Gail D. Fosler* $ 0 -- -- $ 60,950
William F. Glavin** $ 551 -- -- $ 41,750
Patrick Grant** $ 578 -- -- $ 44,000
Bayard Henry* $ 0 -- -- $ 62,950
Ralph Lowell, Jr.** $ 551 -- -- $ 42,000
Dr. John A. Moore** $ 551 -- -- $ 41,750
Patti McGill Peterson** $ 551 -- -- $ 42,000
John W. Pratt** $ 551 -- -- $ 42,000
Edward J. Spellman* $ 0 -- -- $ 60,950
------ ---------
$5,557 $792,700
(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.
*Trustees of 17 funds in the John Hancock Complex. As of the date of this document, these Trustees have not
received any compensation from the Fund.
**Trustees of 10 funds in the John Hancock Complex.
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser for the Fund is the Adviser, a Massachusetts corporation
with offices at 101 Huntington Avenue, Boston, Massachusetts 02199-7603. The
Adviser is a registered investment advisory firm which maintains a securities
research department, the efforts of which will be made available to the Fund.
The Adviser was organized in 1968 and presently has more than $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/Freedom group of funds having a combined total of over 1,060,000,000
shareholders. The Adviser is an affiliate of the Life 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
a high rating from Standard & Poor's and A.M. Best's. Founded in 1862, the Life
Company has been serving clients for over 125 years.
Pursuant to an investment advisory agreement dated as of August 29, 1989 and
restated July 1, 1992, between Freedom Investment Trust III and the Advisor
(successor to Freedom Capital Management Corporation ("Freedom Capital"), the
Fund's former investment adviser) (the "Advisory Agreement"), 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 its business.
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 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 any of
their affiliates; expenses of Trustees' and shareholders' meetings; trade
association memberships; insurance premiums; and any extraordinary expenses.
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 annual expenses
fall below this limit.
If the total of all ordinary business expenses of the Fund for any fiscal year
exceeds limitations prescribed in any state in which shares of the Fund are
qualified for sale, the fee payable to the Adviser will be reduced to the extent
required by these limitations. At this time, the most restrictive limit on
expenses imposed by a state requires that expenses charged to the Fund in any
fiscal year may not exceed 2 1/2% 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 1/2% of the
remaining average net assets. When calculating the above limit, the Fund may
exclude interest, brokerage commissions and extraordinary expenses.
The continuation of the Advisory Agreement for Freedom Investment Trust III was
last approved on August 28, 1995 by all of the Trustees, including all of the
Trustees who are not parties to the Advisory Agreement or "interested persons"
(as defined in the Investment Company Act of 1940) of any such party; and on
November 15, 1995 by the Fund's shareholders, to be effective December 1, 1995.
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 Agreement or
"interested persons" of any such parties. The Advisory Agreement may be
terminated on 60 days written notice by either party and will terminate
automatically if it is assigned.
For the fiscal years ended July 31, 1993, 1994 and 1995, the Fund paid the
Adviser investment advisory fees, respectively, of $424,825, $383,127 and
$294,993.
DISTRIBUTION CONTRACTS
The Trust has entered into a Distribution Contract with John Hancock Funds and
Freedom Distributors Corporation (together the "Distributors").
Under the contract, Distributors are obligated to use their 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 the Distributors. The Distributors 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, 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 Fund's Trustees adopted a Distribution Plan with respect to Class A and
Class B shares ("the Plan"), pursuant to rule 12b-1 under the Investment Company
Act of 1940. Under the Plan 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. 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 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 the Distributors may carry these expenses
forward, provided, however, that the Trustees may terminate the Plan and thus
the Fund's obligation to make further payments at any time. Accordingly, the
Fund does not treat unreimbursed expenses under the Plan as a liability of the
Fund. The Plan was approved by a majority of the voting securities of the Fund.
The Plan 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 Plan (the
"Independent Trustees"), by votes cast in person at meetings called for the
purpose of voting on such Plans.
Pursuant to the Plan, at least quarterly, the Distributors provide the Fund with
a written report of the amounts expended under the Plan and the purpose for
which these expenditures were made. The Trustees review these reports on a
quarterly basis.
The Plan 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. The Plan 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 upon 60
days' written notice to The Distributor, and (c) automatically in the event of
assignment. The Plan 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, the Plan 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
holder 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 Plan the Trustees concluded that, in their judgment, there is a reasonable
likelihood that the Plan will benefit the holders of the applicable class of
shares of the Fund.
Amounts paid to the Distributors by any class of shares of the Fund will not be
used to pay the expenses incurred with respect to any other class of shares of
the Fund; provided, however, that expenses attributable to the 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 Trustees. From
time to time the Fund may participate in joint distribution activities with
other Funds and the costs of those activities will be borne by each Fund in
proportion to the relative net asset value of the participating Funds.
For the fiscal year ended July 31, 1995, the Distributors received $11,042 and
$249,491 from the Fund with respect to Class A shares and Class B shares,
respectively. During the fiscal year ended July 31, 1995, the Distributors paid
the following amounts of expenses in connection with its services for the Fund:
<TABLE>
<CAPTION>
Expense Items
- --------------
CLASS A CLASS B
------- -------
<S> <C> <C>
Advertising and Promotion Expense $11,201 $ 29,891
Printing and Mailing of Prospectuses to New Shareholders $ 1,878 $ 2,714
Trail Payments to Underwriters and Selling Brokers $23,602 $440,620
and Compensation to Sales Personnel $40,506 $ 74,431
Interest, Carrying or other Finance Charges $ 0 $148,509
</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 last available bid price. 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 charge applicable to purchases of Class A shares of the Fund is
described in the Fund's Prospectus. Methods of obtaining the reduced sales
charge referred to generally in the Prospectus are described in detail below. In
calculating the sales charge applicable to current purchases of Class A shares,
the investor is entitled to cumulate current purchases with the greater of the
current value (at offering price) of the Class A shares of the Fund or if
Investor Services is notified by the investor's dealer or the investor at the
time of the purchase, the cost of the Class A shares owned.
Combined Purchases. In calculating the sales charge applicable to purchases of
Class A shares made at one time, the purchases will be combined if made by (a)
an individual, his 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 trust estate or single 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 Prospectus, Class A shares of the Fund
may be sold without a sales charge to the persons described in the Prospectus.
Accumulation Privilege. Investors (including investors combining purchases) who
are already shareholders may also obtain the benefit of a reduced sales charge
by taking into account not only the money then being invested but also the
current account value of the Class A shares already held by such persons.
Combination Privilege. For the Fund, reduced sales charges (according to the
schedule set forth in the Prospectus) also are available to an investor based on
the aggregate amount of his concurrent and prior investments in shares of the
Fund and Class A shares of all other John Hancock funds which carry a sales
charge.
Letter of Intention. Reduced sales charges are also applicable to investments in
shares 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 IRAs, SEP,
SARSEP, TSA, 401(k), 403(b) plans and 457 plans. Such an investment (including
accumulations and combinations) must aggregate $50,000 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 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 sufficient Class A shares
(approximately 5% of the aggregate) 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
escrow 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 attorney-in-fact to redeem
any escrowed Class A shares and adjust the sales charge, if necessary. A LOI
does not constitute binding commitments by an investor to purchase or by the
Fund to sell any additional Class A shares and may be terminated at any time.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per share without
the imposition of an initial sales charge so that the Fund will receive the full
amount of the purchase payment.
Contingent Deferred Sales Charge. Class B shares which are redeemed within six
years of purchase will be subject to a contingent deferred sales charge ("CDSC")
at the rates set forth in the Prospectus as a percentage of the dollar amount
subject to the CDSC. The charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the Class B
shares being redeemed. Accordingly, no CDSC will be imposed on increases in
account value above the initial purchase prices, including Class B shares
derived from reinvestment of dividends or capital gains distributions.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for the purpose of determining the number of
years from the time of any payment for the purchases of shares, 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 Broker Services and are used in whole or in
part by Broker Services 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 selected 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
Fund's 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 and when the shareholder sells
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 FOR CLASS A AND CLASS B SHARES
Exchange Privilege. As described more fully in the Prospectus, the Fund permits
exchanges of shares of any class of the Fund for shares of the same class in any
other John Hancock fund offering that class.
Systematic Withdrawal Plan. As described briefly in the 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 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 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 Fund Services.
Monthly Automatic Accumulation Program (MAAP). This program is explained more
fully in the 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
check is not honored by your bank. The bank shall be under no obligation to
notify the shareholder as to the non-payment of any draft.
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 due date of any investment.
Reinvestment Privilege. A shareholder who has redeemed shares of the Fund 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
Fund or in shares of any of the other John Hancock mutual funds, subject to the
minimum investment limits in any 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
mutual 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.
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Trust are responsible for the management and supervision of
the Fund. The Master Trust Agreement permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Trust,
without par value. Under the Master Trust Agreement, 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 Master Trust Agreement 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 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 that 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 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.
Dividends paid by the Fund, if any, with respect to each class 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. Accordingly,
it is expected that the net asset value per share of the Fund's Class B shares,
each of which has a Rule 12b-1 distribution plan and sales load. Similarly, 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 Prospectus.
Unless otherwise required by the Investment Company Act or the Master Trust
Agreement, 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 requesting 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 Master Trust Agreement contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Fund. The Master Trust Agreement also provides for indemnification out of the
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. Liability is 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 the Trust, including the Fund, is treated as a separate entity
for tax purposes. The Fund has qualified and intends to continue to qualify and
be treated as a "regulated investment company" under Subchapter M of the
Internal Revenue Code (the "Code") for each taxable year. As such and by
complying with the applicable provisions of the Code regarding the sources of
its income, the timing of its distributions and the diversification of its
assets, the Fund will not be subject to Federal income tax on taxable income
(including net realized capital gains) which is distributed to shareholders at
least annually.
Distributions of net investment income (which includes original issue discount
and market discount income) and any net realized capital gains, as computed for
Federal income tax purposes, will be taxable as described in the Prospectus
whether taken in shares or in cash. 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 that they would have received had they elected to receive the distributions
in cash.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
forward foreign currency 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 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 may 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.
If the Fund invests in certain non-U.S. corporations that receive at least 75%
of their annual gross income from passive sources (such as sources that produce
interest, dividend, rental, royalty or capital gain income) or hold at least 50%
of their assets in such passive sources ("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. In certain cases, an election may be available that would ameliorate
these adverse tax consequences. Accordingly, the Fund may limit its investments
in such passive foreign investment companies and will undertake appropriate
actions, including the consideration of any available elections, to limit its
tax liability, if any, with respect to such investments.
Limitations imposed by the Code on regulated investment companies like the Fund
may restrict the Fund's ability to enter into options and futures contracts,
foreign currency positions and foreign currency forward contracts. Certain of
these transactions may cause the Fund to recognize gains or losses from marking
to market even though its positions have not been sold or terminated and may
affect the character as long-term or short-term (or, in the case of certain
foreign currency options, futures and forward contracts, as ordinary income or
loss) of some capital gains and losses realized by the Fund. Additionally,
certain of the Fund's losses on transactions involving options, futures, forward
contracts, and any offsetting or successor positions in its portfolio may be
deferred rather than being taken into account currently in calculating the
Fund's taxable income or gain. Certain of such transactions may also cause the
Fund to dispose of investments sooner than would otherwise have occurred. 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 applicable to options, futures or forward contracts, including
consideration of available elections, in order to minimize any potential adverse
tax consequences.
The amount of net realized capital gains, if any, in any given year will result
from sales of securities made with a view to the maintenance of a portfolio
believed by the Fund's management to be most likely to attain the Fund's
objectives. Such sales, and any resulting gains or losses, may therefore vary
considerably from year to year. Since, at the time of an investor's purchase of
shares of the Fund, a portion of the per share net asset value by which the
purchase price is determined may be represented by realized or unrealized
appreciation in the Fund's portfolio or undistributed taxable income of the
Fund, subsequent distributions (or portions thereof) on those shares may be
taxable to such investor even if the net asset value of his shares is, as a
result of the distributions, reduced below his cost for such shares and the
distributions (or portions thereof) in reality represent a return of a portion
of the purchase price.
Upon a redemption of shares (including by exercise of the exchange privilege) a
shareholder will ordinarily realize a taxable gain or loss depending upon his
basis in his shares. This 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 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 Class
A shares of the Fund or another John Hancock fund are subsequently acquired
without payment of a sales charge pursuant to the reinvestment or exchange
privilege. This disregarded charge will result in an increase in the
shareholder's tax basis in the Class A shares subsequently acquired. Also, any
loss realized on a redemption or exchange will be disallowed for tax purposes 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 realized capital gains
annually, if any, the Fund reserves the right to retain and reinvest all or any
portion of 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 carry forward 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 tax 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 carry forward a net
realized capital loss in any year to offset net realized capital gains, if any,
during the eight years following the year of the loss. To the extent subsequent
net realized 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 $184,368 of capital loss carry
forward (which expires July 31, 2003) available to offset future net realized
capital gains.
For purposes of the dividends-received deduction available to corporations,
dividends received by the Fund 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.
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.
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 United States may reduce or eliminate such
taxes. Because more than 50% of the Fund's total assets at the close of any
taxable year will not consist of stock or securities of foreign corporations,
the Fund will not be able to pass such taxes through to its shareholders, who in
consequence will not be able to include any portion of such taxes in their
incomes and will not be entitled to tax credits or deductions with respect to
such taxes. However, the Fund will be entitled to deduct such taxes in
determining the amounts it must distribute in order to avoid Federal income tax.
The Fund will be subject to a four percent nondeductible Federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements. The
Fund intends under normal circumstances to avoid liability for this tax by
satisfying such distribution requirements.
The foregoing discussion relates solely to U.S. Federal income tax laws
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under these laws.
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 exchange or redemption of shares of the Fund 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 the
Fund in particular circumstances.
Foreign 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, including a possible 30%
U.S. withholding tax (or lower treaty rate) on dividends representing ordinary
income, and should consult their tax advisers regarding such treatment and the
application of foreign taxes to an investment in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
Provided that the Fund qualifies as a regulated investment company under the
Code, it will also not be required to pay any Massachusetts income tax.
CALCULATION OF PERFORMANCE
The average annual total return on Class A shares and Class B shares of the
Fund, respectively, for the 1 year and life of that Class periods ended July 31,
1995, was 48.02% and 14.32% for Class A shares (since inception on January 3,
1992) and 49.97% and 17.95% for Class B shares (since inception on August 30,
1991).
The Fund's total return in computed by finding the average annual compounded
rate of return over the 1 year and life-of-fund period that would equate the
initial amount invested to the ending redeemable value according to the
following formula:
[GRAPHIC OMITTED]
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment made at the
beginning of the 1 year and life-of-fund periods.
This calculation assumes the maximum sales charge of 5% is included in the
initial investment and 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 5% sales charge on Class A
shares and the CDSC on Class B shares into account. 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 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 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 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.
From time to time, in reports and promotional literature, the Fund's yield and
total return will be compared to indices of mutual funds such as the Russell and
Wilshire Indices and those prepared by Lipper Analytical Services, Inc.,
Ibottson and Associates, CDA Weisenberger and F.C. Towers.
Performance rankings and ratings reported periodically in national financial
publications such as Money Magazine, Forbes, Business Week, The Wall Street
Journal, Micropal, Inc., Morningstar, Stranger's, Barron's, etc. will also be
utilized.
The performance of the Fund is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of the Fund for
any period in the future. The performance of the Fund is a function of many
factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performance.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the 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
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 commission paid by the issuer and transactions with dealers
serving as market maker reflect a "spread." Investment 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 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, the policies in this regard
must be consistent with the foregoing and will at all times be subject to review
by the Trustees. For the fiscal years ended July 31, 1993, 1994 and 1995, the
Fund paid brokerage commissions in the amount of $150,242, $97,167 and $57,084,
respectively.
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 July 31,
1995, the Fund paid $4,025 in 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 ("all 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, Sutro or Distributors. During the year ending July 31,
1995, the Fund did not execute any portfolio transactions 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 Trustee 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 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 commission at a rate higher than
that determined in accordance with the above criteria.
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 the Life
Company, is the transfer and dividend paying agent for the Fund. The Fund pays
an annual fee per shareholder account plus certain out-of-pocket expenses. These
expenses are charged to the Fund and allocated to each class on the basis of the
relative net asset values.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Trust and Investors Bank and Trust Company, 24 Federal Street,
Boston, Massachusetts 02110.
INDEPENDENT AUDITORS
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116,
has been selected as the independent auditors of the Fund. The financial
statements of the Fund included in the Prospectus and this Statement of
Additional Information have been audited by Ernst & Young LLP for the periods
indicated in their report thereon appearing elsewhere herein, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
<PAGE>
APPENDIX A
RATINGS
Bonds.
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 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
probably credit statute upon completion of that act or fulfillment of that
condition.
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
are to give investors a more precise indication of relative debt quality in each
of the historically defined categories.
Commercial Paper.
Standard & Poor's Commercial Paper Ratings
A Standard & Poor's Commercial Paper Rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of no more
than 365 days. The two highest categories are as follows:
A Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are further
refined with the designation 1, 2 and 3 to indicate the relative degree of
safety.
A-1 This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus(+) sign
designation.
The Commercial Paper Rating is not a recommendation to purchase or sell
a security. The ratings are based on current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information.
Moody's Commercial Paper Ratings
Moody's Commercial Paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following designations, judged to be
investment grade, to indicate the relative repayment capacity of rated issuers.
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well established access to
a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-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 alternate liquidity is maintained.
s:\corpsec\N1A\SAI\fitiii\discovry.doc
<PAGE>
----------------------
FINANCIAL STATEMENTS
----------------------
John Hancock Funds - Discovery Fund
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1995
- --------------------------------------------------------------------------------
ASSETS:
Investments at value - Note C:
Common stocks (cost - $21,667,328) .................... $ 36,896,478
Short-term investments (cost - $43,000) ............... 43,000
------------
36,939,478
Cash ................................................... 7,112
Receivable for investments sold ........................ 804,723
Receivable for shares sold ............................. 36,073
Interest receivable .................................... 11
Deferred organization expenses - Note A ................ 15,810
------------
Total Assets ......................... 37,803,207
----------------------------------------------------
LIABILITIES:
Payable for investments purchased ..................... 983,125
Payable for shares repurchased ........................ 13,463
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ................................... 48,687
Accounts payable and accrued expenses .................. 37,615
------------
Total Liabilities .................... 1,082,890
----------------------------------------------------
NET ASSETS:
Capital paid-in ........................................ 21,675,535
Accumulated net realized loss on investments and
foreign currency transactions ......................... (184,368)
Net unrealized appreciation of investments ............. 15,229,150
------------
Net Assets ........................... $ 36,720,317
====================================================
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 - $5,075,356/391,822 ........................... $ 12.95
========================================================================
Class B - $31,644,961/2,523,395 ........................ $ 12.54
========================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - $(12.95 x 105.26%) ........................... $ 13.63
========================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON JULY 31, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
STATEMENT OF OPERATIONS
Year ended July 31, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ............................................... $ 60,431
Dividends (net of foreign withholding taxes
of $4,323) ............................................ 45,978
------------
106,409
------------
Expenses:
Investment management fee - Note B .................... 294,993
Distribution/service fee - Note B
Class A ............................................. 11,042
Class B ............................................. 249,491
Transfer agent fee - Note B
Class A ............................................. 13,194
Class B ............................................. 72,966
Custodian fee ......................................... 46,275
Auditing fee .......................................... 31,300
Registration and filing fees .......................... 17,387
Organization expense - Note A ......................... 14,658
Printing .............................................. 12,789
Trustees' fees ........................................ 6,547
Miscellaneous ......................................... 1,473
Legal fees ............................................ 1,239
------------
Total Expenses ....................... 773,354
----------------------------------------------------
Net Investment Loss .................. (666,945)
----------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investments sold .................. (184,355)
Net realized loss on foreign currency transactions ..... (1,501)
Change in net unrealized appreciation/depreciation
of investments ........................................ 14,483,069
------------
Net Realized and Unrealized
Gain on Investments and
Foreign Currency Transactions ........ 14,297,213
----------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ............ $ 13,630,268
====================================================
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
<TABLE>
<CAPTION>
----------------------
FINANCIAL STATEMENTS
----------------------
John Hancock Funds - Discovery Fund
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
-----------------------------
1995 1994
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C> <C>
Net investment loss ........................................................... $ (666,945) $ (831,202)
Net realized gain (loss) on investments sold and foreign currency
transactions ................................................................. (185,856) 1,895,546
Change in net unrealized appreciation/depreciation of investments ............. 14,483,069 (3,261,315)
------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations .............. 13,630,268 (2,196,971)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on investments sold
Class A - $(0.2685 and $1.6619 per share, respectively) ...................... (101,860) (902,081)
Class B - $(0.2685 and $1.6619 per share, respectively) ...................... (755,311) (5,438,402)
------------- -------------
Total Distributions to Shareholders ........................................ (857,171) (6,340,483)
------------- -------------
FROM FUND SHARE TRANSACTIONS -- NET* ............................................ (5,816,073) (5,063,020)
------------- -------------
NET ASSETS:
Beginning of period ........................................................... 29,763,293 43,363,767
------------- -------------
End of period ................................................................. $ 36,720,317 $ 29,763,293
============= =============
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------
1995 1994
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ------------ ------------
CLASS A
<S> <C> <C> <C> <C>
Shares sold ................................................... 334,726 $ 3,367,716 2,972,453 $ 30,392,925
Shares issued to shareholders in reinvestment of
distributions ................................................ 10,315 92,837 90,127 825,563
--------
345,041 3,460,553 3,062,580 31,218,488
Less shares repurchased ....................................... (330,231) (3,351,654) (3,119,595) (31,598,574)
-------- ----------- ---------- ------------
Net increase (decrease) ....................................... 14,810 $ 108,899 (57,015) $ (380,086)
======== =========== ========== ============
CLASS B
Shares sold .................................................. 214,582 $ 2,091,432 243,890 $ 2,401,058
Shares issued to shareholders in reinvestment of
distributions ............................................... 79,634 696,802 545,000 4,888,647
-------- ----------- ---------- ------------
294,216 2,788,234 788,890 7,289,705
Less shares repurchased ...................................... (951,880) (8,713,206) (1,238,061) (11,972,639)
-------- ----------- ---------- ------------
Net decrease.................................................. (657,664) $(5,924,972) (449,171) $ (4,682,934)
======== =========== ========== ============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAVE CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE
REFLECTS EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS
PAID TO SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY SHAREHOLDERS
INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND SHARES SOLD,
REINVESTED AND REDEEMED DURING THE LAST TWO PERIODS, ALONG WITH THE
CORRESPONDING DOLLAR VALUES.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
----------------------
FINANCIAL STATEMENTS
----------------------
John Hancock Funds - Discovery Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
periods indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A YEAR ENDED JULY 31,
-------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1995 1994 1993 1992(a)
------- ------- ------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........................... $ 8.56 $ 10.81 $ 8.95 $ 9.40
------- ------- ------- --------
Net Investment Loss ............................................ (0.17)+ (0.16)+ (0.16) (0.05)
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions ............................ 4.83 (0.43) 2.15 (0.40)
------- ------- ------- --------
Total from Investment Operations ............................. 4.66 (0.59) 1.99 (0.45)
------- ------- ------- --------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold ....... (0.27) (1.66) (0.13) --
------- ------- ------- --------
Net Asset Value, End of Period ................................. $ 12.95 $ 8.56 $ 10.81 $ 8.95
======= ======= ======= =======
Total Investment Return at Net Asset Value ..................... 55.80% (6.45)% 22.33% (4.79)%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ...................... $ 5,075 $ 3,226 $ 4,692 $ 3,866
Ratio of Expenses to Average Net Assets ........................ 2.10% 2.01% 2.17% 1.78%*
Ratio of Net Investment Loss to Average Net Assets ............. (1.73)% (1.64)% (1.61)% (1.20)%*
Portfolio Turnover Rate ........................................ 118% 108% 148% 138%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........................... $ 8.34 $ 10.65 $ 8.87 $ 8.00
------- ------- ------- --------
Net Investment Loss ............................................ (0.22)+ (0.22)+ (0.23) (0.11)
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions ............................ 4.69 (0.43) 2.14 0.98
------- ------- ------- --------
Total from Investment Operations ............................. 4.47 (0.65) 1.91 0.87
------- ------- ------- --------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold ....... (0.27) (1.66) (0.13) $ --
------- ------- ------- --------
Net Asset Value, End of Period ................................. $ 12.54 $ 8.34 $ 10.65 $ 8.87
======= ======= ======= =======
Total Investment Return at Net Asset Value ..................... 54.97% (7.18)% 21.63% 10.88%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ...................... $31,645 $26,537 $38,672 $34,636
Ratio of Expenses to Average Net Assets ........................ 2.70% 2.62% 2.86% 2.56%*
Ratio of Net Investment Loss to Average Net Assets ............. (2.34)% (2.24)% (2.26)% (1.56)%*
Portfolio Turnover Rate ........................................ 118% 108% 148% 138%
* On an annualized basis.
(a) Class A and Class B shares commenced operations on January 3, 1992 and
August 30, 1991, respectively.
(b) Not annualized.
+ On average month end shares outstanding.
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZE THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT INCOME, GAINS (LOSSES)
AND DISTRIBUTIONS OF THE FUND. IT SHOWS HOW THE FUND'S NET ASSET VALUE FOR A
SHARE HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. IT ALSO SHOWS THE TOTAL
INVESTMENT RETURN FOR EACH PERIOD BASED ON THE NET ASSET VALUE OF FUND SHARES.
ADDITIONALLY, IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE
FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
----------------------
FINANCIAL STATEMENTS
----------------------
John Hancock Funds - Discovery Fund
SCHEDULE OF INVESTMENTS
July 31, 1995
- --------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
FUND ON JULY 31, 1995. THE MAIN CATEGORY OF SECURITIES, COMMON STOCKS, ARE
FURTHER BROKEN DOWN BY INDUSTRY GROUPS. SHORT-TERM INVESTMENTS, WHICH REPRESENT
THE FUNDS "CASH" POSITION, ARE LISTED LAST.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
APPLIANCES - HOUSEHOLD(1.15%)
Fedders Corp. ......................... 19,100 $ 128,925
Fedders Corp. (Class A) ............... 60,463 294,755
----------
423,680
----------
BROADCASTING/RADIO/TV (2.26%)
Citicasters, Inc.** ................... 15,000* 498,750
Evergreen Media Corp. (Class A)** ..... 10,000* 330,000
----------
828,750
----------
BUSINESS SERVICES (13.15%)
Alternative Resources Corp.** ......... 50,000 1,500,000
Corrections Corp of America** ......... 15,000* 616,875
CRA Managed Care, Inc.** .............. 10,000* 227,500
Li & Fung Ltd. (Hong Kong) ............ 300,000 238,410
PhyCor, Inc.** ........................ 15,000* 615,000
PMT Services, Inc.** .................. 30,000* 547,500
Seattle Filmworks, Inc.** ............. 45,000* 894,375
RTW, Inc.** ........................... 10,000* 188,750
----------
4,828,410
----------
COMPUTERS (18.06%)
Astea International, Inc.** ........... 5,000* 106,250
Baan Company, N.V.** .................. 3,500* 116,812
CBT Group PLC, American Depositary
Receipt ** ........................... 14,000* 634,375
Discreet Logic, Inc. ** ............... 2,500* 105,000
Eagle Point Software Corp.** .......... 20,000* 415,000
HCIA, Inc.** .......................... 22,900* 681,275
HNC Software, Inc.** .................. 20,700* 501,975
Informix Corp.** ...................... 34,000* 1,007,250
Novadigm, Inc.** ...................... 6,000* 124,500
Phamis, Inc.** ........................ 14,000* 409,500
Pinnacle Systems, Inc.** .............. 25,000* 676,563
Read-Rite Corp.** ..................... 20,000* 825,000
Sterling Software, Inc.** ............. 15,000 615,000
Symantec Corp.** ...................... 15,000* 408,750
----------
6,627,250
----------
ELECTRONICS (17.96%)
ANADIGICS, Inc.** ..................... 8,000* 224,000
Aseco Corp.** ......................... 35,000* 695,625
Cypress Semiconductor Corp.** ......... 27,000* 1,424,250
Integrated Silicon Solution, Inc.** ... 15,000* 1,035,000
LSI Logic Corp.** ..................... 30,000 1,402,500
OnTrak Systems, Inc.** ................ 6,000* $ 175,500
Teradyne, Inc.** ...................... 20,000 1,637,500
----------
6,594,375
----------
MACHINE - DIVERSIFIED (3.48%)
AG Associates, Inc.** ................. 10,000* 368,125
ASM Lithography Holding, N.V.** ....... 13,000* 728,000
Opal, Inc.** .......................... 7,500* 181,875
----------
1,278,000
----------
MEDICAL/DENTAL (16.59%)
American Oncology Resources, Inc.** ... 18,000* 596,250
Boston Scientific Corp.** ............. 30,000* 1,095,000
Idexx Laboratories, Inc.** ............ 45,000 1,383,750
i-STAT Corp.** ........................ 10,000* 372,500
InStent, Inc.** ....................... 20,000* 265,000
Isolyser Co, Inc.** ................... 16,750* 598,813
Omnicare, Inc. ....................... 40,000 1,240,000
Research Industries Corp.** ........... 16,000* 380,000
Ventritex, Inc.** ..................... 10,000* 159,375
----------
6,090,688
----------
PHARMACEUTICALS (1.40%)
Dura Pharmaceuticals, Inc.** .......... 20,000* 515,000
----------
PHOTO EQUIPMENT (1.69%)
Avid Technology, Inc.** ............... 14,000 621,250
----------
PRECIOUS METALS/JEWELRY (0.69%)
Fossil, Inc.** ........................ 10,000* 255,000
-------
RETAIL (10.02%)
Dollar General Corp. ................. 22,031 743,555
Dollar Tree Stores, Inc.** ............ 9,100* 276,412
Elkjop Norge AS (Norway) .............. 14,300* 324,863
Geerlings & Wade Inc.** ............... 34,200* 410,400
Global DirectMail Corp.** ............. 14,200* 355,000
Micro Warehouse, Inc.** ............... 20,000 975,000
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
----------------------
FINANCIAL STATEMENTS
----------------------
John Hancock Funds - Discovery Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
RETAIL (CONTINUED)
Next PLC (United Kingdom) ............. 97,000* $ 594,445
-----------
3,679,675
-----------
RESTAURANTS/FOOD SERVICE (2.07%)
Rock Bottom Restaurants, Inc.** ....... 29,500* 759,625
-----------
TELECOMMUNICATIONS (6.61%)
DSP Communications, Inc.** ............ 25,000* 631,250
Palmer Wireless, Inc.** ............... 16,500* 338,250
Spectrian Corp.** ..................... 20,000* 877,500
Telcom Semiconductor Inc.** ........... 2,000* 30,375
U.S. Order, Inc.** .................... 25,000* 550,000
-----------
2,427,375
-----------
TEXTILES (2.15%)
Tommy Hilfiger Corp.** ................ 25,000 790,625
-----------
TOYS/GAMES/HOBBY PRODUCTS (3.20%)
First Team Sports, Inc.** ............. 41,200* 1,176,775
-----------
TOTAL COMMON STOCKS
(Cost $21,667,328) ....... (100.48%) $36,896,478
----------- -----------
INTEREST PAR VALUE
ISSUER DISCRIPTION RATE (OOO's OMITTED) MARKET VALUE
- ------------------ ---- --------------- ------------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.12%)
Investment in a joint repurchase
agreement transaction with
Lehman Brothers, Inc. - Dated
07-31-95, Due 08-01-95 (secured
by U.S. Treasury Bond, 13.125%
due 05-15-01 , U.S. Treasury
Note, 8.625% due 10-15-95,
and U.S.Treasury Bill, 5.47%
due 06-27-96) Note A .......... 5.85% 43 $ 43,000
-----------
TOTAL SHORT-TERM INVESTMENTS (0.12%) 43,000
-------- -----------
TOTAL INVESTMENTS (100.60%) $36,939,478
======== ===========
* Securities, other than short-term investments, newly added to the portfolio
during the year ended July 31, 1995.
** Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of net assets of the fund.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
----------------------
FINANCIAL STATEMENTS
----------------------
John Hancock Funds - Discovery Fund
Portfolio Concentration
- --------------------------------------------------------------------------------
THE DISCOVERY FUND INVESTS PRIMARILY IN SECURITIES ISSUED IN THE UNITED STATES
OF AMERICA. THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE ECONOMIC AND
FINANCIAL CONDITIONS WITHIN THE COUNTRIES IN WHICH IT INVESTS. THE CONCENTRATION
OF INVESTMENTS BY INDUSTRY CATEGORY FOR INDIVIDUAL SECURITIES HELD BY THE FUND
IS SHOWN IN THE SCHEDULE OF INVESTMENTS.
IN ADDITION, CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS
COUNTRIES. THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS AT
JULY 31, 1995 ASSIGNED TO COUNTRY CATEGORIES.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
OF FUND'S
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- ----------
Hong Kong...................................... 0.65%
Norway......................................... 0.89
United Kingdom................................. 1.62
United States.................................. 97.44
------
TOTAL INVESTMENTS 100.60%
======
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
-------------------------------
NOTES TO FINANCIAL STATEMENTS
-------------------------------
John Hancock Funds - Discovery Fund
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust III (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. As of December 16,
1994, the Trust consisted of two series portfolios: John Hancock Discovery Fund
(the "Fund"), and John Hancock Freedom Environmental Fund.
On November 30, 1994, the shareholders approved a plan of reorganization
between the John Hancock Freedom Environmental Fund and John Hancock Special
Opportunities Fund ("Special Opportunities Fund") providing for the transfer of
substantially all of the assets and liabilities of the John Hancock Freedom
Environmental Fund to Special Opportunities Fund in exchange solely for shares
of beneficial interest of Special Opportunities Fund. After this transaction and
as of the close of business on December 16, 1994, John Hancock Freedom
Environmental Fund was terminated.
The Trustees have authorized the issuance of two classes of shares of the Fund,
designated as Class A and Class B shares. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemptions, dividends and liquidation, except that certain expenses,
subject to the approval of the Trustees, may be applied differently to each
class of shares in accordance with current regulations of the Securities and
Exchange Commission 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 to such distribution plan. Significant
accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value. 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 $184,368 of capital loss
carryforward available, to the extent provided by regulations, to offset future
net realized capital gains. If such carryforward is used by the Fund, no capital
gain distributions will be made. The carryforward expires July 31, 2003.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date, or, in the case of some foreign securities,
on the date thereafter when the Fund is made aware of the dividend. Interest
income on investment securities is recorded on the accrual basis. Foreign income
may be subject to foreign withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares
15
<PAGE>
-------------------------------
NOTES TO FINANCIAL STATEMENTS
-------------------------------
John Hancock Funds - Discovery Fund
will be calculated in the same manner, at the same time and will be in the same
amount, except for the effect of expenses that may be applied differently to
each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which are not readily identifiable to a specific
fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees, if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rates
applicable to each class.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Fund have been capitalized and are being charged ratably to the Fund's
operations over a five-year period that began with the commencement of
investment operations of the Fund.
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, resulting
from changes in the exchange rate.
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) 1.00% of the first $250,000,000 of the
Fund's average daily net asset value, (b) 0.80% of the next $250,000,000 and (c)
0.75% of the Fund's average daily net asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. Prior to January 1, 1995, JH
Funds was known as John Hancock Broker Distribution Services, Inc. For the
period ended July 31, 1995, JH Funds received net sales charges of $21,836 with
regard to sales of Class A shares. Out of this amount, $3,274 was retained and
used for printing prospectuses, advertising, sales literature and other
purposes, $13,065 was paid as sales commissions to unrelated broker-dealers and
$5,497 was paid as sales commissions to sales personnel of John Hancock
Distributors, Inc. ("Distributors"), Tucker Anthony, Incorporated ("Tucker
Anthony") and Sutro & Co., Inc.
16
<PAGE>
-------------------------------
NOTES TO FINANCIAL STATEMENTS
-------------------------------
John Hancock Funds - Discovery Fund
("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, 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% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the period ended July 31, 1995
contingent deferred sales charges received by JH Funds amounted to $42,273.
In addition, to compensate JH Funds for the services it provides as
distributors of shares of the Fund, the Fund has adopted Distribution Plans with
respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund will make payments to JH Funds, for
distribution and service expenses at an annual rate not to exceed 0.30% of Class
A average daily net assets and 1.00% of Class B average daily net assets to
reimburse JH Funds for its distribution/service costs. Up to a maximum of 0.25%
of such payments may be service fees as defined by the amended Rules of Fair
Practice of the National Association of Securities Dealers. Under the amended
Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1 payments
could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation, ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Effective January 1, 1995, Class A and Class B
shares pay transfer agent fees based on the number of shareholder accounts and
certain out-of-pocket expenses. Prior to January 1, 1995, the Fund paid Investor
Services a monthly transfer agent fee equivalent, on an annual basis, to 0.25%
and 0.21% of the average daily net asset value of Class A and Class B shares of
the Fund, respectively, plus out of pocket expenses incurred by Investor
Services on behalf of the Fund for proxy mailings.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser, and/or
its affiliates, as well as a Trustee of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees paid for
1995, the unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund will make investments into other John Hancock funds,
as applicable, to cover its liability with regard to the deferred compensation.
Investments to cover the Fund's deferred compensation liability will be recorded
on the Fund's books as an other asset. The deferred compensation liability will
be marked to market on a periodic basis and income earned by the investment will
be recorded on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended July 31, 1995, aggregated $34,136,849 and $38,536,977, respectively. There
were no purchases or sales of long-term obligations of the U.S. government and
its agencies during the period ended July 31, 1995.
The cost of investments owned at July 31, 1995 for federal income tax
purposes was $21,710,328. Gross unrealized appreciation and depreciation of
investments aggregated $15,291,081 and $61,931 respectively, resulting in net
unrealized appreciation of $15,229,150.
17
<PAGE>
-------------------------------
NOTES TO FINANCIAL STATEMENTS
-------------------------------
John Hancock Funds - Discovery Fund
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended July 31, 1995, the Fund has reclassified $1,501 from
accumulated net realized loss on investments to accumulated net investment loss
and reclassified the accumulated net investment loss of $668,446 to capital
paid-in. This represents the cumulative amount necessary to report these
balances on a tax basis, excluding certain temporary differences, as of July 31,
1995. 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 - Discovery Fund
REPORT OF ERNST &YOUNG LLP,
INDEPENDENT AUDITORS
To the Trustees and Shareholders of
John Hancock Discovery Fund
We have audited the accompanying statement of assets and liabilities of John
Hancock Discovery Fund (the "Fund"), including the schedule of investments, as
of July 31, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights of John Hancock Discovery Fund for the period
ended July 31, 1992, were audited by other independent auditors whose report
dated September 18, 1992 expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of John
Hancock Discovery Fund at July 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and its financial highlights for each of the three years in
the period then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
September 8, 1995
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 July 31,
1995.
The Fund designated distributions to shareholders of $857,100 as long-term
capital gain dividends. Shareholders were mailed a 1994 U.S. Treasury Department
Form 1099-DIV in January 1995 representing their proportionate share. The Fund
has not paid any distributions of ordinary income dividends during the fiscal
year ended July 31, 1995.
None of the distributions noted above qualify for the corporate dividends
received deduction.
19
<PAGE>
PART C.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements included in the Registration Statement:
Freedom Investment Trust III
John Hancock Discovery Fund
Statement of Assets and Liabilities as of July 31, 1995.
Statement of Operations of the year ended July 31, 1995.
Statement of Changes in Net Asset for each of the two years in the
period ended July 31, 1995.
Notes to Financial Statements.
Schedule of Investments as of July 31, 1995.
(b) Exhibits:
The exhibits to this Registration Statement are listed in the Exhibit
Index hereto and are incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person is directly or indirectly controlled by or under common
control with Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of August 31, 1995, the number of record holders of shares of
Registrant was as follows:
Title of Class Number of Record Holders
-------------- ------------------------
Class A Class B
------- -------
John Hancock Discovery Fund - 1,049 3,908
<PAGE>
ITEM 27. INDEMNIFICATION
(a) Under Article VI of the Registrant's Master Trust Agreement each of
its Trustees and Officers or person serving in such capacity with another entity
at the request of the Registrant ("Covered Person") shall be indemnified against
all liabilities, including, but not limited to, amounts paid in satisfaction of
judgments, in compromises or as fines or penalties, and expenses, including
reasonable legal and accounting fees, in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or otherwise or with which
such person may be or may have been threatened, while in office or thereafter,
by reason of being or having been such a Trustee or officer, director or
trustee, except with respect to any matter as to which it has been determined
that such Covered Person (i) did not act in good faith in the reasonable belief
that such Covered Person's action was in or not opposed to the best interests of
the Trust or (ii) had acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office (either and both of the conduct described in (i) and
(ii) being referred to hereafter as "Disabling Conduct"). A determination that
the Covered Person is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an administrative proceeding
against a Covered Person for insufficiency of evidence of Disabling Conduct, or
(iii) a reasonable determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by (a) a vote of a
majority of a quorum of Trustees who are neither "interested persons" of the
Trust as defined in section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion.
(b) Under the Distribution Agreement. Under Section 12 of the
Distribution Agreement, John Hancock Funds, Inc. ("John Hancock Funds" ) has
agreed to indemnify the Registrant and its Trustees, officers and controlling
persons against claims arising out of certain acts and statements of John
Hancock Funds.
Section 9(a) of the By-Laws of the John Hancock Mutual Life Insurance
Company (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 ADVISERS
For information as to the business, profession, vocation or employment
of a substantial nature of each of the officers and Directors of the Adviser,
reference is made to Form ADV (801-8124) filed under the Investment Advisers Act
of 1940, which is incorporated herein by reference.
Substantial business and other connections of the directors and
officers of the Adviser other than with Registrant are listed below:
ITEM 29.
Principal Underwriters
(a) The Funds have two distributors. One distributor, Freedom
Distributors Corporation ("Freedom") also acts as co-distributor with Tucker
Anthony Incorporated for two other registered investment companies: Freedom
Group of Tax Exempt Funds and Freedom Mutual Fund. The other distributor is John
Hancock Funds, which also acts as principal underwriter for the following
investment companies: John Hancock Cash Reserve, Inc., John Hancock Bond Fund,
John Hancock Current Interest, John Hancock Series, Inc., John Hancock Tax-Free
Bond Fund, John Hancock California Tax-Free Income Fund, John Hancock Capital
Series, John Hancock Limited Term Government Fund, John Hancock Tax-Exempt
Income Fund, John Hancock Sovereign Investors Fund, Inc., John Hancock Cash
Management Fund, John Hancock Special Equities Fund, John Hancock Sovereign Bond
Fund, John Hancock Tax-Exempt Series, John Hancock Strategic Series, John
Hancock Technology Series, Inc., John Hancock World Fund, John Hancock
Investment Trust, John Hancock Institutional Series Trust, Freedom Investment
Trust, Freedom Investment Trust II and Freedom Investment Trust III.
(b) The 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.
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
------------------ --------------------- ---------------------
<S> <C> <C>
Edward J. Boudreau, Jr. Chairman Chairman
101 Huntington Avenue
Boston, Massachusetts
Robert H. Watts Director and Senior None
John Hancock Place Vice President
P.O. Box 111
Boston, Massachusetts
C. Troy Shaver, Jr. President, Chief None
101 Huntington Avenue Executive Officer and
Boston, Massachusetts Director
Robert G. Freedman Director Vice President, Chief
101 Huntington Avenue Investment Officer
Boston, Massachusetts
Stephen M. Blair Executive Vice President- None
101 Huntington Avenue Sales
Boston, Massachusetts
Thomas H. Drohan Senior Vice President Senior Vice President and
101 Huntington Avenue Secretary
Boston, Massachusetts
James W. McLaughlin Senior Vice President None
101 Huntington Avenue and
Boston, Massachusetts Chief Financial Officer
David A. King 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
William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
John A. Morin Vice President Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President and Secretary Vice President,
101 Huntington Avenue Assistant Secretary
Boston, Massachusetts and Compliance Officer
Christopher M. Meyer Treasurer None
101 Huntington Avenue
Boston, Massachusetts
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director 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
Foster Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Michael T. Carpenter Senior Vice President None
1000 Louisiana Street
Houston, Texas
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
James V. Bowhers Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
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>
(c) None.
<PAGE>
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 to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts on the
28th day of September 1995.
FREEDOM INVESTMENT TRUST III
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)
- ----------------------- Senior Vice President and Chief September 28, 1995
James B. Little Financial Officer (Principal
Financial and Accounting Officer)
*
- ----------------------- Trustee
William A. Barron III
*
- ----------------------- Trustee
Douglas M. Costle
*
- ----------------------- Trustee
Leland O. Erdahl
*
- ----------------------- Trustee
Richard A. Farrell
*
- ----------------------- Trustee
William F. Glavin
*
- ----------------------- Trustee
Ralph Lowell, Jr.
*
- ----------------------- Trustee
John A. Moore
*
- ----------------------- Trustee
Patti McGill Peterson
*
- ----------------------- Trustee
John W. Pratt
*By: ___________________
Thomas H. Drohan, Attorney-in-Fact September 28, 1995
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, incorporated by reference to
Post-Effective Amendment No. 10.
</TABLE>
<PAGE>
EXHIBIT INDEX
The exhibits listed below which are marked by an asterisk (*) have previously
been filed with the Commission are incorporated by reference.
<TABLE>
<CAPTION>
Exhibit No. Description Page Number
<S> <C> <C>
1 Master Trust Agreement (Agreement and Declaration.
of Trust), as amended.
1(a) Amendment No. 1 to Master Trust Agreement as Amended and Restated.
1(b) Amendment No. 2 to Master Trust Agreement as Amended and Restated.
1(c) Amendment No. 3 to Master Trust Agreement as Amended and Restated.
2 By-Laws as amended September 16, 1992.
2(a) Amendment to By-Laws dated December 19, 1994.
3 None
4 Specimen share certificate for the Discovery Fund Classes A & B.
5 Advisory Agreement dated August 29, 1989 as restated
July 1 1992.
6 Distribution Agreement by and among Freedom Distributions Corporation and
John Hancock Broker Distribution Corporation.
6(a) Form of Soliciting Dealer Agreement between John Hancock
Broker Distribution Services, Inc. and Selected Dealers.
6(b) Form of Financial Institution Sales and Service Agreement.
7 None
8 Master Custodian Agreement with Investors Bank & Trust Company
dated December 15, 1992.
<PAGE>
Exhibit No. Description Page Number
9 Transfer Agency and Service Agreement with John Hancock Fund
Services, Inc.
10 Legal opinion and consent of Goodwin, Procter & Hoar with respect to
the Discovery Fund (Class B Shares); Legal opinion and consent of
Goodwin, Procter & Hoar with respect to the Class B Shares of the
Environmental Fund and the Class A Shares of the Discovery Fund.
10a 24e2 Opinion.
11 Consent of Ernst & Young.
12 Financial Statement of the Discovery Fund for the fiscal year ended
July 31, 1994 included in Part B.
13 Investment letter for the Discovery Fund (Class B Shares); Investment
letter for the Class B Shares of the Environmental Fund and the Class A
Shares of the Discovery Fund.
14 None
15 Plan of Distribution pursuant to Rule 12b-1 as amended and restated.
16 Schedule for Computation of Total Return.
17 Powers of Attorney dated June 25, 1992, December 14, 1992 and
August 17, 1993.
27 Class A
27 Class B
</TABLE>
<PAGE>
EXHIBIT 99.1
FREEDOM INVESTMENT TRUST III
MASTER TRUST AGREEMENT
AS AMENDED AND RESTATED
May 14, 1991
1991 Goodwin, Procter & Hoar
All Rights Reserved
<PAGE>
FREEDOM INVESTMENT TRUST III
MASTER TRUST AGREEMENT
Page
ARTICLE I. NAME AND DEFINITIONS.................................. 1
Section 1.1 Name and Principal Office............................. 1
Section 1.2 Definitions........................................... 1
(a) "By-laws".................................. 1
(b) "class".................................... 1
(c) "Commission"............................... 1
(d) "Declaration of Trust"..................... 2
(e) "1940 Act"................................. 2
(f) "Shareholder".............................. 2
(g) "Shares"................................... 2
(h) "Sub-Trust" or "Series".................... 2
(i) "Trust".................................... 2
(j) "Trustees"................................. 2
ARTICLE II. PURPOSE OF TRUST...................................... 2
ARTICLE III. THE TRUSTEES.......................................... 2
Section 3.1 Number, Designation, Election, Term, etc.............. 2
(a) Initial Trustees........................... 2
(b) Number..................................... 3
(c) Election and Term.......................... 3
(d) Resignation and Retirement................. 3
(e) Removal.................................... 3
(f) Vacancies.................................. 3
(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...................... 5
(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.......................... 6
(j) Borrowing and Security..................... 6
(k) Guarantees, etc............................ 7
(l) Insurance.................................. 7
(m) Pensions, etc.............................. 7
(n) Distribution Plans......................... 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............. 12
(b) Liabilities Belonging to Sub-Trusts........ 13
(c) Dividends.................................. 13
(d) Liquidation................................ 14
(e) Voting..................................... 14
(f) Redemption by Shareholder.................. 14
(g) Redemption by Trust........................ 15
(h) Net Asset Value............................ 15
(i) Transfer................................... 16
(j) Equality................................... 16
(k) Fractions.................................. 16
(l) Conversion Rights.......................... 16
Section 4.3 Ownership of Shares................................... 16
Section 4.4 Investments in the Trust.............................. 17
Section 4.5 No Pre-emptive Rights................................. 17
Section 4.6 Status of Shares and Limitation of
Personal Liability............................. 17
Section 4.7 No Appraisal Rights................................... 17
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS.............. 18
Section 5.1 Voting Powers......................................... 18
Section 5.2 Meetings ........................................... 18
Section 5.3 Record Dates.......................................... 19
Section 5.4 Quorum and Required Vote.............................. 19
Section 5.5 Action by Written Consent............................. 19
Section 5.6 Inspection of Records................................. 20
Section 5.7 Additional Provisions................................. 20
Section 5.8 Shareholder Communications............................ 20
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION.............. 21
Section 6.1 Trustees, Shareholders, etc. Not
Personally Liable; Notice...................... 21
Section 6.2 Trustee's Good Faith Action; Expert
Advice; No Bond or Surety...................... 21
Section 6.3 Indemnification of Shareholders....................... 22
Section 6.4 Indemnification of Trustees, Officers, etc............ 22
Section 6.5 Compromise Payment.................................... 23
Section 6.6 Indemnification Not Exclusive, etc.................... 24
Section 6.7 Liability of Third Persons Dealing with
Trustees....................................... 24
ARTICLE VII. MISCELLANEOUS......................................... 24
Section 7.1 Duration and Termination of Trust..................... 24
Section 7.2 Reorganization........................................ 25
Section 7.3 Amendments ........................................... 26
Section 7.4 Filing of Copies; References; Headings................ 26
Section 7.5 Applicable Law........................................ 27
<PAGE>
FREEDOM INVESTMENT TRUST III
MASTER TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts on the
16th day of June, 1989 (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, as amended and restated this 14th day of May,
1991 in Boston, Massachusetts.
WHEREAS, Section 7.3 of the Original Master Trust Agreement of Freedom
Investment Trust III (the "Trust") provides that the Trustees may amend the
Original Master Trust Agreement at any time, so long as such amendment does not
adversely affect the rights of any Shareholder and so long as such amendment is
not in contravention of applicable law including the Investment Company Act of
1940;
WHEREAS, pursuant to Section 7.3 of the Original Master Trust Agreement
the Trustees have determined that the Original Master Trust Agreement should be
amended so as to empower the Trustees to divide the Shares of any current or
future Sub-Trust into two or more classes; and
WHEREAS, a majority of the Trustees of the Trust have duly voted to
authorize the amendments to the Original Master Trust Agreement set forth
herein.
NOW, THEREFORE, the Trustees of this Trust direct that this Amended and
Restated Master Trust Agreement be filed with the Secretary of State of The
Commonwealth of Massachusetts and shall take effect as of the date of filing.
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,
all in accordance with the provisions 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 III" 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) "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;
(c) "Commission" shall have the meaning given it in the 1940 Act;
(d) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time;
(e) "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(f) "Shareholder" means a record owner of Shares;
(g) "Shares" refers to the transferable units of interest into which
the beneficial interest in the Trust and each Sub-Trust of the Trust (as the
context may require) shall be divided from time to time;
(h) "Sub-Trust" or "Series" refers to a series of Shares 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 Thomas J. Brown, Douglas M. Costle, Hugh A. Dunlap, Jr., Patrick Grant, Ralph
Lowell, Jr. and John A. Moore.
(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. The Trustees in all instances
shall act as principals, and are and shall be free from the control of the
Shareholders. The Trustees shall have full power and authority to do any and all
acts and to make and execute any and all contracts and instruments that they may
consider necessary or appropriate in connection with the management of the
Trust. The Trustees shall not be bound or limited by present or future laws or
customs with regard to investment by trustees or fiduciaries, but shall have
full authority and absolute power and control over the assets of the Trust and
the business of the Trust to the same extent as if the Trustees were the sole
owners of the assets of the Trust and the business in their own right, including
such authority, power and control to do all acts and things as they, in their
uncontrolled discretion, shall deem proper to accomplish the purposes of this
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 sue or
be sued in the name of the Trust; 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;
they may from time to time in accordance with the provisions of Article IV
hereof establish classes of Shares; 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, and 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, depositary, 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,
depositary 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, depositary 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;
(l) 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.
(n) Distribution Plans. To adopt on behalf of the Trust or any
Sub-Trust a plan of distribution and related agreements thereto pursuant to the
terms of Rule 12b-1 of the 1940 Act and to make payments from the assets of the
Trust or the relevant Sub-Trust or Sub-Trusts pursuant to said Rule 12b-1 Plan.
Except as otherwise provided by the l940 Act or other applicable law,
this Declaration of Trust or the By-Laws, any action to be taken by the Trustees
on behalf of the Trust or any Sub-Trust 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, 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 the 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 one or more of the classes of Shares that may be
established and designated pursuant to Article IV, as the Trustees deem fair or,
if applicable, with respect to any class of Shares, in accordance with an
applicable exemptive or other order of the Commission or by any applicable Rule
or Regulation of the Commission under the 1940 Act, all expenses, fees, charges,
taxes and liabilities incurred or arising in connection with the Trust, any
Sub-Trust or class of Shares, 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 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, but the Trustees shall have
the authority from time to time to divide the Shares into two or more Series of
Shares (each of which Series of Shares shall be a separate and distinct
Sub-Trust of the Trust, including without limitation those Sub-Trusts
specifically established and designated in Section 4.2), as they deem necessary
or desirable. For all purposes under this Declaration of Trust or otherwise,
including, without implied limitation, (i) with respect to the rights of
creditors and (ii) for purposes of interpreting the relevant 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. 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, if authorized by an applicable exemptive or other order of
the Commission or by any applicable Rule or Regulation of the Commission under
the 1940 Act from time to time in effect, the Trustees may divide the Shares of
any Sub-Trust into two or more classes having such different dividend,
liquidation, voting and other rights arising as a result of different plans or
arrangements for the distribution of Shares of the various classes as the
Trustees may determine and that are not inconsistent with such applicable order,
Rule or Regulation, and may establish and 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) shall not limit the authority of the Trustees to establish and designate
separate classes of said Sub-Trust without approval of the holders of the
initial class thereof if the establishment and designation of separate classes
would not adversely affect the rights of the holders of the initial class
(within the meaning of section 77 of the Massachusetts Business Corporation Law
as in effect on the date hereof).
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 or class thereof 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 or class 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 (including Shares of any class) of any Sub-Trust 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 (including Shares of any class) of any Sub-Trust 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
(including Shares of any class) of such Sub-Trust 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
two Sub-Trusts: the Freedom Environmental Fund and the Freedom Discovery 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, 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 and shall irrevocably belong to that Sub-Trust 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. 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. Each such
allocation by the Trustees shall be conclusive and binding upon the Shareholders
of all Sub-Trusts 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 is consistent with the provisions of
the writing establishing and designating the classes of Shares of that
Sub-Trust. 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 and of all
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 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 thereof, from
such of the income and capital gains, accrued or realized, from the assets
belonging to that Sub-Trust, 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.
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.
(d) Liquidation. In the event of the liquidation or dissolution of the
Trust, the Shareholders of each Sub-Trust 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 over the liabilities
belonging to that Sub-Trust or class thereof. The assets so distributable to the
Shareholders of any particular Sub-Trust or class thereof shall be distributed
among such Shareholders 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 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 the 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 of each Sub-Trust shall be entitled to one vote for each
whole 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 Shares of any
Sub-Trust, and except that on any matter which does not affect the interest of a
particular Sub-Trust or class of Shares thereof only the holders of Shares of
the one or more affected Sub-Trusts or classes thereof shall be entitled to
vote.
(f) Redemption by Shareholder. Each holder of Shares of a particular
Sub-Trust 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 at a redemption price equal to the
net asset value per Share of that Sub-Trust 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 of 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 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 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 and by majority vote
that failure to so redeem may have materially adverse consequences to the Trust
or any Sub-Trust or to the holders of the Shares of the Trust or any Sub-Trust
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 or
class thereof shall be the quotient obtained by dividing the value of the net
assets of that Sub-Trust or class thereof (being the value of the assets
belonging to that Sub-Trust or class thereof less the liabilities belonging to
that Sub-Trust or class) by the total number of Shares of that Sub-Trust or
class thereof 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 shall be
transferable, but transfers of Shares of a particular Sub-Trust will be recorded
on the Share transfer records of the Trust applicable to that Sub-Trust only at
such times as Shareholders shall have the right to require the Trust to redeem
Shares of that Sub-Trust 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 shall represent an equal proportionate
interest in the assets belonging to that Sub-Trust (subject to the liabilities
belonging to that Sub-Trust or class thereof), and each Share of any particular
Sub-Trust 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 into a greater or lesser number of Shares of that Sub-Trust without
thereby changing the proportionate beneficial interest in the assets belonging
to that Sub-Trust or in any way affecting the rights of Shares of any other
Sub-Trust.
(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 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 classes 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 classes 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 and class thereof 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.
Section 4.7 No Appraisal Rights. Shareholders shall have no right to
demand payment for their shares or to any other rights of dissenting
shareholders in the event the Trust participates in any transaction which would
give rise to appraisal or dissenters' rights by a shareholder of a corporation
organized under Chapter 156B of the General Laws of the Commonwealth of
Massachusetts, or otherwise.
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 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 or class thereof or the Shareholders (provided,
however, that a Shareholder of a particular Sub-Trust or class shall not be
entitled to a derivative or class action on behalf of any other Sub-Trust or
class (or Shareholder of any other Sub-Trust or class) 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. Except as otherwise provided by
the 1940 Act or other applicable law, thirty percent 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
a "Covered Person"]) against all liabilities, including but not 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 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 (such conduct 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)(l9) 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 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 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.
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) 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 a substantial portion of the 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 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.
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.
[END OF TEXT]
<PAGE>
IN WITNESS WHEREOF, the undersigned 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/ Thomas J. Brown
---------------------------
Thomas J. Brown
/s/ Douglas M. Costle
---------------------------
Douglas M. Costle
/s/ Hugh A. Dunlap, Jr.
---------------------------
Hugh A. Dunlap, Jr.
/s/ Patrick Grant
---------------------------
Patrick Grant
/s/ Ralph Lowell, Jr.
---------------------------
Ralph Lowell, Jr.
/s/ John A. Moore
---------------------------
John A. Moore
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk County, ss.
Then personally appeared the within-named Thomas J. Brown of 13 Beaver
Dam Drive, Westford, MA 01886, Douglas M. Costle, RR2, Box 480, Woodstock, VT
05091, Hugh A. Dunlap, Jr. of 29 Lowell Road, Brookline, MA 02146, Patrick Grant
of 5 Haven Street, Dedham, MA 02026, Ralph Lowell, Jr. of 106 South Summer
Street, Edgartown, MA 02539 and John A. Moore of 50 Monticello, Irvine, CA 92720
who acknowledged the execution of the foregoing instrument to be their free act
and deed, before me, this 14 day of May, 1991.
/s/ John Danello
---------------------------
Notary Public
[Notarial Seal]
My commission expires: 12-5-91
67205.c1
EXHIBIT 99.1A
FREEDOM INVESTMENT TRUST III
AMENDMENT NO.1 TO MASTER TRUST AGREEMENT AS AMENDED AND RESTATED
Amendment No. 1 to the Master Trust Agreement dated June 16, 1989, as
amended and restated as of May 14, 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 dated June 16, 1989,
as amended and restated as of May 14, 1991 (the "Agreement") of Freedom
Investment Trust III (the "Trust") provides that the Agreement may be 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 August 10, 1992, to change
the name of the established and designated Sub-Trust Freedom Discovery Fund to
John Hancock Discovery Fund.
Furthermore, that the initial paragraph of Section 4.2 of the Agreement
as heretofore in effect is amended, effective August 10, 1992, 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 two Sub-Trusts: Freedom Environmental Fund and
John Hancock Discovery 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 4.2 of the Agreement and all other appropriate
references in the Agreement are amended, effective October 1, 1992, to change
the name of the established and designated Sub-Trust Freedom Environmental Fund
to John Hancock Freedom Environmental 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 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 two Sub-Trusts: John Hancock Freedom
Environmental Fund and John Hancock Discovery Fund. The Share 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:"
3. 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
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 III" 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 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 been duly adopted in accordance
with the provision of the Master Trust Agreement of the Trust.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hand and
seals for themselves and their assigns, as of this 25th day of June, 1992.
/s/ Hugh A. Dunlap, Jr. /s/ Douglas M. Costle
- ------------------------------ ------------------------------
Hugh A. Dunlap, Jr. Douglas M. Costle
/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 )
) SS.
COUNTY OF SUFFOLK )
Then personally appeared the above-named Hugh A. Dunlap, Jr. Edward J.
Boudreau, Jr., Douglas Costle, 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 the 25th
day of June, 1992.
Regina M. Pisa
------------------------------
Notary Public
My commission expires: 1-24-97
corpsec/edgar/fit3/amend1
EXHIBIT 99.1B
FREEDOM INVESTMENT TRUST III
AMENDMENT NO. 2 TO MASTER TRUST AGREEMENT
AS AMENDED AND RESTATED
Amendment No. 2 to the Master Trust Agreement dated June 16, 1989, as
amended and restated as of May 14, 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 dated June 16, 1989,
as amended and restated as of May 14, 1991 (the "Agreement") of Freedom
Investment Trust III (the "Trust") provides that the Agreement may be 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 paragraphs 1 and 2 of Amendment No. 1 to the Agreement and
Section 4.2 of the Agreement and all other appropriate references in the
Agreement are further amended to change the name, effective October 1, 1992 (not
August 10, 1992), of the established and designated Sub-Trusts as follows:
Freedom Environmental Fund to John Hancock Freedom Environmental Fund and
Freedom Discovery Fund to John Hancock Discovery Fund. Furthermore, that the
initial paragraph of Section 4.2 of the Agreement as heretofore in effect is
amended and restated, to read as follows effective October 1, 1992 (not August
10, 1992):
"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 two Sub-Trusts: John Hancock Freedom
Environmental Fund and John Hancock Discovery 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 25th day of June, 1992.
/s/ Hugh A. Dunlap, Jr. /s/ Douglas M. Costle
- ------------------------------ ------------------------------
Hugh A. Dunlap, Jr. Douglas M. Costle
/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 )
) SS.
COUNTY OF SUFFOLK )
Then personally appeared the above-named Hugh A. Dunlap, Jr. Edward J.
Boudreau, Jr., Douglas Costle, 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 the 25th
day of June, 1992.
/s/ (illegible)
------------------------------
Notary Public
My commission expires: 1-24-97
67203.cl
EXHIBIT 99.1C
FREEDOM INVESTMENT TRUST III
101 Huntington Avenue
Boston, Massachusetts 02199
AMENDMENT NO. 3 TO MASTER TRUST AGREEMENT
AS AMENDED AND RESTATED
Amendment No. 3, dated March 6, 1995 ("Amendment No. 3"), to the Master
Trust Agreement dated June 16, 1989, as amended and restated dated May 14, 1991,
as further amended from time to time (the "Agreement"), of Freedom Investment
Trust III, a Massachusetts business trust (the "Trust").
W I T N E S S E T H:
WHEREAS, Section 7.3 of the Agreement provides that the Agreement may
be amended by an instrument, signed by a majority of the Trustees of the Trust,
to adversely affect the rights of shareholders provided that the amendment is
approved by a majority of the outstanding shares of beneficial interest of the
Trust entitled to vote thereon; and
WHEREAS, the termination of John Hancock Freedom Environmental Fund as
a series of the Trust was approved by at least a majority of the outstanding
shares of beneficial interest of John Hancock Freedom Environmental Fund at a
meeting duly called and held on November 30, 1994 at which a quorum was present
and acting throughout.
NOW, THEREFORE, the Trustees hereby state:
1. That all other references to John Hancock Freedom Environmental Fund
in the Agreement and Amendment Nos. 1 and 2, each dated June 25, 1992, thereto
are hereby deleted and John Hancock Freedom Environmental Fund is hereby
terminated as a series of the Trust. The initial paragraph of Section 4.2 of the
Agreement as heretofore in effect is hereby amended and restated 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 one Sub-Trust: "John Hancock Discovery 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:"
2. This Amendment No. 3 shall become effective upon filing with the
Secretary of State of The Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being at least a majority of the
Trustees of the Trust, have executed this Amendment No. 3 as of the 6th day of
March , 1995.
/s/ Edward J. Boudreau, Jr. /s/William A. Barron, III
- --------------------------- -------------------------
Edward J. Boudreau, Jr., as William A. Barron, III, as
Trustee and not individually Trustee and not individually
101 Huntington Avenue RR 1, 325 Sea Meadows Lane
Boston, MA 02199 Yarmouth, ME 04096
/s/Douglas M. Costle /s/ Hugh A. Dunlap, Jr.
- --------------------------- -------------------------
Douglas M. Costle, as Hugh A. Dunlap, as Trustee and
Trustee and not individually not individually
RR 2, Box 480 101 Huntington Avenue
Woodstock, VT 05091 Boston, MA 02199
/s/ Leland O. Erdahl /s/Richard A. Farrell
- --------------------------- -------------------------
Leland O. Erdahl, as Trustee Richard A Farrell, as Trustee
and not individually and not individually
161 Camino Barranca 160 Federal Street
Placitas, NM 87043 Boston, MA 02110
/s/William F. Glavin /s/Patrick Grant
- --------------------------- -------------------------
William F. Glavin , as Trustee Patrick Grant, as Trustee and
and not individually not individually
Babson College 5 Haven Street
Babson Park, MA 02157 Dedham, MA 02026
/s/ Ralph Lowell, Jr. /s/John A Moore
- --------------------------- -------------------------
Ralph Lowell, Jr. as Trustee John A. Moore, as Trustee and
and not individually not individually
11 Swallow Cave Road 1101 Vermont Avenue
Nehant, MA 01908 Washington, DC 20005
/s/ Patti McGill Peterson /s/John W. Pratt
- --------------------------- -------------------------
Patti McGill Peterson, as John W. Pratt, as Trustee and
Trustee and not individually not individually
St. Lawrence University Soldiers Field Road
Canton , NY 13617 Boston, MA 02163
corpsec/edgar/fit3/amend2
EXHIBIT 99.2
As Amended September 16, 1992
BY-LAWS
OF
FREEDOM INVESTMENT TRUST III
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 Declaration of Trust, as from time to time in effect (the "Declaration of
Trust"), of Freedom Investment Trust III, 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 Board of 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 Board of 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 Board of 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.
y:\corpsec\edgar\fit3\bylaws.doc
<PAGE>
<PAGE>
EXHIBIT 99.2A
Freedom Investment Trust I
Freedom Investment Trust II
Freedom Investment Trust III
AMENDMENT TO BY-LAWS
RESOLVED, that the By-Laws of the Trust be and hereby are amended to
create the office of Vice Chairman of the Trust by adding the following as
Article III, Sub-Section 3.5A of the By-Laws:
Section 3.5A. Powers and Duties of the Vice Chairman. The Trustees may, but need
not, appoint one or more Vice Chairmen of the Trust. A Vice Chairman shall be an
executive officer of the Trust and shall have the powers and duties of a Vice
President of the Trust, as provided in Section 3.6 of this Article III. The Vice
Chairman shall perform such duties as may be assigned to him or her from time to
time by the Trustees of the Chairman.
bylaws\94amends.doc
<PAGE>
EXHIBIT 99.4
FREEDOM INVESTMENT TRUST III
(A Massachusetts Business Trust)
JOHN HANCOCK DISCOVERY FUND
SHARES OF BENEFICIAL INTEREST
CLASS A
fully paid and non-assessable shares (without par value) of John Hancock
Discovery Fund (the "Fund"), a Series of Shares established and designated under
the Master Trust Agreement of FREEDOM INVESTMENT TRUST III, a Massachusetts
business trust (the "Trust") dated June 16, 1989 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 III 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 9/10/93...fpb
<PAGE>
FREEDOM INVESTMENT TRUST III
(A Massachusetts Business Trust)
JOHN HANCOCK DISCOVERY FUND
SHARES OF BENEFICIAL INTEREST
CLASS B
fully paid and non-assessable shares (without par value) of John Hancock
Discovery Fund (the "Fund"), a Series of Shares established and designated under
the Master Trust Agreement of FREEDOM INVESTMENT TRUST III, a Massachusetts
business trust (the "Trust") dated June 16, 1989 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 III 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 9/10/93...fpb
EXHIBIT 99.5
ADVISORY AGREEMENT
ADVISORY AGREEMENT made as of the 29th day of August, 1989, as restated
July 1, 1992, by and between JOHN HANCOCK ADVISERS, INC. (successor to FREEDOM
CAPITAL MANAGEMENT CORPORATION), a corporation organized under the laws of
Delaware having its principal place of business in Boston, Massachusetts (the
"Adviser"), and FREEDOM INVESTMENT TRUST III, 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 Adviser 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 intends initially to offer shares in one series, the
Freedom Environmental Fund, such series (the "Initial Fund"), together with all
other series subsequently established by the Trust with respect to which the
Adviser renders management and investment advisory services pursuant to the
terms of this Agreement, 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 ADVISER.
(a) Initial Fund. The Trust hereby appoints the Adviser to act as
manager and investment adviser to the Initial Fund for the period and on the
terms herein set forth. The Adviser 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 Initial Fund with respect to which it
desires to retain the Adviser to render management and investment advisory
services hereunder, it shall so notify the Adviser in writing, indicating the
advisory fee to be payable with respect to the additional series of shares. If
the Adviser 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 ADVISER.
The Adviser, at its own expense, shall furnish the following services
and facilities to the Trust:
(a) Investment Program. The Adviser 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 of the Trust in the investments of each Fund. The Adviser shall also
manage, supervise and conduct the other affairs and businesses 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 Adviser 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 Adviser shall furnish the Trust
office space in the offices of the Adviser, 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 Adviser 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 bookkeeping and accounting
services of any dividend disbursing agent, transfer agent, registrar or
custodian. The Adviser shall compensate all personnel, officers and Trustees of
the Trust if such persons are also employees of the Adviser or its affiliates.
(e) Fidelity Bond. The Adviser 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 Adviser 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 EXPENSES.
Except for the services and facilities to be provided by the Adviser 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 Adviser for
any such expenses incurred by the Adviser (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 Adviser) 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;
(q) expenses incurred in connection with any distribution plan adopted
by the Trust in compliance with Rule 12b-1 of the 1940 Act; and
(r) 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 Adviser as set
forth in paragraph 2 hereof, the Trust agrees that the Initial Fund shall pay to
the Adviser a monthly fee as soon as practical after the last day of each
calendar month, which fee shall be paid at an annual rate equal to .75% of the
first $500 million of the average daily net assets of the Initial Fund, and .65%
of the average daily net assets in excess of that amount and agrees that John
Hancock Discovery Fund shall pay to the Adviser a monthly fee as soon as
practical after the last day of each calendar month, which fee shall be paid at
an annual rate equal to 1.00% of the first $250 million of the average daily net
assets of the John Hancock Discovery Fund, .80% of the next $250 million of the
average daily net assets of the John Hancock Discovery Fund, .80% of the next
$250 million of the average daily net assets and .75% of the average daily net
assets over $500 million. Such fee shall be accrued daily and paid as soon as
practical after the last day of each calendar month.
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 it is in effect, and the fee shall be computed upon
the average daily net assets of such Fund for the days during which it is in
effect.
5. EXPENSE LIMITATION.
The Adviser 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 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 Adviser 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, the Adviser 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 Adviser.
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 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 Adviser shall pay to, or receive from,
the applicable Fund or Funds a pro rata portion of the amount that the Adviser
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 Adviser, 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 Adviser 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
Adviser 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 Adviser 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 Adviser or an affiliate of the
Adviser exercises investment discretion. The Adviser may take into consideration
and 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 Adviser determines in good faith
that such commission was reasonable in relation to the value of the brokerage
and research services provided. In addition, subject to obtaining the best price
and execution, the Adviser may also allocate brokerage transactions of the Funds
in a manner which takes into account the sale of shares of the Funds.
7. RELATIONS WITH TRUST.
It is understood that the Trustees, officers and shareholders of the
Trust or a Fund are or may be or become interest in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Trust or a Fund, and
that the Adviser may be or become interested in the Trust or a Fund as a
shareholder or otherwise.
8. LIABILITY OF ADVISER
The Adviser shall not be liable to the Trust or any Fund for any error
of judgment or mistake of law or for any loss suffered by the Trust or any Fund
in connection with the matters to which this Agreement relates; provided,
however, that no provision of this Agreement shall be deemed to protect the
Adviser against any liability to the Trust or any Fund 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, stature,
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 on the date hereof and, with respect to any additional Fund, on the
date of receipt by the Trust of notice from the Adviser in accordance with
paragraph 1(b) hereof that the Adviser is willing to serve as Adviser with
respect to such Fund. Unless terminated as herein provided, this Agreement shall
remain full force and effect for two years from the date hereof 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 of the Trust 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 (as defined in
the 1940 Act) of that Fund 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 Adviser 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 Adviser, 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 Adviser to the Trust hereunder are not to be deemed
exclusive, and the Adviser 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 Adviser may subcontract for the
performance of any of the services contemplated to be rendered by the Adviser to
any Fund hereunder; provided, however, that each subcontract meets all of the
requirements of the 1940 Act.
12. LIMITATION OF LIABILITY.
The term "Freedom Investment Trust III" 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 thereunder 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.
13. MISCELLANEOUS.
(a) Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for the receipt of such
notices.
(b) Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder
shall not be thereby affected.
(c) Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
FREEDOM INVESTMENT TRUST III
Attest:
/s/ Thomas H. Drohan By: /s/Hugh A. Dunlap, Jr.
- ---------------------------- ----------------------------
Secretary President
JOHN HANCOCK ADVISERS, INC.
Attest:
/s/ Thomas H. Drohan By: /s/Robert G. Freedman
- ---------------------------- ----------------------------
Secretary President
y:\corpsec\edgar\fit3\advagg.doc
EXHIBIT 99.6
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 III, 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 III"
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
III, 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 III
By: /s/ Hugh Dunlap, Jr.
-----------------------------
President
ATTEST: /s/ John Danello
-------------------------
Secretary
67198.c1
<PAGE>
EXHIBIT 99.6A
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.
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.
-2-
<PAGE>
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:
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<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.
<PAGE>
EXHIBIT 99.6B
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.
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
-2-
<PAGE>
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.
-4-
<PAGE>
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
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").
<PAGE>
EXHIBIT 99.8
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
EXHIBIT 99.9
FREEDOM INVESTMENT TRUST III
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 III, 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 two 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 June 16,
1989 as amended and restated through May 14, 1991, a copy of which, together
with all amendments thereto (the "Declaration"), 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 III
/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
y:\Agr_Cont\Agreement\Transagt\Freedom3.doc
EXHIBIT 99.10
GOODWIN, PROCTER & HOAR
(A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS)
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
July 22, 1991
Freedom Investment Trust III
Three Center Plaza
Boston, MA 02108
Gentlemen:
As counsel to Freedom Investment Trust III, 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
shares of Freedom Discovery 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
May 14, 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.: 33-29438) 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 Statement of Additional Information
and to a copy of this opinion being filed as an exhibit to the foregoing
Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar
-----------------------------
GOODWIN, PROCTER & HOAR
corpsec/edgar/fit3/opin3
<PAGE>
GOODWIN, PROCTER & HOAR
(A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS)
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
December 20, 1991
Freedom Investment Trust III
One Beacon Street
Boston, MA 02108
Gentlemen:
As counsel to Freedom Investment Trust III, 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 Discovery Fund and Class B Shares of Freedom
Environmental Fund, both of which are series of the Trust which have 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
May 14, 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.: 33-29438) 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,
/s/Goodwin, Procter & Hoar
-----------------------------
GOODWIN, PROCTER & HOAR
corpsec/edgar/fit3/opin2
EXHIBIT 99.10a
September 27, 1995
Freedom Investment Trust III
101 Huntington Avenue
Boston, MA 02199
RE: Freedom Investment Trust III (the "Fund")
(File Nos. 33-29438; 811-5732) (00000852204)
Ladies and Gentlemen:
In connection with the filing of Post-Effective Amendment No.15 pursuant to Rule
24e-2 under the Investment Company Act of 1940, as amended, registering by
Post-Effective Amendment No. 14 under the Securities Act of 1933, as amended,
21,402 shares of the Fund sold in reliance upon Rule 24e-2 during the fiscal
year ending July 31, 1995, it is the opinion of the undersigned that such shares
will be legally issued, fully paid and nonassessable.
In connection with this opinion it should be noted that the Fund is an entity of
the type generally known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of a Massachusetts business trust may be held
personally liable for the obligations of the Fund. However, the Fund's
Declaration of Trust disclaims shareholder liability for obligations of the Fund
and indemnifies any shareholder of the Fund, with this indemnification to be
paid solely out of the assets of the Fund. Therefore, the shareholder's risk is
limited to circumstances in which the assets of the Fund are insufficient to
meet the obligations asserted against Fund assets.
Sincerely,
Avery P. Maher
Assistant Secretary
Member of Massachusetts Bar
EXHIBIT 99.11
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "The Fund's
Financial Highlights" in the Prospectus and "Independent Auditors" in the
Statement of Additional Information and to the use, in this Post-Effective
Amendment Number 14 to Registration Statement (Form N-1A No. 33-29438), of our
report on the financial statements and financial highlights of the John Hancock
Discovery Fund portfolio of Freedom Investment Trust III dated September 8,
1995.
/s/ ERNST & YOUNG LLP
-----------------------
ERNST & YOUNG LLP
Boston, Massachusetts
September 26, 1995
EXHIBIT 99.13A
FREEDOM CAPITAL MANAGEMENT CORPORATION
One Beacon Street
Boston, Ma 02108
July 8, 1991
Freedom Investment Trust III
One Beacon Street
Boston, Massachusetts 02108
Gentlemen:
In connection with your sale to us today of 125 shares of beneficial
interest in the Freedom Discovery Fund series of Freedom Investment Trust III
(the "Shares") at a purchase price of $8.00 per Share, we understand that: (i)
the Shares have not been registered under the Securities Act of 1933, as amended
(the "1933 Act"); (ii) your sale of the shares to us is made in reliance on such
sale being exempt under Section 4(2) of the 1933 Act as not involving any public
offering; and (iii) in part, your reliance on such exemption is predicated on
our representation, which we hereby confirm, that we are acquiring the Shares
for investment for our own account as the sole beneficial owner thereof, and not
with a view to or in connection with any resale or distribution of the Shares or
of any interest therein. We hereby agree that we will not sell, assign or
transfer the Shares or any interest therein, except upon repurchase or
redemption by Freedom Investment Trust III or as contemplated by the immediately
preceding sentence, unless and until the Shares have been registered under the
1933 Act or you have received an opinion of your counsel indicating to your
satisfaction that said sale, assignment or transfer will not violate the
provisions of the 1933 Act or any rules or regulations promulgated thereunder.
This letter is intended to take effect as an instrument under seal,
shall be construed under the laws of the Commonwealth of Massachusetts, and is
delivered at Boston, Massachusetts, as of the date above written.
FREEDOM CAPITAL MANAGEMENT
CORPORATION
By: /s/ Hugh A. Dunlap, Jr.
--------------------------
Hugh A. Dunlap, Jr.
President
corsec/edgar/fit3/exhit13a
EXHIBIT 99.13B
FREEDOM CAPITAL MANAGEMENT CORPORATION
One Beacon Street
Boston, Ma 02108
December 16, 1991
Freedom Investment Trust III
One Beacon Street
Boston, Massachusetts 02108
Gentlemen:
In connection with your sale to us today of five (5) Class A shares of
beneficial interest in the Freedom Discovery Fund series of Freedom Investment
Trust III (the "Shares") at a purchase price of $10.00 per share and five (5)
Class B shares of beneficial interest in the Freedom Environmental Fund series
of Freedom Investment Trust III at a purchase price of $10.00 per share
(collectively, the "Shares"), we understand that: (i) the Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"); (ii)
your sale of the Shares to us is made in reliance on each such sale being exempt
under Section 4(2) of the 1933 Act as not involving any public offering; and
(iii) in part, your reliance on each such exemption is predicated on our
representation, which we hereby confirm, that we are securing the Shares for
investment for our own account as the sole beneficial owner thereof, and not
with a view to or in connection with any resale or distribution of the Shares or
of any interest therein. We hereby agree that we will not sell, assign or
transfer the Shares or any interest therein, except upon repurchase or
redemption by Freedom Investment Trust III or as contemplated by the immediately
preceding sentence, unless and until the Shares have been registered under the
1933 Act or you have received an opinion of your counsel indicating to your
satisfaction that said sale, assignment or transfer will not violate the
provisions of the 1933 Act or any rules or regulations promulgated thereunder.
This letter is intended to take effect as an instrument under seal,
shall be construed under the laws of the Commonwealth of Massachusetts, and is
delivered at Boston, Massachusetts, as of the date above written.
FREEDOM CAPITAL MANAGEMENT
CORPORATION
By: /s/ Hugh A. Dunlap, Jr.
--------------------------
Hugh A. Dunlap, Jr.
President
corsec/edgar/fit3/exhit13b
EXHIBIT 99.15
Effective January 1, 1994
FREEDOM INVESTMENT TRUST III
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12B-1
WHEREAS, FREEDOM INVESTMENT TRUST III, an unincorporated 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 to (i) issue shares of beneficial
interest (the "Shares") in separate series, with the Shares of each such series
representing the interests 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 two portfolio series, John Hancock
Freedom Environmental Fund and John Hancock Discovery 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 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 judgment 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 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 distribution 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, the 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; and (d) 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 Environmental 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 Expense, 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, and
(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 Discovery 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 .25 of 1% of the average
daily net asset value of the Fund attributable to that class of Shares.
(iii) All Funds subsequently established by the Trust, at 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 the 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 or upon such other method 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 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 each 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 and related
agreements.
(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 a 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
increase in the amount of distribution expenditures is proposed, and no material
amendment to the Plan 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, for the first two years
to be kept in an easily accessible place.
SECTION 9. LIMITATION OF LIABILITY
The term "Freedom Investment Trust III" means and refers to the
Trustees from time to time serving under the Declaration of Trust dated June 16,
1989 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,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust, as provided in the Declaration of 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 Declaration of Trust. The Declaration
of 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.
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this Plan of Distribution
dated as of October 23, 1989, as amended and restated on the day and year set
forth below in Boston, Massachusetts.
FREEDOM INVESTMENT TRUST III
By: /s/ Hugh A. Dunlap, Jr.
--------------------------
President
ATTEST:
/s/ Thomas H. Drohan
--------------------------
Secretary
Date: January 1, 1994
y\agr_cont\plans\distrib\fitthree.doc
EXHIBIT 99.16
JOHN HANCOCK DISCOVERY FUND - CLASS A
<TABLE>
INITIAL INVESTMENT $1,000.00
<CAPTION>
- -------------------------------- -----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN RATE INVESTMENT VALUE AT END OF PERIOD CUMULATIVE
<S> <C> <C> <C> <C>
10 Year Return: N/A 10 Year Value: N/A N/A
3.58 Year Return: 15.96% 5 Year Value: $1,697.67 69.77%
3 Year Return: 21.26% 3 Year Value: $1,783.03 78.30%
1 Year Return: 55.80% 1 Year Value: $1,557.98 55.80%
YTD Return: 40.91% YTD Value: $1,409.14
MTD Return: 14.80% MTD Value: $1,148.04
- -------------------------------- -----------------------------------------------
<CAPTION>
Constant Sales Charge: 0.00%
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains
Ended NAV Price Charge Date Amount Price Information
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
6/92 $8.79 $8.79 0.00%
7/92 $8.95 $8.95 0.00%
8/92 $8.72 $8.72 0.00%
9/92 $8.82 $8.82 0.00%
10/92 $9.33 $9.33 0.00%
11/92 $10.19 $10.19 0.00%
12/92 $10.52 $10.52 0.00% 12/23/92 $0.1313 $10.23 $0.1313 ST Cap Gain
1/93 $10.71 $10.71 0.00%
2/93 $9.94 $9.94 0.00%
3/93 $10.28 $10.28 0.00%
4/93 $9.95 $9.95 0.00%
5/93 $10.58 $10.58 0.00%
6/93 $10.67 $10.67 0.00%
7/93 $10.81 $10.81 0.00%
8/93 $11.26 $11.26 0.00%
9/93 $11.28 $11.28 0.00%
10/93 $11.10 $11.10 0.00%
11/93 $10.68 $10.68 0.00%
12/93 $9.54 $9.54 0.00% 12/23/93 $1.6619 $9.16 $1.6619 LT/ST Cap Gain
1/94 $9.92 $9.92 0.00%
2/94 $9.61 $9.61 0.00%
3/94 $8.94 $8.94 0.00%
4/94 $9.09 $9.09 0.00%
5/94 $8.86 $8.86 0.00%
6/94 $8.54 $8.54 0.00%
7/94 $8.56 $8.56 0.00%
8/94 $9.01 $9.01 0.00%
9/94 $9.14 $9.14 0.00%
10/94 $9.60 $9.60 0.00%
11/94 $9.31 $9.31 0.00%
12/94 $9.19 $9.19 0.00% 12/23/94 $0.2685 $9.00 $0.2685 LT Cap Gain
1/95 $8.82 $8.82 0.00%
2/95 $9.17 $9.17 0.00%
3/95 $9.38 $9.38 0.00%
4/95 $9.48 $9.48 0.00%
5/95 $9.91 $9.91 0.00%
6/95 $11.28 $11.28 0.00%
7/95 $12.95 $12.95 0.00%
<PAGE>
<CAPTION>
Constant Sales Charge: [continued]
3-Year 1-Year YTD MTD
----------------------------------------------------------------------------------------------------------------------
Month Dividend # of Shares Shares Dividend # of Shares Shares Dividend # of Shares Shares Shares
Ended Received Reinv. Outstanding Received Reinv. Outstanding Received Reinv. Outstanding Outstanding
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/92
7/92 111.732
8/92 $0.0000 0.000 111.732
9/92 $0.0000 0.000 111.732
10/92 $0.0000 0.000 111.732
11/92 $0.0000 0.000 111.732
12/92 $14.6704 1.434 113.166
1/93 $0.0000 0.000 113.166
2/93 $0.0000 0.000 113.166
3/93 $0.0000 0.000 113.166
4/93 $0.0000 0.000 113.166
5/93 $0.0000 0.000 113.166
6/93 $0.0000 0.000 113.166
7/93 $0.0000 0.000 113.166
8/93 $0.0000 0.000 113.166
9/93 $0.0000 0.000 113.166
10/93 $0.0000 0.000 113.166
11/93 $0.0000 0.000 113.166
12/93 $188.0706 20.532 133.698
1/94 $0.0000 0.000 133.698
2/94 $0.0000 0.000 133.698
3/94 $0.0000 0.000 133.698
4/94 $0.0000 0.000 133.698
5/94 $0.0000 0.000 133.698
6/94 $0.0000 0.000 133.698
7/94 $0.0000 0.000 133.698 116.822
8/94 $0.0000 0.000 133.698 $0.0000 0.000 116.822
9/94 $0.0000 0.000 133.698 $0.0000 0.000 116.822
10/94 $0.0000 0.000 133.698 $0.0000 0.000 116.822
11/94 $0.0000 0.000 133.698 $0.0000 0.000 116.822
12/94 $35.8939 3.988 137.686 $31.3632 3.485 120.307 108.814
1/95 $0.0000 0.000 137.686 $0.0000 0.000 120.307 $0.0000 0.000 108.814
2/95 $0.0000 0.000 137.686 $0.0000 0.000 120.307 $0.0000 0.000 108.814
3/95 $0.0000 0.000 137.686 $0.0000 0.000 120.307 $0.0000 0.000 108.814
4/95 $0.0000 0.000 137.686 $0.0000 0.000 120.307 $0.0000 0.000 108.814
5/95 $0.0000 0.000 137.686 $0.0000 0.000 120.307 $0.0000 0.000 108.814
6/95 $0.0000 0.000 137.686 $0.0000 0.000 120.307 $0.0000 0.000 108.814 88.652
7/95 $0.0000 0.000 137.686 $0.0000 0.000 120.307 $0.0000 0.000 108.814
</TABLE>
<PAGE>
JOHN HANCOCK DISCOVERY FUND (CLASS B) - SEC TOTAL RETURN
<TABLE>
INITIAL INVESTMENT $1,000.00
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN INVESTMENT VALUE AT END OF PERIOD CUMULATIVE CUMULATIVE
CDSC CDSC
Excluding With Excluding % CDSC Ending Excluding Ending
CDSC CDSC CDSC CDSC Amount Value CDSC Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Year Return: N/A N/A $0.00 $0.00 $0.00 $0.00 N/A N/A
3.92 Year Return: 18.42% 17.95% $1,939.79 3.00% $30.00 $1,909.79 93.98% 90.98%
3 Year Return: 20.50% 19.80% $1,749.53 3.00% $30.00 $1,719.53
1 Year Return: 54.97% 49.97% $1,549.73 5.00% $50.00 $1,499.73 54.97% 49.97%
YTD Return: 40.43% 35.43% $1,404.25 5.00% $50.00 $1,354.25
MTD Return: 14.73% 9.73% $1,147.30 5.00% $50.00 $1,097.30
- ------------------------------------------------------------------------------------------------------
<CAPTION>
Constant Sales Charge: N/A
10-Year 5-Year
--------------------------------------------------------
Month Offering Sales Ex-Div Dividend Reinv. Capital Gains Dividend # of Shares Dividend # of Shares Shares
Ended NAV Price Charge Date Amount Price Information Received Reinv. Received Reinv. Outstanding
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/91 $8.00 $8.00 N/A $0.0000 0.000 125.000
9/91 $8.17 $8.17 N/A $0.0000 0.000 125.000
10/91 $8.56 $8.56 N/A $0.0000 0.000 125.000
11/91 $8.18 $8.18 N/A $0.0000 0.000 125.000
12/91 $9.25 $9.25 N/A $0.0000 0.000 125.000
1/92 $10.38 $10.38 N/A $0.0000 0.000 125.000
2/92 $10.57 $10.57 N/A $0.0000 0.000 125.000
3/92 $9.86 $9.86 N/A $0.0000 0.000 125.000
4/92 $9.28 $9.28 N/A $0.0000 0.000 125.000
5/92 $9.39 $9.39 N/A $0.0000 0.000 125.000
6/92 $8.72 $8.72 N/A $0.0000 0.000 125.000
7/92 $8.87 $8.87 N/A $0.0000 0.000 125.000
8/92 $8.64 $8.64 N/A $0.0000 0.000 125.000
9/92 $8.74 $8.74 N/A $0.0000 0.000 125.000
10/92 $9.24 $9.24 N/A $0.0000 0.000 125.000
11/92 $10.08 $10.08 N/A $0.0000 0.000 125.000
12/92 $10.40 $10.40 N/A 12/23/92 $0.1313 $10.11 $0.1313 ST Cap Gain $16.4125 1.623 126.623
1/93 $10.58 $10.58 N/A $0.0000 0.000 126.623
2/93 $9.81 $9.81 N/A $0.0000 0.000 126.623
3/93 $10.14 $10.14 N/A $0.0000 0.000 126.623
4/93 $9.82 $9.82 N/A $0.0000 0.000 126.623
5/93 $10.43 $10.43 N/A $0.0000 0.000 126.623
6/93 $10.52 $10.52 N/A $0.0000 0.000 126.623
7/93 $10.65 $10.65 N/A $0.0000 0.000 126.623
8/93 $11.09 $11.09 N/A $0.0000 0.000 126.623
9/93 $11.11 $11.11 N/A $0.0000 0.000 126.623
10/93 $10.92 $10.92 N/A $0.0000 0.000 126.623
11/93 $10.50 $10.50 N/A $0.0000 0.000 126.623
12/93 $9.34 $9.34 N/A 12/23/93 $1.6619 $8.97 $1.6619 LT/ST Gain $210.4348 23.460 150.083
1/94 $9.71 $9.71 N/A $0.0000 0.000 150.083
2/94 $9.39 $9.39 N/A $0.0000 0.000 150.083
3/94 $8.74 $8.74 N/A $0.0000 0.000 150.083
4/94 $8.87 $8.87 N/A $0.0000 0.000 150.083
5/94 $8.64 $8.64 N/A $0.0000 0.000 150.083
6/94 $8.33 $8.33 N/A $0.0000 0.000 150.083
7/94 $8.34 $8.34 N/A $0.0000 0.000 150.083
8/94 $8.78 $8.78 N/A $0.0000 0.000 150.083
9/94 $8.90 $8.90 N/A $0.0000 0.000 150.083
10/94 $9.35 $9.35 N/A $0.0000 0.000 150.083
11/94 $9.06 $9.06 N/A $0.0000 0.000 150.083
12/94 $8.93 $8.93 N/A 12/23/94 $0.2685 $8.75 $0.2685 LT Gain $40.2928 4.605 154.688
1/95 $8.56 $8.56 N/A $0.0000 0.000 154.688
2/95 $8.90 $8.90 N/A $0.0000 0.000 154.688
3/95 $9.10 $9.10 N/A $0.0000 0.000 154.688
4/95 $9.19 $9.19 N/A $0.0000 0.000 154.688
5/95 $9.60 $9.60 N/A $0.0000 0.000 154.688
6/95 $10.93 $10.93 N/A $0.0000 0.000 154.688
7/95 $12.54 $12.54 N/A $0.0000 0.000 154.688
</TABLE>
EXHIBIT 99.17
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Freedom Investment Trust
III (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 amendments to the Registration Statement of the
Trust on Form N-1A or N-14 filed with the Securities and Exchange Commission to
enable the Trust to comply with the provisions of the Securities Act of 1933, 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:
- --------- ----- -----------
Chairman, Trustee
/s/ Edward J. Boudreau, Jr. and Principal June 25, 1992
- -------------------------- Executive Officer
Edward J. Boudreau, Jr.
Treasurer, Principal
Accounting Officer
/s/ James B. Little and Principal June 25, 1992
- -------------------------- Financial Officer
James B. Little
/s/ William Barron Trustee June 25, 1992
- --------------------------
William Barron
/s/Douglas M. Costle Trustee June 25, 1992
- --------------------------
Douglas M. Costle
/s/Hugh A. Dunlap, Jr. Trustee June 25, 1992
- --------------------------
Hugh A. Dunlap, Jr.
/s/Leland D. Erdahl Trustee June 25, 1992
- --------------------------
Leland D. Erdahl
/s/Richard A. Farrell Trustee June 25, 1992
- --------------------------
Richard A. Farrell
<PAGE>
/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
corpsec/edgar/fit3/pwers
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> FREEDOM INVESTMENT TRUST III - DISCOVERY FUND, CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 21,710,328
<INVESTMENTS-AT-VALUE> 36,939,478
<RECEIVABLES> 840,807
<ASSETS-OTHER> 22,922
<OTHER-ITEMS-ASSETS> 15,229,150
<TOTAL-ASSETS> 37,803,207
<PAYABLE-FOR-SECURITIES> 983,125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 99,765
<TOTAL-LIABILITIES> 1,082,890
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,675,535
<SHARES-COMMON-STOCK> 391,822
<SHARES-COMMON-PRIOR> 377,012
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (184,368)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,229,150
<NET-ASSETS> 36,720,317
<DIVIDEND-INCOME> 45,978
<INTEREST-INCOME> 60,431
<OTHER-INCOME> 0
<EXPENSES-NET> 773,354
<NET-INVESTMENT-INCOME> (666,945)
<REALIZED-GAINS-CURRENT> (185,856)
<APPREC-INCREASE-CURRENT> 14,483,069
<NET-CHANGE-FROM-OPS> 13,630,268
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 101,860
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 334,726
<NUMBER-OF-SHARES-REDEEMED> 330,231
<SHARES-REINVESTED> 10,315
<NET-CHANGE-IN-ASSETS> 6,957,024
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 857,158
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 294,993
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 773,354
<AVERAGE-NET-ASSETS> 29,499,302
<PER-SHARE-NAV-BEGIN> 8.56
<PER-SHARE-NII> (0.17)
<PER-SHARE-GAIN-APPREC> 4.83
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.27)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.95
<EXPENSE-RATIO> 2.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 022
<NAME> FREEDOM INVESTMENT TRUST III - DISCOVERY FUND, CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 21,710,328
<INVESTMENTS-AT-VALUE> 36,939,478
<RECEIVABLES> 840,807
<ASSETS-OTHER> 22,922
<OTHER-ITEMS-ASSETS> 15,229,150
<TOTAL-ASSETS> 37,803,207
<PAYABLE-FOR-SECURITIES> 983,125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 99,765
<TOTAL-LIABILITIES> 1,082,890
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,675,535
<SHARES-COMMON-STOCK> 2,523,395
<SHARES-COMMON-PRIOR> 3,181,059
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (184,368)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,229,150
<NET-ASSETS> 36,720,317
<DIVIDEND-INCOME> 45,978
<INTEREST-INCOME> 60,431
<OTHER-INCOME> 0
<EXPENSES-NET> 773,354
<NET-INVESTMENT-INCOME> (666,945)
<REALIZED-GAINS-CURRENT> (185,856)
<APPREC-INCREASE-CURRENT> 14,483,069
<NET-CHANGE-FROM-OPS> 13,630,268
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 755,311
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 214,582
<NUMBER-OF-SHARES-REDEEMED> 951,880
<SHARES-REINVESTED> 79,634
<NET-CHANGE-IN-ASSETS> 6,957,024
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 857,158
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 294,993
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 773,354
<AVERAGE-NET-ASSETS> 29,499,302
<PER-SHARE-NAV-BEGIN> 8.34
<PER-SHARE-NII> (0.22)
<PER-SHARE-GAIN-APPREC> 4.69
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.27)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.54
<EXPENSE-RATIO> 2.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
